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
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
mPhase Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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mPHASE
TECHNOLOGIES, INC. |
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9841 Washingtonian Boulevard, #200 |
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Gaithersburg, MD 20878 |
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Tel:
(301) 329-2700 |
NOTICE OF 2022 SPECIAL MEETING OF STOCKHOLDERS
To Be Held on
March ,
2022
Dear Stockholder:
We are pleased to invite you to attend the 2022 Special Meeting of
stockholders (the “Special Meeting”) of mPhase Technologies, Inc.
(“mPhase” or the “Company”), which will be held on March
, 2022 at 10:00 a.m. Eastern Time
located at 1101 Wootton Pkwy, #1020, Rockville MD 20852 for the
following purposes:
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1. |
To approve an amendment to the Company’s Amended and Restated
Certificate of Incorporation (the “Certificate of Incorporation”)
to effect a reverse stock split at a ratio not less than 1-for-10
and not greater than 1-for-45, with the exact ratio to be set
within that range at the discretion of our board of directors
without further approval or authorization of our stockholders;
and |
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2. |
To approve and adopt the 2022 Equity and Incentive
Plan. |
Our Board of Directors has fixed February 14, 2022 as the record
date (the “Record Date”) for the determination of stockholders
entitled to notice of, and to vote at, the Special Meeting and at
any adjournment or postponement of the meeting.
All stockholders are cordially invited to attend the Special
Meeting. Whether or not you expect to attend the Special Meeting,
please complete, sign and date the enclosed proxy and return it
promptly. If you plan to attend the Special Meeting and wish to
vote your shares personally, you may do so at any time before the
proxy is voted.
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit
attendance to stockholders of record only. Registration and seating
will begin at 9:30am Eastern Time. Shares of common stock can be
voted at the Special Meeting only if the holder is present in
person or by valid proxy.
For admission to the Special Meeting, each stockholder may be asked
to present valid picture identification, such as 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 meeting.
Important Notice Regarding the Availability of Proxy Materials
for the Special Meeting to be held on March
, 2022 at 10:00 a.m. Eastern
Time.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Dated: February 8, 2022 |
Anshu Bhatnagar
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Chairman and Chief Executive Officer |
Whether or not you expect to attend the Special Meeting in
person, we urge you to vote your shares at your earliest
convenience. This will ensure the presence of a quorum at the
Special Meeting. Promptly voting your shares will save mPhase the
expenses and extra work of additional solicitation. An addressed
envelope for which no postage is required if mailed in the United
Stated is enclosed if you wish to vote by mail. Submitting your
proxy now will not prevent you from voting your shares at the
Special Meeting if you desire to do so, as your proxy is revocable
at your option. Your vote is important, so please act
today!
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mPHASE
TECHNOLOGIES,
INC. |
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9841
Washingtonian Boulevard, #200 |
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Gaithersburg,
MD 20878 |
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Tel: (301) 329-2700 |
PROXY STATEMENT FOR THE
2022 SPECIAL MEETING OF STOCKHOLDERS
To be held on March ,
2022
The Board of Directors (the “Board” or “Board of Directors”) of
mPhase Technologies, Inc. (“mPhase” or the “Company”) is soliciting
your proxy to vote at the 2022 Special Meeting of Stockholders (the
“Special Meeting”) to be held at 1101 Wootton Pkwy, #1020,
Rockville, MD 20852 on March , 2022,
at 10:00 a.m. Eastern Time, including at any adjournments or
postponements of the Special Meeting.
Our of Board of Directors is asking you to vote your shares by
completing, signing and returning the accompanying proxy card via
mail or fax or vote over the Internet. If you attend the Special
Meeting in person, you may vote at the Special 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 Special Meeting, you must
obtain a proxy issued in your name from that record holder as
described in more detail below.
We intend to begin mailing this proxy statement, the attached
notice of the Special Meeting, the enclosed proxy card, and copies
of our Annual Report on Form 10-K and 10-Q for the second quarter
ended December 31, 2021 on or about
February , 2022 to all
stockholders of record entitled to vote at the Special Meeting.
Only stockholders who owned our common stock on February 14, 2022
are entitled to vote at the Special Meeting.
mPHASE TECHNOLOGIES, INC.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THIS PROXY
STATEMENT 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 a
proxy card, as more fully described herein, you are designating
Anshu Bhatnagar, our Chief Executive Officer as your proxy for the
Special Meeting and you are authorizing Mr. Bhatnagar to vote your
shares at the Special Meeting as you have instructed on the proxy
card. This way, your shares will be voted whether or not you attend
the Special Meeting. Even if you plan to attend the Special
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 Special 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. Bhatnagar
as proxy to vote on your behalf.
Why did you send me this proxy statement?
We sent you this proxy statement and the enclosed proxy card
because our Board is soliciting your proxy to vote at the 2022
Special Meeting of stockholders. This proxy statement summarizes
information related to your vote at the Special Meeting. All
stockholders who find it convenient to do so are cordially invited
to attend the Special Meeting in person. However, you do not need
to attend the meeting to vote your shares. Instead, you may simply
complete, sign and return the enclosed proxy card or vote over the
Internet.
We intend to begin mailing this proxy statement, the attached
notice of Special Meeting, the enclosed proxy card, and copies of
our Annual Report on Form 10-K and 10-Q for the second quarter
ended December 31, 2021 to all stockholders of record entitled to
vote at the Special Meeting. Only stockholders who owned our common
stock on February 14, 2022 are entitled to vote at the Special
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 Special Meeting?
The Special Meeting will be held on March
, 2022, at 10:00 a.m. Eastern Time
located at 1101 Wootton Pkwy, #1020, Rockville, MD
20852.Information on how to vote in person at the Special Meeting
is discussed below.
Who is Entitled to Vote?
The Board has fixed the close of business on February 14, 2022 as
the record date (the “Record Date”) for the determination of
stockholders entitled to notice of, and to vote at, the Special
Meeting or any adjournment or postponement thereof. On the Record
Date, there were 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 Special 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,
Worldwide Stock Transfer LLC, 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, these proxy materials have 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 Special Meeting. As the beneficial owner, you have the right
to instruct this organization on how to vote your
shares.
Who May Attend the Special Meeting?
Only record holders and beneficial owners of our common stock, or
their duly authorized proxies, may attend the Special Meeting. If
your shares of common stock are held in street name, you will need
to bring 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 two matters scheduled for a vote:
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1. |
To approve an amendment to the Company’s Certificate of
Incorporation to effect a reverse stock split at a ratio not less
than 1-for-10 and not greater than 1-for-45, with the exact ratio
to be set within that range at the discretion of our board of
directors without further approval or authorization of our
stockholders; and |
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2. |
To approve and adopt the 2022 Equity and Incentive
Plan. |
What if another matter is properly brought before the Special
Meeting?
The Board knows of no other matters that will be presented for
consideration at the Special Meeting. If any other matters are
properly brought before the Special Meeting, it is the intention of
the persons named in the accompanying proxy to vote on those
matters in accordance with their best judgment.
How Do I Vote?
Stockholders of Record
For your convenience, record holders of our common stock have three
methods of voting:
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Vote by Internet. The website address for Internet voting is
on your vote instruction form; |
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2. |
Vote by mail. Mark, date, sign and promptly mail the proxy
card; or |
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3. |
Vote at the Meeting. Attend and vote at the Special Meeting
held in person at 1101 Wootton Pkwy, #1020, Rockville, MD,
20852. |
Beneficial Owners of Shares Held in Street
Name
For your convenience, beneficial owners of our common stock have
three methods of voting:
1. |
Vote by Internet. The website address for Internet voting is
on your vote instruction form; |
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2. |
Vote by mail. Mark, date, sign and promptly mail your vote
instruction form; or |
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3. |
Vote at the Meeting. Obtain a valid legal proxy from the
organization that holds your shares and attend and vote at the
Special Meeting held in person at 1101 Wootton Pkwy, #1020,
Rockville, MD, 20852. |
IMPORTANT: If you vote by Internet, please DO NOT mail
your proxy card.
All shares entitled to vote and represented by a properly completed
and executed proxy received before the Special Meeting and not
revoked will be voted at the Special Meeting as instructed in a
proxy delivered before the Special 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.
If you do not indicate how your shares should be voted on a matter,
the shares represented by your properly completed and executed
proxy will be voted as the Board of Directors recommends on the
enumerated proposal, with regard to any other matters that may be
properly presented at the Special Meeting and on all matters
incident to the conduct of the Special Meeting. 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 Special Meeting and you do not provide
specific voting instructions, your shares will be voted at the
discretion of Mr. Bhatnagar, the Board of Directors’ designated
proxy.
If you are a registered stockholder and attend the Special Meeting,
you may deliver your completed proxy card in person. If your shares
are held in “street name” (i.e. shares are held by a broker for you
as a beneficial owner) and you wish to vote at the Special Meeting,
you will need to obtain a proxy form from the institution that
holds your shares. All votes will be tabulated by the inspector of
elections appointed for the Special Meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker
non-votes.
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.
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 Special 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,
shares must be represented in person or by proxy to have a quorum
at the Special 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 Special Meeting. Abstentions and broker non-votes
will be counted towards the quorum requirement. Shares owned by us
are not considered outstanding or considered to be present at the
Special Meeting. If there is not a quorum at the Special Meeting,
either the chairperson of the Special Meeting or our stockholders
entitled to vote at the Special Meeting may adjourn the Special
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:
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1. |
“For” the approval of amendment of the Company’s Certificate
of Incorporation to effect a reverse stock split with the exact
ratio to be determined at the discretion of the Board of
Directors; |
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2. |
“For” approval of the Company’s adoption of the 2022 Equity
and Incentive Plan. |
This authorization would exist, for example, if a stockholder of
record merely signs, dates and returns the proxy card but does not
indicate how his, her or its shares are to be voted on one or more
proposals. If other matters properly come before the Special
Meeting and you do not provide specific voting instructions, your
shares will be voted at the discretion of the proxies.
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 Special 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. Broker non-votes will not be
included in the tabulation of the voting results of any of the
proposals and, therefore, will have no effect on such
proposals.
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.
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 |
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Votes Required |
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Voting Options |
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Proposal No. 1: |
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To approve an amendment to the Company’s Amended and Restated
Certificate of Incorporation to effect a reverse stock
split
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“FOR”
“AGAINST”
“ABSTAIN”
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Proposal No. 2: |
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To approve and adopt the 2022 Equity and Incentive Plan |
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“FOR”
“AGAINST” “ABSTAIN”
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What is an Abstention?
An abstention is a stockholder’s affirmative choice to decline to
vote on a proposal. Any stockholder who is present at the Special
Meeting, either in person or by proxy, who abstains from voting,
will still be counted for purposes of determining whether a quorum
exists for the meeting. If you hold your shares in “street name”
and you do not instruct your bank, broker or other nominee how to
vote, your shares will be included in the determination of the
number of shares present at the Special Meeting for determining a
quorum at the meeting but may constitute broker non-votes,
resulting in no votes being cast on your behalf with respect to
certain proposals. See “What is a broker non-vote?”
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?
If you are a registered stockholder, you may revoke or change your
vote at any time before the proxy is voted by filing with our
Corporate Secretary, at 1101 Wootton Pkwy, #1020, Rockville, MD,
20852, either a written notice of revocation or a duly executed
proxy bearing a later date. If you attend the Special Meeting you
may revoke your proxy or change your proxy vote by voting at the
meeting. Your attendance at the Special Meeting will not by itself
revoke a previously granted proxy.
If your shares are held in street name or you hold shares through a
retirement or savings plan or other similar plan, please check your
voting instruction card or contact your broker, nominee, trustee or
administrator to determine whether you will be able to revoke or
change your vote.
Who is Paying for the Expenses Involved in Preparing 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.
Do I Have Dissenters’ Rights of Appraisal?
Neither the adoption by the board of directors nor the approval by
the majority of the amendment to our Certificate of Incorporation
provides shareholders any right to dissent and obtain appraisal of
or payment for such shareholder’s shares under the New Jersey
corporate law, the articles of incorporation or the
bylaws.
How can I Find out the Results of the Voting at the Special
Meeting?
Preliminary voting results will be announced at the Special
Meeting. In addition, final voting results will be disclosed in a
Current Report on Form 8-K that we expect to file with the SEC
within four business days after the Special Meeting. If final
voting results are not available to us in time to file a Current
Report on Form 8-K with the SEC within four business days after the
Special Meeting, we intend to file a Current Report on Form 8-K to
publish preliminary results and, within four business days after
the final results are known to us, file an additional Current
Report on Form 8-K to publish the final results.
Do the Company’s Executive Officers and Directors have an
Interest in Any of the Matters to Be Acted Upon at the Special
Meeting?
Members of the Board and executive officers of mPhase do not have
any substantial interest, direct or indirect, in Proposal No. 1 or
2.
PROPOSAL 1:
AMENDMENT TO OUR ARTICLES OF INCORPORATION TO EFFECT A REVERSE
STOCK SPLIT
Our Board has determined it may be advisable and in the best
interest of the Company and its shareholders and is submitting to
the shareholders for their approval a proposed amendment to our
Articles of Incorporation that would allow the Board, if the Board
determined that such action would be in the best interests of the
Company in light of the factors discussed below, to effect a
reverse stock split of our issued and outstanding common stock and
treasury stock (the “Reverse Split”) at a ratio ranging from
1-for-10 or to 1-for-45, with the final ratio to be
determined by the Board in its discretion following the approval by
the shareholders, without the proportional reduction in the number
of shares of common stock the Company is authorized to
issue.
If the Board, following the approval by the shareholders, decides
in its discretion to effect the Reverse Split, it would set the
Reverse Split ratio from the range described in this Proposal 1 and
the Articles of Incorporation would be amended accordingly.
