UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant [ ]☐
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| Preliminary Proxy Statement | |
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| Definitive Proxy Statement | |
| Definitive Additional Materials | |
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VERB TECHNOLOGY COMPANY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Thanother than the Registrant)
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Verb Technology Company, Inc.NOTICE OF THE 2022 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 21, 2022
Annual Meeting of StockholdersDear Fellow Verb Stockholders:
December 20, 2019
Notice and Proxy Statement
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On December 20, 2019
It is my pleasure to invite you to this year’sthe 2022 Virtual Annual Meeting of the Stockholders (the “Annual Meeting”) of Verb Technology Company, Inc., a Nevada corporation (the “Company,” “Verb,” “us,” or “our”). The meetingAnnual Meeting will be held on December 20, 2019October 21, 2022 at 3:11:00 p.m. PST at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. The purposea.m. Pacific Time virtually by means of remote communication and can be accessed by visiting www.virtualshareholdermeeting.com/VERB2022 where you will be able to listen to the meeting live, submit questions and vote online. You will not be able to attend the meeting in person.
The Annual Meeting is to vote onbeing held for the following:following purposes:
| 1. | To elect | |
| 2. | To | |
| To | ||
| To transact such other business as may properly come before the Annual Meeting, or any postponement or adjournment thereof. |
You will also haveOur board of directors recommends that you vote “FOR” the opportunity to hear what has happened inelection of each of the six director nominees; “FOR” the ratification of the selection of Weinberg & Company, P.A. as our business inindependent registered public accounting firm; and “FOR” the past year and to ask questions.approval, on a non-binding, advisory basis, of the compensation of our named executive officers.
Only stockholders of record atas of the close of business on November 12, 2019August 24, 2022 will be entitled to receive notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof. The enclosed Notice andaccompanying Proxy Statement contains details concerning the foregoing items, and any other business to be conducted at the Annual Meeting, as well as information on how to vote your shares. Other detailed information about usour business and our operations, including our audited financial statements, are included in our Annual Report on Form 10-K, (the “Annual Report”), a copy of which is enclosed.as amended. We urge you to read and consider these documents carefully.
Your vote is very important. Whether or not you expectplan to attend the Annual Meeting, we urgeencourage you to cast your vote and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the Notice of Internet Availability of Proxy Materials you received in advancethe mail, and the additional information in the accompanying Proxy Statement. If you requested to receive printed proxy materials, you may also refer to the instructions on the proxy card enclosed with those materials.
On behalf of the Annual Meeting. You can vote in person atboard of directors, and the Annual Meeting or by internet, telephone, or mail as follows:officers and employees of the Company, I would like to take this opportunity to thank you for your continued support.
 | Sincerely, | |||||
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| /s/ Rory J. Cutaia | |
| Rory J. Cutaia | |
Chairperson of the Board, Chief Executive Officer, President |
2210 Newport Boulevard, Suite 200, Newport Beach, California 92663 * (855) 250.2300Approximate Date of Mailing of Notice of Internet Availability of Proxy Materials: September 6, 2022
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may relate to our future financial performance, business operations, and executive compensation decisions, or other future events. You can identify forward-looking statements by the use of words such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “will,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. We have based these forward-looking statements on our current expectations and projections about future events that we believe may affect our business, results of operations and financial condition.
The outcomes of the events described in these forward-looking statements are subject to risks, uncertainties and other factors described in the section titled “Risk Factors,” and elsewhere, in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as the other reports we file with the Securities and Exchange Commission. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those expressed or implied in the forward-looking statements. The forward-looking statements made in this Proxy Statement relate only to events as of the date of this Proxy Statement. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made.
VERB TECHNOLOGY COMPANY, INC.
PROXY STATEMENT
FOR THE 2022 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
To be held December 20, 2019TO BE HELD ON OCTOBER 21, 2022
TABLE OF CONTENTS
VERB TECHNOLOGY COMPANY, INC.
FOR THE 2022 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 21, 2022
General Information
This Proxy Statement and the enclosed proxy card, is solicited by the Boardboard of Directorsdirectors (our “Board”) of Verb Technology Company, Inc., a Nevada corporation (the “Company,” “Verb,” “us,” or “our”), for use at theour 2022 Virtual Annual Meeting of Stockholders (the “Annual Meeting”) to be held December 20, 2019on October 21, 2022 at 3:11:00p.m. PST, a.m. Pacific Time, or at any adjournmentsadjournment or postponements thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders.postponement thereof. The Annual Meeting will be held at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663.virtually by means of remote communication and can be accessed by visiting www.virtualshareholdermeeting.com/VERB2022 where you will be able to listen to the meeting live, submit questions and vote online. You will not be able to attend the meeting in person. The Annual Meeting is being held for the purposes described herein and in the Notice of Internet Availability of Proxy Materials you received in the mail.
References in this Proxy Statement to “Verb,” “we,” “us,” “our,” or the “Company” refers to Verb Technology Company, Inc.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2022 VIRTUAL ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 20, 2019.OCTOBER 21, 2022
This Proxy Statement, the enclosed proxy card, and the Annual Report on Form 10-K for the fiscal year ended on December 31, 20182021 (as amended, the “Annual Report”) are all available on our website atwww.myverb.comwww.proxyvote.com. With respect toThe Annual Report, however, is not a part of the proxy solicitation material.
Questions and Answers About the Annual Meeting and all of our future stockholder meetings, please contact James P. Geiskopf at (855) 250.2300, Extension 12, or Jimmy@verb.tech, to request a copy of the proxy statement, annual report, or proxy card, or to obtain directions to such meeting.
What is a proxy?Voting
A proxy is your legal designationWhy did I receive a Notice of another personInternet Availability of Proxy Materials in the mail?
Under rules adopted by the Securities and Exchange Commission (the “SEC”), we are providing access to vote the stock you own and are entitled to vote. The person you designate is your “proxy,” and, by submitting a proxy card, you give the proxy materials for the authorityAnnual Meeting via the internet. Instead of mailing printed copies of our proxy materials to each of our stockholders, we have elected to provide online access to the materials under the SEC’s “notice and access” rules. Accordingly, on or about September 6, 2022, we mailed a Notice of Internet Availability of Proxy Materials, or Notice, to each of our stockholders. The Notice contains instructions on how to access our proxy materials, including this Proxy Statement and the Annual Report, and how to vote your shares. We have designated James P. Geiskopf, Lead Director, asencourage you to read the proxy for the Annual Meeting.
Why am I receiving these materials?
You are receiving this Proxy Statement and the enclosed proxy card because our Board is soliciting your proxymaterials carefully prior to vote at the Annual Meeting for the purposes set forth herein. This Proxy Statement provides you with information on the matters to be voted on at the Annual Meeting as well as instructions on how to vote.voting.
We intendbelieve compliance with the SEC’s “notice and access” rules allows us to mail this Proxy Statementprovide our stockholders with the materials they need to make informed decisions, while lowering the costs of printing and accompanyingdelivering those materials and reducing the environmental impact of the Annual Meeting. However, if you would prefer to receive printed proxy cardmaterials, please follow the instructions included in the Notice.
The Notice was sent on or about November 20, 2019September 6, 2022 to alleach of our stockholders of record entitled to vote at the Annual Meeting.
Who can vote at the Annual Meeting?
You can vote if, as of the close of business on November 12, 2019August 24, 2022 (the “Record Date”), you were a stockholder of record of our Common Stock, our only series of common stock issued and outstanding.stock. On the Record Date, there were 23,524,753102,430,979 shares of our Common Stock issued andcommon stock outstanding.
Stockholder of Record: Shares Registered in Your Name
If, on the Record Date, your shares were registered directly in your name with our transfer agent, V StockVStock Transfer, LLC, then you are a stockholder of record. As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to vote by writtenprovide your proxy telephone, or the Internet to ensure your vote is counted. Even if you vote by proxy, you may still vote in person if you are able to attend the Annual Meeting.
Beneficial Owner: Shares Registered in the Name of a Broker or BankOther Nominee
If, on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization,nominee, then you are the “beneficial owner” of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agentnominee on how to vote the shares in your account. If you do not direct your broker or other nominee how to vote your shares, the broker or other nominee will be entitled to vote the shares with respect to “discretionary”“routine” items, but will not be permitted to vote the shares with respect to “non-discretionary”“non-routine” items. Where you do not direct your broker or other nominee how to vote on “non-routine” items (resulting init is referred to as a “broker non-vote”). Thenon-vote.”
Proposal 1, the election of directors, is considered to be a “non-routine” matter under applicable rules. Accordingly, any shares held in “street name” through a broker or other nominee will not be voted on Proposal 1 unless you affirmatively provide the nominee with instructions for how to vote. Accordingly, broker non-votes may result for this proposal.
Proposal 2, the ratification of the appointmentselection of our independent registered public accounting firm, is considered to be a “routine” matter under applicable rules. Accordingly, any shares held in “street name” through a broker or other nominee may be voted by the nominee on Proposal 6 is a “discretionary” matter. The election of directors under 2 even if you do not provide the nominee with instructions for how to vote. Accordingly, we do not expect any broker non-votes will result for this proposal.
Proposal 1,3, the approval of the Incentive Plancompensation of our named executive officers, is considered a “non-routine” matter under Proposal 2, the approval of the Stock Issuance Proposal underapplicable rules. Accordingly, any shares held in “street name” through a broker or other nominee will not be voted on Proposal 3 unless you affirmatively provide the advisory say-on-pay vote under Proposal 4, the advisory say-on-frequency vote under Proposal 5, and the approval of the grant of authoritynominee with instructions for how to our Board to adjourn the Annual Meeting, if necessary or appropriate, under Proposal 7 are “non-discretionary” items.vote. Accordingly, broker non-votes may result for this proposal.
YouAs a beneficial owner of shares, you are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent.nominee. Please contact your broker or other nominee for additional information.
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of our Common Stockcommon stock that you owned as of the Record Date.
What is the quorum requirement?
One-third of the outstanding shares of common stock entitled to vote at the Annual Meeting must be present at the Annual Meeting, either virtually or represented by proxy, in order for us to hold the Annual Meeting. This is referred to as a quorum. On the Record Date, there were 102,430,979 outstanding shares of our common stock entitled to vote. Thus, 34,143,660 shares of our common stock must be present at the Annual Meeting, either virtually or represented by proxy, to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy or vote at the Annual Meeting. Abstentions and broker non-votes will also be counted towards the quorum requirement.
What proposals am I voting on?being asked to vote upon?
The following matters are scheduledAnnual Meeting is being held for the Annual Meeting: (i) the election of four directors to our Board; (ii) the approval of the Incentive Plan; (iii) the approval of the Stock Issuance Proposal; (iv) an advisory say-on-pay vote; (v) an advisory say-on-frequency vote; (vi) the ratification of the selection of Weinberg as our independent registered public accounting firm; and (vii) the approval of any adjournment or postponement. following purposes:
| 1. | to elect six directors to serve on our Board until their respective successors are duly elected and qualified, or until their respective earlier death, resignation or removal; |
| 2. | to ratify the selection of Weinberg & Company, P.A. (“Weinberg”) as our independent registered public accounting firm; and |
| 3. | to approve, on a non-binding, advisory basis, the compensation of our named executive officers. |
A vote may also be held on any other business as may properly come before the Annual Meeting, or any postponement or adjournment thereof, although there is nothereof. However, as of the date of this Proxy Statement, we are not aware of any other business anticipated to come beforebe considered or acted upon at the Annual Meeting.
What are my voting choices for each of the items to be voted on at the Annual Meeting?
| Proposal | Board Recommendation | Voting Choices | Vote Required for Adoption | Effect of Abstentions | Effect of Broker Non-Votes | |||||
| 1 – Election of | “FOR” each nominee | ● Vote “For All” of the nominees listed ● Vote “Withhold All” to withhold for all of the nominees listed ● Vote “For All Except” to vote for all | Plurality of the votes cast by the holders of shares present | No effect | No effect | |||||
| 2 – | “FOR” | ● Vote “For” ● Vote “Against” ● Abstain from voting on this proposal | Approved if a majority of the votes cast | No effect | No | |||||
| 3 – Approval, |
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| “FOR” | ●Vote “For” ● Vote “Against” ● Abstain from voting on this proposal | Approved, on a non-binding advisory basis, if a majority of the votes cast | ||||||||
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| No effect | No effect |
How do I vote?
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote using the following methods:
| ● |
| ● | By Internet. To vote by proxy via the Internet, follow the instructions described on the Notice (or proxy card if you | |
| ● | By | |
| ● | By Mail. |
Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy using one of the methods described above to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy.
Beneficial Owner: Shares Registered in the Name of Broker Bank, or Other AgentNominee
If you are a beneficial owner of shares registered in the name of your broker bank, or other agent,nominee, you canmay vote as follows:using the following methods:
| ● | ||
| ● | By | |
| ● | By Telephone. You may vote by telephone if your broker or other nominee makes this method available, in which case the instructions will be included in the proxy materials provided to you. | |
| ● | By Mail. |
What if I am a stockholder of record and return a proxy card but do not make specific choices?
You should specify your choice for each matter on the proxy card. If you return a signed and dated proxy card without marking voting selections for the specific proposals, your shares will be voted:
| ● | “FOR” the | |
| ● | “FOR” the | |
| ● | “FOR” the approval, on a non-binding, advisory basis, for the compensation of |
IfIn the event any other matter ismatters are properly presented at the Annual Meeting, youror any postponement or adjournment thereof, the person named as proxy (the individual named on your proxy card) will vote your shares usingin accordance with his or her best judgment.discretion with respect to those matters.
What if I am a beneficial owner and do not give voting instructions to my broker bank, or other agent?nominee?
If you fail to complete a proxy card or provide your broker with voting instructions at least ten days before the Annual Meeting, your broker will be unable to vote on the non-discretionarynon-routine matters. Your broker may use his or her discretion to cast a vote on any other routine or discretionary matter for which you did not provide voting instructions.
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Who is paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors, officers, and employees may also solicit proxies by mail, in person, by telephone, or by other means of communication. Directors, officers, and employees will not be paid any additional compensation for soliciting proxies. We will also reimburse brokerage firms, banks, and other agents for the cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign, and returneach proxy card to ensure that all of your shares are voted.
What is “householding”?
The Securities and Exchange Commission (the “SEC”)SEC has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements with respect to two or more security holders sharing the same address by delivering a single copy of a notice and, if applicable, a proxy statement, addressed to those security holders. This process, which is commonly referred to as “householding,” potentially means convenience for security holders and cost savings for companies and intermediaries.
A numbersingle copy of brokers with account holders who are Verb stockholders will be “householding” our proxy materials. A single proxy statementthe Notice and, if applicable, this Proxy Statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affectedthese stockholders. Once you have received notice from your broker, or from us, that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement,Notice and Proxy Statement, please notify your broker and also notify us by sending your written request to Investor Relations,to: Verb Technology Company, Inc., 2210 Newport Boulevard,3401 North Thanksgiving Way, Suite 200, Newport Beach, California 92663240, Lehi, Utah 84043, Attention: Investor Relations or by calling Investor Relations at (855) 250.2300. 250-2300.
A stockholder who currently receives multiple copies of the proxy statementNotice or Proxy Statement at his/her/its address and would like to request “householding” of their communications should also contact his/her/its broker and notify us in writing or by telephone.using the contact information above.
Can I revoke or change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. YouMeeting as discussed below.
If you are a stockholder of record, you may revoke your proxy by:
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| ● | voting |
If you are a beneficial owner of shares and have instructed your broker or other nominee to vote your shares, you may change your vote by following the directions received from your nominee to change those voting instructions or by attending the Annual Meeting and voting. However, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from your broker or other nominee.
Who will count votes?votes at the Annual Meeting?
Votes will be counted by the inspector of electionselection appointed for the Annual Meeting. The inspector of electionselection will also determine the number of shares outstanding, the voting power of each, the number of shares represented at the Annual Meeting, the existence of a quorum, and whether or not the proxies and ballots are valid and effective.
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What is the quorum requirement?
One-third (1/3) of the outstanding shares of Common Stock entitled to vote on a matter must be present at the Annual Meeting (in person or represented by proxy) in order for us to hold the Annual Meeting and conduct business. This is called a quorum. On the Record Date, there were 23,524,753 outstanding shares of our Common Stock entitled to vote. Thus, 7,841,585 shares of our Common Stock must be present at the Annual Meeting (in person or represented by proxy) to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy or vote in person at the Annual Meeting. Abstentions and broker non-votes will also be counted towards the quorum requirement.
How can I find out the results of the voting at the Annual Meeting?
We will announce preliminary voting results at the Annual Meeting. We will report the final voting results in a Current Report on Form 8-K that we expect to file with the SEC within four business days following the date on which such results become final.
When are stockholder proposals for the Fiscal 20202023 annual meeting due?
Stockholders interested in presenting a proposal to be considered for inclusion in next year’sthe proxy statement and formrelating to the 2023 annual meeting of proxystockholders may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and our Bylaws.Amended and Restated Bylaws (the “Bylaws”). To be considered for inclusion, stockholder proposals must be submitted in writing to the Corporate Secretary, Verb Technology Company, Inc., 2210 Newport Boulevard,3401 North Thanksgiving Way, Suite 200, Newport Beach, California 92663240, Lehi, Utah 84043, Attention: Corporate Secretary, before July 23, 2020,May 9, 2023, which is 120 calendar days prior to the anniversary of the mailing date of this Proxy Statement,Statement. Any such proposal must meet the requirements of the Bylaws and must be in compliance with all applicable laws and regulations.
Any stockholder who wishes to have a proposal considered at the 20202023 annual meeting of stockholders, or to nominate a director for election at the fiscal 2020 annualthat meeting, but not submitted for inclusion in ourthe proxy statement relating to that meeting, must give advance notice to us prior to the deadline for such meeting as set forth in our Amended and Restated Bylaws (the “Bylaws”).meeting. Under ourthe Bylaws, in order for a proposal or nomination to be timely, it must be received by us no earlier than 120 days prior to the anniversary date of thisthe Annual Meeting, or August 22, 2020,June 23, 2023, and no later than 90 days prior to the anniversary of thisthe Annual Meeting, or September 21, 2020.July 23, 2023. In the event that ourthe 2023 annual meeting if stockholders is being held more than 30 days before or more than 70 days after suchthe anniversary date,of the Annual Meeting, or if directors are to be elected at a special meeting, you should refer to ourthe Bylaws for the specific requirements. Please also refer to our Bylaws for specific information that must be included in the notice. We will not consider any proposal or nomination that is not timely or that otherwise does not meet the requirements set forth in our Bylaws.
If a stockholder fails to meet these deadlines or fails to satisfyeach of the requirements of SEC Rule 14a-4, the persons named as proxies will be allowed to use their discretionary voting authority to vote on any such proposal or nomination as they determine appropriate, if and when the matter is raised at the 2020 annual meeting.
How do I get a copy of the exhibits filed with our Annual Report?
A copy of our Annual Report for the fiscal year ended December 31, 2018, and consolidated financial statements, were provided to you with this Proxy Statement. We will provide copies of the exhibits filed with our Annual Report upon written request if you are a stockholder as of the Record Date. Requests for such copies should be directed to Investor Relations at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. In addition, copies of all of our electronically filed exhibits may be reviewed and printed from the SEC website athttp://www.sec.gov.Bylaws.
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PROPOSAL 1 – ELECTION OF DIRECTORS
What Am I Voting On?General
Stockholders are being asked to elect foursix directors, Rory J. Cutaia, Phillip J. Bond, Kenneth S. Cragun, James P. Geiskopf, Phillip J. Bond,Judith Hammerschmidt and Kenneth S. Cragun,Edmund C. Moy, each to serve for a term ending at the next annual meeting of stockholders following thisthe Annual Meeting, or until their respective successors have been duly elected and qualified.qualified, or until their respective earlier death, resignation or removal.
Nancy Heinen will not be standing for re-election at the Annual Meeting and her service on our Board and committees will conclude at the Annual Meeting. Our Board would like to thank Ms. Heinen for her years of dedicated service to the Company.
If any of the director nominees becomes unable or unwilling to serve as a director before the Annual Meeting, an event which is not presently anticipated, the individualperson named as proxy on the proxy card may exercise discretionary authority towill vote in accordance with his discretion for any substitute nomineesnominee proposed by our Board or, if no substitute is selected by our Board prior to or at the Annual Meeting, for a motion to reduce the present membershipauthorized number of our Boarddirectors to the number of director nominees remaining available.available to serve.
Voting Recommendation
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE SIX DIRECTOR NOMINEES.the election of each director nominee.
INFORMATION ABOUT OUR BOARD, BOARD COMMITTEES AND GOVERNANCE
Board and Committee Composition
Currently, we have foursix directors with each director serving until his or her successor is duly elected and qualified. qualified, or until his or her earlier death, resignation or removal. Five of the director nominees are existing directors. Mr. Moy was recommended for election by the Governance and Nominating Committee.
The table below lists each current director each such director’snominee’s committee memberships and the chairmanchairperson of each Board committee.
| Name | Audit Committee | Compensation Committee | Governance and Nominating Committee | Risk and Disclosure Committee | ||||
| Rory J. Cutaia | ||||||||
| James P. Geiskopf | X | X | X | |||||
| Phillip J. Bond | X | X | X | |||||
| Kenneth S. Cragun | X | X | Chairperson | |||||
| Judith Hammerschmidt | X | X | ||||||
| Edmund C. Moy(1) | X | X | X |
| (1) | This table reflects the committees to which Mr. Moy is expected to be appointed assuming he is elected at the Annual Meeting. |
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Biographical and Related Information –Directors– Directors and Executive Officers
Our directorsThe table below provides certain biographical information about our director nominees and executive officers, their ages, positions held, and duration of such, are as follows:officers.
| Name | Position Held | Age | ||||
| Chairperson of our Board, President, Chief Executive Officer and Secretary | 66 | October 16, 2014 | ||||
| Salman H. Khan | Chief Financial Officer and Treasurer | |||||
| January 20, 2022 | ||||||
| James P. Geiskopf | Lead Independent Director | October 16, 2014 | ||||
| Director | September 10, 2018 | |||||
| Kenneth S. Cragun | Director | September 10, 2018 | ||||
| Judith Hammerschmidt | Director | 68 | December 20, 2019 | |||
| Nancy Heinen(1) | Director | 65 | December 20, 2019 | |||
| Edmund C. Moy | Director Nominee | 64 | N/A |
| (1) | Ms. Heinen will not be standing for re-election at the Annual Meeting and her service on our Board and committees will conclude at the Annual Meeting. |
The following is an overviewBoard Diversity Matrix
In accordance with the rules of the biographical information forNasdaq Stock Market (“Nasdaq”), the following table reflects our Board diversity matrix as of September 6, 2022:
| Total Number of Directors | 6 | |||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | |||||
| Part I: Gender Identity | ||||||||
| Directors | 2 | 4 | - | - | ||||
| Part II: Demographic Background | ||||||||
| African American or Black | - | - | - | - | ||||
| Alaskan Native or Native American | - | - | - | - | ||||
| Asian | - | - | - | - | ||||
| Hispanic or Latinx | - | - | - | - | ||||
| Native Hawaiian or Pacific Islander | - | - | - | - | ||||
| White | 2 | 4 | - | - | ||||
| Two or More Races or Ethnicities | - | - | - | - | ||||
| LGBTQ+ | - | |||||||
| Did Not Disclose Demographic Background | - | |||||||
Business Experience
Below is a brief account of the business experience of each of ourthe director nominees and executive officers, including their age, the year they became a director or an officer, their principal occupations or employment for at least the past five years, and certain of their other directorships.officers.
