UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. 1)
Filed
by Registrant |
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Filed by Party
other than Registrant |
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Check the appropriate
box: |
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Preliminary
Proxy Statement |
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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[X] |
Definitive Proxy
Statement |
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Definitive Additional
Materials |
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Soliciting Materials
Pursuant to §240.14a-12 |
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VAPOR
CORP.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box): |
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[X] |
No
fee required. |
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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(1) |
Title of each
class of securities to which transaction applies: |
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(2) |
Aggregate number
of securities to which transaction applies: |
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(3) |
Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): |
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$_____ per share
as determined under Rule 0-11 under the Exchange Act. |
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(4) |
Proposed maximum
aggregate value of transaction: |
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(5) |
Total fee paid: |
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Fee
paid previously with preliminary materials. |
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing. |
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Amount previously
paid: |
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Form, Schedule
or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
TABLE
OF CONTENTS
Vapor
Corp.
3001
Griffin Road
Dania
Beach, Florida 33312
(888)
482-7671
To The Shareholders
of Vapor Corp.:
We
are pleased to invite you to attend the 2015 Annual Meeting of the shareholders of Vapor Corp., which will be held at 2:00 p.m.
on July 7, 2015 at our corporate headquarters in Dania, Florida, at the above address, for the following purposes:
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1. |
To elect members
to our Board of Directors; |
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2. |
To approve and
ratify the 2015 Equity Incentive Plan; |
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3. |
To approve Vapor
’s Named Executive Officer compensation; |
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4. |
To
vote, on a non-binding advisory basis, whether a non-binding advisory vote on Vapor’s executive compensation should
be held every one, two or three years; |
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5. |
To ratify the
appointment of our independent registered public accounting firm for fiscal year 2015; |
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6. |
To approve an amendment to
our Certificate of Incorporation to increase the number of authorized shares of common
stock from 50 million to 150 million shares;
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7. |
To approve an amendment to
our Certificate of Incorporation to effect any of three proposed reverse stock splits;
and
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8. |
For the transaction
of such other matters as may properly come before the Annual Meeting. |
Vapor’s
Board of Directors has fixed the close of business on May 20, 2015 as the record date for a determination of shareholders entitled
to notice of, and to vote at, this Annual Meeting or any adjournment thereof.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on July 7, 2015: We
are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials (which we refer to as a “Notice”),
rather than mailing a full paper set of the materials. The Notice contains instructions on how to access our proxy materials on
the Internet, as well as instructions on obtaining a paper copy of the proxy materials. This process is more environmentally friendly
and reduces our costs to print and distribute these materials. All shareholders who do not receive such a Notice, including shareholders
who have previously requested to receive a paper copy of the materials, will receive a full set of paper proxy materials by U.S.
mail. An electronic version of the Proxy Statement and our Form 10-K are available at: https://www.proxyvote.com
If
You Plan to Attend
Please
note that space limitations make it necessary to limit attendance to shareholders. Registration and seating will begin at 1:00
p.m. Shares can be voted at the meeting only if the holder is present in person or by valid proxy.
For
admission to the meeting, each shareholder may be asked to present valid picture identification, such as a driver’s license
or passport, and proof of stock ownership as of the record date, such as the enclosed proxy card or a brokerage statement reflecting
stock ownership. Cameras, recording devices and other electronic devices will not be permitted at the meeting.
If
you do not plan on attending the meeting, please vote your shares via the Internet, by phone or by signing and dating the enclosed
proxy and return it in the business envelope provided. Your vote is very important.
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By
the Order of the Board of Directors: |
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/s/
Jeffrey Holman |
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Jeffrey Holman
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Chairman of the
Board and Chief Executive Officer |
Dated: May
22, 2015
Whether
or not you expect to attend in person, we urge you to vote your shares at your earliest convenience. This will ensure the presence
of a quorum at the meeting. Promptly voting your shares via the Internet, by phone or by signing, dating, and returning the enclosed
proxy card will save us the expenses and extra work of additional solicitation. An addressed envelope for which no postage is
required if mailed in the United States is enclosed if you wish to vote by mail. Submitting your proxy now will not prevent you
from voting your shares at the meeting if you desire to do so, as your proxy is revocable at your option. Your vote is important,
so please act today!
Vapor
Corp.
3001
Griffin Road
Dania
Beach, Florida 33312
(888)
482-7671
2015
ANNUAL MEETING OF SHAREHOLDERS
PROXY
STATEMENT
Why am
I receiving these materials?
These
proxy materials are being sent to the holders of shares of the voting stock of Vapor Corp., a Delaware corporation, which we refer
to as “Vapor” or the “Company,” in connection with the solicitation of proxies by our Board of Directors,
which we refer to as the “Board,” for use at the 2015 Annual Meeting of Shareholders to be held at 2:00 p.m. on July
7, 2015 at our corporate headquarters at the above address in Dania, Florida. The proxy materials relating to the Annual Meeting
are first being mailed to shareholders entitled to vote at the meeting on or about May 26, 2015. A copy of our Form 10-K for the
year ended December 31, 2014 is being mailed concurrently with this Proxy Statement.
Why
did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the full
set of proxy materials?
We
are pleased to be using the SEC rule that allows companies to furnish their proxy materials over the Internet. As a result, we
are mailing to many of our shareholders a notice of the Internet availability of the proxy materials instead of a paper copy of
the proxy materials. All shareholders receiving the notice will have the ability to access the proxy materials over the Internet
and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the
Internet or to request a paper copy may be found in the notice of the Internet availability of the proxy materials. In addition,
the notice contains instructions on how you may request to access proxy materials in printed form by mail or electronically on
an ongoing basis.
Why
didn’t I receive a notice in the mail about the Internet availability of the proxy materials?
We
are providing some of our shareholders, including shareholders who have previously requested to receive paper copies of the proxy
materials, with paper copies of the proxy materials instead of a notice of the Internet availability of the proxy materials.
In
addition, we are providing notice of the Internet availability of the proxy materials by e-mail to those shareholders who have
previously elected delivery of the proxy materials electronically. Those shareholders should have received an e-mail containing
a link to the website where those materials are available and a link to the proxy voting website.
How
can I access the proxy materials over the Internet?
Your
notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on
how to:
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View our proxy
materials for the annual meeting on the Internet; and |
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Instruct us to
send our future proxy materials to you electronically by e-mail. |
Our
proxy materials are also available at www.proxyvote.com.
Your
notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on
how you may request to access proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials
electronically will help us conserve natural resources and reduce the costs of distributing our proxy materials. If you choose
to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website
where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail
will remain in effect until you terminate it.
How
may I obtain a paper copy of the proxy materials?
Shareholders
receiving a notice of the Internet availability of the proxy materials will find instructions about how to obtain a paper copy
of the proxy materials on their notice. Shareholders receiving notice of the Internet availability of the proxy materials by e-mail
will find instructions about how to obtain a paper copy of the proxy materials as part of that e-mail. All shareholders who do
not receive a notice or an e-mail will receive a paper copy of the proxy materials by mail.
Who
is Entitled to Vote?
Our
Board has fixed the close of business on May 20, 2015 as the record date for a determination of shareholders entitled to notice
of, and to vote at, this Annual Meeting or any adjournment thereof. On the record date, there were 33,635,758 shares of common
stock outstanding. Each share of Vapor common stock represents one vote that may be voted on each matter that may come before
the Annual Meeting. As of the record date, Vapor had issued no preferred stock which is entitled to vote.
What
is the difference between holding shares as a record holder and as a beneficial owner?
If
your shares are registered in your name with our transfer agent, Island Stock Transfer, you are the “record holder”
of those shares. If you are a record holder, these proxy materials have been provided directly to you by Vapor.
If
your shares are held in a stock brokerage account, a bank or other holder of record, you are considered the “beneficial
owner” of those shares held in “street name.” If your shares are held in street name, these proxy materials
have been forwarded to you by that organization. As the beneficial owner, you have the right to instruct this organization on
how to vote your shares.
Who
May Attend the Meeting?
Record
holders and beneficial owners may attend the Annual Meeting. If your shares are held in street name, you will need to bring a
copy of a brokerage statement or other documentation reflecting your stock ownership as of the record date. Please see below for
instructions on how to vote at the Annual Meeting if your shares are held in street name.
How
Do I Vote?
Whether
you hold shares directly as the shareholder of record or through a broker, trustee or other nominee as the beneficial owner, you
may direct how your shares are voted without attending the Annual Meeting. There are three ways to vote by proxy:
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1. |
Vote
by Internet. By following the instructions on the notice, proxy card or voting instruction card. |
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2. |
Vote by phone.
Shareholders of record may vote by phone by calling 1 (800) 690-6903. Shareholders who
are beneficial owners of their shares may vote by phone by calling the number specified on the voting instruction card provided
by their broker, trustee or nominee. |
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3. |
Vote
by mail. Shareholders of record may vote by mail by completing, signing and dating their proxy card or voting instruction
card and mailing it in the accompanying pre-addressed envelope. |
If you vote
by Internet or phone, please DO NOT mail your proxy card.
What
constitutes a Quorum?
To
carry on the business of the Annual Meeting, we must have a quorum. A quorum is present when a majority of the outstanding shares
of stock entitled to vote, as of the record date, are represented in person or by proxy. Shares owned by Vapor are not considered
outstanding or considered to be present at the Annual Meeting. Broker non-votes (because there are routine matters presented at
the Annual Meeting) and abstentions are counted as present for the purpose of determining the existence of a quorum.
What
happens if Vapor is unable to obtain a Quorum?
If
a quorum is not present to transact business at the Annual Meeting or if we do not receive sufficient votes in favor of the proposals
by the date of the Annual Meeting, the persons named as proxies may propose one or more adjournments of the Annual Meeting to
permit solicitation of proxies.
What
is a broker non-vote?
If
your shares are held in street name, you must instruct the organization who holds your shares how to vote your shares. If you
do not provide voting instructions, your shares will not be voted on any non-routine proposal. This vote is called a “broker
non-vote.” Broker non-votes do not count as a vote “FOR” or “AGAINST” any of the proposals. Because
Proposals 6 and 7 require a majority of our outstanding shares to vote “FOR” approval, a broker non-vote will adversely
affect these proposals.
If
you are the shareholder of record, and you sign and return a proxy card without giving specific voting instructions, then the
proxy holders will vote your shares in the manner recommended by our Board on all matters presented in this Proxy Statement and
as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the
meeting. If your shares are held in street name and you do not provide specific voting instructions to the organization that holds
your shares, the organization may generally vote at its discretion on routine matters, but not on non-routine matters. If you
sign your vote instruction form but do not provide instructions on how your broker should vote, your broker will vote your shares
as recommended by our Board on any non-routine matter. See the note below and the following question and answer.
Important
Rule Affecting Beneficial Owners Holding Shares In Street Name
Brokers
may no longer use discretionary authority to vote shares on the election of directors if they have not received instructions from
their clients. Please submit your vote instruction form so your vote is counted.
Which
Proposals are considered “Routine” or “Non-Routine”?
Proposals
1, 2, 3 and 4 are non-routine and Proposals 5, 6 and 7 are routine.
How
are abstentions treated?
Abstentions
only have an effect on the outcome of any matter being voted on that requires the approval based on our total voting stock outstanding.
Thus, abstentions have no effect on any of the proposals.
How
Many Votes are Needed for Each Proposal to Pass, is Broker Discretionary Voting Allowed and What is the Effect of an Abstention?
Proposals |
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Vote
Required |
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Broker
Discretionary
Vote Allowed |
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Effect
of
Abstentions on
the Proposal |
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1.
To elect the board of directors |
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Plurality |
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No |
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Not
applicable |
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2.
To approve and ratify the adoption of the 2015 Equity Incentive Plan |
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Majority
of the votes cast |
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No |
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No
effect |
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3.
To approve named executive officer compensation |
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Majority
of the votes cast |
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No |
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No
effect |
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4.
To vote, on a non-binding advisory basis, whether a non-binding advisory vote on Vapor’s executive compensation, should
be held every one, two or three years |
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Not
applicable |
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No |
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No
effect |
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5.
To ratify the appointment of our independent registered public accounting firm for fiscal 2015 |
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Majority
of the votes cast |
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Yes |
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No
effect |
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6. To approve the amendment
to the Certificate of Incorporation to Increase the Authorized Shares |
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Majority
of the outstanding voting shares
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Yes |
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Vote against |
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7. To approve a reverse stock
split |
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Majority
of the outstanding voting shares
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Yes |
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Vote against |
What
are the Voting Procedures?
In
voting by proxy with regard to the election of directors, you may vote in favor of all nominees, withhold your votes as to all
nominees, or withhold your votes as to specific nominees. With regard to the remaining proposals, you may vote in favor of each
proposal or against each proposal, or in favor of some proposals and against others, or you may abstain from voting on any of
these proposals. You should specify your respective choices on the accompanying proxy card or your vote instruction form.
Is
My Proxy Revocable?
