CBDMD, INC.
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No.
)
Filed
by the Registrant
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by a party other than the Registrant
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Check
the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
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Definitive Additional Materials
☐
Soliciting Material Under Rule
14(a)(12)
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cbdMD,
Inc.
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(Name
of Registrant as Specified in Its Charter)
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Not
Applicable
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
1.
Title of each class of securities to which transaction
applies:
2.
Aggregate number of securities to which transaction
applies:
3. Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
4.
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5.
Total fee paid:
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materials.
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Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or
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1.
Amount Previously Paid:
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Filing Party:
4. Date
Filed:
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2021
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Notice of Annual Meeting of Shareholders
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Friday,
March 12, 2021 1:00 p.m. EST
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VIRTUALLY
https://www.issuerdirect.com/virtual-event/ycbd
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At the
cbdMD, Inc. 2021 annual meeting of shareholders you will be asked
to vote on the following matters:
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the
election of seven directors;
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the
ratification of the appointment of
Cherry Bekaert LLP
as our independent
registered public accounting firm;
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the
approval of the 2021 Equity Compensation Plan;
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non-binding
advisory vote on executive compensation; and
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any
other business as my properly come before the meeting.
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The
board of directors has fixed the close of business on January 22,
2021 as the record date for determining the common shareholders
that are entitled to notice of and to vote at the 2021 annual
meeting of shareholders and any adjournments thereof.
The 2021 annual meeting will be a completely
“virtual” meeting of shareholders. To participate in
our annual meeting, including casting your vote during the meeting,
access the meeting website at
https://www.issuerdirect.com/virtual-event/
ycbd
and entering in your shareholder
information provided on your ballot or proxy information previously
mailed to you. If you attend the meeting virtually, you may revoke
your proxy prior to its exercise and vote virtually at the
meeting.
Your
vote is important regardless of the number of shares you own.
Please vote your common shares by proxy over the Internet or by
mail, by telephone or by facsimile.
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By
order of the board of directors
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Charlotte,
NC
January 25,
2021
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Martin
A. Sumichrast
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Chairman and
co-Chief Executive Officer
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Important Notice Regarding the Availability of Proxy Materials for
the 2021 Annual Meeting to be Held on March 12, 2021
: This
proxy statement, along with our Annual Report on Form 10-K for the
fiscal year ended September 30, 2020 are available free of charge
on our website
www.cbdmd.com
and through the SEC’s website
www.sec.gov
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Table of Contents
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Page
No.
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Proxy
Summary
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1
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How to
Vote
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1
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Annual
Meeting Agenda and Voting Recommendations
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2
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General
Information
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2
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Proposal 1 -
Election of Directors
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4
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Proposal 2 -
Ratification of the Appointment of
Cherry Bekaert LLP
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7
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Proposal 3 –
Approval of the 2021 Equity Compensation Plan
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9
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Proposal 4 –
Non-Binding Advisory Vote on Executive Compensation
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12
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Other
Matters
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13
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Dissenter’s
Rights
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13
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Corporate
Governance
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13
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Corporate
Governance Framework
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13
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Board
of Directors
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13
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Board
Leadership Structure and Board’s Role in Risk
Oversight
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13
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Board
Committees
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14
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Shareholder
Nominations
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14
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Compensation of
Directors
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15
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Compliance with
Section 16(a) of the Securities Exchange Act of 1934
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16
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Executive
Compensation
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16
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Executive
Officers
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16
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Key
Employees
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17
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Summary
Compensation Table
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18
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Executive
Employment Agreements
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19
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Separation
Agreement with Mr. Elliott
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22
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2015
Equity Compensation Plan
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22
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Securities
Authorized for Issuance under Equity Compensation
Plans
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22
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Outstanding Equity
Awards at Year End
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23
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Principal
Shareholders
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23
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Certain
Relationships and Related Transactions
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25
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Shareholder
Proposals to be Presented at the Next Annual Meeting
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25
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Availability of
Annual Report on Form 10-K
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26
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Shareholders
Sharing the Same Last Name and Address
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26
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Where
You Can Find More Information
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26
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Appendix A –
cbdMD, Inc. 2021 Equity Compensation Plan
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Cautionary Statement Regarding
Forward-Looking Statements
This
proxy statement contains “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements are based on our current expectations and
involve risks and uncertainties which may cause results to differ
materially from those set forth in the statements. The
forward-looking statements may include statements regarding actions
to be taken in the future. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future events or otherwise. Forward-looking statements
should be evaluated together with the many uncertainties that
affect our business, particularly those set forth in the section on
forward-looking statements and in the risk factors in Item 1.A of
our Annual Report on Form 10-K for the fiscal year ended September
30, 2020 as filed with the Securities and Exchange Commission (the
“SEC”) on December 22, 2020 (the “2020
10-K”).
Additional Information
Unless
the context otherwise indicates, when used in this proxy statement,
the terms “cbdMD,” “we,” “us,
“our” and similar terms refer to cbdMD, Inc., a North
Carolina corporation, and our subsidiaries CBD Industries LLC, a
North Carolina limited liability company formerly known as cbdMD
LLC (“CBDI”) and Paw CBD, Inc., a North Carolina
corporation (“Paw CBD”). In addition, “fiscal
2019” refers to the year ended September 30, 2019,
“fiscal 2020” refers to the year ended September 30,
2020 and “fiscal 2021” refers to the fiscal year ending
September 30, 2021.
Our corporate website address is
www.cbdmd.com
.
We make available free of charge, through the Investor section of
our website, annual reports on Form 10-K, including our 2020 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended,
as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. The information which
appears on our websites and our social media platforms is not part
of this proxy statement.
i
Shareholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies
PROXY
STATEMENT
FOR
2021
ANNUAL MEETING OF SHAREHOLDERS
Proxy
Summary
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when
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items of business
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Friday,
March 12, 2021 at 1:00 p.m. EST
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the
election of seven directors;
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where
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Virtual
-
https://www.issuerdirect.com/virtual-event/
ycbd
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the
ratification of the appointment of
Cherry Bekaert LLP
as our independent
registered public accounting firm;
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record date
January
22, 2021
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the
approval of the 2021 Equity Compensation Plan (the “2021
Plan”);
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non-binding
advisory vote on executive compensation; and
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any
other business as my properly come before the meeting.
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How
to Vote:
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By
calling 866.752.VOTE (8683), toll free, in the United States or
Canada
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By voting online at
https://www.iproxydirect.com/YCBD
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By returning a properly completed, signed and
dated proxy card
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By completing the reverse side of the proxy card
and faxing it to 202.521.3464
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1
Annual Meeting Agenda and Voting
Recommendations
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Proposal
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Voting
Recommendation
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Page
Reference
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1
Election of seven directors
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FOR each nominee
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4
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2
Ratification of the appointment of
Cherry Bekaert LLP as our independent auditors
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FOR
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7
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3
Approval of the 2021 Plan
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FOR
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9
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4
Non-binding advisory vote on executive
compensation
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FOR
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12
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General
Information
The
accompanying proxy is solicited by the board of directors of cbdMD
for use at our 2021 annual meeting of shareholders to be held on
Friday, March 12, 2021 at 1:00 p.m., or any adjournment or
postponement thereof, for the purposes set forth in the
accompanying notice of 2021 annual meeting of
shareholders.
This
proxy statement and the accompanying proxy card are being mailed to
owners of shares of our common stock, which is our only class of
voting securities, in connection with the solicitation of proxies
by the board of directors for the 2021 annual meeting of
shareholders. The 2021 annual meeting will be in a virtual meeting
format only. Shareholders may attend the 2021 annual meeting by
visiting
https://www.iproxydirect.com/
YCBD
and entering the control number found on their proxy card or voting
instruction form which shareholders previously
received.
The
date of this proxy statement is January 25, 2021, the approximate
date on which this proxy statement and the enclosed proxy were
first sent or made available to our common shareholders. We will
pay the entire cost of preparing, assembling, printing, mailing and
distributing these proxy materials and soliciting
votes.
Electronic
access
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To access
our proxy statement and 2020 10-K electronically, please visit our
corporate website at
www.cbdmd.com
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Voting
securities
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Only our
common shareholders of record as of the close of business on
January 22, 2021, the record date (“Record Date”) for
the 2021 annual meeting, will be entitled to vote at the meeting
and any adjournment thereof. As of the Record Date, there were
52,287,113 shares of our common stock outstanding, all of which are
entitled to vote with respect to all matters to be acted upon at
the 2021 annual meeting. Each common shareholder on the Record Date
is entitled to one vote for each common share held. Holders of our
8.0% Series A Cumulative Convertible Preferred Stock do not have
voting rights, except in certain limited circumstances, and will
not be entitled to vote at the 2021 annual meeting or any
adjournment thereof.
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Quorum and
Vote Required
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In
accordance with our bylaws, the presence of at least 33 1/3% of the
voting power, regardless of whether the proxy has authority to vote
on all matters, constitutes a quorum which is required in order to
hold 2021 annual meeting and conduct business. Presence may be in
person or by proxy. You will be considered part of the quorum if
you voted on the Internet, by telephone, by facsimile or by
properly submitting a proxy card or voting instruction form by
mail, or if you are present and vote at the 2021 annual meeting.
Votes for and against, abstentions and “broker
non-votes” will each be counted as present for purposes of
determining the presence of a quorum.
Assuming the existence of a quorum, the
affirmative vote of a plurality of the shares of our common stock
present, either in person or represented by proxy, and entitled to
vote at the 2021 annual meeting is required to elect directors
(Proposal 1). With respect to the ratification of Cherry Bekaert
LLP as our independent registered public accounting firm (Proposal
2) and the approval of the 2021 Plan (Proposal 3), assuming the
existence of a quorum, the affirmative vote of a majority of the
shares of our common stock present, either in person or represented
by proxy, and entitled to vote at the 2021 annual meeting is
required to decide such matter. Proposal 4 is a non-binding
advisory vote on matters related to executive compensation and
therefore there is no voting standard for this proposal since the
voting results will be informational only and non-binding on us.
However, our Compensation, Corporate Governance and Nominating
Committee, which is responsible for designing and administering our
executive compensation programs, values the opinions expressed by
our shareholders in their vote on this proposal and will consider
the outcome of this vote when making future compensation decisions
for our named executive officers. If a quorum is not present in
person or by proxy, the 2021 annual meeting may be adjourned until
a quorum is obtained.
Abstentions are counted toward the calculation of
a quorum and will have the same effect as a vote against a
proposal. If you are a beneficial owner whose shares are held of
record by a broker, bank or other nominee, you must instruct the
broker, bank or other nominee how to vote your shares. If you do
not provide voting instructions, your shares will not be voted on
any proposal on which the broker, bank or other nominee does not
have discretionary authority to vote. This is called a
“broker non-vote.” Proxies returned by brokerage firms
for which no voting instructions have been provided by the
beneficial owners will count towards the quorum. A broker or other
nominee holding shares for a beneficial owner may generally vote on
routine matters, but not non-routine matters, without receiving
voting instructions. The uncontested election of directors
(Proposal 1), the adoption of the 2021 Plan (Proposal 3) and the
non-binding advisory vote regarding executive compensation
(Proposal 4) are considered non-routine matters. If your shares are
held by a broker or nominee and you do not provide such voting
instructions, your shares will not be voted FOR Proposals 1, 3 or
4. The ratification of the selection of the independent registered
public accounting firm (Proposal 2) is considered a routine
matter.
Please provide instructions to your brokers or nominee on how to
vote your shares
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Communications with our
board of directors.
You may contact any of our directors by
writing to them c/o cbdMD, Inc., 8845 Red Oak Boulevard, Charlotte,
NC 28217. Each communication should specify the applicable director
or directors to be contacted as well as the general topic of the
communication. We may initially receive and process communications
before forwarding them to the applicable director. We generally
will not forward to the directors a shareholder communication that
is determined to be primarily commercial in nature, that relates to
an improper or irrelevant topic, or that requests general
information about cbdMD. Concerns about accounting or auditing
matters or communications intended for non-management directors
should be sent to the attention of the Chairman of the Audit
Committee at the address above. Our directors may at any time
review a log of all correspondence received by cbdMD that is
addressed to the independent members of the board and request
copies of any such correspondence.
Who can help answer your
questions?
If you have additional questions after reading
this proxy statement, you may seek answers to your questions by
writing, calling or emailing:
John
Weston
Director of
Investor Relations
cbdMD,
Inc.
8845
Red Oak Boulevard
Charlotte, NC
28217
Telephone: (704)
249-9515 (direct)
email:
John.Weston@cbdmd.com
3
Proposal 1- Election of Directors
The
board, upon recommendation by the Compensation, Corporate
Governance and Nominating Committee, has nominated the following
seven individuals for election as directors, each to hold office
until the 2022 annual meeting of shareholders or until his
successor has been duly elected and qualified. Set forth below is
biographical information on the director nominees.
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Martin
A. Sumichrast
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Age
54
Director Since
2015
●
Co-Chief Executive Officer and Chairman of the Board of
Directors
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Professional Background and
Qualifications
Mr.
Sumichrast has served as a member of the board of directors and
chairman of the board of directors since April 2015. Mr. Sumichrast
served as our Chief Executive Officer from September 2016 until
July 2019 and as our co-Chief Executive Officer since July 2019.
Mr. Sumichrast has been a member of the board of directors and
Chief Executive Officer of Adara Acquisition Corp., a newly
organized SPAC, since its formation in August 2020, and manager of
its sponsor, Adara Sponsor, LLC, since its formation in August
2020.
Since 2018 he has served as the Managing Director of
SFT1, LLC, a private investment company owned by a family trust,
and from 2012 until 2020 he served as the Managing Director of
Washington Capital, LLC, a family office.
From 2013 until July 2020 he served as the
Managing Member of Stone Street Capital, LLC, a Charlotte, North
Carolina-based private investment company. Mr. Sumichrast serves as
a Trustee and Chairman of the Nominating and Governance Committees
of the Barings Global Short Duration High Yield Fund, Inc. (NYSE:
BGH) and the Barings Capital Funds Trust, Inc. We selected Mr.
Sumichrast to serve on our board of directors based upon his
significant experience both as an investor and advisor, as well as
his experience as a member of a board of directors of a listed
company.
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R.
Scott Coffman
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Age
59
Director since
2018
●
Co-Chief Executive Officer, Director and President
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Professional Background and
Qualifications
Mr. Coffman
has served as a member of our board of directors since
December 2018. He has served as Chief Executive Officer of our CBDI
subsidiary since December 2018 and has served as our co-Chief
Executive Officer since July 2019. He also serves as our President.
Mr. Coffman has over 25 years of business experience in which he
founded several businesses in the internet services, manufacturing
and e-commerce sectors. As an executive or partner in these
entities, Mr. Coffman oversaw the strategic direction, developed
the business plan and oversaw the operation of the companies. Mr.
