Please wait
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE
14C
Information
Statement Pursuant to Section 14(c) of the
Securities
Exchange Act of 1934
Check the
appropriate box:
|
[
]
|
Preliminary
Information Statement
|
|
[ ]
|
Confidential, for
Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
|
|
[X]
|
Definitive
Information Statement
|
|
Exactus,
Inc.
|
|
(Name of Registrant
as Specified in its Charter)
|
Payment of Filing
Fee (Check the appropriate box):
|
[X]
|
No fee
required
|
|
|
|
|
[ ]
|
Fee computed on
table below per Exchange Act Rules 14c-5(g) and 0-11.
|
|
|
|
|
|
1)
Title of each class of securities to which transaction
applies:
|
|
|
|
|
|
2)
Aggregate number of securities to which transaction applies (set
forth the amount on which the filing fee is calculated and state
how it was determined):
|
|
|
|
|
|
3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
|
|
|
|
|
|
4)
Proposed maximum aggregate value of securities::
|
|
|
|
|
|
5)
Total fee paid:
|
|
|
|
|
[ ]
|
Fee paid previously
with preliminary materials.
|
|
|
|
|
[ ]
|
Check box if any
part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
|
|
|
1)
Amount Previously Paid:
|
|
|
|
|
|
2)
Form, Schedule or Registration Statement No.:
|
|
|
|
|
|
3)
Filing Party:
|
|
|
|
|
|
4)
Date Filed:
|
EXACTUS,
INC.
4870 Sadler Road, Suite 300
Glen Allen, VA 23060
February 5,
2019
On January 11,
2019, the board of directors and holders of a majority of the
voting capital stock of Exactus, Inc., a Nevada corporation (the
“Company”), acted by written consent in lieu of a
special meeting of stockholders to:
1. approve a reverse
split of our common stock on the basis of 1 share for every 8
shares of Common Stock held; and
2. approve our 2019
Equity Incentive Plan.
The Company’s
Board of Directors fixed January 25, 2019 as the record date (the
“Record Date”), for determining the holders of its
voting capital stock entitled to notice of these actions and
receipt of this Information Statement.
This Information
Statement is first being mailed on or about February 5, 2019. The
actions to be taken pursuant to the written consents dated as of
January 11, 2019 shall be taken on or about February 25, 2019,
which is twenty (20) days after the mailing of this Information
Statement. You are urged to read the Information Statement in its
entirety for a full description of the actions approved by the
holders of a majority of the Company’s outstanding voting
capital stock.
THIS
IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO
STOCKHOLDER MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH IS
DESCRIBED HEREIN.
WE
ARE NOT ASKING YOU FOR A PROXY
AND
YOU ARE NOT REQUESTED TO SEND US A PROXY
|
|
By Order of the
Board of Directors,
|
|
|
By: /s/ Philip J.
Young
|
|
|
Name: Philip J.
Young
|
|
|
Its: President and
Chief Executive Officer
|
INFORMATION
STATEMENT PURSUANT TO SECTION 14
OF
THE SECURITIES EXCHANGE ACT OF 1934
AND
REGULATION 14C AND SCHEDULE 14C THEREUNDER
NOTICE
OF ACTIONS TO BE TAKEN PURSUANT TO THE WRITTEN CONSENT OF
STOCKHOLDERS
To The Stockholders
of Exactus, Inc.:
NOTICE IS HEREBY
GIVEN that the Board of Directors has received approval, pursuant
to the written consent of stockholders in lieu of a special
meeting, dated January 11, 2019 (the “Written Consent”)
to: (1) approve a reverse split of the Company’s common stock
on the basis of 1 share for every 8 shares of common stock held;
and (2) approve the Company’s 2019 Equity Incentive
Plan.
This Information
Statement is being mailed on or about February 5, 2019. The above
action will be taken on or about February 25, 2019, twenty (20)
days after the mailing of this Information Statement.
OUTSTANDING
SHARES AND VOTING RIGHTS
As of the Record
Date, the Company’s authorized capitalization consisted of:
(i) 650,000,000 shares of common stock, of which 118,953,712 shares
were issued and outstanding; (ii) 32,000,000 shares of Series B-1
Preferred Stock, of which 2,800,000 shares were issued and
outstanding; (iii) 10,000,000 shares of Series B-2 Preferred Stock,
of which 8,684,000 shares were issued and outstanding; (iv)
1,733,334 shares of Series C Preferred Stock, of which 1,733,334
shares were issued and outstanding; and (v) 200 shares of Series D
Preferred Stock, of which 45 shares were outstanding. All classes
of stock are entitled to cast one (1) vote per share, with the
exception of shares Series D Preferred Stock, which are entitled to
cast two hundred thousand 200,000 votes per share.
Because
shareholders holding at least a majority of the voting rights of
all outstanding shares of capital stock as of January 11, 2019 have
voted in favor of the foregoing proposals by written consent, and
having sufficient voting power to approve such proposal through
their ownership of capital stock, no other shareholder consents
will be solicited in connection with this Information
Statement.
The classes and
numbers of shareholders holding the indicated number of shares
voted in favor of the proposal outlined in this Information
Statement:
|
|
|
|
|
Percentage of Voting Power(1)
|
|
Common
Stock
|
86,463,932
|
86,463,932
|
73.93%
|
62.13%
|
|
Series
B-1
|
600,000
|
600,000
|
21.43%
|
0.43%
|
|
Series
B-2
|
456,000
|
456,000
|
5.25%
|
0.33%
|
|
Series
D
|
34
|
6,800,000
|
75.56%
|
4.92%
|
|
Totals
|
|
94,319,932
|
|
66.81%
|
(1)
Based
on total available voting power consisting of 141,171,046
votes.
Pursuant to Rule
14c-2 under the Securities Exchange Act of 1934, as amended, the
actions described herein will not be implemented until a date at
least 20 days after the date on which this Information Statement
has been mailed to the shareholders. The Company anticipates that
the actions contemplated herein will be effected on or about the
close of business on February 25, 2019.
The Company has
asked brokers and other custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of the
Common Stock held as of the Record Date by such persons and will
reimburse such persons for out-of-pocket expenses incurred in
forwarding such material.
This Information
Statement will serve as written notice to stockholders of the
Company pursuant to Section 78.320(2) of the Nevada Revised
Statutes.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The following table
sets forth as of the Record Date, certain information known to us
with respect to the beneficial ownership of the Company's voting
securities by (i) each person who is known by us to own of record
or beneficially more than 5% of the outstanding common stock, (ii)
each of the Company's directors and executive officers, and (iii)
all of the Company's directors and its executive officers as a
group.
|
Title
of class
|
Name
and address of beneficial owner(1)
|
Amount
of
beneficial
ownership
|
Percent
of class(2)
|
Percent
of Voting Power(3)
|
|
Current
Executive Officers & Directors:
|
|
|
Common
Stock
|
Philip
Young
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
8,856,438(4)
|
7.45%
|
7.83%
|
|
Common
Stock
|
Timothy
Ryan
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
8,806,438(5)
|
7.40%
|
7.80%
|
|
Common
Stock
|
Kelley
Wendt
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
3,150,938(6)
|
2.65%
|
2.23%
|
|
Common
Stock
|
James R.
Erickson
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
3,470,833(7)
|
2.92%
|
2.46%
|
|
Common
Stock
|
Kevin
Esval
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
3,653,333(8)
|
3.07%
|
2.59%
|
|
Common
Stock
|
Jeffrey
Thompson
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
83,333(9)
|
0.07%
|
0.06%
|
|
Common
Stock
|
Kenneth E.
Puzder
4870 Sadler Road,
Suite 300
Glen Allen, VA
23060
|
83,333(10)
|
0.07%
|
0.06%
|
|
Common
Stock Total of All Current Directors and Officers:
|
28,104,646
|
23.63%
|
23.03%
|
|
|
|
|
|
|
More
than 5% Beneficial Owners
|
|
|
|
|
Common
Stock
|
Ceed2Med,
LLC
95 NE 4th Ave.
Delray Beach, FL
33483
|
67,085,523
|
57.40%
|
47.52%
|
|
Common
Stock
|
MagniSciFund,
LP
123 N Post Oak
Lane, Suite 400
Houston, TX
77024
|
6,000,000(11)
|
5.04%
|
4.25%
|
(1)
As used
in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole
or shared investment power with respect to a security (i.e., the
power to dispose of, or to direct the disposition of, a security).
In addition, for purposes of this table, a person is deemed, as of
any date, to have "beneficial ownership" of any security that such
person has the right to acquire within 60 days after such
date.
(2)
Based
on 118,953,712 shares of common stock issued and
outstanding.
(3)
Based
on a total of 141,171,046 possible votes, consisting of: (i)
118,953,712 shares of common stock; (ii) 2,800,000 shares of Series
B-1 Preferred Stock; (iii) 8,684,000 shares of Series B-2 Preferred
Stock; (iv) 1,733,334 shares of Series C Preferred Stock; and (v)
45shares of Series D Preferred Stock. All classes of stock are
entitled to cast one (1) vote per share, with the exception of
shares Series D Preferred Stock, which are entitled to cast two
hundred thousand 200,000 votes per share .
(4)
Includes (i)
8,500,000 shares of Common Stock, (ii) 168,000 shares of common
stock issuable upon the conversion of shares of Series B-2, and
(iii) 188,438 stock options to purchase Common Stock exercisable at
$0.089 per share. Does not include 2,200,000 shares of Common Stock
issuable upon the conversion of shares of Series D which are
subject to a 4.99% ownership limitation contained within the
certificate of designations for the Series D. Series D shares are
included in computation of voting power.
(5)
Includes (i)
1,950,000 shares of Common Stock, (ii) 2,950,000 shares of common
stock held by Willets Capital over which Mr. Ryan has sole voting
power and investment power, (iii) 2,850,000 shares of common stock
held by Tonset Capital, over which Mr. Ryan has sole voting power
and investment power, (iv) 400,000 shares of common stock held by
NYTX LLC, over which Mr. Ryan has sole voting power and investment
power, (v) 300,000 shares of common stock held by Brosis LLC, over
which Mr. Ryan has sole voting power and investment power, (vi)
168,000 shares of common stock issuable upon the conversion of
shares of Series B-2, and (vii) 188,438 stock options to purchase
Common Stock exercisable at $0.089 per share. Does not include
2,200,000 shares of Common Stock issuable upon conversion of the
Series D which are subject to a 4.99% ownership limitation
contained within the certificate of designations for the Series D.
Series D shares are included in computation of voting
power.
(6)
Includes (i)
600,000 shares issuable upon conversion of shares of Series B-1,
(ii) 150,938 vested options to purchase Common Stock, and (iii)
2,400,000 shares issuable upon conversion of shares of Series
D.
(7)
Includes (i) 1,600,000 shares of common stock,
(ii) 670,833 stock options to purchase Common Stock exercisable at
$0.089 per share, and (iii) 1,200,000 shares issuable upon
conversion of shares of Series D.
(8)
Includes (i) 2,000
shares of common stock, (ii) 1,900,000 shares of common stock held
by VelocityHealth Capital over which Mr. Esval has sole voting
power and investment power, (iii) 1,500,000 shares of common stock
held by Donegal Bio Ventures, over which Mr. Esval has sole voting
power and investment power, (iv) 168,000 shares issuable upon
conversion of shares of Series B-2 held by VelocityHealth Capital
over which Mr. Esval has sole voting power and investment power,
and (v) vested options to purchase 83,333 shares of common stock
exercisable at $0.025 per share.
(9)
Includes vested
options to purchase 83,333 shares of common stock exercisable at
$0.025 per share.
(10)
Includes vested
options to purchase 83,333 shares of common stock exercisable at
$0.025 per share.
(11)
Includes 6,000,000 shares of common stock issuable
upon the conversion of shares of Series B-2.
EXECUTIVE COMPENSATION
The
following table sets forth certain information about the
compensation paid or accrued to the persons who served as our Chief
Executive Officer and our two highest-paid executive officers
during the last two completed fiscal years whose total compensation
exceeded $100,000 for that year (the “Named Executive
Officers”).
Summary Compensation Table
|
|
|
|
|
|
|
|
|
Philip
J. Young
|
2018
|
$165,417
|
$-
|
$20,025
|
$-
|
$185,442
|
|
Chief
Executive Officer and President
|
2017
|
$222,500
|
$-
|
$-
|
$-
|
$222,500
|
|
|
2016
|
$195,417
|
$-
|
$-
|
$-
|
$195,417
|
|
|
|
|
|
|
|
|
Kelley
A. Wendt
|
2018
|
$178,000
|
$-
|
$20,025
|
$-
|
$198,025
|
|
Chief
Financial Officer
|
2017
|
$38,563
|
$-
|
$-
|
$-
|
$38,563
|
|
|
2016
|
$31,938
|
$-
|
$-
|
$-
|
$31,938
|
|
|
|
|
|
|
|
|
James
R. Erickson, Ph.D.
|
2018
|
$125,000
|
$90,000
|
$89,000
|
$-
|
$304,000
|
|
Chief
Business Officer
|
2017
|
$125,000
|
$-
|
$-
|
$-
|
$125,000
|
|
|
2016
|
$10,417
|
$-
|
$-
|
$-
|
$10,417
|
|
|
|
|
|
|
|
|
Timothy
Ryan
|
2018
|
$157,500
|
$-
|
$20,025
|
$-
|
$177,525
|
|
Executive
Vice President
|
2017
|
$90,000
|
$-
|
$-
|
$-
|
$90,000
|
|
|
2016
|
$60,000
|
$-
|
$-
|
$-
|
$60,000
|
Employment Agreements and Change in Control
Arrangements
On January 11,
2019, we entered into new employment agreement with our CEO, Philip
J. Young, our Executive Vice President, Timothy Ryan, and our CFO
Kelley Wendt, (the “Employment Agreements”). Under the
new Employment Agreements, each executive agreed to their service
for a period of two (2) years, subject to renewal, respectively.
