Potential Impacts the 2014 Plan
Below is a summary of the terms of the 2014 Plan that is qualified in its entirety by reference to the full text of the 2014 Plan which is attached to this Proxy Statement as Appendix A.
Administration
The 2014 Plan will be administered by a committee (the “Committee”) appointed by the Board that will be comprised solely of two or more non-employee directors who also qualify as “outside directors” (within the meaning assigned to such term under Section 162(m) of the Code (“Section 162(m)”)) and as “Non-Employee Directors” as defined in Rule 16b-3 of the Exchange Act. The Board has appointed the Compensation Committee to initially administer the 2014 Plan.
The Committee will have full authority, subject to the terms of the 2014 Plan, to establish rules and regulations for the proper administration of the 2014 Plan, to select the employees, directors and consultants to whom awards are granted, and to set the dates of grants, the types of awards that shall be made and the other terms of the awards. When granting awards, the Committee will consider such factors as an individual’s duties and present and potential contributions to our success and such other factors as the Committee in its discretion shall deem relevant. The Committee may also correct any defect or supply any omission or reconcile any inconsistency in the 2014 Plan or in any agreement relating to an award in the manner and to the extent it shall deem expedient to carry it into effect.
Number of Shares Subject to the 2014 Plan and Award Limits
The aggregate maximum number of shares of Common Stock that may be issued under the 2014 Plan will be limited to 10% of the shares of Common Stock outstanding, which calculation shall be made on the first trading day of a new fiscal year (“Plan Share Limit”). The number of shares of Common Stock that are the subject of awards under the 2014 Plan which are forfeited or terminated, expire unexercised, are settled in cash in lieu of shares of Common Stock or in a manner such that all or some of the shares covered by an award are not issued to a participant or are exchanged for awards that do not involve shares will again immediately become available to be issued pursuant to awards granted under the 2014 Plan. If shares of Common Stock are withheld from payment of an award to satisfy tax obligations with respect to the award, those shares will be treated as shares that have been issued under the 2014 Plan and will not again be available for issuance under the 2014 Plan. If shares of Common Stock are tendered in payment of an option price of an option or the exercise price of a SAR, those shares will not be available for issuance under the 2014 Plan.
The maximum aggregate number of shares of Common Stock that the Company may issue under the 2014 Plan in any single year is 5% of the issued and outstanding shares of Common Stock. The maximum aggregate number of shares of Common Stock that may be granted to any individual participant in a single year is no more than 25% of the total shares awarded for that year under the 2014 Plan. The maximum aggregate amount awarded or credited with respect to Performance Awards to any one employee in any one calendar year that are payable in cash may not exceed $15,000,000 in value, determined as of the date of grant.
The limitations described above may be adjusted upon a subdivision or consolidation of shares of Common Stock or other capital readjustment, the payment of a stock dividend on Common Stock, or other increase or reduction in the number of shares of Common Stock outstanding without receipt of consideration by our company.
Eligibility
All of our (and our affiliates’) employees, directors and consultants are eligible to participate in the 2014 Plan. The selection of those employees, directors and consultants, from among those eligible, who will receive Incentive Stock Options, Non-statutory Stock Options, Stock Awards, Restricted Stock awards, Performance Awards, Phantom Stock Awards, Stock Appreciation Rights or RSU Awards or any combination thereof is within the discretion of the Committee. However, Incentive Stock Options may be granted only to our employees and employees of our subsidiary corporations. We currently have three executive officers, three non-employee directors and approximately 100 other employees that would be eligible to participate in the 2014 Plan.
Term of 2014 Plan
The 2014 Plan became effective as of April 8, 2014, the date the Board approved it and will be considered to have qualified as a shareholder approved incentive plan as of June [xx], 2014, twenty days following the mailing of this information statement. No further awards may be granted under the 2014 Plan after April 8, 2024, and the 2014 Plan will terminate thereafter once all awards have been satisfied, exercised or expire. The Board in its discretion may terminate the 2014 Plan at any time with respect to any shares of Common Stock for which awards have not theretofore been granted.
Restricted Stock
a. Transfer Restrictions and Forfeiture Obligations. Pursuant to a Restricted Stock award, shares of Common Stock will be issued or delivered to the employee, director or consultant at the time the award is made without any payment to us (other than for any payment amount determined by the Committee in its discretion), but such shares will be subject to certain restrictions on the disposition thereof and certain obligations to forfeit and surrender such shares to us as may be determined in the discretion of the Committee. The Committee may provide that the restrictions on disposition and the obligations to forfeit the shares will lapse based on (i) the attainment of one or more performance measures established by the Committee, (ii) the continued employment or service with us or our affiliates for a specified period or (iii) the occurrence of any event or the satisfaction of any other condition specified by the Committee in its sole discretion. Upon the issuance of shares of Common Stock pursuant to a Restricted Stock award, except for the foregoing restrictions and unless otherwise provided, the recipient of the award will have all the rights of a stockholder with respect to such shares, including the right to vote such shares and to receive all dividends paid with respect to such shares, which dividends will accrue and be paid when the forfeiture restrictions applicable to the Restricted Stock award have lapsed. At the time of such award, the Committee may, in its sole discretion, prescribe additional terms, conditions, or restrictions relating to Restricted Stock awards, including rules pertaining to the effect of the termination of employment or service as a director or consultant of a recipient of Restricted Stock (by reason of retirement, disability, death or otherwise) prior to the lapse of any applicable restrictions.
b. Accelerated Vesting. The Committee may, in its discretion, fully vest (i.e., cause the lapse of forfeiture restrictions with respect to) any outstanding Restricted Stock award as of a date determined by the Committee.
c. Other Terms and Conditions. The Committee may establish other terms and conditions for the issuance of Restricted Stock under the 2014 Plan.
