As filed with the Securities and Exchange Commission on June 17, 2022
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
APPLIED BLOCKCHAIN, INC.
(Exact Name of Registrant as Specified in Its Charter)
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| Nevada | | 95-4863690 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
3811 Turtle Creek Blvd., Suite 2100,
Dallas, Texas 75219
(Address of Principal Executive Offices)
2022 Incentive Plan
2022 Non-Employee Director Stock Plan
(Full Title of the Plan)
Wesley Cummins
Chief Executive Officer
Applied Blockchain, Inc.
3811 Turtle Creek Blvd., Suite 2100
Dallas, Texas 75219
(Name and Address of Agent for Service)
(214) 427-1704
(Telephone Number, Including Area Code, of Agent for Service)
With a copy to:
Carol W. Sherman, Esq.
Kelley Drye & Warren LLP
3 World Trade Center
175 Greenwich Street
New York, New York 10007
(212) 808-7800
_______________________
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | Accelerated filer |
Non-accelerated filer | Smaller reporting company |
| 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 7(a)(2)(B) of the Securities Act.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The document(s) containing the information specified by Part I of this Form S-8 Registration Statement (the “Registration Statement”) will be sent or given to participants in the 2022 Incentive Plan (the “Incentive Plan”) or the 2022 Non-Employee Director Stock Plan (the “Director Plan”), as applicable, of Applied Blockchain, Inc., a Nevada corporation (the “Company”), by the Company as specified in Rule 428(b)(1) promulgated by the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”). Such document(s) are not being filed with the Commission but constitute (along with the documents incorporated by reference into the Registration Statement pursuant to Item 3 of Part II hereof), a prospectus that meets the requirements of Section 10(a) of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents have been filed by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are hereby incorporated by reference in this Registration Statement:
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| our Quarterly Report on Form 10-Q filed with the SEC on May 13, 2022; |
| our Current Report on Form 8-K filed with the SEC on April 13, 2022; |
| our Current Report on Form 8-K filed with the SEC on April 18, 2022; |
| our Current Report on Form 8-K filed with the SEC on June 8, 2022; |
| our Current Report on Form 8-K filed with the SEC on June 14, 2022; |
| Final Prospectus under Rule 424(b)(4) of the Securities Act of 1933 (File No. 333-261278), filed with the SEC on April 13, 2022; |
| the description of our common stock contained in our Registration Statement on Form 8-A (File No. 001-31968), filed with the SEC under Section 12(b) of the Exchange Act on April 11, 2022; and |
| all documents subsequently filed by the Company with the SEC pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents. |
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You may obtain a copy of these filings, excluding exhibits (but including exhibits that are specifically incorporated by reference in any such filing), free of charge, by oral or written request directed to: Applied Blockchain, Inc., 3811 Turtle Creek Blvd., Suite 2100, Dallas, TX 75219, Attention: General Counsel, Telephone (214) 427-1704.
Item 4. Description of Securities.
Not applicable.
Item 5. Interest of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
Limitation of Liability and Indemnification Matters
Neither our second amended and restated articles of incorporation, nor our amended and restated bylaws, prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes (“NRS”). NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including
attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
Our bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
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Exhibit Number | Description |
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Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that (A) paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8 (§ 239.16b of this chapter), and the information
required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Dallas, State of Texas, on this 17th day of June, 2022.
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| | | APPLIED BLOCKCHAIN, INC. |
| | By: | /s/ Wes Cummins |
| | | Wes Cummins |
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Wes Cummins and David Rench, and each of them individually, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments to the registration statement (which includes any additional registration statement under Rule 462(b)) together with all schedules and exhibits thereto, (ii) act on, sign and file with the Securities and Exchange Commission any and all exhibits to the registration statement and any and all exhibits and schedules thereto, (iii) act on, sign and file any and all such certificates, applications, registration statements, notices, reports, instruments, agreements and other documents necessary or appropriate in connection with the registration or qualification under foreign and state securities laws of the securities described in the registration statement or any amendment thereto, or obtain an exemption therefrom, in connection with the offerings described therein and (iv) take any and all such actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he or she might or could do in person, and hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact, any of them or any of his or her or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
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| Signature(s) | Title(s) | Date | |
| /s/ Wes Cummins | Chief Executive Officer, President, Secretary, Treasurer | June 17, 2022 | |
| Wes Cummins | (Principal Executive Officer) | | |
| /s/ David Rench | Chief Financial Officer | June 17, 2022 | |
| David Rench | (Principal Financial and Accounting Officer) | | |
| /s/ Chuck Hastings | Director | June 17, 2022 |
| Chuck Hastings | | |
| /s/ Kelli McDonald | Director | June 17, 2022 |
| Kelli McDonald | | |
| /s/ Douglas Miller | Director | June 17, 2022 |
| Douglas Miller | | |
| /s/ Virginia Moore | Director | June 17, 2022 |
| Virginia Moore | | |
| /s/ Richard Nottenberg | Director | June 17, 2022 |
| Richard Nottenberg | | |
| /s/ Jason Zhang | Director | June 17, 2022 |
| Jason Zhang | | |
Exhibit 5.1
Snell & Wilmer L.L.P.
Hughes Center
3883 Howard Hughes Parkway, Suite 1100
Las Vegas, NV 89169-5958
TELEPHONE: 702.784.5200
FACSIMILE: 702.784.5252
June 17, 2022
Applied Blockchain, Inc.
3811 Turtle Creek Blvd., Suite 2100
Dallas, Texas 75219
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have served as special Nevada counsel to Applied Blockchain, Inc., a Nevada corporation (the “Company”), in connection with the registration of 15,166,666 shares (the “Shares”) of common stock, $0.001 par value per share (the “Common Stock”), of the Company issuable to employees and independent contractors of the Company pursuant to the Company’s 2022 Incentive Plan (the “Incentive Plan”) and to non-employee directors of the Company pursuant to the Company’s 2022 Non-Employee Director Stock Plan (the “Director Plan;” and, together with the Incentive Plan, the “Plans”), covered by the above-referenced Registration Statement on Form S-8 (the “Registration Statement”) filed by the Company with the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), on or about the date hereof.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act in connection with the filing of the Registration Statement. All capitalized terms used herein and not otherwise defined shall have the respective meanings given to them in the Registration Statement.
In connection with our representation of the Company, and as a basis for the opinion hereinafter set forth, we have relied upon and examined matters of fact, questions of law and documents as we have deemed necessary to render this opinion, including the originals, or copies certified or otherwise identified to our satisfaction, of the following documents (hereinafter collectively referred to as the “Documents”):
1. The Registration Statement and exhibits hereto;
2. The Second Amended and Restated Articles of Incorporation of the Company filed with the Secretary of State of the State of Nevada, as amended though the date hereof, certified as of the date hereof by an officer of the Company;
3. The Amended and Restated Bylaws of the Company, as amended though the date hereof, certified as of the date hereof by an officer of the Company;
4. Certificate of Existence with Status in Good Standing, certified by the Secretary of State of the State of Nevada, dated as of June 15, 2022;
5. The resolutions adopted by the Board of Directors of the Company relating to the approval of the Plans, the authorization of the issuance of the Shares pursuant to the terms of the Plans and the preparation and filing of the Registration Statement and the resolutions adopted by the shareholders of the Company relating to the approval of the Plans (collectively, the “Resolutions”), certified as of the date hereof by an officer of the Company;
6. The Plans, each certified as of the date hereof by an officer of the Company;
7. A certificate executed by an officer of the Company, dated as of the date hereof, as to certain factual matters; and
8. Such other documents and matters as we have deemed necessary or appropriate to express the opinion set forth below, subject to the assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed the following:
Applied Blockchain, Inc.
June 17, 2022
Page 2
A. Each individual executing any of the Documents, whether on behalf of such individual or any other person, is legally competent to do so.
B. All Documents submitted to us as originals are authentic. The form and content of all Documents submitted to us as unexecuted drafts do not differ in any respect relevant to this opinion from the form and content of such Documents as executed and delivered. All Documents submitted to us as certified or photostatic copies conform to the original documents. All signatures on all such Documents are genuine. All public records reviewed or relied upon by us or on our behalf are true and complete. All representations, warranties, statements and information contained in the Documents are true and complete. There has been no oral or written modification of or amendment to any of the Documents, and there has been no waiver of any provision of any of the Documents, by action or omission of the parties or otherwise. For the purpose of the opinion rendered below, we have assumed that, upon each issuance of Shares, the Company will receive or has received the consideration for such Shares required by the Resolutions.
Based upon the foregoing, and subject to the assumptions, limitations and qualifications stated herein, it is our opinion that the issuance of the Shares has been duly authorized and, when issued and delivered by the Company pursuant to the Resolutions and otherwise in accordance with the Registration Statement, and upon payment for and delivery of the Shares subject to issuance and sale by the Company, the Shares will be validly issued, fully paid and nonassessable.
We render this opinion only with respect to the general corporate law of the State of Nevada as set forth in Chapter 78 of the Nevada Revised Statutes. We neither express nor imply any obligation with respect to any other laws or the laws of any other jurisdiction or of the United States. For purposes of this opinion, we assume that the Shares will be issued in compliance with all applicable state securities or blue sky laws.
The opinion expressed herein is limited to the matters specifically set forth herein and no other opinion shall be inferred beyond the matters expressly stated. We assume no obligation to supplement this opinion if any applicable law changes after the date hereof or if we become aware of any fact that might change the opinion expressed herein after the date hereof. Without limiting the generality of the foregoing, we neither express nor imply any opinion regarding the contents of the Registration Statement, other than as expressly stated herein with respect to the Shares.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of the name of our firm therein. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act or the rules and regulations of the Commission promulgated thereunder.
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| Very truly yours, |
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/s/ Snell & Wilmer L.L.P. |
Applied Blockchain, Inc.
2022 Incentive Plan
(Effective January 20, 2022)
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Article 1. Establishment, Purpose, and Duration | |
Article 2. Definitions | |
Article 3. Administration | |
Article 4. Shares Subject to this Plan and Maximum Awards | |
Article 5. Eligibility and Participation | |
Article 6. Stock Options | |
Article 7. Stock Appreciation Rights | |
Article 8. Restricted Stock and Restricted Stock Units | |
Article 9. Performance Units/Performance Shares | |
Article 10. Cash-Based Awards and Other Stock-Based Awards | |
Article 11. Transferability of Awards | |
Article 12. Performance Measures | |
Article 13. Minimum Vesting of Share-Based Awards | |
Article 14. Dividend Equivalents | |
Article 15. Beneficiary Designation | |
Article 16. Rights of Participants | |
Article 17. Change of Control | |
Article 18. Amendment, Modification, Suspension, and Termination | |
Article 19. Withholding | |
Article 20. Successors | |
Article 21. General Provisions | |
Applied Blockchain, Inc.
2022 Incentive Plan
Article 1.Establishment, Purpose, and Duration
1.1Establishment. Applied Blockchain, Inc. (the “Company”) establishes an incentive compensation plan to be known as the Applied Blockchain, Inc. 2022 Incentive Plan (this “Plan”), as set forth in this document.
This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Other Stock-Based Awards.
This Plan’s effective date is the date this Plan is approved by the Company’s shareholders (the “Effective Date”), and this Plan shall remain in effect as provided in Section 1.3 hereof.
1.2Purpose of this Plan. The purpose of this Plan is to provide a means whereby Employees and certain Third Party Service Providers develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become Employees and Third Party Service Providers and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.
1.3Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of (a) adoption of this Plan by the Board, or (b) the Effective Date.
Article 2.Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1“Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Committee.
2.2 “Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Other Stock-Based Awards, in each case subject to the terms of this Plan.
2.3“Award Agreement” means either (i) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (ii) a written or electronic statement issued by
the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, internet or other non-paper Award Agreements, and the use of electronic, internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.
2.4“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.5“Board” or “Board of Directors” means the Board of Directors of the Company.
2.6“Cash-Based Award” means an Award, denominated in cash, granted to a Participant as described in Article 10.
2.7“Cause” means, unless otherwise specified in an Award Agreement or in an applicable employment agreement or similar agreement between the Company and a Participant, with respect to any Participant, as determined by the Committee in its sole discretion:
(a)willful refusal to follow the lawful directions of the Company or an Employee’s supervisor, which directions are consistent with normal business practice;
(b)indictment or conviction of, or plea of nolo contendere to, (i) any felony, or (ii) another crime involving dishonesty or moral turpitude, or Participant’s engaging in any embezzlement, financial misappropriation or fraud, related to their employment with, or provision of services to, the Company or any Subsidiary or Affiliate;
(c)engaging in any willful misconduct or gross negligence or willful act of dishonesty, including any violation of federal securities laws, or violence or threat of violence, which is materially injurious to the Company or any Subsidiary or Affiliate;
(d)repeated abuse of alcohol or drugs (legal or illegal) that, in the Company’s reasonable judgment, materially impairs Participant’s ability to perform their duties; or
(e)willful and knowing breach or violation of any material provision of their employment or agreement to provide services to the Company, including, but not limited to, any applicable confidentiality, non-solicitation and non- competition requirements thereof.
2.8“Change of Control” means the occurrence of any of the following events:
(i)Any Person, other than (x) a fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary or Affiliate, or (y) any corporation owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company’s Shares becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding voting securities;
(ii)the sale of disposition by the Company of all or substantially all of the Company’s assets;
(iii)the members of the Board of Directors as of the Effective Date (the “Incumbent Directors”) and any successor director whose appointment is endorsed by the Incumbent Directors or any such duly-endorsed successor director cease to constitute a majority of the Board; or
(iv)a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
2.9“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
2.10“Committee” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of the Committee shall (i) be appointed from time to time by and shall serve at the discretion of the Board, and (ii) shall consist of “non-employee directors” as defined in Section 16 of the Exchange Act. If the Committee does not exist or cannot function for any reason, the Board may take any action under this Plan that would otherwise be the responsibility of the Committee.
2.11“Company” or “Corporation” means Applied Blockchain, Inc. and any successor thereto as provided in Article 20 herein.
2.12“Effective Date” has the meaning set forth in Section 1.1.