You
may revoke your proxy and reclaim your right to vote up to and including the day of the Annual Meeting by giving written notice
to the Corporate Secretary of Vapor, by delivering a proxy card dated after the date of the proxy or by voting in person at the
Annual Meeting. All written notices of revocation and other communications with respect to revocations of proxies should be addressed
to: Vapor Corp., 3001 Griffin Road, Dania Beach, Florida 33312, Attention: Corporate Secretary.
Who
is Paying for the Expenses Involved in Preparing and Mailing this Proxy Statement?
All
of the expenses involved in preparing, assembling and mailing these proxy materials and all costs of soliciting proxies will be
paid by Vapor. In addition to the solicitation by mail, proxies may be solicited by our officers and regular employees by telephone
or in person. Such persons will receive no compensation for their services other than their regular salaries. Arrangements will
also be made with brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial
owners of the shares held of record by such persons, and we may reimburse such persons for reasonable out of pocket expenses incurred
by them in so doing. We may hire an independent proxy solicitation firm.
What
Happens if Additional Matters are Presented at the Annual Meeting?
Other
than the items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual
Meeting. If you submit a signed proxy card, the persons named as proxy holders, Messrs. Jeffrey Holman and James Martin, will
have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. If for
any reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your
proxy for such other candidate or candidates as may be nominated by the Board.
What
is “householding” and how does it affect me?
Record
holders who have the same address and last name will receive only one copy of their proxy materials, unless we are notified that
one or more of these record holders wishes to continue receiving individual copies. This procedure will reduce our printing costs
and postage fees. Shareholders who participate in householding will continue to receive separate proxy cards.
If
you are eligible for householding, but you and other record holders with whom you share an address, receive multiple copies of
these proxy materials, or if you hold Vapor stock in more than one account, and in either case you wish to receive only a single
copy of each of these documents for your household, please contact our Corporate Secretary at: Vapor Corp., 3001 Griffin Road,
Dania Beach, Florida 33312, (888) 482-7671.
If
you participate in householding and wish to receive a separate copy of these proxy materials, or if you do not wish to continue
to participate in householding and prefer to receive separate copies of these documents in the future, please contact our Corporate
Secretary as indicated above. Beneficial owners can request information about householding from their brokers, banks or other
holders of record.
Do
I Have Dissenters’ (Appraisal) Rights?
Appraisal
rights are not available to Vapor shareholders with any of the proposals brought before the Annual Meeting.
Can
a Shareholder Present a Proposal To Be Considered At the 2016 Annual Meeting?
If
you wish to submit a proposal to be considered at the 2016 Annual Meeting, the following is required:
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For
a shareholder proposal to be considered for inclusion in Vapor’s Proxy Statement and proxy card for the 2016 Annual
Meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, which we refer to as the “Exchange Act,”
our Corporate Secretary must receive the written proposal no later than January 26, 2016, which is 120 calendar days
prior to the anniversary date Vapor’s Proxy Statement was mailed to shareholders in connection with this Annual Meeting.
Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of shareholder proposals in
company sponsored materials. |
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Neither
our Certificate of Incorporation nor our Bylaws contain any provisions regarding shareholder director nominations or shareholder
proposals. |
A
nomination or other proposal will be disregarded if it does not comply with the above procedures. All proposals and nominations
should be sent to Vapor Corp., 3001 Griffin Road, Dania Beach, Florida 33312, Attention: Corporate Secretary.
We
reserve the right to amend our Bylaws and any change will apply to the 2016 Annual Meeting unless otherwise specified in the amendment.
Interest
of Officers and Directors in Matters to Be Acted Upon
Except
in the election to our board of nominees set forth herein, none of the officers or directors have any interest in any of the matters
to be acted upon at the Annual Meeting.
The
Board Recommends that Shareholders Vote “For” Proposal Nos. 1, 2, 3, 4 (every THREE years), 5, 6 and 7.
PROPOSAL
1. ELECTION OF DIRECTORS
We
currently have five members of our Board, all of whose terms will expire at this Annual Meeting. The Board proposes the election
of the following nominees as directors:
Jeffrey
Holman
Gregory
Brauser
Angela
Courtin
William
C. Conway III
Daniel
MacLachlan
All
of the nominees listed above have been nominated for election this year and have agreed to serve if elected. The five persons
who receive the most votes cast will be elected and will serve as directors until the next Annual Meeting. If a nominee becomes
unavailable for election before this Annual Meeting, the Board can name a substitute nominee and proxies will be voted for such
substitute nominee unless an instruction to the contrary is written on the proxy card. Furthermore, we may appoint an additional
person to our Board before the Annual Meeting. The principal occupation and certain other
information about the nominees and our executive officers are set forth on the following pages.
The
Board recommends a vote “For” the election of the nominated slate of directors.
DIRECTORS
AND EXECUTIVE OFFICERS
The following
table represents our Board of Directors as of the record date:
Name |
|
Age |
|
Position |
Jeffrey
Holman |
|
46 |
|
Chairman
of the Board |
Gregory
Brauser |
|
30 |
|
Director |
Angela
Courtin |
|
41 |
|
Director |
Frank
Jaumot |
|
57 |
|
Director |
Daniel
MacLachlan |
|
36 |
|
Director |
The following
table represents our Board of Director Nominees:
Name |
|
Age |
|
Position |
Jeffrey
Holman |
|
46 |
|
Current
Director and Nominee |
Gregory
Brauser |
|
30 |
|
Current
Director and Nominee |
Angela
Courtin |
|
41 |
|
Current
Director and Nominee |
William
Conway III |
|
30 |
|
Director
Nominee |
Daniel
MacLachlan |
|
36 |
|
Current
Director and Nominee |
Board
of Director Nominee Biographies
Jeffrey
Holman has been our Chairman of the Board and Chief Executive Officer since April 2014. From February 2013 until March
4, 2015, Mr. Holman serviced as our President. Mr. Holman has been a member of our Board since May 2013 and has served as a member
of the Board of Directors of our operating subsidiary Smoke Anywhere USA, Inc. (“Smoke Anywhere”) since its inception
on March 24, 2008. Since 1998, Mr. Holman has been the President of Jeffrey E. Holman & Associates, P.A., a South Florida
Based law firm. He has also been a Partner in Holman, Cohen & Valencia since the year 2000. Mr. Holman was selected as a director
for his business and legal experience. In addition, as the founder of our operating subsidiary, Mr. Holman possesses an
in-depth understanding of the challenges, risks and characteristics unique to our industry.
Gregory
Brauser has served as a director since March 4, 2015. Prior to that, Mr. Brauser served as Chief Operating Officer of
Vaporin beginning in January 2014. Mr. Brauser founded Direct Source China in 2009, a sourcing company headquartered in Shanghai,
China, that assists mid-size U.S. businesses with their direct manufacturing overseas. Since 2010, Mr. Brauser has served as Vice
Chairman and director of Dog-E-Glow, Inc., a manufacturer and distributer of LED lighted dog collars and leashes, which he formed.
Mr. Brauser was appointed as a Vaporin designee in connection with the merger with Vaporin, Inc.
Angela
Courtin has been a director since April 2014. Since July 2014, Ms. Courtin has been the Chief Marketing Officer of Relativity
Media, a next-generation film studio. From August 2013 until June 2014, Ms. Courtin was the President, Dentsu Aegis Network, US.
Dentsu Aegis Network US businesses include Carat, mcgarrybowen, Isobar, Vizeum, 360i, Posterscope, D2D, PSLive, The Story Lab,
Team Epic, Copernicus and iProspect. Previously, Ms. Courtin acted as Chief Content Officer for Aegis Media and President of The
Story Lab, Aegis’ content agency which she founded in 2012 to help clients reach and deepen connections with consumers by
creating and leveraging content. Prior to that, Ms. Courtin was co-head of Integrated Marketing at MTV; led Marketing, Entertainment
and Content at MySpace; and was an Associate Producer on the hit HBO series “Big Love.” She was featured as one of
Ad Age’s “Women to Watch” in 2013 and The Business Insider’s “30 Most Powerful Women in Advertising”
in 2012. Ms. Courtin was appointed as a director for her extensive marketing expertise.
William
Conway III has served in many management positions with City Furniture since 2008 the latest being Director of Operations
and Customer Service. Mr. Conway was designated a director nominee for his business and management expertise.
Daniel
MacLachlan has been a director since April 18, 2015. Mr. MacLachlan served as the Chief Financial Officer of The Best
One, Inc., from October 2014 through early February 2015, facilitating its merger with IDI, Inc. (FKA, Tiger Media, Inc.) (NYSE
MKT: IDI). Mr. MacLachlan served as Director of Finance and Chief Financial Officer for TransUnion Risk and Alternative Data Solutions,
Inc., after it acquired substantially all the assets of TLO, LLC (“TLO”), a leading provider of data fusion technology-driven
investigative products and solutions, in December 2013. Mr. MacLachlan was Chief Financial Officer of TLO since its inception
in 2009. Mr. MacLachlan was appointed a director for his financial and accounting expertise.
In
March 2015, Mr. Frank Jaumot, a director as of the record date, notified Vapor of his intention not to seek re-election as a director.
Executive
Officers
Name |
|
Age |
|
Position |
Jeffrey
Holman |
|
46 |
|
Chief
Executive Officer |
Gregory
Brauser |
|
30 |
|
President
|
James
Martin |
|
48 |
|
Chief
Financial Officer |
Christopher
Santi |
|
43 |
|
Chief
Operating Officer |
Executive
Officer Biographies
See above
for Mr. Jeffrey Holman’s and Mr. Gregory Brauser’s biographies.
James
Martin has served as Chief Financial Officer since March 4, 2015. Prior to that, Mr. Martin served as Chief Financial
Officer of Vaporin, Inc. beginning in April 2014. Prior to his appointment as Chief Financial Officer of Vaporin, Mr. Martin was
Chief Financial Officer of Non-Invasive Monitoring Systems, Inc. (“NIMS”), a publicly held medical device company
since January 2011. Mr. Martin previously had served as Chief Financial Officer of SafeStitch Medical, Inc. (“SafeStitch”),
a publicly-held medical device company from January 2011 through October 2013. From January 2011 through December 2011 Mr. Martin
also served as Vice President of Finance of Aero Pharmaceuticals, Inc. (“Aero”), a privately held pharmaceutical distributor
that voluntarily dissolved in December 2011. From July 2010 through January 2011, Mr. Martin served as Controller of each of NIMS,
SafeStitch and Aero. Also from May 2008 through July 2010, Mr. Martin served as Controller of AAR Aircraft Services-Miami, a subsidiary
of AAR Corp, an aerospace and defense company in which he was responsible for all financial reporting and inventory logistics.
Christopher
Santi has been our Chief Operating Officer since December 12, 2012. Prior to that
Mr. Santi served as Director of Operations of Vapor beginning in October 2011. Mr. Santi served as the National Sales Manager
of Collages.net from November 2007 to October 2011.
There
are no family relationships among our directors and executive officers.
Corporate
Governance
Board
Responsibilities
The
Board oversees, counsels, and directs management in the long-term interest of Vapor and its shareholders. The Board’s responsibilities
include establishing broad corporate policies and reviewing the overall performance of Vapor. The Board is not, however, involved
in the operating details on a day-to-day basis.
Board
Committees and Charters
The
Board and its Committees meet throughout the year and act by written consent from time-to-time as appropriate. The Board delegates
various responsibilities and authority to different Board Committees. Committees regularly report on their activities and actions
to the Board.
The
Board currently has and appoints the members of: the Audit Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee. Each of these committees have a written charter which can be found on our corporate website at ir.vapor-corp.com/committee-charters.
The
following table identifies the independent and non-independent current Board and committee members:
Name | |
Independent | |
Audit | |
Compensation | |
Nominating
and
Corporate
Governance |
Jeffrey Holman | |
| | | |
| | | |
| | | |
| | |
Gregory Brauser | |
| | | |
| | | |
| | | |
| | |
Angela Courtin | |
| x | | |
| x | | |
| x | | |
| x | |
Frank Jaumot | |
| x | | |
| x | | |
| x | | |
| x | |
Daniel MacLachlan | |
| x | | |
| x | | |
| x | | |
| x | |
Number of Meetings
held in 2014 | |
| | | |
| 5 | | |
| 0 | | |
| 0 | |
The Board held 19 Board
meetings in fiscal 2014. Although our Compensation and Nominating and Corporate Governance Committees did not hold any formal
meetings in 2014, they have either held informal meetings or acted by unanimous written consent in 2015. Each of the incumbent
directors attended over 75% of the total number of Board meetings and committee meetings on which such director served (during
the period which such director has served). We do not have a policy with regard to directors’ attendance at the Annual Meeting.
Vapor did not hold an Annual Meeting in fiscal 2014.
Director
Independence
Our
Board has determined that Angela Courtin, Frank Jaumot and Daniel MacLachlan are independent in accordance with standards under
the Nasdaq Listing Rules. Our Board determined that as a result of being executive officers, Messrs. Jeffrey Holman and Gregory
Brauser were not independent under the Nasdaq Listing Rules.
Our
Board has also determined that Angela Courtin, Frank Jaumot and Daniel MacLachlan are independent under the Nasdaq Listing Rules
independence standards for Audit Committee members.