Restricted Stock Unit Awards
a. RSU Awards. An RSU Award will be similar in nature to a Restricted Stock Award except that no shares of Common Stock or cash will be transferred to the holder of the award until the applicable vesting restrictions lapse or performance conditions have been satisfied. The amount of, and the vesting and the transferability restrictions applicable to, any RSU Award will be determined by the Committee in its sole discretion. The Committee will maintain a bookkeeping ledger account that reflects the number of restricted stock units credited under the 2014 Plan for the benefit of a holder.
b. RSU Award Agreement. Each RSU Award will be evidenced by an award agreement that contains any substantial risk of forfeiture (within the meaning of Section 409A of the Code (“Section 409A”)), vesting and transferability restrictions, form and time of payment provisions and other provisions not inconsistent with the 2014 Plan as the Committee may specify. An RSU Award agreement may provide for the payment of dividend equivalents.
c. Form of Payment Under RSU Award. Payment under an RSU Award will be made in cash or shares of Common Stock as specified in the applicable award agreement.
d. Time of Payment Under RSU Award. Payment to a holder under an RSU Award shall be made at the time specified in the applicable award agreement. The award agreement will specify that the payment will be made (i) by a date that is no later than the date that is two and one-half months after the end of the fiscal year in which the RSU Award payment is no longer subject to a substantial risk of forfeiture or (ii) at a time that is permissible under Section 409A.
Stock Awards
a. Award. Stock Awards are rights to receive shares of Common Stock, which vest immediately, without satisfaction of any performance criteria or objectives.
b. Payment. A Stock Award entitles the recipient to receive immediate payment of such award in Common Stock. The Committee may, in its discretion, require payment, partial payment or other conditions of the recipient relating to any Stock Award.
c. Other Terms and Conditions. The Committee may establish other terms and conditions for Stock Awards under the 2014 Plan.
Stock Options
a. Term of Option. The term of each option will be as specified by the Committee at the date of grant but shall not be exercisable more than ten years after the date of grant. The effect of the termination of an optionee’s employment, consulting relationship, or membership on the Board will be specified in the option agreement that evidences each option grant.
b. Option Price. The option price will be determined by the Committee and, in the case of an Incentive Stock Option, may not be less than the fair market value of a share of Common Stock on the date that the option is granted.
c. Repricing Restrictions. Except for adjustments for certain changes in the Common Stock, the Committee may not, without the approval of our stockholders, amend any outstanding option agreement that evidences an option grant to lower the option price (or cancel and replace any outstanding option agreement with an option agreement having a lower option price). In addition, the Committee may not lower the option price (or cancel and replace any outstanding option agreement with an option agreement having a lower option price) to the extent that doing so would subject the holder to additional taxes under Section 409A.
d. Special Rules for Certain Stockholders. If an Incentive Stock Option is granted to an employee who then owns, directly or by attribution under the Code, stock possessing more than 10% of the total combined voting power of all classes of our stock or the stock of a subsidiary of ours, then the term of the option may not exceed five years, and the option price will be at least 110% of the fair market value of the shares on the date that the option is granted.
e. Size of Grant. Subject to the limitations described above under the section “Number of Shares Subject to the 2014 Plan and Award Limits,” the number of shares for which an option is granted to an employee, director or consultant will be determined by the Committee.
f. Status of Options. The status of each option granted to an employee as either an Incentive Stock Option or a Non-statutory Stock Option will be designated by the Committee at the time of grant. Unless an option is specifically characterized by the Committee as an Incentive Stock Option it will be a Non-statutory Stock Option. If, however, the aggregate fair market value (determined as of the date of grant) of shares with respect to which Incentive Stock Options become exercisable for the first time by an employee exceeds $100,000 in any calendar year, the options with respect to the excess shares will be Non-statutory Stock Options. All options granted to any non-employee directors and consultants will be Non-statutory Stock Options.
g. Payment. The option price upon exercise may be paid by an optionee in any combination of the following: (a) cash, certified check, bank draft or postal or express money order for an amount equal to the option price under the option, (b) an election to make a cashless exercise through a registered broker-dealer (if approved in advance by the Committee or one of our executive officers) or (c) any other form of payment which is acceptable to the Committee.
h. Option Agreement. All options will be evidenced by a written agreement containing provisions consistent with the 2014 Plan and such other provisions as the Committee deems appropriate, including provisions to qualify an Incentive Stock Option under Section 422 of the Code. The terms and conditions of the respective option agreements need not be identical. The Committee may, with the consent of the participant, amend any outstanding option agreement in any manner not inconsistent with the provisions of the 2014 Plan, including amendments that accelerate the exercisability of the option.
Stock Appreciation Rights
a. Term of Stock Appreciation Right. The term of each Stock Appreciation Right will be as specified by the Committee at the date of grant but shall not be exercisable more than ten years after the date of grant.
b. Stock Appreciation Rights Agreement. All Stock Appreciation Rights will be evidenced by a written agreement containing provisions consistent with the provisions of the 2014 Plan and such other provisions as the Committee deems appropriate. The terms and conditions of the respective Stock Appreciation Rights agreements need not be identical. The Committee may, with the consent of the participant, amend an outstanding Stock Appreciation Right agreement in any manner that is not inconsistent with the provisions of the 2014 Plan, including amendments that accelerate the time at which the Stock Appreciation Right may be exercisable. Unless otherwise provided in a Stock Appreciation Rights agreement, upon the exercise of a Stock Appreciation Right, a holder will be entitled to receive payment from us in an amount determined by multiplying (i) the difference between the value of a share of Common Stock on the date of exercise over the grant price by (ii) the number of shares of Common Stock with respect to which the Stock Appreciation Right is exercised. The per share grant price for a Stock Appreciation Right will be established on the date of grant of the Stock Appreciation Right. At the discretion of the Committee, the payment made to a holder upon the exercise of a Stock Appreciation Right may be in cash, in shares of Common Stock or in some combination of cash and Common Stock.
