DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 1, 2007
000-10210 83-0250943 ---------------------------------------- ------------------------------------- (Commission File Number) (I.R.S. Employer Identification No.) 1041 N. FORMOSA AVENUE, PICKFORD BUILDING, #199, WEST HOLLYWOOD, CALIFORNIA 90046 ---------------------------------------- ------------------------------------- (Address of principal executive offices) (Zip Code)
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR240.14d-2(b))
|_| Soliciting material pursuant to Rule 14a-12 under Exchange Act (17
CFR240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR240.13e4(c))
SECTION 1. REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Effective November 1, 2007, Tree Top Industries, Inc., a Nevada corporation (the "Company"), closed its Agreement and Plan of Reorganization (the "Agreement and Plan of Reorganization") with Ludicrous, Inc., a Nevada corporation ("Ludicrous"), and the security holders of Ludicrous (collectively, the "Ludicrous Securityholders") pursuant to which the Company acquired all of the issued and outstanding capital stock of Ludicrous, and the Ludicrous Securityholders assumed control of the Company (the "Business Combination"). The Business Combination is described in greater detail in Item 2.01 of this Report on Form 8-K. A copy of the Agreement and Plan of Reorganization was filed as an exhibit to the Report on Form 8-K filed by the Company with the Securities and Exchange Commission dated October 19, 2007.
SECTION 2. FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
The Agreement and Plan of Reorganization by and between the Company, Ludicrous and the Ludicrous Securityholders closed effective November 1, 2007. Pursuant to the Business Combination, the Company is issuing directly to the Ludicrous Securityholders a total of 68,000,000 shares of its common stock, par value $0.001 (the "Shares"), in exchange for all of Ludicrous' issued and outstanding common stock. Upon the closing of the Business Combination, Ludicrous became a wholly owned subsidiary of the Company, and the Ludicrous Securityholders became shareholders of the common stock of the Company. The Company expects to continue to operate Ludicrous as a wholly-owned subsidiary after the Business Combination. The Company does not expect to change its name.
Upon completion of the Business Combination, and including stock options and warrants to the extent that they are exercisable within 60 days, the Company expects to have a total of approximately 72,228,400 shares of its common stock outstanding. The outstanding shares will be owned approximately 4.6% by David Reichman, the Chairman of Ludicrous and the Chairman, Chief Executive Officer, and President of the Company, 31.8% by James Black, the Chief Technical Officer of Ludicrous, 1.4% by Mike Davis, the Chief Operating Officer of Ludicrous, 9.7% by Wendy Davis, 27.7% by L.G. Davis, and 11.1% by Justine Reichman. For purposes of the foregoing, beneficial ownership and percentage ownership are determined in accordance with the rules of the Securities and Exchange Commission and include voting or investment power with respect to Shares of common stock. Under these rules, shares of common stock issuable under stock options that are currently exercisable or exercisable within 60 days of November 1, 2007, are deemed outstanding for the purposes of computing the percentage ownership of the person holding the options but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
BUSINESS AND MANAGEMENT OF LUDICROUS, INC.
Ludicrous, Inc. is a Nevada corporation formed on August 1, 2007 to engage in the installation and build-out of its network for commercialization of its proprietary technology for the telecommunications industry. The principals of Ludicrous spent a combined eleven years developing and designing NetThruster.com prior to Ludicrous being incorporated.
Internet users are usually unaware of the considerable effort that is needed to deliver information or entertainment over the Internet. The process of data transmission is called "content delivery" and it is usually handled by the website where the information resides.
This manner of sending entertainment directly from the provider to the end-user works well if the amount of information is relatively small (one to three minutes of low resolution video or audio) and demand for the content is infrequent. Under these circumstances the host website's own servers can service a reasonable number of end-users simultaneously. This manner of content delivery has served the Internet for a good number of years, however, the demand for broadband services has recently been increasing dramatically. For example, word-of-mouth about a new video clip can severely tax the transmission capability of the host website when demand exceeds the host's transmission capability. Even now the delivery of DVD quality motion pictures cannot be supported by most traditional server-based websites. A different strategy is needed to cope with sending huge amounts of information and reliably reconstituting that information at the receiving end. There are companies that specialize in transmission of high quality information in massive amounts such as Limelight Networks(R), which does so by utilizing a worldwide network of transmission nodes that split the information into several streams and reintegrate these streams at the end-user's destination.
This third party solution to information transmission is estimated to be around $1 billion in yearly sales and research firms predict that figure will double every couple of years. By building upon its Net Thruster(R) technology, Ludicrous is developing the capability to rapidly and reliably send high quality content on demand to any Internet destination. In addition, the information can be safeguarded against theft through the use of Ludicrous' own network. The information can be transmitted and received in a manner that prohibits copying and understanding by anyone other than the targeted recipient. As a result, when the content is entertainment, there is a built-in safeguard against pirating the information.
Ludicrous has developed the NetThruster.com(R)tm content delivery network. NetThruster.com is the newest content delivery network for Internet distribution of video, music, games and downloads. NetThruster.com's advanced content delivery network provides media companies with high-performance, cost-effective delivery of high bandwidth media and software via the Internet. NetThruster.com has created a scalable system for distributed high-bandwidth media delivery to large audiences. Management believes that Ludicrous' delivery solutions are uniquely tailored to the specific needs of those doing distributed on-demand and live delivery of video, music, games and downloads.
Built from day one as a media delivery platform, NetThruster.com distributes massive amounts of numerous forms of digital video, including live streaming user-generated content proliferating on popular video sharing sites to virtually any Internet-connected device with a screen. NetThruster.com content delivery provides HTTP/Web distribution of all digital media formats. Digital media files such as video, music, graphics, and software are delivered with full fidelity (no packet loss) from NetThruster.com's content delivery location at One Wilshire in Los Angeles, California, directly to the end user's IP-connected computer or device.
NetThruster.com Streaming Media provides on-demand and/or live streaming to customers worldwide for all major formats including Windows Media, Flash Video, QuickTime, Real and MP3 audio. Eager audiences embracing the "digital lifestyle" are requesting greater and greater volumes of content every day. To meet the high expectations of these enthusiastic users, NetThruster.com content delivery enables content providers to make their entire asset libraries available for 24x7 global distribution to broadband and mobile audiences. This frees content providers to focus on giving their audiences what they want, without concern for their delivery infrastructure.
TRISHA WOODS, President and Acting Chief Financial Officer, age 27, has been the President, Acting Chief Financial Officer, and a director of Ludicrous since its inception in August 2007. Ms. Woods is a data center specialist and streaming video engineer. She also contributed to the development of Linux, Windows and ASP. From 2004 to 2006, prior to joining Ludicrous Ms. Woods was a network specialist for TV Bidder Software.
MIKE DAVIS, age 61, has been the Chief Operating Officer of Ludicrous since its inception in August 2007. From 1978 to present, Mr. Davis was a consultant with NASA, aerospace companies, and several government agencies. He has designed computer software systems that run naval vessels, military aircraft and NASA satellites. He has experience in computer communication and telemetry systems and real-time programming as well as systems architecture and design.
JAMES BLACK, age 35, has been the Chief Technical Officer of Ludicrous since its inception in August 2007. Mr. Black is the director of the technical sector of Ludicrous. He developed Ludicrous' Internet hardware platform. He has a wide range of hardware design and development in computer networks and he is experienced in advanced Internet networking and Internet operations center construction and maintenance. He also has experience in fiber optic network installation and he has developed and implemented an Internet relay station. Mr. Black was also a contributor to the development of the Microsoft Windows operating system as well as the Microsoft Office program suite. He has also contributed to the development of both Linux and Pearl. From 1990 to 1999, prior to joining Ludicrous Mr. Black was the computer science engineer of PRINE (Program Reactor Interfacing Network Engine) and From 1999 to 2007 he was the Development Officer of Movie Star Web.
JEFF FROST, age 22, has been the Secretary and a director of Ludicrous since its inception in August 2007. Mr. Frost is currently working on Ludicrous' Internet hardware platform. He has experience in computer networks, Internet networks, and server construction and maintenance. He has a background in computer graphics and computer audio systems with a specialty in integrating sound into computer programs. He also contributed to the development of the Microsoft XBOX and Sony Playstation gaming environments. From 2002 to 2005, prior to joining Ludicrous Mr. Frost was the Graphic Engineer of Movie Star Web.
DAVID REICHMAN, age 63, has been the Chairman of the Board of Directors of Ludicrous since its inception in August 2007 and the Chairman of the Board of Directors, Chief Executive Officer, and President of the Company since 2003. In 1975, Mr. Reichman, Manager-Budget & Cost, left American Express Company, for whom he had worked for five years, to form his own private consulting practice specializing in tax representation and business management.
FINANCIAL INFORMATION FOR LUDICROUS
The audited balance sheet for Ludicrous as of and for the two month period from inception through September 30, 2007 are included in Section 9(a) of this Report.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
The Company plans to amend its Articles of Incorporation to, among other things, increase the authorized number of shares of common stock to 350,000,000 and to authorize 50,000 shares of preferred stock, as will be more fully described in the Information Statement on Schedule 14C, which the Company plans to file in November 2007. At a later date, the Company may also amend and restate its corporate Bylaws.
SECTION 3. SECURITIES AND TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
See the description of the Agreement and Plan of Reorganization in Item 2.01 of this Report. In addition, for valuable services performed for the Company, the following individuals who are the directors of the Company were issued the following number of shares of the Company's common stock: David Reichman, 2,560,000 shares, Michael Valle, 10,000 shares, Don Gilbert, 10,000 shares and Frank Benintendo, 10,000 shares.
SECTION 5. CORPORATE GOVERNANCE AND MANAGEMENT
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS.