Approval of this Reverse Split proposal will authorize the Board in
its discretion to effect the Reverse Split at any of the ratios
within the range described above, or not to effect the Reverse
Split. A form of the Articles of Amendment to the Company’s Amended
and Restated Articles of Incorporation that would be filed with the
Secretary of State of New Jersey to effect the Reverse Split is set
forth in Appendix A (the “Amendment”). However, such form is
subject to amendment to include such changes as may be required by
the office of the Secretary of State of New Jersey or as the Board
deems necessary and advisable to effect the Reverse Split. If at
any time prior to the effectiveness of the filing of the Amendment
with the New Jersey Secretary of State, the Board determines that
it would not be in the best interests of the Company and its
shareholders to effect the Reverse Split, in accordance with New
Jersey law and notwithstanding the approval by the shareholders,
the Board may abandon the Reverse Split without further action by
the shareholders.
We believe that giving the Board the discretion to set the ratio
within the stated range will provide us with the flexibility to
implement the Reverse Split in a manner designed to maximize the
anticipated benefits for our shareholders. By voting in favor of
the Reverse Split, you are expressly authorizing the Board to
select one ratio from among the ratios set forth in this Proposal
1. If the shareholders approve this Proposal 1, the Board would
effect the Reverse Split only upon the Board’s determination that
the Reverse Split would be in the best interest of the Company and
its shareholders at that time. In determining whether to implement
the Reverse Split and selecting the Reverse Split ratio, our Board
will consider several factors, including:
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the initial listing requirements of The Nasdaq Stock Market
(“Nasdaq”), including the minimum bid price
requirement; |
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the historical trading price and trading volume of our common
stock; |
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the then prevailing trading price and trading volume for our common
stock; |
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the anticipated impact of the Reverse Split on the trading price of
and market for our common stock; and |
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the prevailing general market and economic conditions. |
If approved by the shareholders, the authorization to effect the
Reverse Split will remain effective until our common stock is
listed on a national securities exchange or one year from the date
of the Special Meeting, whichever is earlier.
Appendix A as provided with this Proxy Statement does not purport
to be a complete description of the entirety of the Company’s
Articles of Incorporation, and merely only provides the material
amendment that is relevant to this Section. Such descriptions are
qualified in their entirely by reference to the full text of the
Company’s Articles of Incorporation effective on the date of this
Proxy Statement.
Reasons for the Reverse Split
The purpose of the Reverse Split is to increase the market price of
our common stock in connection with the potential up-listing of the
Common Stock to the Nasdaq. The Board intends to implement the
Reverse Split only if it believes that a decrease in the number of
shares outstanding is likely to improve the trading price for our
common stock on a split adjusted basis.
The Board believes that effecting the Reverse Stock Split may be
desirable for a number of reasons, including:
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List our Common Stock on The Nasdaq. Our common stock is
currently quoted on the OTCMKTS market under the symbol “XDSL”. The
high and low sales prices of our common stock over the past thirty
days were $.230 and $.186 per share. We intend to apply to have our
common stock listed on Nasdaq. We expect that the Reverse Split
will increase the market price of our common stock so that we will
be able to meet the minimum bid price requirements of the listing
rules of Nasdaq. |
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Broaden our Investor Base. We believe the Reverse Split may
increase the price of our common stock and thus may allow a broader
range of institutional investors with the ability to invest in our
common stock. For example, many funds and institutions have
investment guidelines and policies that prohibit them from
investing in stocks trading below a certain threshold. We believe
that increased institutional investor interest in the Company and
our common stock will potentially increase the overall market for
our common stock. |
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Increase Analyst and Broker Interest. We believe the Reverse
Split would help increase analyst and broker-dealer interest in our
common stock as many brokerage and investment advisory firms’
policies can discourage analysts, advisors, and broker-dealers from
following or recommending companies with low stock prices. Because
of the trading volatility and lack of liquidity often associated
with lower-priced stocks, many broker-dealers have adopted
investment guidelines, policies and practices that either prohibit
or discourage them from investing in or trading such stocks or
recommending them to their customers. Some of those guidelines,
policies and practices may also function to make the processing of
trades in lower-priced stocks economically unattractive to
broker-dealers. While we recognize that we will remain a “penny
stock” under the SEC rules, if our common stock is not listed on
the Nasdaq, we expect the increase in the stock price resulting
from the Reverse Split will position us better if our business
continues to grow as we anticipate. Additionally, because brokers’
commissions and dealer mark-ups/mark-downs on transactions in
lower-priced stocks generally represent a higher percentage of the
stock price than commissions and mark-ups/mark-downs on
higher-priced stocks, the current average price per share of our
common stock can result in shareholders or potential shareholders
paying transaction costs representing a higher percentage of the
total share value than would otherwise be the case if the share
price were substantially higher. |
Certain Risks Associated with the Reverse
Split
If the Reverse Split does not result in a proportionate increase
in the price of our common stock, we may not be able to list our
common stock on the Nasdaq.
We expect that the Reverse Split of will increase the market price
of our common stock so that we will be able to meet the minimum bid
price requirement of the listing rules of the Nasdaq. However, the
effect of Reverse Split upon the market price of our common stock
cannot be predicted with certainty, and the results of reverse
stock splits by companies in similar circumstances have been
varied. It is possible that the market price of our common stock
following the Reverse Split will not increase sufficiently for us
to be in compliance with the minimum bid price requirement. If we
are unable meet the minimum bid price requirement, we may be unable
to list our shares on the Nasdaq markets.
Even if the Reverse Split achieves the requisite increase in the
market price of our common stock, we cannot assure you that we will
be able to continue to comply with the minimum bid price
requirement of either the Nasdaq.
Even if the reverse stock split achieves the requisite increase in
the market price of our common stock to be in compliance with the
minimum bid price of either the Nasdaq, there can be no assurance
that the market price of our common stock following the Reverse
Split will remain at the level required for continuing compliance
with that requirement. It is not uncommon for the market price of a
company’s common stock to decline in the period following a reverse
stock split. If the market price of our common stock declines
following the effectuation of the Reverse Split, the percentage
decline may be greater than would occur in the absence of a reverse
stock split. In any event, other factors unrelated to the number of
shares of our common stock outstanding, such as negative financial
or operational results, could adversely affect the market price of
our common stock and jeopardize our ability to meet or maintain
either the Nasdaq market’s minimum bid price
requirement.
Even if the Reverse Split increases the market price of our
common stock, our stock price could fall, and we could be delisted
from the Nasdaq market.
The Nasdaq market require that the trading price of its listed
stocks remain above one dollar in order for the stock to remain
listed. If a listed stock trades below one dollar for more than 30
consecutive trading days, then it is subject to delisting. In
addition, to maintain a listing on the Nasdaq, we must satisfy
minimum financial and other continued listing requirements and
standards, including those regarding director independence and
independent committee requirements, minimum shareholders’ equity,
and certain corporate governance requirements. If we are unable to
satisfy these requirements or standards, we could be subject to
delisting. Such a delisting would likely have a negative effect on
the price of our common stock and would impair your ability to sell
or purchase our common stock when you wish to do so. In the event
of a delisting, we would expect to take actions to restore our
compliance with the listing requirements, but we can provide no
assurance that any such action taken by us would allow our common
stock to become listed again, stabilize the market price or improve
the liquidity of our common stock, prevent our common stock from
dropping below the minimum bid price requirement, or prevent future
non-compliance with the listing requirements.
The Reverse Split may decrease the liquidity of our common
stock.
The liquidity of the shares of our common stock may be affected
adversely by the reverse stock split given the reduced number of
shares that will be outstanding following the Reverse Split,
especially if the market price of our common stock does not
increase as a result of the Reverse Split. In addition, the Reverse
Split may increase the number of shareholders who own odd lots
(less than 100 shares) of our common stock, creating the potential
for such shareholders to experience an increase in the cost of
selling their shares and greater difficulty effecting such
sales.
Following the Reverse Split, the resulting market price of our
common stock may not attract new investors, including institutional
investors, and may not satisfy the investing requirements of those
investors. Consequently, the trading liquidity of our common stock
may not improve.
Although we believe that a higher market price of our common stock
may help generate greater or broader investor interest, there can
be no assurance that the Reverse Split will result in a share price
that will attract new investors, including institutional investors.
In addition, there can be no assurance that the market price of our
common stock will satisfy the investing requirements of those
investors. As a result, the trading liquidity of our common stock
may not necessarily improve.
Principal Effects of the Reverse Split
If approved and implemented, the principal effects of the Reverse
Split would include the following:
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the number of outstanding shares of the Company’s common stock and
treasury stock will decrease based on the Reverse Split ratio
selected by the Board; |
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the number of shares of the Company’s common stock held by
individual shareholders will decrease based on the Reverse Split
ratio selected by the Board, and the number of shareholders who own
“odd lots” of less than 100 shares of our common stock will
increase; |
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the number of shares common stock reserved for issuance under our
stock incentive plans will be reduced proportionally based on the
Reverse Split ratio selected by the Board (along with any other
appropriate adjustments or modifications); and |
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the exercise price of our outstanding stock options and warrants
and the conversion price of our outstanding convertible securities,
including debt securities, and the number of shares reserved for
issuance upon exercise or conversion thereof will be adjusted in
accordance with their terms based on the Reverse Split ratio
selected by the Board. |
The Reverse Split will not change the number of authorized shares
of our common stock or preferred stock, or the par value of the
common stock or preferred stock.
Fractional Shares
No fractional shares will be issued in connection with the Reverse
Split. We will round up any fractional shares resulting from the
Reverse Split to the nearest whole share.
No Going Private Transaction
Notwithstanding the decrease in the number of outstanding shares of
common stock following the proposed Reverse Stock Split, the Board
does not intend for this transaction to be the first step in a
“going private transaction” within the meaning of Rule 13e-3 under
the Exchange Act.
Procedure for Implementing the Reverse
Split
The Reverse Split, if approved by our shareholders, would become
effective following the filing of the Amendment with the Secretary
of State of the State of New Jersey as of the time of filing or
such other time set forth in the Amendment (the “Effective Time”).
The Effective Time of the Reverse Split will be determined by our
Board based on its evaluation as to when such action will be the
most advantageous to us and our shareholders. Beginning at the
Effective Time, each certificate representing shares of our common
stock will be deemed for all corporate purposes to evidence
ownership of the number of whole shares into which the shares
previously represented by the certificate were combined pursuant to
the Reverse Split. The form of the Amendment to implement the
Reverse Split is attached to this Proxy Statement as Appendix B.
The Reverse Split alone will have no effect on our authorized
capital stock, and the total number of authorized shares will
remain the same as before the Reverse Split. After the Effective
Time, our common stock will have a new Committee on Uniform
Securities Identification Procedures (“CUSIP”) number, which is a
number used to identify our equity securities.
Effect on Beneficial Owners of Common
Stock
Upon implementing the Reverse Split, we intend to treat shares held
by shareholders through a bank, broker, custodian or other nominee
in the same manner as the shareholders whose shares are registered
in their names. Banks, brokers, custodians or other nominees will
be instructed to effect the Reverse Split for their beneficial
holders holding our common stock in street name. However, these
banks, brokers, custodians or other nominees may have different
procedures than registered shareholders for processing the Reverse
Split. Shareholders who hold shares of our common stock with a
bank, broker, custodian or other nominee and who have any questions
in this regard are encouraged to contact their banks, brokers,
custodians or other nominees.
Effect on Registered “Book-Entry” Holders of Common
Stock
Certain registered holders of our common stock may hold some or all
of their shares electronically in book-entry form with Worldwide
Stock Transfer, LLC, our transfer agent (the “Transfer Agent”).
These shareholders do not have stock certificates evidencing their
ownership of the common stock. They are, however, provided with a
statement reflecting the number of shares registered in their
accounts.
Shareholders who hold shares electronically in book-entry form with
the Transfer Agent will not need to act in connection with the
Reverse Split. The Reverse Split will automatically be reflected in
the Transfer Agent’s records and on their next
statement.
Exchange of Stock Certificates
Until surrendered as contemplated herein, any physical stock
certificates possessed by the shareholders shall be deemed at and
after the effective time of the Reverse Split to represent the
number of whole shares of our common stock resulting from the
Reverse Split. If the Reverse Split is effected, shareholders
holding certificated shares (i.e., shares represented by one or
more physical stock certificates) may be able to exchange their old
stock certificate(s) for shares held electronically in book-entry
form representing the appropriate number of whole shares of our
common stock resulting from the Reverse Split. This means that,
instead of receiving a new stock certificate, shareholders holding
certificated shares prior to the effective time of the Reverse
Split will receive a statement of holding indicating the number of
shares held by them electronically in book-entry form after giving
effect to the Reverse Split. Shareholders of record upon the
effective time of the Reverse Split will be furnished the necessary
materials and instructions for the surrender and exchange of their
old certificate(s) at the appropriate time by our Transfer Agent.
Any shareholder whose old certificate(s) have been lost, destroyed
or stolen will be entitled to new shares in book-entry form only
after complying with the requirements that we and our Transfer
Agent customarily apply in connection with lost, stolen or
destroyed certificates.
Accounting Matters
The Reverse Split and the related proposed amendment to our
Articles of Incorporation will not affect the par value of our
common stock, which will remain having no par value per share. Our
shareholders’ equity, in the aggregate, will remain unchanged.
However, after the Reverse Split, net income or loss per share, and
other per share amounts, will be increased because there will be
fewer shares of common stock outstanding. In future financial
statements, net income or loss per share and other per share
amounts for periods ending before the Reverse Split would be recast
to give retroactive effect to the Reverse Split.
Certain Federal Income Tax Consequences
Each shareholder is advised to consult their own tax advisor as
the following discussion may be limited, modified or not apply
based on your particular situation.
