USBC, Inc PRE 14A, filed Aug 20, 2021
USBC, Inc. (USBC)
PRE 14A
2021-08-20
For: 2021-08-20
View Original
Added on
October 20, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
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☒
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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))
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☐
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Definitive
Proxy Statement
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Definitive
Additional Materials
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☐
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Soliciting
Material Pursuant to Rule 14a-12
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KNOW LABS, INC.
(Name
of Registrant as Specified in Its Charter)
Payment
of Filing Fee (Check the appropriate box):
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☒
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No fee
required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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(1)
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Title
of each class of securities to which transaction applies:
____________________
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(2)
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Aggregate
number of securities to which transaction applies:
____________________
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(3)
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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):
_____________
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(4)
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Proposed
maximum aggregate value of transaction:
___________________________
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(5)
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Total
fee paid:
_________________________________________________________
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Fee
paid previously with preliminary 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 Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
________________________________________________
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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Copies
of all communications to:
Lockett
+ Horwitz, A Professional Law Corporation
14
Orchard, Suite 200
Lake
Forest, CA 92630
(949)
540-6540, (949) 540-6578 (fax)
_______________________________________________________
PRELIMINARY PROXY STATEMENT — SUBJECT TO
COMPLETION
KNOW LABS, INC.
500 Union Street, Suite 810
Seattle, WA 98101
206-903-1351
[●],
2021
Dear Stockholders:
You are cordially invited to attend the 2021 Annual Meeting of
Shareholders of Know Labs, Inc. (the “Company”) and any
adjournments or postponements thereof (the “Annual
Meeting”). The Annual Meeting will be held on Friday, October
15, 2021 at 1:00 p.m., Pacific time. In light of the
ongoing COVID-19 pandemic, this
year’s Annual Meeting will be a completely virtual meeting,
which will be conducted via live webcast on the Internet, providing
a consistent experience to all shareholders regardless of
location. You will be able to attend the meeting online, vote
your shares electronically and submit your questions during the
Annual Meeting by visiting www.virtualshareholdermeeting.com/knwn2021. There
will not be a physical meeting and you will not be able to attend
the Annual Meeting in person. Details regarding how to participate
in the meeting online and the business to be conducted at
the Annual Meeting are more fully described in the
accompanying proxy statement.
Shareholders of record at the close of Business on August
[●], 2021 are entitled to notice of and are cordially
invented to, attend this virtual Annual Meeting, or any
adjournments or postponements thereof.
YOUR VOTE IS IMPORTANT. Whether or not you plan to
attend the virtual Annual Meeting, we request that you
submit your vote via the Internet, telephone or mail.
To ensure that your vote is recorded
promptly, please vote as soon as possible, even if you plan to
attend the meeting, by submitting your proxy by telephone, via the
Internet at the address listed on the Internet Notice or proxy card
or, if you received paper copies of these materials, by signing,
dating and returning the proxy card, which requires no postage if
mailed in the United States. Note that in light of possible
disruptions in mail service related
to the COVID-19 pandemic, we encourage
stockholders to submit their proxy via the Internet or
telephone.
This notice, the attached proxy statement, and the Company’s
Annual Report on Form 10-K for the fiscal year ending September 30,
2020 will be first transmitted to shareholders on or about
[●], 2021.
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By
order of the Board of Directors,
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/s/ Ronald P. Erickson
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Ronald
P. Erickson
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Chairman
and Interim Chief Financial Officer
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Seattle,
Washington
[●], 2021
2
PRELIMINARY PROXY STATEMENT — SUBJECT TO
COMPLETION
KNOW LABS, INC.
500 Union Street, Suite 810
Seattle, WA 98101
206-903-1351
Notice of the 2021 Annual Meeting of Stockholders
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Date:
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October
15, 2021
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Time:
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1:00
p.m. Pacific
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Location:
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www.virtualshareholdermeeting.com/knwn2021
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Proposals:
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1. To
elect five nominees to serve on the Board until the 2022 Annual
Meeting of Stockholders;
2. To
approve an amendment to the Company’s Articles of
Incorporation to increase the authorized shares of common stock
(“Common Stock”) from 100,000,000 to 200,000,000
shares;
3.
To authorize and approve that the
Company’s current Bylaws, as amended to date (the
“Current Bylaws”), be amended, restated, and replaced
in its entirety by the Second Amended and Restated Bylaws in the
form attached hereto as Appendix
A (the “Amended
and Restated Bylaws”);
4. To
adopt and approve the 2021 Equity Incentive Plan, as described in the
accompanying proxy statement and set forth
in Appendix B thereto;
5. To
ratify the appointment of BPM, LLP of Walnut Creek, CA as the
Company’s independent registered public accounting firm for
the fiscal year ending September 30, 2020 and 2021;
6. To
transact such other business that may properly come before the
Annual Meeting and at any adjournments thereof.
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Who Can Vote:
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Stockholders
of record at the close of business on August [●], 2021.
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How You Can Vote:
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IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY
MATERIALS
This proxy statement and our Annual Report on
Form 10-K, as filed with the
Securities and Exchange Commission, are available on the Internet
at www.virtualshareholdermeeting.com/knwn2021. The
Annual Report includes our audited consolidated financial
statements for the fiscal year ended September 30,
2020.
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It
is important that your shares be represented and voted at the
meeting. You can vote your shares via the Internet or telephone or
by mail by completing and returning the accompanying proxy card in
the accompanying self-addressed envelope. Voting instructions are
printed on the proxy card. You may revoke a proxy at any time
before its exercise at the meeting by following the instructions in
the accompanying proxy statement.
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By
authorization of the Board of Directors,
Ronald
P. Erickson
Chairman
Seattle,
WA
[●], 2021
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Your Vote Is
Important. Whether You Own One Share or Many,
Your Prompt Cooperation in Voting Your Proxy is Greatly
Appreciated.
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3
PROXY STATEMENT
FOR THE
2021 ANNUAL MEETING OF STOCKHOLDERS
OF
KNOW LABS, INC.
Our
Board of Directors (the “Board of Directors” or
“Board”) has made this Proxy Statement and related
materials available to you on the Internet, or at your request has
delivered printed versions to you by mail, in connection with the
Board of Directors’ solicitation of proxies for our 2021
Annual Meeting of Stockholders (the “Annual Meeting”),
and any adjournment of the Annual Meeting. If you requested printed
versions of these materials by mail, they will also include a proxy
card for the Annual Meeting. This Proxy Statement and related
materials will be released on or about [●], 2021 to our
stockholders on the Record Date.
Pursuant
to rules adopted by the Securities and Exchange Commission
(“SEC”), we are providing access to our proxy materials
over the Internet. Accordingly, we are sending a Notice of Internet
Availability of Proxy Materials (the “Notice”) to our
stockholders of record and beneficial owners as of the record date
identified below. The mailing of the Notice to our stockholders is
scheduled to begin by [●], 2021.
IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL STOCKHOLDERS MEETING TO BE HELD ON October
15, 2021: This proxy statement,
the accompanying proxy card or voting instruction card and our 2020
Annual Report on Form 10-K are available
www.proxyvote.com
and on our website at
www.knowlabs.co/investors
In
this Proxy Statement, the terms the “Company,”
“Know Labs,” “we,” “us,” and
“our” refer to Know Labs, Inc. and our wholly owned
subsidiary. The mailing address of our principal executive offices
is 500 Union Street, Suite 810, Seattle, WA 98101.
What is a proxy?
A proxy is your legal designation of another person or persons (the
“proxy”) to vote on your behalf. By completing and
returning the enclosed proxy card, you are giving the Company the
authority to vote your shares in the manner you indicate on your
proxy card.
Why did I receive more than one proxy card?
You will receive multiple proxy cards if you hold your shares in
different ways (e.g., joint tenancy, trusts, and custodial
accounts) or in multiple accounts. If your shares are held by a
broker (i.e., in “street name”), you will receive your
proxy card or other voting information from your broker, and you
will return your proxy card or cards to your broker. You should
vote on and sign each proxy card you receive.
How to
Attend the Virtual Annual Meeting
You may attend the Annual Meeting online only if
you are a Know Labs’ stockholder who is entitled to vote at
the Annual Meeting, or if you hold a valid proxy for the Annual
Meeting. The Annual Meeting will be a completely virtual meeting
and is scheduled to be held on October 15, 2021 at 1:00 Pacific
time, via live webcast through the following
link: www.virtualshareholdermeeting.com/knwn2021.
You will need the 16-digit control number
provided on the Notice of Internet Availability of Proxy Materials,
on your proxy card (if applicable) or on the instructions that
accompanied your proxy materials. You may attend the Annual
Meeting, vote, and submit a question during the Annual Meeting by
visiting www.virtualshareholdermeeting.com/knwn2021 and
using our 16-digit control number. If you are
not a stockholder of record but hold shares as a beneficial owner
in “street name”, you should contact your bank or
broker to obtain your 16-digit control number
or otherwise vote through the bank or broker. If you
lose your 16-digit control number, you may join
the Annual Meeting as a “Guest” but you will be not
able to vote, ask questions or access the list of stockholders as
of the Record Date. The meeting webcast will begin promptly at 1:00
p.m., Pacific time. Online check-in will begin at 12:45
p.m. Pacific time, and you should allow ample
time for check-in procedures.
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Reasons for Virtual Annual Meeting
In
light of the ongoing COVID-19 pandemic, and as part
of our effort to maintain a safe and healthy environment for our
directors, members of management and stockholders who wish to
attend the Annual Meeting, we believe that hosting a virtual
meeting this year is in the best interest of the Company and its
stockholders. A virtual meeting also enables increased stockholder
attendance and participation because stockholders can participate
from any location around the world. There will not be a physical
meeting location and you will not be able to attend the meeting in
person.
Technical Difficulties
We
will have technicians ready to assist you with any technical
difficulties you may have accessing the virtual meeting website. If
you encounter any technical difficulties with the virtual meeting
platform on the meeting date, please call the technical support
number to be provided on the website portal used to access the
virtual meeting.
Question and Answer Session
As
part of the Annual Meeting, we will hold a live Q&A session,
during which we intend to answer appropriate questions submitted by
stockholders during the meeting that are pertinent to the Company
and the meeting matters. The Company will endeavor to answer as
many questions submitted by stockholders as time permits. Only
stockholders that have accessed the Annual Meeting as a stockholder
(rather than a “Guest”) by following the procedures
outlined above in “How to Attend the Virtual Meeting”
will be permitted to submit questions during the Annual Meeting.
Each stockholder is limited to no more than two questions.
Questions should be succinct and only cover a single topic. We will
not address questions that are, among other
things:
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irrelevant to the
business of the Company or to the business of the Annual
Meeting;
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related
to material non-public information of the Company, including the
status or results of our business since our last Quarterly Report
on Form 10-Q;
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related
to any pending, threatened or ongoing litigation;
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related
to personal grievances;
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derogatory
references to individuals or that are otherwise in bad
taste;
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substantially
repetitious of questions already made by another
stockholder;
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in
excess of the two question limit;
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in
furtherance of the stockholder’s personal or business
interests; or
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out of
order or not otherwise suitable for the conduct of the Annual
Meeting as determined by the Chair or Secretary in their reasonable
judgment.
Additional
information regarding the Q&A session will be available in the
“Rules of Conduct” available on the Annual Meeting
webpage for stockholders that have accessed the Annual Meeting as a
stockholder (rather than a “Guest”) by following the
procedures outlined above in “How to Attend the Virtual
Meeting”.
Voting Information
Who is qualified to vote?
You are qualified to receive notice of and to vote at the Annual
Meeting if you own shares of common stock of the Company at the
close of business on our record date of [●],
2021.
How many shares of Common Stock may vote at the
Meeting?
As of the close of business on [●], 2021, the record date for
determination of stockholders entitled to vote at the Annual
Meeting, there were outstanding [●] shares of our common
stock, par value $0.001 per share, all of which are entitled to
vote with respect to all matters to be acted upon at the Annual
Meeting. Each stockholder of record is entitled to one vote for
each share of our common stock held by such stockholder. As of the
Record Date there are 8,108,356 shares of the Company’s
common stock issuable upon the conversion of Series C and Series D
Convertible Preferred Stock which are entitle to
vote approximately 8,108,356
shares at the Annual
Meeting.
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What is the difference between a “stockholder of
record” and a “street name” holder?
These terms describe how your shares are held. If your shares are
registered directly in your name with American Stock Transfer and
Trust Company, the Company’s transfer agent, you are a
“stockholder of record.” If your shares are held in the
name of a brokerage, bank, trust or other nominee as a custodian,
you are a “street name” holder.
How do I vote my shares?
If you are a “stockholder of record,” you can vote your
proxy by mailing in the enclosed proxy card. Please refer to the
specific instructions set forth in the enclosed proxy card. If you
hold your shares in “street name,” your
broker/bank/trustee/nominee will provide you with materials and
instructions for voting your shares.
Electronically At the Meeting
This year’s Annual Meeting will be held entirely online to
allow greater participation. Stockholders may participate in the
Annual Meeting by visiting the following website at the time of the
Annual Meeting: www.virtualshareholdermeeting.com/knwn2021.
To participate in the Annual Meeting, you will
need the 16-digit control number included on your
Notice, on your proxy card or on the instructions that accompanied
your proxy materials. Shares held in your name as the stockholder
of record may be voted electronically during the Annual Meeting.
Shares for which you are the beneficial owner but not the
stockholder of record also may be voted electronically during the
Annual Meeting. However, even if you plan to attend the Annual
Meeting online, the Company recommends that you vote your shares as
promptly as possible and in advance over the Internet
(www.proxyvote.com) or telephone [(●)] so that your vote will
be counted if you later decide not to attend the Annual
Meeting.
By Proxy
If
you do not wish to vote at the Annual Meeting or will not be
participating in the online meeting, you may vote by proxy. You can
vote by proxy over the Internet (www.proxyvote.com) or telephone
[(●)] and by following the instructions provided in the
Notice, or, if you requested printed copies of the proxy materials
by mail, you can vote by mailing your proxy as described in the
proxy materials. Internet and telephone voting facilities for
stockholders of record will close at 11:59 p.m., eastern time, on
October 14, 2021. If you complete and submit your proxy before the
meeting, the persons named as proxies will vote the shares
represented by your proxy in accordance with your instructions. If
you submit a proxy without giving voting instructions, your shares
will be voted in the manner recommended by the Board of Directors
on all matters presented in this Proxy Statement, and as the
persons named as proxies may determine in their discretion with
respect to any other matters properly presented at the
meeting.
If
any other matters are properly presented for consideration at the
Annual Meeting, including, among other things, consideration of a
motion to adjourn the Annual Meeting to another time or place
(including, without limitation, for the purpose of soliciting
additional proxies), the persons named in the enclosed proxy card
and acting thereunder will have discretion to vote on those matters
in accordance with their best judgment. We do not currently
anticipate that any other matters will be raised at the Annual
Meeting.
Revocability of Proxy
You
may revoke your proxy by (1) following the instructions on the
Notice and entering a new vote by mail, over the Internet or via
telephone before the Annual Meeting or (2) electronically
attending the Annual Meeting and voting (although attendance at the
Annual Meeting will not in and of itself revoke a proxy). Any
written notice of revocation or subsequent proxy card must be
received by our Secretary prior to the taking of the vote at the
Annual Meeting. Such written notice of revocation or subsequent
proxy card should be sent to our principal executive offices at
Know Labs, Inc., 500 Union Street, Suite 810, Seattle, WA
98101, Attention: Corporate Secretary.
6
If
a broker, bank, or other nominee holds your shares, you must
contact them in order to find out how to change your vote, or you
may vote at the Annual Meeting by following the procedures
described above.
What are the Board’s recommendations on how I should vote my
shares?
The Board recommends that you vote your shares as
follows:
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Proposal
1 —
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FOR the
election of all five nominees to serve on the Board until the 2022
Annual Meeting of Stockholders.
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Proposal
2 —
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FOR
amendment to the Company’s Articles of Incorporation to
increase the authorized shares of Common Stock from 100,000,000 to
200,000,000 shares.
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Proposal
3 —
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FOR
adoption of the Second Amended and Restated Bylaws;
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Proposal
4 —
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FOR
approval and adoption of the 2021 Equity Incentive
Plan;
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Proposal
5 —
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FOR
ratifying the appointment of BPM, LLP of Walnut Creek, CA as the
Company’s independent registered public accounting firm for
the fiscal year ending September 30, 2020 and 2021
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How many votes are required to approve each proposal?
The table below summarizes the proposals that will be voted on, the
vote required to approve each item and how votes are
counted:
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Proposal
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Votes
Required
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Voting
Options
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Impact of
“Withhold” or “Abstain”
Votes
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Broker
Discretionary Voting Allowed / Impact of Broker
Non-Votes
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Proposal
No. 1: To elect five directors to hold office until the next annual
meeting of stockholders or until their successors are duly elected
and qualified, subject to prior death, resignation, or
removal.
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The plurality of the votes cast. This means that the nominees
receiving the highest number of affirmative (“FOR”)
votes (among votes properly cast virtually or by proxy) will be
elected as directors.
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“FOR
ALL”
“WITHHOLD
ALL”
“FOR
ALL EXCEPT”
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None(1)
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No(2)
/ None
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Proposal
No. 2: Increase in the authorized shares of common
stock.
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The
affirmative vote of the holders of a majority of the total number
of shares issued and outstanding as of the Record
Date.
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“FOR”
“AGAINST” “ABSTAIN”
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Against(4)
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No (2)
/Against )
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Proposal
No. 3: To authorize and approve that
the Company’s current Bylaws, as amended to date, be amended,
restated, and replaced in their entirety by the Second Amended and
Restated Bylaws
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The
affirmative (“FOR”) vote of a majority of the votes
cast by the stockholders present in person or represented by proxy
at the 2021 Annual Meeting.
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“FOR”
“AGAINST” “ABSTAIN”
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Against(4)
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No(2)
/None
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Proposal
No. 4:
Adoption
of 2021 Equity Incentive Plan
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The affirmative (“FOR”) vote of a majority of the votes
cast by the stockholders present in person or represented by proxy
at the 2021 Annual Meeting.
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“FOR”
“AGAINST” “ABSTAIN”
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Against(4)
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No(2)
/None
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Proposal
No. 5: Ratification of Appointment of Independent Registered Public
Accounting Firm
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The
affirmative vote of the holders of a majority in voting power of
the votes cast affirmatively or negatively (excluding abstentions)
at the Annual Meeting by the holders entitled to vote
thereon.
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“FOR”
“AGAINST” “ABSTAIN”
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Against(4)
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Yes(3)
/N/A (as a routine matter there are no broker
non-votes)
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7
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(1)
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Votes
that are “withheld” will have the same effect as an
abstention and will not count as a vote “FOR” or
“AGAINST” a director.
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(2)
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As this
proposal is not considered a discretionary matter, brokers lack
authority to exercise their discretion to vote uninstructed shares
on this proposal.
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(3)
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As this
proposal is considered a discretionary matter, brokers are
permitted to exercise their discretion to vote uninstructed shares
on this proposal.
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(4)
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A
“Withhold” or “ABSTAIN” vote will have the
effect of a vote “AGAINST” Proposals 2, 3, 4, and
5,
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What if I do not specify how my shares are to be
voted?
If you submit a proxy but do not indicate any voting instructions,
the persons named as proxies will vote in accordance with the
recommendations of the Board. The Board’s recommendations are
set forth above, as well as with the description of each proposal
in this Proxy Statement.
How are votes withheld, abstentions and broker non-votes
treated?
Votes withheld and abstentions are deemed as “present”
at the Annual Meeting, are counted for quorum purposes, and other
than for Proposal 1, will have the same effect as a vote against
the matter. Broker non-votes are possible with regard to Proposals
1, 2, 3, and 4, (all of which are considered routine by New York
Stock Exchange (“NYSE”) interpretations that govern
broker non-votes) and, while counted for general quorum purposes,
are not deemed to be “present” with respect to any
matter for which a broker does not have authority to vote. Broker
non-votes will have no impact with regard to Proposals 1, 3, and 4.
Broker non-votes will have the same impact as an
“against” vote with regard to Proposal 2. Brokers have
discretion to vote on Proposal 5 (as it is considered a routine
matter by NYSE interpretations) so there will not be any broker
non-votes with regard to that proposal.
What are “broker non-votes?”
A “broker non-vote” occurs when shares held by a broker
in “street name” for a beneficial owner are not voted
with respect to a proposal because (1) the broker has not received
voting instructions from the stockholder who beneficially owns the
shares and (2) the broker lacks the authority to vote the shares at
their discretion.
Can I change my vote after I have mailed in my proxy
card?
You may revoke your proxy by doing one of the
following:
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●
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By
sending a written notice of revocation to the Secretary of the
Company that is received prior to the Annual Meeting, stating that
you revoke your proxy;
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●
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By
signing a later-dated proxy card and submitting it so that it is
received prior to the Annual Meeting in accordance with the
instructions included in the proxy card(s); or
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●
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By
attending the Annual Meeting and voting your shares in
person.
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Who will count the votes?
Representatives from the Company will count the votes and serve as
our Inspector of Election. The Inspector of Election will be
present at the Annual Meeting.
Who pays the cost of this proxy solicitation?
Proxies will be solicited by mail, and we will pay all expenses of
preparing and soliciting such proxies. We have also arranged for
reimbursement, at the rates suggested by brokerage houses,
nominees, custodians and fiduciaries for the forwarding of proxy
materials to the beneficial owners of shares held of
record.
Is this Proxy Statement the only way that proxies are being
solicited?
No. We have also arranged for brokerage houses, nominees,
custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares held of record. Our directors, officers
and employees may also solicit proxies but such persons will not be
specifically compensated for such services.
If you have any further questions about voting your shares or
attending the Annual Meeting, please call the Company’s
Investor Relations department at (206) 903-1351.
8
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of August 17, 2021, the name,
age, and position of each executive officer and director and the
tenure in office of each director of the
Company.
Identification of Directors and Executive Officers
The following table sets forth certain information about our
current directors and executive officers:
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Name
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Age
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Director/ Executive Officer
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Directors-
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Ronald
P. Erickson
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77
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Chairman
and Interim Chief Financial Officer (1)
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Phillip
A. Bosua
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47
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Chief
Executive Officer and Director
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Jon
Pepper
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69
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Director
(2)
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Ichiro
Takesako
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62
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Director
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William
A. Owens
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81
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Director
(3)
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(1) Chairman of the Nominating and Corporate Governance
Committee.
(2) Chairman of the Audit Committee
(3) Chairman of the Compensation Committee
All directors hold office until their successors are duly appointed
or until their earlier resignation or removal.
Background and Business Experience
Ronald P. Erickson has
been a director and officer of Know Labs since April 2003. He was
appointed as our CEO and President in November 2009 and as Chairman
of the Board in February 2015. Previously, Mr. Erickson was our
President and Chief Executive Officer from September 2003 through
August 2004 and was Chairman of the Board from August 2004 until
May 2011. Mr. Erickson stepped down as Chief Executive Officer
on April 10, 2018.
A senior executive with more than 30 years of experience in the
high technology, telecommunications, micro-computer, and digital
media industries, Mr. Erickson was the founder of Know Labs. He is
formerly Chairman, CEO and Co-Founder of Blue Frog Media, a mobile
media and entertainment company; Chairman and CEO of eCharge
Corporation, an Internet-based transaction procession
company, Chairman, CEO and Co-founder of GlobalTel
Resources, a provider of telecommunications services; Chairman,
Interim President and CEO of Egghead Software, Inc. a software
reseller where he was an original investor; Chairman and CEO of
NBI, Inc.; and Co-founder of MicroRim, Inc. the database software
developer. Earlier, Mr. Erickson practiced law in Seattle and
worked in public policy in Washington, DC and New York, NY.
Additionally, Mr. Erickson has been an angel investor and board
member of a number of public and private technology
companies. In addition to his business activities, Mr.
Erickson is Chairman of the Board of Trustees of Central Washington
University where he received his BA degree. He also holds a MA from
the University of Wyoming and a JD from the University of
California, Davis. He is licensed to practice law in the State of
Washington.
Mr. Erickson is our founder and was appointed as a director because
of his extensive experience in developing technology
companies.
Phillip A. Bosua was
appointed a director and Chief Executive Officer of the Company on
April 10, 2018. Previously, Mr. Bosua served as our Chief Product
Officer since August 2017 and we entered into a Consulting
Agreement on July 7, 2017. From September 2012 to February 2015, he
was the founder and Chief Executive Officer of LIFX Inc. (where he
developed and marketed an innovative “smart” light
bulb) and from August 2015 until February 2016 was Vice President
Consumer Products at Soraa (which markets specialty LED light
bulbs). From February 2016 to July 2017, Mr. Bosua was the founder
and CEO of RAAI, Inc. (where he continued the development of his
smart lighting technology). From May 2008 to February 2013 he
was the Founder and CEO of LimeMouse Apps, a leading developer of
applications for the Apple App Store.
Mr. Bosua was appointed as a director because of his extensive
experience in developing technology companies.
9
Ichiro Takesako has served
as a director since December 28, 2012. Mr. Takesako has held
executive positions with Sumitomo Precision Products Co., Ltd or
Sumitomo since 1983. Mr. Takesako graduated from Waseda University,
Tokyo, Japan where he majored in Social Science and graduated with
a Degree of Bachelor of Social Science.
In the past few years, Mr. Takesako has held the following
executive position in Sumitomo and its affiliates:
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June 2008:
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appointed as General Manager of Sales and Marketing Department of
Micro Technology Division
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April 2009:
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appointed as General Manager of Overseas Business Department of
Micro Technology Division in charge of M&A activity of
certain business segment and assets of Aviza Technology,
Inc.