2.13“Employee” means any individual performing services for the Company, an Affiliate, or a Subsidiary and designated as an employee of the Company, its Affiliates, and/or its Subsidiaries on the payroll records thereof. An Employee shall not include any individual during any period they are classified or treated by the Company, Affiliate, and/or Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company, Affiliate, and/or Subsidiary, without regard to whether such individual is subsequently determined to have been, or is subsequently retroactively reclassified as a common-law employee of the Company, Affiliate, and/or Subsidiary during such period.
2.14“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.15“Fair Market Value” means, on any given date, the closing price of a Share as reported by The Trading Market on such date, or if Shares were not traded on The
Trading Market on such day, then on the next preceding day that Shares were traded on The Trading Market; in the event Shares are traded only on an exchange other than The Trading Market, references herein to The Trading Market shall mean such other exchange. The Company may use an alternate method of determining the value of Shares for accounting or any other purpose.
2.16“Good Reason” means, unless otherwise specified in an Award Agreement or in an applicable severance compensation or other employment-type or service agreement between the Company and a Participant, with respect to any Participant, as determined by the Committee in its sole discretion:
(a) a 10% or more diminution in Participant’s base salary as in effect on the last day of the immediately preceding calendar year or a 30% or greater reduction in the amount of Participant’s target cash bonus as compared to the cash bonus amount for the preceding year, provided, however, that a Company-wide compensation program, as determined by the Company, shall not constitute an event under this subparagraph (a);
(b) a material diminution in Participant’s title, or the nature or scope of Participant’s authority, duties, or responsibilities from those applicable to Participant immediately prior to the Change in Control; or
(c) the Company’s requiring Participant to be based at any office or location that is more than 25 miles from Participant’s principal place of employment prior to such change in location.
In order for one of the events set forth in (a), (b), or (c) to constitute a Good Reason, (x) Participant must notify the Company in writing of such fact and the reasons therefor no later than 90 days after Participant knows or should have known that the relevant event has occurred, (y) such grounds for termination (if susceptible to correction) are not corrected by the Company within thirty (30) days after Participant’s notice (or, in the event that such grounds cannot be corrected with thirty (30) days, the Company has not taken all reasonable steps within such thirty-day (30) period to correct such grounds as promptly as practicable thereafter); and (z) Participant terminates Participant’s employment with the Company within thirty (30) days following expiration of such thirty-day (30) period. Failure to satisfy the requirements of this paragraph will result in there not being a termination for Good Reason for purposes of this Plan.
2.17“Grant Date” means the date an Award is granted to a Participant pursuant to this Plan.
2.18“Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.19“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.
2.20“Insider” shall mean an individual who is, on the relevant date, an officer, or director of the Company, or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.
2.21“Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.
2.22“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.
2.23“Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.24“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.
2.25“Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted.
2.26“Performance-Based Compensation” means compensation under an Award that is subject to performance-based vesting, earning or payment conditions.
2.27“Performance Measures” means measures as described in Article 12 on which the performance goals are based.
2.28“Performance Period” means the period of time during which the performance goals must be met in order to determine the amount and/or vesting, earning or payment of an Award.
2.29“Performance Share” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined by the extent to which the applicable Performance Measures have been achieved.
2.30“Performance Unit” means an Award under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined by the extent to which the applicable Performance Measures have been achieved.
2.31“Period of Restriction” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.
2.32“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
2.33“Plan” means this Applied Blockchain, Inc. 2022 Incentive Plan.
2.34“Restricted Stock” means an Award granted to a Participant pursuant to Article 8.
2.35“Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the Grant Date.
2.36“Share” means a share of common stock of the Company.
2.37“Stock Appreciation Right” or “SAR” means an Award, designated as an SAR, pursuant to the terms of Article 7 herein.
2.38“Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.
2.39“Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s securities. Individuals who otherwise meet the definition of a Third Party Service Provider under this Section 2.39, and who also serve as a non-employee director of the Company, Subsidiary, or an Affiliate, shall be eligible for participation under this Plan, but only with respect to the services they provide to the Company as a Third Party Service Provider.
2.40“The Trading Market” means, initially, OTC Markets (including OTCQX, OTCQB and Pink Markets), or any of the following other markets that becomes the primary trading market for the Shares: The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select Market, the New York Stock Exchange or the NYSE American (or any nationally recognized successor to any of the foregoing).
Article 3.Administration
3.1General. The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.
3.2Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, construing any ambiguous provision of
this Plan or any Award Agreement, and, subject to Article 18, adopting modifications and amendments to this Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate.
3.3Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards and (b) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee who is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.
Article 4.Shares Subject to this Plan and Maximum Awards
4.1Number of Shares Available for Awards and Maximum Amount of
Non-Share Awards.
Subject to adjustment as provided in Section 4.3:
(a) The maximum number of Shares available for issuance to Participants under this Plan is 80,000,000 Shares.
(b) The maximum aggregate number of Shares that may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (“ISOs”) is 80,000,000 Shares.
(c) The aggregate number of Shares reserved for Awards under Section 4.1(a) and permitted to be granted as ISOs under Section 4.1(b) will automatically increase on January 1 of each year beginning with January 1, 2023, for a period of not more than nine (9) years, ending on (and including) January 1, 2031, by an amount equal to three percent (3%) of the total number of shares of Common Stock outstanding on December 31 of the preceding calendar year. Notwithstanding the foregoing, the Board may act prior to January 1 of a given year to provide that there will be no January 1 increase for such year or that the increase for such year will be a lesser number of Shares than provided herein.
4.2Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued. The number of Shares available for Awards under this Plan shall be reduced by one Share for each Share covered by such Award or to which such Award relates. Awards that do not entitle the holder thereof to receive or purchase Shares shall not be counted against the aggregate number of Shares available for Awards under this Plan. In addition, any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares shall be available again for grant under this Plan. In no event, however, will the following Shares again become available for Awards or increase the number of Shares available for grant under this Plan: (i) Shares tendered by the Participant in payment of the exercise price of an Option; (ii) Shares withheld from exercised Awards for tax
withholding purposes; (iii) Shares subject to a SAR that are not issued in connection with the settlement of that SAR; and (iv) Shares repurchased by the Company with proceeds received from the exercise of an Option. The Shares available for issuance under this Plan may consist, in whole or in part, of authorized and unissued Shares, treasury Shares, or Shares reacquired by the Company in any manner.
4.3Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, and other value determinations applicable to outstanding Awards.
The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect or relate to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
Subject to the provisions of Article 18 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a conversion of equity awards into Awards under this Plan in a manner consistent with paragraph 53 of FASB Interpretation No. 44), subject to compliance with the rules under Code Sections 422 and 424, as and where applicable.
Article 5.Eligibility and Participation
5.1Eligibility. Individuals eligible to participate in this Plan include all Employees and Third Party Service Providers.
5.2Actual Participation. Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of any and all terms permissible by law, and the amount of each Award.
Article 6.Stock Options
6.1Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to Employees of the Company, a parent, or Subsidiary (as permitted under Code Sections 422 and 424).
6.2Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price must be at least equal to one hundred percent (100%) of the Fair Market Value of the Shares as determined on the Grant Date.
6.4Term of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the day before the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for Nonqualified Stock Options granted to Participants outside the United States, the Committee has the authority to grant Nonqualified Stock Options that have a term greater than ten (10) years.
6.5Exercise of Options. Subject to Article 13, Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.6Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price; (c) by a cashless (broker-assisted) exercise; (d) by a combination of (a), (b) and/or (c); or (e) any other method approved or accepted by the Committee in its sole discretion.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any
stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares.
6.8Termination of Employment. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.9Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.
Article 7.Stock Appreciation Rights
7.1Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee
Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs.
The Grant Price for each grant of an SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price on the Grant Date must be at least equal to one hundred percent (100%) of the Fair Market Value of the Shares as determined on the Grant Date.
7.2SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.3Term of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant SARs that have a term greater than ten (10) years.
7.4Exercise of SARs. SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
7.5Settlement of SARs. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(a)The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by
(b)The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.
7.6Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
7.7Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of an SAR granted pursuant to this Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
Article 8.Restricted Stock and Restricted Stock Units
8.1Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually awarded to the Participant on the Grant Date.
8.2Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and such other provisions as the Committee shall determine.
8.3Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant to this Plan as it may deem advisable including, without limitation, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
8.4Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.3, each certificate representing Shares of Restricted Stock granted pursuant to this Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion:
The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Applied Blockchain, Inc. 2022 Incentive Plan, and in the associated Award Agreement. A copy of this Plan and such Award Agreement may be obtained from Applied Blockchain, Inc..
8.5Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
8.6Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
8.7Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
Article 9.Performance Units/Performance Shares
9.1Grant of Performance Units/Performance Shares. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine. Performance Units and Performance Shares that are earned (as described in Section 9.3) may be subject to vesting requirements as set forth in the applicable Award Agreement.
9.2Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the Grant Date. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that may be earned by the Participant.
9.3Earning of Performance Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period and vesting period, if any, have ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value
and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned and vested Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned and vested Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof). Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
9.5Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with, or performance of services to, the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
Article 10.Cash-Based Awards and Other Stock-Based Awards
10.1Grant of Cash-Based Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms as the Committee may determine.
10.2Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4Payment of Cash-Based Awards and Other Stock-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.
10.5Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant’s employment with, or provision of services to, the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an
agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
Article 11.Transferability of Awards
11.1Transferability. Except as provided in Section 11.2 below, during a Participant’s lifetime, their Awards shall be exercisable only by the Participant. Awards shall not be transferable other than by will or the laws of descent and distribution; no Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind; and any purported transfer in violation hereof shall be null and void. The Committee may establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable or Shares deliverable in the event of, or following, the Participant’s death, may be provided.
11.2Committee Action. The Committee may, in its discretion, determine that notwithstanding Section 11.1, any or all Awards (other than ISOs) shall be transferable to and exercisable by such transferees, and subject to such terms and conditions, as the Committee may deem appropriate; provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8).
Article 12.Performance Measures
12.1Performance Measures. The performance goals upon which the payment or vesting of an Award depends may include, without limitation, the following Performance Measures:
(a)Net earnings or Net Income (before or after taxes);
(b)Earnings per share (basic or diluted);
(c)Net sales or revenue growth;
(d)Net operating profit;
(e)Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);
(f)Cash flow (including, but not limited to, throughput, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);
(g)Earnings before or after taxes, interest, depreciation, and/or amortization;
(h) Earnings before taxes;
(i) Gross or operating margins;
(j) Corporate value measures;
(k) Capital expenditures;
(l) Unit volumes;
(m) Productivity ratios;
(n) Share price (including, but not limited to, growth measures and total shareholder return);
(o) Cost or expense;
(p) Margins (including, but not limited to, debt or profit);
(q) Operating efficiency;
(r) Market share;
(s) Customer satisfaction;
(t) Working capital targets or any element thereof;
(u) Economic value added or EVA® (net operating profit after tax minus the sum of capital multiplied by the cost of capital);
(v) Health, safety and environmental performance;
(w) Corporate advocacy metrics;
(x) Strategic milestones (including, but not limited to, debt reduction, improvement of cost of debt, equity or capital, completion of projects, achievement of synergies or integration objectives, or improvements to credit rating, inventory turnover, weighted average cost of capital, implementation of significant new processes, productivity or production, product quality, and any combination of the foregoing);
(y) Strategic sustainability metrics (including, but not limited to, corporate governance, enterprise risk management, employee development, and portfolio restructuring); and
(z) Stockholder equity or net worth.
Any one or more Performance Measure(s) may be used to measure the performance of any Participant, the Company, Subsidiary, and/or Affiliate as a whole or any business unit or line of business of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures on an absolute, gross, total, net per share, average, adjusted or relative basis (or measure based on changes therein), including, as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (n) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 12.
12.2Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or
settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses.
12.3Adjustment of Performance-Based Compensation. The Committee shall retain the discretion to adjust such Awards upward or downward, either on a formula or discretionary basis or any combination, as the Committee determines.
Article 13.Minimum Vesting of Share-Based Awards
Notwithstanding any other provision of this Plan to the contrary, Awards granted pursuant to Article 6, 7, 8, 9 or 10 of this Plan shall be subject to a minimum vesting period of at least one (1) year, provided, however, (a) such vesting may be cliff or graded (starting no earlier than one (1) year after grant), (b) the Committee may provide for earlier vesting as specified in an Award Agreement, and (c) no more than five percent (5%) of the maximum number of Shares authorized for issuance under this Plan pursuant to Section 4.1(a) may be granted with a minimum vesting period of less than one (1) year.
Article 14.Dividend Equivalents
Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding the foregoing, for all Awards, the payment of dividends and dividend equivalents prior to an Award becoming vested shall be prohibited, and the Committee shall determine the extent to which dividends and dividend equivalents may accrue during the vesting period and become payable upon vesting.
Article 15.Beneficiary Designation
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of their death before they receive any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company, or the Company’s designated agent, during the Participant’s lifetime. In the absence of any such beneficiary designation, benefits remaining unpaid or rights remaining unexercised at the Participant’s death shall be paid to or exercised by the Participant’s executor, administrator, or legal representative on behalf of the Participant’s estate.
Article 16.Rights of Participants
16.1Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue their employment, or service as a Third Party Service Provider, for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 18, this Plan and the benefits hereunder may be terminated at any time in the sole
and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates or Subsidiaries, or the Committee.
16.2Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
16.3Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 17.Change of Control
17.1Change of Control of the Company. Notwithstanding any other provision of this Plan to the contrary, the provisions of this Article 17 shall apply in the event of a Change of Control, unless otherwise determined by the Committee in connection with the grant of an Award as reflected in the applicable Award Agreement or other agreement between the Participant and the Company or a subsidiary or Affiliate.
(a)If, upon a Change of Control, a Participant receives a new Award which qualifies as a “Replacement Award” (as defined below), the Award shall continue subject to the terms of the Replacement Award.
(b)If, upon a Change of Control that results in the Company’s Shares no longer being traded on The Trading Market or another established securities market and no Replacement Award is granted to a Participant, the unvested portion of an Award whose vesting is based only on a service requirement shall become immediately vested and exercisable, as applicable, upon the Change of Control.