The following discussion of the material U.S. federal income tax
consequences of the Reverse Split is based on the current
provisions of the Internal Revenue Code of 1986, as amended (the
“Code”), Treasury regulations promulgated under the Code, Internal
Revenue Service (“IRS”) rulings and pronouncements and judicial
decisions now in effect. Those legal authorities are subject to
change at any time by legislative, judicial or administrative
action, possibly with retroactive effect to the Reverse Split. No
ruling from the IRS with respect to the matters discussed below has
been requested, and there is no assurance that the IRS or a court
would agree with the conclusions set forth in this discussion. The
following discussion assumes that the pre-split shares of common
stock were, and post-split shares will be, held as “capital assets”
as defined in the Code. This discussion may not address certain
U.S. federal income tax consequences that may be relevant to
particular shareholders in light of their specific circumstances or
to certain types of shareholders (like dealers in securities,
insurance companies, foreign individuals and entities, financial
institutions and tax-exempt entities) that may be subject to
special treatment under the U.S. federal income tax laws. This
discussion also does not address any tax consequences under state,
local or foreign laws.
PLEASE CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL,
STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE
REVERSE SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL
REVENUE CODE AND THE LAWS OF ANY OTHER TAXING
JURISDICTION.
We will not recognize any gain or loss for U.S. federal income tax
purposes as a result of the Reverse Split.
A shareholder will not recognize gain or loss for U.S. federal
income tax purposes on the exchange of pre-Reverse Split shares of
our common stock for post-Reverse Split shares of our common stock
in the Reverse Split. A shareholder’s aggregate tax basis in the
post-Reverse Split shares of our common stock the shareholder
receives in the Reverse Split will be the same as the shareholder’s
aggregate tax basis in the pre-Reverse Split shares of our common
stock the shareholder surrenders in exchange therefor. A
shareholder’s holding period for the post-Reverse Split shares of
our common stock the shareholder receives in the Reverse Split will
include the shareholder’s holding period for the pre-Reverse Split
shares of our common stock the shareholder surrenders in exchange
therefor. Shareholders who have different bases or holding periods
for pre-Reverse Split shares of our common stock should consult
their tax advisors regarding their bases or holding periods in
their post-Reverse Split common stock.
Effect of Not Obtaining the Required Vote of
Approval
The failure of shareholders to approve the Reverse Stock Proposal
could prevent us from meeting the Nasdaq 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
shareholders may not have the ability to liquidate their
investments in our common stock when desired and we believe our
access to capital would become significantly diminished as a
result.
Interests of Directors and Executive Officers in this
Proposal
All of our directors and executive officers have a direct interest
in increasing the value of our shares. Therefore, they have an
interest in the approval of this proposal as it is expected it will
lead to an increase in the value of our shares. However, the Board
does not believe this interest is different from that of any other
shareholder.
Anti-Takeover Effects of the Reverse Split
The effective increase in our authorized and unissued shares as a
result of the Reverse Split could potentially be used by our Board
to thwart a takeover attempt. The overall effects of this might be
to discourage, or make it more difficult to engage in, a merger,
tender offer or proxy contest, or the acquisition or assumption of
control by a holder of a large block of our securities and the
removal of incumbent management. The Reverse Split could make the
accomplishment of a merger or similar transaction more difficult,
even if it is beneficial to the shareholders. Our Board might use
the additional shares to resist or frustrate a third-party
transaction, favored by a majority of the independent shareholders
that would provide an above-market premium, by issuing additional
shares to frustrate the takeover effort.
As discussed above, the principal goals of the Company in effecting
the Reverse Split are to list our securities on Nasdaq and increase
the ability of institutions to purchase our common stock and
stimulate the interest in our common stock by analysts and brokers.
This Reverse Split is not the result of management’s knowledge of
an effort to accumulate the Company’s securities or to obtain
control of the Company by means of a merger, tender offer,
solicitation or otherwise.
Neither our Articles of Incorporation nor our Bylaws presently
contain any provisions having anti-takeover effects and the Reverse
Split proposal is not a plan by our Board to adopt a series of
amendments to our Articles of Incorporation or Bylaws to institute
an anti-takeover provision. We do not have any plans or proposals
to adopt other provisions or enter into other arrangements that may
have material anti-takeover consequences.
Vote Required
Approval of the reverse stock split requires the affirmative vote
of a majority of the shares outstanding at the Special Meeting. If
approved by the shareholders at the Company’s Special Meeting, the
Amendment to implement the Reverse Split will be filed with the New
Jersey Secretary of State and will become effective.
Board Recommendation
The Board of Directors recommends that you vote “FOR” Proposal
1. Proxies solicited by the Board of Directors will be voted “FOR”
the Proposal 1 unless shareholders specify a contrary
vote.
PROPOSAL 2:
APPROVAL OF THE COMPANY’S 2022 EQUITY AND INCENTIVE PLAN AND THE
RESERVATION OF UP TO 15,000,000 SHARES OF COMMON STOCK FOR ISSUANCE
THEREUNDER
The Company’s 2022 Equity Incentive Plan (the “2022 Plan”) was
adopted by the Board on February 4, 2022, and we are requesting
approval of this new equity compensation plan because we need to be
able to issue equity awards to service providers in order to
motivate and retain such persons and to further align their
interests with those of our Stockholders. The 2022 Plan will only
become effective if approved by the Stockholders. If approved, the
2022 Plan will be effective immediately, subject to any
restrictions on the issuance of awards under the 2022 Plan because
of a lack of available or reserved shares of Common Stock to
underlie such awards.
Having an adequate number of shares available for future equity
compensation grants is necessary to promote our long-term success
and the creation of Stockholder value by:
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Enabling us to continue to attract and retain the services of key
service providers who would be eligible to receive
grants; |
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Aligning participants’ interests with Stockholders’ interests
through incentives that are based upon the performance of our
Common Stock; and |
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Motivating participants, through equity incentive awards, to
achieve long-term growth in the Company’s business, in addition to
short-term financial performance. |
The 2022 Plan has identified the number of shares of Common Stock
reserved for issuance as 15,000,000. The 2022 Plan will provide for
the grant of incentive stock options (“ISOs”), non-qualified stock
options (“NQSOs”), stock appreciation rights (“SARs”), other equity
awards and/or cash awards to employees, directors and consultants.
The 2022 Plan will remain in effect until the earlier of (i) the
time the Board decides to amend the Plan and (ii) the date upon
which the 2022 Plan is terminated pursuant to its terms, and in any
event subject to the maximum share limit.
On February 4, 2022, our Board adopted the 2022 Plan and authorized
the reservation of up to 15,000,000 shares of Common Stock for
issuance thereunder, subject to availability. To the extent that
there are no authorized and unreserved shares of Common Stock
available, the awards underlying the 2022 Plan will not be issuable
until such time, and from time to time, as shares of Common Stock
are available to be reserved and in such amounts as are available.
Assuming all 15,000,000 shares become available and the Company may
issue the full amount of awards under the 2022 Plan, the number of
shares available for issuance under the 2022 Plan shall constitute
approximately [ ]% of our issued and outstanding shares
of Common Stock as of the Record Date. The 2022 Plan is intended to
provide us with a sufficient number of shares to satisfy our equity
grant requirements until our 2022 Special Meeting of Stockholders,
based on the current scope and structure of our equity incentive
programs and the rate at which we expect to grant stock options,
restricted stock, and/or other forms of equity
compensation.
When approving the reservation of up to 15,000,000 shares of Common
Stock issuable pursuant to the 2022 Plan, the Board considered a
number of factors, including those set forth below:
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Alignment with our Stockholders. Achieving superior,
long-term results for our Stockholders remains one of our primary
objectives. We believe that stock ownership enhances the alignment
of the long-term economic interests of our employees and our
Stockholders. |
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Attract, Motivate and Retain Key Employees. We compete for
employees in a variety of geographic and talent markets and strive
to maintain compensation programs that are competitive in order to
attract, motivate and retain key employees. If we are unable to
grant equity as part of our total compensation strategy, our
ability to attract and retain all levels of talent we need to
operate our business successfully would be significantly
harmed. |
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Balanced Approach to Compensation. We believe that a
balanced approach to compensation - using a mix of salaries,
performance-based bonus incentives and long-term equity incentives
(including performance based equity) encourages management to make
decisions that favor long-term stability and profitability, rather
than short-term results. |
Set forth below is a summary of the 2022 Plan, which is qualified
in its entirety by reference to the full text of the 2022 Plan, a
copy of which is included as Appendix B to this Proxy
Statement. If there is any inconsistency between the following
summary of the 2022 Plan and Appendix B, the full
text of the 2022 Plan included as Appendix B shall
govern.
Key Features of the 2022 Plan
Certain key features of the 2022 Plan are summarized as
follows:
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If not terminated earlier by the Board, the 2022 Plan will
terminate on at a time the Board amends or removes the
Plan. |
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Up to a maximum aggregate of 15,000,000 shares of Common Stock may
be issued under the 2022 Plan, subject to availability. The maximum
number of shares that may be issued pursuant to the exercise of
ISOs is also 15,000,000, subject to availability. |
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The 2022 Plan will generally be administered by the Board or the
Compensation Committee (the “2022 Plan Committee”). The Board may
also designate a separate committee to make awards to employees who
are not officers subject to the reporting requirements of Section
16 of the Exchange Act. |
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Employees, consultants and Board members are eligible to receive
awards, provided that the 2022 Plan Committee has the discretion to
determine (i) who shall receive any awards, and (ii) the terms and
conditions of such awards. |
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Awards may consist of ISOs, NQSOs, restricted stock, SARs, other
equity awards and/or cash awards. |
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Stock options and SARs may not be granted at a per share exercise
price below the fair market value of a share of our Common Stock on
the date of grant. |
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Stock options and SARs may not be repriced or exchanged without
Stockholder approval. |
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The maximum exercisable term of stock options and SARs may not
exceed [ten] years. |
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Awards
are subject to recoupment of compensation policies adopted by the
Company. |
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The
aggregate amount of all cash compensation (including annual
retainers and other fees, whether or not granted under the 2002
Plan) plus the aggregate grant date fair market value of all awards
issued under the 2022 Plan (or under any other incentive plan)
provided to any non-employee director during any single calendar
year may not exceed $300,000. |
Background and Purpose of the 2022 Plan. The purpose
of the 2022 Plan is to promote our long-term success and the
creation of Stockholder value by:
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Attracting and retaining the services of key employees who would be
eligible to receive grants as selected participants; |
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Motivating selected participants through equity-based compensation
that is based upon the performance of our Common Stock;
and |
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Further aligning selected participants’ interests with the
interests of our Stockholders, through the award of equity
compensation grants which increases their interest in the Company,
to achieve long-term growth over short-term
performance. |
The 2022 Plan permits the grant of the following types of
equity-based incentive awards: (1) stock options (which can be
either ISOs or NQSOs), (2) SARs, (3) restricted stock, (4) other
equity awards and (5) cash awards. The vesting of awards can be
based on either continuous service and/or performance goals. Awards
are evidenced by a written agreement between the selected
participant and the Company.
Eligibility to Receive Awards. Employees, consultants
and Board members of the Company and certain of our affiliated
companies are eligible to receive awards under the 2022 Plan. The
2022 Plan Committee will determine, in its discretion, the selected
participants who will be granted awards under the 2022
Plan.
Non-Employee Director Limitations. With respect to
our non-employee directors, the 2022 Plan provides that any
non-employee director serving in the following positions cannot
receive awards in any fiscal year which in the aggregate exceeds
the following: $300,000 in any calendar year. Provided that the
Board affirmatively acts to implement such a process, the 2022 Plan
also provides that non-employee directors may elect to receive
stock grants or stock units (which would be issued under the 2022
Plan) in lieu of fees that would otherwise be paid in
cash.
Shares Subject to the 2022 Plan. The maximum number
of shares of Common Stock that can be issued under the 2022 Plan is
15,000,000 shares. The shares underlying forfeited or terminated
awards (without payment of consideration), or unexercised awards
become available again for issuance under the 2022 Plan. The 2022
Plan also imposes certain share grant limits such as the limit on
grants to non-employee directors described above and other limits
that are intended to comply with the legal requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the “Code”)
and which are discussed elsewhere in this proposal. No fractional
shares may be issued under the 2022 Plan. No shares will be issued
with respect to a participant’s award unless applicable tax
withholding obligations have been satisfied by the participant. To
the extent that there are no authorized and unreserved shares of
Common Stock available for the 2022 Plan, the awards underlying the
2022 Plan will not be issuable until such time, and from time to
time, as shares of Common Stock are available and in such amounts
as are available.
Administration of the 2022 Plan. The 2022 Plan will
be administered by the 2022 Plan Committee. Subject to the terms of
the 2022 Plan, the 2022 Plan Committee has the sole discretion,
with among other things, to:
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Select the individuals who will receive awards; |
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Determine the terms and conditions of awards (for example,
performance conditions, if any, and vesting schedule); |
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Correct any defect, supply any omission, or reconcile any
inconsistency in the 2022 Plan or any award agreement; |
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Accelerate the vesting, extend the post-termination exercise term
or waive restrictions of any awards at any time and under such
terms and conditions as it deems appropriate, subject to the
limitations set forth in the 2022 Plan; |
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Permit a participant to defer compensation to be provided by an
award; and |
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Interpret the provisions of the 2022 Plan and outstanding
awards. |
The 2022 Plan Committee may suspend vesting, settlement, or
exercise of awards pending a determination of whether a selected
participant’s service should be terminated for cause (in which case
outstanding awards would be forfeited). Awards may be subject to
any policy that the Board may implement on the recoupment of
compensation (referred to as a “clawback” policy). The members of
the Board, the 2022 Plan Committee and their delegates shall be
indemnified by the Company to the maximum extent permitted by
applicable law for actions taken or not taken regarding the 2022
Plan. In addition, the 2022 Plan Committee may use the 2022 Plan to
issue shares under other plans or sub-plans as may be deemed
necessary or appropriate, such as to provide for participation by
non-U.S. employees and those of any of our subsidiaries and
affiliates.
Types of Awards.
Stock Options. A stock option is the right to acquire shares
at a fixed exercise price over a fixed period of time. The 2022
Plan Committee will determine, among other terms and conditions,
the number of shares covered by each stock option and the exercise
price of the shares subject to each stock option, but such per
share exercise price cannot be less than the fair market value of a
share of our Common Stock on the date of grant of the stock option.