Mr. Young’s annual salary will be $150,000 per annum. Mr.
Ryan and Ms. Wendt’s annual salaries will each be $120,000
per annum. Additionally, the executives shall
be entitled to an annual cash bonus in an amount as determined
by the board of directors, if the Company meets or exceeds criteria
adopted by the Compensation Committee of the Board of
Directors. The executives shall also be eligible for grants of
awards under stock option or other equity incentive plans of the
Company as the Company’s Compensation Committee or, in the
absence thereof, the Company’s Board of Directors may from
time to time determine and shall be entitled to participate in all
benefits plans the Company provides to its senior
executives. The Company shall reimburse the executives
for all reasonable expenses incurred in the course of
employment. In the event employment is terminated
without Cause or by the executives with Good Reason (as such terms
are defined in the Employment Agreement), the Executives shall be
entitled to receive severance benefits equal to the greater of the
Base Salary (as then in effect) for the remaining balance of the
Employment Agreement or six months, continued coverage under the
Company’s benefit plans and payment of her pro-rated earned
annual bonus, provided certain conditions are met. The executives
are subject to a one (1) year non-competition and non-solicitation
provision.
Director Compensation
On January 9, 2019,
Kevin Esval, Jeffrey Thompson and Ken Puzder were appointed to the
Board of Directors of the Company. In connection with their
appointment the Company adopted a compensation arrangement for
directors under which upon initial appointment, each new director
will receive 2,000,000 of 10 year options under the 2019 Equity
Incentive Plan, exercisable at $0.025 per share ($0.20 following
the Reverse Split) vesting 1/24 on the date of award and 1/24 on
the first day of each calendar month thereafter until fully vested.
Mr. Young and Mr. Ryan do not receive separate compensation for
their service on the board of directors.
REVERSE
SPLIT ON A 1 FOR 8 BASIS
The Board of
Directors and stockholders of the Company have approved a reverse
split on the basis of 1 shares for every 8 shares held. Except for
any changes as a result of the treatment of fractional shares, each
stockholder will hold the same percentage of our common stock
outstanding immediately after the reverse stock split as such
stockholder held immediately prior to the reverse stock split. The
proposed reverse stock split will not affect the number of shares
of common stock authorized in the Articles of Incorporation.
Because the number of shares of authorized common stock will not be
affected, the effect of the proposed reverse stock split will be an
increase in the authorized, but unissued, shares of common
stock.
Reasons for Reverse Split
The primary reason
for implementing a reverse stock split is to increase the market
price per share of our common stock. We believe that the increased
market price of our common stock expected as a result of
implementing the reverse stock split will improve the marketability
and liquidity of our common stock and will encourage interest and
trading in our common stock. Because of the trading volatility
often associated with low-priced stocks, many brokerage houses and
institutional investors have internal policies and practices that
either prohibit them from investing in low-priced stocks or tend to
discourage individual brokers from recommending low-priced stocks
to their customers. Some of those policies and practices may
function to make the processing of trades in low-priced stocks
economically unattractive to brokers. Additionally, because
brokers’ commissions on low-priced stocks generally represent
a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of our
common stock can result in individual stockholders paying
transaction costs representing a higher percentage of their total
stock value than would be the case if the stock price were
substantially higher. It should be noted, however, that the
liquidity of our common stock may in fact be adversely affected by
the proposed reverse stock split given the reduced number of shares
that would be outstanding after the reverse stock split is
implemented.
For the above
reasons, we believe the reverse stock split is in the best
interests of the Company and our stockholders. However, we cannot
assure you that the reverse stock split, when implemented, will
have the desired effect of proportionately raising our common stock
price over the long term, or at all. The effect of a reverse stock
split upon the market price of our common stock cannot be predicted
with any certainty, and the history of similar stock splits for
companies in similar circumstances is varied. The market price of
our common stock may vary based on other factors unrelated to the
number of shares outstanding, including our future
performance.
Effects
of the Reverse Stock Split
Except for
adjustments that may result from the treatment of fractional shares
as described below, each stockholder will hold the same percentage
of our outstanding common stock immediately following the
implementation of the reverse stock split as that stockholder held
immediately prior to the reverse stock split. After the reverse
stock split is implemented, each stockholder will own approximately
1/8th of
their current number of shares of our common stock. We estimate
that following the implementation of the reverse stock split we
will have approximately the same number of stockholders. No
fractional shares will be issued as a result of the reverse split,
and all fractional shares will be rounded to the nearest whole
share. For convenience, all shareholders having less than one (1)
whole share following the reverse split will be rounded up to one
(1) share. Except for any changes as a result of the treatment of
fractional shares, the completion of the reverse stock split alone
will not reduce any stockholder’s proportionate ownership
interest in the Company. The implementation of the reverse stock
split may, however, increase the number of stockholders of the
Company who own “odd lots” of less than 100 shares of
our common stock. Odd lots may be more difficult to sell, and
brokerage commissions and other costs of transactions in odd lots
are generally higher than the costs of transactions of more than
100 shares of common stock.
Because the number
of shares of authorized common stock will not be affected, the
reverse stock split will result in an increase in the authorized,
but unissued, shares of common stock. The reverse stock split will
not affect the par value of our common stock, which shall remain at
$0.0001 per share, or the number of shares of preferred stock which
the Company may issue, which shall remain at 50,000,000 shares. Our
preferred stock is available for issuance from time to time for
such purposes and consideration as the Board may approve in their
discretion.
Based on
118,953,712 shares of common stock issued and outstanding as of
January 25, 2019, we will have approximately 14,869,214 shares of
common stock issued and outstanding after the reverse
split.
The number of
authorized shares of our common stock will not be reduced by the
reverse stock split. Accordingly, the reverse Stock split will have
the effect of creating additional unissued and unreserved shares of
our common stock. We have no current arrangements or understandings
providing for the issuance of any of the additional authorized and
unreserved shares of our common stock that would be available as a
result of the proposed reverse stock split. However, these
additional shares may be used by us for various purposes in the
future without further stockholder approval (subject to applicable
Nasdaq Marketplace Rules, if applicable), including, among other
things: (i) raising capital necessary to fund our future
operations, (ii) providing equity incentives to our employees,
executive officers, directors and consultants, (iii) entering into
collaborations and other strategic relationships and (iv) expanding
our business through the acquisition of other businesses or
products.
Although the Board
expects that the reduction in outstanding shares of common stock
will result in an increase in the per share price of the
Company’s common stock, there is no assurance that such a
result will occur. Similarly, there is no assurance that if the per
share price of the Company’s common stock increases as a
result of the reverse stock split, such increase in the per share
price will be permanent, which will be dependent on several
factors.
●
Should
the per share price of our common stock decline after
implementation of the reverse stock split, the percentage decline
may be greater than would occur in the absence of the reverse stock
split.
●
The
anticipated resulting increase in per share price of the
Company’s common stock due to the reverse stock split is
expected to encourage interest in the Company’s common stock
and possibly promote greater liquidity for our stockholders.
However, such liquidity could also be adversely affected by the
reduced number of shares that would be outstanding after the
reverse stock split.
●
The
reverse stock split could be viewed negatively by the market and,
consequently, could lead to a decrease in our overall market
capitalization. It is often the case that the reverse-split
adjusted stock price and market capitalization of companies that
effect a reverse stock split decline.
Treatment
of Fractional Shares
No fractional
shares of common stock will be issued as a result of the reverse
stock split. Instead, all fractional shares will be rounded to the
nearest whole share. For convenience, all shareholders having less
than one (1) whole share following the reverse split will be
rounded up to one (1) share.
Accounting
Consequences
The par value of
our common stock will remain unchanged at $0.0001 per share after
the reverse stock split. As a result, our stated capital, which
consists of the par value per share of the common stock multiplied
by the aggregate number of shares of the common stock issued and
outstanding, will be reduced proportionately at the effective time
of the reverse stock split. Correspondingly, our additional paid-in
capital, which consists of the difference between our stated
capital and the aggregate amount paid to us upon the issuance of
all currently outstanding shares of common stock, will be increased
by a number equal to the decrease in stated capital. Further, net
loss per share, book value per share, net income and other per
share amounts will be increased as a result of the reverse stock
split because there will be fewer shares of common stock
outstanding.
Potential
Anti-Takeover Effect
Although in certain
circumstances the increased proportion of unissued authorized
shares to issued shares could have an anti-takeover effect (for
example, by permitting issuances that would dilute the stock
ownership of a person seeking to effect a change in the composition
of the Board or contemplating a tender offer or other transaction
for the combination of the Company and another company), the
proposed reverse stock split is not being proposed in response to
any effort of which we are aware to accumulate shares of our common
stock or obtain control of the Company, and it is not part of a
plan by management to recommend a series of similar actions to the
Board and stockholders. The Board currently does not contemplate
recommending the adoption of any other actions that could be
construed to affect the ability of third parties to effect a change
control of the Company.
No
Appraisal Rights
Under the Nevada
law, our stockholders are not entitled to appraisal rights with
respect to our proposed reverse stock split, and we will not
independently provide our stockholders with any such
rights.
No
Going Private Transaction
Notwithstanding the
decrease in the number of outstanding shares following the
implementation of the reverse stock split, the Board of Directors
does not intend for this transaction to be the first step in a
“going private transaction” within the meaning of Rule
13e-3 of the Securities Exchange Act of 1934, and the
implementation of the proposed reverse stock split will not cause
the Company to go private.
Book-Entry
Shares
When the reverse
stock split is effected, stockholders who hold uncertificated
shares (i.e. shares held in book entry form and not represented by
a physical certificate), whether as direct or beneficial owners,
will have their holdings electronically adjusted by our transfer
agent (and for beneficial owners by their brokers or banks that
hold the shares in street name for their benefit, as the case may
be) to give effect to the reverse stock split.
Certain
Material U.S. Federal Income Tax Consequences of the Reverse Stock
Split
The following is a
summary of certain material U.S. federal income tax consequences of
the reverse stock split to holders of our common stock. It
addresses only U.S. stockholders who hold the pre-reverse stock
split common stock and post-reverse stock split common stock as
“capital assets” within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the
“Code”). This discussion does not purport to be a
complete discussion of all of the possible federal income tax
consequences of the reverse stock split and does not account for or
consider the federal income tax consequences to stockholders in
light of their individual investment circumstances or to
stockholders subject to special treatment under the federal income
tax laws, including but not limited to:
●
banks,
financial institutions, thrifts, mutual funds or
trusts;
●
tax-exempt
organizations;
●
dealers
in securities or foreign currency;
●
real
estate investment trusts, personal holding companies, regulated
investment companies, or passive foreign investment
companies;
●
foreign
or United States expatriate stockholders;
●
stockholders who
are not “United States persons,” as defined in Section
7701 of the Internal Revenue Code;
●
controlled foreign
corporations;
●
stockholders with a
functional currency other than the U.S. dollar;
●
stockholders who
hold the pre-reverse stock split common stock as part of a
straddle, hedge, constructive sale, conversion transaction, or
other integrated investment;
●
stockholders who
hold the pre-reverse stock split common stock as “qualified
small business stock” within the meaning of Section 1202 of
the Internal Revenue Code;
●
traders, brokers,
or dealers in securities who elect to apply a mark-to-market method
of accounting;
●
partnerships or
other pass-through entities or investors in such
entities;
●
stockholders who
are subject to the alternative minimum tax provisions of the
Internal Revenue Code;
●
stockholders who
acquired their pre-reverse stock split common stock pursuant to the
exercise of employee stock options, through a tax-qualified
retirement plan, or otherwise as compensation; or,
●
holders
of warrants or stock options.
In addition, this
discussion does not address any tax considerations under state,
local, gift, or foreign tax laws. This summary is based upon the
Internal Revenue Code, existing and proposed U.S. Treasury
regulations promulgated thereunder, legislative history, judicial
decisions, and current administrative rulings and practices, all as
in effect on the date hereof and all of which are subject to
differing interpretations. Any of these authorities could be
repealed, overruled, or modified at any time. Any such change could
be retroactive and, accordingly, could cause the tax consequences
of the reverse stock split to vary substantially from the
consequences described herein. Further, no ruling from the Internal
Revenue Service (the “IRS”) or opinion of legal or tax
counsel will be obtained with respect to the matters discussed
herein, and there is no assurance or guarantee that the IRS would
agree with the conclusions set forth in this summary. This
information is not intended as tax advice to any person and may not
be relied upon to avoid penalties.
STOCKHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL, GIFT, OR FOREIGN TAX LAWS,
CHANGES IN APPLICABLE TAX LAWS, AND ANY PENDING OR PROPOSED
LEGISLATION OR AUTHORITY.
The reverse stock
split is intended to constitute a “recapitalization”
within the meaning of Section 368(a)(1)(E) of the Internal Revenue
Code. Certain filings with the IRS must be made by the Company and
certain “significant holders” of our common stock in
order for the reverse stock split to qualify as a recapitalization.
The tax consequences discussed below assume that the reverse stock
split is treated as a recapitalization and that the common stock is
held by each stockholder as a capital asset:
●
A
stockholder generally will not recognize gain or loss as a result
of the reverse stock split, except to the extent of cash, if any,
received in lieu of a fractional share interest in the post-reverse
stock split common stock. A stockholder who receives cash in lieu
of a fractional share interest in the post-reverse stock split
common stock generally will recognize gain or loss equal to the
difference, if any, between the cash received and the portion of
the tax basis of the pre-reverse stock split common stock allocated
to the fractional share interest. Subject to the limitations above,
such gain or loss will be long-term capital gain or loss if the
pre-reverse stock split common stock was held for more than one
year by the stockholder at the time of the reverse stock split. If
a stockholder is an individual, such gain may also be subject to an
additional 3.8% Medicare tax if such stockholder attains certain
income thresholds.
●
A
stockholder’s aggregate tax basis of the post-reverse stock
split common stock received in the reverse stock split will
generally be equal to the aggregate tax basis of the pre-reverse
stock split common stock exchanged therefore (excluding any portion
of the stockholder’s tax basis allocated to fractional share
interests).
●
A
stockholder’s holding period for the common stock held
post-reverse stock split will include the holding period of the
pre-reverse stock split common stock exchanged.
●
No gain
or loss for federal income tax purposes will be recognized by the
Company as a result of the reverse stock split.
APPROVAL
OF 2019 EQUITY INCENTIVE PLAN
A majority of the stockholders of
the Company have approved our 2019 Equity Incentive
Plan.
The Board has adopted a resolution adopting the
Plan and the Plan has been approved by the Consenting Shareholders.
A copy of the Plan is attached to this Information Statement
as Exhibit
A.
Overview and purpose of the shareholder approval
The
Plan will allow us to incentivize the Company’s key
employees, consultants, officers and directors with long-term
compensation awards, such as stock options, restricted stock, and
restricted stock units. Equity incentives may form an integral part
of the compensation paid to the Company’s employees,
particularly those in positions of key importance, and directors.
The approval of the Plan by the Consenting Shareholders is
important to the Company’s ability to continue to attract,
retain, engage and focus highly motivated and qualified employees,
particularly in the competitive labor market that exists today, and
to attract independent directors.
No appraisal rights
Shareholders
have no rights under the Nevada Revised Statutes or under the
Company’s charter documents to exercise dissenters’
rights of appraisal with respect to the approval of the
Plan.
Description of the Plan
In
the following paragraphs we provide a summary of the terms of the
Plan.
Background
The
Plan is a broad-based equity incentive plan in which all employees,
consultants and directors of the Company and its affiliates and
such other individuals designated by the Board or committee
administering the plan who are reasonably expected to become
employees, consultants and directors are eligible to participate
(collectively the “Eligible Parties”). The purpose of
the Plan is to further the growth and development of the Company by
providing, through ownership of stock of the Company and other
equity-based awards, an incentive to its Eligible Parties who are
in a position to contribute materially to the prosperity of the
Company, to increase such persons’ interests in the
Company’s welfare, by encouraging them to continue their
services to the Company, and by enabling the Company to attract
individuals of outstanding ability to become Eligible Parties of
the Company.
Administration and eligibility
The
Plan is to be administered by the Board, or by a compensation
committee if appointed by the Board to administer the Plan, which
collectively we refer to as the “Administrator.” The
Board may delegate to officers of the Company the power to grant
awards to the extent permitted by the laws of the State of
Nevada.
Awards
granted under the Plan may be Incentive Stock Option
(“ISOs”), Non-Qualified Stock Options, Stock
Appreciation Rights (“SARs”), restricted stock, or
restricted stock units which are awarded to Eligible Parties, who,
in the opinion of the Administrator, have contributed, or are
expected to contribute, materially to the Company’s
success.
The
identification of individuals entitled to receive awards, the terms
of the awards, and the number of shares subject to individual
awards, are determined by the Administrator, in its sole
discretion.
Share Limit
The maximum number of shares of Common Stock that
may be delivered pursuant to awards granted to Eligible Persons
under this Plan may not exceed fifteen percent (15%) of the total
of: (a) the issued and outstanding shares of the
Corporation’s Common Stock, and (b) all shares common stock
issuable upon conversion or exercise of any outstanding securities
of the Corporation which are convertible or exercisable into shares
of Common Stock under the terms thereof, as determined on the date
this Plan is adopted by the Corporation’s Board of Directors
(the “Share Limit”). The Share Limit will be increased
effective the first day of each of the Corporation’s fiscal
quarters, by an amount equal to the lesser of:
(1)
The number of shares which is equal to 15% of the total of: (a) the
issued and outstanding shares of the Corporation’s Common
Stock, and (b) all shares common stock issuable upon conversion or
exercise of any outstanding securities of the Corporation which are
convertible or exercisable into shares of Common Stock under the
terms thereof; and
(2) any lesser
number of shares of Common Stock as may determined by the board of
directors of the Corporation.
Stock options
The
Administrator may grant either qualified options, which are options
that qualify as ISOs under Section 422(b) of the Internal Revenue
Code, or Non-Qualified Stock Options. A stock option entitles the
recipient to purchase a specified number of shares of common stock
at a fixed price subject to terms and conditions set by the
Administrator, including conditions for exercise that must be
satisfied, which typically will be based solely on continued
provision of services. The purchase price of shares of common stock
covered by an ISO cannot be less than 100% of the fair market value
of the common stock on the last trading day prior to the date the
option is granted. Fair market value of the common stock is
generally equal to the closing price for the common stock on the
trading date before the option is granted.
Stock appreciation rights
An
SAR entitles the holder to receive, as designated by the
Administrator, cash or shares of common stock, having a value equal
to the excess of the fair market value of a specified number of
shares of common stock at the time of exercise over the exercise
price established by the Administrator.
The
exercise price of each SAR granted under the Plan shall be
established by the Administrator or shall be determined by the
method established by the Administrator at the time the SAR is
granted, provided the exercise price shall not be less than 100% of
the fair market value of a share of common stock on the date of the
grant of the SAR, or such higher price as is established by the
Administrator. Shares of common stock delivered pursuant to the
exercise of a SAR shall be subject to such conditions, restrictions
and contingencies as the Administrator may establish in the
applicable SAR agreement or document, if any.
Restricted stock
awards
A
restricted stock award gives the recipient a stock award subject to
restriction on sale. The Administrator determines the terms and
conditions of restricted stock awards, including the number of
shares of restricted stock granted, and conditions for vesting that
must be satisfied, which may be based principally or solely on
continued provision of services, and also may include a
performance-based component. Unless otherwise provided in the award
agreement, the holder of a restricted stock award generally will
have the rights of a shareholder from the date of grant of the
award, including the right to vote the shares of common stock and
the right to receive cash dividends and share and property
distributions on the shares.
Restricted stock units
A
restricted stock unit gives the recipient the right to receive a
number of shares of the Company’s common stock on the
applicable vesting or later delivery dates. Delivery of the
underlying restricted stock may be deferred beyond vesting as
determined by the Administrator. The Administrator determines the
terms and conditions of restricted stock units, including the
number of units granted, and conditions for vesting that must be
satisfied, which may be based principally or solely on continued
provision of services, and also may include a performance-based
component. The holder of a restricted stock unit award will not
have voting rights with respect to the award and possess no
incidents of ownership with respect to the underlying common stock
until shares are delivered.
Term, termination and amendment
The Board may terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate 10 years after
the effective date of the Plan. No award may be granted under the
Plan once it is terminated. Termination of the Plan shall not
impair rights or obligations under any award granted while the Plan
is in effect, except with the written consent of the grantee. The
Board at any time, and from time to time, may amend the
Plan; provided, however,
no amendment shall be effective unless approved by the shareholders
of the Company to the extent shareholder approval is necessary to
satisfy any applicable laws or required by the rules of the
principal national securities exchange or trading market upon which
the Company’s common stock trades.
The
Board at any time, and from time to time, may amend the terms of
any one or more awards; provided, however, that the rights under
the award shall not be impaired by any such amendment, except with
the written consent of the grantee. In addition, any amendment of
the purchase price or exercise price of any outstanding award will
not be effective without shareholder approval.
All
vested or unvested awards are immediately forfeited at the option
of the Board in the event that the recipient performs certain acts
against the interests of the Company including a termination of
employment for cause, violating the Company’s insider trading
guidelines, breach of a duty of confidentiality, competing with the
Company, soliciting Company personnel after employment is
terminated, failure to be available to the Company after
termination of employment if such failure is a condition of any
agreement, failure to assign any invention or technology to the
Company if such assignment is a condition of employment or any
other agreements between the Company and the participant, or other
conduct by the participant that is detrimental to the business or
reputation of the Company or its affiliates as determined by the
Board. Any award in the Plan which is subject to recovery under any
law, government regulation or stock exchange listing requirement,
will be subject to such deductions and clawback as may be required
to be made pursuant to such law, government regulation or stock
exchange listing requirement (or any policy adopted by the
Board).
Adjustments upon changes in capitalization
The
number of shares of common stock covered by each outstanding stock
right, and the number of shares of common stock which have been
authorized for issuance under the Plan as well as the price per
share of common stock (or cash, as applicable) covered by each such
outstanding option or SAR, shall be proportionately adjusted for
any increases or decrease in the number of issued shares of common
stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification, or any other increase or
decrease in the number of issued shares of common stock effected
without receipt of consideration by the Company. Such adjustment
shall be made by the Administrator.
Federal income tax consequences
The
following is a brief summary of the principal U.S. federal income
tax consequences with respect to awards granted under the
Plan.
Restricted stock awards
The
recipient of a restricted stock award does not have taxable income
upon receipt of the award except to the extent that award is vested
or not subject to a substantial risk of forfeiture. When the
restricted stock award is vested, the recipient will recognize
ordinary income in an amount equal to the difference of the fair
market value of the shares on the date of vesting and the amount
paid for such restricted stock award, if any.
Upon
the vesting of a restricted stock award, the Company will be
entitled to a corresponding income tax deduction in the tax year in
which the restricted stock award vested.
The
recipient may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year the shares
are granted an amount equal to the excess of (i) the fair market
value of the shares on the date of issuance, over (ii) the purchase
price, if any, paid for the shares. If the Section 83(b) election
is made, the recipient will not realize any additional taxable
income when the shares become vested.
Stock options
The
recipient does not recognize any taxable income as a result of a
grant of a Non-Qualified Stock Option. Upon exercise of a
Non-Qualified Stock Option, the recipient will recognize ordinary
income in an amount equal to the difference between the fair market
value of the shares on the date of exercise and the exercise price.
When the shares are sold, any difference between the sale price and
the fair market value of the shares on the date of exercise will
generally be treated as long term or short term capital gain or
loss, depending on whether the stock was held for more than one
year. Upon the exercise of a Non-Qualified Stock Option, the
Company will be entitled to a corresponding income tax deduction in
the tax year in which the option was exercised.
Upon
exercise of an ISO, the excess of the fair market value of the
shares of common stock acquired over the option exercise price will
be an item of tax preference to the participant, which may be
subject to an alternative minimum tax for the year of exercise. If
no disposition of the shares is made within two years from the date
of granting of the ISO or within one year after the transfer of the
shares to the participant, the participant does not realize taxable
income as a result of exercising the ISO; the tax basis of the
shares received for capital gain treatment is the option exercise
price; any gain or loss realized on the sale of the shares is
long-term capital gain or loss. If the recipient disposes of the
shares within the two-year or one-year periods referred to above,
the recipient will realize ordinary income at that time in an
amount equal to the excess of the fair market value of the shares
at the time of exercise (or the net proceeds of disposition, if
less) over the option exercise price. For capital gains treatment
on such a disposition, the tax basis of the shares will be their
fair market value at the time of exercise.
Stock appreciation rights
A
recipient does not recognize any taxable income upon the receipt of
an SAR. Upon the exercise of an SAR, the recipient will recognize
ordinary income in an amount equal to cash received or the excess
of the fair market value of the underlying shares of common stock
on the exercise date over the exercise price.
Upon
the exercise of a SAR, the Company will be entitled to a
corresponding income tax deduction in the tax year in which the SAR
was exercised.
Transfer
Except
for ISOs, all awards are transferable subject to compliance with
the securities laws and the Plan. ISOs are only transferable by
will or by the laws of descent and distribution.
