UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 13, 2017

 

IRONCLAD ENCRYPTION CORPORATION

(Exact name of registrant as specified in its charter)

 

Commission file number:   000-53662

 

Delaware   81-0409475
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification
No.)
     

777 South Post Oak Lane, Suite 1700

Houston, Texas

 

 

77056

(Address of principal executive offices)   (Zip Code)

 

(888) 362-7972

(Issuer's telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

 

  Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

     

 

 

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

 

On October 17, 2017, the Board of Directors (the “Board”) of IronClad Encryption Corporation (the “Company”) approved the Amended and Restated IronClad Encryption Corporation 2017 Equity Incentive Plan (the “Amended and Restated Equity Incentive Plan”), which includes certain administrative changes relating to the change in the Company’s state of incorporation described below.

 

The foregoing description of the Amended and Restated Equity Incentive Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated Equity Incentive Plan, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

 

On September 25, 2017, the Board and the holders of more than a majority of the outstanding voting interests of the Company approved the Company’s amendment and restatement of its Articles of Incorporation to be filed in Nevada (the “Nevada Amended and Restated Articles of Incorporation”) on October 13, 2017. This amendment and restatement reflects certain administrative changes that were intended to be included in the original Articles of Incorporation of the Company filed in Nevada.

 

In addition, effective as of October 16, 2017, the Company changed its state of incorporation from the State of Nevada to the State of Delaware (the “Conversion”). The Conversion was accomplished by the filing of (a) Articles of Conversion with the Secretary of State of the State of Nevada (the “Nevada Articles of Conversion”), (b) a Certificate of Conversion with the Secretary of State of the State of Delaware (the “Delaware Certificate of Conversion) and (c) a Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Delaware Certificate of Incorporation”). The holders of more than a majority of the outstanding voting interests of the Company approved the Conversion on September 25, 2017, through a written consent in lieu of meeting. The Company also adopted bylaws (the “Delaware Bylaws”) following the Conversion.

 

Although the Delaware Certificate of Incorporation and the Delaware Bylaws contain many similar provisions to the Nevada Amended and Restated Articles of Incorporation and Nevada bylaws (the “Nevada Bylaws”), they also include certain provisions that are different from the provisions contained in the Nevada Amended and Restated Articles of Incorporation and Nevada Bylaws, including provisions relating to preemptive rights and the indemnification of officers, directors, employees and other agents.

 

The foregoing descriptions of the Nevada Amended and Restated Articles of Incorporation, the Nevada Articles of Conversion, the Delaware Certificate of Conversion, the Delaware Certificate of Incorporation, and the Delaware Bylaws do not purport to be complete and are qualified in their entirety by reference to the full text of the Nevada Articles of Incorporation, the Nevada Articles of Conversion, the Delaware Certificate of Conversion, the Delaware Certificate of Incorporation and the Delaware Bylaws, copies of which are filed as Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 8.01 Other Events

 

The purpose of the disclosure in this Item 8.01 is to provide a description of the Class A common stock of the Company. This description is being provided for purposes of U.S. Securities and Exchange Commission (the “SEC”) forms that require a description of, or an incorporation by reference to a description of, securities covered by a registration statement filed under the Securities Exchange Act of 1934.

 

     

 

 

Description of Class A Common Stock

 

Authorized Shares : The Company is authorized to issue 150,000,000 shares of Class A common stock, par value $0.001 per share.

 

Voting Rights : The holders of Class A common stock shall at all times vote as one class, with each holder of record entitled to one vote for each share held. A holder of shares of Class A common stock shall not be entitled as a matter of right to cumulate its votes.

 

Dividend Rights : Each issued and outstanding share of Class A common stock shall entitle the holder thereof to receive dividends (whether payable in cash, stock or otherwise), when, as and if declared by the Board out of funds legally available therefore.

 

Liquidation, Dissolution or Winding Up : In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, each issued and outstanding share of Class A common stock shall entitle the holder of record thereof to receive ratably and equally all of the assets and funds of the Company available for distribution to its stockholders, whether from capital or surplus.

 

Preemptive Rights : Holders of Class A common stock shall not be entitled as a matter of right to preemptive rights to acquire additional shares of capital stock of the Company.

 

Limitation of Class A Common Stock Holders’ Rights : The Board has the authority, without action by the stockholders of the Company, to designate and issue preferred stock and to designate the rights, preferences and privileges of each series of preferred stock, which may be greater than the rights attached to the Class A common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of Class A common stock until the Board determines the specific rights attached to that preferred stock. The effects of issuing preferred stock could include one or more of the following:

 

· restricting dividends of the Class A common stock;

 

· diluting the voting power of the Class A common stock;

 

· impairing the liquidation rights of the Class A common stock; or

 

· delaying or preventing a change of control of our company.

 

The foregoing description is a summary of the terms of the Company’s Class A common stock and is qualified in its entirety by the provisions of the Company’s Delaware Certificate of Incorporation and Delaware Bylaws, copies of which are filed as Exhibit 3.4 and Exhibit 3.5, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

     

 

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits

 

Exhibit No.   Description
     
3.1*   Amended and Restated Articles of Incorporation of Ironclad Encryption Corporation, dated October 13, 2017
     
3.2*   Articles of Conversion, dated October 16, 2017
     
3.3*   Certificate of Conversion, dated October 16, 2017
     
3.4*   Certificate of Incorporation of IronClad Encryption Corporation, dated October 16, 2017
     
3.5*   Bylaws of IronClad Encryption Corporation, dated October 16, 2017
     
10.1*   Amended and Restated IronClad Encryption Corporation 2017 Equity Incentive Plan, dated October 17, 2017

 

* Filed herewith.

 

     

 


SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized,

 

IRONCLAD ENCRYPTION CORPORATION

 

Date: October 17, 2017

 

By: /s/ James D. McGraw  
  James D. McGraw  
     
Its: President  

 

     

 

Exhibit 3.1

 

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

IRONCLAD ENCRYPTION

CORPORATION

 

Pursuant to the provision of the Nevada Business Corporation Act, ss.78.010, et. seq. the undersigned corporation hereby adopts the following Articles of Incorporation as follows:

 

ARTICLE I

NAME

 

The name of this corporation is IRONCLAD ENCRYPTION CORPORATION

 

ARTICLE II

DURATION

 

This corporation has perpetual existence.

 

ARTICLE III

CORPORATION PURPOSES

 

The purpose or purposes for which the Corporation is organized are all things necessary or convenient to carry out any lawful business, as well as those itemized under Chapter 78 of Nevada Revised Statutes, including any amendments thereto or successor statute that may hereinafter be enacted.

 

ARTICLE IV

CAPITALIZATION

 

Section 1          Aggregate Number of Shares . The total number of shares which the Corporation shall have authority to issue is 521,707,093 having a par value of $0.001 per share of which (a) 20,000,000 shares shall be Preferred Stock, (b) 500,000,000 shares shall be Class A Common Stock, and (c) 1,707,093 shares shall be Class B Common Stock.

 

Section 2          Rights of Preferred Stock . The Preferred Stock shall be entitled to preference over the Common Stock with respect to the distribution of assets of the Corporation in the event of liquidation, dissolution, or winding-up of the Corporation, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs. The authorized, but unissued shares of Preferred Stock, may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The Directors, in their sole discretion, shall have the power to determine the relative powers, preferences and rights of each series of Preferred Stock.

 

Section 3          Rights of Common Stock . The designations, relative rights, preferences and limitations of the shares of Class A Common Stock and Class B Common Stock are as follows:

 

Class A Common Stock :

 

Voting . The holders of Class A Common Stock shall at all times vote as one class, with each holder of record entitled to one vote for each share held. A holder of shares of Class A Common Stock shall not be entitled as a matter of right to cumulate its votes.

 

Dividends . Each issued and outstanding share of Class A Common Stock shall entitle the holder thereof to receive dividends (whether payable in cash, stock or otherwise), when, as and if declared by the board of directors of the Corporation out of funds legally available therefore.

 

Liquidation, Dissolution or Winding Up . In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Class A Common Stock shall entitle the holder of record thereof to receive ratably and equally all the assets and funds of the Corporation available for distribution to its stockholders, whether from capital or surplus.

 

     

 

 

Merger, Consolidation, Etc . Upon the merger or consolidation of the Corporation (in a merger or consolidation in which stockholders of the Corporation receive cash or securities of any other person or entity upon such merger or consolidation), or upon the sale or other disposition of all or substantially all of the properties and assets of the Corporation as an entirety to any person or entity, the aggregate consideration therefore payable to the stockholders of the Corporation, if any, shall be distributed as if such merger, consolidation, sale or other disposition were a distribution in liquidation, dissolution or winding up of the affairs of the Corporation.

 

Preemptive Rights . A holder of shares of Class A Common Stock shall not be entitled as a matter of right to preemptive rights to acquire additional shares of capital stock of the Corporation.

 

Class B Common Stock :

 

Voting . The holders of Class B Common Stock shall not be entitled to vote with respect to any matter submitted to the stockholders of the Corporation for vote.

 

Dividends . Each issued and outstanding share of Class B Common Stock shall entitle the holder thereof to receive dividends (whether payable in cash, stock or otherwise), when, as and if declared by the board of directors of the Corporation out of funds legally available therefore.

 

Liquidation, Dissolution or Winding Up . In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Class B Common Stock shall entitle the holder of record thereof to receive ratably and equally all the assets and funds of the Corporation available for distribution to its stockholders, whether from capital or surplus.

 

Merger, Consolidation, Etc . Upon the merger or consolidation of the Corporation (in a merger or consolidation in which stockholders of the Corporation receive cash or securities of any other person or entity upon such merger or consolidation), or upon the sale or other disposition of all or substantially all of the properties and assets of the Corporation as an entirety to any person or entity, the aggregate consideration therefore payable to the stockholders of the Corporation, if any, shall be distributed as if such merger, consolidation, sale or other disposition were a distribution in liquidation, dissolution or winding up of the affairs of the Corporation.

 

Preemptive Rights . A holder of shares of Class B Common Stock shall not be entitled as a matter of right to preemptive rights to acquire additional shares of capital stock of the Corporation.

 

ARTICLE V

PREEMPTIVE RIGHTS

 

Except as may otherwise be provided by the Board of Directors, no preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation.

 

ARTICLE VI

NO CUMULATIVE VOTING

 

Each shareholder entitled to vote at any election for Directors shall have the right to vote, in person or by proxy, one vote for each share of stock owned by such shareholder for as many persons as there are Directors to be elected and for whose election such shareholder has a right to vote, and no shareholder shall be entitled to cumulate their votes.

 

ARTICLE VII

BYLAWS

 

The Board of Directors shall have the power to adopt, amend or repeal the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power of the shareholders to adopt, alter, amend or repeal the Bylaws.

 

  2  

 

 

ARTICLE VIII

DIRECTORS' LIABILITY

 

To the full extent from time to time permitted by law, no director of the corporation shall be personally liable to the corporation or its shareholders for damages for conduct as a director. Neither the amendment or repeal of this Article, nor the adoption of any provision of the Articles of Incorporation inconsistent with this Article, shall eliminate or reduce the protection afforded by this Article to a director of the corporation with respect to any matter which occurred, or any cause of action, suit or claim which but for this Article would have accrued or arisen, prior to such amendment, repeal or adoption.

 

ARTICLE IX

LIMITATION ON RIGHT TO CALL SPECIAL SHAREHOLDERS' MEETING

 

Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, upon not less than 30 nor more than 50 days' written notice to the stockholders of the Corporation.

 

ARTICLE X

AMENDMENT TO ARTICLES OF INCORPORATION

 

This corporation reserves the right to amend or repeal any provisions contained in these Articles of Incorporation, in any manner now or hereafter permitted by law, and all rights and powers conferred herein on the shareholders and directors of this corporation are subject to this reserved power.

 

ARTICLE XI

BOARD OF DIRECTORS

 

The qualifications, terms, of office, manner of election, time and place of meetings, and powers and duties of the Directors shall be prescribed by the Bylaws.

 

ARTICLE XII

OFFICER AND DIRECTOR INDEMNITY

 

The Corporation shall have the power to indemnify its directors, officers, employees and agents to the full extent permitted by Chapter 78 of the Nevada Revised Statutes of the State of Nevada as now in effect or as hereafter amended.