On November 5, 2007, the Company entered into an Employment Agreement with its Chief Executive Officer and President, David Reichman, effective October 1, 2007 (the "Agreement"). The Agreement has a term of two years, commencing October 1, 2007 and expiring on September 30, 2009. Mr. Reichman's annual salary is $250,000 and he has an automobile allowance of $2,500 per month. In connection with the Agreement, Mr. Reichman was granted 1,200,000 options to purchase 1,200,000 shares of the Company's common stock, vesting 1/24 on October 1, 2007 and 1/24 on the first day of each subsequent month over a 23 month period. The exercise price is $0.55 per share and the exercise period is five years from the date of grant. The stock options were granted under the Company's 2007 Omnibus Stock and Incentive Plan (the "Plan") adopted by the Company's Board of Directors on September 24, 2007, and subject to shareholder ratification. The Plan authorizes the issuance of stock options or other equity incentives covering the issuance of up to 6,000,000 shares of the Company's common stock.
A copy of the Employment Agreement is attached to this Report as Exhibit 99.2.
The terms of the Company's 2007 Omnibus Stock and Incentive Plan will be more fully described in the Information Statement on Schedule 14C, which the Company plans to file in November 2007. A copy of the 2007 Omnibus Stock and Incentive Plan is attached to this Report as Exhibit 99.3.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS.
See Item 2.01 of this Report.
SECTION 9. FINANCIAL STATEMENTS, PRO FORMA FINANCIALS & EXHIBITS
(a) Financial Statements of Business Acquired
Audited Balance Sheet of Ludicrous, Inc. as of September 30, 2007.
(b) Pro Forma Financial Information
99.1 Agreement and Plan of Reorganization.*
99.2 Employment Agreement with David Reichman, dated as of October 1, 2007.
99.3 Tree Top Industries, Inc. 2007 Omnibus Stock and Incentive Plan.
* Incorporated by reference from the Report on Form 8-K filed with the Securities and Exchange Commission dated October 19, 2007.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 5, 2007 /s/ David Reichman, Chief Executive Officer ------------------------------------------- David Reichman, Chief Executive Officer
To the Board of Directors
1041 N. Formosa Ave.
Pickford Building, #199
West Hollywood, CA 90046
We have audited the accompanying interim balance sheet of Ludicrous, Inc. as of September 30, 2007 and the related statements of income and cash flows for the period beginning July 31, 2007 and ending September 30, 2007. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted accounting standards on the cash basis of accounting. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit holds a reasonable basis for our opinion.
In our opinion, the financial statements referred to above represent fairly, in all material respects the financial position of Ludicrous Inc. as of September 30, 2007, and the results of its operations and its cash flows for the interim period then ended in conformity with generally accepted accounting principles on the cash basis of accounting.
/s/Shirley A. Bailey, CPA ------------------------- Shirley A. Bailey, CPA Oct. 30, 2007
As of September 30, 2007 Sep 30, 07 ------------ ASSETS Current Assets Checking/Savings Sterling 477,409.54 ------------ Total Checking/Savings 477,409.54 ------------ Total Current Assets 477,409.54 Fixed Assets Equipment Computers 6,036.62 ------------ Total Equipment 6,036.62 ------------ Total Fixed Assets 6,036.62 Other Assets Security Deposit 12,424.00 ------------ Total Other Assets 12,424.00 ------------ TOTAL ASSETS 495,870.16 ============ LIABILITIES & EQUITY Liabilities Current Liabilities Other Current Liabilities Due to T. Woods 1,695.77 ------------ Total Other Current Liabilities 1,695.77 ------------ Total Current Liabilities 1,695.77 ------------ Total Liabilities 1,695.77 Equity Paid in Capital 500,000.00 Net Income -5,825.61 ------------ Total Equity 494,174.39 ------------ TOTAL LIABILITIES & EQUITY 495,870.16 ============
Interim Audited Financials
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 1st day of October 2007, by and between Tree Top Industries, Inc., a Nevada corporation (the "Company"), and David Reichman, an individual ("Employee"), and is made with respect to the following facts:
R E C I T A L S
A. The Company and the Employee wish to ensure that the Company will receive the benefit of Employee's loyalty and service.
B. In order to help ensure that the Company receives the benefit of Employee's loyalty and service, the parties desire to enter into this formal Employment Agreement to provide Employee with appropriate compensation arrangements and to assure Employee of employment stability.
C. The parties have entered into this Agreement for the purpose of setting forth the terms of employment of the Employee by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:
1. EMPLOYMENT OF EMPLOYEE AND DUTIES. The Company hereby hires Employee and Employee hereby accepts employment upon the terms and conditions described in this Agreement. The Employee shall continue to be the Chief Executive Officer of the Company with all of the duties, privileges and authorities usually attendant upon such office, including but not limited to overall supervision of the management of the Company's operations. Subject to (a) the general supervision of the Board of Directors of the Company, and (b) the Employee's duty to report to the Board of Directors periodically, as specified by it from time-to-time, Employee shall have all of the authority to perform his employment duties for the Company.
2. TIME AND EFFORT. Employee agrees to devote his full working time and attention to the management of the Company's business affairs, the implementation of its strategic plan, as determined by the Board of Directors, and the fulfillment of his duties and responsibilities as the Company's Chief Executive Officer. Expenditure of a reasonable amount of time for personal matters and business and charitable activities shall not be deemed to be a breach of this Agreement, provided that those activities do not materially interfere with the services required to be rendered to the Company under this Agreement.
3. THE COMPANY'S AUTHORITY. Employee agrees to comply with the Company's rules and regulations as adopted by the Company's Board of Directors regarding performance of his duties, and to carry out and perform those orders, directions and policies established by the Company with respect to his engagement. Employee shall promptly notify the Company's Board of Directors of any objection he has to the Board's directives and the reasons for such objection.
4. NONCOMPETITION BY EMPLOYEE. During the term of this Agreement, the Employee shall not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, stockholder (in a private company), corporate officer, director, or in any other individual or representative capacity, engage or participate in any business that is in direct competition with the business of the Company or its affiliates.
5. TERM OF AGREEMENT. This Agreement shall commence to be effective on October 1, 2007 (the "Commencement Date"), and shall continue until September 30, 2009, unless terminated as provided in Section 14 hereof.
6. COMPENSATION. During the term of this Agreement, the Company shall pay the following compensation to Employee:
6.1 ANNUAL COMPENSATION. Employee shall be paid a fixed salary of $250,000 per year, payable in two installments per month of $10,416.67 each on the 20th and 5th day of each month, corresponding to the first 15 days of the month and the second half of the previous month, respectively, commencing on October 20, 2007 for the period from October 1, 2007 until October 15, 2007.
6.2 ADDITIONAL COMPENSATION. In addition to the compensation set forth in Section 6.1 of this Agreement, Employee may be paid a bonus or bonuses during each year, as determined at the sole discretion of the Company's Board of Directors based on the Board's evaluation of the Employee's definable efforts, accomplishments and similar contributions. The bonus will also be based on a consideration of increases in shareholder value, efforts made by the Employee to effect mergers or acquisitions for the Company, and other positive results for shareholders based on extraordinary efforts by the Employees.
6.3 STOCK INCENTIVES. On October 1, 2007, the Company will grant to the Employee 1,200,000 stock options to purchase 1,200,000 shares of the Company's Common Stock pursuant to the Company's 2007 Stock Option Plan for Directors, Officers, Employees, and Key Consultants of Tree Top Industries, Inc. ("Stock Option Plan"), having an exercise price of $0.55 per share (i.e. 110% of its fair market value on the date of grant) and an exercise period of ten years after the date of grant, with a vesting schedule as follows: 1/24 upon grant and 1/24 of the balance the first day of each subsequent month thereafter until the remaining stock options have vested. The stock options granted to Employee pursuant to this Agreement will be governed by the terms and conditions of the Stock Option Plan and the stock option agreement executed by the Company which applies to the options. Upon recommendation of the Compensation Committee of the Company's Board of Directors and approval of the Company's full Board of Directors, the Employee may be granted additional stock options to purchase additional stock of the Company after the first year of the term of this Agreement, depending on the achievement of Company operating milestones such as annual gross revenue and EBIDTA, to be established by the Board of Directors of the Company.
7. FRINGE BENEFITS. Employee shall be entitled to all fringe benefits which the Company or its subsidiaries may make available from time-to-time for persons with comparable positions and responsibilities. Without limitation, such benefits shall include participation in any life and disability insurance programs, profit incentive plans, pension or retirement plans, and bonus plans as are maintained or adopted from time-to-time by the Company. The Company shall also provide Employee with medical and dental group insurance coverage or equivalent coverage for Employee and his dependents. The medical and dental insurance coverage shall begin on the Commencement Date and shall continue throughout the term of this Agreement. The Company will also provide and pay for a health club membership for Employee, reasonably selected by the Employee.
8. OFFICE AND STAFF. In order to enable Employee to discharge his obligations and duties pursuant to this Agreement, the Company agrees that it shall provide suitable office space for Employee in West Hollywood, California, together with all necessary and appropriate supporting staff and secretarial assistance, equipment, stationery, books and supplies. Employee agrees that the office space and supporting staff presently in place is suitable for the
purposes of this Agreement. The Company agrees to provide at its expense parking for one vehicle by the Employee at the Company's executive offices.
9. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Employee for all reasonable travel, mobile telephone, promotional and entertainment expenses incurred in connection with the performance of Employee's duties hereunder, subject to Section 10 of this Agreement with respect to automobile expenses. These expenses include but are not limited to all reasonable expenses incurred by him for working part of the time in New York, part of the time in Los Angeles, California, and traveling between those locations, and for renting a residence in the Los Angeles Metropolitan Area. The Company shall also reimburse Employee for all medical expenses incurred by him at any time when the Company does not otherwise have a medical insurance plan in place for its employees. Employee's reimbursable expenses shall be paid promptly by the Company upon presentment by Employee of an itemized list of invoices describing such expenses. All compensation provided in Sections 6, 7, and 9 of this Agreement shall be subject to customary withholding tax and other employment taxes, to the extent required by law.
