UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 14, 2017

 

IIOT-OXYS, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   000-50773   56-2415252
(State or Other Jurisdiction   (Commission File   (I.R.S. Employer
of Incorporation)   Number)   Identification Number)

 

705 Cambridge Street

Cambridge, MA 02141

(Address of principal executive offices, including zip code)

 

(617) 500-5101

(Registrant’s telephone number,

including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    x

 

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

 

 

 

 

 

 

     
 

 

Item 1.01 Entry into a Material Definitive Agreement

 

On December 14, 2017, IIOT-OXYS, Inc., a Nevada corporation (the “ Company ”), entered into the Securities Exchange Agreement dated December 14, 2017, between the Company, HereLab, Inc., a Delaware corporation (“ HereLab ”), and the shareholders of HereLab (the “ Exchange Agreement ”). The Exchange Agreement contains representations and warranties of the parties customary to a transaction of this nature.

 

Upon completion of the closing of the Exchange Agreement was completed (the “ Closing ”), the Company will issue an aggregate of 1,650,000 shares of its Common Stock on a pro rata basis to the two shareholders of HereLab, and HereLab became a wholly owned subsidiary of the Company. In addition, on the Closing date Patrick Phillips, the principal shareholder of HereLab, will be appointed as Vice President of Product Management and a director of the Company and will receive 1,500,000 of the shares issued in the exchange transaction.

 

Upon Closing, the Company will file Articles of Exchange with the State of Nevada. Under the terms of the Exchange Agreement, HereLab has agreed to prepare and furnish audited financial statements in compliance with Item 9.01(a) of Form 8-K for filing by IIOT not later than 75 days following the Closing date.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

2015 Equity Incentive Plan

 

On December 14, 2017 (the “ Effective Date ”) the Board of Directors of the Company approved the 2017 Stock Incentive Plan (the “ 2017 Plan ”). Awards may be made under the 2017 Plan for up to 4,500,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2017 Plan. No awards can be granted under the 2017 Plan after the expiration of 10 years from the Effective Date, but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.

 

With the approval of the 2017 Plan, the Board terminated the Gotham Capital Holdings, Inc. 2017 Stock Awards Plan with no awards having been granted thereunder.

 

Item 9.01. Financial Statements and Exhibits

 

(d)         Exhibits .

 

Exhibit No.   Description
2.1   Securities Exchange Agreement dated December 14, 2017, with HereLab, Inc.
4.1   2017 Stock Incentive Plan

 

 

 

SIGNATURES

 

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

 

  IIOT-OXYS, Inc.
   
Date: December 18, 2017 By: /s/ Giro DiBiase
    Giro DiBiase, Chief Executive Officer

 

 

 

  2  

Exhibit 2.1

 

Stock Exchange Agreement

 

THIS STOCK EXCHANGE AGREEMENT (this “ Agreement ”) dated as of December 14, 2017, is by, between, and among IIOT-OXYS, Inc., a Nevada corporation (“ IIOT ”), HereLab, Inc., a Delaware corporation (“ HereLab ”), and its shareholders, Patrick Phillips and Andrew Lindsay, individuals (the “ Shareholders ”). Certain capitalized terms used in this Agreement are defined in ARTICLE XII of this Agreement.

 

WITNESSETH:

 

WHEREAS, IIOT desires to acquire HereLab, and HereLab desires to be acquired by IIOT in an acquisition transaction through the exchange of all of the outstanding equity stock of HereLab solely for shares of common stock of IIOT pursuant to the terms hereinafter set forth (the “ Exchange ”);

 

WHEREAS, the respective Boards of Directors of HereLab and IIOT have approved and declared advisable the Exchange upon the terms and subject to the conditions of this Agreement, and in accordance with corporate laws of the State of Nevada applicable to for-profit corporations (the Nevada Revised Statutes (the “ NRS ”)) and the corporate laws of the State of Delaware applicable to for-profit corporations (the General Corporation Law of the State of Delaware (the “ DGCL ”));

 

WHEREAS, the respective Boards of Directors of HereLab and IIOT have determined that the Exchange is in furtherance of and consistent with their respective business strategies and is in the best interest of their respective shareholders; and

 

WHEREAS, the parties hereto each intends, for federal income tax purposes, that the Exchange contemplated hereby constitute a reorganization pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “ Code ”).

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereto, intending to be legally bound hereby, agree as follows:

 

ARTICLE I.

ADOPTION OF AGREEMENT

 

1.1                The Exchange . Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.2 herein), in accordance with the relevant provisions of the NRS and DGCL, the parties shall consummate the Exchange. Upon completion of the Exchange, HereLab will become a wholly owned subsidiary of IIOT.

 

1.2                Effective Time of Exchange . Upon Closing Articles of Exchange (the “ Articles of Exchange ”) shall be filed with the Nevada Secretary of State in accordance with Section 92A.200 of the NRS. The date and time of filing of the Articles of Exchange shall be the “ Effective Time ”.

 

ARTICLE II.
EXCHANGE OF SHARES

 

2.1                Transfer of Outstanding HereLab Shares to IIOT . On the Closing Date the Shareholders shall transfer to IIOT on the stock records of HereLab all of their uncertificated shares of common stock of HereLab (the “ HereLab Shares ”), which in the aggregate shall represent all of the issued and outstanding shares of the common stock of HereLab.

 

2.2                Issuance of Shares to the Shareholders . In exchange for the transfer of the HereLab Shares pursuant to Section 2.1. hereof, IIOT shall on the Closing Date and contemporaneously with such transfer of the HereLab Shares to it by the Shareholders, issue and deliver to the Shareholders on a pro rata basis 1,650,000 shares of common stock of IIOT (the “ IIOT Shares ”). The rate of exchange of the IIOT Shares for the HereLab Shares shall be one-for-one.

 

2.3                Restricted Stock . The IIOT Shares to be issued pursuant to the Exchange shall not have been registered and shall be characterized as “restricted securities” under the federal securities laws, and under such laws such shares may be resold without registration under the Securities Act only in certain limited circumstances. Each certificate evidencing the HereLab Shares to be issued pursuant to the Exchange shall bear an appropriate restrictive legend in accordance with Rule 144 under the Securities Act.

 

 

 

  1  
 

 

ARTICLE III.
CLOSING

 

3.1                Closing Date . The closing of the Exchange and the consummation of the other transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of IIOT legal counsel at 1656 Reunion Avenue, Suite 250, South Jordan, Utah, on a day and at a time mutually agreed by the parties on or before December 31, 2017 (the “ Closing Date ”). If a party hereto is not in attendance at the Closing, Closing may be held by conference call and delivery of the stock certificate representing the IIOT Shares and signed agreements shall be via Federal Express to the address set forth in this Agreement or such other address that the party has provided to counsel.

 

3.2                Execution of Exchange Documents . On the Closing Date, the parties hereto shall cause the Exchange to be consummated by filing the Articles of Exchange with the Nevada Secretary of State, together with any required or related certificates in such form as required by, and executed in accordance with, the relevant provisions of the NRS or DGCL. The Exchange shall be effective as of the Effective Time.

 

3.3                HereLab and Shareholders Closing Deliverables . At the Closing HereLab and Shareholders must deliver the following items to consummate the Closing of this Agreement:

 

(a)                 Resolutions of the Board of Directors and shareholders of HereLab approving and authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby, including the Exchange;

 

(b)                 The executed Articles of Exchange;

 

(c)                 Evidence of transfer of the HereLab shares from the Shareholders to IIOT on the transfer books of HereLab;

 

(d)                 Representation forms from each of the Shareholders evidencing compliance with Rule 506(b) of Regulation D promulgated by the SEC in connection with the issuance of the IIOT Shares; and

 

(e)                 All other instruments and documents that IIOT or its counsel, in the reasonable exercise of their reasonable discretion, shall deem to be necessary: (i) to fulfill any obligation required to be fulfilled by HereLab on the Closing Date; and (ii) to evidence satisfaction of any conditions to Closing.

 

3.4                IIOT Deliverables . At the Closing IIOT must deliver the following items to consummate the Closing of this Agreement:

 

(a)                 Resolutions of the Board of Directors of IIOT approving and authorizing the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and thereby, including the Exchange;

 

(b)                 The executed Articles of Exchange;

 

(c)                 Irrevocable instructions to the transfer agent directing the issuance of the stock certificates representing the IIOT Shares; and

 

(d)                 All other instruments and documents that HereLab, the Shareholders or their counsel, in the reasonable exercise of their reasonable discretion, shall deem to be necessary: (i) to fulfill any obligation required to be fulfilled by IIOT on the Closing Date; and (ii) to evidence satisfaction of any conditions to Closing.

 

 

 

 

  2  
 

 

ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF IIOT

 

IIOT represents and warrants to HereLab that all of the statements contained in this ARTICLE IV are true as of the date of this Agreement (or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.

 

4.1                Due Incorporation; Foreign Qualification . IIOT is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being owned, leased, operated and conducted. True, correct and complete copies of the Articles of Incorporation and Bylaws of IIOT have been delivered to HereLab and the Shareholders. Except for OXYS Corp., IIOT does not have any wholly or partially owned subsidiaries and does not own any economic, voting or management interests in any other Person. IIOT is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in or cause a IIOT Material Adverse Effect.

 

4.2                Due Authorization . IIOT has full power and authority to enter into this Agreement and the Articles of Exchange, as applicable, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by IIOT of this Agreement have been duly and validly approved and authorized by the Board of Directors of IIOT and no other actions or proceedings on the part of IIOT is necessary to authorize this Agreement, the Articles of Exchange, and the transactions contemplated hereby and thereby. IIOT has duly and validly executed and delivered this Agreement. This Agreement constitutes the legal, valid and binding obligation of IIOT, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to time in effect which affect creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

4.3                Consents; Non-Contravention .

 

(a)                 Except for the filing of the Articles of Exchange with the Nevada Secretary of State, as applicable, filings required by applicable federal and state securities laws, no Permit, consent, authorization or approval of, or filing or registration with, any Governmental Authority or any other Person not a party to this Agreement, is necessary in connection with the execution, delivery and performance by IIOT of this Agreement or the Articles Exchange, or the consummation of the transactions contemplated hereby or thereby, or for the lawful continued operation by IIOT following the Effective Time of the business currently conducted by IIOT.

 

(b)                 Except as would not result in or cause a IIOT Material Adverse Effect, the execution, delivery and performance by IIOT of this Agreement and the Articles of Exchange do not and will not (i) violate any Law; (ii) violate or conflict with, result in a breach or termination of, or constitute a default (or a circumstance which, with or without notice or lapse of time or both, would constitute a default) under any material Contract or Permit; (iii) give any third party any additional right (including a termination right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes not yet due and payable) upon any of the assets or properties of IIOT under any material Contract to which IIOT is a party or by which IIOT or any of its assets or properties are bound; (iv) permit the acceleration of the maturity of any indebtedness of IIOT or indebtedness secured by IIOT’s assets or properties; (v) violate or conflict with any provision of the Articles of Incorporation or Bylaws of IIOT; or (vi) result in the activation of any anti-dilution rights or a reset or repricing of any debt or security instrument of any creditor or equity holder of IIOT except as provided for in this Agreement.

 

 

 

 

  3  
 

 

4.4                Capitalization . The authorized capital stock of IIOT consists of 190,000,000 shares of IIOT common stock (the “ IIOT Common Stock ”) and 10,000,000 shares of IIOT Preferred Stock. There are issued and outstanding 38,453,328 shares of IIOT Common Stock and no shares of IIOT Preferred Stock. All of the issued and outstanding shares of IIOT Common Stock are validly issued, fully paid and non-assessable and the issuance thereof was not subject to preemptive rights or was issued in compliance therewith. No shares of IIOT’s capital stock are subject to preemptive rights or any other similar rights or any Liens or encumbrances suffered or permitted by IIOT; (ii) there are no outstanding convertible debt securities; (iii) except for 350,000 reserved for issuance to a consultant, there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of IIOT, or contracts, commitments, understandings or arrangements by which IIOT is or may become bound to issue additional shares of capital stock of IIOT or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of IIOT; (iv) there are no agreements or arrangements under which IIOT is obligated to register the sale of any of its securities under the Securities Act; (v) there are no outstanding securities of IIOT which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which IIOT is or may become bound to redeem a security of IIOT; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the shares as described in this Agreement; (vii) Except for the 2017 Stock Awards Plan, IIOT does not have any stock appreciation rights plans or agreements or any similar plan or agreement; and (viii) there is no dispute as to the class of any shares of IIOT’s capital stock. The Common Stock of IIOT is quoted on the OTCQB platform of OTC Markets.

