Item 5.02 Departure of Directors or Certain Officers. Election of
Directors. Appointment of Certain Officers. Compensatory
Arrangements of Certain Officers.
On
April 14, 2021, the board of directors (the “Board”) of
Sollensys Corp (the “Company”) and stockholders holding
a majority of the Company’s outstanding common stock approved
the Sollensys Corp 2021 Equity Incentive Plan (the “2021
Plan”).
Authorized Shares
A
total of 1,000,000 shares of the Company’s common stock are
authorized for issuance pursuant to the 2021 Plan. Subject to
adjustment as provided in the 2021 Plan, the maximum aggregate
number of shares that may be issued under the 2021 Plan will be
cumulatively increased on January 1, 2022 and on each subsequent
January 1 through and including January 1, 2023, by a number of
shares equal to the smaller of (i) 3% of the number of shares of
common stock issued and outstanding on the immediately preceding
December 31, or (ii) an amount determined by the
Board.
Additionally,
if any award issued pursuant to the 2021 Plan expires or becomes
unexercisable without having been exercised in full, is surrendered
pursuant to an exchange program, as provided in the 2021 Plan, or,
with respect to restricted stock, restricted stock units
(“RSUs”), performance units or performance shares, is
forfeited to or repurchased by the Company due to the failure to
vest, the unpurchased shares (or for awards other than stock
options or stock appreciation rights the forfeited or repurchased
shares) which were subject thereto will become available for future
grant or sale under the 2021 Plan (unless the 2021 Plan has
terminated). With respect to stock appreciation rights, only shares
actually issued pursuant to a stock appreciation right will cease
to be available under the 2021 Plan; all remaining shares under
stock appreciation rights will remain available for future grant or
sale under the 2021 Plan (unless the 2021 Plan has terminated).
Shares that have actually been issued under the 2021 Plan under any
award will not be returned to the 2021 Plan and will not become
available for future distribution under the 2021 Plan; provided,
however, that if shares issued pursuant to awards of restricted
stock, restricted stock units, performance shares or performance
units are repurchased by the Company or are forfeited to the
Company due to the failure to vest, such shares will become
available for future grant under the 2021 Plan. Shares used to pay
the exercise price of an award or to satisfy the tax withholdings
related to an award will become available for future grant or sale
under the 2021 Plan. To the extent an award under the 2021 Plan is
paid out in cash rather than shares, such cash payment will not
result in reducing the number of shares available for issuance
under the 2021 Plan.
Notwithstanding
the foregoing and, subject to adjustment as provided in the 2021
Plan, the maximum number of shares that may be issued upon the
exercise of incentive stock options will equal the aggregate share
number stated above, plus, to the extent allowable under Section
422 of the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder, any shares that become
available for issuance under the 2021 Plan in accordance with the
foregoing.
Plan Administration
The
Board or one or more committees appointed by the Board will
administer the 2021 Plan. In addition, if the Company determines it
is desirable to qualify transactions under the 2021 Plan as exempt
under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended, such transactions will be structured with the intent that
they satisfy the requirements for exemption under Rule 16b-3.
Subject to the provisions of the 2021 Plan, the administrator has
the power to administer the 2021 Plan and make all determinations
deemed necessary or advisable for administering the 2021 Plan,
including the power to determine the fair market value of the
Company’s common stock, select the service providers to whom
awards may be granted, determine the number of shares covered by
each award, approve forms of award agreements for use under the
2021 Plan, determine the terms and conditions of awards (including
the exercise price, the time or times at which the awards may be
exercised, any vesting acceleration or waiver or forfeiture
restrictions and any restriction or limitation regarding any award
or the shares relating thereto), construe and interpret the terms
of the 2021 Plan and awards granted under it, prescribe, amend and
rescind rules relating to the 2021 Plan, including creating
sub-plans and modify or amend each award, including the
discretionary authority to extend the post-termination
exercisability period of awards (provided that no option or stock
appreciation right will be extended past its original maximum
term), and to allow a participant to defer the receipt of payment
of cash or the delivery of shares that would otherwise be due to
such participant under an award. The administrator also has the
authority to allow participants the opportunity to transfer
outstanding awards to a financial institution or other person or
entity selected by the administrator and to institute an exchange
program by which outstanding awards may be surrendered or cancelled
in exchange for awards of the same type which may have a higher or
lower exercise price or different terms, awards of a different type
or cash, or by which the exercise price of an outstanding award is
increased or reduced. The administrator’s decisions,
interpretations and other actions are final and binding on all
participants.
Eligibility
Awards
under the 2021 Plan, other than incentive stock options, may be
granted to employees (including officers) of the Company or a
subsidiary, members of the Company’s Board, or consultants
engaged to render bona fide services to the Company or a
subsidiary. Incentive stock options may be granted only to
employees of the Company or a subsidiary.
