UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed
by the
Registrant
☑
Filed
by Party other than the
Registrant
☐
Check
the appropriate box:
☐
Preliminary Proxy
Statement
☐
Confidential, for
Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
☑
Definitive Proxy
Statement
☐
Definitive
Additional Materials
☐
Soliciting Material
under Rule 14a-12
SharpSpring, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
☑
No fee
required.
☐
Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
Title
of each class of securities to which transaction
applies:
(2)
Aggregate
number of securities to which transaction applies:
(3)
Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined):
(4)
Proposed
maximum aggregate value of transaction:
(5)
Total
fee paid:
☐
Fee paid previously
with preliminary materials.
☐
Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1)
Amount
previously paid:
(2)
Form,
Schedule or Registration Statement No.:
(3)
Filing
Party:
(4)
Date
Filed:
5001
Celebration Pointe Avenue, Suite 410
Gainesville,
FL 32608
April
30, 2019
Dear
Fellow Stockholder:
The
2019 Annual Meeting of Stockholders (the “
Annual Meeting
”) of SharpSpring,
Inc. (the “
Company
”) will be held at 10:00
a.m. (Eastern Time) on Thursday, June 13, 2019 at 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. I hope you will be
able to attend.
The
attached Notice of Annual Meeting and Proxy Statement describe the
matters that we expect to be acted upon at the Annual Meeting.
Management will be available to answer any questions you may have
immediately after the Annual Meeting.
Please
sign, date and return the enclosed Proxy without delay. The
Company’s Annual Report on Form 10-K (including audited
financial statements) for the fiscal year ended December 31, 2018
(“
Annual
Report
”) accompanies the Proxy Statement. The proxy
materials and Annual Report included in this package are also
available on the internet under the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
All
shares represented by Proxies will be voted at the Annual Meeting
in accordance with the specifications marked thereon, or if no
specifications are made, (i) as to Proposal No. 1, the Proxy
confers authority to vote “FOR” all of the five (5)
persons listed as candidates for a position on the Board of
Directors; (ii) as to Proposal No. 2, the Proxy confers authority
to vote “FOR” the ratification of Cherry Bekaert LLP as
the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2019; (iii) as to Proposal
No. 3, the Proxy confers authority to vote “FOR” the
approval of the
SharpSpring,
Inc. 2019 Equity Incentive Plan; and (iv); as to any other business
which comes before the Annual Meeting, the Proxy confers authority
to vote in the Proxy holder’s discretion.
The
Company’s Board of Directors believes that a favorable vote
for each candidate for a position on the Board of Directors and for
all other matters described in the attached Notice of Annual
Meeting of Stockholders and Proxy Statement is in the best interest
of the Company and its stockholders and recommends a vote
“FOR” all candidates and all other matters.
Accordingly, we urge you to review the accompanying material
carefully and to return the enclosed Proxy promptly.
Your
vote is important and we encourage you to vote promptly. For record
holders, whether or not you are able to attend the Annual Meeting
in person, please follow the instructions contained in the Notice
on how to vote via internet, email, phone, or request a paper proxy
card to complete, sign and return by mail so that your shares may
be voted. If your shares are held in the name of a broker, bank or
other holder of record, follow the voting instructions you receive
from the holder of record to vote your shares.
Thank
you for your investment and continued interest in SharpSpring,
Inc.
/s/
Steven A. Huey
Steven
A. Huey,
Chair of the Board of Directors
SHARPSPRING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, JUNE 13, 2019
To our
Stockholders:
Notice
is hereby given that the 2019 Annual Meeting of Stockholders (the
“
Annual
Meeting
”) of SharpSpring, Inc. (the
“
Company
”) will
be held at 10:00 a.m. (Eastern Time) on Wednesday, June 13, 2019 at
5001 Celebration Pointe Avenue, Suite 410, Gainesville, FL 32608,
for the following purposes:
1.
To
elect five (5) Directors to the Board of Directors to serve until
the 2020 Annual Meeting of Stockholders or until their successors
have been duly elected or appointed and qualified;
2.
To
ratify the appointment Cherry Bekaert LLP to serve as the
Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2019;
3.
To
approve the SharpSpring, Inc. 2019 Equity Incentive
Plan;
4.
To
consider and take action upon such other business as may properly
come before the Annual Meeting or any adjournments
thereof.
The
Board of Directors has fixed the close of business on April 15,
2019, as the Record Date for determining the stockholders entitled
to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.
For a
period of 10 days prior to the Annual Meeting, a stockholders list
will be kept at the Company’s office and shall be available
for inspection by stockholders during usual business hours. A
stockholders list will also be available for inspection at the
Annual Meeting.
Your
attention is directed to the accompanying Proxy Statement for
further information regarding each proposal to be
made.
STOCKHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND FAX, EMAIL OR
MAIL IT IN THE ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE AS
PROMPTLY AS POSSIBLE. IF YOU SIGN AND RETURN YOUR PROXY WITHOUT
SPECIFYING YOUR CHOICES IT WILL BE UNDERSTOOD THAT YOU WISH TO HAVE
YOUR SHARES VOTED IN ACCORDANCE WITH THE DIRECTORS’
RECOMMENDATIONS. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU
DESIRE, REVOKE YOUR PROXY AND VOTE IN PERSON.
By
Order of the Board of Directors
/s/
Steven A. Huey
Steven
A. Huey,
Chair of the Board of Directors
April
30, 2019
PROXY STATEMENT
2019 ANNUAL MEETING OF STOCKHOLDERS
This
Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors (the “
Board of Directors
” or
“
Board
”) of
SharpSpring, Inc. of proxies to be voted at the 2019 Annual Meeting
of Stockholders (the “
Annual
Meeting
”) that will be held at 10:00 a.m. (Eastern
Time) on Thursday, June 13, 2019 at 5001 Celebration Pointe Avenue,
Suite 410, Gainesville, FL 32608 and at any adjournments thereof
(the “
Annual
Meeting
”). In this Proxy Statement, SharpSpring, Inc.
is referred to as “
we
,” “
us
,” “
our
,” or “
Company
” unless the context
indicates otherwise. The Annual Meeting has been called to consider
and take action on the following proposals: (i) to elect five (5)
Directors to the Board of Directors; (ii) to ratify the appointment
of Cherry Bekaert LLP to serve as the Company’s independent
registered public accounting firm for the fiscal year ending
December 31, 2019; (iii) to approve the SharpSpring, Inc. 2019
Equity Incentive Plan; and (iv) to consider and take action upon
such other business as may properly come before the Annual Meeting
or any adjournments thereof.
The
Board of Directors knows of no other matters to be presented for
action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting, the persons named in the
proxy will vote on such other matters and/or for other nominees in
accordance with their best judgment.
The Company’s Board of Directors
recommends that the stockholders vote in favor of each of the
director nominees and each of the proposals.
Only
holders of record of common stock of the Company at the close of
business on April 15, 2019 (the “
Record Date
”) will be entitled to
vote at the Annual Meeting.
The
approximate date on which this Proxy Statement, the proxy card and
other accompanying materials are first being sent or given to
stockholders is May 2, 2019. A copy of the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2018
(“
Annual
Report
”) is enclosed with these materials, but should
not be considered proxy solicitation material.
Additionally, the proxy materials and Annual
Report included in this package are also available on the internet
under
the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
The
principal executive offices of our Company are located at 5001
Celebraton Pointe Avenue, Suite 410, Gainesville, FL 32608, and our
telephone number is
888-428-9605
.
INFORMATION CONCERNING
SOLICITATION AND VOTING
Why did I receive this Proxy Statement?
Our
Board of Directors is soliciting your proxy to vote at the Annual
Meeting because you were a stockholder of record at the close of
business on April 15, 2019 (the “
Record Date
”), and are entitled to
vote at the meeting. The Company has delivered this Proxy Statement
and the Annual Report, along with either a proxy card or a voting
instruction card to you by mail beginning on or about May 2, 2019.
This Proxy Statement summarizes the information you need to know to
vote at the Annual Meeting. You do not need to attend the Annual
Meeting to vote your shares.
Who can attend the Annual Meeting?
All
stockholders as of the Record Date, or their duly appointed
proxies, may attend.
What do I need to be admitted to the Annual Meeting?
In
order to be admitted to the Annual Meeting, a stockholder must
present proof of ownership of SharpSpring, Inc. common stock on the
Record Date. Any holder of a proxy from a stockholder must present
the proxy card, properly executed. If your shares are held in the
name of a bank, broker or other holder of record, you must present
proof of your ownership, such as a bank or brokerage account
statement, to be admitted to the meeting. All stockholders must
also present a form of personal identification in order to be
admitted to the meeting.
What am I being asked to vote on at the meeting?
We are
asking our stockholders to elect directors, ratify the appointment
of our independent registered public accounting firm and approve
the SharpSpring, Inc. 2019 Equity Incentive Plan.
Who is entitled to vote?
Stockholders as of
the close of business on the Record Date are entitled to vote. Each
stockholder is entitled to one vote for each share of common stock
held on the Record Date. Stockholders are not entitled to
cumulative voting.
How many votes are needed for approval of each item?
Proposal Number 1
. Directors
will be elected by a plurality of the votes cast in person or by
proxy, meaning the five nominees receiving the most votes will be
elected as directors. Stockholders are not entitled to cumulative
voting with respect to the election of directors.
Proposal Number 2
. The
appointment of Cherry Bekaert LLP to serve as our independent
registered public accounting firm will be ratified if a majority of
the votes present in person or by proxy and entitled to vote on the
matter vote in favor of the proposal.
Proposal Number 3
. The adoption
of our 2019 Employee Stock Plan will be approved if a majority of
the votes present in person or by proxy and entitled to vote on the
matter vote in favor of the proposal.
Unless
a contrary choice is indicated, all duly executed proxies will be
voted in accordance with the instructions set forth on the proxy
card.
What constitutes a quorum?
As of
the Record Date, 9,632,013 shares of our common stock were issued
and outstanding. The presence, either in person or by proxy, of the
holders of a majority of the shares entitled to vote at the Annual
Meeting is necessary to constitute a quorum for the Annual Meeting.
Abstentions and broker non-votes are counted as present and
entitled to vote for purposes of determining a quorum.
How Do I Vote?
Record
Holders
:
1.
Vote by
Internet. Follow the VOTE BY INTERNET instructions on the enclosed
proxy card.
2.
Vote by
phone. Follow the VOTE BY PHONE instructions on the enclosed proxy
card.
3.
Vote by
mail. Follow the VOTE BY MAIL instructions on the enclosed proxy
card (a postage-paid envelope is provided for mailing in the United
States).
4.
Vote in
person. Attend and vote at the Annual Meeting.
If
you vote by phone or Internet, please DO NOT mail your proxy
card.
Beneficial Owners
(Holding Shares in Street Name)
:
1.
Vote by
Internet. Follow the VOTE BY INTERNET instructions on the enclosed
proxy card/voting instruction card.
2.
Vote by
phone. Follow the VOTE BY PHONE instructions on the enclosed proxy
card/voting instruction card.
3.
Vote by
mail. Follow the VOTE BY MAIL instructions on the enclosed proxy
card/voting instruction card (a postage-paid envelope is provided
for mailing in the United States).
4.
Vote in
person. Obtain a valid legal proxy from the organization that holds
your shares and attend and vote at the Annual Meeting.
If
you vote by phone or Internet, please DO NOT mail your proxy
card.
What is the difference between being a “record holder”
and “holding shares in street name?”
Most
stockholders of the Company hold their shares through in a stock
brokerage account or by a nominee rather than directly in their own
name. As summarized below, there are some distinctions between
shares held of record and those owned beneficially.
Record Holders
: If your shares
are registered directly in your name with our Company’s
transfer agent, Issuer Direct Corporation, you are considered the
stockholder of record with respect to those shares, and these proxy
materials are being sent directly to you by the Company. As the
stockholder of record, you have the right to grant your voting
proxy directly to us or to vote in person at the Annual Meeting. We
have enclosed a proxy card for you to use.
Beneficial Owners (Holding Shares in
Street Name)
: If your shares are held in a stock brokerage
account or by a nominee, you are considered the beneficial owner of
the shares which are held in “street name” and these
proxy materials are being forwarded to you by your nominee, who is
considered the stockholder of record with respect to these shares.
As the beneficial owner, you have the right to direct your nominee
on how to vote and are also invited to attend the Annual Meeting.
However, since you are not the stockholder of record, you may not
vote these shares in person at the Annual Meeting unless you
request, complete and deliver a legal proxy from your nominee. Your
nominee has enclosed a proxy card/voting instruction card for you
to use in directing the nominee how to vote your
shares.
What happens if I return my signed proxy but forget to indicate how
I want my shares of common stock voted?
If you
sign, date and return your proxy and do not mark how you want to
vote, your proxy will be counted as a vote “FOR” all of
the nominees for directors and “FOR” all of the other
proposals.
What happens if I do not instruct my broker how to vote or if I
mark “abstain” or “withhold” on the
proxy?
If you mark your proxy “abstain” or
“withhold authority,” your vote will have the same
effect as a vote against the proposal or the election of the
applicable director. If you do not instruct your broker how to
vote, your broker may vote for you on “routine”
proposals but not on “non-routine” proposals. The
ratification of our auditor is considered routine, but the election
of directors and the approval of the
SharpSpring, Inc. 2019
Equity Incentive Plan
are non-routine.
Therefore, if you do not vote on the election of directors or
provide voting instructions on the approval of the
SharpSpring, Inc. 2019 Equity Incentive Plan
, your broker will not be allowed to vote your
shares on these matters. Broker non-votes with respect to a matter
will not be considered as present and entitled to vote with respect
to that matter and thus will have no effect on the vote for that
matter.
Can I revoke or change my voting instructions before the
meeting?
For shares that are held in "street name", the stockholder must
follow the directions provided by its bank, broker or other
intermediary for revoking or modifying voting instructions. For
shares that are registered in the stockholder's own name, the proxy
may be revoked by written notification to the Company Secretary
prior to its exercise and providing relevant name and account
information, submitting a new proxy card with a later date (which
will override the earlier proxy) or voting in person at the Annual
Meeting.
Who will count the vote?
Bradley
Stanczak, our Chief Financial Officer, will tabulate the votes and
act as inspector of election at the Annual Meeting.
Where can I find the voting results of the Annual
Meeting?
We
intend to publish the final results in a current report on Form 8-K
within four business days after the end of the Annual
Meeting.
What does it mean if I get more than one proxy card?
It
means that you hold shares registered in more than one account. You
must return all proxies to ensure that all of your shares are
voted.
How many copies of the Proxy Statement or Annual Report to
Stockholders will I receive if I share my mailing address with
another security holder?
Unless
we have been instructed otherwise, we are delivering only one Proxy
Statement,
Notice of
Internet Availability of Proxy Materials
or Annual Report to
Stockholders to multiple security holders sharing the same address.
This is commonly referred to as “householding.” We will
however, deliver promptly a separate copy of the Proxy Statement,
Notice of Internet
Availability of Proxy Materials
or Annual Report to
Stockholders to a security holder at a shared address to which a
single copy of such documents was delivered, on written or oral
request. Requests for copies of the Proxy Statement,
Notice of Internet Availability of
Proxy Materials
or Annual Report to Stockholders or requests
to cease householding in the future should be directed to Investor
Relations, SharpSpring, Inc., 5001 Celebration Pointe Avenue, Suite
410, Gainesville, FL 32608. Telephone
888-428-9605.
If you share an
address with another stockholder and wish to receive a single copy
of these documents, instead of multiple copies, you may direct this
request to us at the address or telephone number listed above.
Stockholders who hold shares in “street name” may
contact their brokerage firm, bank, broker-dealer or other similar
organization to request information about
householding.
How can I obtain additional proxy materials or other Company
materials?
The
proxy materials and Annual Report included in this package, along
with the Company’s other SEC filings, are available on the
internet under the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
Additionally, any stockholder desiring additional proxy materials,
a copy of any other document incorporated by reference in this
Proxy Statement, or a copy of the Company’s bylaws should
contact Investor Relations, SharpSpring, Inc., 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. Telephone
888-428-9605
.
Who pays for the cost of this proxy solicitation?
The
Company pays for the cost of soliciting proxies on behalf of the
Board of Directors. The Company also will reimburse brokerage firms
and other custodians, nominees and fiduciaries for their reasonable
expenses in forwarding proxy material to beneficial owners. Proxies
may be solicited by mail, telephone, other electronic means or in
person. Proxies may be solicited by directors, officers and
regular, full-time employees of the Company, none of whom will
receive any additional compensation for their
services.
Who are the largest principal stockholders?
See
“
Security Ownership of
Certain Beneficial Owners
” elsewhere in this Proxy
Statement for a table setting forth each owner of greater than 5%
of the Company’s common stock as of the Record
Date.
What percentages of stock do the directors and officers
own?
Together, they own
approximately 25.6% of our Company common stock as of the Record
Date. For information regarding the ownership of our common stock
by directors and officers, see the section entitled
“
Security Ownership of
Certain Beneficial Owners and Management
” elsewhere in
this Proxy Statement.
Do I have dissenters’ rights of appraisal?
Under
Delaware General Corporation Law, our stockholders are not entitled
to appraisal rights with respect to any of the items proposed to be
voted upon at the Annual Meeting.
Where can I find general information about the
Company?
General
information about us can be found on our website at
http://sharpspring.com/
.
The information on our website is for informational purposes only
and should not be relied upon for investment purposes. The
information on our website is not incorporated by reference into
this Proxy Statement and should not be considered part of this or
any other report that we file with the Securities and Exchange
Commission (“
SEC
”). We make available free of
charge, either by direct access on our website or a link to the
SEC’s website, our Annual Report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the
“
Exchange Act
”),
as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. Our reports
filed with, or furnished to, the SEC are also available directly at
the SEC’s website at
www.sec.gov
.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF EACH
DIRECTOR NOMINEEE AND FOR A PROPOSAL IF NO CONTRARY SPECIFICATION
IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION
OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER
BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING.
INFORMATION REGARDING DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Board of Directors
Our
bylaws provide that the number of directors is determined by
resolution of the Board of Directors. Our Board of Directors is
currently set at five directors and we currently have five
directors serving on our Board of Directors. All current directors
are standing for reelection at the Annual Meeting. Each director is
elected to serve a one (1) year term until the next annual meeting
of stockholders and until the election and qualification of his or
her successor or his or her earlier resignation or
removal.
