UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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by the Registrant [X]
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Definitive
Proxy Statement |
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Definitive
Additional Materials |
[ ] |
Soliciting
Material under §240.14a-12 |
Cipherloc
Corporation
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Proposed
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CIPHERLOC
CORPORATION
6836
BEE CAVE RD, BLDG. 1, S#279
AUSTIN,
TX 78746
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on September 13, 2021
Dear
Stockholder:
We
are pleased to invite you to attend the annual meeting of
stockholders (the “Annual Meeting”) of Cipherloc Corporation (the
“Company”), which will be held on September 13, 2021, at 9:00 a.m.
local time at 6836 Bee Caves Road, Building 1, Suite 279 in Austin,
Texas, for the following purposes:
|
1. |
To
elect four (4) members to our Board of Directors; |
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|
2. |
To
ratify the appointment of Briggs & Veselka Co. as our
independent registered public accounting firm for our fiscal year
ending September 30, 2021; |
|
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|
3. |
To
approve the Company’s 2021 Omnibus Equity Incentive Plan and the
reservation of 8,000,000 shares for issuance
thereunder; |
|
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|
4. |
To
approve the reincorporation of the Company from the State of Texas
to the State of Delaware; |
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|
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|
5. |
To
grant discretionary authority to our board of directors to (i)
amend our proposed Delaware certificate of incorporation, after the
Company effectuates its reincorporation to the State of Delaware,
to combine outstanding shares of our common stock into a lesser
number of outstanding shares, or a “reverse stock split,” at a
specific ratio within a range of 1-for-2 to a maximum of a 1-for-20
split, with the exact ratio to be determined by our board of
directors in its sole discretion; and (ii) effect the reverse stock
split, if at all, within one year of the date the proposal is
approved by stockholders; |
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|
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|
6. |
To
approve an amendment of the Company’s Amended and Restated Articles
of Incorporation, as amended, to eliminate the shareholders’
statutory preemptive rights pursuant to Section 21.208 of the Texas
Business Organizations Code in the event that the reincorporation
of the Company from the State of Texas to the State of Delaware is
not consummated; and |
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|
7. |
To
transact such other matters as may properly come before the Annual
Meeting and any adjournment or postponement thereof. |
The
Company’s Board of Directors has fixed the close of business on
July 15, 2021, as the record date for a determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment or postponement thereof.
If
You Plan to Attend
Please
note that space limitations make it necessary to limit attendance
of the Annual Meeting to our stockholders. Registration and seating
will begin at 8:30 a.m. local time. Shares of common stock can be
voted at the Annual Meeting only if the holder thereof is present
in person or by valid proxy.
For
admission to the Annual Meeting, each stockholder may be asked to
present valid picture identification, such as a driver’s license or
passport, and proof of stock ownership as of the record date, such
as the enclosed proxy card or a brokerage statement reflecting
stock ownership. Cameras, recording devices and other electronic
devices will not be permitted at the Annual Meeting. If you do not
plan on attending the Annual Meeting, please vote, date and sign
the enclosed proxy and return it in the business envelope provided.
Even if you do plan to attend the Annual Meeting, we recommend that
you vote your shares at your earliest convenience in order to
ensure your representation at the Annual Meeting. Your vote is very
important.
If
you have any questions or need assistance voting your shares,
please call Kingsdale Advisors at:

Strategic
Stockholder Advisor and Proxy Solicitation Agent
745
Fifth Avenue, 5th Floor, New York, NY 10151
North
American Toll Free Phone:
+1
(888) 518-6824
Email:
contactus@kingsdaleadvisors.com
Call
Collect Outside North America: +1 (416) 867-2272
Dated:
July 15, 2021 |
By
the Order of the Board of Directors |
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|
Tom
Wilkinson |
|
Chairman
of the Board of Directors |
Whether
or not you expect to attend the Annual Meeting in person, we urge
you to vote your shares at your earliest convenience. This will
ensure the presence of a quorum at the Annual Meeting. Promptly
voting your shares will save the Company the expenses and extra
work of additional solicitation. An addressed envelope for which no
postage is required if mailed in the United States is enclosed if
you wish to vote by mail. Submitting your proxy now will not
prevent you from voting your shares at the Annual Meeting if you
desire to do so, as your proxy is revocable at your option. Your
vote is important, so please act today!
CIPHERLOC
CORPORATION
6836
BEE CAVE RD, BLDG. 1, S#279
AUSTIN,
TX 78746
PROXY
STATEMENT FOR THE
2021
ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 13, 2021
The
Board of Directors (the “Board”) of Cipherloc Corporation (the
“Company”) is soliciting your proxy to vote at the annual meeting
of stockholders (the “Annual Meeting”) to be held at 6836 Bee Caves
Road, Building 1, Suite 279 in Austin, Texas, on September 13,
2021, at 9:00 a.m. local time, including at any adjournments or
postponements of the Annual Meeting.
Our
Board is asking you to vote your shares by completing, signing and
returning a proxy card or vote over the Internet. If you attend the
Annual Meeting in person, you may vote at the Annual Meeting even
if you have previously returned a proxy card. Please note, however,
that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the Annual Meeting, you must obtain
a proxy issued in your name from that record holder as described in
more detail below.
INTERNET
AVAILABILITY OF PROXY MATERIALS
As
permitted by Securities and Exchange Commission (“SEC”) rules, we
are making this proxy statement and our annual report available to
our stockholders primarily via the Internet, rather than mailing
printed copies of these materials to each stockholder. We believe
that this process will expedite stockholders’ receipt of the proxy
materials, lower the costs of the Annual Meeting and help to
conserve natural resources. On or about July 30, 2021, we intend to
begin mailing to each stockholder a Notice of Internet Availability
of Proxy Materials (the “Notice”) containing instructions on how to
access and review the proxy materials, including our proxy
statement and our annual report, on the Internet and how to access
an electronic proxy card to vote on the Internet or by telephone.
The Notice also contains instructions on how to receive a paper
copy of the proxy materials. If you receive the Notice by mail, you
will not receive a printed copy of the proxy materials unless you
request one. If you receive the Notice by mail and would like to
receive a printed copy of our proxy materials, please follow the
instructions included in the Notice. Only stockholders who owned
our common stock on July 15, 2021 are entitled to vote at the
Annual Meeting.
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on September 13,
2021:
The
Notice of Meeting, Proxy Statement, and our 2020 Annual Report on
Form 10-K are available at:
|
QUESTIONS
AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
What
is a proxy?
A
proxy is the legal designation of another person to vote the stock
you own. That other person is called a proxy. If you designate
someone as your proxy in a written document, that document is also
called a proxy or a proxy card. By completing, signing and
returning the accompanying proxy card, you are designating Tom
Wilkinson, the Chairman of our Board, as your proxy for the Annual
Meeting and you are authorizing Mr. Wilkinson to vote your shares
at the Annual Meeting as you have instructed on the proxy card.
This way, your shares will be voted whether or not you attend the
Annual Meeting. Even if you plan to attend the Annual Meeting, we
urge you to vote in one of the ways described below so that your
vote will be counted even if you are unable or decide not to attend
the Annual Meeting.
What
is a proxy statement?
A
proxy statement is a document that we are required by regulations
of the U.S. Securities and Exchange Commission, or “SEC,” to give
you when we ask you to sign a proxy card designating Mr. Wilkinson
to vote on your behalf.
Why
did you send me this proxy statement?
We
sent you this proxy statement and proxy card because our Board is
soliciting your proxy to vote at the Annual Meeting and any
adjournment and postponement thereof. This proxy statement
summarizes information related to your vote at the Annual Meeting.
All stockholders who find it convenient to do so are cordially
invited to attend the Annual Meeting. However, you do not need to
attend the meeting to vote your shares. Instead, you may simply
complete, sign and return the proxy card by mail or vote over the
Internet or by phone.
On or
about July 30, 2021, we intend to begin mailing to each stockholder
a Notice of Internet Availability of Proxy Materials containing
instructions on how to access and review the proxy materials,
including our proxy statement and our annual report, on the
Internet and how to access an electronic proxy card to vote on the
Internet. Only stockholders who owned our common stock on July 15,
2021 are entitled to vote at the Annual Meeting.
What
Does it Mean if I Receive More than one set of proxy
materials?
If
you receive more than one set of proxy materials, your shares may
be registered in more than one name or in different accounts.
Please complete, sign, and return each proxy card to ensure that
all of your shares are voted.
How
do I attend the Annual Meeting?
The
Annual Meeting will be held on September 13, 2021, at 9:00 a.m.
local time at 6836 Bee Caves Road, Building 1, Suite 279 in Austin,
Texas. Information on how to vote in person at the Annual Meeting
is discussed below.
Who
is Entitled to Vote?
The
Board has fixed the close of business on July 15, 2021 as the
record date (the “Record Date”) for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment or postponement thereof. On the Record
Date, there were 82,927,311 shares of common stock outstanding.
Each share of common stock represents one vote that may be voted on
each proposal that may come before the Annual Meeting.
What
is the Difference Between Holding Shares as a Record Holder and as
a Beneficial Owner (Holding Shares in Street Name)?
If
your shares are registered in your name with our transfer agent,
Pacific Stock Transfer Company, you are the “record holder” of
those shares. If you are a record holder, these proxy materials
have been provided directly to you by the Company.
If
your shares are held in a stock brokerage account, a bank or other
holder of record, you are considered the “beneficial owner” of
those shares held in “street name.” If your shares are held in
street name, the Notice has been forwarded to you by that
organization. The organization holding your account is considered
to be the stockholder of record for purposes of voting at the
Annual Meeting. As the beneficial owner, you have the right to
instruct this organization on how to vote your shares. See “How
Will my Shares be Voted if I Give No Specific Instruction?” below
for information on how shares held in street name will be voted
without instructions provided.
Who
May Attend the Annual Meeting?
Only
record holders and beneficial owners of our common stock, or their
duly authorized proxies, may attend the Annual Meeting. If your
shares of common stock are held in street name, you will need to
provide a copy of a brokerage statement or other documentation
reflecting your stock ownership as of the Record Date.
What
am I Voting on?
There
are six(6) matters scheduled for a vote:
|
1. |
To
elect four (4) members to our Board; |
|
|
|
|
2. |
To
ratify the appointment of Briggs & Veselka Co. as our
independent registered public accounting firm for the fiscal year
ending September 30, 2021; |
|
|
|
|
3. |
To
approve and adopt the Company’s 2021 Omnibus Equity Incentive Plan
(the “2021 Plan”) and the reservation of 8,000,000 shares of common
stock for issuance thereunder; |
|
|
|
|
4. |
To
approve the reincorporation of the Company from the State of Texas
to the State of Delaware; |
|
|
|
|
5. |
To
grant discretionary authority to our board of directors to (i)
amend our proposed Delaware certificate of incorporation, after the
Company effectuates its reincorporation to the State of Delaware,
to combine outstanding shares of our common stock into a lesser
number of outstanding shares, or a “reverse stock split,” at a
specific ratio within a range of 1-for-2 to a maximum of a 1-for-20
split, with the exact ratio to be determined by our board of
directors in its sole discretion; and (ii) effect the reverse stock
split, if at all, within one year of the date the proposal is
approved by stockholders; and |
|
|
|
|
6. |
To
approve an amendment of the Company’s Amended and Restated Articles
of Incorporation, as amended, to eliminate the shareholders’
statutory preemptive rights pursuant to Section 21.208 of the Texas
Business Organizations Code in the event that the reincorporation
of the Company from the State of Texas to the State of Delaware is
not consummated. |
What
if another matter is properly brought before the Annual
Meeting?
The
Board knows of no other matters that will be presented for
consideration at the Annual Meeting. The proxy also has
discretionary authority to vote to adjourn the Annual Meeting,
including for the purpose of soliciting votes in accordance with
our Board’s recommendations. If any other matters are properly
brought before the Annual Meeting, it is the intention of the
person named in the accompanying proxy to vote on those matters in
accordance with his best judgment.
How
Do I Vote?
 |
|
 |
|
 |
MAIL |
|
INTERNET |
|
PHONE |
Mailing
your signed proxy card or voter instruction card to:
Pacific Stock Transfer Company
6725 Via Austi Pkwy, Suite 300
Las Vegas, NV 19003
|
|
Using
the Internet at:
https://ipst.pacificstocktransfer.com/pxlogin |
|
1-800-785-7782 |
Stockholders of Record
If
you are a registered stockholder, you may vote by mail, Internet,
phone or online at the Annual Meeting by following the instructions
in the Notice. You also may submit your proxy by mail by following
the instructions included with your proxy card. The deadline for
submitting your proxy by Internet is 11:59 p.m. Eastern Time on
September 11, 2021. Our Board’s designated proxy, Mr. Wilkinson,
will vote your shares according to your instructions. If you attend
the live webcast of the Annual Meeting, you also will be able to
vote your shares electronically at the meeting up until the time
the polls are closed.
Beneficial Owners of Shares Held in Street Name
If
you are a street name holder, your broker or nominee firm is the
legal, registered owner of the shares, and it may provide you with
the Notice. Follow the instructions on the Notice to access our
proxy materials and vote or to request a paper or email copy of our
proxy materials. The materials include a voting instruction card so
that you can instruct your broker or nominee how to vote your
shares. Please check the Notice or voting instruction card or
contact your broker or other nominee to determine whether you will
be able to deliver your voting instructions by Internet in advance
of the meeting and whether, if you attend the live webcast of the
Annual Meeting, you will be able to vote your shares electronically
at the meeting up until the time the polls are closed.
All
shares entitled to vote and represented by a properly completed and
executed proxy received before the Annual Meeting and not revoked
will be voted at the Annual Meeting as instructed in a proxy
delivered before the Annual Meeting. We provide Internet proxy
voting to allow you to vote your shares online, with procedures
designed to ensure the authenticity and correctness of your proxy
vote instructions. However, please be aware that you must bear any
costs associated with your Internet access, such as usage charges
from Internet access providers and telephone companies.
IMPORTANT:
If you vote by Internet, please DO NOT mail your proxy
card.
How
Many Votes do I Have?
On
each matter to be voted upon, you have one vote for each share of
common stock you own as of the close of business on the Record
Date.
Is
My Vote Confidential?
Yes,
your vote is confidential. Only the inspector of elections,
individuals who help with processing and counting your votes and
persons who need access for legal reasons will have access to your
vote. This information will not be disclosed, except as required by
law.
What
Constitutes a Quorum?
To
carry on business at the Annual Meeting, we must have a quorum. A
quorum is present when a majority of the shares entitled to vote,
as of the Record Date, are represented in person or by proxy. Thus,
41,463,656 shares must be represented in person or by proxy to have
a quorum at the Annual Meeting. Your shares will be counted towards
the quorum only if you submit a valid proxy (or one is submitted on
your behalf by your broker, bank or other nominee) or if you vote
in person at the Annual Meeting. Abstentions and broker non-votes
will be counted towards the quorum requirement. Shares owned by the
Company are not considered outstanding or considered to be present
at the Annual Meeting. If there is not a quorum at the Annual
Meeting, either the chairperson of the Annual Meeting or our
stockholders entitled to vote at the Annual Meeting may adjourn the
Annual Meeting.
How
Will my Shares be Voted if I Give No Specific
Instruction?
We
must vote your shares as you have instructed. If there is a matter
on which a stockholder of record has given no specific instruction
but has authorized us generally to vote the shares, they will be
voted as follows:
|
1. |
“For”
the election of the board of director’s four (4) nominees to our
Board; |
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2. |
“For”
the ratification of the appointment of Briggs & Veselka Co. as
our independent registered public accounting firm for the fiscal
year ending September 30, 2021; |
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|
3. |
“For”
the approval and adoption of the Company’s 2021 Omnibus Equity
Incentive Plan (the “2021 Plan”) and the reservation of 8,000,000
shares of common stock for issuance thereunder; |
|
|
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|
4. |
“For”
the approval of the reincorporation of the Company from the State
of Texas to the State of Delaware; |
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|
5. |
“For”
the grant discretionary authority to our board of directors to (i)
amend our proposed Delaware certificate of incorporation, after the
Company effectuates its reincorporation to the State of Delaware,
to combine outstanding shares of our common stock into a lesser
number of outstanding shares, or a “reverse stock split,” at a
specific ratio within a range of 1-for-2 to a maximum of a 1-for-20
split, with the exact ratio to be determined by our board of
directors in its sole discretion; and (ii) effect the reverse stock
split, if at all, within one year of the date the proposal is
approved by stockholders; and |
|
|
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|
6. |
“For”
the approval of the amendment of the Company’s Amended and Restated
Articles of Incorporation, as amended, to eliminate the
shareholders’ statutory preemptive rights pursuant to Section
21.208 of the Texas Business Organizations Code |
This
authorization would exist, for example, if a stockholder of record
merely signs, dates and returns the proxy card but does not
indicate how its shares are to be voted on one or more proposals.
If other matters properly come before the Annual Meeting and you do
not provide specific voting instructions, your shares will be voted
at the discretion of Mr. Wilkinson, the Board’ designated
proxy.
If
your shares are held in street name, see “What is a Broker
Non-Vote?” below regarding the ability of banks, brokers and other
such holders of record to vote the uninstructed shares of their
customers or other beneficial owners in their
discretion.
How
are Votes Counted?
Votes
will be counted by the inspector of election appointed for the
Annual Meeting, who will separately count, for the election of
directors, “For,” “Withhold” and broker non-votes; and, with
respect to the other proposals, votes “For” and “Against,”
abstentions and broker non-votes.
What
is a Broker Non-Vote?
A
“broker non-vote” occurs when shares held by a broker in “street
name” for a beneficial owner are not voted with respect to a
proposal because (1) the broker has not received voting
instructions from the stockholder who beneficially owns the shares
and (2) the broker lacks the authority to vote the shares at their
discretion.
What
is an Abstention?
An
abstention is a stockholder’s affirmative choice to decline to vote
on a proposal. Under Delaware law, abstentions are counted as
shares present and entitled to vote at the Annual Meeting.
Generally, unless provided otherwise by applicable law, our amended
and restated bylaws (the “Bylaws”) provide that an action of our
stockholders (other than the election of directors) is approved if
a majority of the number of shares of stock entitled to vote
thereon and present (either in person or by proxy) vote in favor of
such action. Therefore, abstentions will have no effect with
respect to Proposals 1, 2, and 3. Abstentions will have the effect
of a vote “against” Proposals 4, 5, and 6.
How
many votes are required to approve each proposal?
The
table below summarizes the proposals that will be voted on, the
vote required to approve each item and how votes are
counted:
Proposal |
|
Votes
Required |
|
Voting
Options |
|
Impact
of “Withhold” or “Abstain” Votes |
Proposal
No. 1: Election of Directors |
|
The
plurality of the votes cast. This means that the nominees receiving
the highest number of affirmative “FOR” votes will be elected as
directors. |
|
“FOR”
“WITHHOLD” |
|
None(1) |
|
|
|
|
|
|
|
Proposal
No. 2: Ratification of Appointment of Independent Registered Public
Accounting Firm |
|
The
affirmative vote of the holders of a majority in voting power of
the votes cast affirmatively or negatively (excluding abstentions)
at the Annual Meeting by the holders entitled to vote
thereon. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
None(2) |
|
|
|
|
|
|
|
Proposal
No. 3: Adoption of the 2021 Omnibus Equity Incentive
Plan |
|
The
affirmative vote of the holders of a majority in voting power of
the votes cast affirmatively or negatively (excluding abstentions)
at the Annual Meeting by the holders entitled to vote
thereon. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
None(2) |
|
|
|
|
|
|
|
Proposal
No. 4: Reincorporation of the Company from the State of Texas to
the State of Delaware |
|
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
(3) |
|
|
|
|
|
|
|
Proposal
No. 5: Reverse Stock Split Proposal |
|
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
(3) |
|
|
|
|
|
|
|
Proposal
No. 6: Amendment to Amended and Restated Articles of
Incorporation |
|
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock. |
|
“FOR”
“AGAINST” “ABSTAIN” |
|
(3) |
(1) |
Votes
that are “withheld” will have the same effect as an abstention and
will not count as a vote “FOR” or “AGAINST” a director, because
directors are elected by plurality voting. |
(2) |
A
vote marked as an “Abstention” is not considered a vote cast and
will, therefore, not affect the outcome of this
proposal. |
(3) |
Abstentions
will have the effect of a vote against this proposal. |
What
Are the Voting Procedures?
In
voting by proxy with regard to the election of directors, you may
vote in favor of all nominees, withhold your votes as to all
nominees, or withhold your votes as to specific nominees. With
regard to other proposals, you may vote in favor of or against the
proposal, or you may abstain from voting on the proposal. You
should specify your respective choices on the accompanying proxy
card or your vote instruction form.
Is
My Proxy Revocable?
You
may revoke your proxy and reclaim your right to vote at any time
before your proxy is voted by giving written notice to the
Corporate Secretary of the Company by delivering a properly
completed, later-dated proxy card or vote instruction form or by
voting in person at the Annual Meeting. All written notices of
revocation and other communications with respect to revocations of
proxies should be addressed to: Cipherloc Corporation, 6836 Bee
Cave Rd, Bldg. 1, S#279, Austin, TX 78746 Attention: Corporate
Secretary. Your most current proxy card or Internet proxy is the
one that will be counted.
Who
is Paying for the Expenses Involved in Preparing and Mailing this
Proxy Statement?
All
of the expenses involved in preparing, assembling and mailing these
proxy materials and all costs of soliciting proxies will be paid by
us. In addition to the solicitation by mail, proxies may be
solicited by our officers and other employees by telephone or in
person. Such persons will receive no compensation for their
services other than their regular salaries. Arrangements will also
be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial
owners of the shares held of record by such persons, and we may
reimburse such persons for reasonable out of pocket expenses
incurred by them in forwarding solicitation materials. We have
retained Kingsdale Advisors as our strategic stockholder advisor
and proxy solicitation agent in connection with the solicitation of
proxies for the Annual Meeting. If you have any questions or
require any assistance with completing your proxy, please contact
Kingsdale Advisors by telephone (toll-free within North America) at
+1 (888) 518-6824 or (call collect outside North America) at +1
(416) 867-2272 or by email at
contactus@kingsdaleadvisors.com.
Do
I Have Dissenters’ Rights of Appraisal?
Stockholders
do not have appraisal rights under Texas law or under the Company’s
governing documents with respect to Proposal 1 (Election of
Directors), Proposal 2 (Ratification of Appointment of Independent
Registered Public Accounting Firm), Proposal 3 (Adoption of the
2021 Omnibus Equity Incentive Plan), Proposal 5 (Reverse Stock
Split Proposal) and Proposal 6 (Amendment to Amended and Restated
Articles of Incorporation).
Stockholders
do have appraisal rights under Texas law with respect to Proposal 4
(Reincorporation from Texas to Delaware). Under Subchapter H,
Chapter 10 of the Texas Business Organizations Code (§§10.351
through 10.368), a copy of which is included as Appendix G
to this proxy statement (the “Dissenters’ Rights Statutes”),
shareholders have dissenters’ and appraisal rights in connection
with the approval of the Reincorporation. There are strict
procedures for exercising these rights that if not met could result
in the loss of these rights. Persons having beneficial interests in
the Company’s common stock held of record in the name of another
person, such as a broker or bank, must act promptly to cause the
record holder to take the actions required under Texas law to
exercise dissenters’ rights. In order to dissent, you must
carefully follow the requirements of the Dissenters’ Rights
Statutes, including giving the required written notice of objection
prior to the Annual Meeting. These steps are summarized below under
“Proposal #4: The Reincorporation Proposal — Dissenters’ Right
of Appraisal.”
How
can I Find out the Results of the Voting at the Annual
Meeting?
Preliminary
voting results will be announced at the Annual Meeting. In
addition, final voting results will be disclosed in a Current
Report on Form 8-K that we expect to file with the Securities and
Exchange Commission (“SEC”) within four business days after the
Annual Meeting. If final voting results are not available to us in
time to file a Form 8-K with the SEC within four business days
after the Annual Meeting, we intend to file a Form 8-K to publish
preliminary results and, within four business days after the final
results are known to us, file an amended Form 8-K to publish the
final results.
PROPOSAL
1
ELECTION
OF DIRECTORS
At
the Annual Meeting, the stockholders will elect four (4) directors
to hold office until the 2022 annual meeting of stockholders.
Directors are elected by a plurality of votes cast by stockholders.
In the event the nominees are unable or unwilling to serve as
directors at the time of the Annual Meeting, proxies will be voted
for any substitute nominees designated by the present Board or the
proxy holders to fill such vacancy, or for the balance of the
nominees named without nomination of a substitute. The Board has no
reason to believe that the persons named below will be unable or
unwilling to serve as nominees or as directors if
elected.
Assuming
a quorum is present, the four (4) nominees receiving the highest
number of affirmative votes of shares entitled to be voted for such
persons will be elected as directors of the Company for the ensuing
year. Unless marked otherwise, proxies received will be voted “FOR”
the election of the nominees named below. In the event that
additional persons are nominated for election as directors, the
proxy holder intends to vote all proxies received by them in such a
manner as will ensure the election of the nominees listed below,
and, in such event, the specific nominees to be voted for will be
determined by the proxy holders.
Information
with Respect to Director Nominees
Listed
below are the current directors who are nominated to hold office
until their successors are elected and qualified, and their ages as
of June 30, 2021.
Name |
|
Age |
Tom
Wilkinson |
|
51 |
Anthony
Ambrose |
|
59 |
David
Chasteen |
|
43 |
Sammy
Davis DrPH |
|
74 |
Tom
Wilkinson – Chairman of the Board
Mr.
Wilkinson serves as the Company’s Chairman of the Board. He is a
licensed CPA in Texas. From October 2019 to May 2021, Mr. Wilkinson
served as the Chief Executive Officer and director of Sonim
Technologies (NASDAQ: SOMN), which makes rugged mobile devices.
From July 2019 to October 2019, Mr. Wilkinson served as the Interim
Chief Executive Officer of the Company. From 2014 to October 2015,
he was the Chief Financial Officer of Amherst Holdings, LLC. Mr.
Wilkinson joined Xplore Technologies Corp., a NASDAQ traded
company, in 2015 where he served as the Chief Financial Officer
until 2017 when he took on the position of Chief Executive Officer
until the sale of the company to Zebra Technologies in August 2018.
He presently owns and operates Wilkinson & Company, a financial
and business consulting firm focused on emerging growth pre-IPO and
public companies, which he started in January 2014. He has also
served as President and Chief Financial Officer of Amherst
Holdings, a securities firm and as Managing Partner/Audit Partner
with PMB Helin Donovan, a public accounting firm. Mr. Wilkinson has
also been a member of the Board of Directors of Astrotech
Corporation (NASDAQ: ASTC) since October 2018. He received his
Bachelor of Business Administration and Master of Professional
Accounting from the University of Texas in 1992. We believe Mr.
Wilkinson is qualified to serve on our Board based on his financial
experience.
Anthony
Ambrose – Director
Mr.
Ambrose serves a director of the Company. Mr. Ambrose has served as
a director, President and Chief Executive Officer of Data I/O, the
leading global provider of advanced data and security programming
solutions, and a NASDAQ listed company (NASDAQ: DAIO) since 2012.
Prior to Data I/O, Mr. Ambrose was Owner and Principal of Cedar
Mill Partners, LLC, a strategy consulting firm from 2011 to 2012.
From 2007 to 2011, he was Vice President and General Manager at
RadiSys Corporation, a leading provider of embedded wireless
infrastructure solutions, where he established the telecom platform
business and grew it to over $125M in annual revenues. He was
previously general manager and held several other progressively
responsible positions at Intel Corporation, where he led
development and marketing of standards-based communications
platforms and grew the industry standard server business to over
$1B in revenues. Mr. Ambrose has a Bachelor of Science degree in
Engineering from Princeton University, and has completed the
Stanford University Director Symposium. Mr. Ambrose has also been
awarded 2 US Patents in Computing and Data Security. We believe Mr.
Ambrose is qualified to serve on our Board based on his data
security and industry experience.
David
Chasteen – Director and Chief Executive
Officer
Mr.
Chasteen serves as a director of the Company. From June 2018 to
December 2019, Mr. Chasteen was the Chief Information Security
Officer for the City and County of San Francisco Police Department.
From June 2016 to June 2018, Mr. Chasteen was a Threat Intelligence
Strategist for the City and County of San Francisco where he was
responsible for managing city, state and federal intelligence
relationships and managing cybersecurity operations for the City
and County of San Francisco. From October 2015 to June 2016 Mr.
Chasteen was the Western Regional Director for Iraq and Afghanistan
Veterans of America. From 2006 to 2014, Mr. Chasteen worked for the
Central Intelligence Agency as a Collection Management Officer,
Specialized Skills Officer, and finally an Executive Officer,
Covert Action Staff. Mr. Chasteen received a B.S. in Political
Science from Ball State University in 2000. We believe Mr. Chasteen
is qualified to serve on our Board based on his cybersecurity and
industry experience.
Sammy
Davis DrPH – Director
Dr.
Davis serves as a Director of the Company. Dr. Davis has over 20
years’ experience in operations, finance, budgeting, financial
reporting, revenue cycle management, inventory, payroll, accounts
receivable and payable, and information systems in the healthcare
industry. Since 2009 Dr. Davis has been a Senior Marketing Liaison
with Physician Reliance Corporation. From 2005 to 2009, Dr. Davis
was the Chief Executive Officer of Renaissance Hospital in the
Dallas/Fort Worth Area. From 2004 to 2005, Dr. Davis was the
interim Chief Executive Officer of Transition Health Care LTAC in
Corpus Christi, TX. Dr. Davis holds a Doctor of Public Health
degree from the University of Texas. We believe Dr. Davis is
qualified to serve on our Board based on his leadership
experience.
