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Exhibit A
Change of Control Retention Bonus Plan
{Exhibit A. }
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CANDI CONTROLS, INC.
CHANGE OF CONTROL RETENTION BONUS PLAN
1.
PURPOSE OF THE PLAN
1.1 Purpose.
(a) It is expected that Candi Controls, Inc., a Delaware corporation (the “Company”), from
time to time will consider the possibility of a Change of Control. The Board of Directors of the Company (the
“Board”) recognizes that such possibilities can cause employees and other service providers of the Company to
consider alternative employment and service opportunities.
(b) This Change of Control Retention Bonus Plan (the “Plan”) is intended to (a) assure
that the Company will have the continued dedication and objectivity of employees and service providers,
notwithstanding the possibility, threat or occurrence of a Change of Control, (b) provide the Company’s
employees and service providers with an incentive to continue their service prior to a Change of Control and to
motivate the team to maximize the value of the Company upon a Change of Control for the benefit of its
stockholders, and/or (c) provide the Company’s employees and service providers with enhanced financial
security, incentive and encouragement to remain with the Company notwithstanding the possibility of a Change
of Control.
2.
DEFINITIONS
The following words and phrases will have the following meanings unless a different meaning is plainly
required by the context:
2.1 “Affiliate” means each corporation, trade or business that is, together with the Company, a
member of a controlled group of corporations or under common control (as determined under Section 414(b)
or (c) of the Code), but only for the period during which such other entity is so affiliated with the Company.
2.2 “Board” is defined in Section 1.1.
2.3 “Bonus” is defined in Section 3.4.
2.4 “Bonus Percentage” is defined in Section 3.3.
2.5 “Bonus Pool” is defined in Section 3.2.
2.6 “Change of Control” will mean the occurrence of any of the following events:
(a) the acquisition by any one person, or more than one person acting as a group (for these
purposes, persons will be considered to be acting as a group if they are owners of a corporation that enters into
a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company)
(“Person”), that or is or becomes the owner, directly or indirectly, of securities of the Company representing
more than 50% of the total voting power represented by the Company’s then outstanding securities (the “Voting
Securities”); provided, however, that for purposes of this subsection (a), the acquisition of additional securities
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by any one Person, who is considered to own more than 50% of the total voting power of the securities of the
Company will not be considered a Change of Control; or
(b) a change in the ownership of a substantial portion of the Company’s assets which
occurs on the date that any Person acquires (or has acquired during the twelve (12)-month period ending on the
date of the most recent acquisition by such person or persons) assets from the Company that have a total gross
fair market value equal to or more than 50% of the total fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection
(b), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets:
(1) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer; or (2)
a transfer of assets by the Company to: (A) a stockholder of the Company (immediately before the asset transfer)
in exchange for or with respect to the Company’s securities; (B) an entity, 50% or more of the total value or
voting power of which is owned, directly or indirectly, by the Company; (C) a Person, that owns, directly or
indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or (D)
an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a Person
described in subparagraph (C). For purposes of this subsection (b), gross fair market value means the value of
the assets of the Company, or the value of the assets being disposed of, determined without regard to any
liabilities associated with such assets.
Notwithstanding the foregoing, a Company transaction that does not constitute a change in control
event under U.S. Treasury Regulation 1.409A-3(i)(5)(v) or (vii) will be not be considered a Change of Control
for purposes of this Plan. For the avoidance of doubt, (1) a liquidation, dissolution or winding up of the
Company, (2) an assignment for the benefit of creditors, (3) a change in the state of the Company’s
incorporation, (4) a transaction where the Company will be held by a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately before such
transaction, or (5) a transaction effected primarily for the purpose of financing the Company with cash, in each
case, as determined by the Board in its discretion, will not constitute an Change of Control for purposes of this
Plan.
2.7 “Closing Date” the date on which the closing of the Change of Control is determined, pursuant
to the transaction agreements providing for such event.
2.8 “Code” means the Internal Revenue Code of 1986, as amended, and any U.S. Treasury
Department regulations and official IRS pronouncements thereunder.
2.9 “Common Stock” means the common stock of the Company.
2.10 “Company” is defined in Section 1.1.