The
Company’s Nominating and Corporate Governance Committee may
evaluate individuals in the future to consider additional members
for our Board of Directors following the Annual Meeting, although
there is no current active candidate search. P
roxies cannot be voted for a greater
number of persons than the number of nominees
named.
The
names of the five directors standing for reelection at the Annual
Meeting, and certain information about each of them, are set forth
below.
Identity of Directors Standing for Reelection
|
Name
|
|
Age
|
|
Year First Elected Director
|
|
Positions/Committees
|
|
Independent
|
|
Steven
A. Huey
|
|
53
|
|
2016
|
|
COB,
AC, CC, NCGC
|
|
yes
|
|
Richard
Carlson
|
|
46
|
|
2015
|
|
CEO,
P
|
|
no
|
|
David
A. Buckel
|
|
57
|
|
2014
|
|
AC,
NCGC, FE
|
|
yes
|
|
Marietta
Davis
|
|
59
|
|
2017
|
|
AC,
CC
|
|
yes
|
|
Daniel
C. Allen*
|
|
44
|
|
2018
|
|
CC,
NCGC
|
|
yes
|
AC -
Audit Committee
CEO, P
- Chief Executive Officer, President
COB -
Chair of the Board of Directors (non-executive)
CC -
Compensation Committee
FE -
Financial Expert
NCGC -
Nominating/Corporate Governance Committee
*
Pursuant to a certain investors’ rights agreement, an
investor has the right to designate one person for election to our
Board of Directors and the Company agreed to use its reasonable
best efforts to cause such person to be elected to the Board at
each annual meeting of the Company’s stockholders. The
investor designated Mr. Allen, who is an affiliate of investor. See
“Transactions with Related Persons” below.
Business Experience of Directors Standing for Reelection and New
Director Nominees
Steven A.
Huey
.
Steven A.
Huey has been a director since December 2016 and the chair of our
Board of Directors since July 2017. Since August 2012, Mr. Huey has
been Chief Executive Officer of Capture Higher Ed, a technology
firm that helps educational institutions meet their enrollment
goals. Prior to that, from November 2007 to August 2012, Mr. Huey
was Chief Operating Officer of The Learning House, Inc. Mr. Huey
received a B.S. in Accounting and Finance from Miami University and
an MBA from Emory University. Mr. Huey’s qualifications to
serve on our Board of Directors include his extensive experience as
a technology company executive, with a focus on growing early
stage companies.
Richard A. Carlson.
Richard Carlson has been a director and has served as the
Company’s Chief Executive Officer and President since October
1, 2015. From August 1, 2015 to October 1, 2015, he served as
President of the Company. From August 15, 2014 until August 1,
2015, he served as the President of SharpSpring Technologies, Inc.,
our wholly owned subsidiary. Mr. Carlson founded RCTW, LLC (fka
SharpSpring, LLC) in December 2011 and served as its President
until it was acquired by the Company on August 15, 2014. From April
2009 to December 2011, he served as the Managing Director of US
Operations for Panda Security, an international internet security
software company. Mr. Carlson’s qualifications to serve on
our Board of Directors include his knowledge of marketing
automation technology, email technology, marketing strategies, as
well as his general leadership skills.
David A. Buckel.
David A. Buckel has been a director since January 2014. Since
November 2007 to present, Mr. Buckel has served as the Managing
Director at BVI Venture Services, a professional services firm that
provides experienced, C-Suite professionals to deliver strategic
and functional consulting services to both private and small public
technology companies. Mr. Buckel has hands-on experience creating
accounting and control systems and processes, financial statements,
financial and operating metrics, dashboards, cash flow forecast,
budget processes, trend analysis and dealing with auditors.
Additionally, Mr. Buckel has been CFO for various NASDAQ and AMEX
Companies leading growth strategy, financial operations and various
fund raising efforts. Mr. Buckel holds an M.B.A in Finance and
Operations Management from Syracuse University and a B.S. in
Accounting from Canisius College. He is also a Certified Management
Accountant (CMA). Mr. Buckel’s qualifications to serve on our
Board of Directors include a strong background and skill set in
areas relating to board service, finance and
management.
Marietta
Davis
.
Marietta
Davis has been a director since July 2017. Ms. Davis is currently
an Advisory Board Member at DataOceans, LLC, a customer
communications management solutions and services company, where she
has served since April 2016. She is also currently a National Board
Member of Youth Villages, a nationally-recognized nonprofit
organization that helps children, young people and families, where
she has served since January 2010. Davis also served as Vice
President – US Dynamic Sales at Microsoft, from 2013 to 2016,
where she helped define marketing strategies for SMB, mid-tier and
enterprise customers for Dynamics CRM Cloud and ERP products and
services. Prior to that time, from 2009 to 2013, Davis served as
General Manager – Enterprise Accounts, Greater Southeast
District at Microsoft, where she led the sales organization and
managed strategic community engagement in the areas of economic
development and innovation for that district. Ms. Davis holds a
B.S. in communications from Bradley University. Ms. Davis’
qualifications to serve on our Board of Directors include
experience in sales and marketing leadership roles in the CRM
industry, which is highly-correlated to the Company’s
marketing automation industry segment.
Daniel
Allen
. Daniel Allen has been a director since April
2018. Mr. Allen serves as Managing Partner of
Corona Park Investment Partners, a
private investment company that invests and grows profitable
technology enabled companies. He has held that position since
January 2012. Since January 2013, he has also served as CEO of
Evercel
(EVRC)
,
a holding company that manages
its portfolio companies and seeks new opportunities to invest
capital for long term returns. Evercel is
the parent company of Printronix, a
global industrial printing company, where Mr. Allen serves as
Chairman of the Board. From 2001 to 2010, Mr. Allen worked at
Bain Capital, where he also focused on investing in technology
related growth opportunities. Prior to Bain Capital, Mr.
Allen was on the founding team of Fandango, a strategy consultant
at McKinsey and Company, and worked at ABCNews in Moscow, London,
Hong Kong and New York City. Mr. Allen graduated from Harvard
College and Harvard Business School.
Mr. Allen’s
qualifications to serve on our Board of Directors include
experience managing and investing in growth-focused technology
companies.
During
the past ten years, none of our directors or nominees for director
have been involved in any of the proceedings described in Item
401(f) of Regulation S-K.
Transactions with Related Persons
James
Morgan, Richard Carlson’s brother-in-law, serves as our Vice
President of Sales. During 2018 and 2017, Mr. Morgan’s total
compensation, including base salary, commissions, bonus and equity
compensation approximated $139,000 and $158,000, respectively. Mr.
Morgan’s compensation package is highly variable based on new
sales and is comparable to industry standards. Mr. Morgan also
participates in standard Company employment benefits that are
available to all Company employees.
On
March 28, 2018, the Company entered into a convertible note
purchase agreement (the “Note Purchase Agreement”) with
SHSP Holdings, LLC (“SHSP Holdings”), pursuant to which
the Company issued to SHSP Holdings an unsecured 5% convertible
promissory note in the aggregate principal amount of $8,000,000
(the “Note”). As of the Record Date, no principal or
interest has been paid to SHSP Holdings, and approximately $421,800
in interest has accrued on the Note. Simultaneously with the
execution of the Note Purchase Agreement and the issuance of the
Note, the Company entered into the Investors’ Rights
Agreement (the “Investors’ Rights Agreement”) by
and among the Company, SHSP Holdings and two management
stockholders. Under the Investors’ Rights Agreement, among
other things, SHSP Holdings will have the right to designate one
person for election to the Company’s Board of Directors for
as long as SHSP Holdings continues to hold any of the Notes, and
the Company agreed to use its reasonable best efforts to cause such
person to be elected to the Board of Directors at each annual
meeting of the Company’s stockholders. SHSP Holdings
designated Daniel C. Allen, an affiliate of SHSP Holdings, who was
appointed to our Board of Directors on April 3, 2018 and has
continuously served on our Board since that date. Mr. Allen is the
founder and manager of Corona Park Investment Partners, LLC
(“CPIP”). CPIP is a member of Evercel Holdings LLC and
is a member and sole manager of SHSP Holdings. Evercel, Inc. is a
member and the manager of Evercel Holdings LLC and is a member of
SHSP Holdings. Additionally, under the Investor Rights Agreement,
SHSP Holdings has customary demand and piggyback registration
rights with respect to the shares of common stock issued or
issuable upon conversion of the Note and, under specified
conditions, held by members of SHSP Holdings.
Policies and Procedures for Related-Party Transactions
Our
Audit Committee considers and approves or disapproves any related
person transaction as required by NASDAQ regulations.
Corporate Governance
Code
of Ethics and Business Conduct
Our
Company has adopted a Code of Ethics and Business Conduct which
constitutes a “code of ethics” as defined by applicable
SEC rules and a “code of conduct” as defined by
applicable NASDAQ rules. Our Code of Ethics and Business
Conduct applies to all of the Company’s employees, including
its principal executive officer, principal accounting officer, and
our Board of Directors. A copy of this Code is available for review
on the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
Requests for a copy of the Code of Ethics and Business Conduct
should be directed to Investor Relations, SharpSpring, Inc., 5001
Celebration Pointe Avenue, Suite 410, Gainesville, FL 32608. The
Company intends to disclose any changes in or waivers from its Code
of Ethics and Business Conduct by posting such information on its
website or by filing a Form 8-K.
The
proxy materials and Annual Report included in this package, along
with the Company’s other SEC filings, are available on the
internet under the “
Investors
” page of the
Company’s website at
http://sharpspring.com/
.
Additionally, any stockholder desiring additional proxy materials,
a copy of any other document incorporated by reference in this
Proxy Statement, or a copy of the Company’s bylaws should
contact Investor Relations, SharpSpring, Inc., 5001 Celebration
Pointe Avenue, Suite 410, Gainesville, FL 32608. Telephone
888-428-9605
.
Director
Independence Standards
Applicable NASDAQ
rules require a majority of a listed company’s board of
directors to be comprised of independent directors. In addition,
the NASDAQ rules require that, subject to specified exceptions,
each member of a listed company’s audit, compensation and
nominating and corporate governance committees be independent and
that audit committee members also satisfy independence criteria set
forth in Rule 10A-3 under the Exchange Act. Under applicable NASDAQ
rules, a director will only qualify as an “independent
director” if, in the opinion of the listed company’s
board of directors, that person does not have a relationship that
would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. In order to be
considered independent for purposes of Rule 10A-3, a member of an
audit committee of a listed company may not, other than in his or
her capacity as a member of the audit committee, the board of
directors, or any other board committee, accept, directly or
indirectly, any consulting, advisory, or other compensatory fee
from the listed company or any of its subsidiaries or otherwise be
an affiliated person of the listed company or any of its
subsidiaries.
Director
Independence
In
April 2019, our Board of Directors undertook a review of the
composition of our Board of Directors and its committees and the
independence of each of our present directors and each director
standing for reelection. Based upon information requested from and
provided by each director concerning his background, employment and
affiliations, including family relationships, our Board of
Directors has determined that each of David A. Buckel, Steven A.
Huey, Marietta Davis and Daniel Allen are “independent
directors” as defined under applicable NASDAQ Stock Market
Rules. In making such determination, our Board of Directors
considered the relationships that each such non-employee director
has with our Company and all other facts and circumstances that our
Board of Directors deemed relevant in determining his/her
independence, including the beneficial ownership of our capital
stock by each non-employee director. The one member of our Board of
Directors who is not an “independent director” is
Richard Carlson as a result of his executive officer status with
our Company.
There
are no family relationships
between any director, executive
officer, or person nominated or chosen by the Company to become a
director or executive officer.
Board Committees
Our
Board of Directors has established the committees described below
and may establish others from time to time. The charters for each
of our committees are described below and are available on the
“
Investors
” page
of the Company’s website
http://sharpspring.com/
.
Audit
Committee
We have
a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. Our
Audit Committee is comprised of David A. Buckel, Steven A. Huey and
Marietta Davis. Mr. Buckel is the chairperson of the committee.
Each member of the Audit Committee is “independent”
within the meaning of Rule 10A-3 under the Exchange Act and the
NASDAQ Stock Market Rules. Our Board of Directors has designated
David A. Buckel as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K. The Audit Committee’s purpose and power are
to (a) retain, oversee and terminate, as necessary, the auditors of
the Company, (b) oversee the Company's accounting and financial
reporting processes and the audit and preparation of the Company's
financial statements, (c) exercise such other powers and authority
as are set forth in the Charter of the Audit Committee of the Board
of Directors, and (d) exercise such other powers and authority as
shall from time to time be assigned thereto by resolution of the
Board of Directors.
The
Audit Committee also has the power to investigate any matter
brought to its attention within the scope of its duties and to
retain counsel and advisors to fulfill its responsibilities and
duties. During our last fiscal year, our Audit Committee held four
meetings and acted by unanimous consent two times.
Compensation
Committee
Our
Compensation Committee is comprised of Marietta Davis, Steven A.
Huey and Daniel C. Allen, with Ms. Davis being the chairperson of
the Compensation Committee. Our Board of Directors has determined
that each member of the Compensation Committee is an independent
director for compensation committee purposes as that term is
defined in the applicable rules of NASDAQ and the Exchange Act, is
a “non-employee director” within the meaning of Rule
16b-3(d)(3) promulgated under the Exchange Act and is an
“outside director” within the meaning of Section 162(m)
of the Internal Revenue Code, as amended. The Compensation
Committee’s purpose and powers are to (a) review and approve
the compensation of the chief executive officer of the Company and
such other employees of the Company as are assigned thereto by the
Board of Directors and to make recommendations to the Board of
Directors with respect to standards for setting compensation
levels, (b) exercise such other powers and authority as are set
forth in a charter of the Compensation Committee of the Board of
Directors, and (c) exercise such other powers and authority as
shall from time to time be assigned thereto by resolution of the
Board of Directors.
Our
Compensation Committee has the authority to delegate any of its
responsibilities, along with the authority to take action in
relation to such responsibilities, to one or more subcommittees as
the committee may deem appropriate in its sole discretion. If the
Committee elects to delegate any authority to a subcommittee, the
subcommittee shall be comprised of at least two members who qualify
as "non-employee directors" for the purposes of Rule 16b-3 under
the Exchange Act, and as "outside directors" for the purposes of
Section 162(m) of the Internal Revenue Code, as amended. The
Committee is not precluded from accepting solely recommendations
from executive
officers
regarding the amount or form of executive and director
compensation.
The
Compensation Committee also has the power to investigate any matter
brought to its attention within the scope of its duties, and to
retain counsel and advisors to fulfill its responsibilities and
duties. During our last fiscal year, our Compensation Committee
held four meetings and acted by unanimous consent two
times.
Nominating
and Corporate Governance Committee
Our
Nominating and Corporate
Governance Committee is comprised
of Daniel C. Allen, Steven A. Huey and David A. Buckel, with Mr.
Allen being the chairperson of the Nominating and
Corporate
Governance
Committee.
Our
Board of Directors has determined that each of the committee
members is an independent director for Nominating and Corporate
Governance Committee purposes as that term is defined in the
applicable rules of NASDAQ and the Exchange Act. The Nominating and
Corporate Governance Committee’s purpose and powers are to:
(a) identify potential qualified nominees for director and
recommend to the Board of Directors for nomination candidates for
the Board of Directors, (b) develop the Company's corporate
governance guidelines and additional corporate governance policies,
(c) exercise such other powers and authority as are set forth in a
charter of the Nominating and Corporate Governance Committee of the
Board of Directors, and (d) exercise such other powers and
authority as shall from time to time be assigned thereto by
resolution of the Board of Directors.
The
Nominating and Corporate
Governance Committee also has the
power to investigate any matter brought to its attention within the
scope of its duties and to retain counsel and advisors to fulfill
its responsibilities and duties. During our last fiscal year, our
Nominating and Corporate Governance Committee held four meetings
and acted by unanimous consent one time.
Each of
the five directors standing for reelection at the Annual Meeting
have expressed their willingness to serve as a
director.
When
new candidates for our Board of Directors are sought, all of our
directors evaluate each candidate for nomination as director within
the context of the needs and the composition of the Board of
Directors as a whole. The Board of Directors conducts any
appropriate and necessary inquiries into the backgrounds and
qualifications of candidates. When evaluating director nominees,
our Board of Directors generally seeks to identify individuals with
diverse, yet complementary backgrounds. Our directors consider both
the personal characteristics and experience of director nominees,
including each nominee’s independence, diversity, age,
skills, expertise, time availability and industry background in the
context of the needs of the Board of Directors and the Company. The
Board of Directors believes that director nominees should exhibit
proven leadership capabilities and experience at a high level of
responsibility within their chosen fields, and have the experience
and ability to analyze business and/or scientific issues facing our
Company. In addition to business expertise, the Board of Directors
requires that director nominees have the highest personal and
professional ethics, integrity and values and, above all, are
committed to representing the long-term interests of our
stockholders and other stakeholders. Except for Daniel Allen, to
date, all new candidates have been identified and recommended by
members of our Board of Directors, including management and
non-management directors, our principal executive officer, and
other executive officers, and we have not paid any fee to a third
party to assist in the process of identifying or evaluating
director candidates. Pursuant to the Investors’ Rights
Agreement, the Investor has the right to designate one person for
election to our Board of Directors and the Company agreed to use
its reasonable best efforts to cause such person to be elected to
the Board at each annual meeting of the Company’s
stockholders. The Investor designated Mr. Allen, who is an
affiliate of Investor. See “Transactions with Related
Persons” and “Security Ownership of Certain Beneficial
Owners and Management.”
Our
directors will consider candidates for nomination as director who
are recommended by a stockholder and will not evaluate any
candidate for nomination for director differently because the
candidate was recommended by a stockholder.
When
submitting candidates for nomination to be elected at our annual
meeting of stockholders, stockholders should follow the following
notice procedures and comply with applicable provisions of our
bylaws. To consider a candidate recommended by a stockholder for
nomination at the 2020 Annual Meeting of Stockholders, the
recommendation must be delivered or mailed to and received by our
Secretary within the time periods discussed elsewhere in this Proxy
Statement under the heading “Stockholder Proposals for 2020
Annual Meeting.” The recommendation must include the
information specified in our bylaws for stockholder nominees to be
considered at an annual meeting, along with the
following:
●
The
stockholder’s name and address and the beneficial owner, if
any, on whose behalf the nomination is proposed;
●
The
stockholder’s reason for making the nomination at the annual
meeting, and the signed consent of the nominee to serve if
elected;
●
The number of
shares owned by, and any material interest of, the record owner and
the beneficial owner, if any, on whose behalf the record owner is
proposing the nominee;
●
A description of
any arrangements or understandings between the stockholder, the
nominee and any other person regarding the nomination;
and
●
Information
regarding the nominee that would be required to be included in our
Proxy Statement by the rules of the Securities and Exchange
Commission, including the nominee’s age, business experience
for the past five years and any other directorships held by the
nominee.