 

ARTICLE XIII

STATUTES NOT APPLICABLE

 

The provisions of Nevada Revised Statutes, 78.378 through 787.3793, inclusive, regarding the voting of a controlling interest in stock of a Nevada corporation and sections 78.411 through 78.444, inclusive, regarding combinations with interested stockholders, shall not be applicable to this Corporation.

 

The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is 43,265,891.

 

IN WITNESS WHEREOF, the Corporation has caused these Amended and Restated Articles of Incorporation to be accepted and signed by its General Counsel this 13th day of October, 2017.

 

By:  /s/ Len E. Walker  

 

Len E. Walker  
   
General Counsel  

 

  3  

 

 

Exhibit 3.2 BARBARA K. CEGAVSKE *140304* Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Articles of Conversion (PURSUANT TO NRS 92A.205) Page 1 USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY PLEASE NOTE: The charter document for the resulting entity must be submitted/filed simultaneously with the articles of conversion. Articles of Conversion (Pursuant to NRS 92A.205) 1. Name and jurisdiction of organization of constituent entity and resulting entity: IRONCLAD ENCRYPTION CORPORATION Name of constituent entity Nevada Corporation Jurisdiction Entity type * and, IRONCLAD ENCRYPTION CORPORATION Name of resulting entity Delaware Corporation Jurisdiction Entity type * 2. A plan of conversion has been adopted by the constituent entity in compliance with the law of the jurisdiction governing the constituent entity. 3. Location of plan of conversion: (check one) • The entire plan of conversion is attached to these articles. The complete executed plan of conversion is on file at the registered office or principal place of business of the resulting entity. • The complete executed plan of conversion for the resulting domestic limited partnership is on file at the records office required by NRS 88.330. * corporation, limited partnership, limited-liability limited partnership, limited-liability company or business trust . This form must be accompanied by appropriate fees. Nevada Secretary of State 92A Conversion Page 1 Revised: 1-5-15 NV096 - 1/16/2015 Wolters Kluwer Online  

 

     

 

 

 

BARBARA K. CEGAVSKE Secretary of State 202 North Carson Street Carson City, Nevada 89701-4201 (775) 684-5708 Website: www.nvsos.gov Articles of Conversion (PURSUANT TO NRS 92A.205) Page 2 USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY 4. Forwarding address where copies of process may be sent by the Secretary of State of Nevada (if a foreign entity is the resulting entity in the conversion): Attn: Corporation Trust Center c/o: 1209 Orange Street New Castle, DE 19801 5. Effective date and time of filing: (optional) (must not be later than 90 days after the certificate is filed) Date: Time: 6. Signatures - must be signed by: 1. If constituent entity is a Nevada entity: an officer of each Nevada corporation; all general partners of each Nevada limited partnership or limited-liability limited partnership; a manager of each Nevada limited-liability company with managers or one member if there are no managers; a trustee of each Nevada business trust; a managing partner of a Nevada limited-liability partnership (a.k.a. general partnership governed by NRS chapter 87). 2. If constituent entity is a foreign entity: must be signed by the constituent entity in the manner provided by the law governing it. IRONCLAD ENCRYPTION CORPORATION Name of constituent entity X /s/ Len E. Walker VP, General Counsel & Secretary 10/16/2017 Signature Title Date * Pursuant to NRS 92A.205(4) if the conversion takes effect on a later date specified in the articles of conversion pursuant to NRS 92A.240, the constituent document filed with the Secretary of State pursuant to paragraph (b) subsection 1 must state the name and the jurisdiction of the constituent entity and that the existence of the resulting entity does not begin until the later date. This statement must be included within the resulting entity's articles. FILING FEE: $350.00 IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected. This form must be accompanied by appropriate fees. Nevada Secretary of State 92A Conversion Page 2 Revised: 1-5-15 NV096 - 1/16/2015 Wolters Kluwer Online  

 

     

 

 

Exhibit 3.3

 

STATE OF DELAWARE

CERTIFICATE OF CONVERSION

FROM A NON-DELAWARE CORPORATION

TO A DELAWARE CORPORATION

PURSUANT TO SECTION 265 OF THE

DELAWARE GENERAL CORPORATION LAW

 

1. The jurisdiction where the Non-Delaware Corporation first formed is Nevada.

 

2. The jurisdiction immediately prior to filing this Certificate is Nevada.

 

3. The date the Non-Delaware Corporation first formed is February 22, 2017.

 

4. The name of the Non-Delaware Corporation immediately prior to filing this Certificate is Ironclad Encryption Corporation.

 

5. The name of the Corporation as set forth in the Certificate of Incorporation is IronClad Encryption Corporation.

 

IN WITNESS WHEREOF, the undersigned being duly authorized to sign on behalf of the converting Non-Delaware Corporation has executed this Certificate on the 16th day of October, 2017.

 

  By: /s/ Len E. Walker
     
  Name: Len E. Walker
     
  Title:  Vice President, General Counsel and Secretary

 

     

 

Exhibit 3.4

 

 

CERTIFICATE OF INCORPORATION OF

IRONCLAD ENCRYPTION CORPORATION

 

Pursuant to the provisions of the Delaware General Corporation Law, the undersigned corporation hereby adopts the following Certificate of Incorporation as follows:

 

ARTICLE I

NAME

 

The name of the corporation is IronClad Encryption Corporation (the “Corporation”).

 

ARTICLE II

DURATION

 

The Corporation has perpetual existence.

 

ARTICLE III

CORPORATION PURPOSES

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.

 

ARTICLE IV

REGISTERED OFFICE AND ADDRESS

 

The address of the registered office of the Corporation in the state of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle, and the name of its initial registered agent at such address is The Corporation Trust Company.

 

ARTICLE V

INCORPORATOR

 

The name and address of the sole incorporator are as follows:

 

Name: Mailing Address:
   
Len E. Walker 777 South Post Oak Lane, Suite 1700
  Houston, TX 77056

 

ARTICLE VI

CAPITALIZATION

 

Section 1          Aggregate Number of Shares . The total number of shares which the Corporation shall have authority to issue is 171,707,093, having a par value of $0.001 per share, of which (a) 20,000,000 shares shall be Preferred Stock, (b) 150,000,000 shares shall be Class A Common Stock, and (c) 1,707,093 shares shall be Class B Common Stock.

 

Section 2          Rights of Preferred Stock . The Preferred Stock shall be entitled to preference over the Common Stock with respect to the distribution of assets of the Corporation in the event of liquidation, dissolution, or winding-up of the Corporation, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the Corporation among its stockholders for the purpose of winding up its affairs. The authorized, but unissued shares of Preferred Stock, may be divided into and issued in designated series from time to time by one or more resolutions adopted by the Board of Directors. The Directors, in their sole discretion, shall have the power to determine the relative powers, preferences and rights of each series of Preferred Stock.

 

Section 3          Rights of Common Stock . The designations, relative rights, preferences and limitations of the shares of Class A Common Stock and Class B Common Stock are as follows:

 

     

 

 

Class A Common Stock :

 

Voting . The holders of Class A Common Stock shall at all times vote as one class, with each holder of record entitled to one vote for each share held. A holder of shares of Class A Common Stock shall not be entitled as a matter of right to cumulate its votes.

 

Dividends . Each issued and outstanding share of Class A Common Stock shall entitle the holder thereof to receive dividends (whether payable in cash, stock or otherwise), when, as and if declared by the board of directors of the Corporation out of funds legally available therefore.

 

Liquidation, Dissolution or Winding Up . In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Class A Common Stock shall entitle the holder of record thereof to receive ratably and equally all the assets and funds of the Corporation available for distribution to its stockholders, whether from capital or surplus.

 

Merger, Consolidation, Etc . Upon the merger or consolidation of the Corporation (in a merger or consolidation in which stockholders of the Corporation receive cash or securities of any other person or entity upon such merger or consolidation), or upon the sale or other disposition of all or substantially all of the properties and assets of the Corporation as an entirety to any person or entity, the aggregate consideration therefore payable to the stockholders of the Corporation, if any, shall be distributed as if such merger, consolidation, sale or other disposition were a distribution in liquidation, dissolution or winding up of the affairs of the Corporation.

 

Preemptive Rights . A holder of shares of Class A Common Stock shall not be entitled as a matter of right to preemptive rights to acquire additional shares of capital stock of the Corporation.

 

Class B Common Stock :

 

Voting . The holders of Class B Common Stock shall not be entitled to vote with respect to any matter submitted to the stockholders of the Corporation for a vote.

 

Dividends . Each issued and outstanding share of Class B Common Stock shall entitle the holder thereof to receive dividends (whether payable in cash, stock or otherwise), when, as and if declared by the board of directors of the Corporation out of funds legally available therefore.

 

Liquidation, Dissolution or Winding Up . In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, each issued and outstanding share of Class B Common Stock shall entitle the holder of record thereof to receive ratably and equally all the assets and funds of the Corporation available for distribution to its stockholders, whether from capital or surplus.

 

Merger, Consolidation, Etc . Upon the merger or consolidation of the Corporation (in a merger or consolidation in which stockholders of the Corporation receive cash or securities of any other person or entity upon such merger or consolidation), or upon the sale or other disposition of all or substantially all of the properties and assets of the Corporation as an entirety to any person or entity, the aggregate consideration therefore payable to the stockholders of the Corporation, if any, shall be distributed as if such merger, consolidation, sale or other disposition were a distribution in liquidation, dissolution or winding up of the affairs of the Corporation.

 

Preemptive Rights . A holder of shares of Class B Common Stock shall not be entitled as a matter of right to preemptive rights to acquire additional shares of capital stock of the Corporation.

 

ARTICLE VII

PREEMPTIVE RIGHTS

 

Except as may otherwise be provided by the Board of Directors, no preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of the Corporation.

 

  2  

 

 

ARTICLE VIII

NO CUMULATIVE VOTING

 

Each stockholder entitled to vote at any election of directors shall have the right to vote, in person or by proxy, one vote for each share of stock owned by such stockholder for as many persons as there are directors to be elected and for whose election such stockholder has a right to vote, and no stockholder shall be entitled to cumulate its votes.

 

ARTICLE IX

LIMITATION OF LIABILITY OF DIRECTORS

 

A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law (c) under Section 174 of the Delaware General Corporation Law, or (d) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.

 

Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

 

ARTICLE X

BYLAWS

 

The board of directors shall have the power to adopt, alter, amend or repeal the Bylaws of the Corporation or adopt new Bylaws. Nothing herein shall deny the concurrent power of the stockholders to adopt, alter, amend or repeal the Bylaws.

 

ARTICLE XI

AMENDMENT TO CERTIFICATE OF INCORPORATION

 

The Corporation reserves the right to amend, alter, change or repeal any provisions contained in this Certificate of Incorporation, in any manner now or hereafter permitted by law, and all rights and powers conferred herein on the stockholders and directors of the Corporation are subject to this reserved power.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Incorporation this 16th day of October, 2017.

 

  /s/ Len E. Walker
  Len E. Walker , Sole Incorporator

 

  3  

 

 

Exhibit 3.5

BYLAWS OF

IRONCLAD ENCRYPTION CORPORATION

Adopted to be Effective October 16, 2017

 

ARTICLE 1

REGISTERED OFFICE AND RESIDENT AGENT

 

The registered office of the corporation shall be located in the State of Delaware at such place as may be fixed from time to time by the officers of the corporation upon filing such notices as may be required by law, and the resident agent shall have a business office identical with such registered office. Any change in the resident agent or registered office shall be effective upon filing such change with the Office of the Secretary of State of the State of Delaware unless a later date is specified.

 

ARTICLE 2

STOCKHOLDERS

 

2.1          Place of Meeting. All meetings of the stockholders shall be held at the principal place of business of the corporation, or at such other place, within or without the State of Delaware, as shall be determined from time to time by the Board, and the place at which any such meeting shall be held shall be stated in the notice of the meeting.

 

2.2          Annual Meeting. The annual meeting of stockholders for election of Directors and for transaction of such other business as may properly come before the meeting shall be held on the date and at the time fixed, from time to time, by the Board of Directors, provided that there shall be an annual meeting every calendar year. Stockholder annual meetings may occur through the use of any means of communication by which all stockholders participating can hear each other during the meeting, or by tele-facsimile transmission.

