Exhibit 10.5

 

CERBERUS CYBER SENTINEL CORPORATION

2019 EQUTY INCENTIVE PLAN

 

1. PURPOSES. The purposes of the Plan are to (a) attract and retain for the
Company and its Affiliates the best available personnel, (b) provide additional
incentive to Employees, Directors and Consultants and to increase their interest
in the Company’s welfare, and (c) promote the success of the business of the
Company and its Affiliates.

 

2. DEFINITIONS. As used herein, unless the context requires otherwise, the
following terms shall have the meanings indicated below:

 

(a) “Affiliate” means (i) any corporation, partnership or other entity which
owns, directly or indirectly, a majority of the voting equity securities of the
Company, (ii) any corporation, partnership or other entity of which a majority
of the voting equity securities or equity interest is owned, directly or
indirectly, by the Company, and (iii) with respect to an Option that is intended
to be an Incentive Stock Option, (A) any “parent corporation” of the Company, as
defined in Section 424(e) of the Code or (B) any “subsidiary corporation” of the
Company as defined in Section 424(f) of the Code, any other entity that is taxed
as a corporation under Section 7701(a)(3) of the Code and is a member of the
“affiliated group” as defined in Section 1504(a) of the Code of which the
Company is the common parent, and any other entity as may be permitted from time
to time by the Code or by the Internal Revenue Service to be an employer of
Employees to whom Incentive Stock Options may be granted; provided, however,
that in each case the Affiliate must be consolidated in the Company’s financial
statements.

 

(b) “Award” means any right granted under the Plan, whether granted singly or in
combination, to a Grantee pursuant to the terms, conditions and limitations that
the Committee may establish.

 

(c) “Award Agreement” means a written agreement with a Grantee with respect to
any Award, including any amendments thereto.

 

(d) “Board” means the Board of Directors of the Company.

 

(e) “Bonus Stock Agreement” means a written agreement with a Grantee with
respect to a Bonus Stock Award, including any amendments thereto.

 

(f) “Bonus Stock Award” means an Award granted under Section 8 of the Plan.

 

(g) “Change in Control” of the Company means the occurrence of any of the
following events: (i) any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50 percent or more of the combined voting power of the
Company’s then outstanding securities, except any such person who is a
beneficial owner of securities in excess of such amount as of the date of
adoption of the Plan; (ii) as a result of, or in connection with, any tender
offer or exchange offer, merger, or other business combination (a
“Transaction”), the persons who were directors of the Company immediately before
the Transaction shall cease to constitute a majority of the Board of Directors
of the Company or any successor to the Company; (iii) the Company is merged or
consolidated with another entity and as a result of the merger or consolidation
less than 50 percent of the voting power of the outstanding voting securities of
the surviving or resulting corporation shall then be owned in the aggregate by
the former shareholders of the Company; (iv) a tender offer or exchange offer is
made and consummated for the ownership of securities of the Company representing
50 percent or more of the combined voting power of the Company’s then
outstanding voting securities; or (v) the Company transfers substantially all of
its assets to another entity which is not controlled by the Company.

 

 

 

 

(h) “Code “means the Internal Revenue Code of 1986, as amended, and any
successor statute. Reference in the Plan to any section of the Code shall be
deemed to include any amendments or successor provisions to such section and any
Treasury regulations promulgated under such section.

 

(i) “Committee” means the committee (or committees), as constituted from time to
time, of the Board that is appointed by the Board to administer the Plan, or if
no such committee is appointed (or no such committee shall be in existence at
any relevant time), the term “Committee” for purposes of the Plan shall mean the
Board. Within the scope of such authority, the Board or the Committee may (i)
delegate to a committee of one or more members of the Board who are not Outside
Directors the authority to grant Awards to eligible persons who are either (A)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Awards, or (B) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code, and/or (ii) delegate to a committee of one or more members of the Board
who are not Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act. The Board
may assume any or all of the powers and responsibilities prescribed for the
Committee, and to the extent it does so, the term “Committee” as used herein
shall also be applicable to the Board.

 

(j) “Common Stock” means the Common Stock, $0.0001 par value per share, of the
Company or the common stock that the Company may in the future be authorized to
issue (as long as the common stock varies from that currently authorized, if at
all, only in amount of par value) in replacement or substitution thereof.

 

(k) “Company” means Cerberus Cyber Sentinel Corporation, a Delaware corporation.

 

(l) “Consultant” means any person (other than an Employee or a Director, solely
with respect to rendering services in such person’s capacity as a Director) who
is engaged by the Company or any Affiliate to render consulting or advisory
services to the Company or such Affiliate and who is a “consultant or advisor”
within the meaning of Rule 701 promulgated under the Securities Act or Form S-8
promulgated under the Securities Act, including any foreign national who, but
for the laws of his country, would be an employee of the Company or an
Affiliate.

 

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(m) “Continuous Service” means that the provision of services to the Company or
an Affiliate in any capacity of Employee, Director or Consultant is not
interrupted or terminated. Except as otherwise provided in the Award Agreement,
service shall not be considered interrupted or terminated for this purpose in
the case of (i) any approved leave of absence, (ii) transfers among the Company,
any Affiliate, or any successor, in any capacity of Employee, Director or
Consultant, or (iii) any change in status as long as the individual remains in
the service of the Company or an Affiliate in any capacity of Employee, Director
or Consultant. An approved leave of absence shall include sick leave, military
leave, or any other authorized personal leave. For purposes of each Incentive
Stock Option, if such leave exceeds ninety (90) days, and re-employment upon
expiration of such leave is not guaranteed by statute or contract, then the
Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the
day that is three (3) months and one (1) day following the expiration of such
ninety (90)-day period.