The
information listed above is not a complete list of requisite
information. The secretary will forward any timely recommendations
containing the required information to our independent directors
for consideration.
No material changes to the procedures by which our stockholders may
recommend nominees to our Board of Directors has occurred since we
last provided disclosure regarding these procedures in our
Definitive Schedule 14A filed on May 14, 2018.
Board Leadership Structure
Our
bylaws provide the Board of Directors with flexibility to combine
or separate the positions of Chair of the Board of Directors and
Principal Executive Officer in accordance with its determination
that utilizing one or the other structure is in the best interests
of our Company. Our current structure is that of separate Principal
Executive Officer and Chair of the Board of Directors. Richard
Carlson serves as our Principal Executive Officer and is
responsible for the day-to-day operation of our Company. Steven A.
Huey serves as our Chair of the Board of Directors, which is a
non-executive position. Mr. Huey is responsible for performing a
variety of functions related to our corporate leadership and
governance, including coordinating board activities, setting
relevant items on the agenda and ensuring adequate communication
between the Board of Directors and management, which he does in
conjunction with the independent directors. Our Board of Directors
has determined that maintaining the independence of a majority of
our directors helps maintain its independent oversight of
management.
Risk Oversight
The Board oversees risk management
directly and through its committees associated with their
respective subject matter areas. Generally, the Board oversees
risks that may affect the business of the Company as a whole,
including operational matters. The Audit Committee is responsible
for oversight of the Company’s accounting and financial
reporting processes and also discusses with management the
Company’s financial statements, internal controls and other
accounting and related matters. The Compensation Committee oversees
certain risks related to compensation programs and the
Nominating and Corporate
Governance Committee
oversees certain corporate governance
risks. As part of their roles in overseeing risk management, these
Committees periodically report to the Board regarding briefings
provided by management and advisors as well as the
Committees’ own analysis and conclusions regarding certain
risks faced by the Company. Management is responsible for
implementing the risk management strategy and developing policies,
controls, processes and procedures to identify and manage
risks.
The interaction with management occurs not only at
formal board and committee meetings, but also through periodic and
other written and oral communications.
Stockholder Communications with the Board
Stockholders who
desire to communicate with the Board of Directors, or a specific
director, may do so by sending the communication addressed to
either the Board of Directors or any director, c/o SharpSpring,
Inc., 5001 Celebration Pointe Avenue, Suite, 410, Gainesville, FL
32608. These communications will be delivered directly to the
Board, or any individual director, as specified.
Board Meetings and Committees; Annual Meeting
Attendance
During our last fiscal year, our Board of Directors held six Board
meetings. Each current director attended at least 75% of the total
number of Board meetings and their respective committee meetings of
the Board held during our last fiscal year. The Board of Directors
acted at various times by unanimous written consent, as authorized
by our bylaws and the Delaware General Corporation
Law.
Our Company has no policy with regard to Board members' attendance
at our annual meetings of security holders. One Board member
attended our 2018 annual meeting.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
that our executive officers and directors, and persons who own more
than ten percent of a registered class of our equity securities,
file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater-than-ten
percent stockholders are required by SEC regulations to furnish us
with all Section 16(a) forms they file. To the best of our
knowledge, based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to our Company during its most recent
fiscal year and Forms 5 and amendments thereto furnished to our
Company with respect to its most recent fiscal year, and any
written representation referred to in paragraph (b)(1) of Item 405
of Regulation S-K, all of our executive officers, directors
and greater-than-ten percent stockholders complied with all Section
16(a) filing requirements with the following exception: Mr. Daniel
Allen filed one late Form 4, Mr. David Buckel filed one late Form
4, Ms. Marietta Davis filed one late Form 4 and Mr. Steven Huey
filed one late Form 4.
AUDIT COMMITTEE REPORT
The following Report of the Audit Committee does not constitute
soliciting material and should not be deemed filed or incorporated
by reference into any other Company filing under the Securities Act
of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this Audit Committee
Report by reference therein.
Role of the Audit Committee
The Audit Committee’s primary responsibilities are generally
as follows:
1.
To retain, oversee
and terminate, as necessary, the auditors of the
Company;
2.
To oversee the
Company's accounting and financial reporting processes and the
audit and preparation of the Company's financial
statements;
3.
To exercise such
other powers and authority as are set forth in the Charter of the
Audit Committee of the Board of Directors; and
4.
To exercise such
other powers and authority as shall from time to time be assigned
thereto by resolution of the Board of Directors.
The Committee has implemented
procedures to ensure that during the course of each fiscal year it
devotes the attention that it deems necessary or appropriate to
each of the matters assigned to it under the Committee’s
charter. In overseeing the preparation of the Company’s
financial statements, the Committee met with management and the
Company’s outside auditors, including meetings with the
outside auditors without management present, to review and discuss
all financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the Committee
that all financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee
discussed the statements with both management and the outside
auditors. The Committee’s review included discussion with the
outside auditors of matters required to be discussed pursuant to
Statement on Auditing Standards No. 61, as amended
(AICPA,
Professional
Standards
, Vol. 1.
AU section 380), as adopted by the Public Company Accounting
Oversight Board in Rule 3200T.
The Committee has received the written disclosures and the letter
from the Company’s outside auditors required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the outside auditor’s communications with the
Committee concerning independence, and has discussed with the
outside auditors the outside auditor's independence.
Recommendations of
the Audit Committee.
In reliance on the reviews and
discussions referred to above, the Committee recommended to the
Board that the Board approve the inclusion of the Company’s
audited financial statements in the Company’s Annual Report
on Form 10-K for the fiscal year ended December 31, 2018, for
filing with the SEC.
This Audit Committee Report has been furnished by the Audit
Committee of the Board of Directors.
David
A. Buckel, Chairman
Marietta
Davis
Steven
A. Huey
Executive Officers
Identity of Executive Officers
|
Name
|
|
Age
|
|
Position
|
|
Richard
A. Carlson
|
|
46
|
|
Director,
Chief Executive Officer and President
|
|
Bradley
Stanczak (1)
|
|
47
|
|
Chief
Financial Officer
|
|
Edward
Lawton (1)
|
|
41
|
|
Chief
Financial Officer
|
|
Travis
Whitton
|
|
37
|
|
Chief
Technology Officer
|
(1) As
disclosed in Current Report 8-K filed on November 11, 2018, Mr.
Stanczak replaced Mr. Lawton as Chief Financial Officer effective
December 10, 2018
Experience
Richard A. Carlson
.
Mr. Carlson’s business experience is described above under
the caption “Identity and Business Experience of
Directors.”
Edward S. Lawton
.
Edward S. Lawton served as Chief Financial Officer from September
2014 through December 10, 2018. Mr. Lawton was responsible for
overseeing our Company’s financial reporting, accounting and
administrative functions. Mr. Lawton has
over 18 years of financial and
accounting experience with a focus on financial planning and
analysis and integrating acquisitions for technology
companies.
From 2006 to September 2014, Mr. Lawton
served as the Director of Finance and Senior Director of Finance at
Bottomline Technologies (de), Inc., a publicly-traded
cloud-based payment,
invoice and digital banking solutions software
company
.
Bradley Stanczak
.
Bradley Stanczak has served as our Chief Financial Officer since
December 10, 2018. Mr. Stanczak is responsible for overseeing our
Company’s financial reporting, accounting and administrative
functions. Mr. Stanczak brings over 14 years of experience in
progressive finance and accounting roles. Since 2015, and prior to
joining SharpSpring, Mr. Stanczak was VP of Finance and Accounting
for Resonate Networks, Inc., a big-data consumer intelligence
software company.
Travis Whitton
.
Travis Whitton has served as our Chief Technology Officer since the
acquisition of the SharpSpring assets in August 2014. Mr. Whitton
was a co-founder of RCTW, LLC (fka SharpSpring, LLC) and served as
its Chief Technology Officer from January 2012 until it was
acquired by the Company in August 2014. From September 2007 to
January 2012, Mr. Whitton served as Senior Software Engineer of
Grooveshark, an online streaming music company.
Each
officer is elected annually by the Board of Directors and holds
their office until they resign or are removed by the Board of
Directors or otherwise disqualified to serve, or their successor is
elected and qualified.
During
the past ten years, none of our executive officers have been
involved in any of the proceedings described in Item 401(f) of
Regulation S-K.
Executive Compensation
Compensation Discussion and Analysis
The
compensation committee of our Board of Directors oversees, reviews
and approves all compensation decisions relating to our named
executive officers. In the discussion that follows,
“executives” refers to our 2018 named executive
officers, Messrs. Carlson, Stanczak, Whitton and
Lawton.
Objectives and Philosophy of Our Executive Compensation
Program
The
primary objectives of the compensation committee with respect to
executive compensation are to:
●
enable
us to attract, retain and motivate the best possible executive
talent by ensuring that our compensation packages are competitive
with those offered by similarly situated companies;
●
align
our executive compensation with our corporate strategies and
business objectives;
●
promote
the achievement of key strategic and financial performance
measures; and
●
align
executives’ incentives with the creation of stockholder
value.
To
achieve these objectives, the compensation committee evaluates our
executive compensation program with the goal of setting
compensation at levels the committee believes are competitive with
those of other companies of a comparable size within our industry.
Executives are also evaluated on their professional growth and
individual contributions to the Company’s success. We provide
a portion of our executive compensation in the form of stock option
awards that vest over time, typically four years, which we believe
promotes the retention of our executives and aligns their interests
with those of our stockholders since this form of compensation
allows our executives to participate in the long-term success of
our Company as reflected in stock price appreciation.
Compensation Challenges
We face
challenges in hiring and retaining our executives and other key
employees due to several factors. These challenges are similar to
those faced by other high-growth technology companies and make
recruiting and retaining our executives and other key employees
difficult. Specifically, we face challenges related to the pace of
our operations, the high growth rate of our businesses, the fact
that we are in a competitive industry and the fact that many of our
executives and key employees are targeted by other
companies.
Components of our Executive Compensation Program
The
primary elements of our current executive compensation program
are:
●
base
salary;
●
cash
bonuses;
●
stock
option awards and stock awards; and
●
retirement
and other employee benefits
We do
not have any formal or informal policy or target for allocating
compensation between long-term and short-term compensation, between
cash and non-cash compensation or among the different forms of
non-cash compensation. Instead, the Compensation Committee
determines what it believes to be the appropriate level and mix of
the various compensation components based on recommendations from
our chief executive officer, Company performance against stated
objectives and individual performance.
Base Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of all our employees, including our
executives. When establishing base salaries, the compensation
committee considers a variety of other factors such as the
executive’s scope of responsibility, individual performance,
prior employment experience and salary history, relative pay
adjustments within the Company and our overall financial
performance. Base salaries are reviewed at least annually by our
compensation committee and may be adjusted from time to time based
upon market conditions, individual responsibilities and Company and
individual performance.
Mr.
Carlson’s salary was increased from $250,000 to $330,000 on
January 1, 2018.
Mr.
Lawton’s salary was increased from $185,000 to $200,000 on
January 1, 2018.
Mr.
Whitton’s salary was increased from $160,000 to $175,000 on
January 1, 2018.
Mr.
Stanczak joined the company on December 10, 2018 with a base salary
of $185,000.
Effective as of the
start of 2019, executive salaries were increased as follows: Mr.
Carlson’s salary was increased to $340,000 and Mr.
Whitton’s salary was increased to $200,000.
Cash Bonuses
Cash
bonuses are used to compensate and align our executives toward
certain financial, strategic and operational goals. The
Compensation Committee approves payment of quarterly or annual cash
bonuses as part of the overall compensation packages of our
executive officers, and retains the authority to review and adjust
the overall bonus at year-end. During 2017 and 2018, the executive
cash bonuses have been based on revenue and EBITDA targets for the
year, as determined by the Compensation Committee, with payments
varying between annual and quarterly. For the performance during
the year ended December 31, 2017, executive bonuses were paid
annually during February 2018. For the performance during the year
ended December 31, 2018, executive bonuses were paid quarterly
following the financial reporting of each quarter. The following
summarizes the executive cash bonus awards, separated based on both
the timing of the payment and the performance year for which the
bonus was earned:
(1)
As
disclosed in Current Report 8-K filed on November 11, 2018, Mr.
Stanczak received a $25,000 signing bonus upon relocation to the
Gainesville, FL area
(2)
For
the executive bonuses earned for the performance during the years
ended December 31, 2017, and December 31, 2018, all or a portion
was paid in the first quarter of the subsequent year.
Stock Option Awards
Stock
option awards are the primary vehicle for long-term retention of
our executives. Our compensation committee believes that stock
options promote, create and reward long term stockholder value
creation, as well as provide a strong incentive for the executive
to remain employed by the Company.
The
following table shows stock option grants made to executives during
2018.
___________
1.
The options expire ten years from
the grant date and
vest over a 4-year period, with 1/48 of
the original number of options vesting every
month.
2.
The options expire ten years from
the grant date and
vest over a 4-year period, with 25%
vesting on the first anniversary of the grant date and an
additional 1/48 of the original number of options vesting every
month thereafter, until becoming fully vested on the fourth
anniversary of the grant date.
Benefits and Other Compensation
We
maintain broad-based benefits that are provided to all of our
employees, including (for U.S. resources) health and dental
insurance, life insurance and a retirement plan. Executives are
eligible to participate in all of our employee benefit plans, in
each case on the same terms as our other employees. No employee
benefit plans are in place solely for the benefit of our
executives.
Severance and Change in Control Benefits
Pursuant to
employment agreements we have entered into with our executives and
the terms of our 2010 Stock Incentive Plan, our executives are
entitled to certain benefits in the event of a change in control of
our Company or the termination of their employment under specified
circumstances, including termination following a change in control.
We believe these benefits help us compete for and retain executive
talent and are generally in line with severance packages offered to
executives by the companies in our peer group. We also believe that
these benefits would serve to minimize the distraction caused by
any change in control scenario and reduce the risk that key talent
would leave the Company before any such transaction closes, which
could reduce the value of the Company if such transaction failed to
close.
2018 Summary Compensation Table
The
table below summarizes all compensation awarded to, earned by, or
paid to our named executive officers that earned more than $100,000
for the fiscal years ended December 31, 2018 and
2017:
(a)
The
amounts in this column represent the dollar value of bonus earned
by the named executive officer during the fiscal year. For the
performance during the year ended December 31, 2017, executive
bonuses were paid annually during February 2018. For the
performance during the year ended December 31, 2018, executive
bonuses were paid quarterly following the financial reporting of
each quarter
(b)
The
amounts in this column represent the grant date fair values of
option grants as computed in accordance with FASB ASC
718.
(c)
These
amounts consist primarily of our matching contributions to each
executive’s retirement savings plan account.
(1)
As
disclosed in Current Report 8-K filed on November 11, 2018, Mr.
Stanczak replaced Mr. Lawton as Chief Financial Officer effective
December 10, 2018.
During
2018 and 2017, we provided our U.S. employees the ability to
contribute to a 401(k) retirement plan. Under the plan, eligible
employees may elect to defer part of their compensation to the plan
each year. The amount of compensation an employee can elect to
defer is generally expressed as a percentage of the
employee’s compensation up to a maximum of $18,500 and
$18,000 for 2018 and 2017, respectively. The Company provides a
matching contribution of 100% of employee deferrals up to 3% of
total compensation. We have no other annuity, pension, retirement
or similar benefit plans in place on behalf of our executive
officers.
We
grant stock awards and stock options to our executive officers
based on their level of experience and contributions to our
Company. The aggregate fair value of awards and options are
computed in accordance with FASB ASC 718 and options are reported
in the Summary Compensation Table above in columns (a).
The assumptions made in the
computation may be found in
Note 11: Stock-Based
Compensation to
our
financial statements contained in our latest Annual
Report.
At no
time during the last fiscal year was any outstanding option
otherwise modified or re-priced, and there was no tandem feature,
reload feature, or tax-reimbursement feature associated with any of
the stock options we granted to our executive officers or
otherwise.
The
table below summarizes all of the outstanding equity awards for our
named executive officers as of December 31, 2018, our latest
fiscal year end:
Outstanding Equity Awards At Fiscal Year-End
|
|
Number of
|
|
|
|
|
|
|
|
|
securities
|
|
|
|
|
|
|
|
|
underlying
|
|
|
|
|
|
|
|
|
unexercised
|
Option
|
Option
|
|
Initial
|
|
|
|
|
options(#)
|
exercise
|
expiration
|
|
vesting
|
|
|
|
Name
|
Exercisable
|
Unexercisable
|
price ($)
|
date
|
|
date
|
|
|
|
|
|
|
|
|
|
|
|
Richard A.
Carlson
|
20,834
|
79,166
|
$
4.65
|
02/08/28
|
|
03/08/18
|
(1
)
|
|
|
43,750
|
56,250
|
$
4.74
|
03/17/27
|
|
04/17/17
|
(1
)
|
|
|
197,917
|
52,083
|
$
4.80
|
10/01/25
|
|
11/01/15
|
(1
)
|
|
|
60,000
|
-
|
$
6.29
|
06/01/25
|
|
12/31/16
|
(2
)
|
|
|
|
|
|
|
|
|
|
|
Edward
Lawton
|
-
|
75,000
|
$
4.65
|
02/08/28
|
|
02/08/19
|
(3
)
|
|
|
18,101
|
28,128
|
$
4.74
|
03/17/27
|
|
03/17/18
|
(3
)
|
|
|
4,230
|
2,770
|
$
5.15
|
07/12/26
|
|
07/12/17
|
(3
)
|
|
|
5,452
|
4,687
|
$
4.82
|
09/13/25
|
|
09/13/16
|
(3
)
|
|
|
21,000
|
-
|
$
6.29
|
08/14/24
|
|
08/14/15
|
(3
)
|
|
|
|
|
|
|
|
|
|
|
Bradley
Stanczak
|
-
|
100,000
|
$
12.40
|
12/10/28
|
|
12/10/19
|
(3
)
|
|
|
|
|
|
|
|
|
|
|
Travis
Whitton
|
-
|
50,000
|
$
4.65
|
03/17/27
|
|
02/08/19
|
(3
)
|
|
|
15,313
|
19,687
|
$
4.74
|
03/17/27
|
|
03/17/18
|
(3
)
|
|
|
17,709
|
7,291
|
$
3.34
|
02/17/26
|
|
02/17/17
|
(3
)
|
|
|
25,000
|
-
|
$
6.29
|
06/01/25
|
|
12/31/16
|
(2
)
|
___________
1.