Rory J. Cutaia, ChairmanChairperson of theour Board, President, Chief Executive Officer Secretary, and TreasurerSecretary
Rory J. Cutaia has beenserved as our ChairmanChairperson of theour Board, Chief Executive Officer, President Secretary, and TreasurerSecretary, since the formation of Cutaia Media Group LLC (“CMG”), in 2012, in which roles he has continued to serve through our October 2014 acquisition of bBooth (USA), Inc., (“bBooth”) to current.the present. In these roles, Mr. Cutaia also serves as our Principal Executive Officer. Mr. Cutaia founded CMG in 2012 and bBooth Inc. in 2014. In May 2014, CMG and bBooth Inc. merged and became known as bBoothUSA, which entity was acquired in October 2014 by Global SystemSystems Designs, Inc. (“GSD”), our predecessor. Prior to that, from October 2006 to August 2011, heMr. Cutaia was a partner andEntrepreneur-in-Residenceat Corinthian Capital Group, Inc. (“Corinthian”), a private equity fund based in New York City that invested in middle-market, U.S. based companies. During his tenure at Corinthian, from June 2008 to October 2011, heMr. Cutaia was the co-founder and Executive Chairman of Allied Fiber, Inc., a company engaged in the construction of a nation-wide fiber-optic network, and from June 2007 to August 2011, Mr. Cutaia was the Chief Executive Officer of GreenFields Coal Company, a company engaged in the deployment of technology to recycle coal waste and clean-up coal waste sites. Before joining Corinthian, from January 2000 to October 2006, he founded and was the Chairman and Chief Executive Officer of The Telx Group, Inc. (“Telx”), a company engaged in the telecom carrier inter-connection, co-location, and data center business, which he sold in 2006. Before founding Telx, heMr. Cutaia was a practicing lawyer with Shea & Gould, a prominent New York City law firm. Mr. Cutaia obtainedearned his Juris Doctorate degree from the Fordham University School of Law in 1985 and his Bachelor of Science,magna cum laude, in business management from the New York Institute of Technology in 1982.
We believe that Mr. Cutaia is qualified to serve on our board of directorsBoard because of his extensive knowledge of our business and current operations, in addition toas well as his education and the additional business experiences described above.
Salman H. Khan, Chief Financial Officer and Treasurer
Salman H. Khan was permanently appointed as our Chief Financial Officer and Treasurer on March 30, 2022 after having been appointed Interim Chief Financial Officer and Treasurer on January 20, 2022. In these roles, Mr. Khan also serves as our Principal Financial Officer and Principal Accounting Officer. Mr. Khan initially joined the Company in May 2021 as Executive Vice President of Corporate Development and Strategic Planning where he worked closely with our Chief Executive Officer in connection with mergers and acquisitions and capital market activities. Prior to joining the Company, Mr. Khan served as business division chief financial officer, among other senior executive level positions with Occidental Petroleum Corporation and its spinoff, California Resources Corporation, a NYSE listed company with a market capitalization of approximately $3.5 billion. Mr. Khan has more than 20 years of finance and accounting experience with eight years at Arthur Andersen, PricewaterhouseCoopers and Ernst & Young, where he served domestic and international clients in technology, media, telecommunications, entertainment, and biotechnology industries. Mr. Khan holds a Masters in Business Administration from the University of Michigan, Ross School of Business and is a licensed chartered certified accountant (UK).
James P. Geiskopf, Lead Independent Director
James P. Geiskopf has beenserved as one of our directors since the formation of bBooth USA,in May of 2014, in which role he has continued to serve through our October 2014 acquisition of bBooth USA by GSD our predecessor, to current.the present. He also serves as our Lead Director.Independent Director, as the Chairperson of the Compensation Committee, and as a member of the Audit Committee, Governance and Nominating Committee and Risk Committee. Mr. Geiskopf has 32 years of experience leading companies in the services industry. From 1975 to 1986, Mr. Geiskopf served as the Chief Financial Officer of Budget Rent a Car of Fairfield California and from 1986 to 2007, he served as its President and Chief Executive Officer. In 2007, he sold the franchise. Mr. Geiskopf served on the Boardboard of Directorsdirectors of Suisun Valley Bank from 1986 to 1993 and also served on the Boardboard of Directorsdirectors of Napa Valley Bancorp from 1991 to 1993, which was sold to a larger institution in 1993. Since 2014, Mr. Geiskopf has served on the Boardboard of Directorsdirectors of CurrencyWorksMetaWorks Platforms, Inc. (formerly Currency Works, Inc.), a public company quotedthat trades on the TSX Venture Exchange and on the OTC Markets Group Inc.’s OTCQB® Venture Market (the “OTCQB”).OTCQB. From June 2013 to March 16, 2017, the date of his resignation, Mr. Geiskopf had served as a director of Electronic Cigarettes International Group, Ltd.(“ECIG”), a Nevada corporation, (“ECIG”), whose common stock had been quoted on the over-the-counter market.an OTC listed company. ECIG filed a voluntary petition for relief under the provisions of Chapter 7 of Title 11 of the United States Code on March 16, 2017.
We believe Mr. Geiskopf hasis qualified to serve on our Board because of his significant and lengthy business experience including building, operating, and selling companies, serving on the boards of directors for several banks, and serving as a director and officer of several public companies. In these roles he acquired substantial business management, strategic, operational, human resource, financial, disclosure, compliance, and corporate governance skills. These were the primary reasons that we concluded that he should serve as one of our directors.
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Phillip J. Bond, Director
Phillip J. Bond was appointed as one of our directors effectivein September 10, 2018. On2018 and currently serves as the same date, he was appointedChairperson of the Audit Committee, and as Chairmana member of the Compensation Committee, Governance and Nominating Committee and to serve on the Audit, Compensation, and Governance and Nominating Committees.Risk Committee. In 2018, Mr. Bond co-founded Potomac International Partners, Inc., a multidisciplinary consulting firm and currently serves as its President of Government Affairs. In 2009, TechAmerica, a U.S.-based technology trade association, was formed from the merger of AeA, the Cyber Security Industry Alliance, the Government Electronics & Information Technology Association, and the Information Technology Association of America. Mr. Bond was appointed as the President of TechAmerica at the date of the merger, and later, in 2010, was appointed as its Chief Executive Officer.Officer in 2010. Prior to the merger, Mr. Bond served as the President and Chief Executive Officer of Information Technology Association of America from 2006 to 2008. From 2001 to 2005, Mr. Bond served as Undersecretary of Technology in the U.S. Department of Commerce for Technology. From 2002 to 2003, Mr. Bond served concurrently as Chief of Staff to Commerce Secretary Donald Evans. In his dual role, he worked closely with Secretary Evans to increase market access for U.S. goods and services and further advance America’s technological leadership at home and abroad. Mr. Bond oversaw the operations of the National Institute of Standards and Technology, (NIST), the Office of Technology Policy, and the National Technical Information Service. During his tenure, the Technology Administration was the pre-eminent portal between the federal government and the U.S. technology. Earlier in his career, Mr. Bond served as Senior Vice President of Government Relations for Monster Worldwide, the world’s largest online career site, and General Manager of Monster Government Solutions. Mr. Bond also served as Director of Federal Public Policy for the Hewlett-Packard Company; Senior Vice President for Government Affairs and Treasurer of the Information Technology Industry Council; as Chief of Staff to the late Congresswoman Jennifer Dunn (R-WA); Principal Deputy Assistant Secretary of Defense for Legislative Affairs; Chief of Staff and Rules Committee Associate for Congressman Bob McEwen (R-OH); and as Special Assistant to the Secretary of Defense for Legislative Affairs. Mr. Bond is a graduate of Linfield College in Oregon, where he earned his bachelor’s degree in communications, and now serves on the school’s board of trustees.
We believe Mr. Bond is qualified to serve on our Board because he has extensive and unique leadership experience in Washington D.C., where he is recognized for his leadership roles in the Executive branch of the government of the United States, at major high technology companies, and most recently as the Chief Executive Officer of TechAmerica, the largest technology advocacy association in the United States. Mr. Bond’s unique leadership experience and expertise in Government Relations, were the primary reasons that we concluded that he should serve as one of our directors.
Kenneth S. Cragun, Director
Kenneth S. Cragun was appointed as one of our directors effectivedirector in September 10, 2018. On2018, and also serves as the same date, he was appointed as ChairmanChairperson of the Audit Committee, and to serve onas a member of the Compensation andCommittee, Governance and Nominating Committees. SinceCommittee and Risk Committee. Mr. Cragun was appointed as Chief Financial Officer of BitNile Holdings, Inc. (NYSE American: NILE) on August 19, 2020. Prior to his appointment as Chief Financial Officer, Mr. Cragun served as Chief Accounting Officer of BitNile Holdings, Inc. since October 2018,1, 2018. Mr. Cragun has served as the Chief AccountingFinancial Officer of DPW Holdings, Inc., a diversified holdingAult Disruptive Technologies Corporation, an NYSE listed special-purpose acquisition company, and since January 2019, asits incorporation in February 2021. Mr. Cragun has been the Senior Vice President of Finance or Chief Financial Officer and Treasurer forof Alzamend Neuro, Inc. (NASDAQ: ALZN), a biopharma company. Mr. Cragun also servesan early clinical-stage entity seeking to prevent, treat and cure Alzheimer’s Disease, since October of 2018. He served as a partner ofChief Financial Officer Partner at Hardesty, LLC, a national executive services firm. He has been a partner of its Southern California Practicefirm since October 2016. From January 2018 to September 2018, Mr. Cragun servedHis assignments at Hardesty, LLC included serving as the Chief Financial Officer of CorVel Corporation, (“CorVel”)a $1.1 billion market cap publicly traded company (NASDAQ: CRVL). CorVel is an Irvine, California-based national provider of workers’ compensation solutions for employers, third-party administrators, insurance companies, and government agencies. Mr. Cragun is a two-timethree-time finalist for the Orange County Business Journal’s “CFO of the Year –- Public Companies” and has more than 30 years of experience, primarily in the technology industry. He served as Chief Financial Officer of two Nasdaq-listed companies: Local Corporation, (Aprilfrom April 2009 to September 2016), formerly based in Irvine, California,2016, which operated a U.S. top 100 website “Local.com” and, in June 2015, filed a voluntary petition in the United States Bankruptcy Court for the Central District of California seeking relief under the provisions of Chapter 11 of Title 11 of the United States Code, (the “Bankruptcy Code”), and Modtech Holdings, Inc. (June, from June 2006 to March 2009), formerly based in Perris, California, and, in October 2008, filed a voluntary petition in the United States Bankruptcy Court for the Central District of California seeking relief under the provisions of Chapter 11 of the Bankruptcy Code.2009. Mr. Cragun receivedserves on the board of directors of The Singing Machine Company, Inc. (NASDAQ: MICS). Mr. Cragun earned his B.S.Bachelor of Science in Accounting from Colorado State University-Pueblo. Mr. Cragun began his professional career at Deloitte.
We believe Mr. Cragun’s industry experienceCragun is vast withqualified to serve on our Board due to his extensive experience inwith fast-growth environmentsbusinesses and building teams in more than 20 countries. Mr. Cragun has also led multiple financing transactions, including IPOs, PIPEs, convertible debt offerings, term loans and lines of credit. For these reasons, weWe believe that he provideshis experiences provide additional breadth and depth to our Board.
Executive Officer Who Does Not Serve as aNancy Heinen, Former Director
Nancy Heinen was appointed as one of our directors in December 2019 and serves on the Compensation Committee, Governance and Nominating Committee and Risk Committee. Ms. Heinen is currently a board member, investor, strategy consultant, and startup advisor with more than 25 years of experience in senior executive roles in Silicon Valley. In 1997, she was recruited by Steve Jobs to join the executive team of Apple Inc. (“Apple”), and assisted in its turnaround. During Ms. Heinen’s tenure at Apple, her responsibilities included all legal matters, including intellectual property litigation, acquisitions, corporate governance, and securities compliance, as well as global government affairs and corporate security. Previously, she served as General Counsel of NeXT Software, Inc., and Associate General Counsel at Tandem Computers, Inc. Ms. Heinen currently acts as Board Chair of First Place for Youth, is a board member and past board chair of SV2 – Silicon Valley Social Venture Fund, and serves on the advisory boards of Illuminate Ventures, University of California, Berkeley Center for Law and Business, and the Northern California Innocence Project. Ms. Heinen earned her Bachelor of Arts and Juris Doctor from the University of California at Berkeley.
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Jeffrey R. Clayborne, Chief Financial Officer
Judith Hammerschmidt, Director
Jeffrey R. ClayborneJudith Hammerschmidt was appointed as one of our directors in December 2019 and serves on the Compensation Committee and Governance and Nominating Committee. Ms. Hammerschmidt has been our Chief Financial Officer since July 15, 2016. Mr. Clayborne isspent the last 40 years as an experienced finance professionalinternational attorney. She began her career as a Special Assistant to two Attorneys General of the United States, focusing on international matters of interest to the U.S. government, including negotiating treaties and agreements with foreign governments. She then joined Dickstein, Shapiro & Morin, LLP, a proven recordWashington, D.C. firm, where she represented companies around the world as they expanded internationally in highly regulated environments. Her clients included Guess? Inc., Pfizer Inc., Merck & Co., Inc., the Receiver for Bank of drivingCredit and Commerce International of the United Arab Emirates, Recycled Paper Products, Inc., and Herbalife Nutrition Ltd. (“Herbalife”). She provided structuring, growth, and profitregulatory advice for both Fortune 50 companies, as well as start-upthese and other companies. Prior to joining the Company, Mr. Clayborne served as Chief Financial Officer with Breath Life Healing Center from August 2015 to July 2016. From September 2014 to August 2015, he servedShe joined Herbalife as Vice President and General Counsel of Business DevelopmentEurope in 1994, becoming Executive Vice President and International Chief Counsel in 1996. In 2002, she was part of Incroud, Inc. and from May 2012 to September 2014, Mr. Claybornethe management group that sold Herbalife. Since that time, she has served as outside counsel to a series of entrepreneurial companies looking to expand internationally, primarily in the food and drug/nutritional supplements space. In addition, Ms. Hammerschmidt was previously a Principal in JBT, LLC, a privately held company that owned “mindful dining” restaurants in the Washington, D.C. area. Ms. Hammerschmidt earned her Bachelor of Arts from Duke University and her Juris Doctor from the University of Pittsburgh. Since December 2021, Ms. Hammerschmidt has served as a member of the board of directors of NewAge, Inc. On August 30, 2022, NewAge filed a voluntary petition for relief under the provisions of Chapter 11 of Title 11 of the United States Code.
We believe that Ms. Hammerschmidt is qualified to serve on our Board because of her significant legal and regulatory experience counseling clients of different sizes and stages of growth on complex matters. We believe these experiences will provide additional breadth and depth to our Board.
Edmund C. Moy, Director Nominee
Edmund C. Moy is a director nominee and, if elected, is expected to serve on the Compensation Committee, Governance and Nominating Committee and Risk and Disclosure Committee. From 2001 through 2006, Mr. Moy served as special assistant to the President of Blast Music, LLC. Prior to this, Mr. Claybornethe United States at The White House, after which he was employed by Universal Music Group, where he servedappointed as Vice President, Head of Finance & Business Development for Fontana, in which role he managed the financial planning and analysisdirector of the sales and marketing division and ledUnited States Mint at the business development department. He also served in senior finance positions at The Walt Disney Company, including Senior Finance Manager at Walt Disney International, whereU.S. Department of the Treasury, a position he oversaw financial planning and analysis for the organization in 37 countries.held until 2011. Mr. ClayborneMoy began his career as a CPAsales and marketing executive with Blue Cross Blue Shield United of Wisconsin, was appointed head of the regulatory agency Office of Prepaid Health Care, and was then selected to head the Office of Managed Care at McGladreythe Centers for Medicare and Medicaid Services. Thereafter, he became an exclusive advisor to private equity firm Welsh, Carson, Anderson & Pullen LLP (now, RSM US LLP)Stowe. Mr. Moy currently serves as a director and member of the audit committee of MetaWorks Platforms, Inc. (formerly Currency Works, Inc.), then at KPMG Peat Marwick LLP (now, KPMG LLP)as director and chair of the audit committee of Parsec Capital Acquisitions Corp. (PCXCU:NASDAQ), and as an advisory board member of Draganfly Inc. (DPRO:NASDAQ). He bringsalso advises and consults with him more than 20 yearsseveral privately held companies, is an exclusive provider of experience in all aspectsautographs to Numismatic Guaranty Corp., and serves on the Board of strategy, finance, business development, negotiation,Regents for Trinity International University. His prior board service includes privately held Emerald Health Network and accounting. Mr. ClayborneL&L Energy, Inc. (LLEN:NASDAQ). He earned his MasterBachelor of Business Administration degreeArts in Economics, International Relations, and Political Science in 1979 from the University of Southern California, with high honors.Wisconsin - Madison.
We believe that Mr. Moy is qualified to serve on our Board because he has extensive and unique leadership experience in Washington D.C., where he is recognized for his leadership roles in the Executive Branch of the government of the United States, as well as the experience gained from serving on the boards of several public companies.
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Family Relationships
There are no family relationships among any of our directors, director nominees or executive officers.
Involvement in Certain Legal Proceedings
Other than the matters listedExcept as disclosed under “Business Experience” above, with respectthere are no legal proceedings related to Messrs. Geiskopf and Cragun, noneany of our directors, anddirector nominees or executive officers has been involved in any of the following events during the past ten years:which are required to be disclosed pursuant to applicable SEC rules.
CORPORATE GOVERNANCEAgreements with Directors
None of our directors or director nominees were selected pursuant to any arrangement or understanding, other than with our directors acting within their capacity as such.
Meetings of theour Board and its Committees
Our Board has ana standing Audit Committee, a Compensation Committee, and a Governance and Nominating Committee, and Risk and Disclosure Committee. Our Board met 1711 times, including telephonic meetings, during the fiscal 2018.year ended December 31, 2021. All foursix directors attended 100% of theour Board meetings following their respective appointments to our Board.held during that period. Messrs. Geiskopf, Bond, and Cragun and Mses. Hammerschmidt and Heinen attended 100% of the meetings held by committees of theour Board on which they served. This is our first annual meeting of stockholders.served during that period.
It is our policy that all of our directors are required to make a concerted and conscientious effort to attend our annual meeting of stockholders in each year during which that director serves as a member of our Board. All of our directors attended our 2021 annual meeting of stockholders.
Audit Committee and Audit Committee Financial Expert
On August 14, 2018,In June 2021, our Board amended and restated the charter (the “Audit Committee Charter”) to govern the Audit Committee (our “Audit Committee”). Currently, Messrs. Geiskopf, Bond, and Cragun (Chairman) serve as members of our Audit Committee and each meets the independence requirements of The Nasdaq Capital Market (“Nasdaq”) and the SEC. Mr. Cragun qualifies as an “audit committee financial expert.”charter. The Audit Committee Chartercharter can be found online at https://www.verb.tech/investor-relations/governance/audit.
The Audit Committee charter requires that each member of the Audit Committee meetscommittee meet the independence requirements of Nasdaq and the SEC, and requires the Audit Committeecommittee to have at least one member that qualifies as an “audit committee financial expert.” Currently, Messrs. Geiskopf, Bond, and Cragun (Chairperson) serve on the Audit Committee and each meets the independence requirements of Nasdaq and the SEC. In addition, Mr. Cragun qualifies as an “audit committee financial expert” under applicable SEC regulations.
In addition to the enumerated responsibilities as set forth inof the Audit Committee Charter,in the charter, the primary function of our Audit Committeethe committee is to assist our Board in its general oversight of our accounting and financial reporting processes, audits of our financial statements, and internal control and audit functions. The Audit Committee Charter can be found online athttps://myverb.com/audit-committe-charter.
Compensation Committee
On August 14, 2018,In June 2021, our Board approvedamended and adopted a charter (the “Compensation Committee Charter”) to governrestated the Compensation Committee (our “Compensation Committee”). Currently, Messrs. Geiskopf (Chairman), Bond, and Cragun serve as members of ourcharter. The Compensation Committee andcharter may be found online at https://www.verb.tech/investor-relations/governance/compensation-committee.
The Compensation Committee charter requires that each meetsmember of the committee meet the independence requirements of Nasdaq and the SEC, qualifiesSEC. Currently, Messrs. Geiskopf (Chairperson), Bond and Cragun, and Mses. Hammerschmidt and Heinen, serve as members of the Compensation Committee. If elected, Mr. Moy is expected to serve on the Compensation Committee following the date of the Annual Meeting and Ms. Heinen’s service on the committee will conclude at the Annual Meeting. Following the Annual Meeting, each of the members will meet the independence requirements, qualify as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and qualifiesqualify as an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). amended.
In addition to the enumerated responsibilities as set forth inof the Compensation Committee Charter,in the charter, the primary function of our Compensation Committeethe committee is to oversee the compensation of our executives, produce an annual report on executive compensation for inclusion in our proxy statement, if and when required by applicable laws or regulations, and advise our Board on the adoption of policies that govern our compensation programs. The Compensation Committee Charter may be found online athttps://myverb.com/compensation-committee-charter.
Governance and Nominating Committee
On August 14, 2018,In June 2021, our Board approvedamended and adopted a charter (the “Nominating Committee Charter”) to governrestated the Governance and Nominating Committee (our “Nominating Committee”)charter. The charter of the Governance and Nominating Committee may be found online https://www.verb.tech/investor-relations/governance/governance-and-nominating-committee.
The Governance and Nominating Committee charter requires that each member of the committee meet the independence requirements of Nasdaq. Currently, Messrs. Geiskopf, Bond (Chairman),(Chairperson) and Cragun, and Mses. Hammerschmidt and Heinen, serve as members of ourthe Governance and Nominating Committee. If elected, Mr. Moy is expected to serve on the Governance and Nominating Committee following the date of the Annual Meeting and Ms. Heinen’s service on the committee will conclude at the Annual Meeting. Following the Annual Meeting, each meetsof the members will meet the independence requirements of Nasdaq and the SEC. The Nominating Committee Charter requires that each member meets the independence requirements of Nasdaq and the SEC. Nasdaq.
In addition to the enumerated responsibilities as set forthof the Governance and Nominating Committee in the Nominating Committee Charter,charter, the primary function of our Nominating Committeethe committee is to determine the slate of director nominees for election to our Board, to identify and recommend candidates to fill vacancies occurring between annual stockholder meetings, of stockholders,and to review our policies and programs that relate to matters of corporate responsibility, including public issuesresponsibility.
Risk and Disclosure Committee
In June 2021, our Board approved and adopted the Risk and Disclosure Committee charter. The charter of significance to our stockholdersthe Risk and us, and any other related matters required by federal securities laws. The NominatingDisclosure Committee Charter may be found online at https://myverb.com/governance-and-nominating-committee-charterwww.verb.tech/investor-relations/governance/risk-and-disclosure..
All currentThe Risk and Disclosure Committee charter requires that each member of the committee meet the independence requirements of Nasdaq. Currently, Messrs. Geiskopf, Bond and Cragun (Chairman), and Ms. Heinen serve as members areof the Risk and Disclosure Committee. If elected, Mr. Moy is expected to be reappointedserve on the Risk and Disclosure Committee following the date of the Annual Meeting and Ms. Heinen’s service on the committee will conclude at the Annual Meeting. Following the Annual Meeting, each of the members will meet the independence requirements of Nasdaq.
In addition to the sameenumerated responsibilities of the Risk and Disclosure Committee in the charter, the primary function of the committee is to assist our Chief Executive Officer and Chief Financial Officer in fulfilling their responsibility for oversight of the accuracy and timeliness of the disclosures made by us.
Other Board Committees
Other than the Audit Committee, Compensation Committee, Governance and Nominating Committee, and Risk and Disclosure Committee, we have no standing committees at the meeting of our Board currently scheduled to be held immediately following the Annual Meeting.Board.
Nominations Process and Criteria
As of November 12, 2019,September 6, 2022, we had not effected any material changes to the procedures by which our stockholders may recommend nominees to our Board. Our Board does not have a formal policy with regard to the consideration of any director candidates recommended by our stockholders. Our Board has determined that it is in the best position to evaluate our requirements, as well as the qualifications of each candidate when it considers the recommendation of a nominee for a position on our Board.director nominee. Accordingly, we do not currently have any specific or minimum criteria for the election of director nominees, to our Board and we do not have any specific process or procedureprocedures for evaluating such nominees. Our Board assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.
There were no fees paid or dueIn recommending director nominees for appointment to third partiesour Board, the Governance and Nominating Committee also actively considers diversity characteristics, including diversity of professional experience, race, ethnicity, gender, age, education, cultural background and personal background. However, we have not adopted a formal policy regarding the consideration of specific diversity characteristic, and instead prefer to rely on the judgment of our committee members in fiscal 2019 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees.recommending candidates with the most appropriate mix of experiences, skills and expertise.
Any stockholder wishing to propose that a person be nominated for or appointed to our Board may submit such a proposal according to the procedure described in the stockholder proposal section on page 7 of this Proxy Statement, to:
Corporate Secretary
Verb Technology Company, Inc.
2210 Newport Boulevard,3401 North Thanksgiving Way, Suite 200240
Newport Beach, California 92663Lehi, Utah 84043
(855) 250.2300250-2300
Attention: Corporate Secretary
The Corporate Secretary will promptly forward any such correspondence to the ChairmanChairperson of the Governance and Nominating Committee for review and consideration by the Governance and Nominating Committee in accordance with the criteria described above.above and the requirements set forth in the Bylaws.