The fair market value of a share of our Common Stock for the
purposes of pricing our awards shall be equal to the closing price
for our Common Stock as reported by the OTC Markets or such other
principal trading market on which our securities are traded on the
date of determination. Stock options may not be repriced or
exchanged without Stockholder approval, and no re-load options may
be granted under the 2022 Plan.
Stock options granted under the 2022 Plan may be either ISOs or
NQSOs. As required by the Code and applicable regulations, ISOs are
subject to various limitations not imposed on NQSOs. For example,
the exercise price for any ISO granted to any employee owning more
than 10% of our Common Stock may not be less than 110% of the fair
market value of the Common Stock on the date of grant, and such ISO
must expire no later than five years after the grant date. ISOs may
not be transferred other than upon death, or to a revocable trust
where the participant is considered the sole beneficiary of the
stock option while it is held in trust. In order to comply with
Treasury Regulation Section 1.422-2(b), the 2022 Plan provides that
all 15,000,000 shares may be issued pursuant to the exercise of
ISOs, subject to the availability of underlying shares of Common
Stock.
A stock option granted under the 2022 Plan generally cannot be
exercised until it becomes vested. The 2022 Plan Committee
establishes the vesting schedule of each stock option at the time
of grant. The maximum term for stock options granted under the 2022
Plan may not exceed ten years from the date of grant although the
2022 Plan Committee may establish a shorter period at its
discretion. The exercise price of each stock option granted under
the 2022 Plan must be paid in full at the time of exercise, either
with cash, or through a broker-assisted “cashless” exercise and
sale program, or net exercise, or through another method approved
by the 2022 Plan Committee. The optionee must also make
arrangements to pay any taxes that are required to be withheld at
the time of exercise.
SARs. A SAR is the right to receive, upon exercise, an
amount equal to the difference between the fair market value of the
shares on the date of the SAR’s exercise and the aggregate exercise
price of the shares covered by the exercised portion of the SAR.
The 2022 Plan Committee determines the terms of SARs, including the
exercise price (provided that such per share exercise price cannot
be less than the fair market value of a share of our Common Stock
on the date of grant), the vesting and the term of the SAR. The
maximum term for SARs granted under the 2022 Plan may not exceed
ten years from the date of grant, subject to the discretion of the
2022 Plan Committee to establish a shorter period. Settlement of a
SAR may be in shares of Common Stock or in cash, or any combination
thereof, as the 2022 Plan Committee may determine. SARs may not be
repriced or exchanged without Stockholder approval.
Restricted Stock. A restricted stock award is the grant of
shares of our Common Stock to a selected participant and such
shares may be subject to a substantial risk of forfeiture until
specific conditions or goals are met. The restricted shares may be
issued with or without cash consideration being paid by the
selected participant as determined by the 2022 Plan Committee. The
2022 Plan Committee also will determine any other terms and
conditions of an award of restricted stock. In determining whether
an award of restricted stock should be made, and/or the vesting
schedule for any such award, the 2022 Plan Committee may impose
whatever conditions to vesting it determines to be appropriate.
During the period of vesting, the participant will not be permitted
to transfer the restricted shares but will generally have voting
and dividend rights (subject to vesting) with respect to such
shares.
Other Awards. The 2022 Plan also provides that other equity
awards, which derive their value from the value of our shares or
from increases in the value of our shares, may be granted. In
addition, cash awards may also be issued. Substitute awards may be
issued under the 2022 Plan in assumption of or substitution for or
exchange for awards previously granted by an entity which we (or an
affiliate) acquire.
Limited Transferability of Awards. Awards granted under the
2022 Plan generally are not transferrable other than by will or by
the laws of descent and distribution. However, the 2022 Plan
Committee may in its discretion permit the transfer of awards other
than ISOs. Generally, where transfers are permitted, they will be
permitted only by gift to a member of the selected participant’s
immediate family or to a trust or other entity for the benefit of
the selected participant and/or member(s) of his or her immediate
family.
Termination of Employment, Death or Disability. The 2022
Plan generally determines the effect of the termination of
employment on awards, which determination may be different
depending on the nature of the termination, such as terminations
due to cause, resignation, death, or disability and the status of
the award as vested or unvested, unless the award agreement or a
selected participant’s employment agreement or other agreement
provides otherwise.
Dividends and Dividend Equivalents. Any dividend equivalents
distributed in the form of shares under the 2022 Plan will count
against the 2022 Plan’s maximum share limit. The 2022 Plan also
provides that dividend equivalents will not be paid or accrue on
unexercised stock options or unexercised SARs. Dividends and
dividend equivalents that may be paid or accrue with respect to
unvested Awards shall be subject to the same vesting conditions as
the underlying award and shall only be distributed to the extent
that such vesting conditions are satisfied.
Adjustments upon Changes in Capitalization.
In the event of the following actions:
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stock split of our outstanding shares of Common Stock; |
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stock dividend; |
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dividend payable in a form other than shares in an amount that has
a material effect on the price of the shares; |
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consolidation; |
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combination or reclassification of the shares; |
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recapitalization; |
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spin-off; or |
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other similar occurrences, |
then the following shall each be equitably and proportionately
adjusted by the 2022 Plan Committee:
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maximum number of shares that can be issued under the 2022 Plan
(including the ISO share grant limit); |
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number and class of shares issued under the 2022 Plan and subject
to each award; |
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exercise prices of outstanding awards; and |
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number and class of shares available for issuance under the 2022
Plan. |
Change in Control. In the event that we are a party to a
merger or other reorganization or similar transaction, outstanding
2022 Plan awards will be subject to the agreement pertaining to
such merger or reorganization. Such agreement may provide for (i)
the continuation of the outstanding awards by us if we are a
surviving corporation, (ii) the assumption or substitution of the
outstanding awards by the surviving entity or its parent, (iii)
full exercisability and/or full vesting of outstanding awards, or
(iv) cancellation of outstanding awards either with or without
consideration, in all cases with or without consent of the selected
participant. The Board or the 2022 Plan Committee need not adopt
the same rules for each award or selected participant.
The 2022 Plan Committee will decide the effect of a change in
control of the Company on outstanding awards. The 2022 Plan
Committee may, among other things, provide that awards will fully
vest and/or be canceled upon a change in control, or fully vest
upon an involuntary termination of employment following a change in
control. The 2022 Plan Committee may also include in an award
agreement provisions designed to minimize potential negative income
tax consequences for the participant or the Company that could be
imposed under the golden parachute tax rules of Section 280G of the
Code.
Term of the 2022 Plan. If not terminated earlier by the
Board, the 2022 Plan will terminate on at a time the Board amends
or removes the Plan. Outstanding awards shall continue to be
governed by their terms after the termination of the 2022
Plan.
Governing Law. The 2022 Plan shall be governed by the laws
of the State of New Jersey (which is the state of our
incorporation) except for conflict of law provisions.
Amendment and Termination of the 2022 Plan. The Board
generally may amend or terminate the 2022 Plan at any time and for
any reason, except that it must obtain Stockholder approval of
material amendments to the extent required by applicable laws,
regulations or rules.
Certain Federal Income Tax Information
The following is a general summary, as of the date this Proxy
Statement is filed, of the federal income tax consequences to us
and to U.S. participants for awards granted under the 2022 Plan.
The federal tax laws may change and the federal, state and local
tax consequences for any participant will depend upon his or her
individual circumstances. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a
participant’s death or provisions of income tax laws of any
municipality, state or other country. We advise participants to
consult with a tax advisor regarding the tax implications of their
awards under the 2022 Plan.
Incentive Stock Options. For federal income tax purposes,
the holder of an ISO has no taxable income at the time of the grant
or exercise of the ISO. If such person retains the Common Stock
acquired under the ISO for a period of at least two years after the
stock option is granted and one year after the stock option is
exercised, any gain upon the subsequent sale of the Common Stock
will be taxed as a long-term capital gain. A participant who
disposes of shares acquired by exercise of an ISO prior to the
expiration of two years after the stock option is granted or before
one year after the stock option is exercised will realize ordinary
income equal to the lesser of (i) the excess of the fair market
value over the exercise price of the shares on the date of
exercise, or (ii) the excess of the amount realized on the
disposition over the exercise price for the shares. Any additional
gain or loss recognized upon any later disposition of the shares
would be a short- or long-term capital gain or loss, depending on
whether the shares have been held by the participant for more than
one year. Utilization of losses is subject to special rules and
limitations.
Nonstatutory Stock Options. A participant who receives a
nonstatutory stock option generally will not realize taxable income
on the grant of such option, but will realize ordinary income at
the time of exercise of the stock option equal to the difference
between the option exercise price and the fair market value of the
stock on the date of exercise.
Restricted Stock. A participant will generally not have
taxable income upon grant of unvested restricted shares unless he
or she elects to be taxed at that time pursuant to an election
under Code Section 83(b). Instead, he or she will recognize
ordinary income at the time(s) of vesting equal to the fair market
value (on each vesting date) of the shares or cash received minus
any amount paid for the shares, if any.
Stock Units. No taxable income is generally reportable when
unvested stock units are granted to a participant. Upon settlement
of the vested stock units, the participant will recognize ordinary
income in an amount equal to the fair market value of the shares
issued or payment received in connection with the vested stock
units.
Stock Appreciation Rights. No taxable income is generally
reportable when a stock appreciation right is granted to a
participant. Upon exercise, the participant will recognize ordinary
income in an amount equal to the amount of cash received plus the
fair market value of any shares received.
Income Tax Effects for the Company. We generally will be
entitled to a tax deduction in connection with an award under the
2022 Plan in an amount equal to the ordinary income realized by a
participant at the time the participant recognizes such income (for
example, upon the exercise of an nonqualified stock option or
vesting of restricted stock).
Internal Revenue Code Section 162(m) Deduction Limitation.
Section 162(m) of the Code places a limit of $1 million on the
amount of compensation that we may deduct in any one fiscal year
with respect to our executive officers and other persons who are
subject to Code Section 162(m). Therefore, compensation derived
from 2022 Plan awards may not be fully deductible by the
Company.
Internal Revenue Code Section 280G. For certain persons, if
a change in control of the Company causes an award to vest or
become newly payable, or if the award was granted within one year
of a change in control and the value of such award or vesting or
payment, when combined with all other payments in the nature of
compensation contingent on such change in control, equals or
exceeds the dollar limit provided in Section 280G of the Code
(generally, this dollar limit is equal to three times the five-year
historical average of the individual’s Annual compensation received
from the Company), then the entire amount exceeding the
individual’s average Annual compensation will be considered an
excess parachute payment. The recipient of an excess parachute
payment must pay a 20% excise tax on this excess amount and the
Company cannot deduct the excess amount from its taxable
income.
Internal Revenue Code Section 409A. Section 409A of the Code
governs the federal income taxation of certain types of
nonqualified deferred compensation arrangements. A violation of
Section 409A of the Code generally results in an acceleration of
the recognition of income of amounts intended to be deferred and
the imposition of a federal excise tax of 20% on the employee over
and above the income tax owed, plus possible penalties and
interest. The types of arrangements covered by Section 409A of the
Code are broad and may apply to certain awards available under the
2022 Plan (such as stock units). The intent is for the 2022 Plan,
including any awards available thereunder, to comply with the
requirements of Section 409A of the Code to the extent applicable.
As required by Code Section 409A, certain nonqualified deferred
compensation payments to specified employees may be delayed to the
seventh month after such employee’s separation from
service.
New Plan Benefits. All 2022 Plan awards are granted at the
2022 Plan Committee’s discretion, subject to the limitations
contained in the 2022 Plan. Future benefits and amounts that will
be received or allocated under the 2022 Plan are not presently
determinable. As of the Record Date, the fair market value of a
share of our Common Stock (as determined by the closing price
quoted by the OTCMKTS on that date) was $[*].
Existing Plan Benefits. As of the Record Date, no awards
have been granted under the 2022 Plan.
Vote Required
The affirmative vote of a majority of the Shares present in person
or represented by proxy and entitled to vote on the subject matter
at the Special Meeting is required to approve the 2022 Stock
Plan.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2022 Plan
AND THE RESERVATION OF UP TO 15,000,000 SHARES FOR ISSUANCE
THEREUNDER, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN
FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE
PROXY.
OTHER MATTERS
The board of directors knows of no other business, which will be
presented to the Special Meeting. If any other business is properly
brought before the Special Meeting, proxies in the enclosed form
will be voted in accordance with the judgment of the persons voting
the proxies.
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 Special 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 Special Meeting, at your request,
we will cancel your previously submitted proxy.
HOUSEHOLDING
The SEC has adopted rules that permit companies and intermediaries
(e.g., brokers) to satisfy the delivery requirements for proxy
statements and other Special Meeting materials with respect to two
or more stockholders sharing the same address by delivering a proxy
statement or other Special 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.
If you share an address with another stockholder and have received
multiple copies of our proxy materials, you may write or call us at
the address and phone number below to request delivery of a single
copy of the notice and, if applicable, other proxy materials in the
future. We undertake to deliver promptly upon written or oral
request a separate copy of the proxy materials, as requested, to a
stockholder at a shared address to which a single copy of the proxy
materials was delivered. If you hold stock as a record stockholder
and prefer to receive separate copies of our proxy materials either
now or in the future, please contact us at 9841 Washington
Boulevard, #200, Gaithersburg, MD 20878 Attn: Corporate Secretary.
If your stock is held through a brokerage firm or bank and you
prefer to receive separate copies of our proxy materials either now
or in the future, please contact your brokerage firm or
bank.
ANNUAL REPORT
Additional copies of our Annual Report on Form 10-K and Form 10-Q
for the second quarter ended December 31, 2021 may be requested by
contacting the Company at 9841 Washingtonian Boulevard, #200,
Gaithersburg, MD 20878.
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BY ORDER OF THE BOARD OF DIRECTORS |
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Anshu Bhatnagar |
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Chairman and Chief Executive Officer |
February
8,
2022 |
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PROXY CARD
mPHASE TECHNOLOGIES, INC.