(c)Notwithstanding subparagraph (a) and except as may be otherwise provided in an Award Agreement, upon a Change of Control, with respect to Awards that are Performance Shares or Performance Units issued pursuant to Article 9 of this Plan, a pro-rata portion of the Award shall be immediately earned, vested and payable; such portion shall be determined based on the portion of the Performance Period that has elapsed as of (i) the date of the Change of Control, if the Performance Measure is based on stock price, or (ii) the end of the last full calendar quarter preceding or commensurate with the date of the Change of Control if the Performance Measure is not based on stock price (in each case, the “Adjusted Measurement Date”). The Award amount that will be considered earned and payable will be calculated based on the higher of target or actual performance measured as of the Adjusted Measurement Date. To the extent any earned Awards that are Performance Shares or Performance Units have not been paid prior to the Change of Control because they are subject to vesting, such earned but unvested Awards shall become immediately vested, and payable upon the Change of Control.
(d)Except as provided in subparagraph (c) or as otherwise provided in an Award Agreement, if, following a Change of Control, the Company’s Shares continue to be traded on The Trading Market or another established securities market, outstanding Awards shall continue in effect and be treated as Replacement Awards as described in subparagraph (a).
(e)Notwithstanding any of subparagraphs (a), (b) or (d) of this Section 17.1, the Committee may, in its sole discretion, determine that any or all outstanding Awards granted under this Plan, whether or not exercisable, will be canceled and terminated, and that in connection with such cancellation and termination, the holder of such Award may receive for each Share of Common Stock subject to such Awards a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash
payment) equal to the difference, if any, between the consideration received by shareholders of the Company in respect of a Share of Common Stock in connection with such transaction and the purchase price per share, if any, under the Award multiplied by the number of Shares of Common Stock subject to such Award; provided that if such product is zero or less or to the extent that the Award is not then exercisable, the Awards will be canceled and terminated without payment therefor.
17.2Replacement Awards. An Award shall be considered a Replacement Award if: (i) it has a value at least equal to the value of the Award it is replacing as determined by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following the Change of Control; and (iii) its other terms and conditions are not less favorable to the Participant than the terms and conditions of the Award it is replacing (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Award it is replacing if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 17.2 are satisfied shall be made by the Committee, as constituted immediately before the Change of Control, in its sole discretion.
17.3Reduction of Excess Parachute Payments. Except as may be provided in an employment or severance compensation or other service agreement between the Company and the Participant, if, in connection with a Change of Control, a Participant’s payment of any Awards will cause the Participant to be liable for federal excise tax under Code Section 4999 levied on certain “excess parachute payments” as defined in Code Section 280G (“Excise Tax”), then the payments made pursuant to the Awards shall be reduced (or repaid to the Company, if previously paid or provided) as provided below:
(a) If the payments due upon of Change of Control under this Plan and any other agreement between a Participant and the Company, exceed 2.99 times the Participant’s “base amount,” as defined in Code Section 280G, a reduced payment amount shall be calculated by reducing the payments to the minimum extent necessary so that no portion of any payment, as so reduced or repaid, constitutes an excess parachute payment. If it is determined that any Excise Tax is payable by a Participant, the Participant shall receive either (i) all payments otherwise due; or (ii) the reduced payment amount described in the preceding sentence, whichever will provide the Participant with the greater after-tax economic benefit taking into account for these purposes any applicable Excise Tax.
(b) Whether payments are to be reduced pursuant to this Section 17.3, and the extent to which they are to be so reduced, will be determined solely by the Company in good faith and the Company will notify the Participant in writing of its determination.
(c) In no event shall a Participant be entitled to receive any kind of gross-up payment or Excise Tax reimbursement from the Company.
Article 18.Amendment, Modification, Suspension, and Termination
18.1Amendment, Modification, Suspension, and Termination. Subject to Section 18.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part; provided, however, that, (i) without the prior approval of the Company’s shareholders and except as provided in Section 4.3, Options or SARs issued under this Plan will not be repriced, repurchased (including a cash buyout), replaced, or regranted through cancellation, or by lowering the Option Price of a
previously granted Option or the Grant Price of a previously granted SAR, (ii) any amendment of this Plan must comply with the rules of The Trading Market, and (iii) no material amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.
18.2Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
18.3Awards Previously Granted. Notwithstanding any other provision of this Plan to the contrary (other than Section 18.4), no termination, amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.
18.4Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Committee may amend this Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming this Plan or an Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 18.4 to any Award granted under this Plan without further consideration or action.
Article 19.Withholding
19.1Tax Withholding. The Company shall have the power and the right to deduct or withhold from any amounts due and owing to the Participant, or require a Participant to remit to the Company, up to the maximum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
19.2Share Withholding. With respect to withholding required upon the lapse of restrictions on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award granted hereunder, the Committee may establish provisions in the applicable Award Agreements to satisfy the withholding requirement, in whole or in part, by having the Company withhold whole Shares having a Fair Market Value on the date the tax is to be determined up to the maximum statutory total tax withholding that could be imposed on the transaction.
Article 20.Successors
All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, regardless of whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 21.General Provisions
21.1Forfeiture Events. Any Awards granted under this Plan will be subject to recoupment in accordance with any clawback policy that the Company currently has in effect, or is required to adopt or modify, 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 the Sarbanes-Oxley Act of 2002, or other applicable law (“Clawback Policy”). In addition, the Committee or the Board may impose such clawback, recovery or recoupment provisions in an Award Agreement as the Committee or the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired Shares or other cash or property as set forth in the Award Agreement. No recovery of compensation under this Section will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement or otherwise with the Company.
21.2Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
21.3Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
21.4Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
21.5Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
21.6Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:
(a)Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b)Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
21.7Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
21.8Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
21.9Employees Based Outside the United States. Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a)Determine which Affiliates and Subsidiaries shall be covered by this Plan;
(b)Determine which Employees and/or Third Party Service Providers outside the United States are eligible to participate in this Plan;
(c)Modify the terms and conditions of any Award granted to Employees or Third Party Service Providers outside the United States to comply with applicable foreign laws;
(d)Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 21.9 by the Committee shall be attached to this Plan document as appendices; and
(e)Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
21.10Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
21.11Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.
21.12No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
21.13Retirement and Welfare Plans. Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation” for purposes of
computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.
21.14Deferred Compensation. If any Award would be considered deferred compensation as defined under Code Section 409A and if this Plan fails to meet the requirements of Code Section 409A with respect to such Award, then such Award shall be null and void. However, the Committee may permit deferrals of compensation pursuant to the terms of a Participant’s Award Agreement, a separate plan or a subplan which meets the requirements of Code Section 409A and any related guidance. Additionally, to the extent any Award is subject to Code Section 409A, notwithstanding any provision herein to the contrary, this Plan does not permit the acceleration or delay of the time or schedule of any distribution related to such Award, except as permitted by Code Section 409A, the regulations thereunder, and/or the Secretary of the United States Treasury.
21.15Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
21.16No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
21.17Governing Law. This Plan shall be governed by the laws of the State of Texas, without regard to choice-of-law principles. The Participants consent to personal and exclusive jurisdiction and venue Dallas County in the State of Texas. Any controversy or claim arising out of or relating to (i) a Participant’s employment with the Company or a Subsidiary or Affiliate and/or (ii) the Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Employment Arbitration Rules before a single arbitrator in Dallas, Texas, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The Company and the Participant will each be responsible for their own attorneys’ fees and expenses incurred in connection with any such arbitration. The decision arrived at by the arbitrator shall be binding upon all parties to the arbitration and no appeal shall lie therefrom, except as provided by the Federal Arbitration Act. These arbitration procedures are intended to be the exclusive method of resolving any claim or dispute arising out of or related to this Plan, including the applicability of this Section; provided, however, that any party seeking injunctive relief in connection with a breach or anticipated breach of the Plan will do so in a state or federal court of competent jurisdiction within Dallas County in the State of Texas.
As evidence of its adoption of this Plan, the Company has caused this document to be executed by its duly authorized officer as of the 20th day of January, 2022.
APPLIED BLOCKCHAIN, INC.
By: /s/ David Rench
Name: David Rench
Title: Chief Financial Officer
Template for Employee Restricted Stock Award Under the Incentive Plan
Exhibit 10.2
RESTRICTED STOCK AWARD
as of ____________ __, 20__ (“Grant Date”)
The parties to this Restricted Stock Award (“Award”) are Applied Blockchain, Inc. a Nevada Corporation (the “Company”), and _______________ (“Employee”), an employee of the Company.
The Company has retained Employee as an employee of the Company, and, pursuant to the terms of the Applied Blockchain, Inc. 2021 Incentive Plan (the “Plan”), the Company wishes to provide Employee with an incentive to put forth maximum effort for the success of the Company’s business.
Accordingly, the Company has determined to grant Employee an incentive award in the form of ________ (#) shares of restricted stock (“Stock Award” or “Restricted Stock”) subject to the terms and conditions of the plan and as herein set forth.
Terms used herein that are defined in the Plan, shall have the same meanings given them in the Plan.
Accordingly, intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
Grant of Stock Award
1.1 On the Grant Date, the Company granted to Employee this Stock Award in the form of ____________ (#) shares of restricted stock.
1.2 The Stock Award shall be subject to the terms and conditions of the Plan and this Stock Award.
1.3 Except as provided in the Plan or in this Stock Award, the Stock Award shall remain unvested, nontransferable and subject to a substantial risk of forfeiture. In addition, the Stock Award shall not be vested, and Employee’s interest in the Stock Award granted hereunder shall be forfeited, except to the extent that the provisions of this Award are satisfied.
ARTICLE II
Vesting of Stock Award
2.1 Employee’s Stock Award shall be vested in accordance with this Article II.
2.2 The Stock Award shall vest in accordance with the following schedule:
Number of Shares Vesting Date
__________ ______
__________ ______
2.3 Subject to Section 2.4 and Article V of this Award, the Stock Award that remains forfeitable shall be forfeited if Employee’s employment terminates at any time.
2.4 [IF APPLICABLE-- Notwithstanding the provisions of Section 2.3 hereof, if, prior to the forfeiture of this Stock Award under Section 2.3, Employee experiences a Qualifying Termination Event (as defined in Section 2.5), the portion of the Stock Award that is forfeitable shall become vested as to a pro rata portion of the unvested portion of the Stock Award, as to a pro rata portion of the unvested portion of the Stock Award, as determined in accordance with the following sentence. The pro rata portion of the Award that shall vest pursuant to the preceding sentence shall be equal to a fraction (not to exceed 1) of the total shares in each unvested Tranche of the Stock Award where the numerator of such fraction shall be the number of full months of service performed by Employee after the Grant Date and prior to the Qualifying Termination Date, and the denominator of such fraction shall be determined in accordance with the following table:
Tranche No. Denominator
The non-vested portion of this Stock Award shall be forfeited.
2.5 For purposes of this Stock Award, “Qualifying Termination Event” shall mean Employee’s death, Disability, or termination by the Company or an affiliate other than for Cause. “Disability” for purposes of this Section 2.5 shall mean Employee’s permanent and total disability within the meaning of Section 22(e)(3) of the Code.]
ARTICLE III
Rights as Shareholder; Dividends; Taxation
3.1 Employee shall be the record owner of the Restricted Stock until the shares of Common Stock are sold, forfeited or otherwise disposed of, and shall be entitled to all of the rights of a shareholder of the Company including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares, provided, however, that any dividends paid on unvested Restricted Stock, shall be and remain unvested until the Restricted Stock on which the dividends are paid becomes fully vested (and to the extent such Restricted Stock shall be forfeited, any underlying dividends on such forfeited Restricted Stock shall be forfeited as well).
3.2 The Company may issue stock certificates or evidence Employee’s interest by using a restricted book entry account with the Company’s transfer agent. Physical possession or custody of any stock certificates that are issued shall be retained by the Company until such time as the Stock Award vests.
3.3 If Employee forfeits any or all of the Stock Award pursuant to Section 3 or any other provision herein, Employee shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Stock Award and shall no longer be entitled to vote or receive dividends on such shares.
3.4 Employee hereby grants a power of attorney to the President and the Secretary of the Company, and each of them, with full power of substitution, with respect to any shares of the Stock Award which are forfeited hereunder. The power granted hereunder shall authorize each of the President and the Secretary of the Company, acting alone, to execute and deliver any stock powers or other agreements or instruments reasonably required to assign, transfer or cancel any shares that have so been forfeited by Employee. Such power of attorney granted pursuant to this Section 3.4 is given in consideration of the agreements and covenants of the Company in connection with the transactions contemplated by this Stock Award and, as such, is coupled with an interest and shall be irrevocable unless and until all of the shares of the Stock Award have vested in full. In addition to the foregoing, on the Grant Date, Employee shall deliver three (3) executed blank stock powers with respect to the Stock Award, in the form required by the Company, which may be used by the Company to effect any forfeiture or transfer of the Common Stock contemplated hereunder, or otherwise at the direction of Employee.
3.5 [If Applicable-- The Company may elect to withhold from the vested Award, the number of whole Shares necessary to satisfy tax-withholding requirements attributable to the vesting of the Restricted Stock. Notwithstanding the foregoing,] [T]he liability related to all taxes with respect to this Stock Award is and remains Employee’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any taxes in connection with the grant or vesting of this Stock Award or the subsequent sale of any shares; and (b) does not commit to structure the Stock Award to reduce or eliminate Employee’s liability for taxes.
ARTICLE IV
Change in Control
4.1 In the event of a Change in Control prior to the forfeiture of the Stock Award under Section 2.3, the provisions of this Article V shall apply.
(a)Subject to subparagraphs (b) and (d) of this Section 4.1, if, upon a Change in Control, Employee receives a new award which qualifies as a Replacement Award (as defined below), the Replacement Award shall replace this Stock Award and continue subject to the Replacement Award’s terms.
(i) A “Replacement Award” is an award that substitutes for this Stock Award and meets the following requirements: (i) it has a value at least equal to the value of this Award as determined under applicable law and by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less favorable to Employee than the terms and conditions of this Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of this Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of a Replacement Award are satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
(b)If, following a Change in Control, the Company’s shares continue to be traded on The Trading Market or another established securities market, this Stock Award shall continue in effect and be treated as a Replacement Award.
(c)If, upon a Change in Control that results in the Company’s shares no longer being traded on The Trading Market or another established securities market and no Replacement Award is granted to Employee, the unvested portion of this Stock Award shall become vested immediately prior to the consummation of the Change in Control.
(d)Notwithstanding the foregoing, upon a Change in Control, the Committee may determine that the unvested portion of this Stock Award shall be canceled and terminated for consideration instead.
ARTICLE V
Miscellaneous
5.1 The terms of this Stock Award shall be adjusted as the Committee determines is equitable in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.