There were no fees paid or due to third parties in the fiscal year ended December 31, 2021 to identify or evaluate, or to assist in evaluating or identifying, potential director nominees.
Director Independence
Our Board is currently composed of foursix members. We have determined that threethe following five directors qualify as independent: James P. Geiskopf, Phillip J. Bond, and Kenneth S. Cragun, Judith Hammerschmidt and Nancy Heinen. If elected, we expect that Edmund C. Moy will also qualify as independent directors.independent. We determined that Mr.Rory J. Cutaia, our Chairman of the Board,Chairperson, President, Chief Executive Officer Treasurer, and Secretary, is not independent.independent due to his employment relationship with the Company. We evaluated independence in accordance with the rules of Nasdaq and the SEC. Messrs. Geiskopf, Bond,
Stockholder Communications with our Board
Stockholders and Cragun also serve onother parties interested in communicating directly with our Audit, Compensation, and Governance and Nominating Committees. Accordingly, allBoard, a committee thereof, or any individual director, may do so by sending a written communication to the attention of the membersintended recipient(s) to: Verb Technology Company, Inc., 3401 North Thanksgiving Way, Suite 240, Lehi, Utah 84043, Attention: Corporate Secretary. The Corporate Secretary will forward all appropriate communications to the Chairperson of the Audit Nominating and Corporate Governance, and Compensation Committees are also independent.Committee.
Orientation and Continuing Education
We have an informal process to orient and educate new directors to our Board regarding their role on our Board ourand committees, and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a Board member.members. This information includes the most recent Board-approved budget, the most recent annual report, copies of the audited financial statements, and copies of the interim quarterly financial statements.
Our Board doesAs a company with limited resources, we do not typically provide continuing education for our directors. Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as a director.
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Director Assessments
OurIn December 2021, the Board intends thatimplemented individual director assessments. The director assessments be conducted byinvolve each director performing a self-assessment, as well as each director individually assessing other directors,members of the Board, taking into account each director’s contributions at Board meetings, service on committees, experience base,level, and their general ability to contribute to one or more of our major needs. However, duegrowth areas.
Investment in Human Capital
We believe our people are at the heart of our success and our customers’ success. We endeavor to not only attract and retain talented employees, but also to provide a challenging and rewarding environment to motivate and develop our valuable human capital. We look to our stage of developmenttalented employees to lead and foster various initiatives that support our needcompany culture including those related to deal with other urgent priorities,diversity, equity and inclusion. In addition, we rely heavily on our Board has not yet implemented such a process of assessment.talented team to execute our growth plans and achieve our long-term strategic objectives.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists betweenAs of September 6, 2022, no member of the Compensation Committee is serving, and during the past year no member of the Compensation Committee has served, as an officer or employee of the Company or any of its subsidiaries. None of our Board andexecutive officers currently serves, or during the past year has served, as a member of the board of directors or compensation committee (or other committee serving a similar purpose) of any other company, norentity that has an executive officer serving on our Board or Compensation Committee. In addition, none of the Compensation Committee members had any interlocking relationship, existedor participated in any transaction, with our Company during the past.fiscal year ended December 31, 2021 that requires disclosure under SEC rules. We have entered into indemnification agreements with each of our directors, including each member of the Compensation Committee.
Code of Ethics
In 2014, our Board approved and adopted a Codecode of Ethicsethics and Business Conductbusiness conduct for Directors, Senior Officers,directors, senior officers, and Employees (our “Codeemployees, or code of Ethics”)ethics, that applies to all of our directors, officers, and employees, including our principal executive officer and principal financial officer. Our CodeThe code of Ethicsethics is available on our website at https://www.verb.tech/investor-relations/governance/code-of-ethics.
The code of ethics addresses such individuals’ conduct with respect to, among other things, conflicts of interests; compliance with applicable laws, rules and regulations; full, fair, accurate, timely and understandable disclosure by us; competition and fair dealing; corporate opportunities; confidentiality; protection and proper use of our assets; and reporting suspected illegal or unethical behavior. Our Code
To the extent required by law, any amendments to or waivers of Ethics is availableany provision of the code of ethics will be promptly disclosed publicly on our website athttps://myverb.com/code-of-ethics.website.
Related Party Transactions
We follow ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. When and if we contemplate entering into a transaction in which any executive officer, director, nominee, or any family member of the foregoing would have a direct or indirect interest, regardless of the amount involved, the terms of such transaction are to be presented to our full Board (other than any interested director) for approval, and documented in the Board minutes.
Other than as disclosed below, we have had no related party transactions.
Notes Payable – Related Parties
We had the following outstanding notes payable during the period specified above:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Largest Aggregate Amount Outstanding Since January 1, 2018 | Amount Outstanding as of November 12, 2019 | Interest Paid Since January 1, 2019 | Interest Paid Since January 1, 2018 | ||||||||||||||||||||
| Note 1(1) | December 1, 2015 | February 8, 2021 | 12.0 | % | $ | 1,249,000 | $ | 1,199,000 | $ | 825,000 | $ | 78,000 | $ | 210,000 | ||||||||||||||
| Note 2(2) | December 1, 2015 | February 8, 2021 | 12.0 | % | 189,000 | 189,000 | - | - | 17,000 | |||||||||||||||||||
| Note 3(3) | December 1, 2015 | April 1, 2017 | 12.0 | % | 112,000 | 112,000 | 112,000 | - | - | |||||||||||||||||||
| Note 4(4) | April 4, 2016 | June 4, 2021 | 12.0 | % | 343,000 | 343,000 | 240,000 | 23,000 | 107,000 | |||||||||||||||||||
| Note 5(5) | April 4, 2016 | December 4, 2018 | 12.0 | % | 122,000 | 122,000 | - | - | 37,000 | |||||||||||||||||||
| Total notes payable – related parties | $ | 2,015,000 | $ | 1,965,000 | $ | 1,177,000 | $ | 101,000 | $ | 317,000 | ||||||||||||||||||
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Board Leadership Structure and Role in Risk Oversight
Board Leadership Structure
We currently combine the positions of ChairmanChairperson and Chief Executive Officer into one position. We believe that this structure is appropriate at this time and is a leadership model that has served our stockholders well since the inception of the Company. We believe that this combined model has certain advantages over other leadership structures. This combined role allows Mr. Cutaia to drive execution of our strategic plans and facilitates effective communication between management and our Board to bring key issues to its attention, and to see that our Board’s guidance and decisions are implemented effectively by management.
Further, our Board has designated Mr. Geiskopf as its Lead Independent Director. Mr. Geiskopf qualifies as an independent director under Nasdaq and SEC rules. Our Board believes that Mr. Geiskopf’shis strong leadership and qualifications, including his prior experience as a chief executive officer and chief financial officer and his tenure on our Board, among other factors, contribute to his ability to fulfill the role of Lead Independent Director effectively.
| 16 |
Role of theour Board in Risk Oversight
Our Board is responsible for the oversight of our operational risk management process. Our Board has delegated authority for addressing certain risks, and accessingassessing the steps management has taken to monitor, control, and report such risks to ourthe Audit Committee. Such risks include risks relating to execution of our growth strategy, the effects of the economy and general financial condition and outlook, our ability to expand our client base, communication with investors, certain actions of our competitors, the protection of our intellectual property, sufficiency of our capital, security of information systems and data, integration of new information systems, credit risk, product liability, and costs of reliance on external advisors. OurThe Audit Committee then reports such risks as appropriate to our Board, which then initiates discussions with appropriate members of our senior management if, after discussion of such risks, our Board determines that such risks raise questions or concerns about the status of operational risks then facing us.
Our Board relies on ourthe Compensation Committee to address significant risk exposures that we may face with respect to compensation, including risks relating to retention of key employees, protection of partner relationships, management succession, and benefit costs, and, when appropriate, reports these risks to the full Board.
Stockholder Communications with the Board
Stockholders and other parties interested in communicating directly with our Board, a committee thereof, or any individual director, may do so by sending a written communication to the attentionChange of the intended recipient(s) in care of the Corporate Secretary, Verb Technology Company, Inc., 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. The Corporate Secretary will forward all appropriate communications to the Chairman of our Audit Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 12, 2019, certain information with respect to the beneficial ownership of shares of our Common Stock by (i) each of our directors (including director nominees), (ii) each of our named executive officers, (iii) our directors and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than 5% of our outstanding Common Stock.
| Name and Address(7) | Title of Class | Amount and Nature of Beneficial Ownership(1) | Percent Owned (%)(2) | |||||||
| Rory J. Cutaia c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 3,981,869 | (3) | 16.5 | % | |||||
| James P. Geiskopf c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 503,933 | (4) | 2.1 | % | |||||
| Jeffrey R. Clayborne c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 403,265 | (5) | 1.7 | % | |||||
| Phillip J. Bond c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 28,167 | (6) | * | ||||||
| Kenneth S. Cragun c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 28,167 | (7) | * | ||||||
| Chad Thomas c/o 2210 Newport Boulevard, Suite 200 Newport Beach, California 92663 | Common Stock | 44,444 | (8) | * | ||||||
| All executive officers and directors as a group (6 persons) | Common Stock | 4,989,845 | (9) | 20.1 | % | |||||
| Beneficial owner of more than 5% | ||||||||||
| None | ||||||||||
* Represents less than 1%.
Change-in-ControlControl Arrangements
We do not know of any arrangements, which may, at a subsequent date, result in a change-in-control.change of control of the Company.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our directorsofficers and executive officers,directors, and persons who beneficially own more than 10% of the outstanding shares of our Common Stock (referredcommon stock, to herein as the “Reporting Persons”) file reports of ownership and changes in ownership concerning their shares of our common stock with the SEC variousand to furnish us with copies of all Section 16(a) forms they file. We are required to disclose delinquent filings of reports as to their ownershipby such persons.
Based solely on the copies of such reports and activities relating to our Common Stock. To the best of our knowledge,amendments thereto received by us, or written representations that no filings were required, we believe that all Reporting Persons complied on a timely basis with allSection 16(a) filing requirements applicable to them with respect to transactions during our most recent fiscal year. In making these statements, we have relied solely on our review of copies of the reports furnished to us, representations that no other reports were required, and other knowledge relating to transactions involving the Reporting Persons.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain compensation awarded to, earned by, or paid to the following “named executive officers” which is defined as follows:
We did not have any individuals for whom disclosure would have been required but and directors and 10% stockholders were met for the fact that the individual was not serving as an executive officer as of the end of fiscal 2018.
| Name and Position | Fiscal Year | Salary ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||
| Rory J. Cutaia(3) | 2018 | 436,000 | - | - | - | 1,186,000 | 1,622,000 | (4) | |||||||||||||||||||
| Chairman of the Board, Chief Executive Officer, President, Secretary, and Treasurer | 2017 | 400,000 | 710,000 | 167,000 | - | 690,000 | 1,967,000 | (5) | |||||||||||||||||||
| Jeffrey R. Clayborne(6) | 2018 | 110,000 | - | 17,000 | - | - | 127,000 | ||||||||||||||||||||
| Chief Financial Officer | 2017 | 96,000 | 325,000 | 313,000 | - | - | 733,000 | ||||||||||||||||||||
| Chad J. Thomas(7) | 2018 | 28,000 | - | - | 965,000 | - | 993,000 | ||||||||||||||||||||
| Chief Technology Officer | 2017 | - | - | - | - | - | - | ||||||||||||||||||||
Narrative Disclosure to Summary Compensation Table
The following is a discussion of the material information that we believe is necessary to understand the information disclosed in the foregoing Summary Compensation Table.
Rory J. Cutaia
On November 1, 2014, we entered into an employment agreement with Mr. Cutaia. The employment agreement is for a five-year term, and can be extended for additional one-year periods. On October 30, 2019, we entered into that certain First Amendment to Executive Employment Agreement with Mr. Cutaia for the purpose of extending the term of his employment agreement to December 31, 2019. In addition to certain payments due to Mr. Cutaia upon termination of employment, the employment agreement contains customary non-competition, non-solicitation, and confidentiality provisions. Mr. Cutaia is entitled to a base salary of $325,000 per year, with annual increases of 10%. Mr. Cutaia is also entitled to a mandatory increase of not less than $100,000 per annum upon us achieving EBITDA break-even. In addition, Mr. Cutaia is eligible for an annual bonus in an amount of $325,000 upon the achievement of certain performance targets established by our Board, as well as an annual stock option grant of 16,667 shares of our Common Stock. Finally, Mr. Cutaia is eligible for certain other benefits such as health, vision, and dental insurance, life insurance, and 401(k) Company matching.
Mr. Cutaia earned total cash compensation for his services to us in the amount of $436,000 and $400,000 for fiscal years 2018 and 2017, respectively.
On August 15, 2017, we issued Mr. Cutaia 250,000 shares of our Common Stock. The price per share was $2.25, as reported on the OTCQB.
On January 10, 2017, we granted Mr. Cutaia a stock option to purchase up to 133,333 shares of our Common Stock at an exercise price of $1.20 per share. The option is not currently vested, but will vest in full on January 10, 2020, and will expire on January 9, 2022. On December 19, 2017, we granted Mr. Cutaia a stock option to purchase up to 16,667 shares of our Common Stock at an exercise price of $1.16 per share. The option was vested as to 8,333 shares on the date of grant and vested as to the other 8,333 shares on December 18, 2018. The option expires on December 18, 2022.
On March 7, 2018, we issued Mr. Cutaia 100,000 shares of our Common Stock for services rendered in 2017. The price per share was $6.60, as reported on the OTCQB.
Mr. Cutaia also received $1,186,000 and $690,000 for fiscal years 2018 and 2017, respectively, as “other compensation,” which represented warrants with 3-year terms to purchase up to 186,675 and 205,623 shares of our Common Stock, respectively.
Jeffrey R. Clayborne
Mr. Clayborne earned total cash compensation for his services to us in the amount of $110,000 and $96,000 for fiscal years 2018 and 2017, respectively.
On May 4, 2017, we issued Mr. Clayborne 33,333 shares of our Common Stock. The price per share was $5.40, as reported on the OTCQB.
On January 10, 2017, we granted Mr. Clayborne a stock option to purchase 133,333 shares of our Common Stock at an exercise price of $1.20 per share. All of the shares will vest on January 10, 2020. On May 4, 2017, we granted Mr. Clayborne a stock option to purchase 33,333 shares of our Common Stock at an exercise price of $1.20 per share. The shares will vest annually in three equal installments. As of November 12, 2019, 22,222 shares were vested.
On March 7, 2018, we issued Mr. Clayborne 100,000 shares of our Common Stock for services rendered in 2017. The price per share was $6.60, as reported on the OTCQB.
On January 22, 2018, we granted Mr. Clayborne a stock option to purchase 12,876 shares of our Common Stock at an exercise price of $1.35. The shares vested on grant date.
Chad J. Thomas
Mr. Thomas earned total cash compensation for his services to us in the amount of $28,000 for fiscal year 2018.
On October 12, 2018, we granted Mr. Thomas a stock option to purchase 133,333 shares of our Common Stock at an exercise price of $7.50. The shares will vest annually in three equal installments. As of November 12, 2019, no shares were vested.
Outstanding Equity Awards at Fiscal Year-End
We did not have any stock awards outstanding as of December 31, 2018. The following table sets forth, for each named executive officer, certain information concerning outstanding option awards as of December 31, 2018:
| Name | Number of securities underlying unexercised options (exercisable) | Number of securities underlying unexercised options (unexercisable) (#) | Option exercise price ($) | Option expiration date | ||||||||||
| Rory J. Cutaia | 16,667 | - | 1.20 | December 18, 2022(1) | ||||||||||
| - | 133,333 | 1.20 | January 9, 2022(2) | |||||||||||
| 16,667 | - | 1.65 | October 31, 2012(3) | |||||||||||
| 83,333 | - | 1.50 | May 11, 2021(4) | |||||||||||
| 16,667 | - | 1.20 | November 1, 2019(5) | |||||||||||
| 53,333 | - | 7.50 | May 12, 2019(6) | |||||||||||
| Jeffrey R. Clayborne | 11,111 | 22,222 | 5.40 | May 3, 2022(7) | ||||||||||
| - | 133,333 | 1.20 | January 9, 2022(8) | |||||||||||
| 68,889 | 31,178 | 1.65 | July 14, 2021(9) | |||||||||||
| 12,876 | - | 1.35 | January 21, 2023(10) | |||||||||||
| Chad J. Thomas | - | 133,333 | 7.50 | October 11, 2023(11) | ||||||||||
Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.
Resignation, Retirement, Other Termination, or Change in Control Arrangements
Other than as disclosed below, we have no contract, agreement, plan, or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement, or other termination of our directors or executive officers, or a change in control of our company or a change in our directors’ or executive officers’ responsibilities following a change in control.
Rory J. Cutaia
Pursuant to Mr. Cutaia’s executive employment agreement dated November 1, 2014 (the “Employment Agreement”), Mr. Cutaia is entitled to the following severance package in the event he is “terminated without cause,” “terminated for good reason,” or “terminated upon permanent disability”: (i) monthly payments of $27,000 or such sum equal to his monthly base compensation at the time of the termination, whichever is higher, for a period of 36 months from the date of such termination or to the end of the term of the Employment Agreement, whichever is longer; and (ii) reimbursement for COBRA health insurance costs for 36 months from the date of such termination or to the end of the term of the Employment Agreement, whichever is longer. In addition, Mr. Cutaia’s unvested equity will immediately vest, without restriction, and any unearned and unpaid bonus compensation, expense reimbursement, and all accrued vacation, personal, and sick days, etc. shall be deemed earned, vested, and paid immediately. For purposes of the Employment Agreement, “terminated without cause” means Mr. Cutaia is terminated for any reason other than a discharge for cause or due to Mr. Cutaia’s death or permanent disability. For purposes of the Employment Agreement, “terminated for good reason” means the voluntary termination of the Employment Agreement by Mr. Cutaia if any of the following occurs without his prior written consent, which consent cannot be unreasonably withheld considering our then current financial condition, and in each case, which continues uncured for 30 days following receipt by us of Mr. Cutaia’s written notice: (i) there is a material reduction by us in (A) Mr. Cutaia’s annual base salary then in effect or (B) the annual target bonus, as set forth in the Employment Agreement, or the maximum additional amount up to which Mr. Cutaia is eligible pursuant to the Employment Agreement; (ii) we reduce Mr. Cutaia’s job title and position such that Mr. Cutaia (A) is no longer our Chief Executive Officer; (B) is no longer the Chairman of the Board; or (C) is involuntarily removed from our Board; or (iii) Mr. Cutaia is required to relocated to an office location outside of Los Angeles, California, or outside of a 30-mile radius of Los Angeles, California. With respect to our recent office relocation to Newport Beach, California, Mr. Cutaia voluntarily relocated. For purposes of the Employment Agreement, “terminated upon permanent disability” means Mr. Cutaia is terminated because he is unable to perform his duties due to a physical or mental condition for (i) a period of 120 consecutive days or (ii) an aggregate of 180 days in any 12-month period. On October 30, 2019, we entered into that certain First Amendment to Executive Employment Agreement with Mr. Cutaia for the purpose of extending the term of the Employment Agreement to December 31, 2019.
DIRECTOR COMPENSATION2021.
Director Summary Compensation Table
The table below summarizes the compensation paid to our non-employee directors for the fiscal year ended December 31, 2018:2021:
| Name(1) | Fees earned or paid in cash ($) | Stock awards ($) | Option awards ($) | Non-equity incentive plan compensation ($) | Nonqualified deferred compensation earnings ($) | All other compensation ($) | Total ($) | Fees Earned or | Stock Awards ($)(2) | Total ($) | |||||||||||||||||||||||||||||||
| James P. Geiskopf | - | - | - | - | - | - | - | 175,000 | 172,000 | (3) | 347,000 | ||||||||||||||||||||||||||||||
| Phillip J. Bond | - | - | 483,000 | (2)(3) | - | - | - | 483,000 | |||||||||||||||||||||||||||||||||
| Philip J. Bond | 75,000 | 86,000 | (4) | 161,000 | |||||||||||||||||||||||||||||||||||||
| Kenneth S. Cragun | - | - | 483,000 | (2)(3) | - | - | - | 483,000 | 75,000 | 86,000 | (4) | 161,000 | |||||||||||||||||||||||||||||
| Judith Hammerschmidt | 75,000 | 86,000 | (4) | 161,000 | |||||||||||||||||||||||||||||||||||||
| Nancy Heinen(5) | 75,000 | 86,000 | (4) | 161,000 | |||||||||||||||||||||||||||||||||||||
| (1) | |
| (2) | The amounts in this column represent the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718. |
| (3) | Represents 101,658 restricted stock units valued at $1.69 per share, which was the closing price of our common stock on |
| (4) | Represents 50,829 restricted stock units valued at $1.69 per share, which was the closing price of our common stock on Nasdaq on the grant date. The restricted stock units vested on the first anniversary of the grant date. |
Narrative Discussion onof Director Compensation
We have no formal planThe annual board retainer payable in cash for compensating our Lead Independent Director is $175,000 and for each of our other non-employee directors is $75,000. No additional cash fees are paid for their services in their capacity as directors. Ourattendance at Board or committee meetings. However, our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetingsBoard and committee meetings.
Each of our non-employee directors is entitled to receive an annual grant of restricted stock units for service on the Board. OurThe value of the annual grant is determined each year by the Board with feedback from our compensation consultant. The number of shares underlying each grant is determined based on the closing price of our common stock on Nasdaq on the grant date. The grants are typically subject to vesting on the first anniversary of the grant date. Additional information about the grants made during the fiscal year ended December 31, 2022 for each non-employee director is provided below.
Further, our Board may also award special remuneration to any director undertaking anydirectors who provide special services on their behalf other than services ordinarily required of a director.the Company, which may be in the form of cash or equity awards, subject to compliance with applicable Nasdaq and SEC rules regarding independence.
James P. Geiskopf
We did not pay any compensation to Mr. Geiskopf earned total cash compensation for his services as a director duringto us in the amount of $175,000 and $152,000 for the fiscal 2018.years ended December 31, 2021 and 2020, respectively.
On January 4, 2021, we granted Mr. Geiskopf restricted stock units valued at $172,000 payable in 101,658 shares of our common stock. The restricted stock award vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to calculate fair market value.
On April 10, 2020, we granted Mr. Geiskopf restricted stock units valued at $12,000 payable in 9,782 shares of our common stock as part of the Company’s COVID-19 Full Employment and Cash Preservation Plan (the “COVID Plan”). The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Geiskopf restricted stock units valued at $160,000 payable in 150,943 shares of our common stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Geiskopf restricted stock units valued at $35,000 payable in 33,078 shares of our common stock. The restricted stock units vested on grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
PhillipPhilip J. Bond
Mr. Bond earned total cash compensation for his services to us in the amount of $75,000 and $70,000 for the fiscal years ended December 31, 2021 and 2020, respectively.
On August 27, 2018,January 4, 2021, we granted Mr. Bond arestricted stock option to purchase up to 66,667units valued at $86,000 payable in 50,829 shares of our Common Stock at an exercise price of $7.50 per share. 13,333 of the sharescommon stock. The restricted stock units vested on the inceptionfirst anniversary of service, the remaininggrant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to calculate fair market value.
On April 10, 2020, we granted Mr. Bond restricted stock units valued at $6,000 payable in 4,891 shares vest annuallyof our common stock as part of the COVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Bond restricted stock units valued at $80,000 payable in four equal installments.75,472 shares of our common stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
Kenneth S. Cragun
Mr. Cragun earned total cash compensation for his services to us in the amount of $75,000 and $70,000 for the fiscal years ended December 31, 2021 and 2020, respectively.
On August 27, 2018,January 4, 2021, we granted Mr. Cragun arestricted stock option to purchase up to 66,667units valued at $86,000 payable in 50,829 shares of our Common Stock at an exercise price of $7.50 per share. 13,333 of the sharescommon stock. The restricted stock units vested on the inceptionfirst anniversary of service, the remaininggrant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to calculate fair market value.
On April 10, 2020, we granted Mr. Cragun restricted stock units valued at $6,000 payable in 4,891 shares vest annuallyof our common stock as part of the COVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Cragun restricted stock units valued at $80,000 payable in four equal installments.75,472 shares of our common stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
Golden Parachute CompensationJudith Hammerschmidt
For a descriptionMs. Hammerschmidt earned total cash compensation for her services to us in the amount of $75,000 and $64,000 for the fiscal years ended December 31, 2021 and 2020, respectively.