Vests
monthly over four years, with 1/48 vesting each month.
2.
Vests
50% on December 31, 2016, 25% on December 31, 2017 and 25% on
December 31, 2018.
3.
Vests
over four years, with 25% vesting on the first anniversary and 1/48
of the grant vesting each month thereafter.
Compensation of Non-Employee Directors
Compensation for
our directors is discretionary and is reviewed from time to time by
our Board of Directors. Any determinations with respect to Board
compensation are made by our Board of Directors. Since our second
quarter of 2017, we have compensated all non-employee directors
with a stipend of $7,500 per quarter ($30,000 per year), payable
quarterly in stock. Typically, newly elected non-employee directors
receive 16,000 stock options upon joining the board, which vest
over four years. All directors are also entitled to reimbursement
for travel expenses for attending director meetings.
Set
forth below is a summary of the compensation of our directors
during our December 31, 2018 fiscal year.
___________
1.
Mr.
Allen joined the Board of Directors on April 3, 2018. During April
2018, Mr. Allen received an option grant of 16,000 options, vesting
over four years, with 1/48 of the grant vesting each
month.
2.
Since
our second quarter of 2017, SharpSpring’s non-employee
directors received a quarterly stipend of $7,500, payable in stock
issued in arrears. Quarterly stock stipends are issued shortly
after quarter end, and the amount above represents the values on
the dates of issuance.
3.
Messrs.
Olivier and Troost ceased being directors on April 3,
2018.
The
aggregate fair value of option awards are computed in accordance
with FASB ASC 718.
The
assumptions made in the computation may be found
in
Note 11: Stock-Based Compensation
to
our financial
statements contained in our latest Annual
Report.
Compensation Policies and Practices As They Relate To Our Risk
Management
Our
compensation program for employees does not create incentives for
excessive risk taking by our employees or involve risks that are
reasonably likely to have a material adverse effect on us. Our
compensation has the following risk-limiting
characteristics:
●
Our base pay
consists of competitive salary rates that represent a reasonable
portion of total compensation and provide a reliable level of
income on a regular basis, which decreases incentive on the part of
our executives to take unnecessary or imprudent risks;
●
Option awards are
not tied to formulas that could focus executives on specific
short-term outcomes; and
●
Option awards,
generally, have multi-year vesting which aligns the long-term
interests of our executives with those of our shareholders and,
again, discourages the taking of short-term risk at the expense of
long-term performance.
Securities Authorized for Issuance under Equity Compensation
Plans
Equity
Compensation Plans as of December 31, 2018.
Equity Compensation Plan Information
|
Plan
category
|
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants and
rights
(a)
|
Weighted-average
exercise price
of
outstanding
options,
warrants and
rights
(b)
|
Number of
securities
remaining
available for
future issuance
under
equity
compensation plans
(excluding
securities reflected
in column
(a))
(c)
|
|
Equity compensation
plans approved by security holders (1)
|
1,654,522
|
$
6.07
|
479,152
|
|
Equity compensation
plans not approved by security holders (2)
|
30,000
|
$
7.81
|
-
|
|
Total
|
1,684,522
|
$
6.11
|
479,152
|
|
(1)
|
Reflects
our 2010 Employee Stock Plan, as amended for the benefit of our
directors, officers, employees and consultants. We currently have
reserved 2,600,000 shares of common stock for such persons pursuant
to that plan.
|
|
(2)
|
Comprised
of common stock purchase warrants we issued for
services.
|
Voting Securities and Principal Holders Thereof
As of
the Record Date, we had outstanding 9,632,013 shares of common
stock. Each share of our common stock is entitled to one vote with
respect to each matter on which it is entitled to
vote.
The following table
sets forth, as of the Record Date, the names, addresses, amount and
nature of beneficial ownership and percent of such ownership of (i)
each person or group known to our Company to be the beneficial
owner of more than five percent (5%) of our common stock; and (ii)
each of our officers and directors, and officers and directors as a
group:
Security Ownership of Certain Beneficial Owners and
Management
___________
*
Represents less
than 1% of the outstanding shares of common stock.
(1)
To
our best knowledge, as of the date hereof, such holders had the
sole voting and investment power with respect to the voting
securities beneficially owned by them, unless otherwise indicated
herein. Includes the person's right to obtain additional shares of
common stock within 60 days from the Record Date.
(2)
Unless
otherwise noted, in care of SharpSpring, Inc., 5001 Celebration
Pointe Avenue, Suite, 410, Gainesville, FL 32608.
(3)
Based on
9,632,013
shares of common stock outstanding on
the Record Date. Does not include shares underlying: (i) options to
purchase shares of our common stock under our 2010 Employee Stock
Plan, (ii) outstanding warrants to purchase shares of our common
stock, or (iii) shares issuable upon conversion of convertible
notes.
(4)
Represents
options exercisable within 60 days from the Record Date and shares
of common stock issuable within 60 days from Record Date upon
conversion of a convertible note.
(5)
Based solely upon a review of Schedule 13G filings with the
SEC.
(6)
If
a person listed on this table has the right to obtain additional
shares of common stock within 60 days from the Record Date, the
additional shares are deemed to be outstanding for the purpose of
computing the percentage of class owned by such person, but are not
deemed to be outstanding for the purpose of computing the
percentage of any other person.
(7)
Additionally
includes (i) 519,000 shares of common stock held directly by
Evercel Holdings LLC, a subsidiary of Evercel, Inc.; (ii) 1,082,685
shares of common stock issuable upon conversion of a convertible
note held directly by SHSP Holdings, LLC that is convertible within
60 days from the Record Date; and (iii) 2,027 shares held directly
by Mr. Allen. Mr. Allen is the founder and manager of Corona Park
Investment Partners, LLC (“CPIP”). CPIP is a member of
Evercel Holdings LLC and is a member and sole manager of SHSP
Holdings, LLC. Evercel, Inc. is a member and the manager of Evercel
Holdings LLC and is a member of SHSP Holdings.
We are
not aware of any arrangements that could result in a change of
control.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the time of the Annual Meeting, our
Board of Directors will consist of five directors:
Steven A.
Huey, Richard Carlson, David A. Buckel, Marietta Davis and Daniel
C. Allen. At the Annual Meeting, five directors are to be elected
for a one (1) year term to serve until the next annual meeting of
stockholders and until a successor for such director is elected and
qualified, or until the death, resignation or removal of such
director.
Nominees
There
are five nominees, all of whom currently serve on our Board of
Directors. Set forth below is information regarding the nominees
for election to our Board of Directors:
|
Name
|
|
Position(s) with the Company
|
|
Year First Elected Director
|
|
Steven
A. Huey
|
|
Chair
of the Board of Directors
|
|
2016
|
|
Richard
Carlson
|
|
Chief
Executive Officer; Director
|
|
2015
|
|
David
A. Buckel
|
|
Director
|
|
2014
|
|
Marietta
Davis
|
|
Director
|
|
2017
|
|
Daniel
C. Allen
|
|
Director
|
|
2018
|
Each
person nominated has agreed to serve if elected, and our Board of
Directors has no reason to believe that any nominee will be
unavailable or will decline to serve. In the event, however, that
any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any
nominee who is designated by the current Board of Directors to fill
the vacancy.
Vote Required
Directors will be
elected by a plurality of the votes cast at the Annual Meeting. A
“withhold” vote with respect to any nominee will not
effect the election of that nominee. Each holder of common stock is
entitled to one vote for each share held.
Recommendation of the Board of Directors
The
Board of Directors recommends a vote “
FOR
” the election of all of the
above nominees.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2019
We are
asking stockholders to ratify the appointment of Cherry Bekaert LLP
to serve as our Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2019.
Representatives of Cherry Bekaert LLP will not be present at the
Annual Meeting.
The
following table represents aggregate fees billed to the Company for
the fiscal years ended December 31, 2018 and December 31, 2017 by
Cherry Bekaert LLP.
|
|
2018
|
2017
|
|
|
|
|
|
Audit
Fees
|
$
157,587
|
$
162,447
|
|
Audit-Related
Fees
|
12,000
|
9,200
|
|
Tax
Fees
|
—
|
—
|
|
All Other
Fees
|
3,500
|
—
|
|
Total
|
$
173,087
|
$
171,647
|
Audit Fees
are the fees billed during
the years ended December 31, 2018 and December 31, 2017 for
professional services rendered by Cherry Bekaert LLP for the audit
of the Company’s annual financial statements and review of
financial statements included in the Company’s Form 10-Q or
services that are normally provided by Cherry Bekaert LLP in
connection with statutory and regulatory filings or
engagements.
Audit-Related Fees
are the aggregate
fees billed during the years ended December 31, 2018 and December
31, 2017 for assurance and related services rendered by Cherry
Bekaert LLP that are reasonably related to the performance of the
audit or review of the Company’s financial statements and are
not reported under the category Audit Fees described
above.
Tax Fees
are the fees billed during the
years ended December 31, 2018 and December 31, 2017 for tax
compliance rendered by Cherry Bekaert LLP.
All Other Fees
are the aggregate fees
billed for products and services provided during the years ended
December 31, 2018 and December 31, 2017 rendered by Cherry Bekaert
LLP, other than the services reported in the above
categories.
Audit Committee Pre-Approval Policies
.
The
Company’s audit committee currently does not have any
pre-approval policies or procedures concerning services performed
by Cherry Bekaert LLP, however, all the services performed by
Cherry Bekaert LLP that are described above were pre-approved by
the Company’s audit committee.
None of
the hours expended on Cherry Bekaert LLP’s engagement to
audit the Company’s financial statements for the years ended
December 31, 2018 and December 31, 2017 were attributed to work
performed by persons other than Cherry Bekaert LLP’s
full-time, permanent employees.
Vote Required
The
vote required to ratify the appointment of Cherry Bekaert LLP to
serve as our Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2019 is the
affirmative vote of the holders of a majority of the votes cast at
the Annual Meeting entitled to vote on the matter. Each holder of
common stock is entitled to one vote for each share
held.
Recommendation of the Board of Directors
The
Board of Directors recommends that the stockholders vote
“
FOR
” the
proposal to ratify the appointment of Cherry Bekaert LLP to serve
as our Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2019.
PROPOSAL THREE
ADDOPTION OF THE SHARPSPRING, INC. 2019 EQUITY INCENTIVE
PLAN
On April 25, 2019, the
Board of Directors of the Company adopted and
approved the SharpSpring, Inc. 2019 Equity Incentive Plan (the
“
Plan
”), subject to stockholder approval prior to
April 25, 2020.
The
Board of Directors approved the Plan to ensure that the Company has
adequate ways in which to provide stock based compensation to its
directors, officers, employees, and consultants. The Board of
Directors believes that the ability to grant stock-based
compensation is important to the Company’s future
success.
Approval of the Plan is needed to continue to
provide a pool of shares available for the grant of stock-based
compensation. Our 2010 Employee Stock Plan, which expires
on
June 14, 2020,
has
597,039
shares remaining
available,
a
s of the Record
Date, for grant under our 2010 Employee Stock Plan. If
shareholder approval is not obtained for the Plan, we will not be
able to grant equity awards to our directors, officers, employees,
and consultants after the 2010 Employee Stock Plan expires. If
shareholder approval is obtained for the Plan, the Company intends
to terminate the 2010 Employee Stock Plan soon after such approval
is obtained.
The Plan incorporates key corporate governance practices, including
the following:
●
Limits
the number of shares available to 697,039, which represents
approximately 7% of our issued and outstanding common shares as of
the Record Date;
●
The
price of any outstanding Award may not be altered or repriced
without stockholder approval;
●
Discounted
stock options and stock appreciation rights are not
allowed;
●
Reload
options are not provided for under the Plan;
●
Performance
goals may be imposed on grants;
●
No
ability of participants to receive dividend payments with respect
to restricted stock until the shares are vested;
●
The
Plan does not have fungible counting provisions
●
Payment of the exercise price or applicable taxes
made by delivery of shares, or withholding of shares, in
satisfaction of a participant
’
s
obligation, will not result in additional shares becoming available
for subsequent awards under the Plan.
Significant Features of the Plan:
The following is a summary of certain significant
features of the Plan. The information which follows is subject to,
and qualified in its entirety by reference to, the Plan document,
which is attached to this proxy statement
as
Appendix
A
. We urge you to read the Plan
in its entirety.
Awards
that may be granted include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards, (e) Performance Share Awards, (f) Cash Awards,
and (g) Other Equity-Based Awards. These awards offer the
Company’s officers, employees, directors and consultants the
possibility of future value, depending on the long-term price
appreciation of the Company’s common stock and the award
holder’s continuing service with the Company.
Stock
options give the option holder the right to acquire from the
Company a designated number of shares of common stock at a purchase
price that is fixed upon the grant of the option. The exercise
price will be not less than the market price of the common stock on
the date of grant. Stock options granted may be either
tax-qualified stock options (so-called “incentive stock
options”) or non-qualified stock options.
Stock Appreciation Rights (SARs), sometimes
referred to as phantom equity,
may be granted alone or in tandem with options,
have an economic value similar to that of options. When a SAR for a
particular number of shares is exercised, the holder receives a
payment equal to the difference between the market price of the
shares on the date of exercise and the exercise price of the shares
under the SAR. The exercise price for SARs is the market price of
the shares on the date the SAR is granted. Under the Plan, holders
of SARs may receive this payment – the appreciation value
– either in cash or shares of common stock valued at the fair
market value on the date of exercise. The form of payment will be
determined by the Company.
A
Restricted Award is an Award of actual shares of common stock
("
Restricted Stock
") or
hypothetical common stock units ("
Restricted Stock Units
") having a value
equal to the Fair Market Value of an identical number of shares of
common stock at no cost.
Restricted
shares are forfeitable and non-transferable until the shares vest.
The vesting date or dates and other conditions for vesting are
established when the shares are awarded.
Restricted Stock
Units with a deferral feature, whereby settlement is deferred
beyond the vesting date until the occurrence of a future payment
date or event set forth in an Award Agreement ("
Deferred Stock Units
"), may also be
granted.
The
Plan also provides for performance compensation awards,
representing the right to receive a payment, which may be in the
form of cash, shares of common stock, or a combination, based on
the attainment of pre-established goals.
All
of the permissible types of awards under the Plan are described in
more detail as follows:
Purposes of
Plan:
The purposes of the
Plan are to: (a) enable the Company to attract and retain the types
of employees, consultants and directors who will contribute to the
Company's long range success; (b) provide incentives that align the
interests of employees, consultants and directors with those of the
shareholders of the Company; and (c) promote the success of the
Company's business.
Administration
of the Plan:
The Plan is
administered by a committee of one or more members of the Board of
Directors appointed by the Board of Directors to administer the
Plan or, in the Board's sole discretion, by the Board of Directors
(the “
Committee
”). Among other things, the Committee
has the authority to select persons who will receive awards,
determine the types of awards and the number of shares to be
covered by awards, and to establish the terms, conditions,
restrictions and other provisions of awards. The Committee has
authority to establish, amend and rescind rules and regulations
relating to the Plan.
Eligible
Recipients:
Persons
eligible to receive awards under the Plan will be those officers,
employees, consultants, and directors of the Company and its
subsidiaries (if any) who are selected by the Company’s Board
of Directors or the Committee of the Board administering the Plan.
As of the Record Date, approximately 184 individuals were eligible
to participate in the Plan.
Shares
Available Under the Plan:
The maximum number of shares of our common
stock that may be delivered to participants under the Plan is
697,039; subject to adjustment for certain corporate changes
affecting the shares, such as stock splits. Shares subject to an
award under the Plan for which the award is canceled, forfeited or
expires again become available for grants under the Plan. Shares
subject to an award that is settled in cash will not again be made
available for grants under the Plan. Payment of the exercise price
or applicable taxes made by delivery of shares, or withholding of
shares, in satisfaction of a participant’s obligation, will
not result in additional shares becoming available for subsequent
awards under the Plan.
Stock Options:
General.
Subject to the provisions of the Plan, the
Committee has the authority to determine all grants of stock
options. That determination will include: (i) the number of shares
subject to any option; (ii) the exercise price per share; (iii) the
expiration date of the option; (iv) the manner, time and date of
permitted exercise; (v) other restrictions, if any, on the option
or the shares underlying the option; and (vi) any other terms and
conditions as the Committee may determine.
Option
Price
. The exercise price for
stock options will be determined at the time of grant. Normally,
the exercise price may not be less than the fair market value on
the date of grant. As a matter of tax law, the exercise price for
any incentive stock option awarded may not be less than the fair
market value of the shares on the date of grant. However, incentive
stock option grants to any person owning 10% or more of the
Company’s voting stock must have an exercise price of not
less than 110% of the fair market value on the grant
date.
Exercise of
Options.
An option may be
exercised only in accordance with the terms and conditions for the
option agreement as established by the Committee at the time of the
grant. The option must be exercised by notice to the Company,
accompanied by payment of the exercise price. Payments may be made
in cash or, at the option of the Committee, by actual or
constructive delivery of shares of common stock to the holder of
the option based upon the fair market value of the shares on the
date of exercise.
Expiration or
Termination.
Options, if
not previously exercised, will expire on the expiration date
established by the Committee at the time of grant. In the case of
incentive stock options, such term cannot exceed ten years provided
that in the case of holders of 10% or more of the Company’s
voting stock, such term cannot exceed five years. Options will
terminate before their expiration date if the holder’s
service with the Company or a subsidiary terminates before the
expiration date. The option may remain exercisable for specified
periods after certain terminations of employment, including
terminations as a result of death, disability or retirement, with
the precise period during which the option may be exercised to be
established by the Committee and reflected in the grant evidencing
the award.
Incentive and Non-Qualified
Options.