c. Repricing Restrictions. Except for adjustments for certain changes in the Common Stock, the Committee may not, without the approval of our stockholders, amend any outstanding Stock Appreciation Right agreement to lower the Stock Appreciation Right grant price (or cancel and replace any outstanding Stock Appreciation Right with Stock Appreciation Rights agreements having a lower Stock Appreciation Right grant price). In addition, the Committee may not lower the Stock Appreciation Right grant price (or cancel and replace any outstanding Stock Appreciation Right with Stock Appreciation Rights agreements having a lower Stock Appreciation Right grant price) to the extent that doing so would subject the holder to additional taxes under Section 409A.
Performance Awards
a. Grant of Performance Awards. The Committee, at any time, may grant Performance Awards under the 2014 Plan to eligible persons in such amounts and upon such terms as the Committee may determine. The amount of, the vesting and the transferability restrictions applicable to any Performance Award will generally be based upon the attainment of performance goals as the Committee may determine. The performance period for any Performance Award will not be less than one year. All of our (and our affiliates’) employees are eligible to receive grants of Performance Awards.
b. Performance Goals. The 2014 Plan provides that a performance goal must be objective so that a third party having knowledge of the relevant facts could determine whether the goal is met. A performance goal may be based on one or more business criteria that apply to the holder, one or more of our business units, or us as a whole, with reference to one or more of the following: stock price (including adjustments for dividends), funds from operations, adjusted funds from operations, earnings or adjusted earnings before or after interest, taxes, depletion, depreciation or amortization, earnings per share, earnings per share growth, total shareholder return, economic value added, cash return on capitalization, increased revenue, revenue ratios (per employee or per customer), net income (before or after taxes), market share, return on equity, return on assets, return on capital, return on capital compared to cost of capital, return on capital employed, return on invested capital, return on investment, return on sales, operating or profit margins, shareholder value, net cash flow, operating income, cash flow, cash flow from operations, cost reductions or cost savings, cost ratios (per employee or per customer), expense control, sales, proceeds from dispositions, project completion time, budget goals, net cash flow before financing activities, customer growth, total capitalization, debt to total capitalization ratio, credit quality or debt ratings, dividend payout, dividend growth, production volumes or safety results. Goals may also be based on performance relative to a peer group of companies. A performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). Performance goals may be determined by including or excluding, in the Committee’s discretion, items that are determined to be extraordinary, unusual in nature, infrequent in occurrence, related to the disposal or acquisition of a segment of a business, or related to a change in accounting principal, in each case, based on Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 225-20, Income Statement, Extraordinary and Unusual Items, and FASB ASC 830-10, Foreign Currency Matters, Overall, or other applicable accounting rules, or consistent with our accounting policies and practices in effect on the date the performance goal is established. In interpreting 2014 Plan provisions applicable to performance goals and performance awards, it is intended that the 2014 Plan conform with the standards of Section 162(m).
c. Performance Award Agreement. Each Performance Award will be evidenced by an agreement that contains any vesting or transferability restrictions, performance goals, payment provisions and other provisions not inconsistent with the 2014 Plan as the Committee may specify. The terms and provisions of the respective Performance Award agreements need not be identical.
d. Time of Establishment of Performance Goals. With respect to a covered employee (as defined in Section 162(m)), a performance goal for a particular Performance Award must be established by the Committee prior to the earlier to occur of (i) 90 days after the commencement of the period of service to which the performance goal relates or (ii) the lapse of 25% of the period of service, and in any event while the outcome is substantially uncertain.
e. Payment. Payment under a Performance Award may be made in cash or shares of Common Stock, as specified in the holder’s award agreement. Unless a Performance Award is structured as a current transfer of shares of Common Stock subject to a risk of forfeiture in the event performance goals are not achieved, a holder’s payment under a Performance Award will be made at the time specified in the applicable award agreement. The award agreement will specify that any payment will be made (i) by a date that is no later than the date that is two and one-half months after the end of the calendar year in which the Performance Award payment is no longer subject to a substantial risk of forfeiture or (ii) at a time that is permissible under Section 409A. The amount of compensation payable under a performance award may not be increased. If the time at which a performance award will vest or be paid is accelerated for any reason, the number of shares of Common Stock subject to, or the amount payable under, the Performance Award will be reduced pursuant to Department of Treasury Regulation § 1.162-27(e)(2)(iii) to reasonably reflect the time value of money.
f. Dividends and Dividend Equivalents. Holders of Performance Awards will not be entitled to the payment of dividend equivalents under the award, unless the payment of dividend equivalents will be subject to the same performance conditions as apply to the Performance Award. In the case of a Performance Award that is payable in shares of Common Stock, if the holder becomes entitled to the payment of dividends paid in shares of Common Stock with respect to the Performance Award, these dividends will be added to the Performance Award and will be subject to the satisfaction of the same performance conditions as apply to the underlying Performance Award.