On January 4, 2021, we granted Ms. Hammerschmidt restricted stock units valued at $86,000 payable in 50,829 shares of our common stock. The restricted stock units vested on the first anniversary of the termsgrant date. The price per share as reported by Nasdaq on the day of any agreement or understanding, whether written or unwritten, between any officer or directorissuance was $1.69 and us concerning any type of compensation, whether present, deferred, or contingent, that will be based on or otherwise will relatewas used to an acquisition, merger, consolidation, sale, or other type of disposition of all or substantially all assetscalculate fair market value.
On April 10, 2020, we granted Ms. Hammerschmidt restricted stock units valued at $6,000 payable in 4,891 shares of our company, see above undercommon stock as part of the heading “Executive Compensation,” “Director Summary Compensation Table,”COVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and “Narrative Discussion on Director Compensation.”was used to calculate fair market value.
Risk AssessmentOn July 29, 2020, we granted Ms. Hammerschmidt restricted stock units valued at $80,000 payable in Compensation Programs75,472 shares of our common stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
Nancy Heinen
During fiscal 2018 and 2017, we paidMs. Heinen earned total cash compensation for her services to our employees, including executive and non-executive officers. Due to the size and scope of our business, andus in the amount of compensation, we did not have any employee compensation policies$75,000 and programs to determine whether our policies$64,000 for the fiscal years ended December 31, 2021 and programs create risks that are reasonably likely to have a material adverse effect on us.
Equity Compensation Plan Information2020 respectively.
Equity Compensation Plan Information
The following table summarizes certain information regarding our equity compensation plans as of December 31, 2018:
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
| Equity compensation plans approved by security holders | - | - | - | |||||||||
| Equity compensation plans not approved by security holders | 2,478,974 | $ | 5.25 | 168,600 | ||||||||
| Total | 2,478,974 | $ | 5.25 | 168,600 | ||||||||
Effective October 16, 2014, our board of directors adopted and approved the 2014 Stock Option Plan (the “2014 Plan”). The purpose of the 2014 Plan is to (a) enable us and any of our affiliates to attract and retain the types of employees, consultants, and directors who will contribute to our long-term success; (b) provide incentives that align the interests of employees, consultants and directors with those of our stockholders; and (c) promote the success of our business.
The 2014 Plan provides for the grant of incentiveOn January 4, 2021, we granted Ms. Heinen restricted stock options to purchaseunits valued at $86,000 payable in 50,829 shares of our Common Stockcommon stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to our directors, officers, employees, and consultants. The 2014 Plan is administered by our Board, except that it may,calculate fair market value.
On April 10, 2020, we granted Ms. Heinen restricted stock units valued at $6,000 payable in its discretion, delegate such responsibility to a committee comprised of at least two directors. A maximum of 800,0004,891 shares are reserved and set aside for issuance under the 2014 Plan. Each option, upon its exercise, entitles the optionee to acquire one share of our Common Stock, upon paymentcommon stock as part of the applicable exerciseCOVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which is determinedwas the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
On July 29, 2020, we granted Ms. Heinen restricted stock units valued at $80,000 payable in 75,472 shares of our Boardcommon stock. The restricted stock units vested on the first anniversary of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
Nancy Heinen will not be standing for re-election at the time of grant. Stock options may be granted under the 2014 Plan for an exercise period of up to ten years from the grant date of the option or such lesser periods as may be determined by our Board, subject to earlier terminationAnnual Meeting and any unvested restricted stock units will terminate in accordance with the terms of the 2014 Plan.
Vesting terms are determined by our Board at the time of grant; provided, that, if no vesting schedule is specified at the time of grant, 25% of the options granted will vest on each of the first, second, third, and fourth anniversaries of the grant date. Options that have vested will terminate, to the extent not previously exercised, upon the occurrence of the first of the following events: (i) the expiration of the options; (ii) the date of an optionee’s termination of employment or contractual relationship with us for cause (as determined in the sole discretion of the plan administrator; (iii) the expiration of three months from the date of an optionee’s termination of employment or contractual relationship with us for any reason whatsoever other than cause, death, or disability (as defined in the Plan); or (iv) the expiration of one year from termination of an optionee’s employment or contractual relationship by reason of death or disability.
PROPOSAL 2 – APPROVAL OF THE 2019 OMNIBUS INCENTIVE PLANrelevant award agreements.
What Am I Voting On?
Stockholders are being asked to approve the Incentive Plan, which was approved by our Board on November 11, 2019. The Incentive Plan will become effective on the date it is approved by our stockholders, and will replace the 2014 Plan, which is the only plan under which equity awards are currently being granted.
Voting Recommendation
FORthe approval of the Incentive Plan because it includes a number of features that we believe are consistent with the interests of our stockholders and sound corporate governance practices.
GeneralEquity Awards Outstanding
The purposefollowing table sets forth, for each non-employee director, the number of the Incentive Plan is to enhance stockholder value by linking the compensationequity awards outstanding as of our officers, directors, key employees, and consultants to increases in the price of our Common Stock and the achievement of other performance objections and to encourage ownership in the Company by key personnel whose long-term employment is considered essential to our continued progress and success. The Incentive Plan is also intended to assist us in recruiting new employees and to motivate, retain, and encourage such employees and directors to act in our stockholders’ interest and share in our success.December 31, 2021:
| Name | Number of Restricted (#) | Number of Stock (#) | ||||||
| James P. Geiskopf | 101,658 | 133,333 | ||||||
| Philip J. Bond | 50,829 | 66,667 | ||||||
| Kenneth S. Cragun | 50,829 | 66,667 | ||||||
| Judith Hammerschmidt | 80,232 | - | ||||||
| Nancy Heinen | 80,232 | - | ||||||
TermIndemnification of Directors and Officers
The Incentive PlanWe are a Nevada corporation governed by the Nevada Revised Statutes (the “NRS”).
Section 78.138 of the NRS provides that, unless the corporation’s articles of incorporation provide otherwise, a director or officer will become effective upon approval by our stockholders and will continue in effect from that date untilnot be individually liable unless it is terminated in accordance with its terms.proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud, or a knowing violation of the law.
Administration
The Incentive Plan may be administered by our Board,Section 78.7502 of the NRS permits a committee designated by it, and/company to indemnify its directors and officers against expenses, judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending, or their respective delegates. Our Board currently contemplates that our Compensation Committee will administercompleted action, suit, or proceeding, if the Incentive Plan. The administrator hasofficer or director (i) is not liable pursuant to Section 78.138 of the power to determineNRS, or (ii) acted in good faith and in a manner the directors, employees, and consultants who may participate in the Incentive Plan and the amounts and other terms and conditions of awardsofficer or director reasonably believed to be granted under the Incentive Plan. All questions of interpretation and administration with respectin or not opposed to the Incentive Plan will be determinedbest interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful. Section 78.7502 of the NRS also precludes indemnification by the administrator. The administrator also will havecorporation if the complete authorityofficer or director has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals, to adopt, amend, rescind, and enforce rules and regulations pertainingbe liable to the administrationcorporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines that in view of all the circumstances, the person is fairly and reasonably entitled to indemnity for such expenses and requires a corporation to indemnify its officers and directors if they have been successful on the merits or otherwise in defense of any claim, issue, or matter resulting from their service as a director or officer.
Section 78.751 of the Incentive Plan;NRS permits a Nevada corporation to correct administrative errors;indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit, or proceeding as they are incurred and in advance of a final disposition thereof, upon determination by the stockholders, the disinterested board members, or by independent legal counsel. Section 78.751 of the NRS provides that the articles of incorporation, the bylaws, or an agreement may require a corporation to make all other determinations deemed necessaryadvance expenses as incurred upon receipt of an undertaking by or advisable for administering the Incentive Plan and any award granted under the Incentive Plan; and to authorize any person to execute, on behalf of the Company, all agreements and documents previously approvedofficer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the administrator, among other items.
Eligibility
Any of our directors, employees, or consultants, or any directors, employees, or consultants of any of our affiliates (except that with respect to incentive stock options, only employees of the Company or any of our subsidiaries are eligible), are eligible to participate in the Incentive Plan.
Available Shares
Subject to the adjustment provisions included in the Incentive Plan, a total of 8,000,000 shares of our Common Stock would be authorized for awards granted under the Incentive Plan. Shares subject to awards that have been canceled, expired, settled in cash, or not issued or forfeited for any reason (in whole or in part), will not reduce the aggregate number of shares that may be subject to or delivered under awards granted under the Incentive Plan and will be available for future awards granted under the Incentive Plan.
Types of Awards
We may grant the following types of awards under the Incentive Plan: stock awards; options; stock appreciation rights; stock units; or other stock-based awards.
Stock Awards. The Incentive Plan authorizes the grant of stock awards to eligible participants. The administrator determines (i) the number of shares subject to the stock award or a formula for determining such number, (ii) the purchase price of the shares,corporation if any, (iii) the means of payment for the shares, (iv) the performance criteria, if any, and the level of achievement versus these criteria, (v) the grant, issuance, vesting, and/or forfeiture of the shares, (vi) restrictions on transferability, and such other terms and conditions determined by the administrator.
Options. The Incentive Plan authorizes the grant of non-qualified and/or incentive options to eligible participants, which options give the participant the right, after satisfaction of any vesting conditions and prior to the expiration or termination of the option, to purchase shares of our Common Stock at a fixed price. The administrator determines the exercise price for each share subject to an option granted under the Incentive Plan, which exercise price cannot be less than the fair market value (as defined in the Incentive Plan) of our Common Stock on the grant date. The administrator also determines the number of shares subject to each option, the time or times when each option becomes exercisable, and the term of each option (which cannot exceed ten (10) years from the grant date).
Stock Appreciation Rights. The Incentive Plan authorizes the grant of stock appreciation rights to eligible participants, which stock appreciation rights give the participant the right, after satisfaction of any vesting conditions and prior to the expiration or termination of the stock appreciation right, to receive in cash or shares of our Common Stock the excess of the fair market value (as defined in the Incentive Plan) of our Common Stock on the date of exercise over the exercise price of the stock appreciation right. All stock appreciation rights under the Incentive Plan shall be granted subject to the same terms and conditions applicable to options granted under the Incentive Plan. Stock appreciation rights may be granted to awardees either alone or in addition to or in tandem with other awards granted under the Incentive Plan and may, but need not, relate to a specific option granted under the Incentive Plan.
Stock Unit Awards and Other Stock-Based Awards. In addition to the award types described above, the administrator may grant any other type of award payable by delivery of our Common Stock in such amounts and subject to such terms and conditions as the administrator determines in its sole discretion, subject to the terms of the Incentive Plan. Such awards may be made in addition to or in conjunction with other awards under the Incentive Plan. Such awards may include unrestricted shares of our Common Stock, which may be awarded, without limitation (except asso provided in the Incentive Plan),corporation’s articles of incorporation, bylaws, or other agreement. Section 78.751 of the NRS further permits the corporation to grant its directors and officers additional rights of indemnification under its articles of incorporation, bylaws, or other agreement.
Section 78.752 of the NRS provides that a Nevada corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a bonus,director, officer, employee, or agent of another company, partnership, joint venture, trust, or other enterprise, for any liability asserted against him and liability and expenses incurred by him in paymenthis capacity as a director, officer, employee, or agent, or arising out of director fees,his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. We have obtained insurance policies insuring our directors and officers against certain liabilities they may incur in lieu of cash compensation, in exchangetheir capacity as directors and officers. Under such policies, the insurer, on our behalf, may also pay amounts for cancellation of a compensation right, or upon the attainment of performance goals or otherwise, or rights to acquire shares of our Common Stock from us.
Award Limits
Subjectwhich we have granted indemnification to the terms of the Incentive Plan, the aggregate number of shares that may be subject to all incentive stock options granted under the Incentive Plan cannot exceed the total aggregate number of shares that may be subject todirectors or delivered under awards under the Incentive Plan. Notwithstanding any other provisions of the Incentive Plan to the contrary, the aggregate grant date fair value (computed as specified in the Incentive Plan) of all awards granted to any non-employee director during any single calendar year shall not exceed 300,000 shares during 2019 and, thereafter, 200,000 shares.
New Plan Benefitsofficers.
The amountforegoing discussion of future grants underindemnification merely summarizes certain aspects of indemnification provisions and is limited by reference to the Incentive Plan is not determinable, as awards under the Incentive Plan will be granted at the sole discretionabove discussed sections of the administrator. We cannot determinate at this time either the persons who will receive awards under the Incentive Plan or the amount or types of such any such awards.NRS.
Transferability
Unless determined otherwise by the administrator, an award mayOur articles of incorporation provide that, except in some specified instances, our directors and officers shall not be sold, pledged, assigned, hypothecated, transferred,personally liable to us or disposedour stockholders for monetary damages for breach of in any manner other than by beneficiary designation, will, or bytheir fiduciary duty as directors and officers, except liability for the laws of descent or distribution, including but not limited to any attempted assignment or transfer in connection with the settlement of marital property or other rights incident to a divorce or dissolution, and any such attempted sale, assignment, or transfer shall be of no effect prior to the date an award is vested and settled.
Termination of Employment or Board Membership
At the grant date, the administrator is authorized to determine the effect a termination from membership on the Board by a non-employee director for any reason or a termination of employment (as defined in the Incentive Plan) due to disability (as defined in the Incentive Plan), retirement (as defined in the Incentive Plan), death, or otherwise (including termination for cause (as defined in the Incentive Plan)) will have on any award. Unless otherwise provided in the award agreement:following:
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ChangeIn addition, our articles of Control
Inincorporation and Bylaws provide that we must indemnify our directors and officers and may indemnify our employees and other agents to the eventfullest extent permitted by the NRS. The Bylaws also authorize us to purchase and maintain insurance on behalf of a changeany of control (as definedour directors or officers against any liability asserted against that person in that capacity, whether or not we would have the Incentive Plan), unless otherpower to indemnify that person against such liability and expenses. We have entered and expect to continue to enter into agreements to indemnify our directors and executive officers as determined by our Board. In general, the administratorindemnification agreements provide that we will, to the fullest extent permitted by Nevada law and subject to certain limitations, indemnify the indemnitee against certain expenses (including attorneys’ fees), judgments, fines, penalties, and settlement amounts that may be incurred in connection with the defense or settlement of any claim, criminal, civil, or administrative action or proceeding to which the indemnitee becomes subject in connection with his or her services as of the grant date of a particular award, the following acceleration, exercisability,an executive officer, director, or both. We believe that these Bylaw provisions and valuation provisions apply:
U.S. Federal Income Tax Treatmentindemnification agreements are necessary to attract and retain qualified persons as directors and executive officers.
The following discussion is intended only aslimitation of liability and indemnification provisions in our articles of incorporation and Bylaws may discourage stockholders from bringing a brief summarylawsuit against our directors for breach of their fiduciary duty. They may also reduce the federal income tax rules that are generally relevant to awards aslikelihood of the date of this Proxy Statement. The laws governing the tax aspects of awards are highly technicalderivative litigation against our directors and such laws are subject to change.
Non-Qualified Options. With respect to non-qualified options granted to participants under the Incentive Plan, (i) no income is realized by the participant at the time the non-qualified option is granted, (ii) at exercise, (a) ordinary income is realized by the participant inofficers, even though an amount equal to the difference between the option exercise priceaction, if successful, might benefit us and the fair market value of our Common Stock on the date of exercise, (b) such amount is treated as compensation and is subject to both income and wage tax withholding, and (c) weother stockholders. Furthermore, a stockholder’s investment may claim a tax deduction for the same amount, and (iii) on disposition of the option shares, any appreciation or depreciation after the date of exercise of the non-qualified option, compared to the disposition price of the option shares will be treated as either short-term or long-term capital gain or loss depending on the holding period.
Incentive Stock Options. With respect to incentive stock options, there is no tax to the participant at the time of the grant. Additionally, if applicable holding period requirements (a minimum of both two years from the grant date and one year from the exercise date) are met, the participant will not recognize taxable income at the time of the exercise. However, the excess of the fair market value of the shares acquired at the time of exercise over the aggregate exercise price is an item of tax preference income, potentially subject to the alternative minimum tax. If shares acquired upon exercise of an incentive stock option are held for the holding period described above, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the option exercise price), upon their disposition, the holding period of the option shares will be treated as a long-term capital gain or loss, and, unlike the treatment for shares issued pursuant to the exercise of a non-qualified option, we will not be entitled to any tax deduction. If the shares acquired on option exercise are disposed of in a “non-qualifying disposition” (i.e., before the holding period requirements had been met), the participant will generally realize ordinary income at the time of the disposition of the option shares in an amount equal to the lesser of (i) the excess of the fair market value of the option shares on the date of exercise of the incentive stock option over the exercise price thereof or (ii) the excess, if any, of the amount realized upon disposition of the option shares over the exercise price of the incentive stock option, and, just as the treatment for shares issued pursuant to the exercise of a non-qualified option, we will be entitled to a corresponding tax deduction. Any amount realized in excess of the value of the shares on the date of exercise will be capital gain. If the amount realized is less than the exercise price, the participant will not recognize ordinary income, and the participant will generally recognize a capital loss equal to the excess of the exercise price of the incentive stock option over the amount realized upon the disposition of the option shares.
Other Awards. The current federal income tax consequences of other awards authorized under the Incentive Plan generally follow certain basic patterns. An award of restricted shares of Common Stock results in income recognition by a participant in an amount equal to the fair market value of the shares received at the time the restrictions lapse and the shares then vest, unless the participant elects under Internal Revenue Code Section 83(b) to accelerate income recognition and the taxability of the award to the grant date. Stock unit awards generally result in income recognition by a participant at the time payment of such an award is made in an amount equal to the amount paid in cash or the then-current fair market value of the shares received, as applicable. Stock appreciation right awards result in income recognition by a participant at the time such an award is exercised in an amount equal to the amount paid in cash or the then-current fair market value of the shares received by the participant, as applicable. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes ordinary income, subject to Internal Revenue Code Section 162(m) with respect to covered employees.
Section 162(m) of the Internal Revenue Code. Internal Revenue Code Section 162(m) denies a deduction to any publicly-held corporation for compensation paid to certain “covered employees” in a taxable yearadversely affected to the extent that compensation to a covered employee exceeds $1,000,000. “Covered employees” generally includeswe pay the Chief Executive Officer, the Chief Financial Officer,costs of settlement and the three other most highly compensated executive officers.
Section 409A of the Internal Revenue Code. Awards granted under the Incentive Plan will generally be designeddamage awards against directors and administered in such a manner that they are either exempt from the application of, or comply with the requirements of, Section 409A of the Internal Revenue Code. Section 409A of the Internal Revenue Code imposes restrictions on nonqualified deferred compensation. Failure to satisfy these rules results in accelerated taxation, an additional tax to the holder in an amount equal to 20% of the deferred amount, and a possible interest charge. Options granted with an exercise price that is not less than the fair market value of the underlying shares on the date of grant will not give rise to “deferred compensation” for this purpose unless they involve additional deferral features.
Other Tax Considerations. This summary is not intended to be a complete explanation of all of the federal income tax consequences of participating in the Incentive Plan. A participant should consult his or her personal tax advisor to determine the particular tax consequences of the Incentive Plan, including the application and effect of foreign state and local taxes and any changes in the tax laws after the date of this Proxy Statement.
Amendment and Termination
The administrator may amend, alter, or discontinue the Incentive Plan or any award agreement, but any such amendment is subject to the approval of our stockholders in the manner and to the extent required by applicable law. In addition, without limiting the foregoing, unless approved by our stockholders and subject to the terms of the Incentive Plan, no such amendment shall be made that would (i) increase the maximum aggregate number of shares that may be subject to awards granted under the Incentive Plan, (ii) reduce the minimum exercise price for options or stock appreciation rights granted under the Incentive Plan, or (iii) reduce the exercise price of outstanding options or stock appreciation rights, as prohibited by the terms of the Incentive Plan without stockholder approval.
No amendment, suspension, or termination of the Incentive Plan will impair the rights of any participant with respect to an outstanding award, unless otherwise mutually agreed between the participant and the administrator, which agreement must be in writing and signed by the participant and us, except that no such agreement will be required if the administrator determines in its sole discretion that such amendment either (i) is required or advisable in order for us, the Incentive Plan, or the award to satisfy any applicable law or to meet the requirements of any accounting standard or (ii) is not reasonably likely to diminish the benefits provided under such award significantly, or that any such diminution has been adequately compensated, except that this exception shall not apply following a change of control. Termination of the Incentive Plan will not affect the administrator’s ability to exercise the powers granted to it hereunder with respect to awards granted under the Incentive Plan prior to the date of such termination.
PROPOSAL 3 – APPROVAL OF THE STOCK ISSUANCE PROPOSAL
What Am I Voting On?
Stockholders are being asked to approve the issuance of up to 3,245,162 shares of our Common Stock upon conversion of the shares of our Series A Preferred Stock and up to 3,245,162 shares of our Common Stock upon exercise of the Warrants, the aggregate of which conversions and exercises would represent greater than 19.99% of the issued and outstanding shares of our Common Stock as of August 14, 2019 (the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants). This requested approval is required by and in accordance with Nasdaq Listing Rules 5635(b) and 5635(d).
Voting Recommendation
FORthe approval of the Stock Issuance Proposal.
General
We are currently authorized to issue up to 200,000,000 shares of our Common Stock and 15,000,000 shares of our preferred stock, par value $0.0001 per share. Of the 200,000,000 shares of our Common Stock authorized by our Articles of Incorporation, 24,469,949 shares of our Common Stock are issued and outstanding as of November 12, 2019. Of the 15,000,000 shares of preferred stock, par value $0.0001 per share, authorized in our Articles of Incorporation, 6,000 shares have been designated as Series A Preferred Stock, of which 5,030 shares were issued and outstanding as of November 12, 2019.
On August 14, 2019, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers named therein, pursuant to which we issued and sold to the purchasers up to an aggregate of 5,030 shares of our Series A Preferred Stock and granted Warrants to purchase an aggregate of up to 3,245,162 shares of our Common Stock (an amount equivalent to the number of shares of our Common Stock into which the shares of our Series A Preferred Stock is initially convertible). Each share of our Series A Preferred Stock is convertible, at any time and from time to time from and after August 14, 2019, at the holder’s option into that number of shares of our Common Stock equal to its stated value per share (or $1,000) divided by the conversion price (initially, $1.55); thus, initially, each share of our Series A Preferred Stock is convertible into approximately 645 shares of our Common Stock. The Warrants have an initial exercise price of $1.88 per share of our Common Stock, subject to customary adjustments, are exercisable from and after February 14, 2020, and will expire at 5:00 p.m. (New York City time) on August 14, 2024. We closed the offering on August 14, 2019 and issued and sold 5,030 shares of our Series A Preferred Stock and granted Warrants exercisable into a maximum of 3,245,162 shares of our Common Stock, resulting in aggregate proceeds of $5,030,000. The conversion price of the shares of our Series A Preferred Stock and the exercise price of the Warrants may be subject to downward price adjustments based on the pricing of future equity sales or rights offerings.
Unless and until this Proposal 3 is approved by our stockholdersofficers as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Nasdaq Listing Rules, the purchasers are limitedSecurities Act of 1933, as to the number of shares of our Series A Preferred Stock thatamended (the “Securities Act”), may be convertedpermitted to our directors, officers and the number of Warrants that may be exercised. If our stockholders approve this Proposal 3, and assuming the conversion of all of the shares of our Series A Preferred Stock and exercise of all of the Warrants, the purchasers would own an aggregate of 6,490,324 shares of our Common Stock, representing approximately 22% of our outstanding capital stock as of November 12, 2019.
Nasdaq Rules
Our Common Stock is listed on the Nasdaq Capital Market under the symbol “VERB” and, as such, we are subject to the Nasdaq Listing Rules. Pursuant to Listing Rule 5635(b), stockholder approval is required prior to the issuance of securities if such issuance or potential issuance may result in a change of control of the issuer. Under Nasdaq rules and policies, a change of control may be deemed to occur when, as a result of an issuance, an investor or a group would own, or have the right to acquire, 20% or more of the outstanding shares of common stock or voting power of the issuer, and such ownership or voting power would be the largest ownership position of the issuer. Conversion of the shares of our Series A Preferred Stock and exercise of the Warrants could result in the holders thereof owning an amount in excess of 19.99% of the issued and outstanding shares of our Common Stock as of August 14, 2019 (the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants). Pursuant to Listing Rule 5635(d), stockholder approval is required for a transaction, other than a public offering, that involves the sale, issuance, or potential issuance by a company of shares of its common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the number of shares of its common stock, or 20% or more of the voting power outstanding before the issuance for less than the lower of: (i) the closing price as reported by Nasdaq immediately preceding the signing of the SPA, or $1.85, or (ii) the average closing price of our Common Stock as reported by Nasdaq for the five trading days immediately preceding the signing of the SPA, or $1.828.