Family
Relationships and Other Arrangements
There
are no family relationships among our directors and executive
officers. There are no arrangements or understandings between or
among our executive officers and directors pursuant to which any
director or executive officer was or is to be selected as a
director or executive officer.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, except as discussed in the individual
biographies of our officers and directors, above or disclosed
herein, none of our executive officers or directors has been
involved in any of the following events during the past ten years:
(1) any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that
time; (2) any conviction in a criminal proceeding or being a named
subject to a pending criminal proceeding (excluding traffic
violations and minor offenses); (3) being subject to any order,
judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking
activities; (4) being found by a court of competent jurisdiction
(in a civil action), the SEC or the Commodities Futures Trading
Commission to have violated a federal or state securities or
commodities law; (5) being the subject of, or a party to, any
Federal or State judicial or administrative order, judgment,
decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of (i) any Federal or
State securities or commodities law or regulation; (ii) any law or
regulation respecting financial institutions or insurance
companies, including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order, or (iii) any law or regulation
prohibiting mail or wire fraud or fraud in connection with any
business entity; or (6) being the subject of, or a party to, any
sanction or order, not subsequently reversed, suspended or vacated,
of any self-regulatory organization (as defined in Section 3(a)(26)
of the Exchange Act), any registered entity (as defined in Section
(1a)(40) of the Commodity Exchange Act), or any equivalent
exchange, association, entity, or organization that has
disciplinary authority over its members or persons associated with
a member.
Generation
Next Franchise Brands, Inc., filed a petition in the United States
Bankruptcy Court for the District of Nevada on December 15, 2019,
under Chapter 11 of the U.S. Bankruptcy Code. Ryan Polk was Chief
Financial Officer of Generation Next Franchise Brands, Inc., at the
time of the filing, but has subsequently resigned from that
position. On January 24, 2020, the matter was converted to a
petition under Chapter 7 of the U.S. Bankruptcy Code. The matter is
still pending.
On
February 1, 2019, FirstFire Global Opportunities Fund LLC filed a
first amended complaint against Mr. Polk as a co-defendant in the
United States District Court for the Southern District of
California (the “Action”). The Action arises out of alleged
materially false and misleading statements or omissions from its
PPM and other information provided to the plaintiff by or on behalf
of Company with respect to the Company’s debt obligations. The
Action asserts claims against all defendants for violation of
Section 10(b) of the Securities Exchange Act of 1934 (the “Act”),
violation of Section 20(a) of the Act and violation of Sections
25401, 25501, 25503 and 25504 of the California Securities Law of
1968, as amended, CA Corporations Code. The Action seeks (1)
general, compensatory and consequential damage and losses, costs,
interest, (2) punitive damages and (3) temporary, preliminary and
permanent injunctive, equitable relief and declaratory
relief.
Board
Leadership Structure and Role in Risk Oversight
Our
Board has established an audit committee, a compensation committee,
and a nominating and corporate governance committee, each of which
operate pursuant to a charter adopted by our Board. Each committee
has the composition and responsibilities described below. Our Board
may establish other committees from time to time.
The
following table identifies the current members of each of our
committees:
Member |
|
Executive
Committee
|
|
Audit |
|
Compensation |
|
Corporate
Governance/
Nominating |
Tom
Wilkinson |
|
X* |
|
X |
|
X |
|
X |
Anthony
Ambrose |
|
X |
|
X* |
|
X |
|
X* |
David
Chasteen |
|
X |
|
|
|
|
|
|
Sammy
Davis DrPH |
|
X |
|
X |
|
X |
|
X |
*
Chairman of the committee
Director
Independence
As
our common stock is traded over the counter on the OTCQB, we are
not required to comply with independent director requirements of
the Nasdaq Stock market LLC. Nevertheless, the Board considers Dr.
Davis and Mr. Ambrose to be “independent” under such
rules.
Audit
Committee
Messrs.
Ambrose, Wilkinson and Dr. Davis serve on the Audit Committee,
which is chaired by Mr. Ambrose.
The
audit committee’s responsibilities include:
|
● |
appointing,
approving the compensation of, and assessing the independence of
our independent registered public accounting firm; |
|
● |
pre-approving
auditing and permissible non-audit services, and the terms of such
services, to be provided by our independent registered public
accounting firm; |
|
|
|
|
● |
reviewing
the overall audit plan with our independent registered public
accounting firm and members of management responsible for preparing
our financial statements; |
|
|
|
|
● |
reviewing
and discussing with management and our independent registered
public accounting firm our annual and quarterly financial
statements and related disclosures as well as critical accounting
policies and practices used by us; |
|
|
|
|
● |
coordinating
the oversight and reviewing the adequacy of our internal control
over financial reporting; |
|
|
|
|
● |
establishing
policies and procedures for the receipt and retention of
accounting-related complaints and concerns; |
|
|
|
|
● |
recommending
based upon the audit committee’s review and discussions with
management and our independent registered public accounting firm
whether our audited financial statements will be included in our
Annual Reports on Form 10-K; |
|
|
|
|
● |
monitoring
the integrity of our financial statements and our compliance with
legal and regulatory requirements as they relate to our financial
statements and accounting matters; |
|
|
|
|
● |
preparing
the audit committee report required by SEC rules to be included in
our annual proxy statement; |
|
● |
reviewing
all related person transactions for potential conflict of interest
situations and approving all such transactions; and |
|
|
|
|
● |
reviewing
quarterly earnings releases. |
Compensation
Committee
Messrs.
Ambrose, Wilkinson and Dr. Davis serve on the Compensation
Committee, which is chaired by Mr. Ambrose.
The
compensation committee’s responsibilities include:
|
● |
annually
reviewing and approving corporate goals and objectives relevant to
the compensation of our chief executive officer; |
|
|
|
|
● |
evaluating
the performance of our chief executive officer considering such
corporate goals and objectives and determining the compensation of
our chief executive officer; |
|
|
|
|
● |
reviewing
and approving the compensation of our other executive
officers; |
|
|
|
|
● |
reviewing
and establishing our overall management compensation, philosophy
and policy; |
|
|
|
|
● |
overseeing
and administering our compensation and similar plans; |
|
|
|
|
● |
evaluating
and assessing potential and current compensation advisors in
accordance with the independence standards identified in the
applicable Nasdaq rules; |
|
|
|
|
● |
retaining
and approving the compensation of any compensation
advisors; |
|
● |
reviewing
and making recommendations to our Board about our policies and
procedures for the grant of equity-based awards; |
|
|
|
|
● |
evaluating
and making recommendations to the Board about director
compensation; |
|
|
|
|
● |
preparing
the compensation committee report required by SEC rules, if and
when required, to be included in our annual proxy statement;
and |
|
|
|
|
● |
reviewing
and approving the retention or termination of any consulting firm
or outside advisor to assist in the evaluation of compensation
matters. |
Corporate
Governance/Nominating Committee
Messrs.
Ambrose, Wilkinson and Dr. Davis serve on the Corporate
Governance/Nominating Committee, which is chaired by Mr.
Ambrose.
The
nominating and corporate governance committee’s responsibilities
include:
|
● |
developing
and recommending to the Board criteria for board and committee
membership; |
|
|
|
|
● |
establishing
procedures for identifying and evaluating board of director
candidates, including nominees recommended by
shareholders; |
|
|
|
|
● |
reviewing
the size and composition of the Board to ensure that it is composed
of members containing the appropriate skills and expertise to
advise us; |
|
|
|
|
● |
identifying
individuals qualified to become members of the Board; |
|
● |
recommending
to the Board the persons to be nominated for election as directors
and to each of the board’s committees; |
|
|
|
|
● |
developing
and recommending to the Board a code of business conduct and ethics
and a set of corporate governance guidelines; and |
|
|
|
|
● |
overseeing
the evaluation of our Board and management. |
Stockholder
Communications
Although
we do not have a formal policy regarding communications with the
Board, stockholders may communicate with the Board by writing to
Cipherloc Corporation, 6836 Bee Cave Rd, Bldg. 1, S#279, Austin, TX
78746. Stockholders who would like their submission directed to a
member of the Board may so specify, and the communication will be
forwarded, as appropriate.
Code
of Business Conduct and Ethics
We
have adopted a formal Code of Ethics applicable to all Board
members, officers and employees. A copy of our Code of Ethics may
be obtained without charge upon written request to Secretary,
Cipherloc Corporation, 6836 Bee Cave Rd, Bldg. 1, S#279, Austin, TX
78746.
Compensation
of Directors
Annual
director compensation is $60,000 for the Chairman of the Board and
Lead Independent Director, $40,000 for directors with an additional
$4,000 for additional committees. During the years ended September
30, 2020 and 2019, the company paid $170,000 and $40,000 in board
fees, respectively. In July 2020, the Board temporarily deferred
cash director payments. On March 31, 2021, the Company had accrued
$160,000 of unpaid director fees. On April 8, 2021, the Board of
Directors approved paying the accrued fees. During that same
meeting, the Directors approved one-time performance bonuses
totaling $325,000 for the Chairman, Chief Executive Officer, Chief
Technology Officer, and Chief Financial Officer. The executive
performance bonuses and the accrued director fees were paid the
following week.
The
following table sets forth summary information concerning the
compensation we paid to non-executive directors during the year
ended September 30, 2020:
Name |
|
Fees Earned or Paid in Cash ($) |
|
|
Option
Awards
($)(1)
|
|
|
All
Other
Compensation
($)
|
|
|
Total ($) |
|
Anthony Ambrose |
|
$ |
60,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60,000 |
|
Sammy Davis DrPH |
|
$ |
40,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
40,000 |
|
Zeynep Young (2) |
|
$ |
20,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
20,000 |
|
* The
table above does not include the amount of any expense
reimbursements paid to the above directors. No directors received
any Stock Awards, Non-Equity Incentive Plan Compensation, Change in
Pension Value and Nonqualified Deferred Compensation Earnings
during the period presented. Does not include perquisites and other
personal benefits, or property, unless the aggregate amount of such
compensation is more than $10,000.
(1)
Represents the fair value of the grant of certain options to
purchase shares of our common stock calculated in accordance with
Financial Accounting Standards Board Accounting Standards
Codification Topic 718.
(2)
Resigned January 19, 2021.
Required
Vote of Stockholders
A
plurality of the votes cast at the Annual Meeting is required to
elect a nominee as a director.
Board
Recommendation
The
Board unanimously recommends a vote “FOR” the
election of Tom Wilkinson, Anthony Ambrose, David Chasteen, and
Sammy Davis, DrPH as directors of the Company.
PROPOSAL
2
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our
Board has selected Briggs & Veselka Co. to audit our financial
statements for the fiscal year ending September 30, 2021. Briggs
& Veselka Co. has audited our financial statements since fiscal
year 2019.
Although
stockholder approval of the selection of Briggs & Veselka Co.
is not required by law, our Board believes it is advisable to give
stockholders an opportunity to ratify this selection. If this
proposal is not approved at the Annual Meeting, the Board may
reconsider its selection of Briggs & Veselka Co.
Fees
of Independent Registered Public Accounting Firm
Briggs
& Veselka Co. acted as the Company’s independent registered
public accounting firm for the years ended September 30, 2020 and
2019 and for the interim periods in such fiscal years. The
following table shows the fees that were incurred by the Company
for audit and other services provided by Briggs & Veselka Co.
for the years ended September 30, 2020 and 2019.
|
|
Year Ended September, |
|
|
|
2020 |
|
|
2019 |
|
Audit
Fees (a) |
|
$ |
76,125 |
|
|
$ |
46,975 |
|
Tax
Fees (b) |
|
|
- |
|
|
|
- |
|
Other
Fees (c) |
|
|
- |
|
|
|
- |
|
Total |
|
$ |
76,125 |
|
|
$ |
46,975 |
|
(a) |
Audit
fees represent fees for professional services provided in
connection with the audit of the Company’s annual financial
statements and the review of its financial statements included in
the Company’s Quarterly Reports on Form 10-Q and services that are
normally provided in connection with statutory or regulatory
filings. |
|
|
(b) |
Tax
fees represent fees for professional services related to tax
compliance, tax advice and tax planning. |
|
|
(c) |
Other
fees represent fees related to our filing of certain Registration
Statements. |
Pre-Approval
Policies and Procedures
All
audit related services, tax services and other services rendered by
Briggs & Veselka Co. were pre-approved by the Company’s Board.
Commencing in 2020, the Audit Committee was charged with all
pre-approval activities with respect to the Company’s independent
registered public accounting firm. The Audit Committee has adopted
a pre-approval policy that provides for the pre-approval of all
services performed for the Company by its independent registered
public accounting firm. Our independent registered public
accounting firm and management are required to periodically report
to the Audit Committee regarding the extent of services provided by
the independent registered public accounting firm in accordance
with this pre-approval policy, and the fees for the services
performed to date.
Interests
of Officers and Directors in this Proposal
Our
officers and directors do not have any substantial interest, direct
or indirect, in in this proposal.
Required
Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual
Meeting is required to ratify the appointment of the independent
registered public accounting firm.
Board
Recommendation
The
Board unanimously recommends a vote “FOR” the
ratification of the appointment of Briggs & Veselka Co. as our
independent registered public accounting firm.
AUDIT
COMMITTEE REPORT
The
following Audit Committee Report shall not be deemed to be
“soliciting material,” deemed “filed” with the SEC or subject to
the liabilities of Section 18 of the Exchange Act. Notwithstanding
anything to the contrary set forth in any of the Company’s previous
filings under the Securities Act of 1933, as amended (the
“Securities Act”), or the Exchange Act that might incorporate by
reference future filings, including this Proxy Statement, in whole
or in part, the following Audit Committee Report shall not be
incorporated by reference into any such filings.
The
Audit Committee is comprised of three directors, two of whom are
independent directors (as defined under Nasdaq Listing Rule
5605(a)(2)). The Audit Committee operates under a written
charter.
We
have reviewed and discussed with management and the Company’s
auditors, the Company’s audited financial statements as of and for
the fiscal year ended September 30, 2020.
We
have discussed with Briggs & Veselka Co., the Company’s
independent registered public accounting firm, the matters as
required to be discussed by the Public Company Accounting Oversight
Board (the “PCAOB”) Auditing Standard No. 1301 (Communications with
Audit Committees).
We
have received the written disclosures and the letter from Briggs
& Veselka Co.Required by applicable requirements of the PCAOB
regarding Briggs & Veselka Co.’s communications with the Audit
Committee concerning independence, and have discussed with Briggs
& Veselka Co., their independence from management and the
Company.
Based
on the review and discussions referred to above, we recommended to
the Board that the financial statements referred to above be
included in the Company’s Annual Report on Form 10-K for the fiscal
year ended September 30, 2020 for filing with the SEC.
|
|
Submitted
by the Audit Committee |
|
|
|
|
|
Anthony
Ambrose, Chairman |
|
|
|
|
|
Tom
Wilkinson |
|
|
|
|
|
Sammy
Davis DrPH |
PROPOSAL
3:
ADOPTION
OF 2021 OMNIBUS EQUITY INCENTIVE PLAN
Summary
On
May 12, 2021, our Board adopted our 2021 Omnibus Equity Incentive
Plan (the “2021 Plan”). The 2021 Plan will become effective, if at
all, on the date that it is approved by our stockholders (the
“Effective Date”).
The
Company does not currently have any equity compensation
plans.
Under
the 2021 Plan, 8,000,000 shares of Company common stock are
initially available for grant.
Our
administrator may grant incentive stock options, non-statutory
stock options, stock appreciation rights, restricted stock,
restricted stock units and other stock-based awards to participants
to acquire shares of Company common stock under the 2021 Plan. The
2021 Plan will be administered by the Compensation Committee of our
Board. The closing price per-share of Company common stock on June
1, 2021, was $0.2150. The following table sets forth, as of June 1,
2021, the approximate number of each class of participants eligible
to participate in the 2021 Plan and the basis of such
participation.
Class and Basis of Participation |
|
Approximate
Number of
Class |
Employees |
|
4 |
Directors(1) |
|
4 |
Independent Contractors |
|
2 |
(1) |
One
(1) of the four (4) directors is an employee of the
Company. |
Rationale
for Adoption of the 2021 Plan
Grants
of options, stock appreciation rights, restricted shares of common
stock, restricted stock units and other stock-based awards to our
employees, directors and independent contractors are an important
part of our long-term incentive compensation program, which we use
in order to strengthen the commitment of such individuals to us,
motivate them to faithfully and diligently perform their
responsibilities and attract and retain competent and dedicated
individuals whose efforts are expected to result in our long-term
growth and profitability.
The
number of shares proposed to be available for grant under the 2021
Plan is designed to enable the Company to properly incentivize its
employees and management teams over a number of years on a
going-forward basis.
Dilution,
Stock Available and Historical Stock Usage
Dilution.
Subject to stockholder approval of the 2021 Plan, 8,000,000 shares
of Company common stock will be reserved for issuance under the
Plan, which represents approximately 9.6% of our issued and
outstanding shares of Company’s common stock. The Board believes
that this number of shares of Company’s common stock constitutes
reasonable potential equity dilution and provides a significant
incentive for employees to increase the value of the Company for
all stockholders. The closing trading price of each share of
Company common stock as of the Record Date was $0.18.
As of
the Record Date, we had: (i) 82,927,311 shares of Company’s common
stock outstanding; and (ii) 0 (zero) stock options outstanding
(vested and unvested). The new shares of Company’s common stock
available under the 2021 Plan would represent an additional
potential equity dilution of approximately 9.6%. Including the
proposed additional shares of Company’s common stock under the 2021
Plan, the potential equity dilution from all equity incentive
awards outstanding and available for grant under all of our equity
plans would result in a maximum potential equity dilution of
approximately 9.6%.
Shares
Available; Certain Limitations. The maximum number of shares of
common stock reserved and available for issuance under the 2021
Plan will be 8,000,000 shares of common stock.
New
shares reserved for issuance under the 2021 Plan may be authorized
but unissued shares of Company’s common stock or shares of
Company’s common stock that will have been or may be reacquired by
us in the open market, in private transactions or otherwise. If any
shares of Company’s common stock subject to an award are forfeited,
cancelled, exchanged or surrendered or if an award terminates or
expires without a distribution of shares to the participant, the
shares of Company common stock with respect to such award will, to
the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for awards
under the Plan except that any shares of Company common stock
surrendered or withheld as payment of either the exercise price of
an award and/or withholding taxes in respect of an award will not
again be available for awards under the Plan. If an award is
denominated in shares of Company’s common stock, but settled in
cash, the number of shares of common stock previously subject to
the award will again be available for grants under the 2021 Plan.
If an award can only be settled in cash, it will not be counted
against the total number of shares of common stock available for
grant under the 2021 Plan. However, upon the exercise of any award
granted in tandem with any other awards, such related awards will
be cancelled as to the number of shares as to which the award is
exercised and such number of shares of Company’s common stock will
no longer be available for grant under the 2021 Plan.
As
exhibited by our responsible use of equity over the past several
years and good corporate governance practices associated with
equity and executive compensation practices in general, the stock
reserved under the 2021 Plan will provide us with the platform
needed for continued our growth, while managing program costs and
share utilization levels within acceptable industry
standards.
Share
Usage. Cipherloc does not have an equity incentive plan
currently and have not had one covering the previous three-year
period. Consequently, there is no share usage by existing equity
plan over the past three years.
Description
of 2021 Plan
The
following is a summary of the material features of the 2021 Plan.
This summary is qualified in its entirety by the full text of the
2021 Plan, a copy of which is attached to this Proxy Statement as
Appendix A.
Types
of Awards. The 2021 Plan provides for the issuance of incentive
stock options, non-statutory stock options, stock appreciation
rights (“SARs”), restricted stock, restricted stock units (“RSUs”),
and other stock-based awards. Items described above in the Section
called “Shares Available” are incorporated herein by
reference.
Administration.
The 2021 Plan will be administered by our Board, or if our Board
does not administer the 2021 Plan, a committee or subcommittee of
our Board that complies with the applicable requirements of Section
16 of the Exchange Act and any other applicable legal or stock
exchange listing requirements (each of our Board or such committee
or subcommittee, the “plan administrator”). The plan administrator
may interpret the 2021 Plan and may prescribe, amend and rescind
rules and make all other determinations necessary or desirable for
the administration of the 2021 Plan, provided that, subject to the
equitable adjustment provisions described below, the plan
administrator will not have the authority to reprice or cancel and
re-grant any award at a lower exercise, base or purchase price or
cancel any award with an exercise, base or purchase price in
exchange for cash, property or other awards without first obtaining
the approval of our stockholders.
The
2021 Plan permits the plan administrator to select the eligible
recipients who will receive awards, to determine the terms and
conditions of those awards, including but not limited to the
exercise price or other purchase price of an award, the number of
shares of common stock or cash or other property subject to an
award, the term of an award and the vesting schedule applicable to
an award, and to amend the terms and conditions of outstanding
awards.
Restricted
Stock and Restricted Stock Units. Restricted stock and RSUs may
be granted under the 2021 Plan. The plan administrator will
determine the purchase price, vesting schedule and performance
goals, if any, and any other conditions that apply to a grant of
restricted stock and RSUs. If the restrictions, performance goals
or other conditions determined by the plan administrator are not
satisfied, the restricted stock and RSUs will be forfeited. Subject
to the provisions of the 2021 Plan and the applicable award
agreement, the plan administrator has the sole discretion to
provide for the lapse of restrictions in installments.
Unless
the applicable award agreement provides otherwise, participants
with restricted stock will generally have all of the rights of a
stockholder, provided that dividends will only be paid if and when
the underlying restricted stock vests. RSUs will not be entitled to
dividends prior to vesting but may be entitled to receive dividend
equivalents if the award agreement provides for them. The rights of
participants granted restricted stock or RSUs upon the termination
of employment or service to us will be set forth in the award
agreement.
Options.
Incentive stock options and non-statutory stock options may be
granted under the 2021 Plan. An “incentive stock option” means an
option intended to qualify for tax treatment applicable to
incentive stock options under Section 422 of the Internal Revenue
Code. A “non-statutory stock option” is an option that is not
subject to statutory requirements and limitations required for
certain tax advantages that are allowed under specific provisions
of the Internal Revenue Code. A non-statutory stock option under
the 2021 Plan is referred to for federal income tax purposes as a
“non-qualified” stock option. Each option granted under the Plan
will be designated as a non-qualified stock option or an incentive
stock option. At the discretion of the administrator, incentive
stock options may be granted only to our employees, employees of
our “parent corporation” (as such term is defined in Section 424(e)
of the Code) or employees of our subsidiaries.
The
exercise period of an option may not exceed ten years from the date
of grant and the exercise price may not be less than 100% of the
fair market value of a share of common stock on the date the option
is granted (110% of fair market value in the case of incentive
stock options granted to ten percent stockholders). The exercise
price for shares of common stock subject to an option may be paid
in cash, or as determined by the administrator in its sole
discretion, (i) through any cashless exercise procedure approved by
the administrator (including the withholding of shares of common
stock otherwise issuable upon exercise), (ii) by tendering
unrestricted shares of common stock owned by the participant, (iii)
with any other form of consideration approved by the administrator
and permitted by applicable law or (iv) by any combination of these
methods. The option holder will have no rights to dividends or
distributions or other rights of a stockholder with respect to the
shares of Common Stock subject to an option until the option holder
has given written notice of exercise and paid the exercise price
and applicable withholding taxes.
In
the event of a participant’s termination of employment or service,
the participant may exercise his or her option (to the extent
vested as of such date of termination) for such period of time as
specified in his or her option agreement.
Stock
Appreciation Rights. SARs may be granted either alone (a
“free-standing SAR”) or in conjunction with all or part of
any option granted under the 2021 Plan (a “tandem SAR”). A
free-standing SAR will entitle its holder to receive, at the time
of exercise, an amount per share up to the excess of the fair
market value (at the date of exercise) of a share of common stock
over the base price of the free-standing SAR (which shall be no
less than 100% of the fair market value of the related shares of
common stock on the date of grant) multiplied by the number of
shares in respect of which the SAR is being exercised. A tandem SAR
will entitle its holder to receive, at the time of exercise of the
SAR and surrender of the applicable portion of the related option,
an amount per share up to the excess of the fair market value (at
the date of exercise) of a share of common stock over the exercise
price of the related option multiplied by the number of shares in
respect of which the SAR is being exercised. The exercise period of
a free-standing SAR may not exceed ten years from the date of
grant. The exercise period of a tandem SAR will also expire upon
the expiration of its related option.
The
holder of a SAR will have no rights to dividends or any other
rights of a stockholder with respect to the shares of Common Stock
subject to the SAR until the holder has given written notice of
exercise and paid the exercise price and applicable withholding
taxes.
In
the event of a participant’s termination of employment or service,
the holder of a SAR may exercise his or her SAR (to the extent
vested as of such date of termination) for such period of time as
specified in his or her SAR agreement.
Other
Stock-Based Awards. The administrator may grant other
stock-based awards under the 2021 Plan, valued in whole or in part
by reference to, or otherwise based on, shares of common stock. The
administrator will determine the terms and conditions of these
awards, including the number of shares of common stock to be
granted pursuant to each award, the manner in which the award will
be settled, and the conditions to the vesting and payment of the
award (including the achievement of performance goals). The rights
of participants granted other stock-based awards upon the
termination of employment or service to us will be set forth in the
applicable award agreement. In the event that a bonus is granted in
the form of shares of common stock, the shares of common stock
constituting such bonus shall, as determined by the administrator,
be evidenced in uncertificated form or by a book entry record or a
certificate issued in the name of the participant to whom such
grant was made and delivered to such participant as soon as
practicable after the date on which such bonus is payable. Any
dividend or dividend equivalent award issued hereunder shall be
subject to the same restrictions, conditions and risks of
forfeiture as apply to the underlying award.
Equitable Adjustment and Treatment of Outstanding Awards Upon a
Change in Control
Equitable
Adjustments. In the event of a merger, consolidation,
reclassification, recapitalization, spin-off, spin-out, repurchase,
reorganization, special or extraordinary dividend or other
extraordinary distribution (whether in the form of common shares,
cash or other property), combination, exchange of shares, or other
change in corporate structure affecting our common stock, an
equitable substitution or proportionate adjustment shall be made in
(i) the aggregate number and kind of securities reserved for
issuance under the 2021 Plan, (ii) the kind and number of
securities subject to, and the exercise price of, any outstanding
options and SARs granted under the 2021 Plan, (iii) the kind,
number and purchase price of shares of common stock, or the amount
of cash or amount or type of property, subject to outstanding
restricted stock, RSUs and other stock-based awards granted under
the 2021 Plan and (iv) the terms and conditions of any outstanding
awards (including any applicable performance targets). Equitable
substitutions or adjustments other than those listed above may also
be made as determined by the plan administrator. In addition, the
plan administrator may terminate all outstanding awards for the
payment of cash or in-kind consideration having an aggregate fair
market value equal to the excess of the fair market value of the
shares of common stock, cash or other property covered by such
awards over the aggregate exercise price, if any, of such awards,
but if the exercise price of any outstanding award is equal to or
greater than the fair market value of the shares of common stock,
cash or other property covered by such award, the plan
administrator may cancel the award without the payment of any
consideration to the participant. With respect to awards subject to
foreign laws, adjustments will be made in compliance with
applicable requirements. Except to the extent determined by the
plan administrator, adjustments to incentive stock options will be
made only to the extent not constituting a “modification” within
the meaning of Section 424(h)(3) of the Code.
Change
in Control. The 2021 Plan provides that, unless otherwise
determined by the plan administrator and evidenced in an award
agreement, if a “change in control” (as defined below) occurs and a
participant is employed by us or any of our affiliates immediately
prior to the consummation of the change in control, then the plan
administrator, in its sole and absolute discretion, may (i) provide
that any unvested or unexercisable portion of an award carrying a
right to exercise will become fully vested and exercisable; and
(ii) cause the restrictions, deferral limitations, payment
conditions and forfeiture conditions applicable to any award
granted under the 2021 Plan to lapse, and the awards will be deemed
fully vested and any performance conditions imposed with respect to
such awards will be deemed to be fully achieved at target
performance levels. The administrator shall have discretion in
connection with such change in control to provide that all
outstanding and unexercised options and SARs shall expire upon the
consummation of such change in control.
For
purposes of the 2021 Plan, a “change in control” means, in summary,
the first to occur of the following events: (i) a person or entity
becomes the beneficial owner of more than 50% of our voting power;
(ii) an unapproved change in the majority membership of our Board;
(iii) a merger or consolidation of us or any of our subsidiaries,
other than (A) a merger or consolidation that results in our voting
securities continuing to represent 50% or more of the combined
voting power of the surviving entity or its parent and our Board
immediately prior to the merger or consolidation continuing to
represent at least a majority of the board of directors of the
surviving entity or its parent or (B) a merger or consolidation
effected to implement a recapitalization in which no person is or
becomes the beneficial owner of our voting securities representing
more than 50% of our combined voting power; or (iv) stockholder
approval of a plan of our complete liquidation or dissolution or
the consummation of an agreement for the sale or disposition of
substantially all of our assets, other than (A) a sale or
disposition to an entity, more than 50% of the combined voting
power of which is owned by our stockholders in substantially the
same proportions as their ownership of us immediately prior to such
sale or (B) a sale or disposition to an entity controlled by our
Board. However, a change in control will not be deemed to have
occurred as a result of any transaction or series of integrated
transactions following which our stockholders, immediately prior
thereto, hold immediately afterward the same proportionate equity
interests in the entity that owns all or substantially all of our
assets.