Allocation of New Plan Benefits
To date, we have granted options to purchase a
total of 12,000,000 shares of common stock under the Plan. On
January 8, 2019, we granted options to purchase a total of
6,000,000 shares of common stock to the founders of Ceed2Med, LLC
(“C2M”) under our Development Agreement with that
company. These options are exercisable at a price of $0.04 per
share for a period of 10 years, and are immediately exercisable. On
January 9, 2019, in connection with appointment of Kevin
Esval, Jeffrey Thompson and Ken Puzder to our board of directors,
we granted each new director options to purchase 2,000,000 shares
of common stock at a price of $0.025 per share, exercisable for 10
years and vesting 1/24 on the date of award and 1/24 on the first
day of each calendar month thereafter until fully vested. No
additional benefits under the Plan have been allocated at this
time, and will be awarded in the future in the discretion of the
board.
|
2019 Equity Incentive Plan
|
|
Name
and Position
|
|
|
|
Kevin
Esval, Director
|
2,000,000
|
$40,000
|
|
Jeffrey
Thompson, Director
|
2,000,000
|
$40,000
|
|
Kenneth
Puzder, Director
|
2,000,000
|
$40,000
|
|
Total
Non-Executive Director Group
|
6,000,000
|
$120,000
|
|
|
|
|
|
Emiliano
Aloi, founder C2M
|
2,000,000
|
$40,000
|
|
Jamie
Goldstein, founder C2M
|
2,000,000
|
$40,000
|
|
Vladislav
Yampolsky, founder C2M
|
2,000,000
|
$40,000
|
Forward-Looking
Statements and Information
This Information
Statement includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange
Act. You can identify our forward-looking statements by the words
"expects," "projects," "believes," "anticipates," "intends,"
"plans," "predicts," "estimates" and similar
expressions.
The forward-looking
statements are based on management’s current expectations,
estimates and projections about us. The Company cautions you that
these statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that we cannot
predict. In addition, the Company has based many of these
forward-looking statements on assumptions about future events that
may prove to be inaccurate. Accordingly, actual outcomes and
results may differ materially from what the Company has expressed
or forecast in the forward-looking statements.
You should rely
only on the information the Company has provided in this
Information Statement. The Company has not authorized any person to
provide information other than that provided herein. The Company
has not authorized anyone to provide you with different
information. You should not assume that the information in this
Information Statement is accurate as of any date other than the
date on the front of the document.
ADDITIONAL
INFORMATION
The Company will
provide upon request and without charge to each shareholder
receiving this Information Statement a copy of the Company's annual
report on Form 10-K for the fiscal year ended June 30, 2016,
including the financial statements and financial statement schedule
information included therein, as filed with the SEC. Reports and
other information filed by us can be inspected and copied at the
public reference facilities maintained at the SEC at 100 F Street,
N.E., Washington, DC 20549. Copies of such material can be obtained
upon written request addressed to the Commission, Public Reference
Section, 100 F Street, N.E., Washington, D.C. 20549, at prescribed
rates. The SEC maintains a web site on the Internet
(http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the SEC through the Electronic Data Gathering,
Analysis and Retrieval System.
EXHIBIT
INDEX
RECOMMENDATION
OF THE BOARD OF DIRECTORS
The Board of
Directors recommended approval of the Amendment to the Articles of
Incorporation to the shareholders holding majority of the voting
power.
|
|
By Order of the
Board of Directors,
|
|
|
By: /s/ Philip
Young
|
|
|
Name: Philip Young,
President and CEO
|
2019
EQUITY INCENTIVE PLAN
1.1 The purpose of this 2019 Equity
Incentive Plan (this “Plan”) of Exactus, Inc., a
Delaware corporation (the “Corporation”), is to promote the
success of the Corporation and to increase stockholder value by
providing an additional means through the grant of awards to
attract, motivate, retain and reward selected employees and other
eligible persons.
2.1 The Administrator (as such term is
defined in Section 3.1) may grant awards under this Plan only to
those persons that the Administrator determines to be Eligible
Persons. An “Eligible
Person” is any person who is either: (a) an officer
(whether or not a director) or employee of the Corporation or one
of its Subsidiaries; (b) a director of the Corporation or one of
its Subsidiaries; or (c) a consultant who renders bona fide
services (other than services in connection with the offering or
sale of securities of the Corporation or one of its Subsidiaries in
a capital-raising transaction or as a market maker or promoter of
securities of the Corporation or one of its Subsidiaries) to the
Corporation or one of its Subsidiaries and who is selected to
participate in this Plan by the Administrator; provided, however, that a person who is
otherwise an Eligible Person under clause (c) above may participate
in this Plan only if such participation would not adversely affect
either the Corporation’s eligibility to use Form S-8 to
register under the Securities Act of 1933, as amended (the
“Securities
Act”), the offering and sale of shares issuable under
this Plan by the Corporation, or the Corporation’s compliance
with any other applicable laws. An Eligible Person who has been
granted an award (a “participant”) may, if otherwise
eligible, be granted additional awards if the Administrator shall
so determine. As used herein, “Subsidiary” means any corporation
or other entity a majority of whose outstanding voting stock or
voting power is beneficially owned directly or indirectly by the
Corporation; and “Board” means the Board of
Directors of the Corporation.
3.1 The
Administrator. This Plan shall be administered by and all
awards under this Plan shall be authorized by the Administrator.
The “Administrator” means the Board or
one or more committees appointed by the Board or another committee
(within its delegated authority) to administer all or certain
aspects of this Plan. Any such committee shall be comprised solely
of one or more directors or such number of directors as may be
required under applicable law. A committee may delegate some or all
of its authority to another committee so constituted. The Board or
a committee comprised solely of directors may also delegate, to the
extent permitted by Section 157(c) of the Delaware General
Corporation Law or any applicable law, to one or more officers of
the Corporation, its powers under this Plan (a) to designate
Eligible Persons who will receive grants of awards under this Plan,
and (b) to determine the number of shares subject to, and the other
terms and conditions of, such awards. The Board may delegate
different levels of authority to different committees with
administrative and grant authority under this Plan. Unless
otherwise provided in the bylaws of the Corporation or the
applicable charter of any Administrator: (a) a majority of the
members of the acting Administrator shall constitute a quorum, and
(b) the affirmative vote of a majority of the members present
assuming the presence of a quorum or the unanimous written consent
of the members of the Administrator shall constitute due
authorization of an action by the acting
Administrator.
With respect to
awards intended to satisfy the requirements for performance-based
compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”) , this Plan shall be
administered by a committee consisting solely of two or more
outside directors (as this requirement is applied under Section
162(m) of the Code); provided,
however, that the failure to satisfy such requirement shall
not affect the validity of the action of any committee otherwise
duly authorized and acting in the matter. Award grants, and
transactions in or involving awards, intended to be exempt under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the “Exchange
Act”) , must be duly and timely authorized by the
Board or a committee consisting solely of two or more non-employee
directors (as this requirement is applied under Rule 16b-3
promulgated under the Exchange Act). To the extent required by any
applicable stock exchange, this Plan shall be administered by a
committee composed entirely of independent directors (within the
meaning of the applicable stock exchange). Awards granted to
non-employee directors shall not be subject to the discretion of
any officer or employee of the Corporation and shall be
administered exclusively by a committee consisting solely of
independent directors.
3.2 Powers
of the Administrator. Subject to the express provisions of
this Plan, the Administrator is authorized and empowered to do all
things necessary or desirable in connection with the authorization
of awards and the administration of this Plan (in the case of a
committee or delegation to one or more officers, within the
authority delegated to that committee or person(s)), including,
without limitation, the authority to:
(a) determine
eligibility and, from among those persons determined to be
eligible, the particular Eligible Persons who will receive awards
under this Plan;
(b) grant awards to
Eligible Persons, determine the price at which securities will be
offered or awarded and the number of securities to be offered or
awarded to any of such persons, determine the other specific terms
and conditions of such awards consistent with the express limits of
this Plan, establish the installments (if any) in which such awards
shall become exercisable or shall vest (which may include, without
limitation, performance and/or time-based schedules), or determine
that no delayed exercisability or vesting is required, establish
any applicable performance targets, and establish the events of
termination or reversion of such awards;
(c) approve the
forms of award agreements (which need not be identical either as to
type of award or among participants);
(d) construe and
interpret this Plan and any agreements defining the rights and
obligations of the Corporation, its Subsidiaries, and participants
under this Plan, further define the terms used in this Plan, and
prescribe, amend and rescind rules and regulations relating to the
administration of this Plan or the awards granted under this
Plan;
(e) cancel, modify,
or waive the Corporation’s rights with respect to, or modify,
discontinue, suspend, or terminate any or all outstanding awards,
subject to any required consent under Section 8.6.5;
(f) accelerate or
extend the vesting or exercisability or extend the term of any or
all such outstanding awards (in the case of options or stock
appreciation rights, within the maximum ten-year term of such
awards) in such circumstances as the Administrator may deem
appropriate (including, without limitation, in connection with a
termination of employment or services or other events of a personal
nature) subject to any required consent under Section
8.6.5;
(g) adjust the
number of shares of Common Stock subject to any award, adjust the
price of any or all outstanding awards or otherwise change
previously imposed terms and conditions, in such circumstances as
the Administrator may deem appropriate, in each case subject to
compliance with applicable stock exchange requirements, Sections 4
and 8.6 and the applicable requirements of Code Section 162(m) and
treasury regulations thereunder with respect to awards that are
intended to satisfy the requirements for performance-based
compensation under Section 162(m), and provided that in no case
(except due to an adjustment contemplated by Section 7 or any
repricing that may be approved by stockholders) shall such an
adjustment constitute a repricing (by amendment, cancellation and
regrant, exchange or other means) of the per share exercise or base
price of any stock option or stock appreciation right or other
award granted under this Plan, and further provided that any
adjustment or change in terms made pursuant to this Section 3.2(g)
shall be made in a manner that, in the good faith determination of
the Administrator will not likely result in the imposition of
additional taxes or interest under Section 409A of the
Code;
(h) determine the
date of grant of an award, which may be a designated date after but
not before the date of the Administrator’s action (unless
otherwise designated by the Administrator, the date of grant of an
award shall be the date upon which the Administrator took the
action granting an award);
(i) determine
whether, and the extent to which, adjustments are required pursuant
to Section 7 hereof and authorize the termination, conversion,
substitution, acceleration or succession of awards upon the
occurrence of an event of the type described in Section
7;
(j) acquire or
settle (subject to Sections 7 and 8.6) rights under awards in cash,
stock of equivalent value, or other consideration; and
(k) determine the
Fair Market Value (as defined in Section 5.6) of the Common Stock
or awards under this Plan from time to time and/or the manner in
which such value will be determined.
3.3 Binding
Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, or the Administrator relating or
pursuant to this Plan and within its authority hereunder or under
applicable law shall be within the absolute discretion of that
entity or body and shall be conclusive and binding upon all
persons. Neither the Board, the Administrator, nor any Board
committee, nor any member thereof or person acting at the direction
thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with
this Plan (or any award made under this Plan), and all such persons
shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage or expense
(including, without limitation, legal fees) arising or resulting
therefrom to the fullest extent permitted by law and/or under any
directors and officers liability insurance coverage that may be in
effect from time to time.
3.4 Reliance
on Experts. In making any determination or in taking or not
taking any action under this Plan, the Administrator may obtain and
may rely upon the advice of experts, including professional
advisors to the Corporation. The Administrator shall not be liable
for any such action or determination taken or made or omitted in
good faith based upon such advice.
3.5 Delegation
of Non-Discretionary Functions. In addition to the ability
to delegate certain grant authority to officers of the Corporation
as set forth in Section 3.1, the Administrator may also delegate
ministerial, non-discretionary functions to individuals who are
officers or employees of the Corporation or any of its Subsidiaries
or to third parties.
|
4.
|
SHARES
OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMIT
|
4.1 Shares
Available. Subject to the provisions of Section 7.1, the
capital stock available for issuance under this Plan shall be
shares of the Corporation’s authorized but unissued Common
Stock. For purposes of this Plan, “Common Stock” shall mean the
common stock of the Corporation and such other securities or
property as may become the subject of awards under this Plan, or
may become subject to such awards, pursuant to an adjustment made
under Section 7.1.
4.2 Share
Limit. The maximum number of shares of Common Stock that may
be delivered pursuant to awards granted to Eligible Persons under
this Plan may not exceed fifteen percent (15%) of the total of: (a)
the issued and outstanding shares of the Corporation’s Common
Stock, and (b) all shares common stock issuable upon conversion or
exercise of any outstanding securities of the Corporation which are
convertible or exercisable into shares of Common Stock under the
terms thereof, as determined on the date this Plan is adopted by
the Corporation’s Board of Directors (the “Share Limit”). The Share Limit
will be increased effective the first day of each of the
Corporation’s fiscal quarters, by an amount equal to the
lesser of:
(1) The
number of shares which is equal to 15% of the total of: (a) the
issued and outstanding shares of the Corporation’s Common
Stock, and (b) all shares common stock issuable upon conversion or
exercise of any outstanding securities of the Corporation which are
convertible or exercisable into shares of Common Stock under the
terms thereof; and
(2) any
lesser number of shares of Common Stock as may determined by the
board of directors of the Corporation.
