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 ☒
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by a Party other than the Registrant ☐
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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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Definitive
Proxy Statement |
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Definitive
Additional Materials |
☐ |
Soliciting
Material Pursuant to §240.14a-12 |
WORKSPORT
LTD.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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Per
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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November
8, 2021
Dear
Stockholder:
You
are invited to attend the Annual Meeting of Stockholders of
Worksport Ltd., which will be held on Wednesday, December 20, 2021,
at 9:00 a.m., Eastern Time. This year’s Annual Meeting will be a
virtual meeting, conducted solely online. Hosting a virtual meeting
will enable our stockholders to attend online and participate from
any location around the world, and support the health and
well-being of our management, directors and stockholders.
Stockholders will be able to attend the Annual Meeting by visiting
www.virtualshareholdermeeting.com/WKSP2021.
At
the Annual Meeting, stockholders will be asked to: (1) elect five
directors (2) to hold an advisory vote on executive compensation
(the “say on pay vote”) (3) ratify the appointment of Haynie &
Co. as our independent registered public accounting firm for 2021
and (4) approve an amendment to our 2015 Equity Incentive Plan. The
Board of Directors believes that the proposals being submitted for
stockholder approval are in the best interests of the Company and
its stockholders and recommends a vote consistent with the Board’s
recommendation for each proposal.
It is
important that your shares be represented and voted at the Annual
Meeting regardless of the size of your holdings. Whether or not you
plan to participate in the Annual Meeting online, please take the
time to vote online, by telephone or, if you receive a printed
proxy card, by returning a marked, signed and dated proxy card. If
you participate in the Annual Meeting online, you may also vote
your shares online at that time if you wish, even if you have
previously submitted your vote.
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Sincerely, |
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/s/
Steven Rossi |
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Steven
Rossi |
|
CEO
and Director |
Worksport
Ltd.
7299
E Danbro Cres.
Mississaugua,
Ontario L5N 6P8
888-554-8789
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Notice
is hereby given that the 2021 Annual Meeting of Stockholders of
Worksport Ltd. (the “Company”) will be held virtually at
www.virtualshareholdermeeting.com/WKSP2021 at 9:00 a.m., Eastern
Time, on Wednesday December 20, 2021 for the following
purposes:
1. To
elect as directors the five nominees named in the Proxy Statement
to serve for the ensuing year and until their respective successors
are duly elected and qualified.
2. To
hold an advisory vote on executive compensation (the “say on pay
vote”).
3. To
hold an advisory vote on the frequency of the holding the say on
pay vote on executive compensation.
4. To
ratify the appointment of Haynie & Co. as our independent
registered public accounting firm for the fiscal year ending
December 31, 2021.
5. To
approve the amendment to the Company’s 2015 Equity Incentive Plan;
and
6. To
transact such other business as may properly come before the
meeting or any adjournment thereof.
These
proposals are more fully described in the Proxy Statement following
this Notice.
The
Board of Directors has fixed the close of business on, October 29,
2021 as the record date for the determination of the stockholders
entitled to notice of, and to vote at, the Annual Meeting.
Accordingly, only stockholders of record at the close of business
on that date will be entitled to vote at the Annual
Meeting.
Only
stockholders and persons holding proxies from stockholders may
attend the Annual Meeting. To participate in the Annual Meeting
online at www.virtualshareholdermeeting.com/WKSP2021 you
will need the information included on your Notice of Internet
Availability of Proxy Materials, your proxy card or the
instructions that accompanied your proxy materials.
By
order of the Board of Directors, |
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/s/
Steven Rossi |
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Steven
Rossi |
|
CEO
and Director |
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November
8, 2021 |
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PROXY
STATEMENT
TABLE
OF CONTENTS
PROXY STATEMENT
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Q:
Why did I receive a Notice of Internet Availability of Proxy
Materials?
A: In
accordance with rules adopted by the Securities and Exchange
Commission (the “SEC”), we have elected to deliver this proxy
statement and our 2020 Annual Report on Form 10-K to the majority
of our stockholders online in lieu of mailing printed copies of
these materials to each of our stockholders (the “Notice Process”).
If you received a Notice of Internet Availability of Proxy
Materials (the “Notice”) by mail, you will not receive printed
copies of our proxy materials unless you request them. Instead, the
Notice provides instructions on how to access this proxy statement
and our 2020 Annual Report on Form 10-K online, as well as how to
obtain printed copies of these materials by mail. We believe that
the Notice Process allows us to provide our stockholders with the
information they need in a more timely manner than if we had
elected to mail printed materials, while reducing the environmental
impact of, and lowering the costs associated with, the printing and
distribution of our proxy materials.
The
Notice is being mailed on or about November 10, 2021 to
stockholders of record at the close of business on October 29, 2021
and this proxy statement and our 2020 Annual Report on Form 10-K
will be available at
www.virtualshareholdermeeting.com/WKSP2021 beginning on
November 10, 2021. If you received a Notice by mail, but would
rather receive printed copies of our proxy materials, please follow
the instructions included in the Notice. You will not receive a
Notice if you have previously elected to receive printed copies of
our proxy materials.
Q:
Can I vote my shares by filling out and returning the
Notice?
A:
No. However, the Notice contains instructions on how to vote your
shares: (i) before the date of the Annual Meeting by way of
completing and submitting your proxy online, by phone or by
requesting and returning a written proxy card by mail, or (ii) at
the Annual Meeting online at
www.virtualshareholdermeeting.com/WKSP2021.
Q:
How do I participate in the Annual Meeting?
A: To
participate in the Annual Meeting, go to
www.virtualshareholdermeeting.com/WKSP2021 at the time and
date of the Annual Meeting and enter the sixteen-digit control
number included on your Notice, your proxy card or the instructions
from your broker that accompanied your proxy materials.
Q:
Who is entitled to vote at the Annual Meeting?
A:
Holders of our common stock at the close of business on October 29,
2021, the record date for the Annual Meeting established by our
Board of Directors, are entitled to receive notice of the Annual
Meeting and to vote their shares at the Annual Meeting and any
related adjournments or postponements.
At
the close of business on October 29, 2021, there were [______]
shares of common stock outstanding. Holders of our common stock are
entitled to one vote per share.
Q:
What is the difference between a stockholder of record and a
stockholder who holds Worksport shares in street
name?
A: If
your shares are registered in your name, you are a stockholder of
record. If your shares are held in the name of your broker, bank or
other holder of record, your shares are held in street
name.
You
may examine a list of the stockholders of record as of the close of
business on October 29, 2021 for any purpose germane to the Annual
Meeting during normal business hours during the 10-day period
preceding the date of the meeting at 7299 E Danbro Cres.
Mississaugua, Ontario L5N 6P8.
Q:
What shares are included on the enclosed proxy card?
A: If
you are a stockholder of record only, you will receive one proxy
card from Broadridge for all shares of Worksport common stock that
you hold. If you hold your shares in street name through one or
more banks, brokers and/or other holders of record, you will
receive proxy materials, together with voting instructions and
information regarding the consolidation of your votes, from the
third party or parties through which you hold your shares. If you
are a stockholder of record and hold additional shares in street
name, you will receive proxy materials from Broadridge and the
third party or parties through which you hold your
shares.
Q:
What are the quorum requirements for the Annual
Meeting?
A:
The presence at the Annual Meeting, in person or by proxy, of
holders having one-third of the total votes entitled to be cast by
holders of Worksport common stock at the Annual Meeting constitutes
a quorum. Stockholders who participate in the Annual Meeting online
at www.virtualshareholdermeeting.com/WKSP2021 will be deemed
to be in person attendees for purposes of determining whether a
quorum has been met. Shares of Worksport common stock represented
by proxy will be treated as present at the Annual Meeting for
purposes of determining whether there is a quorum, without regard
to whether the proxy is marked as casting a vote or
abstaining.
Q:
What matters will stockholders vote on at the Annual
Meeting?
A:
Stockholders will vote on the following proposals:
●Proposal
1—to elect five members of the Worksport Board of Directors,
each to hold office until the next succeeding annual meeting of
stockholders or until such director’s successor shall have been
duly elected and qualified (or, if earlier, such director’s removal
or resignation from the Board);
●Proposal
2—an advisory vote on executive compensation (the “say on pay
vote”);
●Proposal
3—an advisory vote on frequency of holding say on pay
vote;
●Proposal
4—to ratify the appointment of Haynie & Co, as our
independent registered public accounting firm for the 2021 fiscal
year;
●Proposal
5—to approve an amendment to our 2015 Equity Incentive Plan;
and
●to
transact such other business as may properly come before the Annual
Meeting and any related adjournments or postponements.
Q:
What are my voting choices when voting for director nominees and
what votes are required to elect directors to the Board of
Directors?
A:
You may vote in favor of all director nominees,
withhold votes as to all director nominees or vote in
favor of and withhold votes as to specific director
nominees.
The
election of each of our director nominees requires the affirmative
vote of a plurality of the total number of votes cast by holders of
shares of common stock, with each share of common stock
representing the right to one vote, respectively.
The
Board recommends that our stockholders vote FOR the election
of each of the director nominees.
Q:
What are my voting choices when voting on the advisory say on pay
proposal and what votes are required to approve the
proposal?
A:
You may vote in favor of the advisory proposal, vote against the
advisory proposal or abstain from voting on the advisory
proposal.
The
approval, on an advisory basis, of the say on pay proposal requires
the affirmative vote of holders of a majority of the voting power
of shares of common stock present at the Annual Meeting in person
or represented by proxy and voting together. As an advisory vote,
the outcome is not binding upon the Company.
The
Board recommends a vote FOR the advisory vote on executive
compensation.
Q:
What are my voting choices when voting on the advisory proposal on
the frequency of holding the say on pay vote and what votes are
required to approve the proposal?
A:
You may vote in favor of holding the say on pay vote every year,
every two years or every three years, or abstain from voting on
this advisory proposal.
The
approval, on an advisory basis, of the frequency of holding the say
on pay vote in the future requires the affirmative vote of holders
of a majority of the voting power of shares of common stock present
at the Annual Meeting in person or represented by proxy and voting
together. However, if no choice receives a majority of votes, then
the option on the frequency of the advisory vote that receives the
highest number of votes cast by stockholders will be considered by
the Board as the stockholders’ recommendation as to the frequency
of holding future say on pay votes.
As an
advisory vote, the votes cast in connection with this proposal are
not binding upon the Company. While the Board is making a
recommendation with respect to this proposal, stockholders are
being asked to vote for one of the choices specified above, and not
whether they agree or disagree with the Board’s
recommendation.
The
Board recommends a vote for holding the say on pay vote once
EVERY THREE YEARS.
Q:
What are my voting choices when voting on the ratification of the
appointment of Haynie & Co. as our independent registered
public accounting firm for 2021 and what votes are required to
ratify this appointment?
A:
You may vote in favor of the ratification, vote against the
ratification or abstain from voting on the ratification.
The
ratification of the appointment of Haynie & Co. as our
independent registered public accounting firm for 2021 requires the
affirmative vote of holders of a majority of the voting power of
shares of common stock present at the Annual Meeting in person or
represented by proxy and voting together.
The
Board recommends that our stockholders vote FOR the ratification of
the appointment of Haynie & Co. as our independent registered
public accounting firm for 2021.
Q:
What are my voting choices when voting on the approval of the
amendment to the 2015 Equity Incentive Plan?
A:
You may vote in favor of the amendment, vote against the amendment
or abstain from voting on the amendment.
The
approval of the amendment to the 2015 Equity Incentive Plan
requires the affirmative vote of holders of a majority of the
voting power of shares of common stock present at the Annual
Meeting in person or represented by proxy and voting
together.
The
Board recommends that our stockholders vote FOR the amendment to
the 2015 Equity Incentive Plan.
Q:
Could other matters be decided at the Annual
Meeting?
A: As
of the date of this proxy statement, we did not know of any matters
to be raised at the Annual Meeting, other than those referred to in
this proxy statement.
If
other matters are properly presented at the Annual Meeting for
consideration, the officers who have been designated as proxies for
the Annual Meeting will have the discretion to vote on those
matters for stockholders who have submitted their proxy.
Q:
What do I need to do now to vote at the Annual
Meeting?
A:
The Board of Directors is soliciting proxies for use at the Annual
Meeting. Stockholders may submit proxies to instruct the designated
proxies to vote their shares in any of three ways:
•Submitting
a Proxy Online: Submit your proxy online at
www.virtualshareholdermeeting.com/WKSP2021 Internet proxy
voting is available 24 hours a day and will close at 11:59 p.m.,
Eastern Time, on Tuesday, December 19, 2021;
•Submitting
a Proxy by Telephone: Submit your proxy by telephone by using
the toll-free telephone number provided on your proxy card
(1.800.690.6903). Telephone voting is available 24 hours a day and
will close at 11:59 p.m., Eastern Daylight Time, on Tuesday,
December 19, 2021; or
•Submitting
a Proxy by Mail: If you choose to submit your proxy by mail,
simply mark, date and sign your proxy and return it in the
postage-paid envelope provided or to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, New York 11717.
You
may also participate in the Annual Meeting online at
www.virtualshareholdermeeting.com/WKSP2021 and vote your
shares online at that time, even if you have previously submitted
your vote. To do so, you will need the sixteen-digit control number
included on your Notice, your proxy card or the instructions from
your broker that accompanied your proxy materials.
For
shares of common stock held in street name, holders may submit a
proxy online or by telephone before the date of the Annual Meeting
if their broker, bank and/or other holder of record makes these
methods available. If you submit a proxy online or by telephone,
DO NOT request and return a printed proxy card from us or
from your broker, bank and/or other holder of record. If you hold
your shares through a broker, bank and/or other holder of record,
follow the voting instructions you receive from your broker, bank
and/or other holder of record.
Q:
If I hold my shares in street name, will my broker, bank or other
holder of record vote my shares for me?
A: If
you hold your shares of common stock in street name, you must
provide your broker, bank and/or other holder of record with
instructions in order to vote these shares. If you do not provide
voting instructions, whether your shares can be voted depends on
the type of item being considered for a vote.