5.2 Whenever the term “Employee” is used in any provision of this Award under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Stock Award may be transferred by will or by the laws of descent and distribution, the term “Employee” shall be deemed to include such person or persons.
5.3 The Stock Award granted hereunder is not transferable by Employee otherwise than by will or the laws of descent and distribution. No assignment or transfer of the Stock Award granted hereunder, or of the rights represented thereby, whether voluntary or involuntary, by the operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon any such assignment or transfer the Stock Award shall terminate and become of no further effect.
5.4 The following, or similar, legends may be placed on any certificate(s) or other document(s) delivered to Employee in connection with this Stock Award, in addition to any other legends required under the Stockholders’ Agreements or as required under federal or state securities laws:
THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
5.5 Nothing in this Award or otherwise shall obligate the Company to vest any of the Stock Award, to permit the Stock Award to be vested other than in accordance with the terms
hereof or to grant any waivers of the terms of this Stock Award, regardless of what actions the Company, the Board or the Committee may take or waivers the Company, the Board or the Committee may grant under the terms of or with respect to any Stock Award now or hereafter granted to any other person or any other Stock Award granted to Employee.
5.6 Notwithstanding any other provision hereof, Employee shall not vest in the Stock Award granted hereunder, and the Company shall not be obligated to issue any shares to Employee hereunder, if the vesting thereof or the issuance of such shares would constitute a violation by Employee or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final and binding. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action in order to cause the issuance of shares pursuant to this Stock Award comply with any law or regulation of any governmental authority.
5.7 If the events described in Article III or V occur after the date that Employee is advised (upon recommendation by the Committee) that their employment with the Company is being, or will be, terminated for Cause, on account of performance or in circumstances that prevent them from being in good standing with the Company, accelerated vesting shall not occur and all rights under this Stock Award shall terminate, and this Stock Award shall expire on the date of termination of Employee’s employment. The Committee shall have the authority to determine whether termination of Employee is for Cause or for any reason other than Cause.
5.8 This Stock Award shall be governed by the laws of the State of Texas applicable to agreements made and performed wholly within the State of Texas (regardless of the laws that might otherwise govern under applicable conflicts of laws principles) and applicable federal law. All disputes arising under this Stock Award shall be adjudicated solely within the state or Federal courts located within the State of Texas, Dallas County.
5.9 This Stock Award sets forth a complete understanding between the parties with respect to its subject matter and supersedes all prior and contemporaneous agreements and understandings with respect thereto. Except as expressly set forth in this Stock Award, the Company makes no representations, warranties or covenants to Employee with respect to this Stock Award or its subject matter, including with respect to the current or future value of the shares subject to the Stock Award. Any modification, amendment or waiver to this Stock Award will be effective only if it is in writing signed by the Company and Employee. The failure of any party to enforce at any time any provision of this Stock Award shall not be construed to be a waiver of that or any other provision of this Stock Award.
5.10 This Stock Award shall be administered and interpreted solely by the Committee or its delegated agent. The interpretations and decisions of the Committee with regard to this Stock Award shall be final and conclusive and binding upon Employee.
5.11 It is the intent that this Award comply in all respects with Rule 16b-3 under the Exchange Act and any related regulations. If any provision of this Stock Award is later found not to be in compliance with such Rule and regulations, the provisions shall be deemed null and void. The provisions of the Common Stock under this Stock Award shall be executed in accordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder.
5.12 Subject to the limitations set forth herein, this Stock Award shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Employee and the successors of the Company.
5.13 This Stock Award is subject to the terms of any separate Clawback Policy that is or may be maintained by the Company, as such Policy may be amended from time to time.
5.14 Employee hereby acknowledges receipt of a copy of the Plan and this Stock Award, and that they have read and understand the terms and provisions of the Plan and this Award, and accept the Stock Award subject to all of the terms and conditions of the Plan and this Award.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Stock Award as of the day and year first above written.
APPLIED BLOCKCHAIN, INC.
By:
Name:
Title:
EMPLOYEE:
Template for Employee RSU Award under
the Incentive Plan
Exhibit 10.3
RESTRICTED STOCK UNIT AWARD
as of __________ __, 20__ (“Grant Date”)
The parties to this Restricted Stock Unit Award (“Award”) are Applied Blockchain, Inc. a Nevada Corporation (the “Company”), and _____________, an employee of the Company (“Employee”).
The Company has retained Employee as an employee of the Company, and wishes to provide Employee with an incentive to put forth maximum effort for the success of the Company’s business.
Pursuant to the terms of the Applied Blockchain, Inc. 2021 Incentive Plan (the “Plan”), the Company has determined to grant Employee as of the Grant Date, an incentive award in the form of _____ restricted stock units (“RSUs”), subject to the terms of the Plan, and subject to the terms and conditions herein set forth.
Terms used herein that are defined in the Plan, shall have the same meanings given them in the Plan.
ARTICLE I
Grant of RSUs
2.1 Each RSU shall have a value equal to the Fair Market Value of one share of the Company’s Common Stock on the relevant date.
2.2 The RSUs shall be subject to the terms and conditions of this Award.
2.3 Except as provided in this Award, the RSUs shall remain unvested, nontransferable and are subject to a substantial risk of forfeiture. In addition, the RSUs shall not be vested, and Employee’s interest in the RSUs granted hereunder shall be forfeited, except to the extent that the provisions of this Award are satisfied.
2.4 RSUs granted to the Employee shall be credited to an account (the “Account”) established and maintained for the Employee. An Employee’s Account shall be the record of RSUs granted to the Employee under the Plan, is solely for accounting purposes and shall not require a segregation of any Company assets.
ARTICLE III
Vesting of RSUs
3.1 Employee’s RSUs shall be vested in accordance with this Article III.
3.2 The RSUs shall vest in accordance with the following schedule—
_________________________________
_________________________________
3.3 Subject to Section 3.4 and Article V of this Award, all RSUs that are forfeitable shall be forfeited if Employee’s employment shall be terminated for any reason.
3.4 [IF APPLICABLE-- Notwithstanding the provisions of Section 3.3 hereof, if, prior to the forfeiture of this RSU Award under Section 3.3, Employee experiences a Qualifying Termination Event (as defined in Section 3.5),
ALTERNATIVE A-- all RSUs that are forfeitable shall become fully vested upon the Qualifying Termination Event. OR
ALTERNATIVE B-- the portion of the RSUs that are forfeitable shall become vested as to a pro rata portion of the unvested portion of the RSUs, as determined in accordance with the following sentence. The pro rata portion of the RSUs that shall vest pursuant to the preceding sentence shall be equal to a fraction (not to exceed 1) of the total RSUs in each unvested Tranche of the RSUs where the numerator of such fraction shall be the number of full months of service performed by Employee after the Grant Date and prior to the Qualifying Termination Date, and the denominator of such fraction shall be determined in accordance with the following table:
Tranche No. Denominator
The non-vested portion of the RSUs shall be forfeited.
3.5 For purposes of this RSU Award, “Qualifying Termination Event” shall mean Employee’s death, Disability, or termination of employment by the Company other than for Cause. “Disability” for purposes of this Section 3.5 shall mean Employee’s permanent and total disability within the meaning of Section 22(e)(3) of the Code.]
3.6 If the events described in Article V [or a Qualifying Termination Event]occur after the date that Employee is advised that their employment is being, or will be, terminated for Cause, on account of performance or in circumstances that prevent them from being in good standing with the Company, accelerated vesting shall not occur and all rights under this Award shall terminate, and this Award shall expire on the date of Employee’s termination of employment.
ARTICLE IV
Payment of the RSUs
4.1 Payment of the vested RSUs shall be made as soon as practicable after the RSUs have vested, but in no event later than March 15th of the calendar year after the calendar year in which the RSUs vest.
4.2 The vested RSUs shall be paid in cash or whole shares of Common Stock or a combination thereof, as determined in the sole discretion of the Company.
4.3 If Employee dies prior to the payment of their vested RSUs, any vested RSUs shall be paid to their Beneficiary as designated or determined in accordance with the terms of the Plan.
ARTICLE V
Change in Control
5.1 In the event of a Change in Control prior to the forfeiture of the RSUs under Section 3.3, the provisions of this Article V shall apply.
(a)Subject to subparagraphs (b) and (d) of this Section 5.1, if, upon a Change in Control, Employee receives a new award which qualifies as a Replacement Award (as defined below), the Replacement Award shall replace this Award and continue subject to the Replacement Award’s terms.
(i) A “Replacement Award” is an award that substitutes for this Award and meets the following requirements: (i) it has a value at least equal to the value of this Award as determined under applicable law and by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less favorable to Employee than the terms and conditions of this Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of this Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of a Replacement Award are satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
(b)If, following a Change in Control, the Company’s shares continue to be traded on The Trading Market or another established securities market, this Award shall continue in effect and be treated as a Replacement Award.
(c)If, upon a Change in Control that results in the Company’s shares no longer being traded on The Trading Market or another established securities market and no Replacement Award is granted to Employee, the unvested portion of this Award shall become vested immediately prior to the consummation of the Change in Control.
(d)Notwithstanding the foregoing, upon a Change in Control, the Committee may determine that this Award shall be canceled and terminated for consideration instead.
(e)If, in connection with a Change of Control, Employee’s payment of this Award will cause Employee to be liable for federal excise tax under Code Section 4999 levied on certain “excess parachute payments” as defined in Code Section 280G (“Excise Tax”), then the payments made pursuant to the Awards shall be reduced (or repaid to the Company, if previously paid or provided) as provided below:
(i) If the payments due upon a Change of Control under this Award and any other agreement between Employee and the Company, exceed 2.99 times Employee’s “base amount,” as defined in Code Section 280G, a reduced payment amount shall be calculated by reducing the payments to the minimum extent necessary so that no portion of any payment, as so reduced or repaid, constitutes an excess parachute payment. If it is determined that any Excise Tax is payable by Employee, Employee shall receive either (i) all payments otherwise due; or (ii) the reduced payment
amount described in the preceding sentence, whichever will provide Employee with the greater after-tax economic benefit taking into account for these purposes any applicable excise tax.
(ii) Whether payments are to be reduced pursuant to this subparagraph (e), and the extent to which they are to be so reduced, will be determined solely by the Company in good faith and the Company will notify Employee in writing of its determination.
(iii) In no event shall Employee be entitled to receive any kind of gross-up payment or excise tax reimbursement from the Company.
ARTICLE VI
Miscellaneous
6.1 [If Applicable -- The Company may withhold from the Award, to the extent paid in Shares, the number of whole Shares of the Company’s common stock necessary to satisfy tax-withholding requirements attributable to the vesting of the RSUs. Notwithstanding the foregoing] [I]t is Employee’s responsibility to properly report all income and remit all Federal, state, and local taxes that may be due to the relevant taxing authorities as the result of the vesting of this RSU Award.
6.2 The terms of this RSU shall be adjusted as the Committee determines is equitable in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.
6.3 Whenever the term “Employee” is used in any provision of this Award under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the RSUs may be transferred by will or by the laws of descent and distribution, the term “Employee” shall be deemed to include such person or persons.
6.4 Employee shall not be deemed for any purpose to be a shareholder of the Company in respect of any shares as to which the RSUs shall not have been vested and paid in Common Stock.
6.5 Nothing in this Award or otherwise shall obligate the Company to vest any of the RSUs, to permit the RSUs to be earned and vested other than in accordance with the terms hereof or to grant any waivers of the terms of this Award, regardless of what actions the Company, the Board or the Committee may take or waivers the Company, the Board or the Committee may grant under the terms of or with respect to any RSU now or hereafter granted to any other person or any other RSU granted to Employee.
6.6 Notwithstanding any other provision hereof, Employee shall not earn or vest in the RSUs granted hereunder, and the Company shall not be obligated to issue any shares to Employee hereunder, if the earning or vesting thereof or the issuance of such shares would constitute a violation by Employee or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final and binding. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action in order to cause the issuance of shares pursuant this RSU to comply with any law or regulation of any governmental authority.
6.7 The RSUs granted hereunder are not transferable by Employee otherwise than by will or the laws of descent and distribution. No assignment or transfer of the RSUs granted hereunder, or of the rights represented thereby, whether voluntary or involuntary, by the operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon any such assignment or transfer the RSUs shall terminate and become of no further effect.
6.8 This Award shall be governed by the laws of the State of Texas applicable to agreements made and performed wholly within the State of Texas (regardless of the laws that might otherwise govern under applicable conflicts of laws principles) and applicable federal law. All disputes arising under this Award shall be adjudicated solely within the State or Federal courts located within the State of Texas, Dallas County, and in accordance with the resolution provisions under the Agreement.
6.9 This Award sets forth a complete understanding between the parties with respect to its subject matter and supersedes all prior and contemporaneous agreements and understandings with respect thereto. Except as expressly set forth in this Award, the Company makes no representations, warranties or covenants to Employee with respect to this Award or its subject matter, including with respect to the current or future value of the shares subject to the RSUs. Any modification, amendment or waiver to this Award will be effective only if it is in writing signed by the Company and Employee. The failure of any party to enforce at any time any provision of this Award shall not be construed to be a waiver of that or any other provision of this Award.
6.10 This Award shall be administered and interpreted solely by the Committee or its delegated agent. The interpretations and decisions of the Committee with regard to this RSU shall be final and conclusive and binding upon Employee.
6.11 It is the intent that this Award comply in all respects with Rule 16b-3 under the Exchange Act and any related regulations. If any provision of this Award is later found not to be in compliance with such Rule and regulations, the provisions shall be deemed null and void. The provisions of the RSUs under this Award shall be executed in accordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder.
6.12 Subject to the limitations set forth herein, this Award shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Employee and the successors of the Company.
6.13 This Award is subject to the terms of any separate Clawback Policy maintained by the Company, as such Policy may be amended from time to time.
6.14 Employee hereby acknowledges receipt of a copy of the Plan and this Award, and that they have read and understand the terms and provisions of such documents, and accepts the RSUs subject to all of the terms and conditions of the Plan and the Award.
6.15 In the event of any conflict between the provisions of this Award and the provisions of the Plan as in effect on the Grant Date, the provisions of the Plan, as in effect on the Grant Date, shall govern.
6.16 Neither this RSU Award nor the granting or vesting of RSUs shall confer upon the Employee any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate the Employee’s employment at any time.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Award as of the day and year first above written.