10. AUTOMOBILE. Notwithstanding anything else herein to the contrary, the Company shall pay to the Employee a fixed amount equal to $2,500 per month on the last day of each month during the term of this Agreement as reimbursement to the Employee on a non-accountable basis of all expenses incurred by the Employee for the use of his automobile for Company business purposes in New York and California, including but not limited to depreciation, repairs, maintenance, gasoline and insurance. After the expiration of the first year of the term of this Agreement, the Company's Board of Directors will review and may in its discretion determine to increase the Employee's automobile allowance, or authorize the Company to lease an automobile for the Employee. Employee shall not be entitled to any other reimbursement for the use of his automobile for business purposes.
11. VACATION. Employee shall be entitled to three weeks of paid vacation per year or pro rata portion of each year of service by Employee under this Agreement. The Employee shall be entitled to the holidays provided in the Company's established corporate policy for employees with comparable duties and responsibilities.
12. RIGHTS IN AND TO INVENTIONS AND PATENTS.
12.1 DESCRIPTION OF PARTIES' RIGHTS. The Employee agrees that with respect to any inventions made by him or the Company during the term of this Agreement, solely or jointly with others, (i) which are made with the Company's equipment, supplies, facilities, trade secrets or time, or (ii) which relate to the business of the Company or the Company's actual or demonstrably anticipated research or development, or (iii) which result from any work performed by the Employee for the Company, such inventions shall belong to the Company. The Employee also agrees that the Company shall have the right to keep such inventions as trade secrets, if the Company chooses.
12.2 DISCLOSURE REQUIREMENTS. For purposes of this Agreement, an invention is deemed to have been made during the term of this Agreement if, during such period, the invention was conceived or first actually reduced to practice. In order to permit the Company to claim rights to which it may be entitled, the Employee agrees to disclose to the Company in confidence the nature of all patent applications filed by the Employee during the term of this Agreement.
13. TERMINATION. This Agreement may be terminated in the following manner and not otherwise:
13.1 MUTUAL AGREEMENT. This Agreement may be terminated by the mutual written agreement of the Company and Employee to terminate.
13.2 TERMINATION BY EMPLOYEE FOR BREACH. Employee may at his option and in his sole discretion terminate this Agreement for the material breach by the Company of the terms of this Agreement. In the event of such termination, Employee shall give the Company 30 days prior written notice.
13.3 TERMINATION BY THE COMPANY FOR BREACH. The Company may at
its option terminate this Agreement in the event that the Employee intentionally
performs his duties in bad faith under this Agreement, or breaches his fiduciary
duty to the Company, to the Board of Directors or to the Company's shareholders;
provided, however, that the Company shall give the Employee written notice of
specific instances for the basis of any termination of this Agreement by the
Company pursuant to Section 13.3 of this Agreement. Employee shall have a period
of 30 days after said notice in which to cease the alleged violations before the
Company may terminate this Agreement. If Employee ceases to commit the alleged
violations within said 30 day period, the Company may not terminate this
Agreement pursuant to this Section. If Employee continues to commit the alleged
violations after said 30 day period, the Company may terminate this Agreement
immediately upon written notification to Employee. Notwithstanding anything else
herein to the contrary, if the Employee is removed pursuant to Section 13.3 of
this Agreement, the Employee shall receive all of the benefits provided in
Section 14(iii) of this Agreement, regardless of the terms and conditions of the Company's Stock Option Plan or any existing stock option agreements or any amendments thereto governing the options described in Section 14(iii) of this Agreement.
13.4 TERMINATION UPON DEATH. This Agreement shall terminate upon the death of the Employee.
13.5 TERMINATION UPON THE DISABILITY OF THE EMPLOYEE. This Agreement shall terminate upon the disability of the Employee. As used in the previous sentence, the term "disability" shall mean the complete disability to discharge Employee's duties and responsibilities for a continuous period of not less than six months during any calendar year. Any physical or mental disability which does not prevent Employee from discharging his duties and responsibilities in accordance with usual standards of conduct as determined by the Company in its reasonable opinion shall not constitute a disability under this Agreement.
13.6 TERMINATION FROM OR CHANGES IN POSITION. Removal of the Employee from his position as the Chief Executive Officer or President of the Company shall be deemed to be a termination subject to the severance payment positions set forth in Section 14 of this Agreement. The Company shall not be entitled to place the Employee in any other employment position without the Employee's consent. The Employee's failure to consent shall not be a breach of any provision of this Agreement.
13.7 TERMINATION AS A RESULT OF A CHANGE IN CONTROL OF THE COMPANY. "Change of Control" is defined as a sale of all or substantially all of the Company's assets or more than fifty percent (50%) of the Company's outstanding stock, to a purchaser which is unaffiliated with the Company, in a single transaction or a series of related transactions, or a merger pursuant to which the Company is not the surviving corporation, with any entity which is unaffiliated with the Company. In the event of a Change in Control of the Company, if the Employee, negotiating in good faith, is unable to come to an agreement with the surviving company regarding an employment agreement, then the Employee may terminate this Agreement pursuant to Section 13.2 of this Agreement.
13.8 OTHER TERMINATION BY EMPLOYEE. If this Agreement is terminated by Employee in writing for a reason other than the Company's breach of this Agreement (i.e. voluntary resignation) then (a) Employer shall not be entitled to assert any claim against the Employee for consequential or indirect damages or for lost profits as a result of the termination; and (b) Employee
shall not be entitled to any rights set forth in Section 14 of this Agreement except that Employee shall be entitled to the right to exercise vested options, if any, for a period of 90 days after the date of the written notification of termination by the Employee.
14. IMPROPER TERMINATION. If this Agreement is terminated by Employee for any reason pursuant to Section 13.2, 13.6 or 13.7 of this Agreement or by the Company in any manner except specifically in accordance with Section 13.1 or 13.3, 13.4 or 13.5 of this Agreement, then (i) the Company shall immediately pay to the Employee a lump sum payment equal to the sum of the Employee's entire annual compensation and accrued but unpaid bonus (if any, with respect to bonus) payable through the end of the term of this Agreement pursuant to Sections 6.1 and 6.2 herein, respectively, (ii) Employee shall be entitled to all of the benefits under Section 7 of this Agreement, as amended, through the end of the term of this Agreement, and (iii) if applicable, all unvested stock options owned by Employee will immediately vest, Employee shall be entitled to exercise all vested stock options which he owns for the entire remaining exercise period of the stock options, no such stock options shall terminate prior to said expiration dates, and no "severance" shall be deemed to have occurred under the Company's Stock Option Plan or under existing Stock Option Agreements covering said stock options. It is specifically agreed that in such event Employee shall have no duty to mitigate his damages by seeking comparable, inferior or different employment.
15. INDEMNIFICATION OF EMPLOYEE. Pursuant to the provisions and subject to the limitations of the Nevada General Corporations Laws and the California Corporations Code, and in particular Sections 204 and 317 therein, the Company shall indemnify and hold Employee harmless as provided in Sections 15.1, 15.2 and 15.3 of this Agreement. The Company shall, upon the request of Employee, assume the defense and directly bear all of the expense of any action or proceedings which may arise for which Employee is entitled to indemnification pursuant to this Section.
15.1 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS BY THIRD PARTIES. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, fines, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys' fees and costs actually incurred by him as they are incurred, as a result of Employee being made at any time a party to, or being threatened to be made a party to, any proceeding (other than an action by or in the right of the Company, which is addressed in Section 15.2 of this Agreement), relating to actions Employee takes within the scope of his employment as the Chief Executive Officer of the Company or in any other employment capacity, or in his role as a director of the Company, provided that Employee acted in good faith and in a manner he reasonably believed to be in the best interest of the Company and, in the case of a criminal proceeding, had no reasonable cause to believe his conduct was unlawful.
15.2 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS IN THE RIGHT OF THE COMPANY. The Company hereby agrees to indemnify and hold Employee harmless from any liability, claims, damages, losses, expenses, judgments or settlements actually incurred by him, including but not limited to reasonable attorneys' fees and costs actually incurred by him as they are incurred, as a result of Employee being made a party to, or being threatened to be made a party to, any proceeding by or in the right of the Company to procure a judgment in its favor by reason of any action taken by Employee as an officer, director or agent of the Company, provided that Employee acted in good faith in a manner he reasonably believed to be in the best interests of the Company and its shareholders, and provided further, that no indemnification by the Company shall be required pursuant to this Section 15.2 (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that Employee believed to be contrary to the best interests of the Company or its shareholders or that involve the absence of good faith on the part of Employee, (iii) for any transaction from which Employee derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard by Employee of his duties to the Company or its shareholders in
circumstances in which Employee was aware, or should have been aware, in the ordinary course of performing his duties, of a risk of serious injury to the Company or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of Employee's duties to the Company or its shareholders, or (vi) for any other act by Employee for which Employee is not permitted to be indemnified under the California Corporations Code or the Nevada General Corporation Law. Furthermore, the Company has no obligation to indemnify Employee pursuant to this Section 15.2 in any of the following circumstances:
A. In respect of any claim, issue, or matter as to which Employee is adjudged to be liable to the Company in the performance of his duties to the Company and its shareholders, unless and only to the extent that the court in which such action was brought determines upon application that, in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for the expenses and then only in the amount that the court shall determine.
B. In the event of the application of Section 15.2(A), then for amounts paid in settling or otherwise disposing of a threatened or pending action without court approval.
C. In the event of the application of Section 15.2(A), then for expenses incurred in defending a threatened or pending action which is settled or otherwise disposed of without court approval.
15.3 REIMBURSEMENT. In the event that it is determined by a trier of fact that Employee is not entitled to indemnification by the Company pursuant to Sections 15.1 or 15.2 of this Agreement, then Employee is obligated to reimburse the Company for all amounts paid by the Company on behalf of Employee pursuant to the indemnification provisions of this Agreement. In the event that Employee is successful on the merits in the defense of any proceeding referred to in Sections 15.1 or 15.2 of this Agreement, or any related claim, issue or matter, then the Company will indemnify and hold Employee harmless from all fees, costs and expenses actually incurred by him in connection with the defense of any such proceeding, claim, issue or matter.