 

4.5                SEC Reports; Financial Statements . To the Knowledge of IIOT, it has filed all reports, schedules, forms, statements and other documents required to be filed by IIOT under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as IIOT was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, to the Knowledge of IIOT, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. To the Knowledge of IIOT, the consolidated financial statements of IIOT included in the SEC Reports (the “ IIOT Financial Statements ”) comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Based upon the report of the auditor of the IIOT Financial Statements, such financial statements have been prepared in accordance with GAAP (except (i) as may be otherwise indicated in the IIOT Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and, to the Knowledge of IIOT, fairly present in all material respects the financial position of IIOT on a consolidated basis as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

4.6                Liabilities . There are no liabilities of IIOT, whether accrued, absolute, contingent or otherwise, which arose or relate to any transaction of IIOT, its agents or servants occurring prior to the period covered by the IIOT Financial Statements which are not disclosed by or reflected in the IIOT Financial Statements. To the Knowledge of IIOT, there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may hereafter give rise to liabilities, except in the normal course of business of IIOT.

 

4.7                Material Changes; Undisclosed Events, Liabilities or Developments . Since the period covered by the IIOT Financial Statements, (i) there has been no event, occurrence or development that has had or that could reasonably be expected, individually or in the aggregate, to result in or cause a IIOT Material Adverse Effect, (ii) IIOT has not incurred any liabilities (contingent or otherwise) other than trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, (iii) IIOT has not altered its method of accounting, (iv) IIOT has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) IIOT has not issued any equity securities to any officer, director or Affiliate. IIOT has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy or similar law nor does IIOT or the Shareholder have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or similar proceedings.

 

 

 

  4  
 

 

4.8                Taxes . All federal, state, foreign, county, and local income, withholding, profits, franchise, occupation, property, sales, use, gross receipts and other taxes (including any interest or penalties relating thereto) and assessments which are due and payable have been duly reported, fully paid and discharged as reported by IIOT, and there are no unpaid taxes which are, or could become a Lien on the properties and assets of IIOT, except as provided for in the IIOT Financial Statements, or have been incurred in the normal course of business of IIOT since that date. All tax returns of any kind required to be filed have been filed and the taxes paid. There are no disputes as to taxes of any nature payable by IIOT.

 

4.9                Patents and Trademarks . IIOT has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with its business and which the failure to so have could have or cause an IIOT Material Adverse Effect (collectively, the “ IIOT Intellectual Property Rights ”). IIOT has not received a notice (written or otherwise) that any of the IIOT Intellectual Property Rights used by IIOT violates or infringes upon the rights of any Person. To the knowledge of IIOT, all such IIOT Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the IIOT Intellectual Property Rights. IIOT has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have or cause an IIOT Material Adverse Effect.

 

4.10              Litigation . There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or governmental investigations pending or, to the Knowledge of IIOT, threatened against IIOT or any of its officers or directors in their capacity as such, or any of its properties or businesses, and IIOT has no Knowledge of any facts or circumstances which may reasonably be likely to give rise to any of the foregoing. IIOT is not subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court or other Governmental Authority. IIOT has not entered into any agreement to settle or compromise any proceeding pending or threatened in writing against it which has involved any obligation for which IIOT or its properties or business has any continuing obligation. There are no claims, actions, suits, proceedings, or investigations pending or, to the Knowledge of IIOT, threatened by or against IIOT with respect to this Agreement or the Articles of Exchange, or in connection with the transactions contemplated hereby or thereby, and IIOT has no reason to believe there is a valid basis for any such claim, action, suit, proceeding or investigation.

 

4.11             Consents and Approvals . IIOT has obtained all consents and approvals required for the consummation of the transactions contemplated by this Agreement.

 

4.12             Brokers . Neither IIOT nor any of its agents or representatives has retained any finder, broker, agent, financial advisor or other intermediary in connection with the transactions contemplated by this Agreement.

 

4.13              Board Approval . The Board of Directors of IIOT, by unanimous written consent, duly adopted resolutions: (a) approving and declaring advisable this Agreement, the Exchange and the transactions contemplated hereby; (b) determining that the terms of the Exchange are fair to and in the best interests of IIOT and its shareholders; and (c) adopting this Agreement, which resolutions have not been modified, supplemented or rescinded and remain in full force and effect.

 

4.14              Completion of Due Diligence . Prior to execution of this Agreement, IIOT or its representatives was granted access to all the facilities, properties, books, Contracts, commitments and records of HereLab reasonably requested by IIOT or its representatives, and IIOT was furnished with any and all information concerning HereLab which IIOT or its representatives reasonably requested.

 

4.15              Disclosure . All of the disclosure furnished by or on behalf of IIOT to HereLab or any Shareholder regarding IIOT, its business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

 

 

 

  5  
 

 

ARTICLE V.
REPRESENTATIONS OF HereLab and the Shareholders

 

HereLab and each of the Shareholders, jointly and severally, represent and warrant to IIOT that all of the statements contained in this ARTICLE V are true as of the date of this Agreement (or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.

 

5.1                Due Incorporation; Foreign Qualification . HereLab is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease and operate its properties and to carry on its business as it is now being owned, leased, operated and conducted. True, correct and complete copies of the Certificate of Incorporation and Bylaws of HereLab have been delivered to IIOT. The Shareholders are collectively the sole shareholders of HereLab. HereLab is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in or cause a HereLab Material Adverse Effect.

 

5.2                Due Authorization . Each of HereLab and the Shareholders has full power and authority to enter into this Agreement and the Articles of Exchange, as applicable, and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by HereLab of this Agreement have been duly and validly approved and authorized by its Board of Directors and its shareholders, and no other actions or proceedings on the part of HereLab is necessary to authorize this Agreement, the Articles of Exchange, and the transactions contemplated hereby and thereby. Each of HereLab and the Shareholders has duly and validly executed and delivered this Agreement. This Agreement constitutes the legal, valid and binding obligation of each of HereLab and the Shareholders enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to time in effect which affect creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

5.3                Consents; Non-Contravention .

 

(a)                 Except for the filing of the Articles of Exchange with the Nevada Secretary of State and filings required by applicable federal and state securities laws, no Permit, consent, authorization or approval of, or filing or registration with, any Governmental Authority or any other Person not a party to this Agreement, is necessary in connection with the execution, delivery and performance by HereLab and Shareholders of this Agreement or the Articles Exchange, or the consummation of the transactions contemplated hereby or thereby.

 

(b)                 Except as would not result in or cause a HereLab Material Adverse Effect, the execution, delivery and performance by HereLab of this Agreement and the Articles of Exchange do not and will not (i) violate any Law; (ii) violate or conflict with, result in a breach or termination of, or constitute a default (or a circumstance which, with or without notice or lapse of time or both, would constitute a default) under any material Contract or Permit; (iii) give any third party any additional right (including a termination right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes not yet due and payable) upon any of the assets or properties of HereLab under any material Contract to which HereLab is a party or by which HereLab or any of their assets or properties are bound; (iv) permit the acceleration of the maturity of any indebtedness of HereLab or indebtedness secured by such entity’s assets or properties; (v) violate or conflict with any provision of the Certificate of Incorporation or Bylaws of HereLab; or (vi) result in the activation of any anti-dilution rights or a reset or repricing of any debt or security instrument of any creditor or equity holder of HereLab, except as provided for in this Agreement.

 

 

 

 

  6  
 

 

5.4                Capitalization . The authorized capital stock of HereLab consists of 10,000,000 shares of common stock (the “ HereLab Common Stock ”), par value $0.00001 per share. As of the date of this Agreement and Closing, there are issued and outstanding 1,650,000 shares of HereLab Common Stock. The Shareholders are the sole owners of record and sole beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of the 1,650,000 outstanding shares of HereLab Common Stock. All of the issued and outstanding shares of HereLab Common Stock are validly issued, fully paid and non-assessable and the issuance thereof was not subject to preemptive rights or was issued in compliance therewith. No shares of HereLab’s capital stock are subject to preemptive rights or any other similar rights or any Liens or encumbrances suffered or permitted by HereLab; (ii) there are no outstanding debt securities; (iii) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of HereLab, or contracts, commitments, understandings or arrangements by which HereLab is or may become bound to issue additional shares of capital stock of HereLab or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of HereLab; (iv) there are no agreements or arrangements under which HereLab is obligated to register the sale of any of its securities under the Securities Act; (v) there are no outstanding securities of HereLab which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which HereLab is or may become bound to redeem a security of HereLab; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the shares as described in this Agreement; and (vii) there is no dispute as to the class of any shares of HereLab’s capital stock.

 

5.5                Financial Statements . HereLab’s unaudited financial statements as of and for the period from inception (February 27, 2017) through September 30, 2017 (the “ HereLab Financial Statements ”) were prepared in accordance with GAAP and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. HereLab Financial Statements fairly present in all material respects the financial position of HereLab as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject to normal, immaterial, year-end audit adjustments. HereLab Financial Statements are capable of audit under U.S. auditing standards and HereLab has sufficient financial records to prepare the financial statements and financial information required under Item 9.01(a) and (b) of Form 8-K promulgated by the SEC (“ Form 8-K ”).

 

5.6                Liabilities . There are no liabilities of HereLab, whether accrued, absolute, contingent or otherwise, which arose or relate to any transaction of HereLab, its agents or servants occurring prior to the period covered by the HereLab Financial Statements which are not disclosed by or reflected in the HereLab Financial Statements. To the Knowledge of HereLab and the Shareholders, there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may hereafter give rise to liabilities, except in the normal course of business of HereLab.

 

5.7                Material Changes; Undisclosed Events, Liabilities or Developments . Except for the transactions contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to HereLab, or its business, prospects, properties, operations, assets or financial condition that would result in or cause a HereLab Material Adverse Effect. HereLab has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy or similar law nor does HereLab have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or similar proceedings.

 

5.8                Taxes . All federal, state, foreign, county, and local income, withholding, profits, franchise, occupation, property, sales, use, gross receipts and other taxes (including any interest or penalties relating thereto) and assessments which are due and payable have been duly reported, fully paid and discharged as reported by HereLab, and there are no unpaid taxes which are, or could become a Lien on the properties and assets of HereLab, except as provided for in the HereLab Financial Statements, or have been incurred in the normal course of business of HereLab since that date. All tax returns of any kind required to be filed have been filed and the taxes paid. There are no disputes as to taxes of any nature payable by HereLab.

 

5.9                Patents and Trademarks . HereLab has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with its business and which the failure to so have could have or cause a HereLab Material Adverse Effect (collectively, the “ HereLab Intellectual Property Rights ”). HereLab has not received a notice (written or otherwise) that any of the HereLab Intellectual Property Rights used by HereLab violates or infringes upon the rights of any Person. To the knowledge of HereLab, all such HereLab Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the HereLab Intellectual Property Rights. HereLab has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have or cause a HereLab Material Adverse Effect.

 

 

 

 

  7  
 

 

5.10              Litigation . There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or governmental investigations pending or, to the Knowledge of HereLab, threatened against Shareholders, HereLab or any of its officers or directors in their capacity as such, or any of its properties or businesses, and HereLab has no any Knowledge of any facts or circumstances which may reasonably be likely to give rise to any of the foregoing. Neither HereLab nor any Shareholder is subject to any order, judgment, decree, injunction, stipulation or consent order of or with any court or other Governmental Authority. Neither HereLab nor any Shareholder has entered into any agreement to settle or compromise any proceeding pending or threatened in writing against them which has involved any obligation for which any Shareholder or HereLab or its properties or business has any continuing obligation. There are no claims, actions, suits, proceedings, or investigations pending or, to the Knowledge of HereLab, threatened by or against either HereLab or any Shareholder with respect to this Agreement or the Articles of Exchange, or in connection with the transactions contemplated hereby or thereby and HereLab and Shareholders have no reason to believe there is a valid basis for any such claim, action, suit, proceeding or investigation.

 

5.11              Consents and Approvals . HereLab and Shareholders have obtained all consents and approvals required for the consummation of the transactions contemplated by this Agreement.

 

5.12              Brokers . Neither HereLab or any Shareholder, nor any of their agents or representatives, has retained any finder, broker, agent, financial advisor or other intermediary in connection with the transactions contemplated by this Agreement.

 

5.13              Board of Directors and Shareholder Approval . The Board of Directors and shareholders of HereLab, by unanimous written consent, have duly adopted resolutions: (a) approving and declaring advisable this Agreement, the Exchange and the transactions contemplated hereby; (b) determined that the terms of the Exchange are fair to and in the best interests of HereLab and its shareholders; and (c) adopting this Agreement, which resolutions have not been modified, supplemented or rescinded and remain in full force and effect.