As described
elsewhere in this summary, an incentive stock option is an option
that is intended to qualify under certain provisions of the
Internal Revenue Code of 1986, as amended (the
“
Code
”) for more favorable tax treatment than
applies to non-qualified stock options. Any option that does not
qualify as an incentive stock option will be a non-qualified stock
option. Under the Code, certain restrictions apply to incentive
stock options. For example, the exercise price for incentive stock
options may not be less than the fair market value of the shares on
the grant date and the term of the option may not exceed ten years.
In addition, an incentive stock option may not be transferred,
other than by will or the laws of descent and distribution, and is
exercisable during the holder’s lifetime only by the holder.
In addition, no incentive stock options may be granted to a holder
that is first exercisable in a single year if that option, together
with all incentive stock options previously granted to the holder
that also first become exercisable in that year, relate to shares
having an aggregate market value in excess of $100,000, measured at
the grant date.
Stock
Appreciation Rights:
Awards of stock appreciation rights or
“SARs” may be granted alone or in tandem with stock
options. SARs provide the holder with the right, upon exercise, to
receive a payment, in cash or shares of stock, having a value equal
to the excess of the fair market value on the exercise date of the
shares covered by the award over the exercise price of those
shares. Essentially, a holder of a SAR benefits when the market
price of the common stock increases, to the same extent that the
holder of an option does, but, unlike an option holder, the SAR
holder need not pay an exercise price upon exercise of the
award.
Stock
Awards:
Stock Awards can
also be granted under the Plan. A stock award is a grant of shares
of common stock or of a right to receive shares in the future.
These awards will be subject to such conditions, restrictions and
contingencies as the Committee shall determine at the date of
grant. Those may include requirements for continuous service and/or
the achievement of specified performance goals.
Cash
Awards:
A cash award is an
award that may be in the form of cash or shares of common stock or
a combination, based on the attainment of pre-established
performance goals and other conditions, restrictions and
contingencies identified by the Committee.
Other
Equity-Based Awards
:
The Committee may
grant Other Equity-Based Awards, either alone or in tandem with
other Awards, in such amounts and subject to such
conditions, restrictions and contingencies
identified by the Committee.
Performance
Goals
:
are the one
or more goals established by the Committee for the performance
period based upon business criteria or other performance measures
determined by the Committee in its discretion.
Other
Material Provisions:
Awards will be evidenced by a written
agreement, in such form as may be approved by the Committee. In the
event of various changes to the capitalization of the Company, such
as stock splits, stock dividends and similar re-capitalizations, an
appropriate adjustment will be made by the Committee to the number
of shares covered by outstanding awards or to the exercise price of
such awards. The Committee is also permitted to include in the
written agreement provisions that provide for certain changes in
the award in the event of a change of control of the Company,
including acceleration of vesting. Except as otherwise permitted by
the Committee, awards will not be transferable, other than by will
or the laws of descent and distribution. Prior to any award
distribution, the Company is permitted to deduct or withhold
amounts sufficient to satisfy any employee withholding tax
requirements. Our Board also has the authority, at any time, to
discontinue the granting of awards. The Board also has the
authority to alter or amend the Plan or any outstanding award or
may terminate the Plan as to further grants, provided that no
amendment will, without the approval of the Company’s
shareholders, to the extent that such approval is required by law
or the rules of an applicable exchange, increase the number of
shares available under the Plan, change the persons eligible for
awards under the Plan, extend the time within which awards may be
made, or amend the provisions of the Plan related to amendments. No
amendment that would adversely affect any outstanding award made
under the Plan can be made without the consent of the holder of
such award.
Federal
Income Tax Consequences:
The following is based on current laws,
regulations and interpretations, all of which are subject to
change. It does not purport to be complete and does not describe
the state, local or foreign tax considerations or the consequences
for any particular individual.
Non-qualified Options.
Under
current federal income tax law, the grant of
a non-qualified option under the Plan will have no
federal income tax consequences to us or the optionee (unless the
options are publicly traded). Generally, upon exercise of
a non-qualified stock option granted under the Plan, the
excess of the fair market value of the stock at the date of
exercise over the option price (the “
Spread
”) is taxable to the optionee as ordinary
income and is subject to withholding. All such amounts taxable to
an employee are deductible by us as compensation expense. The
deduction will be allowed for our taxable year which includes the
end of the taxable year in which the optionee includes an amount in
income.
Generally,
the shares received on exercise of an option under the Plan are not
subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of
exercise of a non-qualified stock option. However, if the
optionee is subject to Section 16(b) of the Exchange Act, the
Section 16(b) restriction will be considered a substantial
risk of forfeiture for tax purposes. Under current law, employees
who are either our directors or officers will be subject to
restrictions under Section 16(b) of the Exchange Act during
their term of service and for up to six months after termination of
such service. SEC Rule 16b-3 provides an exemption
from the restrictions of Section 16(b) for the grant of
derivative securities, such as stock options, under qualifying
plans. Because the Plan satisfies the requirements for exemption
under SEC Rule 16b-3, the grant of options will not be
considered a purchase and the exercise of the options to acquire
the underlying shares of common stock will not be considered a
purchase or a sale. Thus, ordinary income will be recognized and
the Spread will be measured on the date of exercise.
The
taxable income resulting from the exercise of
a non-qualified stock option will constitute wages for
employees and is generally subject to withholding. We will be
required to make whatever arrangements are necessary to ensure that
funds equaling the amount of tax required to be withheld, if any,
are available for payment, including the deduction of required
withholding amounts from the optionee’s other compensation
and requiring payment of withholding amounts as part of the
exercise price. The tax basis for the common stock acquired is the
option price plus the taxable income recognized. An optionee will
recognize gain or loss on the subsequent sale of shares acquired
upon exercise of a non-qualified stock option in an
amount equal to the difference between the amount realized and the
tax basis of such shares. Such gain or loss will be long-term or
short-term capital gain or loss, depending upon whether the shares
have been held for more than one year.
Incentive Stock
Options
. There will
be no federal income tax consequences to us or the employee as a
result of the grant of an incentive stock option. The optionee also
will not recognize income when the incentive stock option is
exercised (subject to the alternative minimum tax rules discussed
below). Generally, we receive no deduction at the time of
exercise.
In
the event of a disposition of shares acquired upon exercise of an
incentive stock option, the tax consequences depend upon how long
the employee has held the shares. If the employee does not dispose
of the shares within two years after the incentive stock option was
granted, or within one year after the incentive stock option was
exercised and shares were purchased, then the employee must
recognize only a long-term capital gain or loss. We are not
entitled to any deduction under these circumstances.
If
the optionee fails to satisfy either of the foregoing holding
periods, then he or she must recognize ordinary income in the year
of disposition (referred to as a “disqualifying
disposition”). The amount of such ordinary income generally
is determined under the rules applicable
to non-qualifiedoptions (see above) based on the Spread at the
date of exercise. However, such ordinary income will in no event
exceed the amount of the gain realized on the sale, provided that
the disposition involves an arm’s-length sale or
exchange with an unrelated party. Any gain in excess of the amount
taxed as ordinary income will be treated as capital gain. In the
year of the disqualifying disposition, we are entitled to a
deduction equal to the amount of ordinary income recognized by the
optionee.
The Spread under an incentive stock option is
treated as an adjustment in computing alternative minimum taxable
income (“
AMTI
”) for the year of exercise. As a result,
the Spread on an incentive stock option will be included in income
for purposes of the alternative minimum tax even though it is not
included in taxable income for purposes of determining the regular
tax liability of an optionee. A subsequent disqualifying
disposition of shares acquired upon exercise of an incentive stock
option will eliminate the AMTI adjustment if the disposition occurs
in the same taxable year as the exercise. A disqualifying
disposition in a subsequent taxable year will not affect the
alternative minimum tax computation in the earlier
year.
Payment of Option Exercise
Price in Shares
. To
the extent an optionee pays all or part of the option exercise
price of a non-qualified stock option by tendering shares
of common stock owned by the optionee, the tax consequences
described above apply except that the number of shares of common
stock received upon such exercise which is equal to the number of
shares surrendered in payment of the option price will have the
same tax basis and holding periods as the shares surrendered. The
additional shares of common stock received upon such exercise will
have a tax basis equal to the amount of ordinary income recognized
on such exercise and a holding period which commences on the day
following the date of recognition of such income. Under Treasury
regulations, if an optionee exercises an incentive stock option by
tendering shares of common stock previously acquired by the
exercise of an incentive stock option that have not satisfied
statutory holding period requirements, a disqualifying disposition
will occur and the optionee will recognize income and be subject to
other basis allocation and holding period
requirements.
Restricted Stock
Awards
. Stock
granted under the Plan may, in the determination of the Committee,
be subject to rights of repurchase and other transfer restrictions.
The tax consequences of stock granted under the Plan depends on
whether the stock is subject to restrictions and if so, whether the
restrictions are deemed to create a “substantial risk of
forfeiture” under Code Section 83 (for example, stock
granted under the Plan which is subject to our right to repurchase
the stock at a price that is less than fair market value which
right lapses over a period of continued employment is considered a
“substantial risk of forfeiture” under Code
Section 83).
If
stock is not subject to a “substantial risk of
forfeiture,” the recipient normally will recognize taxable
ordinary income equal to the value of the stock in the year in
which the stock is granted less the amount paid for that stock. If
the stock is subject to a “substantial risk of
forfeiture,” the recipient normally will recognize taxable
ordinary income as and when the “substantial risk of
forfeiture” lapses in the amount of the fair market value of
the shares no longer subject to the “substantial risk of
forfeiture” less the amount paid for the stock. Upon
disposition of the stock, the recipient will recognize a capital
gain or loss equal to the difference between the selling price and
the sum of the amount paid for the stock plus any amount recognized
as ordinary income upon grant or vesting of the stock. The gain or
loss will be long or short-term depending on how long the recipient
held the stock. In general, the holding period for the stock
commences when the stock is no longer subject to a substantial risk
of forfeiture.
A
recipient of stock subject to a “substantial risk of
forfeiture” may make an election under Code
Section 83(b) to recognize ordinary income in the year the
recipient purchases the restricted stock, rather than waiting until
the “substantial risk of forfeiture” lapses. If the
stock recipient makes a Section 83(b) election, the recipient
will be required to recognize as ordinary income in the year the
recipient purchases the stock the difference, if any, between the
fair market value of the stock on the purchase date and the
purchase price paid. If the stock recipient makes a
Section 83(b) election, the recipient will not be required to
recognize any income when the “substantial risk of forfeiture
lapses.”
Generally,
with respect to employees, we are required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, we will generally be
entitled to a business expense deduction equal to the taxable
ordinary income realized by the stock recipient.
Stock Appreciation
Rights.
Generally,
the recipient of a SAR will not recognize any taxable income at the
time the SAR is granted. With respect to stand-alone SARs, if the
holder receives the appreciation inherent in the SARs in cash, the
cash will be taxable as ordinary compensation income to the
employee at the time that it is received. If the holder receives
the appreciation inherent in the stand-alone SARs in stock, the
holder will recognize ordinary compensation income equal to the
excess of the fair market value of the stock on the day it is
received over any amounts paid by the holder for the
stock.
The
income recognized by the holder of a stand-alone SAR will generally
be subject to U.S. income tax withholding and employment
taxes.
In
general, we will not be entitled to a federal income tax deduction
upon the grant or termination of stand-alone SARs. However, upon
the exercise of a stand-alone SAR, we will be entitled to a
deduction for federal income tax purposes equal to the amount of
ordinary income that the holder is required to recognize as a
result of the exercise, provided that the deduction is not
otherwise disallowed under the Code.
Performance Compensation
Awards
. Generally,
the recipient of a performance compensation award will not
recognize any taxable income at the time the award is made but will
generally recognize taxable income at the time the award is paid.
If the performance compensation award is payable in cash, the cash
will be taxable as ordinary compensation income to the participant
at the time that it is received. If the holder receives the
performance compensation award in stock, the participant will
recognize ordinary compensation income equal to the excess of the
fair market value of the stock on the day it is received over any
amounts paid by the holder for the stock.
The
income recognized by the holder of a performance compensation award
will generally be subject to U.S. income tax withholding and
employment taxes.
In
general, we will not be entitled to a federal income tax deduction
upon the grant or termination of performance compensation awards.
However, upon payment of a performance compensation award, we will
be entitled to a deduction for federal income tax purposes equal to
the amount of ordinary income that the participant is required to
recognize as a result of such payment, provided that the deduction
is not otherwise disallowed under the Code.
Limitations on
Deductions
. Section 162(m) of the Code
denies a deduction to any publicly held corporation for
compensation paid to certain “covered employees” in a
taxable year to the extent that compensation to each covered
employee exceeds $1 million.
Compliance with
Section 409A of the Code
. Code Section 409A imposes
requirements on non-qualified deferred compensation
plans. The requirements include the timing of elections to defer,
the timing of distributions and prohibitions on the acceleration of
distributions. Failure to satisfy these requirements may result in
the immediate taxation of the arrangement, the imposition of an
additional 20% income tax on the participant and the possible
imposition of interest and penalties on the unpaid tax. Proposed
regulations generally provide that the type of equity incentives
provided under the Plan will not be
considered non-qualified deferred compensation. However,
some awards could be covered by Section 409A of the
Code. For example, the modification of a stock option or stock
appreciation right with an exercise price less than fair market
value of the underlying common stock could
constitute non-qualified deferred compensation. In such
event, the administrator normally would expect to design and
administer any such award in a manner that ordinarily should avoid
adverse federal income tax consequences under Section 409A of
the Code to any affected participant. In the event that an award
under the Plan is determined to
constitute “non-qualified deferred
compensation” that would be subject to additional tax under
Section 409A of the Code, the Committee may impose such
additional conditions as it deems necessary to avoid the imposition
of the additional tax.
Recognition of Compensation
Expense.
In accordance
with ASC 718,
Compensation-Stock
Compensation
, the Company is
required to recognize compensation expense in its income statement
for the grant-date fair value of stock options and other
equity-based compensation issued to its employees and directors,
the amount of which can only be determined at the time of
grant.
New Plan Benefits
Except
as described below, no awards have been made to eligible persons
under the Plan as of the Record Date. The future awards, if any,
that will be made to eligible persons under the Plan are subject to
the discretion of the Committee and, therefore, we cannot currently
determine the benefits or number of shares subject to awards that
may be granted in the future to our employees, officers, directors
and consultants under the Plan. Therefore, a New Plan Benefits
Table is not provided.
The
Plan was adopted and approved by our Board of directors on April
25, 2019, and is subject to stockholder approval prior to April 25,
2020. On February 21, 2019, subject to approval by our Compensation
Committee and subsequent to stockholder approval of the Plan, the
following named executive officers will be issued the number of
Restricted Stock Units set forth next to their name:
Richard
Carlson, Chief Executive Officer: 12,500 Restricted Stock
Units
Travis
Whitton, Chief Technology Officer: 7,353 Restricted Stock
Units
No awards will be issued to any persons from the Plan prior to
stockholder approval.
C
ompensation for our directors is
discretionary and is reviewed from time to time by our Board of
Directors. Any determinations with respect to Board compensation
are made by our Board of Directors. Since our second quarter of
2017, we have compensated all non-employee directors with a stipend
of $7,500 per quarter ($30,000 per year), payable quarterly in
stock. Upon stockholder approval of the Plan, all stock issued to
our directors will be Stock Awards from the Plan. Typically, newly
elected non-employee directors receive 16,000 stock options upon
joining the board, which vest over four years, which will also be
issued from the Plan.
No awards will
be issued to any persons from the Plan prior to stockholder
approval.
Vote Required
The
vote required to approve the 2019 Equity Incentive Plan is the
affirmative vote of the holders of a majority of the votes cast at
the Annual Meeting entitled to vote on the matter. Each holder of
common stock is entitled to one vote for each share
held.
Recommendation of the Board of Directors
The Board of Directors recommends that the
shareholders vote “
FOR
” approval of the 2019 Equity Incentive
Plan.
STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
In
order for stockholder proposals to be included in our proxy
statement for the 2020 Annual Meeting, we must receive them at our
principal executive offices, 5001 Celebration Pointe Avenue, Suite
410, Gainesville, FL 32608, by January 1, 2020, being 120 days
prior to the date of the first anniversary of the date of our proxy
statement for the 2019 Annual Meeting of Stockholders. All other
stockholder proposals, including nominations for directors, in
order to be voted on at the 2020 Annual Meeting, must be received
by us not earlier than February 14, 2020 and not later than March
15, 2020 being, respectively, 120 days and 90 days prior to the
date of the first anniversary of the 2019 Annual Meeting of
Stockholders. In the event that the 2020 Annual Meeting is called
for a date that is not within 30 days before or after the
anniversary date of the 2019 Annual Meeting of Stockholders, notice
by a stockholder in order to be timely must be so received not
later than the close of business on the 10th day following the
day on which such notice of the date of the 2020 Annual Meeting is
mailed or such public disclosure of the date of the 2020 Annual
Meeting is made, whichever first occurs.
OTHER MATTERS
Our
Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters
do properly come before the Annual Meeting or any adjournments or
postponements thereof, our Board of Directors intends that the
persons named in the proxies will vote upon such matters in
accordance with the best judgment of the proxy
holders.
Whether
or not you intend to be present at the meeting, you are urged to
fill out, sign, date and return the enclosed proxy at your earliest
convenience.
Gainesville,
FL
April
30, 2019
APPENDIX A
SHARPSPRING, INC.
2019 EQUITY INCENTIVE PLAN
1.
Purpose;
Eligibility
.
1.1
General
Purpose
. The name of this plan
is the SharpSpring, Inc. 2019 Equity Incentive Plan (the
"
Plan
"). The purposes of the Plan are to (a) enable
SharpSpring, Inc., a Delaware corporation (the "
Company
"), and any Affiliate to attract and retain the
types of Employees, Consultants and Directors who will contribute
to the Company's long range success; (b) provide incentives that
align the interests of Employees, Consultants and Directors with
those of the shareholders of the Company; and (c) promote the
success of the Company's business.
1.2
Eligible
Award Recipients
. The persons
eligible to receive Awards are the Employees, Consultants and
Directors of the Company and its Affiliates and such other
individuals designated by the Committee who are reasonably expected
to become Employees, Consultants and Directors after the receipt of
Awards.
1.3
Available
Awards
. Awards that may be
granted under the Plan include: (a) Incentive Stock Options, (b)
Non-qualified Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Awards, (e) Performance Share Awards, (f) Cash Awards,
and (g) Other Equity-Based Awards.