Tax Withholding
Each
participant will be required to make arrangements satisfactory to
the plan administrator regarding payment of up to the maximum
statutory tax rates in the participant’s applicable jurisdiction
with respect to any award granted under the 2021 Plan, as
determined by us. We have the right, to the extent permitted by
applicable law, to deduct any such taxes from any payment of any
kind otherwise due to the participant. With the approval of the
plan administrator, the participant may satisfy the foregoing
requirement by either electing to have us withhold from delivery of
shares of common stock, cash or other property, as applicable, or
by delivering already owned unrestricted shares of common stock, in
each case, having a value not exceeding the applicable taxes to be
withheld and applied to the tax obligations. We may also use any
other method of obtaining the necessary payment or proceeds, as
permitted by applicable law, to satisfy our withholding obligation
with respect to any award.
Amendment and Termination of the 2021 Plan
The
2021 Plan provides our Board with authority to amend, alter or
terminate the 2021 Plan, but no such action impairs the rights of
any participant with respect to outstanding awards without the
participant’s consent. The plan administrator may amend an award,
prospectively or retroactively, but no such amendment may
materially impair the rights of any participant without the
participant’s consent. Stockholder approval of any such action will
be obtained if required to comply with applicable law. The 2021
Plan will terminate on the tenth anniversary of the Effective Date
(although awards granted before that time will remain outstanding
in accordance with their terms).
Clawback.
If we are required to prepare a financial restatement due to the
material non-compliance with any financial reporting requirement,
then the plan administrator may require any Section 16 officer to
repay or forfeit to us that part of the cash or equity incentive
compensation received by that Section 16 officer during the
preceding three years that the plan administrator determines was in
excess of the amount that such Section 16 officer would have
received had such cash or equity incentive compensation been
calculated based on the financial results reported in the restated
financial statement. The plan administrator may take into account
any factors it deems reasonable in determining whether to seek
recoupment of previously paid cash or equity incentive compensation
and how much of such compensation to recoup from each Section 16
officer (which need not be the same amount or proportion for each
Section 16 officer). The amount and form of the incentive
compensation to be recouped shall be determined by the
administrator in its sole and absolute discretion.
US Federal Income Tax Consequences
The
following is a summary of certain United States federal income tax
consequences of awards under the 2021 Plan. It does not purport to
be a complete description of all applicable rules, and those rules
(including those summarized here) are subject to change.
Non-Qualified
Stock Options. A participant who has been granted a
non-qualified stock option will not recognize taxable income upon
the grant of a non-qualified stock option. Rather, at the time of
exercise of such non-qualified stock option, the participant will
recognize ordinary income for income tax purposes in an amount
equal to the excess of the fair market value of the shares of
common stock purchased over the exercise price. We generally will
be entitled to a tax deduction at such time and in the same amount
that the participant recognizes ordinary income. If shares of
common stock acquired upon exercise of a non-qualified stock option
are later sold or exchanged, then the difference between the amount
received upon such sale or exchange and the fair market value of
such shares on the date of such exercise will generally be taxable
as long-term or short-term capital gain or loss (if the shares are
a capital asset of the participant) depending upon the length of
time such shares were held by the participant.
Incentive
Stock Options. In general, no taxable income is realized by a
participant upon the grant of an ISO. If shares of common stock are
purchased by a participant, or option shares, pursuant to the
exercise of an ISO granted under the 2021 Plan and the participant
does not dispose of the option shares within the two-year period
after the date of grant or within one year after the receipt of
such option shares by the participant, such disposition a
disqualifying disposition, then, generally (1) the participant will
not realize ordinary income upon exercise and (2) upon sale of such
option shares, any amount realized in excess of the exercise price
paid for the option shares will be taxed to such participant as
capital gain (or loss). The amount by which the fair market value
of the common stock on the exercise date of an ISO exceeds the
purchase price generally will constitute an item which increases
the participant’s “alternative minimum taxable income.” If option
shares acquired upon the exercise of an ISO are disposed of in a
disqualifying disposition, the participant generally would include
in ordinary income in the year of disposition an amount equal to
the excess of the fair market value of the option shares at the
time of exercise (or, if less, the amount realized on the
disposition of the option shares), over the exercise price paid for
the option shares. Subject to certain exceptions, an option
generally will not be treated as an ISO if it is exercised more
than three months following termination of employment. If an ISO is
exercised at a time when it no longer qualifies as an ISO, such
option will be treated as a nonqualified stock option as discussed
above. In general, we will receive an income tax deduction at the
same time and in the same amount as the participant recognizes
ordinary income.
Stock
Appreciation Rights. A participant who is granted an SAR
generally will not recognize ordinary income upon receipt of the
SAR. Rather, at the time of exercise of such SAR, the participant
will recognize ordinary income for income tax purposes in an amount
equal to the value of any cash received and the fair market value
on the date of exercise of any shares of common stock received. We
generally will be entitled to a tax deduction at such time and in
the same amount, if any, that the participant recognizes as
ordinary income. The participant’s tax basis in any shares of
common stock received upon exercise of an SAR will be the fair
market value of the shares of common stock on the date of exercise,
and if the shares are later sold or exchanged, then the difference
between the amount received upon such sale or exchange and the fair
market value of such shares on the date of exercise will generally
be taxable as long-term or short-term capital gain or loss (if the
shares are a capital asset of the participant) depending upon the
length of time such shares were held by the participant.
Restricted
Stock. A participant generally will not be taxed upon the grant
of restricted stock, but rather will recognize ordinary income in
an amount equal to the fair market value of the shares of common
stock at the earlier of the time the shares become transferable or
are no longer subject to a substantial risk of forfeiture (within
the meaning of the Code). We generally will be entitled to a
deduction at the time when, and in the amount that, the participant
recognizes ordinary income on account of the lapse of the
restrictions. A participant’s tax basis in the shares of common
stock will equal their fair market value at the time the
restrictions lapse, and the participant’s holding period for
capital gains purposes will begin at that time. Any cash dividends
paid on the shares of common stock before the restrictions lapse
will be taxable to the participant as additional compensation and
not as dividend income, unless the individual has made an election
under Section 83(b) of the Code. Under Section 83(b) of the Code, a
participant may elect to recognize ordinary income at the time the
restricted shares are awarded in an amount equal to their fair
market value at that time, notwithstanding the fact that such stock
is subject to restrictions or transfer and a substantial risk of
forfeiture. If such an election is made, no additional taxable
income will be recognized by such participant at the time the
restrictions lapse, the participant will have a tax basis in the
shares of common stock equal to their fair market value on the date
of their award, and the participant’s holding period for capital
gains purposes will begin at that time. We generally will be
entitled to a tax deduction at the time when, and to the extent
that, ordinary income is recognized by such participant.
Restricted
Stock Units. In general, the grant of RSUs will not result in
income for the participant or in a tax deduction for us. Upon the
settlement of such an award in cash or shares of common stock, the
participant will recognize ordinary income equal to the aggregate
value of the payment received, and we generally will be entitled to
a tax deduction at the same time and in the same amount.
Other
Awards. With respect to other stock-based awards, generally
when the participant receives payment in respect of the award, the
amount of cash and/or the fair market value of any shares of common
stock or other property received will be ordinary income to the
participant, and we generally will be entitled to a tax deduction
at the same time and in the same amount.
New Plan Benefits
Future
grants under the 2021 Plan will be made at the discretion of the
plan administrator and, accordingly, are not yet determinable. In
addition, benefits under the 2021 Plan will depend on a number of
factors, including the fair market value of our common stock on
future dates and the exercise decisions made by participants.
Consequently, at this time, it is not possible to determine the
future benefits that might be received by participants receiving
discretionary grants under the 2021 Plan.
Interests
of Officers and Directors in this Proposal
Members
of our Board and our executive officers are eligible to receive
awards under the terms of the 2021 Plan, including through certain
outstanding employment agreements and grants, and they therefore
have a substantial interest in Proposal 3.
Required
Vote of Stockholders
The
affirmative vote of a majority of the votes cast at the Annual
Meeting is required to approve the adoption of the 2021
Plan.
Board
Recommendation
The
Board unanimously recommends a vote “FOR” Proposal
3.
PROPOSAL
4
REINCORPORATION
OF THE COMPANY
FROM
THE STATE OF TEXAS TO THE STATE OF DELAWARE
General
The
Board has unanimously approved and recommends that shareholders
approve the reincorporation of the Company from the State of Texas
to the State of Delaware (the “Reincorporation” or the
“Reincorporation Proposal”). This approval and recommendation have
been provided by the entire Board. The Company would effect the
Reincorporation by merging with and into a newly formed wholly
owned subsidiary of the Company incorporated under the laws of the
State of Delaware (“Delaware Merger Sub” and the surviving entity
in the Reincorporation, “New Cipherloc”) pursuant to an agreement
and plan of merger in form attached hereto as Appendix B
(the “Agreement and Plan of Merger”). As part of the
Reincorporation, the name of New Cipherloc following the completion
of the Reincorporation will continue to be “Cipherloc Corporation.”
Additionally, the authorized capital of the Company will be
681,000,000 shares of common stock and 10,000,000 shares of
preferred stock. At the effective time of the merger (the
“Effective Time”), the Certificate of Incorporation in the form
attached hereto as Appendix C (the “Delaware Certificate of
Incorporation”), and the Bylaws in the form attached hereto
Appendix D (the “Delaware Bylaws”), will govern New
Cipherloc. All descriptions of the Delaware Certificate of
Incorporation and Delaware Bylaws are qualified by and subject to
the more complete information set forth in those
documents.
Upon
the Effective Time:
|
(1) |
The
affairs of the Company will cease to be governed by Texas
corporation laws and will become subject to Delaware corporation
laws. See “Comparison of Shareholder Rights Before and After the
Reincorporation” below. |
|
|
|
|
(2) |
The
legal existence of the Company as a separate Texas corporation will
cease and New Cipherloc will continue with all of the rights,
titles and interests of the Company, will continue with the same
officers and directors of the Company, the rights of creditors of
the Company will continue to exist as creditors of New Cipherloc,
and the shareholders of the Company will be the stockholders of New
Cipherloc. |
|
|
|
|
(3) |
Each
outstanding share of our common stock of the Company will
automatically be converted into one share of common stock, par
value $0.001 per share, of New Cipherloc (“New Cipherloc Common
Stock”). |
|
|
|
|
(4) |
Each
outstanding option and warrant to purchase our common stock will
automatically be converted into an option or warrant, as the case
may be, to purchase an identical number of shares of New Cipherloc
Common Stock at the same exercise price per share and upon the same
terms and subject to the same conditions set forth in the
applicable plan, related award agreement, option agreement, or
warrant agreement, as applicable. |
|
|
|
|
(5) |
New
Cipherloc Common Stock will become issuable upon the vesting of the
Company’s existing restricted shares and awards of restricted stock
units upon the same terms and subject to the same conditions set
forth in the applicable plan and related award
agreement. |
|
|
|
|
(6) |
Our
ticker symbol “CLOK” will remain unchanged as a result of the
Reincorporation, and the New Cipherloc Common Stock will trade
under that symbol. |
|
(7) |
All
of the Company’s employee benefit and incentive plans and
arrangements will be assumed by New Cipherloc upon the same terms
and subject to the same conditions set forth in such plans and
arrangements as before the Reincorporation. |
The
Reincorporation will become effective upon filing of certificates
of merger with the Secretary of State of each of Delaware and
Texas, which filings are expected to be made as soon as practicable
after shareholder adoption of the Agreement and Plan of Merger.
Pursuant to the terms of the Agreement and Plan of Merger, the
Reincorporation may be abandoned by the Board at any time before
the Effective Time (whether before or after approval by the
Company’s shareholders). In addition, the Company and New Cipherloc
may amend the Agreement and Plan of Merger, the Delaware
Certificate of Incorporation and Delaware Bylaws at any time before
the Effective Time (whether before or after approval by the
Company’s shareholders), provided that after approval by the
Company’s shareholders, no amendment may be made that by law
requires further approval by the Company’s shareholders without
obtaining such further approval.
No
regulatory approval (other than various filings with Secretary of
State of Texas and Delaware discussed above) is required to effect
the Reincorporation. The terms of the Reincorporation are described
in more detail in the Agreement and Plan of Merger and all
descriptions of the Reincorporation are qualified by and subject to
the more complete information therein.
Reasons
for the Reincorporation
The
State of Delaware has been a leading jurisdiction in adopting a
comprehensive and coherent set of corporate laws that are
responsive to the evolving legal and business needs of corporations
organized under Delaware law. Our Board believes that it is
important for the Company to be able to draw upon well-established
principles of corporate governance in making legal and business
decisions. The prominence and predictability of Delaware corporate
law provide a reliable foundation on which our governance decisions
can be based, and we believe that our shareholders will benefit
from the responsiveness of Delaware corporate law to their needs.
In addition, the Board believes that direct benefits that Delaware
law provides to a corporation indirectly benefit our shareholders,
who are our owners. Specifically, our Board believes that there are
several benefits of the Reincorporation, as summarized
below.
Access to Specialized Courts
Delaware
has a specialized court of equity called the Court of Chancery that
hears corporate law cases. The Delaware Court of Chancery operates
under rules that are intended to ensure litigation of disputes in a
timely and effective way, keeping in mind the timelines and
constraints of business decision-making and market dynamics. The
appellate process on decisions emanating from the Court of Chancery
is similarly streamlined, and the justices of Delaware appellate
courts tend to have substantial experience with corporate cases
because of the relatively higher volume of these cases in the
Delaware courts. As the leading state of incorporation for both
private and public companies, Delaware has developed a vast body of
corporate law that helps to promote greater consistency and
predictability in judicial rulings. In contrast, Texas does not
have a similar specialized court established to hear corporate law
cases. Rather, disputes involving questions of Texas corporate law
are either heard in law courts of general jurisdiction, alongside
other civil cases, or, if federal jurisdiction exists, a federal
district court. These courts hear many different types of cases,
and the cases may be heard before judges or juries with limited
corporate law experience. As a result, corporate law cases brought
in Texas may not proceed as expeditiously as cases brought in
Delaware and the outcomes in such courts may be less consistent and
predictable.
Delaware
has one of the most modern statutory corporation codes, which is
revised regularly in response to changing legal and business needs
of corporations. The Delaware legislature is particularly
responsive to developments in modern corporate law and Delaware has
proven sensitive to changing needs of corporations and their
shareholders. The Delaware Secretary of State is viewed as
particularly flexible and responsive in its administration of the
filings required for mergers, acquisitions and other corporate
transactions. Delaware has become a preferred domicile for most
major American corporations and the Delaware corporate law and
administrative practices have become comparatively well-known and
widely understood. As a result of these factors, it is anticipated
that the Delaware corporate law will provide greater efficiency,
predictability and flexibility in the Company’s legal affairs than
is presently available under Texas law. In addition, Delaware case
law provides a well-developed body of law defining the proper
duties and decision-making processes expected of boards of
directors in evaluating potential or proposed extraordinary
corporate transactions.
Enhanced Ability to Attract and Retain Directors and
Officers
The
Board believes that the Reincorporation will enhance our ability to
attract and retain qualified directors and officers, as well as
encourage directors and officers to continue to make independent
decisions in good faith on behalf of the Company. We are in a
competitive industry and compete for talented individuals to serve
on our management team and on our Board. The vast majority of
public companies are incorporated in Delaware. Not only is Delaware
law more familiar to directors, it also offers greater certainty
and stability from the perspective of those who serve as corporate
officers and directors. The parameters of director and officer
liability are more extensively addressed in Delaware court
decisions and are therefore better defined and better understood
than under Texas law. The Board believes that the Reincorporation
will enhance our ability to recruit and retain directors and
officers. We believe that the better understood and comparatively
stable corporate environment afforded by Delaware law will enable
us to compete more effectively with other public companies in the
recruitment of talented and experienced directors and
officers.
We
have provided a discussion of differences between the Delaware and
Texas corporate laws below under the heading “Comparison of
Shareholder Rights Before and After the
Reincorporation.”
No
Change in Business, Jobs, Physical Location, Etc.
The
Reincorporation Proposal will effect a change in the legal domicile
of the Company and other changes of a legal nature, the most
significant of which are described below under the heading
“-Comparison of Shareholder Rights Before and After the
Reincorporation.” The Reincorporation Proposal will not result in
any change in headquarters, business, jobs, management, location of
any of our offices or facilities, number of employees, assets,
liabilities or net worth (other than as a result of the costs
incident to the Reincorporation). Our management, including all
directors and officers, will remain the same in connection with the
reincorporation and will have identical positions with New
Cipherloc. To the extent the Reincorporation will require the
consent or waiver of a third party, the Company will use
commercially reasonable efforts to obtain such consent or waiver
before completing the Reincorporation. If a material consent cannot
be obtained, the Company will not proceed with the Reincorporation.
The Reincorporation will not otherwise affect any of the Company’s
material contracts with any third parties and the Company’s rights
and obligations under such material contractual arrangements will
continue as rights and obligations of New Cipherloc as a Delaware
corporation. Because the Company’s corporate headquarters,
management and employees are located in Austin, Texas, the
Company’s status as a Delaware corporation physically located in
Texas will require the Company to comply with reporting and tax
obligations in Delaware. The Board has considered the additional
franchise tax obligations and believes that the benefits discussed
above outweigh the additional costs.
Comparison
of Shareholder Rights Before and After the
Reincorporation
The
Reincorporation will effect some changes in the rights of the
Company’s shareholders. This is as a result of differences between
the Texas Business Organizations Code (“TBOC”) and the General
Corporation Law of the State of Delaware (“DGCL”), as well as
differences between each of the Company’s charter documents before
and after the Reincorporation. Summarized below are the most
significant differences between the rights of the Company’s
shareholders before and after the Reincorporation. The differences
between the current Amended and Restated Articles of Incorporation
of the Company (the “Texas Articles of Incorporation”) and Third
Amended and Restated Bylaws of the Company (the “Texas Bylaws”) and
the proposed Delaware Certificate of Incorporation and Delaware
Bylaws, as relevant to such rights, are noted within this summary.
The summary below is not intended to be relied upon as an
exhaustive list of all the differences or a complete description of
the differences resulting from the Reincorporation. Furthermore,
this summary is qualified in its entirety by reference to the DGCL,
the Texas Articles of Incorporation and Texas Bylaws, the TBOC, and
the Company’s proposed Delaware Certificate of Incorporation and
Delaware Bylaws.
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Delaware |
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Texas |
Business Combinations Statute |
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Unless
its original certificate of incorporation provides that Section 203
does not apply to the corporation, DGCL Section 203 prohibits
certain business combinations between a Delaware corporation and an
“interested stockholder” for a period of three years after the time
the interested stockholder acquired its stock.
“Interested
stockholder” is broadly defined as a person (including the
affiliates and associates of such person) that is directly or
indirectly a beneficial owner of 15% or more of the outstanding
voting stock of a Delaware corporation.
Business
combinations include: (i) certain mergers and consolidations, (ii)
sales, leases, exchanges, mortgages, pledges, transfers or other
dispositions of assets having an aggregate market value of 10% or
more of either the consolidated assets or the outstanding stock of
a company, and (iii) certain transactions that would result in the
issuance or transfer of stock of a company, increase the interested
stockholder’s proportionate share of ownership in a company, or
grant the interested stockholder disproportionate financial
benefits.
The
DGCL provides an exception to this prohibition if: (i) the business
combination or the transaction in which the stockholder became an
interested stockholder is approved by that company’s board of
directors prior to the time the interested stockholder became an
interested stockholder, (ii) the interested stockholder acquired at
least 85% of the voting stock of that company in the transaction in
which it became an interested stockholder, or (iii) the business
combination is approved by a majority of the board of directors and
the affirmative vote of two-thirds of the votes entitled to be cast
by disinterested stockholders at an annual or annual meeting (and
not by written consent).
The
proposed Delaware Certificate of Incorporation does not opt out of
Section 203.
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Unless
its certificate of formation or bylaws provide otherwise, the TBOC
prohibits Texas public corporations from entering into certain
business combinations with affiliated shareholders, including
certain (i) mergers, share exchanges and conversions, (ii) sales,
leases, exchanges, mortgages, pledges, transfers and other
dispositions of assets having an aggregate market value of 10% or
more of (a) the aggregate market value of the consolidated assets
of a company, (b) the aggregate market value of the outstanding
voting stock of a company or (c) the earning power or net income of
a company on a consolidated basis, (iii) the issuance or transfer
of shares of a company to an affiliated shareholder or its
associate, except by the exercise of warrants or rights to purchase
shares, or a share dividend paid pro rata to all shareholders, (iv)
reclassifications of securities that would result in increasing the
proportionate ownership percentage of voting shares beneficially
owned by the affiliated shareholder or its associates, except for
immaterial changes due to fractional share adjustments, (v)
liquidation proposals with an affiliated shareholder, and (vi) the
receipt by an affiliated shareholder or its associate of the
benefit of a loan, advance, guarantee, pledge or other financial
assistance or tax advantage provided by or through the company
except proportionately as a shareholder, in each case, for a period
of three years after the date the shareholder obtained “affiliated
shareholder” status.
“Affiliated
shareholder” is defined as a person who beneficially owns (or has
owned within the preceding three-year period) 20% or more of the
outstanding voting shares of a Texas public corporation.
The
TBOC provides an exception to this prohibition if: (i) the board of
directors of the corporation approves the business combination or
the acquisition of shares by the affiliated shareholder prior to
the affiliated shareholder becoming an affiliated shareholder, or
(ii) two-thirds of the unaffiliated shareholders approve the
transaction at a meeting held no earlier than six months after the
shareholder acquires such ownership. Such shareholder approval may
not be by written consent.
The
existing Texas Articles of Incorporation and Bylaws do not address
this issue.
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Sales, Leases, Exchanges or Other Dispositions |
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A
Delaware corporation may sell, lease or exchange all or
substantially all of its property and assets when and as authorized
by the board of directors and by a majority in voting power of the
outstanding stock of the corporation entitled to vote thereon, but
the certificate of incorporation may provide for a greater
vote.
The
proposed Delaware Certificate of Incorporation does not provide for
a greater vote.
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Generally,
the sale, lease, exchange or other disposition of all, or
substantially all, of the property and assets of a Texas
corporation requires the approval of the board of directors and,
except as set forth in the certificate of formation of the company,
the holders of at least two-thirds of the outstanding shares of the
corporation entitled to vote. No such approval is required,
however, if the transaction is made in the usual and regular course
of the corporation’s business. Under Texas law, the transfer of
substantially all of a corporation’s assets in such a manner that
the corporation continues directly or indirectly to engage in one
or more businesses is deemed to be in the usual and regular course
of its business.
The
Texas Articles of Incorporation and Texas Bylaws do not address
this issue.
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Approval of Mergers |
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Subject
to certain exceptions, under Delaware law, mergers must be approved
by the stockholders. When stockholder approval is required, the
vote required is a majority in voting power of the outstanding
stock of the corporation entitled to vote thereon, but the
certificate of incorporation may provide for a greater vote of the
corporation’s stockholders.
The
proposed Delaware Certificate of Incorporation does not provide for
a greater vote.
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Under
Texas law, any merger with a third party requires approval by
holders of at least two-thirds of the outstanding shares of the
Texas corporation entitled to vote unless a different threshold,
not less than a majority, is specified in the certificate of
formation of the corporation.
The
Texas Articles of Incorporation and Texas Bylaws do not set forth a
different approval standard.
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Appraisal Rights |
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Under
Delaware law, subject to exceptions for certain mergers and
consolidations, stockholders who do not vote in favor of a merger
or consolidation and otherwise comply with applicable statutory
provisions are entitled to appraisal rights in connection with such
merger or consolidation. Notwithstanding the foregoing, appraisal
rights are not available in the event of a merger or consolidation
of the corporation if the stock of the Delaware corporation is
listed on a national securities exchange (the Company currently
meets this condition by virtue of its listing on the NASDAQ Global
Select Market) or if such stock is held of record by more than
2,000 stockholders. Even if appraisal rights would not otherwise be
available under Delaware law in the cases described above,
stockholders would still have appraisal rights if they were
required by the terms of the agreement of merger or consolidation
to accept for their stock anything other than:
(1)
shares of stock of the surviving corporation or resulting
corporation or depository receipts in respect thereof;
(2)
shares of stock, or depository receipts in respect thereof, of any
other corporation which shares (or depository receipts) at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or held of record by more than
2,000 stockholders;
(3)
cash in lieu of fractional shares or depository receipts;
or
(4) a
combination of such shares or depository receipts and such cash in
lieu of fractional shares or depository receipts.
Under
Delaware law, any corporation may provide in its certificate of
incorporation that appraisal rights will also be available as a
result of an amendment to its certificate of incorporation, any
merger or consolidation in which the corporation is a constituent
corporation, or the sale of all or substantially all of the assets
of the corporation.
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Except
for the limited classes of mergers, consolidations, sales and asset
dispositions for which no shareholder approval is required under
Texas law, shareholders of Texas corporations with voting rights
have rights of dissent and appraisal in the event of a merger,
consolidation, conversion, sale, lease, exchange or other
disposition of all, or substantially all, the property and assets
of the corporation. However, a shareholder of a Texas corporation
has no rights of dissent and appraisal with respect to any plan of
merger or conversion in which there is a single surviving or new
domestic or foreign corporation, or with respect to any plan of
exchange if, in each case:
(1)
the ownership interest, or a depository receipt in respect of the
ownership interest, held by the owner is part of a class or series
of ownership interests, or depository receipts in respect of
ownership interests, that are, on the record date set for purposes
of determining which owners are entitled to vote on the plan of
merger, conversion, or exchange, as appropriate, either:
(A)
listed on a national securities exchange; or
(B) held
of record by at least 2,000 owners;
(2)
the owner is not required by the terms of the plan of merger,
conversion, or exchange, as appropriate, to accept for the owner’s
ownership interest any consideration that is different from the
consideration to be provided to any other holder of an ownership
interest of the same class or series as the ownership interest held
by the owner, other than cash instead of fractional shares or
interests the owner would otherwise be entitled to receive;
and
(3)
the owner is not required by the terms of the plan of merger,
conversion, or exchange, as appropriate, to accept for the owner’s
ownership interest any consideration other than:
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The
proposed Delaware Certificate of Incorporation does not include
such a provision. |
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(A)
ownership interest, or depository receipts in respect of ownership
interests, of another entity of the same general organizational
type that, immediately after the effective date of the merger,
conversion, or exchange, as appropriate, will be part of a class or
series of ownership interests, or depository receipts in respect
ownership interests, that are: (i) listed on a national securities
exchange or authorized for listing on the exchange on official
notice of issuance; or (ii) held of record by at least 2,000
owners; (B) cash instead of fractional ownership interests the
owner would otherwise be entitled to receive; or (C) any
combination of the ownership interests and cash described
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Shareholder Consent to Action Without a Meeting |
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Under
Delaware law, unless otherwise provided in the certificate of
incorporation, any action that can be taken at a meeting of the
stockholders can be taken without such meeting if written consent
thereto is signed by the holders of outstanding stock having the
minimum number of votes necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were
presented and voted.
The
proposed Delaware Certificate of Incorporation does not prohibit
action by written consent.
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Under
Texas law, any action that may be taken at a meeting of the
shareholders may be taken without a meeting if written consent
thereto is signed by all the holders of shares entitled to vote on
that action. The certificate of formation of a Texas corporation
may provide that action by written consent in lieu of a meeting may
be taken by the holders of that number of votes which would be
required to take the action which is the subject of the consent at
a meeting at which each of the shares entitled to vote thereon were
present and voted.
The
existing Texas Articles of Incorporation allow action by one or
more written consents if such consent or consents, setting forth
the action so taken, shall be signed by the holder or holders of
shares having not less than the minimum number of votes that would
be necessary to take such action at a meeting at which the holders
of all shares entitled to vote on the action were presented and
voted.
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Procedures for Filling Vacant Directorships |
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Under
Delaware law, unless the certificate of incorporation or bylaws
provide otherwise, vacancies and newly created directorships
resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining
director.
The
proposed Delaware Certificate of Incorporation and Delaware Bylaws
provide that a vacancy may be filled by the vote of a majority of
the directors then in office, although less than a quorum of the
board of directors.
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Under
Texas law, unless otherwise authorized by the corporation’s
certificate of formation, any vacancy occurring in the board of
directors may, unless otherwise authorized by a corporation’s
certificate of formation, fill a vacancy or a newly created vacancy
in a director position only: (i) by the affirmative vote of the
majority of the directors then in office, even if less than a
quorum, (ii) by the sole remaining director, or (iii) by the
affirmative vote of the shareholders.
A
directorship to be filled because of an increase in the number of
directors may be filled by the shareholders or by the board of
directors for a term of office continuing only until the next
election of one or more directors by the shareholders. The board of
directors may not fill more than two such directorships during the
period between any two successive annual meetings of
shareholders.
The
existing Texas Articles of Incorporation provide that a vacancy may
be filled by (a) the holders of a majority of the outstanding
shares entitled to vote thereon at an annual or special meeting of
shareholders called for that purpose, or (b) a majority of the
remaining directors though less than a quorum of the board of
directors.
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Right to Call Meetings |
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Delaware
law provides that meetings, including annual meetings, of the
stockholders may be called by the board of directors or such other
persons as are authorized in the certificate of incorporation or
bylaws.
The
proposed Delaware Certificate of Incorporation and the Delaware
Bylaws provide that, subject to the rights of the holders of
preferred stock, special meetings of the stockholders may be called
by a majority of the board of directors at any time and are
required to be called upon the written request of the holders of
25% of the voting power of the Company’s outstanding
stock.
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Unless
otherwise specified in the corporation’s certificate of formation
holders of not less than 10% of all of the shares entitled to vote
at the proposed meeting have the right to call a special
shareholders’ meeting. The certificate of formation may allow for
annual meetings to be called by a number of shares entitled to vote
greater than or less than 10%, but it may not set the required
number of shares above 50%. The president, board of directors, or
any other person authorized to call special meetings by the
certificate of formation or bylaws of the corporation may also call
special shareholders’ meetings.