 

5.14             Completion of Due Diligence . Prior to execution of this Agreement, each of HereLab, the Shareholders, and their representatives was granted access to all the facilities, properties, books, Contracts, commitments and records of IIOT reasonably requested by such parties, and were furnished with any and all information concerning IIOT which HereLab, its Shareholders, or their representatives reasonably requested.

 

5.15              Disclosure . All of the disclosure furnished by or on behalf of HereLab to IIOT regarding HereLab, its businesses and the transactions contemplated hereby, including the disclosure schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

ARTICLE VI.
COVENANTS

 

6.1                Access to Information and Facilities; Confidentiality .

 

(a)                 From and after the date of this Agreement, HereLab and the Shareholders shall allow IIOT and its representatives access during normal business hours to all of the facilities, properties, books, Contracts, commitments and records of HereLab and shall make the officers and employees of HereLab available to IIOT and its representatives as such party or its representatives shall from time to time reasonably request. IIOT and its representatives shall be furnished with any and all information concerning HereLab, which IIOT or its representatives reasonably request and can be obtained by HereLab without unreasonable effort or expense.

 

(b)                 From and after the date of this Agreement, IIOT shall allow HereLab and the Shareholders, and their representatives access during normal business hours to all of the facilities, properties, books, Contracts, commitments and records of IIOT and shall make the officers and employees of IIOT available to HereLab, the Shareholders and their representatives as HereLab, the Shareholders or their representatives shall from time to time reasonably request. HereLab, the Shareholders and their representatives shall be furnished with any and all information concerning IIOT which HereLab, the Shareholders or their representatives reasonably request and can be obtained by IIOT without unreasonable effort or expense.

 

(c)                 With respect to the information disclosed pursuant to this Section, the parties shall maintain the confidentiality of any material non-public information furnished by the other party.

 

 

 

 

  8  
 

 

6.2                Preservation of Business . Subject to the terms of this Agreement, from the date of this Agreement until the Closing Date, each of IIOT and HereLab, as the case may be, shall operate only in the ordinary and usual course of business consistent with past practice, and shall use reasonable commercial efforts to: (a) preserve intact its present business organization, as the case may be; (b) preserve the good and advantageous relationships of IIOT and HereLab, as the case may be, with employees and other Persons material to the operation of their respective businesses; and (c) not permit any action or omission within its control which would cause any of the representations or warranties of HereLab, the Shareholders, or IIOT, as the case may be, contained herein to become inaccurate in any material respect or any of the covenants of HereLab, the Shareholder, or IIOT, as the case may be, to be breached in any material respect.

 

6.3                Conduct of Business . Neither HereLab nor IIOT shall engage in any extraordinary transactions affecting the transactions contemplated by this Agreement without the other party or parties’ prior written consent, including, without limitation the following: (i) the Shareholders shall not transfer or dispose of their shares of IIOT, grant any options or rights to such shares, or in any way encumber the shares; (ii) HereLab shall not issue any equity shares or rights to purchase or instruments convertible into equity shares of HereLab; (iii) neither HereLab nor IIOT shall pay any dividends or redeem any securities; (iv) neither HereLab nor IIOT shall borrow any funds or incur any debt or other obligations; and (v) no party hereto shall take any action which would have a material negative effect on the proposed Exchange.

 

6.4                Certain Notices . From and after the date of this Agreement until the Effective Time, each party hereto shall promptly notify the other party hereto of: (a) the occurrence, or non-occurrence, of any event that would be likely to cause any condition to the obligations of any party to effect the Exchange and the other transactions contemplated by this Agreement not to be satisfied; or (b) the failure of IIOT or HereLab, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it pursuant to this Agreement which would reasonably be expected to result in any condition to the obligations of any party to effect the Exchange and the other transactions contemplated by this Agreement not to be satisfied; provided, however , that the delivery of any notice pursuant to this Section 6.4 shall not cure any breach of any representation or warranty requiring disclosure of such matter prior to the date of this Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice.

 

6.5                Consents and Approvals .

 

(a)                 Each of HereLab and the Shareholders shall use commercially reasonable efforts to obtain all consents, approvals, certificates and other documents required in connection with the performance by it or them of this Agreement and the consummation of the transactions contemplated hereby. HereLab and the Shareholders shall make all filings, applications, statements and reports to all Governmental Authorities and other Persons that are required to be made prior to the Closing Date by or on behalf of HereLab or the Shareholders, as applicable, pursuant to Applicable Law in connection with this Agreement and the transactions contemplated hereby.

 

(b)                 IIOT shall use commercially reasonable efforts to obtain all consents, approvals, certificates and other documents required in connection with the performance by it of this Agreement and the consummation of the transactions contemplated hereby. IIOT shall make all filings, applications, statements and reports to all Governmental Authorities and other Persons that are required to be made prior to the Closing Date by or on behalf of IIOT pursuant to Applicable Law or otherwise in connection with this Agreement and the transactions contemplated hereby.

 

6.6                Shareholder Approval . HereLab shall provide Shareholder Approval of the Exchange and this Agreement, and the transactions contemplated thereby, as soon as practicable following the date of this Agreement.

 

6.7                Supplemental Information . From time to time prior to the Closing, HereLab and the Shareholders, on the one hand, and IIOT, on the other hand, shall promptly disclose in writing to the other any matter hereafter arising which, if existing, occurring or known at the date of this Agreement would have been required to be disclosed to the other parties hereto or which would render inaccurate any of the representations, warranties or statements set forth in ARTICLE IV and ARTICLE V, respectively, hereof.

 

6.8                Exclusive Dealing . From the date of this Agreement until Closing or termination hereof pursuant to Section 11.1, neither HereLab nor the Shareholders shall, directly or indirectly, through any representative or otherwise, solicit, negotiate with or in any manner encourage, discuss or accept any proposal of any other person relating to the acquisition of HereLab, shares of its capital stock purchased from HereLab or the Shareholders, or its assets or business, in whole or in part, whether through direct purchase, merger, consolidation, or other business combination.

 

 

 

  9  
 

 

6.9                Implementing Agreement . Subject to the terms and conditions hereof, each party hereto shall use its or his commercially reasonable efforts to take, or cause to be taken, all appropriate action required of it to consummate and make effective the transactions contemplated by this Agreement.

 

6.10             Tax-Free Reorganization Treatment .

 

(a)                 IIOT, the Shareholders, and HereLab shall use their commercially reasonable efforts, and cause their respective Affiliates to use their commercially reasonable efforts, to take or cause to be taken any action necessary for the Exchange to qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither IIOT, any Shareholder, nor HereLab shall, nor shall they permit any of their respective representatives or Affiliates to, take or cause to be taken any action that could reasonably be expected to prevent the Exchange from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

 

(b)                 This Agreement is intended to constitute, and the parties hereto hereby adopt this Agreement as, a “plan of reorganization” within the meaning Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). Each of IIOT, the Shareholders, and HereLab shall report the Exchange as a reorganization within the meaning of Section 368 of the Code, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code.

 

(c)                 Notwithstanding the foregoing, neither HereLab or IIOT, nor any representative of, or legal counsel or consultant for, HereLab or IIOT warrants that the Exchange will qualify as a tax-free reorganization.

 

6.11             Financial Statements . Following Closing HereLab shall prepare and furnish audited financial statements in compliance with Item 9.01(a) of Form 8-K (the “ HereLab 8-K Financial Statements ”) and shall furnish financial information of HereLab for compliance with Item 9.01(b) of Form 8-K for filing by IIOT not later than 75 days following the Closing Date. Shareholders shall cooperate in all material respects with the preparation of these financial statements and financial information.

 

ARTICLE VII.

MUTUAL INDEMNIFICATION

 

7.1                Indemnification.

 

(a)                 HereLab and the Shareholders, jointly and severally, covenant and agree to defend, indemnify and hold harmless IIOT its officers, directors, and each person who controls IIOT within the meaning of the Securities Act from and against any damages (including reasonable attorneys’, accountants’, and experts’ fees, disbursements of counsel, and other related costs and expenses) arising out of or resulting from: (A) any inaccuracy in or breach of any representation or warranty made by HereLab or any Shareholder in this Agreement; or (B) the failure of HereLab or any Shareholder to perform or observe fully any covenant, agreement or provision to be performed or observed by such party pursuant to this Agreement.

 

(b)                 IIOT covenants and agrees to defend, indemnify and hold harmless HereLab and the Shareholders, HereLab’s officers, directors, and each person who controls HereLab within the meaning of the Securities Act from and against any damages (including reasonable attorneys’, accountants’, and experts’ fees, disbursements of counsel, and other related costs and expenses) arising out of or resulting from: (A) any inaccuracy in or breach of any representation or warranty made by IIOT in this Agreement; or (B) the failure by IIOT to perform or observe any covenant, agreement or condition to be performed or observed by it pursuant to this Agreement.

 

7.2                Third Party Claims.

 

(a)                 If any party entitled to be indemnified pursuant to Section 7.1 (an “ Indemnified Party ”) receives notice of the assertion by any third party of any claim or of the commencement by any such third person of any actual or threatened claim, action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or investigation by or before any governmental entity or arbitrator and an appeal from any of the foregoing (any such claim or Action being referred to herein as an “ Indemnifiable Claim ”) with respect to which another party hereto (an “ Indemnifying Party ”) is or may be obligated to provide indemnification, the Indemnified Party shall promptly notify the Indemnifying Party in writing (the “ Claim Notice ”) of the Indemnifiable Claim; provided, that the failure to provide such notice shall not relieve or otherwise affect the obligation of the Indemnifying Party to provide indemnification hereunder, except to the extent that any damages directly resulted or were caused by such failure.

 

 

 

  10  
 

 

(b)                 The Indemnifying Party shall have 30 days after receipt of the Claim Notice to undertake, conduct and control, through counsel of its own choosing, and at its expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith; provided, that (A) the Indemnifying Party shall permit the Indemnified Party to participate in such settlement or defense through counsel chosen by the Indemnified Party (subject to the consent of the Indemnifying Party, which consent shall not be unreasonably withheld), provided that the fees and expenses of such counsel shall not be borne by the Indemnifying Party, and (Bi) the Indemnifying Party shall not settle any Indemnifiable Claim without the Indemnified Party’s consent. So long as the Indemnifying Party is vigorously contesting any such Indemnifiable Claim in good faith, the Indemnified Party shall not pay or settle such claim without the Indemnifying Party’s consent, which consent shall not be unreasonably withheld.

 

(c)                 If the Indemnifying Party does not notify the Indemnified Party within 30 days after receipt of the Claim Notice that it elects to undertake the defense of the Indemnifiable Claim described therein, the Indemnified Party shall have the right to contest, settle, or compromise the Indemnifiable Claim in the exercise of its reasonable discretion; provided, that the Indemnified Party shall notify the Indemnifying Party of any compromise or settlement of any such Indemnifiable Claim.

 

7.3                Maximum Liability . In no event shall the aggregate liability of all Indemnifying Parties under either 7.2(a) or 7.2(b) this Article VII exceed $50,000.

 

7.4                Indemnification Non-Exclusive . The foregoing indemnification provisions are in addition to, and not in derogation of, any statutory, equitable, or common-law remedy any party may have for breach of representation, warranty, covenant or agreement.

 

ARTICLE VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF IIOT

 

The obligations of IIOT under this Agreement are subject to the satisfaction (or waiver by IIOT) of the following conditions precedent on or before the Closing Date:

 

8.1                Representations and Warranties . Without supplementation after the date of this Agreement, the representations and warranties of HereLab and the Shareholders contained in this Agreement shall be, with respect to those representations and warranties qualified by any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other representations and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect as if made as of the Closing Date.

 

8.2                Compliance with Agreements and Covenants . HereLab and the Shareholders shall have performed and complied in all material respects with all of their covenants, obligations and agreements contained in this Agreement to be performed and complied with by them on or prior to the Closing Date.

 

8.3                Officer’s and Shareholder’s Certificate . IIOT shall have been furnished with a certificate (dated as of the Closing Date and in form and substance reasonably satisfactory to IIOT), executed by the chief executive officer of HereLab and by the Shareholders, certifying to the fulfillment of the conditions specified in subsections 8.1 and 8.2 hereof.

 

8.4                Consents and Approvals . HereLab and the Shareholders shall have received written evidence satisfactory to IIOT that all consents and approvals required for the consummation of the transactions contemplated hereby have been obtained, and all required filings have been made.