If
elected, Mr. Conway will be deemed to be independent under the Nasdaq Listing Rules.
Committees
of the Board of Directors
Audit
Committee
The
Audit Committee, which currently consists of Angela Courtin, Frank Jaumot and Daniel MacLachlan, reviews Vapor’s financial
reporting process on behalf of the Board and administers our engagement of the independent registered public accounting firm.
See Proposal 5 for a further description of the Audit Committee’s responsibilities.
Audit
Committee Financial Expert
Our
Board has determined that Frank Jaumot and Daniel MacLachlan are both qualified as an Audit Committee Financial Expert, as that
term is defined by the rules of the SEC and in compliance with the Sarbanes-Oxley Act of 2002.
Compensation
Committee
The
function of the Compensation Committee is to determine the compensation of our executive officers. The Compensation Committee
has the power to set performance targets for determining periodic bonuses payable to executive officers and may review and make
recommendations with respect to shareholder proposals related to compensation matters. Additionally, the Compensation Committee
is responsible for administering Vapor’s equity compensation plans including the 2015 Equity Incentive Plan, which we refer
to as the “Plan.”
The
members of the Compensation Committee are all independent directors within the meaning of applicable Nasdaq Listing Rules and
all of the members are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.
Nominating
and Corporate Governance Committee
The
responsibilities of the Nominating and Corporate Governance Committee include the identification of individuals qualified to become
Board members, the selection of nominees to stand for election as directors, the oversight of the selection and composition of
committees of the Board, establish procedures for the nomination process including procedures and the oversight of the evaluations
of the Board and management. The Nominating and Corporate Governance Committee has not established a policy with regard to the
consideration of any candidates recommended by shareholders since no shareholders have made any recommendations. If we receive
any shareholder recommended nominations, the Nominating Committee will carefully review the recommendation(s) and consider such
recommendation(s) in good faith.
Board
Diversity
While we do not have a
formal policy on diversity, our Board and Nominating and Corporate Governance Committee consider diversity to include the skill
set, background, reputation, type and length of business experience of our board members as well as a particular nominee’s
contribution to that mix. Although there are many other factors, our Board seeks individuals with experience in the vaporizer
industry, marketing, legal and accounting skills and board experience.
Board
Leadership Structure
Vapor
has chosen to combine the Chief Executive Officer and Board Chairman positions. We believe that this Board leadership structure
is appropriate for Vapor at this time. Vapor believes it is more efficient to have the leadership of the Board in the same hands
as the Chief Executive Officer of Vapor. Vapor does not have a lead independent director.
Role
of Board in Risk Oversight
Our
risk management function is overseen by our Board. Our management keeps its Board apprised of material risks and provides its
directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect
us, and how management addresses those risks. Jeffrey Holman, as our Chief Executive Officer and Chairman of the Board, and James
Martin, our Chief Financial Officer work closely together with the Board once material risks are identified on how to best address
such risks. If the identified risk poses an actual or potential conflict with management, our independent directors may conduct
the assessment. Presently, the primary risks affecting us are our ability to grow our business includes raising capital, marketing
our products and proposed state and federal regulation.
Code
of Ethics
The
Company has a code of ethics, “Business Conduct: “Code of Conduct and Policy,” that applies to all of the Company’s
employees, including its principal executive officer, principal financial officer and principal accounting officer, and the Board.
A copy of this code is available on the Company’s website at www.vapor-corp.com. The Company intends to disclose any changes
in or waivers from its code of ethics by posting such information on its website or by filing a Current Report on Form 8-K.
Communication
with our Board of Directors
Although
we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing
to us at Vapor Corp., 3001 Griffin Road, Dania Beach, Florida 33312, Attention: Corporate Secretary, or by facsimile (888) 882-7095.
Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded,
as appropriate.
Related
Person Transactions
In
connection with the issuance of $300,000 18% senior convertible notes (“$300,000 Senior Convertible Notes”) in 2012
to Kevin Frija, Vapor’s then Chief Executive Officer, Harlan Press, Vapor’s then Chief Financial Officer, and Doron
Ziv, a greater than 10% shareholder of Vapor, Vapor paid $48,674 of interest to these noteholders in 2013 until these notes were
converted in full into shares of the Company’s common stock on October 29, 2013. The Company did not pay any principal on
the $300,000 Senior Convertible Notes in 2013 prior to or in connection with their conversion.
In
connection with the issuance of a $500,000 24% senior note (the “Senior Note”) in 2012 to Ralph Frija, the father
of the Company’s then Chief Executive Officer, Vapor paid approximately $106,800 of interest to this noteholder in 2013
until it was converted in full into shares of the Company’s common stock on October 29, 2013. The Senior Note was not convertible
until Vapor and Ralph Frija amended the Note to provide for (i) cash principal and interest payments on a weekly basis, (ii) an
extended maturity date for payment to April 22, 2016 and (iii) to make the Senior Note convertible into shares of Vapor’s
common stock at a conversion price of $2.57 per share. The Company paid principal of $70,513 on the Senior Note in 2013 prior
to its conversion.
On
July 9, 2013, the Company entered into Securities Purchase Agreements with, among others, Ralph Frija, and Philip Holman, the
father of Jeffrey Holman, Vapor’s then President, pursuant to which (x) Mr. Frija purchased a senior convertible note from
Vapor in the principal amount of $200,000 and warrants to purchase 1,927 shares of the Company’s common stock at $5.71 per
share and (y) Mr. Holman purchased a senior convertible note from Vapor in the principal amount of $100,000 and warrants to purchase
964 shares of the Company’s common stock with an exercise price of $5.71 per share. These senior convertible notes paid
interest at 18% per annum, a maturity date of July 8, 2016, and were convertible into shares of the Company’s common stock
at $5.71 per share. The Company paid interest of $16,126 to these noteholders during 2013 until they were converted extinguished
on October 29, 2013. The Company did not pay any principal on these senior convertible notes prior to or in connection with their
conversion.
On
October 29, 2013, Kevin Frija, our then Chief Executive Officer, Jeffrey Holman, our then President and current Chairman of the
Board and Chief Executive Officer, Harlan Press, our former Chief Financial Officer, Doron Ziv, a former director, and Isaac Galazan,
a former director of our operating subsidiary Smoke Anywhere, purchased 20,000, 40,000, 20,000, 20,000 and 17,167 shares of our
common stock, respectively, at $3.00 per share in a private placement on terms identical with other investors.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than 10% of our common stock to
file initial reports of ownership and changes in ownership of our common stock and other equity securities with the SEC. These
individuals are required by the regulations of the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely
on a review of the copies of the forms furnished to us, and written representations from reporting persons that no Forms 5 were
required to report delinquent filings, we believe that all filing requirements applicable to our officers, directors and 10% beneficial
owners were complied with during fiscal year 2014.
Security Ownership of Certain Beneficial
Owners and Management
The
following table sets forth the number of shares of our common stock beneficially owned as of May 20, 2015 by (i) those persons
known by us to be owners of more than 5% of our common stock, (ii) each director and director nominee, (iii) our Named Executive
Officers (described below) and (iv) all of our executive officers and directors of as a group. Unless otherwise specified in the
notes to this table, the address for each person is: c/o Vapor Corp., 3001 Griffin Road, Dania Beach, Florida 33312.
Title
of Class | |
Name
and Address of Beneficial Owner | |
Amount
and Nature of Beneficial Ownership (1) | |
Percent
of Class (1) |
Directors
and Named Executive Officers: | |
| | | |
| | |
Common
Stock | |
Jeffrey
Holman (2) | |
| 1,281,110 | | |
| 3.8 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Kevin
Frija (3) | |
| 1,333,359 | | |
| 3.9 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Harlan
Press (4) | |
| 156,998 | | |
| * | |
| |
| |
| | | |
| | |
Common
Stock | |
Christopher
Santi (5) | |
| 32,222 | | |
| * | |
| |
| |
| | | |
| | |
Common
Stock | |
Gregory
Brauser (6) | |
| 1,087,144 | | |
| 3.2 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Angela
Courtin (7) | |
| 20,000 | | |
| * | |
| |
| |
| | | |
| | |
Common
Stock | |
Frank
Jaumot (8) | |
| 22,000 | | |
| * | |
| |
| |
| | | |
| | |
Common
Stock | |
William
Conway III (9) | |
| 0 | | |
| 0 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Daniel
MacLachlan (10) | |
| 0 | | |
| 0 | % |
| |
| |
| | | |
| | |
Common
Stock | |
All
directors and executive officers as a group (7 persons) (11) | |
| 2,650,732
| | |
| 7.8 | % |
| |
| |
| | | |
| | |
5% Shareholders: | |
| |
| | | |
| | |
Common
Stock | |
Michael
Brauser (12) | |
| 2,056,382 | | |
| 6.0 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Barry
Honig (13) | |
| 2,358,437
| | |
| 6.7 | % |
| |
| |
| | | |
| | |
Common
Stock | |
Alpha
Capital Anstalt (14) | |
| 2,115,613 | | |
| 6.1 | % |
* Less than
1%.
(1)
|
Applicable
percentages are based on 33,635,758 shares outstanding as of May 20, 2015, adjusted as required by rules of the SEC. Beneficial
ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities.
Shares of common stock underlying options, warrants and convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but
are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to
this table, Vapor believes that each of the shareholders named in the table has sole voting and investment power with respect
to the shares of common stock indicated as beneficially owned by them. The table includes only vested securities or securities
that will vest and become exercisable within 60 days. |
|
|
(2) |
Holman:
A director and executive officer. Includes 120,000 vested options. |
|
|
(3) |
Frija:
Former chief executive officer. Because Mr. Frija served as a Chief Executive Officer during fiscal 2014, he is a Named Executive
Officer under the SEC’s rules and regulations. Includes 180,000 vested options and 4,475 shares underlying warrants.
|
|
|
(4) |
Press:
A former executive officer. Includes 40,000 vested options and 3,101 shares underlying warrants. |
|
|
(5) |
Santi:
An executive officer. Represents vested options. |
|
|
(6) |
Gregory
Brauser: A director and executive officer. |
|
|
(7) |
Courtin:
A director. Represents vested options. |
|
|
(8) |
Jaumot:
A director. |
|
|
(9) |
Conway:
A director nominee. |
|
|
(10) |
MacLachlan:
A director. |
|
|
(11) |
Total
D&O: Includes securities beneficially owned by executives who are not a Named Executive Officer. |
|
|
(12) |
Michael
Brauser: Includes 427,059 shares underlying warrants. Address is 4400 Biscayne Blvd., Miami, Florida 33137. |
|
|
(13) |
Honig:
Includes 834,482 shares underlying warrants and 942,914 shares underlying a convertible note. Address is 555 South Federal
Highway, Ste. 450, Boca Raton, Florida 33432. |
|
|
(14) |
Alpha:
Includes 634,968 shares underlying warrants and 454,545 shares underlying a convertible note. Address is Lettstrasse 32, P.O.
Box 1212, FL 9490, Vaduz Furstentum Liechtenstein c/o LH Financial Services Corp., 510 Madison Avenue, Ste 1400, New York,
New York 10022. |
Director
Compensation
Non-employee
directors are paid a monthly fee of $1,000 per month and $1,000 for each meeting attended. Because we do not pay any compensation
to employee directors, Messrs. Holman and Frija are omitted from the following table.
Fiscal
2014 Director Compensation
Name (a) | |
Fees
Earned or Paid
in Cash ($)(b) | |
Option
Awards
($)(d)(1) | |
All
Other Compensation ($)(g) | |
Total ($)(j) |
Robert J Barrett III (2) | |
| 27,000 | | |
| 388,800 | | |
| 0 | | |
| 415,800 | |
| |
| | | |
| | | |
| | | |
| | |
Angela Courtin | |
| 21,000 | | |
| 388,800 | | |
| 0 | | |
| 409,800 | |
| |
| | | |
| | | |
| | | |
| | |
Frank E. Jaumot (3) | |
| 27,000 | | |
| 388,800 | | |
| 0 | | |
| 415,800 | |
| |
| | | |
| | | |
| | | |
| | |
Ryan Kavanaugh (2) | |
| 13,000 | | |
| 498,000 | | |
| 1,540,000 | (4) | |
| 2,051,000 | |
(1)
|
This
represents the fair value of the award as of the grant date in accordance with FASB ASC Topic 718. These amounts represent
awards that are paid in shares of common stock or options to purchase shares of our common stock and do not reflect the actual
amounts that may be realized by the directors. In April 2014, these directors were granted 60,000 stock options exercisable
at $6.48 and vesting in three equal annual increments beginning April 25, 2015. |
|
|
(2)
|
Messrs.
Barrett and Kavanaugh resigned prior to the record date. |
|
|
(3)
|
Not
standing for re-election in connection with the Annual Meeting. |
|
|
(4)
|
Represents
200,000 shares of common stock issued in connection with consulting services. See footnote (1) above. |
EXECUTIVE
COMPENSATION
Fiscal
2014 Summary Compensation Table
The
following table sets forth information regarding the compensation for services performed during fiscal years 2014 and 2013, awarded
to, paid to or earned by our Named Executive Officers, which include all Chief Executive Officers serving during fiscal 2014 and
(iii) our two other most highly compensated executive officers, as determined by reference to total compensation for fiscal year
2014, who were serving as executive officers at the end of fiscal year 2014.