APPLIED BLOCKCHAIN, INC.
By:
Name:
Title:
Employee:
[Name]
Template for Consultant RSU Award
Under the Plan
Exhibit 10.4
RESTRICTED STOCK UNIT AWARD
as of __________ __, 20__ (“Grant Date”)
The parties to this Restricted Stock Unit Award (“Award”) are Applied Blockchain, Inc. a Nevada Corporation (the “Company”), and _____________, a third-party service provider to the Company (“Consultant”).
The Company has retained Consultant as a Third Party Service Provider as such term is defined in the Applied Blockchain, Inc. 2021 Incentive Plan (the “Plan”), and wishes to provide Consultant with an incentive to put forth maximum effort for the success of the Company’s business.
Pursuant to the terms of the Plan, the Company has determined to grant Consultant as of the Grant Date, an incentive award in the form of __[#]___ restricted stock units (“RSUs”), subject to the terms of the Plan, and subject to the terms and conditions herein set forth.
Terms used herein that are defined in the Plan, shall have the same meanings given them in the Plan.
ARTICLE I
Grant of RSUs
2.1 Each RSU shall have a value equal to the Fair Market Value of one share of the Company’s Common Stock on the relevant date.
2.2 The RSUs shall be subject to the terms and conditions of this Award.
2.3 Except as provided in this Award, the RSUs shall remain unvested, nontransferable and are subject to a substantial risk of forfeiture. In addition, the RSUs shall not be vested, and Consultant’s interest in the RSUs granted hereunder shall be forfeited, except to the extent that the provisions of this Award are satisfied.
2.4 RSUs granted to the Consultant shall be credited to an account (the “Account”) established and maintained for the Consultant. A Consultant’s Account shall be the record of RSUs granted to the Consultant under the Plan, is solely for accounting purposes and shall not require a segregation of any Company assets.
ARTICLE III
Vesting of RSUs
3.1 Consultant’s RSUs shall be vested in accordance with this Article III.
3.2 The RSUs shall vest in accordance with the following schedule—
_________________________________
_________________________________
3.3 Subject to Section 3.4 and Article V of this Award, all RSUs that are forfeitable shall be forfeited if Consultant’s services to the Company or an Affiliate shall be terminated for any reason.
3.4 [IF APPLICABLE-- Notwithstanding the provisions of Section 3.3 hereof, if, prior to the forfeiture of this RSU Award under Section 3.3, Consultant experiences a Qualifying Termination Event (as defined in Section 3.5),
ALTERNATIVE A-- all RSUs that are forfeitable shall become fully vested upon the Qualifying Termination Event. OR
ALTERNATIVE B-- the portion of the RSUs that are forfeitable shall become vested as to a pro rata portion of the unvested portion of the RSUs, as determined in accordance with the following sentence. The pro rata portion of the RSUs that shall vest pursuant to the preceding sentence shall be equal to a fraction (not to exceed 1) of the total RSUs in each unvested Tranche of the RSUs where the numerator of such fraction shall be the number of full months of service performed by Consultant after the Grant Date and prior to the Qualifying Termination Date, and the denominator of such fraction shall be determined in accordance with the following table:
Tranche No. Denominator
The non-vested portion of the RSUs shall be forfeited.
3.5 For purposes of this RSU Award, “Qualifying Termination Event” shall mean Consultant’s death, Disability, or termination of services by the Company other than for Cause. “Disability” for purposes of this Section 3.5 shall mean Consultant’s permanent and total disability within the meaning of Section 22(e)(3) of the Code.]
3.6 If the events described in Article V [or a Qualifying Termination Event]occur after the date that Consultant is advised that their services are being, or will be, terminated for Cause, on account of performance or in circumstances that prevent them from being in good standing with the Company, accelerated vesting shall not occur and all rights under this Award shall terminate, and this Award shall expire on the date of Consultant’s termination of services.
ARTICLE IV
Payment of the RSUs
4.1 Payment of the vested RSUs shall be made as soon as practicable after the RSUs have vested, but in no event later than March 15th of the calendar year after the calendar year in which the RSUs vest.
4.2 The vested RSUs shall be paid in cash or whole shares of Common Stock or a combination thereof, as determined in the sole discretion of the Company.
4.3 Consultant covenants and agrees that it will prepare all applicable income and information tax returns and all other governmental reports of any kind and report and pay all taxes resulting from the grant and vesting of the RSUs. Consultant shall be liable for and shall indemnify Company with respect to all taxes, contributions and penalties imposed on the Company by any governmental or other public authority having jurisdiction with respect to or measured by the income or profit received by Consultant pursuant to this Award.
4.4 If Consultant dies prior to the payment of their vested RSUs, any vested RSUs shall be paid to their Beneficiary as designated or determined in accordance with the terms of the Plan.
ARTICLE V
Change in Control
5.1 In the event of a Change in Control prior to the forfeiture of the RSUs under Section 3.3, the provisions of this Article V shall apply.
(a)Subject to subparagraphs (b) and (d) of this Section 5.1, if, upon a Change in Control, Consultant receives a new award which qualifies as a Replacement Award (as defined below), the Replacement Award shall replace this Award and continue subject to the Replacement Award’s terms.
(i) A “Replacement Award” is an award that substitutes for this Award and meets the following requirements: (i) it has a value at least equal to the value of this Award as determined under applicable law and by the Committee in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less favorable to Consultant than the terms and conditions of this Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of this Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of a Replacement Award are satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
(b)If, following a Change in Control, the Company’s shares continue to be traded on The Trading Market or another established securities market, this Award shall continue in effect and be treated as a Replacement Award.
(c)If, upon a Change in Control that results in the Company’s shares no longer being traded on The Trading Market or another established securities market and no Replacement Award is granted to Consultant, the unvested portion of this Award shall become vested immediately prior to the consummation of the Change in Control.
(d)Notwithstanding the foregoing, upon a Change in Control, the Committee may determine that this Award shall be canceled and terminated for consideration instead.
(e)If, in connection with a Change of Control, Consultant’s payment of this Award will cause Consultant to be liable for federal excise tax under Code Section 4999 levied on certain “excess parachute payments” as defined in Code Section 280G (“Excise Tax”), then the payments made pursuant to the Awards shall be reduced (or repaid to the Company, if previously paid or provided) as provided below:
(i) If the payments due upon a Change of Control under this Award and any other agreement between Consultant and the Company, exceed 2.99 times Consultant’s “base amount,” as defined in Code Section 280G, a reduced payment amount shall be calculated by reducing the payments to the minimum extent necessary so that no portion of any payment, as so reduced or repaid, constitutes an excess parachute payment. If it is determined that any Excise Tax is payable by Consultant, Consultant shall receive either (i) all payments otherwise due; or (ii) the reduced payment amount described in the preceding sentence, whichever will provide Consultant with the greater after-tax economic benefit taking into account for these purposes any applicable excise tax.
(ii) Whether payments are to be reduced pursuant to this subparagraph (e), and the extent to which they are to be so reduced, will be determined solely by the Company in good faith and the Company will notify Consultant in writing of its determination.
(iii) In no event shall Consultant be entitled to receive any kind of gross-up payment or excise tax reimbursement from the Company.
ARTICLE VI
Miscellaneous
6.1 The terms of this RSU shall be adjusted as the Committee determines is equitable in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization..
6.2 Whenever the term “Consultant” is used in any provision of this Award under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the RSUs may be transferred by will or by the laws of descent and distribution, the term “Consultant” shall be deemed to include such person or persons.
6.3 The RSUs granted hereunder are not transferable by Consultant otherwise than by will or the laws of descent and distribution. No assignment or transfer of the RSUs granted hereunder, or of the rights represented thereby, whether voluntary or involuntary, by the operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon any such assignment or transfer the RSUs shall terminate and become of no further effect.
6.4 Consultant shall not be deemed for any purpose to be a shareholder of the Company in respect of any shares as to which the RSUs shall not have been vested and paid in Common Stock.
6.5 Nothing in this Award or otherwise shall obligate the Company to vest any of the RSUs, to permit the RSUs to be earned and vested other than in accordance with the terms hereof or to grant any waivers of the terms of this Award, regardless of what actions the Company, the Board or the Committee may take or waivers the Company, the Board or the Committee may grant under the terms of or with respect to any RSU now or hereafter granted to any other person or any other RSU granted to Consultant.
6.6 Notwithstanding any other provision hereof, Consultant shall not earn or vest in the RSUs granted hereunder, and the Company shall not be obligated to issue any shares to Consultant hereunder, if the earning or vesting thereof or the issuance of such shares would constitute a violation by Consultant or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final and binding. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action in order to cause the issuance of shares pursuant this RSU to comply with any law or regulation of any governmental authority.
6.7 This Award shall be governed by the laws of the State of Texas applicable to agreements made and performed wholly within the State of Texas (regardless of the laws that might otherwise govern under applicable conflicts of laws principles) and applicable federal law. All disputes arising under this Award shall be adjudicated solely within the State or Federal courts located within the State of Texas, Dallas County, and in accordance with the resolution provisions under the Agreement.
6.8 This Award sets forth a complete understanding between the parties with respect to its subject matter and supersedes all prior and contemporaneous agreements and understandings with respect thereto. Except as expressly set forth in this Award, the Company makes no representations, warranties or covenants to Consultant with respect to this Award or its subject matter, including with respect to the current or future value of the shares subject to the RSUs. Any modification, amendment or waiver to this Award will be effective only if it is in writing signed by the Company and Consultant. The failure of any party to enforce at any time any provision of this Award shall not be construed to be a waiver of that or any other provision of this Award.
6.9 This Award shall be administered and interpreted solely by the Committee or its delegated agent. The interpretations and decisions of the Committee with regard to this RSU shall be final and conclusive and binding upon Consultant.
6.10 It is the intent that this Award comply in all respects with Rule 16b-3 under the Exchange Act and any related regulations. If any provision of this Award is later found not to be
in compliance with such Rule and regulations, the provisions shall be deemed null and void. The provisions of the RSUs under this Award shall be executed in accordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder.
6.11 Subject to the limitations set forth herein, this Award shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Consultant and the successors of the Company.
6.12 This Award is subject to the terms of any separate Clawback Policy maintained by the Company, as such Policy may be amended from time to time.
6.13 Consultant hereby acknowledges receipt of a copy of the Plan and this Award, and that they have read and understand the terms and provisions hereof, and accepts the RSUs subject to all of the terms and conditions of the Plan and the Award.
6.15 In the event of any conflict between the provisions of this Award and the provisions of the Plan as in effect on the Grant Date, the provisions of the Plan, as in effect on the Grant Date, shall govern.
6.16 Neither this RSU Award nor the granting or vesting of RSUs shall confer upon Consultant any right with respect to the continuance of services to the Company or an Affiliate nor shall it interfere in any way with the right of the Company or an Affiliate to terminate Consultant’s services at any time.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Award as of the day and year first above written.
APPLIED BLOCKCHAIN, INC.
By:
Name:
Title:
CONSULTANT:
[Name]
Applied Blockchain, Inc.
2022 Non-Employee Director Stock Plan
(Effective January 20, 2022)
| | | | | |
| Article 1 Establishment, Purpose, and Duration | |
| Article 2 Definitions | |
| Article 3 Administration | |
| Article 4 Shares Subject to this Plan and Maximum Grants | |
| Article 5 Eligibility and Participation | |
| Article 6 Grants of Shares | 6 |
| Article 7 Deferral Elections | |
| Article 8 DEFERRAL Distributions | |
| Article 9 Hardship Distributions | |
| Article 10 Beneficiary Designation | |
| Article 11 Successors | |
| Article 12 Amendment, Modification, Suspension, and Termination | |
| Article 13 General Provisions | |
Applied Blockchain, Inc.
2022 Non-Employee Director Stock Plan
Article 1Establishment, Purpose, and Duration
1.1Establishment. Applied Blockchain, Inc. (the “Company”), establishes a compensation plan to be known as the Applied Blockchain, Inc. Non-Employee Director Stock Plan (this “Plan”), in accordance with the terms and conditions of the Plan as set forth in this document.
This Plan’s effective date is the date this Plan is approved by the Company's shareholders at an Annual Meeting (the “Effective Date”), and this Plan shall remain in effect as provided in Section 1.3 hereof.
1.2Purpose of this Plan. The purpose of this Plan is to enable the Company to pay part of the compensation of its non-employee Directors in shares of the Company’s common stock and, at such time as the Board may determine, to allow the Company’s non-employee Directors to defer some or all of their directors’ fees.
1.3Duration of this Plan. Unless sooner terminated as provided herein, this Plan shall terminate ten years from the Effective Date. After this Plan is terminated, no Stock Compensation may be granted but Stock Compensation previously granted shall remain outstanding in accordance with its applicable terms and conditions and this Plan’s terms and conditions.
Article 2Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1“Administrator” means the Chief Financial Officer of the Company.
2.2“Affiliate” shall mean any corporation or other entity (including, but not limited to, a partnership or a limited liability company), that is affiliated with the Company through stock or equity ownership or otherwise, and is designated as an Affiliate for purposes of this Plan by the Administrator.
2.3“Annual Grant Limit” and “Annual Grant Limits” shall mean the number of shares or dollar amounts set forth in Section 4.1.
2.4“Annual Meeting” means the annual meeting of the shareholders of the Company held in the relevant year.
2.5“Beneficiary” or “Beneficiaries” means any person or persons designated on a Beneficiary Designation Form by a Director as allowed in Article 10 to receive Stock Compensation and, if applicable, unpaid Deferred Benefits under this Plan. If there is no valid designation by the Director, or if the designated Beneficiary or Beneficiaries fail to survive the Director or otherwise fail to take the benefit, the Director’s Beneficiary shall be the first of the following who survives the Director: (i) a Director’s spouse (the person legally married to the Director when the Director dies); (ii) the Director’s children in equal shares, and (iii) the Director’s estate.
2.6“Beneficiary Designation Form” means a form acceptable to the Administrator or its designee used by a Director pursuant to Article 10 hereof to name their Beneficiary or Beneficiaries who will receive their Stock Compensation and unpaid Deferred Benefits under this Plan, if any, when they die.
2.7“Board” or “Board of Directors” means the Board of Directors of the Company.
2.8“Cash Compensation” means any retainers or other fees payable to a Director in cash in consideration for services performed as a Director.