The foregoing Share
Limit is subject to adjustment as contemplated by Section 4.3,
Section 7.1, and Section 8.10.
4.3 Awards
Settled in Cash, Reissue of Awards and Shares. The
Administrator may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in
the case of tandem or substitute awards) and make adjustments in
accordance with this Section 4.3. Shares shall be counted against
those reserved to the extent such shares have been delivered and
are no longer subject to a substantial risk of forfeiture.
Accordingly, (i) to the extent that an award under the Plan, in
whole or in part, is canceled, expired, forfeited, settled in cash,
settled by delivery of fewer shares than the number of shares
underlying the award, or otherwise terminated without delivery of
shares to the participant, the shares retained by or returned to
the Corporation will not be deemed to have been delivered under the
Plan and will be deemed to remain or to become available under this
Plan; and (ii) shares that are withheld from such an award or
separately surrendered by the participant in payment of the
exercise price or taxes relating to such an award shall be deemed
to constitute shares not delivered and will be deemed to remain or
to become available under the Plan. The foregoing adjustments to
the Share Limit of this Plan are subject to any applicable
limitations under Section 162(m) of the Code with respect to awards
intended as performance-based compensation thereunder.
4.4 Reservation of Shares; No
Fractional Shares. The Corporation shall at all times
reserve a number of shares of Common Stock sufficient to cover the
Corporation’s obligations and contingent obligations to
deliver shares with respect to awards then outstanding under this
Plan (exclusive of any dividend equivalent obligations to the
extent the Corporation has the right to settle such rights in
cash). No fractional shares shall be delivered under this Plan. The
Administrator may pay cash in lieu of any fractional shares in
settlements of awards under this Plan.
5.1 Type and Form of
Awards. The Administrator shall determine the type or types
of award(s) to be made to each selected Eligible Person. Awards may
be granted singly, in combination or in tandem. Awards also may be
made in combination or in tandem with, in replacement of, as
alternatives to, or as the payment form for grants or rights under
any other employee or compensation plan of the Corporation or one
of its Subsidiaries. The types of awards that may be granted under
this Plan are:
5.1.1 Stock Options. A
stock option is the grant of a right to purchase a specified number
of shares of Common Stock during a specified period as determined
by the Administrator. An option may be intended as an incentive
stock option within the meaning of Section 422 of the Code (an
“ISO”) or a
nonqualified stock option (an option not intended to be an ISO).
The award agreement for an option will indicate if the option is
intended as an ISO; otherwise it will be deemed to be a
nonqualified stock option. The maximum term of each option (ISO or
nonqualified) shall be ten (10) years. The per share exercise price
for each ISO shall be not less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of the option. When
an option is exercised, the exercise price for the shares to be
purchased shall be paid in full in cash or such other method
permitted by the Administrator consistent with Section
5.5.
5.1.2 Additional Rules Applicable
to ISOs. To the extent that the aggregate Fair Market Value
(determined at the time of grant of the applicable option) of stock
with respect to which ISOs first become exercisable by a
participant in any calendar year exceeds $100,000, taking into
account both Common Stock subject to ISOs under this Plan and stock
subject to ISOs under all other plans of the Corporation or one of
its Subsidiaries (or any parent or predecessor corporation to the
extent required by and within the meaning of Section 422 of the
Code and the regulations promulgated thereunder), such options
shall be treated as nonqualified stock options. In reducing the
number of options treated as ISOs to meet the $100,000 limit, the
most recently granted options shall be reduced first. To the extent
a reduction of simultaneously granted options is necessary to meet
the $100,000 limit, the Administrator may, in the manner and to the
extent permitted by law, designate which shares of Common Stock are
to be treated as shares acquired pursuant to the exercise of an
ISO. ISOs may only be granted to employees of the Corporation or
one of its subsidiaries (for this purpose, the term
“subsidiary” is used as defined in Section 424(f) of
the Code, which generally requires an unbroken chain of ownership
of at least 50% of the total combined voting power of all classes
of stock of each subsidiary in the chain beginning with the
Corporation and ending with the subsidiary in question). There
shall be imposed in any award agreement relating to ISOs such other
terms and conditions as from time to time are required in order
that the option be an “incentive stock option” as that
term is defined in Section 422 of the Code. No ISO may be granted
to any person who, at the time the option is granted, owns (or is
deemed to own under Section 424(d) of the Code) shares of
outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation,
unless the exercise price of such option is at least 110% of the
Fair Market Value of the stock subject to the option and such
option by its terms is not exercisable after the expiration of five
years from the date such option is granted.
5.1.3 Stock Appreciation
Rights. A stock appreciation right or “SAR” is a right to receive a
payment, in cash and/or Common Stock, equal to the number of shares
of Common Stock being exercised multiplied by the excess of (i) the
Fair Market Value of a share of Common Stock on the date the SAR is
exercised, over (ii) the Fair Market Value of a share of Common
Stock on the date the SAR was granted as specified in the
applicable award agreement (the “base price”). The maximum term of
a SAR shall be ten (10) years.
5.1.4 Restricted
Shares.
(a) Restrictions. Restricted shares are
shares of Common Stock subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any,
as the Administrator may impose, which restrictions may lapse
separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or
otherwise, as the Administrator may determine at the date of grant
or thereafter. Except to the extent restricted under the terms of
this Plan and the applicable award agreement relating to the
restricted stock, a participant granted restricted stock shall have
all of the rights of a shareholder, including the right to vote the
restricted stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed
by the Administrator).
(b) Certificates for Shares. Restricted
shares granted under this Plan may be evidenced in such manner as
the Administrator shall determine. If certificates representing
restricted stock are registered in the name of the participant, the
Administrator may require that such certificates bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to such restricted stock, that the
Corporation retain physical possession of the certificates, and
that the participant deliver a stock power to the Corporation,
endorsed in blank, relating to the restricted stock. The
Administrator may require that restricted shares are held in escrow
until all restrictions lapse
(c) Dividends and Splits. As a condition to
the grant of an award of restricted stock, subject to applicable
law, the Administrator may require or permit a participant to elect
that any cash dividends paid on a share of restricted stock be
automatically reinvested in additional shares of restricted stock
or applied to the purchase of additional awards under this Plan.
Unless otherwise determined by the Administrator, stock distributed
in connection with a stock split or stock dividend, and other
property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the
restricted stock with respect to which such stock or other property
has been distributed.
5.1.5
Restricted Share Units.
(a) Grant of Restricted Share
Units. A restricted share unit,
or “RSU”,
represents the right to receive from the Corporation on the
respective scheduled vesting or payment date for such RSU, one
Common Share. An award of RSUs may be subject to the attainment of
specified performance goals or targets, forfeitability provisions
and such other terms and conditions as the Administrator may
determine, subject to the provisions of this Plan. At the time an
award of RSUs is made, the Administrator shall establish a period
of time during which the restricted share units shall vest and the
timing for settlement of the RSU.
(b) Dividend Equivalent Accounts. Subject
to the terms and conditions of the Plan and the applicable award
agreement, as well as any procedures established by the
Administrator, prior to the expiration of the applicable vesting
period of an RSU, the Administrator may determine to pay dividend
equivalent rights with respect to RSUs, in which case, the
Corporation shall establish an account for the participant and
reflect in that account any securities, cash or other property
comprising any dividend or property distribution with respect to
the shares of Common Stock underlying each RSU. Each amount or
other property credited to any such account shall be subject to the
same vesting conditions as the RSU to which it relates. The
participant shall have the right to be paid the amounts or other
property credited to such account upon vesting of the subject
RSU.
(c) Rights as a
Shareholder. Subject to the
restrictions imposed under the terms and conditions of this Plan
and the applicable award agreement, each participant receiving RSUs
shall have no rights as a shareholder with respect to such RSUs
until such time as shares of Common Stock are issued to the
participant. No shares of Common Stock shall be issued at the time
a RSU is granted, and the Company will not be required to set aside
a fund for the payment of any such award. Except as otherwise
provided in the applicable award agreement, shares of Common Stock
issuable under an RSU shall be treated as issued on the first date
that the holder of the RSU is no longer subject to a substantial
risk of forfeiture as determined for purposes of Section 409A of
the Code, and the holder shall be the owner of such shares of
Common Stock on such date. An award agreement may provide that
issuance of shares of Common Stock under an RSU may be deferred
beyond the first date that the RSU is no longer subject to a
substantial risk of forfeiture, provided that such deferral is
structured in a manner that is intended to comply with the
requirements of Section 409A of the Code.
5.1.6 Cash
Awards. The
Administrator may, from time to time, subject to the provisions of
the Plan and such other terms and conditions as it may determine,
grant cash bonuses (including without limitation, discretionary
awards, awards based on objective or subjective performance
criteria, awards subject to other vesting criteria or awards
granted consistent with Section 5.2 below). Cash awards shall be
awarded in such amount and at such times during the term of the
Plan as the Administrator shall determine.
5.1.7 Other
Awards. The other types of awards that may be granted under
this Plan include: (a) stock bonuses, performance stock,
performance units, dividend equivalents, or similar rights to
purchase or acquire shares, whether at a fixed or variable price or
ratio related to the Common Stock (subject to the requirements of
Section 5.1.1 and in compliance with applicable laws), upon the
passage of time, the occurrence of one or more events, or the
satisfaction of performance criteria or other conditions, or any
combination thereof; or (b) any similar securities with a value
derived from the value of or related to the Common Stock and/or
returns thereon.
5.2 Section
162(m) Performance-Based Awards. Without limiting the generality of the
foregoing, any of the types of awards listed in Sections 5.1.4
through 5.1.7 above may be, and options and SARs granted with an
exercise or base price not less than the Fair Market Value of a
share of Common Stock at the date of grant (“Qualifying Options” and
“Qualifying SARs
,” respectively) typically will be, granted as awards
intended to satisfy the requirements for “performance-based
compensation” within the meaning of Section 162(m) of the
Code (“Performance-Based
Awards”) . The grant, vesting, exercisability or
payment of Performance-Based Awards may depend (or, in the case of
Qualifying Options or Qualifying SARs, may also depend) on the
degree of achievement of one or more performance goals relative to
a pre-established targeted level or levels using the Business
Criteria provided for below for the Corporation on a consolidated
basis or for one or more of the Corporation’s subsidiaries,
segments, divisions or business units, or any combination of the
foregoing. Such criteria may be evaluated on an absolute basis or
relative to prior periods, industry peers, or stock market indices.
Any Qualifying Option or Qualifying SAR shall be subject to the
requirements of Section 5.2.1 and 5.2.3 in order for such award to
satisfy the requirements for “performance-based
compensation” under Section 162(m) of the Code. Any other
Performance-Based Award shall be subject to all of the following
provisions of this Section 5.2.
5.2.1 Class;
Administrator. The eligible class of persons for
Performance-Based Awards under this Section 5.2 shall be officers
and employees of the Corporation or one of its Subsidiaries. The
Administrator approving Performance-Based Awards or making any
certification required pursuant to Section 5.2.4 must be
constituted as provided in Section 3.1 for awards that are intended
as performance-based compensation under Section 162(m) of the
Code.
5.2.2 Performance
Goals. The specific performance goals for Performance-Based
Awards (other than Qualifying Options and Qualifying SARs) shall
be, on an absolute or relative basis, established based on such
business criteria as selected by the Administrator in its sole
discretion (“Business
Criteria”) , including the following: (1) earnings per
share, (2) cash flow (which means cash and cash equivalents derived
from either (i) net cash flow from operations or (ii) net cash flow
from operations, financing and investing activities), (3) total
stockholder return, (4) price per share of Common Stock, (5) gross
revenue, (6) revenue growth, (7) operating income (before or after
taxes), (8) net earnings (before or after interest, taxes,
depreciation and/or amortization), (9) return on equity, (10)
capital employed, or on assets or on net investment, (11) cost
containment or reduction, (12) cash cost per ounce of production,
(13) operating margin, (14) debt reduction, (15) resource amounts,
(16) production or production growth, (17) resource replacement or
resource growth, (18) successful completion of financings, or (19)
any combination of the foregoing. To qualify awards as
performance-based under Section 162(m), the applicable Business
Criterion (or Business Criteria, as the case may be) and specific
performance goal or goals (“targets”) must be established and
approved by the Administrator during the first 90 days of the
performance period (and, in the case of performance periods of less
than one year, in no event after 25% or more of the performance
period has elapsed) and while performance relating to such
target(s) remains substantially uncertain within the meaning of
Section 162(m) of the Code. Performance targets shall be adjusted
to mitigate the unbudgeted impact of material, unusual or
nonrecurring gains and losses, accounting changes or other
extraordinary events not foreseen at the time the targets were set
unless the Administrator provides otherwise at the time of
establishing the targets; provided that the Administrator may not
make any adjustment to the extent it would adversely affect the
qualification of any compensation payable under such performance
targets as “performance-based compensation” under
Section 162(m) of Code. The applicable performance measurement
period may not be less than 3 months nor more than 10
years.
5.2.3 Form
of Payment. Grants or awards intended to qualify under this
Section 5.2 may be paid in cash or shares of Common Stock or any
combination thereof.