 

8.5                No Material Adverse Change . At the Closing Date, there shall have been no material adverse change in the assets, liabilities, prospects, financial condition or business of HereLab or the Shareholders. Between the date of this Agreement and the Closing Date, there shall not have occurred an event that would reasonably be expected to constitute an HereLab Material Adverse Effect.

 

8.6                Actions or Proceedings . No action or proceeding by any Governmental Authority or other Person shall have been instituted or threatened which: (a) is likely to constitute an HereLab Material Adverse Effect; or (b) could enjoin, restrain or prohibit, or could result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated hereby.

 

 

 

  11  
 

 

8.7                Approval of Exchange . The Shareholders shall have approved this Agreement and the Exchange contemplated hereby in accordance with the DGCL.

 

8.8                Compliance with Securities Laws . IIOT shall be satisfied that the transfer of the HereLab Common Stock in connection with Exchange shall be exempt from registration under Regulation D of the Securities Act and Section 4(a)(2) of the Securities Act and all applicable state securities laws, and that, unless expressly waived by IIOT in writing, each of the Shareholders is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated by the SEC under the Securities Act.

 

ARTICLE IX.
CONDITIONS PRECEDENT TO OBLIGATIONS OF HereLab

 

The obligations of HereLab and the Shareholders under this Agreement are subject to the satisfaction (or waiver by HereLab and the Shareholders) of the following conditions precedent on or before the Closing Date:

 

9.1                Representations and Warranties . Without supplementation after the date of this Agreement, the representations and warranties of IIOT contained in this Agreement shall be, with respect to those representations and warranties qualified by any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other representations and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect as if made as of the Closing Date.

 

9.2                Compliance with Agreements and Covenants . IIOT shall have performed and complied in all material respects with all of its covenants, obligations and agreements contained in this Agreement to be performed and complied with by it on or prior to the Closing Date.

 

9.3                Officer’s Certificates . HereLab and the Shareholders shall have been furnished with a certificate (dated as of the Closing Date and in form and substance reasonably satisfactory to HereLab and the Shareholders), executed by an executive officer of IIOT, certifying to the fulfillment of the conditions specified in subsections 9.1 and 9.2 hereof.

 

9.4                No Material Adverse Change . At the Closing Date, there shall have been no material adverse change in the assets, liabilities, financial condition or business of IIOT. Between the date of this Agreement and the Closing Date, there shall not have occurred an event that would reasonably be expected to constitute a IIOT Material Adverse Effect.

 

9.5                Actions or Proceedings . No action or proceeding by any Governmental Authority or other Person shall have been instituted or threatened which: (a) is likely to constitute an IIOT Material Adverse Effect; or (b) could enjoin, restrain or prohibit, or could result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated hereby.

 

9.6                Approval of Exchange . IIOT shall have approved this Agreement and the Exchange contemplated hereby in accordance with the NRS.

 

ARTICLE X.

PRE-CLOSING TERMINATION

 

10.1             Termination . Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the Exchange contemplated hereby may be abandoned at any time prior to the Closing Date, only as follows:

 

(a)                 by mutual written agreement of IIOT and HereLab;

 

(b)                 by IIOT (if IIOT is then not in material breach of its obligations under this Agreement) if: (i) a material default or breach shall be made by HereLab or the Shareholders with respect to the due and timely performance of any of its or his covenants and agreements contained herein and such default is not cured within 30 days; (ii) HereLab or the Shareholders makes an amendment or supplement to any schedule hereto and such amendment or supplement reflects an HereLab Material Adverse Effect after the date of this Agreement; (iii) a HereLab Material Adverse Effect shall have occurred after the date of this Agreement; or (iv) Closing shall not have occurred on or before December 31, 2011;

 

 

 

  12  
 

 

(c)                 by HereLab and the Shareholders (if neither HereLab nor the Shareholders is then in material breach of their obligations under this Agreement) if: (i) a material default or breach shall be made by IIOT with respect to the due and timely performance of any of its covenants and agreements contained herein and such default is not cured within 30 days; (ii) IIOT makes an amendment or supplement to any schedule hereto and such amendment or supplement reflects a IIOT Material Adverse Effect after the date of this Agreement; (iii) an IIOT Material Adverse Effect shall have occurred after the date of this Agreement; or (iv) Closing shall not have occurred on or before December 31, 2011.

 

10.2             Effect of Termination . In the event of termination of this Agreement authorized pursuant to Section 11.1 hereof, written notice thereof shall be given to the other parties and all obligations of the parties shall terminate and, except as otherwise provided in this Section, no party shall have any right against any other party hereto for any loss, damage, expense (including out-of-pocket expenses) or liability, including, without limitation, reasonable attorneys’ fees and disbursements arising out of the preparation and execution of this Agreement, fulfilling in whole in part its obligations under this Agreement or otherwise incurred by a party in any action or proceeding between such party and the other party hereto or between such party and a third party, which is determined to have been sustained, suffered or incurred by a party and to have arisen from or in connection with an event or state of facts which is subject to claim under this Agreement.

 

ARTICLE XI.
POST-CLOSING RESCISSION

 

11.1             Grounds for Rescission . The following events shall be deemed grounds for rescission of this Agreement and the Exchange as provided herein (each a “ Rescission Event ”):

 

(a)                 failure of HereLab or the Shareholders to comply with Section 6.11 above within the period provided therein or a material difference between the HereLab Financial Statements and the HereLab 8-K Financial Statements;

 

(b)                 during the period ending 90 days following the Closing Date, HereLab or a Shareholder declares a breach by IIOT of any representation or warranty contained in this Agreement or of any covenant contained in this Agreement, which inaccuracy or breach has resulted in a IIOT Material Adverse Effect, and which cannot be, or has not been, cured within ten days after written notice of such breach is given to IIOT by HereLab or a Shareholder;

 

(c)                 during the period ending 90 days following the Closing Date, IIOT declares a breach by HereLab or any Shareholder of any representation or warranty contained in this Agreement or of any covenant contained in this Agreement, which inaccuracy or breach has resulted in a HereLab Material Adverse Effect, and which cannot be, or has not been, cured within ten days after written notice of such breach is given to HereLab or the Shareholder by IIOT; or

 

(d)                 during the period ending 90 days following the Closing Date, IIOT becomes Insolvent.

 

11.2             Notice of an Rescission Event . In order to enforce a rescission of this Agreement, the party seeking to enforce rescission must provide notice to the other party reasonably detailing the Rescission Event and providing the other party not less than ten days to cure the Rescission Event (the “ Cure Period ”). If this Rescission Event is not cured within the Cure Period, the party giving notice may declare this Agreement rescinded by giving notice to the other party or parties. The curing of a Rescission Event during the Cure Period shall not prohibit a party from declaring another or subsequent Rescission Event.

 

11.3             Effect of Rescission . The parties hereto agree that if this Agreement is rescinded under Section 11.2, this Agreement shall be cancelled and rescinded effective retroactive as of the date of Closing Date, and this Agreement and all transactions arising here from shall be null and void ab initio . Each of the parties hereto further agrees to take all steps necessary and proper to accomplish the rescission, including the following actions:

 

(a)                 Each of the Shareholders shall return to IIOT the stock certificates representing the IIOT Shares, duly endorsed for cancellation;

 

(b)                 IIOT shall cause HereLab to issue on its stock records the HereLab shares cancelled in exchange for the IIOT Shares and shall cancel the HereLab shares issued to IIOT under the Exchange;

 

(c)                 IIOT shall return to HereLab, and HereLab shall return to IIOT, any assets of the other party not spent or consumed in the ordinary course of business;

 

 

 

  13  
 

 

(d)                 HereLab shall cause any of its Affiliates to return to IIOT for cancellation any stock or other equity awards granted by IIOT to the Affiliates; and

 

(e)                 The parties shall take any further actions reasonably requested by the other party or parties to place IIOT, HereLab, and the Shareholders in the same position as prior to Closing, taking into account the normal course of business of the parties after closing and prior to rescission of this Agreement.

 

ARTICLE XII.
MISCELLANEOUS

 

12.1             Certain Definitions . As used herein, the following terms shall have the meanings set forth below:

 

Affiliate ” shall mean any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.

 

Applicable Law ” shall mean all Laws, to the extent applicable to any Person.

 

Contract ” shall mean any contract, lease, commitment or understanding, sales order, purchase order, agreement, indenture, mortgage, note, bond, instrument or license, whether written or verbal, which is intended or purports to be a binding and enforceable agreement.

 

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

GAAP ” means U.S. generally accepted accounting principles

 

Governmental Authority ” shall mean: (a) the government of the United States: (b) the government of any foreign country; (c) the government of any state or political subdivision of the government of the United States or the government of any foreign country; or (d) any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

HereLab Material Adverse Effect ” shall mean any change or effect that is, or is reasonably likely to be, materially adverse to the business, assets and liabilities (taken together), financial condition or operations or results of operations of HereLab; provided, however, that none of the following shall be deemed (either alone or in combination) to constitute such a change or effect: (a)(i) any adverse change attributable to the announcement or pendency of the transactions contemplated by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting the United States economy or financial markets in general; (b) any act or threat of terrorism or war anywhere in the world, any armed hostilities or terrorist activities anywhere in the world, any threat or escalation of armed hostilities or terrorist activities anywhere in the world or any governmental or other response or reaction to any of the foregoing; or (c) any action by HereLab approved or consented to in writing by IIOT.

 

IIOT Material Adverse Effect ” shall mean any change or effect that is, or is reasonably likely to be, materially adverse to the business, assets and liabilities (taken together), financial condition or operations or results of operations of IIOT and its subsidiaries, taken as a whole; provided, however , that none of the following shall be deemed (either alone or in combination) to constitute such a change or effect: (a) (i) any adverse change attributable to the announcement or pendency of the transactions contemplated by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting (A) the mortgage banking or brokerage industries as a whole; (B) the United States economy or financial markets in general; or (C) any foreign economy or financial markets in any location where IIOT has material operations or sales; (b) any act or threat of terrorism or war anywhere in the world, any armed hostilities or terrorist activities anywhere in the world, any threat or escalation of armed hostilities or terrorist activities anywhere in the world or any governmental or other response or reaction to any of the foregoing; or (c) any action by IIOT approved or consented to in writing by HereLab.

 

Insolvent ” shall mean the circumstance where a IIOT cannot raise enough cash to meet its obligations or the obligations of its consolidated subsidiaries, or to pay debts of IIOT or its consolidated subsidiaries as they become due for payment, but does not include when the value of IIOT’s total or consolidated assets is less than its total liabilities.

 

 

 

  14  
 

 

Knowledge ” shall mean, as it relates to HereLab, the actual knowledge of the Shareholders, in each case upon reasonable inquiry; and as it relates to IIOT, the actual knowledge of Giro DiBiase, in each case upon reasonable inquiry.

 

Law ” shall mean any law, statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority.

 

Lien ” shall mean any mortgage, lien, charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any third party, easement, encroachment or encumbrance upon any of the assets or properties of any Person.

 

Material ” or “ materially ” (whether or not capitalized) except as otherwise specifically defined in this Agreement, when used in this Agreement refer, with respect to a given Person, to a level of significance that would have affected any decision of a reasonable person in that Person’s position regarding whether to enter into this Agreement or would affect any decision of a reasonable person in that Person’s position regarding whether to consummate the transactions contemplated by this Agreement.

 

Permit ” shall mean a permit, license, registration, certificate of occupancy, approval or other authorization issued by any Governmental Authority.

 

Person ” shall mean any corporation, proprietorship, firm, partnership, limited partnership, trust, association, individual or other entity.

 

SEC ” shall mean the U.S. Securities and Exchange Commission.

 

Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

Other Definitions . In addition to the terms set forth in Section 12.1 and elsewhere in this Agreement, each of the following terms is defined in the section set forth opposite such term:

 

Defined Term Location
Agreement Preamble
Articles of Exchange §1.2
Claim Notice §7.2(a)
Closing §3.1
Closing Date §3.1
Code Recitals
Cure Period §11.2
DGCL Recitals
Effective Time §1.2
Form 8-K §5.5
HereLab Preamble
HereLab Common Stock §5.4
HereLab Financial Statements §5.5
HereLab 8-K Financial Statements §6.11
HereLab Intellectual Property Rights §5.9
HereLab Shares §2.2
Indemnifiable Claim §7.2(a)
Indemnified Party §7.2(a)
Indemnifying Party §7.2(a)
IIOT Preamble
IIOT Common Stock §4.4
IIOT Financial Statements §4.5
IIOT Intellectual Property Rights §4.9
IIOT Shares §2.1
Exchange Recitals
NRS Recitals
Rescission Event §11.1
SEC Reports §4.5
Shareholders Preamble

 

 

 

  15  
 

 

12.2             Expenses . Except as otherwise expressly provided herein, each party hereto shall bear its own expenses with respect to this Agreement and the transactions contemplated hereby. IIOT shall not pay for any of the expenses, directly or indirectly, incurred by the Shareholders related to this reorganization transaction.