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July 2010:
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appointed as Executive Director of SPP Process Technology Systems,
100% owned subsidiary of Sumitomo Precision Products then,
stationed in Newport, Wales
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August 2011:
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appointed as General Manager, Corporate Strategic Planning
Group
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January 2013:
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appointed as Chief Executive Officer of M2M Technologies, Inc., a
company invested by Sumitomo Precision products
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April 2013:
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appointed as General Manager of Business Development Department, in
parallel of CEO of M2M Technologies, Inc.
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April 2014:
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relieved from General Manager of Business Development Department
and is responsible for M2M Technologies Inc. as its
CEO
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Mr. Takesako was appointed as a Director based on his previous
position with Sumitomo and Sumitomo's previous significant
partnership with the Company.
Jon Pepper has served as
an independent director since April 2006. Mr. Pepper founded Pepcom
in 1980, a company that become the industry leader at producing
press-only technology showcase events around the country and
internationally. He sold his stake in the corporation and retired
as a partner at the end of 2018. Prior to that, Mr. Pepper started
the DigitalFocus newsletter, a ground-breaking newsletter on
digital imaging that was distributed to leading influencers
worldwide. Mr. Pepper has been closely involved with the high
technology revolution since the beginning of the personal computer
era. He was formerly a well-regarded journalist and columnist; his
work on technology subjects appeared in The New York
Times, Fortune, PC Magazine, Men's
Journal, Working
Woman, PC Week, Popular
Science and many other
well-known publications. Pepper was educated at Union College in
Schenectady, New York and the Royal Academy of Fine Arts in
Copenhagen. He continues to be active in non-profit work and
boards, and last year founded Mulberry Tree Films, a non-profit
that supports independent high-quality documentary
films.
Mr. Pepper was appointed as a director because of his marketing
skills with technology companies.
William A. Owens has
served as an independent director since May 24, 2018. Mr. Owens is
currently the co-founder and executive chairman of Red Bison
Advisory Group, a company which identifies opportunities with
proven enterprises in China, the Middle East, and the United States
and creates dynamic partnerships focusing on natural resources
(oil, gas and fertilizer plants), real estate, and information and
communication technology. Most recently, he was the chairman of the
board of CenturyLink Telecom, the third largest telecommunications
company in the United States and was on the advisory board of SAP
USA. Mr. Owens serves on the board of directors at Wipro
Technologies and is a director of the following private companies:
Humm Kombucha, a beverage company and Versium. Mr. Owens is on the
advisory board of the following private companies: Healthmine,
Platform Science, Sarcos, Sierra Nevada Corporation, and Vodi. Mr.
Owens is on the board of trustees at EastWest Institute, Seattle
University, and an advisor to the Fiscal Responsibility Amendment
(CFFRA) Association which aims to establish a balanced budget
amendment to the US Constitution. He is also a member of the
Council of Foreign Relations.
From 2007 to 2015, Mr. Owens was the Chairman and Senior Partner of
AEA Investors Asia, a private equity firm located in Hong Kong, and
Vice Chairman of the NYSE for Asia. Mr. Owens also served as the
Chairman of Eastern Airlines. He has served on over 20 public
boards including Daimler, British American Tobacco, Telstra, Nortel
Networks, and Polycom. Mr. Owens was the CEO/Chairman of Teledesic
LLC, a Bill Gates/Craig McCaw company bringing worldwide broadband
through an extensive satellite network and prior, was the
President, COO/Vice Chairman of Science Applications International
Corporation (SAIC). Mr. Owens has also served on the boards of the
non-for-profit organizations; Fred Hutchinson Cancer Research
Center, Carnegie Corporation of New York, Brookings Institution,
and RAND Corporation.
10
Mr. Owens is a four-star US Navy veteran. He was Vice Chairman of
the Joint Chiefs of Staff, the second-ranking United States
military officer with responsibility for reorganizing and
restructuring the armed forces in the post-Cold War era. He is
widely recognized for bringing commercial high-grade technology
into the Department of Defense for military
applications
Mr. Owens is a 1962 honor graduate of the United States Naval
Academy with a bachelor’s degree in mathematics,
bachelor’s and master’s degrees in politics, philosophy
and economics from Oxford University, and a master’s degree
in management from George Washington University.
Mr. Owens was appointed as a director because of his business
skills with technology companies.
Term of
Office
Each
director serves until the next annual meeting of the shareholders
or their earlier resignation or removal. The Board of Directors
elects officers whose terms of office are at the discretion of the
Board of Directors. Each director serves until a successor is
elected and qualified.
Family Relationship
There
are no family relationships between any of our directors or
executive officers.
Board of Directors Committee Composition
The Board has three standing committees to facilitate and assist
the Board in the execution of its responsibilities. The committees
are currently the Audit Committee, the Nominating and Corporate
Governance Committee, and the Compensation Committee. The
Committees were formed in July 2010. The Audit and Compensation
Committees are comprised solely of non-employee, independent
directors. The Nominating and Corporate Governance Committee has
two management directors, Ronald P. Erickson as Chairman and
Phillip A. Bosua as a member. Charters for each committee are
available on our website at www.knowlabs.co. The discussion below
describes current membership for each of the standing Board
committees.
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Nominations and
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Audit
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Compensation
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Corporate Governance
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Jon
Pepper (Chairman)
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William
A. Owens (Chairman)
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Ron
Erickson (Chairman)
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William
A. Owens
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Jon
Pepper
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Phillip
A. Bosua
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Ichiro
Takesako
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Ichiro
Takesako
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William
A. Owens
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Jon
Pepper
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Related Party Transaction Approval Policy
While
the Company does not current have a written policy regarding
approval of transactions between the Company and a related party,
our Board of Directors, as matter of appropriate corporate
governance, reviews and approves all such transactions, to the
extent required by applicable rules and regulations. Generally,
management would present to the Board of Directors for approval at
the next regularly scheduled Board of Directors meeting any related
party transactions proposed to be entered into by us. The Board of
Directors may approve the transaction if it is deemed to be in the
best interests of our Shareholders and the Company.
CORPORATE GOVERNANCE
Code of Ethics
We have adopted conduct and ethics standards titled the code of
ethics, which is available at www.knowlabs.co. These standards were
adopted by our Board of Directors to promote transparency and
integrity. The standards apply to our Board of Directors,
executives and employees. Waivers of the requirements of our code
of ethics or associated polices with respect to members of our
Board of Directors or executive officers are subject to approval of
the full board.
Audit Committee
Our Board of Directors established an audit committee in
July 2010. Our audit committee provides assistance to the
Board in fulfilling its responsibilities to our stockholders
relating to: (1) maintaining the integrity of our financial
reports, including our compliance with legal and regulatory
requirements, (2) the independent auditor's qualifications and
independence, (3) the performance of our internal audit
function in cooperation with the independent auditors, and
(4) the preparation of the report required by the rules of the
SEC to be included in our annual proxy statement. Our audit
committee is directly responsible for the appointment, compensation
and oversight of the independent auditors (including the resolution
of any disagreements between management and the independent
auditors regarding financial reporting), approving in advance all
auditing services, and approving in advance all non-audit services
provided by the independent auditors. The independent auditors
report directly to the committee. In addition, our audit committee
is to review our annual and quarterly financial reports in
conjunction with the independent auditors and financial
management.
Our Board of Directors has adopted a written charter for the audit
committee, a copy of which is available on our website
at www.knowlabs.co.
11
Compensation Committee
Our Board of Directors established a compensation committee in July
2010. Our compensation committee is responsible for:
(1) reviewing and approving goals and objectives underlying
the compensation of our Chief Executive Officer, evaluating the
CEO's performance in accordance with those goals and objectives,
and determining and approving the CEO's compensation;
(2) recommending to the board the compensation of executive
officers other than the CEO, subject to board approval;
(3) administering any incentive compensation and equity-based
plans, subject to board approval; (4) preparing the
compensation report required by the rules and regulations of the
SEC for inclusion in our annual proxy statement; and
(5) periodically reviewing the results of our executive
compensation and perquisite programs and making recommendations to
the board with respect to annual compensation (salaries, fees and
equity) for our executive officers and non-employee
directors.
Our Board of Directors has adopted a written charter for the
compensation committee, a copy of which is available on our website
at www.knowlabs.co.
Nominations and Governance Committee
Our Board of Directors established the nominations and governance
committee in July 2010 for the purpose of: (1) assisting the
board in identifying individuals qualified to become board members
and recommending to the board the nominees for election as
directors at the next annual meeting of stockholders;
(2) assist the board in determining the size and composition
of the board committees; (3) develop and recommend to the
board the corporate governance principles applicable to us; and
(4) serve in an advisory capacity to the board and the
Chairman of the Board on matters of organization, management
succession planning, major changes in our organizational and the
conduct of board activities.
Our Board of Directors has adopted a written charter for the
nominations and governance committee, a copy of which is available
on our website at www.knowlabs.co.
Communication with our Board of Directors
Our stockholders and other interested parties may communicate with
our Board of Directors by sending written communication in an
envelope addressed to "Board of Directors" in care of the
Secretary, 500 Union Street, Suite 810, Seattle, Washington
98101.
Director Independence
The Board has affirmatively determined that Mr. Pepper, Mr.
Takesako and William A. Owens are each an independent director.
For purposes of making that determination, the Board used
NASDAQ’s Listing Rules even though the Company is not
currently listed on NASDAQ.
Board’s Role in Risk Oversight
Risk is
inherent in every business. As is the case in virtually all
businesses, we face a number of risks, including operational,
economic, financial, legal, regulatory, and competitive risks. Our
management is responsible for the day-to-day management of the
risks we face. Our Board of Directors, as a whole and through its
committees, has responsibility for the oversight of risk
management.
In its
oversight role, our Board of Directors’ involvement in our
business strategy and strategic plans plays a key role in its
oversight of risk management, its assessment of management’s
risk appetite, and its determination of the appropriate level of
enterprise risk. Our Board of Directors receives updates at least
quarterly from senior management and periodically from outside
advisors regarding the various risks we face, including
operational, economic, financial, legal, regulatory, and
competitive risks. Our Board of Directors also reviews the various
risks we identify in our filings with the SEC and risks relating to
various specific developments, such as acquisitions, debt and
equity placements, and new service offerings.
12
Our
board committees assist our Board of Directors in fulfilling its
oversight role in certain areas of risk. Pursuant to its charter,
the Audit Committee oversees the financial and reporting processes
of our company and the audit of the financial statements of our
company and provides assistance to our Board of Directors with
respect to the oversight and integrity of the financial statements
of our company, our company’s compliance with legal and
regulatory requirements, the independent registered public
accountant’s qualification and independence, and the
performance of our independent registered public accountant. The
Compensation Committee considers the risk of our compensation
policies and practices and endeavors to assure that it is not
reasonably likely that our compensation plans and policies would
have a material adverse effect on our company. Our Nominations and
Corporate Governance Committee oversees governance related risk,
such as board independence, conflicts of interests, and management
and succession planning.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past
ten years:
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Had any petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or had a receiver, fiscal
agent, or similar officer appointed by a court for the business or
property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
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Been convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
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Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
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◦
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Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such
activity;
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◦
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Engaging in any type of business practice; or
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◦
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Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities
laws;
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●
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Been the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or
state authority barring, suspending, or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in (i) above, or to be associated with persons engaged in
any such activity;
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●
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Been found by a court of competent jurisdiction in a civil action
or by the SEC to have violated any federal or state securities law,
where the judgment in such civil action or finding by the SEC has
not been subsequently reversed, suspended, or vacated;
or
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●
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Been found by a court of competent jurisdiction in a civil action
or by the Commodity Futures Trading Commission to have violated any
federal commodities law, where the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended, or vacated.
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Compliance with Section 16(a) of the Exchange Act
Our executive officers, directors and 10% stockholders are required
under Section 16(a) of the Exchange Act to file reports of
ownership and changes in ownership with the SEC. Copies of these
reports must also be furnished to us.
Based solely on a review of copies of reports furnished to us, as
of September 30, 2020 our executive officers, directors and 10%
holders complied with all filing requirements except as
follows:
13
Jon Pepper filed a Form 4 on January 23, 2020 that was required to
be filed on January 3, 2020.
Ichiro Takesako filed a Form 4 on January 23, 2020 that was
required to be filed on January 3, 2020.
William A. Owens filed a Form 4 on January 23, 2020 that was
required to be filed on January 3, 2020.
Phillip A. Bosua filed a Form 4 on January 23, 2020 that was
required to be filed on January 3, 2020.
Ronald P. Erickson filed a Form 4 on January 23, 2020 that was
required to be filed on January 3, 2020.
EXECUTIVE AND DIRECTOR COMPENSATION
The following table provides information concerning remuneration of
the chief executive officer, the chief financial officer and
another named executive officer for the fiscal years ended
September 30, 2020 and 2019:
Summary Compensation Table
The following table provides information concerning remuneration of
the chief executive officer, the chief financial officer and
another named executive officer for the fiscal years ended
September 30, 2020 and 2019:
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All
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Stock
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Option
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Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Total
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Name
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Principal
Position
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($)
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($)
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($)
(3)
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($)
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($)
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($)
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Salary-
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Ronald P. Erickson
(1)
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Chairman of the Board and Interim
Chief Financial Officer
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9/30/20
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$243,333
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$-
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$190,000
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$394,000
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$-
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$827,333
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9/30/19
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$188,750
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$-
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$102,000
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$-
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$-
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$290,750
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||
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Phillip A. Bosua
(2)
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Chief Executive
Officer
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9/30/20
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$288,333
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$-
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$285,000
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$394,000
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$-
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$967,333
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9/30/19
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$233,750
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$-
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$-
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$-
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$-
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$233,750
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(1) Mr. Erickson’s annual compensation from October 1, 2018
to March 4, 2019 was $180,000, from March 5, 2019 to May 1,
2020, the annual compensation was $195,000, and from May 5, 2020 to
September 30, 2020, the annual compensation was $215,000. The
Compensation Committee and the Board
of Particle, Inc. compensated Ronald P. Erickson with an annual
salary of $120,000 from June 1, 2020. The 100,000 shares of
restricted common stock issued on January 2, 2019 to Mr. Erickson
were valued at the grant date market value of $1.02 per
share.
The 100,000
shares of restricted common stock issued on January 1, 2020 to Mr.
Erickson were valued at the grant date market value of $1.90 per
share. The stock grant was authorized at $0.17 per share.
Mr. Erickson received a vested
stock option grant from Particle for 500,000 Particle shares valued
at $0.788 per share or $394,000. On August 15, 2021,
in connection with the conversion of investor SAFE’s in
Particle in exchange for shares of KNWN, Mr. Erickson voluntarily
agreed to cancel all vested and non-vested option grants for
Particle shares previously granted and to forego all rights to the
Particle salary on a go forward basis.
(2) Mr. Bosua’s annual compensation from
October 1, 2018 to March 4, 2019 was
$225,000, the annual compensation was $225,000, from March 5, 2019 to May 1, 2020, the
annual compensation was $240,000, and from May 5, 2020 to September
30, 2020, the annual compensation was $260,000. The Compensation Committee and the Board of Particle,
Inc. compensated Phillip A. Bosua with an annual salary of $120,000
from June 1, 2020. The 150,000 shares of restricted common stock
issued on January 1, 2020 to Mr. Bosua were valued at the grant
date market value of $1.90 per share. Mr. Bosua received a
vested stock option grant from Particle for 500,000 Particle
shares valued at $0.788 per share or $394,000.
On
August 15, 2021, in connection with the conversion of investor
SAFE’s in Particle in exchange for shares of KNWN, Mr. Bosua
voluntarily agreed to cancel all vested and non-vested option
grants for Particle shares previously granted and to forego all
rights to the Particle salary on a go forward
basis.
(3)
These
amounts reflect the grant date market value as required by
Regulation S-K Item 402(n)(2), computed in accordance with FASB ASC
Topic 718.
14
Grants of Stock Based Awards in Fiscal Year Then Ended September
30, 2020
The Compensation Committee approved the following performance-based
incentive compensation to the Named Executive Officers during the
year ended September 30, 2020.
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All
Other
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All
Other
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Option
Awards;
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Estimated Future
Payouts Under
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Estimated Future
Payouts Under
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Stock
Awards;
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Number
of
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Exercise
or
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||||
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Non-Equity
Incentive Plan
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Equity Incentive
Plan
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Number
of
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Securities
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Exercise
or
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Grant
Date
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||||
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Awards
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Awards
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Shares
of
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Underlying
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Base Price
of
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Fair Value
of
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||||
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Grant
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Stock or
Units
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Options
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Option
Awards
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Stock
and
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Name
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Date
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($)
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($)
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($)
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(#)
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(#)
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(#)
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(#)
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(#)
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($/Sh)
(3)
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Option
Awards
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Ronald P. Erickson
(1)
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11/4/19
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$-
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$-
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$-
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-
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-
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-
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-
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1,200,000
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$1.100
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$-
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7/2/20
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$-
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$-
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$-
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-
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-
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-
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-
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1,500,000
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$0.100
|
0.788
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|
Phillip A. Bosua
(2)
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11/4/19
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$-
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$-
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$-
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-
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-
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-
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-
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1,200,000
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$1.100
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$-
|
|
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7/2/20
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$-
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$-
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$-
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-
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-
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-
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-
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1,500,000
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$0.100
|
0.788
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(1)
On November 4, 2019, the Company granted a stock
option grant to Ronald P. Erickson for 1,200,000 shares with an
exercise price of $1.10 per share. The performance grant expires
November 4, 2024 and vests upon uplisting to the NASDAQ or NYSE
exchanges. On July 2, 2020, Particle approved stock option
grants for 1,500,000 shares at $0.10 per share to Ronald P.
Erickson. The stock option grants vest (i) 33.3% upon issuance;
(ii) 33.3% after the first sale; and (iii) 33.4% after one million
in sales are achieved. Mr. Erickson
received a vested stock option grant from Particle for
500,000 Particle shares valued at $0.788 per share or $394,000. The
remaining 1,000,000 Particle options are milestone based and
expense will be recognized when the milestone is met or likely to
be met. On August 15, 2021,
in connection with the conversion of investor SAFE’s in
Particle in exchange for shares of KNWN, Mr. Erickson voluntarily
agreed to cancel all vested and non-vested option grants for
Particle share previously granted and to forego all rights to the
Particle salary on a go forward basis.
(2)
On November 4, 2019, the Company granted a stock
option grant to Philip A. Bosua for 1,200,000 shares with an
exercise price of $1.10 per share. The performance grant expires
November 4, 2024 and vests upon FDA approval of the UBAND blood
glucose monitor. On July 2, 2020, Particle approved stock
option grants for 1,500,000 shares at $0.10 per share to Phillip A.
Bosua. The stock option grants vest (i) 33.3% upon issuance; (ii)
33.3% after the first sale; and (iii) 33.4% after one million in
sales are achieved. Mr. Bosua received
a vested stock option grant from Particle for 500,000
Particle shares valued at $0.788 per share or $394,000. The remaining 1,000,000 Particle
options are milestone based and expense will be recognized when the
milestone is met or likely to be met. On August 15, 2021,
in connection with the conversion of investor SAFE’s in
Particle in exchange for shares of KNWN, Mr. Bosua voluntarily
agreed to cancel all vested and non-vested option grants for
Particle share previously granted and to forego all rights to the
Particle salary on a go forward basis.
(3)
These
amounts reflect the grant date market value as required by
Regulation S-K Item 402(n)(2), computed in accordance with FASB ASC
Topic 718.
15
Outstanding Equity Awards as of Fiscal Year Then Ended September
30, 2020
Our Named Executive Officers have the following outstanding equity
awards as of September 30, 2020.
|
|
Option
Awards
|
|||
|
|
Number
of
|
Number
of
|
|
|
|
|
Securities
|
Securities
|
|
|
|
|
Underlying
|
Underlying
|
|
|
|
|
Unexercised
|
Unexercised
|
Option
|
|
|
|
Options
|
Options
|
Exercise
|
Option
|
|
|
Exercisable
|
Unexerciseable
|
Price
|
Expiration
|
|
Name
|
(#)
|
(#)
|
($)
(3)
|
Date
|
|
|
|
|
|
|
|
Ronald P. Erickson
(1)
|
-
|
1,200,000
|
$1.10
|
11/4/24
|
|
|
500,000
|
1,000,000
|
$0.10
|
7/2/25
|
|
Phillip A. Bosua
(2)
|
-
|
1,200,000
|
$1.10
|
11/4/24
|
|
|
500,000
|
1,000,000
|
$0.10
|
7/2/25
|
(1)
On November 4, 2019, the Company granted a stock
option grant to Ronald P. Erickson for 1,200,000 shares with an
exercise price of $1.10 per share. The performance grant expires
November 4, 2024 and vests upon uplisting to the NASDAQ or NYSE
exchanges. On July 2, 2020, Particle approved stock option
grants for 1,500,000 shares at $0.10 per share to Ronald P.
Erickson. The stock option grants vest (i) 33.3% upon issuance;
(ii) 33.3% after the first sale; and (iii) 33.4% after one million
in sales are achieved. Mr. Erickson
received a vested stock option grant from Particle for
500,000 Particle shares valued at $0.788 per share or $394,000. The
remaining 1,000,000 Particle options are milestone based and
expense will be recognized when the milestone is met or likely to
be met. On August 15, 2021,
in connection with the conversion of investor SAFE’s in
Particle in exchange for shares of KNWN, Mr. Erickson voluntarily
agreed to cancel all vested and non-vested option grants for
Particle share previously granted and to forego all rights to the
Particle salary on a go forward basis.
(2)
On November 4, 2019, the Company granted a stock
option grant to Philip A. Bosua for 1,200,000 shares with an
exercise price of $1.10 per share. The performance grant expires
November 4, 2024 and vests upon FDA approval of the UBAND blood
glucose monitor. On July 2, 2020, Particle approved stock
option grants for 1,500,000 shares at $0.10 per share to Phillip A.
Bosua. The stock option grants vest (i) 33.3% upon issuance; (ii)
33.3% after the first sale; and (iii) 33.4% after one million in
sales are achieved. Mr. Bosua received
a vested stock option grant from Particle for 500,000
Particle shares valued at $0.788 per share or $394,000. The remaining 1,000,000 Particle
options are milestone based and expense will be recognized when the
milestone is met or likely to be met. On August 15, 2021,
in connection with the conversion of investor SAFE’s in
Particle in exchange for shares of KNWN, Mr. Bosua voluntarily
agreed to cancel all vested and non-vested option grants for
Particle share previously granted and to forego all rights to the
Particle salary on a go forward basis.
(3)
These
amounts reflect the grant date market value as required by
Regulation S-K Item 402(n)(2), computed in accordance with FASB ASC
Topic 718.
16
Option Exercises and Stock Vested
Our Named Executive Officers did not have any option exercises
during the year ended September 30, 2020.
Pension Benefits
We do not provide any pension benefits.
Nonqualified Deferred Compensation
We do not have a nonqualified deferral program.
Employment Agreements
We have an employment agreement with each of Ronald P. Erickson and
Phillip A. Bosua, which are summarized in tabular format
below.
Potential Payments upon Termination or Change in
Control
We have the following potential
payments upon termination or change in control with Ronald P.
Erickson:
|
|
|
Early
|
Not For
Good
|
Change
in
|
|
|
Executive
|
For
Cause
|
or
Normal
|
Cause
|
Control
|
Disability
|
|
Payments
Upon
|
Termination
|
Retirement
|
Termination
|
Termination
|
or
Death
|
|
Separation
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
|
Compensation:
|
|
|
|
|
|
|
Base salary
(1)
|
$-
|
$-
|
$215,000
|
$215,000
|
$-
|
|
Performance-based
incentive
|
|
|
|
|
|
|
compensation
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Stock options
(2)
|
$-
|
$-
|
$2,202,000
|
$2,202,000
|
$-
|
|
|
|
|
|
|
|
|
Benefits and
Perquisites:
|
|
|
|
|
|
|
Health and welfare
benefits (3)
|
$-
|
$-
|
$26,388
|
$26,388
|
$-
|
|
Accrued vacation
pay
|
$-
|
$-
|
$72,769
|
$72,769
|
$-
|
|
|
|
|
|
|
|
|
Total
|
$-
|
$-
|
$2,516,157
|
$2,516,157
|
$-
|
(1)
Reflects a salary
for twelve months.
(2)
Reflects
the vesting of stock option grants.
(3)
Reflects
the cost of medical benefits for eighteen months.
17
We have the following potential payments upon termination or change
in control with Phillip A. Bosua:
|
|
|
Early
|
Not For
Good
|
Change
in
|
|
|
Executive
|
For
Cause
|
or
Normal
|
Cause
|
Control
|
Disability
|
|
Payments
Upon
|
Termination
|
Retirement
|
Termination
|
Termination
|
or
Death
|
|
Separation
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
on
9/30/2020
|
|
Compensation:
|
|
|
|
|
|
|
Base salary
(1)
|
$-
|
$-
|
$260,000
|
$260,000
|
$-
|
|
Performance-based
incentive
|
|
|
|
|
|
|
compensation
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
Stock options
(2)
|
$-
|
$-
|
$2,202,000
|
$2,202,000
|
$-
|
|
|
|
|
|
|
|
|
Benefits and
Perquisites:
|
|
|
|
|
|
|
Health and welfare
benefits (3)
|
$-
|
$-
|
$22,572
|
$22,572
|
$-
|
|
Accrued vacation
pay
|
$-
|
$-
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
Total
|
$-
|
$-
|
$2,484,572
|
$2,484,572
|
$-
|
(1)
Reflects a salary
for twelve months.
(2)
Reflects
the vesting of stock option grants.
(3)
Reflects
the cost of medical benefits for eighteen months.
We do
not have any potential payments upon
termination or change in control with our other Named Executive
Officers.