2.9 “Change in Control” means the occurrence of any of the following events:
(i)Any Person, other than (x) a fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary or Affiliate, or (y) any corporation owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company’s Shares becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding voting securities;
(ii)the sale of disposition by the Company of all or substantially all of the Company’s assets;
(iii)the members of the Board of Directors as of the Effective Date (the “Incumbent Directors”) and any successor director whose appointment is endorsed by the Incumbent Directors or any such duly-endorsed successor director cease to constitute a majority of the Board; or
(iv)a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
For purposes of this section, the following terms have the meanings set forth below:
(a) “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
(b)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
(c)"Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
2.10 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
2.11“Common Stock” means the common stock of the Company.
2.12“Company” or “Corporation” means Applied Blockchain, Inc. and any successor thereto as provided in Article 11 herein.
2.13“Compensation Year” means the 12-month period commencing on April 21st each year and ending on the following April 20th.
2.14 “Director” means each director of the Company who is not an employee of the Company.
2.15“Disabled” or “Disability” means a Director’s inability to engage in any substantial gainful activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of twelve (12) months or longer.
2.16 “Effective Date” has the meaning set forth in Section 1.1.
2.17 “Fair Market Value” means, on any given date, the closing price of a Share as reported by The Trading Market on such date, or if Shares were not traded on The Trading Market on such day, then on the next preceding day that Shares were traded on The Trading Market; in the event Shares are traded only on an exchange other than The Trading Market, references herein to The Trading Market shall mean such other exchange. The Company may use an alternate method of determining the value of Shares for accounting or any other purpose. For these purposes The Trading Market means, initially, OTC Markets (including OTCQX, OTCQB and Pink Markets), or any of the following other markets that becomes the primary trading market for the Shares: The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select Market, the New York Stock Exchange or the NYSE American (or any nationally recognized successor to any of the foregoing).
2.18“Grant” means the grant of Shares made to Directors pursuant to Article 6 of this Plan.
2.19“Grant Date” means the date Grants are made to Directors pursuant to Article 6 of this Plan.
2.20“Grant Price” means the Fair Market Value of Shares on the Grant Date.
2.21“Plan” means this Applied Blockchain, Inc. 2022 Non-Employee Director Stock Plan.
2.22“Share” means a share of Common Stock of the Company.
2.23“Stock Compensation” means Shares of stock issued to the Directors as part of their annual compensation.
2.24“Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.
2.25“Terminate”, “Terminating”, or “Termination”, with respect to a Director, means cessation of their relationship with the Company as a director whether by death, Disability or severance for any other reason provided there is a “separation from service” for purposes of Code Section 409A.
THE REMAINING PROVISIONS OF THIS ARTICLE 2 SHALL BECOME EFFECTIVE, IF AT ALL, ONLY AT SUCH TIME AS THE BOARD SHALL DETERMINE THAT DIRECTORS MAY ELECT TO DEFER THEIR CASH AND/OR STOCK COMPENSATION UNDER THE PLAN.
2.26“Cash Distribution Date” means the date specified under Section 7.3(b)(ii) used for determining interest, earnings and losses accrued on a Deferred Cash Benefit.
2.27“Deferral Election” means a Director’s election to defer Cash Compensation or Stock Compensation granted or earned during the Deferral Year.
2.28“Deferral Election Form” means any instrument, whether in paper, electronic or such other form or manner prescribed by the Administrator, governed by the provisions of Article 7 of this Plan, including the portion that is the Distribution Election Form and the related Beneficiary Designation Form that applies to all of that Director’s Deferred Benefits under the Plan.
2.29“Deferral Year” means a calendar year for which a Director has an operative Deferral Election Form.
2.30“Deferred Benefit” means either a Deferred Cash Benefit or a Deferred Stock Benefit under the Plan for a Director who has submitted an operative Deferral Election Form pursuant to Article 7 of this Plan.
2.31“Deferred Cash Account” means that bookkeeping record established for each Director who elects to defer some or all of their Cash Compensation for a Compensation Year. A Deferred Cash Account is established only for purposes of measuring a Deferred Cash Benefit and not to segregate assets or to identify assets that may or must be used to satisfy a Deferred Cash Benefit. A Deferred Cash Account will be credited with the Director’s Cash Compensation deferred as a Deferred Cash Benefit according to a Deferral Election Form and according to Section 7.3 of this Plan. A Deferred Cash Account will be credited periodically with interest, earnings and losses pursuant to Section 7.3(b) of this Plan.
2.32“Deferred Cash Benefit” means the Cash Compensation that a Director elects to defer under Article 7, that results in payments governed by Section 7.3 and Article 8 of this Plan.
2.33“Deferred Stock Account” means that bookkeeping record established for each Director who elects to defer some or all of their Stock Compensation for a Compensation Year. A Deferred Stock Account is established only for purposes of measuring a Deferred Stock Benefit and not to segregate assets or to identify assets that may or must be used to satisfy a Deferred Stock Benefit. A Deferred Stock Account will be credited with the Director’s Stock Compensation deferred as a Deferred Stock Benefit according to a Deferral Election Form and according to Section 7.4 of this Plan. A Deferred Stock Account will be credited periodically with amounts determined under Section 7.4(b) of this Plan.
2.34“Deferred Stock Benefit” means Stock Compensation that a Director elects to defer under Article 7 that results in payments governed by Section 7.4 and Article 8 of this Plan.
2.35“Distribution Election Form” means that part of a Deferral Election Form used by a Director according to this Plan to establish the duration of deferral and the form of payments (lump sum or a designated number of annual installments) of a Deferred Benefit. If a Deferred Benefit has no Distribution Election Form that is operative according to Article 7 of this Plan, distribution of that Deferred Benefit is governed by Article 8 of this Plan.
2.36“Election Date” means the date established by this Plan as the date before which a Director must submit a valid Deferral Election Form to the Administrator. For each Deferral Year, the Election Date is December 31 of the preceding calendar year. However, for an individual who becomes a Director during a Deferral Year, the Election Date is the thirtieth day following the date they become a Director. The Administrator may set an earlier date as the Election Date for any Deferral Year.
2.37“Financial Emergency” means a severe financial hardship to the Director resulting from an illness or accident of the Director, the Director's spouse, or the Director's dependent; loss of the Director's property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Director and qualifying as an Unforeseeable Emergency for purposes of Code Section 409A.
Article 3Administration
3.1General. The Administrator shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Administrator may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an employee, and the Administrator, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Administrator shall be final and binding upon the Directors, the Company, and all other interested individuals.
3.2Authority of the Administrator. The Administrator shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any agreement or document ancillary to or in connection with this Plan, to determine eligibility for Grants and the right to make deferrals, and to adopt such rules, regulations, forms, instruments, and guidelines for administering this
Plan as the Administrator may deem necessary or proper. Such authority shall include, but not be limited to, determining Grant recipients, establishing Grant and deferral terms and conditions, construing any ambiguous provision of the Plan, and, subject to Article 12, adopting modifications and amendments to this Plan, including without limitation, any that are necessary to comply with applicable laws.
3.3Delegation. The Administrator may delegate to one or more officers of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Administrator or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Administrator or such individuals may have under this Plan.
Article 4Shares Subject to this Plan and Maximum Grants
4.1Number of Shares Available for Grants.
(a)Subject to adjustment as provided in Section 4.3, the maximum number of Shares available for issuance to Directors under this Plan is 11,000,000 Shares.
(b)The aggregate Fair Market Value (determined as of the Grant Date) of Shares that may be issued as Stock Compensation Grants under Article 6 of this Plan to a Director in any Compensation Year shall not exceed $750,000, provided, however, with respect to a Director performing their first year of service as a Director, the limit under this Section 4.1(b) shall be $1,000,000.
4.2Share Usage. Shares covered by a Grant shall only be counted as used to the extent they are actually issued. Any Shares related to Grants or Deferred Stock which terminate by forfeiture, cancellation, or otherwise shall be available again for grant under this Plan. The Shares available for issuance under this Plan may consist, in whole or in part, of authorized and unissued Shares, treasury Shares, or Shares reacquired by the Company in any manner.
4.3Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure, number of outstanding Shares or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Administrator, in its sole discretion, in order to prevent dilution or enlargement of Directors’ rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan, the number and kind of Shares subject to outstanding Grants, the Annual Grant Limits, and other value determinations applicable to outstanding Grants.
The Administrator, in its sole discretion, may also make appropriate adjustments in the terms of any Grants under this Plan to reflect or relate to such changes or distributions and to modify any other terms of outstanding Grants. The determination of the Administrator as to the foregoing adjustments, if any, shall be conclusive and binding on Directors under this Plan.
Subject to the provisions of Section 6.7 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Administrator may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate.
Article 5Eligibility and Participation
5.1Eligibility. Each Director of the Corporation shall be eligible to participate in this Plan until the Director is no longer serving as a non-employee director of the Corporation.
Article 6Grants of Shares
6.1Annual Grants. As of the first date of each Compensation Year, the Company will grant to each Director a number of Shares for that Compensation Year. The number of Shares granted to each Director shall be determined by (i) dividing the amount of each Director’s cash retainer for the Compensation Year by the Fair Market Value of the Shares on the first day of the Compensation Year (which date is the Grant Date for purposes of this Plan), and (ii) rounding such number of Shares up to the nearest whole Share, provided, however, that the Corporation may revise the foregoing formula for any year without shareholder approval, subject to the Plan’s overall Share limits. Except as provided herein, the Shares shall remain unvested and forfeitable.
6.2Partial Year Directors. For individuals who become Directors after the first day of the Compensation Year, such Directors shall receive a pro-rata number of Shares for the Compensation Year based on the number of days remaining in the Compensation Year. The number of Shares granted under this Section 6.2 shall be determined pursuant to Section 6.1 but based on the Fair Market Value of the Shares on the date the Director becomes a Director, which date shall be the Grant Date with respect to such Shares.
6.3Limits on Shares. The Administrator shall have the authority to increase the number of Shares granted to each Director during a Compensation Year but in no event shall the amount granted exceed the limits set forth in Article 4 above.
6.4Vesting of Shares. Subject to Section 6.7, each Director’s Shares pursuant to a Grant (including the Shares of Directors whose Grants were subject to Section 6.2) shall become vested and non-forfeitable on the first anniversary of the Grant Date. Notwithstanding the foregoing, the Administrator may determine each year, in its sole discretion, that a different vesting schedule shall apply to the Grant for that year.
6.5Death or Disability Before Vesting. Subject to Section 6.7, if a Director dies or becomes Disabled while they are a Director, all Shares that are forfeitable shall become non-forfeitable as of the date of the Director’s death or Disability.
6.6Forfeiture of Nonvested Shares. (a) Subject to paragraph (b) and Sections 6.5 and 6.7, all Shares that are forfeitable shall be forfeited if a Director Terminates their service as a director before the Shares become vested under Section 6.4.
(b) Notwithstanding paragraph (a) hereof, a Director who elects not to stand for reelection as a Director for the following Compensation Year shall vest in a pro-rata portion of their outstanding Grants at the annual meeting at which their service as a Director Terminates. For the avoidance of doubt, if such Director’s service Terminates prior to such annual meeting for any reason, the Director shall not be entitled to pro-rata accelerated vesting pursuant to this Section 6.6(b).
6.7Change in Control of the Company. Notwithstanding any other provision of this Plan to the contrary, the provisions of this Section 6.7 shall apply in the event of a Change in Control, unless otherwise determined by the Administrator in connection with a Grant.
(a)If, upon a Change of Control, a Director receives a new Grant which qualifies as a “Replacement Grant” (as defined below), the Award shall continue subject to the terms of the Replacement Grant.
(b)If, upon a Change of Control that results in the Company’s Shares no longer being traded on The Trading Market or another established securities market and no Replacement Grant is granted to a Director, the unvested portion of a Grant shall become immediately vested upon the Change of Control.
(c)If, following a Change of Control, the Company’s Shares continue to be traded on The Trading Market or another established securities market, outstanding Grants shall continue in effect and be treated as Replacement Awards as described in subparagraph (a).
(d)Notwithstanding any of subparagraphs (a), (b) or (c) of this Section 6.7, the Administrator may, in its sole discretion, determine that any or all outstanding Grants granted under this Plan will be canceled and terminated, and that in connection with such cancellation and termination, the holder of such Grant may receive for each Share of Common Stock subject to such Grant a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the consideration received by shareholders of the Company in respect of a Share of Common Stock in connection with such transaction multiplied by the number of Shares of Common Stock subject to such Grant.
(e)A Grant shall be considered a Replacement Grant if: (i) it has a value at least equal to the value of the Grant it is replacing as determined by the Administrator in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following the Change of Control; and (iii) its other terms and conditions are not less favorable to the Director than the terms and conditions of the Grant it is replacing (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, the Replacement Grant may take the form of a continuation of the Grant it is replacing if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 6.7 are satisfied shall be made by the Administrator in its sole discretion.
(f)With respect to Grants for which a Deferral Election has been made under Article 7, if applicable, such Grants shall vest pursuant to paragraph (a) but the Deferral Election with respect to such Grants shall remain in place.
6.8Dividends. On and after the Grant Date, Directors shall receive, as additional cash payments, amounts representing the cash dividends paid on their Shares. If, however, a Director elects to defer their Stock Compensation pursuant to Section 7.1(c) of this Plan, dividend equivalents shall accrue in the Deferred Stock Account from the Grant Date.
THE PROVISIONS OF ARTICLES 7, 8, AND 9 OF THIS PLAN SHALL BECOME EFFECTIVE, IF AT ALL, ONLY AT SUCH TIME AS THE BOARD SHALL DETERMINE THAT DIRECTORS MAY ELECT TO DEFER THEIR CASH AND/OR STOCK COMPENSATION FOR THE YEAR. PRIOR TO THE TIME DESCRIBED IN THE PRECEDING SENTENCE, NO DEFERRALS SHALL BE PERMITTED UNDER THE PLAN AND ARTICLES 7, 8 AND 9 OF THE PLAN, AS WELL AS ANY OTHER PLAN PROVISIONS TO THE EXTENT THEY APPLY TO DEFERRALS OF BENEFITS, SHALL NOT APPLY.
Article 7Deferral Elections
7.1Right to Elect Deferrals. A Director may elect a Deferred Benefit for any Deferral Year if they are a Director at the beginning of that Deferral Year or they become a Director during that Deferral Year.