PROXY FOR SPECIAL MEETING TO BE HELD ON MARCH
, 2022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints, [ ], as
proxy, with full power of substitution, to represent and to vote
all the shares of common stock of mPhase Technologies, Inc. (the
“Company”), which the undersigned would be entitled to vote, at the
Company’s Special Meeting of Stockholders to be held on March
, 2022 and at any adjournments thereof,
subject to the directions indicated on this Proxy Card.
In their discretion, the proxy is authorized to vote upon any other
matter that may properly come before the meeting or any
adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS
MADE, BUT IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF ALL DIRECTOR NOMINEES AND FOR THE
PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT — This Proxy must be signed and dated below.
The Special Meeting of Stockholders of mPhase Technologies, Inc.
will be held at the following location 1101 Wootton Pkwy,
#1020, Rockville, MD, 20852 on March ,
2022. The proxy statement, notice of the Special Meeting, a copy of
our Annual Report on Form 10-K and 10-Q for the second quarter
ended December 31, 2021, and this proxy card are being mailed to
all stockholders eligible to vote at the Special
Meeting.
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
You are cordially invited to our 2022 Special stockholder meeting.
Please read the proxy statement which describes the proposals and
presents other important information, and complete, sign and return
your proxy promptly in the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1
and 2.
1. Proposal to Amend the Articles of Incorporation to Effect a
Reverse Stock Split |
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FOR
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AGAINST
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ABSTAIN
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2. Proposal to approve and adopt the 2022 Equity and Incentive
Plan |
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FOR
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AGAINST
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ABSTAIN
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Important: Please sign exactly as name appears on this proxy. When
signing as attorney, executor, trustee, guardian, corporate
officer, etc., please indicate full title.
Dated: ________________, 2022 |
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Signature |
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Signature |
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(Joint Owners) |
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Name(printed) |
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Title |
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YOUR VOTE IS IMPORTANT
VOTE BY INTERNET:
1. BEFORE THE MEETING: Go to
Use the Internet to transmit your voting instructions and for
electronic delivery of information. Vote by 11:59 p.m. Eastern Time
on March , 2022. Have your proxy card and
control number in hand when you access the web site and follow the
instructions.
2. DURING THE MEETING: Go to
You may attend the Meeting and vote during the Special
Meeting.
VOTE BY MAIL:
Please mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided.
YOUR CONTROL NUMBER IS:
REMINDER: You may vote your proxy by Internet 24 hours a day, 7
days a week. Internet voting is available through 11:59 p.m.
Eastern Time, prevailing time, on March ,
2022.
Your Internet vote authorizes the named proxies to vote in the same
manner as if you attended the meeting.
APPENDIX A
Amendment to Articles of Incorporation of mPhase
Technologies, Inc. for Reverse Stock Split
Paragraph IV – Shares of Common Stock shall be amended to add
the following section:
Section 5. Reverse Stock Split. Effective
upon the filing of this Certificate of Amendment of Articles of
Incorporation with the Secretary of State of the State of New
Jersey (the “Effective Time”), the shares of the Corporation’s
Common Stock issued and outstanding immediately prior to the
Effective Time (the “Old Common Stock”), will be automatically
reclassified as and combined into shares of Common Stock (the “New
Common Stock”) such that each [ ] ([ ]) shares of Old Common Stock
shall be reclassified as and combined into one share of New Common
Stock. Notwithstanding the previous sentence, no fractional shares
of New Common Stock shall be issued to the holders of record of Old
Common Stock in connection with the foregoing reclassification of
shares of Old Common Stock. Stockholders who, immediately prior to
the Effective Time, own a number of shares of Old Common Stock,
which is not evenly divisible by [ ] shall, with respect to such
fractional interest, be entitled to receive one (1) whole share of
Common Stock in lieu of a fraction of a share of New Common Stock.
Each stock certificate that, immediately prior to the Effective
Time represented shares of Old Common Stock shall, from and after
the Effective Time, automatically and without the necessity of
presenting the same for exchange, represent that number of whole
shares of New Common Stock into which the shares of Old Common
Stock represented by such certificate shall have been reclassified;
provided, however, that each holder of record of a certificate that
represented shares of Old Common Stock shall receive, upon
surrender of such certificate, a new certificate representing the
number of whole shares of New Common Stock into which the shares of
Old Common Stock represented by such certificate shall have been
reclassified as set forth above. In conjunction with the Reverse
Stock Split, no stockholder holding at least a round lot (100
shares) prior to the Reverse Stock Split shall have less than one
round lot (100 shares) after the Reverse Stock Split.
APPENDIX B
mPHASE
TECHNOLOGIES, INC.
2022
EQUITY AND INCENTIVE PLAN
SECTION
1. GENERAL PURPOSE OF THE PLAN: DEFINITIONS
The
name of the plan is the mPHASE TECHNOLOGIES, INC. 2022 EQUITY AND
INCENTIVE PLAN (the “Plan”). The purpose of the Plan is to
encourage, retain and enable the officers, employees, directors,
Consultants and other key persons of mPHASE TECHNOLOGIES, INC., a
New Jersey corporation (including any successor entity, the
“Company”) and its Subsidiaries, upon whose judgment, initiative
and efforts the Company largely depends for the successful conduct
of its business, to acquire a proprietary interest in the
Company.
The
following terms shall be defined as set forth below:
“Affiliate”
of any Person means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by or is under
common control with the first mentioned Person. A Person shall be
deemed to control another Person if such first Person possesses
directly or indirectly the power to direct, or cause the direction
of, the management and policies of the second Person, whether
through the ownership of voting securities, by contract or
otherwise.
“Award”
or “Awards,” except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights (“SAR”),
Restricted Stock Awards (including preferred stock), Unrestricted
Stock Awards, Restricted Stock Units, Performance Awards or any
combination of the foregoing.
“Award
Agreement” means a written or electronic agreement setting
forth the terms and provisions applicable to an Award granted under
the Plan. Each Award Agreement may contain terms and conditions in
addition to those set forth in the Plan; provided, however, in the
event of any conflict in the terms of the Plan and the Award
Agreement, the terms of the Plan shall govern.
“Board”
means the Board of Directors of the Company.
“Cause”
shall have the meaning as set forth in the Award Agreement(s). In
the case that any Award Agreement does not contain a definition of
“Cause,” it shall mean (i) the grantee’s dishonest statements or
acts with respect to the Company or any Affiliate of the Company,
or any current or prospective customers, suppliers vendors or other
third parties with which such entity does business; (ii) the
grantee’s commission of (A) a felony or (B) any misdemeanor
involving moral turpitude, deceit, dishonesty or fraud; (iii) the
grantee’s failure to perform his assigned duties and
responsibilities to the reasonable satisfaction of the Company
which failure continues, in the reasonable judgment of the Company,
after written notice given to the grantee by the Company; (iv) the
grantee’s gross negligence, willful misconduct or insubordination
with respect to the Company or any Affiliate of the Company; or (v)
the grantee’s material violation of any provision of any
agreement(s) between the grantee and the Company relating to
noncompetition, nonsolicitation, nondisclosure and/or assignment of
inventions.
“Chief
Executive Officer” means the Chief Executive Officer of the
Company or, if there is no Chief Executive Officer, then the
President of the Company.
“Code”
means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and
interpretations.
“Committee”
means the Committee of the Board referred to in Section
2.
“Consultant”
means any entity or natural person that provides bona fide services
to the Company (including a Subsidiary), and such services are not
in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company’s
securities.
“Disability”
means such condition which renders a Person (A) unable to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to
result in death or can be expect to last for a continuous period of
not less than 12 months, (B) by reason of any medically
determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits
for a period of not less than 3 months under an accident and health
plan covering employees of the Company, (C) determined to be
totally disabled by the Social Security Administration, or (D)
determined to be disabled under a disability insurance program
which provides for a definition of disability that meets the
requirements of this section.
“Effective
Date” means the date on which the Plan is adopted as set forth
in this Plan.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
“Fair
Market Value” of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Committee
based on the reasonable application of a reasonable valuation
method that is consistent with Section 409A of the Code. If the
Stock is admitted to trade on a national securities exchange, the
determination shall be made by reference to the closing price
reported on such exchange. If there is no closing price for such
date, the determination shall be made by reference to the last date
preceding such date for which there is a closing price. If the date
for which Fair Market Value is determined is the first day when
trading prices for the Stock are reported on a national securities
exchange, the Fair Market Value shall be the “Price to the Public”
(or equivalent).
“Good
Reason” shall have the meaning as set forth in the Award
Agreement(s). In the case that any Award Agreement does not contain
a definition of “Good Reason,” it shall mean (i) a material
diminution in the grantee’s base salary except for across-the-board
salary reductions similarly affecting all or substantially all
similarly situated employees of the Company or (ii) a change of
more than 100 miles in the geographic location at which the grantee
provides services to the Company, so long as the grantee provides
at least 90 days’ notice to the Company following the initial
occurrence of any such event and the Company fails to cure such
event within 30 days thereafter.
“Grant
Date” means the date that the Committee designates in its
approval of an Award in accordance with applicable law as the date
on which the Award is granted, which date may not precede the date
of such Committee approval.
“Holder”
means, with respect to an Award or any Shares, the Person holding
such Award or Shares, including the initial recipient of the Award
or any Permitted Transferee.
“Incentive
Stock Option” means any Stock Option designated and qualified
as an “incentive stock option” as defined in Section 422 of the
Code.
“Non-Qualified
Stock Option” means any Stock Option that is not an Incentive
Stock Option.
“Option”
or “Stock Option” means any option to purchase shares of
Stock granted pursuant to Section 5.
“Permitted
Transferees” shall mean any of the following to whom a Holder
may transfer Shares hereunder (as set forth in Section
10(a)(ii)(A)): the Holder’s child, stepchild, grandchild, parent,
step-parent, grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships,
any person sharing the Holder’s household (other than a tenant or
employee), a trust in which these persons have more than fifty
percent of the beneficial interest, a foundation in which these
persons control the management of assets, and any other entity in
which these persons own more than fifty percent of the voting
interests; provided, however, that any such trust does not require
or permit distribution of any Shares during the term of the Award
Agreement unless subject to its terms. Upon the death of the
Holder, the term Permitted Transferees shall also include such
deceased Holder’s estate, executors, administrators, personal
representatives, heirs, legatees and distributees, as the case may
be.
“Person”
shall mean any individual, corporation, partnership (limited or
general), limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or
any similar entity.
“Restricted
Stock Award” means Awards granted pursuant to Section 7 and
“Restricted Stock” means Shares issued pursuant to such
Awards.
“Restricted
Stock Unit” means an Award of phantom stock units to a grantee,
which may be settled in cash or Shares as determined by the
Committee, pursuant to Section 9.
“Sale
Event” means the consummation of i) a change in the ownership
of the Company, ii) a change in effective control of the Company,
or iii) a change in the ownership of a substantial portion of the
assets of the Company. The occurrence of a Sale Event shall be
acknowledged by the plan administrator or board of directors, by
strictly applying these provisions without any discretion to
deviate from the objective application of the definitions provided
herein; provided, however, that any capital raising event, or a
merger effected solely to change the Company’s domicile shall not
constitute a “Sale Event.”
Except
as otherwise provided herein, a change in the ownership of the
Company occurs on the date that any one person, or more than one
person acting as a group acquires ownership of stock of the Company
that, together with stock held by such person or group, constitutes
more than 50 percent of the total fair market value or total voting
power of the stock of the Company. However, if any one person, or
more than one person acting as a group, is considered to own more
than 50 percent of the total fair market value or total voting
power of the stock of the Company the acquisition of additional
stock by the same person or persons is not considered to cause a
change in the ownership of the Company (or to cause a change in the
effective control of the Company). An increase in the percentage of
stock owned by any one person, or persons acting as a group, as a
result of a transaction in which the corporation acquires its stock
in exchange for property will be treated as an acquisition of stock
for purposes of this section. This section applies only when there
is a transfer of stock of the Company (or issuance of stock) which
remains outstanding after the transaction.
A
change in the effective control of the Company occurs only on
either of the following dates: (1) The date any one person, or more
than one person acting as a group acquires (or has acquired during
the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the
Company possessing 30 percent or more of the total voting power of
the stock of the Company; (2) The date a majority of members of the
Company’s board of directors is replaced during any 12-month period
by directors whose appointment or election is not endorsed by a
majority of the members of the Company’s board of directors before
the date of the appointment or election.
A
change in the ownership of a substantial portion of the Company’s
assets occurs on the date that any one person, or more than one
person acting as a group acquires (or has acquired during the 12-
month period ending on the date of the most recent acquisition by
such person or persons) assets from the Company that have a total
gross fair market value equal to or more than 40 percent of the
total gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions. For this
purpose, gross fair market value means the value of the assets of
the corporation, or the value of the assets being disposed of,
determined without regard to any liabilities associated with such
assets.
“Section
409A” means Section 409A of the Code and the regulations and
other guidance promulgated thereunder.
“Securities
Act” means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
“Service
Relationship” means any relationship as a full-time employee,
part-time employee, director or other key person (including
Consultants) of the Company or any Subsidiary or any successor
entity (e.g., a Service Relationship shall be deemed to continue
without interruption in the event an individual’s status changes
from full-time employee to part-time employee or
Consultant).
“Shares”
means shares of Stock.
“Stock”
means the Common Stock, par value $0.001 per share, of the
Company.
“Stock
Appreciation Right” or “SAR” means any right to receive from
the Company upon exercise by an optionee or settlement, in cash,
Shares, or a combination thereof, the excess of (i) the Fair Market
Value of one Share on the date of exercise or settlement over (ii)
the exercise price of the right on the date of grant, or if granted
in connection with an Option, on the date of grant of the
Option.
“Subsidiary”
means any corporation or other entity (other than the Company) in
which the Company has more than a 50 percent interest, either
directly or indirectly.
“Ten
Percent Owner” means an employee who owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code)
more than 10 percent of the combined voting power of all classes of
stock of the Company or any parent of the Company or any
Subsidiary.