Phantom Stock Awards
a. Forfeiture. Phantom Stock Awards under the 2014 Plan are awards of rights to receive the value of shares of Common Stock. Such awards vest over a period of time established by the Committee, without satisfaction of any performance criteria or objectives. The Committee may, in its discretion, require payment or other conditions of the recipient of a Phantom Stock Award. A Phantom Stock Award will terminate if the recipient’s employment or service as a director or consultant with us and our affiliates terminates during the applicable vesting period, except as otherwise determined by the Committee.
b. Payment. Following the end of the vesting period for a Phantom Stock Award (or at such other time as may be provided in a Phantom Stock Award agreement), the holder of a Phantom Stock Award will be entitled to receive payment of the an amount not exceeding the maximum value of the Phantom Stock Award, based on the then vested value of the award. Payment of a Phantom Stock Award may be made in cash, Common Stock, or a combination thereof.
c. Other Terms and Conditions. The Committee may establish other terms and conditions for Phantom Stock Awards under the 2014 Plan.
Corporate Change and Other Adjustments
The 2014 Plan provides that, upon a Corporate Change (as hereinafter defined), the Committee generally may accelerate the vesting of options and Stock Appreciation Rights, cancel options and Stock Appreciation Rights and cause us to make payments in respect thereof in cash, or adjust the outstanding options and Stock Appreciation Rights as appropriate to reflect such Corporate Change (including, subject to certain conditions, having some or all of the then outstanding options and Stock Appreciation Rights (whether vested or unvested) assumed or having a new award of a similar nature substituted for some or all of their then outstanding options and Stock Appreciation Rights under the 2014 Plan (whether vested or unvested) by an entity which is a party to the transaction resulting in such Corporate Change). The 2014 Plan provides that a Corporate Change occurs if (i) we are not the surviving entity in any merger or consolidation or other reorganization (or we survive only as a subsidiary of an entity other than an entity that was directly or indirectly wholly-owned by us immediately prior to such merger, consolidation or other reorganization), (ii) we sell, lease or exchange all or substantially all of our assets to any other person (other than an entity that is directly or indirectly wholly owned by us), (iii) we are to be dissolved, (iv) any person or group acquires or gains ownership or control of more than 50% of the outstanding shares of our voting stock, (v) as a result of a contested election of directors, the persons who were our directors before the election cease to constitute a majority of our Board or (vi) we are party to any other corporate transaction (as defined under section 424(a) of the Code and applicable Department of Treasury regulations) that is not described in clauses (i), (ii), (iii), (iv) or (v). With respect to awards under the 2014 Plan other than options and Stock Appreciation Rights, upon changes in our capitalization the Committee generally may make appropriate adjustments to the awards.
The maximum number of shares that may be issued under the 2014 Plan and the maximum number of shares that may be issued to any one individual and the other individual award limitations, as well as the number and price of shares of Common Stock or other consideration subject to an award under the 2014 Plan, will be appropriately adjusted by the Committee in the event of changes in the outstanding Common Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, split-ups, split-offs, spin-offs, exchanges or other relevant changes in capitalization or distributions to the holders of Common Stock occurring after an award is granted.
Transferability
An Incentive Stock Option is not transferable other than by will or the laws of descent and distribution, and may be exercised during the employee’s lifetime only by the employee or such employee’s guardian or legal representative. All other awards under the 2014 Plan are not transferable other than by will or the laws of descent and distribution, pursuant to a qualified domestic relations order, or with the consent of the Committee (as to certain family transfers, or otherwise).
Amendments
The Board may from time to time amend the 2014 Plan; however, any change that would impair the rights of a participant with respect to an award theretofore granted will require the participant’s consent. Further, without the prior approval of our stockholders, the Board may not amend the 2014 Plan to change the class of eligible individuals, increase the number of shares of Common Stock that may be issued under the 2014 Plan, or amend or delete the provisions of the 2014 Plan that prevent the Committee from amending any outstanding option or Stock Appreciation Right agreement to lower the option price or Stock Appreciation Right grant price (or cancel and replace any outstanding option agreement with an option agreement having a lower option price or cancel and replace any outstanding Stock Appreciation Right agreement with a Stock Appreciation Right agreement having a lower grant price).
Recoupments in Restatement Situations
If we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under applicable securities laws, a recipient of an award under the 2014 Plan who was or is then one of our executive officers will forfeit and must repay to us any compensation awarded to him under the 2014 Plan to the extent specified in any of our recoupment policies established or amended (now or in the future) in compliance with the rules and standards of the SEC under or in connection with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).
Federal Income Tax Aspects of the 2014 Plan
The following discussion summarizes certain material U.S. federal income tax consequences to us and U.S. holders with respect to the acquisition, ownership, exercise or disposition of awards which may be granted under the 2014 Plan. The discussion is based upon the provisions of the Code and the regulations and rulings promulgated thereunder, all of which are subject to change (possibly with retroactive effect) or different interpretations. Options and Stock Appreciation Rights with exercise prices less than the fair market value of Common Stock on the dates of grant, Phantom Stock, and certain other awards that may be granted pursuant to the 2014 Plan, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A and guidance promulgated thereunder. We do not currently intend to grant such awards under the Plan, but if, in the future, we do grant such awards we anticipate they will likely be designed to comply with those restrictions and to avoid the additional taxes imposed by Section 409A. This summary reflects generally contemplated consequences and does not purport to deal with all aspect of U.S. federal income taxation that may be relevant to an individual award holder’s situation, nor any tax consequences arising under the laws of any state, local or foreign jurisdiction.