 

(n) “Covered Employee” means the chief executive officer and the other most
highly compensated officers of the Company for whom total compensation is
required to be reported to shareholders under Regulation S-K, as determined for
purposes of Section 162(m) of the Code.

 

(o) “Director” means a member of the Board.

 

(p) “Disability” means the “disability” of a person (i) as defined in a then
effective written employment agreement between a person and the Company, or (ii)
if such person is not covered by a written employment agreement with the
Company, as defined in a then effective long-term disability plan maintained by
the Company that covers such person, or (iii) if neither a written employment
agreement or a plan exists at any relevant time, “Disability” means the
permanent and total disability of a person within the meaning of Section
22(e)(3) of the Code. For purposes of determining the time during which an
Incentive Stock Option may be exercised under the terms of an Option Agreement,
“Disability” means the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code. Section 22(e)(3) of the Code provides
that an individual is totally and permanently disabled if he is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.

 

(q) “Employee” means any person, including an Officer or Director, who is
employed, within the meaning of Section 3401 of the Code, by the Company or an
Affiliate. The provision of compensation by the Company or an Affiliate to a
Director solely with respect to such individual rendering services in the
capacity of a Director, however, shall not be sufficient to constitute
“employment” by the Company or that Affiliate.

 

(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
any successor statute. Reference in the Plan to any section of the Exchange Act
shall be deemed to include any amendments or successor provisions to such
section and any rules and regulations relating to such section.

 

(s) “Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:

 

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(i) If the Common Stock is listed on any established stock exchange, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such a share of Common Stock (or the closing bid, if no sales were reported) as
quoted on such exchange (or if the Common Stock is listed or traded on more than
one exchange, the exchange with the greatest volume of trading in the Common
Stock) on the day of determination (or if no such price or bid is reported on
that day, on the last market trading day prior to the day of determination), as
reported by the applicable exchange or such other source as the Committee deems
reliable. If the relevant date does not fall on a day on which the Common Stock
has traded on such securities exchange, the date on which the Fair Market Value
shall be established shall be the last day on which the Common Stock was so
traded prior to the relevant date, or such other appropriate day as shall be
determined by the Board, in its sole discretion consistent with Section 409A of
the Code.

 

(ii) If the Common Stock is quoted on the OTC Markets, Fair Market Value of a
share of Common Stock shall be the last trade reported on the OTC Markets on the
day of determination (or if no such trade is reported on that day, on the last
market day prior to the day of determination).

 

(iii) In the absence of any such established market for the Common Stock, the
Fair Market Value shall be determined in good faith by the reasonable
application by the Committee of a reasonable valuation method in accordance with
Section 409A of the Code.

 

(t) “Grantee” means an Employee, Director or Consultant to whom an Award has
been granted under the Plan.

 

(u) “Incentive Stock Option” means an Option granted to an Employee under the
Plan that meets the requirements of Section 422 of the Code.

 

(v) “Non-Employee Director” means a Director of the Company who either (i) is
not an Employee or Officer, does not receive compensation (directly or
indirectly) from the Company or an Affiliate in any capacity other than as a
Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(w) “Non-Qualified Stock Option” means an Option granted under the Plan that is
not intended to be an Incentive Stock Option.

 

(x) “Officer” means a person who is an “officer” of the Company or any Affiliate
within the meaning of Section 16 of the Exchange Act (whether or not the Company
is subject to the requirements of the Exchange Act).

 

(y) “Option” means an Award in the form of a stock option granted pursuant to
Section 7 of the Plan to purchase a specified number of shares of Common Stock,
whether granted as an Incentive Stock Option or as a Non-Qualified Stock Option.

 

(z) “Option Agreement” means the written agreement evidencing the grant of an
Option executed by the Company and the Optionee, including any amendments
thereto.

 

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(aa) “Optionee” means an individual to whom an Option has been granted under the
Plan.

 

(bb) “OTC Markets” means any tier of quotation service operated by the OTC
Markets Group, Inc.

 

(cc) “Outside Director” means a Director who either (i) is not a current
employee of the Company or an “affiliated corporation” (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an “affiliated corporation” receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), has not been an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code) direct or
indirect remuneration from the Company or an “affiliated corporation” for
services in any capacity other than as a Director, or (ii) is otherwise
considered an “outside director” for purposes of Section 162(m) of the Code.

 

(dd) “Plan” means this Cerberus Cyber Sentinel Corporation 2019 Equity Incentive
Plan, as effective June 6, 2019, as set forth herein and as it may be amended
from time to time.

 

(ee) “Qualifying Shares” means shares of Common Stock which either (i) have been
owned by the Optionee and have been “paid for” for more than six (6) months
within the meaning of Rule 144 promulgated under the Securities Act, or (ii)
were obtained by the Optionee in the public market.

 

(ff) “Regulation S-K” means Regulation S-K promulgated under the Securities Act,
as it may be amended from time to time, and any successor to Regulation S-K.
Reference in the Plan to any item of Regulation S-K shall be deemed to include
any amendments or successor provisions to such item.

 

(gg) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as it may
be amended from time to time, and any successor to Rule 16b-3.

 

(hh) “Section” means a section of the Plan unless otherwise stated or the
context otherwise requires.