The
existing Texas Bylaws provide that special meetings of shareholders
may be called by the president or the board of directors any time
and are required to be called upon the request of the holder(s) of
not less than 10% of the outstanding shares of the Company entitled
to vote at the meeting.
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Voting by Proxy |
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Under
Delaware law, a stockholder may authorize another person or persons
to act for such stockholder by proxy. A proxy shall not be voted or
acted upon after three years from its date, unless the proxy
provides for a longer period.
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Under
Texas law, a shareholder may authorize another person or persons to
act for such shareholder by proxy. A proxy is only valid for eleven
months from the date it is executed unless otherwise provided in
the proxy. |
Charter Amendments |
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Delaware
law provides that amendments to the certificate of incorporation
must be approved by the board of directors and thereafter by
holders of a majority in voting power of the corporation’s stock
entitled to vote thereon, and a majority in voting power of each
class entitled to a separate class vote, unless the certificate of
incorporation provides for a greater vote. A separate class vote is
provided for amendments to the certificate of incorporation
changing the number of authorized shares of a class of stock
(unless the certificate of incorporation provides otherwise),
changing the par value of a class of stock, or adversely affecting
the rights, powers and preferences of the class of
stock.
The
proposed Delaware Certificate of Incorporation does not alter the
approval requirement for amendments under Delaware law.
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Under
Texas law, an amendment to the certificate of formation requires
the approval of the holders of at least two-thirds of the
outstanding shares of the corporation entitled to vote, unless a
different threshold, not less than a majority, is specified in the
certificate of formation.
The
existing Texas Articles of Incorporation do not alter the approval
requirement for amendments under Texas law.
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Bylaw Amendments |
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Under
Delaware law, stockholders of a corporation entitled to vote have
the right to amend, repeal or adopt the bylaws. If the
corporation’s certificate of incorporation so provides, the
corporation’s board of directors may also have the right to amend,
repeal or adopt the bylaws.
The
proposed Delaware Bylaws provide that the bylaws may be amended,
repealed, altered or adopted (i) by stockholder action with the
affirmative vote of the holders of at least a majority of the
voting power of all the shares entitled to vote thereon or (ii) by
the board of directors.
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Generally,
under Texas law, the board of directors may amend, repeal or adopt
a corporation’s bylaws. However, a corporation’s certificate of
formation may reserve this power, in whole or in part, exclusively
to the shareholders. Similarly, the shareholders, in amending,
repealing or adopting a particular bylaw, may expressly provide
that the board of directors may not amend, readopt or repeal that
bylaw. Texas case law permits the corporation to increase the
required threshold of shareholders necessary to amend the
bylaws.
The
existing Texas Bylaws allow for amendments of the Texas Bylaws by
the Board, subject to amendment, repeal or adoption of new bylaws
by action of the shareholders and unless the shareholders in
amending, repealing or adopting a particular bylaw expressly
provide that the board of directors may not amend or repeal such
bylaw.
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Removal of Directors |
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Under
Delaware law, subject to the exceptions discussed below, holders of
a majority in voting power of the corporation’s capital stock
entitled to vote at an election of directors may remove a director
with or without cause.
If
the board of directors of a Delaware corporation is classified
(i.e., elected for staggered terms), a director may only be removed
for cause, unless the corporation’s certificate of incorporation
provides otherwise.
If a
corporation uses cumulative voting and less than the entire board
is to be removed, no director may be removed without cause if the
votes cast against his or her removal would be sufficient to elect
him or her if then cumulatively voted at an election of the entire
board of directors. Where a corporation’s certificate of
incorporation provides that separate classes or series of
stockholders are entitled, as such a class or series, to elect
separate directors, in calculating the sufficiency of votes for
removal of such a director, only the votes of the holders of such a
class or series are considered.
The
proposed Delaware Certificate of Incorporation, does not provide
for a classified board of directors, and allows the removal of
directors with or without cause and with the approval of at least
majority of the voting power of all the outstanding shares of
capital stock entitled to vote thereon.
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Under
Texas law, subject to the exceptions discussed below or as
otherwise provided by the certificate of formation or bylaws of a
corporation, the shareholders may remove a director, with or
without cause, by a vote of the holders of a majority of the shares
entitled to vote at an election of the directors.
If
the corporation’s directors serve staggered terms, a director may
not be removed except for cause unless the certificate of formation
provides otherwise.
If
the certificate of formation permits cumulative voting and less
than the entire board is to be removed, a director may not be
removed if the votes cast against the removal would be sufficient
to elect him or her if cumulatively voted at an election of the
entire board of directors. Where a corporation’s certificate of
formation provides that separate classes or series of shareholders
are entitled, as such a class or series, to elect separate
directors, in calculating the sufficiency of votes for removal of
such a director, only the votes of the holders of such class or
series are considered.
The
existing Texas Bylaws provide that directors may be removed at a
meeting of shareholders duly called for the purpose of removal by
the holders of a majority of the shares then entitled to vote at an
election of directors or by unanimous written consent of the
shareholders without a meeting.
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Inspection of Books and Records |
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Under
Delaware law, any stockholder may inspect the corporation’s books
and records upon written demand under oath stating the purpose of
the inspection. If the corporation refuses to permit inspection or
does not reply to the demand within five business days after the
demand has been made, the stockholder may apply to the Court of
Chancery for an order to compel such inspection.
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Under
Texas law, a shareholder may, upon written demand stating a proper
purpose, examine and copy the books, records of account, minutes
and share transfer records of a corporation if such shareholder
holds at least 5% of the outstanding shares of stock of the
corporation or has been a holder of shares for at least six months
prior to such demand. |
Distributions and Dividends |
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Under
Delaware law, a corporation may, subject to any restrictions
contained in its certificate of incorporation, pay dividends out of
surplus and, if there is not surplus, out of net profits for the
current and/or the preceding fiscal year, unless the capital of the
corporation is less than the capital represented by issued and
outstanding stock having preferences on asset
distributions.
The
proposed Delaware Bylaws provide that dividends may be declared as
provided by law.
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Under
Texas law, a distribution is defined as a transfer of cash or other
property (except a transfer of a corporation’s own shares or rights
to acquire its own shares), or an issuance of debt, by a
corporation to its shareholders in the form of: (i) a dividend on
any class or series of the corporation’s outstanding shares, (ii) a
purchase or redemption, directly or indirectly, of any of its own
shares, or (iii) a payment in liquidation of all or a portion of
its assets.
Under
Texas law, a corporation may not make a distribution if such
distribution violates its certificate of formation or, unless the
distribution is in connection with the winding up and termination
of the corporation and complies with the requirements relating
thereto under the TBOC, if the corporation would be insolvent after
the distribution or if the distribution exceeds, depending on the
type of distribution, either the net assets or the surplus of the
corporation.
The
existing Texas Bylaws provide that distributions may be made as
provided by law.
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Stock Redemption and Repurchase |
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Under
Delaware law, a corporation may purchase or redeem shares of any
class except when its capital is impaired or would be impaired by
such purchase or redemption. A corporation may, however, purchase
or redeem out of capital, shares that are entitled upon any
distribution of its assets to a preference over another class or
series of its stock, or, if no shares entitled to such a preference
are outstanding, any of its own shares, if such shares are to be
retired and the capital reduced. |
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As
noted above, under Texas law, the purchase or redemption by a
corporation of its shares constitutes a distribution. Accordingly,
any such purchase or redemption is subject to the restrictions on
distributions discussed above.
Upon
the redemption or purchase of shares, the stated capital of the
corporation shall be reduced by that part of the stated capital
that was, at the time of the redemption or purchase, represented by
those shares.
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Indemnification of and Advancement of Expenses to Directors and
Officers |
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The
DGCL permits a corporation to indemnify present or former
directors, officers, employees and agents and persons serving at
the request of the corporation as officers, directors, employees or
agents of another entity or employee benefit plan against expenses
(including attorneys’ fees), judgments, fines, excise taxes and
amounts paid in settlement actually and reasonably incurred by the
person in connection with an action, suit or proceeding, other than
an action by or in the right of the corporation, to which such
indemnifiable person may be a party, provided such indemnifiable
person shall have acted in good faith and in a manner such person
shall have reasonably believed to be in or not opposed to the best
interests of the corporation, and in the case of a criminal
proceeding, such person had no reasonable cause to believe such
person’s conduct was unlawful. The termination of an action, suit
or proceeding by judgment, order, settlement, conviction or plea of
nolo contendere does not, of itself, create a presumption that the
applicable standard of conduct has not been met.
In
connection with an action by or in the right of the corporation
against an indemnifiable person, the corporation has the power to
indemnify such person for expenses (including attorneys’ fees)
actually and reasonably incurred in connection with such suit (a)
if such person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests
of the corporation, but (b) if such person is found liable to the
corporation, only if ordered by a court of law. The DGCL does not
authorize indemnification of judgments, fines, excise taxes or
amounts paid in settlement in derivative actions.
The
DGCL provides that such section is not exclusive of any other
indemnification rights, which may be granted by a corporation to
its indemnifiable persons, but under Delaware law such person’s
conduct must generally meet the standard of conduct required by the
DGCL.
The
DGCL also permits a corporation to pay in advance the expenses
incurred by directors and officers in defending a proceeding
brought against them in their capacities as such.
The
proposed Delaware Bylaws provide for indemnification of directors
and officers (including advancement of expenses) to the fullest
extent permitted by applicable law.
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Texas
law permits a corporation to indemnify a director or former
director, against judgments and expenses reasonably and actually
incurred by the person in connection with a proceeding if the
person: (i) acted in good faith, (ii) reasonably believed, in the
case of conduct in the person’s official capacity, that the
person’s conduct was in the corporation’s best interests, and
otherwise, that the person’s conduct was not opposed to the
corporation’s best interests, and (iii) in the case of a criminal
proceeding, did not have a reasonable cause to believe the person’s
conduct was unlawful.
If,
however, the person is found liable to the corporation, or is found
liable on the basis he received an improper personal benefit, then
indemnification under Texas law is limited to the reimbursement of
reasonable expenses actually incurred and no indemnification will
be available if the person is found liable for: (i) willful or
intentional misconduct in the performance of the person’s duty to
the corporation, (ii) breach of the person’s duty of loyalty owed
to the corporation, or (iii) an act or omission not committed in
good faith that constitutes a breach of a duty owed by the person
to the corporation.
The
TBOC also permits a corporation to pay in advance or reimburse the
expenses incurred by directors and officers in defending a
proceeding brought against them in their capacities as
such.
The
existing Texas Articles of Incorporation provide for
indemnification of directors (including advancement of expenses) to
the extent permitted by applicable law.
|
Procedure for Indemnification |
|
Delaware
law provides that a determination that indemnification of a
director or officer is appropriate must be made: (i) by a majority
vote of directors who are not party to the proceeding, even though
less than a quorum, (ii) by a committee of such directors
designated by majority vote of such directors, even though less
than a quorum, (iii) if there are no such directors or if such
directors so direct, by independent legal counsel in a written
opinion, or (iv) by stockholder vote.
The
proposed Delaware Bylaws do not address this issue.
|
|
Texas
law provides that a determination that indemnification is
appropriate must be made: (i) by a majority vote of the directors
who, at the time of the vote, are disinterested and independent,
regardless of whether such directors constitute a quorum, (ii) by a
majority vote of a special committee of the board of directors if
the committee is designated by a majority vote of the directors who
at the time of the vote are disinterested and independent and is
composed solely of one or more directors who are disinterested and
independent, (iii) by special legal counsel selected by majority
vote under clauses (i) or (ii) above, (iv) by the shareholders in a
vote that excludes those shares held by directors who, at the time
of the vote, are not disinterested and independent, or (v) by a
unanimous vote of the shareholders of the corporation.
The
existing Texas Articles of Incorporation and Texas Bylaws do not
address this issue.
|
Mandatory Indemnification |
|
Delaware
law requires indemnification for expenses actually and reasonably
incurred with respect to any claim, issue or matter on which the
director is successful on the merits or otherwise, in the defense
of the proceeding.
|
|
Under
Texas law, indemnification by the corporation for reasonable
expenses actually incurred is mandatory only if the director is
wholly successful, on the merits or otherwise, in the defense of
the proceeding. |
Insurance |
|
Delaware
law allows a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation against any liability asserted against
such person and incurred by such person in such a capacity or
arising out of his status as such a person. This is so, regardless
of whether the corporation would have the power to indemnify such
person against that liability.
Under
Delaware law, a corporation may also establish and maintain
arrangements, other than insurance, to protect such persons,
including a trust fund or surety arrangement.
|
|
Texas
law is substantially the same as Delaware law for this
issue. |
Persons Covered |
|
Delaware
law permits the same indemnification rights to officers, employees
and agents that it provides for directors. |
|
Texas
law addresses the indemnification of officers, employees and agents
separately from indemnification for directors. The corporation may
indemnify and advance expenses to an officer, employee or agent as
provided by (i) the corporation’s governing documents, (ii) general
or specific action of the board of directors, (iii) resolution of
the shareholders, (iv) contract, or (v) common law. The corporation
must indemnify an officer to the same extent as a director. The
procedure for indemnification for directors under Texas law
summarized above need not be followed for officers, employees or
agents.
|
Limited Liability of Directors |
|
Delaware
law permits the adoption of a provision in the certificate of
incorporation limiting or eliminating the monetary liability of a
director to a corporation or its stockholders by reason of a
director’s breach of the fiduciary duty of care.
Delaware
law does not, however, permit any limitation of the liability of a
director for: (i) breaching the duty of loyalty to the corporation
or its stockholders, (ii) failing to act in good faith, (iii)
engaging in intentional misconduct or a knowing violation of law,
(iv) obtaining an improper personal benefit from the corporation,
or (v) declaring an illegal dividend or approving an illegal stock
purchase or redemption.
The
proposed Delaware Certificate of Incorporation eliminates the
monetary liability of a director to the fullest extent permitted by
applicable law.
|
|
Texas
law permits a corporation to eliminate or limit in its certificate
of formation liability of a director for monetary damages to the
corporation or its shareholders for his or his acts or omissions in
such person’s capacity as a director.
Texas
law does not, however, permit any limitation or elimination of the
liability of a director for: (i) a breach of the duty of loyalty to
the corporation or its shareholders, (ii) an act or omission not in
good faith that constitutes a breach of duty of the person to the
corporation or involves intentional misconduct or a knowing
violation of law, (iii) a transaction from which the director
obtains an improper benefit, or (iv) an act or omission for which
liability of a director is expressly provided by an applicable
statute.
The
existing Texas Articles of Incorporation eliminate the monetary
liability of a director to the extent permitted by applicable
law.
|
Fiduciary Duties of Directors |
|
Delaware
imposes duties of care and loyalty on directors of Delaware
corporations. If not rebutted, the business judgment rule provides
a presumption that a director acted on an informed basis, in good
faith, and in the honest belief that the action taken was in the
best interests of the corporation. Delaware imposes liability upon
directors who willfully or recklessly disregard their duties as
directors so as to constitute an utter failure to carry out their
fiduciary duties.
Directors
of a Delaware corporation owe fiduciary duties both to the
stockholders and the corporation.
|
|
Texas
imposes duties of loyalty, care and obedience on directors of Texas
corporations, but will generally not, absent fraud, impose
liability upon a non-interested director unless the action
challenged is outside of the express purpose of the corporation or
inconsistent with an express limitation on authority.
Directors
of a Texas corporation owe fiduciary duties only to the
corporation.
|
Shareholder Rights Plans |
|
Delaware
courts have generally allowed the use of shareholder rights plans
by a corporation if their adoption is reasonable in response to a
reasonably identified threat posed. |
|
Texas
statutorily permits shareholder rights plans. Texas courts have
provided limited guidance on the extent to which shareholder rights
plans are permitted. |
|
|
|
|
|
Considerations of Directors |
|
Delaware
does not have a statute stating what constituencies the board may
consider when making decisions. |
|
Texas
corporate law includes statutory approval of directors considering
both the long-term and short-term interests of the corporation and
the shareholders.
|
Shareholder Actions |
|
Under
Delaware law, stockholders can bring both derivate actions on
behalf of the corporation and direct claims on their own behalf or
on behalf of a class of stockholders directly injured by the
board’s actions. With respect to derivative actions, stockholders
must either make a demand on the board to bring the action itself
or allege demand futility. Generally, lawsuits alleging breaches of
fiduciary duties brought in Delaware state court are tried in the
Court of Chancery without a jury.
|
|
Texas
generally requires that lawsuits against directors be brought
derivatively by the corporation only after making demand on the
corporation’s board setting out the contours of the demand. Texas
law may, in certain circumstances, such as in a proceeding
determining liability of directors, allow for a jury
trial.
|
Forum Selection |
|
Delaware
law permits corporations to include in their certificates of
incorporation or bylaws a provision that confers exclusive
jurisdiction on the courts of Delaware as to any internal corporate
claims, which include derivative claims that are based upon breach
of duties of a director or stockholder in such capacity and other
matters for which the DGCL confers jurisdiction upon the Delaware
courts.
The
proposed Delaware Certificate of Incorporation makes this election
regarding the Chancery Court’s exclusive jurisdiction to the
maximum extent allowable.
|
|
Texas
law does not have an authorizing statutory provision similar to the
forum selection provision in the DGCL.
The
existing Texas Bylaws do not address forum selection.
|
Certificated
Stock
At
the effective time of the Reincorporation, each outstanding share
of common stock of the Company will automatically be converted into
one share of New Cipherloc Common Stock. If you hold physical stock
certificates, you do not have to exchange your existing stock
certificates of the Company for stock certificates of the resulting
Delaware corporation; however, after the Reincorporation, any
shareholder desiring a new form of stock certificate may submit the
existing stock certificate to Pacific Stock Transfer Company, the
Company’s transfer agent.
Federal
Income Tax Consequences of the Reincorporation
The
proposed Reincorporation is expected to qualify as a reorganization
within the meaning of Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended (the “Code”). Assuming the Reincorporation
qualifies as a tax-free reorganization, we believe that for federal
income tax purposes no gain or loss will be recognized by the
Company, New Cipherloc or the shareholders of the Company who
receive New Cipherloc Common Stock for their Company Common Stock
in connection with the Reincorporation. The aggregate tax basis of
New Cipherloc Common Stock received by a shareholder of the Company
as a result of the Reincorporation will be the same as the
aggregate tax basis of the Company Common Stock converted into that
New Cipherloc Common Stock held by that shareholder as a capital
asset at the time of the Reincorporation. Each shareholder’s
holding period of the New Cipherloc Common Stock received in the
Reincorporation will include the holding period of the Company
Common Stock converted into that New Cipherloc Common Stock,
provided the shares are held by such shareholder as a capital asset
at the time of the Reincorporation.
This
proxy statement only discusses U.S. federal income tax consequences
and has done so only for general information. It does not address
all of the U.S. federal income tax consequences that may be
relevant to particular shareholders based upon individual
circumstances or to shareholders who are subject to special rules,
such as financial institutions, tax-exempt organizations, insurance
companies, dealers in securities, shareholders who hold their stock
through a partnership or as part of a straddle or other derivative
arrangement, foreign holders or holders who acquired their shares
as compensation, whether through employee stock options or
otherwise. This proxy statement does not address the tax
consequences under state, local or foreign laws. State, local or
foreign income tax consequences to shareholders may vary from the
federal income tax consequences described above, and shareholders
are urged to consult their own tax advisors as to the consequences
to them of the Reincorporation under all applicable tax
laws.
This
discussion is based on the Code, applicable Treasury Regulations,
judicial authority and administrative rulings and practice, all in
effect as of the date of this proxy statement, all of which are
subject to differing interpretations and change, possibly with
retroactive effect. The Company has neither requested nor received
a tax opinion from legal counsel or rulings from the Internal
Revenue Service regarding the consequences of the Reincorporation.
There can be no assurance that future legislation, regulations,
administrative rulings or court decisions would not alter the
consequences discussed above.
You
should consult your own tax advisor to determine the particular tax
consequences to you of the Reincorporation, including the
applicability and effect of U.S. federal, state, local, foreign and
other tax laws.
Securities
Law Consequences
The
shares of New Cipherloc Common Stock to be issued for shares of
Company Common Stock in the Reincorporation are not being
registered under the Securities Act of 1933, as amended (the
“Securities Act”). In that respect, the Company is relying on Rule
145(a)(2) under the Securities Act, which provides that a merger
that has as its sole purpose a change in a corporation’s domicile
does not involve the sale of securities for purposes of the
Securities Act and on interpretations of Rule 145(a)(2) by the SEC
to the effect that certain changes in the redomiciled corporation’s
charter or bylaws in connection with the reincorporation that
otherwise could be made only with the approval of shareholders does
not render Rule 145(a)(2) inapplicable. After the Reincorporation,
New Cipherloc will be a publicly held company, New Cipherloc Common
Stock will continue to be listed on the OTCQB under the symbol
“CLOK” and New Cipherloc will file with the SEC and provide to its
stockholders the same type of information that the Company has
previously filed and provided. Shareholders, whose shares of
Company Common Stock are freely tradable before the
Reincorporation, will continue to have freely tradable shares of
New Cipherloc Common Stock. Shareholders holding restricted shares
of Company Common Stock will have shares of New Cipherloc Common
Stock that are subject to the same restrictions on transfer as
those to which their present shares of Company Common Stock are
subject. In summary, New Cipherloc and its shareholders will be in
the same respective positions under the federal securities laws
after the Reincorporation as the Company and its shareholders prior
to the Reincorporation.
Dissenters’
Right of Appraisal
Under
Subchapter H, Chapter 10 of the Texas Business Organizations Code
(§§10.351 through 10.368), a copy of which is included as APPENDIX
G to this proxy statement (the “Dissenters’ Rights
Statutes”), shareholders have dissenters’ and appraisal rights
in connection with the approval of the Reincorporation. There are
strict procedures for exercising these rights that if not met could
result in the loss of these rights. Persons having beneficial
interests in the Company’s common stock held of record in the name
of another person, such as a broker or bank, must act promptly to
cause the record holder to take the actions required under Texas
law to exercise your dissenter’s rights. In order to dissent, you
must carefully follow the requirements of the Dissenters’ Rights
Statutes, including giving the required written notice of objection
prior to the Annual Meeting.
To be
eligible to exercise your right to dissent to the
Reincorporation:
|
● |
you
must, prior to the Annual Meeting, provide the Company with a
written notice of objection to the Reincorporation that states that
you will exercise your right to dissent if the Reincorporation is
completed and that provides an address to which the Company may
send a notice of effectiveness if the Reincorporation is
completed; |
|
● |
you
must vote your shares of Company stock against the
Reincorporation; |
|
● |
you
must, not later than the 20th day after the Company
sends you notice that the Reincorporation was completed, provide
the Company with a written demand for payment that states the
number of shares of Company stock you own, your estimate of the
fair value of such stock and an address to which a notice relating
to the dissent and appraisal procedures may be sent;
and |
|
● |
you
must, not later than the 20th day after the date on
which you make written demand for payment, submit to the Company
your certificates representing Company stock to which the demand
relates for purposes of making a notation on the certificates that
a demand for the payment of the fair value of your certificates
representing Company stock has been made. |
If
you intend to exercise dissenters’ rights, you should read the
Dissenters’ Rights Statutes carefully and consult with your own
legal counsel. You should also remember that if you return a signed
proxy card but fail to provide instructions as to how your shares
of Company stock are to be voted, you will be considered to have
voted in favor of the Reincorporation and you will not be able to
assert dissenters’ rights. Also, if you exercise dissenters’
rights, you may have taxable income that is different from the
taxable income of other shareholders, so you should consult with
your own tax advisor if you intend to dissent. See “Federal
Income Tax Consequences to the Reincorporation.” If the
Reincorporation is approved by the shareholders of the Company,
holders of Company common stock who make a written objection to the
Reincorporation prior to the Annual Meeting, vote against the
approval of the Reincorporation, properly make a written demand for
payment following notice of the Reincorporation and timely
surrender their Company stock certificates will be entitled to
receive the fair value of their shares determined through an
appraisal in cash under the Dissenters’ Rights Statutes.
Effect
of Not Obtaining the Required Vote for Approval
If
the Reincorporation Proposal fails to obtain the requisite vote for
approval, the Reincorporation will not be consummated, and the
Company will continue to be incorporated in the State of
Texas.
Interests
of Officers and Directors in this Proposal
Our
officers and directors do not have any substantial interest, direct
or indirect, in in this proposal.
Required
Vote of Shareholders
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock is required to approve this
proposal.
Board
Recommendation
The
board of directors unanimously recommends a vote
“FOR” Proposal 4.
PROPOSAL
5
REVERSE
STOCK SPLIT PROPOSAL
Our
management team has been studying the potential benefits of
effecting a reverse stock split (a “Reverse Stock Split”) of our
common stock for the purpose of uplisting to the Nasdaq Stock
Market LLC (“Nasdaq”) in the future. Based on the Company’s stage
of development, certain developments in its industry, the Company’s
observations regarding the market for its peers whose securities
are traded on Nasdaq, and discussions with U.S.-based investment
banks and other advisors, the Company believes that there may be
potential benefits of a reverse stock split and a future uplisting
of our common stock from the OTCQB tier of the OTC Markets to
Nasdaq, including:
|
● |
a
larger pool of available capital; |
|
|
|
|
● |
a
greater average daily trading volume; |
|
|
|
|
● |
a
greater number of U.S. retail and institutional investors;
and |
|
|
|
|
● |
a
potential increase in market valuation. |
The
Company must satisfy a variety of requirements to be accepted for
listing on Nasdaq, including the requirement that the listed
securities maintain a minimum per-share trading price for a
specific period of time. The Company is contemplating the
possibility of proceeding to complete the Reverse Stock Split in
order to satisfy this requirement. This is not the only listing
standard that the Company must meet, however, and the Company does
not currently meet certain of the other Nasdaq listing standards.
The Reverse Stock Split is merely a step toward an uplisting on
Nasdaq.
Our
Board has unanimously adopted a resolution authorizing, approving,
declaring advisable and recommending to our stockholders for their
approval an amendment to our proposed Delaware Certificate of
Incorporation, that will be in effect upon the Reincorporation of
our Company to the State of Delaware, to effect a reverse split of
the outstanding shares of common stock in a ratio of one
share-for-2 shares up to a ratio of one share-for-20 shares (the
“Reverse Split Amendment”), which ratio will be selected by the
Board following stockholder approval but in any event no later than
one year after the Annual Meeting. The Reverse Stock Split
Amendment will become effective upon the filing of a Certificate of
Amendment with the Secretary of State of the State of Delaware and
set forth in a public announcement. The form of Reverse Split
Amendment is attached to this proxy statement as Appendix
A.
If
the Board determines to implement the Reverse Split Amendment, we
will communicate to the public, prior to the effective time of the
Reverse Split Amendment, additional details regarding the Reverse
Split Amendment (including the final reverse split ratio, as
determined by the Board). The Board reserves the right to elect not
to proceed with the Reverse Split Amendment if it determines, in
its sole discretion, that the Reverse Split Amendment is no longer
in the best interests of our company or our
stockholders.
In
determining which reverse split amendment to implement, if any,
following receipt of stockholder approval of the Reverse Stock
Proposal, the Board may consider, among other things, various
factors, such as:
|
● |
the
historical trading price and trading volume of our common
stock; |
|
● |
the
then-prevailing trading price and trading volume of our common
stock and the expected impact of the Reverse Split on the trading
market for our common stock in the short- and
long-term; |
|
● |
threshold
prices of brokerage houses or institutional investors that could
impact their ability to invest or recommend investments in our
common stock; |
|
● |
minimum
listing requirements of Nasdaq; |
|
● |
which
reverse split amendment would result in the least administrative
cost to us; and |
|
● |
prevailing
general market and economic conditions. |
The
failure of stockholders to approve the Reverse Stock Proposal could
prevent us from meeting the Nasdaq $4.00 minimum bid price
requirement (the “Minimum Bid Price Requirement”), among other
things, unless the market price of our common stock increases above
the Minimum Bid Price Requirement without a reverse split. If we
are unable to uplist our common stock to Nasdaq, interest in our
common stock may decline and certain institutions may not have the
ability to trade in our common stock, all of which could have a
material adverse effect on the liquidity or trading volume of our
common stock. If our common stock becomes significantly less liquid
due to our inability to qualify for listing on Nasdaq, our
stockholders may not have the ability to liquidate their
investments in our common stock as and when desired and we believe
our access to capital would become significantly diminished as a
result.
Reasons
for the Reverse Split
To
uplist to Nasdaq in the future
We
believe that a reverse stock split could increase the market price
of our common stock sufficient to satisfy the Minimum Bid Price
Requirement in the near term, though we cannot provide any
assurance that a reverse stock split will have that effect or that
a reverse stock split would increase the market price sufficiently
for a prolonged period of time. The Board has weighed the potential
harm to our company and its stockholders resulting from an
inability to uplist to Nasdaq against the potential harm to our
company and its stockholders from another significant reverse stock
split, including the risks described below under “Certain Risks
Associated with a Reverse Split.” We believe we will continue to
need to raise capital to fund our operations until the businesses
we are engaged in become cash flow positive or profitable (of which
there is no assurance). If we are unable to Nasdaq, our access to
capital may become further limited and we may not have sufficient
capital to enable our operating subsidiaries to continue their
operations or become cash flow positive or profitable. Therefore,
the Board has concluded that the potential harm to our company and
its stockholders resulting from a possible uplisting to Nasdaq
outweighs the potential harm to our company and its stockholders
from another significant reverse stock split. The Minimum Bid Price
Requirement is not the only listing standard that the Company must
meet, however, and the Company does not currently meet certain of
the other Nasdaq listing standards. The Reverse Stock Split is
merely the first step toward an uplisting on Nasdaq. There can be
no assurance that the Company will meet the Nasdaq listing
standards or that Nasdaq would approve the Company’s listing
application.