5.2.4 Certification
of Payment. Before any Performance-Based Award under this
Section 5.2 (other than Qualifying Options and Qualifying SARs) is
paid and to the extent required to qualify the award as
performance-based compensation within the meaning of Section 162(m)
of the Code, the Administrator must certify in writing that the
performance target(s) and any other material terms of the
Performance-Based Award were in fact timely satisfied.
5.2.5 Reservation
of Discretion. The
Administrator will have the discretion to determine the
restrictions or other limitations of the individual awards granted
under this Section 5.2 including the authority to reduce awards,
payouts or vesting or to pay no awards, in its sole discretion, if
the Administrator preserves such authority at the time of grant by
language to this effect in its authorizing resolutions or
otherwise.
5.2.6 Expiration
of Grant Authority.
As required pursuant to Section 162(m) of the Code and the
regulations promulgated thereunder, the Administrator’s
authority to grant new awards that are intended to qualify as
performance-based compensation within the meaning of Section 162(m)
of the Code (other than Qualifying Options and Qualifying SARs)
shall terminate upon the first meeting of the Corporation’s
stockholders that occurs in the fifth year following the year in
which the Corporation’s stockholders first approve this Plan
(the “162(m)
Term”) .
5.2.7 Compensation
Limitations. The
maximum aggregate number of shares of Common Stock that may be
issued to any Eligible Person during the term of this Plan pursuant
to Qualifying Options and Qualifying SARs may not exceed the Share
Limit. The maximum aggregate number of shares of Common Stock that
may be issued to any Eligible Person pursuant to Performance-Based
Awards granted during the 162(m) Term (other than cash awards
granted pursuant to Section 5.1.6 and Qualifying Options or
Qualifying SARs) may not exceed the Share Limit. The maximum amount
that may be paid to any Eligible Person pursuant to
Performance-Based Awards granted pursuant to Sections 5.1.6 (cash
awards) during the 162(m) Term may not exceed
$1,000,000.
5.3 Award
Agreements. Each award shall be evidenced by a written or
electronic award agreement in the form approved by the
Administrator and, if required by the Administrator, executed by
the recipient of the award. The Administrator may authorize any
officer of the Corporation (other than the particular award
recipient) to execute any or all award agreements on behalf of the
Corporation (electronically or otherwise). The award agreement
shall set forth the material terms and conditions of the award as
established by the Administrator consistent with the express
limitations of this Plan.
5.4 Deferrals
and Settlements. Payment of awards may be in the form of
cash, Common Stock, other awards or combinations thereof as the
Administrator shall determine, and with such restrictions as it may
impose. The Administrator may also require or permit participants
to elect to defer the issuance of shares of Common Stock or the
settlement of awards in cash under such rules and procedures as it
may establish under this Plan. The Administrator may also provide
that deferred settlements include the payment or crediting of
interest or other earnings on the deferral amounts, or the payment
or crediting of dividend equivalents where the deferred amounts are
denominated in shares. All mandatory or elective deferrals of the
issuance of shares of Common Stock or the settlement of cash awards
shall be structured in a manner that is intended to comply with the
requirements of Section 409A of the Code.
5.5 Consideration
for Common Stock or Awards. The purchase price for any award
granted under this Plan or the Common Stock to be delivered
pursuant to an award, as applicable, may be paid by means of any
lawful consideration as determined by the Administrator and subject
to compliance with applicable laws, including, without limitation,
one or a combination of the following methods:
|
|
●
|
services rendered
by the recipient of such award;
|
|
|
●
|
cash, check payable
to the order of the Corporation, or electronic funds
transfer;
|
|
|
●
|
notice and third
party payment in such manner as may be authorized by the
Administrator;
|
|
|
●
|
the delivery of
previously owned shares of Common Stock that are fully vested and
unencumbered;
|
|
|
●
|
by a reduction in
the number of shares otherwise deliverable pursuant to the award;
or
|
|
|
●
|
subject to such
procedures as the Administrator may adopt, pursuant to a
“cashless exercise” with a third party who provides
financing for the purposes of (or who otherwise facilitates) the
purchase or exercise of awards.
|
In the event that
the Administrator allows a participant to exercise an award by
delivering shares of Common Stock previously owned by such
participant and unless otherwise expressly provided by the
Administrator, any shares delivered which were initially acquired
by the participant from the Corporation (upon exercise of a stock
option or otherwise) must have been owned by the participant at
least six months as of the date of delivery (or such other period
as may be required by the Administrator in order to avoid adverse
accounting treatment). Shares of Common Stock used to satisfy the
exercise price of an option shall be valued at their Fair Market
Value on the date of exercise. The Corporation will not be
obligated to deliver any shares unless and until it receives full
payment of the exercise or purchase price therefor and any related
withholding obligations under Section 8.5 and any other conditions
to exercise or purchase, as established from time to time by the
Administrator, have been satisfied. Unless otherwise expressly
provided in the applicable award agreement, the Administrator may
at any time eliminate or limit a participant’s ability to pay
the purchase or exercise price of any award by any method other
than cash payment to the Corporation.
5.6 Definition
of Fair Market Value. For purposes of this Plan
“Fair Market
Value” shall mean, unless otherwise determined or
provided by the Administrator in the circumstances, the closing
price for a share of Common Stock on the trading day immediately
before the grant date, as furnished by the NASDAQ Stock Market or
other principal stock exchange on which the Common Stock is then
listed for the date in question, or if the Common Stock is no
longer listed on a principal stock exchange, then by the
Over-the-Counter Bulletin Board or OTC Markets. If the Common Stock
is no longer listed on the NASDAQ Capital Market or listed on a
principal stock exchange or is no longer actively traded on the
Over-the-Counter Bulletin Board or OTC Markets as of the applicable
date, the Fair Market Value of the Common Stock shall be the value
as reasonably determined by the Administrator for purposes of the
award in the circumstances.
5.7 Transfer
Restrictions.
5.7.1 Limitations
on Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 5.7, by applicable law
and by the award agreement, as the same may be amended, (a) all
awards are non-transferable and shall not be subject in any manner
to sale, transfer, anticipation, alienation, assignment, pledge,
encumbrance or charge; (b) awards shall be exercised only by the
participant; and (c) amounts payable or shares issuable pursuant to
any award shall be delivered only to (or for the account of) the
participant.
5.7.2 Exceptions.
The Administrator may permit awards to be exercised by and paid to,
or otherwise transferred to, other persons or entities pursuant to
such conditions and procedures, including limitations on subsequent
transfers, as the Administrator may, in its sole discretion,
establish in writing (provided that any such transfers of ISOs
shall be limited to the extent permitted under the federal tax laws
governing ISOs). Any permitted transfer shall be subject to
compliance with applicable federal and state securities
laws.
5.7.3 Further
Exceptions to Limits on Transfer. The exercise and transfer
restrictions in Section 5.7.1 shall not apply to:
(a) transfers to
the Corporation,
(b) the designation
of a beneficiary to receive benefits in the event of the
participant’s death or, if the participant has died,
transfers to or exercise by the participant’s beneficiary,
or, in the absence of a validly designated beneficiary, transfers
by will or the laws of descent and distribution,
(c) subject to any applicable
limitations on ISOs, transfers to a family member (or former family
member) pursuant to a domestic relations order if approved or
ratified by the Administrator,
(d) subject to any
applicable limitations on ISOs, if the participant has suffered a
disability, permitted transfers or exercises on behalf of the
participant by his or her legal representative, or
(e) the
authorization by the Administrator of “cashless
exercise” procedures with third parties who provide financing
for the purpose of (or who otherwise facilitate) the exercise of
awards consistent with applicable laws and the express
authorization of the Administrator.
5.8
International
Awards. One or more awards may be granted to Eligible
Persons who provide services to the Corporation or one of its
Subsidiaries outside of the United States. Any awards granted to
such persons may, if deemed necessary or advisable by the
Administrator, be granted pursuant to the terms and conditions of
any applicable sub-plans, if any, appended to this Plan and
approved by the Administrator.
5.9 Vesting.
Subject to Sections 5.1.2 and 5.10 hereof, awards shall vest at
such time or times and subject to such terms and conditions as
shall be determined by the Administrator at the time of grant;
provided, however , that in
the absence of any award vesting periods designated by the
Administrator at the time of grant in the applicable award
agreement, awards shall vest as to one-third of the total number of
shares subject to the award on each of the first, second and third
anniversaries of the date of grant.
|
6.
|
EFFECT
OF TERMINATION OF SERVICE ON AWARDS
|
6.1 Termination
of Employment.
6.1.1 The
Administrator shall establish the effect of a termination of
employment or service on the rights and benefits under each award
under this Plan and in so doing may make distinctions based upon,
inter alia, the cause of termination and type of award. If the
participant is not an employee of the Corporation or one of its
Subsidiaries and provides other services to the Corporation or one
of its Subsidiaries, the Administrator shall be the sole judge for
purposes of this Plan (unless a contract or the award agreement
otherwise provides) of whether the participant continues to render
services to the Corporation or one of its Subsidiaries and the
date, if any, upon which such services shall be deemed to have
terminated.
6.1.2 For
awards of stock options or SARs, unless the award agreement
provides otherwise, the exercise period of such options or SARs
shall expire: (1) three months after the last day that the
participant is employed by or provides services to the Corporation
or a Subsidiary (provided; however, that in the event of the
participant’s death during this period, those persons
entitled to exercise the option or SAR pursuant to the laws of
descent and distribution shall have one year following the date of
death within which to exercise such option or SAR); (2) in the case
of a participant whose termination of employment is due to death or
disability (as defined in the applicable award agreement), 12
months after the last day that the participant is employed by or
provides services to the Corporation or a Subsidiary; and (3)
immediately upon a participant’s termination for
“cause”. The Administrator will, in its absolute
discretion, determine the effect of all matters and questions
relating to a termination of employment, including, but not by way
of limitation, the question of whether a leave of absence
constitutes a termination of employment and whether a
participant’s termination is for
“cause.”
If not defined in
the applicable award agreement, “Cause” shall mean:
(i) conviction of a
felony or a crime involving fraud or moral turpitude;
or
(ii) theft,
material act of dishonesty or fraud, intentional falsification of
any employment or Company records, or commission of any criminal
act which impairs participant’s ability to perform
appropriate employment duties for the Corporation; or
(iii) intentional
or reckless conduct or gross negligence materially harmful to the
Company or the successor to the Corporation after a Change in
Control, including violation of a non-competition or
confidentiality agreement; or
(iv) willful
failure to follow lawful instructions of the person or body to
which participant reports; or
(v) gross
negligence or willful misconduct in the performance of
participant’s assigned duties. Cause shall not include mere unsatisfactory
performance in the achievement of participant’s job
objectives.
6.1.3 For
awards of restricted shares, unless the award agreement provides
otherwise, restricted shares that are subject to restrictions at
the time that a participant whose employment or service is
terminated shall be forfeited and reacquired by the Corporation;
provided that, the
Administrator may provide, by rule or regulation or in any award
agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to restricted shares
shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Administrator may in other
cases waive in whole or in part the forfeiture of restricted
shares. Similar rules shall apply in respect of RSUs.
6.2 Events
Not Deemed Terminations of Service. Unless the express
policy of the Corporation or one of its Subsidiaries, or the
Administrator, otherwise provides, the employment relationship
shall not be considered terminated in the case of (a) sick leave,
(b) military leave, or (c) any other leave of absence authorized by
the Corporation or one of its Subsidiaries, or the Administrator;
provided that unless reemployment upon the expiration of such leave
is guaranteed by contract or law, such leave is for a period of not
more than 3 months. In the case of any employee of the Corporation
or one of its Subsidiaries on an approved leave of absence,
continued vesting of the award while on leave from the employ of
the Corporation or one of its Subsidiaries may be suspended until
the employee returns to service, unless the Administrator otherwise
provides or applicable law otherwise requires. In no event shall an
award be exercised after the expiration of the term set forth in
the award agreement.
6.3 Effect
of Change of Subsidiary Status. For purposes of this Plan
and any award, if an entity ceases to be a Subsidiary of the
Corporation, a termination of employment or service shall be deemed
to have occurred with respect to each Eligible Person in respect of
such Subsidiary who does not continue as an Eligible Person in
respect of another entity within the Corporation or another
Subsidiary that continues as such after giving effect to the
transaction or other event giving rise to the change in
status.
|
7.
|
ADJUSTMENTS;
ACCELERATION
|
7.1 Adjustments.
Upon or in contemplation of any of the following events described
in this Section 7.1,: any reclassification, recapitalization, stock
split (including a stock split in the form of a stock dividend) or
reverse stock split (“stock
split”) ; any merger, arrangement, combination,
consolidation, or other reorganization; any spin-off, split-up, or
similar extraordinary dividend distribution in respect of the
Common Stock (whether in the form of securities or property); any
exchange of Common Stock or other securities of the Corporation, or
any similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; then the Administrator shall in such
manner, to such extent and at such time as it deems appropriate and
equitable in the circumstances (but subject to compliance with
applicable laws and stock exchange requirements) proportionately
adjust any or all of (1) the number and type of shares of Common
Stock (or other securities) that thereafter may be made the subject
of awards (including the number of shares provided for in this
Plan), (2) the number, amount and type of shares of Common Stock
(or other securities or property) subject to any or all outstanding
awards, (3) the grant, purchase, or exercise price (which term
includes the base price of any SAR or similar right) of any or all
outstanding awards, (4) the securities, cash or other property
deliverable upon exercise or payment of any outstanding awards, and
(5) the 162(m) compensation limitations set forth in Section 5.2.7
and (subject to Section 8.8.3(a)) the performance standards
applicable to any outstanding awards (provided that no adjustment
shall be allowed to the extent inconsistent with the requirements
of Code section 162(m)). Any adjustment made pursuant to this
Section 7.1 shall be made in a manner that, in the good faith
determination of the Administrator, will not likely result in the
imposition of additional taxes or interest under Section 409A of
the Code. With respect to any award of an ISO, the Administrator
may make such an adjustment that causes the option to cease to
qualify as an ISO without the consent of the affected
participant.