Non-Discretionary
Items. The election of directors and the approval of the
amendment to the 2015 Equity Incentive Plan are non-discretionary
items and may NOT be voted on by your broker, bank and/or
other holder of record absent specific voting instructions from
you. If you do not provide your bank, broker and/or other holder of
record with voting instructions, your shares of common stock will
be represented by “broker non-votes” in the case of this
proposal.
Discretionary
Items. The ratification of Haynie & Co. as our independent
registered public accounting firm for 2021 is a discretionary item.
Generally, brokers, banks and/or other holders of record that do
not receive voting instructions from you may vote on this proposal
in their discretion and these votes will be counted for purposes of
determining a quorum.
Q:
What effect do abstentions and broker non-votes have on quorum
requirements and the voting results for each proposal to be voted
on at the Annual Meeting?
A:
Abstentions and shares represented by broker non-votes are counted
as present for purposes of determining a quorum. Abstentions are
treated as shares present and entitled to vote and, as a result,
have the same effect as a vote against any proposal for which the
voting standard is based on the number of shares present at the
Annual Meeting (the auditor ratification proposal) and have no
impact on the vote on any proposal for which the vote standard is
based on the votes cast at the meeting (the election of directors).
Shares represented by broker non-votes are not treated as shares
entitled to vote and, as a result, have no effect on the outcome of
any of the proposals to be voted on by stockholders at the Annual
Meeting.
Q:
Can I change my vote or revoke my proxy?
A:
Yes. If you are a stockholder of record, you may change your vote
or revoke your proxy at any time before the polls close at the
Annual Meeting by:
●submitting
a later-dated proxy relating to the same shares online, by
telephone or by mail before the date of the Annual
Meeting;
●delivering
a written notice, bearing a date later than your proxy, stating
that you revoke the proxy; or
●participating
in the Annual Meeting and voting online at that time at
www.virtualshareholdermeeting.com/WKSP2021 (although virtual
attendance at the Annual Meeting will not, by itself, change your
vote or revoke a proxy).
To
change your vote or revoke your proxy before the date of the Annual
Meeting, follow the instructions provided on your Notice, proxy
card or proxy materials to do so online or by telephone, or send a
written notice or a new proxy card to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, New York
11717.
If
you hold your shares of common stock through a broker, bank and/or
other holder of record, follow the instructions that you receive
from your broker, bank and/or other holder of record if you wish to
change your vote or revoke your proxy.
Q:
What if I do not specify a choice for a matter when returning a
proxy?
A: If
you do not give specific instructions, proxies that are signed and
returned will be voted FOR the election of all director
nominees, FOR the ratification of the appointment of Haynie
& Co as our independent registered public accounting firm for
the 2021 fiscal year and FOR the amendment to the 2015
Equity Incentive Plan.
Q:
How are proxies solicited and who bears the related
costs?
A:
Worksport bears all expenses incurred in connection with the
solicitation of proxies. In addition to solicitations by mail,
directors, officers and employees of Worksport may solicit proxies
from stockholders by various means, including by telephone, e-mail,
letter or in person. Following the initial mailing of the Notice
and proxy materials, we will request brokers, banks and other
holders of record to forward copies of these materials to persons
for whom they hold shares of common stock and to request authority
for the exercise of proxies. In such cases, Worksport, upon the
request of these holders of record, will reimburse these parties
for their reasonable expenses.
Q:
What should I do if I have questions regarding the Annual
Meeting?
A: If
you have any questions about the Annual Meeting, the various
proposals to be voted on at the Annual Meeting and/or how to
participate in the Annual Meeting online at
www.virtualshareholdermeeting.com/WKSP2021 and vote at that
time and/or would like copies of any of the documents referred to
in this proxy statement, contact Worksport Investor Relations at
[tel] or [email]
Q:
Where can I find more information about Worksport?
A:
Worksport filed its 2020 Annual Report on Form 10-K with the SEC on
April 13, 2021. That report, together with other corporate filings
are available for your review on the Internet by visiting the SEC’s
website located at www.sec.gov. Copies of any reports, including
exhibits, will be furnished to stockholders upon written request.
All written requests should be directed to: Worksport Corporate
Secretary 7299 E Danbro Cres. Mississaugua, Ontario L5N
6P8.
We
are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), which
requires that we file reports, proxy statements and other
information with the SEC. The SEC maintains a website on the
Internet that contains reports, proxy and information statements
and other information regarding registrants, including us, that
file electronically with the SEC. The SEC’s website address is
www.sec.gov. In addition, our Exchange Act filings may be inspected
and copied at the public reference facilities of the SEC located at
100 F Street, N.E., Washington, D.C. 20549. Copies of the material
may also be obtained upon request and payment of the appropriate
fee from the Public Reference Section of the SEC located at 100 F
Street, N.E., Washington, D.C. 20549.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than ten percent of our common
stock (“Section 16 Insiders”) to file with the SEC initial reports
of ownership and reports of changes in ownership of our common
stock.
To
our knowledge based solely on a review of the copies of such
reports furnished to us and the Section 16 Insiders’
representations to us, for the year ended December 31, 2020, our
Section 16 Insiders complied with their respective filing
requirements under Section 16(a) on a timely basis.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of the Record Date of
this report by (a) each stockholder who is known to us to
beneficially own 5% or more of our Common Stock, (b) directors, (c)
our executive officers, and (d) all executive officers and
directors as a group. Beneficial ownership is determined according
to the SEC rules, and generally means that person has beneficial
ownership of a security if he or she possesses sole or shared
voting or investment power of that security and includes options,
warrants and other securities convertible or exercisable into
shares of Common Stock, provided that such securities are currently
exercisable or convertible or exercisable or convertible within 60
days of the date hereof. Each director or officer, as the case may
be, has furnished us with information with respect to their
beneficial ownership. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with
respect to their Common Stock, except to the extent that authority
is shared by spouses under applicable law, and (ii) record and
beneficial ownership with respect to their Common Stock.
Name and Address of Beneficial Owner (1) |
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Number of Shares of Common Stock Beneficially Owned |
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Percentage of Common Stock Beneficially Owned (2) |
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Directors and Executive Officers: |
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Steven Rossi (3)
—CEO, President, and Chairman |
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2,592,538 |
(4) |
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15.3 |
% |
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Michael Johnston
—CFO |
|
|
— |
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|
|
— |
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Lorenzo Rossi
—Director |
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— |
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— |
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Craig Loverock
—Director |
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30,000
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(5)
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*
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William Caragol
—Director |
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30,000
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(6)
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*
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Ned L. Siegel
—Director |
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30,000
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(7)
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*
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|
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All officers and
directors as a group (6 persons) |
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2,682,538 |
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15.66 |
% |
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5% or More
Stockholders: |
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— |
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— |
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Prasad Bikkani (8) |
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2,221,470 |
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12.12 |
% |
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Leonite Capital LLC (9) |
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1,500,000 |
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8.41 |
% |
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Wesley Van De Wiel (10) |
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1,450,000 |
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8.31 |
% |
● |
Represents less than 1%. |
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(1) |
Unless
otherwise indicated, the address for each person is c/o Worksport
Ltd., 414-3120 Rutherford Rd, Vaughan, Ontario, Canada L4K
0B1. |
(2) |
Based
on 16,845,951 shares of Common Stock outstanding as of October 29,
2021, the Record Date. Any shares of Common Stock not outstanding
which are issuable upon the exercise or conversion of other
securities held by a person within the next 60 days are considered
to be outstanding when computing such person’s ownership percentage
of Common Stock but are not when computing anyone else’s ownership
percentage. |
(3) |
Mr.
Rossi also owns 100 shares of Series A Preferred Stock entitling
him to 51% of the voting power of the corporation. See “Description
of Securities–Series A Preferred Stock.” |
|
|
(4)
|
Includes 100,000 shares of Common Stock issuable upon the exercise
of stock options that vest January 1,2022.
|
|
|
(5)
|
Includes 15,000 shares of Restricted stock Units and 15,000 shares
of Common Stock issuable upon the exercise of non-qualified stock
options that vest January 1, 2022.
|
|
|
(6)
|
Includes 15,000 shares of Restricted stock Units and 15,000 shares
of Common Stock issuable upon the exercise of non-qualified stock
options that vest January 1, 2022.
|
|
|
(7)
|
Includes 15,000 shares of Restricted stock Units and 15,000 shares
of Common Stock issuable upon the exercise of non-qualified stock
options that vest January 1, 2022.
|
|
|
(8) |
Includes
(i) 100,000 shares of Common Stock issuable upon the exercise of
vested warrants held by Mr. Bikkani, (ii) 315,490 shares of Common
Stock and 630,980 shares of Common Stock issuable upon the exercise
of vested warrants held by Equity Trust Company, an entity of which
Mr. Bikkani has voting and dispositive control, and (ii) 375,000
shares of Common Stock and 750,000 shares of Common Stock issuable
upon the exercise of vested warrants held by Mr. Bikkani’s wife.
The address for Mr. Bikkani is 3043 Forest Lake Dr. Westlake, OH
55145. |
|
|
(9) |
Includes
1,000,000 shares of Common Stock issuable upon the exercise of
vested warrants. The address of Leonite Capital LLC is 1 Hillcrest
Center Dr, Suite 232, Spring Valley, NY 10977. Mr. Avi Geller is
the Chief Investment Officer of Leonite Capital LLC and is deemed
to have voting and dispositive control over the securities held
Leonite Capital, LLC. |
|
|
(10) |
Includes
600,000 shares of Common Stock issuable upon the exercise of vested
warrants. The address for Mr. Van De Wiel is Borodinstraat 164,5011
HE Tilburg, Noord Brabant -The Netherlands. |
MATTERS
TO COME BEFORE THE ANNUAL MEETING
PROPOSAL
No. 1: ELECTION OF DIRECTORS
Nominees
At
the Annual Meeting, five directors will be elected to serve a one
year term or until the next annual stockholders meeting or until
such director’s successor shall have been elected and qualified
following such director’s earlier death, resignation or
removal.
Our
Nominating and Corporate Governance Committee recommended, and our
Board of Directors nominated Steven Rossi, Lorenzo Rossi, Craig
Loverock, William Caragol and Ned L. Siegel as nominees for
election as directors at the 2021 Annual Meeting to hold office for
a one-year term until our Annual Meeting of Stockholders to be held
in 2022. All nominees are currently members of the
Board.
Each
nominee has expressed his willingness to serve as a director if
elected, and we know of no reason why any nominee would be unable
to serve. If a nominee becomes unavailable before the election, the
proxies may be voted for one or more substitute nominees designated
by the Board, or the Board may decide to reduce the number of
directors.
Name: |
|
Position(s): |
|
Age: |
|
Director
Since: |
Steven
Rossi |
|
Chief
Executive Officer, President, Secretary,
Chair
of the Board of Directors, Audit Committee Member
|
|
35 |
|
November
7, 2014 |
|
|
|
|
|
|
|
Lorenzo
Rossi |
|
Director |
|
67 |
|
December
9, 2014 |
|
|
|
|
|
|
|
Craig
Loverock |
|
Director,
Chair of Audit Committee |
|
50 |
|
April
22, 2019 |
|
|
|
|
|
|
|
William
Caragol |
|
Director,
Chair of Compensation Committee |
|
54 |
|
June
30, 2021 |
|
|
|
|
|
|
|
Ned
L. Siegel |
|
Director,
Chair of Nominating and Corporate Governance Committee |
|
69 |
|
June
30, 2021 |
A
brief description of the background and business experience of our
executive officers and directors for the past five years is as
follows:
Steven
Rossi, age 35, has served as the Chief Executive Officer,
President. Secretary and Chair of the Board of Directors of the
Company since November 7, 2014, and as a member of the Audit
Committee since April 22, 2019. Mr. Rossi founded Worksport
Ontario, the wholly-owned operating company of the Company, in
2011. Prior to that, he founded two auto-related companies, 2230164
Ontario, Inc. and Scrap my Junk Car, in 2005 and 2006,
respectively, and managed their respective operations for five
years. Since founding Worksport Ontario in 2011, Mr. Rossi has been
granted 14 different patents across the United States and Canada.
He has licensed all patents to Worksport on an exclusive basis. Mr.
Rossi attended the University of Toronto from 2005 to 2007,
majoring in Life Science. Through his prior experiences, Steven
possesses the knowledge and experience in establishing and managing
auto-related companies that aids him in efficiently and effectively
identifying and executing the Company’s strategic priorities. As
our Chief Executive Officer, President, Chair and founder, Mr.
Rossi brings to the Board extensive knowledge of the Company’s
products, structure, history, and culture as well as years of
expertise in the industry and is qualified to be a member of the
Company’s Board of Directors.
Michael
Johnston CA, CPA, age 40, has been serving as the Chief
Financial Officer of the Company since December 5, 2017. Mr.
Johnston is a partner at Toronto’s Forbes Andersen LLP, Chartered
Professional Accountants, and offers over 12 years of experience
with both private and public companies. His responsibilities
include assisting the Steven Rossi in developing new business,
maintaining operating budgets and ensuring adequate cash flow. Mr.
Johnston was appointed by the Board for his extensive knowledge of
the Company’s products and his financial and accounting expertise.
Mr. Johnston holds a graduate degree from the University of Western
Ontario.
Lorenzo
Rossi, age 67, has been serving as a director of the Company
since December 9, 2014. Since 2005, he has been the Computer
Science & Communications Technology Department Head at the
Cardinal Carter Academy for the Arts of the Toronto Catholic
District Schools. Lorenzo received a Master of Education in 1995
from the University of Toronto and a Bachelor of Arts from
Laurentian University in 1977. The Board believes that Mr. Rossi’s
professional experience qualifies him to serve on our
Board.
Craig
Loverock, CPA, CA, age 50, has been serving as a member of the
Board of the Company since April 22, 2019. Mr. Loverock has also
served as the Chair of the Audit Committee since April 22, 2019.