Stock Options
Stock
options may be granted under the 2021 Plan. The exercise price of
options granted under the 2021 Plan generally must at least be
equal to the fair market value of the Company’s common stock
on the date of grant. The term of each option will be as stated in
the applicable award agreement; provided, however, that the term
may be no more than 10 years from the date of grant. The
administrator will determine the methods of payment of the exercise
price of an option, which may include cash, shares or other
property acceptable to the administrator, as well as other types of
consideration permitted by applicable law. After the termination of
service of an employee, director or consultant, they may exercise
their option for the period of time stated in their option
agreement. In the absence of a specified time in an award
agreement, if termination is due to death or disability, the option
will remain exercisable for 12 months. In all other cases, in the
absence of a specified time in an award agreement, the option will
remain exercisable for three months following the termination of
service. An option may not be exercised later than the expiration
of its term. Subject to the provisions of the 2021 Plan, the
administrator determines the other terms of options.
Notwithstanding
any other provision of the 2021 Plan to the contrary, the aggregate
grant date fair value of all awards granted, under the 2021 Plan,
to any director who is not an employee, during any fiscal year of
the Company, taken together with any cash compensation paid to such
director during such fiscal year, shall not exceed
$300,000.
Stock Appreciation Rights
Stock
appreciation rights may be granted under the 2021 Plan. Stock
appreciation rights allow the recipient to receive the appreciation
in the fair market value of the Company’s common stock
between the exercise date and the date of grant. Stock appreciation
rights may not have a term exceeding 10 years. After the
termination of service of an employee, director or consultant, they
may exercise their stock appreciation right for the period of time
stated in their stock appreciation right agreement. In the absence
of a specified time in an award agreement, if termination is due to
death or disability, the stock appreciation rights will remain
exercisable for 12 months. In all other cases, in the absence of a
specified time in an award agreement, the stock appreciation rights
will remain exercisable for three months following the termination
of service. However, in no event may a stock appreciation right be
exercised later than the expiration of its term. Subject to the
provisions of the 2021 Plan, the administrator determines the other
terms of stock appreciation rights, including when such rights
become exercisable and whether to pay any increased appreciation in
cash or with shares of the Company’s common stock, or a
combination thereof, except that the per share exercise price for
the shares to be issued pursuant to the exercise of a stock
appreciation right will be no less than 100% of the fair market
value per share on the date of grant.
Restricted Stock
Restricted
stock may be granted under the 2021 Plan. Restricted stock awards
are grants of shares of the Company’s common stock that vest
in accordance with terms and conditions established by the
administrator. The administrator will determine the number of
shares of restricted stock granted to any employee, director or
consultant and, subject to the provisions of the 2021 Plan, will
determine the terms and conditions of such awards. The
administrator may impose whatever conditions to vesting it
determines to be appropriate (for example, the administrator may
set restrictions based on the achievement of specific performance
goals or continued service to the Company); provided, however, that
the administrator, in its sole discretion, may accelerate the time
at which any restrictions will lapse or be removed. Recipients of
restricted stock awards generally will have voting and dividend
rights with respect to such shares upon grant without regard to
vesting, unless the administrator provides otherwise. Shares of
restricted stock that do not vest are subject to the
Company’s right of repurchase or forfeiture.
Restricted Stock Units
RSUs
may be granted under the 2021 Plan. RSUs are bookkeeping entries
representing an amount equal to the fair market value of one share
of the Company’s common stock. Subject to the provisions of
the 2021 Plan, the administrator determines the terms and
conditions of RSUs, including the vesting criteria and the form and
timing of payment. The administrator may set vesting criteria based
upon the achievement of Company-wide, divisional, business unit or
individual goals (including continued employment or service),
applicable federal or state securities laws or any other basis
determined by the administrator in its discretion. The
administrator, in its sole discretion, may pay earned RSUs in the
form of cash, in shares of the Company’s common stock or in
some combination thereof. Notwithstanding the foregoing, the
administrator, in its sole discretion, may accelerate the time at
which any vesting requirements will be deemed
satisfied.
Performance Units and Performance Shares
Performance
units and performance shares may be granted under the 2021 Plan.
Performance units and performance shares are awards that will
result in a payment to a participant only if performance goals
established by the administrator are achieved or the awards
otherwise vest. The administrator will establish performance
objectives or other vesting criteria in its discretion, which,
depending on the extent to which they are met, will determine the
number or the value of performance units and performance shares to
be paid out to participants. The administrator may set performance
objectives based on the achievement of Company-wide, divisional,
business unit or individual goals (including continued employment
or service), applicable federal or state securities laws or any
other basis determined by the administrator in its discretion.
After the grant of a performance unit or performance share, the
administrator, in its sole discretion, may reduce or waive any
performance criteria or other vesting provisions for such
performance units or performance shares. Performance units shall
have an initial dollar value established by the administrator on or
prior to the grant date. Performance shares shall have an initial
value equal to the fair market value of the Company’s common
stock on the grant date. The administrator, in its sole discretion,
may pay earned performance units or performance shares in the form
of cash, in shares or in some combination thereof.