7.2 Change
in Control. Upon a Change in Control, each then-outstanding
option and SAR shall automatically become fully vested, all
restricted shares then outstanding shall automatically fully vest
free of restrictions, and each other award granted under this Plan
that is then outstanding shall automatically become vested and
payable to the holder of such award unless the
Administrator has made appropriate provision for the substitution,
assumption, exchange or other continuation of the award pursuant to
the Change in Control. Notwithstanding the foregoing, the
Administrator, in its sole and absolute discretion, may choose (in
an award agreement or otherwise) to provide for full or partial
accelerated vesting of any award upon a Change In Control (or upon
any other event or other circumstance related to the Change in
Control, such as an involuntary termination of employment occurring
after such Change in Control, as the Administrator may determine),
irrespective of whether such any such award has been substituted,
assumed, exchanged or otherwise continued pursuant to the Change in
Control.
For purposes of
this Plan, “Change in
Control” shall be deemed to have occurred
if:
(i) a tender offer
(or series of related offers) shall be made and consummated for the
ownership of 50% or more of the outstanding voting securities of
the Corporation, unless as a result of such tender offer more than
50% of the outstanding voting securities of the surviving or
resulting corporation shall be owned in the aggregate by the
stockholders of the Corporation (as of the time immediately prior
to the commencement of such offer), any employee benefit plan of
the Corporation or its Subsidiaries, and their
affiliates;
(ii) the
Corporation shall be merged or consolidated with another entity,
unless as a result of such merger or consolidation more than 50% of
the outstanding voting securities of the surviving or resulting
entity shall be owned in the aggregate by the stockholders of the
Corporation (as of the time immediately prior to such transaction),
any employee benefit plan of the Corporation or its Subsidiaries,
and their affiliates;
(iii) the
Corporation shall sell substantially all of its assets to another
entity that is not wholly owned by the Corporation, unless as a
result of such sale more than 50% of such assets shall be owned in
the aggregate by the stockholders of the Corporation (as of the
time immediately prior to such transaction), any employee benefit
plan of the Corporation or its Subsidiaries and their affiliates;
or
(iv) a Person (as
defined below) shall acquire 50% or more of the outstanding voting
securities of the Corporation (whether directly, indirectly,
beneficially or of record), unless as a result of such acquisition
more than 50% of the outstanding voting securities of the surviving
or resulting corporation shall be owned in the aggregate by the
stockholders of the Corporation (as of the time immediately prior
to the first acquisition of such securities by such Person), any
employee benefit plan of the Corporation or its Subsidiaries, and
their affiliates.
For purposes of
this Section 5(c), ownership of voting securities shall take into
account and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof)
under the Exchange Act. In addition, for such purposes,
“Person” shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; provided , however , that a Person shall
not include (A) the Company or any of its Subsidiaries; (B) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Subsidiaries; (C) an
underwriter temporarily holding securities pursuant to an offering
of such securities; or (D) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportion as their ownership of stock of the
Company.
Notwithstanding the
foregoing, (1) the Administrator may waive the requirement
described in paragraph (iv) above that a Person must acquire more
than 50% of the outstanding voting securities of the Corporation
for a Change in Control to have occurred if the Administrator
determines that the percentage acquired by a person is significant
(as determined by the Administrator in its discretion) and that
waiving such condition is appropriate in light of all facts and
circumstances, and (2) no compensation that has been deferred for
purposes of Section 409A of the Code shall be payable as a result
of a Change in Control unless the Change in Control qualifies as a
change in ownership or effective control of the Corporation within
the meaning of Section 409A of the Code.
7.3 Early
Termination of Awards. Any award that has been accelerated
as required or permitted by Section 7.2 upon a Change in Control
(or would have been so accelerated but for Section 7.4 or 7.5)
shall terminate upon such event, subject to any provision that has
been expressly made by the Administrator, through a plan of
reorganization or otherwise, for the survival, substitution,
assumption, exchange or other continuation of such award and
provided that, in the case of options and SARs that will not
survive, be substituted for, assumed, exchanged, or otherwise
continued in the transaction, the holder of such award shall be
given reasonable advance notice of the impending termination and a
reasonable opportunity to exercise his or her outstanding options
and SARs in accordance with their terms before the termination of
such awards (except that in no case shall more than ten days’
notice of accelerated vesting and the impending termination be
required and any acceleration may be made contingent upon the
actual occurrence of the event).
The Administrator
may make provision for payment in cash or property (or both) in
respect of awards terminated pursuant to this section as a result
of the Change in Control and may adopt such valuation methodologies
for outstanding awards as it deems reasonable and, in the case of
options, SARs or similar rights, and without limiting other
methodologies, may base such settlement solely upon the excess if
any of the per share amount payable upon or in respect of such
event over the exercise or base price of the award.
7.4 Other
Acceleration Rules. Any acceleration of awards pursuant to
this Section 7 shall comply with applicable legal and stock
exchange requirements and, if necessary to accomplish the purposes
of the acceleration or if the circumstances require, may be deemed
by the Administrator to occur a limited period of time not greater
than 30 days before the event. Without limiting the generality of
the foregoing, the Administrator may deem an acceleration to occur
immediately prior to the applicable event and/or reinstate the
original terms of an award if an event giving rise to the
acceleration does not occur. Notwithstanding any other provision of
the Plan to the contrary, the Administrator may override the
provisions of Section 7.2, 7.3, and/or 7.5 by express provision in
the award agreement or otherwise. The portion of any ISO
accelerated pursuant to Section 7.2 or any other action permitted
hereunder shall remain exercisable as an ISO only to the extent the
applicable $100,000 limitation on ISOs is not exceeded. To the
extent exceeded, the accelerated portion of the option shall be
exercisable as a nonqualified stock option under the
Code.
7.5 Possible
Rescission of Acceleration. If the vesting of an award has
been accelerated expressly in anticipation of an event and the
Administrator later determines that the event will not occur, the
Administrator may rescind the effect of the acceleration as to any
then outstanding and unexercised or otherwise unvested awards;
provided, that , in the
case of any compensation that has been deferred for purposes of
Section 409A of the Code, the Administrator determines that such
rescission will not likely result in the imposition of additional
tax or interest under Code Section 409A.
8.1 Compliance
with Laws. This Plan, the granting and vesting of awards
under this Plan, the offer, issuance and delivery of shares of
Common Stock, the acceptance of promissory notes and/or the payment
of money under this Plan or under awards are subject to compliance
with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law,
federal margin requirements) and to such approvals by any
applicable stock exchange listing, regulatory or governmental
authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. The person
acquiring any securities under this Plan will, if requested by the
Corporation or one of its Subsidiaries, provide such assurances and
representations to the Corporation or one of its Subsidiaries as
the Administrator may deem necessary or desirable to assure
compliance with all applicable legal and accounting
requirements.
8.2 Future
Awards/Other Rights. No person shall have any claim or
rights to be granted an award (or additional awards, as the case
may be) under this Plan, subject to any express contractual rights
(set forth in a document other than this Plan) to the
contrary.
8.3 No
Employment/Service Contract. Nothing contained in this Plan
(or in any other documents under this Plan or in any award) shall
confer upon any Eligible Person or other participant any right to
continue in the employ or other service of the Corporation or one
of its Subsidiaries, constitute any contract or agreement of
employment or other service or affect an employee’s status as
an employee at will, nor shall interfere in any way with the right
of the Corporation or one of its Subsidiaries to change a
person’s compensation or other benefits, or to terminate his
or her employment or other service, with or without cause. Nothing
in this Section 8.3, however, is intended to adversely affect any
express independent right of such person under a separate
employment or service contract other than an award
agreement.
8.4 Plan
Not Funded. Awards payable under this Plan shall be payable
in shares or from the general assets of the Corporation, and no
special or separate reserve, fund or deposit shall be made to
assure payment of such awards. No participant, beneficiary or other
person shall have any right, title or interest in any fund or in
any specific asset (including shares of Common Stock, except as
expressly otherwise provided) of the Corporation or one of its
Subsidiaries by reason of any award hereunder. Neither the
provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to
the provisions of this Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the
Corporation or one of its Subsidiaries and any participant,
beneficiary or other person. To the extent that a participant,
beneficiary or other person acquires a right to receive payment
pursuant to any award hereunder, such right shall be no greater
than the right of any unsecured general creditor of the
Corporation.
8.5 Tax
Withholding. Upon any exercise, vesting, or payment of any
award, the Corporation or one of its Subsidiaries shall have the
right at its option to:
(a) require the
participant (or the participant’s personal representative or
beneficiary, as the case may be) to pay or provide for payment of
at least the minimum amount of any taxes which the Corporation or
one of its Subsidiaries may be required to withhold with respect to
such award event or payment; or
(b) deduct from any
amount otherwise payable in cash to the participant (or the
participant’s personal representative or beneficiary, as the
case may be) the minimum amount of any taxes which the Corporation
or one of its Subsidiaries may be required to withhold with respect
to such cash payment.
In any case where a
tax is required to be withheld in connection with the delivery of
shares of Common Stock under this Plan, the Administrator may in
its sole discretion (subject to Section 8.1) grant (either at the
time of the award or thereafter) to the participant the right to
elect, pursuant to such rules and subject to such conditions as the
Administrator may establish, to have the Corporation reduce the
number of shares to be delivered by (or otherwise reacquire) the
appropriate number of shares, valued in a consistent manner at
their Fair Market Value or at the sales price in accordance with
authorized procedures for cashless exercises, necessary to satisfy
the minimum applicable withholding obligation on exercise, vesting
or payment. In no event shall the shares withheld exceed the
minimum whole number of shares required for tax withholding under
applicable law.
8.6 Effective
Date, Termination and Suspension, Amendments.
8.6.1 Effective
Date and Termination. This Plan was approved by the Board
and became effective on August 3, 2016. Unless earlier terminated
by the Board, this Plan shall terminate at the close of business on
August 3, 2026. After the termination of this Plan either upon such
stated expiration date or its earlier termination by the Board, no
additional awards may be granted under this Plan, but previously
granted awards (and the authority of the Administrator with respect
thereto, including the authority to amend such awards) shall remain
outstanding in accordance with their applicable terms and
conditions and the terms and conditions of this Plan.
8.6.2 Board
Authorization. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or
in part. No awards may be granted during any period that the Board
suspends this Plan.
8.6.3 Stockholder
Approval. To the extent then required by applicable law or
any applicable stock exchange or required under Sections 162, 422
or 424 of the Code to preserve the intended tax consequences of
this Plan, or deemed necessary or advisable by the Board, this Plan
and any amendment to this Plan shall be subject to stockholder
approval.
8.6.4 Amendments
to Awards. Without limiting any other express authority of
the Administrator under (but subject to) the express limits of this
Plan, the Administrator by agreement or resolution may waive
conditions of or limitations on awards to participants that the
Administrator in the prior exercise of its discretion has imposed,
without the consent of a participant, and (subject to the
requirements of Sections 3.2 and 8.6.5) may make other changes to
the terms and conditions of awards. Any amendment or other action
that would constitute a repricing of an award is subject to the
limitations set forth in Section 3.2(g).
8.6.5 Limitations
on Amendments to Plan and Awards. No amendment, suspension
or termination of this Plan or change of or affecting any
outstanding award shall, without written consent of the
participant, affect in any manner materially adverse to the
participant any rights or benefits of the participant or
obligations of the Corporation under any award granted under this
Plan prior to the effective date of such change. Changes,
settlements and other actions contemplated by Section 7 shall not
be deemed to constitute changes or amendments for purposes of this
Section 8.6.
8.7 Privileges
of Stock Ownership. Except as otherwise expressly authorized
by the Administrator or this Plan, a participant shall not be
entitled to any privilege of stock ownership as to any shares of
Common Stock not actually delivered to and held of record by the
participant. No adjustment will be made for dividends or other
rights as a stockholder for which a record date is prior to such
date of delivery.
8.8 Governing
Law; Construction; Severability.
8.8.1 Choice
of Law. This Plan, the awards, all documents evidencing
awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of
Delaware.
8.8.2 Severability.
If a court of competent jurisdiction holds any provision invalid
and unenforceable, the remaining provisions of this Plan shall
continue in effect.