18
DIRECTOR COMPENSATION
We primarily use stock options grants to incentive compensation to
attract and retain qualified candidates to serve on the Board. This
compensation reflected the financial condition of the Company. In
setting director compensation, we consider the significant amount
of time that Directors expend in fulfilling their duties to the
Company as well as the skill-level required by our members of the
Board. During the year ended September 30, 2020, Ronald P. Erickson
and Phillip A. Bosua did not receive any compensation for his
service as a director. The compensation disclosed in the
Summary Compensation Table on page [●] represents the total
compensation for Mr. Erickson and Mr. Bosua.
Compensation Paid to Board Members
Our independent non-employee directors are not compensated in
cash. The only compensation generally has been in the
form of stock awards. There is no formal stock compensation plan
for independent non-employee directors. Our non-employee directors
received the following compensation during the year ended September
30, 2020.
|
|
Stock
|
Option
|
Other
|
|
|
Name
|
Awards
|
Awards
(4)
|
Compensation
|
Total
|
|
Jon Pepper
(1)
|
$76,000
|
$52,815
|
$-
|
$128,815
|
|
Ichiro Takesako
(2)
|
76,000
|
52,815
|
-
|
128,815
|
|
William A. Owens
(3)
|
76,000
|
-
|
-
|
76,000
|
|
|
|
|
|
|
|
Total
|
$228,000
|
$105,630
|
$-
|
$333,630
|
(1)
The
stock award for 40,000 shares was issued on January 1, 2020 to Jon
Pepper and was valued at $1.90 per share. The stock option grant
for 52,500 shares of common stock was issued on November 4, 2019 to
Mr. Pepper and was valued at the black scholes value of $1.006 per
share.
(2)
The
stock award for 40,000 shares was issued on January 1, 2020 to
Ichiro Takesako and was valued at $1.90 per share. The stock option
grant for 52,500 shares of common stock was issued on November 4,
2019 to Mr. Takesako and was valued at the black scholes value of
$1.006 per share.
(3)
The
stock award for 40,000 shares was issued to William A. Owens on
January 1, 2020 and was valued at $1.90 per share.
(4)
These
amounts reflect the grant date market value as required by
Regulation S-K Item 402(n)(2), computed in accordance with FASB ASC
Topic 718.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since
October 1, 2018, we have engaged in the following reportable
transactions with our directors, executive officers, holders of
more than 5% of our voting securities and affiliates, or
immediately family members of our directors, executive officers and
holders of more than 5% of our voting securities.
Other than the following transactions, none of the directors or
executive officers of the Company, nor any person who owned of
record or was known to own beneficially more than 5% of the
Company’s outstanding shares of its Common Stock, nor any
associate or affiliate of such persons or companies, has any
material interest, direct or indirect, in any transaction that has
occurred during the past fiscal year, or in any proposed
transaction, which has materially affected or will affect the
Company.
With regard to any future related party transaction, we plan to
fully disclose any and all related party transactions in the
following manner:
|
|
●
|
Disclosing
such transactions in reports where required;
|
|
|
●
|
Disclosing
in any and all filings with the SEC, where required;
|
|
|
●
|
Obtaining
disinterested director’s consent; and
|
|
|
●
|
Obtaining
shareholder consent where required.
|
19
Policies and Procedures for Related Person
Transactions
We have
operated under a Code of Conduct and Ethics since December 28,
2012. Our Code of Conduct and Ethics requires all employees,
officers and directors, without exception, to avoid the engagement
in activities or relationships that conflict, or would be perceived
to conflict, with our interests.
Prior
to the adoption of our related person transaction policy, there was
a legitimate business reason for all the related person
transactions described above and we believe that, where applicable,
the terms of the transactions are no less favorable to us than
could be obtained from an unrelated person.
Our
Audit Committee reviews all relationships and transactions in which
we and our directors and executive officers or their immediate
family members are participants to determine whether such persons
have a direct or indirect material interest.
As
required under SEC rules, transactions that are determined to be
directly or indirectly material to us or a related person are
disclosed.
Transactions with Clayton Struve
Convertible Promissory Notes with Clayton A. Struve
The Company owes Clayton A. Struve $1,071,000 under
convertible promissory or OID notes. The Company recorded accrued
interest of $77,171and $71,562 as of June 30, 2021 and
September 30, 2020, respectively. On December 23, 2020, the Company
signed Amendments to the convertible promissory or OID notes,
extending the due dates to March 31, 2021. On April 29, 2021, the
Company signed Amendments to the convertible promissory or OID
notes, extending the due dates to September 30,
2021.
Mr. Struve also invested $1,000,000 in the May 2019
Convertible Debt Offering and such note was converted to common
stock in May 2020.
Series C and D Preferred Stock and Warrants
On August 5, 2016, the Company closed a Series C Preferred Stock
and Warrant Purchase Agreement with Clayton A. Struve, an
accredited investor for the purchase of $1,250,000 of preferred
stock with a conversion price of $0.70 per share. The preferred
stock has a yield of 8% and an ownership blocker of 4.99%. In
addition, Mr. Struve received a five-year warrant to acquire
1,785,714 shares of common stock at $0.70 per share. On August 14,
2017, the price of the Series C Stock were adjusted to $0.25 per
share pursuant to the documents governing such instruments. On June
30, 2021 and September 30, 2020 there are 1,785,715 Series C
Preferred shares outstanding. On January 5, 2021, the Company
extended the warrant expiration date to August 4,
2023.
As of June 30, 2021 and September 30, 2020, the Company has
$750,000 of Series D Preferred Stock outstanding with Clayton A.
Struve, an accredited investor. On August 14, 2017, the price of
the Series D Stock were adjusted to $0.25 per share pursuant to the
documents governing such instruments. The Series D Preferred Stock
is convertible into shares of common stock at a price of $0.25 per
share or by multiplying the number of Series D Preferred Stock
shares by the stated value and dividing by the conversion price
then in effect, subject to certain diluted events, and has the
right to vote the number of shares of common stock the Series D
Preferred Stock would be issuable on conversion, subject to a 4.99%
blocker. The Preferred Series D has an annual yield of 8% The
Series D Preferred Stock is convertible into shares of common stock
at a price of $0.25 per share or by multiplying the number of
Series D Preferred Stock shares by the stated value and dividing by
the conversion price then in effect, subject to certain diluted
events, and has the right to vote the number of shares of common
stock the Series D Preferred Stock would be issuable on conversion,
subject to a 4.99% blocker. The Preferred Series D has an annual
yield of 8% if and when dividends are declared.
20
Amendments to Warrants
On January 5, 2021, the Company extended the warrant expiration
date to August 4, 2023 with Clayton A. Struve, a major investor in
the Company:
|
Warrant
No./Class
|
Issue
Date
|
No. Warrant
Shares
|
Exercise
Price
|
Original
Expiration Date
|
Amended
Expiration Date
|
|
Clayton
Struve Warrant
Series
C Warrant W98
|
08-04-2016
|
1,785,715
|
$0.25
|
08-04-2021
|
08-04-2023
|
|
Clayton
Struve Warrant
Series
F Warrant F-1
|
11-14-2016
|
187,500
|
$0.25
|
11-13-2021
|
11-13-2023
|
|
Clayton
Struve Warrant
Series
F Warrant F-2
|
12-19-2016
|
187,500
|
$0.25
|
12-18-2021
|
12-18-2023
|
On January 28, 2021, Clayton A. Struve exercised warrants on a
cashless basis for 889,880 shares of common stock at
$0.25 per share, including warrants for 187,500 and 187,500
that were just extended as discussed above.
The Company owes Clayton A. Struve $1,071,000 under
convertible promissory or OID notes. On April 29, 2021, the Company
signed Amendments to the convertible promissory or OID notes,
extending the due dates to September 30, 2021.
Related Party Transactions with Ronald P. Erickson
On March 16, 2018, the Company entered into a Note and Account
Payable Conversion Agreement pursuant to which (a) all
$664,233 currently owing
under the J3E2A2Z Notes was converted to a Convertible Redeemable
Promissory Note in the principal amount of $664,233, and (b) all
$519,833 of the J3E2A2Z
Account Payable was converted into a Convertible Redeemable
Promissory Note in the principal amount of $519,833together with a warrant
to purchase up to 1,039,666 shares of common
stock of the Company for a period of five years. The initial
exercise price of the warrants described above is
$0.50 per share, also
subject to certain adjustments. The warrants were valued at
$110,545. Because the note is
immediately convertible, the warrants and beneficial conversion
were expensed as interest. The Company recorded accrued interest of
$198,359 and
$145,202 as of June 30,
2021 and September 30, 2020, respectively. On December 8, 2020, the
Company signed Amendment 4 to the convertible promissory or OID
notes, extending the due dates to March 31, 2021. On April
29, 2021, the Company signed Amendment 5 to the convertible
promissory or OID notes, extending the due dates to September 30,
2021.
On January 2, 2019, Mr. Erickson was issued 100,000 shares of
restricted common stock at the grant date market value of $1.02 per
share.
On October 4, 2019, Ronald P. Erickson voluntarily cancelled a
stock option grant for 1,000,000 shares with an exercise price of
$3.03 per share. The grant was related to performance and was not
vested.
On November 4, 2019, we granted a stock option grant to Ronald P.
Erickson for 1,200,000 shares with an exercise price of $1.10 per
share. The performance grant expires November 4, 2024 and vests
upon uplisting to the NASDAQ or NYSE exchanges.
On January 1, 2020, we issued 100,000 shares of restricted common
stock to Ronald P. Erickson. The shares were issued in accordance
with the 2011 Stock Incentive Plan and were valued at $1.90 per
share, the market price of our common stock, or
$190,000.
On June 1, 2020, Mr. Erickson received a salary of $10,000 per
month for work on Particle, Inc.
Mr. Erickson and/or entities with which he is affiliated also have
accounts payable and accrued liabilities $451,525 and
$597,177 of as of June 30, 2021 and September 30, 2020,
respectively, related to accrued compensation, accrued interest and
expenses.
21
On December 15, 2020, the Company issued a fully vested warrant to
Ronald P. Erickson for 2,000,000 shares of common stock.
The five year warrant is exercisable for cash or non-cash at
$1.53 per share and was valued using a Black-Scholes model at
$1,811,691.
On December 15, 2020, the Company issued two stock option grants to
Ronald P. Erickson, one for 1,865,675 shares and one
for 1,865,675 shares at an exercise price of
$1.53 per share. The stock option grants expire in five years.
The stock option grants vest when earned based on certain
performance criteria.
On February 9, 2021, Particle approved a stock option grant to Mr.
Erickson totaling 500,000 shares at an average of
$0.80 per share. The stock option grant vests (i) 33.3% with
the first shipment; (ii) 33.3% with $50 million in sales are
achieved; and (iii) 33.4% after $200 million in sales are
achieved.
On April 29, 2021, the Company signed Amendment 5 to the
convertible promissory or OID notes with J3E2A2Z, extending the due
dates to September 30, 2021.
Related Party Transaction with Phillip A. Bosua
On October 4, 2019, Philip A. Bosua voluntarily cancelled a stock
option grant for 1,000,000 shares with an exercise price of $3.03
per share. The grants was related to performance and was not
vested.
On November 4, 2019, we granted a stock option grant to Philip A.
Bosua for 1,200,000 shares with an exercise price of $1.10 per
share. The performance grant expires November 4, 2024 and vests
upon FDA approval of the UBAND blood glucose monitor.
On January 1, 2020, we issued 150,000 shares of restricted common
stock to Phillip A. Bosua. The
shares were issued in accordance with the 2011 Stock Incentive Plan
and were valued at $1.90 per share, the market price of our common
stock, or $285,000.
On June 1, 2020, Mr. Bosua received a salary of $10,000 per month
for work on Particle, Inc.
On July
2, 2020, Particle issued a stock option grant for 1,500,000 shares
at $0.10 per share to Philip A.
Bosua. The stock option grant vests (i) 33.3% upon issuance;
(ii) 33.3% after the first sale; and (iii) 33.4% after one million
in sales are achieved.
On December 15, 2020, the Company issued two stock option grant to
Phillip A. Bosua, one for 2,132,195 shares and one
for 2,132,200 shares at an exercise price of
$1.53 per share. The stock option grants expire in five years.
The stock option grants vest when earned based on certain
performance criteria.
On February 9, 2021, Particle approved a stock option grant to Mr.
Bosua totaling 500,000 shares at an average of
$0.80 per share. The stock option grant vests (i) 33.3% with
the first shipment; (ii) 33.3% with $50 million in sales are
achieved; and (iii) 33.4% after $200 million in sales are
achieved.
On March 18, 2021, the Company approved a $250,000 bonus for
Mr. Bosua. The bonus was recorded in accrued liabilities –
related party as of June 30, 2021 and was paid during April
2021.
Related Party Transactions with Directors
On
January 15, 2021, the Company issued 30,000 shares each to three
directors shares at an exercise price of $2.00 per
share.
On
January 15, 2021, the Company issued 20,000 warrants to purchase
common stock each to three directors shares at $2.00 per share. The
warrants expire on January 15, 2026.
22
Indemnification
Our
articles of incorporation provide that we will indemnify our
directors and officers to the fullest extent permitted by Nevada
law. In addition, we have an Indemnification Agreements with the
current Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information regarding the
ownership of our common stock as of August 17, 2021
by:
|
|
●
|
each director and nominee for director;
|
|
|
|
|
|
|
●
|
each person known by us to own beneficially 5% or more of our
common stock;
|
|
|
|
|
|
|
●
|
each executive officer named in the summary compensation table
elsewhere in this report;
and
|
|
|
|
|
|
|
●
|
all of our current directors and executive officers as a
group.
|
The amounts and percentages of common stock beneficially owned are
reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities. Under the
rules of the SEC, a person is deemed to be a “beneficial
owner” of a security if that person has or shares voting
power,” which includes the power to vote or to direct the
voting of such security, or has or shares “investment
power,” which includes the power to dispose of or to direct
the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days. Under these
rules more than one person may be deemed a beneficial owner of the
same securities and a person may be deemed to be a beneficial owner
of securities as to which such person has no economic
interest.
Unless otherwise indicated below, each beneficial owner named in
the table has sole voting and sole investment power with respect to
all shares beneficially owned, subject to community property laws
where applicable. The address for each person shown in the table is
c/o Know Labs, Inc. 500 Union Street, Suite 810, Seattle
Washington, unless otherwise indicated.
|
|
Shares
Beneficially Owned
|
|
|
|
Amount
|
Percentage
|
|
Directors and
Officers-
|
|
|
|
Ronald P. Erickson
(1)
|
10,089,015
|
23.2%
|
|
Phillip A. Bosua
(2)
|
3,755,000
|
10.5%
|
|
Jon Pepper
(3)
|
455,500
|
1.3%
|
|
Ichiro Takesako
(4)
|
242,500
|
0.7%
|
|
William A. Owens
(5)
|
833,750
|
2.4%
|
|
Total Directors and
Officers (5 in total)
|
15,375,765
|
44.0%
|
* Less than 1%.
(1) Reflects 1,458,085 shares of shares of common stock
beneficially owned by Ronald P. Erickson or entities controlled by
Mr. Erickson and warrants to purchase 3,894,666 shares of our
common stock that are exercisable within 60 days, and also includes
4,736,264 shares of our common stock related to convertible debt
that are exercisable within 60 days. The address of Mr. Erickson is
500 Union Street, Suite 810, Seattle, WA 98101.
(2) Reflects 3,005,000 shares of shares of common stock
beneficially owned by Phillip A. Bosua and vested stock option
grants to purchase 750,000 shares of our common stock that are
exercisable within 60 days.
(3) Reflects 358,000 shares of shares of common stock beneficially
owned by Jon Pepper, vested stock option grants to purchase 52,500
shares of our common stock that are exercisable within 60 days, and
warrants to purchase 45,000 shares of our common stock that are
exercisable within 60 days.
(4) Reflects 170,000 shares of shares of common stock beneficially
owned Ichiro Takesako, vested stock option grants to purchase
52,500 shares of our common stock that are exercisable within 60
days, and warrants to purchase 20,000 shares of our common stock
that are exercisable within 60 days.
(5) Reflects 582,500 shares of shares of common stock beneficially
owned by William A. Owens and warrants to purchase 251,250 shares
of our common stock that are exercisable within 60
days.
23
|
|
Shares
Beneficially Owned
|
|
|
|
Actual
|
Percent
|
|
|
|
|
|
Clayton
Struve(1)
|
19,511,071
|
36.4%
|
|
Dale
Broderick(2)
|
1,825,508
|
5.1%
|
|
|
21,336,579
|
|
(1) Reflects 849,000 shares
beneficially owned by Clayton A. Struve. This total also includes
6,269,715 warrants to purchase shares of our common stock,
8,108,356 shares related to the conversion of preferred stock into
our common stock and 4,284,000 shares related to the conversion of
debt into our common stock. The 6,785,719 of warrants and all of
the preferred stock and convertible debt are currently priced at
$0.25 per share, subject to adjustment. Mr. Struve is
subject to a 4.99% blocker. The
address of Mr. Struve is 175 West Jackson Blvd., Suite 440,
Chicago, IL 60604.
(2) Reflects the shares beneficially owned by Dale Broadrick.
This total includes 1,239,286 shares and a total of 436,222
warrants to purchase shares of our common stock that are
exercisable within 60 days, and 150,000 shares related to the
conversion of debt into our common stock. The address of Dale
Broadrick is 3003 Brick Church Pike, Nashville,
Tennessee.
24
PROPOSAL 1
Election of Directors
Composition of the Board
Currently, the Board consists of five directors. If
elected, each of the director nominees will serve on the Board
until the 2022 Annual Meeting of Stockholders, or until their
successors are duly elected and qualified in accordance with the
Company’s Bylaws. If any of the five (5) nominees should
become unable to serve upon his election, the persons named on the
proxy card as proxies may vote for other person(s) nominated by the
Board. Management has no reason to believe that any of the five
nominees for election named below will be unable to
serve.
The Company’s Bylaws provide that the size of the Board may
be between three and nine directors, and that the Board may appoint
a director to fill a vacancy created by an increase in the size of
the Board.
Nominations and Governance Committee
Our
Board of Directors established the nominations and governance
committee in July 2010 for the purpose of: (1) assisting the
board in identifying individuals qualified to become board members
and recommending to the board the nominees for election as
directors at the next annual meeting of stockholders;
(2) assist the board in determining the size and composition
of the board committees; (3) develop and recommend to the
board the corporate governance principles applicable to us; and
(4) serve in an advisory capacity to the board and the
Chairman of the Board on matters of organization, management
succession planning, major changes in our organizational and the
conduct of board activities.
The
Nominating Committee identifies nominees by first evaluating the
current members of the Board willing to continue in service.
Current members of the Board with skills and experience that are
relevant to our business and who are willing to continue in service
are considered for re-nomination, but the Nominating Committee at
all times seeks to balance the value of continuity of service by
existing members of the Board with that of obtaining a new
perspective. If any member of the Board does not wish to continue
in service, the Nominating Committee’s policy is to not
re-nominate that member for reelection. The Nominating Committee
identifies the desired skills and experience of a new nominee, and
then uses its network and external resources to solicit and compile
a list of eligible candidates.
We
do not have a formal policy concerning stockholder recommendations
of nominees for director to the Nominating Committee as, to-date,
we have not received any recommendations from stockholders
requesting the Nominating Committee to consider a candidate for
inclusion among the Nominating Committee’s slate of nominees
in our proxy statement. The absence of such a policy does not mean,
however, that such recommendations will not be considered.
Stockholders wishing to recommend a candidate may do so by sending
a written notice to the Nominating Committee, Attn: Chairman, 500
Union Street, Suite 810, Seattle, WA 98101, naming the proposed
candidate and providing detailed biographical and contact
information for such proposed candidate.
There are no arrangements or understandings
between any of our directors, nominees for directors or officers,
and any other person pursuant to which any director, nominee for
director, or officer was or is to be selected as a director,
nominee or officer, as applicable. There currently are no legal
proceedings, and during the past ten years there have been no legal
proceedings, that are material to the evaluation of the ability or
integrity of any of our directors or director nominees. There are
no material proceedings to which any director, officer, affiliate,
or owner of record or beneficially of more than 5% of any class of
voting securities of the Company, or any associates of any such
persons, is a party adverse to the Company or any of our
subsidiaries, and none of such persons has a material interest
adverse to the Company or any of its subsidiaries. Other than as
disclosed below, during the last five years, none of our directors
held any other directorships in any company with a class of
securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”), or subject to
the requirements of Section 15(d) of the Exchange Act or any
company registered as an investment company under the Investment
Company Act of 1940.
25
The
Nominating Committee has recommended, and the Board has nominated,
Ronald P. Erickson, Phillip A. Bosua, Jon Pepper, Ichiro Takesako,
and William A. Owens as nominees for election as members of our
Board at the 2021 Annual Meeting for a period of one year or until
such director’s successor is elected and qualified or until
such director’s earlier death, resignation, or removal. Each
of the nominees is currently a director of the Company. At the 2021
Annual Meeting, five directors will be elected to the
Board.
The nominees for Director are:
|
Name
|
Age
|
|
Directors-
|
|
|
Ronald
P. Erickson
|
77
|
|
Phillip
A. Bosua
|
47
|
|
Jon
Pepper
|
69
|
|
Ichiro
Takesako
|
62
|
|
William
A. Owens
|
81
|
The sections titled “Directors and Executive Officers”
beginning on page [●] of
this proxy statement contain information about the experience and
qualifications that caused the Nominations and Governance Committee
and the Board to determine that these nominees should serve as
directors of the Company.
We believe that each director nominee possesses
attributes that qualify him to serve as a member of our Board, as
set forth in their biographies. Each
has extensive experience in the technology industry, including but
not limited to developing technology companies, strategic
partnership relationships, and marketing and general business
skills in the technology industry.
If, for any reason, any Director Nominee becomes unavailable for
election, the proxies will be voted for such substitute nominee(s)
as the Board may propose.
Vote Required
In the
election of directors, the vote of the holders of a majority of the
stock having voting power present in person or represented by proxy
at the Annual Meeting shall be sufficient to elect each Director
Nominee.
|
Your Board Recommends That Stockholders Vote
FOR
All Five Nominees Listed Above
|
26
PROPOSAL 2
Approval of an Amendment to the Company’s Articles of
Incorporation to increase the authorized Common
Stock from 100,000,000 to 200,000,000
The
Company has authorized 105,000,000 shares of capital stock, of
which 100,000,000 are shares of voting common stock, par value
$0.001 per share, and 5,000,000 are shares of preferred stock, par
value $0.001 per share. The following is a summary of the
proposal.
Description of the Amendment
Recently,
our Board of Directors approved an amendment to Article 4 of our
Articles of Incorporation, subject to stockholder approval, to
increase the number of shares of common stock authorized for
issuance under the Articles of Incorporation from 100,000,000 to
200,000,000 shares. The proposed amendment is as
follows:
Resolutions
Amending Articles of Incorporation
“RESOLVED, that the Corporation is hereby authorized to amend
Article IV of the Corporation’s Articles of Incorporation by
deleting such Article IV in full and replacing it with the
following:
“Article IV – Shares.
Section 4.1 Authorized Shares. The Corporation is
authorized to issue two classes of stock to be designated,
respectively, “Common Stock” and “Preferred
Stock.” The total number of shares of capital
stock that the Corporation is authorized to issue is Two Hundred
Million (200,000,000) shares of Common Stock, par value $0.001 per
share, and Five Million (5,000,000) shares of Preferred Stock, par
value $0.001 per share. The Common Stock is subject to
the rights and preferences of the Preferred Stock as set forth
below.”
FURTHER RESOLVED, that the appropriate executive officers of the
Corporation are hereby authorized and directed to (i) execute
Articles of Amendment attesting to the adoption of the foregoing
resolution adopting the amendment, (ii) cause such Articles of
Amendment to be filed in the office of the Secretary of State for
the State of Nevada, and (iii) pay any fees and take any other
action necessary to effect the Articles of Amendment and the
foregoing resolution.”
The
Company shall have the right to make any additional changes to the
proposed amendment as required by the Nevada Secretary of State to
complete the purpose of such filing.
If
the Amendment to the Articles of Incorporation is approved by a
majority of the voting capital stock, it will become effective upon
its filing with the Nevada Secretary of State of the State. The
Company expects to file the Amendment to the Articles of
Incorporation with the Nevada Secretary of State promptly after its
approval by stockholders.
Purpose of the Amendment
Since
inception, we have incurred losses. To fund operations, we may need
to rely on additional financings from the sale of our securities.
In addition, we have rewarded employees, directors and consultants
with stock option grants. We intend in the future to continue this
process.
As of [●],
2021, we have [●]
shares of Common Stock issued and
outstanding. In addition, as of June 30, 2021, we have options
outstanding for the purchase of 14,650,120 common shares
(including unearned stock option grants
totaling 11,775,745 shares related to performance
targets), warrants for the purchase of 23,169,587 common
shares, and 8,108,356 shares of the Company’s
common stock issuable upon the conversion of Series C and Series D
Convertible Preferred Stock. In addition, the Company currently
has 16,124,764 common shares (9,020,264 common shares at
the current price of $0.25 per share
and 7,104,500 common shares at the current price of
$2.00 per share) reserved and are issuable upon conversion of
convertible debentures of $16,464,066.
27
The
Company has no current plan, commitment, arrangement, understanding
or agreement regarding the issuance of the additional shares of
Common Stock that will result from the Company’s adoption of
the proposed amendment. In addition to the outstanding and reserved
shares described above, we may issue additional shares of Common
Stock and/or securities convertible or exercisable into Common
Stock, which are necessary to finance our continuing operations. If
the Board of Directors elects to issue additional shares of Common
Stock, such issuance could have a dilutive effect on the earnings
per share, voting power and holdings of current stockholders. Our
current amount of authorized and unissued shares of Common Stock is
not sufficient for both (i) our current and future financing needs
and (ii) our commitments under outstanding options, warrants and
convertible notes. Thus, we need to increase the shares of Common
Stock authorized by our articles of incorporation.