 

(ii) “Securities Act” means the Securities Act of 1933, as amended, and any
successor statute. Reference in the Plan to any section of the Securities Act
shall be deemed to include any amendments or successor provisions to such
section and any rules and regulations relating to such section.

 

(jj) “Ten Percent Shareholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) at the time an Option is granted stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any of its Affiliates.

 

3. TYPES OF AWARDS AVAILABLE UNDER THE PLAN. Awards granted under this Plan may
be (a) Incentive Stock Options, (b) Non-Qualified Stock Options, and (c) Bonus
Stock Awards, as designated at the time of grant. The shares of stock that may
be purchased upon exercise of Options granted under this Plan or that may be
awarded under a Bonus Stock Award under this Plan are shares of Common Stock.

 

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4. SHARES SUBJECT TO PLAN. Subject to adjustment pursuant to Section 12(a)
hereof, the aggregate number of shares of Common Stock that may be issued
pursuant to Options granted under this Plan or Bonus Stock Awards under this
Plan shall not exceed 25,000,000 shares. At all times during the term of the
Plan, the Company shall reserve and keep available such number of shares of
Common Stock as will be required to satisfy the requirements of outstanding
Awards under the Plan. The number of shares reserved for issuance under the Plan
shall be reduced only to the extent that shares of Common Stock are actually
issued in connection with the exercise or settlement of an Award. Any shares of
Common Stock covered by an Award (or a portion of an Award) that is forfeited or
canceled or that expires shall be deemed not to have been issued for purposes of
determining the maximum aggregate number of shares of Common Stock which may be
issued under the Plan and shall again be available for Awards under the Plan.
Nothing in this Section 4 shall impair the right of the Company to reduce the
number of outstanding shares of Common Stock pursuant to repurchases,
redemptions, or otherwise; provided, however, that no reduction in the number of
outstanding shares of Common Stock shall (a) impair the validity of any
outstanding Award, whether or not that Award is fully vested or exercisable, or
(b) impair the status of any shares of Common Stock previously issued pursuant
to an Award as duly authorized, validly issued, fully paid, and nonassessable.
The shares to be delivered under the Plan shall be made available from (a)
authorized but unissued shares of Common Stock, (b) Common Stock held in the
treasury of the Company, or (c) previously issued shares of Common Stock
reacquired by the Company, including shares purchased on the open market, in
each situation as the Committee may determine from time to time in its sole
discretion.

 

5. ELIGIBILITY. Awards other than Incentive Stock Options may be granted to
Employees, Officers, Directors, and Consultants. Incentive Stock Options may be
granted only to Employees (including Officers and Directors who are also
Employees), as limited by clause (iii) of Section 2(a). The Committee in its
sole discretion shall select the recipients of Awards. A Grantee may be granted
more than one Award under the Plan, and Awards may be granted at any time or
times during the term of the Plan. The grant of an Award to an Employee,
Officer, Director or Consultant shall not be deemed either to entitle that
individual to, or to disqualify that individual from, participation in any other
grant of Awards under the Plan.

 

6. Limitation on Individual AWARDS. Any and all shares available for Awards
under the Plan may be granted by way of Incentive Stock Options, Non-Qualified
Stock Options, or Bonus Stock Awards to any one person. To the extent consistent
with applicable law, compensation generated under the Plan is intended to
constitute “performance-based” compensation for purposes of Section 162(m) of
the Code.

 

7. OPTIONS.

 

(a) Grant of Options. An Option is a right to purchase shares of Common Stock
during the option period for a specified exercise price. The Committee shall
determine (i) whether each Option shall be granted as an Incentive Stock Option
or as a Non-Qualified Stock Option and (ii) the provisions, terms, and
conditions of each Option including, but not limited to, the vesting schedule,
the number of shares of Common Stock subject to the Option, the exercise price
of the Option, the period during which the Option may be exercised, forfeiture
provisions, methods of payment, and all other terms and conditions of the
Option.

 

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(b) Limitations on Incentive Stock Options. The aggregate Fair Market Value
(determined as of the date of grant of an Option) of Common Stock which any
Employee is first eligible to purchase during any calendar year by exercise of
Incentive Stock Options granted under the Plan and by exercise of incentive
stock options (within the meaning of Section 422 of the Code) granted under any
other incentive stock option plan of the Company or an Affiliate shall not
exceed $100,000. If the Fair Market Value of stock with respect to which all
incentive stock options described in the preceding sentence held by any one
Optionee are exercisable for the first time by such Optionee during any calendar
year exceeds $100,000, the Options (that are intended to be Incentive Stock
Options on the date of grant thereof) for the first $100,000 worth of shares of
Common Stock to become exercisable in such year shall be deemed to constitute
incentive stock options within the meaning of Section 422 of the Code and the
Options (that are intended to be Incentive Stock Options on the date of grant
thereof) for the shares of Common Stock in the amount in excess of $100,000 that
become exercisable in that calendar year shall be treated as Non-Qualified Stock
Options. If the Code or the Treasury regulations promulgated thereunder are
amended after the effective date of the Plan to provide for a different limit
than the one described in this Section 7(b), such different limit shall be
incorporated herein and shall apply to any Options granted after the effective
date of such amendment.