16. ASSIGNABILITY OF BENEFITS. Except to the extent that this provision
may be contrary to law, no assignment, pledge, collateralization or attachment
of any of the benefits under this Agreement shall be valid or recognized by the
Company. Except as provided by law, payment provided for by this Agreement shall
not be subject to seizure for payment of any debts or judgments against the
Employee, nor shall the Employee have any right to transfer, modify, anticipate
or encumber any rights or benefits hereunder; provided that any stock issued by
the Company to the Employee pursuant to this Agreement shall not be subject to
Section 16 of this Agreement.
17. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company will utilize its best efforts in good faith to purchase directors' and officers' liability insurance for the officers and directors of the Company, which would include the same coverage for Employee. The Company covenants to maintain in effect a directors' and officers' liability insurance policy on the same terms and conditions as applicable to all other officers and directors of the Company.
18. NOTICE. All notices and other communications required or permittedhereunder shall be in writing or in the form of a telex or telecopy (confirmed in writing) to be given only during the recipient's normal business hours unless arrangements have otherwise been made to receive such notice by telex or telecopy outside of normal business hours, and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, messenger, or telex or telecopy (as provided above) addressed (a) if to the Employee, at the address for such Employee set forth on the signature page hereto or at such other address as such Employee shall have furnished to the Company in writing or (b) if to the Company, to its principal executive offices and addressed to the
attention of the Chairman of the Board, or at such other address as the Company shall have furnished in writing to the Employee.
IN CASE OF THE COMPANY:
Tree Top Industries, Inc.
1041 North Formosa Avenue, Pickford Bldg., #199
West Hollywood, California 90046
Attention: Chairman of the Board of Directors
Telephone Number: (323) 850-2458 Facsimile Number: (323) 850-2489
IN CASE OF THE EMPLOYEE:
The address listed below Mr. Reichman's signature to this Agreement.
19. ATTORNEYS' FEES. In the event that any of the parties must resort to legal action in order to enforce the provisions of this Agreement or to defend such suit, the prevailing party shall be entitled to receive reimbursement from the nonprevailing party for all reasonable attorneys' fees and all other costs incurred in commencing or defending such suit.
20. ENTIRE AGREEMENT. This Agreement embodies the entire understanding among the parties and merges all prior discussions or communications among them, and no party shall be bound by any definitions, conditions, warranties, or representations other than as expressly stated in this Agreement or as subsequently set forth in a writing signed by the duly authorized representatives of all of the parties hereto.
21. NO ORAL CHANGE; AMENDMENT. This Agreement may only be changed or modified and any provision hereof may only be waived by a writing signed by the party against whom enforcement of any waiver, change or modification is sought. This Agreement may be amended only in writing by mutual consent of the parties.
22. SEVERABILITY. In the event that any provision of this Agreement shall be void or unenforceable for any reason whatsoever, then such provision shall be stricken and of no force and effect. The remaining provisions of this Agreement shall, however, continue in full force and effect, and to the extent required, shall be modified to preserve their validity.
23. APPLICABLE LAW. This Agreement shall be construed as a whole and in accordance with its fair meaning. This Agreement shall be interpreted in accordance with the laws of the State of California, and venue for any action or proceedings brought with respect to this Agreement shall be in the County of Los Angeles in the State of California.
24. SUCCESSORS AND ASSIGNS. Each covenant and condition of this Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, personal representatives, assigns and successors in interest. Without limiting the generality of the foregoing sentence, this
Agreement shall be binding upon any successor to the Company whether by merger, reorganization or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.
COMPANY: TREE TOP INDUSTRIES, INC.
a Nevada corporation
/s/Frank Benintendo ---------------------------------------------- Frank Benintendo, Director Attest: /s/Michael Valle ------------------------------ Michael Valle, Director Attest: /s/Don Gilbert ------------------------------ Don Gilbert, Director EMPLOYEE: /s/David Reichman ---------------------------------------------- David Reichman
TREE TOP INDUSTRIES, INC.
2007 OMNIBUS STOCK AND INCENTIVE PLAN
BACKGROUND AND PURPOSE
1.1. BACKGROUND. This 2007 Omnibus Stock and Incentive Plan (the "Plan") permits the grant of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, and other equity-based awards.
1.2. PURPOSE. The purposes of the Plan are (a) to attract, reward and retain highly competent persons as officers, Directors, Employees and Consultants of the Company; (b) to provide additional incentives to such Employees, officers, Directors and Consultants by aligning their interests with those of the Company's shareholders; and (c) to promote the success of the business of the Company.
1.3. ELIGIBILITY. Service Providers who are officers, Directors, Employees or Consultants are eligible to be granted Awards under the Plan. However, Incentive Stock Options may be granted only to Employees.
1.4. DEFINITIONS. Capitalized terms used in the Plan and not otherwise defined herein shall have the meanings assigned to such terms in the attached Appendix.
(a) SHARE RESERVE. Awards may be made under the Plan for up to 6,000,000 Shares. In addition, on each anniversary of the Effective Date on or before the fifth anniversary of the Effective Date, the aggregate number of shares of the Company's Common Stock reserved for issuance under this Plan shall be increased automatically by the lesser of: (a) a number of shares equal to five percent (5%) of the total number of Shares on the immediately preceding December 31st; (b) 500,000 Shares; or (c) such lesser number of shares as the Board, in its sole discretion, determines. These limits on the number of Shares subject to the share reserve shall be subject to adjustment under Section 2.3(a) of the Plan. All of the available Shares may, but need not, be issued pursuant to the exercise of Incentive Stock Options to the extent permissible under the Code. At all times the Company will reserve and keep available a sufficient number of Shares to satisfy the requirements of all outstanding Awards made under the Plan and all other outstanding but unvested Awards made under the Plan that are to be settled in Shares.
(b) SHARES COUNTED AGAINST LIMITATION. If an Award is
exercised, in whole or in part, by tender or attestation of Shares under Section
5.4(b), or if the Company's tax withholding obligation is satisfied by
withholding Shares under Section 10.7(b), the number of Shares deemed to have
been issued under the Plan (for purposes of the limitation set forth in this
Section 2.1) shall be the number of Shares that were subject to the Award or portion thereof so exercised and not the net number of Shares actually issued upon such exercise.
(c) LAPSED AWARDS. If an Award: (i) expires; (ii) is
terminated, surrendered, or canceled without having been exercised in full; or
(iii) is otherwise forfeited in whole or in part (including as a result of Shares constituting or subject to an Award being repurchased by the Company pursuant to a contractual repurchase right), then the unissued Shares that were subject to such Award and/or such surrendered, canceled, or forfeited Shares (as the case may be) shall become available for future grant or sale under the Plan (unless the Plan has terminated), subject however, in the case of Incentive Stock Options, to any limitations under the Code.
(d) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors, consultants or advisors of another company (an "Acquired Company") in connection with a merger, consolidation or similar transaction involving such Acquired Company with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the Acquired Company. The Committee may direct that the substitute Awards be granted on such terms and conditions as the Committee considers appropriate in the circumstances, including provisions that preserve the aggregate exercise price and the aggregate option spread as of the closing date of any such transaction. Any substitute Awards granted under the Plan shall not count against the share limitations set forth in Sections 2.1(a) and 2.2.
2.2. INDIVIDUAL SHARE LIMIT. In any Tax Year, no Service Provider shall
be granted Awards with respect to more than 2,500,000 Shares. The limit
described in this Section 2.2 shall be construed and applied consistently with
Section 162(m) of the Code, except that this limit shall apply to all Service Providers.
(a) AWARDS NOT SETTLED IN SHARES. If an Award is to be settled in cash or any medium other than Shares, the number of Shares on which the Award is based shall count toward the individual share limit set forth in this Section 2.2.
(b) CANCELED AWARDS. Any Awards granted to a Participant that are canceled shall continue to count toward the individual share limit applicable to that Participant set forth in this Section 2.2.
2.3. ADJUSTMENTS. The following provisions will apply if any extraordinary dividend or other extraordinary distribution occurs in respect of the Shares (whether in the form of cash, Shares, other securities, or other property), or any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend), reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company or any similar, unusual or extraordinary corporate transaction (or event in respect of the Shares) or a sale of all or substantially all the assets of the Company occurs. The Committee will, in such manner and to such extent (if any) as it deems appropriate and equitable:
(a) proportionately adjust any or all of (i) the number and type of Shares (or other securities) that thereafter may be made the subject of Awards (including the specific maximums and numbers of shares set forth elsewhere in the Plan), (ii) the number, amount and type of Shares (or other securities or property) subject to any or all outstanding Awards, (iii) the grant, purchase, or exercise price of any or all outstanding Awards, (iv) the securities, cash or other property deliverable upon exercise of any outstanding
Awards or (v) the performance standards appropriate to any outstanding Awards (subject to the limitations for performance based compensation under Section 162(m) of the Code), or
(b) in the case of an extraordinary dividend or other
distribution, recapitalization, reclassification, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for (i) a cash payment, (ii) the substitution or exchange of any
or all outstanding Awards, (iii) the cash, securities or property deliverable to
the holder of any or all outstanding Awards based upon the distribution or
consideration payable with respect to Shares upon or in respect of such event,
(iv) all vested Options and Stock Appreciation Rights to be exercised by a date certain in connection with such event at which time these stock rights (whether or not then vested) shall terminate, provided Participants are provided advance written notice or (v) a combination of the foregoing.
The Committee shall value Awards as it deems reasonable in the event of a cash
settlement and, in the case of Options, Stock Appreciation Rights or similar
stock rights, 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 price of
the Award. The Committee's determination with respect to any adjustments under
this Section 2.3 shall be final and conclusive. The Committee may act under this
Section 2.3 at any time to the extent that the Committee deems such action necessary to permit a Participant to realize the benefits intended to be conveyed with respect to the underlying Shares in the same manner as is or will be available to stockholders generally. In the case of any stock split or reverse stock split, if no action is taken by the Committee, the proportionate adjustments contemplated by Section 2.3(a) above shall nevertheless be made.