Name
and Principal
Position (a) | |
Year
(b) | |
Salary
($)(c) | |
Bonus
($)(d)(1) | |
All
Other Compensation
($)(i) | |
Total
($)(j) |
| |
| |
| |
| |
| |
|
Jeffrey Holman | |
| 2014 | | |
| 182,000 | | |
| 0 | | |
| 0 | | |
| 182,000 | |
Chief Executive Officer | |
| 2013 | | |
| 169,400 | | |
| 20,000 | | |
| 0 | | |
| 189,400 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Kevin Frija | |
| 2014 | | |
| 138,819 | | |
| 0 | | |
| 0 | | |
| 138,819 | |
Former Chief Executive Officer | |
| 2013 | | |
| 150,404 | | |
| 20,000 | | |
| 0 | | |
| 170,404 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Harlan Press | |
| 2014 | | |
| 188,339 | | |
| 0 | | |
| 0 | | |
| 188,389 | |
Former Chief Financial Officer | |
| 2013 | | |
| 179,939 | | |
| 20,000 | | |
| 10,442
| (2) | |
| 210,381 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Christopher Santi | |
| 2014 | | |
| 162,246 | | |
| 0 | | |
| 0 | | |
| 162,246 | |
Chief Operating Officer | |
| 2013 | | |
| 156,231 | | |
| 20,000 | | |
| 0 | | |
| 176,231 | |
(1) |
Represent cash
bonuses for 2013 which were paid on February 28, 2014. |
|
|
(2) |
Represents
a cash payment for unused accrued vacation for 2013 that was paid on November 15, 2013. |
Named
Executive Officer Employment Agreements
The
chart below summarizes the terms and conditions of employment agreements with our Named Executive Officers.
Executive
(1) | |
Term | |
Base
Salary |
| |
| | | |
| | |
Jeffrey Holman | |
| February
11, 2013 through December 31, 2015 which shall automatically be renewed unless either
party is given six months’ notice of non-renewal | | |
| $182,000 | |
| |
| | | |
| | |
Christopher Santi (2) | |
| December
12, 2012 through December 11, 2015 which shall automatically be renewed unless either
party is given six months’ notice of non-renewal | | |
| $156,000
in first year, increasing to $162,000 in second year and $170,000 thereafter. Currently,
$170,000 | |
(1) |
Mr. Harlan Press,
a Named Executive Officer, resigned effective April 10, 2015. He will receive nine-months’ severance. |
|
|
(2) |
In
accordance with his Employment Agreement, Mr. Santi received a 10-year option to purchase up to 20,000 shares of the Company’s
common stock at an exercise price of $1.25, vesting monthly at the rate of 556 per month. |
The
Compensation Committee will have the discretion to award each of the Named Executive Officers a bonus based upon job performance
or any other factors determined by the Compensation Committee.
Termination
Provisions
The
table below describes the severance payments that our Named Executive Officers are entitled to in connection with a termination
of their employment upon death, disability, dismissal without cause, Change of Control or for Good Reason. All of the termination
provisions are intended to comply with Section 409A of the Internal Revenue Code of 1986 and the Regulations thereunder.
| |
Holman | |
Press | |
Santi |
| |
| |
| |
|
Death or Total Disability | |
Any amounts due at time of termination | |
Any amounts due at time of termination | |
Any amounts due at time of termination |
| |
| |
| |
|
Dismissal Without Cause or Termination by Executive
for Good Reason or upon a Change of Control (1) | |
Three months of Base Salary for each year of service,
up to 18 months maximum | |
Three months of Base Salary for each year of service,
up to 18 months maximum | |
Two months of Base Salary for each year of service,
up to 12 months maximum |
(1)
|
Good
Reason is generally (with certain exceptions) defined as (i) a relocation of principal place of employment outside a stated
area, (ii) a material reduction in Base Salary, (iii) the diminution of the Named Executive Officers’ duties, or (iv)
any other action or inaction that constitutes a material failure by Vapor to fulfill its obligations under the Employment
Agreements. All of these events are subject to a 30-day cure period. |
|
|
(2) |
Change
of Control is generally defined as (i) a sale of substantially all of the Company, (ii) any “person” (as such
term is defined under the Exchange Act) becomes the beneficial owners of over 50% of the Company’s voting power, (iii)
a change in the majority of the composition of the Board or (iv) a transaction that results in over 50% of the Company’s
voting power ceasing to hold a majority of the voting power post-transaction. |
Risk
Assessment Regarding Compensation Policies and Practices as they Relate to Risk Management
Our
compensation program for employees does not create incentives for excessive risk taking by our employees or involve risks that
are reasonably likely to have a material adverse effect on us. Our compensation has the following risk-limiting characteristics:
|
● |
Our
base pay programs consist of competitive salary rates that represent a reasonable portion of total compensation and provide
a reliable level of income on a regular basis, which decreases incentive on the part of our executives to take unnecessary
or imprudent risks; |
|
|
|
|
● |
A
portion of executive incentive compensation opportunity is tied to long-term incentive compensation that emphasizes sustained
performance over time. This reduces any incentive to take risks that might increase short-term compensation at the expense
of longer term company results; |
|
|
|
|
● |
Awards
are not tied to formulas that could focus executives on specific short-term outcomes; |
|
|
|
|
● |
Equity
awards may be recovered by us should a restatement of earnings occur upon which incentive compensation awards were based,
or in the event of other wrongdoing by the recipient; and |
|
|
|
|
● |
Equity
awards, generally, have multi-year vesting which aligns the long-term interests of our executives with those of our shareholders
and, again, discourages the taking of short-term risk at the expense of long-term performance. |
Outstanding
Equity Awards
Listed
below is information with respect to unexercised options, stock that has not vested and equity incentive awards for each Named
Executive Officer as of December 31, 2014:
Outstanding
Equity Awards At Fiscal Year-End
Name (a) | |
Number
of Securities Underlying Unexercised Options (#) Exercisable (b) | |
Number
of Securities Underlying Unexercised Options (#) Unexercisable (c) | |
Equity Incentive Plan
Awards: Number
of Securities Underlying Unexercised or Unearned Options (#) (d) | |
Option Exercise Price ($) (e) | |
Option Expiration Date (f) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Holman | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 120,000 | | |
| 0 | (1) | |
| | | |
| 2.25 | | |
| 10/1/15 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Frija | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 180,000 | | |
| 0 | (1) | |
| | | |
| 2.25 | | |
| 10/1/15 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Press | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 37,778 | | |
| 2,222 | (2) | |
| | | |
| 1.00 | | |
| 2/28/22 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Santi | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| 20,000 | | |
| 10,000 | (3) | |
| | | |
| 1.15 | | |
| 3/29/22 | |
| |
| 13,889 | | |
| 6,111 | (4) | |
| | | |
| 1.25 | | |
| 12/11/22 | |
(1) |
This
option is fully vested. |
|
|
(2) |
These
unvested options were fully vested as of the record date. |
|
|
(3) |
Of
the unvested options, ½ vested on March 30, 2015 and ½ will vest on March 30, 2016. |
|
|
(4) |
The
unvested options vested, or will vest, in 11 equal monthly increments beginning January 11, 2015. |
PROPOSAL
2. APPROVAL AND RATIFICATION OF THE 2015 EQUITY INCENTIVE PLAN
Our
Board has adopted a resolution declaring it advisable and in the best interests of Vapor and its shareholders that the Plan and
awards granted under the Plan be ratified and approved by shareholders. The resolution also recommends that the Plan and the awards
granted under the Plan be ratified and approved by Vapor’s shareholders and directs that such proposal be submitted to Vapor’s
shareholders at the Annual Meeting.
Overview
and Purpose of the Shareholder Approval
Our
Board believes it is in the Company’s and the shareholders’ best interests to seek approval of Vapor’s 2015
Equity Incentive Plan, which we refer to as the “Plan”. The Plan, if approved, will allow us to continue to incent
our key employees with long-term compensation awards, such as stock options and restricted stock. Equity incentives form an integral
part of the compensation paid to many of our employees, particularly those in positions of key importance. Approval of the Plan
is therefore critical to our ability to continue to attract, retain, engage and focus highly motivated and qualified employees,
particularly in the competitive labor market that exists today in our industry.
The
Plan is effective as of April 29, 2015, which we refer to as the “Effective Date.”
No
Appraisal Rights
Shareholders
have no rights under the Delaware General Corporation Law (the “DGCL”) or under our charter documents to exercise
dissenters’ rights of appraisal with respect to the approval of the Plan.
Description
of the Plan
The
principal features of the Plan are summarized below, but the summary is qualified in its entirety by reference to the actual plan
document. A copy of Plan is included as Appendix A.
Background
The
Plan authorizes up to 5,000,000 shares of our common stock for issuance pursuant to the terms of the Plan. The Plan is a broad-based
plan in which all employees, consultants, officers, and directors of the Company are eligible to participate. The purpose of the
Plan is to further the growth and development of the Company by providing, through ownership of stock of the Company and other
equity-based awards, an incentive to its officers and other key employees and consultants who are in a position to contribute
materially to the prosperity of the Company, to increase such persons’ interests in the Company’s welfare, by encouraging
them to continue their services to the Company, and by enabling the Company to attract individuals of outstanding ability to become
employees, consultants, officers and directors of the Company.
Administration
and Eligibility
The
Plan is administered by our Compensation Committee, which we refer to as the “Administrator.” Under the DGCL, the
Board may delegate to officers of the Company the power to grant awards to employees who are not officers or directors.
Awards
granted under the Plan may be restricted stock, restricted stock units, options and stock appreciation rights (“SARs”)
which are awarded to employees, consultants, officers and directors, who, in the opinion of the Administrator, have contributed,
or are expected to contribute, materially to our success.
The
identification of individuals entitled to receive awards, the terms of the awards, and the number of shares subject to individual
awards, are determined by the Administrator, in its sole discretion. As of the record date, approximately 125 employees and non-employee
directors would have been eligible to participate in the Plan had it been effective.
Limitation
on Awards
The
exercise price of options or SARs granted under the Plan shall not be less than the fair market value of our common stock at the
time of grant. The option price may be paid in United States dollars by check or wire transfer or, at the discretion of the Administrator,
by delivery of shares of our common stock having fair market value equal as of the date of exercise to the cash exercise price,
or a combination thereof.
Stock
Options
The
Administrator may grant either qualified options, which are options that qualify as incentive stock options under Section 422(b)
of the Code, or non-qualified stock options. A stock option entitles the recipient to purchase a specified number of shares of
common stock at a fixed price subject to terms and conditions set by the Administrator, including conditions for exercise that
must be satisfied, which typically will be based solely on continued provision of services. The purchase price of shares of common
stock covered by a stock option cannot be less than 100% of the fair market value of the common stock on the date the option is
granted. Fair market value of the common stock is generally equal to the closing price for the common stock on the on the trading
date before the option is granted.
Stock
Appreciation Rights
A
SAR entitles the holder to receive, as designated by the Administrator, cash or shares of common stock, having a value equal to
the excess of the fair market value of a specified number of shares of common stock at the time of exercise over the exercise
price established by the Administrator.
The
exercise price of each SAR granted under the Plan shall be established by the Administrator or shall be determined by the method
established by the Administrator at the time the SAR is granted, provided the exercise price shall not be less than 100% of the
fair market value of a share of common stock on the date of the grant of the SAR, or such higher price as is established by the
Administrator. Shares of common stock delivered pursuant to the exercise of a SAR shall be subject to such conditions, restrictions
and contingencies as the Administrator may establish in the applicable SAR agreement or document, if any.
Restricted
Stock Awards
A
restricted stock award gives the recipient a stock award subject to restriction on sale. The Administrator determines the terms
and conditions of restricted stock awards, including the number of shares of restricted stock granted, and conditions for vesting
that must be satisfied, which may be based principally or solely on continued provision of services, and also may include a performance-based
component. Unless otherwise provided in the award agreement, the holder of a restricted stock award generally will have the rights
of a shareholder from the date of grant of the award, including the right to vote the shares of common stock and the right to
receive cash dividends and share and property distributions on the shares.
Restricted
Stock Units
A
restricted stock unit gives the recipient the right to receive a number of shares of our common stock on the applicable vesting
or other dates. Delivery of the restricted stock unit may be deferred beyond vesting as determined by the Administrator. The Administrator
determines the terms and conditions of restricted stock units, including the number of units granted, and conditions for vesting
that must be satisfied, which may be based principally or solely on continued provision of services, and also may include a performance-based
component. The holder of a restricted stock unit award will not have voting rights with respect to the award and possess no incidents
of ownership with respect to the underlying common stock.
Term,
Termination and Amendment
The
Board may terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate 10 years from the Effective Date.