(a) A Deferral Election is valid when a Deferral Election Form is completed, signed by the electing Director, and received by the Administrator. Deferral Elections are governed by the provisions of this Article 7.
(b) Before each Deferral Year’s Election Date, each Director will be provided with a Deferral Election Form. Under the Deferral Election Form for a single Deferral Year, a Director may elect on or before the Election Date to defer the receipt of all or part of their Cash Compensation (in 10% multiples) for the Deferral Year, that will be earned and payable after the Election Date.
(c) Before each Deferral Year’s Election Date, a Director may also elect to defer the receipt of all or part of their Stock Compensation granted during the Deferral Year (in 10% multiples).
(d) A Director’s Deferral of Cash Compensation shall only be deferred as a Deferred Cash Benefit. A Director’s deferral of Stock Compensation shall only be deferred as a Deferred Stock
Benefit. A Director may not elect to convert a Deferred Cash Benefit to a Deferred Stock Benefit or to convert a Deferred Stock Benefit to a Deferred Cash Benefit.
(e) Each Distribution Election Form is part of the Deferral Election Form on which it appears or to which it is related. The Administrator may allow a Director to file one Distribution Election Form for all of their Deferred Stock Benefits, all of their Deferred Cash Benefits or all of their Deferred Benefits. The Administrator may allow a Director to file multiple Distribution Election Forms that relate to any or all of their Deferred Benefits for one or more Deferral Years. The provisions of Article 8 shall apply to any Deferred Benefit for which there is no operative Distribution Election Form.
(f) Prior to the Election Date, the Administrator may (i) reject any Deferral Election Form or Distribution Election Form for any or no reason and (ii) modify any Distribution Election Form to the extent necessary to comply with any federal tax or securities laws or regulations. However, the Administrator’s rejection of any Deferral Election Form or Distribution Election Form, and the Administrator’s modification of any Distribution Election Form, must be based upon action taken without regard to any vote of the Director whose Deferral Election Form or Distribution Election Form is under consideration, and the Administrator’s rejections must be made on a uniform basis with respect to similarly situated Directors. If the Administrator rejects a Deferral Election Form, the Director must be paid the amounts such Director would then have been entitled to receive if such Director had not submitted the rejected Deferral Election Form.
(g) Subject to the last paragraph of Section 8.1(c) hereof, a Director may not revise or revoke a Deferral Election Form or Distribution Election Form after the Deferral Year begins. Any revocation of a Deferral Election Form or Distribution Election Form before the beginning of the Deferral Year is the same as a failure to submit a Deferral Election Form or Distribution Election Form. Any writing signed by a Director expressing an intention to revoke their Deferral Election Form or a related Distribution Election Form and delivered to the Administrator before the close of business on the relevant Election Date shall constitute a revocation of such form.
(h) The Plan is unfunded. A Deferred Benefit is at all times a mere contractual obligation of the Company. The Company will not segregate any funds or assets for Deferred Benefits nor issue any notes or security for the payment of any Deferred Benefit.
(i) A Director has no control over Deferred Benefits except according to their Deferral Election Forms, Distribution Election Forms, and Beneficiary Designation Forms, and their right to select hypothetical investment options, if applicable.
(j) A Director’s Deferred Cash Account and Deferred Stock Account are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so is void. Deferred Benefits are not subject to attachment or legal process for a Director’s debts or other obligations. Nothing contained in this Plan gives any Director any interest, lien, or claim against any specific asset of the Company. A Director or their Beneficiary has no rights to receive Deferred Benefits other than as a general creditor of the Company.
7.2Effect of No Election. A Director who has not submitted a valid Deferral Election Form to the Administrator on or before the relevant Election Date may not defer their Cash Compensation or Stock Compensation for the applicable Deferral Year. Any Deferred Benefit for which no valid Deferral Election Form has been submitted before the relevant Election Date, and for which there is no otherwise valid Distribution Election Form in effect, shall be governed by Article 8 of this Plan.
7.3Deferred Cash Benefits.
(a) Deferred Cash Benefits will be allocated to a Deferred Cash Account for each Director and credited with interest, earnings and losses, as applicable, determined pursuant to subparagraph (b)(i) of this Section 7.3. Deferred Cash Benefits shall be credited to a Director’s Deferred Cash Account as of the day they would have been paid to such Director but for the applicable Deferral Election.
(b) (i) The value of a Deferred Cash Account as of any date shall equal the amount of Cash Compensation allocated to such Deferred Cash Account as of such date, as adjusted for interest, earnings and losses pursuant to this Section 7.3(b). The Board or its designee shall have the sole discretion to determine how interest, earnings and losses credited to a Director’s Deferred Cash Account will be calculated, including, without limitation, by specifying an applicable interest rate, tracking the performance of one or more investment option, index or similar measure, or allowing Directors to allocate their Deferred Cash Benefits among a series of hypothetical investment options, with such Deferred Cash Benefits to be measured based upon the performance of the investment options selected, reduced by an amount equal to any investment managers’ and other applicable expenses that would apply to an actual investment in the selected investment option.
(ii) Interest, earnings and losses shall accrue through the latest date administratively practicable preceding the date of distribution of a Deferred Cash Benefit, which date is referred to in this Plan as the Cash Distribution Date.
7.4Deferred Stock Benefits.
(a) Deferred Stock Benefits will be allocated to a Deferred Stock Account for each electing Director and credited with earnings and losses in accordance with subsection (b). A Director’s Deferred Stock Account shall be credited with the same number of shares of Common Stock that, but for the Director’s Deferral Election, would have been issued to the Director during the applicable Deferral Year under Article 6 of this Plan.
(b) The value of a Deferred Stock Account as of any date shall equal the Fair Market Value of the Shares allocated to such Deferred Stock Account on such date. If any dividends are paid with respect to Shares for which a Deferral Election is in effect, the Director’s Deferred Stock Account will be credited with additional whole or fractional Shares equal to the Fair Market Value of such dividends on the payment date.
Article 8Deferral Distributions
8.1Time and Form of Payments.
(a) According to a Director’s Distribution Election Form, a Deferred Cash Benefit will be distributed in cash and a Deferred Stock Benefit will be distributed in shares of Common Stock equal to the number of whole shares of Common Stock credited to the Director’s Deferred Stock Account determined as of the distribution date. However, cash will be paid in lieu of fractional shares of Common Stock credited to the Director’s Deferred Stock Account.
(b) Deferred Benefits will be paid in a lump sum unless the Director’s Distribution Election Form specifies annual installment payments over a period of up to 10 years. A Deferred Benefit payable in installments will continue to accrue additional credits under Plan subsection 7.3(b) or 7.4(b), as applicable, on the unpaid balance of the Deferred Cash Account or Deferred Stock Account, as applicable.
(c) Unless otherwise specified in a Director’s Distribution Election Form, any lump sum payment will be paid or installment payments will begin to be paid on the February 15th of the year following the year in which the Director Terminates For distributions that would automatically be caused under the preceding sentence by a Director’s Termination (other than due to death), the Director may elect on their Distribution Election Form that payments are to begin:
(i) on the February 15th of the year following the later of the year in which they Terminate and the year in which they attain a specified age; or
(ii) on the February 15th of the year following the year in which they attain a specified age, regardless of when they Terminate.
For purposes of these distribution election alternatives, the specified age must be not less than the Director’s age two years from the Election Date pertaining to the applicable Deferral Year. A Director may amend their Distribution Election Form to postpone the commencement of benefit payments only if (i) the amendment is made at least twelve months before the date distributions would otherwise have commenced, (ii) the amended payment date is at least five years after the original payment date, and (iii) the amendment otherwise conforms to the requirements of the Plan and Code Section 409A.
8.2Death. Upon a Director’s death, their Beneficiary will receive the Beneficiary’s portion or remaining portion of the Director’s Deferred Cash Account and Deferred Stock Account in a lump sum payment (regardless of the time and form of payment elected by the Director) as soon as administratively feasible following the Director’s death.
Article 9Hardship Distributions
(a) At the request of a Director before or after the Director’s Termination, a Director’s Deferred Benefits under this Plan shall be paid in the event of a Financial Emergency. An accelerated distribution on account of a Financial Emergency must be limited to the amount determined by the Administrator to be necessary to satisfy the Financial Emergency plus amounts necessary to pay applicable income taxes and penalties.
(b) For purposes of an accelerated distribution under this section, the Deferred Stock Benefit’s value is determined by the value of the Deferred Stock Account, as set out in Article 7.4(b), at the time of distribution.
(c) Distributions under this section must first be made from the Director’s Deferred Cash Account before accelerating the distribution of any amount attributable to a Deferred Stock Benefit.
(d) A distribution under this section is in lieu of that portion of the Deferred Benefit that would have been paid otherwise. A Deferred Cash Benefit is adjusted for a distribution under this section by reducing the Director’s Deferred Cash Account by the amount of the distribution. A Deferred Stock Benefit is adjusted for a distribution under this section by reducing the value of the Director’s Deferred Stock Account by the amount of the distribution.
Article 10Beneficiary Designation
Each Director under this Plan may, from time to time, name a Beneficiary or Beneficiaries (who may be named contingently or successively) who will receive any Stock Compensation or unpaid Deferred Benefit under this Plan in case of the Director’s death before their Stock Compensation vests or their Deferred Benefits are paid. Each such designation shall revoke all prior designations by the same Director, shall be in a form prescribed by the Administrator, and will be effective only when filed by the Director in writing with the Company during the Director’s lifetime. In the absence of any such Beneficiary designation, benefits remaining unpaid at the Director’s death shall be paid to the default Beneficiary.
Article 11Successors
All obligations of the Company under this Plan with respect to Grants made hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 12Amendment, Modification, Suspension, and Termination
12.1Amendment, Modification, Suspension, and Termination. The Administrator may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders, no such amendment shall increase the number of Shares that may be granted to any Director, except as otherwise described in this Plan, or increase the total number of Shares that may be granted under the Plan. In addition, any amendment of the Plan must comply with the rules of The Trading Market and no material amendment of this Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.
12.2Plan Termination. Except for a termination of the Plan caused by the determination of the Board that the laws upon which the Plan is based have changed in a manner that negates the Plan’s objectives, this Plan may not be altered, amended, suspended, or terminated without the majority consent of all Directors who are Directors if that action would result either in a distribution of all Deferred Benefits in any manner other than as provided in this Plan or that would result in immediate taxation of Deferred Benefits to Directors.
Upon termination of the Plan, all vested benefits shall be paid upon the earliest to occur of the following events:
1. Termination and liquidation of the Plan within 12 months of a qualifying corporate dissolution or bankruptcy;
2. Termination and liquidation of the Plan pursuant to irrevocable action of the Company within 30 days before, or 12 months after, a Change in Control that qualifies as a distribution event under Code Section 409A;
3. A termination and liquidation of the Plan (i) that does not occur proximate to a downturn in the Company’s financial condition; (ii) where all plans required to be aggregated with the Plan are terminated; (iii) where no liquidation payments are made for at least 12 months after the Plan is terminated; (iv) where all payments are made by 24 months after the Plan is terminated; and (v) where the Company does not adopt a new plan of the same type, for at least three years after the Plan is terminated; or
4. The occurrence of an applicable distribution event pursuant to the other terms of the Plan.
Distributions made under this Section 12.2, other than pursuant to paragraph 4 above, shall be paid in the form of a lump sum.
12.3Adjustment of Grants Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Administrator may make adjustments in the terms and conditions of, and the criteria included in, Grants in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.3 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Administrator determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Administrator as to the foregoing adjustments, if any, shall be conclusive and binding on Directors under this Plan.
12.4Amendment to Conform to Law. Notwithstanding any other provision of this Plan to the contrary, the Plan shall be amended, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), and to the administrative regulations and rulings promulgated thereunder. By accepting a Grant under this Plan, a Director agrees to any amendment made pursuant to this Section 12.4 to any Grant made under the Plan without further consideration or action.
Article 13General Provisions
13.1Forfeiture Events. Any Shares granted under this Plan will be subject to recoupment in accordance with any clawback policy that the Company currently has in effect, or is required to adopt or modify, 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 the Sarbanes-Oxley Act of 2002, or other applicable law (“Clawback Policy”). In addition, the Committee or the Board may impose such clawback, recovery or recoupment provisions on any Shares granted under this Plan as the Administrator determines necessary or
appropriate, including but not limited to a reacquisition right in respect of previously acquired Shares or other cash or property.
13.2Legend. The certificates for Shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer of such Shares.
13.3Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
13.4Non-Assignability. Deferred Benefits may not be assigned by a Director or Beneficiary.
13.5Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
13.6Requirements of Law. The granting and issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
13.7Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and (b) completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
13.8Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue such Shares as to which such requisite authority shall not have been obtained.
13.9Investment Representations. The Administrator may require any individual receiving Shares under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
13.10Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
13.11Unfunded Plan. Directors shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Director, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.
13.12Nonexclusivity of this Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Administrator to adopt such other compensation arrangements as it may deem desirable for any Director.
13.13No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
13.14No Right to Continued Board Membership. Nothing in this Plan shall confer on any Director the right to continued service as a member of the Board or in any other capacity.
13.15Governing Law. The Plan and each Grant and Deferred Benefit hereunder shall be governed by the laws of the State of Texas, without regard to choice-of-law principles. The Directors consent to personal and exclusive jurisdiction and venue Dallas County in the State of Texas. Any controversy or claim arising out of or relating to (i) a Director’s service with the Company or a Subsidiary or Affiliate and/or (ii) the Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Employment Arbitration Rules before a single arbitrator in Dallas, Texas, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The Company and the Director will each be responsible for their own attorneys’ fees and expenses incurred in connection with any such arbitration. The decision arrived at by the arbitrator shall be binding upon all parties to the arbitration and no appeal shall lie therefrom, except as provided by the Federal Arbitration Act. These arbitration procedures are intended to be the exclusive method of resolving any claim or dispute arising out of or related to this Plan, including the applicability of this Section; provided, however, that any party seeking injunctive relief in connection with a breach or anticipated breach of the Plan will do so in a state or federal court of competent jurisdiction within Dallas County in the State of Texas.
13.16Code Section 409A. Notwithstanding any other provision of this Plan, it is intended that all benefits under this Plan that are subject to Code Section 409A, including vested Stock Compensation that has been deferred pursuant to Article 7, shall satisfy the provisions of Code Section 409A, and this Plan shall be interpreted and administered, as necessary, to comply with such provisions.