Coffman was a manager and Chief Executive Officer of Cure Based
Development, LLC from the founding of the company in September 2017
until the mergers with CBDI in December 2018. Prior to that, from
2012 to 2017, he was an
Operating Partner in a regional
restaurant group and also had day to day executive oversight of
DataTech Global LLC, a privately held technology company which
focuses on online sales and marketing. I
n 2009 he founded Blu, an e-cigarette
manufacturer which he built into a leading brand and subsequently
sold it to Lorillard Tobacco in 2012. Mr. Coffman is the managing
member of Coffman Management, LLC. Mr. Coffman received a Bachelor
of Arts degree in Economics from Marshall University. We selected
Mr. Coffman as a member of our board of directors as a result of
his extensive executive level experience and his role as the
founder of Cure Based Development, LLC.
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4
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Bakari
Sellers
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Age
36
Director since
2017
●
Chairman of the Compensation, Corporate Governance and Nominating
Committee
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Professional
Background
and Qualifications
Mr. Sellers has been a member of our board of directors since
March 2017.
Mr. Sellers, an attorney,
has been a member of the Strom Law Firm, LLC, in Columbia, South
Carolina since 2007. Mr. Sellers is a former member of the South
Carolina House of Representative, where he represented the 90th
District beginning in 2006, making history as the youngest member
of the South Carolina state legislature and the youngest African
American elected official in the nation. In 2014, he ran as the
Democratic nominee for Lt. Governor of South Carolina. He has
worked for United States Congressman James Clyburn and former
Atlanta Mayor Shirley Franklin. Earning his undergraduate degree
from Morehouse College, where he served as student body president,
and received his law degree from the University of
South Carolina. Mr. Sellers has followed in the
footsteps of his father, civil rights leader Cleveland Sellers, in
his tireless commitment to service championing progressive policies
to address issues ranging from education and poverty to preventing
domestic violence and childhood obesity. He has served as a
featured speaker at events for the National Education Association,
College Democrats of America National Convention, the 2008
Democratic National Convention and, in 2007, delivered the opening
keynote address to the AIPAC Policy Conference in Washington, DC.
Mr. Sellers is also a political commentator at CNN. We selected Mr.
Sellers as a result of his leadership experience, commitment to
public policy and legal
background.
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William
F. Raines, III
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Age
61
Director since
2019
●
Chairman of the Audit Committee
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Professional Background and
Qualifications
Mr.
Raines has been a member of our board of directors since April
2019. Since 2008 Mr. Raines has been employed by DataTech Global,
LLC, a privately held technology company affiliated with Mr.
Coffman which focuses on online sales and marketing, serving as
Chief Financial Officer from 2008 to 2012 and Chief Executive
Officer since 2012. Mr. Raines has over 35 years of accounting and
financial experience with a primary focus on financial control of
operations, financial reporting, acquisitions and implementation of
acquisition plans. Earlier in his career, from 1991 until 2006 Mr.
Raines served in various capacities from Corporate Controller of
Speedway Motorsports, Inc. (NYSE:TRK) to General Manager of SMI
Properties, Inc., a subsidiary of Speedway Motorsports, Inc., and
from 2009 until 2012 he was Chief Executive Officer and Chief
Financial Officer of Intermark Brands, LLC, the manufacturer of
Blu, an e-cigarette, and its related entities BLEC, LLC and QSN
Technologies, LLC, which
were
subsequently sold to Lorillard Tobacco in 2012. Mr. Raines received
a B.S. in Accounting from the University of Maryland in 1981. We
selected Mr. Raines to serve on the board as a result of his
extensive technology, accounting and mergers and acquisitions
experience.
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5
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Peter
Ghiloni
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Age
70
Director since
2019
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Professional Background and
Qualifications
Mr.
Ghiloni has been a member of our board of directors since April
2019. In 2018 Mr. Ghiloni retired as Chief Executive Officer of
Swisher International, Inc., North America’s largest producer
of cigars. Mr. Ghiloni began his career in the tobacco business
with the United States Tobacco Company in 1972 after graduating
from Fordham University with a Bachelor of Science degree in
Marketing. In 1983, he moved to The Helme Tobacco Company as Vice
President of Marketing and in 1991, he was promoted to Senior Vice
President of Sales and Marketing. Following the merger of Swisher
International, Inc. and The Helme Tobacco Company, Mr. Ghiloni
assumed the role of Senior Vice President of Marketing for the
combined company. In 2013, Mr. Ghiloni was promoted to the position
of President and Chief Executive Officer. Mr. Ghiloni serves on a
variety of boards including the board of
directors of Swisher International, Inc., the Board of
Jacksonville University and the Board of the Baptist Beaches
Hospital. We selected Mr. Ghiloni to serve on the board of
directors as a result of his executive leadership positions, his
position as President, Chief Executive Officer and a member of the
board of directors of Swisher
International, Inc., his service on additional boards and extensive
business background.
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Scott
G. Stephen
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Age
55
Director since
2019
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Professional Background and
Qualifications
Mr.
Stephen has been a member of our board of directors since April
2019. Mr. Stephen has served as Chief Growth Officer of Guaranteed
Rate Inc., a U.S. residential mortgage company headquartered in
Chicago, IL, since February 2012. Mr. Stephen also serves as
President of Guaranteed Rate Insurance and Ravenswood Title,
affiliates of Guaranteed Rate Inc. From 2003 until 2012, he was
employed by Playboy Enterprises, Inc., a leading men’s global
entertainment and lifestyle company, serving in a variety of
positions including Chief Operations Officer, Executive Vice
President, Playboy Print/Digital Group and Executive Vice President
and General Manager of Playboy Digital Media. From 1999 to 2003 Mr.
Stephen was employed by Yesmail, Inc., an online relationship
marketing company, serving as Chief Operating Officer and Vice
President of Client Services and Operations. Mr. Stephen received a
Bachelor of Business Administration in Finance from the University
of Notre Dame and a Master of Management in Marketing and
Organizational Behavior from the Kellogg School of Management at
Northwestern University. We selected Mr. Stephen to serve on the
board of directors as a result of his executive leadership
positions, his positions with Guaranteed Rate Inc. and Playboy
Enterprises and his extensive business background.
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Sim
Farar
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Age
74
Director
Nominee
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Professional Background and
Qualifications
Mr.
Farar is a director nominee. Since 1997 Mr. Farar has been the
managing member of JDF Investment Co, LLC, a privately held company
specializing in corporate development, financing and merger
transactions. Mr. Farar also currently serves on the advisory
boards of Verb Technology Company, Inc. (NASDAQ: VERB) and BioSig
Technologies, Inc. (NASDAQ: BSGM). Since 2017 he has served on the
U.S. Advisory Commission on Public Diplomacy (USACPD) and currently
serves as its Chairman. In 2002, Los Angeles Mayor James Hahn
appointed Mr. Farar to serve as a commissioner for the $12 billion
Los Angeles Fire and Police Pension’s Trustee Fund. In 2001,
he was appointed to the Woodrow Wilson Council, the private sector
advisory board of the Woodrow Wilson International Center for
Scholars in Washington, DC. In 1999, he was appointed by President
Clinton and confirmed by the U.S. Senate to serve as the United
States Representative to the 54th General Assembly at the United
Nations in New York City. We selected Mr. Farar to serve on the
board of directors as a result of his experience and perspective as
an investor in a wide variety of public and private
companies.
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There
are no family relationships between any of the executive officers
and directors. The board of directors has determined that each of
Messrs. Sellers, Ghiloni, Stephen, Raines and Farar will be
independent directors within the meaning of Rule 803 of the NYSE
American Company Guide.
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The board of directors recommends a vote “FOR” the
election of Messrs. Sumichrast, Coffman, Raines,
Sellers, Ghiloni, Stephen and Farar to the board of
directors.
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6
Proposal 2 - Ratification of the
Appointment of Cherry Bekaert LLP
The
Audit Committee has appointed
Cherry
Bekaert LLP
as our independent registered public accounting
firm to audit our consolidated financial statements for fiscal
2021. We have invited representatives of Cherry Bekaert LLP to
attend the 2021 annual meeting. Although shareholder ratification
of the appointment of our independent auditor is not required by
our bylaws or otherwise, we are submitting the selection of
Cherry Bekaert LLP
to our
common shareholders for ratification to permit our common
shareholders to participate in this important corporate decision.
If not ratified, the Audit Committee will reconsider the selection,
although the Audit Committee will not be required to select a
different independent auditor for our company. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may direct the appointment of a different independent registered
public accounting firm at any time during the fiscal year if the
Audit Committee determines that such a change would be in our best
interests.
Fees
The
following table shows the fees that were billed for the audit and
other services provided for fiscal 2020 and fiscal
2019:
|
|
Fiscal
2020
|
Fiscal
2019
|
|
Audit
Fees
|
$
300,000
|
$
276,250
|
|
Audit-Related
Fees
|
119,795
|
127,306
|
|
Tax
Fees
|
20,900
|
30,650
|
|
All Other
Fees
|
77,347
|
80,272
|
|
Total
|
$
518,042
|
$
514,478
|
Audit Fees
— This category includes the audit of our
annual financial statements and services that are normally provided
by the independent registered public accounting firm in connection
with engagements for those fiscal years. This category also
includes advice on audit and accounting matters that arose during,
or as a result of, the audit or the review of interim financial
statements.
Audit-Related Fees
— This category consists of
assurance and related services by the independent registered public
accounting firm that are reasonably related to the performance of
the audit or review of our financial statements and are not
reported above under “Audit Fees.” The services for the
fees disclosed under this category include consultation regarding
our correspondence with the SEC, other SEC filings and other
accounting consulting.
Tax Fees
— This category consists of professional
services rendered by our independent registered public accounting
firm for tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and
technical tax advice.
All Other Fees
— This category consists of fees
for other miscellaneous items.
Pre-Approval Policy
Our
board of directors has adopted a procedure for pre-approval of all
fees charged by our independent registered public accounting firm.
Under the procedure, the Audit Committee of the board approves the
engagement letter with respect to audit, tax and review services.
Other fees are subject to pre-approval by the Audit Committee of
the board. The audit and tax fees paid to the auditors with respect
to the fiscal 2020 and fiscal 2019 were approved by the Audit
Committee of the board of directors.
7
Report of the Audit Committee of the Board of
Directors
The primary function of the Audit Committee is to assist the board
of directors in its oversight of our financial reporting processes.
Management is responsible for the preparation, presentation and
integrity of the financial statements, including establishing
accounting and financial reporting principles and designing systems
of internal control over financial reporting. Our independent
auditors are responsible for expressing an opinion as to the
conformity of our consolidated financial statements with generally
accepted accounting principles.
With
respect to fiscal 2020, in addition to its other work, the Audit
Committee:
●
reviewed and
discussed with management and
Cherry
Bekaert LLP
, our independent registered public accounting
firm, our audited consolidated financial statements as of September
30, 2020 and the fiscal year then ended;
●
discussed
with
Cherry Bekaert LLP
the
matters required to be discussed by Statement on Auditing Standards
No. 61, “
Communication with
Audit Committees
,” as amended, with respect to its
review of the findings of the independent registered public
accounting firm during its examination of our financial statements;
and
●
received from
Cherry Bekaert LLP
written
affirmation of its independence as required by the Independence
Standards Board Standard No. 1, “
Independence Discussions with Audit
Committees
.” In addition, the Audit Committee
discussed with
Cherry Bekaert
LLP
, its independence and determined that the provision of
non-audit services was compatible with maintaining auditor
independence.
The
Audit Committee recommended, based on the review and discussion
summarized above, that the board of directors include the audited
consolidated financial statements in the 2020 10-K for filing with
the SEC.
|
Dated:
December 16, 2020
|
|
Audit
Committee of the board of directors of cbdMD, Inc.
|
|
|
|
|
|
|
|
/s/ William F. Raines, III, Chairman
|
|
|
|
/s/ Bakari Sellers
|
|
|
|
/s/ Peter Ghiloni
|
|
|
|
/s/ Scott G. Stephen
|
|
|
The Board of Directors recommends a vote “FOR” the
ratification of the appointment of Cherry Bekaert LLP as the
independent registered public accounting firm.
|
8
Proposal 3 - Approval of the 2021
Equity Compensation Plan
On January 8, 2021, our board of directors
approved the 2021 Plan and recommended the approval of the 2021
Plan by our shareholders. The purpose of the 2021 Plan is to
advance the interests of our company by providing an incentive to
attract, retain and motivate highly qualified and competent persons
who are important to us and upon whose efforts and judgment the
success of our company is largely dependent. The 2021 Plan reserves
5,000,000 shares of our common stock for issuance pursuant to the
terms of the plan upon the grant of plan options, restricted stock
awards, or other stock-based awards granted under the 2021 Plan.
The 2021 Plan also contains an “evergreen formula”
pursuant to which the number of shares of common stock available
for issuance under the 2021 Plan will automatically increase on
October 1 of each calendar year during the term of the 2021 Plan,
beginning with calendar year 2022, by an amount equal to 1% of the
total number of shares of common stock outstanding on September 30
of the such calendar year, up to a maximum of 250,000 shares. The
terms and provisions of the 2021 Plan are summarized below, which
summary is qualified in its entirety by reference to the 2021 Plan,
a copy of which is attached as
Appendix A
to this proxy
statement.
The
2021 Plan will be administered by the Compensation, Corporate
Governance and Nominating Committee of our board of directors. Such
committee is comprised of independent members of our
board of directors in accordance with the rules of the NYSE
American LLC, the exchange on which our common stock and 8.0%
Series A Cumulative Convertible Preferred Stock is presently
listed. The Compensation, Corporate Governance and Nominating
Committee will determine, from time to time, those individuals to
whom stock awards or plan options will be granted, the terms and
provisions of each such grants, the dates such grants
will become exercisable, the number of shares subject to each
grant, the purchase price of such shares and the form of payment of
such purchase price. All other questions relating to the
administration of the 2021 Plan and the interpretation of the
provisions thereof are to be resolved at the sole discretion of the
Compensation, Corporate Governance and Nominating
Committee.
Grants Under the 2021 Plan
The
2021 Plan provides for the grant of restricted stock awards,
deferred stock grants, stock appreciation rights, incentive stock
options (“ISOs”) and non-statutory stock options
(“NSOs”). Awards may be made or granted to our
employees, officers, directors and consultants who are deemed to
have rendered or to be able to render significant services to cbdMD
or our subsidiaries and who are deemed to have contributed or to
have the potential to contribute to the success of our company. No
ISOs may be granted to any person who is not an employee of cbdMD
or a subsidiary at the time of grant. The recipient of any grant
under the 2021 Plan, and the amount and terms of a specific grant,
will be determined by the Compensation, Corporate Governance and
Nominating Committee. While grants under the 2021 Plan may be made
to our employees prior to such time as the plan is approved by our
shareholders, (i) any such grant, if made, will not vest or become
exercisable, and (ii) no grants will be made to our executive
officers and/or members of our board of directors, until such time
as the 2021 Plan is approved by our shareholders and a Additional
Listing Application covering the shares of our common stock
reserved for issuance under the plan has been approved by NYSE
Regulation.
Plan
options under the 2021 Plan may either be options qualifying as
ISOs under Section 422 of the Internal Revenue Code (the
“Code”), or NSOs that do not so qualify. Any plan
option granted under the 2021 Plan must provide for an exercise
price of not less than 100% of the fair market value of the
underlying shares on the date of such grant, but the exercise price
of any ISO granted to an eligible employee owning more than 10% of
our common stock must be at least 110% of such fair market value as
determined on the date of the grant.