 

12.3             Amendment . This Agreement may only be amended, modified or supplemented pursuant to a written agreement signed by each of the parties hereto.

 

12.4             Survival of Representations and Warranties . Except for an action under Article VII above, all covenants, representations and warranties made herein shall survive the Closing of this Agreement and shall continue in full force and effect for a period of one year from the Closing Date, at the end of which period no claim may be made with respect to any such covenant, representation, or warranty unless such claim shall have been asserted in writing to the other party during such period.

 

12.5             Press Release; Public Announcements . The parties shall not make any other public announcements in respect of this Agreement or the transactions contemplated herein without prior consultation and written approval by the other party as to the form and content thereof, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, any party may make any disclosure which its counsel advises is required by Applicable Law or regulation, including the intended filing of a report on Form 8-K with the SEC, in which case the other party shall be given such reasonable advance notice as is practicable in the circumstances and the parties shall use their best efforts to cause a mutually agreeable release or announcement to be issued.

 

12.6             Notices . Any notice, demand, request, waiver or other communication required or permitted to be given pursuant to this Agreement must be in writing (including electronic format) and will be deemed by the parties to have been received (i) upon delivery in person (including by reputable express courier service) at the address set forth below; (ii) upon delivery by electronic mail (as verified by a printout showing satisfactory transmission) at the electronic mail address set forth below (if sent on a business day during normal business hours where such notice is to be received and if not, on the first business day following such delivery where such notice is to be received); or (iii) upon three business days after mailing with the United States Postal Service if mailed from and to a location within the continental United States by registered or certified mail, return receipt requested, addressed to the address set forth below. Any party hereto may from time to time change its physical or electronic address for notices by giving notice of such changed address or number to the other party in accordance with this section.

 

If to IIOT at:   IIOT-OXYS, Inc.
    705 Cambridge Street
    Cambridge, MA  02141
    Attention: Giro DiBiase, CEO
    Email Address: giro@oxyscorp.com
     
With a copy (which will not constitute notice) to:   Vance, Higley & Associates, P.C.
    1656 Reunion Avenue
    Suite 250
    South Jordan, UT  84095
    Attention:  Ronald N. Vance, Esq.
    Facsimile No.  (801) 446-8803
    Email Address:  ron@vancelaw.us
     
If to HereLab or Shareholders at:   HereLab, Inc.
    10 Rock Pond Road
    West Tisbury MA 02575
    Attention: Patrick Phillips, CEO
    Email Address: patrick@herelab.io
     
With a copy (which will not constitute notice) to:   [If no one, please initial box [PRP]]
     
     
    Attention:  
    Facsimile No.  
    Email Address:  

 

 

  16  
 

 

12.7             Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty.

 

12.8             Interpretation . The headings preceding the text of Articles and Sections included in this Agreement are for convenience only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine, feminine or neuter gender herein shall not limit any provision of this Agreement. The use of the terms “including” or “include” shall in all cases herein mean “including, without limitation” or “include, without limitation,” respectively.

 

12.9             Applicable Law and Venue . This Agreement and the rights and duties of the parties hereto shall be construed and determined in accordance with the laws of the State of New Jersey (without giving effect to any choice or conflict of law provisions), and any and all actions to enforce the provisions of this Agreement shall be brought in a court of competent jurisdiction in the State of New Jersey and in no other place.

 

12.10         Attorneys’ Fees . If any legal action or any arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default, or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties will be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it or they may be entitled.

 

12.11         Assignment . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however , that no assignment of any rights or obligations shall be made by any party without the prior written consent of all the other parties hereto.

 

12.12         No Third Party Beneficiaries . This Agreement is solely for the benefit of the parties hereto and, to the extent provided herein, their respective directors, officers, employees, agents and representatives, and no provision of this Agreement shall be deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right.

 

12.13         Further Assurances . Upon the reasonable request of the parties hereto, the other parties hereto shall, on and after the Closing Date, execute and deliver such other documents, releases, assignments and other instruments as may be required to effectuate completely the transactions contemplated by this Agreement.

 

12.14         Severability . If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions hereof shall remain in full force and shall not be affected thereby, and there shall be deemed substituted for such invalid, illegal or unenforceable provision a valid, legal and enforceable provision as similar as possible to the provision at issue.

 

12.15         Remedies Cumulative . The remedies provided in this Agreement shall be cumulative and shall not preclude the assertion or exercise of any other rights or remedies available by law, in equity or otherwise.

 

12.16         Entire Understanding . This Agreement sets forth the entire agreement and understanding of the parties hereto and supersedes all prior agreements, letters of intent, arrangements and understandings between the parties, including the Letter of Intent dated September 11, 2017, as amended, between the parties hereto.

 

 

 

 

  17  
 

 

12.17         Exhibits and Schedules . Each of the Closing deliverables, exhibits, schedules, or similar attachments referenced in this Agreement is annexed hereto and is incorporated herein by this reference and expressly made a part hereof.

 

12.18         Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile transmissions of any signed original document, or transmission of any signed facsimile document, shall constitute delivery of an executed original. At the request of any of the parties, the parties shall confirm facsimile transmission signatures by signing and delivering an original document.

 

12.19         Full Knowledge . By their signatures, the parties acknowledge that they have carefully read and fully understand the terms and conditions of this Agreement, that each party has had the benefit of counsel, or has been advised to obtain counsel, and that each party has freely agreed to be bound by the terms and conditions of this Agreement. To the extent that a party elects not to consult with such counsel, the party hereby waives any defense to inadequate representation by counsel. HereLab and Shareholders expressly acknowledges that Vance, Higley and Associates, P.C., has not provided representation to them in connection with this Agreement or the transactions contemplated hereby.

 

SIGNATURE PAGE FOLLOWS

 

 

 

 

  18  
 

 

SIGNATURE PAGE

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Stock Exchange Agreement to be executed and delivered on the respective day and year set forth below.

 

    IIOT-OXYS, Inc.
     
     
Date: December 13, 2017   By: /s/ Giro DiBiase                      
    Giro DiBiase, CEO
     
     
    HereLab, Inc.
     
Date: December 14, 2017   By: /s/ Patrick Phillips                 
    Patrick Phillips, CEO
     
     
SHAREHOLDERS:    
     
     
Date: December 14, 2017   /s/ Patrick Phillips                        
    Patrick Phillips, an individual
     
Date: December 14, 2017   /s/ Andrew Lindsay                        
    Andrew Lindsay, an individual

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  19  

Exhibit 4.1

 

IIOT-OXYS, Inc.

2017 STOCK INCENTIVE PLAN

 

THE 2017 STOCK INCENTIVE PLAN (the “ Plan ”) of IIOT-OXYS, Inc., a Nevada corporation, is hereby adopted by its Board of Directors as of December 14, 2017 (the “ Effective Date ”).

 

Article 1.

PURPOSES OF THE PLAN

 

Section 1.01            Purposes . The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, consultants, and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends, and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in the success and increased value of the Company.

 

Article 2.

DEFINITIONS

 

For purposes of this Plan, terms not otherwise defined herein shall have the meanings indicated below:

 

Section 2.01            Administrator . “Administrator” means the Board or, if the Board delegates responsibility for any matter to the Committee, the term Administrator shall mean the Committee.

 

Section 2.02            Affiliated Company . “Affiliated Company” means:

 

a)                    with respect to Incentive Options, any “parent corporation” or “subsidiary corporation” of the Company, whether now existing or hereafter created or acquired, as those terms are defined in Sections 424(e) and 424(f) of the Code, respectively; and

 

b)                   with respect to Nonqualified Options, Restricted Stock Units, Stock Appreciation Rights, and Restricted Stock Grants any entity described in paragraph (a) of this Section 2.02 above, plus any other corporation, limited liability company (“ LLC ”), partnership or joint venture, whether now existing or hereafter created or acquired, with respect to which the Company beneficially owns more than fifty percent (50%) of: (1) the total combined voting power of all outstanding voting securities, or (2) the capital or profits interests of an LLC, partnership or joint venture.

 

Section 2.03            Base Price . “Base Price” means the price per share of Common Stock for purposes of computing the amount payable to a Participant who holds a Stock Appreciation Right upon exercise thereof.

 

Section 2.04            Board . “Board” means the Board of Directors of the Company.

 

Section 2.05            Change in Control . Except as set forth below, “Change in Control” means:

 

a)                    The acquisition, directly or indirectly, in one transaction or a series of related transactions, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of all outstanding securities of the Company;

 

b)                   A merger or consolidation in which the Company is not the surviving entity, except for a transaction in which the holders of the outstanding voting securities of the Company immediately prior to such merger or consolidation hold as a result of holding the Company securities prior to such transaction, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the surviving entity (or the parent of the surviving entity) immediately after such merger or consolidation;

 

 

 

  1  
 

 

c)                    A reverse merger in which the Company is the surviving entity but in which the holders of the outstanding voting securities of the Company immediately prior to such merger hold, in the aggregate, securities possessing less than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the Company or of the acquiring entity immediately after such merger; or

 

d)                   The sale, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, except for a transaction in which the holders of the outstanding voting securities of the Company immediately prior to such transaction(s) receive as a distribution with respect to securities of the Company, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the acquiring entity immediately after such transaction(s).

 

e)                    In addition, a Change in Control will be deemed to have occurred if, at any time during any period of twelve (12) consecutive months during the term of any Option, as stated in the Option Exercise Documents, Restricted Stock Award Agreement, Restricted Stock Unit Agreement or Stock Appreciation Right Agreement under this Plan, individuals who at the beginning of such period constituted the entire Board do not for any reason constitute a majority of the Board, unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period (but not including any new director whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors of the Company).

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Section 409A of the Code.

 

Section 2.06            Code . “Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

Section 2.07            Committee . “Committee” means a committee of two or more members of the Board appointed to administer the Plan, as set forth in Section 9.01.

 

Section 2.08            Common Stock . “Common Stock” means the Common Stock of the Company, subject to adjustment pursuant to Section 4.02.

 

Section 2.09            Company . “Company” means IIOT-OXYS, Inc., a Nevada corporation, or any entity that is a successor to the Company. Except where the context otherwise requires, the term “ Company ” shall include any of the Company’s present or future parent or subsidiary corporations.

 

Section 2.10            Disability . “Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code. The Administrator’s determination of a Disability or the absence thereof shall be conclusive and binding on all interested parties.

 

Section 2.11            Effective Date . “Effective Date” means the date on which the Plan was originally adopted by the Board, as set forth on the first page hereof.

 

Section 2.12            Exchange Act . “Exchange Act” means the Securities and Exchange Act of 1934, as amended.

 

Section 2.13            Exercise Price . “Exercise Price” means the purchase price per share of Common Stock payable by the Optionee to the Company upon exercise of an Option.

 

Section 2.14            Fair Market Value . “Fair Market Value” on any given date means the value of one share of Common Stock, determined as follows: (i) the last sale before or the first sale after the grant date; (ii) the closing price on the trading day before or on the grant date; (iii) the arithmetic mean (average) of the high and low prices on the trading day before or the trading day of the grant; (iv) an average of the stock price (determined either based on the arithmetic mean or the average of such selling price, weighted based on the volume of trading on each trading day during the period) over a fixed period occurring within 30 days before or after the grant; or (v) any other reasonable valuation method using actual transactions. If there is no public trading market for the Common Stock, the Administrator may determine the fair market value in good faith using any reasonable method of evaluation in a manner consistent with the valuation principles under Section 409A of the Code, which determination shall be conclusive and binding on all interested parties.

 

 

 

  2  
 

 

Section 2.15            FINRA Dealer . “FINRA Dealer” means a broker-dealer that is a member of the Financial Industry Regulatory Authority.

 

Section 2.16            Grant Form . “Grant Form” means the Grant of Stock Option form signed by both parties with respect to either an Incentive Option or a Nonqualified Option, the form of which is set forth in Attachment 1 to this Plan.