No award may be granted under the Plan once it is terminated. Termination of the Plan shall not impair rights or obligations under
any award granted while the Plan is in effect, except with the written consent of the grantee. The Board at any time, and from
time to time, may amend the Plan; provided, however, no amendment shall be affected unless approved by our shareholders
to the extent that shareholder approval is necessary to satisfy the requirements of Section 422 of the Code or required by the
rules of the principal national securities exchange or trading market upon which our common stock trades.
The
Administrator at any time, and from time to time, may amend the terms of any one or more awards; provided, however,
that the rights under the award shall not be impaired by any such amendment, except with the written consent of the grantee. In
addition, any amendment of the purchase price or exercise price of any outstanding award will not be effective without shareholder
approval.
The
number of shares with respect to which options or stock awards may be granted under the Plan, the number of shares covered by
each outstanding option or SAR, and the purchase price per share shall be adjusted for any increase or decrease in the number
of issued shares resulting from a recapitalization, reorganization, merger, consolidation, exchange of shares, stock dividend,
stock split, reverse stock split, or other subdivision or consolidation of shares.
Forfeiture
All
vested or unvested awards maybe immediately forfeited at the option of the Board in the event that the recipient performs certain
acts against the interests of the Company including termination as a result of fraud, dishonesty or violation of Company policy.
Adjustments
upon Changes in Capitalization
The
number of shares of common stock covered by each outstanding stock right, and the number of shares of common stock which have
been authorized for issuance under the Plan as well as the price per share of common stock (or cash, as applicable) covered by
each such outstanding option or SAR, shall be proportionately adjusted for any increases or decrease in the number of issued shares
of common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification, or any other
increase or decrease in the number of issued shares of common stock effected without receipt of consideration by the Company.
Such adjustment shall be made by the Administrator.
Federal
Income Tax Consequences
The
following is a brief summary of the principal U.S. federal income tax consequences with respect to awards granted under the Plan.
Restricted
Stock Awards
The
recipient of a restricted stock award does not have taxable income upon receipt of the award. When the restricted stock award
is vested, the recipient will recognize ordinary income in an amount equal to the difference of the fair market value of the shares
on the date of vesting and the amount paid for such restricted stock, if any.
Upon
the vesting of a restricted stock award, the Company will be entitled to a corresponding income tax deduction in the tax year
in which the restricted stock award vested.
The
recipient may, however, elect under Section 83(b) of the Code to include as ordinary income in the year the shares are granted
an amount equal to the excess of (i) the fair market value of the shares on the date of issuance, over (ii) the purchase price,
if any, paid for the shares. If the Section 83(b) election is made, the recipient will not realize any additional taxable income
when the shares become vested.
Restricted
Stock Units
A
recipient will not recognize taxable income upon the grant of a restricted stock unit, and we will not be entitled to a deduction,
until the shares and/or cash with respect to the award are transferred to the recipient, generally at the end of the vesting period.
At the time of transfer, the recipient will recognize ordinary income equal to the value of the shares of common stock and/or
cash. The Company will be entitled to a deduction equal to the income recognized by the recipient. The subsequent disposition
of shares acquired pursuant to a restricted stock unit award will result in capital gain or loss (based upon the difference between
the price received upon disposition and the recipient’s basis in those shares).
Stock
Options
The
recipient does not recognize any taxable income as a result of a grant of a non-qualified stock option. Upon exercise of a non-qualified
stock option, the recipient will recognize ordinary income in an amount equal to the difference between the fair market value
of the shares on the date of exercise and the exercise price. When the shares are sold, any difference between the sale price
and the fair market value of the shares on the date of exercise will generally be treated as long term or short term capital gain
or loss, depending on whether the stock was held for more than one year. Upon the exercise of a non-qualified stock option, the
Company will be entitled to a corresponding income tax deduction in the tax year in which the option was exercised.
Upon
exercise of an incentive stock option, the excess of the fair market value of the shares of common stock acquired over the option
exercise price will be an item of tax preference to the participant, which may be subject to an alternative minimum tax for the
year of exercise. If no disposition of the shares is made within two years from the date of granting of the incentive stock option
or within one year after the transfer of the shares to the participant, the participant does not realize taxable income as a result
of exercising the incentive stock option; the tax basis of the shares received for capital gain treatment is the option exercise
price; any gain or loss realized on the sale of the shares is long-term capital gain or loss. If the recipient disposes of the
shares within the two-year or one-year periods referred to above, the recipient will realize ordinary income at that time in an
amount equal to the excess of the fair market value of the shares at the time of exercise (or the net proceeds of disposition,
if less) over the option exercise price. For capital gain treatment on such a disposition, the tax basis of the shares will be
their fair market value at the time of exercise.
Stock
Appreciation Rights
A
recipient does not recognize any taxable income upon the receipt of an SAR. Upon the exercise of an SAR, the recipient will recognize
ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise
date over the exercise price.
Upon
the exercise of an SAR, the Company will be entitled to a corresponding income tax deduction in the tax year in which the SAR
was exercised.
Transfer
Except
for incentive stock options, all awards are transferable subject to compliance with the securities laws and the Plan. Incentive
stock options are only transferable by will or by the laws of descent and distribution.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following chart reflects the number of securities granted and the weighted average exercise price for our compensation plans as
of December 31, 2014.
Name
Of Plan | |
Number
of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(a) | |
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)($) | |
Number
of
securities
remaining available
for future issuance
under compensation
plans (excluding
securities reflected
in column (a))
(c) |
Equity compensation plans approved by security holders | |
| | | |
| | | |
| | |
2009 Equity Incentive
Plan | |
| 444,300 | | |
| 4.79 | | |
| 1,307,400 | |
Non-Plan Grants (1) | |
| 900,000 | | |
| 2.25 | | |
| N/A | |
Total | |
| 1,344,300 | | |
| __ | | |
| 1,307,400 | |
(1) |
Represents
options granted in October 2009. All of these options expire in October 2015.
|
2009
Equity Incentive Plan
There
are 1,800,000 shares of common stock reserved for issuance under the Company’s 2009 Equity Incentive Plan, which we refer
to as the “2009 Plan”. The 2009 Plan provides for the granting of stock options and restricted stock. Effective on
the approval of the new Plan by our shareholders at the Annual Meeting, Vapor does not intend to issue any more awards under the
2009 Plan.
New Plan
Benefits
Because
future grants of awards under the Plan are subject to the discretion of the Board and the Administrator, the future awards that
may be granted to participants cannot be determined at this time. There are no grants that have been previously made which are
contingent upon receiving shareholder approval of the grant.
The
Board recommends a vote “For” this proposal.
PROPOSAL
3. SHAREHOLDER ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Overview
Pursuant
to Section 14A of the Exchange Act and recent legislation, we are asking our shareholders to vote to approve, on a non-binding,
advisory basis, the compensation of our Named Executive Officers, commonly referred to as the “say-on-pay” vote. In
accordance with the Exchange Act requirements, we are providing our shareholders with an opportunity to express their views on
our Named Executive Officers’ compensation. Although this advisory vote is non-binding, our the Compensation Committee will
review and consider the voting results when making future decisions regarding our Named Executive Officer compensation and related
executive compensation programs.
We
encourage shareholders to read the “Executive Compensation” section in this proxy statement, including the compensation
tables and the related narrative disclosure, which describes the structure and amounts of the compensation of our Named Executive
Officers in fiscal year 2014. The compensation of our Named Executive Officers is designed to enable us to attract and retain
talented and experienced executives to lead us successfully in a competitive environment. The Compensation Committee and our Board
believe that our executive compensation strikes the appropriate balance between utilizing responsible, measured pay practices
and effectively incentivizing our Named Executive Officers to dedicate themselves fully to value creation for our shareholders.
Accordingly,
we ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,
that the compensation paid to Vapor’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including
the compensation tables and narrative discussion is hereby APPROVED.”
The
Board recommends a vote “For” this proposal.
PROPOSAL
4. SHAREHOLDER VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
In
addition to the advisory vote on executive compensation described in Proposal 3, pursuant to Section 14A of the Exchange Act,
we are asking our shareholders to vote, on a non-binding, advisory basis, on the frequency of future votes to approve the compensation
of our executive officers. This non-binding “frequency” vote is required to be submitted to our shareholders at least
once every six years. Shareholders may indicate whether they prefer that we conduct future advisory votes to approve the compensation
of our executive officers every one, two or three years, or abstain.
The
Board has determined that holding an advisory vote to approve the compensation of our executive officers every three years is
the most appropriate policy at this time, and recommends that future advisory votes to approve the compensation of our executive
officers occur every third year. Our executive compensation program is designed to create long-term value for our shareholders,
and a vote every three years will allow shareholders to better judge our executive compensation program in relation to our long-term
performance. We also believe that a vote every three years is an appropriate frequency to provide sufficient time to thoughtfully
consider shareholders’ input and to implement any appropriate changes to our executive compensation program, in light of
the timing that would be required to implement any decisions related to such changes.
Shareholders
will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years, or abstain.
The voting frequency option that receives the highest number of votes cast by shareholders will be deemed the frequency for the
advisory vote on executive compensation that has been selected by shareholders. Although this advisory vote on the frequency of
future advisory votes to approve the compensation of our executive officers is nonbinding, the Board and the Compensation Committee
will carefully review and consider the voting results when determining the frequency of future advisory votes to approve the compensation
of our executive officers.
The
Board recommends that the shareholders vote to conduct future advisory votes to approve the compensation of our executive officers
every three years.
PROPOSAL
5. RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2015
Our
Board has appointed Marcum LLP, which we refer to as “Marcum”, to serve as our independent registered public accounting
firm for the fiscal year ending December 31, 2015. Marcum has been Vapor’s independent registered public accounting firm
since 2011. Selection of Vapor’s independent registered public accounting firm is not required to be submitted to a vote
of the shareholders of Vapor for ratification. However, Vapor is submitting this matter to the shareholders as a matter of good
corporate governance. Even if the appointment is ratified, the Board may, in its discretion, appoint a different independent registered
public accounting firm at any time during the year if they determine that such a change would be in the best interests of Vapor
and its shareholders. If the appointment is not ratified, the Board will consider its options.
A
representative of Marcum is not expected to be present at the Annual Meeting.
The
Board recommends a vote “For” the ratification of the appointment of Marcum LLP.
Audit
Committee Report
The
principal purpose of the Audit Committee is to assist the Board in its general oversight of our accounting practices, system of
internal controls, audit processes and financial reporting processes. The Audit Committee is responsible for appointing and retaining
our independent auditor and approving the audit and non-audit services to be provided by the independent auditor. The Audit Committee’s
function is more fully described in its charter.
Our
management is responsible for preparing our financial statements and ensuring they are complete and accurate and prepared in accordance
with generally accepted accounting principles. Marcum, our independent registered public accounting firm for 2014, was responsible
for performing an independent audit of our consolidated financial statements and expressing an opinion on the conformity of those
financial statements with generally accepted accounting principles and as to the effectiveness of our internal control over financial
reporting.
The
Audit Committee has:
|
● |
reviewed
and discussed the audited financial statements with management; |
|
|
|
|
● |
met
privately with the independent registered public accounting firm and discussed matters required to be discussed pursuant to
the Public Company Accounting Oversight Board Auditing Standard No. 16 “Communications with Audit Committees”; |
|
|
|
|
● |
received
the written disclosures and the letter from the independent registered public accounting firm, as required by the applicable
requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s
communications with the Audit Committee concerning independence, and has discussed its independence with Vapor; and |
|
|
|
|
● |
in
reliance on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC. |
This
report is submitted by the Audit Committee.
Frank
Jaumot, Chairman
Daniel
MacLachlan
Angela
Courtin
The
above Audit Committee Report is not deemed to be “soliciting material,” is not “filed” with the SEC and
is not to be incorporated by reference in any filings that Vapor files with the SEC.
It
is not the duty of the Audit Committee to determine that Vapor’s financial statements and disclosures are complete and accurate
and in accordance with generally accepted accounting principles or to plan or conduct audits. Those are the responsibilities of
management and Vapor’s independent registered public accounting firm. In giving its recommendation to the Board, the Audit
Committee has relied on: (1) management’s representations that such financial statements have been prepared with integrity
and objectivity and in conformity with GAAP; and (2) the report of Vapor’s independent registered public accounting firm
with respect to such financial statements.
Audit
Committee’s Pre-Approval Policies and Procedures
The
Audit Committee pre-approves all audit and permissible non-audit services on a case-by-case basis. In its review of non-audit
services, the Audit Committee considers whether the engagement could compromise the independence of our independent registered
public accounting firm, and whether the reasons of efficiency or convenience is in our best interest to engage our independent
registered public accounting firm to perform the services.
