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Provisions
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Nevada
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Delaware
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Action by Shareholders Without a Meeting
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Nevada law provides that unless otherwise provided in the articles of incorporation or the bylaws, any action required or permitted to be taken at a meeting of the 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 different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required.
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Delaware law permits shareholders action by less than unanimous written consent and provides that any action that could be taken at an annual or special meeting of shareholders (including the election of directors) may be taken without a meeting, without prior notice and without vote, if written consents are signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Delaware law provides that, in order to be effective, all written consents must be delivered to the corporation within 60 days after the earliest dated consent delivered to the corporation, and prompt notice of the actions by written consent must be given to those shareholders who have not consented in writing and who, if the action had been taken at a meeting would have been entitled to notice of the meeting
if the record date for such meeting had been the date that written consents were signed by a sufficient number of shareholders to take the action were delivered to Company.
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Special Meetings of Shareholders
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Under Nevada law, a special meeting of shareholders may be called as set forth in the corporation's bylaws. A Corporation may eliminate such actions by written consent in its articles of incorporation or bylaws.
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Under Delaware law, a special meeting of shareholders may be called by the corporation’s board of directors or by such persons as may be authorized by the corporation’s certificate of incorporation or bylaws.
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Quorum
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Nevada law provides that, unless the articles of incorporation or the bylaws provide for a greater or lesser proportion, a majority of the board of directors of the corporation then in office, at a meeting duly assembled, is necessary to constitute a quorum for the transaction of business, and the act of directors holding a majority of the voting power of the directors, present at a meeting at which a quorum is present, is the act of the board of directors.
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Delaware law provides that, unless the corporation’s certificate of incorporation or bylaws provide otherwise, a majority of the votes entitled to be cast on a matter constitutes a quorum for action on that matter. Unlike Nevada law, Delaware law provides that in no event shall a quorum consist of less than one-third of the shares entitled to vote at a meeting.
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Removal of Directors
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Nevada law allows any director to be removed from office by the vote of shareholders representing not less than two-thirds of the voting power of the class or series of stock of the corporation entitled to elect such director, unless the articles of incorporation provide for cumulative voting or a larger percentage of voting stock. If a Nevada corporation's articles of incorporation provide for cumulative voting, a director may not be removed except upon the vote of shareholders owning sufficient voting power to have prevented such director's election in the first instance.
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Delaware law provides that any director may be removed, with or without cause, by a majority of the shares then entitled to vote at an election of directors; however, Delaware law also provides that, so long as a Delaware corporation has a classified board of directors, unless otherwise provided in the corporation’s certificate of incorporation, shareholders may effect such removal only for cause. |
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Authorized Number of Directors
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Nevada requires a corporation to have at least one director, and may provide in its articles of incorporation or in its bylaws for a fixed number of directors or a variable number of directors, and for the manner in which the number of directors may be increased or decreased.
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Delaware law requires that a corporation must have a minimum of one director and may provide in its articles of incorporation or in its bylaws for a fixed number of directors or a variable number of directors, and for the manner in which the number of directors may be increased or decreased.
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Indemnification of Directors
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Nevada laws require a corporation to indemnify a director, except as detailed in Section 78.751(3)(a) and requires the corporation to indemnify a director who has been successful on the merits or otherwise in defense of any civil action.
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Delaware law requires a corporation to indemnify a director who was successful, on the merits or otherwise, in the defense of any claim, issue or matter, to which he or she was a party because of his or her status as a director of the corporation, against reasonable expenses incurred in connection with the proceeding or claim with respect to which he or she was successful.
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Amendments to the Articles (Certificate) of Incorporation
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Nevada law provides that the board of directors must adopt a resolution setting forth the amendment proposed and either call a special meeting of the stockholders entitled to vote on the amendment or direct that the amendment be voted on at the next annual meeting of the stockholders. Stockholders constituting at least a majority of the voting power must vote in favor of the amendment.
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Under Delaware law, shareholders are not entitled to enact an amendment to the certificate of incorporation without appropriate action taken by the board of directors. Amendments to the certificate of incorporation generally require that the board of directors adopt a resolution setting forth the amendment, declaring its advisability and submitting it to a vote of the shareholders.
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Dissenters’ (Appraisal) Rights
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Under Nevada law a shareholder of a corporation participating in certain major corporate transactions may, under varying circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair market value of his or her shares in lieu of the consideration he or she would otherwise receive in the transaction. Nevada law, dissenters' (or appraisal) rights are not available in a merger or share exchange if the shares held by the shareholders prior to the share exchange or merger were either listed on a national securities exchange or held by at least 2,000 shareholders of record, unless the articles of incorporation of the corporation provide for dissenters' rights or the shareholders are required to accept under the plan
of merger or share exchange anything other than cash, shares of the surviving corporation, shares of a publicly traded or widely held corporation, or a combination of these.
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Delaware law provides appraisal rights only in the case of certain mergers or consolidations. Thus, under Delaware law, shareholders have no appraisal rights in the event of a sale, lease or exchange of all or substantially all of a corporation’s assets. Appraisal rights in Delaware are available only to record holders. No appraisal rights exist, however, for corporations whose shares are listed on a national securities exchange or held of the record by more than 2,000 shareholders unless the articles of incorporation provides otherwise or the shareholders are to receive in the merger or consolidation anything other than (a) share of stock of the corporation surviving or resulting from such merger or consolidation, (b) shares of stock of any other corporation which at the effective date of the merger or consolidation will be either listed on a national
securities exchange or held of record by more than 2,000 shareholders, (c) cash in lieu of fractional shares of the corporation described in the foregoing clauses (a) and (b), or (d) any combination of clauses (a), (b), or (c).
Delaware law permits a shareholder who has received notice of appraisal rights, and who has submitted a written demand for appraisal, to file a petition with the Court of Chancery of the State of Delaware to demand a determination of the fair value of such shareholder’s shares. Such petition must be filed within 120 days after the effective date of a merger or consolidation.
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Dividends
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Nevada law prohibits a distribution (including dividends, purchases, redemptions or other acquisition of shares, distributions of indebtedness, or otherwise) if, after giving effect to the distribution, (i) the corporation would not be able to pay its debts as they become due in the usual course of business or (ii) except as provided in the articles of incorporation, the corporation's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
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Delaware law provides the same provisions with respect to declaration of dividends as Nevada law. Delaware law defines surplus as the excess of the net assets of the corporation over its capital. Unless the corporation’s board of directors determines otherwise, the capital of the corporation is equal to the aggregate par value of the issued shares of stock having par value. Therefore, Delaware law permits a corporation to declare and pay dividends out of surplus or, if there is no surplus, out of the net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year.