Accordingly, to comply with Listing Rules 5635(b) and 5635(d), the Certificate of Designation of Rights, Preferences, and Restrictions of our Series A Preferred Stock and each Common Stock Purchase Warrant prevents us from issuing that number of shares of our Common Stock, which, when aggregated with any shares of our Common Stock that were issued on or after the date on which the shares of our Series A Preferred Stock were issued and sold and on which the Warrants were granted, but prior to such conversion or exercise date (i) in connection with any conversion of shares of our Series A Preferred Stock issuedcontrolling persons pursuant to the SPA, (ii)foregoing provisions, or otherwise, we have been advised that in connection with any exercise of any Warrants issued pursuant to the SPA, and (iii) in connection with the exercise of any warrants issued to any registered broker-dealer as a fee in connection with the issuance and saleopinion of the shares of our Series A Preferred Stock and the grant of the Warrants, all pursuant to the SPA, would exceed 4,459,725 shares of Common Stock (the “Issuable Maximum”).
Effect of Issuance of Common Stock
The issuance of the 6,490,324 shares of our Common Stock that are the subject of this Proposal 3 will result in an increaseSEC such indemnification is against public policy as expressed in the number of shares of our Common Stock outstanding,Securities Act and our stockholders will incur further dilution of their percentage ownership in us to the extent that the holders of our Series A Preferred Stock convert their shares of our Series A Preferred Stock and the holders of the Warrants exercise their Warrants for shares of our Common Stock.
Required Vote
We are seeking your approval of this Proposal 3 in order to satisfy the stockholder approval requirements of Nasdaq, including Nasdaq Listing Rules 5635(b) and 5635(d), with respect to our issuance of shares of our Common Stock to the holders of shares of our Series A Preferred Stock upon their conversion thereof and shares of our Common Stock to the holders of Warrants upon their exercise thereof, which potential issuances, in the aggregate, represent more than 19.99% of our outstanding Common Stock as of August 14, 2019 (the date on which we issued and sold the shares of our Series A Preferred Stock and granted the Warrants).
Stockholder approval of this Proposal 3 requires aFOR vote from at least a majority of the votes cast. Abstentions and broker non-votes will not have any effect on the outcome of this matter.
Consequences if Stockholder Approval is, Not Obtained
If we do not obtain stockholder approval, conversions of shares of our Series A Preferred Stock into shares of our Common Stock and exercises of the Warrants for shares of our Common Stock in excess of the Issuable Maximum will not be permitted, and the holders of the shares of our Series A Preferred Stock will continue to hold those shares, just as the holders of the Warrants will continue to hold those Warrants. We are also required to continue to seek stockholder approval of the Stock Issuance Proposal.
therefore, unenforceable.
PROPOSAL 4 – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
What Am I Voting On?
Stockholders are being asked to approve, on a non-binding, advisory basis, the compensation of our named executive officers.
Voting Recommendation
FORthe non-binding, advisory vote to approve the executive compensation of our named executive officers disclosed in this Proxy Statement under the section entitled “Executive Compensation,” including the compensation tables and other narrative executive compensation disclosures therein, required by Item 402 of SEC Regulation S-K.
Summary
We believe executive compensation is an important matter for our stockholders. A fundamental principle of our executive compensation philosophy and practice continues to be to pay-for-performance. An executive officer’s compensation package historically has been comprised of a base salary, which reflects individual performance and expertise. Previously, we have also granted stock options to our executive officers as part of their compensation. Based on our size and scope, we believe that this type of compensation program is consistent with our strategy, competitive practice, sound corporate governance principles, and stockholder interests and concerns. We urge you to read this Proxy Statement for additional details on our executive compensation, including our compensation philosophy and objectives and the fiscal 2018 compensation of the named executive officers.
This proposal, commonly known as a “say-on-pay” proposal, gives you, as a stockholder, the opportunity to endorse or not to endorse our executive pay philosophy, policies, and procedures. This vote is intended to provide an overall assessment of our executive compensation program, rather than focus on any specific item of compensation. Given the information provided above and elsewhere in this Proxy Statement, our Board asks you to approve the following resolution:
“RESOLVED, that the Company’s stockholders approve the compensation of the Company’s named executive officers described in the Proxy Statement under the section titled “Executive Compensation”, including the compensation tables and other narrative executive compensation disclosures therein, required by Item 402 of Regulation S-K.”
As an advisory vote, this proposal is non-binding on us. However, our Board and Compensation Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.
PROPOSAL 5 – ADVISORY VOTE TO APPROVE THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
What Am I Voting On?
Stockholders are being asked to approve, on a non-binding, advisory basis, the frequency of say-on-pay votes.
Voting Recommendation
FORthe non-binding, advisory vote on the frequency of say-on-pay votes approving the executive compensation of our named executive officers disclosed in this Proxy Statement under the section titled “executive compensation,” including the compensation tables and other narrative execution compensation disclosures therein, required by Item 402 of SEC Regulation S-K every three years.
Summary
As discussed above in Proposal 4, executive compensation is an important matter for the Company’s stockholders. Companies are required to provide a separate stockholder advisory vote once every six years to determine whether the stockholders’ say-on-pay vote should occur every year, every two years, or every three years. We believe that approval of executive compensation should occur every three years, as stockholder feedback on executive compensation would be more useful if the success of our compensation program is judged over a period of time.
We are asking stockholders to vote on whether the say-on-pay vote should occur every year, every two years, or every three years. As an advisory vote, this proposal is non-binding on the Company. However, our Board values the opinions of our stockholders and will consider the outcome of the vote when determining how often a say-on-pay advisory vote of the stockholders should be taken.
PROPOSAL 62 – RATIFICATION OF THE SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
What Am I Voting On?General
It is the responsibility of the Audit Committee to select and retain our independent registered public accounting firms. Ourfirm. The Audit Committee has appointed Weinberg as our independent registered public accounting firm for our fiscal year ending December 31, 2019.2022. Although stockholder ratification of the Audit Committee’s selection of our independent registered public accounting firm is not required by ourthe Bylaws or otherwise,applicable law, we are submitting the selection of Weinberg to stockholderfor ratification so that our stockholders may participate in this important corporate decision. If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select a different independent registered public accounting firm for us.firm.
Representatives of Weinberg willare expected to be present at the Annual Meeting and will have an opportunity to make a statement and respond to questions from stockholders present at the meeting.
Voting RecommendationAudit Fees and Services
FORThe following table sets forth the ratification offees billed to us for the appointment of Weinberg asyear ended December 31, 2021 and 2020 for professional services rendered by our independent registered public accounting firm.
Audit Fees
| Fees | Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||||
| Audit Fees | $ | 224,000 | $ | 217,000 | ||||
| Audit-Related Fees | 2,000 | 4,000 | ||||||
| Tax Fees | 44,000 | 46,000 | ||||||
| All Other Fees | 50,000 | 93,000 | ||||||
| Total Fees | $ | 320,000 | $ | 360,000 | ||||
The followingFor purposes of the table, presentsthe professional fees paid or to be paid for professional audit services rendered by Weinberg for the audit of our annual financial statements during the years ended December 31, 2018 and 2017, review of financial statements included in our quarterly reports during the years ended December 31, 2018 and 2017, and fees billed for other services rendered:are classified as follows:
| Fiscal 2018 | Fiscal 2017 | |||||||
| Audit Fees (1) | $ | 122,000 | $ | 62,000 | ||||
| Audit-Related Fees (2) | 7,000 | 1,000 | ||||||
| Tax Fees | - | - | ||||||
| All Other Fees (3) | 166,000 | 8,000 | ||||||
| Total All Fees | $ | 295,000 | $ | 71,000 | ||||
| Audit Fees | ||
| ● | Audit-Related Fees - Fees for expenses by the independent auditors that are associated with the audit, but don’t fall within the above-described category. | |
| All Other Fees |
Pre-Approval Policies and Procedures
The Audit Committee has adopted policies and procedures to oversee the external audit process and pre-approves all services provided by our independent registered public accounting firm. Prior to the addition of Messrs. Bond and Cragun as members of the Audit Committee, our entire Board, consisting of Messrs. Cutaia and Geiskopf, acted as our Audit Committee and was responsible for pre-approving all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our Board orthe Audit Committee, as applicable, before the respective services were rendered.
Voting Recommendation
OUR BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF WEINBERG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.
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Audit Committee ReportAUDIT COMMITTEE REPORT
OurThe Audit Committee is responsible for, among other things, reviewing and discussing our audited financial statements with management, discussing with our independent registered public accounting firm information relating to its judgments about the quality of our accounting principles, recommending to our Board that we include the audited financial statements in ourthe Annual Report on Form 10-K, and overseeing compliance with the SEC requirements for disclosure of our auditor’s services and activities.independent registered public accounting firm’s services.
Review of Audited Financial Statements
OurThe Audit Committee reviewed our financial statements for the fiscal year ended December 31, 2018,2021, as audited by Weinberg & Company, P.A. (“Weinberg”), our independent registered public accounting firm, and discussed these financial statements with management. In addition, the Audit Committee has discussed with Weinberg the matters required to be discussed by Auditing Standards No. 1301,Communications with Audit Committees,as adopted by the Public Company Accounting Oversight Board, (“PCAOB”), as may be modified or supplemented. Furthermore, ourthe Audit Committee has received the written disclosures and the letter from Weinberg required by the Independence Standards Board Standard No. 1, as may be modified or supplemented, and has discussed with Weinberg its independence.
Generally, theThe members of ourthe Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing, or in determining auditor independence. However, our Board has determined that each member of ourthe Audit Committee meets the independence criteria set forth in the applicable rules of Nasdaq and the SEC, and that one member of ourthe Audit Committee, Mr. Cragun, qualifies as an “audit committee financial expert,” as defined by SEC rules.regulations. Members of ourthe Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management. Accordingly, ourthe Audit Committee’s oversight does not currently provide an independent basis to determine that management has maintained procedures designed to assure compliance with accounting standards and applicable laws and regulations.
Recommendation
Based upon the foregoing review and discussion, ourthe Audit Committee recommended to our Board that the audited financial statements for the fiscal year ended December 31, 2018,2021 be included in ourthe Annual Report on Form 10-K for such fiscal year.
| Audit | |
| Kenneth S. Cragun | |
| James P. Geiskopf | |
| Phillip J. Bond |
The Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under the Securities Act or the Exchange Act.
PROPOSAL 73 – AUTHORITY TO ADJOURN THE ANNUAL MEETINGAPPROVAL, ON A NON-BINDING, ADVISORY BASIS, COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
What Am I Voting On?General
In accordance with applicable SEC rules, we are providing our stockholders with the opportunity to cast a non-binding, advisory vote on the compensation of our named executive officers as described in this proposal,Proxy Statement. We consider seeking the views of our stockholders on our executive compensation program to be an important part of our decision-making process.
For additional information about our executive compensation program, refer to the section titled “Executive Compensation” and the related compensation tables and footnotes.
Proposal
In accordance with Section 14A of the Exchange Act, we are asking youour stockholders to authorize our Board to adjourn the Annual Meeting to another place, date, or time if our Board believes adjournment is necessary or appropriate. If the stockholders approve the proposal to adjourn the Annual Meeting, we would expect to adjourn the Annual Meeting and use the additional time to solicit additional votes, including the solicitation of votes from stockholders that have previously voted, if necessary to approve Proposals 1, 2, 3, 4, 5, or 6.
If a quorum does not exist, the holders of a majority of shares presentfollowing resolution at the Annual MeetingMeeting:
“RESOLVED, that our stockholders approve, on a non-binding advisory basis, the compensation of our Named Executive Officers, as described in person or by proxy may adjourn the Executive Compensation section, and the related compensation tables and footnotes, in the Proxy Statement for our 2022 Annual Meeting to another place, date,of Stockholders.”
Because this vote is advisory only, it will not be binding upon our Board or time.the Compensation Committee. However, the Compensation Committee will take the outcome of the vote into account when considering future executive compensation arrangements.
Voting Recommendation
OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO APPROVE, ON A NON-BINDING ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.the approval of granting our Board the authority to adjourn the Annual Meeting if our Board deems it necessary or appropriate.
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OTHER BUSINESS
Our Board is not aware of any other business to be considered or acted upon at the Annual Meeting other than that for which notice is provided in this Proxy Statement and the accompanying notice. In the event any other matters properly come before the Annual Meeting, it is expected that the shares represented by proxy will be voted with respect thereto in accordance with the judgment of the persons voting them.
2018 ANNUAL REPORT ON FORM 10-KEXECUTIVE COMPENSATION
Copies of our Annual Report for fiscal 2018, which contains our Form 10-K for the fiscal year ended December 31, 2018, and consolidated financial statements, as filed with the SEC, have been included in this mailing. Additional copies may be obtained without charge to stockholders upon written request to Investor Relations at 2210 Newport Boulevard, Suite 200, Newport Beach, California 92663. In addition, copies of this document, the Annual Report and all other documents filed electronically by us may be reviewed and printed from the SEC’s website at:http://www.sec.gov.Summary Compensation Table
By OrderThe table and discussion below present compensation information for the following executive officers, which we refer to as our “named executive officers”:
| ● | Rory J. Cutaia, our Chairperson, President, Chief Executive Officer, and Secretary; and | |
| ● | Jeffrey R. Clayborne, our former Chief Financial Officer and Treasurer. |
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Rory J. Cutaia | 2021 | 490,000 | 350,000 | (2) | 537,000 | (3) | - | - | 1,377,000 | (4) | ||||||||||||||||||
| 2020 | 452,000 | 590,000 | 722,000 | - | - | 1,764,000 | ||||||||||||||||||||||
| Jeffrey R. Clayborne(5) | 2021 | 250,000 | - | 322,000 | (6) | - | - | 572,000 | (7) | |||||||||||||||||||
| 2020 | 234,000 | 150,000 | 391,000 | - | - | 775,000 | ||||||||||||||||||||||
| Salman H. Khan(8) | ||||||||||||||||||||||||||||
| (1) | The amounts in this column represent the aggregate grant date fair value of the respective awards computed in accordance with FASB ASC Topic 718. For information about the assumptions underlying these calculations, refer to Note 2 to our consolidated financial statements included in the Annual Report. |
| (2) | Represents an annual incentive bonus of $350,000. |
| (3) | Represents the grant of an aggregate of 317,682 restricted stock units. |
| (4) | As of December 31, 2021 and 2020, Mr. Cutaia had accrued but unpaid compensation equal to $1,031,000 and $697,000, respectively. |
| (5) | Mr. Clayborne resigned as Chief Financial Officer and Treasurer effective January 20, 2022. |
| (6) | Represents the grant of an aggregate of 190,609 restricted stock units. |
| (7) | As of December 31, 2021 and 2020, Mr. Clayborne had accrued but unpaid compensation equal to $77,000 and $125,000, respectively. On February 14, 2022, Mr. Clayborne executed a separation agreement which settled all accrued and unpaid compensation as of January 20, 2022. |
| (8) | On January 20, 2022, our Board appointed Salman H. Khan as Interim Chief Financial Officer and Treasurer. On March 30, 2022, our Board approved Mr. Khan’s permanent appointment as Chief Financial Officer and Treasurer. |
Narrative Disclosure to Summary Compensation Table
The following is a discussion of the Board of Directors,material information that we believe is necessary to understand the information disclosed in the Summary Compensation Table.
Rory J. Cutaia
ChairmanOn December 20, 2019, we entered into an executive employment agreement with Mr. Cutaia. The employment agreement has a four-year term that can be extended for additional one-year periods. In addition to certain payments due to Mr. Cutaia upon termination of employment, the employment agreement contains customary non-competition, non-solicitation and confidentiality provisions. Mr. Cutaia is entitled to an annual base salary of $430,000, which shall not be subject to reduction during the initial term, but will be subject to annual reviews and increases, if and as approved in the sole discretion of our Board. In addition, Mr. Cutaia is eligible to receive performance-based cash and/or stock bonuses upon attainment of performance targets established by our Board Chief Executive Officer, President, Secretary,in its sole discretion. We must make annual equity grants to Mr. Cutaia as determined by our Board in its sole discretion. Finally, Mr. Cutaia is eligible for certain other benefits, such as health, vision, and Treasurerdental insurance, life insurance, and 401(k) matching.
Mr. Cutaia earned a base salary of $490,000 and $452,000 for the fiscal years ended December 31, 2021 and 2020, respectively.
Newport Beach, CaliforniaFor performance during the fiscal year ended December 31, 2021, Mr. Cutaia earned an annual incentive bonus totaling $350,000.
On January 4, 2021, we granted Mr. Cutaia restricted stock units totaling $537,000 payable in 317,682 shares of our common stock. The restricted stock units are subject to a four-year vesting period, with 25% of the award vesting on the first, second, third, and fourth anniversaries of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to calculate fair market value.
For performance during the fiscal year ended December 31, 2020, Mr. Cutaia earned an annual incentive bonus totaling $490,000.
On April 10, 2020, we granted Mr. Cutaia restricted stock units valued at $37,000 payable in 31,030 shares of our common stock as part of the COVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
On July 29, 2020, Mr. Cutaia earned an incentive bonus totaling $100,000 for the successful closing of our March 31, 2020 private placement and the July 24, 2020 underwritten public offering of our common stock.
On July 29, 2020, we granted Mr. Cutaia restricted stock units valued at $500,000 payable in 471,698 shares of our common stock. The restricted stock units are subject to a four-year vesting period, with 25% of the award vesting on the first, second, third, and fourth anniversaries of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Cutaia restricted stock units valued at $176,000 payable in 166,365 shares of our common stock. The restricted stock units vested on grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
As of December 31, 2021 and 2020, Mr. Cutaia had accrued but unpaid compensation equal to $1,031,000 and $697,000, respectively.
Jeffrey R. Clayborne
Mr. Clayborne earned a base salary of $250,000 and $234,000 for the fiscal years ended December 31, 2021 and 2020, respectively.
On January 4, 2021, we granted Mr. Clayborne restricted stock units valued at $322,000 payable in 190,609 shares of our common stock. The restricted stock units were subject to a four-year vesting period, with 25% of the award vesting on the first, second, third, and fourth anniversaries of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.69 and was used to calculate fair market value.
For performance during the fiscal year ended December 31, 2020, Mr. Clayborne earned an annual incentive bonus totaling $125,000.
On April 10, 2020, we granted Mr. Clayborne restricted stock units valued at $20,000 payable in 16,303 shares of our common stock as part of the COVID Plan. The restricted stock units vested on July 15, 2020 upon completion of the plan. The price per share was $1.198, which was the 21-day volume weighted average price as reported by Nasdaq. The price per share as reported by Nasdaq on the day of issuance was $1.47 and was used to calculate fair market value.
November 12, 2019On July 29, 2020, Mr. Clayborne earned an incentive bonus totaling $25,000 for the successful closing of our March 31, 2020 private placement and the July 24, 2020 underwritten public offering of our common stock, respectively.
On July 29, 2020, we granted Mr. Clayborne restricted stock units valued at $300,000 payable in 283,019 shares of our common stock. The restricted stock units were subject to a four-year vesting period, with 25% of the award vesting on the first, second, third, and fourth anniversaries of the grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
On July 29, 2020, we granted Mr. Clayborne restricted stock units valued at $67,000 payable in 63,288 shares of our common stock. The restricted stock units vested on grant date. The price per share as reported by Nasdaq on the day of issuance was $1.06 and was used to calculate fair market value.
As of December 31, 2021 and 2020, Mr. Clayborne had accrued but unpaid compensation equal to $77,000 and $125,000, respectively.
Mr. Clayborne resigned as our Chief Financial Officer and Treasurer effective January 20, 2022. As a result, all unvested restricted stock units were terminated, provided that 25,000 previously unvested restricted stock units were permitted to vest pursuant to a separation agreement executed by Mr. Clayborne. In addition, all options that were unexercised prior to resignation were terminated.
Compensation Consultant
The Compensation Committee receives advice regarding our compensation programs applicable to executive officers and non-employee directors from its independent compensation consultant, Compensation Advisory Partners LLC (“CAP”). The Compensation Committee selected CAP based on its experience providing strategic executive compensation advice to help companies balance human capital risks while focusing on driving business performance. In making the selection, the Compensation Committee assessed whether work performed or advice rendered by CAP would raise any conflicts of interest and determined that there are no conflicts of interest with respect to this independent compensation consultant.
For the fiscal year ended December 31, 2021, CAP provided information on competitive pay practices and trends in our industry, and made recommendations regarding our peer group, as well as the structure of our compensation programs. The Compensation Committee carefully considered the recommendations in approving the compensation for the named executive officers and non-employee directors during the year.
While we are not obligated to retain an independent compensation consultant, the Compensation Committee believes that the use of an independent consultant provides assurance that our compensation programs are competitive and aligned with our business objectives. The decision to engage CAP was made by the Compensation Committee, and CAP reports directly to the committee.
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APPENDIX AOutstanding Equity Awards at Fiscal Year-End
The following table sets forth, for each named executive officer, certain information concerning outstanding restricted stock units as of December 31, 2021:
| Name | Number of Securities Underlying Unvested Restricted Stock Units (#) | Market Value of Shares that have not Vested ($)(1) | Vesting Date | |||||||||
| Rory J. Cutaia | 176,413 | 218,752 | December 23, 2023 | (2) | ||||||||
| 50,000 | 62,000 | December 23, 2022 | (3) | |||||||||
| 353,774 | 438,680 | July 29, 2024 | (4) | |||||||||
| 317,682 | 393,926 | January 4, 2025 | (5) | |||||||||
| Jeffrey R. Clayborne(6) | 132,310 | 164,064 | December 23, 2023 | (2) | ||||||||
| 25,000 | 31,000 | December 23, 2022 | (3) | |||||||||
| 212,265 | 263,209 | July 29, 2024 | (4) | |||||||||
| 190,609 | 236,355 | January 4, 2025 | (5) | |||||||||
| (1) | In accordance with applicable SEC regulations, the market value of the restricted stock awards has been determined based on the closing price of our common stock on December 31, 2021. |
| (2) | 25% vesting on each of the first, second, third, and fourth anniversaries of the grant date. |
| (3) | 25% vesting on the grant date, and 25% vesting on each of the first, second and third anniversaries of the grant date. |
| (4) | 25% vesting on each of the first, second, third and fourth anniversaries of the grant date. |
| (5) | 25% vesting on each of the first, second, third and fourth anniversaries of the grant date. |
| (6) | Mr. Clayborne resigned as our Chief Financial Officer and Treasurer effective January 20, 2022. As a result, all unvested restricted stock units were terminated, provided that 25,000 previously unvested restricted stock units were permitted to vest pursuant to a separation agreement executed by Mr. Clayborne. |
The following table sets forth, for each named executive officer, certain information concerning outstanding options as of December 31, 2021:
| Name | Number of Securities Underlying Unexercised Options (Exercisable) (#) | Number of Securities Underlying Unexercised Options (Unexercisable) | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| Rory J. Cutaia | - | 189,645 | (1) | 1.13 | January 10, 2022 | |||||||||
| - | 143,085 | (1) | 1.13 | January 10, 2022 | ||||||||||
| 16,667 | (2) | - | 4.35 | January 8, 2024 | ||||||||||
| 16,667 | (2) | - | 1.16 | December 18, 2022 | ||||||||||
| 133,333 | (2) | - | 1.20 | January 9, 2022 | ||||||||||
| Jeffrey R. Clayborne(3) | - | 55,129 | (1) | 1.13 | January 10, 2022 | |||||||||
| - | 71,542 | (1) | 1.13 | January 10, 2022 | ||||||||||
| 33,333 | (2) | - | 5.33 | May 3, 2022 | ||||||||||
| 133,333 | (2) | - | 1.20 | January 9, 2022 | ||||||||||
| 12,876 | (2) | - | 1.35 | January 21, 2023 | ||||||||||
| (1) | All of these options vested on January 10, 2022. |
| (2) | All of these options have fully vested. |
| (3) | Mr. Clayborne resigned as our Chief Financial Officer and Treasurer effective January 20, 2022. As a result of Mr. Clayborne’s resignation, all options that were unexercised prior to resignation were terminated. |
PROPOSED 2019 STOCK AND INCENTIVE COMPENSATION PLANOmnibus Incentive Plan
1. PurposeOn November 11, 2019, our Board approved our 2019 Omnibus Incentive Plan (the “Incentive Plan”) and on December 20, 2019, our stockholders approved and adopted the Incentive Plan. The material terms of the Plan.Incentive Plan are summarized below.