To
potentially improve the liquidity of our common
stock.
A
reverse split could allow a broader range of institutions to invest
in our common stock (namely, funds that are prohibited from buying
stocks whose price is below a certain threshold), potentially
increasing trading volume and liquidity of our common stock and
potentially decreasing the volatility of our common stock if
institutions become long-term holders of our common stock. A
reverse split could help increase analyst and broker interest in
our common stock as their policies can discourage them from
following or recommending companies with low stock
prices.
Because
of the trading volatility often associated with low-priced stocks,
many brokerage houses and institutional investors have internal
policies and practices that either prohibit them from investing in
low-priced stocks or tend to discourage individual brokers from
recommending low-priced stocks to their customers. Some of those
policies and practices may make the processing of trades in
low-priced stocks economically unattractive to brokers.
Additionally, because brokers’ commissions on low-priced stocks
generally represent a higher percentage of the stock price than
commissions on higher-priced stocks, a low average price per share
of common stock can result in individual stockholders paying
transaction costs representing a higher percentage of their total
share value than would be the case if the share price were
higher.
Certain
Risks Associated with a Reverse Stock Split
There
can be no assurance that the Reverse Stock Split will increase the
market price of the common stock and have the desired effect of
achieving compliance with the Minimum Bid Price Requirement. The
Board believes that a Reverse Stock Split has the potential to
increase the market price of our common stock so that we may be
able to satisfy the Minimum Bid Price Requirement. However, the
long- and near-term effect of the Reverse Stock Split upon the
market price of the common stock cannot be predicted with any
certainty.
As of
the Record Date, the closing price of our common stock was $0.18.
Historically, however, the closing price of our common stock during
the fiscal year ended September 30, 2020, has traded as low as
$0.11 per share to a high of $1.10 per share. As a result, we
cannot be assured of compliance with the Minimum Bid Price
Requirement in the future. There can be no assurance that a reverse
stock split will increase the market price of our common stock so
that we may be able to maintain compliance with the Minimum Bid
Price Requirement.
Further,
following any reverse stock split, we will continue to require
significant proceeds from sales of our debt or equity securities to
fund our operations for the near future, which will cause further
dilution to stockholders. The issuance of a substantial number of
shares of common stock or securities convertible into or
exercisable for common stock in the future could cause downward
pressure on the price of our common stock and there is no assurance
that the market price for our common stock will remain at a level
sufficient to satisfy the Minimum Bid Price Requirement.
Even
if a reverse stock split enables us to gain compliance with the
Minimum Bid Price Requirement, we may be unable to meet the other
criteria of listing on Nasdaq. Further, the Reverse Stock Split may
not result in a per share price that would attract brokers and
investors who do not trade in lower priced stocks.
A
reverse stock split would affect all of our common stockholders
uniformly and would not affect any stockholder’s percentage
ownership interests or proportionate voting power. The other
principal effects of the Reverse Stock Split will be
that:
|
● |
the
number of issued and outstanding shares of common stock will be
reduced proportionately based on the final reverse split ratio, as
determined by the Board; and |
|
|
|
|
● |
the
number of shares of our authorized common stock that are unissued
and not reserved for future issuance will increase. |
Although
the number of outstanding shares of common stock would decrease
following the Reverse Split Amendment, the Board does not intend
for a reverse stock split to be the first step in a “going private
transaction” within the meaning of Rule 13e-3 of the Exchange
Act.
The
following table reflects the number of shares of common stock that
would be outstanding as a result of the effectiveness of the
Reverse Split Amendment and the approximate percentage reduction in
the number of outstanding shares based on 82,927,311 shares of
common stock issued and outstanding as of July 15, 2021, the Record
Date. As of the Record Date, we had 598,072,689 shares of common
stock available for issuance. The following table also shows the
shares that would be available for issuance at various ratios that
the Board of Directors may consider if the Reverse Split Amendment
is effected. The Shares of Common Stock Available for Issuance
After the Reverse Split assumes the proposal with respect to the
reincorporation included in this proxy is approved. If approved,
this proposal would set the authorized common shares to
681,000,000.
Proposed Reverse Split Ratio |
|
Approximate
Percentage Reduction
|
|
|
Approximate Shares of Common Stock to be Outstanding After the
Reverse Split |
|
|
Shares of Common Stock Available for Issuance After the Reverse
Split |
|
1-for-2 |
|
|
50.0 |
% |
|
|
41,463,656 |
|
|
|
639,536,345 |
|
1-for-8 |
|
|
87.5 |
% |
|
|
10,365,914 |
|
|
|
670,634,086 |
|
1-for-14 |
|
|
92.9 |
% |
|
|
5,923,379 |
|
|
|
675,076,621 |
|
1-for-20 |
|
|
95.0 |
% |
|
|
4,146,366 |
|
|
|
676,853,634 |
|
Effect
of Reverse Split and Potential Anti-Takeover Effect
Management
does not anticipate that our financial condition, the percentage
ownership of common stock by management, the number of our
stockholders, or any aspect of our business will materially change
as a result of the Reverse Split Amendment. Because the Reverse
Split Amendment will apply to all issued and outstanding shares of
common stock and outstanding rights to purchase common stock or to
convert other securities into common stock, the proposed Reverse
Split Amendment will not alter the relative rights and preferences
of existing stockholders. However, the number of shares of common
stock outstanding will be decreased, while the number of authorized
but unissued shares will be increased.
Management
does not currently plan to use the increase in our authorized but
unissued shares that will result from the Reverse Split Amendment
to make it more difficult or to discourage a future merger, tender
offer or proxy contest or the removal of incumbent management. This
Proposal is not the result of management’s knowledge of an effort
to accumulate our securities or to obtain control of the Company by
means of a merger, tender offer, solicitation or
otherwise.
Summarized
in the following paragraphs are provisions included in our proposed
Delaware Certificate of Incorporation, as amended, and our bylaws
that may have the effect of discouraging, delaying or preventing a
change in control or an unsolicited acquisition proposal that a
stockholder might consider favorable, including a proposal that
might result in the payment of a premium over the market price for
the shares held by our stockholders.
Effects
of authorized but unissued common stock and blank check preferred
stock. One of the effects of the existence of authorized but
unissued common stock and undesignated preferred stock may be to
enable our Board to make more difficult or to discourage an attempt
to obtain control of our company by means of a merger, tender
offer, proxy contest or otherwise, and thereby to protect the
continuity of management. If the Board were to determine that a
takeover proposal was not in our best interest, such shares could
be issued by the Board without stockholder approval in one or more
transactions that might prevent or render more difficult or costly
the completion of the takeover transaction by diluting the voting
or other rights of the proposed acquirer or insurgent stockholder
group, by putting a substantial voting block in institutional or
other hands that might undertake to support the position of the
incumbent board of directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise.
In
addition, our proposed Delaware Certificate of Incorporation, as
amended, grants our Board broad power to establish the rights and
preferences of authorized and unissued shares of additional series
of preferred stock. The creation and issuance of one or more
additional series of preferred stock could decrease the amount of
earnings and assets available for distribution to holders of shares
of common stock. The issuance also may adversely affect the rights
and powers, including voting rights, of those holders and may have
the effect of delaying, deterring or preventing a change in control
of our company.
Cumulative
Voting. Our proposed Delaware Certificate of Incorporation, as
amended, does not provide for cumulative voting in the election of
directors which would allow holders of less than a majority of the
voting stock to elect some directors.
Vacancies.
Section 223 of the Delaware General Corporation Law and our bylaws
provide that all vacancies, including newly created directorships,
may be filled by the affirmative vote of a majority of directors
then in office, even if less than a quorum.
Special
Meeting of Stockholders. A special meeting of stockholders may
be called by our Board or the Chairman of our Board and must be
called by our Secretary at the request in writing of holders of
record of twenty five percent (25%) of our outstanding capital
stock entitled to vote. The requirement that 25% of our outstanding
capital stock is required to call a special meeting means that
small stockholders will not have the power to call a special
meeting to, for example, elect new directors.
Fractional
Shares
If
the reverse stock split ratio determined to be implemented by the
Board, if any, will result in fractional shares, we will not issue
fractional shares. Instead, stockholders who otherwise would be
entitled to receive fractional shares because they hold a number of
shares not evenly divisible by the reverse stock split ratio will
automatically be entitled to receive an additional fraction of a
share of our common stock to round up to the next whole
share.
Procedure
for Effecting Reverse Stock Split
If
the Board decides to implement a reverse split, the reverse split
will become effective on the date the Reverse Split Amendment is
filed with the Secretary of State of the State of Delaware. The
time of such filing, if any, will be determined by the Board in its
sole discretion. Beginning on the effective time of the Reverse
Split Amendment, each certificate representing pre-reverse split
shares of common stock will be deemed for all corporate purposes to
evidence ownership of post-reverse split shares of common
stock.
Certain
U.S. Federal Income Tax Consequences of the Reverse Stock
Split
The
following discussion is a general summary of certain U.S. federal
income tax consequences of the reverse split that may be relevant
to U.S. Holders (as defined below) of our common stock but does not
purport to be a complete analysis of all potential tax effects. The
effects of other U.S. federal tax laws, such as estate and gift tax
laws, and any applicable state, local or non-U.S. tax laws are not
discussed. This discussion is based on the Internal Revenue Code of
1986, as amended (the “Code”), Treasury regulations promulgated
thereunder (the “Treasury Regulations”), judicial decisions, and
published rulings and administrative pronouncements of the U.S.
Internal Revenue Service (“IRS”), in each case in effect as of the
date hereof. These authorities may change or be subject to
differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could
adversely affect a holder of our common stock. We have not sought
and will not seek an opinion of counsel or any rulings from the IRS
regarding the matters discussed below. There can be no assurance
the IRS or a court will not take a contrary position to that
discussed below regarding the tax consequences of the reverse
split.
This
discussion is limited to holders that hold our common stock as
“capital assets” within the meaning of Section 1221 of the Code
(generally, property held for investment). This discussion does not
address all aspects of U.S. federal income tax consequences
relevant to such holders’ particular circumstances, including the
impact of the tax on net investment income imposed by Section 1411
of the Code. In addition, it does not address consequences relevant
to holders subject to particular rules, including, without
limitation:
|
● |
persons
that are not U.S. Holders (as defined below); |
|
● |
persons
subject to the alternative minimum tax; |
|
● |
U.S.
Holders (as defined below) whose functional currency is not the
U.S. dollar; |
|
● |
persons
holding our common stock as part of a hedge, straddle or other risk
reduction strategy or as part of a conversion transaction or other
integrated investment; |
|
● |
banks,
insurance companies or other financial institutions; |
|
● |
real
estate investment trusts or regulated investment
companies; |
|
● |
brokers,
dealers or traders in securities; |
|
● |
S
corporations, partnerships or other entities or arrangements
treated as partnerships for U.S. federal income tax purposes (and
investors therein); |
|
● |
tax-exempt
organizations or governmental organizations; |
|
● |
persons
deemed to sell our common stock under the constructive sale
provisions of the Code; |
|
● |
persons
who hold or receive our common stock pursuant to the exercise of
any employee stock option or otherwise as compensation;
and |
|
● |
tax-qualified
retirement plans. |
If an
entity treated as a partnership for U.S. federal income tax
purposes holds our common stock, the tax treatment of a partner in
the partnership will depend on the status of the partner, the
activities of the partnership and certain determinations made at
the partner level. Accordingly, partnerships holding our common
stock and the partners in such partnerships should consult their
own tax advisors regarding the U.S. federal income tax consequences
to them.
THIS
DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED
AS TAX ADVICE. HOLDERS OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT ARISING UNDER OTHER U.S.
FEDERAL TAX LAWS (INCLUDING ESTATE AND GIFT TAX LAWS), UNDER THE
LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER
ANY APPLICABLE TAX TREATY.
For
purposes of the discussion below, a “U.S. Holder” is a beneficial
owner of shares of our common stock that for U.S. federal income
tax purposes is or is treated as: (1) an individual who is a
citizen or resident of the United States; (2) a corporation created
or organized under the laws of the United States, any state
thereof, or the District of Columbia; (3) an estate the income of
which is subject to U.S. federal income tax regardless of its
source; or (4) a trust that (a) is subject to the primary
supervision of a U.S. court and the control of one of more “United
States persons” (within the meaning of Section 7701(a)(30) of the
Code), or (b) has a valid election in effect to be treated as a
United States person for U.S. federal income tax
purposes.
A
reverse split should constitute a “recapitalization” for U.S.
federal income tax purposes. As a result, a U.S. Holder generally
should not recognize gain or loss upon the reverse split, except
with respect to cash received in lieu of a fractional share of our
common stock. A U.S. Holder’s aggregate tax basis in the shares of
our common stock received pursuant to the reverse split should
equal the aggregate tax basis of the shares of our common stock
surrendered (excluding any portion of such basis that is allocated
to any fractional share of our common stock), and such U.S.
Holder’s holding period in the shares of our common stock received
should include the holding period in the shares of our common stock
surrendered. Treasury Regulations provide detailed rules for
allocating the tax basis and holding period of the shares of our
common stock surrendered to the shares of our common stock received
pursuant to the reverse split. Holders of shares of our common
stock acquired on different dates and at different prices should
consult their tax advisors regarding the allocation of the tax
basis and holding period of such shares.
Information
Reporting and Backup Withholding. A U.S. Holder (other than
corporations and certain other exempt recipients) may be subject to
information reporting and backup withholding when such holder
receives cash in lieu of a fractional share of our common stock
pursuant to the reverse split. A U.S. Holder will be subject to
backup withholding if such holder is not otherwise exempt and such
holder does not provide its taxpayer identification number in the
manner required or otherwise fails to comply with applicable backup
withholding tax rules. Backup withholding is not an additional tax.
Any amounts withheld under the backup withholding rules may be
refunded or allowed as a credit against the U.S. Holder’s federal
income tax liability, if any, provided the required information is
timely furnished to the IRS. U.S. Holders should consult their tax
advisors regarding their qualification for an exemption from backup
withholding and the procedures for obtaining such an
exemption.
Appraisal
Rights
There
are no rights of appraisal or similar rights of dissenters with
respect to this proposal.
Effect
of Not Obtaining the Required Vote for Approval
If
the Proposal 4 (Reincorporation from Texas to Delaware) fails to
obtain the requisite vote for approval, the Board will not
effectuate the Reverse Stock Split, regardless of whether this
Proposal 5 receives the required vote of shareholders.
Interests
of Officers and Directors in this Proposal
Our
officers and directors do not have any substantial interest, direct
or indirect, in in this proposal.
Required
Vote of Shareholders
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock is required to approve this
proposal.
Board
Recommendation
The
board of directors unanimously recommends a vote
“FOR” Proposal 5.
PROPOSAL
6
AMENDMENT
TO AMENDED AND RESTATED ARTICLES OF INCORPORATION
Subject
to the approval of the shareholders, the Board has approved a
proposal to amend the Company’s Amended and Restated Articles of
Incorporation (the “Restated Certificate”) to eliminate the
shareholders’ statutory preemptive rights pursuant to Section
21.208 of the Texas Business Organizations Code (the “Amendment”).
The proposed form of Amendment is attached as Appendix F to
this proxy statement (subject to any changes required by applicable
law). If adopted by the shareholders, in the event Proposal 4 is
not approved by the shareholders or the Reincorporation does not
otherwise occur, the Amendment would become effective upon filing
of an appropriate certificate of amendment with the Secretary of
State of the State of Texas. The proposed Amendment would add a new
Article 9 to the Restated Certificate, which shall read in its
entirety as follows
“No
holder of shares of stock of any class shall have any preemptive
right to subscribe for or purchase any additional shares of any
class, or any bonds or convertible securities of any nature,
provided however that the board of directors may, in authorizing
the issuance of shares of stock of any class, confer a preemptive
right that the board of directors may deem advisable in connection
with such issuance.”
Section
21.208 of the Texas Business Organizations Code provides as
follows:
“Subject
to the certificate of formation, a shareholder of a corporation
incorporated before September 1, 2003, has a preemptive right to
acquire unissued or treasury shares of the corporation to the
extent provided by Sections 21.204 (Statutory Preemptive Rights),
21.206 (Limitation on Action to Enforce Preemptive Right), and
21.207 (Disposition of Shares Having Preemptive Rights). After
September 1, 2003, a corporation may limit or deny the preemptive
right of the shareholders of the corporation by amending the
corporation’s certificate of formation.”
Because
the Company was formed prior to September 1, 2003, and the Restated
Certificate does not currently limit or deny the preemptive right
of the shareholders of the Company, the shareholders are currently
entitled to statutory preemptive rights.
We
believe that adopting an amendment to the Restated Certificate to
eliminate the statutory preemptive rights of our shareholders is in
the best interest of the Company and critical to sustaining our
operations and achieving long-term success. As a public company,
such preemptive rights can severely limit our access to capital and
the types of fundraising methods available to us. If the Company
does not effectuate its reincorporation to the State of Delaware,
by adopting the proposed Amendment in accordance with Section
21.208 of the Texas Business Organizations Code, the Company’s
ability to raise additional capital through different means and
from different sources would be enhanced in the event the Company
remains a Texas corporation. Accordingly, we believe that this
Amendment could aid in our capital raising efforts and long-term
growth.
Effect
of Not Obtaining the Required Vote for Approval
If
Proposal 4 (Reincorporation from Texas to Delaware) obtains the
requisite vote for approval and the Reincorporation is consummated,
the Board will not adopt the Amendment, regardless of whether this
Proposal 6 receives the required vote of shareholders, as such
action would no longer be necessary.
Interests
of Officers and Directors in this Proposal
Our
officers and directors do not have any substantial interest, direct
or indirect, in in this proposal.
Required
Vote of Shareholders
The
affirmative vote of the holders of two-thirds of the outstanding
shares of our common stock is required to approve this
proposal.
Board
Recommendation
The
board of directors unanimously recommends a vote
“FOR” Proposal 6.
EXECUTIVE
OFFICERS
The
table below identifies and sets forth certain biographical and
other information regarding our executive officers as of date of
this proxy statement. There are no family relationships among any
of our executive officers or directors.
Name |
|
Age |
|
Positions |
David
Chasteen |
|
43 |
|
Chief
Executive Officer, Director |
Ryan
Polk |
|
53 |
|
Chief
Financial Officer |
Nicholas
Hnatiw |
|
41 |
|
Chief
Technology Officer |
See “Proposal No. 1—Election of Directors” for biographical and
other information regarding Mr. Chasteen.
Ryan
Polk – Chief Financial Officer
Mr.
Polk has served as the Company’s Chief Financial Officer since
February 1, 2020. Since November 2020, Mr. Polk has served as
President of Archytas Automation, an industrial automation company.
Mr. Polk served as CEO of Automated Retail Technologies from March
2020 to October 2020. Prior to that he was the CFO and COO of
Generation Next Franchise Brands (OTCQB:VEND) from April 2019 to
September 2019, the Chief Executive Officer of Generation Next
Franchise Brands from October 2019 to January 2020, and also served
as Chairman of the Board of Directors from September 2019 to
December 2019 (Generation Next Franchise Brands Generation filed a
petition for Chapter 11 Bankruptcy protection while Mr. Polk served
as the Chairman of the Board and as CEO in December 2019 and then
filed a petition for Chapter 7 Bankruptcy in January 2020). Since
December 2017 he has also provided financial operating consulting
services to small public and private companies through Perissos
Partners, a sole proprietorship. From June 2017 to November 2017,
he served as CFO of Cellpoint, as an employee before continuing to
fulfill the CFO duties through Perissos Partners. He served as
President of Motorsport Aftermarket Group from July 2015 to May
2017. Lacy Diversified Industries employed Mr. Polk in executive
positions from July 2011 through May 2017. Mr. Polk has also held
various vice president and chief financial officer positions during
the period prior to Lacy Diversified and also served as a staff
accountant with Ernst & Young in the 1990s. He is a graduate of
Purdue University with two Bachelor of Science degrees from the
Krannert School of Management. His career has focused on both the
consumer products and technology industries.
Nicholas
Hnatiw – Chief Technology Officer
Mr.
Hnatiw serves as the Company’s Chief Technology Officer since
November 2020. Mr. Hnatiw has more than 15 years of experience
creating software technologies from network security to artificial
intelligence. Mr. Hnatiw has led the design and development of a
security risk assessment SaaS platform, run a security monitoring
service with a custom-built next generation automation and SIEM
system. Prior to the Company, Mr. Hnatiw served as the technical
director for network operations supporting U.S. Cyber Command, U.S.
Intelligence Agencies, and other Department of Defense research
organizations from October 2010 to October 2014. From June 2015 to
September 2019, Mr. Hnatiw was the Chief Executive Officer of Loki
Labs, a cyber security firm. Mr. Hnatiw is also currently a
consultant with Cuesta Partners (since January 2020); a partner and
Chief Technology Officer of Sidechannel Security (since February
2020), and the Chief Technology Officer of RealCISO.io (since
October 2020). Mr. Hnatiw earned a Bachelor of Science degree in
computer engineering and computer science at the University of
Massachusetts, Amherst.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following tables set forth certain information concerning all
compensation paid, earned or accrued for service by (i) our
Principal Executive Officer and Principal Financial Officer and
(ii) all other executive officers who earned in excess of $100,000
in the fiscal years ended September 30, 2020 and 2019, and each of
the other two most highly compensated executive officers of the
Company who served in such capacity at the end of the fiscal year
whose total salary and bonus exceeded $100,000 (collectively, the
“Named Executive Officers”):
SUMMARY
COMPENSATION TABLE
Name
and Position |
|
Year |
|
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards ($)# |
|
|
All
Other Compensation ($) (1) |
|
|
Total
($) |
|
Tom
Wilkinson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
of the Board Former Principal Financial Officer and |
|
|
2020 |
|
|
$ |
50,000 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
65,000 |
|
|
$ |
115,000 |
|
Executive
Officer |
|
|
2019 |
|
|
$ |
25,000 |
|
|
|
— |
|
|
$ |
96,500 |
|
|
$ |
10,000 |
|
|
$ |
131,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Chasteen |
|
|
2020 |
|
|
$ |
16,667 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
20,000 |
|
|
$ |
36,667 |
|
Chief
Executive Officer and Director |
|
|
2019 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
34,939 |
|
|
$ |
10,000 |
|
|
$ |
44,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
De La Garza |
|
|
2020 |
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
Former
Chief Executive Officer and Former Chairman |
|
|
2019 |
|
|
$ |
413,137 |
|
|
|
— |
|
|
|
— |
|
|
$ |
50,217 |
|
|
$ |
463,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Borene |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
Chairman & |
|
|
2020 |
|
|
$ |
94,500 |
|
|
$ |
100,000 |
|
|
|
— |
|
|
$ |
175,000 |
|
|
$ |
369,500 |
|
Chief
Executive Officer(2) |
|
|
2019 |
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan
Polk,
Chief Financial Officer(3) |
|
|
2020 |
|
|
$ |
49,760 |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
49,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gino
Mauriello |
|
|
2020 |
|
|
$ |
72,917 |
|
|
|
— |
|
|
|
— |
|
|
$ |
50,000 |
|
|
$ |
122,917 |
|
Former
Chief Financial |
|
|
2019 |
|
|
$ |
93,750 |
|
|
|
— |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
93,750 |
|
Officer(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert
Carlson, PhD |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
Director & |
|
|
2020 |
|
|
$ |
121,890 |
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
$ |
121,890 |
|
Chief
Scientific |
|
|
2019 |
|
|
$ |
200,833 |
|
|
|
— |
|
|
$ |
57,900 |
|
|
$ |
— |
|
|
$ |
258,733 |
|
Officer
(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Milton
Mattox |
|
|
2020 |
|
|
$ |
222,865 |
|
|
$ |
15,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
237,865 |
|
Former
Chief Operating |
|
|
2019 |
|
|
$ |
185,417 |
|
|
|
— |
|
|
$ |
19,300 |
|
|
$ |
— |
|
|
$ |
204,717 |
|
Officer(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Does
not include perquisites and other personal benefits, or property,
unless the aggregate amount of such compensation is more than
$10,000. No executive officer earned any option awards, non-equity
incentive plan compensation or nonqualified deferred compensation
during the periods reported above.
# The
fair value of stock issued for services is computed in accordance
with Financial Accounting Standards Board Accounting Standards
Codification Topic 718 on the date of grant.
(1)
All other compensation consists primarily of remunerations for
director compensation (where applicable), legal settlements (where
applicable), severance, auto and health insurance costs.
(2)
Mr. Andrew Borene was appointed as Chief Executive Officer on
November 25, 2019, and terminated as Chief Executive Officer on
April 3, 2020.
(3)
Mr. Polk was appointed as Chief Financial Officer on February 1,
2020.
(4)
Mr. Mauriello was terminated as Chief Financial Officer on December
13, 2019.
(5)
Mr. Mattox resigned from the Company on November 12,
2020.
(6)
Mr. Carlson resigned from the Company on December 17,
2019.
Outstanding
Equity Awards at Fiscal Year-End
None.
Employment
Contracts
David
Chasteen
On
October 19, 2020, the Board appointed David Chasteen as Chief
Executive Officer of the Company. Prior to his appointment, Mr.
Chasteen was a member of the Board.
In
connection with Mr. Chasteen’s appointment as Chief Executive
Officer, the Company entered into an Executive Agreement and Offer
Letter, each dated October 19, 2020, with Mr. Chasteen
(collectively, the “Chasteen Employment Agreement”), pursuant to
which he will receive a base annual salary of $100,000, payable in
accordance with the Company’s standard payroll schedule, and other
customary benefits. Mr. Chasteen is also eligible to receive (i) an
annual cash bonus based on personal and Company-based metrics; and
(ii) annual grants of stock-options and/or restricted stock units
at the discretion of the Company’s Board. Mr. Chasteen is further
eligible to receive discretionary bonuses payable from time to time
in cash, stock or options, in the discretion of the Board. The
Board increased Mr. Chasteen’s salary to $200,000 effective June 1,
2021, and granted $200,000 of RSU’s subject to the final approval
of the Omnibus Equity Incentive Plan by the
shareholders.
If
the Company terminates Mr. Chasteen’s employment other than for
Cause (as defined in the Chasteen Employment Agreement) or Mr.
Chasteen resigns for Good Reason (as defined in the Chasteen
Employment Agreement), then the Company is obligated to pay to Mr.
Chasteen an amount equal to six (6) months of his salary.
Additionally, during Mr. Chasteen’s employment, if the Company
sells all or substantially all of its assets or consummates a
merger, reorganization or similar transaction in which a majority
of the equity in the surviving company is not owned by the
stockholders of the Company immediately prior to such a
transaction, then Mr. Chasteen will receive a bonus equal to 5% of
the Net Proceeds of such a transaction. Net Proceeds are defined as
the purchase price, less costs incurred to complete the sale, to
include but not limited to accounting, legal, due diligence,
commissions, investment banking fees or similar costs that are
necessitated by the applicable transaction.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Principal Beneficial Owners and Management
The
following table sets forth information regarding the beneficial
ownership of our common stock as of June 30, 2021 (the “Date of
Determination”) by (i) each Named Executive Officer, as such term
is defined in “Executive and Director Compensation”, (ii) each
member of our Board, (iii) each person deemed to be the beneficial
owner of more than five percent (5%) of our common stock or
preferred stock, and (iv) all of our executive officers and
directors as a group. Unless otherwise indicated, each person named
in the following table is assumed to have sole voting power and
investment power with respect to all shares of our stock listed as
owned by such person. The address of each person is deemed to be
the address of the Company unless otherwise noted.
Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting and/or investing power with respect to securities.
These rules generally provide that shares of common stock subject
to options, warrants or other convertible securities that are
currently exercisable or convertible, or exercisable or convertible
within 60 days of the Date of Determination, are deemed to be
outstanding and to be beneficially owned by the person or group
holding such options, warrants or other convertible securities for
the purpose of computing the percentage ownership of such person or
group, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person or group.
The percentages are based upon 82,927,311 shares of our common
stock outstanding as of the Date of Determination.
To
our knowledge, except as indicated in the footnotes to this table
and pursuant to applicable community property laws, as of the Date
of Determination, (a) the persons named in the table have sole
voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to applicable
community property laws; and (b) no person owns more than 5% of our
common or preferred stock. Unless otherwise indicated, the address
for each director and executive officer listed is: c/o Cipherloc
Corporation, 6836 Bee Cave Road, Bldg. 1, S#279, Austin, Texas
78746.
Name and Address of Beneficial Owners |
|
Amount |
|
|
Percent
Ownership |
|
Tom Wilkinson |
|
|
15,200 |
|
|
|
* |
% |
Anthony Ambrose |
|
|
— |
|
|
|
— |
% |
David Chasteen |
|
|
— |
|
|
|
* |
% |
Sammy Davis, DrPH |
|
|
10,000 |
|
|
|
* |
% |
Ryan Polk |
|
|
— |
|
|
|
— |
% |
Nicholas Hnatiw |
|
|
— |
|
|
|
— |
% |
All Officers and
Directors as a Group (6 persons) |
|
|
25,200 |
|
|
|
* |
% |
|
|
|
|
|
|
|
|
|
5% or greater
shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None. |
|
|
|
|
|
|
|
|
*
Less than 1%.
Equity Compensation Plan Information
As of
this filing, the Company did not have any equity compensation
plans.
Changes in Control
The
Company is not currently aware of any arrangements which may at a
subsequent date result in a change of control of the
Company.