2.11 “Convertible Notes” is defined in Section 3.2.
2.12 “Effective Date” is the date this Plan becomes effective pursuant to Board and, if required,
Company stockholder approval, which is February 1, 2018.
2.13 “Excise Tax” is defined in Section 6.6.
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2.14 “Family Members” means any affiliate of a Participant, including a Participant’s spouse, lineal
descendant or ancestor, uncle, aunt, nephew, niece, brother or sister or stepchild (whether or not adopted), and
any trust for the benefit of the Participant or such Participant’s affiliates.
2.15 “Full Payment” is defined in Section 6.6.
2.16 “IRS” means the U.S. Internal Revenue Service.
2.17 “Net Proceeds” means the sum of the net proceeds derived from the cash and the fair market
value of any securities, other property, or any other form of consideration paid by an acquirer of the Company
to all holders of Company capital stock and promissory notes convertible into Company capital stock for the
equity, assets or business of the Company in connection with a Change of Control (or in connection with a
Change of Control followed by a liquidation, dissolution or winding up of the Company), including amounts
distributed to the holders of Company capital stock on their equity after the Closing Date pursuant to any
escrow, earn-out or other similar arrangement. Net Proceeds do not include amounts paid to employees for
bonuses and similar compensation for services arrangements. The calculation of payments under this Plan will
not deduct such payments from gross proceeds in determining the amount of Net Proceeds under this Section
2.17. The fair market value of any securities, other property or any other form of consideration received by the
Company or the holders of the equity securities of the Company in connection with the Change of Control will
be determined on the same basis on which such securities are valued in the Change of Control.
2.18 “Participant” means an individual employed by or providing services to the Company (or any
Affiliate of the Company), who also is designated as a participant in the Plan by the Board and provided a
Participation Agreement.
2.19 “Participation Agreement” with respect to each Participant, means such Participant’s
agreement with certain terms of such Participant’s Bonus set forth therein.
2.20 “Person” is defined in Section 2.6.
2.21 “Plan” is defined in Section 1.1.
2.22 “Plan Administrator” means the Board of Directors of the Company or the Successor Company,
as applicable.
2.23 “Reduced Payment” is defined in Section 6.6.
2.24 “Series A Preferred Conversion Amount” is defined in Section 3.2.
2.25 “Successor Company” means the successor to the Company pursuant to the Change of Control.
2.26 “Transaction Payment” is defined in Section 6.6.
2.27 “Voting Securities” is defined in Section 2.6.
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3.
PARTICIPATION & BONUS POOL & BONUS AMOUNTS
3.1 Plan Eligibility. The Board will have full power and authority to determine which employees
and service providers of the Company (or any Affiliate of the Company) will become Participants.
3.2 Bonus Pool. Upon the first Change of Control to occur following the Effective Date, a bonus
pool (the “Bonus Pool”) will be established equal to:
1. 10% of the Net Proceeds less than or equal to $2,500,000; plus
2. 5% of the Net Proceeds that exceed $2,500,000 but are less than or equal to the Series A
Preferred Conversion Amount (defined below); plus
3. 0% of the Net Proceeds that exceed the Series A Preferred Conversion Amount.
“Series A Preferred Conversion Amount” equals the amount of Net Proceeds at which the
holders of the then-outstanding shares of the Company’s Series A Preferred Stock receive a greater return upon
conversion of such shares of Series A Preferred Stock into shares of Common Stock than the liquidation
preference and participation rights of such shares of Series A Preferred Stock.
3.3 Bonus Percentage. A Participant’s bonus percentage will equal the percentage of the
Participant’s annual gross salary, or annualized monthly invoices for services provided by the Participant if the
Participant is a non-payroll service provider (consultant or contractor) excluding expense reimbursements and
amounts due to third parties (e.g., pass-through invoices), relative to the sum total of all Participants’ annual
gross salaries and such annualized monthly invoices (the “Bonus Percentage”).
3.4 Bonus. Provided that a Participant meets the eligibility requirements set forth below in Section
4.1 and that this Plan has not been terminated or otherwise amended prior to the Closing Date, such Participant’s
bonus will equal the product of (1) the Bonus Pool, multiplied by (2) such Participant’s Bonus Percentage (a
“Bonus”).