3.1. ADMINISTRATOR. The Plan shall be administered by the Committee.
3.2. POWERS OF THE COMMITTEE. Subject to the provisions of the Plan,
Applicable Law, and the specific duties delegated by the Board to the Committee,
the Committee shall have the authority in its discretion: (a) to determine the
Fair Market Value; (b) to select the Service Providers to whom Awards may be
granted hereunder and the types of Awards to be granted to each; (c) to
determine the number of Shares to be covered by each Award granted hereunder;
(d) to determine whether, to what extent, and under what circumstances an Award may be settled in cash, Shares, other securities, other Awards, or other property; (e) to approve forms of Award Agreements; (f) to determine and amend, in a manner consistent with the terms of the Plan, the terms and conditions of any Award granted hereunder, based on such factors as the Committee, in its sole discretion, shall determine; (g) to construe and interpret the terms of the Plan and Award Agreements; (h) to correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem desirable to carry out the purposes of the Plan; (i) to prescribe, amend, and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established pursuant to
Section 12.1 of the Plan; (j) to authorize withholding arrangements pursuant to
Section 10.7(b) of the Plan; (k) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Committee; (l) to accelerate the vesting, exercisability and/or the deemed attainment of a Performance Objective with respect to an Award; and
(m) to make all other determinations and take all other action described in the Plan or as the Committee otherwise deems necessary or advisable for administering the Plan and effectuating its purposes.
3.3. COMPLIANCE WITH APPLICABLE LAW. The Committee shall administer,
construe, interpret, and exercise discretion under the Plan and each Award
Agreement in a manner that is consistent and in compliance with a reasonable,
good faith interpretation of all Applicable Laws, and that avoids (to the extent
practicable) the classification of any Award as "deferred compensation" for
purposes of Section 409A of the Code, as determined by the Committee.
Notwithstanding the foregoing, the failure to satisfy the requirements of
Section 409A or Section 162(m) with respect to the grant of an Award under the Plan shall not affect the validity of the action of the Committee otherwise duly authorized and acting in the matter.
3.4. EFFECT OF COMMITTEE'S DECISION AND COMMITTEE'S LIABILITY. The Committee's decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. Neither the Committee nor any of its members shall be liable for any act, omission, interpretation, construction, or determination made in good faith in connection with the Plan or any Award Agreement. Further, in the performance of its responsibilities with respect to the Plan or any Award Agreement, the Committee shall be entitled to rely upon information and/or advice furnished by the Company's officers or employees, the Company's accountants, the Company's counsel and any other party the Committee deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such information and/or advice.
3.5. ACTION BY THE BOARD / DELEGATION TO EXECUTIVE OFFICERS. Subject to Applicable Law, any authority or responsibility that, under the terms of the Plan, may be exercised by the Committee may alternatively be exercised by the Board. Further, to the extent permitted by Applicable Law, the Committee may delegate to one or more Executive Officers the powers: (a) to designate Service Providers who are not Executive Officers as eligible to participate in the Plan; and (b) to determine the amount and type of Awards that may be granted to Service Providers who are not Executive Officers.
3.6. AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. In the Committee's discretion, Awards may be granted alone, in addition to, or in tandem with any other Award or any award granted under another plan of the Company or an Affiliate. Awards granted in addition to or in tandem with other awards may be granted either at the same time or at different times.
VESTING AND PERFORMANCE OBJECTIVES
4.1. GENERAL. The vesting schedule or Period of Restriction for any Award shall be specified in the Award Agreement. The criteria for vesting and for removing restrictions on any Award may include (i) performance of substantial services for the Company for a specified period; (ii) achievement of one or more Performance Objectives; or (iii) a combination of (i) and (ii), as determined by the Committee.
4.2. PERIOD OF ABSENCE FROM PROVIDING SUBSTANTIAL SERVICES. To the extent that vesting or removal of restrictions is contingent on performance of
substantial services for a specified period, a leave of absence (whether paid or unpaid) shall not count toward the required period of service unless the Award Agreement specifically provides otherwise.
4.3. PERFORMANCE OBJECTIVES.
(a) POSSIBLE PERFORMANCE OBJECTIVES. Any Performance Objective shall relate to the Service Provider's performance for the Company (or an Affiliate) or the Company's (or Affiliate's) business activities or organizational goals, and shall be sufficiently specific that a third party having knowledge of the relevant facts could determine whether the Performance Objective is achieved. For Awards not intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Committee may establish Performance Objectives based on other criteria as it deems appropriate. The Performance Objectives will be comprised of specified levels of one or more of the following performance measures as the Committee deems appropriate: net earnings or net income (before of after taxes); earnings per share; net sales or revenue growth; net operating profit; return measures (including, but not limited to, return on assets, capital, equity, sales, or revenue); cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment); earnings before or after taxes, interest, depreciation, and/or amortization; gross or operating margins; productivity ratios; share price (including, but not limited to, growth measures and total shareholder return); expense targets; margins; operating efficiency; market share; working capital targets; cash value added; economic value added; market penetration; and product introductions, in each case determined in accordance with generally accepted accounting principles (subject to modifications approved by the Committee) consistently applied on a business unit, divisional, subsidiary or consolidated basis or any combination thereof. The Performance Objectives may be described in terms of goals that are related to the individual Participant or goals that are Company-wide or related to an Affiliate, division, department, region, function or business unit and may be measured on an absolute or cumulative basis or on the basis of percentage of improvement over time, and may be measured in terms of Company performance (or performance of the applicable Affiliate, division, department, region, function or business unit) or measured relative to selected peer companies or a market or other index. In addition, for Awards not intended to qualify as "performance-based compensation" under Section 162(m) of the Code, the Committee may establish Performance Objectives based on other criteria as it deems appropriate.
(b) STOCKHOLDER APPROVAL OF PERFORMANCE OBJECTIVES. The list of possible Performance Objectives set forth in Section 4.3(a), above, and the other material terms of Awards of Restricted Stock or Restricted Stock Units that are intended to qualify as "performance-based compensation" under Section 162(m) of the Code, shall be subject to reapproval by the Company's stockholders at the first stockholder meeting that occurs in 2011. No Award of Restricted Stock or Restricted Stock Units that is intended to qualify as "performance-based compensation" under Section 162(m) of the Code shall be made after that meeting unless stockholders have reapproved the list of Performance Objectives, or unless the vesting of the Award is made contingent on stockholder approval of the Performance Objectives and other material terms of such Awards.
(c) DOCUMENTATION OF PERFORMANCE OBJECTIVES. With respect to any Award, the Performance Objectives shall be set forth in writing no later than 90 days after commencement of the period to which the Performance
Objective(s) relate(s) (or, if sooner, before 25% of such period has elapsed) and at a time when achievement of the Performance Objectives is substantially uncertain. Such writing shall also include the period for measuring achievement of the Performance Objectives, which shall be no greater than five consecutive years, as established by the Committee. Once established by the Committee, the Performance Objective(s) may not be changed to accelerate the settlement of an Award or to accelerate the lapse or removal of restrictions on Restricted Stock that otherwise would be due upon the attainment of the Performance Objective(s).
(d) COMMITTEE CERTIFICATION. Prior to settlement of any Award that is contingent on achievement of one or more Performance Objectives, the Committee shall certify in writing that the applicable Performance Objective(s) and any other material terms of the Award were in fact satisfied. For purposes of this Section 4.3(d), approved minutes of the Committee shall be adequate written certification.
5.1. TERMS OF OPTION. Subject to the provisions of the Plan, the type of Option, term, exercise price, vesting schedule, and other conditions and limitations applicable to each Option shall be as determined by the Committee and shall be stated in the Award Agreement.
5.2. TYPE OF OPTION.
(a) Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Non-Qualified Option.
(b) Neither the Company nor the Committee shall have liability to a Participant or any other party if an Option (or any part thereof) which is intended to be an Incentive Stock Option does not qualify as an Incentive Stock Option. In addition, the Committee may make an adjustment or substitution described in Section 2.3 of the Plan that causes the Option to cease to qualify as an Incentive Stock Option without the consent of the affected Participant or any other party.
(a) MAXIMUM TERM. No Option shall have a term in excess of 10 years measured from the date the Option is granted. In the case of any Incentive Stock Option granted to a 10% Stockholder (as defined in Section 5.3(d), below), the term of such Incentive Stock Option shall not exceed five years measured from the date the Option is granted.
(b) MINIMUM EXERCISE PRICE. Except as provided in Section
5.3(e) and subject to Section 2.3(b) of the Plan, the exercise price per share
of an Option shall not be less than 100% of the Fair Market Value per Share on
the date the Option is granted. In the case of any Incentive Stock Option
granted to a 10% Stockholder (as defined in Section 5.3(d), below), subject to
Section 2.3(b) of the Plan, the exercise price per share of such Incentive Stock Option shall not be less than 110% of the Fair Market Value per Share on the date the Option is granted.
(c) $100,000 LIMIT FOR INCENTIVE STOCK OPTIONS. Notwithstanding an Option's designation, to the extent that Incentive Stock Options are exercisable for the first time by the Participant during any calendar year with respect to Shares whose aggregate Fair Market Value exceeds
$100,000 (regardless of whether such Incentive Stock Options were granted under the Plan, or any other plan of the Company or any Affiliate), such Options shall be treated as Non-Qualified Options. For purposes of this Section 5.3(c), Fair Market Value shall be measured as of the date the Option was granted and Incentive Stock Options shall be taken into account in the order in which they were granted consistent with Applicable Law.
(d) 10% STOCKHOLDER. For purposes of this Section 5.3, a "10% Stockholder" is an individual who, immediately before the date an Award is granted, owns (or is treated as owning) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or an Affiliate), determined under Section 424(d) of the Code.
(e) SHORT-TERM BELOW MARKET OPTIONS. The Committee shall have the authority to grant Options with an exercise price that is less than the Fair Market Value per Share on the date that the Option is granted; provided, however, that notwithstanding any other provision of this Plan to the contrary, the Award Agreement for each such Option shall require that the Option be exercised no later than the 15th day of the third month following the end of the calendar year in which the Option is granted.