The term of each plan option will be fixed by the
Compensation, Corporate Governance and Nominating Committee;
provided,
however
, that an ISO may be
granted only within the 10-year period commencing from the date of
adoption of the 2021 Plan by our board of directors and may only be
exercised within 10 years of the date of grant, or five years in
the case of an ISO granted to an optionee who, at the time of
grant, owns shares of our common stock possessing more than 10% of
the total combined voting power of all classes of stock of cbdMD.
The exercise price per share of common stock purchasable under a
plan option will be determined by the Compensation, Corporate
Governance and Nominating Committee at the time of
grant.
Shares
of restricted stock may be awarded either alone or in addition to
other awards granted under the 2021 Plan. The Compensation,
Corporate Governance and Nominating Committee, subject to board of
directors authorization, if indicated, may determine the eligible
persons to whom, and the time or times at which, grants of
restricted stock will be awarded, the number of shares to be
awarded, the price (if any) to be paid by the holder, the time or
times within which such awards may be subject to forfeiture, the
vesting schedule and rights to acceleration thereof, and all other
terms and conditions of the awards. Restricted stock will
constitute issued and outstanding shares of our common stock for
all corporate purposes. The holder will have the right to vote such
restricted stock, to receive and retain all regular cash dividends
and other cash equivalent distributions as the board of directors
may in its sole discretion designate, pay or distribute on such
restricted stock and to exercise all other rights, powers and
privileges of a holder of common stock with respect to such
restricted stock, with the exceptions that (i) the holder will not
be entitled to delivery of the stock certificate or certificates
representing such restricted stock until the restriction period, if
any, has expired and unless all other vesting requirements with
respect thereto shall have been fulfilled; (ii) cbdMD will retain
custody of the stock certificate or certificates representing the
restricted stock during the restriction period; (iii) other than
regular cash dividends and other cash equivalent distributions as
the board of directors may in its sole discretion designate, pay or
distribute, we will retain custody of all distributions made or
declared with respect to the restricted stock until such time, if
ever, as the restricted stock with respect to which such retained
distributions may be made, paid or declared has become vested; (iv)
such award has not been forfeited.
9
Other
stock-based awards may be awarded, subject to limitations under
applicable law, that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on, or related to,
shares of common stock, as deemed by the Compensation, Corporate
Governance and Nominating Committee to be consistent with the
purposes of the 2021 Plan, including, without limitation, purchase
rights, shares of common stock awarded which are not subject to any
restrictions or conditions, or other rights convertible into shares
of common stock and awards valued by reference to the value of
securities of or the performance of specified subsidiaries. Other
stock-based awards may be awarded either alone or in addition to or
in tandem with any other awards under the 2021 Plan or any other
plan of cbdMD. Each other stock-based award will be subject to such
terms and conditions as may be determined by the Compensation,
Corporate Governance and Nominating Committee.
Effective Date, Amendment and Termination of the 2021
Plan
The 2021 Plan became effective on the date of its
adoption by our board of directors. To the extent that the 2021
Plan authorizes the award of ISOs, the failure to obtain
shareholder for the 2021 Plan by January 8, 2022 does not
invalidate the 2021 Plan;
provided,
however
, that (i) in the
absence of such shareholder approval, ISOs may not be awarded under
the 2021 Plan and (ii) any ISOs previously awarded under the 2021
Plan will automatically be converted into NSOs upon terms and
conditions determined by the Compensation, Corporate Governance and
Nominating Committee to reflect, as nearly as is reasonably
practicable in its sole determination, the terms and conditions of
the ISOs so converted. Our board of directors may at any time, and
from time to time, amend alter, suspend or discontinue any of the
provisions of the 2021 Plan, but no amendment, alteration,
suspension or discontinuance may be made that would impair the
rights of a holder of any outstanding grant or award under the 2021
Plan without the such holder’s consent. Unless
the plan is suspended or terminated by the board of directors, the
2021 Plan will on terminate 10 years from the date of the
plan’s adoption. Any termination of the 2021 Plan will not
affect the validity of any options previously granted
thereunder.
Summary of Federal Tax Consequences
The
following summary is intended only as a general guide to the
material U.S. federal income tax consequences of participation in
the 2021 Plan. The summary is based on existing U.S. laws and
regulations, and there can be no assurance that those laws and
regulations will not change in the future. The summary does not
purport to be complete and does not discuss the tax consequences
upon a participant’s death, or the provisions of the income
tax laws of any municipality, state or non-U.S. jurisdiction to
which the participant may be subject. As a result, tax consequences
for any particular participant may vary based on individual
circumstances.
Incentive Stock Options
No
taxable income is reportable when an ISO is granted or exercised,
although the exercise may subject the participant to the
alternative minimum tax or may affect the determination of the
participant’s alternative minimum tax (unless the shares are
sold or otherwise disposed of in the same year). If the participant
exercises the option and then later sells or otherwise disposes of
the shares acquired more than two years after the grant date and
more than one year after the exercise date, the difference between
the sale price and the exercise price will be taxed as capital gain
or loss. If the participant exercises the option and then later
sells or otherwise disposes of the shares before the end of the two
or one year holding periods described above, he or she generally
will have ordinary income at the time of the sale equal to the fair
market value of the shares on the exercise date (or the sale price,
if less) minus the exercise price of the option. For purposes of
the alternative minimum tax, the difference between the option
exercise price and the fair market value of the shares on the
exercise date is treated as an adjustment item in computing the
participant’s alternative minimum taxable income in the year
of exercise. In addition, special alternative minimum tax rules may
apply to certain subsequent disqualifying dispositions of the
shares or provide certain basis adjustments or tax credits for
alternative minimum tax purposes.
Non-statutory Stock Options
No
taxable income is reportable when an NSO with a per share exercise
price at least equal to the fair market value of a share of the
underlying stock on the date of grant is granted to a participant.
Upon exercise, the participant will recognize ordinary income in an
amount equal to the excess of the fair market value (on the
exercise date) of the shares purchased over the exercise price of
the exercised shares subject to the option. Any taxable income
recognized in connection with an option exercise by an employee of
cbdMD or our subsidiaries is subject to tax withholding by us. Any
additional gain or loss recognized upon any later disposition of
the shares would be capital gain or loss to the
participant.
10
Restricted Stock
A
participant acquiring shares of restricted stock generally will
recognize ordinary income equal to the fair market value of the
shares on the vesting date. If the participant is an employee, such
ordinary income generally is subject to withholding of income and
employment taxes. The participant may elect pursuant to Section
83(b) of the Code to accelerate the ordinary income tax event to
the date of acquisition by filing an election with the Internal
Revenue Service no later than 30 days after the date the shares are
acquired. Upon the sale of shares acquired pursuant to a restricted
stock award, any gain or loss, based on the difference between the
sale price and the fair market value on the date the ordinary
income tax event occurs, will be taxed as capital gain or
loss.
Medicare Surtax
A
participant’s annual “net investment income,” as
defined in Section 1411 of the Code may be subject to a 3.8%
federal surtax (generally referred to as the “Medicare
Surtax”). Net investment income may include capital gain
and/or loss arising from the disposition of shares subject to a
participant’s awards under the 2021 Plan. Whether a
participant’s net investment income will be subject to the
Medicare Surtax will depend on the participant’s level of
annual income and other factors
Tax Effect for cbdMD
We
generally will be entitled to a tax deduction in connection with an
award under the 2021 Plan in an amount equal to the ordinary income
realized by a participant and at the time the participant
recognizes such income (for example, the exercise of an NSO).
Special rules limit the deductibility of compensation paid to our
co-Chief Executive Officers and other “covered
employees” within the meaning of Code Section 162(m). Under
Code Section 162(m), the annual compensation paid to any of these
specified employees will be deductible only to the extent that it
does not exceed $1,000,000.
The foregoing is only a summary of the effect of federal income
taxation upon us and the participants under the 2021 Plan. It does
not purport to be complete, and does not discuss all of the tax
consequences of a participant’s death or the provisions of
the income tax laws of any state, municipality, or foreign country
in which the participants may reside.
|
|
The board of directors recommends a vote “FOR” the
approval of the 2021 Equity Compensation Plan.
|
11
Proposal 4 - Non-Binding Advisory Vote on Executive
Compensation
Section
951 of the Dodd-Frank Wall Street Reform and Consumer Protection
Act required the SEC to adopt rules requiring us to seek a
non-binding advisory vote from our shareholders to approve the
compensation awarded to our named executive officers disclosed
pursuant to Section 14A of the Securities Exchange Act
of 1934, as amended, and Item 402 of Regulation S-K.
At our 2018 annual meeting of shareholders, our
shareholders approved a non-binding proposal to include a
non-binding advisory vote on executive compensation to our
shareholders once every three years.
Our
overall goal is to develop executive compensation policies that are
consistent with, and linked to, the our strategic business
objectives and values. Our executive compensation policies have
four primary objectives: to attract and retain highly competent
executives to manage our business, to offer executives appropriate
incentives for accomplishment of our business objectives and
strategy, to encourage stock ownership by executives to enhance
mutuality of interest with shareholders and to maximize long-term
shareholder value. The key elements of our executive compensation
are base salary, the opportunity receive annual
performance-based bonuses and discretionary bonuses. A
detailed discussion of the our executive compensation in fiscal
2020 is set forth below under the caption “Executive
Compensation.” Shareholders are encouraged to read this
material in its entirety to obtain an informed understanding of our
executive compensation program.
This
proposal, commonly referred to as “say-on-pay,” enables
shareholders the opportunity to express their views regarding our
executive compensation program in general and not of any one or
more particular elements of that program. Shareholders have the
opportunity to vote for, against, or abstain from voting on
approval of fiscal 2020 executive compensation. This vote is a
non-binding advisory vote on fiscal 2020 executive compensation.
Accordingly, the following resolution will be submitted for a
shareholder vote at the 2021 annual meeting:
RESOLVED
, that the shareholders of cbdMD, Inc. hereby
approve, on an advisory basis, the compensation of cbdMD,
Inc.’s named executive officers, as disclosed in the proxy
statement for its 2021 annual meeting of shareholders pursuant to
Item 402 of Securities Exchange Commission Regulation S-K,
including the compensation tables and narrative disclosures
contained therein.
|
|
The board of directors recommends a vote “FOR” the
approval, on an advisory basis, of the compensation paid to
cbdMD’s named executed officers as disclosed in this proxy
statement.
|
12
Other Matters
As of
the date hereof, there are no other matters that we intend to
present, or have reason to believe others will present, at the 2021
annual meeting. If, however, other matters properly come before the
2021 annual meeting, the accompanying proxy authorizes the person
named as proxy or his substitute to vote on such matters as he
determines appropriate.
Dissenter's Rights
Under
North Carolina law there are no dissenter's rights available to our
common shareholders in connection with any matter submitted to a
vote of our common shareholders at the 2021 annual
meeting.
Corporate Governance
Corporate Governance Framework
We are
committed to maintaining the highest standards of honest and
ethical conduct in running our business efficiently, serving our
shareholders interests and maintaining our integrity in the
marketplace. To assist in its governance, our board has formed two
standing committees composed entirely of independent directors, the
Audit Committee and the Compensation, Corporate Governance and
Nominating Committee, and we have adopted a Code of Business
Conduct and Ethics, a Whistleblower Policy and an
Insider Trading Policy. Copies of our committee charters, Code of
Business Conduct and Ethics, Whistleblower Policy and Insider
Trading Policy may be found on our website at
www.cbdmd.com
.
Copies of these materials also are available without charge upon
written request to our Corporate Secretary.
Board of Directors
The
board of directors oversees our business affairs and monitors the
performance of management. In accordance with our corporate
governance principles, the board of directors does not involve
itself in day-to-day operations. The directors keep themselves
informed through discussions with the co-Chief Executive Officers
and our Chief Financial Officer, by reading materials that we may
send them and by participating in board of directors and committee
meetings. Directors are elected for a term of one year, serving
until our next annual meeting. Our directors hold office until
their successors have been elected and duly qualified unless the
director resigns or by reason of death or other cause is unable to
serve in the capacity of director. If any director resigns, dies or
is otherwise unable to serve out his or her term, or if the board
increases the number of directors, the board may fill any vacancy
by a vote of a majority of the directors then in office, although
less than a quorum of directors then exists. A director elected to
fill a vacancy shall serve for the unexpired term of his or her
predecessor. Vacancies occurring by reason of the removal of
directors without cause may only be filled by vote of the
shareholders.
The
board of directors conducts its business through meetings and
actions taken by written consent in lieu of meetings. Our
independent directors meet in executive session at each regularly
scheduled board meeting. During fiscal 2020, the board of directors
held six meetings. During fiscal 2020, each director attended at
least 75% of the aggregate of (i) the total number of meetings of
the board of directors held during the period of such
member’s service and (ii) the total number of meetings of the
committees of the board of directors on which he served held during
the period of such member’s service.
Board Leadership Structure and Board’s Role in Risk
Oversight
Mr.
Martin A. Sumichrast serves as both our co-Chief Executive Officer
and Chairman of our board of directors. Mr. R. Scott Coffman serves
as our co-Chief Executive Officer. Messrs. Sellers, Stephen,
Ghiloni and Raines are each considered an independent director
within the meaning of Section 803 of the NYSE American LLC Company
Guide. We do not have a “lead” independent
director.
Risk
is inherent with every business, and how well a business manages
risk can ultimately determine its success. We face a number of
risks, including operational risk, regulatory risk, strategic risk,
reputation risk, credit risk, interest rate risk, and liquidity
risk. Management is responsible for the day-to-day management of
risks we face, while the board, as a whole and through its
committees, has responsibility for the oversight of risk
management. In its risk oversight role, the board of directors has
the responsibility to satisfy itself that the risk management
process designed and implemented by management are adequate and
functioning as designed. Our co-Chief Executive Officers are both
members of our board of directors. Our Chief Financial Officer
attends the board meetings and is available to address any
questions or concerns raised by the board on risk management and
any other matters. Our co-Chief Executive Officers, Chief Financial
Officer and the independent members of the board work together to
provide strong, independent oversight of our company’s
management and affairs through its standing committees and, when
necessary, special meetings of independent directors.
13
Board Committees
The
board of directors has standing Audit, and Compensation, Corporate
Governance and Nominating Committees. Each committee has a written
charter. The charters are available on our website at
www.cbdmd.com
. All committee
members are independent directors. Information concerning the
current membership and function of each committee is as
follows:
|
Audit
Committee
|
Responsibilities
The
Audit Committee assists the board in fulfilling its oversight
responsibility relating to:
● the
integrity of our financial statements;
● our
compliance with legal and regulatory requirements; and
● the
qualifications and independence of our independent registered
public accountants.
T
he Audit Committee has the ultimate authority to
select, evaluate and, where appropriate, replace the independent
auditor, approve all audit engagement fees and terms, and engage
outside advisors, including its own counsel, as it deems necessary
to carry out its duties. The Audit Committee is also responsible
for performing other related responsibilities set forth in its
charter.