Non-Employee Directors
The
2021 Plan provides that all non-employee directors will be eligible
to receive all types of awards (except for incentive stock options)
under the 2021 Plan. The 2021 Plan includes a maximum limit of
$750,000 of equity awards that may be granted to a non-employee
director in any fiscal year, increased to $1,500,000 in connection
with his or her initial service. For purposes of this limitation,
the value of equity awards is based on the grant date fair value
(determined in accordance with accounting principles generally
accepted in the United States). Any equity awards granted to a
person for their services as an employee, or for their services as
a consultant (other than as a non-employee director), will not
count for purposes of the limitation. The maximum limit does not
reflect the intended size of any potential compensation or equity
awards to the Company’s non-employee directors.
Non-transferability of Awards
Unless
the administrator provides otherwise, the 2021 Plan generally does
not allow for the transfer of awards and only the recipient of an
award may exercise an award during their lifetime. If the
administrator makes an award transferrable, such award will contain
such additional terms and conditions as the administrator deems
appropriate.
Certain Adjustments
In
the event of certain changes in the Company’s capitalization,
to prevent diminution or enlargement of the benefits or potential
benefits available under the 2021 Plan, the administrator will
adjust the number and class of shares that may be delivered under
the 2021 Plan or the number, and price of shares covered by each
outstanding award and the numerical share limits set forth in the
2021 Plan.
Dissolution or Liquidation
In
the event of the Company’s proposed liquidation or
dissolution, the administrator will notify participants as soon as
practicable and all awards will terminate immediately prior to the
consummation of such proposed transaction.
Merger or Change in Control
The
2021 Plan provides that in the event of the Company’s merger
with or into another corporation or entity or a “change in
control” (as defined in the 2021 Plan), each outstanding
award will be treated as the administrator determines, including,
without limitation, that (i) awards will be assumed, or
substantially equivalent awards will be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof) with
appropriate adjustments as to the number and kind of shares and
prices; (ii) upon written notice to a participant, that the
participant’s awards will terminate upon or immediately prior
to the consummation of such merger or change in control; (iii)
outstanding awards will vest and become exercisable, realizable or
payable, or restrictions applicable to an award will lapse, in
whole or in part, prior to or upon consummation of such merger or
change in control and, to the extent the administrator determines,
terminate upon or immediately prior to the effectiveness of such
merger or change in control; (iv) (A) the termination of an award
in exchange for an amount of cash or property, if any, equal to the
amount that would have been attained upon the exercise of such
award or realization of the participant’s rights as of the
date of the occurrence of the transaction (and, for the avoidance
of doubt, if as of the date of the occurrence of the transaction
the administrator determines in good faith that no amount would
have been attained upon the exercise of such award or realization
of the participant’s rights, then such award may be
terminated by the Company without payment) or (B) the replacement
of such award with other rights or property selected by the
administrator in its sole discretion; or (v) any combination of the
foregoing. The administrator will not be obligated to treat all
awards, all awards a participant holds, or all awards of the same
type, similarly. In the event that awards (or portion thereof) are
not assumed or substituted for in the event of a merger or change
in control, the participant will fully vest in and have the right
to exercise all of their outstanding options and stock appreciation
rights, including shares as to which such awards would not
otherwise be vested or exercisable, all restrictions on restricted
stock and RSUs will lapse and, with respect to awards with
performance-based vesting, all performance goals or other vesting
criteria will be deemed achieved at 100% of target levels and all
other terms and conditions met, in all cases, unless specifically
provided otherwise under the applicable award agreement or other
written agreement between the participant and the Company or any of
the Company’s subsidiaries or parents, as applicable. If an
option or stock appreciation right is not assumed or substituted in
the event of a merger or change in control, the administrator will
notify the participant in writing or electronically that the option
or stock appreciation right will be exercisable for a period of
time determined by the administrator in its sole discretion and the
vested option or stock appreciation right will terminate upon the
expiration of such period.
For
awards granted to an outside director, the outside director will
fully vest in and have the right to exercise all of their
outstanding options and stock appreciation rights, all restrictions
on restricted stock and RSUs will lapse and, for awards with
performance-based vesting, unless specifically provided for in the
award agreement, all performance goals or other vesting criteria
will be deemed achieved at 100% of target levels and all other
terms and conditions met.
Clawback
Awards
will be subject to any Company clawback policy that the Company is
required to adopt pursuant to the listing standards of any national
securities exchange or association on which the Company’s
securities are listed or as is otherwise required by the Dodd-Frank
Wall Street Reform and Consumer Protection Act or other applicable
laws. The administrator also may specify in an award agreement that
the participant’s rights, payments or benefits with respect
to an award will be subject to reduction, cancellation, forfeiture
or recoupment upon the occurrence of certain specified events. The
Board may require a participant to forfeit, return or reimburse the
Company all or a portion of the award or shares issued under the
award, any amounts paid under the award and any payments or
proceeds paid or provided upon disposition of the shares issued
under the award in order to comply with such clawback policy or
applicable laws.
Amendment and Termination
The
administrator has the authority to amend, suspend or terminate the
2021 Plan provided such action does not impair the existing rights
of any participant. The 2021 Plan automatically will terminate on
April 14, 2031, unless it is terminated sooner.
The
foregoing description of the 2021 Plan does not purport to be
complete and is qualified in its entirety by reference to the 2021
Plan, a copy of which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and which is incorporated herein by
reference.