5.4. FORM OF CONSIDERATION. The Committee shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Committee shall determine the acceptable form of consideration at the time of grant. To the extent approved by the Committee, the consideration for exercise of an Option may be paid in any one, or any combination, of the forms of consideration set forth in subsections (a), (b), (c), and (d) below.
(a) CASH EQUIVALENT. Consideration may be paid by cash, check, or other cash equivalent approved by the Committee.
(b) TENDER OR ATTESTATION OF SHARES. Consideration may be paid by the tendering of other Shares to the Company or the attestation to the ownership of the Shares that otherwise would be tendered to the Company in exchange for the Company's reducing the number of Shares issuable upon the exercise of the Option. Shares tendered or attested to in exchange for Shares issued under the Plan must be held by the Service Provider for at least six months prior to their tender or their attestation to the Company and may not be Shares of Restricted Stock at the time they are tendered or attested to. The Committee shall determine acceptable methods for tendering or attesting to Shares to exercise an Option under the Plan and may impose such limitations and prohibitions on the use of Shares to exercise Options as it deems appropriate. For purposes of determining the amount of the Option price satisfied by tendering or attesting to Shares, such Shares shall be valued at their Fair Market Value on the date of tender or attestation, as applicable.
(c) BROKER-ASSISTED CASHLESS EXERCISE. Subject to the Committee's approval, consideration may be paid by the Participant's (i) irrevocable instructions to the Company to deliver the Shares issuable upon exercise of the Option promptly to a broker (acceptable to the Company) for the Participant's account, and (ii) irrevocable instructions to the broker to sell Shares sufficient to pay the exercise price and upon such sale to deliver the exercise price to the Company. A Participant may use this form of exercise only if the exercise would not subject the Participant to liability under Section 16(b) of the Exchange Act or would be exempt pursuant to Rule 16b-3 promulgated under the Exchange Act or any other exemption from such liability. The Company
shall deliver an acknowledgement to the broker upon receipt of instructions to deliver the Shares, and the Company shall deliver the Shares to such broker upon the settlement date. Upon receipt of the Shares from the Company, the broker shall deliver to the Company cash sale proceeds sufficient to cover the exercise price and any applicable withholding taxes due. Shares acquired by a cashless exercise shall be deemed to have a Fair Market Value on the Option exercise date equal to the gross sales price at which the broker sold the Shares to pay the exercise price.
(d) OTHER METHODS. Consideration may be paid using such other methods of payment as the Committee, at its discretion, deems appropriate from time to time.
5.5. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. An Option shall be deemed exercised when the Committee receives: (i) written or facsimile notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Option and (ii) full payment for the Shares (in a form permitted under Section 5.4 of the Plan) with respect to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. Except as otherwise provided in the Award Agreement, in the event of Termination of Service before exercise of an Option, the following rules shall apply:
(i) If the Participant's Termination of Service is for Cause, no portion of the Option may be exercised, and the Option will immediately expire upon the Termination of Service;
(ii) An Option may be exercised after the Partici- pant's Termination of Service only to the extent that the Option was vested as of the Termination of Service;
(iii) An Option may not be exercised after the expiration of the term of such Option as set forth in the Award Agreement;
(iv) Unless a Participant's Termination of Service is the result of the Participant's death or Disability, the Participant may not exercise the vested portion of an Option more than three months after such Termination of Service;
(v) If a Participant's Termination of Service is the result of the Participant's death or Disability, the Participant may exercise the vested portion of an Option up to 12 months after Termination of Service; and
(vi) After the Participant's death, his Beneficiary may exercise an Option only to the extent that the deceased Participant was entitled to exercise such Incentive Stock Option as of the date of his death.
If the Committee determines, subsequent to a Participant's Termination of Service but before exercise of an Option, that either before or after the Participant's Termination of Service the Participant engaged in conduct that constitutes "Cause," then the Participant's right to exercise any Option is forfeited immediately.
(c) RIGHTS AS A STOCKHOLDER. Shares subject to an Option shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the Option exercise date. Until such Option exercise date, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to the Option. In the event that the Company effects a split of the Shares by means of a stock dividend and the exercise
price of, and number of Shares subject to, an Option are adjusted as of the date of distribution of the dividend (rather than as of the record date for such dividend), then a Participant who exercises such Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the Shares subject to the Option. No other adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued.
5.6. REPURCHASE RIGHTS. The Committee shall have the discretion to
grant Options which are exercisable for unvested Shares. If the Participant
ceases to be a Service Provider while holding such unvested Shares, the Company
shall have the right to repurchase any or all of those unvested Shares at a
price per share equal to the lower of (i) the exercise price paid per Share, or
(ii) the Fair Market Value per Share at the time of repurchase. The terms upon which such repurchase right shall be exercisable by the Committee (including the period and procedure for exercise and the appropriate vesting schedule for the purchased Shares) shall be established by the Committee and set forth in the document evidencing such repurchase right.
STOCK APPRECIATION RIGHTS
6.1. TERMS OF STOCK APPRECIATION RIGHT. The term, base amount, vesting schedule, and other conditions and limitations applicable to each Stock Appreciation Right shall be as determined by the Committee and shall be stated in the Award Agreement. Except as otherwise provided by the Committee, all Awards of Stock Appreciation Rights shall be settled in Shares issuable upon the exercise of the Stock Appreciation Right.
6.2. EXERCISE OF STOCK APPRECIATION RIGHT.
(a) PROCEDURE FOR EXERCISE. Any Stock Appreciation Right granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement. A Stock Appreciation Right shall be deemed exercised when the Committee receives written or facsimile notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise the Stock Appreciation Right.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER.
Following a Participant's Termination of Service, the Participant (or the Participant's Beneficiary, in the case of Termination of Service due to death) may exercise his or her Stock Appreciation Right within such period of time as is specified in the Award Agreement to the extent that the Stock Appreciation Right is vested as of the Termination of Service. In the absence of a specified time in the Award Agreement, the Stock Appreciation Right shall remain exercisable for three months following the Participant's Termination of Service for any reason other than Disability or death, and for 12 months after the Participant's Termination of Service on account of Disability or death. However, if the Participant's Termination of Service is for Cause, no portion of the Stock Appreciation Right may be exercised, and the Stock Appreciation Right will immediately expire upon the Termination of Service. If the Committee determines, subsequent to a Participant's Termination of Service but before exercise of a
Stock Appreciation Right, that either before or after the Participant's Termination of Service that the Participant engaged in conduct that constitutes "Cause," then the Participant's right to exercise any Stock Appreciation Right is forfeited immediately.
(c) RIGHTS AS A STOCKHOLDER. Shares subject to a Stock Appreciation Right shall be deemed issued, and the Participant shall be deemed the record holder of such Shares, on the date the Stock Appreciation Right is exercised. Until such date, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to the Stock Appreciation Right. If the Company effects a split of the Shares by means of a stock dividend and the exercise price of, and number of Shares subject to, a Stock Appreciation Right are adjusted as of the date of distribution of the dividend (rather than as of the record date for such dividend), then a Participant who exercises such Stock Appreciation Right between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the Shares subject to the Stock Appreciation Right. No other adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued.
7.1. TERMS OF RESTRICTED STOCK. Subject to the provisions of the Plan, the Period of Restriction, the number of Shares granted, and other conditions and limitations applicable to each Award of Restricted Stock shall be as determined by the Committee shall be stated in the Award Agreement. Unless the Committee determines otherwise, Shares of Restricted Stock shall be held by the Company as escrow agent until the restrictions on such Shares have lapsed.
7.2. TRANSFERABILITY. Except as provided in this Article 7, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
7.3. OTHER RESTRICTIONS. The Committee, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.
7.4. REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article 7, and subject to Section 10.5 of the Plan, Shares of Restricted Stock covered by an Award of Restricted Stock made under the Plan shall be released from escrow, and shall become fully transferable, as soon as practicable after the Period of Restriction ends, and in any event no later than 2 1/2 months after the end of the Tax Year in which the Period of Restriction ends.
7.5. VOTING RIGHTS. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement.
7.6. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction, Service Providers holding Shares of Restricted Stock shall be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement.
(a) If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions (and shall therefore be forfeitable to the same extent) as the Shares of Restricted Stock with respect to which they were paid.
(b) If any such dividends or distributions are paid in cash, the Award Agreement may specify that the cash payments shall be subject to the same restrictions as the related Restricted Stock, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Shares of Restricted Stock vest or are forfeited. Alternatively, the Award Agreement may specify that the dividend equivalents or other payments shall be unrestricted, in which case they shall be paid as soon as practicable after the dividend or distribution date. In no event shall any cash dividend or distribution be paid later than 2 1/2 months after the Tax Year in which the dividend or distribution becomes nonforfeitable.
7.7. RIGHT OF REPURCHASE OF RESTRICTED STOCK. If, with respect to any Award of Restricted Stock: (a) a Participant's Termination of Service occurs before the end of the Period of Restriction; (b) any Performance Objectives are not achieved by the end of the period for measuring such Performance Objectives; or (c) the Participant has engaged in conduct either before or after Termination of Service that constitutes Cause, then the Company shall have the right to repurchase forfeitable Shares of Restricted Stock from the Participant at the lower of their original issuance price (or to require forfeiture of such Shares if issued at no cost) or their Fair Market Value.
RESTRICTED STOCK UNITS
8.1. TERMS OF RESTRICTED STOCK UNITS. Subject to the provisions of the Plan, the Period of Restriction, number of underlying Shares, and other conditions and limitations applicable to each Award of Restricted Stock Units shall be as determined by the Committee and shall be stated in the Award Agreement.
8.2. SETTLEMENT OF RESTRICTED STOCK UNITS. Subject to Section 10.5 of the Plan, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of the underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Period of Restriction, and in any event no later than 2 1/2 months after the end of the Tax Year in which the Period of Restriction ends.