Restricted Stock. The recipient of a Restricted Stock award will not realize taxable income at the time of grant, and we will not be entitled to a deduction at that time, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When the risk of forfeiture with respect to the stock subject to the award lapses, the holder will realize ordinary income in an amount equal to the fair market value of the shares of Common Stock at such time, and, subject to Section 162(m), we will be entitled to a corresponding deduction. All dividends and distributions (or the cash equivalent thereof) with respect to a Restricted Stock award paid to the holder before the risk of forfeiture lapses will also be compensation income to the holder when paid and, subject to Section 162(m), deductible as such by us. Notwithstanding the foregoing, the holder of a Restricted Stock award may elect under Section 83(b) of the Code to be taxed at the time of grant of the Restricted Stock award based on the fair market value of the shares of Common Stock on the date of the award, in which case (a) subject to Section 162(m), we will be entitled to a deduction at the same time and in the same amount, (b) dividends paid to the recipient during the period the forfeiture restrictions apply will be taxable as dividends and will not be deductible by us, and (c) there will be no further federal income tax consequences when the risk of forfeiture lapses. Such election must be made not later than 30 days after the grant of the Restricted Stock award and is irrevocable.
Restricted Stock Unit Awards. The grant of an RSU Award under the 2014 Plan generally will not result in the recognition of any U.S. federal taxable income by the recipient or a deduction for us at the time of grant. At the time an RSU Award vests the recipient will generally recognize ordinary income and, subject to the application of Section 162(m) as discussed below, we will be entitled to a corresponding deduction. Generally, the measure of the income and the deduction will be the number of units subject to the RSU Award multiplied by the value of our Common Stock at the time the RSU Award is settled.
Stock Awards. The recipient of a Stock Award will realize taxable ordinary income at the time of grant in an amount equal to the fair market value of the shares of Common Stock on the date of the award, and, subject to Section 162(m), we will be entitled to a corresponding deduction.
Incentive Stock Options. Incentive Stock Options are subject to special federal income tax treatment. No federal income tax is imposed on the optionee upon the grant or the exercise of an Incentive Stock Option if the optionee does not dispose of the shares acquired pursuant to the exercise within the two-year period beginning on the date the option was granted or within the one-year period beginning on the date the option was exercised (collectively, the “holding period”). In such event, we would not be entitled to any deduction for federal income tax purposes in connection with the grant or exercise of the option or the disposition of the shares so acquired. With respect to an Incentive Stock Option, the difference between the fair market value of the stock on the date of exercise and the exercise price must generally be included in the optionee’s alternative minimum taxable income for the year in which such exercise occurs. However, if the optionee exercises an Incentive Stock Option and disposes of the shares received in the same year and the amount realized is less than the fair market value of the shares on the date of exercise, then the amount included in alternative minimum taxable income will not exceed the amount realized over the adjusted basis of the shares.
Upon disposition of the shares received upon exercise of an Incentive Stock Option after the holding period, any appreciation of the shares above the exercise price should constitute long-term capital gain. If an optionee disposes of shares acquired pursuant to his or her exercise of an Incentive Stock Option prior to the end of the holding period, the optionee will be treated as having received, at the time of disposition, compensation taxable as ordinary income. In such event, and subject to the application of Section 162(m) as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the optionee. The amount treated as compensation is the excess of the fair market value of the shares at the time of exercise (or in the case of a sale in which a loss would be recognized, the amount realized on the sale if less) over the exercise price; any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as short-term or long-term capital gain, depending on the holding period of the shares.
Non-statutory Stock Options and Stock Appreciation Rights. As a general rule, no federal income tax is imposed on the optionee upon the grant of a Non-statutory Stock Option (whether or not including a stock appreciation right), and we are not entitled to a tax deduction by reason of such grant. Generally, upon the exercise of a Non-statutory Stock Option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares of stock at the time of exercise over the option price paid for such shares. In the case of the exercise of a stock appreciation right, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the cash received plus the fair market value of the shares distributed to the optionee. Upon the exercise of a Non-statutory Stock Option or a stock appreciation right, and subject to the application of Section 162(m) as discussed below, we may claim a deduction for compensation paid at the same time and in the same amount as compensation income is recognized by the optionee assuming any federal income tax reporting requirements are satisfied.
Upon a subsequent disposition of the shares received upon exercise of a Non-statutory Stock Option or a stock appreciation right, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as capital gain or loss. If the shares received upon the exercise of an option or a stock appreciation right are transferred to the optionee subject to certain restrictions, then the taxable income realized by the optionee, unless the optionee elects otherwise, and our tax deduction (assuming any federal income tax reporting requirements are satisfied) should be deferred and should be measured at the fair market value of the shares at the time the restrictions lapse. The restrictions imposed on officers, directors and 10% stockholders by Section 16(b) of the Exchange Act is such a restriction during the period prescribed thereby if other shares have been purchased by such an individual within six months of the exercise of a Non-statutory Stock Option or stock appreciation rights.
Performance Awards and Phantom Stock Awards. An individual who has been granted a Performance Award or a Phantom Stock Award generally will not realize taxable income at the time of grant, and we will not be entitled to a deduction at that time. Whether a Performance Award or Phantom Stock Award is paid in cash or shares of Common Stock, the individual will have taxable compensation and, subject to the application of Section 162(m) as discussed below, we will have a corresponding deduction. The measure of such income and deduction will be the amount of any cash paid and the fair market value of any shares of Common Stock either at the time the Performance Award or the Phantom Stock Award is paid or at the time any restrictions on the shares (including restrictions under Section 16(b) of the Exchange Act) subsequently lapse, depending on the nature, if any, of the restrictions imposed and whether the individual elects to be taxed without regard to any such restrictions. Any dividend equivalents paid with respect to a Performance Award or a Phantom Stock Award prior to the actual issuance of shares under the award will be compensation income to the employee and, subject to the application of Section 162(m) as discussed below, deductible as such by us.