Each of the Audit Committee members is considered a
“financial expert”
under
applicable SEC rules.
|
|
Members:
●
William F. Raines, III (Chairman)
●
Bakari Sellers
●
Peter Ghiloni
●
Scott G. Stephen
Meetings in fiscal
2020: 4
|
|
In
April 2020 following our 2020 annual
meeting of shareholders, our board of directors approved the
consolidation of two previously constituted board
committees
, the
Compensation
Committee
and
the Nominating and Corporate Governance
Committee
, into one
consolidated
committee
titled
the Compensation, Corporate Governance and
Nominating
Committee
.
Responsibilities
The
Compensation, Corporate Governance and Nominating Committee is
charged with ensuring that our compensation programs are
competitive, designed to attract and retain highly qualified
directors, officers and employees, encourage high performance,
promote accountability and assure that employee interests are
aligned with the interests of our shareholders. The committee is
also tasked with assessing the performance of the board and to make
recommendations to the board from time to time, or whenever it
shall be called upon to do so, regarding nominees for the board and
to ensure our compliance with appropriate corporate governance
policies and procedures. The Compensation, Corporate Governance and
Nominating Committee also administers our equity compensation
plans.
Use of Outside Advisors
All compensation decisions are made with
consideration of the committee’s guiding principles to
provide competitive compensation for the purpose of attracting and
retaining talented executives and of motivating our executives to
achieve improved cbdMD executive performance, which ultimately
benefits our shareholders. The committee has the sole
authority
to retain and
terminate any advisors, including independent counsel, compensation
consultants and other advisors to assist as needed, and has sole
authority to approve the advisors’ fees, which will be paid
by us, and the other terms and conditions of their engagement. The
committee considers input and recommendations from management,
including our co-Chief Executive Officers (who are not present
during any committee deliberations with respect to compensation) in
connection with its review of our compensation programs and its
annual review of the performance of the other executive officers.
During fiscal 2020 the committee engaged the services of an
independent compensation consultant, Willis Towers Watson, to
provide it with an executive pay review. The committee takes into
consideration the recommendations of the outside compensation
consultant and our co-Chief Executive Officers but retains absolute
discretion as to whether to adopt such recommendations in whole or
in part, as it deems appropriate.
|
|
|
Members:
●
Bakari Sellers (Chairman)
●
Scott G. Stephen
●
Peter Ghiloni
●
William F. Raines, III
Meetings in fiscal
2020: 3
|
Shareholder Nominations
Common
shareholders who would like to propose a candidate to serve as a
member of our board of directors may do so by submitting the
candidate’s name, resume and biographical information to the
attention of our Corporate Secretary. All proposals for nomination
received by the Corporate Secretary will be presented to the
Compensation, Corporate Governance and Nominating Committee for
appropriate consideration. The board of directors is committed to
promoting diversity and inclusion in the governance and operations
of cbdMD. These values are to be reflected in identifying
candidates for board service and in the overall markup of the
board, so that the board is inclusive of members who reflect
racial, gender and ethnic diversity. It is the policy of the
Compensation, Corporate Governance and Nominating Committee to
consider director candidates recommended by common shareholders who
appear to be qualified to serve on our board of directors. The
Compensation, Corporate Governance and Nominating Committee may,
however, choose not to consider an unsolicited recommendation if no
vacancy exists on the board of directors and the committee does not
perceive a need to increase the size of the board of
directors.
14
In
order to avoid the unnecessary use of the Compensation, Corporate
Governance and Nominating Committee’s resources, the
committee will consider only those director candidates recommended
in accordance with the procedures set forth below. To submit a
recommendation of a director candidate to the Compensation,
Corporate Governance and Nominating Committee, a common shareholder
should submit the following information in writing, addressed to
the corporate secretary of cbdMD at our main office:
●
the
name and address of the person recommended as a director
candidate;
●
all
information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;
●
the
written consent of the person being recommended as a director
candidate to be named in the proxy statement as a nominee and to
serve as a director if elected;
●
as to the person making the recommendation, the
name and address, as they appear on our books, of such person, and
number of shares of our common stock owned by such person;
provided,
however
, that if the person is
not a registered holder of our common stock, the person should
submit his or her name and address along with a current written
statement from the record holder of the shares that reflects the
recommending person’s beneficial ownership of our common
stock; and
●
a
statement disclosing whether the person making the recommendation
is acting with or on behalf of any other person and, if applicable,
the identity of such person.
Compensation of Directors
In
May 2020, after reviewing the results of an independent
compensation study on public company executive and board
compensation, the Compensation, Corporate Governance and Nominating
Committee of our board of directors adopted a new compensation
program for our independent directors and non-management directors
for the 2020 board term which began in April 2020, the components
of which are set forth below:
|
Annual
retainer
|
$
35,000
|
|
Option grant,
20,000 shares, vesting immediately
|
|
|
Additional
committee chairperson annual compensation:
|
|
|
Audit
Committee
|
$
17,000
|
|
Compensation,
Corporate Governance and Nominating Committee
|
$
7,000
|
|
Additional
committee membership annual compensation (excluding
chairperson):
|
|
|
Audit
Committee
|
$
8,500
|
|
Compensation,
Corporate Governance and Nominating Committee
|
$
4,000
|
|
No additional
compensation for meeting attendance
|
|
Our
management directors do not receive separate compensation for their
services as members of our board of directors.
The
following table sets forth the compensation paid or earned for
fiscal 2020 by our independent directors.
|
Name
|
Fees
earned
or
paid
in
cash
($)
|
Stock
awards
($)
|
Option
awards
($)
(1)
|
Non-equity
incentive
plan
compensation
($)
|
Nonqualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
William F. Raines,
III
|
45,500
|
-
|
29,020
|
-
|
-
|
-
|
74,520
|
|
Bakari
Sellers
|
49,500
|
-
|
29,020
|
-
|
-
|
-
|
78,520
|
|
Peter
Ghiloni
|
42,750
|
-
|
29,020
|
-
|
-
|
-
|
71,770
|
|
Scott G.
Stephen
|
44,750
|
-
|
29,020
|
-
|
-
|
-
|
73,770
|
|
Seymour G. Siegel
(2)
|
10,500
|
-
|
-
|
-
|
-
|
-
|
10,500
|
|
Gregory C. Morris
(2)
|
5,750
|
-
|
-
|
-
|
-
|
-
|
5,750
|
|
Anthony K. Shriver
(2)
|
2,000
|
-
|
-
|
-
|
-
|
-
|
2,000
|
|
(1)
|
Represents
the grant date value of the options granted during the year,
determined in accordance with FASB ASC Topic 718. The assumptions
made in the valuations of the option awards are included in Note 10
of the notes to our consolidated financial statements appearing in
our 2020 10-K.
|
|
|
|
|
(2)
|
In its
recommendations to our board prior to our 2020 annual meeting of
shareholders held in April 2020, the Corporate Governance and
Nominating Committee (now the Compensation, Corporate Governance
and Nominating Committee) recommended reducing the number of our
board seats by three, and as a result, Messrs. Anthony K. Shriver,
Seymour G. Siegel and Gregory C. Morris did not stand for
re-election at our 2020 annual meeting of
shareholders.
|
15
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors, and persons who beneficially
own more than 10% of a registered class of our equity securities to
file with the Securities and Exchange Commission initial statements
of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership of our common shares and other
equity securities, on Forms 3, 4 and 5 respectively. Executive
officers, directors and greater than 10% shareholders
are required by the Securities and Exchange Commission regulations
to furnish us with copies of all Section 16(a) reports they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to us under Rule 16a-3(d) of the Securities Exchange Act
of 1934, as amended, during fiscal 2020 and Forms 5 and amendments
thereto furnished to us with respect to fiscal 2019, as well as any
written representation from a reporting person that no Form 5 is
required, we are not aware that any officer, director or 10% or
greater shareholder failed to file on a timely basis, as disclosed
in the aforementioned forms, reports required by Section 16(a) of
the Securities Exchange Act of 1934, as amended, during fiscal
2020.
Executive
Compensation
Executive Officers
Set
forth below is biographical information on the executive
officers.
|
Martin
A. Sumichrast
|
|
|
Co-Chief Executive
Officer
|
Biographical
information on Mr. Sumichrast appears earlier in this proxy
statement under Proposal 1.
|
|
R.
Scott Coffman
|
|
|
Co-Chief Executive
Officer and President
|
Biographical
information on Mr. Coffman appears earlier in this proxy statement
under Proposal 1.
|
|
T.
Ronan Kennedy
|
|
|
Age
41
Chief
Financial Officer
|
Mr.
Kennedy has served as our Chief Financial Officer since October
2020. Prior to joining cbdMD, he served as Chief Financial Officer
of AMV Holdings, LLC, a Mooresville, NC-based vaping and
e-cigarette retailer, manufacturer and wholesaler from 2015 through
October 2020. During his tenure, AMV grew from a nine store
regional chain to a platform of over 100 U.S. locations and a
growing European footprint. Following the passing of the Farm Bill
in late 2018, Mr. Kennedy assisted AMV expand into the
manufacturing and retailing of CBD products. Prior to his role at
AMV, Mr. Kennedy spent nine years at Meriturn Partners, LLC, a
Raleigh, NC-based middle-market private equity firm focused on
acquiring and advising middle-market companies, where he was a
Principal. In his role with Meriturn Partners, LLC, Mr. Kennedy has
led all facets of transactions, including due diligence, financial
analysis and capital raising and in 2014 helped lead
Meriturn’s original acquisition of AMV’s predecessor.
Since 2014 Mr. Kennedy has also provided independent advisory and
consulting services with select organizations and his engagements
have included leading the financial analysis on sale-side
engagements, assistance in negotiating a $40 million sale to a
strategic buyer, advising secured creditors through restructuring
of a restaurant group, and serving as a co-trustee for a specialty
pharmaceutical company. From 2001 to 2004 Mr. Kennedy held
engineering and manufacturing roles with Visteon Corporation, a $16
billion Tier 1 automotive supplier. Mr. Kennedy received a B.S. in
Mechanical Engineering from Virginia Polytechnic Institute &
State University and a M.B.A. from the Fuqua School of Business,
Duke University. Since 2019 Mr. Kennedy has served on the
board of directors of Nexus Capital Real
Estate Inc., a Rochester, NY-based real estate investment
firm.
|
16
Key Employees
While
not executive officers of our company, the following individuals
are key employees of our company and are
expected to make
significant contributions to our business.
|
Ken
Cohn
|
|
|
Chief
Marketing Officer
|
Mr.
Cohn has served as our Chief Marketing Officer since January 2019.
He oversees a team responsible for advertising, affiliate programs,
email campaigns, websites, industry research, public
relations, content, design, sponsorships, events, athlete programs,
digital media, radio/podcasts, TV and video. Mr. Cohn has been
involved in the marketing industry for over 25 years with roles
encompassing business, account and brand development and has
expertise in strategy, sponsorships, media, public relations,
advertising, experiential, events, merchandising, contract
negotiation, research, measurement and analytics. From 2012 until
joining cbdMD, Mr. Cohn was a Senior Vice President at Breaking
Limits, an integrated marketing agency, where he was responsible
for overseeing business development, operations, client management,
public relations, event management, and sponsorship. Mr. Cohn
received a Bachelor's degree in business from Indiana
University.
|
|
Lance
Blundell
|
|
|
General
Counsel
|
Mr.
Blundell has been serving as outside counsel since December 2018
and was named General Counsel in January 2021. Mr. Blundell
oversees our industry regulatory compliance. Mr. Blundell has over
20 years of business experience serving as General Counsel for
businesses in the internet services, consumer product
manufacturing, and e-commerce sectors. As General Counsel for these
entities, Mr. Blundell oversaw all aspects of legal and was heavily
involved in business development for the companies. Mr. Blundell
was the General Counsel for Cure Based Development, LLC from the
founding of the company in September 2017 until the mergers with
CBDI in December 2018. Since 2000 he has also served as counsel to
several companies including DataTech Global LLC, a privately held
technology company which focuses on online sales and marketing,
Blu, an e-cigarette manufacturer founded in 2009 and subsequently
sold to Lorillard Tobacco in 2012, and most recently W The Brand, a
multi-state cannabis extraction and manufacturing company. Mr.
Blundell received a Bachelor of Science degree in Business
Administration/Marketing from the University of Colorado in 1994
and a Juris Doctor from the University of San Diego School of Law
in 1997.
|
|
Francisco
(Pancho) Mangual
|
|
|
Senior
Vice President of Sales
|
Mr.
Mangual has served as our Senior Vice President of Sales since
November 2018. He oversees our wholesale sales operations. Prior to
joining our company, from October 2013 until October 2018 he was a
General Sales Manager with Hearst Corporation. While employed by
Hearst Corporation, Mr. Mangual oversaw the
LocalEdge - Hearst Digital Media launch
of its first digital expansion market in the Charlotte, NC market
where he was responsible for connecting with local businesses to
showcase products and lead generating proven solutions. Following
this project, he oversaw the development a new local retail sales
team in San Antonio, TX with a digital focus for the San Antonio
Express News. Mr. Mangual attended the University of South Carolina
- Spartanburg.
|
17
Summary Compensation Table
The
following table summarizes all compensation recorded by us in each
of the last two completed fiscal years for:
●
all
individuals serving as our principal executive officer or acting in
a similar capacity during fiscal 2020;
●
our two
most highly compensated named executive officers at September 30,
2020 whose annual compensation exceeded $100,000; and
●
up to
two additional individuals for whom disclosure would have been made
in this table but for the fact that the individual was not serving
as a named executive officer of our company at September 30,
2020.
The
value attributable to any option awards is computed in accordance
with FASB ASC Topic 718. The assumptions made in the valuations of
the option awards are included in Note 10 of the notes to our
consolidated financial statements appearing in our 2020
10-K.
|
Name and
principal position
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(1)
|
Option
Awards
($)
(1)
|
No
equity
incentive
plan
compensation
($)
|
Non-qualified
deferred
compensation
earnings
($)
|
All
other
compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin A.
Sumichrast
|
|
2020
|
281,000
|
160,000
|
286,160
|
-
|
-
|
-
|
-
|
727,160
|
|
co-CEO
|
|
2019
|
279,115
|
225,000
|
-
|
-
|
-
|
-
|
-
|
504,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Scott
Coffman
|
|
2020
|
186,923
|
-
|
286,160
|
-
|
-
|
-
|
-
|
473,083
|
|
co-CEO
|
|
2019(2)
|
132,231
|
-
|
-
|
-
|
-
|
-
|
-
|
132,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S.
Elliott
|
|
2020
|
210,000
|
62,500
|
273,600
|
-
|
-
|
-
|
-
|
546,100
|
|
CFO and COO
(3)
|
|
2019
|
207,345
|
112,500
|
-
|
-
|
-
|
-
|
-
|
319,845
|
———————
|
(1)
|
Represents
the grant date value of the options and awards granted during the
years presented, determined in accordance with FASB ASC Topic 718.
The assumptions made in the valuations of the awards are included
in Notes 10 and 11 of the notes to our consolidated financial
statements appearing in our 2019 10-K.
|
|
|
|
|
(2)
|
Represents
compensation from December 18, 2018 following the closing of the
mergers with Cure Based Development, LLC through September 30,
2019.
|
|
|
|
|
(3)
|
Mr.
Elliott served as our Chief Financial Officer and Chief Operating
Officer from October 2016 until October 1, 2020. See
“Separation Agreement with Mr. Elliott” appearing
below.
|
18
Executive Employment Agreements
Martin A.