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Anti-Takeover Provisions
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Nevada has adopted special laws designed to make certain kinds of "unfriendly" corporate takeovers, or other transactions involving a corporation and one or more of its significant shareholders, more difficult. This act related to public companies either listed on an exchange or with at least 2,000 shareholders.
Nevada law prohibits a Nevada corporation from engaging in a "combination" with an "interested stockholder" for three years following the date that such person becomes an interested shareholder and place certain restrictions on such combinations even after the expiration of the three-year period. With certain exceptions, an interested stockholder is a person or group that owns 10% or more of the corporation's outstanding voting power (including stock with respect to which the person has voting rights and any rights to acquire stock pursuant to an option, warrant, agreement, arrangement, or understanding or upon the exercise of conversion or exchange rights) or is an affiliate or associate of the corporation and was the owner of 10% or more of such voting stock at any time within the previous three years.
Nevada has a control shares act. See 78.378 et seq. which
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Delaware law prohibits a Delaware corporation that is (a) listed on a national securities exchange; (b) authorized for quotation on the NASDAQ Stock Market; or (c) held of record by more than 2,000 shareholders from engaging in any “business combination” with any “interested stockholder” for a period of three years from the date that such person became an interested stockholder. A Delaware corporation subject to the above may engage in a “business combination” with an “interested stockholder” under certain circumstances in which, prior to the person becoming an interested stockholder, the corporation’s board of directors approves the “business combination” with the interested stockholder or the transaction in which the person becomes an interested stockholder. A “business combination” is defined as, among other things, a merger or consolidation of the corporation or any subsidiary with the interested
stockholder or with any other corporation if such transaction is caused by the interested stockholder and as a result of such merger or consolidation Section 203 of the DGCL is not applicable to the surviving corporation. An “interested stockholder” is defined as any person that (a) owns 15% or more of the corporation voting stock at any time within the three-year period immediately previous to the date on which it is sought to be determined whether such person is an interested stockholder.
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Potential Disadvantages of Reincorporation
The board of directors has also considered the potential disadvantages of the Reincorporation. Operating as a Delaware corporation provides certain perceived benefits. For example, Delaware law is perceived to be highly developed and predictable. Delaware has adopted comprehensive and flexible corporate laws that are revised regularly to meet changing business circumstances. The Delaware legislature is particularly sensitive to issues regarding corporate law and is especially responsive to developments in modern corporate law. In addition, Delaware offers a system of specialized Chancery Courts to deal with corporate law questions, which have streamlined procedures and processes that help provide relatively quick decisions. These courts have developed considerable expertise in dealing with corporate issues, as well as a substantial and influential body of case law construing Delaware’s corporate law. In addition, the Delaware
Secretary of State is particularly flexible, highly experienced and responsive in its administration of the filings required for mergers, acquisitions and other corporate transactions.
Delaware law is the preferred state of incorporation for institutional investors and underwriters. Such entities are familiar with its provisions and prefer to assist or invest in companies who corporate law provisions they understand.
Delaware has become the preferred state of incorporation for most major American corporations, and Delaware law and administrative practices have become comparatively well-known and widely understood. Delaware case law provides a well-developed body of law defining the proper duties and decision making process expected of a board of directors in evaluating potential and proposed corporate takeover offers and business combinations. Our board of directors believes however that the substantial cost savings are more important than what may be the minor advantages of Delaware law.
Effect of the Reincorporation
The Reincorporation will be effected by the merger of Crexendo Delaware with and into Crexendo Nevada, a wholly owned subsidiary of the Company that will be incorporated for purposes of the Reincorporation. The Company as it currently exists as a Delaware corporation will cease to exist as a result of the merger, and Crexendo Nevada will be the surviving corporation and will continue to operate our business as it existed prior to the Reincorporation. The existing holders of our common stock will own all of the outstanding shares of Crexendo Nevada common stock, and no change in ownership will result from the Reincorporation. Assuming approval by our shareholders, we currently intend to cause the Reincorporation to become effective as soon as reasonably
practicable following the Annual Meeting but not later than December 31, 2016 so the Company would not be required to pay fees in Delaware in 2017.
At the effective time of the Reincorporation (the "Effective Time"), we will be governed by the Nevada Articles of Incorporation, the Nevada Bylaws (“Governing Documents”) as well as the laws of the state of Nevada (which are discussed in more detail below). There are no significant differences between the Delaware bylaws and the proposed Nevada bylaws. Although the Nevada Articles of Incorporation contain many provisions that are similar to the provisions of the Delaware
Articles, our Nevada Articles of Incorporation will exclude the Eighth, Ninth and Tenth Articles from our Delaware Articles. The Eight and Ninth Articles relate to indemnification of Officers and Directors. The Nevada Bylaws include indemnification rights in Article V which are also contained in the Delaware Bylaws. The Tenth Article from the Delaware Articles relates to compromise arrangements with creditors or Stockholders, that been omitted from the proposed Nevada Articles of Incorporation. The differences between the Crexendo Delaware Certificate and the Proposed Nevada Articles under which the
Company will operate are described in more detail below. This chart is not intended as an exhaustive list of all differences, and is qualified in its entirety by the Delaware Certificate, the Delaware Bylaws and the proposed Nevada Articles of Incorporation and the proposed Nevada Bylaws.
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Provisions
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Nevada
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Delaware
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Articles/Certificate regarding election of directors
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The Delaware Certificate provides that Election of Directors need not be by written ballet
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Articles/Certificate regarding Indemnification
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The Delaware Certificate provides that each person who by reason of being an officer or director of the Company that is made a party to any action (either civil, criminal or administrative) shall be entitled to be indemnified by the Company and held harmless to the full extent allowed under Delaware law.
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Articles/Certificate regarding right to reimbursement for Indemnification
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The Delaware Certificate provides that any covered party under the Indemnification clause shall be entitled to any expense incurred in their defense. They are deemed to be contracted rights. The Party is entitled to file an action against the Company for failure to reimburse and shall be entitled to recover costs and fees for such an action.