 

(c) Acquisitions and Other Transactions. Notwithstanding the provisions of
Section 9(g), in the case of an Option issued or assumed pursuant to Section
9(g), the exercise price and number of shares for the Option shall be determined
in accordance with the principles of Sections 409A and 424(a) of the Code and
the Treasury regulations promulgated thereunder. The Committee may, from time to
time, assume outstanding options granted by another entity, whether in
connection with an acquisition of such other entity or otherwise, by either (i)
granting an Option under the Plan in replacement of or in substitution for the
option assumed by the Company, or (ii) treating the assumed option as if it had
been granted under the Plan if the terms of such assumed option could be applied
to an Option granted under the Plan. Such assumption shall be permissible if the
holder of the assumed option would have been eligible to be granted an Option
hereunder if the other entity had applied the rules of the Plan to such grant.
The Committee also may grant Options under the Plan in settlement of, or
substitution for, outstanding options or obligations to grant future options in
connection with the Company or an Affiliate acquiring another entity, an
interest in another entity or an additional interest in an Affiliate whether by
merger, stock purchase, asset purchase or other form of transaction.

 

(d) Payment or Exercise. Payment for the shares of Common Stock to be purchased
upon exercise of an Option may be made in cash (by check or electronic funds
transfer) or, if elected by the Optionee in one or more of the following methods
stated in the Option Agreement (at the date of grant with respect to any Option
granted as an Incentive Stock Option) and where permitted by law: (i) if a
public market for the Common Stock exists, through a “same day sale” arrangement
between the Optionee and a broker-dealer that is a member of the Financial
Industry Regulatory Authority (a “FINRA Dealer”) whereby the Optionee
irrevocably elects to exercise the Option and to sell a portion of the shares of
Common Stock so purchased to pay for the exercise price and whereby the FINRA
Dealer irrevocably commits upon receipt of such shares of Common Stock to
forward the exercise price directly to the Company; (ii) if a public market for
the Common Stock exists, through a “margin” commitment from the Optionee and a
FINRA Dealer whereby the Optionee irrevocably elects to exercise the Option and
to pledge the shares of Common Stock so purchased to the FINRA Dealer in a
margin account as security for a loan from the FINRA Dealer in the amount of the
exercise price, and whereby the FINRA Dealer irrevocably commits upon receipt of
such shares of Common Stock to forward the exercise price directly to the
Company; or (iii) by surrender to the Company of Qualifying Shares at the Fair
Market Value per share at the time of exercise (provided that such surrender
does not result in an accounting charge for the Company). No shares of Common
Stock may be issued until full payment of the purchase price therefor has been
made.

 

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(e) Modification, Extension and Renewal of Options. The Committee shall have the
power to modify, cancel, extend or renew outstanding Options and to authorize
the grant of new Options and/or Bonus Stock Awards in substitution therefor
(regardless of whether any such action would be treated as a repricing for
financial accounting or other purposes), provided that (except as permitted by
Section 12(a) of the Plan) any such action may not, without the written consent
of any Optionee, (i) impair any rights under any Option previously granted to
such Optionee, (ii) cause the Option or the Plan to become subject to Section
409A of the Code, or (iii) cause any Option to lose its status as
“performance-based” compensation under Section 162(m) of the Code. Any
outstanding Incentive Stock Option that is modified, extended, renewed or
otherwise altered will be treated in accordance with Section 424(h) of the Code.

 

8. BONUS STOCK AWARDS.

 

(a) Bonus Stock Awards. A Bonus Stock Award is a grant of shares of Common Stock
for such consideration, if any, and subject to such restrictions on transfer,
rights of first refusal, repurchase provisions, forfeiture provisions and other
terms and conditions as are established by the Committee. Each Bonus Stock Award
shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The terms and conditions of such Bonus Stock
Agreement may change from time to time, and the terms and conditions of separate
Bonus Stock Agreements need not be identical, but each such Bonus Stock
Agreement shall be subject to the conditions of this Section 8.

 

(b) Forfeiture Restrictions. Shares of Common Stock that are the subject of a
Bonus Stock Award may be subject to restrictions on disposition by the Grantee
and to an obligation of the Grantee to forfeit and surrender the shares to the
Company under certain circumstances (the “Forfeiture Restrictions”). The
Forfeiture Restrictions shall be determined by the Committee in its sole
discretion, and the Committee may provide that the Forfeiture Restrictions shall
lapse on the passage of time, the attainment of one or more performance targets
established by the Committee, or the occurrence of such other event or events
determined to be appropriate by the Committee. The Forfeiture Restrictions, if
any, applicable to a particular Bonus Stock Award (which may differ from any
other such Bonus Stock Award) shall be stated in the Bonus Stock Agreement.

 

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(c) Rights as Shareholder. Shares of Common Stock awarded pursuant to a Bonus
Stock Award shall be represented by a stock certificate registered in the name
of the Grantee of such Bonus Stock Award, or by a book-entry account with the
Company’s transfer agent. The Grantee shall have the right to receive dividends
with respect to the shares of Common Stock subject to a Bonus Stock Award, to
vote the shares of Common Stock subject thereto and to enjoy all other
shareholder rights with respect to the shares of Common Stock subject thereto,
except that, unless provided otherwise in this Plan, or in the Bonus Stock
Agreement, (i) the Grantee shall not be entitled to delivery of the shares of
Common Stock except as the Forfeiture Restrictions expire, (ii) the Company or
an escrow agent shall retain custody of the shares of Common Stock until the
Forfeiture Restrictions expire, or the Company shall cause its transfer agent to
place restrictions on any such shares in such book-entry account, (iii) the
Grantee may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of the shares of Common Stock until the Forfeiture Restrictions expire,
and (iv) a breach of the terms and conditions established by the Committee
pursuant to the Bonus Stock Agreement shall cause a forfeiture of the Restricted
Stock Award. At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms, conditions or restrictions relating to
Bonus Stock Awards, including rules pertaining to the termination of the
Grantee’s Continuous Service (by retirement, Disability, death or otherwise)
prior to expiration of the Forfeiture Restrictions. Such additional terms,
conditions or restrictions shall also be set forth in a Bonus Stock Agreement
made in connection with the Bonus Stock Award.