Sumichrast.
In September 2018 we entered into an Executive
Employment Agreement with Mr. Sumichrast, which was amended in
November 2020 (collectively, the “Sumichrast Employment
Agreement”), the material terms of which are as
follows:
|
Term
:
|
Initial
term of three years commencing September 2018, with the option of
extending for additional one-year terms by mutual consent of the
parties upon 60 day’s prior notice by us.
|
|
|
|
|
Current annual base
salary
:
|
$335,000.
|
|
|
|
|
Performance bonus
:
|
Mr.
Sumichrast is eligible for a performance bonus, payable in a
combination of cash and awards of common stock, to be based upon
his relative achievement of annual performance goals to be
established by our board of directors upon recommendation of the
Compensation, Corporate Governance and Nominating
Committee.
|
|
|
|
|
Discretionary bonus
:
|
The Compensation, Corporate Governance and
Nominating Committee will review his performance on an annual
basis, and in connection with such annual review, Mr. Sumichrast
may be entitled to receive an annual discretionary bonus in such
amount as may be determined by the committee, in its sole
discretion. In November 2020 the committee awarded him a
discretionary cash bonus of
$250,000, payable in January
2021, provided that (a) the Sumichrast Employment Agreement not
otherwise been terminated by either party for any reason, (b) our
audited financial statements for fiscal 2020 were completed and our
independent registered public accounting firm issued an unqualified
opinion on such financial statements, and (c) we timely filed our
2020 10-K. The bonus was paid to Mr. Sumichrast in January 2021
following the satisfaction of such criteria.
|
|
|
|
|
Other benefits
:
|
Mr.
Sumichrast is entitled to participate in all benefit programs we
offer our employees, reimbursement for business expenses and such
amount of paid vacation as is consistent with his position and
length of service to us.
|
|
|
|
|
Claw back provision:
|
Any
incentive-based compensation, or any other compensation, paid to
Mr. Sumichrast pursuant to the terms of the Sumichrast Employment
Agreement, or otherwise, is subject to recovery under any law,
government regulation or stock exchange listing requirement, and
will be subject to such deductions and claw back as may be required
to be made pursuant to such law, government regulation or stock
exchange listing requirement, or any policy adopted by cbdMD
pursuant to any such law, government regulation or stock exchange
listing requirement.
|
|
|
|
|
Termination
:
|
The
Sumichrast Employment Agreement will terminate upon his death or as
follows:
|
|
|
|
|
Disability
|
If we
should terminate the Sumichrast Employment Agreement as a result of
his disability (as defined in the agreement) he is entitled to his
base salary for a period of three months following the date of
termination.
|
|
|
|
|
By
cbdMD for cause or by Mr. Sumichrast without cause:
|
We may
terminate the Sumichrast Employment Agreement without notice for
“cause” (as defined in the Sumichrast Employment
Agreement) following a 30 day cure period. If we should terminate
the Sumichrast Employment Agreement for cause, he is not entitled
to any compensation or severance benefits. Mr. Sumichrast may also
terminate the agreement without cause. In such event, he is not
entitled to any compensation or severance benefits.
|
|
|
|
|
By
cbdMD other than for cause and not in connection with a change of
control:
|
We may
terminate the Sumichrast Employment Agreement upon 30 days’
notice to Mr. Sumichrast. In such event, he is entitled to receive
his base salary and executive benefits through the remaining period
of the then current term of the agreement, and all granted but
unvested options or restricted shares shall become fully vested on
the date of termination and may be exercised by him for a period of
12 months following the date of termination.
|
|
|
|
|
Constructive
termination:
|
Constructive
termination of the Sumichrast Employment Agreement shall occur if
we materially breach the agreement, a successor company to us fails
to assume the obligations under the agreement, or a material change
in Mr. Sumichrast’s duties and responsibilities occurs, all
subject to waiver by him. In such event, subject to a 30 day cure
period, he is entitled to the same compensation as if we had
terminated the agreement without cause.
|
|
|
|
|
Change
of control:
|
If the
Sumichrast Employment Agreement is terminated not for cause within
two years of a change of control of cbdMD (as defined in the
agreement), or in the 90 days prior to a change of control, we are
obligated to pay Mr. Sumichrast an amount equal to the greater of
(i) 1.5
multiplied
by his
then base salary, or (ii) the base salary remaining to be paid
during the initial term of the agreement, payable in a lump-sum
payment on the termination date.
|
|
|
|
|
Non-compete, confidentially and
indemnification:
|
The
Sumichrast Employment Agreement contains customary non-compete, for
a period of one year following the date of termination,
confidentiality and indemnification provisions.
|
19
R. Scott Coffman
. In
December 2018 CBDI, our wholly-owned subsidiary, entered into an
Executive Employment Agreement with Mr. Coffman, which was amended
in November 2020 (collectively, the “Coffman Employment
Agreement”), the material terms of which are as
follows:
|
Term
:
|
Five
years, with the option of extending for additional one-year terms
by mutual consent of the parties upon 60 day’s prior notice
by us.
|
|
|
|
|
Current annual base
salary
:
|
$335,000.
|
|
|
|
|
Discretionary bonus
:
|
The Compensation, Corporate Governance and
Nominating Committee of cbdMD will review his performance on an
annual basis, and in connection with such annual review, Mr.
Coffman may be entitled to receive an annual discretionary bonus in
such amount as may be determined by the committee, in its sole
discretion. In November 2020 the committee awarded him a
discretionary cash bonus of
$250,000, payable in January
2021, provided that (a) the Coffman Employment Agreement not
otherwise been terminated by either party for any reason, (b) our
audited financial statements for fiscal 2020 were completed and our
independent registered public accounting firm issued an unqualified
opinion on such financial statements, and (c) we timely filed our
2020 10-K. The bonus was paid to Mr. Coffman in January 2021
following the satisfaction of such criteria.
|
|
|
|
|
Other benefits
:
|
Mr.
Coffman is entitled to participate in all benefit programs we offer
our employees, reimbursement for business expenses and such amount
of paid vacation as is consistent with his position and length of
service to us.
|
|
|
|
|
Claw back provision:
|
Any
incentive-based compensation, or any other compensation, paid to
Mr. Coffman pursuant to the terms of the Coffman Employment
Agreement, or otherwise, is subject to recovery under any law,
government regulation or stock exchange listing requirement, and
will be subject to such deductions and claw back as may be required
to be made pursuant to such law, government regulation or stock
exchange listing requirement, or any policy adopted by cbdMD
pursuant to any such law, government regulation or stock exchange
listing requirement.
|
|
|
|
|
Termination
:
|
The
Coffman Employment Agreement will terminate upon his death or
disability. In the event of termination upon death or disability
Mr. Coffman shall receive his base salary for a period of three
months from the date of termination. In addition, CBDI may
terminate the Coffman Employment Agreement without notice for
“cause” (as defined in the Coffman Employment
Agreement) following a 30 day cure period. If CBDI should terminate
the Coffman Employment Agreement for cause, he is not entitled to
any compensation or severance benefits. Mr. Coffman may also
terminate the agreement without cause. In such event, he is not
entitled to any compensation or severance benefits.
|
|
|
|
|
Non-compete, confidentially and
indemnification:
|
The
Coffman Employment Agreement contains customary non-compete, for a
period of one year following the date of termination,
confidentiality and indemnification provisions.
|
20
T. Ronan Kennedy
.
Effective October 1, 2020 we entered into an Executive Employment
Agreement with Mr. Kennedy (the “Kennedy Employment
Agreement”), the material terms of which are as
follows:
|
Term
:
|
One
year, with the option of extending for additional one year terms by
mutual consent of the parties upon 60 day’s prior notice by
us.
|
|
|
|
|
Current annual base
salary
:
|
$250,000.
|
|
|
|
|
Restricted stock awards and stock options:
|
On the
effective date of the agreement we granted Mr. Kennedy (i) a
restricted stock award of 50,000 shares of our common stock, and
(ii)
10 year stock options to purchase
350,000 shares of our common stock, vesting subject to continued
employment as follows: (A) 100,000 shares at an exercise price of
$3.50 per share shall vest in equal amounts over a three year
period on October 1, 2021, October 1, 2022 and October 1, 2023,
respectively; (B) an additional 125,000 shares at an exercise price
of $5.00 per share shall vest in equal amounts over a three year
period on October 1, 2021, October 1, 2022 and October 1, 2023,
respectively; and (B) an additional 125,000 shares at an exercise
price of $6.50 per share shall vest in equal amounts over a three
year period on October 1, 2021, October 1, 2022 and October 1,
2023, respectively.
|
|
|
|
|
Performance bonus
:
|
Mr.
Kennedy is eligible for a performance bonus of up to 40% of his
base salary, payable in a combination of cash and awards of common
stock, to be based upon his relative achievement of annual
performance goals to be established by our board of directors upon
recommendation of the Compensation, Corporate Governance and
Nominating Committee.
|
|
|
|
|
Discretionary bonus
:
|
The
Compensation, Corporate Governance and Nominating Committee will
review his performance on an annual basis, and in connection with
such annual review, Mr. Kennedy may be entitled to receive an
annual discretionary bonus in such amount as may be determined by
our board of directors, upon the recommendation of the committee,
in its sole discretion.
|
|
|
|
|
Other benefits
:
|
Mr.
Kennedy is entitled to participate in all benefit programs we offer
our employees, reimbursement for business expenses and four weeks
of paid vacation.
|
|
|
|
|
Claw back provision:
|
Any
incentive-based compensation, or any other compensation, paid to
Mr. Kennedy pursuant to the terms of the Kennedy Employment
Agreement, or otherwise, is subject to recovery under any law,
government regulation or stock exchange listing requirement, and
will be subject to such deductions and claw back as may be required
to be made pursuant to such law, government regulation or stock
exchange listing requirement, or any policy adopted by cbdMD
pursuant to any such law, government regulation or stock exchange
listing requirement.
|
|
|
|
|
Termination
:
|
The
Kennedy Employment Agreement will terminate upon his death or as
follows:
|
|
|
|
|
Disability
|
If we
should terminate the Kennedy Employment Agreement as a result of
his disability (as defined in the agreement) he is entitled to his
base salary for a period of three months following the date of
termination.
|
|
|
|
|
By
cbdMD for cause or by Mr. Kennedy without cause:
|
We may
terminate the Kennedy Employment Agreement without notice for
“cause” (as defined in the Kennedy Employment
Agreement) following a 30 day cure period. If we should terminate
the Kennedy Employment Agreement for cause, he is not entitled to
any compensation or severance benefits. Mr. Kennedy may also
terminate the agreement without cause. In such event, he is not
entitled to any compensation or severance benefits.
|
|
|
|
|
By
cbdMD other than for cause and not in connection with a change of
control:
|
We may
terminate the Kennedy Employment Agreement upon 30 days’
notice to Mr. Kennedy. In such event, he is entitled to receive his
base salary and executive benefits through the remaining period of
the then current term of the agreement, and all granted but
unvested options or restricted shares shall become fully vested on
the date of termination and may be exercised by him for a period of
12 months following the date of termination.
|
|
|
|
|
Constructive
termination:
|
Constructive
termination of the Kennedy Employment Agreement shall occur if we
materially breach the agreement, a successor company to us fails to
assume the obligations under the agreement, or a material change in
Mr. Kennedy’s duties and responsibilities occurs, all subject
to waiver by him. In such event, subject to a 30-day cure period,
he is entitled to the same compensation as if we had terminated the
agreement without cause.
|
|
|
|
|
Change
of control:
|
If the
Kennedy Employment Agreement is terminated not for cause within two
years of a change of control of cbdMD (as defined in the
agreement), or in the 90 days prior to a change of control, we are
obligated to pay Mr. Kennedy an amount equal to the greater of (i)
1.5
multiplied
by his then
base salary, or (ii) the base salary remaining to be paid during
the then current term of the agreement, payable in a lump-sum
payment on the termination date.
|
|
|
|
|
Non-compete, confidentially and
indemnification:
|
The
Kennedy Employment Agreement contains customary non-compete, for a
period of one year following the date of termination,
confidentiality and indemnification provisions.
|
21
Separation Agreement with Mr. Elliott
In
September 2020 we entered into a Separation and General Release
(the “Elliott Separation Agreement”) with Mr. Mark
Elliott in connection with his resignation as our Chief Financial
Officer and Chief Operating Officer, effective October 1, 2020. His
resignation was pursuant to Section 6(d) of his Employment
Agreement dated September 6, 2018 (the “Elliott Employment
Agreement”). Under the Elliott Separation Agreement, we
agreed to provide Mr. Elliott with the following benefits: (i) in
exchange for transition services to be provided by Mr. Elliott from
October 1, 2020 through February 28, 2021, Mr. Elliott will be paid
through December 31, 2021 in accordance with our regular bi-weekly
payroll practices, his then current salary, along with benefits;
(ii) to the extent not already vested, all options and restricted
stock previously issued to Mr. Elliott fully vest and we extended
the option exercise period and provided for a cashless exercise of
such options; and (iii) in exchange for the transition services
being offered by Mr. Elliott from October 1, 2020 through February
28, 2021, Mr. Elliott received options to purchase 300,000 shares
of the our common stock, exercisable at $2.60 per share for a
period of three years on a cashless basis. Mr. Elliott agreed to
release cbdMD from the provisions contained in the Elliott
Employment Agreement, provided that Mr. Elliott and cbdMD agreed
that provisions relating to confidential information shall remain
full force and effect. We also agreed to release Mr. Elliott from
his non-competition obligations under the Elliott Employment
Agreement. In consideration for the compensation payable under the
Elliott Separation Agreement Mr. Elliott has also agreed to release
cbdMD, its shareholders, directors, officers, employees and agents
from all claims, whether known or unknown, related to his
employment. The agreement also contained customary non-disclosure
and non-disparagement provisions.
2015 Equity Compensation Plan
On
June 2, 2015, our board of directors and shareholders adopted our
2015 Equity Compensation Plan (the “2015 Plan”)
initially covering 1,175,000 shares of common stock. At the 2019
annual meeting of our shareholders, our shareholders approved an
increase in the based number of shares of our common stock reserved
for grants under the plan to 2,000,000 shares. The 2015 Plan also
contains an “evergreen formula” pursuant to which the
number of shares of common stock available for issuance under the
2015 Plan will automatically increase on the first trading day of
October each calendar year during the term of the 2015 Plan by an
amount equal to 1% of the total number of shares of common stock
outstanding on the last trading day in September of the immediately
preceding calendar year, up to a maximum annual increase of 100,000
shares of common stock. The purpose of the 2015 Plan is to enable
us to offer to our employees, officers, directors and consultants,
whose past, present and/or potential contributions to our company
have been, are or will be important to our success, an opportunity
to acquire a proprietary interest in our company. The 2015 Plan is
administered by our Compensation, Corporate Governance and
Nominating Committee. The additional terms of the 2015 are
identical to those of the 2021 Plan which are described in Proposal
2 appearing earlier in this proxy statement.
Securities Authorized for Issuance under Equity Compensation
Plans
The
following table sets forth securities authorized for issuance under
any equity compensation plans approved by our shareholders as well
as any equity compensation plans not approved by our shareholders
as of September 30, 2020.