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Articles/Certificate regarding compromise arrangement between Company and creditors or stockholders/
Shareholders
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The Delaware certificate provides that whenever a compromise arrangement between creditors or stockholders is proposed or an application for a receiver is made that if more than ¾ of stockholders approve the compromise or resolution that decision shall be binding on all stockholders (to the extent permitted by law).
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Other than the change in the state of incorporation, the Reincorporation will not result in any change in the business, physical location, management, assets, liabilities or net worth of the Company, nor will it result in any change in location of our current employees, including management. Upon consummation of the Reincorporation, our daily business operations will continue as they are presently conducted at our principal executive offices in Tempe Arizona. The consolidated financial statements of Crexendo Nevada immediately after consummation of the Reincorporation will be the same as those of Crexendo Delaware immediately prior to the consummation of the Reincorporation. In addition, upon the effectiveness of the merger, the board of directors of Crexendo Nevada will consist of those persons elected to the board of directors of Crexendo
Delaware and will continue to serve for the term of their respective elections to our Board, and the individuals serving as executive officers of Crexendo Delaware immediately prior to the Reincorporation will continue to serve as executive officers of Crexendo Nevada, without a change in title or responsibilities. Upon effectiveness of the Reincorporation, Crexendo Nevada will be the successor in interest to Crexendo Delaware, and the shareholders will become shareholders of Crexendo Nevada.
If the Reincorporation is approved, each outstanding share of common stock of Crexendo Delaware will automatically be converted into one share of common stock of Crexendo Nevada when the Reincorporation is affected. Certificates for shares in Crexendo Delaware will automatically represent shares in Crexendo Nevada upon completion of the merger, and shareholders will not be required to exchange stock certificates as a result of the Reincorporation. All of our employee benefit and incentive compensation plans immediately prior to the Reincorporation will be continued by Crexendo Nevada, and each outstanding option to purchase shares of Crexendo Delaware’s common stock will be converted into an option to purchase an equivalent number of shares of Crexendo Nevada’s common stock on the same terms and subject to the same conditions. The registration statements of Crexendo Delaware on file with the Securities and Exchange Commission
immediately prior to the Reincorporation will be assumed by Crexendo Nevada, and the shares of Crexendo Nevada will continue to be listed on The OTCQX as “CXDO “.
Abandonment or Amendment to Reincorporation Agreement
The Reincorporation Agreement provides that our board of directors may abandon the Reincorporation at any time prior to the Effective Time if the Board determines that the Reincorporation is inadvisable for any reason. The Company is unaware of any specific material considerations that would necessitate such an action.
The boards of directors of Crexendo Nevada and Crexendo Delaware may amend the Reincorporation Agreement at any time prior to the filing of the Certificate of Merger with the Secretary of State of the State of Nevada, provided that an amendment made subsequent to the adoption of this Agreement by the stockholders or shareholders of either entity shall not: (a) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof, (b) alter or change any term of the Certificate of Incorporation of Crexendo Nevada, or (c) alter or change any of the terms and conditions of the Reincorporation Agreement if such alteration or change would adversely affect the holders of any class or series of capital stock of either entity.
Capitalization of Company before and after the Reincorporation
As of May 20, 2016, we were authorized to issue up to 25 million shares of common stock and 5 million share of preferred stock, par value $0.001 per share, of which 13,320,246 common shares were issued and outstanding and no preferred shares were issued and outstanding. An additional 6,339,047 common shares have been reserved to be issued upon exercise of outstanding options. As of May 20, 2016, we have 4,155,024 issues and outstanding common stock options and 2,184,023 available for future issuance under equity compensation plans. Subsequent to the reincorporation, the Company will have authorized to issue up to 25 million shares of common stock and 5 million share of preferred stock, par value $0.001 per share. An additional 6,339,047
common shares will be reserved for existing Equity Compensation Plans.
Holders of common stock and stock options will not be required to exchange their Crexendo Delaware stock certificates or stock options, respectively, and should not destroy any stock certificate or stock option or submit any stock certificate or stock option to the Company unless they are requested to do so. Any Crexendo Delaware stock certificates submitted to the Company for transfer after the Effective Time, whether pursuant to a sale or otherwise, will be exchanged automatically for Crexendo Nevada stock certificates.
Dissenters’ or Appraisal Rights
The shareholders of the Company will not be entitled to dissenters’ rights or appraisal rights as a result of the Reincorporation.
Material U.S. Federal Income Tax Consequences
The following discussion summarizes the material U.S. federal income tax consequences of the Reincorporation to holders of our common stock. This summary is not a comprehensive description of all of the federal tax consequences of the Reincorporation that may be relevant to holders. We urge you to consult your own tax advisor regarding your particular circumstances and the U.S. federal income and estate tax consequences to you of the Reincorporation, as well as any tax consequences arising under the laws of any state, local, foreign or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax laws.
The Reincorporation provided for in the Reincorporation Agreement is intended to be a tax-free reorganization under Section 368(a) of the U.S. Internal Revenue Code. Assuming the reincorporation qualifies as a tax-free reorganization within the meaning of Section 368(a) of the U.S. Internal Revenue Code, and subject to the qualifications and assumptions described in this proxy statement: (a) holders of Crexendo Delaware common stock will not recognize any gain or loss as a result of the consummation of the Reincorporation, (b) the aggregate tax basis of shares of Crexendo Delaware common stock immediately following consummation of the Reincorporation will be equal to the aggregate tax basis of the shares of Crexendo Delaware common stock immediately before consummation of the Reincorporation, and (c) the holding period for the shares of Crexendo Nevada common stock following the Reincorporation will include the holding period
of Crexendo Delaware common stock converted therefor.
Accounting Consequences Associated with the Reincorporation
We expect that the Reincorporation will have no effect on the Company from an accounting perspective because there is no change in the entity as a result of the Reincorporation. As such, the historical financial statements of the Company, which have previously been reported to the SEC on our periodic reports, as of and for all periods through the date of this proxy statement, will remain the financial statements of Crexendo Nevada following the Reincorporation.
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PROPOSAL III
ADVISORY APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED
EXECUTIVE OFFICERS
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Shareholders have an opportunity to cast an advisory vote on compensation of executives as disclosed in this Proxy Statement. This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2015 executive compensation programs and policies and the compensation paid to the named executive officers.