Principal
Accountant Fees and Services
All
of the services provided and fees charged by Marcum described below were pre-approved by our Audit Committee. The following table
sets forth the aggregate fees paid to Marcum, our principal accountant for the fiscal years ended 2014 and 2013.
| |
Fiscal
2014 ($) | |
Fiscal
2013 ($) |
Audit Fees (1) | |
| 165,629 | | |
| 137,831 | |
Audit Related Fees (2) | |
| 0 | | |
| 4,460 | |
Tax Fees | |
| 0 | | |
| 0 | |
All Other Fees (3) | |
| 24,988 | | |
| 5,000 | |
Total | |
| 190,617 | | |
| 147,291 | |
(1) |
Audit
fees – these fees relate to the audit of our annual financial statements, the review of our interim quarterly financial
statements, as well as services associated with Registration Statements. |
|
|
(2) |
Audit
related fees – these fees relate primarily to these fees relate to assurance related services in connection with the
audit or review of financial statements. |
|
|
(3) |
All
other fees – these fees relate primarily to the services provided in connection
with the uplisting of the Company’s common stock on Nasdaq and related services.
|
PROPOSAL 6. AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION TO INCREASE OUR AUTHORIZED COMMON STOCK FROM 50 MILLION TO 150 MILLION SHARES
Our Board adopted a resolution
to amend our Certificate of Incorporation, which we refer to as “Certificate,” to increase the number of shares of
common stock that we are authorized to issue from 50,000,000 to 150,000,000 shares and has directed that the proposed amendment
be submitted to our shareholders for their approval and adoption. The amendment will not change the number of shares of preferred
stock that are authorized, and the total authorized shares will be increased from 51,000,000 to 151,000,000. The form of the amendment
is attached as Annex B to this Proxy Statement. The amendment will replace Section 4 of our Certificate, with the following
language:
4.
The total number of shares of stock which the Corporation is authorized to issue is 151,000,000. 150,000,000 shares shall be common
stock, par value $0.001 per share (“Common Stock”), and 1,000,000 shall be preferred stock, par value
$0.001 per share (“Preferred Stock”). Except as otherwise provided in this Certificate of Incorporation,
authority is hereby vested in the Board of Directors of the Corporation from time to time to provide for the issuance of shares
of one or more series of Preferred Stock and in connection therewith to fix by resolution or resolutions providing for the issue
of any such series, the number of shares to be included therein, the voting powers thereof, and such of the designations, preferences
and relative participating, optional or other special rights and qualifications, limitations and restrictions of each such series,
including, without limitation, dividend rights, voting rights, rights of redemption, or conversion into Common Stock rights, and
liquidation preferences, to the fullest extent now or hereafter permitted by the Delaware General Corporation Law and any other
provisions of the Corporation’s Certificate of Incorporation, as amended. The Board of Directors is further authorized to
increase or decrease (but not below the number of such shares of such class or series then outstanding) the number of shares of
any such class or series subsequent to the issuance of shares of that class or series.
Purpose and Effect
We
may issue shares of capital stock to the extent such shares have been authorized under our Certificate. Our Certificate currently
authorize us to issue up to 50,000,000 shares of common stock and 1,000,000 shares of preferred stock. No shares of our common
stock are held in treasury. We expect that we will need to issue (or reserve shares if we raise capital using convertible preferred
stock or debt) additional shares of common stock to raise capital. The Company has engaged an investment bank in order to
raise capital in a public offering in the near future. The Company is not aware of the timing or terms of any such offering
that may be conducted or if such offering will be successful. Any such public offering will be made pursuant only by a prospectus
filed with the SEC and the disclosure hereunder does not constitute an offer of any securities for sale. In the event we
determine to commence an offering prior to the date of the shareholder meeting that would require us to utilize the additional
shares being authorized, we will mail additional Definitive Materials providing shareholders with an update as to the utilization
of the shares being authorized under this proposal. Pending that public offering, the Company plans to raise capital privately
from the sale of common stock and/or securities convertible into or exercisable for common stock. The Company will also need additional
capital in order to grant equity to existing and future Vapor employees as well as for other corporate purposes in order to grow
our business.
The additional shares
of common stock to be authorized after the amendment to the Certificate would have rights identical to the currently outstanding
shares, except for effects incidental to increasing the number of outstanding shares, such as the dilution of current shareholders’
ownership and voting interests when shares are issued. Under our Certificate, our shareholders do not have preemptive rights with
respect to our common stock. Thus, should our Board elect to issue additional shares, existing shareholders would not have any
preferential rights to purchase any shares.
Possible Anti-Takeover Effects of the Amendment
The proposed amendment
to our Certificate is not being recommended in response to any specific effort of which our Board is aware to obtain control of
Vapor, and our Board does not intend or view the proposed increase in authorized common stock as an anti-takeover measure. However,
the ability of our Board to authorize the issuance of the additional shares of common stock that would be available if the proposed
amendment is approved and adopted could have the effect of discouraging or preventing a hostile takeover.
The Board recommends a vote “For” this proposal.
PROPOSAL 7. APPROVAL
OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT.
Our Board has adopted
and is submitting for shareholder vote three amendments to our Certificate that would grant to our Board the discretion to effect
a reverse split of all outstanding shares of our common stock, if the Board deems that it is in our and our shareholders’
best interests, at a ratio of (i) one-for-two, (ii) one-for-five or (iii) any amount in between one-for-two and one-for-five (any
of which we refer to as a “Reverse Stock Split”). Until one year from the Annual Meeting, our Board will have the
sole discretion to elect, as it determines to be in the best interests of Vapor and our shareholders, whether or not to effect
a Reverse Stock Split, and if so, at which of the approved exchange ratios. If our Board elects to implement one of the Reverse
Stock Splits, the Board would abandon the remaining approved Reverse Stock Splits without need for any further shareholder action.
Our Board believes that approval of a proposal granting this discretion to the Board, rather than approval of an immediate Reverse
Stock Split at a specified ratio, would provide the Board with maximum flexibility to react to current market conditions and to
therefore achieve the purposes of the Reverse Stock Split, if implemented, and to act in the best interests of Vapor and our shareholders.
To effect the reverse
stock split, our Board would authorize our management to file a Certificate of Amendment to our Certificate with the Delaware
Secretary of State. If our Board elects to implement one of the approved Reverse Stock Splits, the number of issued and outstanding
shares of our common stock would be reduced in accordance with the ratio for the selected Reverse Stock Splits. The par value
of our common stock would remain unchanged at $0.001 per share, and the number of our authorized shares of common stock would
remain unchanged. Our Board may elect not to implement any of the approved Reverse Stock Splits at its sole discretion, even if
all of the proposed Reverse Stock Splits are approved by our shareholders. You may elect to vote in favor of each of the proposed
ratios, some of the proposed ratios or none of the proposed ratios. The proposed form of amendment to our Certificate to implement
the Reverse Stock Split is attached to this Proxy Statement as Annex C.
Purpose of the Reverse Stock Split
The reasons for the
reverse stock split are generally to increase the per share market price of our common stock which we believe will have several
benefits to us and our shareholders. Our Board believes that the Reverse Stock Split would, among other things, (i) better enable
us to regain compliance with the minimum bid price requirement in order to maintain our listing on Nasdaq, (ii) facilitate higher
levels of stock ownership by institutions whose investment policies generally prohibit investments in lower-priced securities
and (iii) better enable us to raise funds to finance our planned operations.
Our common stock
is currently listed on the Nasdaq Capital Market. In order to maintain listing on the Nasdaq Capital Market, we must continue
to meet certain financial and corporate governance qualifications including a minimum bid price of $1.00. As of the record date,
our common stock’s closing price was $0.4355. On May 19, 2015, we received notice from Nasdaq that we are not in compliance
with the $1.00 minimum bid price requirement. In order to regain compliance, our closing bid price must be at least $1.00 for
a minimum of 10 consecutive business days by November 16, 2015. In the event we are unable to meet this requirement, we may request
an additional six month period to comply by, assuming we have shareholder approval, effectuating a reverse stock split.
In the event we are
unable to regain compliance with the $1.00 minimum requirement, our common stock would be delisted. Following any such delisting,
our common stock would be traded over-the-counter on one of the tiers of the OTC Markets. These alternative markets, however,
are generally considered to be less efficient than, and not as prestigious as, the Nasdaq Capital Market. Many OTC
stocks trade less frequently and in smaller volumes than securities traded on a major exchange like Nasdaq markets, which could
have a material adverse effect on the liquidity of our common stock. Moreover, if not listed on a major stock exchange, our common
stock would be deemed a “penny stock” under the Securities and Exchange Commission’s rules unless it traded
at or above $5.00 per share.
Additionally,
if Proposal 6 is not approved, the Company will, if this Proposal 7 is approved, effectuate any of the reverse splits in order
to raise capital in a public offering. See page 24.
Our
Board also believes that an increased stock price may encourage investor interest and improve the marketability of our common
stock to a broader range of investors, and thus improve liquidity. Due to the trading volatility often associated with low-priced
stocks (including “penny stocks”), many brokerage firms and institutional investors have internal policies and practices
that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced
stocks to their customers. Our Board believes that the anticipated higher market price resulting from the reverse stock split
would enable institutional investors and brokerage firms with policies and practices such as those described above to invest in
our common stock.
Risks of the Reverse Stock Split
The Reverse Stock
Split may not increase our market capitalization, which would prevent us from realizing some of the anticipated benefits of the
Reverse Stock Split. The market price of our common stock is based on a number of factors which may be unrelated to the
number of shares outstanding. These factors may include our performance, general economic and market conditions and other factors,
many of which are beyond our control. The market price per share may not rise, or it may remain constant in proportion to the
reduction in the number shares outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our
common stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split. In
the future, the market price of common stock following the Reverse Stock Split may not equal or exceed the market price prior
to the Reverse Stock Split.
Effects of the Reverse Stock Split
Reduction of Shares
Held by Individual Shareholders. After the effective date of the Reverse Stock Split, each common shareholder will own
fewer shares of our common stock. However, the Reverse Stock Split will affect all of our common shareholders uniformly and will
not affect any common shareholder’s percentage ownership interests in us, except to the extent that the Reverse Stock Split
results in any of our shareholders owning a fractional share as described below. As discussed further below, we will pay of cash
in lieu of fractional shares. The number of shareholders of record will not be affected by the Reverse Stock Split (except to
the extent that any shareholder holds only a fractional share interest and receives cash for such interest after the Reverse Stock
Split). However, if the Reverse Stock Split is approved, it will increase the number of shareholders who own “odd lots”
of less than 100 shares of our common stock. Brokerage commissions and other costs of transactions in odd lots may be higher than
the costs of transactions of more than 100 shares of common stock.
Reduction in Total
Outstanding Shares. The proposed Reverse Stock Split will reduce the total number of outstanding shares of common stock
by a factor based on the ratio of the split. The following table shows the number of shares of our common stock outstanding both
before the Reverse Stock Split and after the Reverse Stock Split:
|
|
Shares
of Common Stock
Outstanding Before the
Reverse Stock Split |
|
Shares
of Common Stock
Outstanding After the
Reverse Stock Split |
One-for-two split |
|
33,635,758 |
|
16,817,879 |
One-for-five split |
|
33,635,758 |
|
6,727,151 |
If the Reverse Stock Split
is between the two numbers in the table above, the number of outstanding shares will be proportionately reduced.
Change in Number
and Exercise Price of Employee and Equity Awards. The Reverse Stock Split will reduce the number of shares of common stock
available for issuance under our equity plans and agreements in proportion to the split ratio. Under the terms of our outstanding
equity and option awards, the Reverse Stock Split will cause a reduction in the number of shares of common stock issuable upon
exercise or vesting of such awards in proportion to the split ratio of the Reverse Stock Split and will cause a proportionate
increase in the exercise price of such awards to the extent they are stock options. The number of shares authorized for future
issuance under our equity plans will also be proportionately reduced. The number of shares of common stock issuable upon exercise
or vesting of stock option awards will be rounded to the nearest whole share and no cash payment will be made in respect of such
rounding. Warrant and other convertible security holders, if any, will also see a similar reduction of the number of shares such
instruments are convertible into as stock option holders described above.
Regulatory Effects.
Our common stock is currently registered under Section 12(b) of the Exchange Act and we are subject to the periodic reporting
and other requirements of the Exchange Act. The Reverse Stock Split will not affect the registration of the common stock under
the Exchange Act or our obligation to publicly file financial and other information with the Securities and Exchange Commission.
If the Reverse Stock Split is implemented, our common stock will continue to trade on Nasdaq.
In addition to the above,
the Reverse Stock Split will have the following effects upon our common stock:
| ● | The
number of shares owned by each holder of common stock will be reduced; |
| ● | The
per share loss and net book value of our common stock will be increased because there
will be a lesser number of shares of our common stock outstanding; |
| ● | The
authorized common stock and the par value of the common stock will not be affected; |
| ● | The
stated capital on our balance sheet attributable to the common stock will be decreased
and the additional paid-in capital account will be credited with the amount by which
the stated capital is decreased; |
| ● | All
outstanding options, warrants, and convertible securities entitling the holders thereof
to purchase shares of common stock, if any, will enable such holders to purchase, upon
exercise thereof, fewer of the number of shares of common stock which such holders would
have been able to purchase upon exercise thereof immediately preceding the Reverse Stock
Split, at the same total price (but a higher per share price) required to be paid upon
exercise thereof immediately preceding the Reverse Stock Split; and |
| ● | As
mentioned above, the Reverse Stock Split may result in some shareholders owning “odd
lots” of less than 100 shares of common stock. Odd lot shares may be more difficult
to sell, and brokerage commissions and other costs of transactions in odd lots are generally
somewhat higher than the costs of transactions in “round lots” of even multiples
of 100 shares. |
Shares of common stock
after the Reverse Stock Split will be fully paid and non-assessable. The amendment will not change any of the other the terms
of our common stock. The shares of common stock after the Reverse Stock Split will have the same voting rights and rights to dividends
and distributions and will be identical in all other respects to the shares of common stock prior to the Reverse Stock Split.