 

2.3          Special Meetings. Special meetings of stockholders of the corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, or by the holders of ten percent (10%) of the voting power of the corporation, upon not less than ten nor more than fifty days written notice to the stockholders of the corporation. Stockholder special meetings may occur through the use of any means of communication by which all stockholders participating can hear each other during the meeting, or by tele-facsimile transmission.

 

2.4          Notice of Meeting.

 

2.4.1           Annual Meeting. Notice of the time and place of the annual meeting of the stockholders shall be given by delivering personally or by mailing a written or printed notice of the same to each stockholder of record entitled to vote at the meeting, at least ten days and not more than sixty days prior to the meeting.

 

2.4.2           Special Meeting. At least ten days and not more than fifty days prior to the meeting, written or printed notice of each special meeting of the stockholders, stating the place, day and hour of such meeting and the purpose or purposes for which the meeting is called, shall be delivered personally or mailed to each stockholder of record entitled to vote at such meeting.

 

2.5          Voting Record. At least ten days before each meeting of the stockholders, a complete record of stockholders entitled to vote at such meeting, or any adjournment thereof, shall be made, arranged in alphabetical order with the address of and number of shares held by each stockholder, which record shall be kept on file at the registered office of the corporation for a period of ten days prior to such meeting. The record shall be kept open at the time and place of such meeting for inspection by any stockholder. Failure to comply with the requirements of this subsection shall not affect the validity of any action taken at a meeting.

 

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2.6          Quorum and Adjourned Meetings. A majority of the voting power of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of the stockholders. If less than a majority of the voting power entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present or represented at a reconvened meeting following such an adjournment, any business may be transacted that might have been transacted at the meeting as originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

 

2.7          Manner of Acting. Except as may be otherwise provided in the Delaware General Corporation Law, if a quorum is present, the affirmative vote of the majority of the voting power represented at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by these Bylaws, the Certificate of Incorporation or the Delaware General Corporation Law.

 

2.8          Voting of Shares. Except as otherwise provided in these Bylaws or to the extent voting rights of shares of any class or classes are limited or denied by the Certificate of Incorporation, on each matter submitted to a vote at a meeting of stockholders, each stockholder shall have one vote for each share of stock registered in his name in the books of the corporation. Voting by ballot shall not be required for any corporate action except as otherwise provided by Delaware law.

 

2.9          Fixing of Record Date for Determining Stockholders. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any distribution, or in order to make a determination of stockholders for any other purpose, the Board may fix in advance a date as the record date for any such determination. Such record date shall not be more than sixty days, and in case of a meeting of stockholders, not less than ten days prior to the date on which the particular action requiring such determination is to be taken. If no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting or to receive payment of a distribution, the date and hour on which the notice of meeting is mailed or on which the resolution of the Board declaring such distribution is adopted, as the case may be, shall be the record date and time for such determination. Such determination shall apply to any adjournment of the meeting.

 

2.10        Proxies. A stockholder may vote either in person or by written proxy executed by the stockholder or his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. Any proxy regular on its face shall be presumed to be valid.

 

2.11        Waiver of Notice. A waiver of any required stockholder notice signed either before or after the time stated therein for the meeting by the person or persons entitled to such notice shall be equivalent to giving notice.

 

2.12        Voting for Directors. Except as otherwise provided in the Certificate of Incorporation or in these Bylaws, every stockholder of record shall have the right at every stockholders' meeting to one (1) vote for every share standing in his/her name on the books of the corporation, and the affirmative vote of a majority of the shares represented at a meeting and entitled to vote thereat shall be necessary for the adoption of a motion or for the determination of all questions and business which shall come before the meeting.

 

2.13        Action by Stockholders Without a Meeting. Any action required or which may be taken at a stockholders meeting may be taken without a meeting if a written consent setting forth the action so taken is signed by the holders of a majority of the voting power of the corporation entitled to vote with respect to the subject matter thereof. Such consent shall be inserted in the minute book as if it were the minutes of a meeting of the stockholders. In no instance where action by written consent is authorized need a meeting be called or noticed.

 

2.14        Action of Stockholders by Communication Equipment. Stockholders may participate in stockholders meetings by means of conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

 

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2.15        Conduct of Meeting. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting: The Chairman of the Board, if any; the President; a Vice-President; or if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence an Assistant Secretary, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting shall appoint a secretary of the meeting.

 

2.16        Inspectors and Judges. The Board of Directors in advance of any meeting may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meeting or any adjournment thereof. If any inspector or inspectors, or judge or judges, are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may be filled by appointment made by the directors in advance of the meeting, or at the meeting by the person presiding thereat. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots and consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots and consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the person presiding at the meeting, the inspector or inspectors or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them, and execute a certificate of any fact found by him or them.

 

ARTICLE 3

SHARES

 

3.1          Issuance of Shares. No shares of stock shall be issued unless authorized by the Board. Such authorization shall include the maximum number of shares to be issued and the consideration to be received for each share. No certificate shall be issued for any share until consideration for such share is fully paid.

 

3.2          Certificates. Certificates representing shares of the corporation shall be issued in numerical order, and each stockholder shall be entitled to a certificate signed by the President, or a Vice President, and the Secretary or an Assistant Secretary, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of such officers may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. If an officer who has signed or whose facsimile signature has been placed upon such certificate ceases to be such officer before the certificate is issued, it may be issued by the corporation with the same effect as if the person were an officer on the date of issue.

 

Each certificate of shares shall state:

 

(a) that the corporation is organized under the laws of the State of Delaware;

 

(b) the name of the person to whom issued; and

 

(c) the number and class of shares and the designation of the series, if any, which such certificate represents.

 

3.3          Transfers.

 

3.3.1      Record of Transfer. Transfer of shares shall be made only upon the stock transfer books of the corporation which shall be kept at the registered office of the corporation, its principal place of business, or at the office of its transfer agent or registrar. The Board may, by resolution, open a share register in any state and may employ an agent or agents to keep such register and to record transfers of shares therein.

 

3.3.2      Requirements for Transfer. Shares of the corporation shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate, an assignment separate from certificate or a written power of attorney to sell, assign and transfer the same signed by the holder of the certificate. No shares of the corporation shall be transferred on the books of the corporation until the outstanding certificates therefor have been surrendered to the corporation.

 

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3.4          Registered Owner.

 

3.4.1      Name of Stockholder. Registered stockholders shall be treated by the corporation as holders in fact of shares standing in their respective names and the corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided below or by the laws of the State of Delaware.

 

3.4.2      Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name, if authority to do so be contained in an appropriate order of the court by which such receiver was appointed. A stockholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

 

3.4.3           Certification Procedure. The Board may adopt by resolution a procedure whereby a stockholder may certify in writing to the corporation that all or a portion of the shares registered in the name of such stockholder are held for the account of a specified person or persons. The resolution shall set forth:

 

(a) the classification of stockholder who may certify;

 

(b) the purpose or purposes for which the certification may be made;

 

(c) the form of certification and information to be contained therein;

 

(d) if the certification is with respect to a record date or closing of share transfer books, the date by which the certification must be received by the corporation;

 

(e) and, such other provisions with respect to the procedure as are deemed necessary or desirable.

 

3.4.4      Deemed Holder of Record. Upon receipt from the corporation of a certification complying with the procedure, the persons specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holder of record of the number of shares specified in place of the stockholder making the certification.

 

3.5          Mutilated, Lost or Destroyed Certificates. In case of any mutilation, loss or destruction of any certificate of shares, another may be issued in its place on proof of such mutilation, loss or destruction. The Board may impose conditions on such issuance and may require the giving of a satisfactory bond or indemnity to the corporation in such sum as the Board might determine or establish such other procedures as the Board deems necessary.

 

3.6          Fractional Shares or Scrip. The corporation may: (a) issue fractions of shares which shall entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any assets of the corporation in the event of liquidation; (b) arrange for the disposition of fractional interests by those entitled thereto; (c) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such shares are determined; or (d) issue scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon surrender of scrip aggregating a full share.

 

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ARTICLE 4

BOARD OF DIRECTORS

 

4.1          General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of the Board, except as may be otherwise provided in the Certificate of Incorporation or the Delaware General Corporation Law.

 

4.2          Number, Tenure and Qualifications. The authorized number of directors of the corporation shall not be less than one (1) and not more than twelve (12). The number of directors may be increased or decreased by a duly adopted resolution of the Board of Directors. Each director shall serve for a term ending on the annual meeting following the annual meeting at which such director was elected The foregoing notwithstanding, each director shall serve until his successor shall have been duly elected and qualified, unless he shall resign, become disqualified or disabled, or shall otherwise be removed. For purposes of the preceding paragraph, reference to the first election of directors shall signify the first election of directors concurrent with the approval by stockholders of this Bylaw. At each annual election held thereafter, the directors chosen to succeed those whose terms then expire shall be identified as being of the same as the directors they succeed.

 

4.2.1      A majority of the directors at any time in office shall constitute a quorum for the transaction of business, and if at any meeting of the Board of Directors there shall be less than such a quorum, a majority of those present may adjourn the meeting from time to time. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number be required by law or by these Bylaws.

 

4.2.2      A director need not be a stockholder.

 

4.3          Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority of the remaining directors, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires or, in each case, until their respective successors are duly elected and qualified. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. When any director shall give notice of resignation effective at a future date, the Board may fill such vacancy to take effect when such resignation shall become effective.

 

4.4          Removal of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, but only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the shares of the corporation entitled to vote for the election of directors.

 

4.5          Annual and Regular Meetings. An annual Board meeting shall be held without notice immediately after and at the same place as the annual meeting of stockholders. By resolution, the Board, or any committee thereof, may specify the time and place either within or without the State of Delaware for holding regular meetings thereof without other notice than such resolution.

 

4.6          Special Meetings. Special meetings of the Board or any committee appointed by the Board may be called by or at the request of the President, the Secretary or, in the case of special Board meetings, any two Directors and, in the case of any special meeting of any committee appointed by the Board, by the Chairman thereof. The person or persons authorized to call special meetings may fix any place either within or without the State of Delaware as the place for holding any special Board or committee meeting called by them.

 

4.7          Notice of Special Meetings. Notice of a special Board or committee meeting stating the place, day and hour of the meeting shall be given to a Director in writing or orally by telephone or in person. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice of such meeting.

 

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4.7.1      Personal Delivery. If notice is given by personal delivery, the notice shall be effective if delivered to a Director at least two days before the meeting.

 

4.7.2      Delivery by Mail. If notice is delivered by mail, the notice shall be deemed effective if deposited in the official government mail properly addressed to a Director at the Director's address shown on the records of the corporation with postage prepaid at least three days before the meeting.

 

4.7.3      Oral Notice. If notice is delivered orally, by telephone or in person, the notice shall be deemed effective if personally given to the Director at least one day before the meeting.

 

4.8          Quorum and Voting.

 

4.8.1      Action of Board. Except as otherwise provided in these Bylaws or Certificate of Incorporation, the act of the majority of the Directors present at a Board meeting at which there is a quorum shall be the act of the Board, unless the vote of a greater number is required by these Bylaws, the Certificate of Incorporation or the Delaware General Corporation Law. The Directors present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough Directors to leave less than a quorum.

 

4.8.2      Interest in Transaction. If a transaction or contract with the corporation in which a Director or officer of the corporation has a direct or indirect interest is authorized, approved, or ratified by a vote of the majority of Directors with no direct or indirect interest in the transaction, then:

 

(a) a quorum for purposes of taking such action is present; and

 

(b) the act of such majority of disinterested Directors shall constitute the act of the Board.

 

4.9          Waiver of Notice.

 

4.9.1      In Writing. Whenever notice is required to be given to any Director or committee member under these Bylaws, the Certificate of Incorporation or the Delaware General Corporation Law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee appointed by the Board need be specified in the waiver of notice of such meeting.

 

4.9.2      By Attendance. The attendance of a Director or committee member at a meeting shall constitute a waiver of notice of such meeting, except where the Director or committee member attends a meeting for the express purpose of objecting to the transaction or any business because the meeting is not lawfully called or convened.