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted average
exercise price of outstanding options, warrants and rights
($)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column
|
|
|
|
|
|
|
Plans approved by
our shareholders:
|
|
|
|
|
2015
Plan
|
1,750,000
|
4.68
|
622,605
|
|
|
|
|
|
|
Plans not approved
by shareholders
|
-
|
-
|
-
|
Please
see Note 11 of the notes to our audited consolidated financial
statements appearing in our 2020 10-K for more information on our
2015 Plan.
22
Outstanding Equity Awards at Year End
The
following table provides information concerning unexercised
options, stock that has not vested and equity incentive plan awards
for each named executive officer outstanding as of September 30,
2020.
|
|
OPTION
AWARDS
|
STOCK AWARDS
|
|||||||
|
Name
|
Number of
securities underlying unexercised options
(#)
exercisable
|
Number of
securities underlying unexercised options
(#)
unexercisable
|
Equity incentive
plan awards: Number of securities underlying unexercised unearned
options
(#)
|
Option exercise
price
($)
|
Option expiration
date
|
Number of shares or
units of stock that have not vested (#)
|
Market value of
shares or units of stock that have not vested
($)
|
Equity incentive
plan awards: Number of unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or payout value of unearned shares, units or
other rights that have not vested (#)
|
|
Martin A.
Sumichrast
|
-
|
140,000
|
-
|
3.15
|
12/11/24
|
-
|
-
|
-
|
-
|
|
R. Scott
Coffman
|
-
|
140,000
|
-
|
3.15
|
12/11/24
|
-
|
-
|
-
|
-
|
|
Mark S. Elliott
(1)
|
-
|
100,000
|
-
|
7.50
|
1/1/23
|
-
|
-
|
-
|
-
|
|
|
-
|
100,000
|
-
|
4.00
|
5/1/24
|
-
|
-
|
-
|
-
|
|
|
-
|
150,000
|
-
|
4.78
|
5/29/28
|
-
|
-
|
-
|
-
|
|
|
-
|
300,000
|
-
|
2.60
|
9/16/23
|
-
|
-
|
-
|
-
|
|
(1)
|
Mr.
Elliott resigned as our Chief Financial Officer and Chief Operating
Officer effective October 1, 2020.
|
Principal
Shareholders
At
January 22, 2021, there were 52,287,113 shares of our common stock
outstanding. The following table sets forth information known to us
as of January 22, 2021 relating to the beneficial ownership of
shares of our common stock by:
❖
each person who is
known by us to be the beneficial owner of more than 5% of our
outstanding common stock;
❖
each director and
director nominee;
❖
each named
executive officer; and
❖
all named executive
officers, directors and director nominee as a group.
Unless
otherwise indicated, the address of each beneficial owner in the
table set forth below is care of 8845 Red Oak Boulevard, Charlotte,
NC 28217. We believe that all persons, unless otherwise noted,
named in the table have sole voting and investment power with
respect to all shares of our common stock shown as being owned by
them. Under securities laws, a person is considered to be the
beneficial owner of securities owned by him (or certain persons
whose ownership is attributed to him) and that can be acquired by
him within 60 days from January 22, 2021, including upon the
exercise of options, warrants or convertible securities. We
determine a beneficial owner’s percentage ownership by
assuming that options, warrants or convertible securities that are
held by him, but not those held by any other person, and which are
exercisable within 60 days of the that date, have been exercised or
converted.
Certain of the outstanding shares of
our common stock held by our principal shareholders are subject to
a voting proxy. Under the terms of the
Agreement and Plan of
Merger dated December 3, 2018 (the “Merger Agreement”)
and the related Voting Proxy dated December 20, 2018 (the
“Voting Proxy”), the independent Chairman of the Audit
Committee held voting rights over an aggregate of 8,750,000 shares
of common stock (the “Second Tranche Shares”) initially
issued to
CBD Holding, LLC
(“CBDH”) until the unrestricted voting rights to those
shares vest pursuant to the terms of the Merger Agreement. On
December 20, 2019 the unrestricted voting rights to the first
2,187,500 shares vested.
On February 26, 2020, in connection
with its dissolution and liquidation and pursuant to the terms of a
Distribution Agreement (the “CBDH Distribution
Agreement”), CBDH distributed the Second Tranche Shares to
its members on a pro rata basis. On
February 26, 2020, in connection with
the Distribution Agreement, the CBDH members entered into similar
Voting Proxy Agreements with us. On December 20, 2020 the
unrestricted voting rights to an additional 2,187,500 Second
Tranche Shares vested pursuant to the terms of the Merger
Agreement.
The unrestricted voting rights to the remaining
4,375,000 Second Tranche Shares will vest as follows: (i) 2,187,500
shares will vest on June 20, 2022; and (ii) the remaining 2,187,500
shares will vest on December 20, 2023.
23
|
Name of
Beneficial Owner
|
No. of Shares
Beneficially Owned
|
% of
Class
|
|
|
|
|
|
Martin A.
Sumichrast
(1)
|
1,737,935
|
3.3
%
|
|
R. Scott Coffman
(2)
|
13,013,104
|
24.8
%
|
|
T. Ronan Kennedy
(3)
|
0
|
-
|
|
William F. Raines,
III
(4)
|
153,924
|
*
|
|
Bakari Sellers
(5)
|
39,531
|
*
|
|
Peter J. Ghiloni
(6)
|
340,000
|
*
|
|
Scott G. Stephen
(7)
|
81,052
|
*
|
|
Sim
Farar
|
0
|
-
|
|
All named executive
officers, directors and director nominee as a group (eight persons)
(1)(2)(3)(4)(5)(6)(7)
|
15,365,546
|
29.2
%
|
*
Less than
1%
|
(1)
|
The
number of outstanding shares of common stock beneficially owned by
Mr. Sumichrast includes (a) 125,000 shares held individually; (b)
270,600 shares held of record by SFTI,
LLC (“SFTI”); (c) 1,249,001 shares
held of record by the Sumichrast 2017 Family Trust (the
“Family Trust”), and (d) 93,334 shares issuable upon
the exercise of vested stock options with an exercise price of
$3.15 per share.
Of the 1,249,001 shares of common stock
held of record by the Family Trust, Mr. Sumichrast has the sole
power to vote 393,750 shares of common stock. The balance of
393,750 shares are subject to the terms of a Voting Trust Agreement
dated February 26, 2020 between cbdMD and the Family Trust pursuant
to which until such time as the unrestricted voting r
ights to these shares have vested, the
voting rights to such shares are held by the independent chairman
of the Audit Committee who will vote such shares on any matter
brought before our shareholders in accordance with the
recommendation of our board of directors. The voting rights to the
remaining 393,750 shares vest in two equal amounts on each of June
20, 2022 and December 20, 2023.
Except as set forth herein Mr. Sumichrast has
voting and dispositive control over securities owned of record by
each of SFTI and the Family Trust. Mr. Sumichrast disclaims
beneficial ownership of the securities held of record by each of
these entities except to the extent of his pecuniary interest
therein.
The
number of outstanding shares of our common stock beneficially owned
by Mr. Sumichrast excludes: (a) 46,666 shares of
common stock underlying unvested stock options; and
(b) Earnout Rights to up to an additional 910,999
shares of our common stock. Pursuant to the terms of the Merger
Agreement, CBDH was entitled to receive (the “Earnout
Rights”) up to 15,250,000 additional shares of our common
stock (the “Earnout Shares”)
as part of the merger consideration upon the
satisfaction of certain aggregate net revenue criteria within 60
months following the closing date, as measured at four intervals
from the closing date of 12 calendar months (the “First
Marking Period”), 24 calendar months (the “Second
Marking Period”), 42 calendar months (the “Third
Marking Period”), and 59 calendar months (the “Fourth
Marking Period”). Pursuant to the terms of the CBDH
Distribution Agreement, CBDH distributed the Earnout Rights to its
members on a pro rata basis. On February 27, 2020 in accordance
with the terms of the Merger Agreement we determined that the net
revenue criteria for the First Marking Period had been achieved and
an aggregate of 5,127,792 Earnout Shares were to be issued (the
“First Marking Period Earnout Shares”). After giving
effect to the First Marking Period Earnout Shares, Earnout Rights
to an aggregate of 10,122,208 Earnout Shares (the “Remaining
Earnout Rights”) remain under the terms of the Merger
Agreement. See footnote 4.
|
|
|
|
|
(2)
|
The
number of outstanding shares of our common stock beneficially owned
by Mr. Coffman includes: (a) 125,000 shares held individually; (b)
3,684,000 shares held of record by Edge of Business, LLC
(“Edge of Business”); (c)
9,110,770 shares held of record by the Coffman
Family Office, LLC (“Coffman Family Office”); and (d)
93,334 shares underlying vested stock options with an exercise
price of $3.15 per share.
Of the 9,110,770 shares of common
stock held of record by Coffman Family Office, Mr. Coffman has the
sole power to vote 6,238,582 shares. The balance of 2,872,188
shares are subject to the terms of a Voting Trust Agreement dated
February 26, 2020 between cbdMD and Coffman Family
Office
. The voting rights
to the 2,872,188 shares vest in two equal amounts on each of June
20, 2022 and December 20, 2023. Except as set forth herein, Mr.
Coffman
has voting and
dispositive control over securities owned of record by Edge of
Business. Coffman Management, LLC (“Coffman
Management”) is the Manager of Coffman Family Office and Mr.
Coffman is the Manager of Coffman Management. Mr. Coffman disclaims
beneficial ownership of the securities held of record by each of
these entities except to the extent of his pecuniary interest
therein.
The number of outstanding shares of our common
stock beneficially owned by Mr. Coffman excludes (x) 46,666 shares
of common stock underlying unvested stock options; and (y) Earnout
Rights to up to an additional 6,645,230 shares of the our common
stock. See footnote 4.
|
|
|
|
|
(3)
|
The
number of shares of our common stock beneficially owned by Mr.
Kennedy excludes (a) 50,000 shares of common stock underlying
unvested restricted stock awards; and (b) 350,000 shares of common
stock underlying unvested stock options with exercise prices
ranging from $3.50 to $6.50 per share.
|
|
|
|
24
|
(4)
|
The number of shares of
common stock beneficially owned by Mr.
Raines
includes (a) 21,342
shares held by him directly; (b) 92,582 shares held of record by
Board Investor Group II, LLC; (c) 4,375,000 Second Tranche Shares
for which unrestricted voting rights have not yet vested; and (d)
40,000 shares of common stock underlying vested stock options with
exercise prices ranging from $1.57 to $5.41 per share.
Under the terms of
the
Merger Agreement and the related Voting Proxy Agreements
described above until these unrestricted voting rights vest with
the shareholders, Mr. Raines, as independent Chairman of the Audit
Committee, holds voting rights over these shares and will vote such
shares on any matter brought before our shareholders in accordance
with the recommendation of the our board of directors. Accordingly,
Mr. Raines will vote the 4,375,000 Second Tranche Shares which are
subject to the Voting Proxy Agreements “FOR” all
matters to be considered at the 2021 annual meeting.
Mr.
Raines
disclaims
beneficial ownership of securities held by Board Investors Group
II, LLC except to the extent of his pecuniary interest therein, and
disclaims beneficial ownership of the 4,375,000 Second Tranche
Shares which are subject to the Voting Proxy Agreements. See
footnotes 1 and 2.
|
|
|
|
|
(5)
|
The
number of shares of our common stock beneficially owned by Mr.
Sellers includes 27,000 shares of our common stock underlying
vested stock options with exercise prices ranging from $1.57 to
$5.41 per share.
|
|
|
|
|
(6)
|
The
number of shares of our common stock beneficially owned by Mr.
Ghiloni includes
40,000 shares of common
stock underlying vested stock options with exercise prices ranging
from $1.57 to $5.41 per share
.
|
|
|
|
|
(7)
|
The
number of shares of our common stock beneficially owned by Mr.
Stephen includes
40,000 shares of common
stock underlying vested stock options with exercise prices ranging
from $1.57 to $5.41 per share
.
|
Certain Relationships and Related
Transactions
On
February 26, 2020 in connection with the dissolution and
liquidation of CBDH, we entered into the Distribution Agreement
with CBDH and its members pursuant to which CBDH distributed (i)
the Second Tranche Shares, (ii) the First Marking Period Earnout
Shares, and (iii) the remaining
Earnout Rights to an aggregate of 10,122,208
Earnout Shares to its members.
Mr. Coffman, who is now a member of our
board of directors and co-Chief Executive Officer, Martin A.
Sumichrast, Chairman of our board of directors and co-Chief
Executive Officer, through entities controlled by them are members
of CBDH. See “Principal Shareholders” appearing earlier
in this proxy statement.
Pre-Approval Policy
Our
Audit Committee will review any transaction in which we or any of
our directors, nominees for director, executive officers or holders
of more than 5% of our common stock or any of their immediate
family members, is, was or is proposed to be a participant and the
amount involved exceeds the lesser of $120,000 or 1% of our average
total assets at year-end for our last two completed fiscal years.
Our management is responsible for determining whether a transaction
contains the characteristics described above requiring review by
the Audit Committee of our board of directors.
Shareholder Proposals to be Presented
at the Next Annual Meeting
As of
the date of this proxy statement, we had not received notice of any
shareholder proposals for the 2021 annual meeting described herein
and proposals received subsequent to the date of this proxy
statement will be considered untimely. For a shareholder proposal
to be considered for inclusion in our proxy statement for the 2022
annual meeting, the corporate secretary must receive the written
proposal at our principal executive offices no later than the
deadline stated below. Such proposals must comply with SEC
regulations under Rule 14a-8 regarding the inclusion of shareholder
proposals in company-sponsored proxy materials. Proposals should be
addressed to:
cbdMD,
Inc.
Attention:
Corporate Secretary
8845
Red Oak Boulevard
Charlotte, NC
28217
25
Under
Rule 14a-8, to be timely, a shareholder’s notice must be
received at our principal executive offices not less than 120
calendar days before the date of our proxy statement release to
shareholders in connection with the previous year’s annual
meeting. However, if we did not hold an annual meeting in the
previous year or if the date of this year’s annual meeting
has been changed by more than 30 days from the date of the previous
year’s annual meeting, then the deadline is a reasonable time
before we begin to print and send our proxy materials. Therefore,
shareholder proposals intended to be presented at the 2022 annual
meeting must be received by us at our principal executive office no
later than December 31, 2021 in order to be eligible for inclusion
in our 2022 proxy statement and proxy relating to that meeting.
Upon receipt of any proposal, we will determine whether to include
such proposal in accordance with regulations governing the
solicitation of proxies.
You may
propose director candidates for consideration by the board’s
Compensation, Corporate Governance and Nominating Committee. Any
such recommendations should include the nominee’s name and
qualifications for board membership, information regarding the
candidate as would be required to be included in a proxy statement
filed pursuant to SEC regulations, and a written indication by the
recommended candidate of her or his willingness to serve, and
should be directed to the Corporate Secretary of cbdMD, Inc. at our
principal executive offices at 8845 Red Oak Boulevard, Charlotte,
NC 28217 within the time period described above for proposals other
than matters brought under SEC Rule 14a-8.