Mr. Loverock is a licensed CPA (Chartered Professional Accountant)
and received his Chartered Accountant designation from the
Institute of Chartered Accountants, Ontario in 1997, and has over
24 years’ experience in accounting and finance roles in Canada, the
United States and England. Mr. Loverock has been the Chief
Financial Officer and Corporate Secretary at Contagious Gaming Inc.
since November 30, 2015, and currently serves as the Chief
Financial Officer of Sproutly Canada, Inc. From October 2014 to May
2015, he served as the Chief Financial Officer of VoiceTrust Inc.
From November 2012 to October 2014, he served as the Chief
Financial Officer and Chief Compliance officer of Quartz Capital
Group Ltd. From January 2010 to November 2012, he provided Chief
Financial Officer consulting services to a number of high-growth
businesses. The Board
believes that Mr. Loverock’s vast professional experience,
education, and professional credentials qualify him to serve as a
member of the Company’s Board of Directors, and as a member of the
Board’s committees.
William
Caragol, age 54, was appointed a director on June 30, 2021,
and, since July 2021, has served as the Chief Financial Officer of
Mainz BioMed N.V. (NASDAQ: MYNZ), a leading provider of
easy-to-use diagnostic solutions. From 2018 to the present, Mr.
Caragol has also been Managing Director of Quidem LLC, a corporate
advisory firm. Since 2015, Mr. Caragol has been Chairman of the
Board of Thermomedics, Inc., a medical diagnostic equipment
company. Mr. Caragol, since February 2021, is also on the Board of
Directors and is Chairman of the Audit Committee of Greenbox POS
(NASDAQ: GBOX) and from 2012 to 2018, Mr. Caragol was Chairman and
CEO of PositiveID, a holding company that was publicly traded that
had a portfolio of products in the fields of bio detection systems,
molecular diagnostics, and diabetes management products. Mr.
Caragol earned a B.S. in business administration and accounting
from Washington & Lee University and is a member of the
American Institute of Certified Public Accountants. The Board
believes that Mr. Caragol’s vast experience as a member of
severally publicly traded companies’ board of directors, his
education, and professional credentials qualify him to serve as a
member of the Company’s Board Directors, and as a member of the
Board’s committees.
Ambassador
Ned L. Siegel, age 69, was appointed a director June 30, 2021.
Ambassador Seigel is the President of The Siegel Group, a
multi-disciplined international business management advisory firm
he founded in 1997 in Boca Raton, Florida, specializing in real
estate, energy, utilities, infrastructure, financial services, oil
& gas and cyber & secure technology. Mr. Ambassador Siegel
has served since 2013 as Of Counsel to the law firm of Wildes &
Weinberg, P.C. From October 2007 until January 2009, he served as
the United States Ambassador to the Commonwealth of The Bahamas.
Prior to his Ambassadorship, in 2006, he served with Ambassador
John R. Bolton at the United Nations in New York, as the Senior
Advisor to the U.S. Mission and as the United States Representative
to the 61st Session of the United Nations General Assembly. From
2003 to 2007, Mr. Ambassador Siegel served on the Board of
Directors of the Overseas Private Investment Corporation (OPIC),
which was established to help U.S. businesses invest overseas,
fostering economic development in new and emerging markets,
complementing the private sector in managing the risk associated
with foreign direct investment and supporting U.S. foreign policy.
Appointed by Governor Jeb Bush, Mr. Ambassador Siegel served as a
Member of the Board of Directors of Enterprise Florida, Inc. (EFI)
from 1999-2004. EFI is the state of Florida’s primary organization
promoting statewide economic development through its public-private
partnership.
Ambassador
Siegel presently serves on the Board of Directors of the following
companies: CIM City, U.S. Medical Glove Company, Global Supply
Team, Moveo, LLC and the Caribbean Israel Leadership Coalition
(CILC), Caribbean Israel Venture Services, Inc. He also presently
serves on the following Advisory Boards: Usecrypt, Brand Labs
International (BLI), Elminda Ltd., Findings, and Sol Chip Ltd and
Maridose, LLC.
Ambassador
Siegel received a B.A. from the University of Connecticut in 1973
and J.D. from the Dickinson School of Law in 1976. In December
2014, he received an honorary degree of Doctor of Business
Administration from the University of South Carolina.
The
Board believes that Mr. Ambassador Siegel’s vast professional
experience, education, and professional credentials qualify him to
serve as a member of the Company’s Board Directors, and as a member of the
Board’s committees.
Required
Vote
You
may vote “FOR,” “AGAINST,” or “ABSTAIN” for
each director nominee. Directors are elected by a plurality of the
votes properly cast in person or by proxy. If a quorum is present
and voting, the five (5) nominees receiving the highest number of
affirmative votes will be elected. A “plurality vote” means that the winning
candidate only needs to get more votes than a competing candidate.
Because our directors are unopposed, he only needs one vote to be
elected.
Our
articles of incorporation do not permit stockholders to cumulate
their votes for the election of directors. Shares represented by
executed proxies will be voted if authority is not withheld for the
five (5) nominees’ election. Abstentions and broker non-votes will
not affect the outcome of the election of directors.
Broker
non-votes and abstentions will not affect the outcome of the
election of directors, although they will be counted for purposes
of determining whether there is a quorum.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH NOMINEE UNDER PROPOSAL No. 1.
PROPOSAL No. 2: ADVISORY VOTE
ON EXECUTIVE COMPENSATION (THE “SAY ON PAY VOTE”)
The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”), enacted in July 2010, requires the Company to
seek a non-binding advisory vote from its stockholders to approve
the compensation of its named executives. This proposal, also
referred to as the “say on pay vote,” is not intended to address
any specific item of compensation, but rather our overall
compensation program and policies relating to our named
executives.
Worksport’s
executive officer compensation program and policies are designed to
increase long-term stockholder value by attracting, retaining,
motivating and rewarding leaders with the competence, character,
experience and ambition necessary to enable Worksport to meet its
growth objectives.
EXECUTIVE COMPENSATION
The
following summary compensation table sets forth all compensation
awarded to, earned by, or paid to the named executive officers
during the years ended December 31, 2020 and 2019 in all capacities
for the accounts of our executives, including the principal
executive officer and principal financial officer.
Summary
Compensation Table
Name and Position |
|
Year |
|
|
Salary ($) |
|
|
All Other Compensation |
|
|
Total ($) |
|
Steven Rossi, Chief
Executive Officer, President and Chair of the Board |
|
|
2020 |
|
|
$ |
87,030 |
|
|
$ |
0 |
|
|
$ |
87,030 |
|
|
|
|
2019 |
|
|
$ |
65,589 |
|
|
$ |
0 |
|
|
$ |
65,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Johnston, Chief Financial
Officer |
|
|
2020 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
2019 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Employment
Agreements
We
entered into an employment agreement with Steven Rossi, our Chief
Executive Officer effective May 10, 2021 (the “Employment
Agreement”).
The
term of the Employment Agreement commenced on May 10, 2021 (the
“Effective Date”) and continues until the fifth
(5th) anniversary thereof (the “Initial Term”),
unless terminated earlier pursuant to the terms of the Employment
Agreement; provided that, on such fifth (5th)
anniversary of the Effective Date and each third annual anniversary
thereafter (such date and each annual anniversary thereof, a
“Renewal Date”), the Employment Agreement will be
automatically renewed, upon the same terms and conditions, for
successive periods of three (3) years (each, a “Renewal
Term”), unless either party provides written notice of its
intention not to extend the term of the Agreement at least 90 days
prior to the applicable Renewal Date.
Mr.
Rossi’s annual base salary will be $300,000 (“Base Salary”)
and Mr. Rossi shall be entitled to annual bonus (“Bonus”)
equal to 50% of his Base Salary, provided that certain performance
goals are met. The performance goals will be established on an
annual basis by the Compensation Committee of the Board of
Directors of the Company.
The
Employment Agreement may be terminated by the Company with or
without “Cause” (as defined below) or by the Executive with
or without “Good Reason” (as defined below).
The
term “Cause” includes discharge by Company on account of the
occurrence of one or more of the following events:
|
(i) |
Executive’s
continued refusal or failure to perform (other than by reason of
Disability) Executive’s material duties and responsibilities to the
Company; |
|
(ii) |
a
material breach of the Employment Agreement; |
|
(iii) |
an
intentional and material breach of the Confidential Information,
Assignment of Intellectual Property and Restricted Activities
sections of the Employment Agreement; |
|
(iv) |
willful,
grossly negligent or unlawful misconduct by Executive which causes
material harm to the Company or its reputation; |
|
(v) |
any
conduct engaged in that is materially detrimental to the business
or reputation of the Company; |
|
(vi) |
the
Company is directed in writing by regulatory or governmental
authorities to terminate the employment of Executive or Executive
engages in activities that (i) are not approved or authorized by
the Board, and (ii) cause actions to be taken by regulatory or
governmental authorities that have a material adverse effect on the
Company; or |
|
(vii) |
a
conviction, plea of guilty, or plea of nolo contendere by
Executive, of or with respect to a criminal offense which is a
felony or other crime involving dishonesty, disloyalty, fraud,
embezzlement, theft or similar action(s) (including, without
limitation, acceptance of bribes, kickbacks or self-dealing), or
the material breach of Executive’s fiduciary duties with respect to
the Company. |
The
term “Good Reason” generally includes a reduction in the
Base Salary, a reduction in job title, position or responsibility,
a material breach by the Company of the Employment Agreement, or a
material relocation in worksite.
In
the event the Employment Agreement is terminated by the Company
other than for Cause or by Mr. Rossi for Good Reason, Mr. Rossi
will receive an amount equal to his Base Salary at the rate in
effect as of the date immediately preceding such termination until
the earlier of (i) the expiration date of the Term or (ii) the
first anniversary of the date of termination; provided that if the
date of termination is after the first anniversary of the Effective
Date, Mr. Rossi will receive the Base Salary and accrued benefits
for 18 months following the effective date of termination. The
Rossi shall also be entitled to receive earned but not paid Bonuses
and any pro rata portion of the amount of Executive’s Bonus for the
year in which termination occurs that would have been payable based
on actual performance determined under the terms of the Bonus as
then in effect for such year, and expenses incurred through the
date of termination and any other benefits accrued but not paid.
Notwithstanding the foregoing, Mr. Rossi’s right to receive any
unearned compensation is conditioned on Mr. Rossi execution and
delivery to the Company a general release of claims.
If
the date of termination for Good Reason is after the end of a
calendar year but prior to such time as Mr. Rossi’s Bonus, if any,
is paid, then Mr. Rossi will receive a Bonus as determined by the
Compensation Committee prorated for the time of employment during
such year of termination.
Mr.
Rossi has the right under the Employment Agreement to terminate his
employment for other than Good Reason upon 30 days’ written notice
to the Company. If Mr. Rossi terminates the Employment Agreement
for other than Good Reason, Mr. Rossi will receive an amount equal
to his base salary, earned but not paid plus expenses incurred
through the date of termination and any other benefits accrued but
not paid.
If a
Change in Control (as defined below) occurs and Mr. Rossi’s
employment is terminated by the Company for any reason other than
Cause or disability or Mr. Rossi terminates for Good Reason, Mr.
Rossi will receive a non-prorated severance equal to two times his
Base Salary and Bonus for the year of termination and all vested
and accrued benefits up to the date of termination. If Mr. Rossi
holds any non-vested option awards at the date of termination in
connection with a Change in Control, all options not vested will
vest and become exercisable until the earlier of three (3) years
following termination or the expiration of the options as granted.
If Mr. Rossi holds any restricted securities at the date of
termination in connection with a Change in Control, all
restrictions will lapse and all such securities will be
unrestricted, vested and immediately payable. All of Mr. Rossi’s
performance-based goals will also be deemed met in connection with
termination by Change in Control in calculating bonus and other
awards.
The
term “Change in Control” generally means a transaction that
occurs whereby more than 50% of the Company’s voting power is
acquired by a third party, the consummation involving the Company
of a merger, consolidation, reorganization or business combination
or the sale of substantially all of the Company’s assets to a third
party.
Pursuant
to the clawback provisions of the Employment Agreement, any amounts
payable under the Employment Agreement are subject to any policy
(whether in existence as of the Effective Date or later adopted)
established by the Company providing for clawback or recovery of
amounts that were paid to Mr. Rossi. The Company will make any
determination for clawback or recovery in its sole discretion and
in accordance with any applicable law or regulation.
The
Employment Agreement provides that the Company shall indemnify M.
Rossi to the fullest extent permitted by law for all amounts
(including, without limitation, judgments, fines, settlement
payments, expenses and reasonable out-of-pocket attorneys’ fees)
incurred or paid by Executive in connection with any action, suit,
investigation or proceeding, or threatened action, suit,
investigation or proceeding, arising out of or relating to the
performance by Executive of services for, or the acting by
Executive as a director, officer or Executive of, Company, or any
subsidiary of the Company.
In
addition to the foregoing, pursuant to the terms of the Employment
Agreement, Mr. Rossi agreed to the Company amending the Series A
Preferred Stock’s Certificate of Designation to eliminate his right
to convert such his Series A Preferred Stock into 51% of the
outstanding Common Stock of the Company. In consideration for Mr.
Rossi agreeing to terminate his conversion rights, the Company
issued Mr. Rossi an aggregate of 1,717,535 unregistered shares of
Common Stock equal to 25% of the outstanding shares of Common Stock
as of the Effective Date.
Compensation of Directors
Directors
are permitted to receive fixed fees and other compensation for
their services as directors. The Board has the authority to fix the
compensation of directors. No amounts have been paid to, or accrued
to, directors in such capacity.
We
believe that our executive officer compensation programs, with
their balance of short-term and long-term incentives, reward
sustained performance that is aligned with long-term stockholder
interests. Accordingly, we believe that the compensation paid to
our named executives in 2020 pursuant to such programs was fair and
appropriate and are asking our stockholders to vote FOR the
adoption of the following resolution:
“RESOLVED,
that the Company’s stockholders approve, on an advisory basis, the
compensation of the Company’s named executives for 2020, as
disclosed in this proxy statement, including the Compensation
Discussion and Analysis, the executive compensation tables, and the
related narrative.”