Other Potential Effects of the Amendment
Upon
filing the Amendment to our Articles of Incorporation, the Board
may cause the issuance of additional shares of common stock without
further vote of our stockholders, except as provided under
applicable Nevada law or any national securities exchange on which
shares of our common stock are then listed or traded. In addition,
if the Board of Directors elects to issue additional shares of
common stock, such issuance could have a dilutive effect on the
earnings per share, voting power and holdings of current
stockholders.
Required Vote
The
affirmative (“FOR”) vote of the holders of a majority
of the outstanding shares of the Company is required to approve
this proposal.
Abstentions
and broker non-votes are not counted in determining the number of
shares voted for or against this proposal. However, abstentions and
broker non-votes will be counted as entitled to vote and will,
therefore, have the same effect as a vote “against”
this proposal.
|
Your Board Recommends That Stockholders Vote
FOR
To amend the Company’s Articles of Incorporation to increase
the authorized Common Stock
shares from 100,000,000 to 200,000,000
|
28
PROPOSAL 3
APPROVAL OF AMENDED AND RESTATED BYLAWS
Overview
At the 2021 Annual Meeting, holders of our capital
stock will be asked to authorize and approve that the
Company’s current Bylaws, as amended to date (the
“Current
Bylaws”), be amended,
restated, and replaced in their entirety by the Second Amended and
Restated Bylaws in the form attached hereto
as Appendix
A (the
“Amended and
Restated Bylaws”).
Background
The
Company first adopted its Bylaws in 1998, after which they were
amended on in August 2012 to modify the number of directors that
may be appointed to our Board and general updates to reflect more
recent Nevada General Corporation Law. We have not implemented any
changes to our Bylaws since August 2012, as ratified at the 2013
Annual Meeting of Stockholders.
On
August 12, 2021, the Board unanimously approved the Second Amended
and Restated Bylaws, subject to approval by the our stockholders,
and directed that the proposal to authorize and approve the Second
Amended and Restated Bylaws be submitted to our stockholders for
their approval at the 2021 Annual Meeting.
Reasons to Approve the Second Amended and Restated
Bylaws
We believe that the Amended and Restated Bylaws
improve the corporate governance of the Company by providing bylaws
more appropriate for a publicly reporting company, and will assist
the Company in attracting and retaining officers and directors who
will contribute to the Company’s ability to provide
stockholders with increased value. Below is a brief summary of the
material ways in which the Amended and Restated Bylaws, if approved
by our stockholders, will modify our Current Bylaws. This summary
is qualified in its entirety by reference to the full text of the
Second Amended and Restated Bylaws, which you are urged to review
carefully and are attached as Appendix
A hereto.
|
Location of Change in Amended and Restated Bylaws
|
|
Summary
of Provision:
|
|
Rationale
Supporting Change:
|
|
Section
2.8 of Article 2
|
|
Provides
that stockholders holding at least one-third (33 1/3%) of the
voting power of the Company’s outstanding and entitled to
vote thereat, present in person or represented by proxy, shall be
required and shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If such quorum shall
not be present or represented at any meeting of the stockholders,
the presiding officer of the meeting or the stockholders entitled
to vote thereat, present in person or represented by proxy, shall
have the power to adjourn the meeting from time to time by the
affirmative vote of a majority in voting power thereof, until a
quorum shall be present or represented.
|
|
The
Current Bylaws state that the holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall be required and shall
constitute a quorum. The proposed change is meant to provide a
lower minimum threshold of votes present or represented by proxy
for business to be transacted at a meeting of stockholders while
still providing an appropriate level of investor
participation. Further, the amendment allows a meeting to be
adjourned by affirmative vote of a majority in voting power
thereof in the event a
quorum is not present and represented and if a quorum is present
for good reason, by affirmative vote of a majority in voting
power. The amendment is
permissible under Chapter 78 of the Nevada Revised Statutes
(“NRS”).
|
29
|
|
|
|
|
|
|
Section
2.9 of Article 2
|
|
Provides
that in all matters other than the election of Directors, the
affirmative vote of the holders of a majority of the voting power
of the shares of capital stock present in person or represented by
proxy and entitled to vote on the matter shall decide any question
brought before a meeting unless the question is one upon which by
express provision of the Articles of Incorporation or of these
Bylaws, or by law, a different vote is required in which case such
express provision shall govern and control the decision of such
question. Directors shall be elected, by ballot, by a
plurality of the votes of the voting power of the shares of capital
stock present in person or represented by proxy and entitled to
vote at the election of directors; provided, however, that a stockholder
shall not be permitted to cumulate his/her votes with respect to
the election of Directors.
|
|
The
Current Bylaws provide that for matters other than the election of
directors shall be by affirmative vote of the holders of a majority
of the stock present in person or represented by proxy, and for
election of directors by a plurality of the votes of the shares
present in person or represented by proxy. The proposed change is
meant to provide clarity to address situations where holders of
different classes of our capital stock may have different voting
rights.
|
|
Section
2.10 of Article 2
|
|
Provides
that unless otherwise required by law or provided in the Articles
of Incorporation, each stockholder shall have one vote for each
share of capital stock having voting power, registered in such
stockholder’s name on the books of the
Corporation.
|
|
The
Current Bylaws are silent as to an exception to voting power which
may otherwise be different, as required by law or provided for in
the Articles of Incorporation. The proposed change is meant to
provide clarity with respect to applicable votes per
share.
|
|
Section
3.7 of Article 3
|
|
Provides
that the entire Board or an individual director may be removed from
the Company’s Board may be removed from office, with or
without cause, prior to the expiration of their or his/her term of
office by the holders of not less than two-thirds (66 2/3 %) of the
voting power of the shares of capital stock then entitled to vote
at an election of Directors.
|
|
The
Current Bylaws already provide for the two-thirds vote of the
shares then entitled to vote at an election of directors for the
removal of directors. The proposed change is meant to provide
clarity that the vote required for the removal of directors is
based upon voting power of the shares of capital stock, not the
number of shares.
|
In addition to the amendments described above, the
Second Amended and Restated Bylaws reflect updates related
to the name of the Company to reflect its current name, Know Labs,
Inc.
Effective Time of the Second Amended and Restated
Bylaws
If
the Second Amended and Restated Bylaws are approved by stockholders
at the 2021 Annual Meeting, they will be effective upon such
approval.
Vote Required and Recommendation of the Board
The
affirmative (“FOR”) vote of the holders of a majority
of the outstanding shares of the Company is required to approve
this proposal.
Abstentions
and broker non-votes are not counted in determining the number of
shares voted for or against this proposal. However, abstentions and
broker non-votes will be counted as entitled to vote and will,
therefore, have the same effect as a vote “against”
this proposal.
|
Your Board Recommends That Stockholders Vote
FOR
To adopt the Second Amended and Restated Bylaws
|
30
PROPOSAL 4
Approval of the 2021 Equity Incentive Plan
General Information
Stockholders are being asked to approve the new
Know Labs, Inc. 2021 Equity Incentive Plan (the
“2021
Equity Incentive Plan” or the “Plan”). The board of directors approved the 2021
Equity Incentive Plan on August 12, 2021, and if approved by the
stockholders will become effective on October 15,
2021.
The
2021 Equity Incentive Plan will serve as a replacement for the 2011
Plan, which has 14,650,120 common (including unearned stock option
grants totaling 11,775,745 share related to performance targets)
outstanding as of today. The approval of the 2021 Equity
Incentive Plan will have no effect on the 2011 Plan or any options
granted pursuant to the 2011 Plan. No shares will be available for
award under the 2011 Plan once the 2021 Equity Incentive Plan
becomes effective.
The maximum aggregate number of Shares that may be
issued under the Equity Incentive Plan is twenty
million (20,000,000), plus
(i) the number of Shares added to the Plan pursuant to an
annual automatic share reserve increase as set forth in Section 4.2
of the Plan and (ii) the sum of (A) any Shares that, as
of the date of stockholder approval of this Plan, have been
reserved but not issued pursuant to any awards granted under the
Company’s 2011 Stock Incentive Plan, as amended (the
“2011 Plan”), and (B) any Shares subject to stock
options or similar awards granted under the 2011 Plan that, after
the date of stockholder approval of this Plan, expire or otherwise
terminate without having been exercised in full and Shares issued
pursuant to awards granted under the 2011 Plan that are forfeited
to or repurchased by the Company, with the maximum number of Shares
to be added to the Plan pursuant to clause (ii) equal to
14,650,120.
The
adoption of the 2021 Equity Incentive Plan will allow the Company
to continue to provide a comprehensive equity incentive program for
the Company’s officers, employees and non-employee board
members to encourage these individuals to remain in the
Company’s service and to more closely align their interests
with those of the stockholders. The Company relies significantly on
equity incentives in the form of equity grants in order to attract
and retain key employees, and it believes that equity incentives
are necessary for it to remain competitive in the marketplace for
executive talent and other key employees. Option grants made to
newly-hired or continuing employees will be based on both
competitive market conditions and individual
performance.
PLAN SUMMARY
The
following is a summary of the principal features of the 2021 Equity
Incentive Plan. The summary, however, is not a complete description
of all the provisions of the 2021 Equity Incentive Plan. The full
text of the proposed 2021 Equity Incentive Plan is attached to
this proxy statement as Appendix B. Any stockholder who wishes to
obtain a copy of the actual plan document may do so upon written
request to the Company’s Corporate Secretary, c/o Know Labs,
Inc., 500 Union Street Ste 810, Seattle, Washington
98101.
Purpose
The purpose of the 2021 Equity Incentive Plan is
to promote the long-term success of the Company and the creation of
Stockholder value by allowing the Company to attract, retain
and motivate employees, officers, directors, consultants, agents,
advisors and independent contractors of the Company and its related
companies by providing them the opportunity to acquire a
proprietary interest in the Company and to align their interests
and efforts to the long-term interests of the Company’s
stockholders.
31
Description of the Plan
The Plan permits the grant of Stock Options, Stock
Awards, Restricted Stock and Restricted Stock Units
(“RSUs”),
Stock Appreciation Rights (“SAR”), and Other Stock-Based Awards and Cash-based Awards
(each, an “Award”).
The following summary of the material features of the Plan is
entirely qualified by reference to the full text of the 2021 Equity
Incentive Plan, a copy of which is attached hereto as Appendix B.
Unless otherwise specified, capitalized terms used in this summary
have the meanings assigned to them in the Plan.
Eligibility
All Employees, Officers, Non-Employee Directors,
agents, advisors, consultants and independent contractors of the
Company and its related companies (“Eligible
Persons”) are eligible to
receive grants of Awards under the Plan. As of June 30, 2021 the
number of employees eligible to participate in the Plan was 9, the
number of consultants and independent contractors eligible to
participate in the Plan was 10, and the number of non-employee
directors eligible to participate in the Plan was 3.
Administration
The
Plan shall be administered by the Board. Notwithstanding the
foregoing, the Board may delegate concurrent responsibility for
administering the Plan, including with respect to designated
classes of Eligible Persons, to a committee or committees (which
term includes subcommittees) consisting of two or more members of
the Board, subject to such limitations as the Board deems
appropriate. Members of any committee shall serve for such term as
the Board may determine, subject to removal by the Board at any
time. All references in the Plan to the “Plan
Administrator” shall be, as applicable, to the Board or any
committee to whom the Board has delegated authority to administer
the Plan. The Plan Administrator has plenary authority and
discretion to determine the Eligible Persons to whom Awards are
granted (each a “Participant”) and the terms of all
Awards under the Plan. Subject to the provisions of the Plan, the
Plan Administrator has authority to interpret the Plan and
agreements under the Plan and to make all other determinations
relating to the administration of the Plan.
Stock Subject to the Plan
The
maximum aggregate number of Shares that may be issued under the
2021 Equity Incentive Plan is twenty million (20,000,000), plus (i)
the number of Shares added to the Plan pursuant to an annual
automatic share reserve increase at set forth in Section 4.2 of the
Plan and (ii) the sum of (A) any Shares that, as of the date of
stockholder approval of this Plan, have been reserved but not
issued pursuant to any awards granted under the Company’s
2011 Stock Incentive Plan, as amended (the “2011
Plan”), and (B) any Shares subject to stock options or
similar awards granted under the 2011 Plan that, after the date of
stockholder approval of this Plan, expire or otherwise terminate
without having been exercised in full and Shares issued pursuant to
awards granted under the 2011 Plan that are forfeited to or
repurchased by the Company, with the maximum number of Shares to be
added to the Plan pursuant to clause (ii) equal to
14,650,120.
Subject
to certain adjustments as set forth Section 14 of the Plan,
the number of Shares available for issuance under the Plan will be
increased on the first day of each calendar year beginning January
1, 2022 and ending on and including January 1, 2030 in an amount
equal to the least of (i) 2,000,000 Shares, (ii) four
percent (4%) of the outstanding Shares on the last day of the
immediately preceding Fiscal Year or (iii) such number of
Shares determined by the Board; provided, that such determination
under clause (iii) will be made no later than the last day of
the immediately preceding Fiscal Year.
Shares of Common
Stock covered by an Award shall not be counted as used unless and
until they are actually issued and delivered to a Participant. If
any Award lapses, expires, terminates or is canceled prior to the
issuance of shares thereunder or if shares of Common Stock are
issued under the Plan to a Participant and thereafter are forfeited
to or otherwise reacquired by the Company, the shares subject to
such Awards and the forfeited or reacquired shares shall again be
available for issuance under the Plan. Any shares of Common Stock
(i) tendered by a Participant or retained by the Company as
full or partial payment to the Company for the purchase price of an
Award or to satisfy tax withholding obligations in connection with
an Award, or (ii) covered by an Award that is settled in cash
or in a manner such that some or all of the shares covered by the
Award are not issued, shall be available for Awards under the Plan.
The number of shares of Common Stock available for issuance under
the Plan shall not be reduced to reflect any dividends or dividend
equivalents that are reinvested into additional shares of Common
Stock or credited as additional shares of Common Stock subject or
paid with respect to an Award.
32
Options
The
Plan authorizes the grant of Nonqualified Stock Options and
Incentive Stock Options. Incentive Stock Options are stock options
that satisfy the requirements of Section 422 of the Code and may be
granted only to Section 422 Employees. A Section 422 Employee is an
Employee who is employed by the Company or a “parent
corporation” or “subsidiary corporation” (defined
in Sections 424(e) and (f) of the Code) with respect to the
Company, including a “parent corporation” or
“subsidiary corporation” that becomes such after the
adoption of the Plan. Nonqualified Stock Options are stock options
that do not satisfy the requirements of Section 422 of the Code.
The exercise of an Option permits the Participant to purchase
shares of Common Stock from the Company at a specified exercise
price per share. Options granted under the Plan are exercisable
upon such terms and conditions as the Plan Administrator shall
determine. The exercise price per share and manner of payment for
shares purchased pursuant to Options are determined by the Plan
Administrator, subject to the terms of the Plan. The per share
exercise price of Options granted under the Plan may not be less
than the fair market value of the common stock (110% of the fair
market value in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) on the date of grant. The Plan provides
that the term during which Options may be exercised is determined
by the Plan Administrator, except that no Option may be exercised
more than ten years (five years in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder) after its date of
grant. The Plan Administrator may condition the grant or vesting of
an Option on the achievement of one or more performance goals
performance goals, as the Plan Administrator shall determine in its
sole discretion, which terms, conditions and restrictions shall be
set forth in the instrument evidencing the Award.
Grant of Stock Appreciation Rights
The Plan Administrator may grant Stock
Appreciation Rights to Participants at any time on such terms and
conditions as the Plan Administrator shall determine in its sole
discretion. A SAR may be granted in tandem with an Option
(“tandem SAR”) or alone (“freestanding
SAR”). The grant price of a tandem SAR shall be equal to the
exercise price of the related Option. The grant price of a
freestanding SAR shall be established in accordance with procedures
for Options. A SAR may be exercised upon such terms and conditions
and for the term as the Plan Administrator determines in its sole
discretion; provided, however, that, subject to earlier termination in
accordance with the terms of the Plan and the instrument evidencing
the SAR, the maximum term of a freestanding SAR shall be ten years,
and in the case of a tandem SAR, (a) the term shall not exceed
the term of the related Option and (b) the tandem SAR may be
exercised for all or part of the shares subject to the related
Option upon the surrender of the right to exercise the equivalent
portion of the related Option, except that the tandem SAR may be
exercised only with respect to the shares for which its related
Option is then exercisable.
Upon
the exercise of a SAR, a Participant shall be entitled to receive
payment in an amount determined by multiplying: (a) the
difference between the Fair Market Value of the Common Stock on the
date of exercise over the grant price of the SAR by (b) the
number of shares with respect to which the SAR is exercised. At the
discretion of the Plan Administrator as set forth in the instrument
evidencing the Award, the payment upon exercise of a SAR may be in
cash, in shares, in some combination thereof or in any other manner
approved by the Plan Administrator in its sole
discretion.
Grant of Stock Awards, Restricted Stock and Stock
Units
The
Plan authorizes the Plan Administrator to grant Stock Awards,
Restricted Stock and Stock Units on such terms and conditions and
subject to such repurchase or forfeiture restrictions, if any,
which may be based on continuous service with the Company or a
Related Company or the achievement of any performance goals, as the
Plan Administrator shall determine in its sole discretion, which
terms, conditions and restrictions shall be set forth in the
instrument evidencing the Award. Such terms and conditions may
provide, in the discretion of the Plan Administrator, for the
vesting of awards of Restricted Stock to be contingent upon the
achievement of one or more performance goals.
The
Plan authorizes the Plan Administrator to grant Restricted Stock
and Stock Units as contingent awards of Common Stock (or the cash
equivalent thereof). Pursuant to such Awards, shares of Common
Stock are issued subject to such terms and conditions as the Plan
Administrator deems appropriate, including terms that condition the
issuance of the shares upon the achievement of one or more
performance goals. Unlike in the case of awards of Restricted
Stock, shares of Common Stock are not issued immediately upon the
award of Stock Units, but instead shares of Common Stock (or the
case equivalent thereof) are issued upon the satisfaction of such
terms and conditions as the Plan Administrator may specify,
including the achievement of one or more Performance
Goals.
33
Other Stock or Cash-Based Awards
The
Plan authorizes the grant of Other Stock or Cash-Based Awards. The
Plan Administrator may grant other incentives payable in cash or in
shares of Common Stock under the Plan as the Plan Administrator
shall determine, including terms that condition the payment or
vesting of the Other Stock or Cash-Based Award
Dividends and Dividend Equivalents
The terms of an Award may, at the Plan
Administrator ’s discretion, or provide a Participant with
the right to receive dividend payments or dividend equivalent
payments with respect to shares of Common Stock covered by the
Award. Such payments may either be made currently or credited to
any account established for the Participant, and may be settled in
cash or shares of Common Stock. Unless otherwise provided by
the Plan Administrator or in the instrument evidencing the Award or
in a written employment, services or other agreement, no Award,
other than a Stock Award, shall entitle the Participant to any cash
dividend, voting or other right of a stockholder unless and until
the date of issuance under the Plan of the shares that are the
subject of such Award.
Performance Goals
The
terms and conditions of an Award may provide for the grant, vesting
or payment of the Award to be contingent upon the achievement of
one or more specified Performance Goals established by the Plan
Administrator. For this purpose, “Performance Goals”
means performance goals established by the Plan Administrator which
may be based on earnings or earnings growth, sales, return on
assets, cash flow, total shareholder return, equity or investment,
regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or
income statement objectives, implementation or completion of one or
more projects or transactions, or any other objective goals
established by the Plan Administrator, and may be absolute in their
terms or measured against or in relationship to other companies
comparably, similarly or otherwise situated. Such Performance Goals
may be particular to an Eligible Person or the department, branch,
Affiliate, or division in which the Eligible Person works, or may
be based on the performance of the Company, one or more Affiliates,
or the Company and one or more Affiliates, and may cover such
period as may be specified by the Plan Administrator.
Capital Adjustments
If the outstanding Common Stock of the Company
changes as a result of a stock dividend, stock split, spin-off,
combination or exchange of shares, recapitalization, merger,
consolidation, statutory share exchange, distribution to
stockholders other than a normal cash dividend, or other change in
the Company’s corporate or capital structure, the Plan
Administrator shall make proportional adjustments in
(i) the maximum number and kind of securities available for
issuance under the Plan; (ii) the maximum number and kind of
securities issuable as Incentive Stock Options as set forth in
Section 4.3(d); and (iii) the number and kind of
securities that are subject to any outstanding Award and the per
share price of such securities, without any change in the aggregate
price to be paid therefor.
Withholding
The Company is generally required to withhold tax
on the amount of income recognized by a Participant with respect to
the granting, vesting, or exercise of an Award. Withholding
requirements may be satisfied, as provided in the agreement
evidencing the Award, by (a) tender of a cash payment to the
Company, (b) having the Company withhold an amount from any
cash amounts otherwise due or to become due from the Company to the
Participant (c) withholding of shares
of Common Stock otherwise issuable having a Fair Market
Value equal to the tax withholding obligation, or (d) delivery to the Company by the
Participant of unencumbered shares of Common Stock. The
value of the shares so withheld or tendered may not exceed the
employer’s minimum required tax withholding rate.
Notwithstanding any other provision of the Plan to the contrary,
the Company shall not be required to issue any shares of Common
Stock or otherwise settle an Award under the Plan until such tax
withholding obligations and other obligations are
satisfied.
34
Termination and Amendment
The
Board of Directors may amend, suspend, or terminate the Plan at any
time. However, after the Plan has been approved by the stockholders
of the Company, the Board of Directors may not amend or terminate
the Plan without the approval of (a) the Company’s
stockholders if stockholder approval of the amendment is required
by applicable law, rules or regulations, and (b) each affected
Participant if such amendment or termination would adversely affect
such Participant’s rights or obligations under any Awards
granted prior to the date of the amendment or
termination.
Term of the Plan
Unless
sooner terminated by the Board of Directors, the Plan will
terminate on August 12, 2031. Once the Plan is terminated, no
further Awards may be granted or awarded under the Plan.
Termination of the Plan will not affect the validity of any Awards
outstanding on the date of termination.
Summary of Certain Federal Income Tax Consequences
The
following discussion briefly summarizes certain United States
federal income tax aspects of Awards granted pursuant to the 2021
Equity Incentive Plan. State, local and foreign tax consequences
may differ.
Incentive Stock
Options. The grant of an Option
will not be a taxable event for the grantee or for the
Company. A grantee will not recognize taxable income
upon exercise of an Incentive Stock Option (except that the
alternative minimum tax may apply), and any gain realized upon
a disposition of our common stock received pursuant to
the exercise of an Incentive Stock Option will be taxed as
long-term capital gain if the grantee holds the shares
of common stock for at least two (2) years after the date of
grant and for one (1) year after the date of exercise
(the “holding period requirement”). The Company
will not be entitled to any business expense deduction with
respect to the exercise of an Incentive Stock Option, except
as discussed below. For the exercise of an Option to qualify
for the foregoing tax treatment, the grantee generally must be
an Employee of the Company or a subsidiary from the date the
Option is granted through a date within three (3) months before the
date of exercise of the Option. If all of the foregoing
requirements are met except the holding period requirement
mentioned above, the grantee will recognize ordinary income
upon the disposition of the common stock in an amount generally
equal to the excess of the fair market value of the common
stock at the time the Option was exercised over the Option exercise
price (but not in excess of the gain realized on the sale).
The balance of the realized gain, if any, will be capital gain. We
will be allowed a business expense deduction to the extent the
grantee recognizes ordinary income, except to the extent
the deduction limits of Section 162(m) of the Code
apply.
Non-Qualified Stock
Options. The grant of an Option
will not be a taxable event for the grantee or the
Company. Upon exercising a Non-Qualified Stock Option, a
grantee will recognize ordinary income in an amount equal to
the difference between the exercise price and the fair market
value of the common stock on the date of exercise. Upon a
subsequent sale or exchange of shares acquired pursuant to the
exercise of a Non-Qualified Stock Option, the grantee will
have taxable capital gain or loss, measured by the difference
between the amount realized on the disposition and the tax
basis of the shares of common stock (generally, the amount paid for
the shares plus the amount treated as ordinary income at the
time the Option was exercised). The Company will be entitled to a
business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income, except
to the extent the deduction limits of Section 162(m) of the
Code apply.
Stock Appreciation
Rights. There are no immediate
tax consequences of receiving an Award of Stock Appreciation
Rights. Upon exercising a Stock Appreciation Right, a grantee will
recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the common
stock on the date of exercise. The Company will be entitled to
a business expense deduction in the same amount and generally at
the same time as the grantee recognizes ordinary income,
except to the extent the deduction limits of Section 162(m)
of the Code apply.
35
Restricted Stock and
Restricted Stock Units. The
grant of Restricted Stock will not be a taxable event in the
year of the Award, provided that the shares of common stock
are subject to restrictions (that is, the shares of common
stock are nontransferable and subject to a substantial risk of
forfeiture). The fair market value of the common stock on
the date the restrictions lapse (less the purchase price, if
any) will be treated as compensation income to the grantee
and will be taxable in the year the restrictions lapse and
dividends paid while the common stock is subject to
restrictions will be subject to withholding taxes. The Company
will be entitled to a business expense deduction in the
same amount and generally at the same time as the grantee
recognizes ordinary income, except to the extent the
deduction limits of Section 162(m) of the Code
apply.
A grantee will not recognize taxable income at the time a
Restricted Stock Unit is granted and the Company will not be
entitled to a tax deduction at that time. Upon settlement of
Restricted Stock Units, the grantee will recognize compensation
taxable as ordinary income (and subject to income tax withholding
in respect of an employee) in an amount equal to the fair market
value of any shares delivered and the amount of any cash paid by
the Company, and the Company will be entitled to a corresponding
deduction, except to the extent the deduction limits of
Section 162(m) of the Code apply.