“Termination
Event” means the termination of the Award recipient’s Service
Relationship with the Company and its Subsidiaries for any reason
whatsoever, regardless of the circumstances thereof, and including,
without limitation, upon death, disability, retirement, discharge
or resignation for any reason, whether voluntarily or
involuntarily. The following shall not constitute a Termination
Event: (i) a transfer to the service of the Company from a
Subsidiary or from the Company to a Subsidiary, or from one
Subsidiary to another Subsidiary or (ii) an approved leave of
absence for military service or sickness, or for any other purpose
approved by the Committee, if the individual’s right to
re-employment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing.
“Unrestricted
Stock Award” means any Award granted pursuant to Section 8 and
“Unrestricted Stock” means Shares issued pursuant to such
Awards.
SECTION
2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
GRANTEES AND DETERMINE AWARDS
(a)
Administration of Plan. The Plan shall be administered by
the Compensation Committee of the Board, comprised of not less than
three directors or the Board of Directors in the absence of a
Compensation Committee of the Board. All references herein to the
“Committee” shall be deemed to refer to the group then responsible
for administration of the Plan at the relevant time (i.e., either
the Board of Directors or a committee or committees of the Board,
as applicable).
(b)
Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan,
including the power and authority:
(i)
to select the individuals to whom Awards may from time to time be
granted;
(ii)
to determine the time or times of grant, and the amount, if any, of
Incentive Stock Options, Non-Qualified Stock Options, SARs,
Restricted Stock Awards, Unrestricted Stock Awards, Restricted
Stock Units, or any combination of the foregoing, granted to any
one or more grantees;
(iii)
to determine the number and types of Shares to be covered by any
Award and, subject to the provisions of the Plan, the price,
exercise price, conversion ratio or other price relating
thereto;
(iv)
to determine and, subject to Section 13, to modify from time to
time the terms and conditions, including restrictions, not
inconsistent with the terms of the Plan, of any Award, which terms
and conditions may differ among individual Awards and grantees, and
to approve the form of Award Agreements;
(v)
to accelerate at any time the exercisability or vesting of all or
any portion of any Award; (vi) to impose any limitations on Awards,
including limitations on transfers, repurchase provisions and the
like, and to exercise repurchase rights or obligations;
(vii)
subject to Section 5(a)(ii) and any restrictions imposed by Section
409A, to extend at any time the period in which Stock Options may
be exercised; and
(viii)
at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including Award Agreements);
to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in
connection with the Plan; and to otherwise supervise the
administration of the Plan.
All
decisions and interpretations of the Committee shall be binding on
all persons, including the Company and all Holders.
(c)
Award Agreement. Awards under the Plan shall be evidenced by
Award Agreements that set forth the terms, conditions and
limitations for each Award.
(d)
Indemnification. Neither the Board nor the Committee, nor
any member of either or any delegate thereof, shall be liable for
any act, omission, interpretation, construction or determination
made in good faith in connection with the Plan, and the members of
the Board and the Committee (and any delegate thereof) shall be
entitled in all cases to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense
(including, without limitation, reasonable attorneys’ fees) arising
or resulting therefrom to the fullest extent permitted by law
and/or under the Company’s governing documents, including its
certificate of incorporation or bylaws, or any directors’ and
officers’ liability insurance coverage which may be in effect from
time to time and/or any indemnification agreement between such
individual and the Company.
(e)
Foreign Award Recipients. Notwithstanding any provision of
the Plan to the contrary, in order to comply with the laws in other
countries in which the Company and any Subsidiary operate or have
employees or other individuals eligible for Awards, the Committee,
in its sole discretion, shall have the power and authority to: (i)
determine which Subsidiaries, if any, shall be covered by the Plan;
(ii) determine which individuals, if any, outside the United States
are eligible to participate in the Plan; (iii) modify the terms and
conditions of any Award granted to individuals outside the United
States to comply with applicable foreign laws; (iv) establish
subplans and modify exercise procedures and other terms and
procedures, to the extent the Committee determines such actions to
be necessary or advisable (and such subplans and/or modifications
shall be attached to the Plan as appendices); provided, however,
that no such subplans and/or modifications shall increase the share
limitation contained in Section 3(a) hereof; and (v) take any
action, before or after an Award is made, that the Committee
determines to be necessary or advisable to obtain approval or
comply with any local governmental regulatory exemptions or
approvals.
SECTION
3. STOCK ISSUABLE UNDER THE PLAN; MERGERS AND OTHER
TRANSACTIONS; SUBSTITUTION
(a)
Stock Issuable. The maximum number of Shares reserved and
available for issuance under the Plan shall be 15,000,000 Shares
(the “Share Reserve”), subject to adjustment as provided in Section
3(b) and the following sentence regarding the annual increase.
Notwithstanding the foregoing, the Board may act prior to January
1st of a given year to provide that there will be no January 1st
increase in the Share Reserve for such year or that the increase in
the Share Reserve for such year will be a lesser number of shares
of Stock than would otherwise occur pursuant to the preceding
sentence. If a Stock Award or any portion thereof (i) expires or
otherwise terminates without all of the shares covered by such
Stock Award having been issued or (ii) is settled in cash (i.e.,
the Participant receives cash rather than stock), the Shares
subject to such Stock Award, to the extent of any such expiration,
termination or settlement, will again be available for issuance
under the Plan. If any shares of Stock issued pursuant to a Stock
Award are forfeited back to or repurchased by the Company because
of the failure to meet a contingency or condition required to vest
such shares in the Participant, then the shares that are forfeited
or repurchased will revert to and again become available for
issuance under the Plan. Any shares reacquired by the Company in
satisfaction of tax withholding obligations on a Stock Award or as
consideration for the exercise or purchase price of a Stock Award
will again become available for issuance under the Plan. For
purposes of this limitation, the Shares underlying any Awards that
are forfeited, canceled, reacquired by the Company prior to
vesting, satisfied without the issuance of Stock or otherwise
terminated (other than by exercise) shall be added back to the
Shares available for issuance under the Plan. Subject to such
overall limitations, Shares may be issued up to such maximum number
pursuant to any type or types of Award. The value of any Shares
granted to a non-employee director of the Company, solely for
services as a director, when added to any annual cash payments or
awards, shall not exceed an aggregate value of three hundred
thousand dollars ($300,000) in any calendar year.
(b)
Changes in Stock. Subject to Section 3(c) hereof, if, as a
result of any reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar
change in the Company’s capital stock, the outstanding Shares are
increased or decreased or are exchanged for a different number or
kind of shares or other securities of the Company, or additional
Shares or new or different shares or other securities of the
Company or other non-cash assets are distributed with respect to
such Shares or other securities, in each case, without the receipt
of consideration by the Company, or, if, as a result of any merger
or consolidation, or sale of all or substantially all of the assets
of the Company, the outstanding Shares are converted into or
exchanged for other securities of the Company or any successor
entity (or a parent or subsidiary thereof), the Committee shall
make an appropriate and proportionate adjustment in (i) the maximum
number of Shares reserved for issuance under the Plan, (ii) the
number and kind of Shares or other securities subject to any then
outstanding Awards under the Plan, (iii) the repurchase price, if
any, per Share subject to each outstanding Award, and (iv) the
exercise price for each Share subject to any then outstanding Stock
Options under the Plan, without changing the aggregate exercise
price (i.e., the exercise price multiplied by the number of Stock
Options) as to which such Stock Options remain exercisable. The
Committee shall in any event make such adjustments as may be
required by the laws of New Jersey and the rules and regulations
promulgated thereunder. The adjustment by the Committee shall be
final, binding and conclusive. No fractional Shares shall be issued
under the Plan resulting from any such adjustment, but the
Committee in its discretion may make a cash payment in lieu of
fractional shares.
(c)
Sale Events.
(i)
Options.
(A)
In the case of and subject to the consummation of a Sale Event, the
Plan and all outstanding Options and SARs issued hereunder shall
become one hundred percent (100%) vested upon the effective time of
any such Sale Event. New stock options or other awards of the
successor entity or parent thereof shall be substituted therefor,
with an equitable or proportionate adjustment as to the number and
kind of shares and, if appropriate, the per share exercise prices,
as such parties shall agree (after taking into account any
acceleration hereunder and/or pursuant to the terms of any Award
Agreement).
(B)
In the event of the termination of the Plan and all outstanding
Options and SARs issued hereunder pursuant to Section 3(c), each
Holder of Options shall be permitted, within a period of time prior
to the consummation of the Sale Event as specified by the
Committee, to exercise all such Options or SARs which are then
exercisable or will become exercisable as of the effective time of
the Sale Event; provided, however, that the exercise of Options not
exercisable prior to the Sale Event shall be subject to the
consummation of the Sale Event.
(C)
Notwithstanding anything to the contrary in Section 3(c)(i)(A), in
the event of a Sale Event, the Company shall have the right, but
not the obligation, to make or provide for a cash payment to the
Holders of Options, without any consent of the Holders, in exchange
for the cancellation thereof, in an amount equal to the difference
between (A) the value as determined by the Committee of the
consideration payable per share of Stock pursuant to the Sale Event
(the “Sale Price”) times the number of Shares subject to
outstanding Options being cancelled (to the extent then vested and
exercisable, including by reason of acceleration in connection with
such Sale Event, at prices not in excess of the Sale Price) and (B)
the aggregate exercise price of all such outstanding vested and
exercisable Options.
(ii)
Restricted Stock and Restricted Stock Unit
Awards.
(A)
In the case of and subject to the consummation of a Sale Event, all
unvested Restricted Stock and unvested Restricted Stock Unit Awards
issued hereunder shall become one hundred percent (100%) vested,
with an equitable or proportionate adjustment as to the number and
kind of shares subject to such awards as such parties shall agree
(after taking into account any acceleration hereunder and/or
pursuant to the terms of any Award Agreement).
(B)
Such Restricted Stock shall be repurchased from the Holder thereof
at the then Fair Market Value of such shares, (subject to
adjustment as provided in Section 3(b)) for such Shares.
(C)
Notwithstanding anything to the contrary in Section 3(c)(ii)(A), in
the event of a Sale Event, the Company shall have the right, but
not the obligation, to make or provide for a cash payment to the
Holders of Restricted Stock or Restricted Stock Unit Awards,
without consent of the Holders, in exchange for the cancellation
thereof, in an amount equal to the Sale Price times the number of
Shares subject to such Awards, to be paid at the time of such Sale
Event or upon the later vesting of such Awards.
SECTION
4. ELIGIBILITY
Grantees
under the Plan will be such full or part-time officers and other
employees, directors, Consultants and key persons of the Company
and any Subsidiary who are selected from time to time by the
Committee in its sole discretion; provided, however, that Awards
shall be granted only to those individuals described in Rule 701(c)
of the Securities Act.
SECTION
5. STOCK OPTIONS
Upon
the grant of a Stock Option, the Company and the grantee shall
enter into an Award Agreement. The terms and conditions of each
such Award Agreement shall be determined by the Committee, and such
terms and conditions may differ among individual Awards and
grantees.
Stock
Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may
be granted only to employees of the Company or any Subsidiary that
is a “subsidiary corporation” within the meaning of Section 424(f)
of the Code. To the extent that any Option does not qualify as an
Incentive Stock Option, it shall be deemed a Non-Qualified Stock
Option.
(a)
Terms of Stock Options. The Committee in its discretion may
grant Stock Options to those individuals who meet the eligibility
requirements of Section 4. Stock Options shall be subject to the
following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan,
as the Committee shall deem desirable.
(i)
Exercise Price. The exercise price per share for the Shares
covered by a Stock Option shall be determined by the Committee at
the time of grant but shall not be less than 100 percent of the
Fair Market Value on the Grant Date. In the case of an Incentive
Stock Option that is granted to a Ten Percent Owner, the exercise
price per share for the Shares covered by such Incentive Stock
Option shall not be less than 110 percent of the Fair Market Value
on the Grant Date.
(ii)
Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than
ten years from the Grant Date. In the case of an Incentive Stock
Option that is granted to a Ten Percent Owner, the term of such
Stock Option shall be no more than five years from the Grant
Date.
(iii)
Exercisability; Rights of a Stockholder. Stock Options shall
become exercisable and/or vested at such time or times, whether or
not in installments, as shall be determined by the Committee at or
after the Grant Date. The Award Agreement may permit a grantee to
exercise all or a portion of a Stock Option immediately at grant;
provided that the Shares issued upon such exercise shall be subject
to restrictions and a vesting schedule identical to the vesting
schedule of the related Stock Option, such Shares shall be deemed
to be Restricted Stock for purposes of the Plan, and the optionee
may be required to enter into an additional or new Award Agreement
as a condition to exercise of such Stock Option. An optionee shall
have the rights of a stockholder only as to Shares acquired upon
the exercise of a Stock Option and not as to unexercised Stock
Options. An optionee shall not be deemed to have acquired any
Shares unless and until a Stock Option shall have been exercised
pursuant to the terms of the Award Agreement and this Plan and the
optionee’s name has been entered on the books of the Company as a
stockholder.
(iv)
Method of Exercise. Stock Options may be exercised by an
optionee in whole or in part, by the optionee giving written or
electronic notice of exercise to the Company, specifying the number
of Shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods (or any combination
thereof) to the extent provided in the Award Agreement:
(A)
In cash, by certified or bank check, by wire transfer of
immediately available funds, or other instrument acceptable to the
Committee;
(B)
If permitted by the Committee, by the optionee delivering to the
Company a promissory note, if the Board has expressly authorized
the loan of funds to the optionee for the purpose of enabling or
assisting the optionee to effect the exercise of his or her Stock
Option; provided, that at least so much of the exercise price as
represents the par value of the Stock shall be paid in cash if
required by state law;
(C)
If permitted by the Committee, through the delivery (or attestation
to the ownership) of Shares that have been purchased by the
optionee on the open market or that are beneficially owned by the
optionee and are not then subject to restrictions under any Company
plan. To the extent required to avoid variable accounting treatment
under applicable accounting rules, such surrendered Shares if
originally purchased from the Company shall have been owned by the
optionee for at least six months. Such surrendered Shares shall be
valued at Fair Market Value on the exercise date;
(D)
If permitted by the Committee and by the optionee delivering to the
Company a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the
Company cash or a check payable and acceptable to the Company for
the purchase price; provided that in the event the optionee chooses
to pay the purchase price as so provided, the optionee and the
broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure; or
(E)
If permitted by the Committee, and only with respect to Stock
Options that are not Incentive Stock Options, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of
Shares issuable upon exercise by the largest whole number of Shares
with a Fair Market Value that does not exceed the aggregate
exercise price.