Section 162(m). Generally, Section 162(m) precludes a public corporation from taking a deduction for annual compensation in excess of $1,000,000 paid to its covered employees (as defined in Section 162(m)). Our Section 162(m) covered employees are the principal executive officer and our three next highest-paid officers other than the principal financial officer. The Section 162(m) deduction limitation does not apply to certain performance-based compensation that satisfies certain requirements of Section 162(m). The 2014 Plan is designed to permit the Committee to grant awards to covered executive officers that will constitute qualified performance-based compensation for purposes of Section 162(m). Approval of this proposal by our stockholders will constitute approval of 2014 Plan itself and approval of the material terms under which remuneration may be paid under the 2014 Plan, including performance goals, pursuant to Section 162(m). Based on Section 162(m) and the regulations issued thereunder, our ability to deduct compensation income generated in connection with the exercise of Non-statutory Stock Options or Stock Appreciation Rights granted by the Committee under the 2014 Plan generally should not be limited by Section 162(m). Further, we intend that compensation income generated in connection with Performance Awards granted by the Committee under the 2014 Plan (whether they are structured as performance-based restricted stock, restricted stock units or otherwise) generally should not be limited by Section 162(m).
The 2014 Plan is not qualified under Section 401(a) of the Code. Based upon current law and published interpretations, we do not believe that the 2014 Plan is subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.
The comments set forth in the above paragraphs are only a summary of certain of the federal income tax consequences relating to the 2014 Plan. No consideration has been given to the effects of state, local, or other tax laws on the 2014 Plan or award recipients.
Parachute Payment Sanctions. Certain provisions of the Plan or provisions included in an award agreement may afford a recipient special protections or payments which are contingent on a change in the ownership or effective control of us or in the ownership of a substantial portion of our assets. To the extent triggered by the occurrence of any such event, these special protections or payments may constitute “parachute payments” that, when aggregated with other parachute payments received by the recipient, if any, could result in the recipient receiving “excess parachute payments” (a portion of which would be allocated to those protections or payments derived from the award). We would not be allowed a deduction for any such excess parachute payments, and the recipient of the payments would be subject to a nondeductible 20% excise tax upon such payments in addition to income tax otherwise owed.
Summary Compensation Table
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers during the years ended December 31, 2013, and 2012.
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|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($) (5)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total ($)
|
|
|
Brent D. Willis(1)
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|
|
2013
|
|
|
|
142,308
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
292,308
|
|
|
Chief Executive Officer,
|
|
|
2012
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
President and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
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|
|
|
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|
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| |
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|
|
|
|
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|
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|
Robert Hartford(2)
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|
|
2013
|
|
|
|
71,154
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
121,154
|
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Marc Hardgrove(3)
|
|
|
2013
|
|
|
|
106,231
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
106,731
|
|
|
Chief Creative Innovation Officer
|
|
|
2012
|
|
|
|
150,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
Nathan Woods(4)
|
|
|
2013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Former Chief Executive Officer and President
|
|
|
2012
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(1)
|
Mr. Willis was appointed as Chief Executive Officer, President and Secretary on June 25, 2013. The amount set out in the table above for Mr. Willis for the year 2012 and for 2013 up to June 25, reflects $100,000 and $50,000 of compensation, respectively, paid by Victory Electronic Cigarettes, Inc., which became our wholly-owned subsidiary on June 25, 2013.
|
|
(2)
|
Mr. Hartford was appointed Chief Financial Officer and Treasurer on July 9, 2013. Mr. Hartford received compensation prior to July 9, 2013 from the Company for services rendered as a consultant.
|
|
(3)
|
Mr. Hardgrove was appointed as Chief Creative Innovation Officer on June 25, 2013. The amount set out in the table above for Mr. Hardgrove for the year 2012 and for 2013 up to June 25, reflects $150,000 and $37,000 of compensation, respectively, paid by Victory Electronic Cigarettes, Inc., which became our wholly-owned subsidiary on June 25, 2013.
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|
(4)
|
Mr. Woods resigned from his position as Chief Executive Officer and President on June 25, 2013. Mr. Woods received no compensation for his services as an employee for the year 2012 and for 2013 up to June 25. We did not have an employment agreement with Mr. Woods. He received no compensation upon his resignation or the change of control that occurred on June 25, 2013, when we acquired Victory Electronic Cigarettes, Inc, pursuant to a share exchange agreement.
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| |
|
|
(5)
|
The aggregate grant date fair value for 2013 stock awards was computed in accordance with FASB ASC 718. A discussion of all assumptions made in the valuation of the awards is in Note 8, Stock Based Compensation, to our consolidated financial statements included in our Annual Report on Form 10-K, as amended on May 6, 2014, for the year ended December 31, 2013.
|
Employment Agreement with Brent Willis
On June 25, 2013, we entered into an employment agreement with Brent Willis whereby we agreed to employ Brent Willis as our Chief Executive Officer.
Pursuant to the terms of the agreement, we agreed to pay Mr. Willis a base salary of $200,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $200,000 pro-rated from June 25, 2013, which was $92,308. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is warranted for Mr. Willis and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Willis may be entitled to a performance bonus which is based upon criteria to be established by the board of directors. If Mr. Willis achieves such targets as established by the board of directors, Mr. Willis will earn a performance bonus calculated at 50% of base salary. If Mr. Willis exceeds the target established by the board of directors, Mr. Willis will have the opportunity to earn a performance bonus of up to 100% of base salary. If established and defined by the board of directors, Mr. Willis shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements.
For 2013, Mr. Willis was entitled to receive 3,000,000 shares, options, warrants or share equivalents, to be vested at a rate of 50% on December 31, 2013 and 50% on December 31, 2014. Accordingly, on June 25, 2013, he was granted 3,000,000 options by the board of directors, which have an exercise price of $0.25. In the event of a significant financial event or a change of control, all shares, options, warrants or share equivalents will immediately vest.