On September 2, 2020, our Board approved an additional 8,000,000 shares of our common stock to be authorized for awards granted under the Incentive Plan, and on October 16, 2020, our stockholders approved the additional 8,000,000 shares.
General
The purpose of thisthe Incentive Plan is to enhance stockholder value by linking the compensation of our officers, directors, key employees, and consultants of the Company to increases in the price of Verb Technology Company, Inc.our common stock and the achievement of other performance objectives,objections and to encourage ownership in the Companyour company by key personnel whose long-term employment is considered essential to the Company’sour continued progress and success. The Incentive Plan is also intended to assist the Companyus in the recruitment ofrecruiting new employees and to motivate, retain, and encourage such employees and directors to act in theour stockholders’ interest and share in the Company’sour success.
Term
The Incentive Plan became effective upon approval by our stockholders and will continue in effect from that date until it is terminated in accordance with its terms.
2. Definitions.As used herein, the following definitions shall apply:Administration
(a)“Administrator” meansThe Incentive Plan may be administered by our Board or a committee designated by our Board. Currently, the Board, anyCompensation Committee administers the Incentive Plan. The administrator has the power to determine the directors, employees, and consultants who may participate in the Incentive Plan and the amounts and other terms and conditions of awards to be granted under the Incentive Plan. All questions of interpretation and administration with respect to the Incentive Plan will be determined by the administrator. The administrator also will have the complete authority to adopt, amend, rescind, and enforce rules and regulations pertaining to the administration of the Incentive Plan; to correct administrative errors; to make all other determinations deemed necessary or such delegates as shall beadvisable for administering the Incentive Plan in accordance with Section 4and any award granted under the Incentive Plan; and to authorize any person to execute, on behalf of us, all agreements and documents previously approved by the Plan.administrator, among other items.
Eligibility
(b)“Affiliate” means any SubsidiaryAny of our directors, employees, or other entity that is directly or indirectly controlled by the Companyconsultants, or any entity in which the Company has a significant ownership interest as determined by the Administrator. The Administrator shall, in its sole discretion, determine which entitiesdirectors, employees, or consultants of any of our affiliates (except that with respect to incentive stock options, only employees of us or any of our subsidiaries are classified as Affiliates and designated aseligible), are eligible to participate in thisthe Incentive Plan.
Available Shares
(c)“Applicable Law” means the requirements relatingSubject to the administrationadjustment provisions included in the Incentive Plan, a total of 16,000,000 shares of our common stock option plans under U.S. federal and state laws, any stock exchange, or quotation system on which the Company has listed or submittedare authorized for quotation of the Common Stock to the extent provided under the terms of the Company’s agreement with such exchange or quotation system and, with respect to Awards subject to the laws of any foreign jurisdiction where Awards are, or will be,awards granted under the Plan, the laws of such jurisdiction.
(d)“Award” means a Stock Award, Option, Stock Appreciation Right, Stock Unit, or Other Stock-based Award granted in accordance with the terms of the Plan, or any other property (including cash) granted pursuant to the provisions of theIncentive Plan.
(e)“Awardee” means an Employee, Director, or Consultant who has been granted an Award under the Plan.
(f)“Award Agreement” means a Stock Award Agreement, Option Agreement, Stock Appreciation Right Agreement, Restricted Stock Unit Agreement, or Other Stock-based Award Agreement, which may be in written or electronic format, in such form and with such terms as may be specified by the Administrator, evidencing the terms and conditions of an individual Award. Each Award Agreement is subject to the terms and conditions of the Plan. The Award Agreement shall be delivered to the Participant receiving such Award upon, or as promptly, as is reasonably practicable following, the grant of such Award. The effectiveness of an Award shall not be subject to the Award Agreement’s being signed by the Company and/or the Participant receiving the Award unless specifically so provided in the Award Agreement.
(g)“Board” means the Board of Directors of the Company.
(h)“Change of Control” shall mean, except as otherwise provided in an Award Agreement, one of the following shall have taken place after the date of this Agreement:
(i) any one person, or group of owners of another corporation who, acting together through a merger, consolidation, purchase, acquisition of stock or the like (a “Group”), acquires ownership of Shares of the Company that, together with the Shares held by such person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the Shares of the Company (or other voting securities of the Company then outstanding). However, if such person or Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the Shares (or other voting securities of the Company then outstanding) before this transfer of the Company’s Shares (or other voting securities of the Company then outstanding), the acquisition of additional Shares (or other voting securities of the Company then outstanding) by the same person or Group shall not be considered to cause a Change of Control of the Company; or
(ii) any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or persons) ownership of Shares (or other voting securities of the Company then outstanding) of the Company possessing thirty percent (30%) or more of the total voting power of the Shares (or other voting securities then outstanding) of the Company where such person or Group is not merely acquiring additional control of the Company; or
(iii) a majority of members of the Company’s Board is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election (the “Incumbent Board”), but excluding, for purposes of determining whether a majority of the Incumbent Board has endorsed any candidate for election to the Board, any individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person or Group other than the Company’s Board; or
(iv) any one person or Group acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such person or Group) all or substantially all of the assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total fair market value of all assets of the Company immediately prior to such acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. A transfer of assets by the Company will not result in a Change of Control if the assets are transferred to:
(1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;
(2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company immediately after the transfer of assets;
(3) a person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or
(4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned directly or indirectly, by a person described in subparagraph (h)(i), above; or
(v) Stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, if any payment or distribution event applicable to an Award is subject to the requirements of Section 409A(a)(2)(A) of the Code, the determination of the occurrence of a Change of Control shall be governed by applicable provisions of Section 409A(a)(2)(A) of the Code and regulations and rulings issued thereunder for purposes of determining whether such payment or distribution may then occur.
(i)“Code” means the United States Internal Revenue Code of 1986, as amended, and any successor thereto, the Treasury Regulations thereunder, and other relevant interpretive guidance issued by the Internal Revenue Service or the Treasury Department. Reference to any specific section of the Code shall be deemed to include such regulations and guidance, as well as any successor provision of the Code.
(j)“Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan or, in the absence of any such special appointment, the Compensation Committee of the Board.
(k)“Common Stock” means the Common Stock, $0.0001 par value per share, of the Company, or any security of the Company issued in substitution, exchange, or lieu thereof.
(l)“Company” means Verb Technology Company, Inc., a Nevada corporation, or, except as utilized in the definition of Change of Control, its successor.
(m)“Consultant” means an individual providing services to the Company or any of its Affiliates as an independent contractor, and includes prospective consultants who have accepted offers of consultancy for the Company or any of its Affiliates, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction, (ii) does not directly or indirectly promote or maintain a market for the Company’s securities, and (iii) otherwise qualifies as a consultant under the applicable rules of the SEC for registration of shares of stock on a Form S-8 registration statement.
(n) “Conversion Award” has the meaning set forth in Section 4(b)(xii) of the Plan.
(o)“Director” means a member of the Board. Any Director who does not serve as an employee of the Company is referred to herein as a “Non-employee Director.”
(p)“Disability” means (i) “Disability” as defined in any employment, consulting, or similar agreement to which the Participant is a party, or (ii) if there is no such agreement or it does not define “Disability,” (A) permanent and total disability as determined under the Company’s long-term disability plan applicable to the Participant or (B) if there is no such plan applicable to the Participant or the Committee determines otherwise in an applicable Award Agreement, “Disability” shall mean the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, as determined by the Committee. Notwithstanding the above, with respect to an Incentive Stock Option, Disability shall mean permanent and total disability as defined in Section 22(e)(3) of the Code and, with respect to any Award that constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the foregoing definition shall apply for purposes of vesting of such Award, provided that such Award shall not be settled until the earliest of: (x) the Participant’s “disability” within the meaning of Section 409A of the Code, (y) the Participant’s “separation from service” within the meaning of Section 409A of the Code, and (z) the date such Award would otherwise be settled pursuant to the terms of the Award Agreement.
(q)“Disaffiliation” means a Subsidiary’s or Affiliate’s ceasing to be a Subsidiary or Affiliate for any reason (including, without limitation, as a result of a public offering, or a spin-off or sale by the Company, of the stock of the Subsidiary or Affiliate) or a sale of a division of the Company and its Affiliates.
(r)“Employee” means a regular, active employee of the Company or any Affiliate, including an Officer or Director who is also a regular, active employee of the Company or any Affiliate. The Administrator shall determine whether the Chairman of the Board qualifies as an “Employee.” For any and all purposes under the Plan, the term “Employee” shall not include a person hired as a leased employee, Consultant, or a person otherwise designated by the Administrator, the Company, or an Affiliate at the time of hire as not eligible to participate in or receive benefits under the Plan or not on the payroll, even if such ineligible person is subsequently determined to be an employee of the Company or an Affiliate or otherwise an employee by any governmental or judicial authority. Unless otherwise determined by the Administrator in its sole discretion, for purposes of the Plan, an Employee shall be considered to have terminated employment and to have ceased to be an Employee if his or her employer ceases to be an Affiliate, even if he or she continues to be employed by such employer.
(s)“Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and any successor thereto.
(t)“Fair Market Value” means the closing price for the Common Stock reported on a consolidated basis on the primary national securities exchange on which such Common Stock are traded on the date of measurement, or if the Common Stock were not traded on such measurement date, then on the next preceding date on which Common Stock were traded, all as reported by such source as the Committee may select. If the Common Stock is not listed on a national securities exchange, Fair Market Value shall be determined by the Committee in its good faith discretion, taking into account, to the extent appropriate, the requirements of Section 409A of the Code.
(u)“Grant Date” means, with respect to each Award, the date upon which the Award is granted to an Awardee pursuant to this Plan, which may be a designated future date as of which such Award will be effective, as determined by the Committee.
(v)“Incentive Stock Option” means an Option that is identified in the Option Agreement as intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder, and that actually does so qualify.
(w)“Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.
(x)“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(y)“Option” means a right granted under Section 8 of the Plan to purchase a number of Shares at such exercise price, at such times, and on such other terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Option Agreement”). Both Incentive Stock Options and Nonqualified Stock Options may be granted under the Plan.
(z)“Other Stock-based Award” means an Award granted pursuant to Section 12 of the Plan on such terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Other Stock-based Award Agreement”).
(aa)“Participant” means the Awardee or any person (including any estate) to whom an Award has been assigned or transferred as permitted hereunder.
(bb)“Performance Criteria” shall have the meaning set forth in Section 13(b) of the Plan.
(cc)“Plan” means this 2019 Stock and Incentive Compensation Plan, as set forth herein and as hereafter amended from time to time.
(dd)“Retirement” means, unless the Administrator determines otherwise, voluntary Termination of Employment by a Participant from the Company and its Affiliates after attaining age sixty (60) and having completed at least ten (10) years of service for the Company and its Affiliates, excluding service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company.
(ee)“Securities Act” means the United States Securities Act of 1933, as amended.
(ff)“Share” means a share of Common Stock, as adjusted in accordance with Section 15 of the Plan.
(gg)“Stock Appreciation Right” means a right granted under Section 10 of the Plan on such terms and conditions as are specified in the agreement or other documents evidencing the Award (the “Stock Appreciation Right Agreement”).
(hh)“Stock Award” means an award or issuance of Shares made under Section 11 of the Plan, the grant, issuance, retention, vesting, and/or transferability of which is subject during specified periods of time to such conditions (including, without limitation, continued employment or performance conditions) and terms as are expressed in the agreement or other documents evidencing the Award (the “Stock Award Agreement”).
(ii)“Stock Unit” means a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share, payable in cash, property, or Shares. Stock Units represent an unfunded and unsecured obligation of the Company, except as otherwise provided for by the Administrator.
(jj)“Stock Unit Award” means an award or issuance of Stock Units made under Section 12 of the Plan, the grant, issuance, retention, vesting, and/or transferability of which is subject during specified periods of time to such conditions (including, without limitation, continued employment or performance conditions) and terms as are expressed in the agreement or other documents evidencing the Award (the “Stock Unit Award Agreement”).
(kk)“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company; provided, that each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock, in one of the other corporations in such chain.
(ll)“Termination for Cause” means, unless otherwise provided in an Award Agreement, Termination of Employment on account of any act of fraud or intentional misrepresentation or embezzlement, misappropriation, or conversion of assets of the Company or any Affiliate, or the intentional and repeated violation of the written policies or procedures of the Company; provided, that, for an Employee who is party to an individual severance or employment agreement defining Cause, “Cause” shall have the meaning set forth in such agreement except as may be otherwise provided in such agreement. For purposes of this Plan, a Participant’s Termination of Employment shall be deemed to be a Termination for Cause if, after the Participant’s employment has terminated, facts and circumstances are discovered that would have justified, in the opinion of the Committee, a Termination for Cause.
(mm)“Termination of Employment” means, for purposes of this Plan, unless otherwise determined by the Administrator, ceasing to be an Employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and any of its Subsidiaries or Affiliates. Unless otherwise determined by the Committee in the terms of an Award Agreement or otherwise, if a Participant’s employment with the Company and its Affiliates terminates but such Participant continues to provide services to the Company and its Affiliates in a Non-employee Director capacity, such change in status shall not be deemed a Termination of Employment. A Participant employed by, or performing services for, a Subsidiary or an Affiliate or a division of the Company and its Affiliates shall be deemed to incur a Termination of Employment if, as a result of a Disaffiliation, such Subsidiary, Affiliate, or division ceases to be a Subsidiary, Affiliate, or division, as the case may be, and the Participant does not immediately thereafter become an Employee of (or service provider for), or member of the board of directors of, the Company or another Subsidiary or Affiliate. Temporary absences from employment because of illness, vacation, or leave of absence and transfers among the Company and its Subsidiaries and Affiliates shall not be considered Terminations of Employment. In addition, Termination of Employment shall mean a “separation from service” as defined in regulations issued under Code Section 409A whenever necessary to ensure compliance therewith for any payment or settlement of a benefit conferred under this Plan that is subject to such Code section, and, for such purposes, shall be determined based upon a reduction in the bona fide level of services performed to a level equal to twenty percent (20%) or less of the average level of services performed by the Employee during the immediately preceding thirty-six (36)-month period.
3. Stock Subject to the Plan.
(a)Aggregate Limit.Subject to the provisions of Section 15(a) of the Plan, the maximum aggregate number of Shares which may be subject to or delivered under Awards granted under the Plan is eight million (8,000,000) Shares. Shares subject to or delivered under Conversion Awards shall not reduce the aggregate number of Shares which may be subject to or delivered under Awards granted under this Plan. The Shares issued under the Plan may be either Shares reacquired by the Company, including Shares purchased in the open market, or authorized but unissued Shares.
(b)Code Section 422 Limits; Limit on Awards to Directors.Subject to the provisions of Section 15(a) of the Plan, the aggregate number of Shares that may be subject to all Incentive Stock Options granted under the Plan shall not exceed the total aggregate number of Shares that may be subject to or delivered under Awards under the Plan, as the same may be amended from time to time. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any Non-employee Director during any single calendar year shall not exceed two hundred thousand (200,000) Shares;provided,however, that, for calendar year 2019, the limit shall be three hundred (300,000) Shares.
(c)Share Counting Rules.
(i) For purposes of this Section 3 of the Plan, Shares subject to Awardsawards that have been canceled, expired, settled in cash, or not issued or forfeited for any reason (in whole or in part) shall, will not reduce the aggregate number of Sharesshares that may be subject to or delivered under Awardsawards granted under thisthe Incentive Plan and shallwill be available for future Awardsawards granted under thisthe Incentive Plan.
(ii) SharesTypes of Awards
We may grant the following types of awards under the Incentive Plan: stock awards; options; stock appreciation rights; stock units; or other stock-based awards.
Stock Awards. The Incentive Plan authorizes the grant of stock awards to eligible participants. The administrator determines (i) the number of shares subject to Awards that have been retained by the Company in paymentstock award or satisfaction ofa formula for determining such number, (ii) the purchase price of an Award the shares, if any, (iii) the means of payment for the shares, (iv) the performance criteria, if any, and the level of achievement versus these criteria, (v) the grant, issuance, vesting, and/or the tax withholding obligation of an Awardee, and Shares that have been delivered (either actually or constructively by attestation) to the Company in payment or satisfactionforfeiture of the purchase price of an Award orshares, (vi) restrictions on transferability, and such other terms and conditions determined by the tax withholding obligation of an Awardee, shall not be available for grant under the Plan.
(iii) Conversion Awards shall not reduce the Shares authorized for grant under the Plan or the limitations on Awards to a Participant under subsection (b), above, nor shall Shares subject to a Conversion Award again be available for an Award under the Plan as provided in this subsection (c).
4. Administration of the Plan.administrator.
(a)Procedure.
(i)Multiple Administrative Bodies.The Plan shall be administered by the Board, a Committee designated by the Board to so administer this Plan, and/or their respective delegates.
(ii)Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”), Awards to Officers and Directors shall be made by the entire Board or a Committee of two or more “non-employee directors” within the meaning of Rule 16b-3.
(iii)Other Administration.To the extent required by the rules of the principal U.S. national securities exchange on which the Shares are traded, the members of the Committee shall also qualify as “independent directors” as set forth in such rules. Except to the extent prohibited by Applicable Law, the Board or a Committee may delegate to a Committee of one or more Directors or to authorized officers of the Company the power to approve Awards to persons eligible to receive Awards under the Plan who are not subject to Section 16 of the Exchange Act.
(iv)Awards to DirectorsOptions. The Board shall haveIncentive Plan authorizes the power and authoritygrant of non-qualified and/or incentive options to grant Awards to Non-employee Directors, includingeligible participants, which options give the authority to determineparticipant the number and type of awards to be granted; determine the terms and conditions, not inconsistent with the terms of this Plan,right, after satisfaction of any award;vesting conditions and prior to take any other actions the Board considers appropriate in connection with the administrationexpiration or termination of the Plan.
(v)Delegationoption, to purchase shares of Authorityour common stock at a fixed price. The administrator determines the exercise price for each share subject to an option granted under the Day-to-Day Administration ofIncentive Plan, which exercise price cannot be less than the Plan.Except to the extent prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.
(b)Powers of the Administrator.Subject to the provisions of the Plan and,fair market value (as defined in the caseIncentive Plan) of a Committee or delegates acting asour common stock on the Administrator, subject to the specific duties delegated to such Committee or delegates, the Administrator shall have the authority, in its discretion:
(i) to select the Non-employee Directors, Consultants, and Employees of the Company or its Affiliates to whom Awards are to be granted hereunder;
(ii) to determinegrant date. The administrator also determines the number of Shares of Common Stockshares subject to be covered by each Award granted hereunder;
(iii) to determine the type of Award to be granted to the selected Employees, Consultants, and Non-employee Directors;
(iv) to approve forms of Award Agreements;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise and/or purchase price,option, the time or times when an Award may be exercised (which may or may not be based on Performance Criteria), the vesting schedule, any vesting and/or exercisability provisions, terms regarding acceleration of Awards or waiver of forfeiture restrictions, the acceptable forms of consideration for payment for an Award,each option becomes exercisable, and the term and any restriction or limitation regarding any Award or the Shares relating thereto, based inof each case on such factors as the Administrator, in its sole discretion, shall determine and may be established at the time an Award is granted or thereafter;
(vi) to correct administrative errors;
(vii) to construe and interpret the terms of the Plan (including sub-plans and Plan addenda) and Awards granted pursuant to the Plan;
(viii) to adopt rules and procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized (A) to adopt rules and procedures regarding the conversion of local currency, the shift of tax liability from employer to employee (where legally permitted) and withholding procedures, and handling of stock certificates which vary with local requirements, and (B) to adopt sub-plans and Plan addenda as the Administrator deems desirable, to accommodate foreign laws, regulations, and practice;
(ix) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans and Plan addenda;
(x) to modify or amend each Award, including, but not limited to, the acceleration of vesting and/or exercisability;provided,however, that any such modification or amendment (A) is subject to the minimum vesting provisions under the Plan, if any, and the Plan amendment provisions set forth in Section 16 of the Plan, and (B) may not materially impair any outstanding Award unless agreed to in writing by the Participant, except that such agreement shall not be required if the Administrator determines in its sole discretion that such modification or amendment either (Y) is required or advisable in order for the Company, the Plan, or the Award to satisfy any Applicable Law or to meet the requirements of any accounting standard, or (Z) is not reasonably likely to significantly diminish the benefits provided under such Award, or that adequate compensation has been provided for any such diminishment, except following a Change of Control;
(xi) to allow or require Participants to satisfy withholding tax amounts by electing to have the Company withholdoption (which cannot exceed ten years from the Shares to be issued upon exercise of a Nonqualified Stock Option or vesting of a Stock Award or Stock Unit Award that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined in such manner and on such date that the Administrator shall determine or, in the absence of provision otherwise, on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may provide;
(xii) to authorize conversion or substitution under the Plan of any or all stock options, stock appreciation rights, or other stock awards held by awardees of an entity acquired by the Company (the “Conversion Awards”). Any conversion or substitution shall be effective as of the close of the merger or acquisition. The Conversion Awards may be Nonqualified Stock Options or Incentive Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity;
(xiii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
(xiv) to impose such restrictions, conditions, or limitations as it determines appropriate as to the timing and manner of any resale by a Participant or of other subsequent transfers by the Participant of any Shares issued as a result of or under an Award or upon the exercise of an Award, including, without limitation, (A) restrictions under an insider trading policy, (B) restrictions as to the use of a specified brokerage firm for such resale or other transfers, and (C) institution of “blackout” periods on exercises of Awards;
(xv) to provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right, either in tandem with the other rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash, or a combination thereof, the amount of which is determined by reference to the value of the Award; and
(xvi) to make all other determinations deemed necessary or advisable for administering the Plan and any Award granted hereunder.
(c)Effect of Administrator’s Decision.All questions arising under the Plan or under any Award shall be decided by the Administrator in its total and absolute discretion. All decisions, determinations, and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan, and the terms and conditions of any Award granted hereunder, shall be final and binding on all Participants. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations, and interpretations, including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants, and accountants as it may select.
(d)Indemnity.To the extent allowable under Applicable Law, each member of the Committee or of the Board and any person to whom the Committee has delegated any of its authority under the Plan shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan, and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her;provided,that, he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
5. Eligibility.Awards may be granted only to Directors, Employees, and Consultants of the Company or any of its Affiliates;provided,however, that Incentive Stock Options may be granted only to Employees of the Company and its Subsidiaries (within the meaning of Section 424(f) of the Code)date).
6. TermStock Appreciation Rights. The Incentive Plan authorizes the grant of Plan.The Plan shall become effective upon its approval bystock appreciation rights to eligible participants, which stock appreciation rights give the stockholdersparticipant the right, after satisfaction of the Company. It shall continue in effect from the date the Plan is approved by the stockholders of the Company (the “Effective Date”) until terminated under Section 16 of the Plan.
7. Term of Award.Subjectany vesting conditions and prior to the provisions of the Plan, the term of each Award shall be determined by the Administrator and stated in the Award Agreement, and may extend beyond theexpiration or termination of the Plan. Instock appreciation right, to receive in cash or shares of our common stock the caseexcess of an Option or a Stock Appreciation Right, the term shall be ten (10) years from the Grant Date or such shorter term as may be providedfair market value (as defined in the Award Agreement. NotwithstandingIncentive Plan) of our common stock on the foregoing, the termdate of Awards other than Awards that are structured to qualify as Incentive Stock Options under Section 9 shall be extended automatically if the Award would expire at a time when trading in Shares of Common Stock is prohibited by law or the Company’s insider trading policy to the thirtieth (30th) day after the expiration of the prohibition.
8. Options.The Administrator may grant an Option or provide for the grant of an Option, either from time to time in the discretion of the Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of performance goals.
(a)Option Agreement.Each Option Agreement shall contain provisions regarding (i) the number of Shares that may be issued upon exercise of the Option, (ii) the type of Option, (iii)over the exercise price of the Option and the means of payment of such exercise price, (iv) the term of the Option, (v) such terms and conditions regarding the vesting and/or exercisability of an Option as may be determined from time to time by the Administrator, (vi) restrictions on the transfer of the Option and forfeiture provisions, and (vii) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator.
(b)Exercise Price. The per share exercise price for the Shares to be issued upon exercise of an Option shall be determined by the Administrator, except that the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the Grant Date, except with respect to Conversion Awards.