DELINQUENT
SECTION 16(A) REPORTS
Section
16(a) of the Exchange Act requires our directors, executive
officers and holders of more than 10% of our common stock to file
with the SEC initial reports of ownership and reports of changes in
the ownership of our common stock and other equity securities. Such
persons are required to furnish us copies of all Section 16(a)
filings. Based solely upon a review of the copies of the forms
furnished to us, we believe that our officers, directors and
holders of more than 10% of our common stock complied with all
applicable filing requirements.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Except
as discussed below or otherwise disclosed above under “Executive
and Director Compensation”, which information is incorporated by
reference where applicable in this “Certain Relationships and
Related Transactions” section, the following sets forth a summary
of all transactions since January 1, 2019, or any currently
proposed transaction, in which the Company was to be a participant
and the amount involved exceeded or exceeds the lesser of $120,000
or one percent of the average of the Company’s total assets at the
fiscal year-end for September 30, 2020 and 2019, and in which any
officer, director, or any shareholder owning greater than five
percent (5%) of our outstanding voting shares, nor any member of
the above referenced individual’s immediate family, had or will
have a direct or indirect material interest (other than
compensation described above under “Executive Compensation” and/or
“Director Compensation”). We believe the terms obtained or
consideration that we paid or received, as applicable, in
connection with the transactions described below were comparable to
terms available or the amounts that would be paid or received, as
applicable, in arm’s-length transactions.
De
La Garza Settlement
On
August 28, 2020, we entered into a Settlement Agreement and Mutual
General Release (the “Settlement”) with Michael De La Garza,
a former director of the Company. The Settlement related to certain
actions, including (i) Cipherloc Corporation vs. Michael De La
Garza, MSR, LLC, and James LaGanke, as Trustee of the Caramel Trust
II, Civil Action No. 1:19-CV-01147-LY in the United States District
Court for the Western District of Texas, Austin Division, (ii)
Cipherloc Corporation vs. Michael De La Garza, Cause No.
D-1-GN-19-005253 in the 53rd Judicial District Court of
Travis County, Texas, and (iii) Michael De La Garza and Cipherloc,
Inc. v. Tom Wilkinson, Anthony Ambrose, Manchester PR, LLC and
Manchester Explorer, LP; Cause No. D-1-GN-19-004708 in the
53rd Judicial District Court of Travis County, Texas.
Under the Settlement, all of the foregoing actions were dismissed
with prejudice. Pursuant to the Settlement, Mr. De La Garza, agreed
to, among other things, (i) resign as a director of the Company and
confirmed that he had no disagreements with the Board, and (ii)
return 13,137,757 shares of the Company’s common stock, $0.01 par
value per share (the “Forfeited Stock”), held by him to the
Company’s treasury. We agreed to pay Mr. De La Garza an aggregate
sum of $400,000 (the “Settlement Amount”), payable as follows: (A)
$300,000 on or before ten (10) business days after the last to
occur (the “Settlement Date”) of (i) the execution of the
Settlement by Mr. De La Garza, (ii) actual receipt by the Company
of the Forfeited Stock and consummation of the deliveries
contemplated by the Settlement, and (iii) the receipt by the
Company of a completed Internal Revenue Service Form W-9 from Mr.
De La Garza; and (B) $25,000 on each of the four (4) succeeding
quarterly anniversaries of the Settlement Date. Notwithstanding the
foregoing, in the event that Mr. De La Garza is not in compliance
with the Settlement on any such payment date, then no payment shall
be due, and we will have the right to pursue any and all remedies
against De La Garza including, without limitation, seeking the
return of all amounts paid. In exchange for the consideration
described above, and subject to the terms and conditions set forth
in the Settlement, the Company and Mr. De La Garza mutually agreed
to grant each other a general release.
Other
Payments
Skylar,
Olivia and Robin De La Garza, the immediate family members of
former CEO Michael De La Garza, earned $52,278, $47,176 and
$53,000, respectively, in compensation for the year ended September
30, 2019. In August 2019, Robin and Skylar De La Garza were
terminated as employees of the Company. The Company also paid
$11,394 in educational costs of Skylar De La Garza and $6,200 in
moving expenses of Olivia De La Garza. Michael De La Garza was the
CEO and director of the Company during the period of time when
these payments were made.
Review,
Approval or Ratification of Transactions with Related
Parties
Our
Board reviews and approves transactions with directors, officers
and holders of five percent or more of our voting securities and
their affiliates, each a related party. The material facts as to a
related party’s relationship or interest in the transaction are
disclosed to our Board prior to their consideration of such
transaction. Further, when shareholders are entitled to vote on a
transaction with a related party, the material facts of the related
party’s relationship or interest in the transaction are disclosed
to the shareholders, who must approve the transaction in good
faith. The Company does not have a related party transactions
policy in place.
OTHER
MATTERS
The
Board knows of no other business, which will be presented to the
Annual Meeting. If any other business is properly brought before
the Annual Meeting, proxies will be voted in accordance with the
judgment of the persons voting the proxies. The proxy also has
discretionary authority to vote to adjourn the Annual Meeting,
including for the purpose of soliciting votes in accordance with
our board of director’s recommendations.
We
will bear the cost of soliciting proxies in the accompanying form.
In addition to the use of the mails, proxies may also be solicited
by our directors, officers or other employees, personally or by
telephone, facsimile or email, none of whom will be compensated
separately for these solicitation activities.
If
you do not plan to attend the Annual Meeting, in order that your
shares may be represented and in order to assure the required
quorum, please sign, date and return your proxy promptly. In the
event you are able to attend the Annual Meeting, at your request,
we will cancel your previously submitted proxy.
STOCKHOLDER PROPOSALS
AND NOMINATIONS FOR DIRECTOR
For business (including, but not limited to, director nominations)
to be properly brought before an annual meeting by a shareholder,
the shareholder or shareholders of record intending to propose the
business (the "Proposing Shareholder") must have given written
notice of the Proposing Shareholder's nomination or proposal,
either by personal delivery or by United States mail to the
Secretary of the Company not later than sixty (60) calendar days
prior to the date such annual meeting is to be held. If the current
year's meeting is called for a date that is not within thirty (30)
days of the anniversary of the previous year's annual meeting,
notice must be received not later than ten (10) calendar days
following the day on which public announcement of the date of the
annual meeting is first made. In no event will an adjournment or
postponement of an annual meeting of shareholders begin a new time
period for giving a Proposing Shareholder's notice as provided
above.
For business to be properly brought before a special meeting of
shareholders, the notice of the meeting sent by or at the direction
of the person calling the meeting must set forth the nature of the
business to be considered. A person or persons who have made a
written request for a special meeting pursuant to Section 2.2 of
our Bylaws may provide the information required for notice of a
shareholder proposal under this section simultaneously with the
written request for the meeting submitted to the Secretary or
within ten (10) calendar days after delivery of the written request
for the meeting to the Secretary.
A proposing shareholder's notice shall include as to each matter
the proposing shareholder proposes to bring before the annual
meeting;
(a) The name and address of the proposing shareholder, and the
classes and number of shares of the corporation held by the
proposing shareholder.
(b) If the notice is in regard to a nomination of a candidate for
election as director: (a) the name, age, and business and residence
address of the candidate; (b) the principal occupation or
employment of the candidate; and (c) the class and number of shares
of the corporation beneficially owned by the candidate.
(c) If the notice is about a proposal other than a nomination of a
candidate for election as director, a brief description of the
business desired to be brought before the meeting and the material
interest of the proposing shareholder in such proposal.
Accordingly, stockholders who intend to have a proposal considered
at our 2021 Annual Meeting of Stockholders must submit the proposal
to us at our corporate headquarters no later than July 30, 2021,
which proposal must be made in accordance with the provisions
outlined above.
ADDITIONAL
INFORMATION
Householding
The
SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for Proxy
Availability Notice or other Annual Meeting materials with respect
to two or more stockholders sharing the same address by delivering
a single Notice or other Annual Meeting materials addressed to
those stockholders. This process, which is commonly referred to as
householding, potentially provides extra convenience for
stockholders and cost savings for companies. Stockholders who
participate in householding will continue to be able to access and
receive separate proxy cards.
Brokers
with account holders who are our stockholders may be “householding”
our proxy materials. A Notice or proxy materials will be delivered
in one single envelope to multiple stockholders sharing an address
unless contrary instructions have been received from one or more of
the affected stockholders. Once you have received notice from your
broker that they will be householding communications to your
address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in householding and would prefer to
receive a separate Notice or proxy materials, please notify your
broker or submit a request in writing to our Secretary, c/o
Cipherloc Corporation, 6836 Bee Cave Rd, Bldg. 1, S#279, Austin, TX
78746. Stockholders who currently receive multiple copies of the
Notice or proxy materials at their address and would like to
request householding of their communications should contact their
broker. In addition, we will promptly deliver, upon written or oral
request to the address or telephone number above, a separate copy
of the Notice or proxy materials to a stockholder at a shared
address to which a single copy of the documents was
delivered.
Annual
Reports and Form 10-K
Copies
of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2020, may be obtained without charge by writing to
the Company’s Secretary, Cipherloc Corporation, 6836 Bee Cave Rd,
Bldg. 1, S#279, Austin, TX 78746. The Notice, our Annual Report on
Form 10-K and this proxy statement are also available online at
.
|
By
Order of the Board of Directors |
|
|
|
/s/
Tom Wilkinson |
|
Tom
Wilkinson |
|
Chairman
of the Board of Directors |
July
15, 2021
APPENDIX
A
CIPHERLOC
CORPORATION
2021 OMNIBUS EQUITY INCENTIVE PLAN
Section 1. Purpose
of Plan.
The
name of the Plan is the Cipherloc Corporation 2021 Omnibus Equity
Incentive Plan (the “Plan”). The purposes of the Plan are to
(i) provide an additional incentive to selected employees,
directors, and independent contractors of the Company or its
Affiliates whose contributions are essential to the growth and
success of the Company, (ii) strengthen the commitment of such
individuals to the Company and its Affiliates, (iii) motivate those
individuals to faithfully and diligently perform their
responsibilities and (iv) attract and retain competent and
dedicated individuals whose efforts will result in the long-term
growth and profitability of the Company. To accomplish these
purposes, the Plan provides that the Company may grant Options,
Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Other Stock-Based Awards or any combination of the
foregoing.
Section 2. Definitions.
For
purposes of the Plan, the following terms shall be defined as set
forth below:
(a) “Administrator”
means the Board, or, if and to the extent the Board does not
administer the Plan, the Committee in accordance with Section 3
hereof.
(b) “Affiliate”
means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the Person specified as of any date of
determination.
(c) “Applicable
Laws” means the applicable requirements under U.S. federal and
state corporate laws, U.S. federal and state securities laws,
including the Code, any stock exchange or quotation system on which
the Common Stock is listed or quoted and the applicable laws of any
other country or jurisdiction where Awards are granted under the
Plan, as are in effect from time to time.
(d) “Award”
means any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit or Other Stock-Based Award granted under the
Plan.
(e) “Award
Agreement” means any written notice, agreement, contract or
other instrument or document evidencing an Award, including through
electronic medium, which shall contain such terms and conditions
with respect to an Award as the Administrator shall determine,
consistent with the Plan.
(f) “Beneficial
Owner” (or any variant thereof) has the meaning defined in Rule
13d-3 under the Exchange Act.
(g) “Board”
means the Board of Directors of the Company.
(h) “Bylaws”
mean the bylaws of the Company, as may be amended and/or restated
from time to time.
(i) “Cause”
has the meaning assigned to such term in any individual service,
employment or severance agreement or Award Agreement with the
Participant or, if no such agreement exists or if such agreement
does not define “Cause,” then “Cause” means, with respect to a
Participant, the occurrence of any of the following: (i) a
conviction of a Participant for a felony crime or the failure of a
Participant to contest prosecution for a felony crime; (ii) a
Participant’s misconduct, fraud, disloyalty or dishonesty (as such
terms may be defined by the Committee in its sole discretion);
(iii) any unauthorized use or disclosure of confidential
information or trade secrets by a Participant; (iv) a Participant’s
negligence, malfeasance, breach of fiduciary duties, neglect of
duties; (v) any material violation by a Participant of a written
Company or Subsidiary or Affiliate policy or any material breach by
a Participant of a written agreement with the Company or Subsidiary
or Affiliate; or (vi) any other act or omission by a Participant
that, in the opinion of the Committee, could reasonably be expected
to adversely affect the Company’s or a Subsidiary’s or an
Affiliate’s business, financial condition, prospects and/or
reputation. A Participant’s employment or provision of services
shall be deemed to have terminated for Cause if, after the
Participant’s employment or provision of services has terminated,
facts and circumstances are discovered that would have justified a
termination for Cause, including, without limitation, violation of
material Company policies or breach of noncompetition,
confidentiality or other restrictive covenants that may apply to
the Participant. Any voluntary termination of employment or service
by the Participant in anticipation of an involuntary termination of
the Participant’s employment or service, as applicable, for Cause
shall be deemed to be a termination for Cause.
(j) “Change
in Capitalization” means any (i) merger, consolidation,
reclassification, recapitalization, spin-off, spin-out, repurchase
or other reorganization or corporate transaction or event, (ii)
special or extraordinary dividend or other extraordinary
distribution (whether in the form of cash, Common Stock or other
property), stock split, reverse stock split, share subdivision or
consolidation, (iii) combination or exchange of shares or (iv)
other change in corporate structure, which, in any such case, the
Administrator determines, in its sole discretion, affects the
Shares such that an adjustment pursuant to Section 5 hereof is
appropriate.
(k) “Change
in Control” means the first occurrence of an event set forth in
any one of the following paragraphs following the Effective
Date:
(1) any
Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities
Beneficially Owned by such Person which were acquired directly from
the Company or any Affiliate thereof) representing more than fifty
percent (50%) of the combined voting power of the Company’s then
outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in
clause (i) of paragraph (3) below; or
(2) the
date on which individuals who constitute the Board as of the
Effective Date and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including, but not limited to, a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination
for election by the Company’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the Effective
Date or whose appointment, election or nomination for election was
previously so approved or recommended cease for any reason to
constitute a majority of the number of directors serving on the
Board; or
(3) there
is consummated a merger or consolidation of the Company or any
direct or indirect Subsidiary with any other corporation or other
entity, other than (i) a merger or consolidation (A) which results
in the voting securities of the Company outstanding immediately
prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or
any Subsidiary, fifty percent (50%) or more of the combined voting
power of the securities of the Company or such surviving entity or
any parent thereof outstanding immediately after such merger or
consolidation and (B) following which the individuals who comprise
the Board immediately prior thereto constitute at least a majority
of the board of directors of the Company, the entity surviving such
merger or consolidation or, if the Company or the entity surviving
such merger or consolidation is then a Subsidiary, the ultimate
parent thereof, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including
in the securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates) representing
more than fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities; or
(4) the
stockholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially
all of the Company’s assets, other than (A) a sale or disposition
by the Company of all or substantially all of the Company’s assets
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 following the completion of such transaction in
substantially the same proportions as their ownership of the
Company immediately prior to such sale or (B) a sale or disposition
of all or substantially all of the Company’s assets immediately
following which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board of
directors of the entity to which such assets are sold or disposed
or, if such entity is a subsidiary, the ultimate parent
thereof.
Notwithstanding
the foregoing, (i) a Change in Control shall not be deemed to have
occurred by virtue of the consummation of any transaction or series
of integrated transactions immediately following which the holders
of Common Stock immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or
series of transactions and (ii) to the extent required to avoid
accelerated taxation and/or tax penalties under Section 409A of the
Code, a Change in Control shall be deemed to have occurred under
the Plan with respect to any Award that constitutes deferred
compensation under Section 409A of the Code only if a change in the
ownership or effective control of the Company or a change in
ownership of a substantial portion of the assets of the Company
shall also be deemed to have occurred under Section 409A of the
Code. For purposes of this definition of Change in Control, the
term “Person” shall not include (i) the Company or any Subsidiary
thereof, (ii) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any Subsidiary thereof,
(iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of shares of the
Company.
(l) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
(m) “Committee”
means any committee or subcommittee the Board may appoint to
administer the Plan. Subject to the discretion of the Board, the
Committee shall be composed entirely of individuals who meet the
qualifications of a “non-employee director” within the meaning of
Rule 16b-3 under the Exchange Act and any other qualifications
required by the applicable stock exchange on which the Common Stock
is traded.
(n) “Common
Stock” means the common stock of the Company, par value
$0.01.
(o) “Company”
means Cipherloc Corporation, a Texas corporation (or any successor
company, except as the term “Company” is used in the definition of
“Change in Control” above).
(p) “Disability”
has the meaning assigned to such term in any individual service,
employment or severance agreement or Award Agreement with the
Participant or, if no such agreement exists or if such agreement
does not define “Disability,” then “Disability” means that a
Participant, as determined by the Administrator in its sole
discretion, (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than twelve
(12) months, or (ii) is, by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits
for a period of not less than three (3) months under an accident
and health plan covering employees of the Company or an Affiliate
thereof.
(q) “Effective
Date” has the meaning set forth in Section 17
hereof.
(r) “Eligible
Recipient” means an employee, director or independent
contractor of the Company or any Affiliate of the Company who has
been selected as an eligible participant by the Administrator;
provided, however, to the extent required to avoid
accelerated taxation and/or tax penalties under Section 409A of the
Code, an Eligible Recipient of an Option or a Stock Appreciation
Right means an employee, non-employee director or independent
contractor of the Company or any Affiliate of the Company with
respect to whom the Company is an “eligible issuer of service
recipient stock” within the meaning of Section 409A of the
Code.
(s) “Exchange
Act” means the Securities Exchange Act of 1934, as amended from
time to time.
(t) “Exempt
Award” shall mean the following:
(1) An
Award granted in assumption of, or in substitution for, outstanding
awards previously granted by a corporation or other entity acquired
by the Company or any of its Subsidiaries or with which the Company
or any of its Subsidiaries combines by merger or otherwise. The
terms and conditions of any such Awards may vary from the terms and
conditions set forth in the Plan to the extent the Administrator at
the time of grant may deem appropriate, subject to Applicable
Laws.
(2) An
award that an Eligible Recipient purchases at Fair Market Value
(including awards that an Eligible Recipient elects to receive in
lieu of fully vested compensation that is otherwise due) whether or
not the Shares are delivered immediately or on a deferred
basis.
(u) “Exercise
Price” means, (i) with respect to any Option, the per share
price at which a holder of such Option may purchase Shares issuable
upon exercise of such Award, and (ii) with respect to a Stock
Appreciation Right, the base price per share of such Stock
Appreciation Right.
(v) “Fair
Market Value” of a share of Common Stock or another security as
of a particular date shall mean the fair market value as determined
by the Administrator in its sole discretion; provided, that, (i) if
the Common Stock or other security is admitted to trading on a
national securities exchange, the fair market value on any date
shall be the closing sale price reported on such date, or if no
shares were traded on such date, on the last preceding date for
which there was a sale of a share of Common Stock on such exchange,
or (ii) if the Common Stock or other security is then traded in an
over-the-counter market, the fair market value on any date shall be
the average of the closing bid and asked prices for such share in
such over-the-counter market for the last preceding date on which
there was a sale of such share in such market.
(w) “Free
Standing Rights” has the meaning set forth in Section
8.
(x) “Good
Reason” has the meaning assigned to such term in any individual
service, employment or severance agreement or Award Agreement with
the Participant or, if no such agreement exists or if such
agreement does not define “Good Reason,” “Good Reason” and any
provision of this Plan that refers to “Good Reason” shall not be
applicable to such Participant.
(y) “Grandfathered
Arrangement” means an Award which is provided pursuant to a
written binding contract in effect on November 2, 2017, and which
was not modified in any material respect on or after November 2,
2017, within the meaning of Section 13601(e)(2) of P.L. 115.97, as
may be amended from time to time (including any rules and
regulations promulgated thereunder).
(z) “Incentive
Compensation” means annual cash bonus and any Award.
(aa) “ISO”
means an Option intended to be and designated as an “incentive
stock option” within the meaning of Section 422 of the
Code.
(bb) “Nonqualified
Stock Option” shall mean an Option that is not designated as an
ISO.
(cc) “Option”
means an option to purchase shares of Common Stock granted pursuant
to Section 7 hereof. The term “Option” as used in the Plan includes
the terms “Nonqualified Stock Option” and “ISO.”
(dd) “Other
Stock-Based Award” means a right or other interest granted
pursuant to Section 10 hereof that may be denominated or payable
in, valued in whole or in part by reference to, or otherwise based
on or related to, Common Stock, including, but not limited to,
unrestricted Shares, dividend equivalents or performance units,
each of which may be subject to the attainment of performance goals
or a period of continued provision of service or employment or
other terms or conditions as permitted under the Plan.
(ee) “Participant”
means any Eligible Recipient selected by the Administrator,
pursuant to the Administrator’s authority provided for in Section 3
below, to receive grants of Awards, and, upon his or her death, his
or her successors, heirs, executors and administrators, as the case
may be.
(ff) “Person”
shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d)
thereof.
(gg) “Plan”
means this 2021 Omnibus Equity Incentive Plan.
(hh) “Related
Rights” has the meaning set forth in Section 8.
(ii) “Restricted
Period” has the meaning set forth in Section 9.
(jj) “Restricted
Stock” means a Share granted pursuant to Section 9 below
subject to certain restrictions that lapse at the end of a
specified period (or periods) of time and/or upon attainment of
specified performance objectives.
(kk) “Restricted
Stock Unit” means the right granted pursuant to Section 9
hereof to receive a Share at the end of a specified restricted
period (or periods) of time and/or upon attainment of specified
performance objectives.
(ll) “Rule
16b-3” has the meaning set forth in Section 3.
(mm) “Section
16 Officer” means any officer of the Company whom the Board has
determined is subject to the reporting requirements of Section 16
of the Exchange Act, whether or not such individual is a Section 16
Officer at the time the determination to recoup compensation is
made.
(nn) “Shares”
means Common Stock reserved for issuance under the Plan, as
adjusted pursuant to the Plan, and any successor (pursuant to a
merger, consolidation or other reorganization) security.
(oo) “Stock
Appreciation Right” means a right granted pursuant to Section 8
hereof to receive an amount equal to the excess, if any, of (i) the
aggregate Fair Market Value, as of the date such Award or portion
thereof is surrendered, of the Shares covered by such Award or such
portion thereof, over (ii) the aggregate Exercise Price of such
Award or such portion thereof.
(pp) “Subsidiary”
means, with respect to any Person, as of any date of determination,
any other Person as to which such first Person owns or otherwise
controls, directly or indirectly, more than 50% of the voting
shares or other similar interests or a sole general partner
interest or managing member or similar interest of such other
Person.
(qq) “Transfer”
has the meaning set forth in Section 15.
Section
3. Administration.
(a) The
Plan shall be administered by the Administrator and shall be
administered, to the extent applicable, in accordance with Rule
16b-3 under the Exchange Act (“Rule 16b-3”).
(b) Pursuant
to the terms of the Plan, the Administrator, subject, in the case
of any Committee, to any restrictions on the authority delegated to
it by the Board, shall have the power and authority, without
limitation:
(1) to
select those Eligible Recipients who shall be
Participants;
(2) to
determine whether and to what extent Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based
Awards or a combination of any of the foregoing, are to be granted
hereunder to Participants;
(3) to
determine the number of Shares to be covered by each Award granted
hereunder;
(4) to
determine the terms and conditions, not inconsistent with the terms
of the Plan, of each Award granted hereunder (including, but not
limited to, (i) the restrictions applicable to Restricted Stock or
Restricted Stock Units and the conditions under which restrictions
applicable to such Restricted Stock or Restricted Stock Units shall
lapse, (ii) the performance goals and periods applicable to Awards,
(iii) the Exercise Price of each Option and each Stock Appreciation
Right or the purchase price of any other Award, (iv) the vesting
schedule and terms applicable to each Award, (v) the number of
Shares or amount of cash or other property subject to each Award
and (vi) subject to the requirements of Section 409A of the Code
(to the extent applicable) any amendments to the terms and
conditions of outstanding Awards, including, but not limited to,
extending the exercise period of such Awards and accelerating the
payment schedules of such Awards and/or, to the extent specifically
permitted under the Plan, accelerating the vesting schedules of
such Awards);
(5) to
determine the terms and conditions, not inconsistent with the terms
of the Plan, which shall govern all written instruments evidencing
Awards;
(6) to
determine the Fair Market Value in accordance with the terms of the
Plan;
(7) to
determine the duration and purpose of leaves of absence which may
be granted to a Participant without constituting termination of the
Participant’s service or employment for purposes of Awards granted
under the Plan;
(8) to
adopt, alter and repeal such administrative rules, regulations,
guidelines and practices governing the Plan as it shall from time
to time deem advisable;
(9) to
construe and interpret the terms and provisions of, and supply or
correct omissions in, the Plan and any Award issued under the Plan
(and any Award Agreement relating thereto), and to otherwise
supervise the administration of the Plan and to exercise all powers
and authorities either specifically granted under the Plan or
necessary and advisable in the administration of the Plan;
and
(10) to
prescribe, amend and rescind rules and regulations relating to
sub-plans established for the purpose of satisfying applicable
non-United States laws or for qualifying for favorable tax
treatment under applicable non-United States laws, which rules and
regulations may be set forth in an appendix or appendixes to the
Plan.
(c) Subject
to Section 5, neither the Board nor the Committee shall have the
authority to (i) reprice or cancel and regrant any Award at a lower
exercise, base or purchase price or cancel any Award with an
exercise, base or purchase price in exchange for cash, property or
other Awards without first obtaining the approval of the Company’s
stockholders.
(d) All
decisions made by the Administrator pursuant to the provisions of
the Plan shall be final, conclusive and binding on all Persons,
including the Company and the Participants.
(e) The
expenses of administering the Plan shall be borne by the Company
and its Affiliates.
(f) If
at any time or to any extent the Board shall not administer the
Plan, then the functions of the Administrator specified in the Plan
shall be exercised by the Committee. Except as otherwise provided
in the Articles of Incorporation or Bylaws of the Company, any
action of the Committee with respect to the administration of the
Plan shall be taken by a majority vote at a meeting at which a
quorum is duly constituted or unanimous written consent of the
Committee’s members.
Section
4. Shares
Reserved for Issuance Under the Plan.
(a) Subject
to Section 5 hereof, the number of shares of Common Stock that are
reserved and available for issuance pursuant to Awards granted
under the Plan shall be equal to the sum of (i)_8,000,000_ shares,
plus (ii) an annual increase on the first day of each calendar year
beginning with the first January 1 following the Effective Date and
ending with the last January 1 during the initial ten-year term of
the Plan, equal to the lesser of (A) five percent (5%) of the
Shares outstanding (on an as-converted basis, which shall include
Shares issuable upon the exercise or conversion of all outstanding
securities or rights convertible into or exercisable for Shares,
including without limitation, preferred stock, warrants and
employee options to purchase any Shares) on the final day of the
immediately preceding calendar year and (B) such lesser number of
Shares as determined by the Board; provided, that,
shares of Common Stock issued under the Plan with respect to an
Exempt Award shall not count against such share limit.
(b) Shares
issued under the Plan may, in whole or in part, be authorized but
unissued Shares or Shares that shall have been or may be reacquired
by the Company in the open market, in private transactions or
otherwise. If an Award entitles the Participant to receive or
purchase Shares, the number of Shares covered by such Award or to
which such Award relates shall be counted on the date of grant of
such Award against the aggregate number of Shares available for
granting Awards under the Plan. If any Shares subject to an Award
are forfeited, cancelled, exchanged or surrendered or if an Award
otherwise terminates or expires without a distribution of Shares to
the Participant, the Shares with respect to such Award shall, to
the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for
granting Awards under the Plan. Notwithstanding the foregoing, (i)
any Shares reacquired by the Company on the open market or
otherwise using cash proceeds from the exercise of Options; and
(ii) Shares surrendered or withheld as payment of either the
Exercise Price of an Award (including Shares otherwise underlying a
Stock Appreciation Right that are retained by the Company to
account for the Exercise Price of such Stock Appreciation Right)
and/or withholding taxes in respect of an Award shall no longer be
available for grant under the Plan. In addition, (i) to the extent
an Award is denominated in shares of Common Stock, but paid or
settled in cash, the number of shares of Common Stock with respect
to which such payment or settlement is made shall again be
available for grants of Awards pursuant to the Plan and (ii) shares
of Common Stock underlying Awards that can only be settled in cash
shall not be counted against the aggregate number of shares of
Common Stock available for Awards under the Plan. Upon the exercise
of any Award granted in tandem with any other Awards, such related
Awards shall be cancelled to the extent of the number of Shares as
to which the Award is exercised and, notwithstanding the foregoing,
such number of Shares shall no longer be available for grant under
the Plan.
(c) No
more than 8,000,000__ Shares (as increased on an annual basis, on
the first day of each calendar year beginning with the first
January 1 following the Effective Date and ending with the last
January 1 during the initial ten-year term of the Plan, by the
lesser of (A) five percent (5%) of the Shares outstanding (on an
as-converted basis, which shall include Shares issuable upon the
exercise or conversion of all outstanding securities or rights
convertible into or exercisable for Shares, including without
limitation, preferred stock, warrants and employee options to
purchase any Shares) on the final day of the immediately preceding
calendar year; (B) _2,000,000__ Shares, and (C) such lesser number
of Shares as determined by the Board) shall be issued pursuant to
the exercise of ISOs.
(d) Director
Compensation Limits. Notwithstanding any provision to the
contrary in the Plan, the sum of the grant date Fair Market Value
of equity-based Awards (determined as of the grant date in
accordance with Financial Accounting Standards Board Accounting
Standards Codification Top 718, or any successor thereto) plus any
cash fees paid by the Company for serving as a non-employee
director of the Board during any calendar year shall not exceed
$_120,000__, increased to $ 150,000___ in the calendar year of his
or her initial service as a non-employee director.