As discussed in the “Compensation Discussion and Analysis” section of this Proxy Statement, the primary objective of our compensation program, including our executive compensation program, is to help create long-term value for our shareholders by attracting and retaining talented executives, rewarding superior operating and financial performance, and aligning the long-term interests of our executives with those of our shareholders.
This proposal allows our shareholders to express their opinions regarding the decisions of the Compensation Committee on the prior year’s annual compensation to the named executive officers. Your advisory vote will serve as an additional tool to guide the Board of Directors and the Compensation Committee in continuing to improve the alignment of the Company’s executive compensation programs with the interests of the Company and its shareholders, and is consistent with our commitment to high standards of corporate governance.
If a quorum is present, approval of this proposal requires the affirmative vote of the holders of a majority of the shares present and entitled to vote on the proposal. Abstentions will have the effect of a vote “against” the proposal and broker non-votes will have no effect on the outcome of the vote.
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to any named executive officer and will not be binding on or overrule any decisions by the Board of Directors; it will not create or imply any additional fiduciary duty on the part of the Board of Directors, and it will not restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials related to executive compensation. The vote on this proposal is provided as required pursuant to section 14A of the Securities Exchange Act, as amended. The Compensation Committee will take into account the outcome of the vote when considering future compensation arrangements for our named executive officers.
Shareholders are being asked to vote on the following resolution:
RESOLVED: that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the “Compensation Discussion and Analysis” section of this Proxy Statement, compensation tables and the accompanying narrative, is hereby approved.
The Board recommends a vote “FOR” the executive compensation of our
named executive officers as disclosed in this proxy statement.
EXECUTIVE OFFICERS
The name, age, position and a brief account of the business experience of each of our executive officers as of May 20, 2016 are set forth below:
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Name
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Age
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Position
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Steven G. Mihaylo
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72
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Chief Executive Officer and Chairman of the Board
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Jeff Korn
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58
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Chief Administrative Officer
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Doug Gaylor
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Chief Operating Officer and President
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Ron Vincent
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Chief Financial Officer
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Steven G. Mihaylo – Biographical information for Mr. Mihaylo is set forth above under “Directors Standing for Election”
Jeffrey G. Korn – Mr. Korn has served as our Chief Legal Officer since February 2009. From 2002 until his appointment as Chief Legal Officer, Mr. Korn served as our General Counsel. Prior to joining the company, Mr. Korn had a private consulting practice from 2001 until 2002 and before that, he served as General Counsel of ProsoftTraining, an internet training education and certification company which was previously listed on NASDAQ, from 1999 until 2001. From 1983 until 1999, Mr. Korn was a partner in a Jacksonville, Florida, law firm, specializing in corporate matters and litigation. Mr. Korn has been an advisor to private venture firms, as well as a lecturer and a college instructor. Mr. Korn currently serves on several private, not-for-profit,
charitable and educational boards. Mr. Korn has a Bachelor degree from the State University of New York at New Paltz and a juris doctorate degree from Stetson University College.
Doug Gaylor – Mr. Gaylor has served as our President and Chief Operating Officer (COO) since May 2012. From 2009 until his appointment as President and Chief Operating Officer (COO), Mr. Gaylor served as our VP of sales. Prior to joining the Company, Mr. Gaylor held positions of increasing responsibility, culminating with the position of Sr. Vice President at Inter-Tel/Mitel, where he was originally hired in 1987. Mr. Gaylor was responsible for overseeing the sales efforts in the Western United States where he was ultimately responsible for the activities of approximately 200 representatives. Under his leadership, yearly sales for his region reached over $175,000,000 annually. Mr. Gaylor holds a Bachelor degree in Communications from the University of Houston.
Ron Vincent – Mr. Vincent has served as our Chief Financial Officer since May 2012 after joining the Company in April 2012 as Vice President of Finance. Prior to joining the Company, Mr. Vincent was an audit senior manager for Ernst & Young, LLP in Phoenix since 2005. Mr. Vincent managed client relationships for clients of all sizes; his experience included auditing cloud telecommunication companies, content delivery network providers, internet marketing service providers, manufacturing and healthcare networks. Prior to his employment with Ernst & Young, Mr. Vincent was an audit with Mukai, Greenlee & Company and John C. Todd II, P.C. for a total of 13 years of experience as an auditor. Mr. Vincent is a licensed
Certified Public Accountant in the state of Arizona. Mr. Vincent holds a Bachelor degree in accounting and finance from Indiana University Bloomington and an MBA from the University of Phoenix.
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation Discussion and Analysis
The overall objective of our executive compensation program is to help create long-term value for our shareholders by attracting and retaining talented executives, rewarding superior operating and financial performance, and aligning the long-term interests of our executives with those of our shareholders. Accordingly, our executive compensation program incorporates the following principles:
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We believe that retaining experienced, competent, goal-oriented executives and minimizing executive turnover is in our shareholders’ best interests;
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We believe that a portion of our executives’ compensation should be tied to measures of performance of our business as a whole and that such measures of performance should be non-discretionary;
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We believe that a portion of our executives’ compensation should be tied to measures of performance within each executive’s specific job responsibilities and that those measures should be as non-discretionary as possible;
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We believe that the interests of our executives should be linked with those of our shareholders through the risks and rewards of owning our common stock;
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We believe that a meaningful portion of each executive’s long-term incentives, and merit increases will vary based upon individual performance;
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We believe that each executive’s performance against corporate and individual objectives for the previous year should be periodically reviewed, and that the difficulty of achieving desired results in any particular year must be considered; and
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We believe that we should consider the ability of each executive to support our long-term performance goals; as well as each executive’s ability to fulfill his or her management responsibilities and his or her ability to work with and contribute to our executive management team.
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Executive Compensation Procedures
In conjunction with our efforts to achieve the executive compensation objectives and implement the underlying compensation principles described above, we follow the procedures described below:
Role of the Compensation Committee
The Compensation Committee periodically requests and receives survey data from our human resource department on the compensation levels and practices of companies that need executive officers with skills and experience similar to what we require, companies that are in the same or similar industries as us, and companies with market capitalizations and revenues similar to us. The Compensation Committee uses this broad based survey information as a check on whether our compensation packages are consistent with current industry practices and are at a level that will enable us to attract and retain capable executive officers. We did not retain the services of a compensation consulting firm in 2015 or 2014.