Availability of Annual Report on Form
10-K
As
required, we have filed our 2020 10-K with the SEC. Shareholders
may obtain, free of charge, a copy of the 2020 10-K by writing to
us at 8845 Red Oak Boulevard, Charlotte, NC 28217, Attention:
Corporate Secretary, or from our corporate website at
www.cbdmd.com
.
Shareholders Sharing the Same Last
Name and Address
The SEC
has adopted rules that permit companies and intermediaries such as
brokers to satisfy delivery requirements for proxy statements with
respect to two or more shareholders sharing the same address by
delivering a single proxy statement addressed to those
shareholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders and cost savings for companies. We and some
brokers household proxy materials, delivering a single proxy
statement to multiple shareholders sharing an address unless
contrary instructions have been received from the affected
shareholders. Once you have received notice from your broker or us
that they are or we will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate proxy statement, or if you currently receive multiple
proxy statements and would prefer to participate in householding,
please notify your broker if your shares are held in a brokerage
account or us if you hold registered shares. You can notify us by
sending a written request to cbdMD, Inc., Attention: Corporate
Secretary, 8845 Red Oak Boulevard, Charlotte, NC
28217.
Where
You Can Find More Information
We file
annual and special reports and other information with the SEC.
Certain of our SEC filings are available on our corporate website
at
www.cbdmd.com
and on SEC's web site at
www.sec.gov
.
This proxy statement refers to certain documents that are not
presented herein or delivered herewith. Such documents are
available to any person, including any beneficial owner of our
shares, to whom this proxy statement is delivered upon oral or
written request, without charge. Requests for such documents should
be directed to Corporate Secretary, cbdMD, Inc., 8845 Red Oak
Boulevard, Charlotte, NC 28217.
26
APPENDIX
A
cbdMD, INC.
2021 EQUITY COMPENSATION PLAN
1.
Purpose.
1.1
Purpose
.
The purpose of this 2021 Equity Compensation Plan is to enable the
Company to offer to its employees, officers, directors and
consultants whose past, present and/or potential contributions to
the Company and its Subsidiaries have been, are or will be
important to the success of the Company, an opportunity to acquire
a proprietary interest in the Company. The types of long-term
incentive Awards that may be provided under the Plan will enable
the Company to respond to changes in compensation practices, tax
laws, accounting regulations and the size and diversity of its
businesses.
2.
Definitions.
2.1
Definitions
.
For purposes of the Plan, the following terms shall be defined as
set forth below:
(a)
“
Agreement
”
means the agreement between the Company and the Holder setting
forth the terms and conditions of an Award under the Plan.
Agreements shall be in the form(s) attached
hereto.
(b)
“
Award
”
means Stock Options, Restricted Stock and/or other Stock Based
Awards awarded under the Plan.
(c)
“
Board
”
means the Board of Directors of the Company.
(d)
“
Code
”
means the Internal Revenue Code of 1986, as amended from time to
time.
(e)
“
Committee
”
means the Compensation, Corporate Governance and Nominating
Committee of the Board or any other committee of the Board that the
Board may designate to administer the Plan or any portion thereof.
If no Committee is so designated, then all references in this Plan
to “Committee” shall mean the
Board.
(f)
“
Common
Stock
” means the common
stock of the Company, $0.001 par value per
share.
(g)
“
Company
”
means cbdMD, Inc., a corporation organized under the laws of the
State of North Carolina.
(h)
“
Disability
”
means physical or mental impairment as determined under procedures
established by the Committee for purposes of the
Plan.
(i)
“
Effective
Date
” means the date set
forth in Section 11.1, below.
(j)
“
Fair
Market Value
”, unless
otherwise required by any applicable provision of the Code or any
regulations issued thereunder, means, as of any given date: (i) if
the Common Stock is listed on a national securities exchange, the
closing price of the Common Stock in the principal trading market
for the Common Stock on such date, as reported by the exchange (or
on the last preceding trading date if such security was not traded
on such date); (ii) if the Common Stock is not listed on a national
securities exchange, but is traded in the over-the-counter market,
the closing bid price for the Common Stock on such date, as
reported by the OTC Markets Inc. or similar publisher of such
quotations; and (iii) if the fair market value of the Common Stock
cannot be determined pursuant to clause (i) or (ii) above, such
price as the Committee shall determine, in good
faith.
(k)
“
Holder
”
means a person who has received an Award under the
Plan.
(l)
“
Incentive
Stock Option
” means any
Stock Option intended to be and designated as an “incentive
stock option” within the meaning of Section 422 of the
Code.
(m)
“
Nonqualified
Stock Option
” means any
Stock Option that is not an Incentive Stock
Option.
(n)
“
Normal
Retirement
” means
retirement from active employment with the Company or any
Subsidiary, other than for Cause or due to death or disability, of
a Holder who; (i) has reached the age of 65; (ii) has reached the
age of 62 and has completed five years of service with the Company;
or (iii) has reached the age of 60 and has completed 10 years of
service with the Company.
(o)
“
Other
Stock-Based Award
” means
an Award under Section 8, below, that is valued in whole or in part
by reference to, or is otherwise based upon, Common
Stock.
(p)
“
Parent
”
means any present or future “parent corporation” of the
Company, as such term is defined in Section 424(e) of the
Code.
(q)
“
Plan
”
means the cbdMD, Inc. 2021 Equity Compensation Plan, as hereinafter
amended from time to time.
(r)
“
Repurchase
Value
” shall mean the
Fair Market Value in the event the Award to be repurchased under
Section 9.2 is comprised of shares of Common Stock and the
difference between Fair Market Value and the Exercise Price (if
lower than Fair Market Value) in the event the Award is a Stock
Option; in each case, multiplied by the number of shares subject to
the Award.
(s)
“
Restricted
Stock
” means Common
Stock, received under an Award made pursuant to Section 7, below
that is subject to restrictions under said Section
7.
(t)
“
Stock
Option
” or
“
Option
”
means any option to purchase shares of Common Stock that is granted
pursuant to the Plan.
(u)
“
Subsidiary
”
means any present or future “subsidiary corporation” of
the Company, as such term is defined in Section 424(f) of the
Code.
3.
Administration.
3.1
Committee
Membership
. The Plan shall be
administered by the Committee, the Board or a committee designated
by the Board. Committee members shall serve for such term as the
Board may in each case determine, and shall be subject to removal
at any time by the Board. The Committee members, to the extent
deemed to be appropriate by the Board, shall be “non-employee
directors” as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended
(“
Exchange
Act
”), and “outside
directors” within the meaning of Section 162(m) of the Code.
The Committee shall conduct itself in conformance with the
provisions of the Compensation, Corporate Governance and Nominating
Committee Charter.
3.2
Powers of
Committee
. The Committee shall
have the authority and responsibility to recommend to the Board for
approval, Awards for Board members, executive officers,
non-executive employees and consultants of the Company, pursuant to
the terms of the Plan: (i) Stock Options, (ii) Restricted Stock,
and/or (iii) Other Stock-Based Awards. For purposes of illustration
and not of limitation, the Committee shall have the authority
(subject to the express provisions of this
Plan):
(a)
to select the officers, employees, directors and consultants of the
Company or any Subsidiary to whom Stock Options, Restricted Stock,
and/or Other Stock-Based Awards may from time to time be awarded
hereunder.
(b)
to determine the terms and conditions, not inconsistent with the
terms of the Plan or requisite Board approval, of any Award granted
hereunder including, but not limited to, number of shares, share
exercise price or types of consideration paid upon exercise of
Stock Options and the purchase price of Common Stock awarded under
the Plan (including without limitation by a Holder’s
conversion of deferred salary or other indebtedness of the Company
to the Holder), such as other securities of the Company or other
property, any restrictions or limitations, and any vesting,
exchange, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions, as the Committee shall
determine;
(c)
to determine any specified performance goals or such other factors
or criteria which need to be attained for the vesting of an Award
granted hereunder;
(d)
to determine the terms and conditions under which Awards granted
hereunder are to operate on a tandem basis and/or in conjunction
with or apart from other equity awarded under this Plan and cash
Awards made by the Company or any Subsidiary outside of this Plan;
and
(e)
to determine the extent and circumstances under which Common Stock
and other amounts payable with respect to an Award hereunder shall
be deferred that may be either automatic or at the election of the
Holder; and
3.3
Interpretation of Plan.
3.3.1
Committee
Authority
. Subject to Section
10, below, the Committee shall have the authority to adopt, alter
and repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable,
to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and to determine the form and substance of
all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 10, below, all
decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee’s sole discretion,
subject to Board authorization if indicated, and shall be final and
binding upon all persons, including the Company, its Subsidiaries
and Holders.
3.3.2
Incentive
Stock Options
. Anything in the
Plan to the contrary notwithstanding, no term or provision of the
Plan relating to Incentive Stock Options or any Agreement providing
for Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the
Plan be so exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Holder(s) affected,
to disqualify any Incentive Stock Option under such Section
422.
4.
Stock Subject to Plan.
4.1
Number of
Shares
. The total number of
shares of Common Stock reserved and available for issuance under
the Plan shall be five million (5,000,000) shares. Shares of Common
Stock under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. The number of
shares of Common Stock available for issuance under the Plan shall
automatically increase on October 1 of each calendar year during
the term of the Plan, beginning with calendar year 2022, by an
amount equal to
one percent (1%) of the total number of
shares of Common Stock of the Company issued and outstanding on
September 30 of such calendar year, but in no event shall any such
annual increase exceed Two Hundred Fifty Thousand (250,000) shares
of Common Stock. If any share of Common Stock that have been
granted pursuant to
a Stock Option
ceases to be subject to a Stock Option, or if any shares of Common
Stock that are subject to any Restricted Stock, Deferred Stock
Award, or Other Stock-Based Award granted hereunder are forfeited
or any such Award otherwise terminates without a payment being made
to the Holder in the form of Common Stock, such shares shall again
be available for distribution in connection with future grants and
Awards under the Plan.
4.2
Adjustment
Upon Changes in Capitalization, Etc
. In the event of any dividend (other than a cash
dividend) payable on shares of Common Stock, stock split, reverse
stock split, combination or exchange of shares, or other similar
event (not addressed in Section 4.3, below) occurring after the
grant of an Award, which results in a change in the shares of
Common Stock of the Company as a whole, (i) the number of shares
issuable in connection with any such Award and the purchase price
thereof, if any, shall be proportionately adjusted to reflect the
occurrence of any such event and (ii)
the Committee shall
determine whether such change requires an adjustment in the
aggregate number of shares reserved for issuance under the Plan or
to retain the number of shares reserved and available under the
Plan in their sole discretion
. Any
adjustment required by this Section 4.2 shall be made by the
Committee, in good faith, subject to Board authorization if
indicated, whose determination will be final, binding and
conclusive.
4.3
Certain
Mergers and Similar Transactions
. In the event of (a) a dissolution or liquidation
of the Company, (b) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in
which there is no substantial change in the shareholders of the
Company or their relative stock holdings and the Awards granted
under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all Awardees, (c)
a merger in which the Company is the surviving corporation but
after which the shareholders of the Company immediately prior to
such merger (other than any shareholder that merges, or which owns
or controls another corporation that merges, with the Company in
such merger) cease to own their shares or other equity interest in
the Company, (d) the sale of substantially all of the assets of the
Company, or (e) the acquisition, sale, or transfer of more than 50%
of the outstanding shares of the Company by tender offer or similar
transaction, any or all outstanding Awards may be assumed,
converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all
Awardees. In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar
consideration to Awardees as was provided to shareholders (after
taking into account the existing provisions of the Awards). The
successor corporation may also issue, in place of outstanding
Shares of the Company held by the Holder, substantially similar
shares or other property subject to repurchase restrictions no less
favorable to the Holder. In the event such successor corporation
(if any) refuses or otherwise declines to assume or substitute
Awards, as provided above, (i) the vesting of any or all Awards
granted pursuant to this Plan will accelerate immediately prior to
the effective date of a transaction described in this Section 4.3
and (ii) any or all Options granted pursuant to this Plan will
become exercisable in full prior to the consummation of such event
at such time and on such conditions as the Committee determines. If
such Options are not exercised prior to the consummation of the
corporate transaction, they shall terminate at such time as
determined by the Committee. Subject to any greater rights granted
to Awardees under the foregoing provisions of this Section 4.3, in
the event of the occurrence of any transaction described in this
Section 4.3, any outstanding Awards will be treated as provided in
the applicable agreement or plan of merger, consolidation,
dissolution, liquidation, or sale of assets.
5.
Eligibility.
Awards
may be made or granted to employees, officers, directors and
consultants who are deemed to have rendered or to be able to render
significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute
to the success of the Company. No Incentive Stock Option shall be
granted to any person who is not an employee of the Company or a
Subsidiary at the time of grant. Notwithstanding anything to the
contrary contained in the Plan, Awards covered or to be covered
under a registration statement on Form S-8 which may be filed with
the United States Securities and Exchange Commission may be made
under the Plan only if (a) they are made to natural persons, (b)
who provide bona fide services to the Company or its Subsidiaries,
and (c) the services are not in connection with the offer and sale
of securities in a capital raising transaction, and do not directly
or indirectly promote or maintain a market for the Company’s
securities.
6.
Stock Options.
6.1
Grant and
Exercise
. Stock Options granted
under the Plan may be of two types: (i) Incentive Stock Options and
(ii) Nonqualified Stock Options. Any Stock Option granted under the
Plan shall contain such terms, not inconsistent with this Plan, or
with respect to Incentive Stock Options, not inconsistent with the
Plan and the Code, as the Committee may from time to time approve.
The Committee shall have the authority to grant Incentive Stock
Options or Non-qualified Stock Options, or both types of Stock
Options, which may be granted alone or in addition to other Awards
granted under the Plan. To the extent that any Stock Option
intended to qualify as an Incentive Stock Option does not so
qualify, it shall constitute a separate Nonqualified Stock
Option.
6.2
Terms and
Conditions
. Stock Options
granted under the Plan shall be subject to the following terms and
conditions:
(a)
Option
Term
. The term of each Stock
Option shall be fixed by the Committee; provided, however, that an
Incentive Stock Option may be granted only within the ten-year
period commencing from the Effective Date and may only be exercised
within ten years of the date of grant (or five years in the case of
an Incentive Stock Option granted to an optionee who, at the time
of grant, owns Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company
(“
10%
Shareholder
”).
(b)
Exercise
Price
. The exercise price per
share of Common Stock purchasable under a Stock Option shall be
determined by the Committee at the time of grant and may not be
less than 100% of the Fair Market Value on the day of grant;
provided, however, that the exercise price of an Incentive Stock
Option granted to a 10% Shareholder shall not be less than 110% of
the Fair Market Value on the date of grant.
(c)
Exercisability
.
Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the
Committee and as set forth in Section 9, below. If the Committee
provides, in its discretion, that any Stock Option is exercisable
only in installments, i.e., that it vests over time, the Committee
may waive such installment exercise provisions at any time at or
after the time of grant in whole or in part, based upon such
factors as the Committee shall determine.