The
approval, on an advisory basis, of the say on pay vote proposal
requires the affirmative vote of holders of a majority of the
voting power of shares of capital stock present at the Annual
Meeting in person or represented by proxy and voting together. The
vote is advisory in nature and therefore not binding on us or our
Board. However, our Board and its compensation committees value the
opinions of all of our stockholders and will consider the outcome
of this vote when making future compensation decisions for our
named executives.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADVISORY
VOTE ON EXECUTIVE COMPENSATION.
PROPOSAL No. 3: - ADVISORY VOTE ON
THE FREQUENCY OF HOLDING THE SAY ON PAY VOTE
In
addition to the advisory vote on executive compensation set forth
above, the Dodd-Frank Act also requires the Company to seek a
non-binding advisory vote from its stockholders regarding the
frequency of holding the advisory vote on executive compensation in
the future. In casting your advisory vote, you may indicate whether
you prefer that we seek an advisory vote every one, two or three
years. You may also abstain from voting on this matter.
After
thoughtful consideration, our Board believes that holding an
advisory vote on executive compensation every three years is the
most appropriate policy for the Company and its stockholders at
this time. Our Board believes that a triennial vote more closely
mirrors the long-term nature of a significant portion of our
executive officer compensation program and will discourage
short-term thinking and, as a result, a stockholder’s analysis of
our performance and compensation practices would be more fully
informed when viewed over a three-year period. Moreover, allowing
more time in between the advisory votes on executive compensation
would provide a greater opportunity for our Board and its
compensation committees to engage in meaningful analysis of any
compensation issues and consideration of any stockholder
concerns.
The
approval, on an advisory basis, of the frequency of holding the say
on pay vote proposal requires the affirmative vote of holders of a
majority of the voting power of shares of common stock present at
the Annual Meeting in person or represented by proxy and voting
together. However, if no choice receives a majority of votes, then
the option on the frequency of the advisory vote that receives the
highest number of votes cast by stockholders will be considered by
the Board as the stockholders’ recommendation as to the frequency
of holding future say on pay votes. The vote is advisory in nature
and therefore not binding on us or our Board. However, our Board
values the opinions of all of our stockholders and the Board and
its compensation committees will consider the outcome of this vote
when making future decisions on the frequency with which we will
hold an advisory vote on executive compensation.
RECOMMENDATION OF THE
BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR HOLDING THE SAY ON PAY VOTE ONCE EVERY THREE
YEARS.
PROPOSAL
No. 4: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Board has selected the firm of Haynie & Co. as the Company’s
independent registered public accounting firm for the fiscal year
ending December 31, 2021 and is submitting this selection for
ratification by our stockholders at the Annual Meeting. If our
stockholders do not ratify the selection of Haynie & Co., the
Board will consider making a change of its auditors for the fiscal
year ending December, 2022.
Fees
Paid to Auditors
For
the years ended December 31, 2020 and 2019, Haynie & Company
served as our independent registered public accounting
firm.
The
following table sets forth the aggregate fees paid or accrued for
professional services rendered by our independent accountants for
the audit of our annual consolidated financial statements for the
years ended December 31, 2020 and 2019, and the aggregate fees paid
or accrued for audit-related services and all other services
rendered by our independent accountants for those years.
|
|
Year
Ended
December
31,
|
|
|
|
2020 |
|
|
2019 |
|
Audit Fees |
|
$ |
60,556 |
|
|
$ |
84,287 |
|
Tax Fees |
|
|
— |
|
|
|
— |
|
Other |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
60,556 |
|
|
$ |
84,287 |
|
The
category of “Audit fees” includes fees for our annual audit,
quarterly reviews of our 10-Q reports, and services rendered in
connection with statutory or regulatory filings with the SEC. “Tax
fees” include fees incurred in the review and preparation of our
annual income tax filings.
The
audit committee, chaired by Craig Loverock, performs the duties of
evaluating the scope and cost of the engagement of an auditor
before the auditor renders audit and non-audit services.
Policies
and Procedures
In
accordance with the Audit Committee Charter, all audit (including
audit-related) and non-audit services performed by Haynie &
Co., as described above, were pre-approved by the Audit Committee,
which concluded that the provision of such services by our
independent registered public accounting firm was compatible with
the maintenance of that firm’s independence in the conduct of its
auditing functions. The Audit Committee Charter authorizes the
Audit Committee to appoint a subcommittee of one or more members of
the Audit Committee and/or to pre-approve non-audit services by
establishing detailed pre-approval policies as to the particular
service, provided that the Audit Committee is informed of each
service pre-approved (no less frequently than at each meeting of
the Audit Committee) and that no pre-approval shall be delegated to
the Company’s management except as permitted by applicable law and
regulation. In considering whether to pre-approve any non-audit
services, the Audit Committee (or its delegates) considers whether
the provision of such services is compatible with maintaining the
independence of our independent registered public accounting
firm.
Required
Vote
In
order to become effective, the proposal to ratify the appointment
of Haynie & Co. as The Company’s independent registered public
accounting firm for the year ending December 31, 2021 requires the
affirmative vote of the majority of shares present virtually online
or represented by proxy at the Annual Meeting and entitled to
vote.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF
THE APPOINTMENT OF HAYNIE & CO. AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM UNDER PROPOSAL No. 4.
PROPOSAL
No. 5: APPROVAL OF THE AMENDMENT TO THE COMPANY’S 2015 EQUITY
INCENTIVE PLAN
Amendment
to the Company’s 2015 Equity Incentive Plan
At
the Annual Meeting, stockholders will be asked to approve the
amendment to the Worksport 2015 Equity Incentive Plan (the “2015
Plan”) as described below. The 2015 Plan was initially approved by
the stockholders July, 2015. The proposed amendment to the 2015
Plan (the “Amendment” and together the “Amended 2015 Plan”),
described below, were adopted by the Board on October 26, 2021,
subject to stockholder approval. The persons named in the enclosed
form of proxy intend to vote FOR the Amended 2015 Plan.
The
proposed amendment to the 2015 Plan would increase the maximum
number of shares that may be issued pursuant to the 2015 Plan by an
additional 1,700,000 shares, representing approximately 10% of the
issued and outstanding shares of common stock of the Company issued
and outstanding on the Record Date. As of the Record Date, a total
of 500,000 shares were subject to outstanding awards granted under
the 2015 Plan.
Required
Vote
To become
effective, the proposal to ratify the amendment to the Company’s
2015 Equity Incentive Plan requires the affirmative vote of the
majority of shares present in person or represented by proxy at the
Annual Meeting and entitled to vote. Broker non-votes will not be
counted in evaluating the results of the vote.
RECOMMENDATION
OF THE BOARD OF DIRECTORS
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” APPROVAL OF THE AMENDMENT TO THE COMPANY’S 2015 EQUITY
INCENTIVE PLAN
UNDER
PROPOSAL NO. 5.
CORPORATE
GOVERNANCE
Term
of Office
Our
directors are appointed for a one-year term to hold office until
the next annual general meeting of our stockholders or until their
resignation or removal in accordance with our bylaws, or their
successor is elected. Our officers are appointed by our Board of
Directors and hold office until removed by the Board of
Directors.
Family
Relationships
Mr.
Lorenzo Rossi is Steven Rossi’s father. There are no other family
relationships between any of our directors or executive
officers.
Involvement
in Legal Proceedings
To
our knowledge, 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 of our director or
executive officers.
Code
of Business Conduct and Ethics
Our
Board has adopted a written code of business conduct and ethics
(“Code”) that applies to our directors, officers and
employees, including our principal executive officer, principal
financial officer and principal accounting officer or controller,
or persons performing similar functions. We intend to post on our
website a current copy of the Code and all disclosures that are
required by law in regard to any amendments to, or waivers from,
any provision of the Code.
Director
Independence and Board Committees
An
“independent director” is defined generally as a person other than
an officer or employee of the Company or its subsidiaries or any
other individual having a relationship which in the opinion of the
Company’s Board, would interfere with the director’s exercise of
independent judgment in carrying out the responsibilities of a
director. Steven Rossi, Lorenzo Rossi, Craig Loverock, William
Caragol and Ned L. Siegel serve as members of our Board of
Directors. Our Board has determined that Craig Loverock, William
Caragol and Ned L. Siegel are “independent directors” as defined in
the Nasdaq listing rules and under Rule 10-A-3(b)(1) of the
Exchange Act and applicable SEC rules.
Audit Committee. We currently have a standing Audit
Committee. Craig Loverock, William Caragol and Ned L. Siegel serve
as members of our Audit Committee. Mr. Loverock serves as the Audit
Committee Chairman and Financial Expert. Under the Nasdaq listing
standards and applicable SEC rules, we are required to have at
least three members of the Audit Committee, all of whom must be
independent and financially literate, and one member of the Audit
Committee must qualify as an “audit committee financial expert” as
defined in applicable SEC rules. Craig Loverock qualifies as an
“audit committee financial expert” under the SEC rules.
We
have adopted an Audit Committee charter, which details the purpose
and principal functions of the Audit Committee,
including:
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appoint,
compensate, and oversee the work of any registered public
accounting firm employed by us; |
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resolve
any disagreements between management and the auditor regarding
financial reporting; |
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pre-approve
all auditing and non-audit services; |
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retain
independent counsel, accountants, or others to advise the Audit
Committee or assist in the conduct of an investigation; |
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seek
any information it requires from employees-all of whom are directed
to cooperate with the Audit Committee’s requests-or external
parties; |
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meet
with our officers, external auditors, or outside counsel, as
necessary; and |
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oversee
that management has established and maintained processes to assure
our compliance with all applicable laws, regulations and corporate
policy. |
Compensation Committee. We have a standing Compensation
Committee. William Caragol, Craig Loverock and Ned L. Siegel serve
as members of our Compensation Committee. Mr. Caragol serves as the
Compensation Committee Chairman. Under the Nasdaq listing standards
and applicable SEC rules, we are required to have at least two
members of the Compensation Committee, all of whom must be
independent.
We
have adopted a Compensation Committee charter, which details the
purpose and responsibility of the Compensation Committee,
including:
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discharge
the responsibilities of the Board relating to compensation of our
directors, executive officers and key employees; |
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assist
the Board in establishing appropriate incentive compensation and
equity-based plans and to administer such plans; |
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oversee
the annual process of evaluation of the performance of our
management; and |
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perform
such other duties and responsibilities as enumerated in and
consistent with Compensation Committee’s charter. |
The
Compensation Committee charter permits the committee to retain or
receive advice from a compensation consultant and outlines certain
requirements to ensure the consultants independence or certain
circumstances under which the consultant need not be independent.
However, as of the date hereof, the Company has not retained such a
consultant.
Nominating and Governance Committee. We have a standing
Nominating and Corporate Governance Committee. Craig Loverock,
William Caragol and Ned L. Siegel serve as members of the
Nominating and Corporate Governance. Ned L. Siegel serves as the
Nominating and Corporate Governance Committee Chairman.
We
have adopted a Nominating and Governance Committee charter, which
details the purpose and responsibilities of the Nominating and
Governance Committee, including:
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assist
the Board by identifying qualified candidates for director
nominees, and to recommend to the Board of Directors the director
nominees for the next annual meeting of stockholders; |
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lead
the Board in its annual review of its performance; |
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recommend
to the Board director nominees for each committee of the Board;
and |
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develop
and recommend to the Board corporate governance guidelines
applicable to us. |
Meetings
of the Board of Directors
During
its fiscal year ended December 31, 2020, the Board met from time to
time informally and acted by written consent on numerous
occasions.
Indemnification
and Limitation on Liability of Directors
Our
articles of incorporation limit the liability of our directors to
the fullest extent permitted by Nevada law. Nothing contained in
the provisions will be construed to deprive any director of his
right to all defenses ordinarily available to the director nor will
anything herein be construed to deprive any director of any right
he may have for contribution from any other director or other
person.
At
present, there is no pending litigation or proceeding involving any
of our directors, officers, employees or agents where
indemnification will be required or permitted. Insofar as
indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable.
STOCKHOLDER
PROPOSALS
For
nominations or other business to be properly brought before an
annual meeting by a stockholder and for nominations to be properly
brought before a special meeting by a stockholder, the stockholder
of record must have given timely notice thereof in writing to the
secretary of the Corporation, and, in the case of business other
than nominations, such other business must be a proper matter for
stockholder action. To be timely, a stockholder’s notice shall be
delivered to the secretary at the principal executive offices of
the Corporation not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior
to the first anniversary of the preceding year’s annual meeting;
provided that in the event that the date of the annual meeting is
more than 30 days before or more than 70 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of
business on the later of the 90th day prior to such annual meeting
or the 10th day following the day on which public announcement (as
stated in the Bylaws) of the date of such meeting is first made by
the Corporation. In no event shall the public announcement of an
adjournment or postponement of an annual meeting commence a new
time period (or extend any time period) for the giving of a
stockholder’s notice as described above. The notice must be
provided by a stockholder of record and must set forth specific
criteria as defined in the Articles of Incorporation. Such
proposals must also meet the other requirements and procedures
prescribed by Rule 14a-8 under the Exchange Act relating to
stockholders’ proposals.
DELIVERY OF DOCUMENTS TO
STOCKHOLDERS SHARING AN ADDRESS
To
the extent we deliver a paper copy of the proxy materials to
stockholders, the SEC rules allow us to deliver a single copy of
proxy materials to any household at which two or more stockholders
reside, if we believe the stockholders are members of the same
family.
We
will promptly deliver, upon oral or written request, a separate
copy of the proxy materials to any stockholder residing at the same
address as another stockholder and currently receiving only one
copy of the proxy materials who wishes to receive his or her own
copy. Requests should be directed to the attention of our Corporate
Secretary by mail to Worksport Ltd., 7299 E Danbro Cres.
Mississaugua, Ontario L5N 6P8.