2.
Definitions
.
"
Affiliate
" means a corporation or other entity that,
directly or through one or more intermediaries, controls, is
controlled by or is under common control with, the
Company.
"
Applicable
Laws
" means the requirements
related to or implicated by the administration of the Plan under
applicable state corporate law, United States federal and state
securities laws, the Code, any stock exchange or quotation system
on which the shares of Common Stock are listed or quoted, and the
applicable laws of any foreign country or jurisdiction where Awards
are granted under the Plan.
"
Award
" means any right granted under the Plan,
including an Incentive Stock Option, a Non-qualified Stock Option,
a Stock Appreciation Right, a Restricted Award, a Performance Share
Award, a Cash Award, or an Other Equity-Based
Award.
"
Award
Agreement
" means a written
agreement, contract, certificate or other instrument or document
evidencing the terms and conditions of an individual Award granted
under the Plan which may, in the discretion of the Company, be
transmitted electronically to any Participant. Each Award Agreement
shall be subject to the terms and conditions of the
Plan.
"
Beneficial
Owner
" has the meaning assigned
to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that in calculating the beneficial ownership of any
particular Person, such Person shall be deemed to have beneficial
ownership of all securities that such Person has the right to
acquire by conversion or exercise of other securities, whether such
right is currently exercisable or is exercisable only after the
passage of time. The terms "Beneficially Owns" and "Beneficially
Owned" have a corresponding meaning.
"
Board
" means the Board of Directors of the Company, as
constituted at any time.
"Cash Award"
means an Award denominated in cash
that is granted under Section
7.4
of the
Plan.
"
Cause
" means:
With
respect to any Employee or Consultant, unless the applicable Award
Agreement states otherwise:
(a)
If the Employee or Consultant is a party to an employment or
service agreement with the Company or its Affiliates and such
agreement provides for a definition of Cause, the definition
contained therein; or
(b)
If no such agreement exists, or if such agreement does not define
Cause: (i) the commission of, or plea of guilty or no contest to, a
felony or a crime involving moral turpitude or the commission of
any other act involving willful malfeasance or material fiduciary
breach with respect to the Company or an Affiliate; (ii) conduct
that results in or is reasonably likely to result in harm to the
reputation or business of the Company or any of its Affiliates;
(iii) gross negligence or willful misconduct with respect to the
Company or an Affiliate; or (iv) material violation of state or
federal securities laws.
With
respect to any Director, unless the applicable Award Agreement
states otherwise, a determination by a majority of the
disinterested Board members that the Director has engaged in any of
the following:
(a)
malfeasance in office;
(b)
gross misconduct or neglect;
(c)
false or fraudulent misrepresentation inducing the director's
appointment;
(d)
willful conversion of corporate funds; or
(e)
repeated failure to participate in Board meetings on a regular
basis despite having received proper notice of the meetings in
advance.
The
Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to whether a Participant has
been discharged for Cause.
"
Change in
Control
"
(a)
The direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all of
the properties or assets of the Company and its subsidiaries, taken
as a whole, to any Person that is not a subsidiary of the
Company;
(b)
The Incumbent Directors cease for any reason to constitute at least
a majority of the Board;
(c)
The date which is 10 business days prior to the consummation of a
complete liquidation or dissolution of the Company;
(d) The acquisition by any Person of Beneficial
Ownership of 50% or more (on a fully diluted basis) of either (i)
the then outstanding shares of Common Stock of the Company, taking
into account as outstanding for this purpose such Common Stock
issuable upon the exercise of options or warrants, the conversion
of convertible stock or debt, and the exercise of any similar right
to acquire such Common Stock (the "
Outstanding Company Common
Stock
") or (ii) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the "
Outstanding Company Voting
Securities
");
provided,
however
, that for purposes of
this Plan, the following acquisitions shall not constitute a Change
in Control: (A) any acquisition by the Company or any Affiliate,
(B) any acquisition by any employee benefit plan sponsored or
maintained by the Company or any subsidiary, (C) any acquisition
which complies with clauses, (i), (ii) and (iii) of subsection (e)
of this definition or (D) in respect of an Award held by a
particular Participant, any acquisition by the Participant or any
group of persons including the Participant (or any entity
controlled by the Participant or any group of persons including the
Participant); or
(e) The consummation of a reorganization, merger,
consolidation, statutory share exchange or similar form of
corporate transaction involving the Company that requires the
approval of the Company's shareholders, whether for such
transaction or the issuance of securities in the transaction (a
"
Business
Combination
"), unless
immediately following such Business Combination: (i) more than 50%
of the total voting power of (A) the entity resulting from such
Business Combination (the "
Surviving
Company
"), or (B) if
applicable, the ultimate parent entity that directly or indirectly
has beneficial ownership of sufficient voting securities eligible
to elect a majority of the members of the board of directors (or
the analogous governing body) of the Surviving Company (the
"
Parent
Company
"), is represented by
the Outstanding Company Voting Securities that were outstanding
immediately prior to such Business Combination (or, if applicable,
is represented by shares into which the Outstanding Company Voting
Securities were converted pursuant to such Business Combination),
and such voting power among the holders thereof is in substantially
the same proportion as the voting power of the Outstanding Company
Voting Securities among the holders thereof immediately prior to
the Business Combination; (ii) no Person (other than any employee
benefit plan sponsored or maintained by the Surviving Company or
the Parent Company) is or becomes the Beneficial Owner, directly or
indirectly, of 50% or more of the total voting power of the
outstanding voting securities eligible to elect members of the
board of directors of the Parent Company (or the analogous
governing body) (or, if there is no Parent Company, the Surviving
Company); and (iii) at least a majority of the members of the board
of directors (or the analogous governing body) of the Parent
Company (or, if there is no Parent Company, the Surviving Company)
following the consummation of the Business Combination were Board
members at the time of the Board's approval of the execution of the
initial agreement providing for such Business
Combination.]
"
Code
" means the Internal Revenue Code of 1986, as it
may be amended from time to time. Any reference to a section of the
Code shall be deemed to include a reference to any regulations
promulgated thereunder.
"
Committee
" means a committee of one or more members of the
Board appointed by the Board to administer the Plan in accordance
with Section
3.3
and Section
3.4
.
"
Common Stock
" means the common stock, $.001 par value per
share, of the Company, or such other securities of the Company as
may be designated by the Committee from time to time in
substitution thereof.
"
Company
" means SharpSpring, Inc. a Delaware corporation,
and any successor thereto.
"
Consultant
" means any individual or entity which performs
bona fide services to the Company or an Affiliate, other than as an
Employee or Director, and who may be offered securities
registerable pursuant to a registration statement on Form S-8 under
the Securities Act.
"
Continuous
Service
" means that the
Participant's service with the Company or an Affiliate, whether as
an Employee, Consultant or Director, is not interrupted or
terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in
the entity for which the Participant renders such service,
provided
that
there is no interruption
or termination of the Participant's Continuous Service;
provided further
that
if any Award is subject to
Section 409A of the Code, this sentence shall only be given effect
to the extent consistent with Section 409A of the Code. For
example, a change in status from an Employee of the Company to a
Director of an Affiliate will not constitute an interruption of
Continuous Service. The Committee or its delegate, in its sole
discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved
by that party, including sick leave, military leave or any other
personal or family leave of absence. The Committee or its delegate,
in its sole discretion, may determine whether a Company
transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in a
termination of Continuous Service for purposes of affected Awards,
and such decision shall be final, conclusive and
binding.
"
Deferred Stock Units
(DSUs)
" has the meaning set
forth in Section
7.2
hereof.
"
Director
" means a member of the Board.
"
Disability
" means, unless the applicable Award Agreement
says otherwise, that the Participant is unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment;
provided, however,
for purposes of determining the term
of an Incentive Stock Option pursuant to Section
6.10
hereof, the term Disability shall have the meaning
ascribed to it under Section 22(e)(3) of the Code. The
determination of whether an individual has a Disability shall be
determined under procedures established by the Committee. Except in
situations where the Committee is determining Disability for
purposes of the term of an Incentive Stock Option pursuant to
Section
6.10
hereof within the meaning of Section
22(e)(3) of the Code, the Committee may rely on any determination
that a Participant is disabled for purposes of benefits under any
long-term disability plan maintained by the Company or any
Affiliate in which a Participant participates.
"
Disqualifying
Disposition
" has the meaning
set forth in Section
14.12
.
"
Effective
Date
" shall mean the date that
the Company's shareholders approve this Plan if such shareholder
approval occurs before the first anniversary of the date the Plan
is adopted by the Board.
"
Employee
" means any person, including an Officer or
Director, employed by the Company or an Affiliate;
provided,
that,
for purposes of
determining eligibility to receive Incentive Stock Options, an
Employee shall mean an employee of the Company or a parent or
subsidiary corporation within the meaning of Section 424 of the
Code. Mere service as a Director or payment of a director's fee by
the Company or an Affiliate shall not be sufficient to constitute
"employment" by the Company or an Affiliate.
"
Exchange Act
" means the Securities Exchange Act of 1934, as
amended.
"
Fair Market
Value
" means, as of any date,
the value of the Common Stock as determined below. If the Common
Stock is listed on any established stock exchange or a national
market system, including without limitation, the NASDAQ Stock
Market the Fair Market Value shall be the closing price of a share
of Common Stock (or if no sales were reported the closing price on
the date immediately preceding such date) as quoted on such
exchange or system on the day of determination, as reported on such
exchange or system official website. In the absence of an
established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Committee and such
determination shall be conclusive and binding on all
persons.
"Fiscal Year"
means the Company's fiscal
year.
"
Free Standing
Rights
" has the meaning set
forth in Section 7.1
(a)
.
"
Good Reason
" means, unless the applicable Award Agreement
states otherwise:
(a)
If an Employee or Consultant is a party to an employment or service
agreement with the Company or its Affiliates and such agreement
provides for a definition of Good Reason, the definition contained
therein; or
(b)
If no such agreement exists or if such agreement does not define
Good Reason, the occurrence of the following without the
Participant's express written consent, which is not remedied by the
Company within thirty (30) days of its receipt of a written notice
from the Participant describing the applicable circumstances (which
notice must be provided by the Participant within ninety (90) days
of the Participant's knowledge of the applicable circumstances): a
geographical relocation of the Participant's principal office
location by more than one hundred fifty (150) miles.
"
Grant Date
" means the date on which the Committee adopts a
resolution, or takes other appropriate action, expressly granting
an Award to a Participant that specifies the key terms and
conditions of the Award or, if a later date is set forth in such
resolution, then such date as is set forth in such
resolution.
"
Incentive Stock
Option
" means an Option that is
designated by the Committee as an incentive stock option within the
meaning of Section 422 of the Code and that meets the requirements
set out in the Plan.
"
Incumbent
Directors
" means individuals
who, on the Effective Date, constitute the Board,
provided
that
any individual becoming a
Director subsequent to the Effective Date whose election or
nomination for election to the Board was approved by a vote of at
least two-thirds of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for Director
without objection to such nomination) shall be an Incumbent
Director. No individual initially elected or nominated as a
director of the Company as a result of an actual or threatened
election contest with respect to Directors or as a result of any
other actual or threatened solicitation of proxies by or on behalf
of any person other than the Board shall be an Incumbent
Director.
"
Non-Employee
Director
" means a Director who
is a "non-employee director" within the meaning of Rule
16b-3.
"
Non-qualified Stock
Option
" means an Option that by
its terms does not qualify or is not intended to qualify as an
Incentive Stock Option.
"
Officer
" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules
and regulations promulgated thereunder.
"
Option
" means an Incentive Stock Option or a
Non-qualified Stock Option granted pursuant to the
Plan.
"
Optionholder
" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds
an outstanding Option.
"
Option Exercise
Price
" means the price at which
a share of Common Stock may be purchased upon the exercise of an
Option.
"Other Equity-Based
Award"
means an Award that is
not an Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, or Performance Share Award that is granted
under Section
7.4
and is payable by delivery of Common
Stock and/or which is measured by reference to the value of Common
Stock.
"
Participant
" means an eligible person to whom an Award is
granted pursuant to the Plan or, if applicable, such other person
who holds an outstanding Award.
"
Performance
Goals
" means, for a Performance
Period, the one or more goals established by the Committee for the
Performance Period based upon business criteria or other
performance measures determined by the Committee in its
discretion.
"
Performance
Period
" means the one or more
periods of time not less than one fiscal quarter in duration, as
the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a
Participant's right to and the payment of a Performance Share Award
or a Cash Award.
"
Performance Share
Award
" means any Award granted
pursuant to Section
7.3
hereof.
"
Performance
Share
" means the grant of a
right to receive a number of actual shares of Common Stock or share
units based upon the performance of the Company during a
Performance Period, as determined by the
Committee.
"
Permitted
Transferee
" means: (a) a member
of the Optionholder's immediate family (child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships), any person sharing the Optionholder's
household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, a foundation
in which these persons (or the Optionholder) control the management
of assets, and any other entity in which these persons (or the
Optionholder) own more than 50% of the voting interests; (b) third
parties designated by the Committee in connection with a program
established and approved by the Committee pursuant to which
Participants may receive a cash payment or other consideration in
consideration for the transfer of a Non-qualified Stock Option; and
(c) such other transferees as may be permitted by the Committee in
its sole discretion.
"Person"
means a person as defined in Section 13(d)(3) of
the Exchange Act.
"
Plan
" means this SharpSpring, Inc. 2019 Equity
Incentive Plan, as amended and/or amended and restated from time to
time.
"
Related
Rights
" has the meaning set
forth in Section 7.1
(a)
.
"
Restricted
Award
" means any Award granted
pursuant to Section 7.2
(a)
.
"
Restricted
Period
" has the meaning set
forth in Section 7.2
(a)
.
"
Rule 16b-3
" means Rule 16b-3 promulgated under the Exchange
Act or any successor to Rule 16b-3, as in effect from time to
time.
"
Securities
Act
" means the Securities Act
of 1933, as amended.
"
Stock Appreciation
Right
" means the right pursuant
to an Award granted under Section
7.1
to
receive, upon exercise, an amount payable in cash or shares equal
to the number of shares subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (a) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (b) the exercise price specified in the Stock
Appreciation Right Award Agreement.
"
Stock for Stock
Exchange
" has the meaning set
forth in Section
6.4
.
"Substitute Award"
has the meaning set forth in
Section
4.6
.
"
Ten Percent
Shareholder
" means a person who
owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any of its
Affiliates.
"Total Share
Reserve
" has the meaning set
forth in Section
4.1
.
3.
Administration
.
3.1
Authority
of Committee
. The Plan shall be
administered by the Committee or, in the Board's sole discretion,
by the Board. Subject to the terms of the Plan, the Committee's
charter and Applicable Laws, and in addition to other express
powers and authorization conferred by the Plan, the Committee shall
have the authority:
(a)
to
construe and interpret the Plan and apply its
provisions;
(b)
to
promulgate, amend, and rescind rules and regulations relating to
the administration of the Plan;
(c)
to
authorize any person to execute, on behalf of the Company, any
instrument required to carry out the purposes of the
Plan;
(d)
to
delegate its authority to one or more Officers of the Company with
respect to Awards that do not involve "insiders" within the meaning
of Section 16 of the Exchange Act;
(e)
to
determine when Awards are to be granted under the Plan and the
applicable Grant Date;
(f)
from
time to time to select, subject to the limitations set forth in
this Plan, those eligible Award recipients to whom Awards shall be
granted;
(g)
to
determine the number of shares of Common Stock to be made subject
to each Award;
(h)
to
determine whether each Option is to be an Incentive Stock Option or
a Non-qualified Stock Option;
(i)
to
prescribe the terms and conditions of each Award, including,
without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award
Agreement relating to such grant;
(j)
to
determine the target number of Performance Shares to be granted
pursuant to a Performance Share Award, the performance measures
that will be used to establish the Performance Goals, the
Performance Period(s) and the number of Performance Shares earned
by a Participant;
(k)
to
amend any outstanding Awards, including for the purpose of
modifying the time or manner of vesting, or the term of any
outstanding Award;
provided,
however
, that if any such
amendment impairs a Participant's rights or increases a
Participant's obligations under his or her Award or creates or
increases a Participant's federal income tax liability with respect
to an Award, such amendment shall also be subject to the
Participant's consent;
(l)
to
determine the duration and purpose of leaves of absences which may
be granted to a Participant without constituting termination of
their employment for purposes of the Plan, which periods shall be
no shorter than the periods generally applicable to Employees under
the Company's employment policies;
(m)
to
make decisions with respect to outstanding Awards that may become
necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
(n)
to
interpret, administer, reconcile any inconsistency in, correct any
defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or Award granted under, the Plan;
and
(o)
to
exercise discretion to make any and all other determinations which
it determines to be necessary or advisable for the administration
of the Plan.
The Committee also may modify the purchase price
or the exercise price of any outstanding Award,
provided that
if the modification effects a
repricing, shareholder approval shall be required before the
repricing is effective.
3.2
Committee
Decisions Final
. All decisions
made by the Committee pursuant to the provisions of the Plan shall
be final and binding on the Company and the Participants, unless
such decisions are determined by a court having jurisdiction to be
arbitrary and capricious.
3.3
Delegation
.
The Committee or, if no Committee has been appointed, the Board may
delegate administration of the Plan to a committee or committees of
one or more members of the Board, and the term "
Committee
" shall apply to any person or persons to whom
such authority has been delegated. The Committee shall have the
power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in
this Plan to the Board or the Committee shall thereafter be to the
committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or
decrease the size of the Committee, add additional members to,
remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the
Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised of
only two members, the unanimous consent of its members, whether
present or not, or by the written consent of the majority of its
members and minutes shall be kept of all of its meetings and copies
thereof shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its
business as it may determine to be advisable.
3.4
Committee
Composition
. Except as
otherwise determined by the Board, the Committee shall consist
solely of two or more Non-Employee Directors. The Board shall have
discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3. However, if the Board
intends to satisfy such exemption requirements, with respect to any
insider subject to Section 16 of the Exchange Act, the Committee
shall be a compensation committee of the Board that at all times
consists solely of two or more Non-Employee Directors. Within the
scope of such authority, the Board or the Committee may delegate to
a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
Nothing herein shall create an inference that an Award is not
validly granted under the Plan in the event Awards are granted
under the Plan by a compensation committee of the Board that does
not at all times consist solely of two or more Non-Employee
Directors.