(d)
Method of
Exercise
. Subject to whatever
installment, exercise and waiting period provisions are applicable
in a particular case; Stock Options may be exercised in whole or in
part at any time during the term of the Option, by giving written
notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash
or, if provided in the Agreement, either in shares of Common Stock
(including Restricted Stock and other contingent Awards under this
Plan) or partly in cash and partly in such Common Stock, or such
other means which the Committee determines are consistent with the
Plan’s purpose and applicable law. Cash payments shall be
made by wire transfer, certified or bank check or personal check,
in each case payable to the order of the Company; provided,
however, that the Company shall not be required to deliver
certificates for shares of Common Stock with respect to which an
Option is exercised until the Company has confirmed the receipt of
good and available funds in payment of the purchase price thereof.
Payments in the form of Common Stock shall be valued at the Fair
Market Value on the date prior to the date of exercise. Such
payments shall be made by delivery of stock certificates in
negotiable form that are effective to transfer good and valid title
thereto to the Company, free of any liens or encumbrances. A Holder
shall have none of the rights of a shareholder with respect to the
shares subject to the Option until such shares shall be transferred
to the Holder upon the exercise of the Option.
(e)
Transferability
.
Except as may be set forth in the Agreement, no Stock Option shall
be transferable by the Holder other than by will or by the laws of
descent and distribution, and all Stock Options shall be
exercisable, during the Holder’s lifetime, only by the Holder
(or, to the extent of legal incapacity or incompetency, the
Holder’s guardian or legal
representative).
(f)
Termination by Reason
of Death
. If a Holder’s
employment by the Company or a Subsidiary terminates by reason of
death, any Stock Option held by such Holder, unless otherwise
determined by the Committee at the time of grant and set forth in
the Agreement, shall thereupon automatically terminate, except that
the portion of such Stock Option that has vested on the date of
death may thereafter be exercised by the legal representative of
the estate or by the legatee of the Holder under the will of the
Holder, for a period of one year (or such other greater or lesser
period as the Committee may specify at grant) from the date of such
death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter.
(g)
Termination by Reason
of Disability
. If a
Holder’s employment by the Company or any Subsidiary
terminates by reason of Disability, any Stock Option held by such
Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall there upon
automatically terminate, except that the portion of such Stock
Option that has vested on the date of termination may thereafter be
exercised by the Holder for a period of one year (or such other
greater or lesser period as the Committee may specify at the time
of grant) from the date of such termination of employment or until
the expiration of the stated term of such Stock Option, whichever
period is the shorter.
(h)
Other
Termination
. Subject to the
provisions of Section 12, below, and unless otherwise determined by
the Committee at the time of grant and set forth in the Agreement,
if a Holder is an employee of the Company or a Subsidiary at the
time of grant and if such Holder’s employment by the Company
or any Subsidiary terminates for any reason other than death or
Disability, the Stock Option shall thereupon automatically
terminate, except that if the Holder’s employment is
terminated by the Company or a Subsidiary without cause or due to
Normal Retirement, then the portion of such Stock Option that has
vested on the date of termination of employment may be exercised
for the lesser of three months after termination of employment or
the balance of such Stock Option’s term.
(i)
Additional
Incentive Stock Option Limitation
. In the case of an Incentive Stock Option, the
aggregate Fair Market Value (on the date of grant of the Option)
with respect to which Incentive Stock Options become exercisable
for the first time by a Holder during any calendar year (under all
such plans of the Company and its Parent and Subsidiary) shall not
exceed $100,000.
(j)
Buyout and
Settlement Provisions
. The
Committee may at any time, subject to Board authorization, if
indicated, offer to repurchase a Stock Option previously granted,
based upon such terms and conditions as the Committee shall
establish and communicate to the Holder at the time that such offer
is made.
7.
Restricted Stock.
7.1
Grant
.
Shares of Restricted Stock may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee,
subject to Board authorization, if indicated, shall determine the
eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be
awarded, the price (if any) to be paid by the Holder, the time or
times within which such Awards may be subject to forfeiture
(“
Restriction
Period
”), the vesting
schedule and rights to acceleration thereof, and all other terms
and conditions of the Awards.
7.2
Terms and
Conditions
. Each Restricted
Stock Award shall be subject to the following terms and
conditions:
(a)
Certificates
.
Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the Holder to
whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted Stock
and any securities constituting Retained Distributions (as defined
below) shall bear a legend to the effect that ownership of the
Restricted Stock (and such Retained Distributions), and the
enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with
the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to
the Company of all or any portion of the Restricted Stock and any
securities constituting Retained Distributions that shall be
forfeited or that shall not become vested in accordance with the
Plan and the Agreement.
(b)
Rights of
Holder
. Restricted Stock shall
constitute issued and outstanding shares of Common Stock for all
corporate purposes. The Holder will have the right to vote such
Restricted Stock, to receive and retain all regular cash dividends
and other cash equivalent distributions as the Board may in its
sole discretion designate, pay or distribute on such Restricted
Stock and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Restricted Stock, with
the exceptions that (i) the Holder will not be entitled to delivery
of the stock certificate or certificates representing such
Restricted Stock until the Restriction Period shall have expired
and unless all other vesting requirements with respect thereto
shall have been fulfilled; (ii) the Company will retain custody of
the stock certificate or certificates representing the Restricted
Stock during the Restriction Period; (iii) other than regular cash
dividends and other cash equivalent distributions as the Board may
in its sole discretion designate, pay or distribute, the Company
will retain custody of all distributions
(“
Retained
Distributions
”) made or
declared with respect to the Restricted Stock (and such Retained
Distributions will be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock) until such
time, if ever, as the Restricted Stock with respect to which such
Retained Distributions shall have been made, paid or declared shall
have become vested and with respect to which the Restriction Period
shall have expired; (iv) a breach of any of the restrictions, terms
or conditions contained in this Plan or the Agreement or otherwise
established by the Committee with respect to any Restricted Stock
or Retained Distributions will cause a forfeiture of such
Restricted Stock and any Retained Distributions with respect
thereto.
(c)
Vesting;
Forfeiture
. Upon the expiration
of the Restriction Period with respect to each Award of Restricted
Stock and the satisfaction of any other applicable restrictions,
terms and conditions (i) all or part of such Restricted Stock shall
become vested in accordance with the terms of the Agreement,
subject to Section 9, below, and (ii) any Retained Distributions
with respect to such Restricted Stock shall become vested to the
extent that the Restricted Stock related thereto shall have become
vested, subject to Section 9, below. Any such Restricted Stock and
Retained Distributions that do not vest shall be forfeited to the
Company and the Holder shall not thereafter have any rights with
respect to such Restricted Stock and Retained Distributions that
shall have been so forfeited.
8.
Other Stock-Based Awards.
Other
Stock-Based Awards may be awarded, subject to limitations under
applicable law, that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on, or related to,
shares of Common Stock, as deemed by the Committee to be consistent
with the purposes of the Plan, including, without limitation,
purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, or other rights
convertible into shares of Common Stock and Awards valued by
reference to the value of securities of or the performance of
specified Subsidiaries. Other Stock-Based Awards may be awarded
either alone or in addition to or in tandem with any other Awards
under this Plan or any other plan of the Company. Each other
Stock-Based Award shall be subject to such terms and conditions as
may be determined by the Committee.
9.
Accelerated Vesting and Exercisability.
9.1
Non-Approved
Transactions
. If any
“person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial
owner” (as referred in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company’s
then outstanding securities in one or more transactions, and the
Board does not authorize or otherwise approve such acquisition,
then the vesting periods of any and all Stock Options and other
Awards granted and outstanding under the Plan shall be accelerated
and all such Stock Options and Awards will immediately and entirely
vest, and the respective holders thereof will have the immediate
right to purchase and/or receive any and all Common Stock subject
to such Stock Options and Awards on the terms set forth in this
Plan and the respective agreements respecting such Stock Options
and Awards.
9.2
Approved
Transactions
. The Committee
may, subject to Board authorization, if indicated, in the event of
an acquisition of substantially all of the Company’s assets
or at least 50% of the combined voting power of the Company’s
then outstanding securities in one or more transactions (including
by way of merger or reorganization) which has been approved by the
Company’s Board of Directors, (i) accelerate the vesting of
any and all Stock Options and other Awards granted and outstanding
under the Plan, and (ii) require a Holder of any Award granted
under this Plan to relinquish such Award to the Company upon the
tender by the Company to Holder of cash in an amount equal to the
Repurchase Value of such Award.
10.
Amendment and Termination.
The
Board may at any time, and from time to time, amend alter, suspend
or discontinue any of the provisions of the Plan, but no amendment,
alteration, suspension or discontinuance shall be made that would
impair the rights of a Holder under any Agreement theretofore
entered into hereunder, without the Holder’s
consent.
11.
Term of Plan.
11.1
Effective
Date
. The Plan shall become
effective at such time as the Plan is approved and adopted by the
Company’s Board of Directors (the “
Effective
Date
”), subject to the
following provisions:
(a)
to the extent that the Plan authorizes the Award of Incentive Stock
Options, shareholder approval for the Plan shall be obtained within
12 months of the Effective Date; and
(b)
the failure to obtain shareholder for the Plan as contemplated by
subparagraph (a) of this Section 11 shall not invalidate the Plan;
provided, however, that (i) in the absence of such shareholder
approval, Incentive Stock Options may not be awarded under the Plan
and (ii) any Incentive Stock Options theretofore awarded under the
Plan shall be converted into Non-Qualified Options upon terms and
conditions determined by the Committee to reflect, as nearly as is
reasonably practicable in its sole determination, the terms and
conditions of the Incentive Stock Options being so
converted.
11.2
Termination
Date
. Unless otherwise
terminated by the Board, this Plan shall continue to remain
effective until the earlier of ten (10) years from the Effective
Date or such time as no further Awards may be granted and all
Awards granted under the Plan are no longer outstanding.
Notwithstanding the foregoing, grants of Incentive Stock Options
may be made only during the ten-year period following the Effective
Date.
12.
General Provisions.
12.1
Written
Agreements
. Each Award granted
under the Plan shall be confirmed by, and shall be subject to the
terms, of the Agreement executed by the Company and the Holder. The
Committee may terminate any Award made under the Plan if the
Agreement relating thereto is not executed and returned to the
Company within 10 days after the Agreement has been delivered to
the Holder for his or her execution.
12.2
Unfunded
Status of Plan
. The Plan is
intended to constitute an “unfunded” plan for incentive
and deferred compensation. With respect to any payments not yet
made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a
general creditor of the Company.
12.3
Employees
.
(a)
Engaging
in Competition with the Company; Disclosure of Confidential
Information
. If a
Holder’s employment with the Company or a Subsidiary is
terminated for any reason whatsoever, and within three months after
the date thereof such Holder either (i) accepts employment with any
competitor of, or otherwise engages in competition with, the
Company or (ii) discloses to anyone outside the Company or uses any
confidential information or material of the Company in violation of
the Company’s policies or any agreement between the Holder
and the Company, the Committee, in its sole discretion, may require
such Holder to return to the Company the economic value of any
Award that was realized or obtained by such Holder at any time
during the period beginning on that date that is six months prior
to the date such Holder’s employment with the Company is
terminated.
(b)
Termination for
Cause
. The Committee may, if a
Holder’s employment with the Company or a Subsidiary is
terminated for cause, annul any Award granted under this Plan to
such employee and, in such event, the Committee, in its sole
discretion, may require such Holder to return to the Company the
economic value of any Award that was realized or obtained by such
Holder at any time during the period beginning on that date that is
six months prior to the date such Holder’s employment with
the Company is terminated.
(c)
No Right
of Employment
. Nothing
contained in the Plan or in any Award hereunder shall be deemed to
confer upon any Holder who is an employee of the Company or any
Subsidiary any right to continued employment with the Company or
any Subsidiary, nor shall it interfere in any way with the right of
the Company or any Subsidiary to terminate the employment of any
Holder who is an employee at any time.
12.4.
Investment
Representations; Company Policy
. The Committee may require each person acquiring
shares of Common Stock pursuant to a Stock Option or other Award
under the Plan to represent to and agree with the Company in
writing that the Holder is acquiring the shares for investment
without a view to distribution thereof. Each person acquiring
shares of Common Stock pursuant to a Stock Option or other Award
under the Plan shall be required to abide by all policies of the
Company in effect at the time of such acquisition and thereafter
with respect to the ownership and trading of the Company’s
securities.
12.5
Additional
Incentive Arrangements
. Nothing
contained in the Plan shall prevent the Board from adopting such
other or additional incentive arrangements as it may deem
desirable, including, but not limited to, the granting of Stock
Options and the Awarding of Common Stock and cash otherwise than
under the Plan; and such arrangements may be either generally
applicable or applicable only in specific
cases.
12.6
Withholding
Taxes
. Not later than the date
as of which an amount must first be included in the gross income of
the Holder for Federal income tax purposes with respect to any
option or other Award under the Plan, the Holder shall pay to the
Company, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such
amount. If permitted by the Committee, tax withholding or payment
obligations may be settled with Common Stock, including Common
Stock that is part of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditioned upon such payment or arrangements and the Company or
the Holder’s employer (if not the Company) shall, to the
extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Holder from the
Company or any Subsidiary.
12.7
Governing
Law
. The Plan and all Awards
made and actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of North
Carolina.
12.8
Other
Benefit Plans
. Any Award
granted under the Plan shall not be deemed compensation for
purposes of computing benefits under any retirement plan of the
Company or any Subsidiary and shall not affect any benefits under
any other benefit plan now or subsequently in effect under which
the availability or amount of benefits is related to the level of
compensation (unless required by specific reference in any such
other plan to Awards under this Plan).
12.9
Non-Transferability
.
Except as otherwise expressly provided in the Plan or the
Agreement, no right or benefit under the Plan may be alienated,
sold, assigned, hypothecated, pledged, exchanged, transferred,
encumbered or charged, and any attempt to alienate, sell, assign,
hypothecate, pledge, exchange, transfer, encumber or charge the
same shall be void.
12.10
Applicable
Laws
. The obligations of the
Company with respect to all Stock Options and Awards under the Plan
shall be subject to (i) all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required,
including, without limitation, the Securities Act of 1933, as
amended (the “
Securities
Act
”), and (ii) the rules
and regulations of any securities exchange on which the Common
Stock may be listed or quoted.
12.11
Conflicts.
If any of the terms or provisions of
the Plan or an Agreement conflict with the requirements of Section
422 of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with such requirements.
Additionally, if this Plan or any Agreement does not contain any
provision required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated herein and
therein with the same force and effect as if such provision had
been set out at length herein and therein. If any of the terms or
provisions of any Agreement conflict with any terms or provisions
of the Plan, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of
the Plan. Additionally, if any Agreement does not contain any
provision required to be included therein under the Plan, such
provision shall be deemed to be incorporated therein with the same
force and effect as if such provision had been set out at length
therein.
12.12
Non-Registered
Stock
. The shares of Common
Stock to be distributed under this Plan have not been, as of the
Effective Date, registered under the Securities Act or any
applicable state or foreign securities laws and the Company has no
obligation to any Holder to register the Common Stock or to assist
the Holder in obtaining an exemption from the various registration
requirements, or to list the Common Stock on a national securities
exchange or any other trading or quotation
system.
P
lan
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Amended
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TABLE OF CONTENTS