3.5 Forfeitures. Should an individual fail to vest in his or her Bonus due to the failure to achieve
the service requirement listed in Section 4.1 below, such amounts will be forfeited and be available for
reallocation and distribution by the Board under this Plan, as determined by the Board in its sole discretion. To
the extent any amounts of the Bonus Pool are not allocated or reallocated by the Board, as the case may be,
prior to the Closing Date, such amounts will be distributed to the noteholders and stockholders of the Company
in the same manner as the other proceeds resulting from the Change of Control.
4. BONUS TERMS
4.1 Right to Bonus.
(a) A Participant will be eligible to receive his or her Bonus from the Plan only if he or
she is continuously an employee or service provider of the Company (or any Affiliate of the Company) after
the Effective Date through ten (10) or fewer days prior to the Closing Date.
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(b) A Participant will be considered to be providing services under this Plan if he or she is
on a Board-approved and bona fide leave of absence, or any leave of absence guaranteed by applicable federal,
state or local law.
(c) If the Company terminates a Participant for Cause (as defined in the Company’s Stock
Plan) at any time, the Participant will not be eligible to receive his or her Bonus.
4.2 Timing of Payment. Each Participant will receive his or her Bonus upon the first Change of
Control to occur following the Effective Date, with such Bonus payable in the same proportions and at the same
time or times paid by the purchaser(s) to the Company’s equity holders in connection with the Change of
Control and will be likewise subject to any escrow, earn-out or similar arrangement that applies to equity holders
of the Company. Notwithstanding anything to the contrary in this Plan, in no event, will any payments be made
under this Plan more than five (5) years from the Closing Date.
4.3 Form of Payment. Each Participant will receive his or her Bonus in the same form or forms of
payment and in the same proportions paid by the purchaser(s) to the equity holders of the Company upon or
following the Change of Control, in each case, less any required withholdings, as provided for in Section 6.5.
5.
FUNDING
5.1 Funding. No provision of the Plan will require the Company, for the purpose of satisfying any
obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions
are made or otherwise to segregate any assets, nor will the Company maintain separate bank accounts, books,
records or other evidence of the existence of a segregated or separately maintained or administered fund for
such purposes.
6.
ADMINISTRATION
6.1 Administration. The Plan Administrator will administer the Plan consistent with the terms and
conditions of the Plan. No member of the Board and no officer or employee of the Company will be liable to
any person for any action taken or omitted in connection with the administration of the Plan unless attributable
to such officer’s or employee’s fraud or willful misconduct.
6.2 Authority. The Plan Administrator will have all powers and discretion necessary or appropriate
to administer the Plan and to control its operation, including, but not limited to, the power to (a) prescribe the
terms and conditions of Bonuses, (b) interpret the Plan and the Bonuses, (c) adopt such procedures and subplans
as are necessary or appropriate to permit participation in the Plan by employees who are foreign nationals or
employed outside of the United States, (d) adopt rules for the administration, interpretation and application of
the Plan as are consistent with the Plan, and (e) interpret, amend or revoke any such rules.
6.3 Decisions Binding. All determinations and decisions made in good faith by the Plan
Administrator (and any authorized delegate of the Plan Administrator) pursuant to the provisions of the Plan
will be final, conclusive, and binding on all persons, and will be given the maximum deference permitted by
law.
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6.4 Delegation of Authority. The Plan Administrator, in its sole discretion and on such terms and
conditions as it may provide, may delegate all or part of its authority and powers under the Plan to a committee
or to one or more officers of the Company or, after the Change of Control, the Successor Company.
6.5 Tax Withholding. Prior to the payment of any cash, stock or other property pursuant to a Bonus,
the Company or the Successor Company will have the authority to deduct or withhold an amount sufficient to
satisfy Federal, state, local and other taxes or amounts required to be withheld, as determined by the Plan
Administrator in its sole discretion, with respect to such Bonus.