 

4.10        Presumption of Assent. A Director present at a Board meeting at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against the matter, unless his dissent is entered in the minutes of the meeting, unless he files his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof, or unless he forwards such dissent by registered mail to the secretary immediately after adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action.

 

4.11        Resignation. Any Director may resign at any time by delivering written notice to the President, Secretary or registered office of the corporation, or by giving oral notice at any Directors or stockholders meeting.

 

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4.12        Executive and Other Committees. The Board, by resolution adopted by a majority of the full Board, may designate from among its members an Executive Committee and one or more other standing or special committees. The Executive Committee shall have and may exercise all the authority of the Board, and other standing or special committees may be invested with such powers, subject to such conditions, as the Board shall see fit; provided that notwithstanding the above, no committee of the Board shall have the authority to: (1) authorize distributions, or the issuance of shares, unless a resolution of the Board, or these Bylaws or the Certificate of Incorporation expressly so provide; (2) approve or recommend to stockholders actions or proposals required by the Delaware General Corporation Law to be approved by stockholders; (3) fill vacancies on the Board or any committee thereof; (4) amend the Bylaws; (5) fix compensation of any Director for serving on the Board or on any committee thereof; (6) approve a plan of merger, consolidation or exchange of shares not requiring stockholder approval; (7) appoint other committees of the Board or the members thereof; or (8) amend the Certificate of Incorporation, except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares adopted by the Board, fix any of the relative rights and preferences of shares of any preferred or special class as permitted under the Delaware General Corporation Law. All committees so appointed shall keep regular minutes of their meetings and shall cause them to be recorded in books kept for that purpose in the office of the corporation. The designation of any such committee and the delegation of authority thereto shall not relieve the Board, or any member thereof, of any responsibility imposed by law.

 

4.13        Compensation. The Board or a duly authorized committee thereof shall have the authority to fix the compensation of the directors and reimbursement for any reasonable expenses incurred in attending Directors' meetings. The compensation of Directors may be on such basis as is determined by the Board of Directors. The Board of Directors may also establish compensation for members of standing or special committees of the Board for serving on such committees.

 

4.14        Action by Board or Committee Without a Meeting. Any action required or which may be taken at a meeting of the Board or a committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken or to be taken, shall be signed by all Directors or committee members as the case may be.

 

4.15        Participation of Directors by Communication Equipment. Members of the Board or committees thereof may participate in a meeting of the Board or a committee by means of conference telephone or similar communication equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.

 

ARTICLE 5

OFFICERS

 

5.1          Designations. The officers of corporation shall be a President, a Secretary and a Treasurer, each of whom shall be elected by the Board. One or more Vice Presidents and such other officers and assistant officers may be elected or appointed by the Board, such officers and assistant officers to hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as may be provided by resolution of the Board. Any officer may be assigned by the Board any additional title that the Board deems appropriate. The Board may delegate to any officer or agent the power to appoint any such subordinate officers or agents and to prescribe their respective terms of office, authority and duties. Any two or more offices may be held by the same person, except the offices of President and Secretary; provided, however, that if there is only one stockholder, all corporate offices can be held by one individual.

 

5.2          Election and Term of Office. The officers of the corporation shall be elected annually by the Board at the meeting of the Board held after the annual meeting of the stockholders. If the election of officers is not held at such meeting, such election shall be held as soon thereafter as a Board meeting conveniently may be held. Unless an officer dies, resigns or is removed from office, the officer shall hold office until the next annual meeting of the Board or until his or her successor is elected.

 

5.3          President. The President shall be the Chief Executive Officer of the corporation and shall have general control and management of the business affairs and policies of the corporation. He or she shall be generally responsible for the proper conduct of the business of the corporation. The President shall possess the power to sign all certificates, contracts and other instruments of the corporation. The President shall, unless a Chairman of the Board is elected, preside at all meetings of the stockholders and of the Board. The President shall have such other powers and perform such other duties as from time to time may be conferred or imposed upon the President by the Board of Directors.

 

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5.4          Vice President. During the absence or disability of the President, the Executive Vice Presidents, if any, and the Vice Presidents, if any, in the order designated by the Board, shall exercise all functions of the President. Each Vice President shall have such powers and discharge such duties as may be assigned to him from time to time by the President or the Board.

 

5.5          Secretary and Assistant Secretaries. The Secretary shall issue notices for all meetings, except notices for special stockholders meetings and special Directors meetings called by those persons so authorized, shall keep minutes of all meetings, shall have charge of the seal and the corporate books, and shall make such reports and perform such other duties as are incident to such office or as are properly required of the Secretary by the Board. The Assistant Secretary, or Assistant Secretaries in the order designated by the Board, shall perform all duties of Secretary during the absence or disability of the Secretary, and at other times shall perform such duties as are directed by the President or the Board.

 

5.6          Treasurer. The Treasurer shall have the custody of all monies and securities of the corporation and shall keep regular books of account. The Treasurer shall disburse the funds of the corporation in payment of the just demands against the corporation or as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Board, from time to time as may be required of the Treasurer, an account of all transactions as Treasurer and of the corporation's financial condition. The Treasurer shall perform other duties incident to his office as are properly required of him by the Board. The Assistant Treasurer, or Assistant Treasurers in the order designated by the Board, shall perform all duties of Treasurer in the absence or disability of the Treasurer, and at other times shall perform such other duties as are directed by the President or the Board.

 

5.7          Delegation. In the case of absence or inability to act of any officer of the corporation and, of any person herein authorized to act in the place of such person, the Board may from time to time delegate the powers or duties of such officer to any other officer, Director or person whom it may select.

 

5.8          Other Officers. The Board may appoint such other officers and agents as it shall deem necessary or expedient, who shall hold offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.

 

5.9          Resignation. Any officer may resign at any time by delivering written notice to the President, a Vice President, the Secretary, or the Board, or by giving oral notice at any meeting of the Board. Any such resignation shall take effect at the time specified therein, or if time is not specified, upon delivery thereof and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

5.10        Removal. Any officer or agent elected or appointed by the Board may be removed by the Board whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.

 

5.11        Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, creation of a new office or any other cause may be filled by the Board for the unexpired portion of the term or for a new term established by the Board.

 

5.12        Salaries. The salaries of the officers shall be fixed from time to time by the Board or by any person or persons to whom the Board has delegated such authority. No officer shall be prevented from receiving such salary because he or she is also a Director of the corporation.

 

ARTICLE 6

CONTRACTS, LOANS, CHECKS AND DEPOSITS

 

6.1          Contracts. The Board may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances.

 

6.2          Loans to the Corporation. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board. Such authority may be general or confined to specific instances.

 

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6.3          Loans to Directors. The corporation may not lend money to or guarantee the obligation of a Director unless either (a) the loan or guarantee is approved by the holders of at least a majority of the votes represented by the outstanding shares of all classes entitled to vote thereon, excluding the votes of the benefited Director or, (b) the Board determines that the loan or guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing loans and guarantees.

 

6.4          Checks, Drafts, Etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, or agent or agents, of the corporation and in such manner as is from time to time determined by resolution of the Board.

 

6.5          Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board may select.

 

ARTICLE 7

INDEMNIFICATION OF OFFICERS, DIRECTORS,

EMPLOYEES, AND OTHER AGENTS

 

7.1          Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she (or a person for whom he or she is a representative) is or was a director or an officer of the corporation or is or was serving at the request of the corporation in any position or capacity for any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (hereinafter an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity or in any other capacity shall be indemnified and held harmless by the corporation to the fullest extent permitted by Delaware law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than such law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 7.3 with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation.

 

7.2          Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 7.1, the corporation shall, to the fullest extent not prohibited by applicable law, pay the expenses (including attorney’s fees) incurred by an indemnitee in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 7.2 or otherwise.

 

7.3          Right of Indemnitee to Bring Suit. If a claim under Section 7.1 or 7.2 is not paid in full by the corporation within 60 days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim. To the fullest extent permitted by law, if successful in whole or in part in any such suit, or in a suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article 7 or otherwise shall be on the corporation. 

 

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7.4          Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article 7 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the corporation’s Certificate of Incorporation, Bylaws, agreement, vote of stockholders or directors, or otherwise.

 

7.5          Insurance. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

 

7.6          Indemnification of Employees and Agents of the Corporation. The corporation may, to the extent authorized from time to time by the Board of Directors or a duly authorized committee thereof, grant rights to indemnification and to the advancement of expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the corporation.

 

7.7          Nature of Rights. The rights conferred upon indemnitees in this Article 7 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer or agent of the corporation or who has ceased serving at the request of the corporation in any position or capacity for any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise and shall inure to the benefit of the indemnitee’s heirs, executors and administrators. Any amendment, alteration or repeal of this Article 7 that adversely affects any right of an indemnitee or his or her successors shall be prospective only and shall not limit, eliminate or impair any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

 

ARTICLE 8

BOOKS AND RECORDS

 

8.1          Books of Accounts, Minutes, and Share Registrar. The corporation shall keep complete books and records of accounts and minutes of the proceedings of the Board and stockholders and shall keep at its registered office, principal place of business, or at the office of its transfer agent or registrar a share register giving the names of the stockholders in alphabetical order and showing their respective addresses and the number of shares held by each.

 

8.2          Copies of Resolutions. Any person dealing with the corporation may rely upon a copy of any of the records of the proceedings, resolutions, or votes of the Board or stockholders, when certified by the President or Secretary.

 

ARTICLE 9

CORPORATE SEAL

 

The Board may provide for a corporate seal which shall have inscribed thereon the name of the corporation, the year and state of incorporation and the words "corporate seal".

 

  10  

 

 

ARTICLE 10

AMENDMENTS

 

The accounting year of the corporation shall be the calendar year unless a different accounting year is selected by resolution of the Board.

 

ARTICLE 11

AMENDMENTS

 

These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors. The stockholders may also alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made by the Board of Directors may be amended, repealed, altered or modified by the stockholders.

 

ARTICLE 12

RULES OF ORDER

 

The rules contained in the most recent edition of Robert's Rules of Order, Newly Revised, shall govern all meetings of stockholders and Directors where those rules are not inconsistent with the Certificate of Incorporation, Bylaws, or special rules of order of the corporation.

 

ARTICLE 13

REIMBURSEMENT OF DISALLOWED EXPENSES

 

If any salary, payment, reimbursement, employee fringe benefit, expense allowance payment, or other expense incurred by the corporation for the benefit of an employee is disallowed in whole or in part as a deductible expense of the corporation for Federal Income Tax purposes, the employee shall reimburse the corporation, upon notice and demand, to the full extent of the disallowance. This legally enforceable obligation is in accordance with the provisions of Revenue Ruling 69-115, 1969-1 C.B. 50, and is for the purpose of entitling such employee to a business expense deduction for the taxable year in which the repayment is made to the corporation. In this manner, the corporation shall be protected from having to bear the entire burden of disallowed expense items.

 

  11  

 

Exhibit 10.1

 

AMENDED & RESTATED IRONCLAD

ENCRYPTION CORPORATION

 

2017 EQUITY INCENTIVE PLAN

 

     

 

TABLE OF CONTENTS

    Page
Section 1. Purpose 1
Section 2. Definitions 1
Section 3. Administration 6
Section 4. Common Stock Subject to the Plan 7
Section 5. Eligibility to Receive Awards 8
Section 6. Stock Options 8
Section 7. Stock Appreciation Rights 11
Section 8. Restricted Stock Awards 13
Section 9. Stock Bonus Awards 15
Section 10. Other Stock-Based Awards 15
Section 11. Cancellation or Rescission of Awards 16
Section 12. Loans 17
Section 13. Securities Law Requirements 17
Section 14. Restrictions on Transfer; Representations of Participant; Legends 17
Section 15. Single or Multiple Agreements 18
Section 16. Rights of a Stockholder 18
Section 17. No Right to Continue Employment or Service 19
Section 18. Withholding 19
Section 19. Indemnification 19
Section 20. Non-Assignability 19
Section 21. Nonuniform Determinations 20
Section 22. Adjustments 20
Section 23. Termination and Amendment 20
Section 24. Severability 20
Section 25. Effect on Other Plans 21
Section 26. Effective Date of the Plan 21
Section 27. Governing Law 21
Section 28. Gender and Number 21
Section 29. Acceleration of Exercisability and Vesting 21
Section 30. Modification of Awards 21
Section 31. No Strict Construction 22
Section 32. Successors 22
Section 33. Plan Provisions Control 22
Section 34. Headings 22
Section 35. Change in Control 22
Section 36. Compliance with Section 409A of the Code 22

 

   - i -  

 

 

AMENDED & RESTATED IRONCLAD ENCRYPTION
CORPORATION

2017 EQUITY INCENTIVE PLAN

 

Section 1.          Purpose . The Amended & Restated IronClad Encryption Corporation 2017 Equity Incentive Plan (the “Plan”) has been established by IronClad Encryption Corporation, a Delaware corporation (the “Company”), effective (subject to stockholder approval) as of January 6, 2017 (the “Effective Date”), to foster and promote the long-term financial success of the Company and its Subsidiaries and thereby increase stockholder value. The Plan provides for the Award (as defined in Section 3) of equity incentives to those employees, directors, or officers of, or key advisers or consultants to, the Company or any of its Subsidiaries who are responsible for or contribute to the management, growth or success of the Company or any of its Subsidiaries.