Other Stock-Based Awards, and
Cash-Based Awards. The tax
treatment with respect to other stock-based awards and
cash-based awards will depend on the structure of such
awards.
Withholding. The Company may deduct from any payment to be
made pursuant to the Plan, or require before the issuance or
delivery of shares of common stock or the payment of any cash
hereunder, payment by the Participant of, any federal, state,
or local taxes required by law to be withheld. Upon the vesting of
Restricted Stock (or other Award that is taxable upon
vesting), or upon making an election under Section 83(b) of the
Code, a Participant shall pay all required withholding to the
Company. Any minimum statutorily required withholding obligation
with regard to any Participant may be satisfied, subject to
the consent of the Plan Administrator, by reducing the number of
shares of common stock deliverable or by delivering shares of
common stock already owned. Furthermore, at the discretion of
the Plan Administrator, any additional tax obligations of a
Participant with respect to an Award may be satisfied by
further reducing the number of shares of common stock,
deliverable with respect to such Award, to the extent that
such reductions do not result in any adverse accounting
implications to the Company, as determined by the Plan
Administrator. Any fraction of a share of common stock
required to satisfy such tax obligations shall be disregarded and
the amount due shall be paid instead in cash by the
Participant.
Parachute
Payments. Where payments to
certain persons that are contingent on a change in control exceed
limits specified in the Code, the person generally is liable for a
20 percent excise tax on, and the corporation or other entity
making the payment generally is not entitled to any deduction for,
a specified portion of such payments. Under the Plan, the Plan
Administrator has plenary authority and discretion to determine the
vesting schedule of Awards. Any Award under which vesting is
accelerated by a change in control of the Company, would be
relevant in determining whether the excise tax and deduction
disallowance rules would be triggered.
Performance-Based
Compensation. Subject to
certain exceptions, Section 162(m) of the Code disallows federal
income tax deductions for compensation paid by a publicly-held
corporation to certain executives to the extent the amount paid to
an executive exceeds $1 million for the taxable year. The Plan has
been designed to allow the grant of Awards that qualify under an
exception to the deduction limit of Section 162(m) for
“performance-based compensation.”
Tax Rules Affecting
Nonqualified Deferred Compensation Plans. Section 409A of the Code imposes tax rules that
apply to “nonqualified deferred compensation plans.”
Failure to comply with, or to qualify for an exemption from, the
new rules with respect to an Award could result in significant
adverse tax results to the Award recipient including immediate
taxation upon vesting, an additional income tax of 20 percent of
the amount of income so recognized, plus a special interest
payment. The Plan is intended to comply with Section 409A of the
Code to the extent applicable, and the Plan Administrator will
administer and interpret the Plan and Awards
accordingly.
36
Accounting Treatment
The
Company accounts for Options using guidance from FASB ASC Topic
718, which requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the
financial statements based on their fair values.
Securities Authorized for Issuance Under Equity Compensation
Plans
As
of June 30, 2021, the Company had the following equity compensation
plans in place: 2011 Stock Incentive Plan.
|
|
(a)
|
(b)
|
(c)
|
|
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
plan
(excluding securities
reflected
in column (a))
|
|
Equity
compensation plan
|
|
|
|
|
approved
by shareholders
|
78,333
|
$1.495
|
78,333
|
|
Equity
compensation plans
|
|
|
|
|
not
approved by shareholders
|
14,650,120
|
1.495
|
(14,728,453)
|
|
Total
|
14,728,453
|
$1.495
|
(14,650,120)
|
37
PROPOSAL 5
Ratification of Appointment of Independent Registered Public
Accounting Firm
The
Audit Committee of the Board of Directors has selected BPM LLP, an
independent registered accounting firm, to audit the books and
financial records of the Company for the year ending September 30,
2020. The Company is asking its stockholders to ratify the
appointment of BPM as it’s independent registered public
accounting firm for the Company’s fiscal year ending
September 30, 2020 and 2021.
A
representative of BPM is expected to be present either in person or
via teleconference at the 2021 Annual Meeting and available to
respond to appropriate questions, and will have the opportunity to
make a statement if he or she desires to do so.
Ratification
of the appointment of BPM by our stockholders is not required by
law, our bylaws or other governing documents. As a matter of
policy, however, the appointment is being submitted to our
stockholders for ratification at the 2021 Annual Meeting. If our
stockholders fail to ratify the appointment, the Audit Committee
will reconsider whether or not to retain that firm. Even if the
appointment is ratified, the Audit Committee, in its discretion,
may direct the appointment of different independent auditors at any
time during the year if they determine that such a change would be
in our best interest and the best interests of our
stockholders.
Vote Required
The
affirmative vote of a majority of the votes cast at the 2021 Annual
Meeting will be required to approve the ratification of the
appointment of the Company’s registered public accounting
firm. Abstentions are not votes cast and therefore will have no
effect on the outcome of this proposal. Broker non-votes are not
expected to exist for this matter since this is a routine matter
for which brokers may vote in their discretion if beneficial owners
of our stock do not provide voting instructions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
RATIFICATION OF THE SELECTION OF BPM, LLP AS OUR INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM FOR OUR FISCAL YEAR ENDING ON SEPTEMBER 30, 2020
and 2021.
AUDIT COMMITTEE DISCLOSURE
The Audit Committee is comprised solely of independent directors
and, among other things, is responsible for:
|
|
|
|
|
|
●
|
the
appointment of independent registered accounting firm;
|
|
|
|
|
|
|
●
|
review
the arrangements for and scope of the audit by independent
auditors;
|
|
|
|
|
|
|
●
|
review
the independence of the independent auditors;
|
|
|
|
|
|
|
●
|
consider
the adequacy and effectiveness of the system of internal accounting
and financial controls and review any proposed corrective
actions;
|
|
|
|
|
|
|
●
|
review
and monitor our policies regarding business ethics and conflicts of
interest;
|
|
|
|
|
|
|
●
|
discuss
with management and the independent auditors our draft quarterly
interim and annual financial statements and key accounting and
reporting matters; and
|
|
|
|
|
|
|
●
|
review
the activities and recommendations of our accounting
department.
|
38
Audit Committee Pre-Approval Policy
The Audit Committee has established a pre-approval policy and
procedures for audit, audit-related and tax services that can be
performed by the independent auditors without specific
authorization from the Audit Committee subject to certain
restrictions. The policy sets out the specific services
pre-approved by the Audit Committee and the applicable limitations,
while ensuring the independence of the independent auditors to
audit the Company's financial statements is not impaired. The
pre-approval policy does not include a delegation to management of
the Audit Committee’s responsibilities under the Exchange
Act. During the year ended September 30, 2020, the Audit Committee
pre-approved all audit and permissible non-audit services provided
by our independent auditors.
Service Fees Paid to the Independent Registered Public Accounting
Firm
The Audit Committee engaged BPM LLP to perform an annual audit of
our financial statements for the fiscal year ended September 30,
2020. BPM did not perform any services prior to September 30, 2019.
Previously the Audit Committee engaged SD Mayer and Associates, LLP
to perform an annual audit of our financial statements for the
fiscal years ended September 30, 2018; SD Mayer was dismissed on
October 3, 2019. The following is the breakdown of aggregate fees
paid for the last two fiscal years. The audit fees listed below are
those billed in the respective fiscal year but generally relate to
the prior fiscal year:
|
|
Year
Ended
|
Year
Ended
|
|
|
September 30,
2020
|
September 30,
2019
|
|
Audit
fees
|
$178,325
|
$53,620
|
|
Audit related
fees
|
48,150
|
26,000
|
|
Tax
fees
|
14,150
|
7,500
|
|
All other
fees
|
14,615
|
7,800
|
|
|
|
|
|
|
$255,240
|
$94,920
|
-
“Audit Fees” are fees paid for professional services
for the audit of our financial statements.
-
“Audit-Related fees” are fees paid for professional
services not included in the first two categories, specifically,
PCAOB interim quarterly, SEC filings and consents, and accounting
consultations on matters addressed during the audit or interim
reviews, and review work related to quarterly filings.
-
“Tax Fees” are fees primarily for tax compliance in
connection with filing US income tax returns.
-
“All other fees” related to the reviews of Registration
Statements on Form S-1.
AUDIT COMMITTEE
REPORT(1)
The Audit Committee, which is composed of three independent
directors, operates under a written charter adopted by the Board.
Among its functions, the Audit Committee recommends to the Board
the selection of independent registered accounting
firm.
Management has the primary responsibility for the financial
statements and the reporting process, including the systems of
internal controls. The independent auditors are responsible for
auditing those financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The
Audit Committee’s responsibility is to oversee the financial
reporting process on behalf of the Board and to report the result
of their activities to the Board.
39
In this context, the Audit Committee has met and held discussions
with management and the independent auditors. Management
represented to the Audit Committee that our financial statements
were prepared in accordance with generally accepted accounting
principles, and the Audit Committee has reviewed and discussed the
financial statements with management and the independent auditors.
The Audit Committee discussed with the independent auditors matters
required to be discussed by Statement on Auditing Standards No. 61,
as amended (Communication with Audit Committees).
The independent auditors also provided to the committee the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent auditors their
independence and considered the compatibility of permissible
non-audit services with the auditors’
independence.
Based upon the Audit Committee’s discussion with management
and the independent auditors and the Audit Committee’s review
of the representation of management and the report of the
independent auditors to the committee, and relying thereon, the
Audit Committee recommended that the Board include the audited
financial statements in our Annual Report on Form 10-K for the
fiscal years for the fiscal years ended September 30, 2020 and
2019.
Audit Committee of the Board of Directors,
Jon Pepper, Chairman
William A. Owens
Ichiro Takesako
(1) The material in this report is
not “soliciting material,” is not deemed
“filed” with the SEC and is not incorporated by
reference in any filing of Heat under the Securities Act of 1933,
as amended, or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language
in any such filing.
|
Your Board Recommends That Stockholders Vote
FOR
the ratification of the appointment of BPM LLP to serve as the
independent registered public accounting firm for
the year ending September 30, 2020 and 2021
|
STOCKHOLDERS’
PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at our subsequent annual meetings consistent
with Rule 14a-8 promulgated under the Exchange Act. For such
proposals or nominations to be considered timely, they must be
received in writing by our Secretary no later than 120 days before
the date on which the Company first sent its proxy materials for
the prior year’s annual meeting of stockholders. For such
proposals or nominations to be considered in the proxy statement
and proxy relating to the 2022 Annual Meeting of stockholders they
must have been received by us no later than April 20, 2022. Such
proposals should be directed to Know Labs Inc. 500 Union Street Ste
810, Seattle, Washington 98101, Attn: Secretary. Any proposal may
be included in next year’s proxy materials only if such
proposal complies with the rules and regulations promulgated by the
SEC. Nothing in this section shall be deemed to require us to
include in our proxy statement or our proxy relating to any meeting
any stockholder proposal or nomination that does not meet all of
the requirements for inclusion established by the SEC.
OTHER BUSINESS
The
Board knows of no matter other than those described herein that
will be presented for consideration at the 2021 Annual Meeting.
However, should any other matters properly come before the 2021
Annual Meeting or any adjournments or postponements thereof, it is
the intention of the person(s) named in the accompanying proxy to
vote in accordance with their best judgment in the interest of the
Company.
40
MISCELLANEOUS
The
Company will bear all costs incurred in the solicitation of
proxies. In addition to solicitation by mail, our officers and
employees may solicit proxies by telephone, the Internet or
personally, without additional compensation. We may also make
arrangements with brokerage houses and other custodians, nominees
and fiduciaries for the forwarding of solicitation materials to the
beneficial owners of shares of our capital stock held of record by
such persons, and we may reimburse such brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket
expenses incurred in connection therewith. We have not engaged a
proxy solicitor.
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 stockholders sharing the
same address by delivering a single proxy statement addressed to
those stockholders. This process, which is commonly referred to as
“householding,” potentially provides extra convenience
for stockholders and cost savings for companies. The Company and
some brokers household proxy materials may deliver a single proxy
statement and/or Notice of Internet Availability of Proxy Materials
to multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker or the Company that
they or the Company 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 Notice of Internet Availability of Proxy Materials, please
notify your broker if your shares are held in a brokerage account
or the Company if you hold registered shares of capital stock. We
will also deliver a separate copy of this Proxy Statement to any
stockholder upon written request. Similarly, stockholders who have
previously received multiple copies of disclosure documents may
write to the address or call the phone number listed below to
request delivery of a single copy of these materials in the future.
You can notify the Company by sending a written request to Know
Labs Inc., Secretary, 500 Union Street Ste 810, Seattle, Washington
98101, by registered, certified or express mail or by calling the
Company at (206) 903-1351
AVAILABILITY OF ADDITIONAL INFORMATION
We
file annual, quarterly and current reports, proxy statements, and
other information with the SEC. The SEC maintains a website at
http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file
electronically with the SEC.
Ronald
P. Erickson
Chairman
Seattle,
WA
[●],
2021
41
APPENDIX A
KNOW LABS, INC.
SECOND AMENDED AND RESTATED BYLAWS
Effective
Date: ____, 2021
ARTICLE I
OFFICES
1.1 Registered
Office. The address of the Corporation’s
registered office in the State of Nevada is 1805 N Carson Street,
Suite S, Carson City, Nevada 89701. The name of the
Corporation’s registered agent at such address is Pacific
Registered Agents, Inc.
1.2 Other
Offices. The Corporation also may have offices at such
other places as the Board of Directors may from time to time
determine or as the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS’ MEETINGS
2.1 Location
of Meetings. Annual and special meetings of the
stockholders shall be held at such place within or without the
State of Nevada as the Directors may, from time to time, fix.
Whenever the Directors shall fail to fix such place, the
meeting shall be held at the principal office of the Corporation
located in Seattle, Washington.
2.2 Annual
Meeting. The annual meeting of stockholders shall be
held each year at such time and place, within or outside of the
State of Nevada, as shall be designated by the Board of Directors
and stated in the notice of the meeting. At the annual
meeting the stockholders shall elect Directors of the Corporation
and may transact any other business that is properly brought before
the meeting.
2.3 Business
at Annual Meetings; Advance Notice Provision.
(i) No
business may be transacted at an annual meeting of stockholders,
other than business that is of proper matter for stockholder action
and as shall have been properly brought before the meeting.
To be properly brought before a meeting, business must be:
(a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board,
(b) otherwise properly brought before the meeting by or at the
direction of the Board, or (c) otherwise properly brought
before the meeting by a stockholder who complies with the notice
procedures set forth in Section 2.3(ii) below as to any
business submitted by a stockholder other than director nominations
which shall be governed exclusively by Section 3.3 below.
This Section 2.3 shall be the exclusive means for a
stockholder to submit business other than director nominations
before a meeting of the stockholders (and other than proposals
brought under Rule 14a-8 of Regulation 14A of the
Securities Exchange Act of 1934, as amended, (the “Exchange
Act”) and included in the Corporation’s notice of
meeting, which proposals are not governed by these
Bylaws).
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(ii) For
any business (other than the nomination of directors) to be
properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. This subsection (ii) shall
constitute an “advance notice provision” for annual
meetings for purposes of Rule 14a-4(c)(1) under the Exchange
Act. To be timely, a stockholder’s notice must be
received at the principal executive offices of the Corporation not
earlier than the close of business on the 90th day and not
later than the close of business on the 60th day prior to
the first anniversary of the preceding year’s annual
meeting; provided,
however, that in the event the date of the annual meeting is
more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the
90th day prior to
the date of such annual meeting and not later than the close of
business on the later of the 60th day prior to
the date of such annual meeting or, if notice of the meeting is
mailed or the first public announcement of the date of such annual
meeting is made less than 75 days prior to the date of such annual
meeting, the 15th day following
the date on which such notice is mailed or such public announcement
of the date of such meeting is first made by the Corporation,
whichever occurs first. In no event shall any adjournment or
postponement of an annual meeting, or the announcement thereof,
commence a new time period for the giving of a stockholder’s
notice as described above. A stockholder’s notice to
the Secretary shall set forth the following information and shall
include a representation as to the accuracy of the information:
(a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such
business at the annual meeting; (b) the name and record
address of the stockholder proposing such business; (c) the
class and number of shares of the Corporation that are directly or
indirectly, owned beneficially and/or of record by the stockholder;
(d) any option, warrant, convertible, security, stock
appreciation right, or similar right with an exercise or conversion
privilege or a settlement payment or mechanism at a price related
to any class or series of shares of the Corporation or with a value
derived in whole or in part from the value of any class or series
of shares of the Corporation, whether or not the instrument or
right shall be subject to settlement in the underlying class or
series of capital stock of the Corporation or otherwise (a
“Derivative Instrument”) that is directly or indirectly
owned beneficially by the stockholder and any other direct or
indirect opportunity to profit or share in any profit derived from
any increase or decrease in the value of shares of the Corporation;
(e) any proxy, contract, arrangement, understanding, or
relationship pursuant to which the stockholder has a right to vote
or has granted a right to vote any shares of any security of the
Corporation; (f) any short interest in any security of the
Corporation (for purposes of these Bylaws a person shall be deemed
to have a short interest in a security if the stockholder directly
or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has the opportunity to profit or share
in any profit derived from any decrease in the value of the subject
security); (g) any rights to dividends on the shares of the
Corporation owned beneficially by the stockholder that are
separated or separable from the underlying shares of the
Corporation; (h) any proportionate interest in shares of the
Corporation or Derivative Instruments held, directly or indirectly,
by a general or limited partnership or limited liability company or
similar entity in which the stockholder is a general partner or,
directly or indirectly, beneficially owns an interest in a general
partner, is the manager, managing member or directly or indirectly
beneficially owns an interest in the manager or managing member of
a limited liability company or similar entity; (i) any
performance-related fees (other than an asset-based fee) that the
stockholder is entitled to based on any increase or decrease in the
value of shares of the Corporation or Derivative Instruments, if
any;
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(j) any
arrangement, rights or other interests described in subsections
(c) through (i) above held by members of such
stockholder’s immediate family sharing the same household;
(k) any other information related to the stockholder that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitation of
proxies for the proposal pursuant to Section 14 of the
Exchange Act and the rules and regulations thereunder; (l) any
material interest of the stockholder in such business; (m) a
description of any arrangements and understandings between such
stockholder and any other person or persons in connection with the
proposal of such business by such stockholder; and (n) any
other information as reasonably requested by the Corporation.
The information described in subsections (c) through
(j) above is hereinafter collectively referred to as the
“Ownership and Rights Information.”
(iii) Notwithstanding
the foregoing or any other provisions of these Bylaws, including
Section 3.3 below, a stockholder also shall comply with all
applicable laws, regulations and requirements, including
requirements of the Exchange Act and the rules and regulations
thereunder, with respect to the matters set forth in these
Bylaws; provided,
however, that any references in these Bylaws to the Exchange
Act or the rules and regulations thereunder are not intended to and
shall not limit the requirements applicable to proposals or
nominations as to any other business to be considered pursuant to
this Section 2.3 or Section 3.3 below.
(iv) Nothing
in these Bylaws shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the
Corporation’s proxy statement pursuant to Rule 14a-8
under the Exchange Act. Notice of stockholder proposals that
are, or that the submitting stockholder intends to be, governed by
Rule 14a-8 under the Exchange Act are not governed by these
Bylaws.
2.4 Notice
of Annual Meeting. Written notice of the annual
meeting shall be served upon or mailed to each stockholder entitled
to vote thereat at such address as appears on the books of the
Corporation, at least ten (10) but not more than sixty (60) days
prior to the meeting. Such notice shall state the location,
date and hour of the meeting, but the notice need not specify the
business to be transacted thereat.
2.5 Special
Meetings. Special meetings of the stockholders for any
purpose or purposes, unless otherwise provided by law or by the
Articles of Incorporation, may be called by the Chief Executive
Officer and shall be called by the Chief Executive Officer or
Secretary at the request in writing of a majority of the Board of
Directors, and not at the request of any other person or persons.
Such request must state the purpose or purposes of the
proposed meeting.
2.6 Notice
of Special Meetings. Written notice of a special
meeting shall be served upon or mailed to each stockholder entitled
to vote thereat at such address as appears on the books of the
Corporation, at least ten (10) but not more than sixty (60) days
prior to the meeting. Such notice shall state the location,
date and hour of the meeting and shall describe the order of
business to be addressed at the meeting. Business transacted at all
special meetings shall be confined to the matters stated in the
notice.
2.7 Presiding
Officer at Stockholder Meetings. The Chair of the
Board shall preside at all meetings of the stockholders, provided
that the Chair may designate the Chief Executive Officer to preside
in the Chair’s stead. In the Chair’s absence, the
Chief Executive Officer shall preside, and in the absence of both,
the Board shall appoint a person to preside.
2.8 Quorum;
Adjournment. The holders of one-third (33 1/3 %) of
the voting power of the shares of capital stock issued and
outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be required and shall constitute a
quorum at all meetings of the stockholders for the transaction of
business, except as otherwise provided by law, the Articles of
Incorporation, or these Amended and Restated Bylaws (the
“Bylaws”). If such quorum shall not be present or
represented at any meeting of the stockholders, the presiding
officer of the meeting or the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have the
power to adjourn the meeting from time to time by the affirmative
vote of a majority in voting power thereof, until a quorum shall be
present or represented. Even if a quorum is present or
represented at any meeting of the stockholders, the presiding
officer of the meeting, for good cause, or the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to
time by the affirmative vote of a majority in voting power thereof.
If the time and place of the adjourned meeting are announced
at any meeting at which an adjournment is taken, no further notice
of the adjourned meeting need be given; provided, however, that if the
adjournment is for more than thirty (30) days, or if after the
adjournment a new record date for the adjourned meeting is fixed by
the Board of Directors, notice of the adjourned meeting shall be
given to each stockholder entitled to vote at the meeting. At
the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original
meeting.
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2.9 Vote
Required. In all matters other than the election of
Directors, the affirmative vote of the holders of a majority of the
voting power of the shares of capital stock present in person or
represented by proxy and entitled to vote on the matter shall
decide any question brought before a meeting unless the question is
one upon which by express provision of the Articles of
Incorporation or of these Bylaws, or by law, a different vote is
required in which case such express provision shall govern and
control the decision of such question. Directors shall be
elected, by ballot, by a plurality of the votes of the voting power
of the shares of capital stock present in person or represented by
proxy and entitled to vote at the election of
directors; provided,
however, that a stockholder shall not be permitted to
cumulate his/her votes with respect to the election of
Directors.
2.10 Voting;
Proxies. At any meeting of the stockholders every
holder of shares entitled to vote thereat shall be entitled to vote
in person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than six
(6) months prior to the date of said meeting, unless said
instrument provides for a longer period, but in no event may such
period exceed three (3) years from the date of its creation.
Unless otherwise required by law or provided in the Articles
of Incorporation, each stockholder shall have one vote for each
share of capital stock having voting power, registered in such
stockholder’s name on the books of the Corporation, and
except where the transfer books of the Corporation shall have been
closed or a date shall have been fixed as a record date for the
determination of its stockholders entitled to vote, no share of
stock shall be voted on at any election of Directors which shall
have been transferred on the books of the Corporation within twenty
(20) days next preceding such election of Directors.
2.11 Stockholder
Lists. At least ten (10) days before every meeting of
the stockholders, a complete list of the stockholders entitled to
vote at said meeting, arranged in alphabetical order, with the
residence of each and the number of voting shares held by each,
shall be prepared by the Secretary. Such list shall be open
for said ten days to examination by any stockholder for any purpose
germane to the meeting during regular business hours at the place
where the meeting is to be held, or at such other place within the
city in which the meeting is to be held as shall be specified in
the notice of the meeting, and also shall be produced and kept at
the time and place of the meeting, during the whole time thereof,
and may be inspected by any stockholder who is
present.
2.12 Action
Without Meeting. Any action required or permitted to
be taken at any annual or special meeting of stockholders may be
taken without a meeting if, before or after the action, a written
consent thereto is signed by stockholders holding at least a
majority of the voting power, except that if a greater proportion
of voting power is required for such an action under Nevada General
Corporation Law (Title 7, Chapter 78 of the Nevada Revised
Statutes), any other applicable law, or the Corporation’s
Articles of Incorporation, then that greater proportion of written
consents shall be required. In no instance where action is
authorized by written consent need a meeting of stockholders be
called or notice given. All such written consents shall be
filed with the records of the meetings of the stockholders of the
Corporation.
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ARTICLE III
DIRECTORS
3.1 Powers.
The property and business of the Corporation shall be managed
by its Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not
by law or by the Articles of Incorporation or by these Bylaws
directed or required to be exercised or done by the
stockholders.
3.2 Number
of Directors. The number of Directors which shall
constitute the Board shall be fixed from time to time by resolution
of a majority of Directors in office; provided, however, that their number
shall not be less than three (3) nor more than nine (9), and shall
not be increased by more than three directors in any calendar
year.
3.3 Term. Directors
shall be elected at each annual meeting of the stockholders.
Each Director so elected shall serve for a one-year term and
until his/her successor is elected and qualified. If a
Director dies, resigns, or is removed, the Director’s
replacement shall serve throughout the remaining portion of the
Director’s term, and thereafter until the Director’s
successor is elected and qualified. Directors are not
required to be stockholders of the Corporation. The Board of
Directors, at its first meeting after each annual meeting of
stockholders, shall elect the Chair of the Board who shall perform
such duties as are specified in these Bylaws or are properly
required of the Chair by the Board of Directors.
3.4 Nominations.
Nominations for the election of Directors may be made by the
Board, by the Nominations and Governance Committee, or by any
stockholder entitled to vote for the election of Directors.
Nominations proposed by the Board or the Nominations and
Governance Committee shall be given by the Chair on behalf of the
Board or committee. Nominations by stockholders shall be in
writing and in the form prescribed below, and shall be effective
when delivered by hand or received by registered first-class mail,
postage prepaid, by the Secretary of the Corporation not less than
fourteen (14) days nor more than eighty (80) days prior to any
meeting of the stockholders called for the election of
Directors; provided,
however, that if less than twenty-one (21) days’
notice of the meeting is given to stockholders, such writing shall
be received by the Secretary of the Corporation not later than the
close of the seventh (7th) day following the
day on which notice of the meeting was mailed to stockholders.