 

(d) Stock Delivery. One or more stock certificates representing shares of Common
Stock, free of Forfeiture Restrictions, shall be delivered to the Grantee
promptly after, and only after, the Forfeiture Restrictions have expired, or the
Company shall cause the records of the Company’s transfer agent to reflect the
same, if such shares are reflected by book-entry account. The Grantee, by his
acceptance of the Bonus Stock Award, irrevocably grants to the Company a power
of attorney to transfer any shares so forfeited to the Company, agrees to
execute any documents requested by the Company in connection with such
forfeiture and transfer, and agrees that such provisions regarding transfers of
forfeited shares shall be specifically performable by the Company in a court of
equity or law.

 

(e) Payment for Bonus Stock. The Committee shall determine the amount and form
of any payment for shares of Common Stock received pursuant to a Bonus Stock
Award. In the absence of such a determination, the Grantee shall not be required
to make any payment for shares of Common Stock received pursuant to a Bonus
Stock Award, except to the extent otherwise required by law.

 

(f) Forfeiture of Bonus Stock. Unless otherwise provided in a Bonus Stock
Agreement, on termination of the Grantee’s Continuous Service prior to lapse of
the Forfeiture Restrictions, the shares of Common Stock which are still subject
to the Forfeiture Restrictions under Bonus Stock Award shall be forfeited by the
Grantee. Upon any forfeiture, all rights of the Grantee with respect to the
forfeited shares of the Common Stock subject to the Bonus Stock Award shall
cease and terminate, without any further obligation on the part of the Company
except to repay any purchase price per share paid by the Grantee for the shares
forfeited. The Committee will have discretion to determine whether the
Continuous Service of a Grantee has terminated and the date on which such
Continuous Service terminates and whether the Grantee’s Continuous Service
terminated as a result of the Disability of the Grantee.

 

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(g) Lapse of Forfeiture Restrictions in Certain Events; Committee’s Discretion.
Notwithstanding the provisions of Section 8(f) or any other provision in the
Plan to the contrary, the Committee may, in its discretion and as of a date
determined by the Committee, fully vest any or all Common Stock awarded to the
Grantee pursuant to a Bonus Stock Award, and upon such vesting, all Forfeiture
Restrictions applicable to such Bonus Stock Award shall lapse or terminate. Any
action by the Committee pursuant to this Section 8(g) may vary among individual
Grantees and may vary among the Bonus Stock Awards held by any individual
Grantee. Notwithstanding the preceding provisions of this Section 8(g), the
Committee may not take any action described in this Section 8(g) with respect to
a Bonus Stock Award that has been granted to a Covered Employee if such Award
has been designed to meet the exception for performance-based compensation under
Section 162(m) of the Code.

 

(h) Notice of Election Under 83(b). Each Grantee making an election under
Section 83(b) of the Code shall provide a copy thereof to the Company within
thirty (30) days of the filing of such election with the Internal Revenue
Service.

 

9. GENERAL PROVISIONS REGARDING AWARDS.

 

(a) Form of Award Agreement. Each Award granted under the Plan shall be
evidenced by a written Award Agreement in such form (which need not be the same
for each Grantee) as the Committee from time to time approves, but which is not
inconsistent with the Plan, including any provisions that may be necessary to
assure that any Option that is intended to be an Incentive Stock Option will
comply with Section 422 of the Code.

 

(b) Awards Criteria. In determining the amount and value of Awards to be
granted, the Committee may take into account the responsibility level,
performance, potential, other Awards and such other considerations with respect
to a Grantee as it deems appropriate. The terms of an Award Agreement may
provide that the amount payable as an Award may be adjusted for dividends or
dividend equivalent.

 

(c) Date of Grant. The date of grant of an Award will be the date specified by
the Committee as the effective date of the grant of an Award or, if the
Committee does not so specify, will be the date on which the Committee makes the
determination to grant such Award. The Award Agreement evidencing the Award will
be delivered to the Grantee with a copy of the Plan and other relevant Award
documents within a reasonable time after the date of grant.

 

(d) Stock Price. The exercise price or other measurement of stock value relative
to any Award shall be the price determined by the Committee (but, if required by
applicable law, shall be not less than the par value of the shares of Common
Stock on the date of grant of the Award). Unless otherwise determined by the
Committee, the exercise price of any Option shall not be less than 100% of the
Fair Market Value of the shares of Common Stock for the date of grant of the
Option; provided, however, the exercise price of any Incentive Stock Option
granted to a Ten Percent Shareholder shall not be less than 110% of the Fair
Market Value of the shares of Common Stock for the date of grant of the Option.

 

(e) Period of Award. Awards shall be exercisable or payable within the time or
times or upon the event or events determined by the Committee and set forth in
the Award Agreement. Unless otherwise provided in an Option Agreement, Options
shall terminate on (and no longer be exercisable or payable after) the earlier
of: (i) ten (10) years from the date of grant of the Option; (ii) for an
Incentive Stock Option granted to a Ten Percent Shareholder, five (5) years from
the date of grant of the Option; (iii) three (3) months after the Optionee is no
longer serving in any capacity as an Employee, Consultant or Director of the
Company for a reason other than the death or Disability of the Optionee; (iv)
one (1) year after death of the Optionee; or (v) one (1) year after Disability
of the Optionee.