Because the number of
authorized shares of our common stock will not be reduced, an overall effect of the Reverse Stock Split of the outstanding common
stock will be an increase in authorized but unissued shares of our common stock. These shares may be issued by our Board in its
sole discretion. See “Anti-Takeover Effects of the Reverse Stock Split” below. Any future issuance will have the effect
of diluting the percentage of stock ownership and voting rights of the present holders of our common stock and preferred stock.
If we implement a Reverse
Stock Split, the share certificates representing the shares will continue to be valid. In the future, new share certificates will
be issued reflecting the Reverse Stock Split, but this in no way will affect the validity of your current share certificates.
The Reverse Stock Split will occur without any further action on the part of our shareholders. After the effective date of the
Reverse Stock Split, each share certificate representing the shares prior to the Reverse Stock Split will be deemed to represent
the number of shares shown on the certificate, divided by the split ratio. Certificates representing the shares after the Reverse
Stock Split will be issued in due course as share certificates representing shares prior to the Reverse Stock Split are tendered
for exchange or transfer to our transfer agent. We request that shareholders do not send in any of their stock certificates
at this time.
As applicable, new share
certificates evidencing new shares following the Reverse Stock Split that are issued in exchange for share certificates issued
prior to the Reverse Stock Split representing old shares that are restricted shares will contain the same restrictive legend as
on the old certificates. Also, for purposes of determining the term of the restrictive period applicable to the new shares after
the Reverse Stock Split, the time period during which a shareholder has held their existing pre-Reverse Stock Split old shares
will be included in the total holding period.
Procedure for Implementing the Reverse Stock Split
The Reverse Stock Split
would become effective upon the filing of a Second Certificate of Amendment to our Certificate with the Secretary of State of
the State of Delaware. The exact of the filing of the Certificate of Amendment that will effectuate the Reverse Stock Split will
be determined by our Board based on its evaluation as to when such action will be the most advantageous to us and our shareholders.
In addition, our Board reserves the right, notwithstanding shareholder approval and without further action by the shareholders,
to elect not to proceed with the Reverse Stock Split if, at any time prior to filing the amendment to our Certificate, our Board,
in its sole discretion, determines that it is no longer in our best interest and the best interests of our shareholders to proceed
with the Reverse Stock Split. If a Certificate of Amendment effecting the Reverse Stock Split has not been filed with the Secretary
of State of the State of Delaware by the close of business one year from the date of this Annual Meeting, our Board will abandon
the Reverse Stock Split.
After the filing of the
Second Certificate of Amendment, our common stock will have a new CUSIP number, which is a number used to identify our equity
securities, and stock certificates with the older CUSIP number will need to be exchanged for stock certificates with the new CUSIP
number by following the procedures described below.
As soon as practicable
after the Reverse Stock Split our transfer agent will act as exchange agent for purposes of implementing the exchange of stock
certificates for record holders (i.e., shareholders who hold their shares directly in their own name and not through a broker).
Record holders of pre-Reverse Stock Split shares will be asked to surrender to the transfer agent certificates representing pre-Reverse
Stock Split shares in exchange for a book entry with the transfer agent or certificates representing post-Reverse Stock Split
shares in accordance with the procedures to be set forth in a letter of transmittal to be sent by us. No new certificates will
be issued to a shareholder until such shareholder has surrendered such shareholder’s outstanding certificate(s) together
with the properly completed and executed letter of transmittal to the exchange agent.
For street name holders
of pre-Reverse Stock Split shares (i.e., shareholders who hold their shares through a broker), your broker will make the appropriate
adjustment to the number of shares held in your account following the effective date of the Reverse Stock Split.
SHAREHOLDERS SHOULD NOT DESTROY ANY
STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
No service charges, brokerage
commissions or transfer taxes will be payable by any shareholder, except that if any new stock certificates are to be issued in
a name other than that in which the surrendered certificate(s) are registered it will be a condition of such issuance that (1)
the person requesting such issuance pays all applicable transfer taxes resulting from the transfer (or prior to transfer of such
certificate, if any) or establishes to our satisfaction that such taxes have been paid or are not payable, (2) the transfer complies
with all applicable federal and state securities laws, and (3) the surrendered certificate is properly endorsed and otherwise
in proper form for transfer.
Payment for Fractional Shares
No fractional shares of
common stock will be issued as a result of the Reverse Stock Split. Instead, shareholders who otherwise would be entitled to receive
fractional shares, upon surrender to the exchange agent of such certificates representing such fractional shares, will be entitled
to receive cash in an amount equal to the product obtained by multiplying (a) the closing price of our common stock on the record
date as reported on Nasdaq by (b) the number of shares of our common stock held by such shareholder that would otherwise have
been exchanged for such fractional share interest.
Accounting Matters
The par value per share
of our common stock will remain unchanged at $0.001 per share after the Reverse Stock Split. As a result, on the effective date
of the Reverse Stock Split, the stated capital on our consolidated balance sheet attributable to common stock will be reduced
and the additional paid-in-capital account will be increased by the amount by which the stated capital is reduced. Per share net
income or loss will be increased because there will be fewer shares of our common stock outstanding. We do not anticipate that
any other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any
period, will arise as a result of the Reverse Stock Split.
Certain Federal Income Tax Consequences
Each shareholder
is advised to consult their own tax advisor as the following discussion may be limited, modified or not apply based on your own
particular situation.
The following is a summary
of important tax considerations of the Reverse Stock Split. It addresses only shareholders who hold the pre-Reverse Stock Split
shares and post- Reverse Stock Split shares as capital assets. It does not purport to be complete and does not address shareholders
subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities,
mutual funds, foreign shareholders, shareholders who hold the pre-Reverse Stock Split shares as part of a straddle, hedge, or
conversion transaction, shareholders who hold the pre-Reverse Stock Split shares as qualified small business stock within the
meaning of Section 1202 of the Internal Revenue Code of 1986, as amended (the “Code”), shareholders who are subject
to the alternative minimum tax provisions of the Code, and shareholders who acquired their pre-Reverse Stock Split shares pursuant
to the exercise of employee stock options or otherwise as compensation. This summary is based upon current law, which may change,
possibly even retroactively. It does not address tax considerations under state, local, foreign, and other laws. Furthermore,
we have not obtained a ruling from the Internal Revenue Service or an opinion of legal or tax counsel with respect to the consequences
of the Reverse Stock Split.
The Reverse Stock Split
is intended to constitute a reorganization within the meaning of Section 368 of the Code. Assuming the Reverse Stock Split
qualifies as reorganization, a shareholder generally will not recognize gain or loss on the Reverse Stock Split, except to the
extent of cash, if any, received in lieu of a fractional share interest in the post- Reverse Stock Split shares. The aggregate
tax basis of the post- Reverse Stock Split shares received will be equal to the aggregate tax basis of the pre-Reverse Stock Split
shares exchanged (excluding any portion of the holder’s basis allocated to fractional shares), and the holding period of
the post- Reverse Stock Split shares received will include the holding period of the pre-Reverse Stock Split shares exchanged.
A holder of the pre- Reverse
Stock Split shares who receives cash will generally recognize gain or loss equal to the difference between the portion of the
tax basis of the pre- Reverse Stock Split shares allocated to the fractional share interest and the cash received. Such gain or
loss will be a capital gain or loss and will be short term if the pre-Reverse Stock Split shares were held for one year or less
and long term if held more than one year. No gain or loss will be recognized by us as a result of the Reverse Stock Split.
PLEASE CONSULT YOUR
OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
No Appraisal Rights
Shareholders have no rights
under DGCL or under our charter documents to exercise dissenters’ rights of appraisal with respect to the Reverse Stock
Split.
Anti-Takeover Effects of the Reverse Stock Split
The overall effect of
the Reverse Stock Split may be to render more difficult the accomplishment of mergers or the assumption of control by a principal
shareholder and thus make the removal of management more difficult.
The effective increase
in our authorized and unissued shares as a result of the Reverse Stock Split could potentially be used by our Board to thwart
a takeover attempt. The overall effects of this might be to discourage, or make it more difficult to engage in, a merger, tender
offer or proxy contest, or the acquisition or assumption of control by a holder of a large block of our securities and the removal
of incumbent management. The Reverse Stock Split could make the accomplishment of a merger or similar transaction more difficult,
even if it is beneficial to shareholders. Our Board might use the additional shares to resist or frustrate a third-party transaction,
favored by a majority of the independent shareholders that would provide an above-market premium, by issuing additional shares
to frustrate the takeover effort.
This Reverse Stock Split
is not the result of management’s knowledge of an effort to accumulate the Company’s securities or to obtain control
of the Company by means of a merger, tender offer, solicitation or otherwise.
Neither our Certificate
nor our Bylaws presently contain any provisions having anti-takeover effects and the Reverse Stock Split Proposal is not a plan
by our Board to adopt a series of amendments to our Certificate or Bylaws to institute an anti-takeover provision. We do not have
any plans or proposals to adopt other provisions or enter into other arrangements that may have material anti-takeover consequences.
The Board recommends
a vote “For” this proposal.
OTHER MATTERS
Vapor has no knowledge
of any other matters that may come before the Annual Meeting and does not intend to present any other matters. However, if any
other matters shall properly come before the Meeting or any adjournment, the persons soliciting proxies will have the discretion
to vote as they see fit unless directed otherwise.
If you do not plan to
attend the Annual Meeting, in order that your shares may be represented and in order to assure the required quorum, please sign,
date and return your proxy promptly. In the event you are able to attend the Annual Meeting, at your request, Vapor will cancel
your previously submitted proxy.
Annex
A
VAPOR
CORP.
2015
EQUITY INCENTIVE PLAN
1.
Purpose; Eligibility.
1.1
General Purpose. The name of this plan is the Vapor Corp. 2015 Equity Incentive Plan (the “Plan”). The purposes
of the Plan are to (a) enable Vapor Corp., a Delaware corporation (the “Company”), to attract and retain the types
of Employees, Consultants, Officers and Directors who will contribute to the Company’s long range success; (b) provide incentives
that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote
the success of the Company’s business.
1.2
Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants, Officers and Directors
of the Company and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants,
Officers and Directors after the receipt of Awards.
1.3
Available Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-Qualified Stock
Options, (c) SARs, (d) Restricted Awards, and (e) Restricted Stock Units.
2.
Definitions. In addition to words and phrases defined elsewhere
in this Plan, the following capitalized words and phrases have the meanings below.
“Applicable
Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate
law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of
Common Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under
the Plan.
“Award”
means any right granted under the Plan, including an Incentive Stock Option, a Non-Qualified Stock Option, a SAR, a Restricted
Award or Restricted Stock Unit.
“Award
Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions
of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any
Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
“Awardholder”
means any person to whom Non-Qualified Stock Options, Restricted Stock Units or SARs are granted pursuant to the Plan.
“Beneficial
Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act),
such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the
right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable
only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding
meaning.
“Board”
means the Board of Directors of the Company, as constituted at any time.
“Cashless
Exercise” shall have the meaning in Section 6.4(b)(ii).
“Cause”
means:
With
respect to any Employee or Consultant: (a) If the Employee or Consultant is a party to an employment or service agreement with
the Company and such agreement provides for a definition of Cause, the definition contained therein; or (b) If no such agreement
exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to, a felony or a crime
involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect
to the Company; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company
; (iii) gross negligence or willful misconduct with respect to the Company; or (iv) material violation of state or federal securities
laws.
With
respect to any Director, a determination by a majority of the disinterested Board members that the Director has engaged in any
of the following: (a) malfeasance in office; (b) willful misconduct or gross negligence; (c) false or fraudulent misrepresentation
inducing the Director’s appointment; (d) wilful conversion of corporate funds; or (e) repeated failure to participate in
Board meetings on a regular basis despite having received proper notice of the meetings in advance.
The
Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant
has been discharged for Cause.
“Change
in Control” means a change in the ownership of the Company, a change in the effective control of the Company, or a change
in the ownership of a substantial portion of the assets of the Company. A Change in Control has occurred, as fully described in
Treasury Regulations Section 1.409A-3(i)(5), as amended from, if one the following events have occurred:
|
(i) |
if
any one person, or more than one person acting as a group (as defined in Treasury Regulations Section 1.409A-3(i)(5)(v)(B))
acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50
percent of the total fair market value or total voting power of the stock of such Company, provided however,
incremental increases by a person or group that owns 50 percent of the total fair market value or total voting power of the
stock do not result in a change in ownership; or |
|
|
|
|
(ii) |
if,
over a 12 month period, (1) a person or a group acquires ownership of stock of the Company possessing 30 percent or more of
the total power of the stock of such Company or (2) a majority of the members of the Company’s board of directors is
replaced by the directors who are not appointed or recommended for election by a majority of the directors before the new
directors’ appointment. For the purpose of this definition, the delegation of the power by resolution or stock exchange
rule to nominate directors to be elected at a meeting of shareholders shall be disregarded; or |
|
|
|
|
(iii) |
if
a person or group acquires (or has acquired during the 12 month period ending on the date of the most recent acquisition by
such person or group) assets from the Company that have a total gross fair market value equal to or greater than 40 percent
of the total gross fair market value of all of the assets for the Company immediately before such acquisition or acquisitions,
provided however, no change in control results if the assets are transferred to any related entities controlled directly or
indirectly by the shareholders of the transferring Company. |
“Code”
means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall
be deemed to include a reference to any regulations promulgated thereunder.