With respect to executives other than the Chief Executive Officer, the Compensation Committee seeks and receives recommendations from the Chief Executive Officer with respect to performance and appropriate levels of compensation. The Committee does not request or accept recommendations from the Chief Executive Officer concerning his own compensation.
The Compensation Committee’s conclusions and recommendations on the compensation packages for our executive officers are based on the total mix of information from the sources described above, as well as the Committee Members’ general knowledge of executive compensation practices and their personal evaluations of the likely effects of compensation levels and structure on the attainment of our business and financial objectives.
Each year, our senior management prepares a business plan and establishes goals for our company. The Compensation Committee reviews, modifies (if necessary), occasionally sets, and ultimately approves these goals, which are then incorporated into the company’s business plan. Periodically throughout the year, the Compensation Committee compares Company goals against actual circumstances and accomplishments. The Compensation Committee may revise the Company’s goals and business plan if they determine that circumstances warrant.
The Compensation Committee relies on its judgment in making compensation recommendations and decisions after reviewing our company’s overall performance and evaluating each executive’s performance against established goals, leadership ability, responsibilities within the company, and current compensation arrangements. The compensation program for NEOs and the Compensation Committee assessment process are designed to be flexible so as to better respond to the evolving business environment and individual circumstances.
The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee consisting of one or more members of the committee. In particular, the Compensation Committee may delegate the approval of certain transactions to a subcommittee consisting solely of members of the committee who are (a) “Non-Employee Directors” for the purpose of Rule 16b-3 under the Securities Exchange Act of 1934, as in effect from time to time, and (b) “outside directors” for the purposes of Section 162(m) of the Internal Revenue Code, as in effect from time to time.
Elements of our Compensation Programs: What our Compensation Programs are Designed to Award and Why We Choose Each Element
Elements of Compensation. We implement the executive compensation objectives and principles described above through the use of the following elements of compensation, each of which is described in greater detail below:
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Other Personal Benefits
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The Compensation Committee evaluates overall compensation levels for each NEO in relation to other executives within our company and in relation to the NEO’s prior year compensation. The Compensation Committee also considers competing offers made to NEOs, if any. The Compensation Committee considers each element of compensation collectively with the other elements when establishing the various forms and levels of compensation for each NEO. The Compensation Committee approves compensation programs which it believes are competitive with our peers, such that the combination of base pay and performance-based bonuses results in an aggregate rate of cash salary, bonus compensation, equity awards and other benefits for our NEOs within competitive market standards.
In determining long-term equity awards to executives, the Compensation Committee considers total equity awards available under the Plan, the number of equity awards to be granted to each executive in relation to other executives, the overall compensation objective for each executive, and the number and type of awards to executives in prior years.
Base Pay. Base salaries of the NEOs are set at levels that the Compensation Committee believes are generally competitive with our market peers so as to attract, reward, and retain executive talent. The Compensation Committee may opt to pay higher or lower amounts depending on individual circumstances. The Compensation Committee sets the base pay of the Chief Executive Officer and the other NEOs after reviewing recommendations from our Chief Executive Officer. Annual adjustments are influenced by growth of our operations, revenues and profitability, individual performance, changes in responsibility, and other factors. The table below summarizes base pay for our NEOs as of December 31, 2015 and 2014:
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Name
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Base Pay
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Position
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Steven G. Mihaylo
|
|
$ |
- |
|
Chief Executive Officer and Chairman of the Board
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|
Doug Gaylor
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|
$ |
200,000 |
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Chief Operating Officer and President
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|
Satish Bhagavatula
|
|
$ |
180,000 |
|
Chief Technology Officer
|
|
Jeff Korn
|
|
$ |
150,000 |
|
Chief Legal Officer
|
|
Ron Vincent
|
|
$ |
150,000 |
|
Chief Financial Officer
|
Stock Option Awards. The Compensation Committee grants discretionary, long-term equity awards to our NEOs under the Plan. These awards have historically been in the form of stock options. The Compensation Committee believes that stock option awards align the interests of NEOs with the interests of our shareholders and will incentivize the NEOs to provide stockholder value. The Compensation Committee believes that such grants provide long-term performance-based compensation, help retain executives through the vesting periods, and serve to align management and stockholder interests. In making awards under the Plan, the Compensation Committee considers grant size. Options vest only to the extent that the NEO remains a company employee through the applicable vesting dates, typically monthly over three - four years. We believe the three - four year vesting schedule assists in retaining executives and
encourages the NEOs to focus on long-term performance.
We have granted stock options to our NEOs with an exercise price equal to the closing price per share on the date of the grant. We do not grant options with an exercise price below 100% of the trading price of the underlying shares of our common stock on the date of grant. Stock options only have a value to the extent the value of the underlying shares on the exercise date exceeds the exercise price. Accordingly, stock options provide compensation only if the underlying share price increases over the option term and the NEO’s employment continues with us until the vesting date.
In granting stock options to the NEOs, we also consider the impact of the grant on our financial performance, as determined in accordance with accounting guidance. For share-based equity awards, we record expense in accordance with accounting guidance. The amount of expense we record pursuant to accounting guidance may vary from the corresponding compensation value we use in determining the amount of the awards.
Retirement and Other Personal Benefits. All of our NEOs receive similar retirement and other personal benefits. We sponsor the Crexendo, Inc. Retirement Savings Plan (the “401(k) Plan”) for eligible employees. Our NEOs participate in the 401(k) Plan. The 401(k) Plan is a broad-based, tax-qualified retirement plan under which eligible employees, including the NEOs, may make annual pre-tax salary reduction contributions, subject to the various limits imposed under the Internal Revenue Code of 1986, as amended (the “Code”). We make matching contributions under the 401(k) Plan on behalf of eligible participants, including the NEOs, at the rate of 100% of the first one percent and 50% of each additional percentage of each participating NEO’s salary up to a six percent deferral, with a two-year vesting schedule for the matched portion. Matching contributions are not subject to non-discrimination
requirements imposed by the Code. The 401(k) Plan is intended to help us attract and retain qualified executives through the offering of competitive employee benefits. We do not maintain any other pension or retirement plans for the NEOs.
We provide other traditional benefits and limited perquisites to our NEOs in order to achieve a competitive pay package as detailed in the Summary Compensation Table. The Compensation Committee believes that these benefits, which are detailed in the Summary Compensation Table under the heading “All Other Compensation”, are reasonable, competitive, appropriate, and consistent with our overall executive compensation program. Other than our company’s contributions to the 401(k) Plan, these benefits consist principally of employer-paid premiums on health insurance, personal automobile reimbursements, and mobile phone communications charges.