OTHER
MATTERS
Upon
written request addressed to our Corporate Secretary at 7299 E
Danbro Cres. Mississaugua, Ontario L5N 6P8 from any person
solicited herein, we will provide, at no cost, a copy of our fiscal
2020 Annual Report on Form 10-K as filed with the SEC.
Our
Board of Directors does not know of any matter to be brought before
the Annual Meeting other than the matters set forth in the Notice
of Annual Meeting of Stockholders and matters incident to the
conduct of the Annual Meeting. If any other matter should properly
come before the Annual Meeting, the persons named in the enclosed
proxy card will have discretionary authority to vote all proxies
with respect thereto in accordance with their best
judgment.
VIRTUAL ACCESS TO THE ANNUAL MEETING
The
Annual Meeting of Stockholders will be held virtually via the
internet at www.virtualshareholdermeeting.com/WKSP2021 on December
20, 2021 at 9:00 a.m. Eastern Time.
EXHIBIT 1
AMENDED
2015 EQUITY INCENTUVE PLAN
Amended 2015 Equity Incentive Plan
Adopted by the Board of Directors: June 5, 2015
Termination Date: June 5, 2025
General.
Eligible
Stock Award Recipients. Employees, Directors and Consultants
are eligible to receive Stock Awards.
Available
Stock Awards. The Plan provides for the grant of the following
types of Stock Awards: (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Appreciation Rights, (iv)
Restricted Stock Awards, (v) Restricted Stock Unit Awards and (vi)
Other Stock Awards.
Purpose.
The Plan, through the granting of Stock Awards, is intended to help
the Company secure and retain the services of eligible award
recipients, provide incentives for such persons to exert maximum
efforts for the success of the Company and any Affiliate and
provide a means by which the eligible recipients may benefit from
increases in value of the Common Stock.
Administration.
Administration
by Board. The Board will administer the Plan. The Board may
delegate administration of the Plan to a Committee or Committees,
as provided in Section 2(c).
Powers
of Board. The Board will have the power, subject to, and within
the limitations of, the express provisions of the Plan:
To
determine (A) who will be granted Stock Awards; (B) when and how
each Stock Award will be granted; (C) what type of Stock Award will
be granted; (D) the provisions of each Stock Award (which need not
be identical), including when a person will be permitted to
exercise or otherwise receive cash or Common Stock under the Stock
Award; (E) the number of shares of Common Stock subject to a Stock
Award; and (F) the Fair Market Value applicable to a Stock
Award.
To
construe and interpret the Plan and Stock Awards granted under it,
and to establish, amend and revoke rules and regulations for
administration of the Plan and Stock Awards. The Board, in the
exercise of these powers, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a
manner and to the extent it will deem necessary or expedient to
make the Plan or Stock Award fully effective.
To
settle all controversies regarding the Plan and Stock Awards
granted under it.
To
accelerate, in whole or in part, the time at which a Stock Award
may be exercised or vest (or at which cash or shares of Common
Stock may be issued).
To
suspend or terminate the Plan at any time. Except as otherwise
provided in the Plan or a Stock Award Agreement, suspension or
termination of the Plan will not impair a Participant’s rights
under his or her then-outstanding Stock Award without his or her
written consent except as provided in subsection (viii)
below.
To
amend the Plan in any respect the Board deems necessary or
advisable, including, without limitation, by adopting amendments
relating to Incentive Stock Options and certain nonqualified
deferred compensation under Section 409A of the Code and/or to make
the Plan or Stock Awards granted under the Plan compliant with the
requirements for Incentive Stock Options or exempt from or
compliant with the requirements for nonqualified deferred
compensation under Section 409A of the Code, subject to the
limitations, if any, of applicable law. However, if required by
applicable law, and except as provided in Section 9(a) relating to
Capitalization Adjustments, the Company will seek stockholder
approval of any amendment of the Plan that (A) materially increases
the number of shares of Common Stock available for issuance under
the Plan, (B) materially expands the class of individuals eligible
to receive Stock Awards under the Plan, (C) materially increases
the benefits accruing to Participants under the Plan, (D)
materially reduces the price at which shares of Common Stock may be
issued or purchased under the Plan, (E) materially extends the term
of the Plan, or (F) materially expands the types of Stock Awards
available for issuance under the Plan. Except as provided in the
Plan (including subsection (viii) below) or a Stock Award
Agreement, no amendment of the Plan will impair a Participant’s
rights under an outstanding Stock Award unless (1) the Company
requests the consent of the affected Participant, and (2) such
Participant consents in writing.
To
submit any amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 422 of the Code regarding
Incentive Stock Options.
To
approve forms of Stock Award Agreements for use under the Plan and
to amend the terms of any one or more Stock Awards, including, but
not limited to, amendments to provide terms more favorable to the
Participant than previously provided in the Stock Award Agreement,
subject to any specified limits in the Plan that are not subject to
Board discretion; provided however, that a Participant’s
rights under any Stock Award will not be impaired by any such
amendment unless (A) the Company requests the consent of the
affected Participant, and (B) such Participant consents in writing.
Notwithstanding the foregoing, (1) a Participant’s rights will not
be deemed to have been impaired by any such amendment if the Board,
in its sole discretion, determines that the amendment, taken as a
whole, does not materially impair the Participant’s rights, and (2)
subject to the limitations of applicable law, if any, the Board may
amend the terms of any one or more Stock Awards without the
affected Participant’s consent (A) to maintain the qualified status
of the Stock Award as an Incentive Stock Option under Section 422
of the Code; (B) to change the terms of an Incentive Stock Option,
if such change results in impairment of the Award solely because it
impairs the qualified status of the Award as an Incentive Stock
Option under Section 422 of the Code; (C) to clarify the manner of
exemption from, or to bring the Stock Award into compliance with,
Section 409A of the Code; or (D) to comply with other applicable
laws.
Generally,
to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company
and that are not in conflict with the provisions of the Plan or
Stock Awards.
To
adopt such procedures and sub-plans as are necessary or appropriate
to permit participation in the Plan by Employees, Directors or
Consultants who are foreign nationals or employed outside the
United States (provided that Board approval will not be necessary
for immaterial modifications to the Plan or any Stock Award
Agreement that are required for compliance with the laws of the
relevant foreign jurisdiction).
To
effect, with the consent of any adversely affected Participant, (A)
the reduction of the exercise, purchase or strike price of any
outstanding Stock Award; (B) the cancellation of any outstanding
Stock Award and the grant in substitution therefor of a new (1)
Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock
Unit Award, (4) Other Stock Award, (5) cash and/or (6) other
valuable consideration determined by the Board, in its sole
discretion, with any such substituted award (x) covering the same
or a different number of shares of Common Stock as the cancelled
Stock Award and (y) granted under the Plan or another equity or
compensatory plan of the Company; or (C) any other action that is
treated as a repricing under generally accepted accounting
principles.
Delegation
to Committee. The Board may delegate some or all of the
administration of the Plan to a Committee or Committees. If
administration of the Plan is delegated to a Committee, the
Committee will have, in connection with the administration of the
Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a
subcommittee of the Committee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to
the Board will thereafter be to the Committee or subcommittee). Any
delegation of administrative powers will be reflected in
resolutions, not inconsistent with the provisions of the Plan,
adopted from time to time by the Board or Committee (as
applicable). The Committee may, at any time, abolish the
subcommittee and/or revest in the Committee any powers delegated to
the subcommittee. The Board may retain the authority to
concurrently administer the Plan with the Committee and may, at any
time, revest in the Board some or all of the powers previously
delegated.
Delegation
to an Officer. The Board may delegate to one (1) or more
Officers the authority to do one or both of the following: (i)
designate Employees who are not Officers to be recipients of
Options and SARs (and, to the extent permitted by applicable law,
other Stock Awards) and, to the extent permitted by applicable law,
the terms of such Stock Awards, and (ii) determine the number of
shares of Common Stock to be subject to such Stock Awards granted
to such Employees; provided, however, that the Board resolutions
regarding such delegation will specify the total number of shares
of Common Stock that may be subject to the Stock Awards granted by
such Officer and that such Officer may not grant a Stock Award to
himself or herself. Any such Stock Awards will be granted on the
form of Stock Award Agreement most recently approved for use by the
Committee or the Board, unless otherwise provided in the
resolutions approving the delegation authority. The Board may not
delegate authority to an Officer who is acting solely in the
capacity of an Officer (and not also as a Director) to determine
the Fair Market Value pursuant to Section 13(t) below.
Effect
of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith will not be subject
to review by any person and will be final, binding and conclusive
on all persons.
Shares Subject to the Plan.
Share
Reserve.
Subject
to Section 9(a) relating to Capitalization Adjustments, the
aggregate number of shares of Common Stock that may be issued
pursuant to Stock Awards from and after the Effective Date will not
exceed approximately 10% of the total equity of the Company,
calculated post-increase of the authorized shares (which currently
equals 2,200,000 shares) (the “Share
Reserve”).
For
clarity, the Share Reserve in this Section 3(a) is a limitation on
the number of shares of Common Stock that may be issued pursuant to
the Plan. Accordingly, this Section 3(a) does not limit the
granting of Stock Awards except as provided in Section
7(a).
Reversion
of Shares to the Share Reserve. If a Stock Award or any portion
thereof (i) expires or otherwise terminates without all of the
shares covered by such Stock Award having been issued or (ii) is
settled in cash (i.e., the Participant receives cash rather
than stock), such expiration, termination or settlement will not
reduce (or otherwise offset) the number of shares of Common Stock
that may be available for issuance under the Plan. If any shares of
Common Stock issued pursuant to a Stock Award are forfeited back to
or repurchased by the Company because of the failure to meet a
contingency or condition required to vest such shares in the
Participant, then the shares that are forfeited or repurchased will
revert to and again become available for issuance under the Plan.
Any shares reacquired by the Company in satisfaction of tax
withholding obligations on a Stock Award or as consideration for
the exercise or purchase price of a Stock Award will again become
available for issuance under the Plan.
Incentive
Stock Option Limit. Subject to the Share Reserve and Section
9(a) relating to Capitalization Adjustments, the aggregate maximum
number of shares of Common Stock that may be issued pursuant to the
exercise of Incentive Stock Options will be 2,200,000 shares of
Common Stock.
Source
of Shares. The stock issuable under the Plan will be shares of
authorized but unissued or reacquired Common Stock, including
shares repurchased by the Company on the open market or
otherwise.
Eligibility.
Eligibility
for Specific Stock Awards. Incentive Stock Options may be
granted only to employees of the Company or a “parent corporation”
or “subsidiary corporation” thereof (as such terms are defined in
Sections 424(e) and 424(f) of the Code). Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors and
Consultants; provided, however, that Stock Awards may not be
granted to Employees, Directors and Consultants who are providing
Continuous Service only to any “parent” of the Company, as such
term is defined in Rule 405, unless (i) the stock underlying such
Stock Awards is treated as “service recipient stock” under Section
409A of the Code (for example, because the Stock Awards are granted
pursuant to a corporate transaction such as a spin off
transaction), or (ii) the Company, in consultation with its legal
counsel, has determined that such Stock Awards are otherwise exempt
from or alternatively comply with the distribution requirements of
Section 409A of the Code.
Ten
Percent Stockholders. A Ten Percent Stockholder will not be
granted an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair
Market Value on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of
grant.
Consultants.
A Consultant will not be eligible for the grant of a Stock Award
if, at the time of grant, either the offer or sale of the Company’s
securities to such Consultant is not exempt under Rule 701 because
of the nature of the services that the Consultant is providing to
the Company, because the Consultant is not a natural person, or
because of any other provision of Rule 701, unless the Company
determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities
Act as well as comply with the securities laws of all other
relevant jurisdictions.
Provisions Relating to Options and Stock Appreciation
Rights.
Each
Option or SAR will be in such form and will contain such terms and
conditions as the Board deems appropriate. All Options will be
separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and, if certificates are issued, a
separate certificate or certificates will be issued for shares of
Common Stock purchased on exercise of each type of Option. If an
Option is not specifically designated as an Incentive Stock Option,
or if an Option is designated as an Incentive Stock Option but some
portion or all of the Option fails to qualify as an Incentive Stock
Option under the applicable rules, then the Option (or portion
thereof) will be a Nonstatutory Stock Option. The provisions of
separate Options or SARs need not be identical; provided,
however, that each Stock Award Agreement will conform to
(through incorporation of provisions hereof by reference in the
applicable Stock Award Agreement or otherwise) the substance of
each of the following provisions:
Term.
Subject to the provisions of Section 4(b) regarding Ten Percent
Stockholders, no Option or SAR will be exercisable after the
expiration of ten (10) years from the date of its grant or such
shorter period specified in the Stock Award Agreement.
Exercise
Price. Subject to the provisions of Section 4(b) regarding Ten
Percent Stockholders, the exercise or strike price of each Option
or SAR will be not less than one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Option or SAR on
the date the Stock Award is granted. Notwithstanding the foregoing,
an Option or SAR may be granted with an exercise or strike price
lower than one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Stock Award if such Stock Award is
granted pursuant to an assumption of or substitution for another
option or stock appreciation right pursuant to a Corporate
Transaction and in a manner consistent with the provisions of
Section 409A of the Code and, if applicable, Section 424(a) of the
Code. Each SAR will be denominated in shares of Common Stock
equivalents.