 

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(f) Transferability of Awards. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by the Grantee, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution, and shall be exercisable or payable
during the lifetime of the Grantee only by the Grantee; provided, that the
Grantee may designate persons who or which may exercise or receive his Awards
following his death. Notwithstanding the preceding sentence, Awards other than
Incentive Stock Options may be transferred to such family members, family member
trusts, family limited partnerships and other family member entities as the
Committee, in its sole discretion, may approve prior to any such transfer. No
such transfer will be approved by the Committee if the Common Stock issuable
under such transferred Award would not be eligible to be registered on Form S-8
promulgated under the Securities Act.

 

(g) Acquisitions and Other Transactions. The Committee may, from time to time,
approve the assumption of outstanding awards granted by another entity, whether
in connection with an acquisition of such other entity or otherwise, by either
(i) granting an Award under the Plan in replacement of or in substitution for
the awards assumed by the Company, or (ii) treating the assumed award as if it
had been granted under the Plan if the terms of such assumed award could be
applied to an Award granted under the Plan. Such assumption shall be permissible
if the holder of the assumed award would have been eligible to be granted an
Award hereunder if the other entity had applied the rules of this Plan to such
grant.

 

(h) Notice. If an Award involves an exercise, it may be exercised only by
delivery to the Company of a written exercise agreement approved by the
Committee (which need not be the same for each Grantee), stating the number of
shares of Common Stock being purchased, the method of payment, and such other
matters as may be deemed appropriate by the Company in connection with the
issuance of shares upon exercise of the Award, together with payment in full of
any exercise price for any shares of Common Stock being purchased. Such exercise
agreement may be part of a Grantee’s Award Agreement.

 

(i) Withholding Taxes. The Committee may establish such rules and procedures as
it considers desirable in order to satisfy any obligation of the Company to
withhold the statutory prescribed minimum amount of federal or state income
taxes or other taxes with respect to the grant, exercise or payment of any Award
under the Plan, including procedures for a Grantee to have shares of Common
Stock withheld from the total number of shares of Common Stock to be issued or
purchased upon grant or exercise of an Award. Prior to issuance of any shares of
Common Stock, the Grantee shall pay or make adequate provision acceptable to the
Committee for the satisfaction of the statutory minimum prescribed amount of any
federal or state income or other tax withholding obligations of the Company, if
applicable. Upon grant, exercise or payment of an Award, the Company shall
withhold or collect from the Grantee an amount sufficient to satisfy such tax
withholding obligations.

 

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(j) Exercise of Award Following Termination of Continuous Service.

 

(i) An Award may not be exercised after the expiration date of such Award set
forth in the Award Agreement and may be exercised following the termination of a
Grantee’s Continuous Service only to the extent provided in the Award Agreement.

 

(ii) Where the Award Agreement permits a Grantee to exercise an Award following
the termination of the Grantee’s Continuous Service for a specified period, the
Award shall terminate to the extent not exercised on the last day of the
specified period or the last day of the original term of the Award, whichever
occurs first.

 

(iii) Any Option designated as an Incentive Stock Option, to the extent not
exercised within the time permitted by law for the exercise of Incentive Stock
Options following the termination of an Optionee’s Continuous Service, shall
convert automatically to a Non-Qualified Stock Option and thereafter shall be
exercisable as such to the extent exercisable by its terms for the period
specified in the Option Agreement.

 

(iv) The Committee shall have discretion to determine whether the Continuous
Service of a Grantee has terminated and the effective date on which such
Continuous Service terminates and whether the Grantee’s Continuous Service
terminated as a result of the Disability of the Grantee.

 

(k) Limitations on Exercise.

 

(i) The Committee may specify a reasonable minimum number of shares of Common
Stock or a percentage of the shares subject to an Award that may be purchased on
any exercise of an Award; provided, that such minimum number will not prevent a
Grantee from exercising the full number of shares of Common Stock as to which
the Award is then exercisable.

 

(ii) The obligation of the Company to issue any shares of Common Stock pursuant
to the exercise of any Award or otherwise make payments hereunder shall be
subject to the condition that such exercise and the issuance and delivery of
such shares and other actions pursuant thereto comply with Section 409A of the
Code, the Securities Act, all applicable state securities and other laws and the
requirements of any stock exchange or national market system upon which the
shares of Common Stock may then be listed or quoted, as in effect on the date of
exercise. The Company shall be under no obligation to register the shares of
Common Stock with the Securities and Exchange Commission or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws or stock exchange or quotation service, and the Company shall
have no liability for any inability or failure to do so.

 

(iii) As a condition to the exercise of an Award, the Company may require the
person exercising such Award to represent and warrant at the time of any such
exercise that the shares of Common Stock are being purchased only for investment
and without any present intention to sell or distribute such shares of Common
Stock if, in the opinion of counsel for the Company, such a representation is
required by any securities or other applicable laws.