6.6 Parachute Payments. To the extent that any of payments and benefits to be provided to a
Participant (a “Transaction Payment”) constitute an “excess parachute payment” within the meaning of Section
280G of the Code, and, but for this sentence, would subject such Participant to the excise tax imposed by Section
4999 of the Code or any similar or successor provision (the “Excise Tax”), then the Participant’s Transaction
Payment(s) will be either: (1) paid in full (a “Full Payment”), or (2) paid as to a part of the Transaction Payment
so that such affected Participant receives only the largest payment possible without the imposition of the Excise
Tax (a “Reduced Payment”), whichever amount results in receipt, on an after-tax basis, of the greater amount
of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject
to the Excise Tax. For purposes of determining whether to make a Full Payment or a Reduced Payment, the
Company will cause to be taken into account all applicable federal, state and local income and employment
taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction
in federal income taxes which could be obtained from a deduction of such state and local taxes). If a Reduced
Payment is made, (x) the Transaction Payment will be paid only to the extent permitted under the Reduced
Payment alternative, and such affected Participant will have no rights to any additional payments and/or benefits
constituting the Transaction Payment, and (y) reduction in payments and/or benefits will occur in the following
order: (1) reduction of cash payments, if any; (2) cancellation of accelerated vesting of equity awards other than
stock options, if any; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits,
if any, paid to such Participant. In the event that acceleration of vesting of equity awards or stock options is to
be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant. If two or
more equity awards or stock options are granted on the same date, each award or stock option will be reduced
on a pro-rata basis. Notwithstanding, any Excise Tax imposed will be solely the responsibility of the affected
Participant.
7.
GENERAL PROVISIONS
7.1 Non-assignability. To the maximum extent permitted by law, a Participant’s Bonus or right or
benefits under this Plan will not be subject to anticipation, alienation, sale, assignment, pledge, encumbrance
or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same will be void.
No right or benefit hereunder will in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefit. Notwithstanding the foregoing, in the case of a Participant’s death
following the Closing Date, such Participant’s estate will be entitled to payment of such Participant’s Bonus if
such Participant met the requirements of Section 4.1 and the other terms and condition of the Plan.
7.2 No Effect on Service. This Plan does not constitute a contract of employment, service or
consultancy or impose on the Participant or the Company, the Successor Company, or any of their respective
subsidiary companies or Affiliates any obligation to retain any Participant as an employee or consultant. With
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respect to employees, this Plan does not change the status of any such Participant as an “at will” employee or
the policies of the Company regarding termination of employment.
7.3 Bonus Plan. This Plan is intended to be a “bonus program” as defined under U.S. Department
of Labor regulation 2510.3-2(c) and will be construed and administered in accordance with such intention.
7.4 Section 409A. It is intended that this Plan comply with Section 409A of the Code, to the extent
applicable. The Plan Administrator will make either (a) amendments to this Plan, and/or (b) amendments to a
Participant’s Participation Agreement, which are necessary or appropriate, as determined by the Plan
Administrator in good faith, to avoid imposition of any additional tax or income recognition prior to the actual
payment to a Participant under Section 409A of the Code.
7.5 Severability; Governing Law. If any provision of the Plan is found to be invalid or
unenforceable, such provision will not affect the other provisions of the Plan, and the Plan will be construed in
all respects as if such invalid provision had been omitted. The provisions of the Plan will be governed by and
construed in accordance with the laws of the State of Delaware (without regard to its conflict of law provisions).
7.6 Headings. The Section headings in this Plan are for convenience only; they form no part of the
Plan and will not affect its interpretation.
8.
AMENDMENT AND TERMINATION; TERM
8.1 Termination of Plan.
(a) The Board may in its sole and absolute discretion terminate the Plan by unanimous
vote without any obligation or liability of the Company or its successor to Participants at any time prior to the
Closing Date. Notwithstanding anything to the contrary in the Plan, the Plan will automatically terminate if the
Closing Date does not occur before the fifth-year anniversary of the Effective Date.
(b) Upon the termination of the Plan pursuant to Section 8.1(a) above, the Company’s and
all Participants’ rights and obligations under the Plan will terminate and the parties will have no further
liabilities or obligations with respect to each other as a result of participation in or sponsorship of the Plan.