Compensation of Steven G. Mihaylo, Chief Executive Officer. Mr. Mihaylo is primarily responsible for investor relations activities and the general management of our NEOs. Mr. Mihaylo receives a small base salary to cover personal insurance premiums. Mr. Mihaylo does not participate in any non-equity incentive plans, but is eligible to receive stock option awards or other equity compensation. The Compensation Committee believes Mr. Mihaylo’s interests are directly aligned with the interests of our shareholders because of Mr. Mihaylo’s significant equity holdings in our company and his eligibility to participate in stock option awards or other equity compensation.
Compensation of Ronald Vincent, Chief Financial Officer. Mr. Vincent has general responsibility for our accounting, finance, and human resource functions. Mr. Vincent receives a base salary similar to the other NEOs. Mr. Vincent also receives retirement and other personal benefits similar to the other NEOs. Mr. Vincent receives stock options or other equity compensation similar to Messrs. Gaylor and Korn.
Compensation of Doug Gaylor, President and Chief Operating Officer. Mr. Gaylor has general responsibility for our operations. Mr. Gaylor receives a base salary similar to the other NEOs. Mr. Gaylor also receives retirement and other personal benefits similar to the other NEOs. Mr. Gaylor receives stock options or other equity compensation similar to Messrs. Korn and Vincent.
Compensation of Jeffrey G. Korn, Chief Legal Officer. Mr. Korn has general responsibility for our regulatory and legal compliance. Mr. Korn receives a base salary similar to the other NEOs. Mr. Korn also receives retirement and other personal benefits similar to the other NEOs. Mr. Korn receives stock options or other equity compensation similar to Messrs. Gaylor and Vincent.
Deductibility of Executive Compensation. Section 162(m) of the Code imposes a $1 million annual limit on the amount that a public company may deduct for compensation paid to its chief executive officer during a tax year or to any of its three other most highly compensated executive officers who are still employed at the end of the tax year. The limit does not apply to compensation that meets the requirements of Code Section 162(m) for “qualified performance-based” compensation (i.e., compensation paid only if the executive meets pre-established, objective goals based upon performance criteria approved by the shareholders).
The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code. In certain situations, the Compensation Committee may approve compensation that will not meet the requirements of Code Section 162(m) in order to ensure competitive levels of total compensation for our executive officers. We do not have a stockholder approved non-equity incentive compensation plan. As a result, all bonus amounts paid to the NEOs do not constitute qualified performance-based compensation for purposes of Code Section 162(m). For the years ended December 31, 2015 and 2014, the compensation paid to the NEOs did not exceed the limitations imposed by Code Section 162(m).
AUDIT COMMITTEE REPORT
In accordance with the Audit Committee Charter adopted by our Board on March 23, 2004 and amended and restated on August 9, 2006, the Audit Committee is responsible for reviewing and discussing our audited financial statements with management, discussing information with our independent registered public accounting firm relating to such firm’s judgments about the quality of our accounting policies and practices, recommending to our Board that the audited financials be included in our Annual Report on Form 10-K and overseeing compliance with the Securities and Exchange Commission requirements for disclosure of such firm’s services and activities. Currently the Audit Committee is comprised of Goergen, Kamm and Williams. Our Board has determined that each of these persons is independent. The Audit Committee Charter is in compliance
with all regulatory requirements, and is published on our website.
Our management has the primary responsibility for our financial statements as well as our financial reporting process, policies and internal controls. Our independent registered public accounting firm is responsible for performing an audit of our financial statements and expressing an opinion as to the fair presentation of such financial statements in accordance with U.S. generally accepted accounting principles. Our Audit Committee is responsible for, among other things, reviewing the results of the audit engagement with our independent registered public accounting firm; reviewing the adequacy, scope and results of the internal accounting controls and procedures; reviewing the degree of independence of our independent registered public accounting firm; reviewing the fees of such firm; and recommending the engagement of our independent registered public accounting firm to the full Board.
In this context, the Audit Committee reviewed and discussed our audited financial statements as of and for the years ended December 31, 2015 and 2014 with management and our independent registered public accounting firm. The Audit Committee discussed with our independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended. In addition, the Audit Committee received written confirmation, in accordance with standards of the Public Company Accounting Oversight Board, and discussed with our independent registered public accounting firm their independence from our company. The Audit Committee has also considered whether such firm’s provision
of non-audit services to us is compatible with maintaining such firm’s independence.
The members of the Audit Committee are not engaged in the accounting or auditing profession. In the performance of their oversight function, the members of the Audit Committee necessarily relied upon the information, opinions, reports and statements presented to them by our management of and by our independent registered public accounting firm. As a result, the Audit Committee's oversight and the review and discussions referred to above do not assure that management has maintained adequate financial reporting processes, policies and internal controls, that our financial statements are accurate, that the audit of such financial statements has been conducted in accordance with the standards of the Public Company Accounting Oversight Board or that our independent registered public accounting firm meets the standards for auditor independence.
Based on the review and discussions above, the Audit Committee recommended that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2015.
Members of the Audit Committee
David Williams, Chairman
Todd Goergen
Anil Puri
The above report of the Audit Committee will not be deemed to be incorporated by reference to any filing by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate the same by reference.
ADDITIONAL INFORMATION
Annual Report
Our Annual Report on Form 10-K for the year ended December 31, 2015 is enclosed herewith. Additional copies of such report are available, without charge, upon request. For additional copies please write to 1615 South 52nd Street, Tempe, AZ, 85281, Attn: Investor Relations, telephone: (602) 714-8500.
Additional Materials
A copy of this proxy statement has been filed with the SEC. You may read and copy this proxy statement at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of this proxy statement by mail from the Public Reference Section of the SEC at prescribed rates. To obtain information on the operation of the Public Reference Room, you can call the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers, including the company, that file electronically with the SEC. The address of the SEC’s Internet website
is www.sec.gov.