3.5
Indemnification
.
In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by
the Company against the reasonable expenses, including attorney's
fees, actually incurred in connection with any action, suit or
proceeding or in connection with any appeal therein, to which the
Committee may be party by reason of any action taken or failure to
act under or in connection with the Plan or any Award granted under
the Plan, and against all amounts paid by the Committee in
settlement thereof (
provided,
however
, that the settlement
has been approved by the Company, which approval shall not be
unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such Committee did not act in good
faith and in a manner which such person reasonably believed to be
in the best interests of the Company, or in the case of a criminal
proceeding, had no reason to believe that the conduct complained of
was unlawful;
provided,
however
, that within 60 days
after the institution of any such action, suit or proceeding, such
Committee shall, in writing, offer the Company the opportunity at
its own expense to handle and defend such action, suit or
proceeding.
4.1
Subject
to adjustment in accordance with Section
11
, no more
than 697,039 shares of Common Stock plus the number of shares of
Common Stock underlying any award granted under the 2010 Restated
Employee Stock Plan that expires, terminates or is canceled or
forfeited under the terms of the 2010 Restated Employee Stock Plan
shall be available for the grant of Awards under the Plan (the
"
Total Share
Reserve
"). During the terms of
the Awards, the Company shall keep available at all times the
number of shares of Common Stock required to satisfy such
Awards.
4.2
Shares
of Common Stock available for distribution under the Plan may
consist, in whole or in part, of authorized and unissued shares,
treasury shares or shares reacquired by the Company in any
manner.
4.3
Subject
to adjustment in accordance with Section
11
, no more
than 680,000 shares of Common Stock may be issued in the aggregate
pursuant to the exercise of Incentive Stock Options (the
"ISO
Limit"
).
4.4
The
maximum number of shares of Common Stock subject to Awards granted
during a single Fiscal Year to any Director, together with any cash
fees paid to such Director during the Fiscal Year shall not exceed
a total value of $500,000 (calculating the value of any Awards
based on the grant date fair value for financial reporting
purposes).
4.5
Any
shares of Common Stock subject to an Award that expires or is
canceled, forfeited, or terminated without issuance of the full
number of shares of Common Stock to which the Award related will
again be available for issuance under the Plan. Notwithstanding
anything to the contrary contained herein: shares subject to an
Award under the Plan shall not again be made available for issuance
or delivery under the Plan if such shares are (a) shares tendered
in payment of an Option, (b) shares delivered or withheld by the
Company to satisfy any tax withholding obligation, or (c) shares
covered by a stock-settled Stock Appreciation Right or other Awards
that were not issued upon the settlement of the Award.
4.6
Awards
may, in the sole discretion of the Committee, be granted under the
Plan in assumption of, or in substitution for, outstanding awards
previously granted by an entity acquired by the Company or with
which the Company combines ("
Substitute
Awards
"). Substitute Awards
shall not be counted against the Total Share Reserve; provided,
that, Substitute Awards issued in connection with the assumption
of, or in substitution for, outstanding options intended to qualify
as Incentive Stock Options shall be counted against the ISO limit.
Subject to applicable stock exchange requirements, available shares
under a shareholder-approved plan of an entity directly or
indirectly acquired by the Company or with which the Company
combines (as appropriately adjusted to reflect such acquisition or
transaction) may be used for Awards under the Plan and shall not
count toward the Total Share Limit.
5.
Eligibility
.
5.1
Eligibility
for Specific Awards
. Incentive
Stock Options may be granted only to Employees. Awards other than
Incentive Stock Options may be granted to Employees, Consultants
and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants and
Directors following the Grant Date.
5.2
Ten Percent
Shareholders
. A Ten Percent
Shareholder shall not be granted an Incentive Stock Option unless
the Option Exercise Price is at least 110% of the Fair Market Value
of the Common Stock on the Grant Date and the Option is not
exercisable after the expiration of five years from the Grant
Date.
6.
Option
Provisions
. Each Option granted
under the Plan shall be evidenced by an Award Agreement. Each
Option so granted shall be subject to the conditions set forth in
this Section 6, and to such other conditions not inconsistent with
the Plan as may be reflected in the applicable Award Agreement. All
Options shall be separately designated Incentive Stock Options or
Non-qualified Stock Options at the time of grant, and, if
certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of
each type of Option. Notwithstanding the foregoing, the Company
shall have no liability to any Participant or any other person if
an Option designated as an Incentive Stock Option fails to qualify
as such at any time or if an Option is determined to constitute
"nonqualified deferred compensation" within the meaning of Section
409A of the Code and the terms of such Option do not satisfy the
requirements of Section 409A of the Code. The provisions of
separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following
provisions:
6.1
Term
.
Subject to the provisions of Section
5.2
regarding
Ten Percent Shareholders, no Incentive Stock Option shall be
exercisable after the expiration of 10 years from the Grant Date.
The term of a Non-qualified Stock Option granted under the Plan
shall be determined by the Committee;
provided,
however
, no Non-qualified Stock
Option shall be exercisable after the expiration of 10 years from
the Grant Date.
6.2
Exercise
Price of an Incentive Stock Option
. Subject to the provisions of Section
5.2
regarding Ten Percent Shareholders, the Option
Exercise Price of each Incentive Stock Option shall be not less
than 100% of the Fair Market Value of the Common Stock subject to
the Option on the Grant Date. Notwithstanding the foregoing, an
Incentive Stock Option may be granted with an Option Exercise Price
lower than that set forth in the preceding sentence if such Option
is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of
the Code.
6.3
Exercise
Price of a Non-qualified Stock Option
. The Option Exercise Price of each Non-qualified
Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the Grant Date.
Notwithstanding the foregoing, a Non-qualified Stock Option may be
granted with an Option Exercise Price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 409A of the
Code.
6.4
Consideration
.
The Option Exercise Price of Common Stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (a) in cash or by certified or
bank check at the time the Option is exercised or (b) in the
discretion of the Committee, upon such terms as the Committee shall
approve, the Option Exercise Price may be paid: (i) by delivery to
the Company of other Common Stock, duly endorsed for transfer to
the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the
number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common
Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof)
and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the
number of identified attestation shares of Common Stock (a
"
Stock for
Stock Exchange
"); (ii) a
"cashless" exercise program established with a broker; (iii) by
reduction in the number of shares of Common Stock otherwise
deliverable upon exercise of such Option with a Fair Market Value
equal to the aggregate Option Exercise Price at the time of
exercise; (iv) by any combination of the foregoing methods; or (v)
in any other form of legal consideration that may be acceptable to
the Committee. Unless otherwise specifically provided in the
Option, the exercise price of Common Stock acquired pursuant to an
Option that is paid by delivery (or attestation) to the Company of
other Common Stock acquired, directly or indirectly from the
Company, shall be paid only by shares of the Common Stock of the
Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). Notwithstanding the
foregoing, during any period for which the Common Stock is publicly
traded (i.e., the Common Stock is listed on any established stock
exchange or a national market system) an exercise by a Director or
Officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the
Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
6.5
Transferability
of an Incentive Stock Option
.
An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.6
Transferability
of a Non-qualified Stock Option
. A Non-qualified Stock Option may, in the sole
discretion of the Committee, be transferable to a Permitted
Transferee, upon written approval by the Committee to the extent
provided in the Award Agreement. If the Non-qualified Stock Option
does not provide for transferability, then the Non-qualified Stock
Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the
lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of
the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7
Vesting
of Options
. Each Option may,
but need not, vest and therefore become exercisable in periodic
installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or
other criteria) as the Committee may deem appropriate. The vesting
provisions of individual Options may vary. No Option may be
exercised for a fraction of a share of Common Stock. The Committee
may, but shall not be required to, provide for an acceleration of
vesting and exercisability in the terms of any Award Agreement upon
the occurrence of a specified event.
6.8
Termination
of Continuous Service
. Unless
otherwise provided in an Award Agreement or in an employment
agreement the terms of which have been approved by the Committee,
in the event an Optionholder's Continuous Service terminates (other
than upon the Optionholder's death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination)
but only within such period of time ending on the earlier of (a)
the date three months following the termination of the
Optionholder's Continuous Service or (b) the expiration of the term
of the Option as set forth in the Award Agreement;
provided
that
, if the termination of
Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and
cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in
the Award Agreement, the Option shall
terminate.
6.9
Extension
of Termination Date
. An
Optionholder's Award Agreement may also provide that if the
exercise of the Option following the termination of the
Optionholder's Continuous Service for any reason would be
prohibited at any time because the issuance of shares of Common
Stock would violate the registration requirements under the
Securities Act or any other state or federal securities law or the
rules of any securities exchange or interdealer quotation system,
then the Option shall terminate on the earlier of (a) the
expiration of the term of the Option in accordance with
Section
6.1
or (b) the expiration of a period after
termination of the Participant's Continuous Service that is three
months after the end of the period during which the exercise of the
Option would be in violation of such registration or other
securities law requirements.
6.10
Disability
of Optionholder
. Unless
otherwise provided in an Award Agreement, in the event that an
Optionholder's Continuous Service terminates as a result of the
Optionholder's Disability, the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to
exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (a) the date 12
months following such termination or (b) the expiration of the term
of the Option as set forth in the Award Agreement. If, after
termination, the Optionholder does not exercise his or her Option
within the time specified herein or in the Award Agreement, the
Option shall terminate.
6.11
Death
of Optionholder
. Unless
otherwise provided in an Award Agreement, in the event an
Optionholder's Continuous Service terminates as a result of the
Optionholder's death, then the Option may be exercised (to the
extent the Optionholder was entitled to exercise such Option as of
the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance
or by a person designated to exercise the Option upon the
Optionholder's death, but only within the period ending on the
earlier of (a) the date 12 months following the date of death or
(b) the expiration of the term of such Option as set forth in the
Award Agreement. If, after the Optionholder's death, the Option is
not exercised within the time specified herein or in the Award
Agreement, the Option shall terminate.
6.12
Incentive
Stock Option $100,000 Limitation
. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds $100,000, the
Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as
Non-qualified Stock Options.
7.
Provisions
of Awards Other Than Options
.
Each Stock Appreciation Right granted under the
Plan shall be evidenced by an Award Agreement. Each Stock
Appreciation Right so granted shall be subject to the conditions
set forth in this Section 7.1, and to such other conditions not
inconsistent with the Plan as may be reflected in the applicable
Award Agreement. Stock Appreciation Rights may be granted alone
("
Free
Standing Rights
") or in tandem
with an Option granted under the Plan ("
Related
Rights
").
Any
Related Right that relates to a Non-qualified Stock Option may be
granted at the same time the Option is granted or at any time
thereafter but before the exercise or expiration of the Option. Any
Related Right that relates to an Incentive Stock Option must be
granted at the same time the Incentive Stock Option is
granted.
(c)
Term
of Stock Appreciation Rights
The term of a Stock Appreciation Right granted
under the Plan shall be determined by the Committee;
provided,
however
, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the
Grant Date.
(d)
Vesting
of Stock Appreciation Rights
Each
Stock Appreciation Right may, but need not, vest and therefore
become exercisable in periodic installments that may, but need not,
be equal. The Stock Appreciation Right may be subject to such other
terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of
individual Stock Appreciation Rights may vary. No Stock
Appreciation Right may be exercised for a fraction of a share of
Common Stock. The Committee may, but shall not be required to,
provide for an acceleration of vesting and exercisability in the
terms of any Stock Appreciation Right upon the occurrence of a
specified event.
(e)
Exercise
and Payment
Upon
exercise of a Stock Appreciation Right, the holder shall be
entitled to receive from the Company an amount equal to the number
of shares of Common Stock subject to the Stock Appreciation Right
that is being exercised multiplied by the excess of (i) the Fair
Market Value of a share of Common Stock on the date the Award is
exercised, over (ii) the exercise price specified in the Stock
Appreciation Right or related Option. Payment with respect to the
exercise of a Stock Appreciation Right shall be made on the date of
exercise. Payment shall be made in the form of shares of Common
Stock (with or without restrictions as to substantial risk of
forfeiture and transferability, as determined by the Committee in
its sole discretion), cash or a combination thereof, as determined
by the Committee.
(f)
Exercise
Price
The exercise price of a Free Standing Right shall
be determined by the Committee, but shall not be less than 100% of
the Fair Market Value of one share of Common Stock on the Grant
Date of such Stock Appreciation Right. A Related Right granted
simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the
same exercise price as the related Option, shall be transferable
only upon the same terms and conditions as the related Option, and
shall be exercisable only to the same extent as the related
Option;
provided,
however
, that a Stock
Appreciation Right, by its terms, shall be exercisable only when
the Fair Market Value per share of Common Stock subject to the
Stock Appreciation Right and related Option exceeds the exercise
price per share thereof and no Stock Appreciation Rights may be
granted in tandem with an Option unless the Committee determines
that the requirements of Section 7.1
(b)
are
satisfied.
(g)
Reduction
in the Underlying Option Shares
Upon
any exercise of a Related Right, the number of shares of Common
Stock for which any related Option shall be exercisable shall be
reduced by the number of shares for which the Stock Appreciation
Right has been exercised. The number of shares of Common Stock for
which a Related Right shall be exercisable shall be reduced upon
any exercise of any related Option by the number of shares of
Common Stock for which such Option has been exercised.
7.2
Restricted
Awards
.
A Restricted Award is an Award of actual shares of
Common Stock ("
Restricted
Stock
") or hypothetical Common
Stock units ("
Restricted Stock
Units
") having a value equal to
the Fair Market Value of an identical number of shares of Common
Stock, which may, but need not, provide that such Restricted Award
may not be sold, assigned, transferred or otherwise disposed of,
pledged or hypothecated as collateral for a loan or as security for
the performance of any obligation or for any other purpose for such
period (the "
Restricted
Period
") as the Committee shall
determine. Each Restricted Award granted under the Plan shall be
evidenced by an Award Agreement. Each Restricted Award so granted
shall be subject to the conditions set forth in this Section 7.2,
and to such other conditions not inconsistent with the Plan as may
be reflected in the applicable Award Agreement.
(b)
Restricted
Stock and Restricted Stock Units
(i)
Each
Participant granted Restricted Stock shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock
setting forth the restrictions and other terms and conditions
applicable to such Restricted Stock. If the Committee determines
that the Restricted Stock shall be held by the Company or in escrow
rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant
to additionally execute and deliver to the Company (A) an escrow
agreement satisfactory to the Committee, if applicable and (B) the
appropriate blank stock power with respect to the Restricted Stock
covered by such agreement. If a Participant fails to execute an
agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and stock power, the Award shall be
null and void. Subject to the restrictions set forth in the Award,
the Participant generally shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to
vote such Restricted Stock and the right to receive
dividends;
provided
that
, any cash dividends and
stock dividends with respect to the Restricted Stock shall be
withheld by the Company for the Participant's account, and interest
may be credited on the amount of the cash dividends withheld at a
rate and subject to such terms as determined by the Committee. The
cash dividends or stock dividends so withheld by the Committee and
attributable to any particular share of Restricted Stock (and
earnings thereon, if applicable) shall be distributed to the
Participant in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the
Participant shall have no right to such
dividends.
(ii)
The
terms and conditions of a grant of Restricted Stock Units shall be
reflected in an Award Agreement. No shares of Common Stock shall be
issued at the time a Restricted Stock Unit is granted, and the
Company will not be required to set aside funds for the payment of
any such Award. A Participant shall have no voting rights with
respect to any Restricted Stock Units granted hereunder. The
Committee may also grant Restricted Stock Units with a deferral
feature, whereby settlement is deferred beyond the vesting date
until the occurrence of a future payment date or event set forth in
an Award Agreement ("
Deferred Stock
Units
"). At the discretion of
the Committee, each Restricted Stock Unit or Deferred Stock Unit
(representing one share of Common Stock) may be credited with an
amount equal to the cash and stock dividends paid by the Company in
respect of one share of Common Stock ("
Dividend
Equivalents
"). Dividend
Equivalents shall be withheld by the Company and credited to the
Participant's account, and interest may be credited on the amount
of cash Dividend Equivalents credited to the Participant's account
at a rate and subject to such terms as determined by the Committee.
Dividend Equivalents credited to a Participant's account and
attributable to any particular Restricted Stock Unit or Deferred
Stock Unit (and earnings thereon, if applicable) shall be
distributed in cash or, at the discretion of the Committee, in
shares of Common Stock having a Fair Market Value equal to the
amount of such Dividend Equivalents and earnings, if applicable, to
the Participant upon settlement of such Restricted Stock Unit or
Deferred Stock Unit and, if such Restricted Stock Unit or Deferred
Stock Unit is forfeited, the Participant shall have no right to
such Dividend Equivalents.
(i)
Restricted
Stock awarded to a Participant shall be subject to the following
restrictions until the expiration of the Restricted Period, and to
such other terms and conditions as may be set forth in the
applicable Award Agreement: (A) if an escrow arrangement is used,
the Participant shall not be entitled to delivery of the stock
certificate; (B) the shares shall be subject to the restrictions on
transferability set forth in the Award Agreement; (C) the shares
shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are
forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a
shareholder with respect to such shares shall terminate without
further obligation on the part of the Company.
(ii)
Restricted
Stock Units and Deferred Stock Units awarded to any Participant
shall be subject to (A) forfeiture until the expiration of the
Restricted Period, and satisfaction of any applicable Performance
Goals during such period, to the extent provided in the applicable
Award Agreement, and to the extent such Restricted Stock Units or
Deferred Stock Units are forfeited, all rights of the Participant
to such Restricted Stock Units or Deferred Stock Units shall
terminate without further obligation on the part of the Company and
(B) such other terms and conditions as may be set forth in the
applicable Award Agreement.
(iii)
The
Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock, Restricted Stock Units and
Deferred Stock Units whenever it may determine that, by reason of
changes in Applicable Laws or other changes in circumstances
arising after the date the Restricted Stock or Restricted Stock
Units or Deferred Stock Units are granted, such action is
appropriate.
(d)
Restricted
Period
With
respect to Restricted Awards, the Restricted Period shall commence
on the Grant Date and end at the time or times set forth on a
schedule established by the Committee in the applicable Award
Agreement.
No
Restricted Award may be granted or settled for a fraction of a
share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any
Award Agreement upon the occurrence of a specified
event.