 

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(l) Performance-Based Compensation. The Committee may designate any Award as
“qualified performance-based compensation” for purposes of Section 162(m) of the
Code. Any Awards designated as “qualified performance-based compensation” shall
be conditioned on the achievement of any one or more performance criteria, and
the measurement may be stated in absolute terms or relative to individual
performances, comparable companies, peer or industry groups or other standard
indexes, and in terms of Company-wide objectives or in terms of absolute or
comparative objectives that relate to the performance of divisions, affiliates,
departments or functions within the Company or an Affiliate. Notwithstanding any
other provision of the Plan, the Committee may grant an Award that is not
contingent on performance goals or is contingent on performance goals other than
the performance criteria, so long as the Committee has determined that such
Award is not intended to satisfy the requirements for “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Code.

 

10. PRIVILEGES OF STOCK OWNERSHIP. Except as provided in the Plan with respect
to Bonus Stock Awards, no Grantee will have any of the rights of a shareholder
with respect to any shares of Common Stock subject to an Award until such Award
is properly exercised and the purchased or awarded shares are issued and
delivered to the Grantee, as evidenced by an appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company. No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to such date of issuance and delivery, except as provided
in the Plan.

 

11. BREACH; ADDITIONAL TERMS. A breach of the terms and conditions of this Plan
or established by the Committee pursuant to the Award Agreement shall cause a
forfeiture of the Award. At the time of such Award, the Committee may, in its
sole discretion, prescribe additional terms, conditions or restrictions relating
to the Award, including provisions pertaining to the termination of the
Grantee’s employment (by retirement, Disability, death or otherwise) prior to
expiration of Forfeiture Restrictions or other vesting provisions. Without
limitation of the foregoing, the Committee has discretion to suspend vesting
during a leave of absence. Absent action by the Committee or to the extent
otherwise required by law, vesting will be suspended during an unpaid leave of
absence. Such additional terms, conditions or restrictions shall also be set
forth in an Award Agreement made in connection with the Award.

 

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12. ADJUSTMENT UPON CHANGES IN CAPITALIZATION AND CORPORATE EVENTS.

 

(a) Capital Adjustments. The number of shares of Common Stock (i) covered by
each outstanding Award granted under the Plan, the exercise, target or purchase
price of each such outstanding Award, and any other terms of the Award that the
Committee determines requires adjustment and (ii) available for issuance under
Section 4 shall be adjusted to reflect, as deemed appropriate by the Committee,
any increase or decrease in the number of shares of Common Stock resulting from
a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without receipt of consideration, subject to any required action by the Board or
the shareholders of the Company and compliance with applicable securities laws;
provided, however, that a fractional share will not be issued upon exercise of
any Award, and either (i) the value of any fraction of a share of Common Stock
that would have resulted will be cashed out at Fair Market Value and applied
toward the payment of the exercise price pursuant to Section 7(d) or, if
applicable, toward the withholding due under Section 9(i), or (ii) the number of
shares of Common Stock issuable under the Award will be rounded up to the
nearest whole number, as determined by the Committee; and provided further that
the exercise, target or purchase price may not be decreased to below the par
value, if any, for the shares of Common Stock as adjusted pursuant to this
Section 12(a). Except as the Committee determines, no issuance by the Company of
shares of capital stock of any class, or securities convertible into shares of
capital stock of any class, shall affect, and no adjustment by reason hereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an Award. Notwithstanding the foregoing provisions of this Section
12(a), no adjustment may be made by the Committee with respect to an outstanding
Award that would cause such Award and/or the Plan to become subject to Section
409A of the Code.

 

(b) Dissolution or Liquidation. The Committee shall notify the Grantee at least
twenty (20) days prior to any proposed dissolution or liquidation of the
Company. Unless specifically provided otherwise in an individual Award or Award
Agreement or in a then-effective written employment agreement between the
Grantee and the Company or an Affiliate, to the extent that an Award has not
been previously exercised, if applicable, such Award shall terminate immediately
prior to consummation of such dissolution or liquidation.

 

(c) Change in Control. Unless specifically provided otherwise with respect to
Change in Control events in an individual Award or Award Agreement or in a
then-effective written employment agreement between the Grantee and the Company
or an Affiliate, if, during the effectiveness of the Plan, a Change in Control
occurs, the surviving entity or purchaser described in Section 2(g), the
“Purchaser”, shall either assume the obligations of the Company under the
outstanding Awards or convert the outstanding Awards into awards of at least
equal value as to capital stock of the Purchaser. In the event such Purchaser
refuses to assume or substitute Awards pursuant to a Change in Control, each
Award which is at the time outstanding under the Plan shall (i) except as
provided otherwise in an individual Award or Award Agreement, automatically
become, subject to all other terms of the Award or Award Agreement, fully vested
and exercisable or payable, as appropriate, and be released from any repurchase
or forfeiture provisions, immediately prior to the specified effective date of
such Change in Control, for all of the shares of Common Stock at the time
represented by such Award, (ii) the Forfeiture Restrictions applicable to all
outstanding Bonus Stock Awards shall lapse and shares of Common Stock subject to
such Bonus Stock Awards shall be released from escrow, if applicable, and
delivered to the Grantees of the Awards free of any Forfeiture Restriction, and
(iii) notwithstanding any contrary terms in the Award or Award Agreement, expire
on a date at least twenty (20) days after the Committee gives written notice to
Grantees specifying the terms and conditions of such termination.

 

To the extent that a Grantee exercises an Award before or on the effective date
of the Change in Control, the Company shall issue all Common Stock purchased by
exercise of that Award (subject to the Grantee’s satisfaction of the
requirements of Section 9(i)), and those shares of Common Stock shall be treated
as issued and outstanding for purposes of the Change in Control. Upon a Change
in Control, when the outstanding Awards are not assumed by the Purchaser, the
Plan shall terminate and any unexercised Awards outstanding under the Plan at
that date shall terminate.