Purchase
Price for Options. The purchase price of Common Stock acquired
pursuant to the exercise of an Option may be paid, to the extent
permitted by applicable law and as determined by the Board in its
sole discretion, by any combination of the methods of payment set
forth below. The Board will have the authority to grant Options
that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant
Options that require the consent of the Company to use a particular
method of payment. The permitted methods of payment are as
follows:
by
cash, check, bank draft or money order payable to the
Company;
pursuant
to a program developed under Regulation T as promulgated by the
Federal Reserve Board that, prior to the issuance of the stock
subject to the Option, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales
proceeds;
by
delivery to the Company (either by actual delivery or attestation)
of shares of Common Stock;
if an
Option is a Nonstatutory Stock Option, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issuable upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the
aggregate exercise price; provided, however, that the Company will
accept a cash or other payment from the Participant to the extent
of any remaining balance of the aggregate exercise price not
satisfied by such reduction in the number of whole shares to be
issued. Shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that
(A) shares issuable upon exercise are used to pay the exercise
price pursuant to the “net exercise,” (B) shares are delivered to
the Participant as a result of such exercise, and (C) shares are
withheld to satisfy tax withholding obligations;
according
to a deferred payment or similar arrangement with the Optionholder;
provided, however, that interest will compound at least
annually and will be charged at the minimum rate of interest
necessary to avoid (A) the imputation of interest income to the
Company and compensation income to the Optionholder under any
applicable provisions of the Code, and (B) the classification of
the Option as a liability for financial accounting purposes;
or
in
any other form of legal consideration that may be acceptable to the
Board and specified in the applicable Stock Award
Agreement.
Exercise
and Payment of a SAR. To exercise any outstanding SAR, the
Participant must provide written notice of exercise to the Company
in compliance with the provisions of the Stock Award Agreement
evidencing such SAR. The appreciation distribution payable on the
exercise of a SAR will be not greater than an amount equal to the
excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the SAR) of a number of shares of Common Stock equal to
the number of Common Stock equivalents in which the Participant is
vested under such SAR, and with respect to which the Participant is
exercising the SAR on such date, over (B) the strike price. The
appreciation distribution may be paid in Common Stock, in cash, in
any combination of the two or in any other form of consideration,
as determined by the Board and contained in the Stock Award
Agreement evidencing such SAR.
Transferability
of Options and SARs. The Board may, in its sole discretion,
impose such limitations on the transferability of Options and SARs
as the Board will determine. In the absence of such a determination
by the Board to the contrary, the following restrictions on the
transferability of Options and SARs will apply:
Restrictions
on Transfer. An Option or SAR will not be transferable except
by will or by the laws of descent and distribution (and pursuant to
subsections (ii) and (iii) below), and will be exercisable during
the lifetime of the Participant only by the Participant. The Board
may permit transfer of the Option or SAR in a manner that is not
prohibited by applicable tax and securities laws. Except as
explicitly provided herein, neither an Option nor a SAR may be
transferred for consideration.
Domestic
Relations Orders. Subject to the approval of the Board or a
duly authorized Officer, an Option or SAR may be transferred
pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation
instrument as permitted by Treasury Regulation 1.421-1(b)(2). If an
Option is an Incentive Stock Option, such Option may be deemed to
be a Nonstatutory Stock Option as a result of such
transfer.
Beneficiary
Designation. Subject to the approval of the Board or a duly
authorized Officer, a Participant may, by delivering written notice
to the Company, in a form approved by the Company (or the
designated broker), designate a third party who, upon the death of
the Participant, will thereafter be entitled to exercise the Option
or SAR and receive the Common Stock or other consideration
resulting from such exercise. In the absence of such a designation,
the executor or administrator of the Participant’s estate will be
entitled to exercise the Option or SAR and receive the Common Stock
or other consideration resulting from such exercise. However, the
Company may prohibit designation of a beneficiary at any time,
including due to any conclusion by the Company that such
designation would be inconsistent with the provisions of applicable
laws.
Vesting
Generally. The total number of shares of Common Stock subject
to an Option or SAR may vest and therefore become exercisable in
periodic installments that may or may not be equal. The Option or
SAR may be subject to such other terms and conditions on the time
or times when it may or may not be exercised (which may be based on
the satisfaction of performance goals or other criteria) as the
Board may deem appropriate. The vesting provisions of individual
Options or SARs may vary. The provisions of this Section 5(f) are
subject to any Option or SAR provisions governing the minimum
number of shares of Common Stock as to which an Option or SAR may
be exercised.
Termination
of Continuous Service. Except as otherwise provided in the
applicable Stock Award Agreement or other agreement between the
Participant and the Company, if a Participant’s Continuous Service
terminates (other than for Cause and other than upon the
Participant’s death or Disability), the Participant may exercise
his or her Option or SAR (to the extent that the Participant was
entitled to exercise such Stock Award as of the date of termination
of Continuous Service) within the period of time ending on the
earlier of (i) the date three (3) months following the termination
of the Participant’s Continuous Service (or such longer or shorter
period specified in the applicable Stock Award Agreement, which
period will not be less than thirty (30) days if necessary to
comply with applicable laws unless such termination is for Cause)
and (ii) the expiration of the term of the Option or SAR as set
forth in the Stock Award Agreement. If, after termination of
Continuous Service, the Participant does not exercise his or her
Option or SAR within the applicable time frame, the Option or SAR
(as applicable) will terminate.
Extension
of Termination Date. Except as otherwise provided in the
applicable Stock Award Agreement or other agreement between the
Participant and the Company, if the exercise of an Option or SAR
following the termination of the Participant’s Continuous Service
(other than for Cause and other than upon the Participant’s death
or Disability) would be prohibited at any time solely because the
issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option or SAR will
terminate on the earlier of (i) the expiration of a total period of
three (3) months (that need not be consecutive) after the
termination of the Participant’s Continuous Service during which
the exercise of the Option or SAR would not be in violation of such
registration requirements, or (ii) the expiration of the term of
the Option or SAR as set forth in the applicable Stock Award
Agreement. In addition, unless otherwise provided in a
Participant’s Stock Award Agreement, if the sale of any Common
Stock received upon exercise of an Option or SAR following the
termination of the Participant’s Continuous Service (other than for
Cause) would violate the Company’s insider trading policy, then the
Option or SAR will terminate on the earlier of (i) the expiration
of a period of time (that need not be consecutive) equal to the
applicable post-termination exercise period after the termination
of the Participant’s Continuous Service during which the sale of
the Common Stock received upon exercise of the Option or SAR would
not be in violation of the Company’s insider trading policy, or
(ii) the expiration of the term of the Option or SAR as set forth
in the applicable Stock Award Agreement.
Disability
of Participant. Except as otherwise provided in the applicable
Stock Award Agreement or other agreement between the Participant
and the Company, if a Participant’s Continuous Service terminates
as a result of the Participant’s Disability, the Participant may
exercise his or her Option or SAR (to the extent that the
Participant was entitled to exercise such Option or SAR as of the
date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date twelve (12)
months following such termination of Continuous Service (or such
longer or shorter period specified in the Stock Award Agreement,
which period will not be less than six (6) months if necessary to
comply with applicable laws), and (ii) the expiration of the term
of the Option or SAR as set forth in the Stock Award Agreement. If,
after termination of Continuous Service, the Participant does not
exercise his or her Option or SAR within the applicable time frame,
the Option or SAR (as applicable) will terminate.
Death
of Participant. Except as otherwise provided in the applicable
Stock Award Agreement or other agreement between the Participant
and the Company, if (i) a Participant’s Continuous Service
terminates as a result of the Participant’s death, or (ii) the
Participant dies within the period (if any) specified in the Stock
Award Agreement for exercisability after the termination of the
Participant’s Continuous Service (for a reason other than death),
then the Option or SAR may be exercised (to the extent the
Participant was entitled to exercise such Option or SAR as of the
date of death) by the Participant’s estate, by a person who
acquired the right to exercise the Option or SAR by bequest or
inheritance or by a person designated to exercise the Option or SAR
upon the Participant’s death, but only within the period ending on
the earlier of (i) the date eighteen (18) months following the date
of death (or such longer or shorter period specified in the Stock
Award Agreement, which period will not be less than six (6) months
if necessary to comply with applicable laws), and (ii) the
expiration of the term of such Option or SAR as set forth in the
Stock Award Agreement. If, after the Participant’s death, the
Option or SAR is not exercised within the applicable time frame,
the Option or SAR (as applicable) will terminate.
Termination
for Cause. Except as explicitly provided otherwise in a
Participant’s Stock Award Agreement or other individual written
agreement between the Company or any Affiliate and the Participant,
if a Participant’s Continuous Service is terminated for Cause, the
Option or SAR will terminate immediately upon such Participant’s
termination of Continuous Service, and the Participant will be
prohibited from exercising his or her Option or SAR from and after
the time of such termination of Continuous Service.
Non-Exempt
Employees. If an Option or SAR is granted to an Employee who is
a non-exempt employee for purposes of the Fair Labor Standards Act
of 1938, as amended, the Option or SAR will not be first
exercisable for any shares of Common Stock until at least six (6)
months following the date of grant of the Option or SAR (although
the Stock Award may vest prior to such date). Consistent with the
provisions of the Worker Economic Opportunity Act, (i) if such
non-exempt Employee dies or suffers a Disability, (ii) upon a
Corporate Transaction in which such Option or SAR is not assumed,
continued, or substituted, (iii) upon a Change in Control, or (iv)
upon the Participant’s retirement (as such term may be defined in
the Participant’s Stock Award Agreement, in another agreement
between the Participant and the Company, or, if no such definition,
in accordance with the Company’s then current employment policies
and guidelines), the vested portion of any Options and SARs may be
exercised earlier than six (6) months following the date of grant.
The foregoing provision is intended to operate so that any income
derived by a non-exempt employee in connection with the exercise or
vesting of an Option or SAR will be exempt from his or her regular
rate of pay. To the extent permitted and/or required for compliance
with the Worker Economic Opportunity Act to ensure that any income
derived by a non-exempt employee in connection with the exercise,
vesting or issuance of any shares under any other Stock Award will
be exempt from the employee’s regular rate of pay, the provisions
of this Section 5(l) will apply to all Stock Awards and are hereby
incorporated by reference into such Stock Award
Agreements.
Early
Exercise of Options. An Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option
as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option. Subject to the
“Repurchase Limitation” in Section 8(m), any unvested shares of
Common Stock so purchased may be subject to a repurchase right in
favor of the Company or to any other restriction the Board
determines to be appropriate. Provided that the “Repurchase
Limitation” in Section 8(m) is not violated, the Company will not
be required to exercise its repurchase right until at least six (6)
months (or such longer or shorter period of time required to avoid
classification of the Option as a liability for financial
accounting purposes) have elapsed following exercise of the Option
unless the Board otherwise specifically provides in the Option
Agreement.
Right
of Repurchase. Subject to the “Repurchase Limitation” in
Section 8(m), the Option or SAR may include a provision whereby the
Company may elect to repurchase all or any part of the vested
shares of Common Stock acquired by the Participant pursuant to the
exercise of the Option or SAR.
Right
of First Refusal. The Option or SAR may include a provision
whereby the Company may elect to exercise a right of first refusal
following receipt of notice from the Participant of the intent to
transfer all or any part of the shares of Common Stock received
upon the exercise of the Option or SAR. Such right of first refusal
will be subject to the “Repurchase Limitation” in Section 8(m).
Except as expressly provided in this Section 5(o) or in the Stock
Award Agreement, such right of first refusal will otherwise comply
with any applicable provisions of the bylaws of the
Company.
Provisions of Stock Awards Other than Options and
SARs.
Restricted
Stock Awards. Each Restricted Stock Award Agreement will be in
such form and will contain such terms and conditions as the Board
deems appropriate. To the extent consistent with the Company’s
bylaws, at the Board’s election, shares of Common Stock may be (i)
held in book entry form subject to the Company’s instructions until
any restrictions relating to the Restricted Stock Award lapse; or
(ii) evidenced by a certificate, which certificate will be held in
such form and manner as determined by the Board. The terms and
conditions of Restricted Stock Award Agreements may change from
time to time, and the terms and conditions of separate Restricted
Stock Award Agreements need not be identical. Each Restricted Stock
Award Agreement will conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:
Consideration.
A Restricted Stock Award may be awarded in consideration for (A)
cash, check, bank draft or money order payable to the Company, (B)
past services to the Company or an Affiliate, or (C) any other form
of legal consideration (including future services) that may be
acceptable to the Board, in its sole discretion, and permissible
under applicable law.
Vesting.
Subject to the “Repurchase Limitation” in Section 8(m), shares of
Common Stock awarded under the Restricted Stock Award Agreement may
be subject to forfeiture to the Company in accordance with a
vesting schedule to be determined by the Board.
Termination
of Participant’s Continuous Service. If a Participant’s
Continuous Service terminates, the Company may receive through a
forfeiture condition or a repurchase right, any or all of the
shares of Common Stock held by the Participant that have not vested
as of the date of termination of Continuous Service under the terms
of the Restricted Stock Award Agreement.
Transferability.
Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement will be transferable by the Participant only upon
such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board will determine in its sole
discretion, so long as Common Stock awarded under the Restricted
Stock Award Agreement remains subject to the terms of the
Restricted Stock Award Agreement.
Dividends.
A Restricted Stock Award Agreement may provide that any dividends
paid on Restricted Stock will be subject to the same vesting and
forfeiture restrictions as apply to the shares subject to the
Restricted Stock Award to which they relate.
Restricted
Stock Unit Awards. Each Restricted Stock Unit Award Agreement
will be in such form and will contain such terms and conditions as
the Board deems appropriate. The terms and conditions of Restricted
Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award
Agreements need not be identical. Each Restricted Stock Unit Award
Agreement will conform to (through incorporation of the provisions
hereof by reference in the Agreement or otherwise) the substance of
each of the following provisions:
Consideration.
At the time of grant of a Restricted Stock Unit Award, the Board
will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to
the Restricted Stock Unit Award. The consideration to be paid (if
any) by the Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal
consideration that may be acceptable to the Board, in its sole
discretion, and permissible under applicable law.
Vesting.
At the time of the grant of a Restricted Stock Unit Award, the
Board may impose such restrictions on or conditions to the vesting
of the Restricted Stock Unit Award as it, in its sole discretion,
deems appropriate.
Payment.
A Restricted Stock Unit Award may be settled by the delivery of
shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the
Board and contained in the Restricted Stock Unit Award
Agreement.
Additional
Restrictions. At the time of the grant of a Restricted Stock
Unit Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of
Common Stock (or their cash equivalent) subject to a Restricted
Stock Unit Award to a time after the vesting of such Restricted
Stock Unit Award.