 

Section 2.          Definitions . For purposes of this Plan, the following terms used herein shall have the following meanings, unless a different meaning is clearly required by the context.

 

2.1         “Board” means the Board of Directors of the Company.

 

2.2         “Change in Control” means the occurrence of any of the following:

 

(a)       the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)) (a “Person”) of “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i) the then-outstanding shares of common stock of the Company, assuming conversion of any outstanding preferred stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation or other entity pursuant to a reorganization, merger, consolidation or other business combination, if, following such reorganization, merger, consolidation or other business combination, the conditions described in (i), (ii) and (iii) of Section 2.2(c) are satisfied;

 

(b)       if individuals who, as of the date hereof, constitute the Board of the Company (the “Incumbent Board”) cease for any reason to constitute at least two-thirds of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a two-thirds vote of the directors then constituting the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest subject to Regulation 14A promulgated under the Exchange Act or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

     

 

 

(c)       approval by the stockholders of the Company of a reorganization, merger, consolidation or other business combination, unless following such reorganization, merger, consolidation or other business combination (i) more than 50% of, respectively, the then-outstanding shares of common stock or other equity interests of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination and the combined voting power of the then-outstanding voting securities of such corporation or other entity entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger, consolidation or other business combination in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or other business combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be (for purposes of determining whether such percentage test is satisfied, there shall be excluded from the number of shares or other equity interests and voting securities of the resulting corporation or other entity owned by the Company’s stockholders, but not from the total number of outstanding shares or other equity interests and voting securities of the resulting corporation or other entity, any shares or voting securities received by any such stockholder in respect of any consideration other than shares or other equity interests or voting securities of the Company); (ii) no Person (excluding the Company, any employee benefit plan (or related trust) of the Company, any qualified employee benefit plan of such corporation or other entity resulting from such reorganization, merger, consolidation or other business combination and any Person beneficially owning, immediately prior to such reorganization, merger, consolidation or other business combination, directly or indirectly, 50% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock or other equity interests of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination or the combined voting power of the then-outstanding voting securities of such corporation entitled to vote generally in the election of directors; and (iii) at least two-thirds of the members of the board of directors of the corporation or other entity resulting from such reorganization, merger, consolidation or other business combination were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger, consolidation or other business combination; or

 

(d)       (i) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or (ii) the first to occur of (A) the sale or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (B) the approval by the stockholders of the Company of any such sale or disposition, other than, in each case, any such sale or disposition to a corporation or other entity, with respect to which immediately thereafter, (1) more than 50% of, respectively, the then-outstanding shares of common stock or other equity interests of such corporation or other entity and the combined voting power of the then-outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be (for purposes of determining whether such percentage test is satisfied, there shall be excluded from the number of shares or other equity interests and voting securities of the transferee corporation or other entity owned by the Company’s stockholders, but not from the total number of outstanding shares and voting securities of the transferee corporation or other entity, any shares or other equity interests or voting securities received by any such stockholder in respect of any consideration other than shares or voting securities of the Company), (2) no Person (excluding the Company and any employee benefit plan (or related trust) of the Company, any qualified employee benefit plan of such transferee corporation or other entity and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 50% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 50% or more of, respectively, the then-outstanding shares of common stock or other equity interests of such transferee corporation or other entity and the combined voting power of the then-outstanding voting securities of such transferee corporation or other entity entitled to vote generally in the election of directors and (3) at least two-thirds of the members of the board of directors of such transferee corporation or other entity were members of the Incumbent Board at the time of the execution of the initial agreement or action of the board providing for such sale or other disposition of assets of the Company.

 

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Notwithstanding anything to the contrary in the foregoing, a transaction shall not constitute a Change in Control if it is effected for the purpose of changing the place of incorporation or form of organization of the ultimate parent entity (including where the Company is succeeded by an issuer incorporated under the laws of another state, country or foreign government for such purpose and whether or not the Company remains in existence following such transaction) where all or substantially all of the persons or group that beneficially own all or substantially all of the combined voting power of the Company’s voting securities immediately prior to the transaction beneficially own all or substantially all of the combined voting power of the Company in substantially the same proportions of their ownership after the transaction.

 

2.3          “Code” means the Internal Revenue Code of 1986, as amended.

 

2.4          “Committee” shall have the meaning provided in Section 3 of the Plan.

 

2.5          “Common Stock” means the Class A common stock, $0.001 par value per share, of the Company.

 

2.6          “Continuous Service” means that the Participant’s service with the Company, any Parent Company or any Subsidiary, whether as an employee, officer, director, adviser or consultant, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company, any Parent Company or any Subsidiary as an employee, officer, consultant, adviser or director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service. For example, a change in status from an employee of the Company to a consultant of any Parent Company or a Subsidiary or a director will not constitute an interruption of Continuous Service. The Committee, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Committee, including sick leave, military leave or any other personal leave; provided, however, that for purposes of determining whether a Stock Option is entitled to Incentive Stock Option status, a Participant’s Continuous Service shall be treated as terminated ninety (90) days after such Participant goes on leave, unless such Participant’s right to return to active work is guaranteed by law or by a contract..

 

    3  

 

 

2.7          “Disability” means (a) as it relates to the exercise of an Incentive Stock Option after termination of employment, a disability within the meaning of Section 22(e)(3) of the Code, and (b) for all other purposes, shall have the meaning given that term by the group disability insurance, if any, maintained by the Company for its employees or otherwise shall mean the complete inability of the Participant, with or without a reasonable accommodation, to perform his or her duties with the Company, any Parent Company or any Subsidiary on a full-time basis as a result of physical or mental illness or personal injury he or she has incurred, as determined by an independent physician selected with the approval of the Company, any Parent Company or any Subsidiary and the Participant. Notwithstanding the foregoing, in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and solely to the extent necessary to comply with the distribution requirements of Section 409A of the Code, the definition of “Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder

 

2.8          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.9          “Fair Market Value” means, (i) if the Common Stock is listed on the Nasdaq Stock Market, the last sale price as quoted on the Nasdaq Stock Market on the trading day for which the determination is being made or, in the event that no such sale takes place on such day, the average of the reported closing bid and asked prices on such day, or, (ii) if the Common Stock is listed on a national securities exchange, the last reported sale price on the principal national securities exchange on which the Common Stock is listed or admitted to trading on the trading day for which the determination is being made or, if no such reported sale takes place on such day, the average of the closing bid and asked prices on such day on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, (iii) if the Common Stock is not quoted on such Nasdaq Stock Market nor listed or admitted to trading on a national securities exchange, then, until such time as the Company completes a public offering of Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission with gross proceeds of not less than $25 million, the volume weighted average closing price for the trading days within the 30 calendar day period (but in no event earlier than January 31, 2017) immediately preceding the date for which the determination is made and thereafter (or earlier if elected by the Committee in its sole discretion) the average of the closing bid and asked prices on the day immediately preceding the date for which the determination is being made in the over-the-counter market as reported by Nasdaq or, (iv) if bid and asked prices for the Common Stock on such day shall not have been reported through Nasdaq, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm regularly making a market in the Common Stock selected for such purpose by the Board or a committee thereof, or, (v) if none of the foregoing is applicable, then the fair market value of the Common Stock as determined in good faith by the Committee in its sole discretion.

 

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2.10        “Immediate Family” shall have the meaning provided in Section 20 of the Plan.

 

2.11        “Incentive Stock Option” means a stock option granted under the Plan which is intended to be designated as an “incentive stock option” within the meaning of Section 422 of the Code.

 

2.12        “Non-Qualified Stock Option” means a stock option granted under the Plan which is not intended to be an Incentive Stock Option, including any stock option that provides (as of the time such option is granted) that it will not be treated as an Incentive Stock Option.

 

2.13        “Other Stock-Based Award” means Awards (other than Stock Options, Stock Appreciation Rights, Restricted Stock Awards, and Stock Bonus Awards) denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock and granted pursuant to Section 10.

 

2.14        “Outside Director” means a member of the Board who is not employed by the Company, any Parent Company or any Subsidiary.

 

2.15        “Parent Company” means: (i) as it relates to Incentive Stock Options, any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Stock Option, each of the corporations other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain; and (ii) for all other purposes, any corporation (other than the Company) or other entity in an unbroken chain of corporations or other entities ending with the Company if, at the time of the granting of the Stock Option or other Award, each of the corporations or other entities other than the Company owns stock possessing 50% or more of the combined voting power of all classes of stock or other equity interests in one of the other corporations or other entities in the chain.

 

2.16        “Participant” shall mean any employee, director or officer of, or key adviser or consultant to, the Company, any Parent Company or any Subsidiary to whom an Award is granted under the Plan.

 

2.17        “Restricted Stock Award” means an Award of Common Stock made pursuant to Section 8.

 

2.18        “Stock Appreciation Right” means an Award made pursuant to Section 7.

 

2.19        “Stock Bonus Award” means an Award made pursuant to Section 9.

 

2.20        “Stock Option” means any option to purchase Common Stock granted pursuant to Section 6.

 

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2.21        “Subsidiary” means: (i) as it relates to Incentive Stock Options, any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the granting of the Stock Option, each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain; and (ii) for all other purposes, a corporation or other entity of which not less than 50% of the total voting power is held by the Company or by a Subsidiary, whether or not such corporation or other entity now exists or is hereafter organized or acquired by the Company or by a Subsidiary .

 

2.22        “Term of the Plan” means the period beginning on the Effective Date and ending on the earlier to occur of (i) the date the Plan is terminated by the Board in accordance with Section 23 and (ii) the day before the tenth anniversary of the Effective Date.

 

Section 3.         Administration . The Plan shall be administered by the Compensation Committee of the Board or such other committee as may be appointed by the Board from time to time for the purpose of administering this Plan, or if no such committee is appointed or acting, the entire Board; provided, however, that the Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m), of the Code Rule 16b-3 promulgated under the Exchange Act or to the extent required under applicable law or regulation, and if the Plan is to be administered by a committee, then such committee shall consist of two or more members of the Board, each of whom shall each qualify as a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act and, if applicable, as an “independent director” under applicable national securities exchange or Nasdaq Stock Market rules, and also qualify as an “outside director” within the meaning of Section l62(m) of the Code and regulations pursuant thereto. For purposes of the Plan, the Board acting in this capacity or the Compensation Committee described in the preceding sentence shall be referred to as the “Committee.” The Committee shall have the power and authority to grant to eligible persons pursuant to the terms of the Plan: (1) Stock Options, (2) Stock Appreciation Rights, (3) Restricted Stock Awards, (4) Stock Bonus Awards, (5) Other Stock-Based Awards, or (6) any combination of the foregoing (collectively referred to as “Awards”).