(c)No Option Repricings.Subject to Section 15(a) of the Plan, the exercise price of an Option may not be reduced without stockholder approval, nor may outstanding Options be cancelled in exchange for cash, other Awards, or Options with an exercise price that is less than the exercise price of the original Option without stockholder approval.
(d)No Reload Grants.Options shall not be grantedstock appreciation right. All stock appreciation rights under the Plan in consideration for and shall not be conditioned upon the delivery of Shares to the Company in payment of the exercise price and/or tax withholding obligation under any other employee stock option.
(e)Vesting Period and Exercise Dates.Options granted under this Plan shall vest and/or be exercisable at such time and in such installments during the period prior to the expiration of the Option’s term as determined by the Administrator and as specified in the Option Agreement. The Administrator shall have the right to make the timing of the ability to exercise any Option granted under this Plan subject to continued active employment, the passage of time and/or such performance requirements as deemed appropriate by the Administrator. Unless otherwise provided in the Award Agreement, no Option shall vest and be exercisable sooner than one (1) year after its Grant Date. More specifically, unless otherwise provided in the Award Agreement, the Options shall vest in twenty-five percent (25%) increments on each of the first four anniversaries of its Grant Date. At any time after the grant of an Option, the Administrator may reduce or eliminate any restrictions surrounding any Participant’s right to exercise all or part of the Option.
(f)Form of Consideration.The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment, either through the terms of the Option Agreement or at the time of exercise of an Option. Acceptable forms of consideration may include:
(i) cash;
(ii) check or wire transfer (denominated in U.S. Dollars);
(iii) subject to any conditions or limitations established by the Administrator, other Shares which were held for a period of more than six (6) months on the date of surrender and which have a Fair Market Value on the date of surrender equal to or greater than the aggregate exercise price of the Shares as to which said Option shall be exercised (it being agreed that the excess of the Fair Market Value over the aggregate exercise price, if any, shall be refunded to the Awardee in cash);
(iv) subject to any conditions or limitations established by the Administrator, the Company withholding Shares otherwise issuable upon exercise of an Option;
(v) consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator and in compliance with Applicable Law;
(vi) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Law; or
(vii) any combination of the foregoing methods of payment.
(g)Procedure for Exercise; Rights as a Stockholder.
(i) Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the applicable Option Agreement.
(ii) An Option shall be deemed exercised when (A) the Company receives (1) written or electronic notice of exercise (in accordance with the Option Agreement or procedures established by the Administrator) from the person entitled to exercise the Option and (2) full payment for the Shares with respect to which the related Option is exercised, and (B) with respect to Nonqualified Stock Options, provisions acceptable to the Administrator have been made for payment of all applicable withholding taxes.
(iii) Unless provided otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option.
(iv) The Company shall issue (or cause to be issued) such Shares as soon as administratively practicable after the Option is exercised. An Option may not be exercised for a fraction of a Share.
9. Incentive Stock Option Limitations/Terms.
(a)Eligibility.Only Employees (who qualify as employees under Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company or any of its Subsidiaries may be granted Incentive Stock Options. No Incentive Stock Option shall be granted to any such Employee who as of the Grant Date owns stock possessing more than 10% of the total combined voting power of the Company.
(b)$100,000 Limitation.Notwithstanding the designation “Incentive Stock Option” in an Option Agreement, if and to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Awardee during any calendar year (under all plans of the Company and any of its Subsidiaries) exceeds U.S. $100,000, such Options shall be treated as Nonqualified Stock Options. For purposes of this Section 9(b) of the Plan, Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the Grant Date.
(c)Transferability.The Option Agreement must provide that an Incentive Stock Option is not transferable by the Awardee otherwise than by will or the laws of descent and distribution, and, during the lifetime of such Awardee, must not be exercisable by any other person. If the terms of an Incentive Stock Option are amended to permit transferability, the Option will be treated for tax purposes as a Nonqualified Stock Option.
(d)Exercise Price.The per Share exercise price of an Incentive Stock Option shall in no event be inconsistent with the requirements for qualification of the Incentive Stock Option under Section 422 of the Code.
(e)Other Terms.Option Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be necessary to qualify, to the extent determined desirable by the Administrator, with the applicable provisions of Section 422 of the Code. If any such terms and conditions, as of the Grant Date or any later date, do not so comply, the Option will be treated thereafter for tax purposes as a Nonqualified Stock Option.
10. Stock Appreciation Rights.A “Stock Appreciation Right” or “SAR” is a right that entitles the Awardee to receive, in cash or Shares (as determined by the Administrator), value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the aggregate exercise price of the right, as established by the Administrator on the Grant Date. All Stock Appreciation Rights under the Plan shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 8 ofoptions granted under the Incentive Plan. Stock Appreciation Rightsappreciation rights may be granted to Awardeesawardees either alone (“freestanding”) or in addition to or in tandem with other Awardsawards granted under the Incentive Plan and may, but need not, relate to a specific Optionoption granted under Section 8 of the Incentive Plan. However, any Stock Appreciation Right granted in tandem with an Option may be granted at the same time such Option is granted or at any time thereafter before exercise or expiration of such Option, and shall be based on the Fair Market Value of one Share on the Grant Date or, if applicable, on the Grant Date of the Option with respect to a Stock Appreciation Right granted in exchange for or in tandem with, but subsequent to, the Option (subject to the requirements of Section 409A of the Code). Subject to the provisions of Section 8 of the Plan, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate.
11. Stock Awards.
(a)Stock Award Agreement.Each Stock Award Agreement shall contain provisions regarding (i) the number of Shares subject to such Stock Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment for the Shares, (iii) the Performance Criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, retainable, and/or vested, (iv) such terms and conditions on the grant, issuance, vesting, and/or forfeiture of the Shares as may be determined from time to time by the Administrator, (v) restrictions on the transferability of the Stock Award, and (vi) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator. Unless otherwise provided in the Award Agreement, no Stock Award shall vest sooner than one (1) year after its Grant Date. More specifically, unless otherwise provided in the Award Agreement, the Stock Award shall vest in twenty-five percent (25%) increments on each of the first four anniversaries of its Grant Date. The Committee may, in its sole discretion, waive the vesting restrictions and any other conditions set forth in any Award Agreement under such terms and conditions as the Committee shall deem appropriate.
(b)Restrictions and Performance Criteria.The grant, issuance, retention, and/or vesting of Stock Awards issued to Employees may be subject to such Performance Criteria and level of achievement versus these criteria as the Administrator shall determine, which criteria may be based on financial performance, personal performance evaluations, and/or completion of service by the Awardee. Awards with vesting conditions that are based upon Performance Criteria and level of achievement versus such criteria are referred to as “Performance Stock Awards” and Awards with vesting conditions that are based upon continued employment or the passage of time are referred to as “Restricted Stock Awards.”
(c)Rights as a Stockholder.Unless otherwise provided for by the Administrator, the Participant shall have the rights equivalent to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) to the Participant. Any certificate issued in respect of a Restricted Stock Award shall be registered in the name of the applicable Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award. The Committee may require that the certificates evidencing such Shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the applicable Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. The Participant shall not be permitted to sell, assign, transfer, pledge, or otherwise encumber a Stock Award.
12. Stock Unit Awards and Other Stock-based Awards.
(a)Stock UnitStock-Based Awards. Each Stock Unit Award Agreement shall contain provisions regarding (i) the number of Shares subject to such Stock Unit Award or a formula for determining such number, (ii) the Performance Criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, and/or vested, (iii) such terms and conditions on the grant, issuance, vesting, and/or forfeiture of the Shares as may be determined from time to time by the Administrator, (iv) restrictions on the transferability of the Stock Unit Award, and (v) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator. Unless otherwise provided in the Award Agreement, no Stock Unit Award shall vest sooner than one (1) year after its Grant Date. More specifically, unless otherwise provided in the Award Agreement, the Stock Unit Award shall vest in twenty-five percent (25%) increments on each of the first four anniversaries of its Grant Date. The Committee may, in its sole discretion, waive the vesting restrictions and any other conditions set forth in any Award Agreement under such terms and conditions as the Committee shall deem appropriate.
(b)Restrictions and Performance Criteria.The grant, issuance, retention, and/or vesting of Stock Unit Awards issued to Employees may be subject to such Performance Criteria and level of achievement versus these criteria as the Administrator shall determine, which criteria may be based on financial performance, personal performance evaluations, and/or completion of service by the Awardee. Awards with vesting conditions that are based upon Performance Criteria and level of achievement versus such criteria are referred to as “Performance Stock Unit Awards” and Awards with vesting conditions that are based upon continued employment or the passage of time are referred to as “Restricted Stock Unit Awards.”
(c)Rights as a Stockholder.Unless otherwise provided for by the Administrator, the Participant shall have the rights equivalent to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company)In addition to the Participant.
(d)Other Stock-based Award.An “Other Stock-based Award” meansaward types described above, the administrator may grant any other type of equity-based or equity-related Award not otherwise describedaward payable by the termsdelivery of this Plan (including the grant or offer for sale of unrestricted Shares), as well as any cash based bonus based on the attainment of Performance Criteria as described in Section 13(b),our common stock in such amountamounts and subject to such terms and conditions as the Administrator shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares or pursuant to attainment of a performance goal. Each Other Stock-based Award will be evidenced by an Award Agreement containing such terms and conditions as may be determined by the Administrator.
(e)Value of Other Stock-based Awards. Each Other Stock-based Award shall be expressed in terms of Shares or units based on Shares or a target amount of cash, as determined by the Administrator. The Administrator may establish Performance Criteriaadministrator determines in its discretion. If the Administrator exercises itssole discretion, subject to establish Performance Criteria, the number and/or value of Other Stock-based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
(f)Payment of Other Stock-based Awards. Payment, if any, with respect to Other Stock-based Awards shall be made in accordance with the terms of the Award,Incentive Plan. Such awards may be made in addition to or in conjunction with other awards under the Incentive Plan. Such awards may include unrestricted shares of our common stock, which may be awarded, without limitation (except as provided in the Incentive Plan), as a bonus, in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, or Shares asupon the Administrator determines.attainment of performance goals or otherwise, or rights to acquire shares of our common stock from us.
13. Other Provisions Applicable to Awards.Award Limits
(a)Non-TransferabilitySubject to the terms of Awards.the Incentive Plan, the aggregate number of shares that may be subject to all incentive stock options granted under the Incentive Plan cannot exceed the total aggregate number of shares that may be subject to or delivered under awards under the Incentive Plan. Notwithstanding any other provisions of the Incentive Plan to the contrary, the aggregate number of shares granted to any non-employee director during any single calendar year shall not exceed 200,000 shares.
New Plan Benefits
The amount of future grants under the Incentive Plan is not determinable, as awards under the Incentive Plan will be granted at the sole discretion of the administrator. We cannot determine at this time either the persons who will receive awards under the Incentive Plan or the amount or types of such any such awards.
Transferability
Unless determined otherwise by the Administrator,administrator, an Awardaward may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by beneficiary designation, will, or by the laws of descent or distribution, including but not limited to any attempted assignment or transfer in connection with the settlement of marital property or other rights incident to a divorce or dissolution, and any such attempted sale, assignment, or transfer shall be of no effect prior to the date an Awardaward is vested and settled. The Administrator may only make an Award transferable to an Awardee’s family member or any other person or entity provided the Awardee does not receive consideration for such transfer. If the Administrator makes an Award transferable, either as of the Grant Date or thereafter, such Award shall contain such additional terms
Amendment and conditions as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer.Termination
(b)Performance Criteria.For purposes of this Plan, the term “Performance Criteria” shall mean any one or more criteria based on financial performance, personal performance evaluations, and/or completion of service, either individually, alternatively, or in any combination, applied, as applicable, to either the Company as a whole or to a Subsidiary, business unit, Affiliate, or business segment, either individually, alternatively, or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results, or to a designated comparison group, in each case as specified by the Committee in the Award or by duly adopted resolution. The Administrator may establish specific performance targets (including thresholds and whether to exclude certain extraordinary, non-recurring, or similar items) and Award amounts, subject to the right of the Administrator to exercise discretion to adjust payment amounts, either up or down, following the conclusion of the performance period on the basis of such further considerations as the Administrator in its sole discretion shall determine. Extraordinary, non-recurring items that may be the basis of adjustment include, but are not limited to, acquisitions or divestitures, restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, an event either not directly related to the operations of the Company, Subsidiary, division, business segment, or business unit or not within the reasonable control of management, the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, and foreign exchange gains or losses.
(c)Termination of Employment or Board Membership.The Administrator shall determine as of the Grant Date (subject to modification subsequent to the Grant Date) the effect a termination from membership on the Board by a Non-employee Director for any reason or a Termination of Employment due to Disability, Retirement, death, or otherwise (including Termination for Cause) shall have on any Award. Unless otherwise provided in the Award Agreement:
(i) Upon termination from membership on the Board by a Non-employee Director for any reason other than Disability or death, any Option or SAR held by such Director that (1) has not vested and is not exercisable as of the effective date of such termination from membership on the Board shall be subject to immediate cancellation and forfeiture or (2) is vested and exercisable as of the effective date of such termination shall remain exercisable for one (1) year thereafter, or the remaining term of the Option or SAR, if less. Any unvested Stock Award, Stock Unit Award, or Other Stock-based Award held by a Non-employee Director at the time of termination from membership on the Board for a reason other than Disability or death shall be immediately cancelled and forfeited.
(ii) Termination from membership on the Board by a Non-employee Director due to Disability or death shall result in full vesting of any outstanding Options or SARs and vesting of a prorated portion of any Stock Award, Stock Unit Award, or Other Stock-based Award based upon the full months of the applicable performance period, vesting period, or other period of restriction elapsed as of the end of the month in which the termination from membership on the Board by a Non-employee Director due to Disability or death occurs over the total number of months in such period. Any Options or SARs that vest upon Disability or death shall remain exercisable for one (1) year thereafter, or the remaining term of the Option or SAR, if less. In the case of any Stock Award, Stock Unit Award, or Other Stock-based Award that vests on the basis of attainment of Performance Criteria, the pro-rata vested amount shall be based upon the target award.
(iii) Upon Termination of Employment due to Disability or death, any Option or SAR held by an Employee shall, if not already fully vested, become fully vested and exercisable as of the effective date of such Termination of Employment and shall remain exercisable for one (1) year after such Termination of Employment due to Disability or death, or, in either case, the remaining term of the Option or SAR, if less. Termination of Employment due to Disability or death shall result in vesting of a prorated portion of any Stock Award, Stock Unit Award, or Other Stock-based Award based upon the full months of the applicable performance period, vesting period, or other period of restriction elapsed as of the end of the month in which the Termination of Employment due to Disability or death occurs over the total number of months in such period. In the case of any Stock Award, Stock Unit Award, or Other Stock-based Award that vests on the basis of attainment of Performance Criteria, the pro-rata vested amount shall be based upon the target award.
(iv) Any Option or SAR held by an Awardee at Retirement that occurs at least one (1) year after the Grant Date of the Option or SAR will remain outstanding for the remaining term of the Option or SAR and continue to vest; any Stock Award, Stock Unit Award, or Other Stock-based Award held by an Awardee at Retirement that occurs at least one (1) year after the Grant Date of the Award shall also continue to vest and remain outstanding for the remainder of the term of the Award.
(v) Any other Termination of Employment shall result in immediate cancellation and forfeiture of all outstanding Awards that have not vested as of the effective date of such Termination of Employment, and any vested and exercisable Options and SARs held at the time of such Termination of Employment shall remain exercisable for ninety (90) days thereafter, or the remaining term of the Option or SAR, if less. Notwithstanding the foregoing, all outstanding and unexercised Options and SARs shall be immediately cancelled in the event of a Termination for Cause.
14. Dividends and Dividend Equivalents.Awards other than Options and Stock Appreciation Rights may provide the Awardee with the right to receive dividend payments or dividend equivalent payments on the Shares subject to the Award, whether or not such Award is vested. Notwithstanding the foregoing, dividends or dividend equivalents shall not be paid with respect to Stock Awards, Stock Unit Awards, or Other Stock-based Awards that vest based on the achievement of performance goals prior to the date the performance goals are satisfied and the Award is earned, and then shall be payable only with respect to the number of Shares or Stock Units actually earned under the Award. Such payments may be made in cash, Shares, or Stock Units or may be credited as cash or Stock Units to an Awardee’s account and later settled in cash or Shares or a combination thereof, as determined by the Administrator. Such payments and credits may be subject to such conditions and contingencies as the Administrator may establish.
15. Adjustments upon Changes in Capitalization, Organic Change, or Change of Control.
(a)Adjustment Clause.In the event of (i) a stock dividend, extraordinary cash dividend, stock split, reverse stock split, share combination, or recapitalization or similar event affecting the capital structure of the Company (each, a “Share Change”), or (ii) a merger, consolidation, acquisition of property or shares, separation, spin-off, reorganization, stock rights offering, liquidation, Disaffiliation, or similar event affecting the Company or any of its Subsidiaries (each, an “Organic Change”), the Administrator or the Board shall make such substitutions or adjustments as it deems appropriate and equitable to (i) the Share limitations set forth in Section 3 of the Plan, (ii) the number and kind of Shares covered by each outstanding Award, and (iii) the price per Share subject to each such outstanding Award. In the case of Organic Changes, such adjustments may include, without limitation, (x) the cancellation of outstanding Awards in exchange for payments of cash, property, or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the Administrator or the Board in its sole discretion (it being understood that in the case of an Organic Change with respect to which stockholders receive consideration other than publicly traded equity securities of the ultimate surviving entity, any such determination by the Administrator that the value of an Option or Stock Appreciation Right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each Share pursuant to such Organic Change over the exercise price of such Option or Stock Appreciation Right shall conclusively be deemed valid); (y) the substitution of other property (including, without limitation, cash or other securities of the Company and securities of entities other than the Company) for the Shares subject to outstanding Awards; and (z) in connection with any Disaffiliation, arranging for the assumption of Awards, or replacement of Awards with new awards based on other property or other securities (including, without limitation, other securities of the Company and securities of entities other than the Company), by the affected Subsidiary, Affiliate, or division or by the entity that controls such Subsidiary, Affiliate, or division following such Disaffiliation (as well as any corresponding adjustments to Awards that remain based upon Company securities). The Committee may adjust in its sole discretion the Performance Criteria applicable to any Awards to reflect any Share Change and any Organic Change and any unusual or non-recurring events and other extraordinary items, impact of charges for restructurings, discontinued operations, and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles or as identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or the Company’s other SEC filings. Any adjustment under this Section 15(a) need not be the same for all Participants.
(b)Change of Control.In the event of a Change of Control, unless otherwise determined by the Administrator as of the Grant Date of a particular Award (or subsequent to the Grant Date),the following acceleration, exercisability, and valuation provisions shall apply:
(i) On the date that such Change of Control occurs, any or all Options and Stock Appreciation Rights awarded under this Plan not previously exercisable and vested shall, if not assumed, or substituted with a new award, by the successor to the Company, become fully exercisable and vested, and if the successor to the Company assumes such Options or Stock Appreciation Rights or substitutes other awards for such Awards, such Awards (or their substitutes) shall become fully exercisable and vested if the Participant’s employment is terminated (other than a Termination for Cause) within two (2) years following the Change of Control.
(ii) Except as may be provided in an individual severance or employment agreement (or severance plan) to which an Awardee is a party, in the event of an Awardee’s Termination of Employment within two (2) years after a Change of Control for any reason other than because of the Awardee’s death, Retirement, Disability, or Termination for Cause, each Option and Stock Appreciation Right held by the Awardee (or a transferee) that is vested following such Termination of Employment shall remain exercisable until the earlier of the third anniversary of such Termination of Employment (or any later date until which it would remain exercisable under such circumstances by its terms) or the expiration of its original term. In the event of an Awardee’s Termination of Employment more than two (2) years after a Change of Control, or within two (2) years after a Change of Control because of the Awardee’s death, Retirement, Disability, or Termination for Cause, the provisions of Section 13(c) of the Plan shall govern (as applicable).
(iii) On the date that such Change of Control occurs, the restrictions and conditions applicable to any or all Stock Awards, Stock Unit Awards, and Other Stock-based Awards that are not assumed, or substituted with a new award, by the successor to the Company shall lapse and such Awards shall be fully vested. Unless otherwise provided in an Award Agreement at the Grant Date, upon the occurrence of a Change of Control without assumption or substitution of the Awards by the successor, any performance-based Award shall be deemed fully earned at the target amount as of the date on which the Change of Control occurs. All Stock Awards, Stock Unit Awards, and Other Stock-based Awards shall be settled or paid within thirty (30) days of vesting hereunder. Notwithstanding the foregoing, if the Change of Control would not qualify as a permissible date of distribution under Section 409A(a)(2)(A) of the Code, and the regulations thereunder, the Awardee shall be entitled to receive the Award from the Company on the date that would have applied absent this provision. If the successor to the Company does assume (or substitute with a new award) any Stock Awards, Stock Unit Awards, and Other Stock-based Awards, all such Awards shall become fully vested if the Participant’s employment is terminated (other than a Termination for Cause) within two (2) years following the Change of Control, and any performance-based Award shall be deemed fully earned at the target amount effective as of such Termination of Employment.
(iv) The Committee, in its discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per Share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine, and if there is no excess value, the Committee may, in its discretion, cancel such Awards.
(v) An Option, Stock Appreciation Right, Stock Award, Stock Unit Award, or Other Stock-based Award shall be considered assumed or substituted for if following the Change of Control the Award confers the right to purchase or receive, for each Share subject to the Option, Stock Appreciation Right, Stock Award, Stock Unit Award, or Other Stock-based Award immediately prior to the Change of Control, the consideration (whether stock, cash, or other securities or property) received in the transaction constituting a Change of Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares);provided,however, that, if such consideration received in the transaction constituting a Change of Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Option, Stock Appreciation Right, Stock Award, Stock Unit Award or Other Stock-based Award, for each Share subject thereto, will be solely common stock of the successor company with a fair market value substantially equal to the per Share consideration received by holders of Shares in the transaction constituting a Change of Control. The determination of whether fair market value is substantially equal shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding.
(c)Section 409A. Notwithstanding the foregoing: (i) any adjustments made pursuant to Section 15(a) of the Plan to Awards that are considered “deferred compensation” within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (ii) any adjustments made pursuant to Section 15(a) of the Plan to Awards that are not considered “deferred compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that, after such adjustment, the Awards either continue not to be subject to Section 409A of the Code or comply with the requirements of Section 409A of the Code; (iii) the Administrator shall not have the authority to make any adjustments pursuant to Section 15(a) of the Plan to the extent that the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code to be subject thereto; and (iv) if any Award is subject to Section 409A of the Code, Section 15(b) of the Plan shall be applicable only to the extent specifically provided in the Award Agreement and permitted pursuant to Section 24 of the Plan in order to ensure that such Award complies with Code Section 409A.
16. Amendment and Termination of the Plan.
(a)Amendment and Termination.The Administratoradministrator may amend, alter, or discontinue the Incentive Plan or any Award Agreement,award agreement, but any such amendment shall beis subject to the approval of theour stockholders of the Company in the manner and to the extent required by Applicable Law.applicable law. In addition, without limiting the foregoing, unless approved by theour stockholders of the Company and subject to Section 16(b),the terms of the Incentive Plan, no such amendment shall be made that would:
would (i) increase the maximum aggregate number of Shares whichshares that may be subject to Awardsawards granted under the Plan;
Incentive Plan, (ii) reduce the minimum exercise price for Optionsoptions or Stock Appreciation Rightsstock appreciation rights granted under the Plan;Incentive Plan, or
(iii) reduce the exercise price of outstanding Optionsoptions or Stock Appreciation Rights,stock appreciation rights, as prohibited by Section 8(c)the terms of the Incentive Plan without stockholder approval.
(b)Effect of Amendment or Termination.No amendment, suspension, or termination of the Incentive Plan shallwill impair the rights of any Participantparticipant with respect to an outstanding Award,award, unless otherwise mutually agreed otherwise between the Participantparticipant and the Administrator,administrator, which agreement must be in writing and signed by the Participantparticipant and the Company,us, except that no such agreement shallwill be required if the Administratoradministrator determines in its sole discretion that such amendment either (i) is required or advisable in order for us, the Company, theIncentive Plan, or the Awardaward to satisfy any Applicable Lawapplicable law or to meet the requirements of any accounting standard or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award,award significantly, or that any such diminishmentdiminution has been adequately compensated, except that this exception shall not apply following a Changechange of Control.control. Termination of the Incentive Plan shallwill not affect the Administrator’sadministrator’s ability to exercise the powers granted to it hereunder with respect to Awardsawards granted under the Incentive Plan prior to the date of such termination.