 

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13. SHAREHOLDER APPROVAL. The Company shall obtain the approval of the Plan by
the Company’s shareholders to the extent required to satisfy Sections 162(m) or
422 of the Code or to satisfy or comply with any applicable laws or the rules of
any stock exchange or quotation service on which the Common Stock may be listed
or quoted. No Award that is granted as a result of any increase in the number of
shares of Common Stock authorized to be issued under the Plan may be exercised
or forfeiture restrictions lapse prior to the time such increase has been
approved by the shareholders of the Company.

 

14. ADMINISTRATION. The Plan shall be administered by the Committee. The
Committee shall interpret the Plan and any Awards granted pursuant to the Plan
and shall prescribe such rules and regulations in connection with the operation
of the Plan as it determines to be advisable for the administration of the Plan.
The Committee may rescind and amend its rules and regulations from time to time.
The interpretation by the Committee of any of the provisions of the Plan or any
Award granted under the Plan shall be final and binding upon the Company and all
persons having an interest in any Award or any shares of Common Stock purchased
or other payments received pursuant to an Award. Notwithstanding the authority
hereby delegated to the Committee to grant Awards to Employees, Directors and
Consultants under the Plan, the Board shall have full authority, subject to the
express provisions of the Plan, to grant Awards to Employees, Directors and
Consultants under the Plan, to interpret the Plan, to provide, modify and
rescind rules and regulations relating to it, to determine the terms and
provision of Awards granted to Employees, Directors and Consultants under the
Plan and to make all other determinations and perform such actions as the Board
deems necessary or advisable to administer the Plan. No member of the Committee
or the Board shall be liable for any action taken or determination made in good
faith with respect to the Plan or any Award granted hereunder.

 

15. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the Board
or the Committee shall be deemed to give any Employee, Director or Consultant
any right to be granted an Award or any other rights except as may be evidenced
by the Award Agreement, or any amendment thereto, duly authorized by the
Committee and executed on behalf of the Company, and then only to the extent and
on the terms and conditions expressly set forth therein. The existence of the
Plan and the Awards granted hereunder shall not affect in any way the right of
the Board, the Committee or the shareholders of the Company to make or authorize
any adjustment, recapitalization, reorganization or other change in the
Company’s capital structure or its business, any merger or consolidation or
other transaction involving the Company, any issue of bonds, debentures, or
shares of preferred stock ranking prior to or affecting the Common Stock or the
rights thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of the Company’s assets or business, or any other
corporate act or proceeding by or for the Company. Nothing contained in the Plan
or in any Award Agreement or in other related documents shall confer upon any
Employee, Director or Consultant any right with respect to such person’s
Continuous Service or interfere or affect in any way with the right of the
Company or an Affiliate to terminate such person’s Continuous Service at any
time, with or without cause.

 

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16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as specifically
provided in a retirement or other benefit plan of the Company or an Affiliate,
Awards shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or an Affiliate, and
shall not affect any benefits under any other benefit plan of any kind or any
benefit plan subsequently instituted under which the availability or amount of
benefits is related to level of compensation. The Plan is not a “Retirement
Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of
1974, as amended.

 

17. AMENDMENT OR TERMINATION OF PLAN. The Committee in its discretion may, at
any time or from time to time after the date of adoption of the Plan, terminate
or amend the Plan in any respect, including amendment of any form of Award
Agreement, exercise agreement, or instrument to be executed pursuant to the
Plan; provided, however, to the extent necessary to comply with the Code,
including Sections 162(m) and 422 of the Code, other applicable laws, or the
applicable requirements of any stock exchange or quotation service, the Company
shall obtain shareholder approval of any Plan amendment in such manner and to
such a degree as required. No Award may be granted after termination of the
Plan. Any amendment or termination of the Plan shall not affect Awards
previously granted, and such Awards shall otherwise remain in full force and
effect as if the Plan had not been amended or terminated, unless mutually agreed
otherwise in a writing (including an Award Agreement) signed by the Grantee and
the Company.

 

18. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective June 6,
2019, which is the date of adoption of the Plan by the Board. The Plan shall
continue in effect for a term of ten (10) years from June 6, 2019 and terminate
on June 5, 2029, unless sooner terminated by action of the Board.

 

19. SEVERABILITY AND REFORMATION. The Company intends all provisions of the Plan
to be enforced to the fullest extent permitted by law. Accordingly, should a
court of competent jurisdiction determine that the scope of any provision of the
Plan is too broad to be enforced as written, the court should reform the
provision to such narrower scope as it determines to be enforceable. If,
however, any provision of the Plan is held to be wholly illegal, invalid, or
unenforceable under present or future law, such provision shall be fully
severable and severed, and the Plan shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof, and the
remaining provisions of the Plan shall remain in full force and effect and shall
not be affected by the illegal, invalid, or unenforceable provision or by its
severance.

 

20. GOVERNING LAW. The Plan and all issues or matters relating to the Plan shall
be governed by, determined and enforced under, and construed and interpreted in
accordance with the laws of the State of Delaware, without giving effect to the
conflict of law principles thereof.

 

21. INTERPRETIVE MATTERS. Whenever required by the context, pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine, or
neuter, and the singular shall include the plural, and visa versa. The term
“include” or “including” does not denote or imply any limitation. The captions
and headings used in the Plan are inserted for convenience and shall not be
deemed a part of the Plan for construction or interpretation.

 

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