8.2 Amendments.
(a) The Board may amend, modify, or alter the terms of the Plan, any Bonus or any
Participation Agreement at any time prior to the Closing Date; provided, however, that, except in the case of
the Plan’s termination pursuant to the terms of Section 8.1(a) or amendments required pursuant to Section 7.4,
no amendment, modification or alteration prior to the Closing Date may adversely affect the rights of any
Participant without (i) written consent by at least 50% of Plan Participants’ aggregate Bonus Percentage, or (ii)
if the Plan Participants have not yet been identified pursuant to the terms of this Plan, approval of all
management members of the Board.
(b) None of the Plan, any Bonus, or any Participation Agreement can be amended,
modified or altered on or after the Closing Date, other than amendments required pursuant to Section 7.4 and
consented to by a majority of Plan Participants.
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PARTICIPATION AGREEMENT
This Participation Agreement (the “Agreement”) with respect to participation in the Candi Controls,
Inc. Change of Control Retention Bonus Plan (the “Plan”) by and between Candi Controls, Inc., a Delaware
corporation (the “Company”) and (“Participant”) is made effective as of
, 2018. Capitalized terms not otherwise defined herein will have the meanings
given to them in the Plan.
WHEREAS, the Company has adopted and sponsors the Plan;
WHEREAS, it is expected that the Company from time to time will consider the possibility of an
acquisition by another company or other Change of Control; and
WHEREAS, the Company recognizes that such consideration can cause employees and service
providers to consider alternative employment and service opportunities.
NOW, THEREFORE, in consideration of the mutual promises made herein, the parties hereby agree
as follows.
1. Acknowledgements. Participant understands, acknowledges and agrees that the Board may, at
any time, terminate the Plan prior to the Closing Date, without any obligation or liability of the Company or its
successor to pay a Bonus to Participant, and in such events no Bonus would be paid to Participant.
2. Additional Provisions.
(a) Severability. If any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without
said provision.
(b) Integration; No Oral Modification. This Agreement and the Plan constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede all prior agreements, written or
oral. This Agreement may be amended pursuant to Section 8.2 of the Plan.
(c) Counterparts. This Agreement may be executed in counterparts, and each counterpart
will have the same force and effect as an original and will constitute an effective, binding agreement on the part
of each of the undersigned. Execution and delivery of this Agreement by exchange of facsimile copies bearing
the facsimile signature of a party will constitute a valid and binding execution and delivery of the Agreement
by such party. Such facsimile copies will constitute enforceable original documents.
(d) Headings. All captions and section headings used in this Agreement are for convenient
reference only and do not form a part of this Agreement.
(e) Tax Withholding. All payments made pursuant to the Plan and this Agreement will be
subject to withholdings.
(f) Governing Law. This Agreement will be governed by the laws of the State of Delaware
(with the exception of its conflicts of law provisions).
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(g) Attorneys’ Fees. In the event that Participant or the Company brings an action to
enforce or effect its rights under this Agreement, the prevailing party shall be entitled to recover its costs and
expenses, including the costs of mediation, arbitration, litigation, court fees, and reasonable attorneys’ fees
incurred in connection with such an action.
(h) Arbitration. Participant and the Company agree that any dispute arising out of or
relating to this Plan or this Agreement will be resolved, to the fullest extent permitted by law, by final, binding
and confidential arbitration conducted by Judicial Arbitration and Mediation Services (“JAMS”) under its then-
existing rules and procedures. Participant acknowledges that by agreeing to this arbitration procedure, both
Participant and the Company waive the right to resolve any such dispute through a trial by jury or judge. In
addition to and notwithstanding those rules, Participant and the Company agree that the arbitrator will: (1) have
the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (2) issue a written arbitration decision including the arbitrator’s essential
findings and conclusions and a statement of the award. The Company will pay all of the JAMS arbitration fees
in excess of those administrative fees Participant would be required to pay if the dispute were decided in a court
of law. The venue for such arbitration will be in San Francisco, CA.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the date first set forth
above.
CANDI CONTROLS, INC. PARTICIPANT
By: By:
Name: Name:
Title: Address:
428 13th St, 3rd Fl., Oakland, CA 94612
Phone: Phone:
Email: Email:
Date:
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