(e)
Delivery
of Restricted Stock and Settlement of Restricted Stock
Units
Upon the expiration of the Restricted Period with
respect to any shares of Restricted Stock, the restrictions set
forth in Section 7.2
(c)
and the applicable Award Agreement
shall be of no further force or effect with respect to such shares,
except as set forth in the applicable Award Agreement. If an escrow
arrangement is used, upon such expiration, the Company shall
deliver to the Participant, or his or her beneficiary, without
charge, the stock certificate evidencing the shares of Restricted
Stock which have not then been forfeited and with respect to which
the Restricted Period has expired (to the nearest full share) and
any cash dividends or stock dividends credited to the Participant's
account with respect to such Restricted Stock and the interest
thereon, if any. Upon the expiration of the Restricted Period with
respect to any outstanding Restricted Stock Units, or at the
expiration of the deferral period with respect to any outstanding
Deferred Stock Units, the Company shall deliver to the Participant,
or his or her beneficiary, without charge, one share of Common
Stock for each such outstanding vested Restricted Stock Unit or
Deferred Stock Unit ("
Vested Unit
") and cash equal to any Dividend Equivalents
credited with respect to each such Vested Unit in accordance with
Section 7.2(b)
(ii)
hereof and the interest thereon or, at
the discretion of the Committee, in shares of Common Stock having a
Fair Market Value equal to such Dividend Equivalents and the
interest thereon, if any;
provided,
however
, that, if explicitly
provided in the applicable Award Agreement, the Committee may, in
its sole discretion, elect to pay cash or part cash and part Common
Stock in lieu of delivering only shares of Common Stock for Vested
Units. If a cash payment is made in lieu of delivering shares of
Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the
Restricted Period lapsed in the case of Restricted Stock Units, or
the delivery date in the case of Deferred Stock Units, with respect
to each Vested Unit.
(f)
Stock
Restrictions
Each
certificate representing Restricted Stock awarded under the Plan
shall bear a legend in such form as the Company deems
appropriate.
(a)
Grant
of Performance Share Awards
Each
Performance Share Award granted under the Plan shall be evidenced
by an Award Agreement. Each Performance Share Award so granted
shall be subject to the conditions set forth in this Section 7.3,
and to such other conditions not inconsistent with the Plan as may
be reflected in the applicable Award Agreement. The Committee shall
have the discretion to determine: (i) the number of shares of
Common Stock or stock-denominated units subject to a Performance
Share Award granted to any Participant; (ii) the Performance Period
applicable to any Award; (iii) the conditions that must be
satisfied for a Participant to earn an Award; and (iv) the other
terms, conditions and restrictions of the Award.
(b)
Earning
Performance Share Awards
The
number of Performance Shares earned by a Participant will depend on
the extent to which the performance goals established by the
Committee are attained within the applicable Performance Period, as
determined by the Committee.
7.4
Other
Equity-Based Awards and Cash Awards
. The Committee may grant Other Equity-Based
Awards, either alone or in tandem with other Awards, in such
amounts and subject to such conditions as the Committee shall
determine in its sole discretion. Each Equity-Based Award shall be
evidenced by an Award Agreement and shall be subject to such
conditions, not inconsistent with the Plan, as may be reflected in
the applicable Award Agreement. The Committee may grant Cash Awards
in such amounts and subject to such Performance Goals, other
vesting conditions, and such other terms as the Committee
determines in its discretion. Cash Awards shall be evidenced in
such form as the Committee may determine.
8.
Securities
Law Compliance
. Each Award
Agreement shall provide that no shares of Common Stock shall be
purchased or sold thereunder unless and until (a) any then
applicable requirements of state or federal laws and regulatory
agencies have been fully complied with to the satisfaction of the
Company and its counsel and (b) if required to do so by the
Company, the Participant has executed and delivered to the Company
a letter of investment intent in such form and containing such
provisions as the Committee may require. The Company shall use
reasonable efforts to seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such
authority as may be required to grant Awards and to issue and sell
shares of Common Stock upon exercise of the Awards;
provided,
however
, that this undertaking
shall not require the Company to register under the Securities Act
the Plan, any Award or any Common Stock issued or issuable pursuant
to any such Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the
Company shall be relieved from any liability for failure to issue
and sell Common Stock upon exercise of such Awards unless and until
such authority is obtained.
9.
Use
of Proceeds from Stock
.
Proceeds from the sale of Common Stock pursuant to Awards, or upon
exercise thereof, shall constitute general funds of the
Company.
10.
Miscellaneous
.
10.1
Acceleration
of Exercisability and Vesting
.
The Committee shall have the power to accelerate the time at which
an Award may first be exercised or the time during which an Award
or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at
which it may first be exercised or the time during which it will
vest.
10.2
Shareholder
Rights
. Except as provided in
the Plan or an Award Agreement, no Participant shall be deemed to
be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless
and until such Participant has satisfied all requirements for
exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section
11
hereof.
10.3
No
Employment or Other Service Rights
. Nothing in the Plan or any instrument executed
or Award granted pursuant thereto shall confer upon any Participant
any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Award was granted or shall
affect the right of the Company or an Affiliate to terminate (a)
the employment of an Employee with or without notice and with or
without Cause or (b) the service of a Director pursuant to the
By-laws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company
or the Affiliate is incorporated, as the case may
be.
10.4
Transfer;
Approved Leave of Absence
. For
purposes of the Plan, no termination of employment by an Employee
shall be deemed to result from either (a) a transfer of employment
to the Company from an Affiliate or from the Company to an
Affiliate, or from one Affiliate to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee's right to
reemployment is guaranteed either by a statute or by contract or
under the policy pursuant to which the leave of absence was granted
or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the
Code if the applicable Award is subject
thereto.
10.5
Withholding
Obligations
. To the extent
provided by the terms of an Award Agreement and subject to the
discretion of the Committee, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the
exercise or acquisition of Common Stock under an Award by any of
the following means (in addition to the Company's right to withhold
from any compensation paid to the Participant by the Company) or by
a combination of such means: (a) tendering a cash payment; (b)
authorizing the Company to withhold shares of Common Stock from the
shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the
Award,
provided,
however
, that no shares of
Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law; or (c) delivering to the
Company previously owned and unencumbered shares of Common Stock of
the Company.
11.
Adjustments
Upon Changes in Stock
. In the
event of changes in the outstanding Common Stock or in the capital
structure of the Company by reason of any stock or extraordinary
cash dividend, stock split, reverse stock split, an extraordinary
corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange, or other relevant
change in capitalization occurring after the Grant Date of any
Award, Awards granted under the Plan and any Award Agreements, the
exercise price of Options and Stock Appreciation Rights, the
Performance Goals to which Performance Share Awards and Cash Awards
are subject, the maximum number of shares of Common Stock subject
to all Awards stated in Section
4
will be
equitably adjusted or substituted, as to the number, price or kind
of a share of Common Stock or other consideration subject to such
Awards to the extent necessary to preserve the economic intent of
such Award. In the case of adjustments made pursuant to this
Section 11, unless the Committee specifically determines that such
adjustment is in the best interests of the Company or its
Affiliates, the Committee shall, in the case of Incentive Stock
Options, ensure that any adjustments under this Section 11 will not
constitute a modification, extension or renewal of the Incentive
Stock Options within the meaning of Section 424(h)(3) of the Code
and in the case of Non-qualified Stock Options, ensure that any
adjustments under this Section 11 will not constitute a
modification of such Non-qualified Stock Options within the meaning
of Section 409A of the Code. Any adjustments made under this
Section 11 shall be made in a manner which does not adversely
affect the exemption provided pursuant to Rule 16b-3 under the
Exchange Act. The Company shall give each Participant notice of an
adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
12.
Effect
of Change in Control
.
12.1
Unless
otherwise provided in an Award Agreement, notwithstanding any
provision of the Plan to the contrary:
(a)
In
the event of a Participant's termination of Continuous Service
without Cause or for Good Reason during the 12-month period
following a Change in Control, notwithstanding any provision of the
Plan or any applicable Award Agreement to the contrary, all
outstanding Options and Stock Appreciation Rights shall become
immediately exercisable with respect to 100% of the shares subject
to such Options or Stock Appreciation Rights, and/or the Restricted
Period shall expire immediately with respect to 100% of the
outstanding shares of Restricted Stock or Restricted Stock Units as
of the date of the Participant's termination of Continuous
Service.
(b)
With
respect to Performance Share Awards and Cash Awards, in the event
of a Change in Control, all incomplete Performance Periods in
respect of such Awards in effect on the date the Change in Control
occurs shall end on the date of such change and the Committee shall
(i) determine the extent to which Performance Goals with respect to
each such Performance Period have been met based upon such audited
or unaudited financial information then available as it deems
relevant and (ii) cause to be paid to the applicable Participant
partial or full Awards with respect to Performance Goals for each
such Performance Period based upon the Committee's determination of
the degree of attainment of Performance Goals or, if not
determinable, assuming that the applicable "target" levels of
performance have been attained, or on such other basis determined
by the Committee.
To
the extent practicable, any actions taken by the Committee under
the immediately preceding clauses (a) and (b) shall occur in a
manner and at a time which allows affected Participants the ability
to participate in the Change in Control with respect to the shares
of Common Stock subject to their Awards.
12.2
In
addition, in the event of a Change in Control, the Committee may in
its discretion and upon at least 10 days' advance notice to the
affected persons, cancel any outstanding Awards and pay to the
holders thereof, in cash or stock, or any combination thereof, the
value of such Awards based upon the price per share of Common Stock
received or to be received by other shareholders of the Company in
the event. In the case of any Option or Stock Appreciation Right
with an exercise price (or SAR Exercise Price in the case of a
Stock Appreciation Right) that equals or exceeds the price paid for
a share of Common Stock in connection with the Change in Control,
the Committee may cancel the Option or Stock Appreciation Right
without the payment of consideration therefor.
12.3
The
obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to all or
substantially all of the assets and business of the Company and its
Affiliates, taken as a whole.
13.
Amendment
of the Plan and Awards
.
13.1
Amendment of
Plan
. The Board at any time,
and from time to time, may amend or terminate the Plan. However,
except as provided in Section
11
relating to
adjustments upon changes in Common Stock and Section
13.3
, no amendment shall be effective unless approved
by the shareholders of the Company to the extent shareholder
approval is necessary to satisfy any Applicable Laws. At the time
of such amendment, the Board shall determine, upon advice from
counsel, whether such amendment will be contingent on shareholder
approval.
13.2
Shareholder
Approval
. The Board may, in its
sole discretion, submit any other amendment to the Plan for
shareholder approval.
13.3
Contemplated
Amendments
. It is expressly
contemplated that the Board may amend the Plan in any respect the
Board deems necessary or advisable to provide eligible Employees,
Consultants and Directors with the maximum benefits provided or to
be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options or to
the nonqualified deferred compensation provisions of Section 409A
of the Code and/or to bring the Plan and/or Awards granted under it
into compliance therewith.
13.4
No
Impairment of Rights
. Rights
under any Award granted before amendment of the Plan shall not be
impaired by any amendment of the Plan unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
13.5
Amendment
of Awards
. The Committee at any
time, and from time to time, may amend the terms of any one or more
Awards;
provided,
however
, that the Committee may
not affect any amendment which would otherwise constitute an
impairment of the rights under any Award unless (a) the Company
requests the consent of the Participant and (b) the Participant
consents in writing.
14.
General
Provisions
.
14.1
Forfeiture
Events
. The Committee may
specify in an Award Agreement that the Participant's rights,
payments and benefits with respect to an Award shall be subject to
reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events, in addition to applicable vesting
conditions of an Award. Such events may include, without
limitation, breach of non-competition, non-solicitation,
confidentiality, or other restrictive covenants that are contained
in the Award Agreement or otherwise applicable to the Participant,
a termination of the Participant's Continuous Service for Cause, or
other conduct by the Participant that is detrimental to the
business or reputation of the Company and/or its
Affiliates.
14.2
Clawback
.
Notwithstanding any other provisions in this Plan, the Company may
cancel any Award, require reimbursement of any Award by a
Participant, and effect any other right of recoupment of equity or
other compensation provided under the Plan in accordance with any
Company policies that may be adopted and/or modified from time to
time (
"Clawback
Policy"
). In addition, a
Participant may be required to repay to the Company previously paid
compensation, whether provided pursuant to the Plan or an Award
Agreement, in accordance with the Clawback Policy. By accepting an
Award, the Participant is agreeing to be bound by the Clawback
Policy, as in effect or as may be adopted and/or modified from time
to time by the Company in its discretion (including, without
limitation, to comply with applicable law or stock exchange listing
requirements).
14.3
Other
Compensation Arrangements
.
Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only
in specific cases.
14.4
Sub-Plans
.
The Committee may from time to time establish sub-plans under the
Plan for purposes of satisfying securities, tax or other laws of
various jurisdictions in which the Company intends to grant Awards.
Any sub-plans shall contain such limitations and other terms and
conditions as the Committee determines are necessary or desirable.
All sub-plans shall be deemed a part of the Plan, but each sub-plan
shall apply only to the Participants in the jurisdiction for which
the sub-plan was designed.
14.5
Deferral
of Awards
. The Committee may
establish one or more programs under the Plan to permit selected
Participants the opportunity to elect to defer receipt of
consideration upon exercise of an Award, satisfaction of
performance criteria, or other event that absent the election would
entitle the Participant to payment or receipt of shares of Common
Stock or other consideration under an Award. The Committee may
establish the election procedures, the timing of such elections,
the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, shares or other consideration so
deferred, and such other terms, conditions, rules and procedures
that the Committee deems advisable for the administration of any
such deferral program.
14.6
Unfunded
Plan
. The Plan shall be
unfunded. Neither the Company, the Board nor the Committee shall be
required to establish any special or separate fund or to segregate
any assets to assure the performance of its obligations under the
Plan.
14.7
Recapitalizations
.
Each Award Agreement shall contain provisions required to reflect
the provisions of Section
11
.
14.8
Delivery
.
Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory
obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of
time.
14.9
No
Fractional Shares
. No
fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan. The Committee shall determine whether cash,
additional Awards or other securities or property shall be issued
or paid in lieu of fractional shares of Common Stock or whether any
fractional shares should be rounded, forfeited or otherwise
eliminated.
14.10
Other
Provisions
. The Award
Agreements authorized under the Plan may contain such other
provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of Awards, as the
Committee may deem advisable.
14.11
Section
409A
. The Plan is intended to
comply with Section 409A of the Code to the extent subject thereto,
and, accordingly, to the maximum extent permitted, the Plan shall
be interpreted and administered to be in compliance therewith. Any
payments described in the Plan that are due within the "short-term
deferral period" as defined in Section 409A of the Code shall not
be treated as deferred compensation unless Applicable Laws require
otherwise. Notwithstanding anything to the contrary in the Plan, to
the extent required to avoid accelerated taxation and tax penalties
under Section 409A of the Code, amounts that would otherwise be
payable and benefits that would otherwise be provided pursuant to
the Plan during the six (6) month period immediately following the
Participant's termination of Continuous Service shall instead be
paid on the first payroll date after the six-month anniversary of
the Participant's separation from service (or the Participant's
death, if earlier). Notwithstanding the foregoing, neither the
Company nor the Committee shall have any obligation to take any
action to prevent the assessment of any additional tax or penalty
on any Participant under Section 409A of the Code and neither the
Company nor the Committee will have any liability to any
Participant for such tax or penalty.
14.12
Disqualifying
Dispositions
. Any Participant
who shall make a "disposition" (as defined in Section 424 of the
Code) of all or any portion of shares of Common Stock acquired upon
exercise of an Incentive Stock Option within two years from the
Grant Date of such Incentive Stock Option or within one year after
the issuance of the shares of Common Stock acquired upon exercise
of such Incentive Stock Option (a "
Disqualifying
Disposition
") shall be required
to immediately advise the Company in writing as to the occurrence
of the sale and the price realized upon the sale of such shares of
Common Stock.
14.13
Section
16
. It is the intent of the
Company that the Plan satisfy, and be interpreted in a manner that
satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be
entitled to the benefit of Rule 16b-3, or any other rule
promulgated under Section 16 of the Exchange Act, and will not be
subject to short-swing liability under Section 16 of the Exchange
Act. Accordingly, if the operation of any provision of the Plan
would conflict with the intent expressed in this Section 14.13,
such provision to the extent possible shall be interpreted and/or
deemed amended so as to avoid such conflict.
14.14
Beneficiary
Designation
. Each Participant
under the Plan may from time to time name any beneficiary or
beneficiaries by whom any right under the Plan is to be exercised
in case of such Participant's death. Each designation will revoke
all prior designations by the same Participant, shall be in a form
reasonably prescribed by the Committee and shall be effective only
when filed by the Participant in writing with the Company during
the Participant's lifetime.
14.15
Expenses
.
The costs of administering the Plan shall be paid by the
Company.
14.16
Severability
.
If any of the provisions of the Plan or any Award Agreement is held
to be invalid, illegal or unenforceable, whether in whole or in
part, such provision shall be deemed modified to the extent, but
only to the extent, of such invalidity, illegality or
unenforceability and the remaining provisions shall not be affected
thereby.
14.17
Plan
Headings
. The headings in the
Plan are for purposes of convenience only and are not intended to
define or limit the construction of the provisions
hereof.
14.18
Non-Uniform
Treatment
. The Committee's
determinations under the Plan need not be uniform and may be made
by it selectively among persons who are eligible to receive, or
actually receive, Awards. Without limiting the generality of the
foregoing, the Committee shall be entitled to make non-uniform and
selective determinations, amendments and adjustments, and to enter
into non-uniform and selective Award
Agreements.
15.
Effective
Date of Plan
. The Plan shall
become effective as of the Effective Date, but no Award shall be
exercised (or, in the case of a stock Award, shall be granted)
unless and until the Plan has been approved by the shareholders of
the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the
Board.
16.
Termination
or Suspension of the Plan
. The
Plan shall terminate automatically on April 24, 2029. No Award
shall be granted pursuant to the Plan after such date, but Awards
theretofore granted may extend beyond that date. The Board may
suspend or terminate the Plan at any earlier date pursuant to
Section
13.1
hereof. No Awards may be granted under
the Plan while the Plan is suspended or after it is
terminated.
17.
Choice
of Law
. The law of the State of
Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such
state's conflict of law rules.
As
adopted by the Board of Directors of SharpSpring, Inc. on April 25,
2019.
As
approved by the shareholders of SharpSpring, Inc. on
[_______].