Dividend
Equivalents. Dividend equivalents may be credited in respect of
shares of Common Stock covered by a Restricted Stock Unit Award, as
determined by the Board and contained in the Restricted Stock Unit
Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock
covered by the Restricted Stock Unit Award in such manner as
determined by the Board. Any additional shares covered by the
Restricted Stock Unit Award credited by reason of such dividend
equivalents will be subject to all of the same terms and conditions
of the underlying Restricted Stock Unit Award Agreement to which
they relate.
Termination
of Participant’s Continuous Service. Except as otherwise
provided in the applicable Restricted Stock Unit Award Agreement,
such portion of the Restricted Stock Unit Award that has not vested
will be forfeited upon the Participant’s termination of Continuous
Service.
Compliance
with Section 409A of the Code. Notwithstanding anything to the
contrary set forth herein, any Restricted Stock Unit Award granted
under the Plan that is not exempt from the requirements of Section
409A of the Code shall contain such provisions so that such
Restricted Stock Unit Award will comply with the requirements of
Section 409A of the Code. Such restrictions, if any, shall be
determined by the Board and contained in the Restricted Stock Unit
Award Agreement evidencing such Restricted Stock Unit Award. For
example, such restrictions may include, without limitation, a
requirement that any Common Stock that is to be issued in a year
following the year in which the Restricted Stock Unit Award vests
must be issued in accordance with a fixed pre-determined
schedule.
Other
Stock Awards. Other forms of Stock Awards valued in whole or in
part by reference to, or otherwise based on, Common Stock,
including the appreciation in value thereof (e.g., options or stock
rights with an exercise price or strike price less than one hundred
percent (100%) of the Fair Market Value of the Common Stock at the
time of grant) may be granted either alone or in addition to Stock
Awards provided for under Section 5 and the preceding provisions of
this Section 6. Subject to the provisions of the Plan, the Board
will have sole and complete authority to determine the persons to
whom and the time or times at which such Other Stock Awards will be
granted, the number of shares of Common Stock (or the cash
equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock
Awards.
Covenants of the Company.
Availability
of Shares. The Company will keep available at all times the
number of shares of Common Stock reasonably required to satisfy
then-outstanding Stock Awards.
Securities
Law Compliance. The Company will seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan
such authority as may be required to grant Stock Awards and to
issue and sell shares of Common Stock upon exercise of the Stock
Awards; provided, however, that this undertaking will not
require the Company to register under the Securities Act the Plan,
any Stock Award or any Common Stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts and at a
reasonable cost, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the
Company deems necessary for the lawful issuance and sale of Common
Stock under the Plan, the Company will be relieved from any
liability for failure to issue and sell Common Stock upon exercise
of such Stock Awards unless and until such authority is obtained. A
Participant will not be eligible for the grant of a Stock Award or
the subsequent issuance of cash or Common Stock pursuant to the
Stock Award if such grant or issuance would be in violation of any
applicable securities law.
No
Obligation to Notify or Minimize Taxes. The Company will have
no duty or obligation to any Participant to advise such holder as
to the time or manner of exercising such Stock Award. Furthermore,
the Company will have no duty or obligation to warn or otherwise
advise such holder of a pending termination or expiration of a
Stock Award or a possible period in which the Stock Award may not
be exercised. The Company has no duty or obligation to minimize the
tax consequences of a Stock Award to the holder of such Stock
Award.
Miscellaneous.
Use
of Proceeds from Sales of Common Stock. Proceeds from the sale
of shares of Common Stock pursuant to Stock Awards will constitute
general funds of the Company.
Corporate
Action Constituting Grant of Stock Awards. Corporate action
constituting a grant by the Company of a Stock Award to any
Participant will be deemed completed as of the date of such
corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter
evidencing the Stock Award is communicated to, or actually received
or accepted by, the Participant. In the event that the corporate
records (e.g., Board consents, resolutions or minutes) documenting
the corporate action constituting the grant contain terms (e.g.,
exercise price, vesting schedule or number of shares) that are
inconsistent with those in the Stock Award Agreement as a result of
a clerical error in the papering of the Stock Award Agreement, the
corporate records will control and the Participant will have no
legally binding right to the incorrect term in the Stock Award
Agreement.
Stockholder
Rights. No Participant will be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares
of Common Stock subject to a Stock Award unless and until (i) such
Participant has satisfied all requirements for exercise of, or the
issuance of shares of Common Stock under, the Stock Award pursuant
to its terms, and (ii) the issuance of the Common Stock subject to
the Stock Award has been entered into the books and records of the
Company.
No
Employment or Other Service Rights. Nothing in the Plan, any
Stock Award Agreement or any other instrument executed thereunder
or in connection with any Stock Award granted pursuant thereto will
confer upon any Participant any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or will affect the right of the Company or
an Affiliate to terminate (i) the employment of an Employee with or
without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate, or (iii) the service of a
Director pursuant to the bylaws of the Company or an Affiliate, and
any applicable provisions of the corporate law of the state in
which the Company or the Affiliate is incorporated, as the case may
be.
Change
in Time Commitment. In the event a Participant’s regular level
of time commitment in the performance of his or her services for
the Company and any Affiliates is reduced (for example, and without
limitation, if the Participant is an Employee of the Company and
the Employee has a change in status from a full-time Employee to a
part-time Employee) after the date of grant of any Stock Award to
the Participant, the Board has the right in its sole discretion to
(x) make a corresponding reduction in the number of shares subject
to any portion of such Stock Award that is scheduled to vest or
become payable after the date of such change in time commitment,
and (y) in lieu of or in combination with such a reduction, extend
the vesting or payment schedule applicable to such Stock Award. In
the event of any such reduction, the Participant will have no right
with respect to any portion of the Stock Award that is so reduced
or extended.
Incentive
Stock Option Limitations. To the extent that the aggregate Fair
Market Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred
thousand dollars ($100,000) (or such other limit established in the
Code) or otherwise does not comply with the rules governing
Incentive Stock Options, the Options or portions thereof that
exceed such limit (according to the order in which they were
granted) or otherwise do not comply with such rules will be treated
as Nonstatutory Stock Options, notwithstanding any contrary
provision of the applicable Option Agreement(s).
Investment
Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock
Award, (i) to give written assurances satisfactory to the Company
as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award;
and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to
the Stock Award for the Participant’s own account and not with any
present intention of selling or otherwise distributing the Common
Stock. The foregoing requirements, and any assurances given
pursuant to such requirements, will be inoperative if (A) the
issuance of the shares upon the exercise or acquisition of Common
Stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities
Act, or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting
the transfer of the Common Stock.
Withholding
Obligations. Unless prohibited by the terms of a Stock Award
Agreement, the Company may, in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to a
Stock Award by any of the following means or by a combination of
such means: (i) causing the Participant to tender a cash payment;
(ii) withholding shares of Common Stock from the shares of Common
Stock issued or otherwise issuable to the Participant in connection
with the Stock Award; provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum amount
of tax required to be withheld by law (or such lesser amount as may
be necessary to avoid classification of the Stock Award as a
liability for financial accounting purposes); (iii) withholding
cash from a Stock Award settled in cash; (iv) withholding payment
from any amounts otherwise payable to the Participant; or (v) by
such other method as may be set forth in the Stock Award
Agreement.
Electronic
Delivery. Any reference herein to a “written” agreement or
document will include any agreement or document delivered
electronically or posted on the Company’s intranet (or other shared
electronic medium controlled by the Company to which the
Participant has access).
Deferrals.
To the extent permitted by applicable law, the Board, in its sole
discretion, may determine that the delivery of Common Stock or the
payment of cash, upon the exercise, vesting or settlement of all or
a portion of any Stock Award may be deferred and may establish
programs and procedures for deferral elections to be made by
Participants. Deferrals by Participants will be made in accordance
with Section 409A of the Code. Consistent with Section 409A of the
Code, the Board may provide for distributions while a Participant
is still an employee or otherwise providing services to the
Company. The Board is authorized to make deferrals of Stock Awards
and determine when, and in what annual percentages, Participants
may receive payments, including lump sum payments, following the
Participant’s termination of Continuous Service, and implement such
other terms and conditions consistent with the provisions of the
Plan and in accordance with applicable law.
Compliance
with Section 409A of the Code. To the extent that the Board
determines that any Stock Award granted hereunder is subject to
Section 409A of the Code, the Stock Award Agreement evidencing such
Stock Award shall incorporate the terms and conditions necessary to
avoid the consequences specified in Section 409A(a)(1) of the Code.
To the extent applicable, the Plan and Stock Award Agreements shall
be interpreted in accordance with Section 409A of the
Code.
Compliance
with Exemption Provided by Rule 12h-1(f). If at the end of the
Company’s most recently completed fiscal year: (i) the aggregate of
the number of persons who hold outstanding compensatory employee
stock options to purchase shares of Common Stock granted pursuant
to the Plan or otherwise (such persons, “Holders of
Options”) equals or exceeds five hundred (500), and (ii)
the Company’s assets exceed $10 million, then the following
restrictions will apply during any period during which the Company
does not have a class of its securities registered under Section 12
of the Exchange Act and is not required to file reports under
Section 15(d) of the Exchange Act: (A) the Options and, prior to
exercise, the shares of Common Stock to be issued on exercise of
the Options may not be transferred until the Company is no longer
relying on the exemption provided by Rule 12h-1(f) promulgated
under the Exchange Act (“Rule 12h-1(f)”), except: (1)
as permitted by Rule 701(c) promulgated under the Securities Act,
(2) to a guardian upon the disability of the Holder of Options, or
(3) to an executor upon the death of the Holder of Options
(collectively, the “Permitted Transferees”);
provided, however, the following transfers are permitted: (i)
transfers by Holders of Options to the Company, and (ii) transfers
in connection with a change of control or other acquisition
involving the Company, if following such transaction, the Options
no longer remain outstanding and the Company is no longer relying
on the exemption provided by Rule 12h-1(f); provided further, that
any Permitted Transferees may not further transfer the Options; (B)
except as otherwise provided in (A) above, the Options and shares
of Common Stock issuable on exercise of the Options are restricted
as to any pledge, hypothecation, or other transfer, including any
short position, any “put equivalent position” as defined by Rule
16a-1(h) promulgated under the Exchange Act, or any “call
equivalent position” as defined by Rule 16a-1(b) promulgated under
the Exchange Act by Holders of Options prior to exercise of an
Option until the Company is no longer relying on the exemption
provided by Rule 12h-1(f); and (C) at any time that the Company is
relying on the exemption provided by Rule 12h-1(f), the Company
will deliver to Holders of Options (whether by physical or
electronic delivery or written notice of the availability of the
information on an internet site) the information required by Rule
701(e)(3), (4), and (5) promulgated under the Securities Act every
six (6) months, including financial statements that are not more
than one hundred eighty (180) days old; provided, however, that the
Company may condition the delivery of such information upon the
Holder of Options’ agreement to maintain its
confidentiality.
Repurchase
Limitation. The terms of any repurchase right will be specified
in the Stock Award Agreement. The repurchase price for vested
shares of Common Stock will be the Fair Market Value of the shares
of Common Stock on the date of repurchase. The repurchase price for
unvested shares of Common Stock will be the lower of (i) the Fair
Market Value of the shares of Common Stock on the date of
repurchase or (ii) their original purchase price. However, the
Company will not exercise its repurchase right until at least six
(6) months (or such longer or shorter period of time necessary to
avoid classification of the Stock Award as a liability for
financial accounting purposes) have elapsed following delivery of
shares of Common Stock subject to the Stock Award, unless otherwise
specifically provided by the Board.
Adjustments upon Changes in Common Stock; Other Corporate
Events.
Capitalization
Adjustments. In the event of a Capitalization Adjustment, the
Board will appropriately and proportionately adjust: (i) the
class(es) and maximum number of securities subject to the Plan
pursuant to Section 3(a), (ii) the class(es) and maximum number of
securities that may be issued pursuant to the exercise of Incentive
Stock Options pursuant to Section 3(c), and (iii) the class(es) and
number of securities and price per share of stock subject to
outstanding Stock Awards. The Board will make such adjustments, and
its determination will be final, binding and conclusive.
Dissolution
or Liquidation. Except as otherwise provided in the Stock Award
Agreement, in the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards
consisting of vested and outstanding shares of Common Stock not
subject to a forfeiture condition or the Company’s right of
repurchase) will terminate immediately prior to the completion of
such dissolution or liquidation, and the shares of Common Stock
subject to the Company’s repurchase rights or subject to a
forfeiture condition may be repurchased or reacquired by the
Company notwithstanding the fact that the holder of such Stock
Award is providing Continuous Service, provided, however,
that the Board may, in its sole discretion, cause some or all Stock
Awards to become fully vested, exercisable and/or no longer subject
to repurchase or forfeiture (to the extent such Stock Awards have
not previously expired or terminated) before the dissolution or
liquidation is completed but contingent on its
completion.