Section
5. Equitable
Adjustments.
In
the event of any Change in Capitalization, an equitable
substitution or proportionate adjustment shall be made in (i) the
aggregate number and kind of securities reserved for issuance under
the Plan pursuant to Section 4, (ii) the kind, number of securities
subject to, and the Exercise Price subject to outstanding Options
and Stock Appreciation Rights granted under the Plan, (iii) the
kind, number and purchase price of Shares or other securities or
the amount of cash or amount or type of other property subject to
outstanding Restricted Stock, Restricted Stock Units or Other
Stock-Based Awards granted under the Plan; and/or (iv) the terms
and conditions of any outstanding Awards (including, without
limitation, any applicable performance targets or criteria with
respect thereto); provided, however, that any
fractional shares resulting from the adjustment shall be
eliminated. Such other equitable substitutions or adjustments shall
be made as may be determined by the Administrator, in its sole
discretion. Without limiting the generality of the foregoing, in
connection with a Change in Capitalization, the Administrator may
provide, in its sole discretion, but subject in all events to the
requirements of Section 409A of the Code, for the cancellation of
any outstanding Award granted hereunder in exchange for payment in
cash or other property having an aggregate Fair Market Value equal
to the Fair Market Value of the Shares, cash or other property
covered by such Award, reduced by the aggregate Exercise Price or
purchase price thereof, if any; provided, however,
that if the Exercise Price or purchase price of any outstanding
Award is equal to or greater than the Fair Market Value of the
shares of Common Stock, cash or other property covered by such
Award, the Administrator may cancel such Award without the payment
of any consideration to the Participant. Further, without limiting
the generality of the foregoing, with respect to Awards subject to
foreign laws, adjustments made hereunder shall be made in
compliance with applicable requirements. Except to the extent
determined by the Administrator, any adjustments to ISOs under this
Section 5 shall be made only to the extent not constituting a
“modification” within the meaning of Section 424(h)(3) of the Code.
The Administrator’s determinations pursuant to this Section 5 shall
be final, binding and conclusive.
Section 6. Eligibility
and Award Limits.
The
Participants in the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from those individuals that
qualify as Eligible Recipients.
Section 7. Options.
(a) General.
Options granted under the Plan shall be designated as Nonqualified
Stock Options or ISOs. Each Participant who is granted an Option
shall enter into an Award Agreement with the Company, containing
such terms and conditions as the Administrator shall determine, in
its sole discretion, including, among other things, the Exercise
Price of the Option, the term of the Option and provisions
regarding exercisability of the Option, and whether the Option is
intended to be an ISO or a Nonqualified Stock Option (and in the
event the Award Agreement has no such designation, the Option shall
be a Nonqualified Stock Option). The provisions of each Option need
not be the same with respect to each Participant. More than one
Option may be granted to the same Participant and be outstanding
concurrently hereunder. Options granted under the Plan shall be
subject to the terms and conditions set forth in this Section 7 and
shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall
deem desirable and set forth in the applicable Award
Agreement.
(b) Exercise
Price. The Exercise Price of Shares purchasable under an Option
shall be determined by the Administrator in its sole discretion at
the time of grant, but in no event shall the exercise price of an
Option be less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock on the date of grant.
(c) Option
Term. The maximum term of each Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten
(10) years after the date such Option is granted. Each Option’s
term is subject to earlier expiration pursuant to the applicable
provisions in the Plan and the Award Agreement. Notwithstanding the
foregoing, subject to Section 4(d) of the Plan, the Administrator
shall have the authority to accelerate the exercisability of any
outstanding Option at such time and under such circumstances as the
Administrator, in its sole discretion, deems
appropriate.
(d) Exercisability.
Each Option shall be exercisable at such time or times and subject
to such terms and conditions, including the attainment of
performance goals, as shall be determined by the Administrator in
the applicable Award Agreement. The Administrator may also provide
that any Option shall be exercisable only in installments, and the
Administrator may waive such installment exercise provisions at any
time, in whole or in part, based on such factors as the
Administrator may determine in its sole discretion.
(e) Method
of Exercise. Options may be exercised in whole or in part by
giving written notice of exercise to the Company specifying the
number of whole Shares to be purchased, accompanied by payment in
full of the aggregate Exercise Price of the Shares so purchased in
cash or its equivalent, as determined by the Administrator. As
determined by the Administrator, in its sole discretion, with
respect to any Option or category of Options, payment in whole or
in part may also be made (i) by means of consideration received
under any cashless exercise procedure approved by the Administrator
(including the withholding of Shares otherwise issuable upon
exercise), (ii) in the form of unrestricted Shares already owned by
the Participant which have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (iii) any other form of
consideration approved by the Administrator and permitted by
Applicable Laws or (iv) any combination of the
foregoing.
(f) ISOs.
The terms and conditions of ISOs granted hereunder shall be subject
to the provisions of Section 422 of the Code and the terms,
conditions, limitations and administrative procedures established
by the Administrator from time to time in accordance with the Plan.
At the discretion of the Administrator, ISOs may be granted only to
an employee of the Company, its “parent corporation” (as such term
is defined in Section 424(e) of the Code) or a Subsidiary of the
Company.
(1) ISO
Grants to 10% Stockholders. Notwithstanding anything to the
contrary in the Plan, if an ISO is granted to a Participant who
owns shares representing more than ten percent (10%) of the voting
power of all classes of shares of the Company at the time of grant,
its “parent corporation” (as such term is defined in Section 424(e)
of the Code) or a Subsidiary of the Company, the term of the ISO
shall not exceed five (5) years from the time of grant of such ISO
and the Exercise Price shall be at least one hundred and ten
percent (110%) of the Fair Market Value of the Shares on the date
of grant.
(2) $100,000
Per Year Limitation For ISOs. To the extent the aggregate Fair
Market Value (determined on the date of grant) of the Shares for
which ISOs are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company) exceeds
$100,000, such excess ISOs shall be treated as Nonqualified Stock
Options.
(3) Disqualifying
Dispositions. Each Participant awarded an ISO under the Plan
shall notify the Company in writing immediately after the date the
Participant makes a “disqualifying disposition” of any Share
acquired pursuant to the exercise of such ISO. A “disqualifying
disposition” is any disposition (including any sale) of such Shares
before the later of (i) two years after the date of grant of the
ISO and (ii) one year after the date the Participant acquired the
Shares by exercising the ISO. The Company may, if determined by the
Administrator and in accordance with procedures established by it,
retain possession of any Shares acquired pursuant to the exercise
of an ISO as agent for the applicable Participant until the end of
the period described in the preceding sentence, subject to
complying with any instructions from such Participant as to the
sale of such Shares.
(g) Rights
as Stockholder. A Participant shall have no rights to
dividends, dividend equivalents or distributions or any other
rights of a stockholder with respect to the Shares subject to an
Option until the Participant has given written notice of the
exercise thereof, and has paid in full for such Shares and has
satisfied the requirements of Section 15 hereof.
(h) Termination
of Employment or Service. Treatment of an Option upon
termination of employment of a Participant shall be provided for by
the Administrator in the Award Agreement.
(i) Other
Change in Employment or Service Status. An Option shall be
affected, both with regard to vesting schedule and termination, by
leaves of absence, including unpaid and un-protected leaves of
absence, changes from full-time to part-time employment, partial
Disability or other changes in the employment status or service
status of a Participant, in the discretion of the
Administrator.
Section
8. Stock
Appreciation Rights.
(a) General.
Stock Appreciation Rights may be granted either alone (“Free
Standing Rights”) or in conjunction with all or part of any
Option granted under the Plan (“Related Rights”). Related
Rights may be granted either at or after the time of the grant of
such Option. The Administrator shall determine the Eligible
Recipients to whom, and the time or times at which, grants of Stock
Appreciation Rights shall be made. Each Participant who is granted
a Stock Appreciation Right shall enter into an Award Agreement with
the Company, containing such terms and conditions as the
Administrator shall determine, in its sole discretion, including,
among other things, the number of Shares to be awarded, the
Exercise Price per Share, and all other conditions of Stock
Appreciation Rights. Notwithstanding the foregoing, no Related
Right may be granted for more Shares than are subject to the Option
to which it relates. The provisions of Stock Appreciation Rights
need not be the same with respect to each Participant. Stock
Appreciation Rights granted under the Plan shall be subject to the
following terms and conditions set forth in this Section 8 and
shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall
deem desirable, as set forth in the applicable Award
Agreement.
(b) Awards;
Rights as Stockholder. A Participant shall have no rights to
dividends or any other rights of a stockholder with respect to the
shares of Common Stock, if any, subject to a Stock Appreciation
Right until the Participant has given written notice of the
exercise thereof and has satisfied the requirements of Section 15
hereof.
(c) Exercise
Price. The Exercise Price of Shares purchasable under a Stock
Appreciation Right shall be determined by the Administrator in its
sole discretion at the time of grant, but in no event shall the
exercise price of a Stock Appreciation Right be less than one
hundred percent (100%) of the Fair Market Value of a share of
Common Stock on the date of grant.
(d) Exercisability.
(1) Stock
Appreciation Rights that are Free Standing Rights shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Administrator in the
applicable Award Agreement.
(2) Stock
Appreciation Rights that are Related Rights shall be exercisable
only at such time or times and to the extent that the Options to
which they relate shall be exercisable in accordance with the
provisions of Section 7 hereof and this Section 8 of the
Plan.
(e) Payment
Upon Exercise.
(1) Upon
the exercise of a Free Standing Right, the Participant shall be
entitled to receive up to, but not more than, that number of Shares
equal in value to the excess of the Fair Market Value as of the
date of exercise over the Exercise Price per share specified in the
Free Standing Right multiplied by the number of Shares in respect
of which the Free Standing Right is being exercised.
(2) A
Related Right may be exercised by a Participant by surrendering the
applicable portion of the related Option. Upon such exercise and
surrender, the Participant shall be entitled to receive up to, but
not more than, that number of Shares equal in value to the excess
of the Fair Market Value as of the date of exercise over the
Exercise Price specified in the related Option multiplied by the
number of Shares in respect of which the Related Right is being
exercised. Options which have been so surrendered, in whole or in
part, shall no longer be exercisable to the extent the Related
Rights have been so exercised.
(3) Notwithstanding
the foregoing, the Administrator may determine to settle the
exercise of a Stock Appreciation Right in cash (or in any
combination of Shares and cash).
(f) Termination
of Employment or Service. Treatment of a Stock Appreciation
Right upon termination of employment of a Participant shall be
provided for by the Administrator in the Award
Agreement.
(g) Term.
(1) The
term of each Free Standing Right shall be fixed by the
Administrator, but no Free Standing Right shall be exercisable more
than ten (10) years after the date such right is
granted.
(2) The
term of each Related Right shall be the term of the Option to which
it relates, but no Related Right shall be exercisable more than ten
(10) years after the date such right is granted.
(h) Other
Change in Employment or Service Status. Stock Appreciation
Rights shall be affected, both with regard to vesting schedule and
termination, by leaves of absence, including unpaid and
un-protected leaves of absence, changes from full-time to part-time
employment, partial Disability or other changes in the employment
or service status of a Participant, in the discretion of the
Administrator.
Section 9. Restricted
Stock and Restricted Stock Units.
(a) General.
Restricted Stock or Restricted Stock Units may be issued under the
Plan. The Administrator shall determine the Eligible Recipients to
whom, and the time or times at which, Restricted Stock or
Restricted Stock Units shall be made. Each Participant who is
granted Restricted Stock or Restricted Stock Units shall enter into
an Award Agreement with the Company, containing such terms and
conditions as the Administrator shall determine, in its sole
discretion, including, among other things, the number of Shares to
be awarded; the price, if any, to be paid by the Participant for
the acquisition of Restricted Stock or Restricted Stock Units; the
period of time restrictions, performance goals or other conditions
that apply to Transferability, delivery or vesting of such Awards
(the “Restricted Period”); and all other conditions
applicable to the Restricted Stock and Restricted Stock Units. If
the restrictions, performance goals or conditions established by
the Administrator are not attained, a Participant shall forfeit his
or her Restricted Stock or Restricted Stock Units, in accordance
with the terms of the grant. The provisions of the Restricted Stock
or Restricted Stock Units need not be the same with respect to each
Participant.
(b) Awards
and Certificates. Except as otherwise provided below in Section
9(c), (i) each Participant who is granted an Award of Restricted
Stock may, in the Company’s sole discretion, be issued a share
certificate in respect of such Restricted Stock; and (ii) any such
certificate so issued shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions appliable to any such Award.
The Company may require that the share certificates, if any,
evidencing Restricted Stock granted hereunder be held in the
custody of the Company until the restrictions thereon shall have
lapsed, and that, as a condition of any Award of Restricted Stock,
the Participant shall have delivered a share transfer form,
endorsed in blank, relating to the Shares covered by such Award.
Certificates for shares of unrestricted Common Stock may, in the
Company’s sole discretion, be delivered to the Participant only
after the Restricted Period has expired without forfeiture in such
Restricted Stock Award. With respect to Restricted Stock Units to
be settled in Shares, at the expiration of the Restricted Period,
share certificates in respect of the shares of Common Stock
underlying such Restricted Stock Units may, in the Company’s sole
discretion, be delivered to the Participant, or his or her legal
representative, in a number equal to the number of shares of Common
Stock underlying the Restricted Stock Units Award. Notwithstanding
anything in the Plan to the contrary, any Restricted Stock or
Restricted Stock Units to be settled in Shares (at the expiration
of the Restricted Period, and whether before or after any vesting
conditions have been satisfied) may, in the Company’s sole
discretion, be issued in uncertificated form. Further,
notwithstanding anything in the Plan to the contrary, with respect
to Restricted Stock Units, at the expiration of the Restricted
Period, Shares, or cash, as applicable, shall promptly be issued
(either in certificated or uncertificated form) to the Participant,
unless otherwise deferred in accordance with procedures established
by the Company in accordance with Section 409A of the Code, and
such issuance or payment shall in any event be made within such
period as is required to avoid the imposition of a tax under
Section 409A of the Code.
(c) Restrictions
and Conditions. The Restricted Stock or Restricted Stock Units
granted pursuant to this Section 9 shall be subject to the
following restrictions and conditions and any additional
restrictions or conditions as determined by the Administrator at
the time of grant or, subject to Section 409A of the Code where
applicable, thereafter:
(1) The
Administrator may, in its sole discretion, provide for the lapse of
restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such
circumstances as the Administrator may determine, in its sole
discretion, including, but not limited to, the attainment of
certain performance goals, the Participant’s termination of
employment or service with the Company or any Affiliate thereof, or
the Participant’s death or Disability. Notwithstanding the
foregoing, upon a Change in Control, the outstanding Awards shall
be subject to Section 11 hereof.
(2) Except
as provided in the applicable Award Agreement, the Participant
shall generally have the rights of a stockholder of the Company
with respect to Restricted Stock during the Restricted Period;
provided, however, that dividends declared during the
Restricted Period with respect to an Award, shall only become
payable if (and to the extent) the underlying Restricted Stock
vests. Except as provided in the applicable Award Agreement, the
Participant shall generally not have the rights of a stockholder
with respect to Shares subject to Restricted Stock Units during the
Restricted Period; provided, however, that, subject
to Section 409A of the Code, an amount equal to dividends declared
during the Restricted Period with respect to the number of Shares
covered by Restricted Stock Units shall, unless otherwise set forth
in an Award Agreement, be paid to the Participant at the time (and
to the extent) Shares in respect of the related Restricted Stock
Units are delivered to the Participant. Certificates for Shares of
unrestricted Common Stock may, in the Company’s sole discretion, be
delivered to the Participant only after the Restricted Period has
expired without forfeiture in respect of such Restricted Stock or
Restricted Stock Units, except as the Administrator, in its sole
discretion, shall otherwise determine.
(3) The
rights of Participants granted Restricted Stock or Restricted Stock
Units upon termination of employment or service as a director or
independent contractor to the Company or to any Affiliate thereof
terminates for any reason during the Restricted Period shall be set
forth in the Award Agreement.
(d) Form
of Settlement. The Administrator reserves the right in its sole
discretion to provide (either at or after the grant thereof) that
any Restricted Stock Unit represents the right to receive the
amount of cash per unit that is determined by the Administrator in
connection with the Award.
Section 10. Other
Stock-Based Awards.
Other
Stock-Based Awards may be issued under the Plan. Subject to the
provisions of the Plan, the Administrator shall have sole and
complete authority to determine the individuals to whom and the
time or times at which such Other Stock-Based Awards shall be
granted. Each Participant who is granted an Other Stock-Based Award
shall enter into an Award Agreement with the Company, containing
such terms and conditions as the Administrator shall determine, in
its sole discretion, including, among other things, the number of
shares of Common Stock to be granted pursuant to such Other
Stock-Based Awards, or the manner in which such Other Stock-Based
Awards shall be settled (e.g., in shares of Common Stock, cash or
other property), or the conditions to the vesting and/or payment or
settlement of such Other Stock-Based Awards (which may include, but
not be limited to, achievement of performance criteria) and all
other terms and conditions of such Other Stock-Based Awards. In the
event that the Administrator grants a bonus in the form of Shares,
the Shares constituting such bonus shall, as determined by the
Administrator, be evidenced in uncertificated form or by a book
entry record or a certificate issued in the name of the Participant
to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such bonus is payable.
Notwithstanding anything set forth in the Plan to the contrary, any
dividend or dividend equivalent Award issued hereunder shall be
subject to the same restrictions, conditions and risks of
forfeiture as apply to the underlying Award.
Section
11. Change
in Control.
Unless
otherwise determined by the Administrator and evidenced in an Award
Agreement, in the event that (a) a Change in Control occurs, and
(b) the Participant is employed by the Company or any of its
Affiliates immediately prior to the consummation of such Change in
Control then upon the consummation of such Change in Control, the
Administrator, in its sole and absolute discretion, may:
(a) provide
that any unvested or unexercisable portion of any Award carrying a
right to exercise become fully vested and exercisable;
and
(b) cause
the restrictions, deferral limitations, payment conditions and
forfeiture conditions applicable to an Award granted under the Plan
to lapse and such Awards shall be deemed fully vested and any
performance conditions imposed with respect to such Awards shall be
deemed to be fully achieved at target performance
levels.
If
the Administrator determines in its discretion pursuant to Section
3(b)(4) hereof to accelerate the vesting of Options and/or Share
Appreciation Rights in connection with a Change in Control, the
Administrator shall also have discretion in connection with such
action to provide that all Options and/or Stock Appreciation Rights
outstanding immediately prior to such Change in Control shall
expire on the effective date of such Change in Control.
Section
12. Amendment
and Termination.
The
Board may amend, alter or terminate the Plan at any time, but no
amendment, alteration or termination shall be made that would
impair the rights of a Participant under any Award theretofore
granted without such Participant’s consent. The Board shall obtain
approval of the Company’s stockholders for any amendment that would
require such approval in order to satisfy the requirements of any
rules of the stock exchange on which the Common Stock is traded or
other Applicable Law. Subject to Section 3(c), the Administrator
may amend the terms of any Award theretofore granted, prospectively
or retroactively, but, subject to Section 5 of the Plan and the
immediately preceding sentence, no such amendment shall materially
impair the rights of any Participant without his or her
consent.
Section
13. Unfunded
Status of Plan.
The
Plan is intended to constitute an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a
general creditor of the Company.
Section
14. Withholding
Taxes.
Each
Participant shall, no later than the date as of which the value of
an Award first becomes includible in the gross income of such
Participant for purposes of applicable taxes, pay to the Company,
or make arrangements satisfactory to the Administrator regarding
payment of an amount up to the maximum statutory tax rates in the
Participant’s applicable jurisdiction with respect to the Award, as
determined by the Company. The obligations of the Company under the
Plan shall be conditional on the making of such payments or
arrangements, and the Company shall, to the extent permitted by
Applicable Laws, have the right to deduct any such taxes from any
payment of any kind otherwise due to such Participant. Whenever
cash is to be paid pursuant to an Award, the Company shall have the
right to deduct therefrom an amount sufficient to satisfy any
applicable withholding tax requirements related thereto. Whenever
Shares or property other than cash are to be delivered pursuant to
an Award, the Company shall have the right to require the
Participant to remit to the Company in cash an amount sufficient to
satisfy any related taxes to be withheld and applied to the tax
obligations; provided, that, with the approval of the
Administrator, a Participant may satisfy the foregoing requirement
by either (i) electing to have the Company withhold from delivery
of Shares or other property, as applicable, or (ii) delivering
already owned unrestricted shares of Common Stock, in each case,
having a value not exceeding the applicable taxes to be withheld
and applied to the tax obligations. Such already owned and
unrestricted shares of Common Stock shall be valued at their Fair
Market Value on the date on which the amount of tax to be withheld
is determined and any fractional share amounts resulting therefrom
shall be settled in cash. Such an election may be made with respect
to all or any portion of the Shares to be delivered pursuant to an
award. The Company may also use any other method of obtaining the
necessary payment or proceeds, as permitted by Applicable Laws, to
satisfy its withholding obligation with respect to any
Award.
Section
15. Transfer
of Awards.
Until
such time as the Awards are fully vested and/or exercisable in
accordance with the Plan or an Award Agreement, no purported sale,
assignment, mortgage, hypothecation, transfer, charge, pledge,
encumbrance, gift, transfer in trust (voting or other) or other
disposition of, or creation of a security interest in or lien on,
any Award or any agreement or commitment to do any of the foregoing
(each, a “Transfer”) by any holder thereof in violation of
the provisions of the Plan or an Award Agreement will be valid,
except with the prior written consent of the Administrator, which
consent may be granted or withheld in the sole discretion of the
Administrator. Any purported Transfer of an Award or any economic
benefit or interest therein in violation of the Plan or an Award
Agreement shall be null and void ab initio and shall not
create any obligation or liability of the Company, and any Person
purportedly acquiring any Award or any economic benefit or interest
therein transferred in violation of the Plan or an Award Agreement
shall not be entitled to be recognized as a holder of such Shares
or other property underlying such Award. Unless otherwise
determined by the Administrator in accordance with the provisions
of the immediately preceding sentence, an Option or a Stock
Appreciation Right may be exercised, during the lifetime of the
Participant, only by the Participant or, during any period during
which the Participant is under a legal Disability, by the
Participant’s guardian or legal representative.
Section 16. Continued
Employment or Service.
Neither
the adoption of the Plan nor the grant of an Award shall confer
upon any Eligible Recipient any right to continued employment or
service with the Company or any Affiliate thereof, as the case may
be, nor shall it interfere in any way with the right of the Company
or any Affiliate thereof to terminate the employment or service of
any of its Eligible Recipients at any time.
Section 17. Effective
Date.
The
Plan was approved by the Board on May 12, 2021, and shall be
adopted and become effective on the date that it is approved by the
Company’s stockholders (the “Effective Date”).
Section 18. Electronic
Signature.
Participant’s
electronic signature of an Award Agreement shall have the same
validity and effect as a signature affixed by hand.
Section 19. Term
of Plan.
No
Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date, but Awards theretofore granted
may extend beyond that date.
Section
20. Securities
Matters and Regulations.
(a) Notwithstanding
anything herein to the contrary, the obligation of the Company to
sell or deliver Shares with respect to any Award granted under the
Plan shall be subject to all Applicable Laws, rules and
regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the
Administrator. The Administrator may require, as a condition of the
issuance and delivery of certificates evidencing shares of Common
Stock pursuant to the terms hereof, that the recipient of such
shares make such agreements and representations, and that such
certificates bear such legends, as the Administrator, in its sole
discretion, deems necessary or advisable.
(b) Each
Award is subject to the requirement that, if at any time the
Administrator determines that the listing, registration or
qualification of Shares is required by any securities exchange or
under any state or federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Award or the
issuance of Shares, no such Award shall be granted or payment made
or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected
or obtained free of any conditions not acceptable to the
Administrator.
(c) In
the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under
the Securities Act and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to
the extent required by the Securities Act or regulations
thereunder, and the Administrator may require a Participant
receiving Common Stock pursuant to the Plan, as a condition
precedent to receipt of such Common Stock, to represent to the
Company in writing that the Common Stock acquired by such
Participant is acquired for investment only and not with a view to
distribution.
Section
21. Section
409A of the Code.
The
Plan as well as payments and benefits under the Plan are intended
to be exempt from, or to the extent subject thereto, to comply with
Section 409A of the Code, and, accordingly, to the maximum extent
permitted, the Plan shall be interpreted in accordance therewith.
Notwithstanding anything contained herein to the contrary, to the
extent required in order to avoid accelerated taxation and/or tax
penalties under Section 409A of the Code, the Participant shall not
be considered to have terminated employment or service with the
Company for purposes of the Plan and no payment shall be due to the
Participant under the Plan or any Award until the Participant would
be considered to have incurred a “separation from service” from the
Company and its Affiliates within the meaning of Section 409A of
the Code. Any payments described in the Plan that are due within
the “short term deferral period” as defined in Section 409A of the
Code shall not be treated as deferred compensation unless
Applicable Law requires otherwise. Notwithstanding anything to the
contrary in the Plan, to the extent that any Awards (or any other
amounts payable under any plan, program or arrangement of the
Company or any of its Affiliates) are payable upon a separation
from service and such payment would result in the imposition of any
individual tax and penalty interest charges imposed under Section
409A of the Code, the settlement and payment of such awards (or
other amounts) shall instead be made on the first business day
after the date that is six (6) months following such separation
from service (or death, if earlier). Each amount to be paid or
benefit to be provided under this Plan shall be construed as a
separate identified payment for purposes of Section 409A of the
Code. The Company makes no representation that any or all of the
payments or benefits described in this Plan will be exempt from or
comply with Section 409A of the Code and makes no undertaking to
preclude Section 409A of the Code from applying to any such
payment. The Participant shall be solely responsible for the
payment of any taxes and penalties incurred under Section
409A.
Section
22. Notification
of Election Under Section 83(b) of the Code.
If
any Participant shall, in connection with the acquisition of shares
of Common Stock under the Plan, make the election permitted under
Section 83(b) of the Code, such Participant shall notify the
Company of such election within ten (10) days after filing notice
of the election with the Internal Revenue Service.
Section 23. No
Fractional Shares.
No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Administrator shall determine whether
cash, other Awards, or other property shall be issued or paid in
lieu of such fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise
eliminated.
Section 24. Beneficiary.
A
Participant may file with the Administrator a written designation
of a beneficiary on such form as may be prescribed by the
Administrator and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Participant,
the executor or administrator of the Participant’s estate shall be
deemed to be the Participant’s beneficiary.
Section 25. Paperless
Administration.
In
the event that the Company establishes, for itself or using the
services of a third party, an automated system for the
documentation, granting or exercise of Awards, such as a system
using an internet website or interactive voice response, then the
paperless documentation, granting or exercise of Awards by a
Participant may be permitted through the use of such an automated
system.
Section 26. Severability.
If
any provision of the Plan is held to be invalid or unenforceable,
the other provisions of the Plan shall not be affected but shall be
applied as if the invalid or unenforceable provision had not been
included in the Plan.
Section 27. Clawback.
(a) If
the Company is required to prepare a financial restatement due to
the material non-compliance of the Company with any financial
reporting requirement, then the Committee may require any Section
16 Officer to repay or forfeit to the Company, and each Section 16
Officer agrees to so repay or forfeit, that part of the Incentive
Compensation received by that Section 16 Officer during the
three-year period preceding the publication of the restated
financial statement that the Committee determines was in excess of
the amount that such Section 16 Officer would have received had
such Incentive Compensation been calculated based on the financial
results reported in the restated financial statement. The Committee
may take into account any factors it deems reasonable in
determining whether to seek recoupment of previously paid Incentive
Compensation and how much Incentive Compensation to recoup from
each Section 16 Officer (which need not be the same amount or
proportion for each Section 16 Officer), including any
determination by the Committee that a Section 16 Officer engaged in
fraud, willful misconduct or committed grossly negligent acts or
omissions which materially contributed to the events that led to
the financial restatement. The amount and form of the Incentive
Compensation to be recouped shall be determined by the Committee in
its sole and absolute discretion, and recoupment of Incentive
Compensation may be made, in the Committee’s sole and absolute
discretion, through the cancellation of vested or unvested Awards,
cash repayment or both.
(b) Notwithstanding
any other provisions in this Plan, any Award which is subject to
recovery under any Applicable Laws, government regulation or stock
exchange listing requirement, will be subject to such deductions
and clawback as may be required to be made pursuant to such
Applicable Law, government regulation or stock exchange listing
requirement (or any policy adopted by the Company pursuant to any
such law, government regulation or stock exchange listing
requirement).
Section 28. Governing
Law.
The
Plan shall be governed by, and construed in accordance with, the
laws of the State of Texas, without giving effect to principles of
conflicts of law of such state.
Section 29. Indemnification.
To
the extent allowable pursuant to applicable law, each member of the
Board and the Administrator and any officer or other employee to
whom authority to administer any component of the Plan is
designated shall be indemnified and held harmless by the Company
from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or
resulting from any claim, action, suit, or proceeding to which he
or she may be a party or in which he or she may be a party or in
which he or she may be involved by reason of any action or failure
to act pursuant to the Plan and against and from any and all
amounts paid by him or her in satisfaction of judgment in such
action, suit, or proceeding against him or her; provided, however,
that he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf. The foregoing
right of indemnification shall not be exclusive of any other rights
of indemnification to which such individuals may be entitled
pursuant to the Company’s Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have
to indemnify them or hold them harmless.
Section
30. Titles
and Headings, References to Sections of the Code or Exchange
Act.
The
titles and headings of the sections in the Plan are for convenience
of reference only and, in the event of any conflict, the text of
the Plan, rather than such titles or headings, shall control.