13.17Notices. Notices and elections under this Plan must be in writing. A notice or election is deemed delivered if it is delivered personally or if it is mailed by registered or certified mail to the person at their last known business address.
13.18Waiver. The waiver of a breach of any provision in this Plan does not operate as and may not be construed as a waiver of any later breach.
As evidence of its adoption of this Plan, the Company has caused this document to be executed by its duly authorized officer as of the 20th day of January, 2022.
APPLIED BLOCKCHAIN, INC.
By: /s/ David Rench
Name: David Rench
Title: Chief Financial Officer
Template for Director Restricted Stock Award Under the Directors Plan
Exhibit 10.6
RESTRICTED STOCK AWARD
as of ____________ __, 20__ (“Grant Date”)
The parties to this Restricted Stock Award (“Award”) are Applied Blockchain, Inc. a Nevada Corporation (the “Company”), and _______________ (“Director”), a Director of the Company.
The Director has been elected or appointed as a non-employee director to serve on the Company’s Board, and, pursuant to the terms of the Applied Blockchain, Inc. 2021 Non-Employee Director Stock Plan (the “Plan”), the Company wishes to provide Director with an incentive to put forth maximum effort as a member of the Board, for the success of the Company’s business.
Accordingly, the Company has determined to grant Director an incentive award in the form of ________ (#) shares of restricted stock (“Stock Award” or “Restricted Stock”) subject to the terms and conditions of the Plan and as herein set forth.
Terms used herein that are defined in the Plan, shall have the same meanings given them in the Plan.
Accordingly, intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
Definitions
The following additional definitions shall apply for purposes of this Award:
1.1 “Cause” shall mean any of the following events with respect to Director:
(a)indictment or conviction of, or plea of nolo contendere to, (i) any felony, or (ii) another crime involving dishonesty or moral turpitude, or Director’s engaging in any embezzlement, financial misappropriation or fraud, related to their services to the Company;
(b)engaging in any willful misconduct or gross negligence or willful act of dishonesty, including any violation of federal securities laws, or violence or threat of violence, which is materially injurious to the Company or any subsidiary or affiliate;
(c)repeated abuse of alcohol or drugs (legal or illegal) that, in the Company’s reasonable judgment, materially impairs Director’s ability to perform their duties as a Board member; or
(d)willful and knowing breach or violation of any material provision of their agreement to provide services to the Company, including, but not limited to, any applicable confidentiality or similar requirements thereof.
1.2 “The Trading Market” means, initially, The Nasdaq Global Select Market, or any of the following other markets that becomes the primary trading market for the Common Stock: The Nasdaq Capital Market, The Nasdaq Global Market, the New York Stock Exchange, the NYSE American, or the OTC Markets (including OTCQX, OTCQB and Pink Markets) (or any nationally recognized successor to any of the foregoing).
ARTICLE II
Grant of Stock Award
2.1 On the Grant Date, the Company granted to Director this Stock Award in the form of ____________ (#) shares of restricted stock.
2.2 The Stock Award shall be subject to the terms and conditions of the Plan and this Stock Award.
2.3 Except as provided in the Plan or in this Stock Award, the Stock Award shall remain unvested, nontransferable and subject to a substantial risk of forfeiture. In addition, the Stock Award shall not be vested, and Director’s interest in the Stock Award granted hereunder shall be forfeited, except to the extent that the provisions of this Award are satisfied.
ARTICLE III
Vesting of Stock Award
3.1 Director’s Stock Award shall be vested in accordance with this Article III.
3.2 The Stock Award shall vest in accordance with the following schedule:
Number of Shares Vesting Date
___________ ______
___________ ______
3.3 Subject to Section 3.4 and Article V of this Award, the Stock Award that remains forfeitable shall be forfeited if Director’s position on the Board terminates at any time.
3.4 Section 3.3 to the contrary notwithstanding—
(a) If Director dies or becomes Disabled while in service on the Company’s Board, and prior to the forfeiture of the shares of Restricted Stock under Section 3.3, all shares of Restricted Stock that are not then Vested shall become Vested as of the date of Director’s death or of their becoming Disabled; and
(b) In the event Director elects not to stand for reelection as a director for the following Compensation Year, a pro rata portion of the unvested Restricted Stock shall vest at the annual meeting at which their service as a director terminates. For the avoidance of doubt, if such Director’s service terminates prior to such annual meeting for any reason, the Director shall not be entitled to pro-rata accelerated vesting pursuant to this paragraph 3.4(b).
(c) “Disabled” for purposes of subparagraph (a) of this Paragraph 3.4 shall mean Director’s inability to engage in any substantial gainful activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of twelve (12) months or longer.
ARTICLE IV
Rights as Shareholder; Dividends; Taxation
4.1 Director shall be the record owner of the Restricted Stock until the shares of Common Stock are sold, forfeited or otherwise disposed of, and shall be entitled to all of the rights of a shareholder of the Company including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares, provided, however, that any dividends paid on unvested Restricted Stock, shall be and remain unvested until the Restricted Stock on which the dividends are paid becomes fully vested (and to the extent such Restricted Stock shall be forfeited, any underlying dividends on such forfeited Restricted Stock shall be forfeited as well).
4.2 The Company may issue stock certificates or evidence Director’s interest by using a restricted book entry account with the Company’s transfer agent. Physical possession or custody of any stock certificates that are issued shall be retained by the Company until such time as the Stock Award vests.
4.3 If Director forfeits any or all of the Stock Award pursuant to Section 3 or any other provision herein, Director shall, on the date of such forfeiture, no longer have any rights as a shareholder with respect to the Stock Award and shall no longer be entitled to vote or receive dividends on such shares.
4.4 Director hereby grants a power of attorney to the President and the Secretary of the Company, and each of them, with full power of substitution, with respect to any shares of the Stock Award which are forfeited hereunder. The power granted hereunder shall authorize each of the President and the Secretary of the Company, acting alone, to execute and deliver any stock powers or other agreements or instruments reasonably required to assign, transfer or cancel any shares that have so been forfeited by Director. Such power of attorney granted pursuant to this Section 4.4 is given in consideration of the agreements and covenants of the Company in connection with the transactions contemplated by this Stock Award and, as such, is coupled with an interest and shall be irrevocable unless and until all of the shares of the Stock Award have vested in full. In addition to the foregoing, on the Grant Date, Director shall deliver three (3) executed blank stock powers with respect to the Stock Award, in the form required by the Company, which may be used by the Company to effect any forfeiture or transfer of the Common Stock contemplated hereunder, or otherwise at the direction of Director.
4.5 The liability related to all taxes with respect to this Stock Award is and remains Director’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any taxes in connection with the grant or vesting of this Stock Award or the subsequent sale of any shares; and (b) does not commit to structure the Stock Award to reduce or eliminate Director’s liability for taxes.
ARTICLE V
Change in Control
5.1 In the event of a Change in Control prior to the forfeiture of the Stock Award under Section 3.3, the provisions of this Article V shall apply.
(a)Subject to subparagraphs (b) and (d) of this Section 5.1, if, upon a Change in Control, Director receives a new award which qualifies as a Replacement Award (as defined below), the Replacement Award shall replace this Stock Award and continue subject to the Replacement Award’s terms.
(i) A “Replacement Award” is an award that substitutes for this Stock Award and meets the following requirements: (i) it has a value at least equal to the value of this Award as determined under applicable law and by the Administrator in its sole discretion; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less favorable to Director than the terms and conditions of this Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of this Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of a Replacement Award are satisfied shall be made by the Administrator, as constituted immediately before the Change in Control, in its sole discretion.
(b)If, following a Change in Control, the Company’s shares continue to be traded on The Trading Market or another established securities market, this Stock Award shall continue in effect and be treated as a Replacement Award.
(c)If, upon a Change in Control that results in the Company’s shares no longer being traded on The Trading Market or another established securities market and no Replacement Award is granted to Director, the unvested portion of this Stock Award shall become vested immediately prior to the consummation of the Change in Control.
(d)Notwithstanding the foregoing, upon a Change in Control, the Administrator may determine that the unvested portion of this Stock Award shall be canceled and terminated for consideration instead.
ARTICLE VI
Miscellaneous
6.1 The terms of this Stock Award shall be adjusted as the Administrator determines is equitable in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.
6.2 Whenever the term “Director” is used in any provision of this Award under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Stock Award may be transferred by will or by the laws of descent and distribution, the term “Director” shall be deemed to include such person or persons.
6.3 The Stock Award granted hereunder is not transferable by Director otherwise than by will or the laws of descent and distribution. No assignment or transfer of the Stock Award granted hereunder, or of the rights represented thereby, whether voluntary or involuntary, by the operation of law or otherwise (except by will or the laws of descent and distribution), shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon any such assignment or transfer the Stock Award shall terminate and become of no further effect.
6.4 The following, or similar, legends may be placed on any certificate(s) or other document(s) delivered to Director in connection with this Stock Award, in addition to any other legends required under the Stockholders’ Agreements or as required under federal or state securities laws:
THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
6.5 Nothing in this Award or otherwise shall obligate the Company to vest any of the Stock Award, to permit the Stock Award to be vested other than in accordance with the terms hereof or to grant any waivers of the terms of this Stock Award, regardless of what actions the Company, the Board or the Administrator may take or waivers the Company, the Board or the Administrator may grant under the terms of or with respect to any Stock Award now or hereafter granted to any other person or any other Stock Award granted to Director.
6.6 Notwithstanding any other provision hereof, Director shall not vest in the Stock Award granted hereunder, and the Company shall not be obligated to issue any shares to Director hereunder, if the vesting thereof or the issuance of such shares would constitute a violation by Director or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final and binding. The Company shall in no event be obligated to register any securities pursuant to the Securities Act of 1933 (as the same shall be in effect from time to time) or to take any other affirmative action in order to cause the issuance of shares pursuant to this Stock Award comply with any law or regulation of any governmental authority.
6.7 If the events described in Article III or V occur after the date that Director is advised (upon recommendation by the Administrator) that their service on the Board is being, or will be, terminated for Cause, on account of performance or in circumstances that prevent them from being in good standing with the Company, accelerated vesting shall not occur and all rights under this Stock Award shall terminate, and this Stock Award shall expire on the date of
termination of Director’s service on the Board. The Administrator shall have the authority to determine whether termination of Director is for Cause or for any reason other than Cause.
6.8 This Stock Award shall be governed by the laws of the State of Texas applicable to agreements made and performed wholly within the State of Texas (regardless of the laws that might otherwise govern under applicable conflicts of laws principles) and applicable federal law. All disputes arising under this Stock Award shall be adjudicated solely within the state or Federal courts located within the State of Texas, Dallas County.
6.9 This Stock Award sets forth a complete understanding between the parties with respect to its subject matter and supersedes all prior and contemporaneous agreements and understandings with respect thereto. Except as expressly set forth in this Stock Award, the Company makes no representations, warranties or covenants to Director with respect to this Stock Award or its subject matter, including with respect to the current or future value of the shares subject to the Stock Award. Any modification, amendment or waiver to this Stock Award will be effective only if it is in writing signed by the Company and Director. The failure of any party to enforce at any time any provision of this Stock Award shall not be construed to be a waiver of that or any other provision of this Stock Award.
6.10 This Stock Award shall be administered and interpreted solely by the Administrator or its delegated agent. The interpretations and decisions of the Administrator with regard to this Stock Award shall be final and conclusive and binding upon Director.
6.11 It is the intent that this Award comply in all respects with Rule 16b-3 under the Exchange Act and any related regulations. If any provision of this Stock Award is later found not to be in compliance with such Rule and regulations, the provisions shall be deemed null and void. The provisions of the Common Stock under this Stock Award shall be executed in accordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder.
6.12 Subject to the limitations set forth herein, this Stock Award shall be binding upon and inure to the benefit of the legatees, distributees, and personal representatives of Director and the successors of the Company.
6.13 This Stock Award is subject to the terms of any separate Clawback Policy that is or may be maintained by the Company, as such Policy may be amended from time to time.
6.14 Director hereby acknowledges receipt of a copy of the Plan and this Stock Award, and that they have read and understand the terms and provisions of the Plan and this Award, and accept the Stock Award subject to all of the terms and conditions of the Plan and this Award.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the parties hereto have executed this Stock Award as of the day and year first above written.
APPLIED BLOCKCHAIN, INC.
By:
Name:
Title:
DIRECTOR:
Exhibit 23.2
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in this Registration Statement of Applied Blockchain, Inc. on Form S-8 of our report dated August 13, 2021, with respect to our audits of the consolidated financial statements of Applied Blockchain, Inc. as of May 31, 2021 and 2020 and for the years ended appearing in the Annual Report on Form 10-K of Applied Blockchain, Inc. for the years ended May 31, 2021 and 2020. We also consent to the reference to our firm under the heading “Experts” in the Prospectus, which is part of this Registration Statement.
/s/ Marcum LLP
Marcum LLP
New York, NY
June 16, 2022
Exhibit 107
Calculation of Filing Fee Table
Form S-8
(Form Type)
Applied Blockchain, Inc.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Security Type | Security Class Title | Fee Calculation Rule | Amount Registered | Proposed Maximum Offering Price Per Unit | Maximum Aggregate Offering Price | Maximum Aggregate Offering Price | Fee Rate | Amount of Registration Fee |
| Equity | Common Stock, $0.001 par value | Rule 457(c) and (h) | 15,166,666(1) | $1.015(2) | | $15,394,165. 99
| .0000927 | $1,427.04 |
| Total Offering Amounts | $15,394,165. 99 | | $1,427.04 |
| Total Fees Previously Paid | | | $0 |
| Total Fee Offsets | | | $0 |
| Net Fees Due | | | $1,427.04 |
(1) Pursuant to Rule 416(a) promulgated under the Securities Act of 1933, as amended, this registration statement also relates to such indeterminate number of additional shares of common stock of the Registrant as may be issuable in the event of a stock dividend, stock split, recapitalization, or other similar capital structure, merger consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation, or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing.
(2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) and (h) under the Securities Act of 1933, as amended. The price per share is estimated based on the average of the high and low trading prices for the Registrant’s common stock on June 15, 2022, as reported on The Nasdaq Global Select Market.