Mr. Willis is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Willis for all expenses reasonably incurred in connection with the performance of his duties under the agreement.
The term of the employment agreement is effective from June 25, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement, however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.
Pursuant to the terms of the employment agreement, Mr. Willis has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Willis’ name to be used in connection with any e-cigarette business which is competitive to the business of our company or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Willis has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Willis knows or should have reason to know is a client or prospective client of our company.
Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:
|
●
|
Mr. Willis, in carrying out his duties, engages in conduct that constitutes intentional or conscientious misconduct (including but not limited to intentional or reckless breach of fiduciary duties);
|
|
●
|
Mr. Willis commits an intentional or reckless and material breach of his employment agreement or commits an intentional or reckless act of misappropriation or fraud against our company, our property, or otherwise;
|
|
●
|
Mr. Willis is convicted of any felony or act of dishonesty by a court of competent jurisdiction; or
|
|
●
|
Mr. Willis materially fails to achieve annual mutually agreed performance objectives as established by management and agreed upon by our board of directors.
|
Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Willis if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.
Employment Agreement with Robert Hartford
On July 9, 2013, we entered into an employment agreement with Robert Hartford, whereby Mr. Hartford agreed to provide employment services as the Chief Financial Officer of our company. We agreed to pay Mr. Hartford a base salary of $100,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $100,000 pro-rated from July 9, 2013, which was $46,154. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is warranted for Mr. Hartford and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Hartford may be entitled to a performance bonus which is based upon a target of three areas consisting of profit growth, free cash flow and cash flow management; and a strategic objective (e.g. funding, line of credit, etc.). If Mr. Hartford achieves such targets as established by the board of directors, Mr. Hartford will earn a performance bonus calculated at 25% of base salary. If established and defined by the board of directors, Mr. Hartford shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements.
For 2013, Mr. Hartford was entitled to receive options to purchase up to 1,000,000 common shares of our company at a price of $0.25 per share for a period of five years, to be vested at a rate of 50% on December 31, 2013 and 50% on December 31, 2014. Accordingly, on July 9, 2013, he was granted 1,000,000 options by the board of directors, which have an exercise price of $0.25. In the event of a significant financial event or a change of control, all shares, options, warrants or share equivalents will immediately vest.
Mr. Hartford is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Hartford for all expenses reasonably incurred in connection with the performance of his duties under the agreement.
The term of the employment agreement is effective from July 9, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement; however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.
Pursuant to the terms of the employment agreement, Mr. Hartford has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Hartford’s name to be used in connection with any e-cigarette business which is competitive to the business of our company or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Hartford has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Hartford knows or should have reason to know is a client or prospective client of our company.
Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:
|
●
|
Mr. Hartford, in carrying out his duties, engages in conduct that constitutes intentional or conscientious misconduct (including but not limited to intentional or reckless breach of fiduciary duties);
|
|
●
|
Mr. Hartford commits an intentional or reckless and material breach of his employment agreement or commits an intentional or reckless act of misappropriation or fraud against our company, our property, or otherwise;
|
|
●
|
Mr. Hartford is convicted of any felony or act of dishonesty by a court of competent jurisdiction; or
|
|
●
|
Mr. Hartford materially fails to achieve annual mutually agreed performance objectives as established by management and agreed upon by our board of directors.
|
Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Hartford if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.
Employment Agreement with Marc Hardgrove
On June 25, 2013, we entered into an employment agreement with Marc Hardgrove whereby we agreed to employ Marc Hardgrove as Chief Creative Innovation Officer.
Pursuant to the terms of the agreement, we agreed to pay Mr. Hardgrove a base salary of $150,000 per annum subject to annual review commencing January 1, 2014. The base salary for the 2013 calendar year shall be based upon an amount of $150,000 pro-rated from June 25, 2013, which was $69,231. In January of each year starting in 2014, the board of directors will determine if a salary adjustment increase is warranted for Mr. Hardgrove and shall establish criteria for the payment of an incentive bonus with respect to such year. Mr. Hardgrove may be entitled to a performance bonus which is based upon criteria to be established by the board of directors. If Mr. Hardgrove achieves such targets as established by the board of directors, Mr. Hardgrove will earn a performance bonus calculated at 50% of base salary. If Mr. Hardgrove exceeds the target established by the board of directors, Mr. Hardgrove will have the opportunity to earn a performance bonus of up to 100% of base salary. If established and defined by the board of directors, Mr. Hardgrove shall be eligible to participate in our company’s stock option or share award plan, which shall provide for a potential stock or stock option award each year commensurate with the achievement of the performance bonus, subject to vesting and other requirements. Mr. Hardgrove is entitled to three weeks’ vacation with pay annually. Our company has agreed to reimburse Mr. Hardgrove for all expenses reasonably incurred in connection with the performance of his duties under the agreement.
The term of the employment agreement is effective from June 25, 2013 until January 1, 2014, unless terminated in accordance with the agreement. The employment agreement renews thereafter on an annual basis beginning January 1, 2014 to December 31, 2014 and for every successive year thereafter unless the parties terminate the agreement. Either party must provide written notice to the other party if the former elects not to renew the employment agreement; however, the exercising party shall provide such written notice on or before 60 days prior to the commencement of the renewal period.