Severance or Change of Control Arrangements
(c)EffectOther than as disclosed below, we have no agreements that provide for payments to our directors or executive officers at, following, or in connection with the resignation, retirement, or other termination of our directors or executive officers, or a change of control of the Plan on Other Arrangements.Company.
Rory J. CutaiaNeither the adoption of the Plan by the Board or a Committee nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or any Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation, the granting of restricted shares or restricted share units or stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
17. Designation of Beneficiary.
(a) An Awardee may file a written designation of a beneficiary whoPursuant to Mr. Cutaia’s employment agreement dated December 20, 2019, Mr. Cutaia is to receive the Awardee’s rights pursuant to Awardee’s Awards or the Awardee may include his or her Awards in an omnibus beneficiary designation for all benefits under the Plan. To the extent that Awardee has completed a designation of beneficiary while employed with the Company or an Affiliate, such beneficiary designation shall remain in effect with respect to any Award hereunder until changed by the Awardeeentitled to the extent enforceable under Applicable Law.
(b) Such designation of beneficiary may be changed by the Awardee at any time by written notice. Infollowing severance package in the event he is “terminated without cause,” “terminated for good reason,” or “terminated upon permanent disability”: (i) monthly payments of the death of an Awardee and in the absence of a beneficiary validly designated under the Plan who is living$35,833 or such sum equal to his monthly base compensation at the time of the termination, whichever is higher, for a period of 36 months from the date of such Awardee’s death,termination and (ii) reimbursement for COBRA health insurance costs for 18 months from the Companydate of such termination and, thereafter, reimbursement for health insurance costs for Mr. Cutaia and his family during the immediately subsequent 18-month period. In addition, all of Mr. Cutaia’s then-unvested restricted stock awards or other awards will immediately vest, without restriction, and any unearned and unpaid bonus compensation, expense reimbursement, and all accrued vacation, personal, and sick days, and related items shall allow the legal representativebe deemed earned, vested, and paid immediately. For purposes of the Awardee’s estateemployment agreement, “terminated without cause” means if Mr. Cutaia were to exercisebe terminated for any reason other than a discharge for cause or due to Mr. Cutaia’s death or permanent disability. For purposes of the Award.employment agreement, “terminated for good reason” means the voluntary termination of the employment agreement by Mr. Cutaia if any of the following were to occur without his prior written consent, which consent cannot be unreasonably withheld considering our then-current financial condition, and, in each case, which continues uncured for 30 days following receipt by us of Mr. Cutaia’s written notice: (i) there is a material reduction by us in (A) Mr. Cutaia’s annual base salary then in effect or (B) the annual target bonus, as set forth in the employment agreement, or the maximum additional amount up to which Mr. Cutaia is eligible pursuant to the employment agreement; (ii) we reduce Mr. Cutaia’s job title and position such that Mr. Cutaia (A) is no longer our Chief Executive Officer; (B) is no longer our Chairperson of our Board; or (C) is involuntarily removed from our Board; or (iii) Mr. Cutaia is required to relocate to an office location outside of Orange County, California, or outside of a 30-mile radius of Newport Beach, California. For purposes of the employment agreement, “terminated upon permanent disability” means if Mr. Cutaia were to be terminated because he is then unable to perform his duties due to a physical or mental condition for (i) a period of 120 consecutive days or (ii) an aggregate of 180 days in any 12-month period.
18. No Right to Awards or to Employment.No person shall have any claim or right to be granted an AwardTax and the grant of any Award shall not be construed as giving an Awardee the right to continue in the employ of the Company or its Affiliates. Further, the Company and its Affiliates expressly reserve the right, at any time, to dismiss any Employee or Awardee at any time without liability or any claim under the Plan, except as provided herein or in any Award Agreement entered into hereunder.Accounting Considerations
19. Legal Compliance.Shares shall not be issuedAmong the factors it considers when making executive compensation decisions, the Compensation Committee considers the anticipated tax and accounting impact to us (and to our executive officers) of various payments, equity awards and other benefits.
The Compensation Committee considers the impact of the provisions of Section 162(m) of the Internal Revenue Code, or the Code, as amended by the Tax Cuts and Jobs Act, or the TCJA. That section generally limits the deductibility of compensation paid by a publicly held company to “covered employees” for a taxable year to $1.0 million. Effective for taxable years beginning on and after January 1, 2018, “covered employees” generally include our Chief Executive Officer, Chief Financial Officer and other highly compensated executive officers. Effective for taxable years beginning prior to January 1, 2018, an exception to this deduction limit applied to “performance-based compensation,” such as cash incentive and stock option awards, that satisfied certain criteria. This exception to the Section 162(m) deduction limit for “performance-based compensation” was repealed by the TCJA. Thus, except for certain “performance-based compensation” payable pursuant to an Option, Stock Appreciation Right, Stock Award, Stock Unit Award,written contracts that were in effect on November 2, 2017 and that are not modified in any material respect on or Other Stock-based Award unless such Option, Stock Appreciation Right, Stock Award, or Other Stock-based Awardafter that date, effective for taxable years beginning on and the issuance and deliveryafter January 1, 2018 our tax deduction with regard to compensation of such Shares shall comply with Applicable Law and shall be further subject“covered employees” is limited to the approval of counsel for the Company$1.0 million per taxable year with respect to such compliance. Unless the Awards and Shares covered by this Plan have been registered under the Securities Act or the Company has determined that such registration is unnecessary, each person receiving an Award and/or Shares pursuant to any Award may be required by the Company to give a representation in writing that such person is acquiring such Shares for his or her own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.
20. Inability to Obtain Authority.To the extent the Company is unable to or the Administrator deems it unfeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be advisable or necessary to the lawful issuance and sale of any Shares hereunder, the Company shall be relieved of any liability withexecutive officer. With respect to cash and equity awards that were in effect on November 2, 2017, and that are not modified in any material respect on or after that date, the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
21. Reservation of Shares.The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirementsCommittee is mindful of the Plan.
22. Notice.Any written noticebenefit to the Company required by any provisions of this Plan shall be addressed to the Secretaryus and our stockholders of the Companyfull deductibility of compensation and shall be effective when received. Any notice to a Participant hereunder shall be addressed tohave taken steps so that both the last address of record with the Companycash incentive and shall be effective when sent via first class mail, courier service, or electronic mail to such last address of record.
23. Governing Law; Interpretation of Plan; and Awards.
(a) This Plan and all determinations made and actions taken pursuant hereto shall be governed by the substantive laws, but not the choice of law rules,stock option awards that we granted may qualify for deductibility under Section 162(m) of the State of Nevada, exceptCode. However, awards that we granted that were intended to qualify as to matters governed by U.S. federal law.
(b) In the event that any provision“performance-based compensation” may not necessarily qualify for such status under Section 162(m) of the Plan or any Award granted underCode. With respect to cash incentive and equity awards that we may grant in the Plan is declared to be illegal, invalid, or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, tofuture, we do not anticipate that the extent necessary to render it legal, valid, and enforceable, or otherwise deleted, and the remainder$1.0 million deduction limitation set forth in Section 162(m) of the termsCode will have a material impact on our results of operations.
The Compensation Committee also considers the Plan and/or Award shall not be affected except to the extent necessary to reform or delete such illegal, invalid, or unenforceable provision.
(c) The headings preceding the textimpact of each section hereof are inserted solely for convenience of reference, and shall not constitute a part of the Plan, nor shall they affect its meaning, construction, or effect.
(d) The terms of the Plan and any Award shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors, and assigns.
24. Section 409A.It is the intention of the Company that no Award shall be “deferred compensation” subject to Section 409A of the Code, unless and in general, our executive plans and programs are designed to comply with the extentrequirements of that section so as to avoid possible adverse tax consequences that may result from noncompliance.
We account for equity awards in accordance with the Administrator specifically determines otherwise,requirements of Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, Topic 718, Stock Compensation.
Our change of control and the Plan and the terms and conditions of all Awards shall be interpreted accordingly. The terms and conditions governing any Awards that the Administrator determines will be subject to Section 409A of the Code, including any rulesseverance Agreements do not allow for elective or mandatory deferral of the delivery of cash or Shares pursuant thereto and any rules regarding treatment of such Awards in the event of a Change of Control, shall be set forth in the applicable Award Agreement, deferral election forms and procedures, and rules established by the Administrator, and shall comply in all respects with Section 409A of the Code. The following rules will apply to Awards intended to be subject to Section 409A of the Code (“409A Awards”):excise tax gross up payments.
Securities Authorized for Issuance under Equity Compensation Plans
(a) If a Participant is permitted to elect to defer an Award or any payment under an Award, such election will be permitted only at times in compliance with Code Section 409A.The following table summarizes certain information regarding our equity compensation plans as of December 31, 2021:
(b) The Company shall have no authority to accelerate distributions relating to 409A Awards in excess of the authority permitted under Section 409A.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Awards (#) | Weighted-Average Exercise Price of Outstanding Awards ($)(1) | Number of Securities Remaining Available for Future Issuance (#) | ||||||||
| Equity compensation plans approved by security holders | 5,578,723 | $ | 1.49 | 5,448,323 | |||||||
| Equity compensation plans not approved by security holders | 1,002,751 | $ | 2.71 | - | |||||||
| Total | 6,581,474 | $ | 1.68 | 5,448,323 | |||||||
(c) Any distribution of a 409A Award following a Termination of Employment that would be subject to Code Section 409A(a)(2)(A)(i) as a distribution following a separation from service of a “specified employee” as defined under Code Section 409A(a)(2)(B)(i), shall occur no earlier than the expiration of the six (6)-month period following such Termination of Employment.
| (1) | This amount does not take into account shares issuable upon the vesting or settlement of outstanding restricted stock units, which have no exercise price. |
(d) In the case of any distribution of a 409A Award, if the timing of such distribution is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution shall be made not later than the end of the calendar year during which the settlement of the 409A Award is specified to occur.
(e) In the case of an Award providing for distribution or settlement upon vesting or the lapse of a risk of forfeiture, if the time of such distribution or settlement is not otherwise specified in the Plan or an Award Agreement or other governing document, the distribution, or settlement shall be made not later than March 15 of the year following the year in which the Award vested or the risk of forfeiture lapsed.
(f) Notwithstanding anything herein to the contrary, neither the Company nor the Administrator makes any representation or guarantee that the Plan or its administration shall comply with Code Section 409A, and in no event shall the Company or the Administrator be liable for the payment of, or any gross up payment in connection with, any taxes or penalties owed by the Participant pursuant to Code Section 409A.
25. Limitation on Liability.The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant, an Employee, an Awardee, or any other persons as to:
(a)The Non-Issuance of Shares.The non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and
(b)Tax or Exchange Control Consequences.Any tax consequence expected, but not realized, or any exchange control obligation owed, by any Participant, Employee, Awardee, or other person due to the receipt, exercise, or settlement of any Option or other Award granted hereunder.
26. Unfunded Plan.Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Awardees who are granted Stock Awards, Stock Unit Awards, or Other Stock-based Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation. Neither the Company nor the Administrator shall be deemed to be a trustee of Shares or cash to be awarded under the Plan. Any liability of the Company to any Participant with respect to an Award shall be based solely upon any contractual obligations that may be created by the Plan; no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.
27. Foreign Employees and Consultants.Awards may be granted hereunder to Employees and Consultants who are foreign nationals, who are located outside the United States or who are not compensated from a payroll maintained in the United States, or who are otherwise subject to (or could cause the Company to be subject to) legal or regulatory provisions of countries or jurisdictions outside the United States, on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes, the Administrator may make such modifications, amendments, procedures, or subplans as may be necessary or advisable to comply with such legal or regulatory provisions.
28. Tax Withholding.Each Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local, or foreign taxes of any kind required by law to be withheld with respect to any Award under the Plan no later than the date as of which any amount under such Award first becomes includible in the gross income of the Participant for any tax purposes with respect to which the Company has a tax withholding obligation. Unless otherwise determined by the Company, withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement;provided,however, that not more than the maximum statutory withholding requirement may be settled with Shares that are part of the Award. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any vested Shares or any other payment due to the Participant at that time or at any future time. The Administrator may establish such procedures as it deems appropriate, including making irrevocable elections, for the settlement of withholding obligations with Shares.
29. Cancellation of Award; Forfeiture of Gain.
Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that the Award will be cancelled and the Participant will forfeit the Shares or cash received or payable on the vesting or exercise of the Award, and that the amount of any proceeds of the sale or gain realized on the vesting or exercise of the Award must be repaid to the Company, under such conditions as may be required by Applicable Law or established by the Committee in its sole discretion.
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The following table sets forth, as of August 24, 2022, certain information with respect to the beneficial ownership of our common stock by (i) each of our current directors and director nominees, (ii) each of our named executive officers, (iii) our directors, director nominees and executive officers as a group, and (iv) each stockholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our outstanding common stock.
We have determined beneficial ownership in accordance with the rules of the SEC, which generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe, based on the information furnished to us, that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Shares of common stock issuable upon conversion of convertible notes, exercise of options or warrants, or settlement of restricted stock units, or that may become issuable within 60 days of August 24, 2022, are considered outstanding and beneficially owned by the person holding the convertible notes, options, warrants or restricted stock units for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
| Name and Address of Beneficial Owner(1)(2) | Title of Class | Amount and of Beneficial Ownership | Percent of Class(3) | |||||||||
| Rory J. Cutaia | Common | 5,984,976 | (4) | 5.8 | % | |||||||
| James P. Geiskopf | Common | 992,135 | (5) | 1.0 | % | |||||||
| Philip J. Bond | Common | 272,924 | (6) | * | ||||||||
| Kenneth S. Cragun | Common | 272,924 | (6) | * | ||||||||
| Judith Hammerschmidt | Common | 260,561 | (7) | * | ||||||||
| Nancy Heinen | Common | 260,561 | (7) | * | ||||||||
| Salman H. Khan | Common | 89,755 | (8) | * | ||||||||
| Edmund C. Moy | - | - | * | |||||||||
| All directors and executive officers as a group (8 persons) | Common | 8,133,836 | 7.9 | % | ||||||||
| * | Less than 1%. |
| (1) | Messrs. Cutaia, Geiskopf, Bond and Cragun, and Mses. Hammerschmidt and Heinen, are current directors. Mr. Moy is a director nominee. Ms. Heinen is not standing for re-election at the Annual Meeting. Messrs. Cutaia and Khan are our named executive officers (and our only executive officers). |
| (2) | Unless otherwise indicated, the address of each beneficial owner listed in the table below is: c/o Verb Technology Company, Inc., 3401 North Thanksgiving Way, Suite 240, Lehi, Utah 84043. |
| (3) | Percentage of common stock is based on 102,430,979 shares of our common stock outstanding as of August 24, 2022. |
| (4) | Consists of (i) 4,714,137 shares of common stock held directly by Mr. Cutaia, (ii) 240,240 shares of common stock held by Cutaia Media Group Holdings, LLC (an entity over which Mr. Cutaia has dispositive and voting authority), (iii) 54,006 shares of common stock held by Mr. Cutaia’s spouse (as to which shares, he disclaims beneficial ownership), (iv) 4,500 shares of common stock held jointly by Mr. Cutaia and his spouse, (v) 33,333 shares of common stock underlying stock options exercisable within 60 days of August 24, 2022, (vi) 138,889 shares of common stock underlying warrants granted to Mr. Cutaia that are exercisable within 60 days of August 24, 2022, and (viii) 799,870 shares of common stock underlying convertible notes previously issued to Mr. Cutaia, determined by dividing the aggregate amount of principal and accrued interest as of August 24, 2022, which was $823,866, by the fixed conversion price of $1.03. This amount excludes 1,104,957 shares of common stock underlying restricted stock units that will not vest within 60 days of August 24, 2022. For additional information about the convertible notes issued to Mr. Cutaia, refer to the section titled “Certain Relationships and Related Transactions.” |
| (5) | Consists of (i) 986,801 shares of common stock held directly, and (ii) 5,333 shares of common stock held by Mr. Geiskopf’s children. This amount excludes 129,418 shares of common stock underling restricted stock units that will not vest within 60 days of August 24, 2022. |
| (6) | Consists of (i) 206,257 shares of common stock held directly, and (ii) 66,667 shares of common stock underlying stock options exercisable within 60 days of August 24, 2022. This amount excludes 64,709 shares of common stock underlying restricted stock units that will not vest within 60 days of August 24, 2022. |
| (7) | Consists of 260,561 shares of common stock held directly. This amount excludes 94,112 shares of common stock underlying restricted stock units that will not vest within 60 days of August 24, 2022. |
| (8) | On January 20, 2022, our Board appointed Salman H. Khan as Interim Chief Financial Officer and Treasurer. On March 30, 2022, our Board approved Mr. Khan’s permanent appointment as Chief Financial Officer and Treasurer. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
Other than the transactions discussed below, and the executive compensation arrangements described in the section titled “Executive Compensation” since January 1, 2020, there was not, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party for which the amount involved exceeds or will exceed $120,000 and in which any director, director nominee, executive officer, holder of more than 5% of our common stock, or any member of the immediate family of any of the foregoing, had or will have a direct or indirect material interest (any such transaction, a “related party transaction”).
Policies and Procedures for Approval of Related Party Transactions
If we contemplate entering into any transaction with a related party, regardless of the amount involved, the terms of such transaction are required to be presented to our Board for approval in advance of the transaction. Any director, officer or employee who becomes aware of a transaction or relationship that could reasonably be expected to give rise to a conflict of interest is required to disclose the matter promptly to our Board. Our Board must then either approve or reject the transaction and may only approve the transaction if it determines, based on all of the information presented, that the related party transaction is not inconsistent with the best interests of the Company and its stockholders.
Related Party Transactions
Notes Payable to Related Parties
The Company had the following outstanding notes payable to related parties as of December 31, 2021 and January 1, 2020:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Largest Amount Outstanding Since January 1, 2020 | Amount Outstanding as of December 31, 2021 | Interest Paid Since January 1, 2021 | Interest Paid Since January 1, 2020 | ||||||||||||||||||||
| Note 1(1) | December 1, 2015 | February 8, 2021 | 12.0 | % | $ | 1,249,000 | $ | 825,000 | $ | 725,000 | $ | 91,000 | $ | 205,000 | ||||||||||||||
| Note 2(2) | December 1, 2015 | April 1, 2017 | 12.0 | % | 112,000 | 112,000 | - | - | - | |||||||||||||||||||
| Note 3(3) | April 4, 2016 | June 4, 2021 | 12.0 | % | 343,000 | 240,000 | 40,000 | 44,000 | 50,000 | |||||||||||||||||||
| Total notes payable - related parties | $ | 1,177,000 | $ | 765,000 | $ | 135,000 | $ | 255,000 | ||||||||||||||||||||
| (1) | On December 1, 2015, we issued a convertible note to Mr. Cutaia in the principal amount of $1,249,000 to consolidate all loans and advances made by Mr. Cutaia to us as of that date. The note bears interest at a rate of 12% per annum, is secured by our assets, and initially matured on February 8, 2021. 30% of the original principal amount of the note, or $375,000, was converted to common stock in 2018, while the remaining balance of $825,000 was not initially convertible. During the year ended December 31, 2020, the Company made principal payments of $100,000 and interest payments of $114,000 on the note. As of December 31, 2020, the outstanding principal balance of the note was $725,000 and the accrued interest was $4,000. |
| In February 2021, Mr. Cutaia and the Company amended the note to extend the maturity date from February 8, 2021 to February 8, 2023. In exchange for the extension, the Company issued Mr. Cutaia warrants to purchase 138,889 shares of common stock with a grant date fair value of $287,000. The warrants were fully vested upon issuance, are exercisable at $2.61 per share, and have a term of three years. There were no other changes to the original terms of the note. |
| On May 19, 2021, our Board approved an amendment to the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $1.03, which was the closing price of the common stock on the amendment date. | |
| As of December 31, 2021, the outstanding balance of the note was $725,000 and the accrued interest was $0. Assuming all principal and interest owed under the note had converted into common stock on that date, it would have converted into an aggregate of 703,883 shares, based on the fixed conversion price. | |
| (2) | On December 1, 2015, we issued a note payable to a former director in the principal amount of $112,000, representing unpaid consulting fees as of November 30, 2015. The note was unsecured, bore interest at a rate of 12% per annum, and matured in April 2017. |
| On September 24, 2021, we settled all amounts owed under the note for $140,000. | |
| (3) | On April 4, 2016, we issued a convertible note to Mr. Cutaia, in the principal amount of $343,000 to consolidate all loans and advances made by Mr. Cutaia to us during the period December 2015 through March 2016. The note bears interest at a rate of 12% per annum, is secured by our assets, and initially matured on June 4, 2021. 30% of the original principal amount of the note, or $103,000, was converted to common stock in 2018, while the remaining balance of $240,000 was not initially convertible. |
| On May 19, 2021, our Board approved an amendment to the note to allow for conversion of the note at any time at the discretion of the holder at a fixed conversion price of $1.03, which was the closing price of the common stock on the amendment date. On the same date, $200,000 of the principal amount of the note was converted into 194,175 shares of common stock at the fixed conversion price. | |
| As of December 31, 2021, the outstanding balance of the note amounted to $40,000 and the accrued interest was $0. Assuming all principal and interest owed under the note had converted into common stock on that date, it would have converted into an aggregate of 38,835 shares, based on the fixed conversion price. |
Deferred Compensation to Related Parties
The Company had the following outstanding deferred compensation owed to related parties as of December 31, 2021 and January 1, 2020:
| Note | Issuance Date | Maturity Date | Interest Rate | Original Borrowing | Largest Amount Outstanding Since January 1, 2020 | Amount Outstanding as of December 31, 2021 | Interest Paid Since January 1, 2021 | Interest Paid Since January 1, 2020 | ||||||||||||||||||||
| Notes 1 & 2(1) | December 23, 2019 | January 10, 2021 | 0 | % | $ | 278,000 | $ | 278,000 | $ | 139,000 | $ | - | $ | - | ||||||||||||||
| Notes 1 & 2(1) | December 23, 2019 | January 10, 2021 | 0 | % | 278,000 | 278,000 | 139,000 | - | - | |||||||||||||||||||
| Notes 3 & 4(2) | December 23, 2019 | January 10, 2022 | 0 | % | 243,000 | 243,000 | 122,000 | - | - | |||||||||||||||||||
| Notes 3 & 4(2) | December 23, 2019 | January 10, 2022 | 0 | % | 243,000 | 243,000 | 121,000 | - | - | |||||||||||||||||||
| Total deferred compensation - related parties | $ | 1,042,000 | $ | 521,000 | $ | - | $ | - | ||||||||||||||||||||
| (1) | On December 23, 2019, we awarded Mr. Cutaia and Mr. Clayborne annual incentive compensation awards of $430,000 and 125,000, respectively. Our Board determined it was in the Company’s best interest to defer payments to these employees. We paid 50% of the annual incentive compensation on January 10, 2021, and the remaining 50% on January 20, 2022. |
| (2) | On December 23, 2019, we awarded Mr. Cutaia and Mr. Clayborne a cash bonus for our successful up-listing to Nasdaq and the acquisition of Verb Direct totaling $324,000 and 162,000, respectively. Our Board determined it was in the Company’s best interest to defer payments to these employees. We paid 50% of the bonus on January 10, 2021, and the remaining 50% on January 20, 2022. |
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2021 ANNUAL REPORT ON FORM 10-K
Copies of our proxy materials, including this Proxy Statement and the Annual Report are available online at www.proxyvote.com. The Annual Report, however, is not part of this proxy solicitation material.
Any person who was our stockholder on the Record Date (including any beneficial owner of shares) may request a copy of the Annual Report, and it will be furnished without charge upon receipt of a written request. Requests should be directed to Verb Technology Company, Inc., 3401 North Thanksgiving Way, Suite 240, Lehi, Utah 84043, Attention: Investor Relations, or by calling Investor Relations at (855) 250-2300. In addition, copies of this Proxy Statement, the Annual Report, and all other documents filed electronically by us, may be reviewed on the SEC’s website at: http://www.sec.gov.
As of the date of this Proxy Statement, we are not aware of any other business to be considered or acted upon at the Annual Meeting. In the event any other matters are properly presented at the Annual Meeting, or any postponement or adjournment thereof, the person named as proxy will vote in accordance with his discretion with respect to those matters.
| By Order of the Board of Directors, | |
| /s/ Rory J. Cutaia | |
| Chairperson of our Board, Chief Executive Officer, President and Secretary | |
| Lehi, Utah | |
| September 6, 2022 |
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