Payment
instruments will be received subject to collection. No certificates
for Shares so purchased will be issued to the optionee or, with
respect to uncertificated Stock, no transfer to the optionee on the
records of the Company will take place, until the Company has
completed all steps it has deemed necessary to satisfy legal
requirements relating to the issuance and sale of the Shares, which
steps may include, without limitation, (i) receipt of a
representation from the optionee at the time of exercise of the
Option that the optionee is purchasing the Shares for the
optionee’s own account and not with a view to any sale or
distribution of the Shares or other representations relating to
compliance with applicable law governing the issuance of
securities, (ii) the legending of the certificate (or notation on
any book entry) representing the Shares to evidence the foregoing
restrictions, and (iii) obtaining from optionee payment or
provision for all withholding taxes due as a result of the exercise
of the Option. The delivery of certificates representing the shares
of Stock (or the transfer to the optionee on the records of the
Company with respect to uncertificated Stock) to be purchased
pursuant to the exercise of a Stock Option will be contingent upon
(A) receipt from the optionee (or a purchaser acting in his or her
stead in accordance with the provisions of the Stock Option) by the
Company of the full purchase price for such Shares and the
fulfillment of any other requirements contained in the Award
Agreement or applicable provisions of laws and (B) if required by
the Company, the optionee shall have entered into any stockholders
agreements or other agreements with the Company and/or certain
other of the Company’s stockholders relating to the Stock. In the
event an optionee chooses to pay the purchase price by
previously-owned Shares through the attestation method, the number
of Shares transferred to the optionee upon the exercise of the
Stock Option shall be net of the number of Shares attested to by
the Optionee.
(c)
Termination. Any portion of a Stock Option that is not
vested and exercisable on the date of termination of an optionee’s
Service Relationship shall immediately expire and be null and void.
Once any portion of the Stock Option becomes vested and
exercisable, the optionee’s right to exercise such portion of the
Stock Option (or the optionee’s representatives and legatees as
applicable) in the event of a termination of the optionee’s Service
Relationship shall continue until the earliest of: (i) the date
which is: (A) 12 months following the date on which the optionee’s
Service Relationship terminates due to death or Disability (or such
longer period of time as determined by the Committee and set forth
in the applicable Award Agreement), or (B) three months following
the date on which the optionee’s Service Relationship terminates if
the termination is due to any reason other than death or Disability
(or such longer period of time as determined by the Committee and
set forth in the applicable Award Agreement), or (ii) the
Expiration Date set forth in the Award Agreement; provided that
notwithstanding the foregoing, an Award Agreement may provide that
if the optionee’s Service Relationship is terminated for Cause, the
Stock Option shall terminate immediately and be null and void upon
the date of the optionee’s termination and shall not thereafter be
exercisable.
SECTION
6. STOCK APPRECIATION RIGHTS
The
Committee is authorized to grant SARs to optionees with the
following terms and conditions and with such additional terms and
conditions, in either case not inconsistent with the provisions of
the Plan, as the Committee shall determine:
(a)
SARs may be granted under the Plan to optionees either alone or in
addition to other Awards granted under the Plan and may, but need
not, relate to specific Option granted under Section 5.
(b)
The exercise price per Share under a SAR shall be determined by the
Committee, provided, however, that except in the case of a
substitute Award, such exercise price shall not be less than the
fair market value of a Share on the date of grant of such
SAR.
(c)
The term of each SAR shall be fixed by the Committee but shall not
exceed 10 years from the date of grant of such SAR.
(d)
The Committee shall determine the time or times at which a SAR may
be exercised or settled in whole or in part. Unless otherwise
determined by the Committee or unless otherwise set forth in an
Award Agreement, the provisions set forth in Section 5 above with
respect to exercise of an Award following termination of service
shall apply to any SAR. The Committee may specify in an Award
Agreement that an “in-the-money” SAR shall be automatically
exercised on its expiration date.
SECTION
7. RESTRICTED STOCK AWARDS
(a)
Nature of Restricted Stock Awards. The Committee may, in its
sole discretion, grant (or sell at par value or such other purchase
price determined by the Committee) to an eligible individual under
Section 4 hereof a Restricted Stock Award under the Plan. The
Committee shall determine the restrictions and conditions
applicable to each Restricted Stock Award at the time of grant.
Conditions may be based on the type of stock upon which
restrictions are placed, continuing employment (or other Service
Relationship), achievement of pre-established performance goals and
objectives and/or such other criteria as the Committee may
determine. Upon the grant of a Restricted Stock Award, the Company
and the grantee shall enter into an Award Agreement. The terms and
conditions of each such Award Agreement shall be determined by the
Committee, and such terms and conditions may differ among
individual Awards and grantees.
(b)
Rights as a Stockholder. Upon the grant of the Restricted
Stock Award and payment of any applicable purchase price, a grantee
of Restricted Stock shall be considered the record owner of and
shall be entitled to vote the Restricted Stock if, and to the
extent, such Shares are entitled to voting rights, subject to such
conditions contained in the Award Agreement. The grantee shall be
entitled to receive all dividends and any other distributions
declared on the Shares; provided, however, that the Company is
under no duty to declare any such dividends or to make any such
distribution. Unless the Committee shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the
possession of the Company until such Restricted Stock is vested as
provided in subsection (d) below of this Section, and the grantee
shall be required, as a condition of the grant, to deliver to the
Company a stock power endorsed in blank and such other instruments
of transfer as the Committee may prescribe.
(c)
Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except
as specifically provided herein or in the Award Agreement. Except
as may otherwise be provided by the Committee either in the Award
Agreement or, subject to Section 13 below, in writing after the
Award Agreement is issued, if a grantee’s Service Relationship with
the Company and any Subsidiary terminates, the Company or its
assigns shall have the right, as may be specified in the relevant
instrument, to repurchase some or all of the Shares subject to the
Award at such purchase price as is set forth in the Award
Agreement.
(d)
Vesting of Restricted Stock. The Committee at the time of
grant shall specify in the Award Agreement the date or dates and/or
the attainment of pre-established performance goals, objectives and
other conditions on which the substantial risk of forfeiture
imposed shall lapse and the Restricted Stock shall become vested,
subject to such further rights of the Company or its assigns as may
be specified in the Award Agreement.
SECTION
8. UNRESTRICTED STOCK AWARDS
The
Committee may, in its sole discretion, grant (or sell at par value
or such other purchase price determined by the Committee) to an
eligible person under Section 4 hereof an Unrestricted Stock Award
under the Plan. Unrestricted Stock Awards may be granted in respect
of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.
SECTION
9. RESTRICTED STOCK UNITS
(a)
Nature of Restricted Stock Units. The Committee may, in its
sole discretion, grant to an eligible person under Section 4 hereof
Restricted Stock Units under the Plan. The Committee shall
determine the restrictions and conditions applicable to each
Restricted Stock Unit at the time of grant. Vesting conditions may
be based on continuing employment (or other Service Relationship),
achievement of pre-established performance goals and objectives
which may be based on targets for revenue, revenue growth, EBITDA,
net income, earnings per share and/or other such criteria as the
Committee may determine. Upon the grant of Restricted Stock Units,
the grantee and the Company shall enter into an Award Agreement.
The terms and conditions of each such Award Agreement shall be
determined by the Committee and may differ among individual Awards
and grantees. On or promptly following the vesting date or dates
applicable to any Restricted Stock Unit, but in no event later than
March 15 of the year following the year in which such vesting
occurs, such Restricted Stock Unit(s) shall be settled in the form
of cash or shares of Stock, as specified in the Award Agreement.
Restricted Stock Units may not be sold, assigned, transferred,
pledged, or otherwise encumbered or disposed of.
(b)
Rights as a Stockholder. A grantee shall have the rights of
a stockholder only as to Shares, if any, acquired upon settlement
of Restricted Stock Units. A grantee shall not be deemed to have
acquired any such Shares unless and until the Restricted Stock
Units shall have been settled in Shares pursuant to the terms of
the Plan and the Award Agreement, the Company shall have issued and
delivered a certificate representing the Shares to the grantee (or
transferred on the records of the Company with respect to
uncertificated stock), and the grantee’s name has been entered in
the books of the Company as a stockholder.
(c)
Termination. Except as may otherwise be provided by the
Committee either in the Award Agreement or in writing after the
Award Agreement is issued, a grantee’s right in all Restricted
Stock Units that have not vested shall automatically terminate upon
the grantee’s cessation of Service Relationship with the Company
and any Subsidiary for any reason.
SECTION
10. TRANSFER RESTRICTIONS; COMPANY RIGHT OF FIRST REFUSAL;
COMPANY REPURCHASE RIGHTS
(a)
Restrictions on Transfer.
(i)
Non-Transferability of Certain Awards. Restricted Stock
awards granted under Section 7, Stock Options, SARs and, prior to
exercise, the Shares issuable upon exercise of such Stock Option,
shall not be transferable by the optionee otherwise than by will,
or by the laws of descent and distribution, and all Stock Options
shall be exercisable, during the optionee’s lifetime, only by the
optionee, or by the optionee’s legal representative or guardian in
the event of the optionee’s incapacity. Notwithstanding the
foregoing, the Committee, in its sole discretion, may provide in
the Award Agreement regarding a given Stock Option or Restricted
Stock award that the optionee may transfer by gift, without
consideration for the transfer, his or her Non-Qualified Stock
Options to his or her family members (as defined in Rule 701 of the
Securities Act), to trusts for the benefit of such family members,
or to partnerships in which such family members are the only
partners (to the extent such trusts or partnerships are considered
“family members” for purposes of Rule 701 of the Securities Act),
provided that the transferee agrees in writing with the Company to
be bound by all of the terms and conditions of this Plan and the
applicable Award Agreement, including the execution of a stock
power upon the issuance of Shares. Stock Options, SARs and the
Shares issuable upon exercise of such Stock Options, shall be
restricted as to any pledge, hypothecation, or other transfer,
including any short position, any “put equivalent position” (as
defined in the Exchange Act) or any “call equivalent position” (as
defined in the Exchange Act) prior to exercise.
(ii)
Shares. No Shares shall be sold, assigned, transferred,
pledged, hypothecated, given away or in any other manner disposed
of or encumbered, whether voluntarily or by operation of law,
unless (i) the transfer is in compliance with the terms of the
applicable Award Agreement, all applicable securities laws
(including, without limitation, the Securities Act), and with the
terms and conditions of this Section 10, (ii) the transfer does not
cause the Company to become subject to the reporting requirements
of the Exchange Act, and the transferee consents in writing to be
bound by the provisions of the Plan and the Award Agreement,
including this Section 10. In connection with any proposed
transfer, the Committee may require the transferor to provide at
the transferor’s own expense an opinion of counsel to the
transferor, satisfactory to the Committee, that such transfer is in
compliance with all foreign, federal and state securities laws
(including, without limitation, the Securities Act). Any attempted
transfer of Shares not in accordance with the terms and conditions
of this Section 10 shall be null and void, and the Company shall
not reflect on its records any change in record ownership of any
Shares as a result of any such transfer, shall otherwise refuse to
recognize any such transfer and shall not in any way give effect to
any such transfer of Shares. The Company shall be entitled to seek
protective orders, injunctive relief and other remedies available
at law or in equity including, without limitation, seeking specific
performance or the rescission of any transfer not made in strict
compliance with the provisions of this Section 10. Subject to the
foregoing general provisions, and unless otherwise provided in the
applicable Award Agreement, Shares may be transferred pursuant to
the following specific terms and conditions (provided that with
respect to any transfer of Restricted Stock, all vesting and
forfeiture provisions shall continue to apply with respect to the
original recipient):
(A)
Transfers to Permitted Transferees. The Holder may transfer
any or all of the Shares to one or more Permitted Transferees;
provided, however, that following such transfer, such Shares shall
continue to be subject to the terms of this Plan (including this
Section 10) and such Permitted Transferee(s) shall, as a condition
to any such transfer, deliver a written acknowledgment to that
effect to the Company and shall deliver a stock power to the
Company with respect to the Shares. Notwithstanding the foregoing,
the Holder may not transfer any of the Shares to a Person whom the
Company reasonably determines is a direct competitor or a potential
competitor of the Company or any of its Subsidiaries.
(B)
Transfers Upon Death. Upon the death of the Holder, any
Shares then held by the Holder at the time of such death and any
Shares acquired after the Holder’s death by the Holder’s legal
representative shall be subject to the provisions of this Plan, and
the Holder’s estate, executors, administrators, personal
representatives, heirs, legatees and distributees shall be
obligated to convey such Shares to the Company or its assigns under
the terms contemplated by the Plan and the Award
Agreement.
(b)
Right of First Refusal. In the event that a Holder desires
at any time to sell or otherwise transfer all or any part of his or
her Shares (other than shares of Restricted Stock which by their
terms are not transferrable), the Holder first shall give written
notice to the Company of the Holder’s intention to make such
transfer. Such notice shall state the number of Shares that the
Holder proposes to sell (the “Offered Shares”), the price and the
terms at which the proposed sale is to be made and the name and
address of the proposed transferee. At any time within 30 days
after the receipt of such notice by the Company, the Company or its
assigns may elect to purchase all or any portion of the Offered
Shares at the price and on the terms offered by the proposed
transferee and specified in the notice. The Company or its assigns
shall exercise this right by mailing or delivering written notice
to the Holder within the foregoing 30-day period. If the Company or
its assigns elect to exercise its purchase rights under this
Section 10(b), the closing for such purchase shall, in any event,
take place within 45 days after the receipt by the Company of the
initial notice from the Holder. In the event that the Company or
its assigns do not elect to exercise such purchase right, or in the
event that the Company or its assigns do not pay the full purchase
price within such 45-day period, the Holder shall be required to
pay a transaction processing fee of $10,000 to the Company (unless
waived by the Committee) and then may, within 60 days thereafter,
sell the Offered Shares to the proposed transferee and at the same
price and on the same terms as specified in the Holder’s notice.