Nominations by stockholders shall be in the form of a notice
which shall set forth: (a) as to each nominee (i) the
name, age, business address and, if known, residence address of
such nominee, (ii) the principal occupation or employment of
such nominee, (iii) the Ownership and Rights Information as it
relates to the nominee, (iv) the consent of the nominee to
serve as a Director of the Corporation if so elected, (v) a
description of all arrangements or understandings between the
stockholder and the nominee, (vi) a description of all
arrangements or understandings between the stockholder and any
other person or persons pursuant to which the nomination is to be
made by the stockholder, and (vii) any other information
relating to the nominee required to be disclosed in solicitations
of proxies for election of Directors, or otherwise required
pursuant to Regulation 14A under the Exchange Act; and
(b) as to the stockholder giving the notice: (i) the name
and address, as they appear on the Corporation’s books, of
such stockholder, (ii) the Ownership and Rights Information,
and (iii) and any other information as reasonably requested by
the Corporation. Such stockholder notice shall include a
representation as to the accuracy of the information set forth in
the notice. In addition, each nominee must complete and sign
a questionnaire, in a form provided by the Corporation, to be
submitted with the stockholder’s notice, that inquires as to,
among other things, the nominee’s independence and director
eligibility.
Only
those persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible to serve as directors.
The presiding officer of the meeting may, if the facts
warrant, determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if the
presiding officer should so determine, the presiding officer shall
so declare to the meeting and the defective nomination shall be
disregarded. This Section 3.4 shall be the exclusive
means for a stockholder to submit business constituting director
nominations before a meeting of the stockholders (other than
proposals brought under Rule 14a-8 of Regulation 14A of
the Exchange Act, which proposals are not governed by these
Bylaws).
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3.5 Vacancy.
If the office of any Director becomes vacant by reason of
death, resignation, retirement, disqualification, removal from
office, or otherwise, a majority of the remaining Directors, though
less than a quorum, shall choose a successor, who shall hold office
until the next election of Directors and such Director’s
successor shall be elected and qualified.
3.6 Resignation.
Any Director of the Corporation may resign from the Board of
Directors at any time by giving notice in writing or by electronic
transmission to the Chair of the Board and contemporaneously to the
Secretary of the Corporation. The resignation shall be
effective when the resignation notice is delivered unless the
notice specifies a later effective date or an effective date
determined upon the happening of an event or events, and the
acceptance of such resignation shall not be necessary to make it
effective.
3.7 Removal
of Directors. The entire Board of Directors or any
individual Director may be removed from office, with or without
cause, prior to the expiration of their or his/her term of office
by the holders of not less than two-thirds (66 2/3 %) of the voting
power of the shares of capital stock then entitled to vote at an
election of Directors, except as follows:
(i) Unless
the Articles of Incorporation of the Corporation provides
otherwise, if the Board is divided into classes, stockholders may
effect such removal only for cause; or
(ii) If
cumulative voting is permitted and if less than the entire Board is
to be removed, no Director may be removed without cause if the
votes cast against such Director’s removal would be
sufficient to elect such Director if then cumulative voted at an
election of the entire Board of Directors, or if there are classes
of directors, at an election of the class of directors of which
such Director is a part.
3.8 Meetings
Generally. The Board of Directors may hold meetings,
both regular and special, at such times and places either within or
without the State of Nevada as shall from time to time be
determined by the Board.
3.9 Regular
Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as shall be fixed by
resolution of the Board. No notice shall be required for
regular meetings held pursuant to such resolution, except that the
Secretary of the Corporation shall promptly provide a copy of such
resolution to any Director who is absent when such resolution is
adopted. In case any scheduled meeting of the Board is not
held on the day fixed therefor, the Directors shall cause the
meeting to be held as soon thereafter as is convenient. At
such regular meetings directors may transact such business as may
be brought before the meeting.
3.10 Special
Meetings. Special meetings of the Board may be called
by the Chair of the Board or by the Chief Executive Officer by
twenty-four (24) hours’ notice to each Director, either
personally, by telephone, e-mail, or telegram; special meetings
shall be called by the Chair of the Board, the Chief Executive
Officer or the Secretary in like manner and on like notice on the
written request of two (2) Directors.
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3.11 First
Meeting. The first meeting of each newly elected Board
shall be held immediately after the annual meeting of stockholders
and at the same place, and no notice of such meeting to the newly
elected Directors shall be necessary in order legally to constitute
the meeting, provided a quorum shall be present. In the event
such meeting is not held, the Directors shall cause the meeting to
be held as soon thereafter as is convenient.
3.12 Organization.
The Chair of the Board shall preside at all meetings of the
Board, provided that the Chair may designate the Chief Executive
Officer to preside in the Chair’s stead provided that the
Chief Executive Officer is also a Director. In the
Chair’s absence the Chief Executive Officer, if the Chief
Executive Officer is a Director, shall preside. In the
absence of both, the Board shall appoint a person to preside.
The Secretary of the Corporation, or if the Secretary is not
present, one of the Assistant Secretaries, in the order determined
by the Board, or if an Assistant Secretary is not present, a person
designated by the Board, shall take the minutes of the
meeting.
3.13 Quorum;
Adjournment. At all meetings of the Board, a majority
of the number of Directors then in office shall be necessary and
sufficient to constitute a quorum for the transaction of business,
and the act of a majority of the Directors present at any meeting
at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law
or by the Articles of Incorporation or these Bylaws. Whether
or not a quorum is present at any meeting of the Board, a majority
of the Directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the
meeting.
3.14 Participation
by Electronic Means. Any one or more Directors may
participate in a meeting of the Board or any committee thereof by
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time. Participation in a meeting by such
means shall be deemed attendance in person at that
meeting.
3.15 Action
Without Meeting. Any action required or permitted to
be taken at a meeting of the Board or any committee thereof may be
taken without a meeting if, before or after the action, a written
consent thereto (including a consent by electronic transmission) is
signed by all members of the Board or committee, as the case may
be, and such writing(s) or electronic transmission(s) are filed
with the minutes of proceedings of the Board or of the committee,
except that such written consent is not required to be signed
by:
(a) A
common or interested director who abstains in writing from
providing consent to the action. If a common or interested
director abstains in writing from providing consent: (i) the
fact of the common directorship, office or financial interest must
be known to the Board of Directors or committee before a written
consent is signed by all the members of the Board or committee;
(ii) such fact must be described in the written consent; and
(iii) the Board of Directors or committee must approve,
authorize or ratify the action in good faith by unanimous consent
without counting the abstention of the common or interested
director.
(b) A
director who is a party to an action, suit or proceeding who
abstains in writing from providing consent to the action of the
Board of Directors or committee. If a director who is a party
to an action, suit or proceeding abstains in writing from providing
consent on the basis that he or she is a party to an action, suit
or proceeding, the Board of Directors or committee must:
(i) make a determination pursuant to Nevada General
Corporation Law that indemnification of the director is proper
under the circumstances; and (ii) approve, authorize or ratify
the action of the Board of Directors or committee in good faith by
unanimous consent without counting the abstention of the director
who is a party to an action, suit or proceeding.
Any
action taken pursuant to such written consent shall be treated for
all purposes as the act of the Board or committee.
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3.16 Appointment
of Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more special or standing committees, including but not limited
to: a Compensation Committee, an Executive Committee, an Audit
Committee, and a Nominations and Governance Committee. Each
committee shall consist of two or more of the Directors of the
Corporation. The Board of Directors may designate one or more
Directors as alternate members of any committee to replace any
absent or disqualified member at any meeting of the
committee.
3.17 Meetings
of Committees. Regular and special meetings of any
committee established pursuant to this Article III may be called
and held subject to the same requirements with respect to time,
place and notice as are specified in these Bylaws for regular and
special meetings of the Board of Directors. At all committee
meetings, a majority of the members of the committee shall be
necessary to constitute a quorum for the transaction of any
business, and the act of a majority of committee members present at
a meeting at which there is a quorum shall be the act of the
committee.
3.18 Powers
of Committees. Committees of the Board of Directors,
to the extent provided in the Board resolution designating such
committee or in any committee charter relating thereto or as
permitted by law, shall have and may exercise the powers of the
Board of Directors, in the management of the business and affairs
of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as
may be determined from time to time by resolution of the Board.
Except as the Board of Directors may otherwise determine, a
committee may make rules for its conduct, but unless otherwise
provided by the Board or such rules, its business shall be
conducted as nearly as possible in the same manner as is provided
in these Bylaws for the conduct of business by the Board of
Directors. Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when
required. No committee, however, shall have the power or
authority with respect to the following matters: (a) approving
or adopting, or recommending to the stockholders, any action or
matter (other than the election or removal of Directors) expressly
required by Nevada General Corporation Law to be submitted to
stockholders for approval, or (b) adopting, amending or
repealing any Bylaw of the Corporation.
3.19 Compensation
of Directors. Directors shall be reimbursed for
reasonable expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid other compensation in whatever
form and amount the Board of Directors, by resolution, shall
determine to be reasonable. Members of special or standing
committees may be allowed like compensation and reimbursement for
participation in committee meetings. Nothing contained in
this section shall be construed to preclude any Director from
serving the Corporation in any other capacity, as officer, agent,
employee or otherwise, and being compensated for such
service.
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ARTICLE IV
NOTICES
4.1 Generally.
Whenever under the provisions of the Articles of
Incorporation or these Bylaws, or by law, notice is required to be
given to any Director or stockholder, it shall not be construed to
require personal notice, but such notice may be given in writing,
by mail or by courier service, by depositing the same in a post
office or letter box, or with a courier service, in a prepaid
sealed wrapper, addressed to such Director or stockholder at such
address as appears on the books of the Corporation, or, in default
of other address, to such Director or stockholder at the last known
address of such person, and notice shall be deemed to be given at
the time when the same shall be thus deposited.
4.2 Waiver
of Notice. Whenever any notice is required to be given
under the provisions of the Articles of Incorporation or these
Bylaws, or by law, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto.
Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when such person attends a
meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business on the ground that
the meeting is not lawfully convened.
ARTICLE V
OFFICERS
5.1 Officers.
The Officers of the Corporation shall be chosen by the Board
of Directors and shall consist of a Chairman, Chief Executive
Officer, President, a Vice President, a Secretary, and a Treasurer.
The Board of Directors may also choose additional Vice
Presidents, and one or more Assistant Secretaries and Assistant
Treasurers, and may appoint such other Officers and agents as it
shall deem necessary. Two or more offices may be held by the
same person, except that neither the Chairman, the Chief Executive
Officer nor the President shall serve as the
Secretary.
5.2 Election;
Term of Office; Removal. The Board of Directors at its
first meeting after each annual meeting of stockholders shall elect
the Chairman, Chief Executive Officer, President, one or more Vice
Presidents, the Secretary, the Treasurer, and such other Officers
as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board. The
Officers of the Corporation shall hold office until their
successors are chosen and qualify in their stead, or until such
time as they may resign or be removed from office. Any
Officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the
whole Board of Directors. If the office of any Officer
becomes vacant for any reason, the vacancy shall be filled by the
Board of Directors. In the case of any office other than that
of the Chair, Vice Chair, Chief Executive Officer, President,
Secretary or Treasurer, the officer designated as the Chief
Executive Officer may appoint a person to serve in such office, on
a temporary basis, until the vacancy is filled by the
Board.
5.3 Compensation.
The salaries of all Officers and agents of the Corporation
shall be fixed by or in the manner prescribed by the Board of
Directors.
5.4 The
Chair of the Board. The Chair of the Board shall,
except as otherwise provided in these Bylaws, preside at each
meeting of the stockholders and of the Board of Directors, and
shall perform such other duties as may from time to time be
assigned by the Board of Directors.
5.5 The
Vice Chair of the Board.
The Board of Directors may appoint a Vice Chair of the
Board. The Vice Chair of the Board shall assist the Chair of
the Board and have such other duties as may be assigned by the
Board of Directors.
50
5.6 Other
Designated Officers.
(i) Chief
Executive Officer. The Chief Executive Officer shall
have general supervision over the business and affairs of the
Corporation and over its Officers, agents, and
employees; subject,
however, to the oversight of the Board of Directors.
The Chief Executive Officer shall report directly to the
Board of Directors, and shall perform such duties as are incident
to the office of the Chief Executive Officer or are properly
specified and authorized by the Board of Directors.
(ii) Other
Officers. The Board of Directors may designate
officers to serve as Chief Operating Officer, Chief Financial
Officer, Chief Accounting Officer and other such designated
positions and to fulfill the responsibilities of such designated
positions as determined by the Board of Directors in addition to
their duties as Officers as set forth in these Bylaws.
5.7 The
President. The President shall report to the Chief
Executive Officer, unless the President and Chief Executive Officer
are the same person in which case the President shall report to the
Board of Directors. The President shall perform such duties
as are incident to the office of the President or are properly
specified and authorized by the Board of Directors. In the
absence or disability of the Chief Executive Officer, the President
shall perform the duties and exercise the powers of the Chief
Executive Officer.
5.8 Vice
Presidents. The Vice Presidents, in the order fixed by
the Board of Directors, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the
President, and shall perform such other duties as the Board of
Directors shall prescribe.
5.9 The
Secretary. The Secretary shall attend all meetings of
the Board and all meetings of the stockholders, shall record all
votes and the minutes of all proceedings in a book to be kept for
that purpose, and shall perform like duties for the standing
committees when required. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or the
President. The Secretary shall keep in safe custody the seal
of the Corporation and, when authorized by the Board, affix the
same to any instrument requiring it and, when so affixed, it shall
be attested by the Secretary’s signature or by the signature
of the Treasurer or an Assistant Secretary.
5.10 Assistant
Secretaries. The Assistant Secretaries, in the order
fixed by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as the
Board of Directors shall prescribe.
5.11 The
Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation, and shall deposit all moneys and other valuables in
the name and to the credit of the Corporation in such depositories
or other institutions as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the
Corporation by check or by electronic or wire transfer, as may be
ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer,
President and Directors, at the regular meetings of the Board, or
whenever they may require it, an account of all transactions as
Treasurer and of the financial condition of the
Corporation.
5.12 Assistant
Treasurers. The Assistant Treasurers, in the order
fixed by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the
Board of Directors shall prescribe.
51
ARTICLE VI
STOCK CERTIFICATES, TRANSFERS AND RECORD DATE
6.1 Certificates
of Stock. Shares of capital stock of the Corporation
shall be certificated. The certificates of stock of the
Corporation shall be numbered and registered in the stock ledger
and transfer books of the Corporation as they are issued. The
stock certificates of the Corporation shall be signed by the Chief
Executive Officer, the President or a Vice President and the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, and shall bear the corporate seal, which may
be a facsimile, engraved or printed. Any or all of the
signatures on the certificate may be facsimiles, engraved or
printed. In the event that any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been
placed upon any share certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if such person
were such officer, transfer agent, or registrar at the date of
issue. Stock certificates of the Corporation shall be in such
form as provided by statute and approved by the Board of Directors.
The stock record books and the blank stock certificates books
shall be kept by the Secretary or by any agency designated by the
Board of Directors for that purpose.
6.2 Registration
of Transfer. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly
endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction
upon its books. The Board of Directors shall have authority
to make such rules and regulations not inconsistent with law, the
Articles of Incorporation or these Bylaws, as it deems expedient
concerning the issuance, transfer and registration of certificates
for shares and the shares represented thereby.
6.3 Record
Date for Stockholders. For the purpose of determining
the stockholders entitled to notice of or to vote at any annual or
special meeting of stockholders or any adjournment thereof, or for
the purpose of determining stockholders entitled to receive payment
of any dividend or other distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any
change, conversion, or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a
date as the record date for any such determination of stockholders.
Such date shall not be more than sixty (60) days nor less
than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date
is fixed, the record date for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on
which notice is given, or if notice is waived, at the close of
business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
When a determination of stockholders of record entitled to
notice of or to vote at any meeting of stockholders has been made
as provided in this paragraph, such determination shall apply to
any adjournment thereof; provided, however, that the Board of
Directors may fix a new record date for the adjourned
meeting.
6.4 Registered
Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the
holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided
by law.
52
6.5 Lost
Certificates. The Board of Directors may direct that a
new certificate or certificates be issued in place of any
certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen or destroyed. When authorizing the
issuance of such new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or the owner’s legal
representative, to advertise the same in such manner as it shall
require and/or give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
ARTICLE VII
DIVIDENDS
7.1 Power
to Declare Dividends. Dividends upon the capital stock
of the Corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Articles of
Incorporation.
7.2 Discretion
of the Board. Before payment of any dividend, there
may be set aside out of any funds of the Corporation available for
dividends, such sum or sums as the Directors from time to time, in
their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other
purpose as the Directors shall think conducive to the interest of
the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Instruments.
All checks, demands for money, notes, deeds, mortgages,
bonds, contracts and other instruments of the Corporation shall be
signed by such Officer or Officers or such other person or persons
as the Board of Directors may from time to time
designate.
8.2 Borrowing.
No officer, agent or employee of the Corporation shall have
any power or authority to borrow money on behalf of the
Corporation, to pledge the Corporation’s credit, or to
mortgage or pledge the Corporation’s real or personal
property, except within the scope and to the extent such authority
has been delegated to such person by resolution of the Board of
Directors. Such authority may be given by the Board and may
be general or limited to specific instances.
8.3 Voting
Securities of Other Corporations. Subject to any
specific direction from the Board of Directors, the officer
designated as the Chief Executive Officer of the Corporation, or
any other person or persons who may from time to time be designated
by the Board of Directors, shall have the authority to vote on
behalf of the Corporation the securities of any other corporation
which are owned or held by the Corporation and may attend meetings
of stockholders or execute and deliver proxies or written consents
for such purpose.
8.4 Fiscal
Year. The fiscal year shall begin the first day of
October in each year.
8.5 Seal.
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words
“Corporate Seal, Nevada.” Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
53
8.6 Books
and Records of the Corporation. The books and records
of the Corporation shall be kept at such places as the Board may
from time to time determine.
ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS
9.1 Right
To Indemnification. Each person who was or is made a
party or is threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact such person is or was a
Director or Officer of the Corporation or is or was serving at the
request of the Corporation as a Director or Officer of another
corporation or of a partnership, joint venture, trust or other
enterprise, shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by the Nevada General
Corporation Law against all expense, liability and loss (including
attorneys’ fees, judgments, fines or penalties and amounts
paid in settlement) reasonably incurred or suffered by such person
in connection therewith, and such indemnification shall continue as
to such person who has ceased to be a Director or Officer and shall
inure to the benefit of the person’s heirs, executors and
administrators. For purposes of this section, persons serving
as Director or Officer of the Corporation’s direct or
indirect wholly-owned subsidiaries shall be deemed to be serving at
the Corporation’s request.
9.2 Right
To Advancement Of Expenses. The right to
indemnification conferred in Section 9.1 above shall include the
right to be paid by the Corporation the expenses incurred in
defending any action, suit, or proceeding in advance of its final
disposition, subject to the receipt by the Corporation of an
undertaking by or on behalf of such person to repay all amounts so
advanced if it shall ultimately be determined that such person is
not entitled to be indemnified.
9.3 Nonexclusivity
of Rights. The rights to indemnification and to the
advancement of expenses contained in this section shall not be
exclusive of any other right which any person may have or hereafter
acquire under any law, provision of the Corporation’s
Articles of Incorporation, Bylaws, agreement, vote of stockholders
or disinterested Directors or otherwise.
9.4 Employee
Benefit Plans. For purposes of this Article IX,
references to “other enterprises” shall include
employee benefit plans; references to “fines” shall
include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to “serving at the
request of the Corporation” shall include any service as a
Director or Officer of the Corporation which imposes duties on, or
involves services by, such Director or Officer with respect to an
employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have
acted in a manner “not opposed to the best interests of the
Corporation.”
54
ARTICLE X
AMENDMENTS
10.1 Amendment
of Bylaws. These Bylaws may be amended, altered or
repealed at any regular meeting of the stockholders, or at any
special meeting of the stockholders provided that notice of the
proposed amendment, alteration or repeal be contained in the notice
of such special meeting, by the affirmative vote of the holders of
a majority of the outstanding shares of capital stock entitled to
vote at such meeting and present or represented thereat. The
Board of Directors also may amend, alter or repeal the Bylaws by
the affirmative vote of a majority of the entire Board at any
regular meeting of the Board or at any special meeting of the Board
if notice of the proposed amendment, alteration or repeal be
contained in the notice of such special meeting.
=========================================
I,
_______________________, the Secretary of Know Labs, Inc., a Nevada
corporation, hereby certify that the foregoing Amended and Restated
Bylaws, comprising 15 pages, were duly adopted as the Amended and
Restated Bylaws of Know Labs, Inc. on _______________,
2021.
____________________________________
(Signature)
Print
Name: __________________________
55
APPENDIX B
KNOW LABS, INC.
2021 EQUITY INCENTIVE PLAN
SECTION 1.
PURPOSE
The
purpose of the Know Labs, Inc. 2021 Equity Incentive Plan is to
attract, retain and motivate employees, officers, directors,
consultants, agents, advisors and independent contractors of the
Company and its Related Companies by providing them the opportunity
to acquire a proprietary interest in the Company and to align their
interests and efforts to the long-term interests of the
Company’s stockholders.
SECTION 2.
DEFINITIONS
Certain
capitalized terms used in the Plan have the meanings set forth in
Appendix
A.
SECTION 3. ADMINISTRATION
3.1
Administration
of the Plan
The
Plan shall be administered by the Board. Notwithstanding the
foregoing, the Board may delegate concurrent responsibility for
administering the Plan, including with respect to designated
classes of Eligible Persons, to a committee or committees (which
term includes subcommittees) consisting of two or more members of
the Board, subject to such limitations as the Board deems
appropriate. Members of any committee shall serve for such term as
the Board may determine, subject to removal by the Board at any
time. All references in the Plan to the “Plan
Administrator” shall be, as applicable, to the Board
or any committee to whom the Board has delegated authority to
administer the Plan.
3.2
Administration
and Interpretation by Plan Administrator
(a)
Except for the terms and conditions explicitly set forth in the
Plan and to the extent permitted by applicable law, the Plan
Administrator shall have full power and exclusive authority,
subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be adopted by the
Board or a committee composed of members of the Board, to
(i) select the Eligible Persons to whom Awards may from time
to time be granted under the Plan; (ii) determine the type or
types of Awards to be granted to each Participant under the Plan;
(iii) determine the number of shares of Common Stock to be
covered by each Award granted under the Plan; (iv) determine
the terms and conditions of any Award granted under the Plan;
(v) approve the forms of notice or agreement for use under the
Plan; (vi) determine whether, to what extent and under what
circumstances Awards may be settled in cash, shares of Common Stock
or other property or canceled or suspended; (vii) interpret
and administer the Plan and any instrument evidencing an Award,
notice or agreement executed or entered into under the Plan;
(viii) establish such rules and regulations as it shall deem
appropriate for the proper administration of the Plan;
(ix) delegate ministerial duties to such of the
Company’s employees as it so determines; and (x) make
any other determination and take any other action that the Plan
Administrator deems necessary or desirable for administration of
the Plan.
(b)
The effect on the vesting of an Award of a Company-approved leave
of absence or a Participant’s reduction in hours of
employment or service shall be determined by the Company’s
chief human resources officer or other person performing that
function or, with respect to directors or executive officers, by
the Plan Administrator, whose determination shall be
final.
(c)
Decisions of the Plan Administrator shall be final, conclusive and
binding on all persons, including the Company, any Participant, any
stockholder and any Eligible Person. A majority of the members of
the Plan Administrator may determine its actions.
56
SECTION 4. SHARES SUBJECT TO
THE PLAN
4.1
Authorized
Number of Shares
Subject
to the provisions of Section 14.1, the maximum aggregate
number of Shares that may be issued under the Plan is twenty
million (20,000,000), plus (i) the number of Shares added to
the Plan pursuant to Section 4.2 and (ii) the sum of
(A) any Shares that, as of the date of stockholder approval of
this Plan, have been reserved but not issued pursuant to any awards
granted under the Company’s 2011 Stock Incentive Plan, as
amended (the “2011 Plan”), and (B) any Shares
subject to stock options or similar awards granted under the 2011
Plan that, after the date of stockholder approval of this Plan,
expire or otherwise terminate without having been exercised in full
and Shares issued pursuant to awards granted under the 2011 Plan
that are forfeited to or repurchased by the Company, with the
maximum number of Shares to be added to the Plan pursuant to clause
(ii) equal to 14,650,120. The Shares may be
authorized, but unissued, or reacquired Common Stock.
4.2
Automatic
Share Reserve Increase
Subject
to the provisions of Section 14 of the Plan, the number of
Shares available for issuance under the Plan will be increased on
the first day of each calendar year beginning January 1, 2022 and
ending on and including January 1, 2030 in an amount equal to the
least of (i) 2,000,000 Shares, (ii) four percent (4%) of
the outstanding Shares on the last day of the immediately preceding
Fiscal Year or (iii) such number of Shares determined by the
Board; provided, that such determination under clause
(iii) will be made no later than the last day of the
immediately preceding Fiscal Year.