8.8.3 Plan
Construction.
(a) Rule 16b-3. It is the intent of the
Corporation that the awards and transactions permitted by awards be
interpreted in a manner that, in the case of participants who are
or may be subject to Section 16 of the Exchange Act, qualify, to
the maximum extent compatible with the express terms of the award,
for exemption from matching liability under Rule 16b-3 promulgated
under the Exchange Act. Notwithstanding the foregoing, the
Corporation shall have no liability to any participant for Section
16 consequences of awards or events under awards if an award or
event does not so qualify.
(b) Section 162(m). Awards under Sections
5.1.4 through 5.1.7 to persons described in Section 5.2 that are
either granted or become vested, exercisable or payable based on
attainment of one or more performance goals related to the Business
Criteria, as well as Qualifying Options and Qualifying SARs granted
to persons described in Section 5.2, that are approved by a
committee composed solely of two or more outside directors (as this
requirement is applied under Section 162(m) of the Code) shall be
deemed to be intended as performance-based compensation within the
meaning of Section 162(m) of the Code unless such committee
provides otherwise at the time of grant of the award. It is the
further intent of the Corporation that (to the extent the
Corporation or one of its Subsidiaries or awards under this Plan
may be or become subject to limitations on deductibility under
Section 162(m) of the Code) any such awards and any other
Performance-Based Awards under Section 5.2 that are granted to or
held by a person subject to Section 162(m) will qualify as
performance-based compensation or otherwise be exempt from
deductibility limitations under Section 162(m).
(c) Code Section 409A Compliance. The Board
intends that, except as may be otherwise determined by the
Administrator, any awards under the Plan are either exempt from or
satisfy the requirements of Section 409A of the Code and related
regulations and Treasury pronouncements (“Section 409A”) to avoid the
imposition of any taxes, including additional income or penalty
taxes, thereunder. If the Administrator determines that an award,
award agreement, acceleration, adjustment to the terms of an award,
payment, distribution, deferral election, transaction or any other
action or arrangement contemplated by the provisions of the Plan
would, if undertaken, cause a participant’s award to become
subject to Section 409A, unless the Administrator expressly
determines otherwise, such award, award agreement, payment,
acceleration, adjustment, distribution, deferral election,
transaction or other action or arrangement shall not be undertaken
and the related provisions of the Plan and/or award agreement will
be deemed modified or, if necessary, rescinded in order to comply
with the requirements of Section 409A to the extent determined by
the Administrator without the content or notice to the participant.
Notwithstanding the foregoing, neither the Company nor the
Administrator shall have any obligation to take any action to
prevent the assessment of any excise tax or penalty on any
participant under Section 409A and neither the Company nor the
Administrator will have any liability to any participant for such
tax or penalty.
(d) No Guarantee of Favorable Tax
Treatment. Although the Company intends that awards under
the Plan will be exempt from, or will comply with, the requirements
of Section 409A of the Code, the Company does not warrant that any
award under the Plan will qualify for favorable tax treatment under
Section 409A of the Code or any other provision of federal, state,
local or foreign law. The Company shall not be liable to any
participant for any tax, interest or penalties the participant
might owe as a result of the grant, holding, vesting, exercise or
payment of any award under the Plan
8.9 Captions.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of this Plan or any provision
thereof.
8.10 Stock-Based
Awards in Substitution for Stock Options or Awards Granted by Other
Corporation. Awards may be granted to Eligible Persons in
substitution for or in connection with an assumption of employee
stock options, SARs, restricted stock or other stock-based awards
granted by other entities to persons who are or who will become
Eligible Persons in respect of the Corporation or one of its
Subsidiaries, in connection with a distribution, arrangement,
business combination, merger or other reorganization by or with the
granting entity or an affiliated entity, or the acquisition by the
Corporation or one of its Subsidiaries, directly or indirectly, of
all or a substantial part of the stock or assets of the employing
entity. The awards so granted need not comply with other specific
terms of this Plan, provided the awards reflect only adjustments
giving effect to the assumption or substitution consistent with the
conversion applicable to the Common Stock in the transaction and
any change in the issuer of the security. Any shares that are
delivered and any awards that are granted by, or become obligations
of, the Corporation, as a result of the assumption by the
Corporation of, or in substitution for, outstanding awards
previously granted by an acquired company (or previously granted by
a predecessor employer (or direct or indirect parent thereof) in
the case of persons that become employed by the Corporation or one
of its Subsidiaries in connection with a business or asset
acquisition or similar transaction) shall not be counted against
the Share Limit or other limits on the number of shares available
for issuance under this Plan, except as may otherwise be provided
by the Administrator at the time of such assumption or substitution
or as may be required to comply with the requirements of any
applicable stock exchange.
8.11 Non-Exclusivity
of Plan. Nothing in this Plan shall limit or be deemed to
limit the authority of the Board or the Administrator to grant
awards or authorize any other compensation, with or without
reference to the Common Stock, under any other plan or
authority.
8.12 No
Corporate Action Restriction. The existence of this Plan,
the award agreements and the awards granted hereunder shall not
limit, affect or restrict in any way the right or power of the
Board or the stockholders of the Corporation to make or authorize:
(a) any adjustment, recapitalization, reorganization or other
change in the capital structure or business of the Corporation or
any Subsidiary, (b) any merger, arrangement, business combination,
amalgamation, consolidation or change in the ownership of the
Corporation or any Subsidiary, (c) any issue of bonds, debentures,
capital, preferred or prior preference stock ahead of or affecting
the capital stock (or the rights thereof) of the Corporation or any
Subsidiary, (d) any dissolution or liquidation of the Corporation
or any Subsidiary, (e) any sale or transfer of all or any part of
the assets or business of the Corporation or any Subsidiary, or (f)
any other corporate act or proceeding by the Corporation or any
Subsidiary. No participant, beneficiary or any other person shall
have any claim under any award or award agreement against any
member of the Board or the Administrator, or the Corporation or any
employees, officers or agents of the Corporation or any Subsidiary,
as a result of any such action.
8.13 Other
Corporation Benefit and Compensation Programs. Payments and
other benefits received by a participant under an award made
pursuant to this Plan shall not be deemed a part of a
participant’s compensation for purposes of the determination
of benefits under any other employee welfare or benefit plans or
arrangements, if any, provided by the Corporation or any
Subsidiary, except where the Administrator expressly otherwise
provides or authorizes in writing or except as otherwise
specifically set forth in the terms and conditions of such other
employee welfare or benefit plan or arrangement. Awards under this
Plan may be made in addition to, in combination with, as
alternatives to or in payment of grants, awards or commitments
under any other plans or arrangements of the Corporation or its
Subsidiaries.
8.14 Prohibition
on Repricing. Subject
to Section 4, the Administrator shall not, without the approval of
the stockholders of the Corporation (i) reduce the exercise price,
or cancel and reissue options so as to in effect reduce the
exercise price or (ii) change the manner of determining the
exercise price so that the exercise price is less than the fair
market value per share of Common Stock.
As adopted by the
Board of Directors of Exactus, Inc. on December __,
2018.
Dear
Fellow Shareholders:
Over
the last several months the Exactus team and its advisors have been
evaluating numerous opportunities and relationships to increase
shareholder value.
We are
pleased to have identified the rapidly growing hemp-based
Cannabidiol (CBD) market as a valuable target for a new company
focus. Moving forward we will be developing this opportunity. We
will focus on leveraging our recently established relationships to
pursue a vertically integrated company that will have control of
the entire product life cycle.
This
decision was based in part on the passing of The Hemp Farming Act
of 2018. The Act was signed into law during December 2018 and
removes hemp (cannabis with less than 0.3% THC) from the Schedule I
controlled substances list. Following passage, CBD derived from
industrial hemp became legal in the US under federal law and in all
50 states, opening the door to develop and sell hemp-based CBD
products nationwide
The CBD
market is poised for extraordinary growth. The Brightfield Group,
an industry leading market research firm, estimates the total CBD
market to be ~$22B in 2022. This includes growth in specialty
retailers doubling, and the medical practitioner distribution
channel growing by 400% by 2022.
Exactus
started 2019 with momentum, entering into a Master Product
Development and Supply Agreement with Ceed2Med, LLC (www.ceed2med.com).
Ceed2Med owns and utilizes cGMP
facilities in the United States and has expertise, resources,
skills and experience in growing and processing active
phyto-cannabinoid (CBD) rich ingredients into isolates,
distillates, water soluble, and proprietary formulations, including
full-spectrum and broad-spectrum products. It is important to note
that all our CBD products will have a verifiable history and chain
of custody from the seed through to the final consumer product. To
be clear, our Hemp derived CBD products are grown and cultivated to
only produce CBD that will not cause the psycho activity found in
THC based cannabis products or cannabis derived CBD, and we have
chosen to not engage in the cannabis business which continues to
face legal challenges at the federal level.
We also plan to evaluate strategic acquisitions and opportunities
to acquire existing retail distribution channels to fast track our
growth. Hundreds of small CBD distributors have carved out niche
markets which we believe are poised for acquisition in a roll-up
strategy, and we have begun to evaluate several potential
opportunities.
Our
partnership with Ceed2Med provides Exactus a turnkey solution to
enter into this explosive market. Our
goal is to rapidly establish wholesale and retail sales channels
for CBD end-products to be sold to humans, such as nutraceuticals
and supplements, as well as pet and farm products for animal
health. Exactus expects to offer a number of products
including tinctures, edibles, capsules and topical solutions which
we expect to begin marketing by the end of first quarter 2019 under
our own brand and white label options. These products will be
manufactured for us by Ceed2Med.
As a part of our new focus, we have appointed three new board
members including Kevin Esval, Jeffrey Thompson and Ken Puzder who
bring extensive and successful entrepreneurial backgrounds in
investment banking, technology and business to support us as we
achieve our goals.
Kevin Esval currently serves as Executive Managing Director and CCO
of VelocityHealth Securities, a company he founded in 2000. Prior
to founding VelocityHealth Securities, Mr. Esval served as a
divisional SVP and COO for UnitedHealth Group where he was
instrumental in growing his division from $0 to $400 million at his
departure.
Jeffrey
Thompson is the CEO and Founder of Red Cat Propware Inc., a
provider of cloud-based analytics, storage, and services for drone
aircraft. Mr. Thompson founded Towerstream Corp. which became
publicly traded on the NASDAQ in June 2007 as well as EdgeNet Inc.,
a privately held Internet service provider which was sold to
Citadel Broadcasting Corporation in 1997.
Kenneth
Puzder serves as the Chief Financial Officer of Ceed2Med and
Co-founder, CFO and Managing Member of the Lutkens Group, LLC.
Mr. Puzder
specializes in financial leadership, mergers and acquisitions,
restructurings and turnarounds. Mr. Puzder previously served
in various positions with the Arby’s Restaurant Group
(“ARG”) family of companies, including CFO of AFA
Service Corporation.
We are also establishing a world-class advisory board led by
Emiliano Aloi. Mr. Aloi is a co-founder of Ceed2Med and previously
served as Vice President and Director of Strategic Development for
GenCanna Global, Inc. Mr. Aloi is an agribusiness expert skilled in
supply and market development.
Our plan is to expand our board of advisors with additional experts
that will assist us with CBD, FDA regulatory and product
development.
In conclusion, 2019 is looking to be a pivotal year as we
embark on this amazing opportunity. I look forward to keeping you
updated on our progress as we are eager to launch new products,
build out distribution channels, and increase investor awareness
and shareholder value.
On behalf of the Exactus management, Board of Directors, and
employees, I want to personally thank you for your continued
support.
Sincerely,
Phil J
Young
Chairman
& CEO
For information about our products and availability please call
804-205-5036 or email,
cbd@exactusinc.com.
About Exactus:
Exactus, Inc., is a healthcare company pursuing opportunities in
two distinct business segments, Hemp derived, Cannabidiol, which is
more commonly referred to as CBD. Industrial hemp is a type of
cannabis, defined by the federal government as having THC
(tetrahydrocannabinol) content of 0.3 percent or less. THC is the psychoactive
compound found in cannabis. The company is also developing point of
care diagnostics.
Forward Looking Statements:
This
letter includes forward-looking statements. Such forward-looking
statements include those that express plans, anticipation, intent,
contingency, goals, targets or future development and/or otherwise
are not statements of historical fact. These forward-looking
statements are based on our current expectations and projections
about future events and they are subject to risks and uncertainties
known and unknown that could cause actual results and developments
to differ materially from those expressed or implied in such
statements. Such risks and uncertainties include, but are not
limited to, the impact of competitive firms, the ability to meet
regulatory requirements, the ability to manage growth, the ability
to acquire and retain clientele, acquisitions of technology,
equipment, or human resources, the ability to access new capital,
the effect of economic business conditions, and the ability to
attract and retain skilled personnel. We are not obligated to
revise or update any forward-looking statements in order to reflect
events or circumstances that may arise after the date of this press
release.
For more information:
Company
Contacts:
Corporate
Communications Contact:
Tim
Ryan, EVP & Director
tryan@exactusinc.com
646.342.6199
Philip
J. Young, Chairman and CEO
pyoung@exactusinc.com