 

The Committee shall have authority in its discretion to interpret the provisions of the Plan and to decide all questions of fact arising in its application. Except as otherwise expressly provided in the Plan, the Committee shall have authority to select the persons to whom Awards shall be made under the Plan; to determine whether and to what extent Awards shall be made under the Plan; to determine the types of Award to be made and the amount, size, terms and conditions of each such Award; to determine the time when the Awards shall be granted; to determine whether, to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the Participant; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and to make all other determinations necessary or advisable for the administration and interpretation of the Plan. The Committee, in its sole discretion, may determine that an Award will be immediately exercisable or vested, in whole or in part, or that all or any portion may not be exercised until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, including the attainment of performance criteria, subject in any case to the terms of the Plan. If the Committee imposes conditions upon exercise or vesting, then subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Award may be exercised or may vest. Notwithstanding anything in the Plan to the contrary, in the event that the Committee determines that it is advisable to grant Awards which shall not qualify for the exception for performance-based compensation from the tax deductibility limitations of Section 162(m) of the Code, the Committee may make such grants or Awards, or may amend the Plan to provide for such grants or Awards, without satisfying the requirements of Section 162(m) of the Code.

 

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Notwithstanding anything in the Plan to the contrary, the Committee also shall have authority in its sole discretion to vary the terms of the Plan to the extent necessary to comply with foreign, federal, state or local law or to meet the objectives of the Plan. The Committee may, where appropriate, establish one or more sub-plans for this purpose .

 

All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons who participate in the Plan.

 

All expenses and liabilities incurred by the Committee in the administration and interpretation of the Plan shall be borne by the Company. The Committee may employ attorneys, consultants, accountants or other persons in connection with the administration and interpretation of the Plan. The Company, and its officers and directors, shall be entitled to rely upon the advice, opinions or valuations of any such persons.

 

Section 4.          Common Stock Subject to the Plan .

 

4.1           Share Reserve . Subject to the following provisions of this Section 4 and to such adjustment as may be made pursuant to Section 22, the maximum number of shares available for issuance under the Plan shall be equal to thirty million (30,000,000) shares of Common Stock. The maximum number of shares that may be issued upon the exercise of Incentive Stock Options granted under the Plan shall not exceed fifteen million (15,000,000) shares of Common Stock (as adjusted pursuant to Section 22). During the terms of the Awards under the Plan, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.

 

4.2           Source of Shares . Such shares may consist in whole or in part of authorized and unissued shares or treasury shares or any combination thereof as the Committee may determine. Except as otherwise provided herein, any shares subject to an option or right granted or awarded under the Plan which for any reason expires or is terminated unexercised, becomes unexercisable, or is forfeited or otherwise terminated, surrendered or cancelled as to any shares, or if any shares are not delivered because an Award under the Plan is settled in cash or the shares are used to satisfy the applicable tax withholding obligation or pay the exercise price of a Stock Option, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan and shall again become eligible for issuance under the Plan. If the exercise price of any Stock Option granted under the Plan is satisfied by tendering shares of Common Stock to the Company (whether by actual delivery or by attestation and whether or not such surrendered shares were acquired pursuant to any Award granted under the Plan), only the number of shares of Common Stock issued net of the shares of Common Stock tendered shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for issuance under the Plan. No Awards may be granted following the end of the Term of the Plan.

 

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4.3           Code Section 162(m) Limitation . The total number of shares of Common Stock for which Stock Options and Stock Appreciation Rights may be granted to any employee during any twelve-month period shall not exceed fourteen million (14,000,000) shares in the aggregate (as adjusted pursuant to Section 22). The total number of shares of Common Stock for which Restricted Stock Awards, Stock Bonus Awards and Other Stock-Based Awards that are intended to constitute “qualified performance-based compensation” under Section 162(m) of the Code may be granted to any employee during any twelve-month period shall not exceed fourteen million (14,000,000) shares in the aggregate (as adjusted pursuant to Section 22).

 

Section 5.          Eligibility to Receive Awards . An Award may be granted to any employee, director, or officer of, or key adviser or consultant to, the Company, Parent Company or any Subsidiary, who is responsible for or contributes to the management, growth or success of the Company, Parent Company or any Subsidiary, provided that bona fide services shall be rendered by consultants or advisers to the Company, Parent Company or its Subsidiaries and, unless otherwise approved by the Committee, such services must not be in connection with the offer and sale of securities in a capital-raising transaction and must not directly or indirectly promote or maintain a market for the Company’s securities. Subject to the preceding sentence and Section 6.7, the Committee shall have the sole authority to select the persons to whom an Award is to be granted hereunder and to determine what type of Award is to be granted to each such person. No person shall have any right to participate in the Plan. Any person selected by the Committee for participation during any one period will not by virtue of such participation have the right to be selected as a Participant for any other period.

 

Section 6.          Stock Options . A Stock Option may be an Incentive Stock Option or a Non-Qualified Stock Option. Only employees of the Company or a Subsidiary are eligible to receive Incentive Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall constitute a separate Non-Qualified Stock Option. Stock Options may be granted alone or in addition to other Awards granted under the Plan. Except as otherwise expressly provided in Section 6.7, the terms and conditions of each Stock Option granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written Stock Option agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. No person shall have any rights under any Stock Option granted under the Plan unless and until the Company and the person to whom such Stock Option shall have been granted shall have executed and delivered an agreement expressly granting the Stock Option to such person and containing provisions setting forth the terms and conditions of the Stock Option. The terms and conditions of each Incentive Stock Option shall be such that each Incentive Stock Option issued hereunder shall constitute and shall be treated as an “incentive stock option” as defined in Section 422 of the Code. The terms and conditions of each Non-Qualified Stock Option will be such that each Non-Qualified Stock Option issued hereunder shall not constitute nor be treated as an “incentive stock option” as defined in Section 422 of the Code or an option described in Section 423(b) of the Code and will be a “non-qualified stock option” for federal income tax purposes. The terms and conditions of any Stock Option granted hereunder need not be identical to those of any other Stock Option granted hereunder. The Stock Option agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

 

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6.1           Type of Option . Each Stock Option agreement shall identify the Stock Option represented thereby as an Incentive Stock Option or a Non-Qualified Stock Option, as the case may be.

 

6.2           Option Price . The Incentive Stock Option exercise price shall be fixed by the Committee but shall in no event be less than 100% (or 110% in the case of an employee referred to in Section 6.6(ii) below) of the Fair Market Value of the shares of Common Stock subject to the Incentive Stock Option on the date the Incentive Stock Option is granted. The Non-Qualified Stock Option exercise price shall be fixed by the Committee but shall in no event be less than 100% of the Fair Market Value of the shares of Common Stock subject to the Non-Qualified Stock Option at the time the Stock Option is granted.

 

6.3           Exercise Term . Each Stock Option agreement shall state the period or periods of time within which the Stock Option may be exercised, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that no Stock Option shall be exercisable after ten years from the date of grant thereof (or, in the case of an Incentive Stock Option granted to an employee referred to in Section 6.6(ii) below, such term shall in no event exceed five years from the date on which such Incentive Stock Option is granted). The Committee shall have the power to permit an acceleration of previously established exercise upon such circumstances and subject to such terms and conditions as the Committee deems appropriate.

 

6.4           Payment for Shares . A Stock Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Stock Option agreement by the Participant entitled to exercise the Stock Option and full payment for the shares of Common Stock with respect to which the Stock Option is exercised has been received by the Company. The Committee, in its sole discretion, may permit the exercise price for any Stock Option to be paid by (i) cash, certified or cashier’s check, bank draft, money order, wire transfer payable to the order of the Company, free from all collection charges; (ii) delivery of shares of Common Stock already owned by the Participant and having a Fair Market Value equal to the aggregate exercise price, or by a combination of cash and shares of Common Stock, in each case to the extent permitted by applicable law and not in violation of any instrument or agreement to which the Company is a party and, unless approved by the Committee, not resulting in a charge to the Company’s reported earnings; or (iii) delivery (including by facsimile or by electronic mail) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price and any tax withholding obligations that may arise in connection with such exercise (otherwise known as a “cashless exercise”). No shares of Common Stock shall be issued to any Participant upon exercise of a Stock Option until the Company receives full payment therefor as described above. Upon the receipt of notice of exercise and full payment for the shares of Common Stock, the shares of Common Stock shall be deemed to have been issued and the Participant shall be entitled to receive such shares of Common Stock and shall be a stockholder with respect to such shares, and the shares of Common Stock shall be considered fully paid and nonassessable. No adjustment will be made for a dividend or other right for which the record date is prior to the date on which the Common Stock is issued, except as provided in Section 22 of the Plan. Each exercise of a Stock Option shall reduce, by an equal number, the total number of shares of Common Stock that may thereafter be purchased under such Stock Option.

 

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6.5           Rights upon Termination of Continuous Service . Subject to the terms of any agreement relating to a Stock Option granted under the Plan, in the event that a Participant’s Continuous Service terminates for any reason, other than for death, Disability, any rights of the Participant under any Stock Option shall immediately terminate; provided, however, that the Participant (or any successor or legal representative) shall have the right to exercise the Stock Option to the extent that the Stock Option was exercisable at the time of termination, until the earlier of (i) the date that is six months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Option.

 

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Option to the extent that such Stock Option has not previously been exercised, and the Company shall not be obligated to sell or deliver shares of Common Stock (or have any other obligation or liability) under such Stock Option if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Option agreement or employment agreement, if any), which determination shall be made in good faith. If there is a conflict between the definition of Cause as defined in the Participant’s Stock Option agreement and as defined in the Participant’s employment agreement, if any, the most restrictive definition of Cause shall apply unless the employment agreement expressly provides otherwise. In the event of such determination, the Participant (or any successor or legal representative) shall have no right under any Stock Option, to the extent that such Stock Option has not previously been exercised, to purchase any shares of Common Stock. Any Stock Option may be terminated entirely by the Committee at the time or at any time subsequent to a determination by the Committee under this Section 6.5 which has the effect of eliminating the Company’s obligation to sell or deliver shares of Common Stock under such Stock Option.

 

In the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of the Stock Option and without the Participant’s having fully exercised the Stock Option, the Participant or his or her successor or legal representative shall be fully vested in the Stock Option and shall have the right to exercise the Stock Option within the next 12 months following such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the term of the Stock Option.

 

6.6           Special Incentive Stock Option Rules . Notwithstanding the foregoing, in the case of an Incentive Stock Option, each Stock Option agreement shall contain such other terms, conditions and provisions as the Committee determines necessary or desirable in order to qualify such Stock Option as an Incentive Stock Option under the Code including, without limitation, the following:

 

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(i)        To the extent that the aggregate Fair Market Value (determined as of the time the Stock Option is granted) of the Common Stock, with respect to which Incentive Stock Options granted under this Plan (and all other plans of the Company, any Parent Company and any Subsidiary) become exercisable for the first time by any person in any calendar year, exceeds $100,000, such Stock Options shall be treated as Non-Qualified Stock Options.

 

(ii)       No Incentive Stock Option shall be granted to any employee if, at the time the Incentive Stock Option is granted, the employee (by reason of the attribution rules applicable under Section 424(d) of the Code) owns more than 10% of the combined voting power of all classes of stock of the Company or any Parent Company or Subsidiary unless at the time such Incentive Stock Option is granted the Stock Option exercise price is at least 110% of the Fair Market Value (determined as of the time the Incentive Stock Option is granted) of the shares of Common Stock subject to the Incentive Stock Option and such Incentive Stock Option by its terms is not exercisable after the expiration of five years from the date of grant.

 

If an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option shall thereafter be treated as a Non-Qualified Stock Option.

 

6.7           Conversion of Director Fees . The Board may, at its sole discretion, permit an Outside Director to receive all or a portion of his or her annual retainer fee, any fees for attending meetings of the Board or committees thereof, committee chairmanship fees or any other fees payable to an Outside Director in the form of a Stock Option. The terms and conditions of such Stock Option, Restricted Stock Award or Other Stock-Based Award, including (without limitation) the method for converting the annual retainer fee or any other fee payable to an Outside Director into a Stock Option, Restricted Stock Award or Other Stock-Based Award, the date of grant, the vesting schedule, if any, and the time period for an Outside Director to elect such a Stock Option, Restricted Stock Award or Other Stock-Based Award shall be determined solely by the Board. The Board’s decision shall be final, binding and conclusive.