 

Section 2.17            Incentive Option . “Incentive Option” means any Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

 

Section 2.18            Nonqualified Option . “Nonqualified Option” means any Option that is not an Incentive Option.  To the extent that any Option designated as an Incentive Option fails in whole or in part to qualify as an Incentive Option, including, without limitation, for failure to meet the limitations applicable to a 10% Stockholder or because it exceeds the annual limit provided for in Section 5.07 below, it shall to that extent constitute a Nonqualified Option.

 

Section 2.19            Option . “Option” means any option to purchase Common Stock granted pursuant to this Plan.

 

Section 2.20            Option Exercise Documents. “Option Exercise Documents” means and includes the Option Exercise Form, the Grant Form, the forms of which are set forth in Attachments 2 to this Plan, and any other agreements the Optionee is required to enter into to exercise options.

 

Section 2.21            Option Exercise Form . “Option Exercise Form” means the form identified as Exhibit A to the Grant Form.

 

Section 2.22            Optionee . “Optionee” means any Participant who holds an Option.

 

Section 2.23            Participant . “Participant” means an individual or entity that holds Options, Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards under this Plan.

 

Section 2.24            Performance Criteria . “Performance Criteria” means one or more of the following as established by the Administrator, which may be stated as a target percentage or dollar amount, a percentage increase over a base period percentage or dollar amount or the occurrence of a specific event or events:

 

a)                    Revenue;

 

b)                   Gross profit;

 

c)                    Operating income;

 

d)                   Pre-tax income;  

 

e)                    Earnings before interest, taxes, depreciation and amortization (“ EBITDA ”);

 

f)                    Earnings per common share on a fully diluted basis (“ EPS ”);

 

g)                   Consolidated net income of the Company divided by the average consolidated common stockholders’ equity (“ ROE ”);

 

h)                   Cash and cash equivalents derived from either (i) net cash flow from operations, or (ii) net cash flow from operations, financings and investing activities (“ Cash Flow ”);

 

 

 

 

  3  
 

 

i)                     Adjusted operating cash flow return on income;

 

j)                     Cost containment or reduction;

 

k)                   The percentage increase in the market price of the Company’s common stock over a stated period; and

 

l)                     Individual business objectives.

 

Section 2.25            Restricted Stock Award . “Restricted Stock Award” means shares issued pursuant to the Restricted Stock Award Program in Article 8.

 

Section 2.26            Restricted Stock Award Agreement . “Restricted Stock Award Agreement” means the written agreement entered into between the Company and a Participant evidencing the grant of Restricted Stock Awards under the Plan, the form of which is set forth in Attachment 3 to this Plan.

 

Section 2.27            Restricted Stock Award Program . “Restricted Stock Award Program” means the program to issue restricted shares pursuant to Article 8.

 

Section 2.28            Restricted Stock Unit . “Restricted Stock Unit” means a right to receive an amount equal to the Fair Market Value of one share of Common Stock, issued pursuant to Article 6, subject to any restrictions and conditions as are established pursuant to Article 6.

 

Section 2.29             Restricted Stock Unit Agreement . “Restricted Stock Unit Agreement” means the written agreement entered into between the Company and a Participant evidencing the grant of Restricted Stock Units under the Plan, the form of which is set forth in Attachment 4 to this Plan.

 

Section 2.30            Service . “Service” means the provision of services to the Company or any Affiliated Company by a person in the capacity of an employee, a non-employee member of the board of directors, officer, or a Service Provider, except to the extent otherwise specifically provided in the documents evidencing the grant of an award under this Plan.

 

Section 2.31             Service Provider . “Service Provider” means a consultant or other person or entity the Administrator authorizes to become a  Participant in the Plan and who provides services to (i) the Company, (ii) an Affiliated Company, or (iii) any other business venture designated by the Administrator in which the Company or an Affiliated Company has a significant ownership interest.

 

Section 2.32            Stock Appreciation Right . “Stock Appreciation Right” means a right issued pursuant to Article 7, subject to any restrictions and conditions as are established pursuant to Article 7 that is designated as a Stock Appreciation Right.

 

Section 2.33            Stock Appreciation Right Agreement . “Stock Appreciation Right Agreement” means the written agreement entered into between the Company and a Participant evidencing the grant of Stock Appreciation Rights under the Plan, the form of which is set forth in Attachment 6 to this Plan.

 

Section 2.34            10% Stockholder . “10% Stockholder” means a person who, as of a relevant date, owns or is deemed to own (by reason of the attribution rules applicable under 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 an Affiliated Company.

 

 

 

 

 

  4  
 

 

Article 3.

ELIGIBILITY

 

Section 3.01            Incentive Options . Only employees of the Company or of an Affiliated Company (including members of the Board if they are employees of the Company or of an Affiliated Company) are eligible to receive Incentive Options under the Plan.

 

Section 3.02            Nonqualified Options; Restricted Stock Units and Stock Appreciation Rights . Employees and officers of the Company or of an Affiliated Company, members of the Board (whether or not employed by the Company or an Affiliated Company), and Service Providers are eligible to receive Nonqualified Options, Restricted Stock Units, and Stock Appreciation Rights under the Plan.

 

Section 3.03            Section 162(m) Limitation . Subject to adjustment as to the number and kind of shares pursuant to Section 4.02, in no event shall any Participant be granted in any one calendar year any award that does not qualify as “performance-based compensation” under Section 162(m) of the Code. In granting awards which are intended to qualify under Section 162(m) of the Code, the Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the award under Section 162(m) of the Code (e.g., in determining the Performance Criteria), provided that no action by the Company or the Administrator shall be deemed to be a promise that any such award will be “performance-based compensation” under such section.

 

Article 4.

PLAN SHARES

 

Section 4.01            Shares Subject to the Plan . The number of shares of Common Stock that may be issued under this Plan shall be 4,500,000 shares of Class A Common Stock, subject to adjustment as to the number and kind of shares pursuant to Section 4.02. For purposes of this limitation, in the event that (a) all or any portion of any Options or Stock Appreciation Rights granted under the Plan can no longer under any circumstances be exercised, (b) any shares of Common Stock are reacquired by the Company pursuant to the Option Exercise Documents, or (c) all or any portion of any Restricted Stock Units or Restricted Stock Awards granted under the Plan are forfeited or can no longer under any circumstances vest, the shares of Common Stock allocable to or covered by the unexercised or unvested portion of such Options, Stock Appreciation Rights, Restricted Stock Units, or Restricted Stock Awards, or the shares of Common Stock so reacquired shall again be available for grant or issuance under the Plan. The following shares of Common Stock may not again be made available for issuance as awards under the Plan: (i) shares of Common Stock not issued or delivered as a result of the net settlement of outstanding Stock Appreciation Rights or Options, (ii) shares of Common Stock used to pay the Exercise Price related to outstanding Options, (iii) shares of Common Stock used to pay withholding taxes related to outstanding Options, Stock Appreciation Rights, Restricted Stock Units, or Restricted Stock Awards, or (iv) shares of Common Stock repurchased on the open market with the proceeds of the Option Exercise Price.

 

Section 4.02            Changes in Capital Structure . In the event that the outstanding shares of Common Stock are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of a recapitalization, stock split, reverse stock split, reclassification, stock dividend, or other change in the capital structure of the Company, then appropriate adjustments shall be made by the Administrator to the aggregate number and kind of shares subject to this Plan, the number and kind of shares and the price per share subject to or covered by outstanding Option Exercise Documents, Restricted Stock Award Agreement, Restricted Stock Unit Agreement or Stock Appreciation Right Agreement and the limit on the number of shares under Section 3.03, all in order to preserve, as nearly as practical, but not to increase, the benefits to Participants.

 

Section 4.03            Limitation on Number of Shares . The total number of shares of Class A Common Stock issuable under this Plan shall not exceed 30% of the then outstanding shares of Class A Common Stock (with convertible preferred or convertible senior common shares counted on an as if converted basis), unless a percentage higher than 30% is approved by at least two-thirds of the outstanding securities entitled to vote.

 

 

 

 

  5  
 

 

Article 5.

OPTIONS

 

Section 5.01            Grant of Stock Options .  The Administrator shall have the right to grant pursuant to this Plan, Options subject to such terms, restrictions, and conditions as the Administrator may determine at the time of grant.  Such conditions may include, but are not limited to, continued provision of Service or the achievement of specified performance goals or objectives established by the Administrator with respect to one or more Performance Criteria, which require the Administrator to certify in writing whether and the extent to which such Performance Criteria were achieved.

 

Section 5.02            Option Exercise Documents . Each Option granted pursuant to this Plan shall be evidenced by Option Exercise Documents which shall specify the number of shares subject thereto, vesting provisions relating to such Option, the Exercise Price per share, and whether the Option is an Incentive Option or Nonqualified Option. As soon as is practical following the grant of an Option, Option Exercise Documents shall be duly executed and delivered by or on behalf of the Company to the Optionee to whom such Option was granted.  Each Option Exercise Document shall be in such form and contain such additional terms and conditions, not inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem desirable.

 

Section 5.03            Exercise Price . The Exercise Price per share of Common Stock covered by each Option shall be determined by the Administrator, subject to the following:  (a) the Exercise Price of an Incentive Option shall not be less than 100% of Fair Market Value on the date the Incentive Option is granted, (b) the Exercise Price of a Nonqualified Option shall not be less than 100% of Fair Market Value on the date the Nonqualified Option is granted, and (c) if the person to whom an Incentive Option is granted is a 10% Stockholder on the date of grant, the Exercise Price shall not be less than 110% of Fair Market Value on the date the Incentive Option is granted. However, an Option may be granted with an 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 Sections 409A and 424 of the Code.

 

Section 5.04            Payment of Exercise Price . Payment of the Exercise Price shall be made upon exercise of an Option and may be made, in the discretion of the Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c) the surrender of shares of Common Stock owned by the Optionee (provided that shares acquired pursuant to the exercise of options granted by the Company must have been held by the Optionee for the requisite period necessary to avoid a charge to the Company’s earnings for financial reporting purposes), which surrendered shares shall be valued at Fair Market Value as of the date of such exercise; (d) the cancellation of indebtedness of the Company to the Optionee; (e) the waiver of compensation due or accrued to the Optionee for services rendered; (f) provided that a public market for the Common Stock exists, a “same day sale” commitment from the Optionee and a FINRA Dealer whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the shares so purchased to pay for the Exercise Price and whereby the FINRA Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Company; (g) provided that a public market for the Common Stock exists, a “margin” commitment from the Optionee and a FINRA Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the shares so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such shares to forward the Exercise Price directly to the Company; or (h) any combination of the foregoing methods of payment or any other consideration or method of payment as shall be permitted by applicable law and approved by the Administrator.

 

Section 5.05            Term and Termination of Options . The term and provisions for termination of each Option shall be as fixed by the Administrator, but no Option may be exercisable more than ten (10) years after the date it is granted.  An Incentive Option granted to a person who is a 10% Stockholder on the date of grant shall not be exercisable more than five (5) years after the date it is granted.

 

Section 5.06            Vesting and Exercise of Options . Each Option shall vest and become exercisable in one or more installments at such time or times and subject to such conditions, including without limitation the achievement of specified performance goals or objectives established with respect to one or more Performance Criteria, as shall be determined by the Administrator.

 

 

 

  6  
 

 

Section 5.07            Annual Limit on Incentive Options . To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Options granted under this Plan and any other plan of the Company or any Affiliated Company become exercisable for the first time by an Optionee during any calendar year shall not exceed $100,000.

 

Section 5.08            Restrictions. Options may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable or transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order entered by a court in settlement of marital property rights, except as specifically provided in the Stock Option Agreement or as authorized by the Administrator, and subject to Section 13.01 of this Plan.

 

Section 5.09             Effect of Termination of Service, Death, or Disability .

 

a)                    Unless otherwise provided by the Administrator, any unvested Options held by the Optionee at the time of termination of Service, Disability or death, will expire immediately upon the occurrence of any such event.

 

b)                   The following provisions shall govern the exercise of any vested Options held by the Optionee at the time of termination of Service, Disability, or death:

 

(1)                 Should the Optionee’s Service be terminated for cause, then the Options shall terminate on the date Service is terminated.

 

(2)                 Should the Optionee’s Service be terminated for Disability, then the Optionee shall have a period of six (6) months following the date of such termination during which to exercise each outstanding Option held by such Optionee at the time of Disability.

 

(3)                 If the Optionee dies while holding an outstanding Option, then the personal representative of his or her estate or the person or persons to whom the Option is transferred pursuant to the Optionee’s will or the laws of inheritance shall have six (6) months following the date of the Optionee’s death to exercise such Option.