8.3. DIVIDEND AND OTHER DISTRIBUTION EQUIVALENTS. The Committee is authorized to grant to holders of Restricted Stock Units the right to receive payments equivalent to dividends or other distributions with respect to Shares underlying Awards of Restricted Stock Units. The Award Agreement may specify that the dividend equivalents or other distributions shall be subject to the same restrictions as the related Restricted Stock Units, in which case they shall be accumulated during the Period of Restriction and paid or forfeited when the related Restricted Stock Units are paid or forfeited. Alternatively, the Award Agreement may specify that the dividend equivalents or other distributions shall be unrestricted, in which case they shall be paid on the dividend or distribution payment date for the underlying Shares, or as soon as practicable thereafter. In no event shall any unrestricted dividend equivalent or other distribution be paid later than 2 1/2 months after the Tax Year in which the record date for the dividend or distribution occurs.
8.4. DEFERRAL ELECTION. Notwithstanding anything to the contrary in Sections 8.2 or 8.3, a Participant may elect in accordance with the terms of the Award Agreement and Section 409A of the Code to defer receipt of all or any portion of the Shares or other property otherwise issuable to the Participant pursuant to a Restricted Stock Unit Award to the extent permitted by the Committee.
8.5. FORFEITURE. If, with respect to any Award: (a) a Participant's Termination of Service occurs before the end of the Period of Restriction; (b) any Performance Objectives are not achieved by the end of the period for measuring such Performance Objectives; or (c) the Participant has engaged in conduct either before or after Termination of Service that constitutes Cause, then the Restricted Stock Units granted pursuant to such Award shall be forfeited and the Company (and any Affiliate) shall have no further obligation.
OTHER EQUITY-BASED AWARDS
9.1. OTHER EQUITY-BASED AWARDS. The Committee shall have the right to grant other Awards based upon or payable in Shares having such terms and conditions as the Committee may determine, including deferred stock units, the grant of Shares upon the achievement of a Performance Objective and the grant of securities convertible into Shares.
ADDITIONAL TERMS OF AWARDS
10.1. NO RIGHTS TO AWARDS. No Service Provider shall have any claim to be granted any Award under the Plan, and the Company is not obligated to extend uniform treatment to Participants or Beneficiaries under the Plan. The terms and conditions of Awards need not be the same with respect to each Participant.
10.2. NO EFFECT ON EMPLOYMENT OR SERVICE. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant's relationship as a Service Provider with the Company; nor shall they interfere in any way with the Participant's right or the Company's right to terminate such relationship at any time, with or without Cause, to the extent permitted by Applicable Laws and any enforceable agreement between the Service Provider and the Company.
10.3. NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.
10.4. TRANSFERABILITY OF AWARDS. Unless otherwise determined by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. Subject to the approval of the Committee in its sole discretion, Non-Qualified Options may be transferable to members of the immediate family of the Participant and to one or more trusts for the benefit of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only
stockholders. "Members of the immediate family" means the Participant's spouse, children, stepchildren, grandchildren, parents, grandparents, siblings (including half brothers and sisters), and individuals who are family members by adoption. To the extent that any Award is transferable, such Award shall contain such additional terms and conditions as the Committee deems appropriate.
10.5. CONDITIONS ON DELIVERY OF SHARES AND LAPSING OF RESTRICTIONS. The Company shall not be obligated to deliver any Shares pursuant to the Plan or to remove restrictions from Shares previously delivered under the Plan until: (a) all conditions of the Award have been met or removed to the satisfaction of the Committee; (b) subject to approval of the Company's counsel, all other legal matters (including any Applicable Laws) in connection with the issuance and delivery of such Shares have been satisfied; and (c) the Participant has executed and delivered to the Company such representations or agreements as the Committee may consider appropriate to satisfy the requirements of Applicable Laws.
10.6. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance or sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
(a) WITHHOLDING REQUIREMENTS. Prior to the delivery of any Shares or cash pursuant to the grant, exercise, vesting, or settlement of an Award, the Company shall have the power and the right to deduct or withhold, or to require a Participant or Beneficiary to remit to the Company, an amount sufficient to satisfy any federal, state, and local taxes (including the Participant's FICA obligation) that the Company determines is required to be withheld to comply with Applicable Laws. The Participant or Beneficiary shall remain responsible at all times for paying any federal, state, and local income or employment tax due with respect to any Award, and the Company shall not be liable for any interest or penalty that a Participant or Beneficiary incurs by failing to make timely payments of tax.
(b) WITHHOLDING ARRANGEMENTS. The Committee, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant or Beneficiary to satisfy such tax withholding obligation, in whole or in part, by (i) electing to have the Company withhold otherwise deliverable Shares, or (ii) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required by Applicable Law to be withheld. The Fair Market Value of the Shares to be withheld or delivered, or with respect to which restrictions are removed, shall be determined as of the date that the taxes are required to be withheld.
10.8. OTHER PROVISIONS IN AWARD AGREEMENTS. In addition to the provisions described in the Plan, any Award Agreement may include such other provisions (whether or not applicable to the Award of any other Participant) as the Committee determines appropriate, including restrictions on resale or other disposition, provisions for the acceleration of vesting and/or exercisability of Awards upon a Change of Control of the Company and provisions to comply with Applicable Laws. Without limiting any other express authority of the Committee under (but subject to) the express limits of the Plan, the Committee may waive
conditions of or limitations on Awards to Participants that the Committee in the prior exercise of its discretion had imposed, without the Participant's consent, and may make other changes to the terms and conditions of Awards. Notwithstanding the foregoing, the Committee shall not adjust or change previously imposed terms and conditions for an Option or a Stock Appreciation Right in such a manner as would constitute a Repricing of the exercise price or base amount of any Option or Stock Appreciation Right without stockholder approval except as contemplated in Section 2.3 (with respect to a stock split, merger, acquisition, spin-off or any other similar, unusual or extraordinary corporate transaction or event in respect of the Shares as described therein).
10.9. SECTION 16 OF THE EXCHANGE ACT. It is the intent of the Company that 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 Awards, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. The Company shall have no liability to any Participant or other person for Section 16 consequences of Awards or events in connection with Awards if an Award or related event does not so qualify.
10.10. NOT BENEFIT PLAN COMPENSATION. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's compensation for purposes of determining the Participant's benefits under any other employee benefit plans or arrangements provided by the Company or an Affiliate, except where the Committee expressly provides otherwise in writing.
TERM, AMENDMENT, AND TERMINATION OF PLAN
11.1. TERM OF PLAN. The Plan shall become effective on the Effective Date.
11.2. TERMINATION. The Plan shall terminate upon the earliest to occur of (i) September 30, 2017; (ii) the date on which all Shares available for issuance under the Plan have been issued as fully vested Shares; or (iii) the date determined by the Board pursuant to its authority under Section 11.3 of the Plan.
11.3. AMENDMENT. The Board or the Committee may at any time amend, alter, suspend, or terminate the Plan, without the consent of the Participants or Beneficiaries. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws. Any revision that deletes or limits the scope of the provisions of Section 10.8 prohibiting Repricing of Options or Stock Appreciation Rights without stockholder approval shall require stockholder approval.
11.4. EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension, or termination of the Plan shall impair the rights of any Participant or Beneficiary under an outstanding Award, unless required to comply with an Applicable Law or mutually agreed otherwise between the Participant and the Committee; any such agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Committee's ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
12.1. AUTHORIZATION OF SUB-PLANS. The Committee may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities, and/or tax laws of various jurisdictions. The Committee shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations as the Committee deems necessary or desirable, and (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Committee shall deem necessary or desirable. All sub-plans adopted by the Committee shall be deemed to be part of the Plan, but each sub-plan shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any sub-plans to Participants in any jurisdiction which is not the subject of such sub-plan.
12.2. GOVERNING LAW. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Nevada, regardless of the laws that might otherwise govern under any state's applicable principles of conflicts of laws.
12.3. COMMITTEE MANNER OF ACTION. Unless otherwise provided in the bylaws of the Company or the charter of the Committee: (a) a majority of the members of a Committee shall constitute a quorum; and (b) the vote of a majority of the members present who are qualified to act on a question assuming the presence of a quorum or the unanimous written consent of the members of the Committee shall constitute action by the Committee. The Committee may delegate the performance of ministerial functions in connection with the Plan to such person or persons as the Committee may select.
12.4. EXPENSES. The costs of administering the Plan shall be paid by the Company.
12.5. SEVERABILITY. If any provision of the Plan or any Award Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person or Award, such provision shall be construed or deemed to be amended to resolve the applicable infirmity, unless the Committee determines that it cannot be so construed or deemed amended without materially altering the Plan or the Award, in which case such provision shall be stricken as to such jurisdiction, person, or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
12.6. CONSTRUCTION. Unless the contrary is clearly indicated by the
context: (a) the use of the masculine gender shall also include within its
meaning the feminine and vice versa; (b) the use of the singular shall also
include within its meaning the plural and vice versa; and (c) the word "include"
shall mean to include, but not to be limited to.
12.7. NO TRUST OR FUND CREATED. Neither the Plan nor any Award Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company (or an Affiliate) and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company (or an Affiliate) pursuant to an Award, such right shall be no more secure than the right of any unsecured general creditor of the Company (or the Affiliate, as applicable).
12.8. HEADINGS. Headings are given to the sections and subsections of the 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 the Plan or any provision thereof.
12.9 COMPLETE STATEMENT OF PLAN. This document is a complete statement of the Plan.
As used in the Plan, the following terms shall have the following meanings:
"AFFILIATE" means an entity in which the Company has a direct or indirect equity interest, whether now or hereafter existing; provided however, that with respect to an Incentive Stock Option, an Affiliate means a "parent corporation" (as defined in Section 424(e) of the Code) or a "subsidiary corporation" (as defined in Section 424(f) of the Code) with respect to the Company, whether now or hereafter existing. Notwithstanding the foregoing, "Affiliate" for purposes of defining a Change of Control means with respect to a Person, another Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person.