Pursuant to the terms of the employment agreement, Mr. Hardgrove has agreed that he will not, without the prior written consent of our company, during the term of the employment agreement or for a period of 12 months after the expiration or termination of the employment, engage in or carry on business or otherwise have any interest in or permit Mr. Hardgrove’s name to be used in connection with any e-cigarette business which is competitive to the business of our company, or which provides the same or substantially similar services as the business of our company. Further, and under such circumstances, Mr. Hardgrove has agreed he will not solicit, interfere with, accept any business from or render any services to anyone whom Mr. Hardgrove knows or should have reason to know is a client or prospective client of our company.
Our company may terminate the employment agreement for the following reasons at any time by delivery of a notice of termination for any of the following reasons:
|
●
|
Mr. Hardgrove, in carrying out his duties, engages in conduct that constitutes intentional or conscientious misconduct (including but not limited to intentional or reckless breach of fiduciary duties);
|
|
●
|
Mr. Hardgrove commits an intentional or reckless and material breach of his employment agreement or commits an intentional or reckless act of misappropriation or fraud against our company, our property, or otherwise;
|
|
●
|
Mr. Hardgrove is convicted of any felony or act of dishonesty by a court of competent jurisdiction; or
|
|
●
|
Mr. Hardgrove materially fails to achieve annual mutually agreed performance objectives as established by management and agreed upon by our board of directors.
|
Pursuant to the terms of the employment agreement, we have agreed to defend, indemnify and hold harmless Mr. Hardgrove if he is threatened or made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer or employee of our company.
Outstanding Equity Awards at 2013 Fiscal Year End
The following table provides information relating to the unexercised options and stock awards that have not vested for the named executive officers as of December 31, 2013. Each award to each named executive is shown separately, with a footnote describing the award’s vesting schedule.
| |
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#) Unexercisable
|
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of Stock
That
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares
or Units of
Stock That
Have Not
Vested
($)
|
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units
Or Other Rights
That Have Not
Vested
($)
|
|
|
Brent D. Willis
|
|
|
1,500,000
|
(1)
|
|
|
1,500,000
|
(2)
|
|
|
—
|
|
|
$
|
0.25
|
|
|
|
6/25/18
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Robert Hartford
|
|
|
500,000
|
(3)
|
|
|
500,000
|
(2)
|
|
|
—
|
|
|
$
|
0.25
|
|
|
|
7/9/18
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Marc Hardgrove
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Nathan Woods
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(1)
|
These options vested on December 31, 2013 and have not been exercised.
|
|
(2)
|
These options vest on December 31, 2014.
|
|
(3)
|
These options vested on December 31, 2013 and have been exercised.
|
Director Compensation for Fiscal 2013
Our non-employee directors generally receive $50,000 annually for serving on our Board, which is paid quarterly in cash, as well as 100,000 options to purchase shares of our common stock annually. Mr. Fields, who became a director on December 30, 2013, was awarded warrants as described below and will also receive the standard non-employee director compensation in future fiscal years. The following table reflects all compensation awarded to, earned by or paid to the Company’s non-employee directors for the fiscal year ended December 31, 2013.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fees Earned or
Paid in Cash
($)
|
|
|
Stock
Awards
($) (1)
|
|
|
Option
Awards
($) (2)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
James P. Geiskopf (4)
|
|
|
25,000
|
|
|
|
—
|
|
|
|
25,000
|
(3)
|
|
|
—
|
|
|
|
—
|
|
—
|
|
50,000
|
|
William R. Fields (5)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
235,000
|
(5)
|
235,000
|
| |
( 1) |
|
We did not issue any stock awards to our directors as compensation in the year ended December 31, 2013. There were no stock awards outstanding for our non-employee directors as of December 31, 2013.
|
| |
(2) |
|
The aggregate number of option awards outstanding as of December 31, 2013 was 500,000 for Mr. Geiskopf and none for Mr. fields.
|
| |
(3) |
|
We granted Mr. Geiskopf stock options for 500,000 shares of our common stock in the year ended December 31, 2013. The aggregate grant date fair value for 2013 option awards was computed in accordance with FASB ASC 718. A discussion of all assumptions made in the valuation of the awards is in Note 8, Stock Based Compensation, to our consolidated financial statements included in our Annual Report on Form 10-K, as amended on May 6, 2014, for the year ended December 31, 2013.
|
| |
(4) |
|
Mr. Geiskopf has served as a director since June 25, 2013. He received $25,000 in cash for serving on our Board during the quarters ended September 30, 2013 and December 31, 2013.
|
| |
(5) |
|
Mr. Fields became a director on December 30, 2013. Upon his appointment, he was awarded warrants to purchase 100,000 shares of common stock at an exercise price of $9.05. Pursuant to the adjustment provision contained in the warrant, following the completion of our private offering on January 7, 2014, the exercise price of the warrant adjusted to $5.00 per share with the ability to purchase up to 181,000 shares of common stock. This award was not applicable to any of our other directors. The fair value for the warrants was computed in accordance with FASB ASC 815. A discussion of all assumptions made in the valuation of the awards is in Note 7, Distribution Agreement, to our consolidated financial statements included in our Annual Report on Form 10-K, as amended on May 6, 2014, for the year ended December 31, 2013.
|
Pension Benefits
We do not have any defined pension plans.
Potential Payments upon Termination or Change in Control
Our executive employment agreements do not call for any potential payments upon the termination or change in control other than Mr. Willis’s and Mr. Hartford’s employment agreements. Mr. Willis’s and Mr. Harford’s employment agreements call for the immediate vesting of all outstanding stock or option awards (including all shares, options, warrants or share equivalents) only upon a change in control or upon a significant financial event; there is no accelerated vesting that would occur upon a termination event. Under Mr. Willis’s and Mr. Harford’s employment agreements, a change of control is defined as [ ] and a significant financial event is defined as [ ].