 

(4)                 Should Optionee’s Service be terminated by reason other than for cause, Disability, or death, then the Optionee shall have a period of thirty (30) days following the date of such termination during which to exercise each outstanding Option held by such Optionee.

 

(5)                 Under no circumstances, however, shall any such Option be exercisable after the specified expiration of the Option term.

 

(6)                 During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is exercisable on the date of the Optionee’s termination of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any Option which has not been exercised.

 

c)                    The Administrator shall have the discretion, exercisable either at the time an Option is granted or at any time while the Option remains outstanding, to provide either or both of the following, in whole or in part as to any Options:

 

(1)                 extend the period of time for which the Option is to remain exercisable following Optionee’s termination of Service or death from the limited period otherwise in effect for that Option to such greater period of time as the Administrator shall deem appropriate, but in no event beyond the expiration of the Option term;

 

(2)                 permit the Option to be exercised, during the applicable post-termination exercise period, not only with respect to the number of vested shares of Common Stock for which such Option is exercisable at the time of the Optionee’s termination of Service but also with respect to one or more additional installments in which the Optionee would have vested under the Option had the Optionee continued Service.

 

 

 

  7  
 

 

Section 5.10            Rights as a Stockholder . An Optionee or permitted transferee of an Option shall have no rights or privileges as a stockholder with respect to any shares covered by an Option until such Option has been duly exercised and certificates representing shares purchased upon such exercise have been issued to such person.

 

Article 6.

RESTRICTED STOCK UNITS

 

Section 6.01             Grants of Restricted Stock Units . The Administrator shall have the right to grant pursuant to this Plan Restricted Stock Units subject to such terms, restrictions, and conditions as the Administrator may determine at the time of grant.  Such conditions may include, but are not limited to, continued employment or the achievement of specified performance goals or objectives established by the Administrator with respect to one or more Performance Criteria, which require the Administrator to certify in writing whether and the extent to which such Performance Criteria were achieved.

 

Section 6.02             Restricted Stock Unit Agreements . A Participant shall have no rights with respect to the Restricted Stock Units covered by a Restricted Stock Unit Agreement until the Participant has executed and delivered to the Company the applicable Restricted Stock Unit Agreement. Each Restricted Stock Unit Agreement shall be in such form, and shall set forth such other terms, conditions, and restrictions of the Restricted Stock Unit Agreement, not inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem desirable. Each such Restricted Stock Unit Agreement may be different from each other Restricted Stock Unit Agreement.

 

Section 6.03            Vesting of Restricted Stock Units . The Restricted Stock Unit Agreement shall specify the date or dates, the performance goals, if any, established by the Administrator with respect to one or more Performance Criteria that must be achieved, and any other conditions on which the Restricted Stock Units may vest. Except as otherwise provided by the Administrator, should the Participant cease to remain in Service while holding one or more unvested Restricted Stock Units, should the performance objectives not be attained with respect to one or more such unvested Restricted Stock Units, or in the event of the death or Disability of the Participant, then those Restricted Stock Units shall be immediately surrendered to the Company for cancellation, and the Participant shall have no further shareholder rights with respect to those Restricted Stock Units.

 

Section 6.04            Form and Timing of Settlement . Settlement in respect of vested Restricted Stock Units will be automatic upon vesting thereof.  Payment in respect thereof will be made no later than thirty (30) days thereafter and may, in the discretion of the Administrator, be in cash, shares of Common Stock of equivalent Fair Market Value as of the date of exercise, or a combination of both, except as specifically provided in the Restricted Stock Unit Agreement.

 

Section 6.05            Rights as a Stockholder . Holders of Restricted Stock Units shall have no rights or privileges as a stockholder with respect to any shares of Common Stock covered thereby unless and until they become owners of shares of Common Stock following settlement in respect of such Restricted Stock Units, in whole or in part, in shares of Common Stock pursuant to their respective Restricted Stock Unit Agreements and the terms and conditions of the Plan.

 

Section 6.06            Restrictions . Restricted Stock Units may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable or transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order entered by a court in settlement of marital property rights, except as specifically provided in the Restricted Stock Unit Agreement or as authorized by the Administrator, and subject to Section 13.01 of this Plan.

 

 

 

 

  8  
 

 

Article 7.

STOCK APPRECIATION RIGHTS

 

Section 7.01            Grants of Stock Appreciation Rights . The Administrator shall have the right to grant pursuant to this Plan, Stock Appreciation Rights subject to such terms, restrictions and conditions as the Administrator may determine at the time of grant. Such conditions may include, but are not limited to, continued employment or the achievement of specified performance goals or objectives established by the Administrator with respect to one or more Performance Criteria, which require the Administrator to certify in writing whether and the extent to which such Performance Criteria were achieved.

 

Section 7.02            Stock Appreciation Right Agreements . A Participant shall have no rights with respect to the Stock Appreciation Rights covered by a Stock Appreciation Right Agreement until the Participant has executed and delivered to the Company the applicable Stock Appreciation Right Agreement. Each Stock Appreciation Right Agreement shall be in such form, and shall set forth the Base Price and such other terms, conditions and restrictions of the Stock Appreciation Right Agreement, not inconsistent with the provisions of this Plan, as the Administrator shall, from time to time, deem desirable. Each such Stock Appreciation Right Agreement may be different from each other Stock Appreciation Right Agreement.

 

Section 7.03            Base Price . The Base Price per share of Common Stock covered by each Stock Appreciation Right shall be determined by the Administrator and will be not less than 100% of Fair Market Value on the date the Stock Appreciation Right is granted.  However, a Stock Appreciation Right may be granted with a Base Price lower than that set forth in the preceding sentence if such Stock Appreciation Right is granted pursuant to an assumption or substitution for another stock appreciation right in a manner satisfying the provisions of Section 409A of the Code.

 

Section 7.04            Term and Termination of Stock Appreciation Rights . The term and provisions for termination of each Stock Appreciation Right shall be as fixed by the Administrator, but no Stock Appreciation Right may be exercisable more than ten (10) years after the date it is granted.

 

Section 7.05            Vesting and Exercise of Stock Appreciation Rights . Each Stock Appreciation Right shall vest and become exercisable in one or more installments at such time or times and subject to such conditions, including without limitation the achievement of specified performance goals or objectives established with respect to one or more Performance Criteria, as shall be determined by the Administrator.

 

Section 7.06            Effect of Termination of Service, Death, or Disability .

 

a)                    Unless otherwise provided by the Administrator, any unvested Stock Appreciation Right held by the Participant at the time of termination of Service, Disability or death, will expire immediately upon the occurrence of any such event.

 

b)                   The following provisions shall govern the exercise of any vested Stock Appreciation Right held by the Participant at the time of termination of Service, Disability, or death:

 

(1)                 Should the Participant’s Service be terminated for cause, then the Stock Appreciation Rights shall terminate on the date Service is terminated.

 

(2)                 Should the Participant’s Service be terminated for Disability, then the Participant shall have a period of six (6) months following the date of such termination during which to exercise each outstanding Stock Appreciation Right held by such Participant at the time of Disability.

 

(3)                 If the Participant dies while holding an outstanding Stock Appreciation Right, then the personal representative of his or her estate or the person or persons to whom the Stock Appreciation Right is transferred pursuant to the Participant’s will or the laws of inheritance shall have six (6) months following the date of the Participant’s death to exercise such Stock Appreciation Right.

 

 

 

 

  9  
 

 

(4)                 Should Participant’s Service be terminated by reason other than for cause, Disability, or death, then the Participant shall have a period of thirty (30) days following the date of such termination during which to exercise each outstanding Stock Appreciation Right held by such Participant.

 

(5)                 Under no circumstances, however, shall any such Stock Appreciation Right be exercisable after the specified expiration of the Stock Appreciation Right term.

 

c)                    The Administrator shall have the discretion, exercisable either at the time a Stock Appreciation Right is granted or at any time while the Stock Appreciation Right remains outstanding, to extend the period of time for which the Stock Appreciation Right is to remain exercisable following Participant’s termination of Service or death from the limited period otherwise in effect for that Stock Appreciation Right to such greater period of time as the Administrator shall deem appropriate, but in no event beyond the expiration of the Stock Appreciation Right term;

 

Section 7.07             Amount, Form and Timing of Settlement . Upon exercise of a Stock Appreciation Right, the Participant who holds such Stock Appreciation Right will be entitled to receive payment from the Company in an amount equal to the product of (a) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the Base Price per share of Common Stock covered by such Stock Appreciation Right and (b) the number of shares of Common Stock with respect to which such Stock Appreciation Right is being exercised. Payment in respect thereof will be made no later than thirty (30) days after such exercise, provided that such payment will be made in a manner such that no amount of compensation will be treated as deferred under Treasury Regulation Section 1.409A-1(b)(5)(i)(D).  Such payment may, in the discretion of the Administrator, be in cash, shares of Common Stock of equivalent Fair Market Value as of the date of exercise, or a combination of both, except as specifically provided in the Stock Appreciation Right Agreement.

 

Section 7.08            Rights as a Stockholder . Holders of Stock Appreciation Rights shall have no rights or privileges as a stockholder with respect to any shares of Common Stock covered thereby unless and until they become owners of shares of Common Stock following settlement in respect of such Stock Appreciation Rights, in whole or in part, in shares of Common Stock pursuant to their respective Stock Appreciation Right Agreements and the terms and conditions of the Plan.

 

Section 7.09            Restrictions . Stock Appreciation Rights may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable or transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order entered by a court in settlement of marital property rights, except as specifically provided in the Stock Appreciation Right Agreement or as authorized by the Administrator, and subject to Section 13.01 of this Plan.

 

Article 8.

RESTRICTED STOCK AWARDS PROGRAM

 

Section 8.01            Restricted Stock Award Terms . Shares of Common Stock may be issued under the Restricted Stock Awards Program through direct and immediate issuances of Restricted Stock Awards without any intervening option grants. Each such stock grant shall be evidenced by a Restricted Stock Awards Agreement which complies with the terms specified below.

 

Section 8.02            Cost of Shares . Grants of Restricted Stock Awards under the Restricted Stock Awards Program shall be made at such cost as the Administrator shall determine and may be issued for no monetary consideration, subject to applicable state law.

 

Section 8.03            Vesting Provisions .

 

a)                    Each Restricted Stock Award shall vest and become exercisable in one or more installments at such time or times and subject to such conditions, including without limitation the achievement of specified performance goals or objectives established with respect to one or more Performance Criteria, as shall be determined by the Administrator.

 

 

 

  10  
 

 

a)                     Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested Restricted Stock Awards by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Company’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested Restricted Stock Awards and (ii) such escrow arrangements as the Administrator shall deem appropriate.

 

b)                   Unless specified otherwise in the Restricted Stock Awards Agreement, the Participant shall have full shareholder rights with respect to any Restricted Stock Awards issued to the Participant under the Restricted Stock Awards Program, whether or not the Participant’s interest in those shares is vested, and accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

 

c)                    Should the Participant cease to remain in Service while holding one or more unvested Restricted Stock Awards issued under the Restricted Stock Awards Program or should the performance objectives not be attained with respect to one or more such unvested Restricted Stock Awards, then those shares shall be immediately surrendered to the Company for cancellation, and the Participant shall have no further shareholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness), the Company shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares.

 

d)                   The Administrator may in its discretion waive the surrender and cancellation of one or more unvested Restricted Stock Awards (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the Restricted Stock Awards as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives.

 

Section 8.04            Restrictions . Unvested Restricted Stock Awards may not be sold, pledged or otherwise encumbered or disposed of and shall not be assignable or transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order entered by a court in settlement of marital property rights, except as specifically provided in the Restricted Stock Award Agreement or as authorized by the Administrator, and subject to Section 13.01 of this Plan.

 

Section 8.05            Share Escrow/Legends . Stock certificates evidencing any unvested Restricted Stock Awards may, in the Administrator’s discretion, be held in escrow by the Company until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.

 

Article 9.

ADMINISTRATION OF THE PLAN

 

Section 9.01            Administrato r. Authority to control and manage the operation and administration of the Plan shall be vested in the Board, which may delegate such responsibilities in whole or in part to a committee consisting of two (2) or more members of the Board (the “ Committee ”), each of whom shall meet the independence requirements under the then applicable rules, regulations or listing requirements of the principal exchange on which the Company’s shares of Common Stock are then listed or admitted to trading or as otherwise determined by the Board.  Members of the Committee may be appointed from time to time by, and shall serve at the pleasure of, the Board. The Board may limit the composition of the Committee to those persons necessary to comply with the requirements of Section 162(m) of the Code and Section 16 of the Exchange Act. As used herein, the term “Administrator” means the Board or, with respect to any matter as to which responsibility has been delegated to the Committee, the term Administrator shall mean the Committee.