"APPLICABLE LAWS" means the requirements relating to, connected with, or otherwise implicated by the administration of long-term incentive plans under applicable state corporation laws, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the Shares are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.
"AWARD" means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, or other equity-based awards.
"AWARD AGREEMENT" means a written agreement setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement shall be subject to the terms and conditions of the Plan.
"BENEFICIARY" means the personal representative of the Participant's estate or the person(s) to whom an Award is transferred pursuant to the Participant's will or in accordance with the laws of descent or distribution.
"BOARD" means the board of directors of the Company.
"CAUSE", as used in connection with the termination of a Participant's services, means (1) with respect to any Participant employed under a written employment agreement with the Company which agreement includes a definition of "cause," "cause" as defined in that agreement or, if that agreement contains no such definition, a material breach by the Participant of that agreement, or (2) with respect to any other Participant, any of the following:
(a) the failure of the Participant to perform any of his or her material duties to the Company, including, without limitation, breach of the Company's code of ethics, conflict of interest or employment policies;
(b) the Participant's conviction (including any pleas of guilty or nolo contendre) of any felony or other crime that the Committee reasonably determines adversely impacts the Participant's ability to continue performing services with the Company;
(c) any act or omission to act by the Participant (other than the Participant's resignation or retirement) which would reasonably be likely to have the effect of injuring the reputation, business or
business relationships of the Company or impairing the Participant's ability to perform services for the Company;
(d) acts of theft, embezzlement, fraud, dishonesty, misrepresentation or falsification of documents or records involving the Company;
(e) violation of any law or administrative regulation related to the Company's business and use of the Company's facilities or premises to conduct unlawful or unauthorized activities or transactions and
(f) conduct that could result in publicity reflecting unfavorably on the Company in a material way;
(g) the Participant's improper use of the Company's confidential or proprietary information; or
(h) a breach of the terms of any employment agreement, confidentiality agreement, non-competition agreement and non-solicitation agreement or any other agreement between the Participant and the Company , after giving effect to the notification provisions, if any, and the mechanisms to remedy or cure a breach, if appropriate, as described in any such agreement.
The Committee shall determine whether conduct constituting "Cause" has occurred for purposes of the Plan. For purposes of this definition, the term "Company" includes any Affiliate of the Company and "Cause" is not limited to events that have occurred before a Participant's Termination of Service, nor is it necessary that the Committee's finding of "Cause" occur prior to Termination of Service.
"CHANGE OF CONTROL" means and shall be deemed to occur upon the first of the following events:
(a) the acquisition, after the date hereof, by an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the combined voting power of the Voting Securities of the Company then outstanding after giving effect to such acquisition or, if greater the percentage of the combined voting power of the Voting Securities of the Company held or controlled by the Company's largest shareholder or his Affiliates (including but not limited to members of his "family" (as defined under Section 267(c)(4) of the Code) after giving effect to such acquisition); provided however, that if any one Person, or more than one Person acting as a group, is considered to own more than such percentages of the Voting Securities, acquisition of additional Voting Securities is not considered to cause an additional Change of Control; or
(b) the Company is merged or consolidated or reorganized into or with another Company or other legal entity, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the Voting Securities of such Company or entity immediately after such
transaction is held in the aggregate by the holders of Voting Securities of the Company immediately prior to such merger, consolidation or reorganization; or
(c) the Company sells or otherwise transfers all or substantially all of its assets (including but not limited to its Subsidiaries) to another Company or legal entity in one transaction or a series of related transactions, and as a result of such sale(s) or transfer(s), less than a majority of the combined voting power of the then outstanding Voting Securities of such Company or entity immediately after such sale or transfer is held in the aggregate by the holders of Voting Securities of the Company immediately prior to such sale or transfer; or
(d) approval by the Board or the stockholders of the Company of a complete or substantial liquidation or dissolution of the Company.
Notwithstanding the foregoing, unless otherwise determined in a specific case by majority vote of the Board, a Change of Control shall not be deemed to have occurred solely because: (a) the Company; (b) a Subsidiary; (c) any one or more members of executive management of the Company or its Affiliates; (d) any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary; or (e) any combination of the Persons referred to in the preceding clauses (a) through (d) becomes the actual or beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of the Voting Securities of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein shall be a reference to any regulations or other guidance of general applicability promulgated under such section, and shall further be a reference to any successor or amended section of such section of the Code that is so referred to and any regulations thereunder.
"COMMITTEE" means the Compensation Committee of the Board.
"COMPANY" means Tree Top Industries, Inc., a Nevada corporation, or any successor thereto.
"CONSULTANT" means any natural person, including an advisor, engaged by the Company or an Affiliate to render services (other than in connection with the offer or sale of securities in a capital raising transaction or to promote or maintain a market for securities) to such entity.
"DIRECTOR" means a member of the Board.
"DISABILITY" means total and permanent disability as defined in Section 22(e)(3) of the Code. The Committee shall determine both whether Disability has occurred and the date of its occurrence. If requested, a Participant shall be examined by a physician selected or approved by the Committee.
"EFFECTIVE DATE" means the Company's initial public offering; provided that the Plan and any Awards granted hereunder shall be null and void if the Plan is not approved by the Company's stockholders before any compensation under the Plan is paid.
"EMPLOYEE" means any person who is an employee, as defined in Section 3401(c) of the Code, of the Company or any Affiliate or any other entity the employees of which are permitted to receive Incentive Stock Options under the Code. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means an individual who is an "executive officer" of the Company (as defined by Rule 3b-7 under the Exchange Act) or a "covered employee" under Section 162(m) of the Code.
"FAIR MARKET VALUE" means, with respect to Shares as of any date (except in the case of a cashless exercise pursuant to Section 5.4(c)) the closing sale price per share of such Shares (or the closing bid, if no sales were reported) as reported in The Wall Street Journal or, if not reported therein, such other source as the Committee deems reliable.
"INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
"NON-QUALIFIED OPTION" means an Option not intended to qualify as an Incentive Stock Option.
"OPTION" means an option to purchase Shares that is granted pursuant to Article 5 of the Plan. An Option may be an Incentive Stock Option or a Non-Qualified Option.
"PARTICIPANT" means the holder of an outstanding Award granted under the Plan.
"PERFORMANCE OBJECTIVE" means a performance objective or goal that must be achieved before an Award, or a feature of an Award, becomes nonforfeitable, as described in Section 4.3 of the Plan.
"PERIOD OF RESTRICTION" means the period during which Restricted Stock, the remuneration underlying Restricted Stock Units, or any other feature of an Award is subject to a substantial risk of forfeiture. A Period of Restriction shall be deemed to end when the applicable Award ceases to be subject to a substantial risk of forfeiture.
"PERSON" means any individual, Company, partnership, group, association or other "person," as such term is used in Section 14(d) of the Exchange Act.
"PLAN" means this 2007 Omnibus Stock and Incentive Plan.
"PUBLIC SECURITIES" means securities meeting the following requirements: (A) of a class that is registered under Section 12 of the Exchange Act and is either listed and qualified for trading on a national securities exchange or is listed for quotation and qualified for trading on NASDAQ and (B) in a company that is then-current in its reporting obligations under the Exchange Act.
"REPRICING" means: (a) reducing the exercise price or base amount of an
Option or Stock Appreciation Right after it is granted; (b) taking any action
that is treated as a "repricing" under generally accepted accounting principles;
(c) canceling an Option or a Stock Appreciation Right at a time when its exercise price or base amount exceeds the Fair Market Value of a Share (each, an "Underwater Award"), in exchange for another Option, Stock Appreciation Right, Restricted Stock or other Award; or (d) repurchasing an Option or Stock Appreciation Right that is an Underwater Award.
"RESTRICTED STOCK" means Shares that, during a Period of Restriction, are subject to restrictions as described in Article 7 of the Plan.
"RESTRICTED STOCK UNIT" means an Award that entitles the recipient to receive Shares or cash after a Period of Restriction, as described in Article 8 of the Plan.
"SERVICE PROVIDER" means an Officer, Director, Employee or Consultant.
"SHARE" means a share of the Company's common stock, $0.0001 par value per share.
"STOCK APPRECIATION RIGHT" means an Award that entitles the recipient to receive, upon exercise, the excess of (i) the Fair Market Value of a Share on the date the Award is exercised, over (ii) a base amount specified by the Committee which shall not be less than the Fair Market Value of a Share on the date the Award is granted, as described in Article 6 of the Plan.
"SUBSIDIARY" means a Company, company or other entity: (a) more than
fifty percent (50%) of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are; or
(b) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, or unincorporated association), but more than fifty percent (50%) of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company.
"TAX YEAR" means the Company's taxable year. If an Award is granted by an Affiliate, such Affiliate's taxable year shall apply instead of the Company's taxable year.
"TERMINATION OF SERVICE" means the date an individual ceases to be a Service Provider in any capacity. Awards under the Plan shall not be affected by the change of a Participant's status with in or among the Company and any Affiliates, so long as the Participant remains a Service Provider. Unless the Committee or a Company policy provides otherwise, a leave of absence authorized by the Company or the Committee (including sick leave or military leave) from which return to service is not guaranteed by statute or contract shall be characterized as a Termination of Service if the individual does not return to service within three months; such Termination of Service shall be effective as of the first day that is more than three months after the beginning of the period of leave. If the ability to return to service upon the expiration of such leave is guaranteed by statute or contract, but the individual does not return, the leave shall be characterized as a Termination of Service as of a date established by the Committee or Company policy. For purposes of the Plan and any Award hereunder, if an entity ceases to be an Affiliate, Termination of Service shall be deemed to have occurred with respect to each Participant in respect of such Affiliate who does not continue as a Service Provider in respect of the Company or another Affiliate after such giving effect to such Affiliate's change in status.
"VOTING SECURITIES" means, with respect to any Person, any securities entitled to vote (including by the execution of action by written consent) generally in the election of directors of such Person (together with direct or indirect options or other rights to acquire any such securities).