References to sections of the Code or the Exchange Act shall
include any amendment or successor thereto.
Section
31. Successors.
The
obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially
all of the assets and business of the Company.
Section
32. Relationship
to other Benefits.
No
payment pursuant to the Plan shall be taken into account in
determining any benefits under any pension, retirement, savings,
profit sharing, group insurance, welfare, or other benefit plan of
the Company or any Affiliate except to the extent otherwise
expressly provided in writing in such other plan or an agreement
thereunder.
APPENDIX
B
AGREEMENT
AND PLAN OF MERGER
OF
CIPHERLOC
CORPORATION
(a Texas corporation)
WITH
AND INTO
CIPHERLOC
CORPORATION
(a Delaware corporation)
RECITALS
WHEREAS,
Cipherloc Corporation (“Cipherloc Texas”) is a
for-profit corporation duly organized and existing under the laws
of the State of Texas;
WHEREAS,
Cipherloc Corporation (“Cipherloc Delaware”) is a
corporation duly organized and existing under the laws of the State
of Delaware, and a direct wholly owned subsidiary of Cipherloc
Texas;
WHEREAS,
the parties hereto desire that, upon the terms and subject to the
conditions stated herein, Cipherloc Texas be merged with and into
Cipherloc Delaware, and that Cipherloc Delaware be the surviving
corporation of such merger (the “Merger”);
WHEREAS,
the Merger will effectuate a reincorporation of Cipherloc Texas
from the State of Texas to the State of Delaware (the
“Reincorporation”);
WHEREAS,
for U.S. federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section
368(a)(1)(F) of the U.S. Internal Revenue Code and this agreement
represents a plan of reorganization within the meaning of Section
368 of the Code;
WHEREAS,
the Board of Directors of Cipherloc Delaware has (i) determined
that the Merger is advisable, fair to, and in the best interests of
Cipherloc Delaware and its sole stockholder, (ii) approved and
declared advisable this Agreement and Plan of Merger (this
“Agreement”) and the consummation of the transactions
contemplated hereby, including the Merger, in accordance with the
terms and conditions set forth in this Agreement, pursuant to
Section 252 of the General Corporation Law of the State of Delaware
(the “DGCL”), and (iii) recommended that the sole
stockholder of Cipherloc Delaware approve the adoption of this
Agreement and the transactions contemplated hereby, including the
Merger;
WHEREAS,
the Board of Directors of Cipherloc Texas has (i) determined that
the Merger and the Reincorporation are advisable and in the best
interest of Cipherloc Texas and its shareholders, (ii) approved and
declared advisable this Agreement and the consummation of the
transactions contemplated hereby, including the Merger and the
Reincorporation, in accordance with the terms and conditions set
forth in this Agreement, pursuant to Section 10.001 of the Texas
Business Organizations Code (the “TBOC”) and (iii)
submitted the adoption of this Agreement and the transactions
contemplated hereby, including the Merger and the Reincorporation,
to its shareholders for their consideration and
approval;
WHEREAS,
the Certificate of Incorporation of Cipherloc Delaware is as set
forth in Exhibit A; and
WHEREAS,
the Bylaws of Cipherloc Delaware are as set forth in Exhibit
B;
NOW,
THEREFORE, in consideration of the foregoing, the agreements
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound, hereby agree as
follows:
Section
1
Merger
1.1
In accordance with the DGCL and the TBOC, and subject to, and upon
the terms and conditions of, this Agreement, at the Effective Time,
Cipherloc Texas shall be merged with and into Cipherloc Delaware,
the separate corporate existence of Cipherloc Texas shall cease,
and Cipherloc Delaware will continue as the surviving corporation
of the Merger (the “Surviving Corporation”). The name
of the Surviving Corporation shall be “CIPHERLOC
CORPORATION”.
1.2
The Merger shall have the effects set forth in this Agreement and
in the applicable provisions of the DGCL and the TBOC. Without
limiting the generality of the foregoing, and subject to Section
259 of the DGCL and Section 10.008 of the TBOC, at the Effective
Time, the separate existence of Cipherloc Texas will cease, and
Cipherloc Delaware will possess all the rights, privileges,
immunities, powers and franchises of a public as well as of a
private nature, and be subject to all of the restrictions,
disabilities and duties, of Cipherloc Texas; and all the rights,
privileges, immunities, powers and franchises of Cipherloc Texas,
and all property, whether real, personal or mixed, all stock
registered in the name of Cipherloc Texas, and all debts due to
Cipherloc Texas on whatever account, and all subscriptions and all
choses in action of or belonging to Cipherloc Texas, will be vested
in Cipherloc Delaware and all such property, rights, privileges,
immunities, powers and franchises will be thereafter as effectually
the property of Cipherloc Delaware as they were of Cipherloc Texas,
and the title to any real estate vested by deed or otherwise in
Cipherloc Texas will not revert or be in any way impaired by reason
of the Merger but will be vested in Cipherloc Delaware; and all
rights of creditors and all liens upon any property of Cipherloc
Texas will be preserved unimpaired, and all debts, liabilities and
duties of Cipherloc Texas will be preserved unimpaired, and all
debts, liabilities and duties of Cipherloc Texas will attach to
Cipherloc Delaware and may be enforced against it to the same
extent as if said debts, liabilities and duties had been incurred
or contracted by it, and any claim existing or action or proceeding
pending by or against Cipherloc Texas may be prosecuted against
Cipherloc Delaware. All acts, plans, policies, agreements,
arrangements, approvals and authorizations of Cipherloc Texas and
its agents which were valid and effective immediately prior to
consummation of the Merger will be taken for all purposes as the
acts, plans, policies, agreements, arrangements, approvals and
authorizations of Cipherloc Delaware and will be as effective and
binding thereon, in each case as the same were with respect to
Cipherloc Texas.
Section
2
Conversion
of Shares
2.1
At the Effective Time, by virtue of the Merger and without any
action on the part of the parties hereto, the holders of any shares
of capital stock of such parties, or any other person or
entity:
a.
Each share of Common Stock of Cipherloc Delaware, par value $0.001
per share, issued and outstanding immediately prior to the
Effective Time, shall be cancelled and shall cease to exist, and no
consideration shall be issued in respect thereof or in exchange
therefor.
b.
Each share of Common Stock of Cipherloc Texas, par value $0.01 per
share, held in Cipherloc Texas’s treasury immediately prior to the
Effective Time, shall be converted into one share of Common Stock
of the Surviving Corporation, par value $0.01 per share, held in
the Surviving Corporation’s treasury.
c.
Each share of Common Stock of Cipherloc Texas, par value $0.01 per
share, issued and outstanding immediately prior to the Effective
Time, shall be converted into one share of Common Stock of the
Surviving Corporation, par value $0.01 per share.
Section
3
Conversion Mechanics
3.1
At and after the Effective Time, each share certificate which
immediately prior to the Effective Time represented outstanding
shares of Common Stock of Cipherloc Texas (a “Cipherloc Texas
Certificate”) shall be deemed for all purposes to evidence
ownership of, and to represent, the number of shares of Common
Stock of Cipherloc Delaware into which the shares of Common Stock
of Cipherloc Texas represented by such Cipherloc Texas Certificate
immediately prior to the Effective Time have been converted
pursuant to this Agreement. The registered holder of any Cipherloc
Texas Certificate outstanding immediately prior to the Effective
Time, as such holder appears in the books and records of Cipherloc
Texas (or of the transfer agent in respect of the Common Stock of
Cipherloc Texas), immediately prior to the Effective Time, shall,
until such Cipherloc Texas Certificate is surrendered for transfer
or exchange, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividends or other
distributions on the shares of Common Stock of Cipherloc Delaware
into which the shares of Common Stock of Cipherloc Texas
represented by any such Cipherloc Texas Certificate have been
converted pursuant to this Agreement.
3.2
Each holder of a Cipherloc Texas Certificate shall, upon the
surrender of such Cipherloc Texas Certificate to the Surviving
Corporation (or the transfer agent in respect of the Common Stock
of Cipherloc Delaware) for cancellation after the Effective Time,
be entitled to receive from the Surviving Corporation (or the
transfer agent in respect of the Common Stock), a certificate (a
“Cipherloc Delaware Certificate”) representing the
number of shares of Common Stock of Cipherloc Delaware into which
the shares of Common Stock of Cipherloc Texas represented by such
Cipherloc Texas Certificate have been converted pursuant to this
Agreement. If any such Cipherloc Delaware Certificate is to be
issued in a name other than that in which the Cipherloc Texas
Certificate surrendered for exchange is registered, such exchange
shall be conditioned upon (i) the Cipherloc Texas Certificate so
surrendered being properly endorsed or otherwise in proper form for
transfer and (ii) the person requesting such exchange either paying
any transfer or other taxes required by reason of the issuance of
the Cipherloc Delaware Certificate in a name other than that of the
registered holder of the Cipherloc Texas Certificate surrendered,
or establishing to the satisfaction of the Surviving Corporation,
or the transfer agent in respect of the Common Stock that such tax
has been paid or is not applicable.
3.3
Where no Cipherloc Texas Certificate has been issued in the name of
a holder of shares of Common Stock of Cipherloc Texas, a “book
entry” (i.e., a computerized or manual entry) shall be made in the
shareholder records of the Surviving Corporation to evidence the
issuance to such holder of an equal number of shares of Common
Stock of Cipherloc Delaware.
3.4 Notwithstanding anything in this Agreement to the contrary, the
shares of Common Stock of Cipherloc Texas issued and
outstanding immediately prior to the Effective Time that are held
by any person that is entitled to demand and properly demands
payment of the fair value of such shares of Common Stock of
Cipherloc Texas pursuant to, and that complies in all respects
with, the provisions of Section 10.356 of the TBOC, and does not
properly withdraw such demand in accordance with Section 10.357 of
the TBOC or otherwise have such rights of dissent terminated
pursuant to Section 10.367 of the TBOC, in each case prior to the
Effective Time (the “Dissenting Common Shares”),
shall not be converted into the right to receive the consideration
as provided in Section 3.1, but, instead, such person shall
be entitled to such rights (but only such rights) as are granted by
Section 10.354 of the TBOC. At the Effective Time, all Dissenting
Common Shares shall no longer be outstanding and automatically
shall be cancelled and shall cease to exist and, except as
otherwise provided by the TBOC, each holder of Dissenting Common
Shares shall cease to have any rights with respect to the
Dissenting Common Shares, other than such rights as are granted by
Section 10.354 of the TBOC. Notwithstanding the foregoing, if any
such person (i) shall have failed to establish entitlement to
relief as a dissenting shareholder as provided in Section 10.361 of
the TBOC, (ii) shall have effectively withdrawn demand for relief
as a dissenting shareholder with respect to such Dissenting Common
Shares under Section 10.357 of the TBOC or lost the right to relief
as a dissenting shareholder under Section 10.356 of the TBOC or
(iii) shall have failed to file a petition with the appropriate
court seeking relief as to the determination of the value of all
such Dissenting Common Shares within the time provided in Section
10.361 of the TBOC, such person shall forfeit or, in the event a
court of competent jurisdiction shall determine that such person is
not entitled to the relief provided by Section 10.361 of the TBOC,
lose the right to relief as a dissenting shareholder with respect
to such Dissenting Common Shares, and such Dissenting Common Shares
shall be deemed to have been converted at the Effective Time into
the consideration provided for such shares in Section
3.1.
Section
4
Benefit
Plans and Warrants
4.1
Effective as of the Effective Time, automatically and without any
action on the part of the holder thereof: (i) each option to
purchase shares of Common Stock of Cipherloc Texas granted under
any of Cipherloc equity plan (collectively, the “Cipherloc
Texas Equity Plans”) or otherwise (each option so issued, a
“Cipherloc Texas Option”) that is outstanding
immediately prior to the Effective Time, whether or not then vested
or exercisable, shall cease to represent a right to acquire shares
of Common Stock of Cipherloc Texas and shall be converted into an
option to purchase shares of Common Stock of Cipherloc Delaware, on
substantially the same terms and conditions (including exercise
price and vesting schedule) as applied to such Cipherloc Texas
Option immediately prior to the Effective Time (each as so
converted, a “Cipherloc Delaware Option”) and (ii)
each right of any kind (including, without limitation, any
warrants), vested or unvested, contingent or accrued, to receive
shares of Common Stock of Cipherloc Texas or benefits measured in
whole or in part by reference to the value of Common Stock of
Cipherloc Texas whether granted under the Cipherloc Texas Equity
Plans or otherwise outstanding as of the Effective Time, other than
Cipherloc Texas Options (each, a “Cipherloc Texas Equity
Agreement”), shall, in each case, be converted into a
substantially similar award for, or with respect to, shares of
Common Stock of Cipherloc Delaware on substantially the same terms
and conditions (including vesting schedule) as applied to such
Cipherloc Texas Equity Agreement immediately prior to the Effective
Time (each as so converted, a “Cipherloc Delaware Equity
Agreement”).
4.2
Any Cipherloc Texas Option which qualifies as an incentive stock
option under Section 422 of the U.S. Internal Revenue Code and the
Treasury regulations promulgated thereunder shall be converted to a
Cipherloc Delaware Option, to the extent possible, in accordance
with Section 424 of the U.S. Internal Revenue Code and the Treasury
regulations promulgated thereunder. Any Cipherloc Texas Option
which does not qualify as an incentive stock option under Section
422 of the U.S. Internal Revenue Code and the Treasury regulations
promulgated thereunder shall be converted to a Cipherloc Delaware
Option, to the extent possible, in accordance with Section 409A of
the U.S. Internal Revenue Code and the Treasury regulations
promulgated thereunder. Any Cipherloc Texas Equity Agreement shall
be converted to a Cipherloc Delaware Equity Agreement, to the
extent possible, in a manner which does not violate the
requirements of Section 409A of the U.S. Internal Revenue Code and
the Treasury regulations promulgated thereunder.
4.3
Prior to the Effective Time, Cipherloc Texas shall take all
corporate action necessary to provide for the treatment of the
Cipherloc Texas Options, the Cipherloc Delaware Options, the
Cipherloc Texas Equity Agreements and the Cipherloc Delaware Equity
Agreements as set forth in this Section 4.
4.4 A
number of shares of the Surviving Corporation’s Common Stock shall
be reserved for issuance upon the exercise of options, warrants and
stock purchase rights equal to the number of shares of Common Stock
of Cipherloc Texas so reserved immediately before the Effective
Time.
Section
5
Effective
Time
5.1
If the adoption of this Agreement is duly approved by the sole
stockholder of Cipherloc Delaware, and the Merger and the
Reincorporation are duly approved by the shareholders of Cipherloc
Texas, and this Agreement is not terminated in accordance with
Section 8 hereof, (i) Cipherloc Delaware shall execute and file a
Certificate of Merger (the “Delaware Certificate of
Merger”) with the Secretary of State of the State of
Delaware in such form as required by, and executed in accordance
with the relevant provisions of, the DGCL; and (ii) Cipherloc Texas
and Cipherloc Delaware shall each execute and file a Certificate of
Merger (the “Texas Certificate of Merger” and,
together with the Delaware Certificate of Merger, the
“Certificates of Merger”) with the Secretary of State
of the State of Texas in such form as required by, and executed in
accordance with the relevant provisions of, the TBOC.
5.2
The Merger shall become effective upon the later filing of the
Certificates of Merger or at such later time as specified in the
Certificates of Merger (the date and time the Merger becomes
effective being referred to herein as the “Effective
Time”).
Section
6
Certificate
of Incorporation and By-Laws
6.1
The Certificate of Incorporation of Cipherloc Delaware, as it
exists at the Effective Time shall remain in full force and effect
as the Certificate of Incorporation of the Surviving Corporation
after the Effective Time until altered or amended in accordance
with its terms and the DGCL.
6.2
The Bylaws of Cipherloc Delaware as they exist at the Effective
Time shall remain in full force and effect as the bylaws of the
Surviving Corporation until altered or amended in accordance with
their terms and the DGCL.
Section
7
Directors
and Officers
7.1
The parties shall take all actions necessary so that the directors
and officers of Cipherloc Texas immediately prior to the Effective
Time shall be the directors and officers, respectively, of the
Surviving Corporation immediately following the Effective Time
until their respective successors have been duly elected or
appointed and qualified or until their earlier death, resignation,
or removal in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation, as either may be in effect
from time to time, or as otherwise provided by law.
Section
8
Amendment
and Termination
8.1
At any time prior to the Effective Time, whether before or after
approval of the adoption of this Agreement by the sole stockholder
of Cipherloc Delaware and/or the approval of the Merger and the
Reincorporation by the shareholders of Cipherloc Texas, this
Agreement may be amended, to the fullest extent permitted by
applicable law, by an agreement in writing duly approved by the
Board of Directors of each of Cipherloc Delaware and Cipherloc
Texas; provided, however, that after the adoption of
this Agreement by the sole stockholder of Cipherloc Delaware and/or
the approval of the Merger and the Reincorporation by the
shareholders of Cipherloc Texas, no amendment shall be made to this
Agreement that by law requires further approval or authorization by
the sole stockholder of Cipherloc Delaware and/or the shareholders
of Cipherloc Texas, without such further approval or
authorization.
8.2
At any time prior to the Effective Time, whether before or after
approval of the adoption of this Agreement by the sole stockholder
of Cipherloc Delaware and/or the approval of the Merger and the
Reincorporation by the shareholders of Cipherloc Texas, this
Agreement and Plan of Merger may be terminated and abandoned by
either the Board of Directors of Cipherloc Delaware or the Board of
Directors of Cipherloc Texas.
Section
9
Stockholder
Vote
9.1
This Agreement will be submitted to a vote of the stockholders of
the Cipherloc Texas for their consideration and adoption at a
meeting of such stockholders in accordance with the provisions of
Section 10.001 of the TBOC. In the event that this Agreement shall
not be adopted by the requisite vote of the stockholders of
Cipherloc Texas entitled to vote thereon, this Agreement shall
thereupon terminate without further action of the parties
hereto.
Section
10
[Intentionally
Omitted]
Section
11
Miscellaneous
11.1
Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that
any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its
right, title or interest in, to or under any of the rights,
properties or assets of either Cipherloc Texas or Cipherloc
Delaware acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver,
in the name and on behalf of each of Cipherloc Texas and Cipherloc
Delaware, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of each of Cipherloc
Texas and Cipherloc Delaware or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
11.2
Further Assurances. From time to time, as and when required
by Cipherloc Delaware or by its successors and assigns, there will
be executed and delivered on behalf of Cipherloc Texas such deeds
and other instruments, and there will be taken or caused to be
taken by Cipherloc Delaware and Cipherloc Texas such further and
other actions, as shall be appropriate or necessary in order to
vest or perfect in or confirm of record or otherwise in Cipherloc
Delaware the title to and possession of all property, interests,
assets, rights, privileges, immunities, powers, franchises and
authority of Cipherloc Texas, and otherwise to carry out the
purposes of this Agreement, and the officers and director of
Cipherloc Delaware will be fully authorized in the name and on
behalf of Cipherloc Texas or otherwise to take any and all such
action and to execute and deliver any and all such deeds and other
instruments.
11.3
Governing Law. Except to the extent that the laws of the
State of Texas mandatorily apply with respect to the internal
affairs of Cipherloc Texas, this Agreement shall be governed and
construed in accordance with the laws of the State of Delaware,
without giving effect to its principles or rules of conflict of
laws to the extent such principles or rules would require or permit
the application of the laws of another jurisdiction.
11.4
Entire Agreement. This Agreement constitutes the complete
and entire agreement among the parties and constitutes the
complete, final, and exclusive embodiment of their agreement with
respect to the subject matter hereof.
11.5
Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder
without the prior written consent of the other party hereto. This
Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
11.6
Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be
invalid or unenforceable, the remainder of this Agreement and
application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the
parties hereto.
11.7
Counterparts. This Agreement may be executed in counterparts
with the same effect as if all parties have signed the same
document and each such executed counterpart shall be deemed to be
an original instrument. All executed counterparts together shall
constitute one and the same instrument.
11.8
Facsimile or Electric Signatures. This Agreement may be
executed and delivered by facsimile or other electronic
transmission and upon such delivery the facsimile signature or
other electronic signature will be deemed to have the same effect
as if the original signature had been delivered to the other
party.
[Signature
Page Follows]
IN
WITNESS WHEREOF, each of Cipherloc Delaware and Cipherloc Texas
has caused this Agreement to be executed by a duly authorized
officer, as of the __ day of ______, 202_.
|
CIPHERLOC
CORPORATION |
|
(a
Delaware corporation) |
|
|
|
|
By: |
/s/ |
|
Name: |
|
|
Title: |
|
|
|
|
|
CIPHERLOC
CORPORATION |
|
(a
Texas corporation) |
|
|
|
|
By: |
/s/ |
|
Name: |
|
|
Title: |
|
[Signature
page to Agreement and Plan of Merger]
APPENDIX
C
CERTIFICATE
OF INCORPORATION OF
CIPHERLOC
CORPORATION
ARTICLE
I
The
name of the corporation is Cipherloc Corporation (the
“Company”).
ARTICLE
II
The
address of the registered office of the Company in the State of
Delaware is [address of registered office]. The name of its
registered agent at that address is [name of registered
agent].
ARTICLE
III
The
purpose of the Company is to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE
IV
The
total number of shares of stock of all classes which the Company is
authorized to issue is 691,000,000 shares, consisting of
681,000,000 shares of Common Stock, par value $0.001 per share
(“Common Stock”), and 10,000,000 shares of Preferred Stock, par
value $0.001 per share.
The
Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the
issuance of Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each such
series, to fix the designation, powers, preferences and rights of
the shares of each such series and any qualifications, limitations
or restrictions thereof, and to increase or decrease the shares of
any such series (but not below the number of shares of such series
then outstanding).
ARTICLE
V
The name and mailing address of the incorporator is:
[name and address]
ARTICLE
VI
The
stockholders of the Company shall have the power to adopt, amend or
repeal the Bylaws. The Board of Directors of the Company shall also
have the power to adopt, amend or repeal Bylaws of the Company,
except insofar as Bylaws adopted by the stockholders shall
otherwise provide.
ARTICLE
VII
Election
of Directors need not be by written ballot unless a stockholder
demands election by written ballot at a stockholder meeting and
before voting begins, or unless the Bylaws of the Company shall so
provide.
ARTICLE
VIII
A
Director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the Director’s duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv)
for any transactions from which the Director derived an improper
personal benefit.
If
the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of
a Director, then the liability of a director of the Company shall
be eliminated or limited to the fullest extent permitted by the
Delaware General Corporation Law, as so amended.
Neither
any amendment nor repeal of this Article VIII, nor the adoption of
any provision of this Certificate of Incorporation inconsistent
with this Article VIII, shall eliminate, reduce or otherwise
adversely affect any limitation on the personal liability of a
director of the Company existing at the time of such amendment,
repeal or adoption of an inconsistent provision.
ARTICLE
IX
Any
action required or permitted to be taken by the stockholders of the
Company may be taken at a duly called annual or special meeting of
such holders or by consent in writing by such holders. Except as
otherwise required by law, special meetings of stockholders of the
Company for any purpose or purposes may be called only (i) by the
Chairman of the Board of Directors pursuant to a resolution stating
the purpose or purposes thereof or (ii) by the Board of Directors
upon written request by one or more stockholders owning, in the
aggregate, at least 25% of the Company’s outstanding shares
entitled to vote on the matter or matters to be brought before the
proposed special meeting, determined in accordance with the
provisions of the Company’s Bylaws, and who otherwise comply with
such other requirements and procedures set forth in the Company’s
Bylaws, as now or hereinafter in effect.
ARTICLE
X
Each
stockholder of the Corporation and each Person holding any
beneficial interest in the Corporation (whether through a broker,
dealer, bank, trust company or clearing corporation or an agent of
any of the foregoing or otherwise), to the fullest extent permitted
by law, (i) irrevocably agrees that any claims, suits, actions or
proceedings arising out of or relating in any way to this
Certificate of Incorporation (including any claims, suits or
actions to interpret, apply or enforce (A) the provisions of this
Certificate of Incorporation or the Bylaws, (B) the duties,
obligations or liabilities of the Corporation to the stockholders
of the Corporation, or of stockholders of the Corporation to the
Corporation, or among stockholders of the Corporation, (C) the
rights or powers of, or restrictions on, the Corporation or any
stockholder of the Corporation, (D) any provision of the DGCL, or
(E) any other instrument, document, agreement or certificate
contemplated by any provision of the DGCL relating to the
Corporation (regardless of whether such claims, suits, actions or
proceedings (x) sound in contract, tort, fraud or otherwise, (y)
are based on common law, statutory, equitable, legal or other
grounds, or (z) are derivative or direct claims)), shall be
exclusively brought in the Court of Chancery of the State of
Delaware or, if such court does not have subject matter
jurisdiction thereof, any other court in the State of Delaware with
subject matter jurisdiction; (ii) irrevocably submits to the
exclusive jurisdiction of such courts in connection with any such
claim, suit, action or proceeding; (iii) irrevocably agrees not to,
and waives any right to, assert in any such claim, suit, action or
proceeding that (A) it is not personally subject to the
jurisdiction of such courts or any other court to which proceedings
in such courts may be appealed, (B) such claim, suit, action or
proceeding is brought in an inconvenient forum, or (C) the venue of
such claim, suit, action or proceeding is improper; (iv) expressly
waives any requirement for the posting of a bond by a party
bringing such claim, suit, action or proceeding; (v) consents to
process being served in any such claim, suit, action or proceeding
by mailing, certified mail, return receipt requested, a copy
thereof to such party at the address in effect for notices
hereunder, and agrees that such service shall constitute good and
sufficient service of process and notice thereof; provided , that
nothing in clause (v) hereof shall affect or limit any right to
serve process in any other manner permitted by law; and (vi)
irrevocably waives any and all right to trial by jury in any such
claim, suit, action or proceeding.
[signature
page follows]
THE
UNDERSIGNED, being the sole incorporator, for the purpose of
forming a corporation pursuant to the General Corporation Law of
the State of Delaware and the acts amendatory thereof and
supplemental thereto, does make and file this Certificate of
Incorporation, hereby declaring and certifying that the facts
stated herein are true, and accordingly hereunto has set my hand
and seal this __ day of _________ ___.
|
|
|
[name
of incorporator], Incorporator |
APPENDIX
D
CIPHERLOC
CORPORATION
BYLAWS
ADOPTED:
__________, 2021
CIPHERLOC
CORPORATION
BYLAWS
ARTICLE
1. OFFICES
|
Section
1.1 |
Registered
Office |
|
Section
1.2 |
Other
Offices |
ARTICLE
2. MEETINGS OF STOCKHOLDERS
|
Section
2.1 |
Annual
Meeting |
|
Section
2.2 |
Special
Meetings |
|
Section
2.3 |
Time
and Place of Special Meetings |
|
Section
2.4 |
Notice |
|
Section
2.5 |
Quorum |
|
Section
2.6 |
Adjournment |
|
Section
2.7 |
Organization
of Meetings |
|
Section
2.8 |
Voting
and Record Date |
|
Section
2.9 |
Conduct
of Meeting |
|
Section
2.10 |
Action
Without Meeting |
ARTICLE
3. DIRECTORS
|
Section
3.1 |
Number |
|
Section
3.2 |
Term,
Qualification, Vacancies, and Newly Created
Directorships |
|
Section
3.3 |
Removal |
|
Section
3.4 |
Powers |
|
Section
3.5 |
Meetings
of the Board |
|
Section
3.6 |
Quorum |
|
Section
3.7 |
Vote
Necessary to Act and Participation by Conference
Telephone |
|
Section
3.8 |
Executive
and Other Committees |
|
Section
3.9 |
Compensation |
|
Section
3.10 |
Rules
of Procedure |
|
Section
3.11 |
Action
Without Meeting |
ARTICLE
4. OFFICERS
|
Section
4.1 |
Officers |
|
Section
4.2 |
Number
of Offices |
|
Section
4.3 |
Terms |
|
Section
4.4 |
Duties
of the Executive Officers |
|
Section
4.5 |
Chairman
of the Board |
ARTICLE
5. INDEMNIFICATION, advancement, AND
INSURANCE
|
Section
5.1 |
Right
of Indemnification and Advancement |
|
Section
5.2 |
Right
of Claimant to Bring Suit |
|
Section
5.3 |
Non-Exclusivity
of Rights |
|
Section
5.4 |
Insurance |
|
Section
5.5 |
Setoff
of Indemnification Remedies; Subrogation |
|
Section
5.6 |
Amendment
or Repeal |
|
Section
5.7 |
Severability |
ARTICLE
6. MISCELLANEOUS
|
Section
6.1 |
Certificates
of Stock |
|
Section
6.2 |
Transfer
of Stock |
|
Section
6.3 |
Stockholders
of Record |
|
Section
6.4 |
Corporate
Seal |
|
Section
6.5 |
Fiscal
Year |
|
Section
6.6 |
Books
and Records |
|
Section
6.7 |
Notices |
|
Section
6.8 |
Amendments |
Article 7. Construction and Defined Terms
|
Section
7.1 |
Construction |
|
Section
7.2 |
Defined
Terms |
BYLAWS
OF
CIPHERLOC
CORPORATION
ARTICLE
1. OFFICES
Section
1.1. Registered Office. The address of the registered
office of the Corporation1 in Delaware shall be 1209
Orange Street, in the City of Wilmington, County of New Castle. The
registered agent at such address in charge thereof shall be The
Corporation Trust Company, all of which shall be subject to change
from time to time as permitted by applicable law.
Section
1.2. Other Offices. The Corporation may also have an
office or offices or place or places of business within or without
the State of Delaware as the Board may from time to time
designate.
ARTICLE
2. MEETINGS OF STOCKHOLDERS
Section
2.1. Annual Meeti