 

Section 7.          Stock Appreciation Rights . Stock Appreciation Rights entitle Participants to increases in the Fair Market Value of shares of Common Stock. The terms and conditions of each Stock Appreciation Right granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

 

7.1           Award . Stock Appreciation Rights shall entitle the Participant, subject to such terms and conditions determined by the Committee, to receive upon exercise thereof an Award equal to all or a portion of the excess of: (i) the Fair Market Value of a specified number of shares of Common Stock at the time of exercise over (ii) a specified price which shall not be less than 100% of the Fair Market Value of the Common Stock at the time the right is granted. Such amount may be paid by the Company in cash, Common Stock (valued at its then Fair Market Value) or any combination thereof, as the Committee may determine. In the event of the exercise of a Stock Appreciation Right that is fully or partially settled in shares of Common Stock, the number of shares reserved for issuance under this Plan shall be reduced by the number of shares issued upon exercise of the Stock Appreciation Right.

 

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7.2           Term. Each agreement shall state the period or periods of time within which the Stock Appreciation Right may be exercised, in whole or in part, subject to such terms and conditions prescribed for such purpose by the Committee, provided that no Stock Appreciation Right shall be exercisable after ten years from the date of grant thereof. The Committee shall have the power to permit an acceleration of previously established exercise terms upon such circumstances and subject to such terms and conditions as the Committee deems appropriate.

 

7.3           Rights upon Termination of Continuous Service . In the event that a Participant’s Continuous Service terminates for any reason, other than death or Disability, any rights of the Participant under any Stock Appreciation Right shall immediately terminate; provided, however, the Participant (or any successor or legal representative) shall have the right to exercise the Stock Appreciation Right to the extent that the Stock Appreciation Right was exercisable at the time of termination, until the earlier of (i) the date that is three months after the effective date of such termination of Continuous Service, or such other date as determined by the Committee in its sole discretion, or (ii) the expiration of the term of the Stock Appreciation Right.

 

Notwithstanding the foregoing, the Participant (or any successor or legal representative) shall not have any rights under any Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised, and the Company shall not be obligated to pay or deliver any cash, Common Stock or any combination thereof (or have any other obligation or liability) under such Stock Appreciation Right if the Committee shall determine in its sole discretion that the Participant’s Continuous Service shall have been terminated for “Cause” (as such term is defined in the Participant’s Stock Appreciation Right agreement or employment agreement, if any), which determination shall be made in good faith. If there is a conflict between the definition of Cause as defined in the Participant’s Stock Appreciation Right agreement and as defined in the Participant’s employment agreement, if any, the most restrictive definition of Cause shall apply unless the employment agreement expressly provides otherwise. In the event of such determination, the Participant (or any successor or legal representative) shall have no right under such Stock Appreciation Right, to the extent that such Stock Appreciation Right has not previously been exercised. Any Stock Appreciation Right may be terminated entirely by the Committee at the time of or at any time subsequent to the determination by the Committee under this Section 7.3 which has the effect of eliminating the Company’s obligations under such Stock Appreciation Right.

 

In the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability prior to the expiration of his or her Stock Appreciation Right and without having fully exercised his or her Stock Appreciation Right, the Participant or his or her successor or legal representative shall be fully vested in the Stock Appreciation Right and shall have the right to exercise any Stock Appreciation Right within the next 12 months following such event, or such other period as determined by the Committee in its sole discretion, but not later than the expiration of the Stock Appreciation Right.

 

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Section 8.          Restricted Stock Awards . Restricted Stock Awards shall consist of shares of Common Stock restricted against transfer (“Restricted Stock”) and subject to a substantial risk of forfeiture. The Committee may, in its sole discretion, grant Restricted Stock at no cost to a Participant or it may establish a cost (the “Purchase Price”), which may be less than or equal to the Fair Market Value of a share of Common Stock on the date of grant, for each share of Restricted Stock granted to a Participant. The terms and conditions of each Restricted Stock Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. The agreements shall contain in substance the following terms and conditions and may contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

 

8.1           Vesting Period . Restricted Stock Awards shall be subject to the restrictions described in the preceding paragraph over such vesting period as the Committee determines. To the extent the Committee deems necessary or appropriate to structure the Restricted Stock Awards to constitute “qualified performance-based compensation” under Section 162(m) of the Code, Restricted Stock Awards to any Participant may also be subject to certain conditions with respect to attainment of one or more preestablished performance objectives which shall relate to corporate, subsidiary, division, group or unit performance in terms of growth in gross revenue, earnings per share or ratios of earnings to equity or assets, net profits, stock price, market share, sales or costs. In order to take into account unforeseen events or changes in circumstances, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance objectives.

 

8.2           Restriction upon Transfer . Shares awarded, and the right to vote such shares and to receive dividends thereon, may not be sold, assigned, transferred, exchanged, pledged, hypothecated or otherwise encumbered, except as herein provided or as provided in any agreement entered into between the Company and a Participant in connection with the Plan, during the vesting period applicable to such shares. Notwithstanding the foregoing, and except as otherwise provided in the Plan, the Participant shall have all the other rights of a stockholder including, but not limited to, the right to receive dividends and the right to vote such shares, until such time as the Participant disposes of the shares or forfeits the shares pursuant to the agreement relating to the Restricted Stock Award.

 

8.3           Certificates . Any stock certificate issued in respect of shares awarded to a Participant shall be registered in the name of the Participant and deposited with the Company, or its designee, and shall bear the following legend:

 

The shares of stock represented by this certificate are subject to the terms and conditions (including forfeiture provisions and restrictions against transfer) contained in the AMENDED & RESTATED IRONCLAD ENCRYPTION CORPORATION 2017 Equity Incentive Plan and a Restricted Stock Award Agreement entered into between the registered owner and Ironclad Encryption Corporation Release from such terms and conditions shall be obtained only in accordance with the provisions of the Plan and Agreement, a copy of each of which is on file in the office of the Secretary of Ironclad Encryption Corporation

 

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Each Participant, as a condition of any Restricted Stock Award, shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award.

 

8.4           Termination of Continuous Service . Except as otherwise provided in the written agreement relating to the Participant’s Restricted Stock Award, in the event that a Participant’s Continuous Service terminates for any reason, other than death or Disability, any rights of the Participant or his or her successors or legal representatives under any Restricted Stock Award that remains subject to restrictions shall immediately terminate and any Restricted Stock Award with unlapsed restrictions shall be forfeited to the Company without payment of any consideration; provided that, if a Participant paid a Purchase Price in connection with the grant of a share of Restricted Stock, upon forfeiture of such a share of Restricted Stock the Company shall pay to the Participant, as soon as reasonably practicable following such forfeiture, the lesser of (i) the Purchase Price or (ii) the Fair Market Value of a share of Common Stock on the date of forfeiture.

 

Unless the written agreement between the Participant and the Company relating to the Restricted Stock Award provides otherwise, in the event that a Participant’s Continuous Service terminates because such Participant dies or suffers a Disability, all remaining shares of a Restricted Stock Award shall no longer be subject to any unlapsed restrictions.

 

Section 9.          Stock Bonus Awards . Stock Bonus Awards shall consist of Awards of fully vested shares of Common Stock.

 

The terms and conditions of each Stock Bonus Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. Shares of Common Stock subject to a Stock Bonus Award may be: (i) subject to additional restrictions (including, without limitation, restrictions on transfer) or (ii) granted directly to a person free of any restrictions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable.

 

Section 10.       Other Stock-Based Awards . Other Stock-Based Awards may be awarded, subject to limitations under applicable law and this Plan, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, restricted stock units, purchase rights, convertible or exchangeable debentures, dividend equivalent rights or other rights convertible into shares of Common Stock and Awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other Awards under the Plan or any other plan of the Company. The terms and conditions of each Other Stock-Based Award granted under the Plan shall be specified by the Committee, in its sole discretion, and shall be set forth in a written agreement between the Company and the Participant in such form as the Committee shall approve from time to time or as may be reasonably required in view of the terms and conditions approved by the Committee from time to time. Each Other Stock-Based Award granted under this Plan must satisfy the requirements of, or be exempt from, Section 409A of the Code.

 

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To the extent the Committee deems necessary or appropriate to structure the Stock-Based Awards to constitute “qualified performance-based compensation” under Section 162(m) of the Code, Other Stock-Based Awards to any Participant may also be subject to certain conditions with respect to attainment of one or more preestablished performance objectives which shall relate to corporate, subsidiary, division, group or unit performance in terms of growth in gross revenue, earnings per share or ratio of earnings to equity or assets, net profits, stock price, market share, sales or costs. In order to take into account unforeseen events or changes in circumstances, the Committee may provide that one or more objectively determinable adjustments shall be made to the performance objectives.

 

Section 11.        Cancellation or Rescission of Awards .

 

(a)          Unless the agreement evidencing an Award specifies otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or deferred Awards at any time if the Participant is not in compliance with all applicable provisions of the applicable Award agreement and the Plan, or if the Participant engages in any “Detrimental Activity.”

 

For purposes of this Section 11, “Detrimental Activity” shall include:

 

(i)       the rendering of services for any organization or engaging directly or indirectly in any business which is or becomes competitive with the Company, any Parent Company or any Subsidiary or the willful or intentional breach of any agreement between the Company, a Parent Company or a Subsidiary and the Participant regarding noncompetition with the Company, such Parent Company or such Subsidiary (or the finding by a court or other tribunal that any such agreement regarding noncompetition is unenforceable);

 

(ii)       the willful or intentional breach of any agreement or policy of the Company, any Parent Company or a Subsidiary regarding the protection and disclosure of the confidential information of the Company, any Parent Company or any Subsidiary;

 

(iii)     the willful or intentional breach of the provisions of any agreement between the Company, any Parent Company or a Subsidiary and the Participant regarding the protection, declaration or assignment of inventions or the protection, declaration or assignment of copyrights;

 

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(iv)      the willful or intentional breach of the provisions of any agreement between the Company, a Parent Company or a Subsidiary and the Participant prohibiting the Participant from directly or indirectly (i) inducing or attempting to induce any employee of the Company, a Parent Company or a Subsidiary to quit employment with the Company, a Parent Company or a Subsidiary; (ii) otherwise interfering with or disrupting the Company’s, a Parent Company’s or a Subsidiary’s relationship with its employees, customers or suppliers; (iii) identifying employees of the Company, a Parent Company or a Subsidiary for any future employer of the Participant; (iv) soliciting, enticing or hiring away any employee of the Company, a Parent Company or a Subsidiary; or (v) hiring or engaging any employee of the Company, a Parent Company or a Subsidiary or any former employee of the Company, a Parent Company or a Subsidiary whose employment with the Company, a Parent Company or a Subsidiary ceased less than one year before the date of such hiring or engagement (or the finding by a court or other tribunal that any such agreement regarding such matters is unenforceable); or

 

(v)       any activity that may result in termination of the Participant's employment for “Cause” as defined in the Participant’s Award Agreement or an employment agreement between the Company, a Parent Company or a Subsidiary and the Participant.

 

(b)          Upon exercise, payment or delivery pursuant to an Award, the Participant shall certify in a manner acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan. In the event a Participant fails to comply with any applicable provision of the applicable Award agreement and the Plan, or engages in Detrimental Activity, prior to, or during the two years after, any exercise, payment or delivery pursuant to an Award, such exercise, payment or delivery may be rescinded within two years thereafter. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery, in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company, any Parent Company or any Subsidiary.

 

Section 12.          Loans . The Committee may, in its sole discretion and to further the purpose of the Plan, provide for loans to persons in connection with all or any part of an Award under the Plan; provided that no Participant who is a non-employee member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be issued a loan or an extension of credit arranged by the Company in violation of Section 13(k) of the Exchange Act. Any loan made pursuant to this Section 12 shall be evidenced by a loan agreement, promissory note or other instrument in such form and which shall contain such terms and conditions (including without limitation, provisions for interest, payment, schedules, collateral, forgiveness, acceleration of such loans or parts thereof or acceleration in the event of termination) as the Committee shall prescribe from time to time. Notwithstanding the foregoing, each loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction.

 

Section 13.          Securities Law Requirements . No shares of Common Stock shall be issued upon the exercise or payment of any Award unless and until:

 

(i)        The shares of Common Stock underlying the Award have been registered under the Securities Act of 1933, as amended (the “Act”), or the Company has determined that an exemption from the registration requirements under the Act is available or the registration requirements of the Act do not apply to such exercise or payment;

 

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(ii)       The Company has determined that all applicable listing requirements of any stock exchange or quotation system on which the shares of Common Stock are listed have been satisfied; and

 

(iii)       The Company has determined that any other applicable provision of state or Federal law, including without limitation applicable state securities laws, has been satisfied.