4.3
Share
Usage
(a)
Shares of Common Stock covered by an Award shall not be counted as
used unless and until they are actually issued and delivered to a
Participant. If any Award lapses, expires, terminates or is
canceled prior to the issuance of shares thereunder or if shares of
Common Stock are issued under the Plan to a Participant and
thereafter are forfeited to or otherwise reacquired by the Company,
the shares subject to such Awards and the forfeited or reacquired
shares shall again be available for issuance under the Plan. Any
shares of Common Stock (i) tendered by a Participant or
retained by the Company as full or partial payment to the Company
for the purchase price of an Award or to satisfy tax withholding
obligations in connection with an Award, or (ii) covered by an
Award that is settled in cash or in a manner such that some or all
of the shares covered by the Award are not issued, shall be
available for Awards under the Plan. The number of shares of Common
Stock available for issuance under the Plan shall not be reduced to
reflect any dividends or dividend equivalents that are reinvested
into additional shares of Common Stock or credited as additional
shares of Common Stock subject or paid with respect to an
Award.
(b)
The Plan Administrator shall also, without limitation, have the
authority to grant Awards as an alternative to or as the form of
payment for grants or rights earned or due under other compensation
plans or arrangements of the Company.
(c)
Notwithstanding any other provision of the Plan to the contrary,
the Plan Administrator may grant Substitute Awards under the Plan.
In the event that a written agreement between the Company and an
Acquired Entity pursuant to which a merger, consolidation or
statutory share exchange is completed is approved by the Board and
that agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the
Acquired Entity, those terms and conditions shall be deemed to be
the action of the Plan Administrator without any further action by
the Plan Administrator, and the persons holding such awards shall
be deemed to be Participants.
(d)
Notwithstanding any other provisions in this Section 4 to the
contrary, the maximum number of shares that may be issued upon the
exercise of Incentive Stock Options shall equal the aggregate share
number stated in Section 4.1, subject to increase as set forth
in Section 4.2 and subject further to adjustment as provided in
Section 14.1.
57
SECTION 5.
ELIGIBILITY
An
Award may be granted to any employee, officer or director of the
Company or a Related Company whom the Plan Administrator from time
to time selects. An Award may also be granted to any consultant,
agent, advisor or independent contractor for bona fide services
rendered to the Company or any Related Company that (a) are
not in connection with the offer and sale of the Company’s
securities in a capital-raising transaction and (b) do not
directly or indirectly promote or maintain a market for the
Company’s securities.
SECTION 6.
AWARDS
6.1
Form,
Grant and Settlement of Awards
The
Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be granted
under the Plan. Such Awards may be granted either alone or in
addition to or in tandem with any other type of Award. Any Award
settlement may be subject to such conditions, restrictions and
contingencies as the Plan Administrator shall
determine.
6.2
Evidence
of Awards
Awards
granted under the Plan shall be evidenced by a written, including
an electronic, instrument that shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator
shall deem advisable and that are not inconsistent with the
Plan.
6.3
Dividends
and Distributions
Participants
may, if the Plan Administrator so determines, be credited with
dividends or dividend equivalents paid with respect to shares of
Common Stock underlying an Award in a manner determined by the Plan
Administrator in its sole discretion. The Plan Administrator may
apply any restrictions to the dividends or dividend equivalents
that the Plan Administrator deems appropriate. The Plan
Administrator, in its sole discretion, may determine the form of
payment of dividends or dividend equivalents, including cash,
shares of Common Stock, Restricted Stock or Stock Units.
Notwithstanding the foregoing, the right to any dividends or
dividend equivalents declared and paid on the number of shares
underlying an Option or Stock Appreciation Right may not be
contingent, directly or indirectly, on the exercise of the Option
or Stock Appreciation Right, and must comply with or qualify for an
exemption under Section 409A. Also notwithstanding the
foregoing, the right to any dividends or dividend equivalents
declared and paid on Restricted Stock must (a) be paid at the
same time they are paid to other stockholders and (b) comply
with or qualify for an exemption under
Section 409A.
SECTION 7.
OPTIONS
7.1
Grant
of Options
The
Plan Administrator may grant Options designated as Incentive Stock
Options or Nonqualified Stock Options.
7.2
Option
Exercise Price
Options
shall be granted with an exercise price per share not less than
100% of the Fair Market Value of the Common Stock on the Grant Date
(and not less than the minimum exercise price required by
Section 422 of the Code with respect to Incentive Stock
Options), except in the case of Substitute Awards. Notwithstanding
the foregoing, the Plan Administrator may grant Nonqualified Stock
Options with an exercise price per share less than the Fair Market
Value of the Common Stock on the Grant Date if the Option meets all
the requirements for Awards that are considered “deferred
compensation” within the meaning of
Section 409A.
58
7.3
Term
of Options
Subject
to earlier termination in accordance with the terms of the Plan and
the instrument evidencing the Option, the maximum term of an Option
(the “Option Term”)
shall be ten years from the Grant Date. For Incentive Stock
Options, the maximum Option Term shall be as specified in
Section 8.4.
7.4
Exercise
of Options
The
Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in
which, the Option shall vest and thus become exercisable, any of
which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument
evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or
modified by the Plan Administrator at any time:
|
Period of Participant’s Continuous Employment or
Service with the
Company or Its Related Companies
|
Portion of Total Option that is Vested
and Exercisable from the Vesting
Commencement Date
|
|
12
months
|
25%
|
|
13 to
48 months
|
1/48th
per month
|
To the
extent an Option has vested and become exercisable, the Option may
be exercised in whole or from time to time in part by delivery to
or as directed or approved by the Company of a properly executed
stock option exercise agreement or notice, in a form and in
accordance with procedures established by the Company, setting
forth the number of shares with respect to which the Option is
being exercised, the restrictions imposed on the shares purchased
under such exercise agreement or notice, if any, and such
representations and agreements as may be required by the Plan
Administrator, accompanied by payment in full as described in
Section 7.5. An Option may be exercised only for whole shares
and may not be exercised for less than a reasonable number of
shares at any one time, as determined by the Company.
7.5
Payment
of Exercise Price
The
exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the
product of the Option exercise price and the number of shares
purchased. Such consideration must be paid before the Company will
issue the shares being purchased and must be in a form or a
combination of forms acceptable to the Plan Administrator for that
purchase, which forms may include:
(e)
cash;
(f)
check or wire transfer;
(g)
having the Company withhold shares of Common Stock that would
otherwise be issued on exercise of the Option that have an
aggregate Fair Market Value equal to the aggregate exercise price
of the shares being purchased under the Option;
(h)
tendering (either actually or, if and so long as the Common Stock
is registered under Section 12(b) or 12(g) of the Exchange
Act, by attestation) shares of Common Stock owned by the
Participant that have an aggregate Fair Market Value equal to the
aggregate exercise price of the shares being purchased under the
Option;
(i)
if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, and to the extent
permitted by law, delivery of a properly executed exercise
agreement or notice, together with irrevocable instructions to a
brokerage firm designated or approved by the Company to deliver
promptly to the Company the aggregate amount of proceeds to pay the
Option exercise price and any tax withholding obligations that may
arise in connection with the exercise, all in accordance with the
regulations of the Federal Reserve Board; or
59
(j)
such other consideration as the Plan Administrator may
permit.
In
addition, to assist a Participant (including directors and
executive officers) in acquiring shares of Common Stock pursuant to
an Option granted under the Plan, the Plan Administrator, in its
sole discretion and only to the extent permitted by applicable law,
may authorize, either at the Grant Date or at any time before the
acquisition of Common Stock pursuant to the Option, (i) the
payment by a Participant of the purchase price of the Common Stock
by a promissory note or (ii) the guarantee by the Company of a
loan obtained by the Participant from a third party. Such notes or
loans must be full recourse to the extent necessary to avoid
adverse accounting charges to the Company’s earnings for
financial reporting purposes. Subject to the foregoing, the Plan
Administrator shall in its sole discretion specify the terms of any
loans or loan guarantees, including the interest rate and terms of
and security for repayment.
7.6
Effect
of Termination of Service
The
Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be
exercisable, and the terms and conditions of such exercise, after a
Termination of Service, any of which provisions may be waived or
modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and
conditions, which may be waived or modified by the Plan
Administrator at any time:
(k) Any
portion of an Option that is not vested and exercisable on the date
of a Participant’s Termination of Service shall expire on
such date.
(l)
Any portion of an Option that is vested and exercisable on the date
of a Participant’s Termination of Service shall expire on the
earliest to occur of:
(i)
if the Participant’s Termination of Service occurs for
reasons other than Cause, Disability or death, the date that is
three months after such Termination of Service;
(ii)
if the Participant’s Termination of Service occurs by reason
of Disability or death, the one-year anniversary of such
Termination of Service; and
(iii)
the Option
Expiration Date.
Notwithstanding
the foregoing, if a Participant dies after such Participant’s
Termination of Service but while an Option is otherwise
exercisable, the portion of the Option that is vested and
exercisable on the date of such Termination of Service shall expire
upon the earlier to occur of (y) the Option Expiration Date
and (z) the one-year anniversary of the date of death, unless
the Plan Administrator determines otherwise.
Also
notwithstanding the foregoing, in case a Participant’s
Termination of Service occurs for Cause, all Options granted to the
Participant shall automatically expire upon first notification to
the Participant of such termination, unless the Plan Administrator
determines otherwise. If a Participant’s employment or
service relationship with the Company is suspended pending an
investigation of whether the Participant shall be terminated for
Cause, all the Participant’s rights under any Option shall
likewise be suspended during the period of investigation. If any
facts that would constitute termination for Cause are discovered
after a Participant’s Termination of Service, any Option then
held by the Participant may be immediately terminated by the Plan
Administrator, in its sole discretion.
SECTION 8. INCENTIVE STOCK
OPTION LIMITATIONS
Notwithstanding
any other provisions of the Plan to the contrary, the terms and
conditions of any Incentive Stock Options shall in addition comply
in all respects with Section 422 of the Code, or any successor
provision, and any applicable regulations thereunder, including, to
the extent required thereunder, the following:
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8.1
Dollar
Limitation
To the
extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which a Participant’s
Incentive Stock Options become exercisable for the first time
during any calendar year (under the Plan and all other stock option
plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such portion in excess of $100,000 shall be
treated as a Nonqualified Stock Option. In the event the
Participant holds two or more such Options that become exercisable
for the first time in the same calendar year, such limitation shall
be applied on the basis of the order in which such Options are
granted.
8.2
Eligible
Employees
Individuals
who are not employees of the Company or one of its parent or
subsidiary corporations on the Grant Date may not be granted
Incentive Stock Options.
8.3
Exercise
Price
Incentive
Stock Options shall be granted with an exercise price per share not
less than 100% of the Fair Market Value of the Common Stock on the
Grant Date, and in the case of an Incentive Stock Option granted to
a Participant who owns more than 10% of the total combined voting
power of all classes of the stock of the Company or of its parent
or subsidiary corporations (a “Ten Percent
Stockholder”), shall be granted with an exercise price
per share not less than 110% of the Fair Market Value of the Common
Stock on the Grant Date. The determination of more than 10%
ownership shall be made in accordance with Section 422 of the
Code.
8.4
Option
Term
Subject
to earlier termination in accordance with the terms of the Plan and
the instrument evidencing the Option, the maximum term of an
Incentive Stock Option shall not exceed ten years, and in the case
of an Incentive Stock Option granted to a Ten Percent Stockholder,
shall not exceed five years.
8.5
Exercisability
An
Option designated as an Incentive Stock Option shall cease to
qualify for favorable tax treatment as an Incentive Stock Option to
the extent it is exercised (if permitted by the terms of the
Option) (a) more than three months after the date of a
Participant’s termination of employment if termination was
for reasons other than death or disability, (b) more than one
year after the date of a Participant’s termination of
employment if termination was by reason of disability, or
(c) more than six months following the first day of a
Participant’s leave of absence that exceeds three months,
unless the Participant’s reemployment rights are guaranteed
by statute or contract.
8.6
Taxation
of Incentive Stock Options
In
order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must
hold the shares acquired upon the exercise of an Incentive Stock
Option for the later of two years after the Grant Date and one year
after the date of exercise.
A
Participant may be subject to the alternative minimum tax at the
time of exercise of an Incentive Stock Option. The Participant
shall give the Company prompt notice of any disposition of shares
acquired on the exercise of an Incentive Stock Option prior to the
expiration of such holding periods.
8.7
Code
Definitions
For the
purposes of this Section 8, “disability,”
“parent corporation” and “subsidiary
corporation” shall have the meanings attributed to those
terms for purposes of Section 422 of the Code.
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8.8
Promissory
Notes
The
amount of any promissory note delivered pursuant to
Section 7.5 in connection with an Incentive Stock Option shall
bear interest at a rate specified by the Plan Administrator, but in
no case less than the rate required to avoid imputation of interest
(taking into account any exceptions to the imputed interest rules)
for federal income tax purposes.
SECTION 9. STOCK APPRECIATION
RIGHTS
9.1
Grant
of Stock Appreciation Rights
The
Plan Administrator may grant Stock Appreciation Rights to
Participants at any time on such terms and conditions as the Plan
Administrator shall determine in its sole discretion. A SAR may be
granted in tandem with an Option (“tandem SAR”)
or alone (“freestanding
SAR”). The grant price of a tandem SAR shall be equal
to the exercise price of the related Option. The grant price of a
freestanding SAR shall be established in accordance with procedures
for Options set forth in Section 7.2. A SAR may be exercised
upon such terms and conditions and for the term as the Plan
Administrator determines in its sole discretion; provided, however, that, subject to earlier
termination in accordance with the terms of the Plan and the
instrument evidencing the SAR, the maximum term of a freestanding
SAR shall be ten years, and in the case of a tandem SAR,
(a) the term shall not exceed the term of the related Option
and (b) the tandem SAR may be exercised for all or part of the
shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option,
except that the tandem SAR may be exercised only with respect to
the shares for which its related Option is then
exercisable.
9.2
Payment
of SAR Amount
Upon
the exercise of a SAR, a Participant shall be entitled to receive
payment in an amount determined by multiplying: (a) the
difference between the Fair Market Value of the Common Stock on the
date of exercise over the grant price of the SAR by (b) the
number of shares with respect to which the SAR is exercised. At the
discretion of the Plan Administrator as set forth in the instrument
evidencing the Award, the payment upon exercise of a SAR may be in
cash, in shares, in some combination thereof or in any other manner
approved by the Plan Administrator in its sole
discretion.
9.3
Waiver
of Restrictions
The
Plan Administrator, in its sole discretion, may waive any other
terms, conditions or restrictions on any SAR under such
circumstances and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.
SECTION 10. STOCK AWARDS,
RESTRICTED STOCK AND STOCK UNITS
10.1
Grant
of Stock Awards, Restricted Stock and Stock
Units
The
Plan Administrator may grant Stock Awards, Restricted Stock and
Stock Units on such terms and conditions and subject to such
repurchase or forfeiture restrictions, if any, which may be based
on continuous service with the Company or a Related Company or the
achievement of any Performance Goals, as the Plan Administrator
shall determine in its sole discretion, which terms, conditions and
restrictions shall be set forth in the instrument evidencing the
Award.
10.2
Vesting
of Restricted Stock and Stock Units
Upon
the satisfaction of any terms, conditions and restrictions
prescribed with respect to Restricted Stock or Stock Units, or upon
a Participant’s release from any terms, conditions and
restrictions of Restricted Stock or Stock Units, as determined by
the Plan Administrator, (a) the shares of Restricted Stock
covered by each Award of Restricted Stock shall become freely
transferable by the Participant subject to the terms and conditions
of the Plan (including the restrictions on Transfer set forth in
Section 13, the rights of first refusal and repurchase set
forth in Section 15 and the market standoff requirements set
forth in Section 16), the instrument evidencing the Award, and
applicable securities laws, and (b) Stock Units shall be paid
in shares of Common Stock or, if set forth in the instrument
evidencing the Award, in cash or a combination of cash and shares
of Common Stock. Any fractional shares subject to such Awards shall
be paid to the Participant in cash.
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10.3
Waiver
of Restrictions
The
Plan Administrator, in its sole discretion, may waive the
repurchase or forfeiture period and any other terms, conditions or
restrictions on any Restricted Stock or Stock Units under such
circumstances and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.
SECTION 11. OTHER STOCK OR
CASH-BASED AWARDS
Subject
to the terms of the Plan and such other terms and conditions as the
Plan Administrator deems appropriate, the Plan Administrator may
grant other incentives payable in cash or in shares of Common Stock
under the Plan.
SECTION 12.
WITHHOLDING
The
Company may require the Participant to pay to the Company the
amount of (a) any taxes that the Company is required by
applicable federal, state, local or foreign law to withhold with
respect to the grant, vesting or exercise of an Award
(“tax
withholding obligations”) and (b) any amounts due
from the Participant to the Company or to any Related Company
(“other
obligations”). Notwithstanding any other provision of
the Plan to the contrary, the Company shall not be required to
issue any shares of Common Stock or otherwise settle an Award under
the Plan until such tax withholding obligations and other
obligations are satisfied.
The
Plan Administrator may permit or require a Participant to satisfy
all or part of the Participant’s tax withholding obligations
and other obligations by (i) paying cash to the Company,
(ii) having the Company withhold an amount from any cash
amounts otherwise due or to become due from the Company to the
Participant, (iii) having the Company withhold a number of
shares of Common Stock that would otherwise be issued to the
Participant (or become vested, in the case of Restricted Stock or
Stock Units) having a Fair Market Value equal to the tax
withholding obligations and other obligations, or
(iv) surrendering a number of shares of Common Stock the
Participant already owns having a value equal to the tax
withholding obligations and other obligations. The value of the
shares so withheld or tendered may not exceed the employer’s
minimum required tax withholding rate.
SECTION 13. ASSIGNABILITY
(m)
No Award may be Transferred by a Participant other than by will, or
by the applicable laws of descent and distribution, to one or more
of such Participant’s Immediate Family Members or by
gratuitous Transfer to a trust, family limited partnership, family
limited liability company or other bona fide estate planning or
planned gifting vehicle for the benefit of such Participant or one
or more of such Participant’s Immediate Family Members.
During a Participant’s lifetime, an Award may be exercised
only by the Participant. Notwithstanding the foregoing and to the
extent permitted by Section 422 of the Code, the Plan
Administrator, in its sole discretion, may permit a Participant to
Transfer an Award, subject to such terms and conditions as the Plan
Administrator shall specify.
(n)
In addition to the restrictions set forth above in
Section 13(a), no shares of Transfer Restricted Common Stock
received in connection with an Award may be Transferred, whether by
a Participant or any other person or entity, except pursuant to a
Permitted Transfer. As a condition to any Permitted Transfer, the
person or entity to whom Transfer Restricted Common Stock is to be
so Transferred shall be obligated to execute an agreement in form
and substance prescribed by the Plan Administrator under which the
recipient agrees (i) to be bound by the terms and conditions
of the Plan (including, without limitation, the restrictions on
Transfer set forth in this Section 13, the rights of first
refusal and repurchase set forth in Section 15 and the market
standoff requirements set forth in Section 16), and
(ii) that the shares so Transferred to the recipient will
continue to constitute Transfer Restricted Common Stock subject to
this Section 13 following such Permitted Transfer. The
restrictions on Transfer imposed by this Section 13(b) shall
terminate upon the earlier to occur of (x) the closing of an
underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed
under the Securities Act and (y) the closing of a Company
Transaction that is not a Related Party Transaction. This
Section 13(b), and any determination or agreement that a given
Transfer of Transfer Restricted Common Stock would be deemed a
Permitted Transfer, will in no way limit or reduce the
Company’s rights under Section 15 with respect to such
Transfer.
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SECTION 14.
ADJUSTMENTS
14.1
Adjustment
of Shares
In the
event, at any time or from time to time, a stock dividend, stock
split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, statutory share exchange,
distribution to stockholders other than a normal cash dividend, or
other change in the Company’s corporate or capital structure
results in (a) the outstanding shares of Common Stock, or any
securities exchanged therefor or received in their place, being
exchanged for a different number or kind of securities of the
Company or any other company or (b) new, different or
additional securities of the Company or any other company being
received by the holders of shares of Common Stock, then the Plan
Administrator shall make proportional adjustments in (i) the
maximum number and kind of securities available for issuance under
the Plan; (ii) the maximum number and kind of securities
issuable as Incentive Stock Options as set forth in
Section 4.3(d); and (iii) the number and kind of
securities that are subject to any outstanding Award and the per
share price of such securities, without any change in the aggregate
price to be paid therefor. The determination by the Plan
Administrator as to the terms of any of the foregoing adjustments
shall be conclusive and binding.
Notwithstanding
the foregoing, the issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any
class, for cash or property, or for labor or services rendered,
either upon direct sale or upon the exercise of rights or warrants
to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made
with respect to, outstanding Awards. Also notwithstanding the
foregoing, a dissolution or liquidation of the Company or a Change
of Control shall not be governed by this Section 14.1 but
shall be governed by Sections 14.2 and 14.3,
respectively.
14.2
Dissolution
or Liquidation
To the
extent not previously exercised or settled, and unless otherwise
determined by the Plan Administrator in its sole discretion, Awards
shall terminate immediately prior to the dissolution or liquidation
of the Company. To the extent a vesting condition, forfeiture
provision or repurchase right applicable to an Award has not been
waived by the Plan Administrator, the Award shall be forfeited
immediately prior to the consummation of the dissolution or
liquidation.
14.3
Change
of Control
(o)
Notwithstanding any other provision of the Plan to the contrary,
unless the Plan Administrator determines otherwise with respect to
a particular Award in the instrument evidencing the Award or in a
written employment, services or other agreement between the
Participant and the Company or a Related Company, in the event of a
Change of Control:
(i)
If and to the extent an outstanding Award is not converted,
assumed, substituted for or replaced by the Successor Company, then
effective immediately prior to the Change of Control, any such
Award held by a Participant whose employment or service has not
terminated prior to such Change of Control shall become
additionally vested and exercisable or payable, and applicable
restrictions or forfeiture provisions shall lapse, with respect to
100% of the unvested portion of such Award. Awards shall then
terminate upon effectiveness of the Change of Control if and to the
extent not exercised at or prior to consummation of the Change of
Control.
(ii)
If and to the extent the Successor Company converts, assumes,
substitutes for or replaces an outstanding Award, the vesting
and/or exercisability restrictions and/or forfeiture or repurchase
provisions applicable to such Award shall not be accelerated or
lapse, and all such vesting and/or exercisability restrictions
and/or forfeiture or repurchase provisions shall continue with
respect to any shares of the Successor Company or other
consideration that may be received with respect to such
Award.
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(p)
For the purposes of Section 14.3(a), an Award shall be
considered converted, assumed, substituted for or replaced by the
Successor Company if following the Change of Control the Award
confers the right to purchase or receive, for each share of Common
Stock subject to the Award immediately prior to the Change of
Control, the consideration (whether stock, cash or other securities
or property) received in the Change of Control by holders of Common
Stock for each share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the
outstanding shares); provided, however, that if such consideration
received in the Change of Control is not solely common stock of the
Successor Company, the Plan Administrator may, with the consent of
the Successor Company, provide for the consideration to be received
pursuant to the Award, for each share of Common Stock subject
thereto, to be solely common stock of the Successor Company
substantially equal in fair market value to the per share
consideration received by holders of Common Stock in the Change of
Control. The determination of such substantial equality of value of
consideration shall be made by the Plan Administrator, and its
determination shall be conclusive and binding.
(q)
Notwithstanding the foregoing, the Plan Administrator, in its sole
discretion, may instead provide in the event of a Change of Control
that a Participant’s outstanding Awards shall terminate upon
or immediately prior to such Change of Control and that each such
Participant shall receive, in exchange therefor, a cash payment
equal to the amount (if any) by which (i) the Acquisition
Price multiplied by the number of shares of Common Stock subject to
such outstanding Awards (either to the extent then vested and
exercisable, or subject to restrictions and/or forfeiture
provisions, or whether or not then vested and exercisable, or
subject to restrictions and/or forfeiture provisions, as determined
by the Plan Administrator in its sole discretion) exceeds
(ii) if applicable, the respective aggregate exercise, grant
or purchase price payable with respect to shares of Common Stock
subject to such Awards.
(r)
For the avoidance of doubt, nothing in this Section 14.3
requires all Awards to be treated similarly.
14.4
Further
Adjustment of Awards
Subject
to Sections 14.2 and 14.3, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger,
statutory share exchange, consolidation, reorganization,
liquidation, dissolution or change of control of the Company, as
defined by the Plan Administrator, to take such further action as
it determines to be necessary or advisable with respect to Awards.
Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Awards so as to provide for
earlier, later, extended or additional time for exercise, lifting
restrictions and other modifications, and the Plan Administrator
may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The
Plan Administrator may take such action before or after granting
Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation,
reorganization, liquidation, dissolution or change of control that
is the reason for such action.
14.5
No
Limitations
The
grant of Awards shall in no way affect the Company’s right to
adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or
assets.
14.6
Fractional
Shares
In the
event of any adjustment in the number of shares covered by any
Award, each such Award shall cover only the number of full shares
resulting from such adjustment, and any fractional shares resulting
from such adjustment shall be disregarded.
14.7
Section 409A
Subject
to Section 18.5(b), but notwithstanding any other provision of
the Plan to the contrary, (a) any adjustments made pursuant to
this Section 14 to Awards that are considered “deferred
compensation” within the meaning of Section 409A shall
be made in compliance with the requirements of Section 409A
and (b) any adjustments made pursuant to this Section 14
to Awards that are not considered “deferred
compensation” subject to Section 409A shall be made in
such a manner as to ensure that after such adjustment the Awards
either (i) continue not to be subject to Section 409A or
(ii) comply with the requirements of
Section 409A.
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SECTION
15. FIRST REFUSAL AND
REPURCHASE RIGHTS;
OTHER
RIGHTS AND VOTING RESTRICTIONS
15.1
First
Refusal Rights
Until
the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes
effective, the Company shall have the right of first refusal with
respect to any proposed sale or other disposition by a Participant
of any shares of Common Stock issued pursuant to an Award. Such
right of first refusal shall be exercisable in accordance with the
terms and conditions established by the Plan Administrator and set
forth in the stock purchase agreement evidencing the
Participant’s acquisition of the shares or, if applicable, in
a stockholders agreement or other similar agreement.