Delivery of Documents to Shareholders Sharing an Address
If you are the beneficial owner, but not the record holder, of shares of our common stock, your broker, bank or other nominee may only deliver one copy of this proxy statement and our 2015 annual report to multiple shareholders who share an address unless that nominee has received contrary instructions from one or more of the shareholders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement and our 2015 annual report to a stockholder at a shared address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of this proxy statement and annual report, now or in the future, should submit this request by writing to Crexendo, Inc., 1615 South 52nd Street, Tempe, AZ, 85281, Attn: Investor Relations. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and
who wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all shareholders at the shared address in the future.
Electronic Access to Proxy Statement and Annual Report
This proxy statement and our 2015 annual report may be viewed online at www.crexendo.com under the Investors tab, SEC Filings. If you are a stockholder of record, you can elect to access future annual reports and proxy statements electronically by marking the appropriate box on your proxy form or by following the instructions provided if you vote by Internet or by telephone. If you choose this option, you will receive a proxy form listing the website locations and your choice will remain in effect until you notify us by mail that you wish to resume mail delivery of these documents. If you hold your common stock through a bank, broker or another holder of record, refer to the information provided by that entity
for instructions on how to elect this option.
Stockholder Proposals for Action at Our Next Annual Meeting
Any stockholder who wishes to present any proposal for stockholder action at the 2019 annual meeting of shareholders must send the proposal to our Secretary. The proposal must be received by our Secretary, at our offices, no later than January 21, 2019 in order to be included in our proxy statement. Such proposals should be addressed to the Corporate Secretary, Crexendo, Inc., 1615 South 52nd Street, Tempe, AZ, 85281. If a stockholder proposal is introduced at the 2015 annual meeting of shareholders without any discussion of the proposal in our proxy statement, and the stockholder does not notify us on or before 45 days before the date the proxy is mailed or sent, as required by SEC Rule 14a-4(c)(1), of the intent to raise such proposal at the annual meeting of shareholders, then proxies received by us for that annual meeting will be voted by the persons
named in such proxies in their discretion with respect to such proposal. Notice of such proposal is to be sent to the above address.
Other Matters
As of the date of this statement, our Board does not intend to present and has not been informed that any other person intends to present a matter for action at the meeting other than as set forth herein and in the Notice of Meeting. If any other matter properly comes before the meeting, the holders of proxies will vote the shares represented by them in accordance with their best judgment.
* * *
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By Order of the Directors
Dated: May 31 , 2016
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Appendix - A
CREXENDO, INC., A NEVADA CORPORATION,
AND
CREXENDO, INC., A DELAWARE CORPORATION
This AGREEMENT AND PLAN OF MERGER, dated as of __________________, 2016 (this Agreement”), is between Crexendo, Inc., a Delaware corporation (“Crexendo Delaware”), and Crexendo, Inc., a Nevada corporation and wholly owned subsidiary of Crexendo Delaware (“Crexendo Delaware”). Crexendo Delaware and Crexendo Nevada are sometimes referred to herein as the “Constituent Corporations.”
RECITALS
WHEREAS, Crexendo Nevada is a corporation duly organized and existing under the laws of the State of Nevada and has a total authorized capital stock of 30,000,00shares, of which 25,000,000 are designated as Common Stock, par value $0.0001 per share (the “Crexendo Nevada Common Stock”). Crexendo Nevada, and 5,000,000 are designated as preferred stock, pare value $0.001 per share (the “Crexendo Nevada Preferred Stock)” As of the date of this Agreement, and before giving effect to the transactions contemplated hereby, 13,320,246 shares of Crexendo Nevada Common Stock are issued and outstanding, all of which are held by Crexendo Delaware, and no shares of Crexendo Nevada Preferred Stock are issued and outstanding;
WHEREAS, Crexendo Delaware is a corporation duly organized and existing under the laws of the State of Delaware and has a total authorized capital stock of 30,000,000 shares, of which 25,000,000are designated as Common Stock, par value $0.0001 per share (the “Crexendo Nevada Common Stock”), and 5,000,000are designated as Preferred Stock, par value $0.0001 per share (the “Crexendo Delaware Preferred Stock”), and, as of the date of this Agreement, and before giving effect to the transactions contemplated hereby, 13,320,246shares of Crexendo Delaware Common Stock are issued and outstanding, and no shares of Crexendo Delaware Preferred Stock are issued and outstanding;
WHEREAS, the Board of Directors of Crexendo Delaware has determined that, for the purpose of effecting the reincorporation of Crexendo Delaware in the State of Nevada under the Nevada Revised Statutes, it is advisable and in the best interests of Crexendo Delaware and its shareholders that Crexendo Delaware merge with and into Crexendo Nevada upon the terms and conditions herein provided; and
WHEREAS, the respective Boards of Directors of the Constituent Corporations, the shareholders of Crexendo Delaware and the stockholder of Crexendo Nevada have approved this Agreement and have directed that this Merger Agreement be executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, Crexendo Nevada and Crexendo Delaware hereby agree, subject to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the Nevada Revised Statutes and Delaware General Corporation Law, at the Effective Time (as hereinafter defined), Crexendo Delaware shall be merged with and into Crexendo Nevada (the “Merger”), the separate existence of Crexendo Delaware shall cease and Crexendo Nevada shall survive the Merger and shall continue to be governed by the laws of the State of Nevada. Crexendo Nevada shall be, and is herein sometimes referred to as, the “Surviving Corporation,” and the name of the Surviving Corporation shall be “Crexendo, Inc.,” a Nevada corporation.
1.2 Filing and Effectiveness. The Merger shall become effective on the date and at the time of filing a Certificate of Merger conforming with the terms of this Agreement with the Secretary of State of the State of Delaware and Articles of Merger conforming with the terms of this Agreement with the Secretary of State of the State of Nevada, whichever occurs later (the “Effective Time”), all after satisfaction of the requirements of the applicable laws of such states.