Any Shares not sold to the proposed transferee shall remain subject
to the Plan. If the Holder is a party to any stockholders
agreements or other agreements with the Company and/or certain
other of the Company’s stockholders relating to the Shares, (i) the
transferring Holder shall comply with the requirements of such
stockholders agreements or other agreements relating to any
proposed transfer of the Offered Shares, and (ii) any proposed
transferee that purchases Offered Shares shall enter into such
stockholders agreements or other agreements with the Company and/or
certain of the Company’s stockholders relating to the Offered
Shares on the same terms and in the same capacity as the
transferring Holder.
(c)
Company’s Right of Repurchase.
(i)
Right of Repurchase for Unvested Shares Issued Upon the Exercise
of an Option. Upon a Termination Event, the Company or its
assigns shall have the right and option to repurchase from a Holder
of Shares acquired upon exercise of a Stock Option which is still
subject to a risk of forfeiture as of the Termination Event. Such
repurchase rights may be exercised by the Company within the later
of (A) six months following the date of such Termination Event or
(B) seven months after the acquisition of Shares upon exercise of a
Stock Option. The repurchase price shall be equal to the lower of
the original per share price paid by the Holder, subject to
adjustment as provided in Section 3(b) of the Plan, or the current
Fair Market Value of such Shares as of the date the Company elects
to exercise its repurchase rights.
(ii)
Right of Repurchase With Respect to Restricted Stock. Upon a
Termination Event, the Company or its assigns shall have the right
and option to repurchase from a Holder of Shares received pursuant
to a Restricted Stock Award any Shares that are still subject to a
risk of forfeiture as of the Termination Event. Such repurchase
right may be exercised by the Company within six months following
the date of such Termination Event. The repurchase price shall be
the lower of the original per share purchase price paid by the
Holder, subject to adjustment as provided in Section 3(b) of the
Plan, or the current Fair Market Value of such Shares as of the
date the Company elects to exercise its repurchase
rights.
(iii)
Procedure. Any repurchase right of the Company shall be
exercised by the Company or its assigns by giving the Holder
written notice on or before the last day of the repurchase period
of its intention to exercise such repurchase right. Upon such
notification, the Holder shall promptly surrender to the Company,
free and clear of any liens or encumbrances, any certificates
representing the Shares being purchased, together with a duly
executed stock power for the transfer of such Shares to the Company
or the Company’s assignee or assignees. Upon the Company’s or its
assignee’s receipt of the certificates from the Holder, the Company
or its assignee or assignees shall deliver to him, her or them a
check for the applicable repurchase price; provided, however, that
the Company may pay the repurchase price by offsetting and
canceling any indebtedness then owed by the Holder to the
Company.
(d)
Escrow Arrangement.
(i)
Escrow. In order to carry out the provisions of this Section
10 of this Plan more effectively, the Company shall hold any Shares
issued pursuant to Awards granted under the Plan in escrow together
with separate stock powers executed by the Holder in blank for
transfer. The Company shall not dispose of the Shares except as
otherwise provided in this Plan. In the event of any repurchase by
the Company (or any of its assigns), the Company is hereby
authorized by the Holder, as the Holder’s attorney-in-fact, to date
and complete the stock powers necessary for the transfer of the
Shares being purchased and to transfer such Shares in accordance
with the terms hereof. At such time as any Shares are no longer
subject to the Company’s repurchase and first refusal rights, the
Company shall, at the written request of the Holder, deliver to the
Holder a certificate representing such Shares with the balance of
the Shares to be held in escrow pursuant to this
Section.
(ii)
Remedy. Without limitation of any other provision of this
Plan or other rights, in the event that a Holder or any other
Person is required to sell a Holder’s Shares pursuant to the
provisions of Sections 10(b) or (c) hereof and in the further event
that he or she refuses or for any reason fails to deliver to the
Company or its designated purchaser of such Shares the certificate
or certificates evidencing such Shares together with a related
stock power, the Company or such designated purchaser may deposit
the applicable purchase price for such Shares with a bank
designated by the Company, or with the Company’s independent public
accounting firm, as agent or trustee, or in escrow, for such Holder
or other Person, to be held by such bank or accounting firm for the
benefit of and for delivery to him, her, them or it, and/or, in its
discretion, pay such purchase price by offsetting any indebtedness
then owed by such Holder as provided above. Upon any such deposit
and/or offset by the Company or its designated purchaser of such
amount and upon notice to the Person who was required to sell the
Shares to be sold pursuant to the provisions of Sections 10(b) or
(c), such Shares shall at such time be deemed to have been sold,
assigned, transferred and conveyed to such purchaser, such Holder
shall have no further rights thereto (other than the right to
withdraw the payment thereof held in escrow, if applicable), and
the Company shall record such transfer in its stock transfer book
or in any appropriate manner.
(e)
Lockup Provision. If requested by the Company, a Holder
shall not sell or otherwise transfer or dispose of any Shares
(including, without limitation, pursuant to Rule 144 under the
Securities Act) held by him or her for such period following the
effective date of a public offering by the Company of Shares as the
Company shall specify reasonably and in good faith. If requested by
the underwriter engaged by the Company, each Holder shall execute a
separate letter confirming his or her agreement to comply with this
Section.
(f)
Adjustments for Changes in Capital Structure. If, as a
result of any reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other similar
change in the Common Stock, the outstanding Shares are increased or
decreased or are exchanged for a different number or kind of
securities of the Company, the restrictions contained in this
Section 10 shall apply with equal force to additional and/or
substitute securities, if any, received by Holder in exchange for,
or by virtue of his or her ownership of, Shares.
(g)
Termination. The terms and provisions of Section 10(b) and
Section 10(c) (except for the Company’s right to repurchase Shares
still subject to a risk of forfeiture upon a Termination Event)
shall terminate upon consummation of any Sale Event, in either case
as a result of which Shares are registered under Section 12 of the
Exchange Act and publicly-traded on any national security
exchange.
SECTION
11. TAX WITHHOLDING
(a)
Payment by Grantee. Each grantee shall, no later than the
date as of which the value of an Award or of any Shares or other
amounts received thereunder first becomes includable in the gross
income of the grantee for income tax purposes, pay to the Company,
or make arrangements satisfactory to the Committee regarding
payment of, any Federal, state, or local taxes of any kind required
by law to be withheld by the Company with respect to such income.
The Company and any Subsidiary shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the grantee. The Company’s obligation to
deliver stock certificates (or evidence of book entry) to any
grantee is subject to and conditioned on any such tax withholding
obligations being satisfied by the grantee.
(b)
Payment in Stock. The Company’s minimum required tax
withholding obligation may be satisfied, in whole or in part, by
the Company withholding from Shares to be issued pursuant to an
Award a number of Shares having an aggregate Fair Market Value (as
of the date the withholding is effected) that would satisfy the
minimum withholding amount due.
SECTION
12. SECTION 409A AWARDS
To
the extent that any Award is determined to constitute “nonqualified
deferred compensation” within the meaning of Section 409A (a “409A
Award”), the Award shall be subject to such additional rules and
requirements as may be specified by the Committee from time to
time. In this regard, if any amount under a 409A Award is payable
upon a “separation from service” (within the meaning of Section
409A) to a grantee who is considered a “specified employee” (within
the meaning of Section 409A), then no such payment shall be made
prior to the date that is the earlier of (i) six months and one day
after the grantee’s separation from service, or (ii) the grantee’s
death, but only to the extent such delay is necessary to prevent
such payment from being subject to interest, penalties and/or
additional tax imposed pursuant to Section 409A. The Company makes
no representation or warranty and shall have no liability to any
grantee under the Plan or any other Person with respect to any
penalties or taxes under Section 409A that are, or may be, imposed
with respect to any Award. It is the intent of the Board that
payments and benefits under the Plan comply with or be exempt from
Section 409A and the regulations and guidance promulgated
thereunder and, accordingly, to the maximum extent permitted the
Plan shall be interpreted to be in compliance therewith or exempt
therefrom. In no event whatsoever shall the Company be liable for
any additional tax, interest or penalty that may be imposed upon a
Participant by Section 409A or damages to a Participant for failing
to comply with Section 409A.
SECTION
13. AMENDMENTS AND TERMINATION
The
Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award
for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights
under any outstanding Award without the consent of the holder of
the Award. The Committee may exercise its discretion to reduce the
exercise price of outstanding Stock Options or effect repricing
through cancellation of outstanding Stock Options and by granting
such holders new Awards in replacement of the cancelled Stock
Options. To the extent determined by the Committee to be required
either by the Code to ensure that Incentive Stock Options granted
under the Plan are qualified under Section 422 of the Code or
otherwise, Plan amendments shall be subject to approval by the
Company stockholders entitled to vote at a meeting of stockholders.
Nothing in this Section 13 shall limit the Board’s or Committee’s
authority to take any action permitted pursuant to Section 3(c).
The Board reserves the right to amend the Plan and/or the terms of
any outstanding Stock Options to the extent reasonably necessary to
comply with the requirements of the exemption pursuant to Rule
12h-1 of the Exchange Act.
SECTION
14. STATUS OF PLAN
With
respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by
a grantee, a grantee shall have no rights greater than those of a
general creditor of the Company unless the Committee shall
otherwise expressly so determine in connection with any
Award.
SECTION
15. GENERAL PROVISIONS
(a)
No Distribution; Compliance with Legal Requirements. The
Committee may require each person acquiring Shares pursuant to an
Award to represent to and agree with the Company in writing that
such person is acquiring the Shares without a view to distribution
thereof. No Shares shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or
similar requirements have been satisfied. The Committee may require
the placing of such stop-orders and restrictive legends on
certificates for Stock and Awards, as it deems
appropriate.
(b)
Delivery of Stock Certificates. Stock certificates to
grantees under the Plan shall be deemed delivered for all purposes
when the Company or a stock transfer agent of the Company shall
have mailed such certificates in the United States mail, addressed
to the grantee, at the grantee’s last known address on file with
the Company; provided that stock certificates to be held in escrow
pursuant to Section 10 of the Plan shall be deemed delivered when
the Company shall have recorded the issuance in its records.
Uncertificated Stock shall be deemed delivered for all purposes
when the Company or a stock transfer agent of the Company shall
have given to the grantee by electronic mail (with proof of
receipt) or by United States mail, addressed to the grantee, at the
grantee’s last known address on file with the Company, notice of
issuance and recorded the issuance in its records (which may
include electronic “book entry” records).
(c)
No Employment Rights. The adoption of the Plan and the grant
of Awards do not confer upon any Person any right to continued
employment or Service Relationship with the Company or any
Subsidiary.
(d)
Trading Policy Restrictions. Option exercises and other
Awards under the Plan shall be subject to the Company’s insider
trading policy-related restrictions, terms and conditions as may be
established by the Committee, or in accordance with policies set by
the Committee, from time to time.
(e)
Designation of Beneficiary. Each grantee to whom an Award
has been made under the Plan may designate a beneficiary or
beneficiaries to exercise any Award on or after the grantee’s death
or receive any payment under any Award payable on or after the
grantee’s death. Any such designation shall be on a form provided
for that purpose by the Committee and shall not be effective until
received by the Committee. If no beneficiary has been designated by
a deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the grantee’s
estate.
(f)
Legend. Any certificate(s) representing the Shares shall
carry substantially the following legend (and with respect to
uncertificated Stock, the book entries evidencing such shares shall
contain the following notation):
The
transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including repurchase and restrictions against transfers
contained in the Plan and any agreements entered into thereunder by
and between the company and the holder of this certificate (a copy
of which is available at the offices of the company for
examination).
(g)
Information to Holders of Options. In the event the Company
is relying on the exemption from the registration requirements of
Section 12(g) of the Exchange Act contained in paragraph (f)(1) of
Rule 12h-1 of the Exchange Act, the Company shall provide the
information described in Ru€701(e)(3), (4) and (5) of the
Securities Act to all holders of Options in accordance with the
requirements thereunder. The foregoing notwithstanding, the Company
shall not be required to provide such information unless the option
holder has agreed in writing, on a form prescribed by the Company,
to keep such information confidential.
SECTION
16. EFFECTIVE DATE OF PLAN
The
Plan shall become effective upon adoption by the Board and shall be
approved by stockholders in accordance with applicable state law
and the Company’s articles of incorporation and bylaws within 12
months thereafter. If the stockholders fail to approve the Plan
within 12 months after its adoption by the Board of Directors, then
any Awards granted or sold under the Plan shall be rescinded and no
additional grants or sales shall thereafter be made under the Plan.
Subject to such approval by stockholders and to the requirement
that no Shares may be issued hereunder prior to such approval,
Stock Options and other Awards may be granted hereunder on and
after adoption of the Plan by the Board. No grants of Stock Options
and other Awards may be made hereunder after the tenth anniversary
of the date the Plan is adopted by the Board or the date the Plan
is approved by the Company’s stockholders, whichever is
earlier.
SECTION
17. GOVERNING LAW
This
Plan, all Awards and any controversy arising out of or relating to
this Plan and all Awards shall be governed by and construed in
accordance with the laws of the State of New Jersey as to matters
within the scope thereof, without regard to conflict of law
principles that would result in the application of any law other
than the law of the State of Delaware.
DATE
ADOPTED BY THE BOARD OF DIRECTORS: |
February
04, 2022 |
|
|
DATE
ADOPTED BY THE |
|
|
|
SHAREHOLDERS:
__________________________. |
|
MPhase Technologies (PK) (USOTC:XDSL)
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