 

Section 14.       Restrictions on Transfer; Representations of Participant; Legends . Regardless of whether the offering and sale of shares of Common Stock has been registered under the Act or has been registered or qualified under the securities laws of any state, the Company may impose restrictions upon the sale, pledge, or other transfer of such shares, including the placement of appropriate legends on stock certificates, if, in the judgment of the Company and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state, or any other law. As a condition to the Participant’s receipt of shares, the Company may require the Participant to represent that such shares are being acquired for investment, and not with a view to the sale or distribution thereof, except in compliance with the Act, and to make such other representations as are deemed necessary or appropriate by the Company and its counsel.

 

The Company may, but shall not be obligated to, register or qualify the sale of shares under the Act or other applicable law. In the event of a public offering of Common Stock or any other securities of the Company, it may be necessary for the Company to restrict for a period of time (during or following the offering process) the transfer of shares of Common Stock issued to a Participant under the Plan (including any securities issued with respect to such shares in accordance with Section 22 of the Plan).

 

Section 15.       Single or Multiple Agreements . Multiple forms of Awards or combinations thereof may be evidenced by a single agreement or multiple agreements, as determined by the Committee.

 

Section 16.       Rights of a Stockholder . The recipient of any Award under the Plan, unless otherwise expressly provided by the Plan, shall have no rights as a stockholder with respect thereto unless and until shares of Common Stock are issued to him.

 

Section 17.       No Right to Continue Employment or Service . Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company, Parent Company or any Subsidiary in the capacity in effect at the time the Award was granted or shall affect the right of the Company, Parent Company or any Subsidiary to terminate (i) the employment of an employee with or without notice and with or without cause, (ii) the service of a consultant or adviser pursuant to the terms of such consultant’s or adviser’s agreement with the Company, Parent Company or any Subsidiary, if any or (iii) the service of a director pursuant to the Bylaws of the Company, Parent Company or any Subsidiary and any applicable provisions of the corporate law of the state in which the Company, Parent Company or any Subsidiary is incorporated, as the case may be.

 

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Section 18.       Withholding . The Company’s obligations hereunder in connection with any Award shall be subject to applicable foreign, federal, state and local withholding tax requirements. Foreign, federal, state and local withholding tax due under the terms of the Plan may be paid in cash or shares of Common Stock (either through the surrender of already-owned shares of Common Stock that the Participant has held for the period required to avoid a charge to the Company’s reported earnings or the withholding of shares of Common Stock otherwise issuable upon the exercise or payment of such Award) having a Fair Market Value equal to the required withholding and upon such other terms and conditions as the Committee shall determine; provided, however, the Committee, in its sole discretion, may require that such taxes be paid in cash; and provided, further, any election by a Participant subject to Section 16(b) of the Exchange Act to pay his or her withholding tax in shares of Common Stock shall be subject to and must comply with Rule 16b-3 of the Exchange Act.

 

Section 19.       Indemnification . No member of the Board or the Committee, nor any officer or employee of the Company or Parent Company or Subsidiary acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company or any Parent Company or any Subsidiary acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

 

Section 20.       Non-Assignability . No right or benefit hereunder shall in any manner be subject to the debts, contracts, liabilities or torts of the person entitled to such right or benefit. No Award under the Plan shall be assignable or transferable by the Participant except by will, by the laws of descent and distribution and by such other means as the Committee may approve from time to time, and all Awards shall be exercisable, during the Participant’s lifetime, only by the Participant.

 

However, the Participant, with the approval of the Committee, may transfer an Award other than an Incentive Stock Option for no consideration to or for the benefit of the Participant’s Immediate Family (including, without limitation, to a trust for the benefit of the Participant’s Immediate Family or to a partnership or limited liability company for one or more members of the Participant’s Immediate Family), subject to such limits as the Committee may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Award prior to such transfer. The foregoing right to transfer Award shall apply to the right to consent to amendments to the Award agreement and, in the discretion of the Committee, shall also apply to the right to transfer ancillary rights associated with the Award. The term “Immediate Family” shall mean the Participant’s spouse, parents, children, stepchildren, adoptive relationships, sisters, brothers and grandchildren (and, for this purpose, shall also include the Participant).

 

At the request of the Participant and subject to the approval of the Committee, Common Stock issued under an Award may be issued or transferred into the name of the Participant and his or her spouse jointly with rights of survivorship.

 

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Except as set forth above or in a Stock Option agreement, any attempted assignment, sale, transfer, pledge, mortgage, encumbrance, hypothecation, or other disposition of an Award under the Plan contrary to the provisions hereof, or the levy of any execution, attachment, or similar process upon an Award under the Plan shall be null and void and without effect.

 

Section 21.       Nonuniform Determinations . The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same, and the establishment of values and performance targets) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan, whether or not such persons are similarly situated.

 

Section 22.       Adjustments . In the event of any change in the outstanding shares of Common Stock, without the receipt of consideration by the Company, by reason of a stock dividend, stock split, reverse stock split or distribution (other than a regular dividend), recapitalization, merger, reorganization, reclassification, consolidation, split-up, spin-off, combination of shares, exchange of shares or other change in corporate structure affecting the Common Stock and not involving the receipt of consideration by the Company, the Committee shall make appropriate adjustments in (a) the aggregate number of and kind of shares of Common Stock (i) available for issuance under the Plan, (ii) for which grants or Awards may be made to any Participant or to any group of Participants (e.g., Outside Directors), (iii) which are available for issuance under Incentive Stock Options, (iv) covered by outstanding unexercised Awards and grants denominated in shares or units of Common Stock, and (v) underlying Stock Options granted pursuant to Section 6.7, (vi) the Code Section 162(m) limitations; (b) the exercise or other applicable price related to outstanding Awards or grants and (c) the appropriate Fair Market Value and other price determinations relevant to outstanding Awards or grants and shall make such other adjustments as may be appropriate under the circumstances; provided, that the number of shares subject to any Award or grant always shall be a whole number.

 

Section 23.       Termination and Amendment . The Board may terminate or amend the Plan or any portion thereof at any time and the Committee may amend the Plan to the extent provided in Section 3, without approval of the stockholders of the Company, unless stockholder approval is required by Rule 16b-3 of the Exchange Act, applicable stock exchange or NASDAQ or other quotation system rules, applicable Code provisions, or other applicable laws or regulations. No amendment, termination or modification of the Plan shall affect any Award theretofore granted in any material adverse way without the consent of the recipient.

 

Section 24.       Severability . If any of the terms or provisions of this Plan, or Awards made under this Plan, conflict with the requirements of Section 162(m) or Section 422 of the Code with respect to Awards subject to or governed by Section 162(m) or Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Section 162(m) or Section 422 of the Code. With respect to an Incentive Stock Option, if this Plan does not contain any provision required to be included herein under Section 422 of the Code (as the same shall be amended from time to time), such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out herein. If any provision of the Plan is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, and the Plan shall be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the Company under the Plan.

 

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Section 25.       Effect on Other Plans . Participation in this Plan shall not affect an employee’s eligibility to participate in any other benefit or incentive plan of the Company or any Subsidiary and any Awards made pursuant to this Plan shall not be used in determining the benefits provided under any other plan of the Company or any Subsidiary unless specifically provided.

 

Section 26.       Effective Date of the Plan . The Plan shall become effective on the Effective Date, subject to approval of the stockholders of the Company within twelve months after the Effective Date.

 

Section 27.       Governing Law . This Plan and all agreements executed in connection with the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to its conflicts of law doctrine.

 

Section 28.       Gender and Number . Words denoting the masculine gender shall include the feminine gender, and words denoting the feminine gender shall include the masculine gender. Words in the plural shall include the singular, and the singular shall include the plural.

 

Section 29.       Acceleration of Exercisability and Vesting . The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

 

Section 30.       Modification of Awards . Within the limitations of the Plan and subject to Sections 22 and 35, the Committee may modify outstanding Awards or accept the cancellation of outstanding Awards for the granting of new Awards in substitution therefor. Notwithstanding the preceding sentence, except for any adjustment described in Section 22 or 34, no modification of an Award shall, without the consent of the Participant, alter or impair any rights or obligations under any Award previously granted under the Plan in any material adverse way without the affected Participant’s consent. For purposes of the preceding sentence, any modification to any of the following terms or conditions of an outstanding unexercised Award or grant shall be deemed to be a material modification: (i) the number of shares of Common Stock covered by such Award or grant, (ii) the exercise or other applicable price or Fair Market Value determination related to such Award or grant, (iii) the period of time within which the Award or grant vests and is exercisable and the terms and conditions of such vesting and exercise, (iv) the type of Award or Stock Option, and (v) the restrictions on transferability of the Award or grant and of any shares of Common Stock issued in connection with such Award or grant (including the Company’s right of repurchase, if any).

 

Section 31.       No Strict Construction . No rule of strict construction shall be applied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any agreement executed in connection with the Plan, any Award granted under the Plan, or any rule, regulation or procedure established by the Committee.

 

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Section 32.        Successors . This Plan is binding on and will inure to the benefit of any successor to the Company, whether by way of merger, consolidation, purchase, or otherwise.

 

Section 33.        Plan Provisions Control . The terms of the Plan govern all Awards granted under the Plan, and in no event will the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan. Notwithstanding the foregoing, to the extent the provisions of the Plan conflict with the terms and conditions of any written agreement between the Company and a Participant (including the vesting and settlement of any Awards upon termination of employment), the terms and conditions of such agreement shall control.

 

Section 34.       Headings . The headings used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize, or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions had been used in the Plan.

 

Section 35.        Change in Control . In the event of a Change in Control, each Participant shall have the rights set forth in his individual Award agreement or such other rights as may be determined by the incumbent Board, in its sole discretion, prior to the Change in Control.

 

Section 36.       Compliance with Section 409A of the Code . All Awards granted hereunder shall be granted in compliance with, or shall be structured to be exempt from, the provisions of Section 409A of the Code. Notwithstanding anything to the contrary in the Plan, any and all Awards, payments, distributions, deferral elections, transactions and any other actions or arrangements made or entered into pursuant to the Plan shall remain subject at all times to compliance with the requirements of Section 409A of the Code. If the Committee determines that an Award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a Participant to become subject to Section 409A of the Code, such Award, payment, distribution, deferral election, transaction or other action or arrangement shall not be undertaken and the related provisions of the Plan shall be deemed modified or, if necessary, rescinded in order to comply with the requirements of Section 409A of the Code to the extent determined by the Committee. Notwithstanding any provision of the Plan to the contrary, in the event that following the date an Award is granted the Committee determines that the Award may be subject to Section 409A of the Code and related U.S. Department of Treasury guidance (including such guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, including amendments or actions that would result in a reduction to the benefits payable under an Award, in each case, without the consent of the Participant, that the Committee determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related U.S. Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section or mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Section 409A of the Code if compliance is not practical. To the extent required in order to avoid the imposition of any interest and/or additional tax under Section 409A(a)(1)(B) of the Code, any payments or deliveries due upon the Participant’s “separation from service” within the meaning of Section 409A shall be delayed for six months if a Participant is deemed to be a “specified employee” as defined by Section 409A(a)(2)(i)(B) of the Code. Nothing in this Plan or in an Award agreement shall provide a basis for any person to take any action against the Company or any affiliate based on matters covered by Section 409A of the Code, including the tax treatment of any Awards, and neither the Company nor any affiliate will have any liability under any circumstances to the Participant or any other party if the Award that is intended to be exempt from, or compliant with, Section 409A of the Code, is not so exempt or compliant or for any action taken by the Committee with respect thereto.

 

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Section 37.       Clawback/Recovery . All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable laws.

 

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CERTIFICATE

 

I, Len Walker , Secretary of IronClad Encryption Corporation hereby certify that the attached document is a correct copy of the Amended & Restated IronClad Encryption Corporation 2017 Equity Incentive Plan, as effective January 6, 2017.

 

Dated this 17 th day of October, 2017.

 

  /s/ Len E. Walker
  Secretary