Corporate
Transaction. The following provisions will apply to Stock
Awards in the event of a Corporate Transaction unless otherwise
provided in the instrument evidencing the Stock Award or any other
written agreement between the Company or any Affiliate and the
Participant or unless otherwise expressly provided by the Board at
the time of grant of a Stock Award. In the event of a Corporate
Transaction, then, notwithstanding any other provision of the Plan,
the Board may take one or more of the following actions with
respect to Stock Awards, contingent upon the closing or completion
of the Corporate Transaction:
arrange
for the surviving corporation or acquiring corporation (or the
surviving or acquiring corporation’s parent company) to assume or
continue the Stock Award or to substitute a similar stock award for
the Stock Award (including, but not limited to, an award to acquire
the same consideration paid to the stockholders of the Company
pursuant to the Corporate Transaction);
arrange
for the assignment of any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to the
Stock Award to the surviving corporation or acquiring corporation
(or the surviving or acquiring corporation’s parent
company);
accelerate
the vesting, in whole or in part, of the Stock Award (and, if
applicable, the time at which the Stock Award may be exercised) to
a date prior to the effective time of such Corporate Transaction as
the Board determines (or, if the Board does not determine such a
date, to the date that is five (5) days prior to the effective date
of the Corporate Transaction), with such Stock Award terminating if
not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction; provided, however, that the Board may
require Participants to complete and deliver to the Company a
notice of exercise before the effective date of a Corporate
Transaction, which exercise is contingent upon the effectiveness of
such Corporate Transaction;
arrange
for the lapse, in whole or in part, of any reacquisition or
repurchase rights held by the Company with respect to the Stock
Award;
cancel
or arrange for the cancellation of the Stock Award, to the extent
not vested or not exercised prior to the effective time of the
Corporate Transaction, in exchange for such cash consideration, if
any, as the Board, in its sole discretion, may consider
appropriate; and
make
a payment, in such form as may be determined by the Board equal to
the excess, if any, of (A) the value of the property the
Participant would have received upon the exercise of the Stock
Award immediately prior to the effective time of the Corporate
Transaction, over (B) any exercise price payable by such holder in
connection with such exercise. For clarity, this payment may be
zero ($0) if the value of the property is equal to or less than the
exercise price. Payments under this provision may be delayed to the
same extent that payment of consideration to the holders of the
Company’s Common Stock in connection with the Corporate Transaction
is delayed as a result of escrows, earn outs, holdbacks or any
other contingencies.
The
Board need not take the same action or actions with respect to all
Stock Awards or portions thereof or with respect to all
Participants. The Board may take different actions with respect to
the vested and unvested portions of a Stock Award.
Change
in Control. A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a Change
in Control as may be provided in the Stock Award Agreement for such
Stock Award or as may be provided in any other written agreement
between the Company or any Affiliate and the Participant, but in
the absence of such provision, no such acceleration will
occur.
Plan Term; Earlier Termination or Suspension of the
Plan.
Plan
Term. The Board may suspend or terminate the Plan at any time.
Unless terminated sooner by the Board, the Plan will automatically
terminate on the day before the tenth (10th) anniversary of the
earlier of (i) the date the Plan is adopted by the Board, or (ii)
the date the Plan is approved by the stockholders of the Company.
No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
No
Impairment of Rights. Suspension or termination of the Plan
will not impair rights and obligations under any Stock Award
granted while the Plan is in effect except with the written consent
of the affected Participant or as otherwise permitted in the
Plan.
Effective Date of Plan.
This
Plan will become effective on the Effective Date.
Choice of Law.
The
laws of the State of Nevada will govern all questions concerning
the construction, validity and interpretation of this Plan, without
regard to that state’s conflict of laws rules.
Definitions. As
used in the Plan, the following definitions will apply to the
capitalized terms indicated below:
“Affiliate”
means, at the time of determination, any “parent” or
“majority-owned subsidiary” of the Company, as such terms are
defined in Rule 405. The Board will have the authority to determine
the time or times at which “parent” or “majority-owned subsidiary”
status is determined within the foregoing definition.
“Board”
means the Board of Directors of the Company.
“Capitalization
Adjustment” means any change that is made in, or other
events that occur with respect to, the Common Stock subject to the
Plan or subject to any Stock Award after the Effective Date without
the receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, large
nonrecurring cash dividend, stock split, reverse stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure, or any similar equity restructuring
transaction, as that term is used in Statement of Financial
Accounting Standards Board Accounting Standards Codification Topic
718 (or any successor thereto). Notwithstanding the foregoing, the
conversion of any convertible securities of the Company will not be
treated as a Capitalization Adjustment.
“Cause”
will have the meaning ascribed to such term in any written
agreement between the Participant and the Company defining such
term and, in the absence of such agreement, such term means, with
respect to a Participant, the occurrence of any of the following
events: (i) such Participant’s commission of any felony or any
crime involving fraud, dishonesty or moral turpitude under the laws
of the United States or any state thereof; (ii) such Participant’s
attempted commission of, or participation in, a fraud or act of
dishonesty against the Company; (iii) such Participant’s
intentional, material violation of any contract or agreement
between the Participant and the Company or of any statutory duty
owed to the Company; (iv) such Participant’s unauthorized use or
disclosure of the Company’s confidential information or trade
secrets; or (v) such Participant’s gross misconduct. The
determination that a termination of the Participant’s Continuous
Service is either for Cause or without Cause will be made by the
Company, in its sole discretion. Any determination by the Company
that the Continuous Service of a Participant was terminated with or
without Cause for the purposes of outstanding Stock Awards held by
such Participant will have no effect upon any determination of the
rights or obligations of the Company or such Participant for any
other purpose.
“Change
in Control” means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the
following events:
any
Exchange Act Person becomes the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then
outstanding securities other than by virtue of a merger,
consolidation or similar transaction. Notwithstanding the
foregoing, a Change in Control will not be deemed to occur (A) on
account of the acquisition of securities of the Company directly
from the Company, (B) on account of the acquisition of securities
of the Company by an investor, any affiliate thereof or any other
Exchange Act Person that acquires the Company’s securities in a
transaction or series of related transactions the primary purpose
of which is to obtain financing for the Company through the
issuance of equity securities or (C) solely because the level of
Ownership held by any Exchange Act Person (the “Subject
Person”) exceeds the designated percentage threshold of the
outstanding voting securities as a result of a repurchase or other
acquisition of voting securities by the Company reducing the number
of shares outstanding, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such
share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Change in Control will be
deemed to occur;
there
is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than fifty percent (50%) of the
combined outstanding voting power of the surviving Entity in such
merger, consolidation or similar transaction or (B) more than fifty
percent (50%) of the combined outstanding voting power of the
parent of the surviving Entity in such merger, consolidation or
similar transaction, in each case in substantially the same
proportions as their Ownership of the outstanding voting securities
of the Company immediately prior to such transaction;
the
stockholders of the Company approve or the Board approves a plan of
complete dissolution or liquidation of the Company, or a complete
dissolution or liquidation of the Company will otherwise occur,
except for a liquidation into a parent corporation;
there
is consummated a sale, lease, exclusive license or other
disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease,
license or other disposition of all or substantially all of the
consolidated assets of the Company and its Subsidiaries to an
Entity, more than 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 outstanding voting securities of the Company immediately prior
to such sale, lease, license or other disposition; or
individuals
who, on the date the Plan is adopted by the Board, are members of
the Board (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the members of the
Board; provided, however, that if the appointment or
election (or nomination for election) of any new Board member was
approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member will, for
purposes of this Plan, be considered as a member of the Incumbent
Board.
Notwithstanding
the foregoing definition or any other provision of this Plan, (A)
the term Change in Control will not include a sale of assets,
merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company, and (B) the definition of
Change in Control (or any analogous term) in an individual written
agreement between the Company or any Affiliate and the Participant
will supersede the foregoing definition with respect to Stock
Awards subject to such agreement; provided, however, that if
no definition of Change in Control or any analogous term is set
forth in such an individual written agreement, the foregoing
definition will apply.
“Code”
means the Internal Revenue Code of 1986, as amended, including any
applicable regulations and guidance thereunder.
“Committee”
means a committee of one or more Directors to whom authority has
been delegated by the Board in accordance with Section
2(c).
“Common
Stock” means the common stock of the Company.
“Company”
means Franchise Holdings International, Inc., a Nevada
corporation.
“Consultant”
means any person, including an advisor, who is (i) engaged by the
Company or an Affiliate to render consulting or advisory services
and is compensated for such services, or (ii) serving as a member
of the board of directors of an Affiliate and is compensated for
such services. However, service solely as a Director, or payment of
a fee for such service, will not cause a Director to be considered
a “Consultant” for purposes of the Plan.
“Continuous
Service” means that the Participant’s service with the
Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. A change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Director or Consultant or a change in
the Entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s
service with the Company or an Affiliate, will not terminate a
Participant’s Continuous Service; provided, however, that if
the Entity for which a Participant is rendering services ceases to
qualify as an Affiliate, as determined by the Board in its sole
discretion, such Participant’s Continuous Service will be
considered to have terminated on the date such Entity ceases to
qualify as an Affiliate. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or to a
Director will not constitute an interruption of Continuous Service.
To the extent permitted by law, the Board or the chief executive
officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service will be considered interrupted
in the case of (i) any leave of absence approved by the Board or
chief executive officer, including sick leave, military leave or
any other personal leave, or (ii) transfers between the Company, an
Affiliate, or their successors. Notwithstanding the foregoing, a
leave of absence will be treated as Continuous Service for purposes
of vesting in a Stock Award only to such extent as may be provided
in the Company’s leave of absence policy, in the written terms of
any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law.
“Corporate
Transaction” means the consummation, in a single
transaction or in a series of related transactions, of any one or
more of the following events:
a
sale or other disposition of all or substantially all, as
determined by the Board in its sole discretion, of the consolidated
assets of the Company and its Subsidiaries;
a
sale or other disposition of at least ninety percent (90%) of the
outstanding securities of the Company;
a
merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or
a
merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the
merger, consolidation or similar transaction into other property,
whether in the form of securities, cash or otherwise.
“Director”
means a member of the Board.
“Disability”
means, with respect to a Participant, the inability of such
Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than twelve
(12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i)
of the Code, and will be determined by the Board on the basis of
such medical evidence as the Board deems warranted under the
circumstances.
“Effective
Date” means the effective date of this Plan, which is the
date this Plan is adopted by the Board.
“Employee”
means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an “Employee”
for purposes of the Plan.
“Entity”
means a corporation, partnership, limited liability company or
other entity.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
“Exchange
Act Person” means any natural person, Entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that “Exchange Act Person” will not include (i) the Company
or any Subsidiary of the Company, (ii) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to an offering
of such securities, (iv) an Entity Owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their Ownership of stock of the Company; or (v) any
natural person, Entity or “group” (within the meaning of Section
13(d) or 14(d) of the Exchange Act) that, as of the Effective Date,
is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities.
“Fair
Market Value” means, as of any date, the value of the
Common Stock determined by the Board in compliance with Section
409A of the Code or, in the case of an Incentive Stock Option, in
compliance with Section 422 of the Code.
“Incentive
Stock Option” means an option granted pursuant to Section 5
of the Plan that is intended to be, and that qualifies as, an
“incentive stock option” within the meaning of Section 422 of the
Code.
“Nonstatutory
Stock Option” means any option granted pursuant to Section
5 of the Plan that does not qualify as an Incentive Stock
Option.
“Officer”
means any person designated by the Company as an
officer.
“Option”
means an Incentive Stock Option or a Nonstatutory Stock Option to
purchase shares of Common Stock granted pursuant to the
Plan.
“Option
Agreement” means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an
Option grant. Each Option Agreement will be subject to the terms
and conditions of the Plan.
“Optionholder”
means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding
Option.
“Other
Stock Award” means an award based in whole or in part by
reference to the Common Stock which is granted pursuant to the
terms and conditions of Section 6(c).
“Other
Stock Award Agreement” means a written agreement between
the Company and a holder of an Other Stock Award evidencing the
terms and conditions of an Other Stock Award grant. Each Other
Stock Award Agreement will be subject to the terms and conditions
of the Plan.
“Own,”
“Owned,” “Owner,”
“Ownership” A person or Entity will be deemed to
“Own,” to have “Owned,” to be the “Owner” of, or to have acquired
“Ownership” of securities if such person or Entity, directly or
indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power, which
includes the power to vote or to direct the voting, with respect to
such securities.
“Participant”
means a person to whom a Stock Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding
Stock Award.
“Plan”
means this Franchise Holdings International, Inc. 2015 Equity
Incentive Plan.
“Restricted
Stock Award” means an award of shares of Common Stock which
is granted pursuant to the terms and conditions of Section
6(a).
“Restricted
Stock Award Agreement” means a written agreement between
the Company and a holder of a Restricted Stock Award evidencing the
terms and conditions of a Restricted Stock Award grant. Each
Restricted Stock Award Agreement will be subject to the terms and
conditions of the Plan.
“Restricted
Stock Unit Award” means a right to receive shares of Common
Stock which is granted pursuant to the terms and conditions of
Section 6(b).
“Restricted
Stock Unit Award Agreement” means a written agreement
between the Company and a holder of a Restricted Stock Unit Award
evidencing the terms and conditions of a Restricted Stock Unit
Award grant. Each Restricted Stock Unit Award Agreement will be
subject to the terms and conditions of the Plan.
“Rule
405” means Rule 405 promulgated under the Securities
Act.
“Rule
701” means Rule 701 promulgated under the Securities
Act.
“Securities
Act” means the Securities Act of 1933, as
amended.
“Stock
Appreciation Right” or “SAR” means a right to
receive the appreciation on Common Stock that is granted pursuant
to the terms and conditions of Section 5.
“Stock
Appreciation Right Agreement” means a written agreement
between the Company and a holder of a Stock Appreciation Right
evidencing the terms and conditions of a Stock Appreciation Right
grant. Each Stock Appreciation Right Agreement will be subject to
the terms and conditions of the Plan.
“Stock
Award” means any right to receive Common Stock granted
under the Plan, including an Incentive Stock Option, a Nonstatutory
Stock Option, a Restricted Stock Award, a Restricted Stock Unit
Award, a Stock Appreciation Right or any Other Stock
Award.
“Stock
Award Agreement” means a written agreement between the
Company and a Participant evidencing the terms and conditions of a
Stock Award grant. Each Stock Award Agreement will be subject to
the terms and conditions of the Plan.
“Subsidiary”
means, with respect to the Company, (i) any corporation of which
more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the
time, stock of any other class or classes of such corporation will
have or might have voting power by reason of the happening of any
contingency) is at the time, directly or indirectly, Owned by the
Company, and (ii) any partnership, limited liability company or
other entity in which the Company has a direct or indirect interest
(whether in the form of voting or participation in profits or
capital contribution) of more than fifty percent (50%) .
“Ten
Percent Stockholder” means a person who Owns (or is deemed
to Own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Affiliate.
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