15.2
Repurchase
Rights for Vested Shares
Until
the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes
effective, upon a Participant’s Termination of Service, all
vested shares of Common Stock issued pursuant to an Award (whether
issued before or after such Termination of Service) shall be
subject to repurchase by the Company, at the Company’s sole
discretion, at the Fair Market Value of such shares on the date of
such repurchase. The terms and conditions upon which such
repurchase right shall be exercisable (including the period and
procedure for exercise) shall be established by the Plan
Administrator and set forth in the agreement evidencing the
Participant’s acquisition of the shares or, if applicable, in
a stockholders agreement or other similar agreement.
15.3
Other
Rights and Voting Restrictions
Until
the date on which the initial registration of the Common Stock
under Section 12(b), or 12(g) of the Exchange Act first
becomes effective, the Plan Administrator may require a
Participant, as a condition to receiving shares under the Plan, to
become a party to a stock purchase agreement and/or a stockholders
agreement or other similar agreement, in the form designated by the
Plan Administrator, pursuant to which the Participant grants to the
Company and/or its other stockholders certain rights, including but
not limited to co-sale rights, and agrees to certain voting
restrictions with respect to the shares acquired by the Participant
under the Plan.
15.4
General
The
Company’s rights under this Section 15 are assignable by
the Company at any time.
SECTION 16. MARKET
STANDOFF
In the
event of an underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement
filed under the Securities Act, including the Company’s
initial public offering, no person may sell, make any short sale
of, loan, hypothecate, pledge, grant any option for the purchase
of, or otherwise dispose of or transfer for value or otherwise
agree to engage in any of the foregoing transactions with respect
to any shares issued pursuant to an Award granted under the Plan
without the prior written consent of the Company or its
underwriters. Such limitations shall be in effect for such period
of time as may be requested by the Company or such underwriters;
provided, however, that in no event shall such
period exceed (a) 180 days after the effective date of the
registration statement for such public offering or (b) such
longer period requested by the underwriters as is necessary to
comply with regulatory restrictions on the publication of research
reports (including, but not limited to, NYSE Rule 472 or NASD
Conduct Rule 2711, or any successor rules or amendments thereto).
The limitations of this Section 16 shall in all events
terminate two years after the effective date of the Company’s
initial public offering.
In the
event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting
the Company’s outstanding Common Stock effected as a class
without the Company’s receipt of consideration, any new,
substituted or additional securities distributed with respect to
the shares issued under the Plan shall be immediately subject to
the provisions of this Section 16, to the same extent the
shares issued under the Plan are at such time covered by such
provisions.
66
In
order to enforce the limitations of this Section 16, the
Company may impose stop-transfer instructions with respect to the
shares until the end of the applicable standoff
period.
SECTION 17. AMENDMENT AND
TERMINATION
17.1
Amendment,
Suspension or Termination
The
Board may amend, suspend or terminate the Plan or any portion of
the Plan at any time and in such respects as it shall deem
advisable; provided,
however, that, to the
extent required by applicable law, regulation or stock exchange
rule, stockholder approval shall be required for any amendment to
the Plan. Subject to Section 17.3, the Plan Administrator may
amend the terms of any outstanding Award, prospectively or
retroactively.
17.2
Term
of the Plan
Unless
sooner terminated, the 2021 Plan shall terminate on August 12,
2031. After the Plan is terminated, no future Awards may be
granted, but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the
Plan’s terms and conditions. Notwithstanding the foregoing,
no Incentive Stock Options may be granted more than ten years after
the later of (a) the adoption of the Plan by the Board and
(b) the adoption by the Board of any amendment to the Plan
that constitutes the adoption of a new plan for purposes of
Section 422 of the Code.
17.3
Consent
of Participant
The
amendment, suspension or termination of the Plan or a portion
thereof or the amendment of an outstanding Award shall not, without
the Participant’s consent, materially adversely affect any
rights under any Award theretofore granted to the Participant under
the Plan. Any change or adjustment to an outstanding Incentive
Stock Option shall not, without the consent of the Participant, be
made in a manner so as to constitute a “modification”
that would cause such Incentive Stock Option to fail to continue to
qualify as an Incentive Stock Option. Notwithstanding the
foregoing, any adjustments made pursuant to Section 14 shall
not be subject to these restrictions.
Subject
to Section 18.5, but notwithstanding any other provision of
the Plan to the contrary, the Plan Administrator shall have broad
authority to amend the Plan or any outstanding Award without the
consent of the Participant to the extent the Plan Administrator
deems necessary or advisable to comply with, or take into account,
changes in applicable tax laws, securities laws, accounting rules
or other applicable law, rule or regulation.
SECTION 18.
GENERAL
18.1
No
Individual Rights
No
individual or Participant shall have any claim to be granted any
Award under the Plan, and the Company has no obligation for
uniformity of treatment of Participants under the
Plan.
Furthermore,
nothing in the Plan or any Award granted under the Plan shall be
deemed to constitute an employment contract or confer or be deemed
to confer on any Participant any right to continue in the employ
of, or to continue any other relationship with, the Company or any
Related Company or limit in any way the right of the Company or any
Related Company to terminate a Participant’s employment or
other relationship at any time, with or without cause.
18.2
Issuance
of Shares
Notwithstanding
any other provision of the Plan to the contrary, the Company shall
have no obligation to issue or deliver any shares of Common Stock
under the Plan or make any other distribution of benefits under the
Plan unless, in the opinion of the Company’s counsel, such
issuance, delivery or distribution would comply with all applicable
laws (including, without limitation, the requirements of the
Securities Act or the laws of any state or foreign jurisdiction)
and the applicable requirements of any securities exchange or
similar entity.
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The
Company shall be under no obligation to any Participant to register
for offering or resale or to qualify for exemption under the
Securities Act, or to register or qualify under the laws of any
state or foreign jurisdiction, any shares of Common Stock, security
or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or
qualifications if made.
As a
condition to the exercise of an Option or any other receipt of
Common Stock pursuant to an Award under the Plan, the Company may
require (a) the Participant to represent and warrant at the
time of any such exercise or receipt that such shares are being
purchased or received only for the Participant’s own account
and without any present intention to sell or distribute such shares
and (b) such other action or agreement by the Participant as
may from time to time be necessary to comply with the federal,
state and foreign securities laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the
official stock books and records of the Company, and a legend
indicating that such shares may not be pledged, sold or otherwise
transferred, unless an opinion of counsel is provided (concurred in
by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on
stock certificates to ensure exemption from registration. The Plan
Administrator may also require the Participant to execute and
deliver to the Company a purchase agreement or such other agreement
as may be in use by the Company at such time that describes certain
terms and conditions applicable to the shares. To the extent the
Plan or any instrument evidencing an Award provides for issuance of
stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to
the extent not prohibited by applicable law or the applicable rules
of any stock exchange.
18.3
Indemnification
Each
person who is or shall have been a member of the Board or a
committee appointed by the Board in accordance with
Section 3.1 shall be indemnified and held harmless by the
Company against and from any loss, cost, liability or expense that
may be imposed upon or reasonably incurred by such person in
connection with or resulting from any claim, action, suit or
proceeding to which such person may be a party or in which such
person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by
such person in settlement thereof, with the Company’s
approval, or paid by such person in satisfaction of any judgment in
any such claim, action, suit or proceeding against such person,
unless such loss, cost, liability or expense is a result of such
person’s own willful misconduct or except as expressly
provided by statute; provided, however, that such person shall give
the Company an opportunity, at its own expense, to handle and
defend the same before such person undertakes to handle and defend
it on such person’s own behalf.
The
foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such person may be
entitled tinder the Company’s articles of incorporation or
bylaws, as a matter of law, or otherwise, or of any power that the
Company may have to indemnify or hold harmless.
18.4
No
Rights as a Stockholder
Unless
otherwise provided by the Plan Administrator or in the instrument
evidencing the Award or in a written employment, services or other
agreement, no Award, other than a Stock Award, shall entitle the
Participant to any cash dividend, voting or other right of a
stockholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Award.
18.5
Compliance
with Laws and Regulations
(s)
In interpreting and applying the provisions of the Plan, any Option
granted as an Incentive Stock Option pursuant to the Plan shall, to
the extent permitted by law, be construed as an “incentive
stock option” within the meaning of Section 422 of the
Code.
68
(t)
The Plan and Awards granted under the Plan are intended to be
exempt from the requirements of Section 409A to the maximum
extent possible, whether pursuant to the short-term deferral
exception described in Treasury Regulation
Section 1.409A-1(b)(4), the exclusion applicable to stock
options, stock appreciation rights and certain other equity-based
compensation under Treasury Regulation Section 1.409A-l(b)(5),
or otherwise. To the extent Section 409A is applicable to the
Plan or any Award granted under the Plan, it is intended that the
Plan and any Awards granted under the Plan comply with the
deferral, payout, plan termination and other limitations and
restrictions imposed under Section 409A. Notwithstanding any
other provision of the Plan or any Award granted under the Plan to
the contrary, the Plan and any Award granted under the Plan shall
be interpreted, operated and administered in a manner consistent
with such intentions; provided, however, that the Plan
Administrator makes no representations that Awards granted under
the Plan shall be exempt from or comply with Section 409A and
makes no undertaking to preclude Section 409A from applying to
Awards granted under the Plan. Without limiting the generality of
the foregoing, and notwithstanding any other provision of the Plan
or any Award granted under the Plan to the contrary, with respect
to any payments and benefits under the Plan or any Award granted
under the Plan to which Section 409A applies, all references
in the Plan or any Award granted under the Plan to the termination
of the Participant’s employment or service are intended to
mean the Participant’s “separation from service,”
within the meaning of Section 409A(a)(2)(A)(i) to the extent
necessary to avoid subjecting the Participant to the imposition of
any additional tax under Section 409A. In addition, if the
Participant is a “specified employee,” within the
meaning of Section 409A, then to the extent necessary to avoid
subjecting the Participant to the imposition of any additional tax
under Section 409A, amounts that would otherwise be payable
under the Plan or any Award granted under the Plan during the
six-month period immediately following the Participant’s
“separation from service,” within the meaning of
Section 409A(a)(2)(A)(i), shall not be paid to the Participant
during such period, but shall instead be accumulated and paid to
the Participant (or, in the event of the Participant’s death,
the Participant’s estate) in a lump sum on the first business
day after the earlier of the date that is six months following the
Participant’s separation from service or the
Participant’s death. Notwithstanding any other provision of
the Plan to the contrary, the Plan Administrator, to the extent it
deems necessary or advisable in its sole discretion, reserves the
right, but shall not be required, to unilaterally amend or modify
the Plan and any Award granted under the Plan so that the Award
qualifies for exemption from or complies with
Section 409A.
18.6
Participants
in Other Countries or Jurisdictions
Without
amending the Plan, the Plan Administrator may grant Awards to
Eligible Persons who are foreign nationals on such terms and
conditions different from those specified in the Plan, as may, in
the judgment of the Plan Administrator, be necessary or desirable
to foster and promote achievement of the purposes of the Plan and
shall have the authority to adopt such modifications, procedures,
subplans and the like as may be necessary or desirable to comply
with provisions of the laws or regulations of other countries or
jurisdictions in which the Company or any Related Company may
operate or have employees to ensure the viability of the benefits
from Awards granted to Participants employed in such countries or
jurisdictions, meet the requirements that permit the Plan to
operate in a qualified or tax efficient manner, comply with
applicable foreign laws or regulations and meet the objectives of
the Plan.
18.7
No
Trust or Fund
The
Plan is intended to constitute an “unfunded” plan.
Nothing contained herein shall require the Company to segregate any
monies or other property, or shares of Common Stock, or to create
any trusts, or to make any special deposits for any immediate or
deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general
unsecured creditor of the Company.
18.8
Successors
All
obligations of the Company under the Plan with respect to Awards
shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or
substantially all the business and/or assets of the
Company.
18.9
Severability
If any
provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person,
or would disqualify the Plan or any Award under any law deemed
applicable by the Plan Administrator, such provision shall be
construed or deemed amended to conform to applicable laws, or, if
it cannot be so construed or deemed amended without, in the Plan
Administrator’s determination, materially altering the intent
of the Plan or the Award, such provision shall be stricken as to
such jurisdiction, person or Award, and the remainder of the Plan
and any such Award shall remain in full force and
effect.
69
18.10
Choice
of Law and Venue
The
Plan, all Awards granted thereunder and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed
by the laws of the United States, shall be governed by the laws of
the State of Washington without giving effect to principles of
conflicts of law. Participants irrevocably consent to the
nonexclusive jurisdiction and venue of the state and federal courts
located in the State of Washington.
18.11
Legal
Requirements
The
granting of Awards and the issuance of shares of Common Stock under
the Plan are subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national
securities exchanges as may be required.
SECTION 19. EFFECTIVE
DATE
The
effective date (the “Effective
Date”) is the date on which the Plan is adopted by the
Board. If the stockholders of the Company do not approve the Plan
or an amendment thereto that requires stockholder approval pursuant
to Section 422 of the Code, as applicable, within 12 months before
or after the Board’s adoption of the Plan, any Incentive
Stock Options granted under the Plan will be treated as
Nonqualified Stock Options. For purposes of determining the
appropriate treatment of stock options granted under the Plan, the
adoption of any amendment to the Plan requiring stockholder
approval pursuant to Section 422 of the Code shall constitute the
adoption of a new plan.
70
APPENDIX A
DEFINITIONS
As used
in the Plan,
“Acquired
Entity” means any entity acquired by the Company or a
Related Company or with which the Company or a Related Company
merges or combines.
“Acquisition
Price” means the fair market value of the securities,
cash or other property, or any combination thereof, receivable or
deemed receivable upon a Change of Control in respect of a share of
Common Stock, as determined by the Plan Administrator in its sole
discretion.
“Award”
means any Option, Stock Appreciation Right, Stock Award, Restricted
Stock, Stock Unit or cash-based award or other incentive payable in
cash or in shares of Common Stock, as may be designated by the Plan
Administrator from time to time.
“Board”
means the Board of Directors of the Company.
“Cause,”
unless otherwise defined in the instrument evidencing an Award or
in a written employment, services or other agreement between the
Participant and the Company or a Related Company, means the
Participant’s (a) willful and continued failure to
substantially perform the Participant’s duties to the Company
after a written demand for substantial performance is delivered to
the Participant by the Board or Chief Executive Officer of the
Company, which demand specifically identifies the manner in which
the Participant has not substantially performed the
Participant’s duties, and which gives the Participant at
least 10 days to cure such deficiencies; (b) unauthorized use
or disclosure of the confidential information or trade secrets of
the Company; (c) indictment of, conviction of, or a plea of
“guilty” or “no contest” to a felony under
the laws of the United States or any state thereof; or
(d) willful misconduct, which is demonstrably and materially
injurious to the Company, monetarily or otherwise.
“Change
of Control,” unless the Plan Administrator determines
otherwise with respect to an Award at the time the Award is granted
or unless otherwise defined for purposes of an Award in a written
employment, services or other agreement between the Participant and
the Company or a Related Company, means consummation
of:
(a)
a merger or consolidation of the Company with or into any other
company or other entity;
(b)
a statutory share exchange pursuant to which the Company’s
outstanding shares are acquired or a sale, in one transaction or a
series of transactions undertaken with a common purpose, of at
least 50% of the Company’s outstanding voting securities;
or
(c)
a sale, lease, exchange or other transfer, in one transaction or a
series of related transactions, undertaken with a common purpose of
all or substantially all of the Company’s property or
business.
Notwithstanding
the foregoing, a Change of Control shall not include (i) a
merger or consolidation of the Company, or a statutory share
exchange pursuant to which the Company’s outstanding shares
are acquired, in which the holders of the outstanding voting
securities of the Company immediately prior to the merger,
consolidation or statutory share exchange hold at least a majority
of the outstanding voting securities of the Successor Company
immediately after the merger, consolidation or statutory share
exchange; (ii) a sale, lease, exchange or other transfer of
all or substantially all of the Company’s assets to a
majority-owned subsidiary company; (iii) a transaction
undertaken for the principal purpose of restructuring the capital
of the Company, including, but not limited to, reincorporating the
Company in a different jurisdiction, converting the Company to a
limited liability company or creating a holding company; or
(iv) an equity financing in which the Company is the surviving
company.
Where a
series of transactions undertaken with a common purpose is deemed
to be a Change of Control, the date of such Change of Control shall
be the date on which the last of such transactions is
consummated.
A-3
“Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
“Common
Stock” means the common stock, par value $.001 per
share, of the Company.
“Company”
means the Know Labs, Inc., a Nevada corporation.
“Disability,”
unless otherwise defined by the Plan Administrator for purposes of
the Plan or in the instrument evidencing an Award or in a written
employment, services or other agreement between the Participant and
the Company or a Related Company, means a mental or physical
impairment of the Participant that is expected to result in death
or that has lasted or is expected to last for a continuous period
of 12 months or more and that causes the Participant to be unable
to perform his or her material duties for the Company or a Related
Company and to be engaged in any substantial gainful activity, in
each case as determined by the Company’s chief human
resources officer or other person performing that function or, in
the case of directors and executive officers, the Plan
Administrator, each of whose determination shall be conclusive and
binding.
“Effective
Date” has the meaning set forth in
Section 19.
“Eligible
Person” means any person eligible to receive an Award
as set forth in Section 5.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended from time to time.
“Fair
Market Value” means the per share fair market value of
the Common Stock as established in good faith by the Plan
Administrator or, if the Common Stock is publicly traded, the
closing price for the Common Stock on any given date during regular
trading, or if not trading on that date, such price on the last
preceding date on which the Common Stock was traded, unless
determined otherwise by the Plan Administrator using such methods
or procedures as it may establish.
“Grant
Date” means the later of (a) the date on which
the Plan Administrator completes the corporate action authorizing
the grant of an Award or such later date specified by the Plan
Administrator and (b) the date on which all conditions
precedent to an Award have been satisfied, provided that conditions
to the exercisability or vesting of Awards shall not defer the
Grant Date.
“Immediate
Family Member” means a child, stepchild, grandchild,
step-grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, mother-in-law, father-in-law, son-in law,
daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships.
“Incentive
Stock Option” means an Option granted with the
intention that it qualify as an “incentive stock
option” as that term is defined for purposes of
Section 422 of the Code or any successor
provision.
“Nonqualified
Stock Option” means an Option other than an Incentive
Stock Option.
“Option”
means a right to purchase Common Stock granted under
Section 7.
“Option
Expiration Date” means the last day of the maximum
term of an Option.
“Option
Term” means the maximum term of an Option as set forth
in Section 7.3.
“Participant”
means any Eligible Person to whom an Award is granted.
“Performance
Goals” means
performance goals established by the Plan Administrator which may
be based on earnings or earnings growth, sales, return on assets,
cash flow, total shareholder return, equity or investment,
regulatory compliance, satisfactory internal or external audits,
improvement of financial ratings, achievement of balance sheet or
income statement objectives, implementation or completion of one or
more projects or transactions, or any other objective goals
established by the Plan Administrator, and which may be absolute in
their terms or measured against or in relationship to other
companies comparably, similarly or otherwise
situated. Such performance goals may be particular to an
Eligible Person or the department, branch, Affiliate, or division
in which the Eligible Person works, or may be based on the
performance of the Company, one or more Affiliates, or the Company
and one or more Affiliates, and may cover such period as may be
specified by the Plan Administrator.
A-3
“Permitted
Transfer” means any Transfer of Transfer Restricted
Common Stock: (a) made gratuitously to one or more of the
Participant’s Immediate Family Members or made gratuitously
to a trust, family limited partnership, family limited liability
company or other bona fide estate planning or planned gifting
vehicle for the benefit of such Participant or one or more of such
Participant’s Immediate Family Members; (b) to any
person or entity who is a stockholder of the Company at the time of
such Transfer, provided that the price per share paid in such
Transfer is less than or equal to the then most recent fair market
value per share of Common Stock as determined by the Board; or
(c) that is approved in writing by the Plan
Administrator.
“Plan”
means the Know Labs, Inc. 2021 Equity Incentive Plan.
“Plan
Administrator” has the meaning set forth in
Section 3.1.
“Related
Company” means any entity that, directly or
indirectly, is in control of, is controlled by or is under common
control with the Company.
“Restricted
Stock” means an Award of shares of Common Stock
granted under Section 10, the rights of ownership of which are
subject to restrictions prescribed by the Plan
Administrator.
“Section 409A”
means Section 409A of the Code, including any regulations and
other guidance issued thereunder by the Department of the Treasury
and/or the Internal Revenue Service.
“Securities
Act” means the Securities Act of 1933, as amended from
time to time.
“Stock
Appreciation Right” or “SAR” means a
right granted under Section 9.1 to receive the excess of the
Fair Market Value of a specified number of shares of Common Stock
over the grant price.
“Stock
Award” means an Award of shares of Common Stock
granted under Section 10, the rights of ownership of which are
not subject to restrictions prescribed by the Plan
Administrator.
“Stock
Unit” means an Award denominated in units of Common
Stock granted under Section 10.
“Substitute
Awards” means Awards granted or shares of Common Stock
issued by the Company in substitution or exchange for awards
previously granted by an Acquired Entity.
“Successor
Company” means the surviving company, the successor
company, the acquiring company or its parent, as applicable, in
connection with a Change of Control.
“Ten
Percent Stockholder” has the meaning set forth in
Section 8.3.
“Termination
of Service” means a termination of employment or
service relationship with the Company or a Related Company for any
reason, whether voluntary or involuntary, including by reason of
death or Disability. Any question as to whether and when there has
been a Termination of Service for the purposes of an Award and the
cause of such Termination of Service shall be determined by the
Company’s chief human resources officer or other person
performing that function or, with respect to directors and
executive officers, by the Plan Administrator, whose determination
shall be conclusive and binding. Transfer of a Participant’s
employment or service relationship between the Company and any
Related Company shall not be considered a Termination of Service
for purposes of an Award. Unless the Plan Administrator determines
otherwise, a Termination of Service shall be deemed to occur if the
Participant’s employment or service relationship is with an
entity that has ceased to be a Related Company. A
Participant’s change in status from an employee of the
Company or a Related Company to a nonemployee director, consultant,
advisor or independent contractor of the Company or a Related
Company, or a change in status from a nonemployee director,
consultant, advisor or independent contractor of the Company or a
Related Company to an employee of the Company or a Related Company,
shall not be considered a Termination of Service.
“Transfer”
means, as the context may require, (a) any sale, assignment,
pledge, hypothecation, mortgage, encumbrance or other disposition,
whether by contract, gift, will, intestate succession, operation of
law or otherwise, of all or any part of an Award or shares issued
thereunder, as applicable, or (b) any verbal equivalent of the
foregoing.
“Transfer
Restricted Common Stock” means (a) shares of
Common Stock that are issued under the Plan and (b) or any
securities issued in exchange for the foregoing shares or received
in a stock dividend, recapitalization, stock split or otherwise in
respect of such shares.
“Vesting
Commencement Date” means the Grant Date or such other
date selected by the Plan Administrator as the date from which an
Award begins to vest.
A-3
APPENDIX B
TO THE KNOW LABS, INC.
2021 EQUITY INCENTIVE PLAN
(For California Residents Only)
This
Appendix to the Know Labs, Inc. 2021 Equity Incentive Plan (the
“Plan”) shall
have application only to Participants who are residents of the
State of California. Capitalized terms contained herein shall have
the same meanings given to them in the Plan, unless otherwise
provided in this Appendix. Notwithstanding any other provision of the Plan
to the contrary and to the extent required by applicable law, the
following terms and conditions shall apply to all Awards granted to
residents of the State of California, until such time as the Common
Stock becomes a “listed security” under the Securities
Act:
1.
Options shall have a term of not more than ten years from the Grant
Date.
2.
Awards shall be nontransferable other than by will or the laws of
descent and distribution. Notwithstanding the foregoing, and to the
extent permitted by Section 422 of the Code, the Plan
Administrator, in its discretion, may permit transfer of an Award
to a revocable trust or as otherwise permitted by Rule 701 of the
Securities Act.
3.
Unless employment or services are terminated for Cause, the right
to exercise an Option in the event of Termination of Service, to
the extent that the Participant is otherwise entitled to exercise
an Option on the date of Termination of Service, shall
be
(a)
at least six months from the date of a Participant’s
Termination of Service if termination was caused by death or
Disability; and
(b)
at least 30 days from the date of a Participant’s Termination
of Service if termination of employment was caused by other than
death or Disability;
(c)
but in no event later than the Option Expiration Date.
4.
No Award may be granted to a resident of California more than ten
years after the date the Board adopts the Plan and the date the
stockholders approve the Plan.
5.
Stockholders of the Company must approve the Plan by the later of
(a) within 12 months before or after the Plan is adopted by
the Board and (b)(i) with respect to Options, prior to or
within 12 months of the grant of an Option under the Plan to a
resident of the State of California, and (ii) with respect to
Awards other than Options, prior to the issuance of such Award to a
resident of the State of California. Any Option exercised by a
California resident or shares issued under an Award to a California
resident shall be rescinded if stockholder approval is not obtained
in the foregoing manner. Shares subject to such Awards shall not be
counted in determining whether such approval is
obtained.
6.
To the extent required by applicable law, the Company shall provide
annual financial statements of the Company to each California
resident holding an outstanding Award under the Plan. Such
financial statements need not be audited and need not be issued to
key persons whose duties at the Company assure them access to
equivalent information.
B-1
PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY
PAGE
|
Date of
Board Action
|
|
Action
|
|
Section/Effect
of Amendment
|
|
Date of
Stockholder Approval
|
|
____________,
2021
|
|
Initial
Plan Adoption
|
|
|
|
|
|
|
|
Approved
by Stockholders
|
|
|
|
_____________,
2021
|
B-2