 

 

 

 

  11  
 

 

Section 9.02            Powers of the Administrator . In addition to any other powers or authority conferred upon the Administrator elsewhere in this Plan or by law, the Administrator shall have full power and authority:  (a) to determine the persons to whom, and the time or times at which, Incentive Options, Nonqualified Options, Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards shall be granted, the number of shares to be represented by Option Exercise Documents, and the Exercise Price of such Options and the Base Price of such Stock Appreciation Rights; (b) to interpret the Plan; (c) to create, amend or rescind rules and regulations relating to the Plan; (d) to determine the terms, conditions and restrictions contained in, and the form of, Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, or Stock Appreciation Right Agreement; (e) to determine the identity or capacity of any persons who may be entitled to exercise a Participant’s rights under any Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, or Stock Appreciation Right Agreement under the Plan; (f) to correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, or Stock Appreciation Right Agreement; (g) to accelerate the vesting of any Option, Restricted Stock Unit, Stock Appreciation Right, or Restricted Stock Award; (h) to extend the expiration date of any Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, or Stock Appreciation Right Agreement; (i) subject to Section 9.03, to amend outstanding Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, or Stock Appreciation Right Agreement to provide for, among other things, any change or modification which the Administrator could have included in the original agreement or in furtherance of the powers provided for herein; and (j) to make all other determinations necessary or advisable for the administration of this Plan, but only to the extent not contrary to the express provisions of this Plan.  Any action, decision, interpretation or determination made in good faith by the Administrator in the exercise of its authority conferred upon it under this Plan shall be final and binding on the Company and all Participants.  Notwithstanding any term or provision in this Plan, the Administrator shall not have the power or authority, by amendment or otherwise to extend the expiration date of an Option, Restricted Stock Unit or Stock Appreciation Right beyond the tenth (10th) anniversary of the date such Option or Stock Appreciation Right was granted.

 

Section 9.03            Repricing Prohibited . Subject to Section 4.02, and except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), neither the Committee nor the Board shall amend the terms of outstanding awards to reduce the Exercise Price of outstanding Options or the Base Price of outstanding Stock Appreciation Rights or cancel outstanding Options, Stock Appreciation Rights, or Restricted Stock Awards in exchange for cash, other awards or Options with an Exercise Price that is less than the Exercise Price of the original Options or Stock Appreciation Rights with a Base Price that is less than the Base Price of the original Stock Appreciation Rights, without approval of the Company’s stockholders, evidenced by a majority of votes cast.

 

Section 9.04            Limitation on Liability; Indemnification .  No employee of the Company or member of the Board or Committee shall be subject to any liability with respect to duties under the Plan unless the person acts fraudulently or in bad faith.  To the extent permitted by law, the Company shall indemnify each member of the Board or Committee, and any employee of the Company with duties under the Plan, who was or is a party, or is threatened to be made a party, to any threatened, pending or completed proceeding, whether civil, criminal, administrative or investigative, by reason of such person’s conduct in the performance of duties under the Plan.

 

Article 10.

CHANGE IN CONTROL

 

Section 10.01          Options and Stock Appreciation Rights . Vesting of all outstanding Options or Stock Appreciation Rights shall accelerate automatically effective as of immediately prior to the consummation of the Change in Control. In connection with such acceleration, the Administrator in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of each Option or Stock Appreciation Right for an amount of cash or other property having a value equal to (i) with respect to each Option, the amount (or “spread”) by which, (x) the value of the cash or other property that the Optionee would have received pursuant to the Change in Control transaction in exchange for the shares issuable upon exercise of the Option had the Option been exercised immediately prior to the Change in Control, exceeds (y) the Exercise Price of the Option, and (ii) with respect to each Stock Appreciation Right, the value of the cash or other property that the Participant would have received had the Stock Appreciation Right been exercised immediately prior to the Change in Control. The Administrator shall have the discretion to provide in each Option Exercise Document other terms and conditions that relate to vesting of such Option or Stock Appreciation Right in the event of a Change in Control. The aforementioned terms and conditions may vary in each Option Exercise Document and may be different from and have precedence over the provisions set forth in this Section 10.01.

 

 

 

  12  
 

 

Section 10.02           Restricted Stock Units and Restricted Stock Awards . All Restricted Stock Units and unvested Restricted Stock Awards shall vest in full effective as of immediately prior to the consummation of the Change in Control. In connection with such acceleration, the Administrator in its discretion may provide, in connection with the Change in Control transaction, for the purchase or exchange of each Restricted Stock Unit or Restricted Share for an amount of cash or other property having a value equal to the value of the cash or other property that the Participant would have received had the Restricted Stock Unit or Restricted Share vested immediately prior to the Change in Control. The Administrator shall have the discretion to provide in each agreement other terms and conditions that relate to vesting of such Restricted Stock Units and Restricted Stock Awards in the event of a Change in Control. The aforementioned terms and conditions may vary in each agreement, and may be different from and have precedence over the provisions set forth in this Section 10.02.

 

Article 11.

AMENDMENT AND TERMINATION OF THE PLAN

 

Section 11.01           Amendments . The Board may from time to time alter, amend, suspend or terminate this Plan in such respects as the Board may deem advisable. No such alteration, amendment, suspension or termination shall be made which shall substantially affect or impair the rights of any Participant under an outstanding Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, and Stock Appreciation Right Agreement without such Participant’s consent. Shareholder approval is required for any amendment which increases the number of shares that may be issued under the Plan. The Board may alter or amend the Plan to comply with requirements under the Code relating to Incentive Options or other types of options which gives Optionees more favorable tax treatment than that applicable to Options granted under this Plan as of the date of its adoption. Upon any such alteration or amendment, any outstanding Option granted hereunder may, if the Administrator so determines and if permitted by applicable law, be subject to the more favorable tax treatment afforded to an Optionee pursuant to such terms and conditions. The Plan Administrator may revise or amend the grant forms attached to this Plan.

 

Section 11.02          Plan Termination . Unless this Plan shall theretofore have been terminated, the Plan shall terminate on the tenth (10th) anniversary of the Effective Date and no Options, Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards may be granted under the Plan thereafter, but Option Exercise Documents, Restricted Stock Awards Agreement, Restricted Stock Unit Agreements, and Stock Appreciation Right Agreements then outstanding shall continue in effect in accordance with their respective terms.

 

Article 12.

TAXES

 

Section 12.01          Withholding . The Company shall have the power to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy any applicable Federal, state, and local tax withholding requirements with respect to any Options, Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards. To the extent permissible under applicable tax, securities and other laws, the Administrator may, in its sole discretion and upon such terms and conditions as it may deem appropriate, permit a Participant to satisfy his or her obligation to pay any such tax, in whole or in part, up to an amount determined on the basis of the highest marginal tax rate applicable to such Participant, by (a) directing the Company to apply shares of Common Stock to which the Participant is entitled as a result of the exercise of an Option or Stock Appreciation Right or vesting of a Restricted Stock Unit or Restricted Share, or (b) delivering to the Company shares of Common Stock owned by the Participant. The shares of Common Stock so applied or delivered in satisfaction of the Participant’s tax withholding obligation shall be valued at their Fair Market Value as of the date of measurement of the amount of income subject to withholding.

 

 

 

  13  
 

 

Section 12.02          Compliance with Section 409A of the Code . Options, Restricted Stock Units, Stock Appreciation Rights, and Restricted Stock Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A of the Code such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Section 409A of the Code, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Option Exercise Document, Restricted Stock Awards Agreement, Restricted Stock Unit Agreement, and Stock Appreciation Right Agreement is intended to meet the requirements of Section 409A of the Code and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Option, Restricted Stock Unit, Stock Appreciation Right, or Restricted Stock Award, or grant, payment, settlement or deferral thereof is subject to Section 409A of the Code such Option, Restricted Stock Unit, Stock Appreciation Right, or Restricted Share will be granted, paid, settled or deferred in a manner that will meet the requirements of Section 409A of the Code, such that the grant, payment, settlement or deferral thereof will not be subject to the additional tax or interest applicable under Section 409A of the Code.

 

Article 13.

MISCELLANEOUS

 

Section 13.01          Involuntary Transfer . In the event of any transfer by operation of law or other involuntary transfer (including divorce or death) of all or a portion of any awards or shares granted pursuant to this Plan, whether vested or unvested, held by the record holder thereof, the Company shall have the right to purchase all of the awards or shares transferred at the greater of the purchase price paid by purchaser or the Fair Market Value of the awards or shares (as determined by the Board of Directors) on the date of transfer. Upon such a transfer, the person acquiring the awards or shares shall promptly notify the Secretary of the Company of such transfer. The right to purchase such awards or shares shall be provided to the Company for a period of thirty (30) days following receipt by the Company of written notice by the person acquiring the awards or shares. Within thirty (30) days of receiving notice of the transfer or proposed transfer, the Company shall notify the purchaser/acquirer or his or her executor of the price. If the purchaser/acquirer does not agree with the Company’s valuation, the purchaser/acquirer may have the valuation determined by an independent appraiser to be mutually agreed upon and paid for by the purchaser/acquirer and the Company.

 

Section 13.02          Shareholder Approval of the Plan . The Plan shall be approved by a majority of the outstanding securities entitled to vote at a duly called meeting or by majority written consent by the later of (i) within twelve (12) months before or after the date the Plan is adopted, or (ii) prior to or within twelve (12) months of the granting of any Incentive Options or Nonqualified Options, or the issuance of any Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards. If any Incentive Options or Nonqualified Options is exercised, or any Restricted Stock Units, Stock Appreciation Rights, or Restricted Stock Awards is issued before security holder approval is obtained, the award shall be rescinded if security holder approval is not obtained in the manner described in the preceding sentence.

 

Section 13.03         Excess Awards . Awards may be granted under the Plan which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained shareholder approval of an amendment or increase pursuant to Section 4.01 sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such shareholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Company shall promptly refund to the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically canceled and cease to be outstanding.

 

Section 13.04          Benefits Not Alienable . Other than as provided above, benefits under this Plan may not be assigned or alienated, whether voluntarily or involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other disposition shall be without effect.

 

 

 

  14  
 

 

Section 13.05          No Enlargement of Employee Rights . This Plan is strictly a voluntary undertaking on the part of the Company and shall not be deemed to constitute a contract between the Company and any Participant to be consideration for, or an inducement to, or a condition of, the employment of any Participant. Nothing contained in the Plan shall be deemed to give the right to any Participant to be retained as an employee of the Company or any Affiliated Company or to interfere with the right of the Company or any Affiliated Company to discharge any Participant at any time.

 

Section 13.06          Application of Funds . The proceeds received by the Company from the sale of Common Stock pursuant to Option Exercise Documents, except as otherwise provided herein, will be used for general corporate purposes.

 

Section 13.07          Annual Reports . During the term of this Plan, the Company will furnish to each Participant who does not otherwise receive such materials, copies of all reports, proxy statements and other communications that the Company distributes generally to its stockholders, including, but not limited to, annual financial statements.

 

Section 13.08          Choice of Law and Venue .  The Plan and all related documents shall be governed by, and construed in accordance with, the laws of the State of Nevada.  Acceptance of an award shall be deemed to constitute consent to the jurisdiction and venue of the courts located in the State of Nevada for all purposes in connection with any suit, action or other proceeding relating to such award, including the enforcement of any rights under the Plan or any agreement or other document, and shall be deemed to constitute consent to any process or notice of motion in connection with such proceeding being served by certified or registered mail or personal service within or without the State of Nevada, provided a reasonable time for appearance is allowed.

 

Section 13.09          Rule 16b-3. With respect to Participants subject to Rule 16b-3 of the Exchange Act, transactions under the Plan are intended to comply with all applicable provisions of Rule 16b-3. To the extent any provision of the Plan or action by the Plan Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Plan Administrator.

 

Section 13.10          Relationship to Other Plans . Nothing in this Plan shall prevent the Company or any Affiliated Company from adopting or continuing other or additional compensation arrangements, including without limitation plans providing for the granting of options, restricted stock units, stock appreciation rights, restricted stock awards, or other equity awards. Grants under the Plan may form a part of or otherwise be related to such other or additional compensation arrangements.

 

Attachments:

 

1. Grant of Stock Option form
2. Option Exercise Form and the Grant Form
3. Restricted Stock Award Agreement form
4. Restricted Stock Unit Agreement form

 

 

 

 

  15