1.3 Effect of the Merger. Upon the Effective Time, the separate existence of Crexendo Delaware shall cease, and Crexendo Nevada, as the Surviving Corporation, shall: (i) continue to possess all of its assets, rights, powers and property as constituted immediately prior to the Effective Date, (ii) be subject to all actions previously taken by its and Crexendo Delaware’s Boards of Directors, (iii) succeed, without other transfer, to all of the assets, rights, powers and property of Crexendo Delaware in the manner as more fully proscribed by applicable law, (iv) continue to be subject to all of its debts, liabilities and obligations as constituted immediately prior to the Effective Date, and (v) succeed, without other transfer, to all of the debts, liabilities and obligations of Crexendo Delaware in the same manner as if Crexendo Nevada had itself incurred them, all as more fully provided under the applicable provisions of the
laws of Delaware and Nevada.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.2 Bylaws. The Bylaws of Crexendo Nevada as in effect immediately prior to the Effective Time shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of Crexendo Delaware immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation until their respective successors shall have been duly elected and qualified or until as otherwise provided by law, the Certificate of Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 Crexendo Delaware Common Stock. Upon the Effective Time, each share of Crexendo Delaware Common Stock issued and outstanding immediately prior to the Merger shall, by virtue of the Merger and without any action by the Constituent Corporations, the holder of such shares or any other person, be converted into and exchanged for one (1) fully paid and nonassessable share of Crexendo Nevada Common Stock.
3.2 Crexendo Nevada Common Stock. Upon the Effective Time, each share of Crexendo Nevada Common Stock issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by Crexendo Nevada, the holder of such shares or any other person, be canceled and returned to the status of authorized but unissued shares, without any consideration being delivered in respect thereof.
3.3 Exchange of Certificates. After the Effective Time, each holder of an outstanding certificate representing shares of Crexendo Delaware Common Stock may, at such shareholder’s option, surrender the same for cancellation to an exchange agent designated by the Surviving Corporation (the “Exchange Agent”), and each such holder shall be entitled to receive in exchange therefor a certificate or certificates shares of Crexendo Nevada Common Stock outstanding immediately prior to the Effective Date shall be deemed for all purposes, from and after the Effective Date, to represent the number of shares of Crexendo Nevada Common Stock into which such shares of Crexendo Nevada Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation or the Exchange Agent of any shares of stock represented by such outstanding certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Surviving Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights with respect to and to receive dividends and other distributions upon the shares of Crexendo Nevada Common Stock represented by such outstanding certificate as provided above.
Each certificate representing Crexendo Nevada Common Stock so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of Crexendo Delaware so converted and given in exchange therefor, unless otherwise determined by the Board of Directors of the Surviving Corporation in compliance with applicable laws.
3.4 Crexendo Nevada Equity Incentive Plans.
(a) Upon the Effective Date, the Surviving Corporation shall assume and continue any and all stock option, stock incentive, employee benefit and other equity-based award plans heretofore adopted by Crexendo Delaware (collectively, the “Plans”). Each outstanding and unexercised option, warrant or right to purchase or receive, or security convertible into, Crexendo Delaware Common Stock shall become an option, warrant or right to purchase or receive, or security convertible into, Crexendo Nevada Common Stock on the basis of one (1) share of Crexendo Nevada Common Stock for each share of Crexendo Delaware Common Stock issuable pursuant to any such option, warrant or right to purchase or receive, or convertible security, on the same terms and conditions and at an exercise price per share equal to the exercise price per share applicable to any such option, warrant or right to purchase or receive, or security convertible
into, Crexendo Delaware Common Stock at the Effective Date. No other changes in the terms and conditions of such options will occur.
(b) A number of shares of Crexendo Nevada Common Stock shall be reserved for issuance under the Plans equal to the number of shares of Crexendo Delaware Common Stock so reserved immediately prior to the Effective Date.
IV. CONDITIONS
4.1 Conditions to Crexendo Delaware’s Obligations. The obligations of Crexendo Delaware under this Merger Agreement shall be conditioned upon the occurrence of the following events:
(a) The principal terms of this Merger Agreement shall have been duly approved by the shareholders of Crexendo Delaware;
(b) Any consents, approvals or authorizations that Crexendo Delaware deems necessary or appropriate to be obtained in connection with the consummation of the Merger shall have been obtained, including, but not limited to, approvals with respect to federal and state securities laws; and
(c) The Crexendo Nevada Common Stock to be issued and reserved for issuance in connection with the Merger shall have been approved for listing by the OTCQX Stock Exchange.
V. GENERAL
5.1 Covenants of Crexendo Nevada. Crexendo covenants and agrees that it will:
(a) Qualify to do business as a foreign corporation in the State of Delaware and in connection therewith irrevocably appoint an agent for service of process to the extent required by Delaware Law; and
(b) Take such other actions as may be required by the law of the State of Delaware.
5.2 Further Assurances. From time to time, as and when required by Crexendo Nevada or by its successors or assigns, there shall be executed and delivered on behalf of Crexendo Nevada such deeds and other instruments, and there shall be taken or caused to be taken by Crexendo Nevada and Crexendo Delaware such further and other actions as shall be appropriate or necessary in order to vest or perfect in or conform of record or otherwise by Crexendo Nevada the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of Crexendo Delaware and otherwise to carry out the purposes of this Agreement, and the officers and directors of Crexendo Nevada are fully authorized in the name and on behalf of Crexendo Delaware or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.
5.3 Abandonment. At any time before the filing of the Certificate of Merger with the Secretary of State of the State of Nevada, this Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of Directors of either Crexendo Delaware or of Crexendo Nevada, or of both, notwithstanding the approval of this Agreement by the shareholders of Crexendo Delaware.
5.4 Amendment. The Boards of Directors of the Constituent Corporations may amend this Agreement at any time prior to the filing of the Certificate of Merger with the Secretary of State of the State of Nevada, provided that an amendment made subsequent to the adoption of this Agreement by the stockholders or shareholders of either Constituent Corporation shall not: (a) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (b) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger, or (c) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect
the holders of any class or series of capital stock of any Constituent Corporation.
5.5 Governing Law. This Agreement shall in all respects be construed, interpreted and enforced in accordance with and governed by the laws of the State of Nevada and, so far as applicable, the merger provisions of the Delaware Statutes.
5.6 Counterparts. In order to facilitate the filing and recording of this Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
SIGNATURE PAGE FOLLOWS
IN WITNESS WHEREOF, this Agreement, having first been approved by resolutions of the Boards of Directors of Crexendo, Inc., a Nevada corporation, and Crexendo, Inc., a Delaware corporation, is hereby executed on behalf of each of such two corporations and attested by their respective officers thereunto duly authorized.
Crexendo, Inc.,
a Delaware corporation
By: _____________________________________________
Name: Steven G. Mihaylo
Title: Chief Executive Officer
Crexendo, Inc.,
A Nevada, corporation
By: __________________________________________________
Name: Steven G. Mihaylo
Title: Chief Executive Officer