“Committee”
means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section
3.3 and Section 3.4.
“Common
Stock” means the common stock, $.001 par value per share, of the Company, or such other securities of the Company as may
be designated by the Committee from time to time in substitution thereof.
“Company”
means Vapor Corp., a Delaware corporation, and its subsidiaries, and any successor thereto.
“Consultant”
means any individual who is engaged by the Company to render consulting or advisory services.
“Continuous
Service” means that the Participant’s service with the Company, whether as an Employee, Consultant or Director, is
not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because
of a change in the capacity in which the Participant renders service to the Company as an Employee, Consultant or Director or
a change in the entity for which the Participant renders such service, provided that there is no interruption or termination
of the Participant’s Continuous Service; provided further that if any Award is subject to Section 409A of
the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change
in status from an Employee of the Company to a Director will not constitute an interruption of Continuous Service. The Committee
or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of
absence.
“Covered
Employee” has the same meaning as set forth in Section 162(m)(3) of the Code, as interpreted by Internal Revenue Service
Notice 2007-49.
“Director”
means a member of the Board.
“Disability”
means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant
to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination
of whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations
where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10 hereof
within the meaning of Section 22(e) (3) of the Code, the Committee may rely on any determination that a Participant is disabled
for purposes of benefits under any long-term disability plan maintained by the Company in which a Participant participates.
“Disqualifying
Disposition” has the meaning set forth in Section 14.12.
“Effective
Date” shall mean the date as of which this Plan is adopted by the Board.
“Employee”
means any person, including an Officer or Director, employed by the Company; provided that, for purposes of determining
eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation
within the meaning of Code Section 424. Mere service as a Director or payment of a Director’s fee by the Company shall not
be sufficient to constitute “employment” by the Company.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Fair
Market Value” means, as of any date, the value of the Common Stock as determined below. If the principal market for the
Common Stock is any national securities exchange, or the OTC Markets or a similar system, the Fair Market Value shall be the closing
price of a share of Common Stock (or if no sales were reported the closing price on the date immediately preceding such date)
as quoted on such exchange or market on the day of determination, as reported in the Wall Street Journal or such other source
as the Committee deems reliable. In the absence of an established market for the Common Stock, the Fair Market Value shall be
determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.
“Free
Standing Rights” has the meaning set forth in Section 7.1(a).
“Good
Reason” means a Separation From Service for good reason within the meaning of Treasury Regulation Section 1.409A-1(n)(2),
as may be amended from time to time.
“Grant
Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an
Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution,
then such date as is set forth in such resolution.
“Incentive
Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code.
“Incumbent
Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual
becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a
vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be
an Incumbent Director. No individual initially elected or nominated as a Director of the Company as a result of an actual or threatened
election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf
of any person other than the Board shall be an Incumbent Director.
“Non-Employee
Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.
“Non-Qualified
Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“Officer”
means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
“Option”
means an Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to the Plan.
“Optionholder”
means a person to whom an option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding
Option.
“Option
Exercise Price” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“Outside
Director” means a Director who is an “outside director” within the meaning of Section 162(m) of the Code and
Treasury Regulations Section 1.162-27(e)(3) or any successor to such statute and regulation.
“Participant”
means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding
Award.
“Permitted
Transferee” means: (a) a member of the Awardholder’s immediate family (child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
or sister-in-law, including adoptive relationships), any person sharing the Awardholder’s household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons
(or the Awardholder) control the management of assets, and any other entity in which these persons (or the Awardholder) own more
than 50% of the voting interests; (b) third parties designated by the Committee in connection with a program established and approved
by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer
of an Award; and (c) such other transferees as may be permitted by the Committee in its sole discretion.
“Plan”
means this Vapor Corp. 2015 Equity Incentive Plan, as amended and/or amended and restated from time to time.
“Related
Rights” has the meaning set forth in Section 7.1(a).
“Restricted
Award” means any Award granted pursuant to Section 7.2(a).
“Restricted
Period” has the meaning set forth in Section 7.2(a).
“Rule
16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“SAR”
means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares
equal to the number of shares subject to the SAR that is being exercised multiplied by the excess of (a) the Fair Market Value
of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the SAR Award Agreement.
“Securities
Act” means the Securities Act of 1933, as amended.
“Separation
From Service” shall carry the meaning of that phrase as interpreted under Treasury Regulation Section 1.409A-1(h), as may
be amended from time, for all purposes of this Plan.
“Without
Cause” means an involuntary Separation From Service within the meaning of Treasury Regulation Section 1.409A-1(n), as may
be amended from time to time.
“10
Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing
more than 10% of the total combined voting power of all classes of stock of the Company.
3.
Administration.
3.1
Authority of Committee. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the
Board. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers
and authorization conferred by the Plan, the Committee shall have the authority:
(a)
to construe and interpret the Plan and apply its provisions;
(b)
to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c)
to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d)
to delegate its authority to one or more Officers of the Company with respect to Options to employees who are not officers or
directors;
(e)
to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f)
from time to time to select, subject to the limitations set forth in this Plan, those Participants to whom Awards shall be granted;
(g)
to determine the number of shares of Common Stock to be made subject to each Award;
(h)
to determine whether each Option is to be an Incentive Stock Option or a Non-Qualified Stock Option;
(i)
to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and
vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j)
to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding
Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s
obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to
an Award, such amendment shall also be subject to the Participant’s consent;
(k)
to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees
under the Company’s employment policies;
(l)
to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event
that triggers anti-dilution adjustments;
(m)
to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any
instrument or agreement relating to, or Award granted under, the Plan; and
(n)
to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration
of the Plan.
The
Committee also may modify the purchase price or the exercise price of any outstanding Award, provided that if the
modification effects a repricing, shareholder approval shall be required before the repricing is effective.
3.2
Committee Decisions Final. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and
binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary
and capricious.
3.3
Delegation. Subject to the Rules of the Nasdaq Stock Market, the Committee, or if no Committee has been appointed, the
Board, may delegate administration of the Plan to a committee or committees of one or more members of the Board, and the term
“Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have
the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references
in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed
by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add
additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies,
however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of
a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent
of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board.
Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations
for the conduct of its business as it may determine to be advisable.
3.4
Committee Composition. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee
Directors who are also Outside Directors. The Board shall have discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the Board intends to satisfy such exemption
requirements, with respect to Awards to any Covered Employee and with respect to any insider subject to Section 16 of the Exchange
Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee
Directors who are also Outside Directors. Nothing herein shall create an inference that an Award is not validly granted under
the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist
solely of two or more Non-Employee Directors who are also Outside Directors.
3.5
Indemnification. In addition to such other rights of indemnification as they may have as Directors or members of the Committee,
and to the extent allowed by Applicable Laws, the Committee members and other Directors shall be indemnified by the Company against
the reasonable expenses, including attorneys’ fees, actually incurred in connection with pre-suit disputes arising from
claims or allegations made by or on behalf of an Award recipient and any action, suit or proceeding or in connection with any
appeal therein, to which the Company and/or Directors may be a party by reason of any action taken or failure to act under or
in connection with the Plan or any Award granted under the Plan, and against all amounts paid by such parties in settlement thereof
(provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably
withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that such parties did not act in good faith and in
a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding,
had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after
institution of any such action, suit or proceeding, such persons shall, in writing, offer the Company the opportunity at its own
expense to handle and defend such action, suit or proceeding.
4.
Shares Subject to the Plan.
4.1
Subject to adjustment in accordance with Section 11, a total of 5,000,000 shares of Common Stock shall be available for the grant
of Awards under the Plan. During the term of the Awards, the Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Awards.
4.2
Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued
shares, treasury shares or shares reacquired by the Company in any manner.
4.3
Subject to adjustment in accordance with Section 11, no Participant shall be granted, during any one year period, Options to purchase
Common Stock and SARs with respect to more than 500,000 shares of Common Stock in the aggregate or any other Awards with respect
to more than 500,000 shares of Common Stock in the aggregate. If an Award is to be settled in cash, the number of shares of Common
Stock on which the Award is based shall count toward the individual share limit set forth in this Section 4.
4.4
Any shares of Common Stock subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either
in full or in part, shall again become available for issuance under the Plan. Notwithstanding anything to the contrary contained
herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if
such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax
withholding obligation, or (c) shares covered by a stock-settled SAR or other Awards that were not issued upon the settlement
of the Award.
5.
Eligibility.
5.1
Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive
Stock Options may be granted to Employees, Consultants, Officers and Directors and those individuals whom the Committee determines
are reasonably expected to become Employees, Consultants, Officers and Directors following the Grant Date.
5.2
10 Percent Shareholders. A 10 Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise
Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date and the Option is not exercisable after
the expiration of five years from the Grant Date.
6.
Option Provisions. Each Option granted under the Plan shall
be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and
to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall
be separately designated Incentive Stock Options or Non-Qualified Stock Options at the time of grant, and, if certificates are
issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of
Option. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option
designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements
of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
6.1
Term. Subject to the provisions of Section 5.2 regarding 10 Percent Shareholders, no Incentive Stock Option shall be exercisable
after the expiration of 10 years from the Grant Date. The term of a Non-Qualified Stock Option granted under the Plan shall be
determined by the Committee; provided, however, no Non-Qualified Stock Option shall be exercisable after the expiration
of 10 years from the Grant Date.
6.2
Exercise Price of An Incentive Stock Option. Subject to the provisions of Section 5.2 regarding 10 Percent Shareholders,
the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option
Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3
Exercise Price of a Non-Qualified Stock Option. The Option Exercise Price of each Non-Qualified Stock Option shall be not
less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing,
a Non-Qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence
if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of
Section 409A of the Code.
6.4
Consideration. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted
by applicable statutes and regulations, either (a) by wire transfer or by certified or bank check at the time the Option is exercised
or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid:
(i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the
date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired; (ii) a “cashless”
exercise program established with a broker; (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon
exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise (a “Cashless
Exercise”); (iv) any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable
to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to
an Option that is paid by delivery (or through a Cashless Exercise) to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than
six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes).
Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded an exercise by a Director or Officer
that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company,
directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any
Award under this Plan.
6.5
Transferability of An Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise
the Option.
6.6
Transferability of a Non-Qualified Stock Option. A Non-Qualified Stock Option may, in the sole discretion of the Committee,
be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement.
If the Non-Qualified Stock Option does not provide for transferability, then the Non-Qualified Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only
by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.
6.7
Vesting of Options. The Committee (or an Officer if given authority to grant Options by resolution of the Board) at the
time of granting an Award may provide for vesting terms based upon time of service to the Company and/or other criteria. Awards
which do not vest shall be forfeited and the underlying Common Stock shall be available for future grant. The Committee may, but
shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Award Agreement upon the
occurrence of a specified event.
6.8
Termination of Continuous Service. Unless otherwise provided in an Award Agreement or in an employment agreement the terms
of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon
the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier
of (a) the date 12 months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the
term of the Option as set forth in the Award Agreement; provided that, if the termination of Continuous Service is by the Company
for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after
termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option
shall terminate. Except as otherwise provided in an Award Agreement, (including Awards under Section 7), any mention of vesting
in an Award Agreement shall be deemed to require that the Participant be providing services to the Company on an applicable vesting
date, or the Award shall not vest as of that date or in the future.
6.9
Extension of Termination Date. An Optionholder’s Award Agreement may also provide that if the exercise of the Option
following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because
the issuance of shares of Common Stock would violate the registration requirements under the Securities Act or any other state
or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate
on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period
after termination of the Participant’s Continuous Service that is 12 months after the end of the period during which the
exercise of the Option would be in violation of such registration or other securities law requirements.
6.10
Disability of Optionholder. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option
(to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such
period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of
the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within
the time specified herein or in the Award Agreement, the Option shall terminate.
6.11
Death of Optionholder. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder
was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s
death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration
of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised
within the time specified herein or in the Award Agreement, the Option shall terminate.
6.12
Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time
of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company) exceeds $100,000, the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
7.
Provisions of Awards Other Than Options.
7.1
SARs.
(a)
General.
Each
SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set
forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award
Agreement. SARs may be granted alone (“Free Standing Rights”) or in tandem with an Option granted under the Plan (“Related
Rights”).
(b)
Grant Requirements.
Any
Related Right that relates to a Non-Qualified Stock Option may be granted at the same time the Option is granted or at any time
thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must
be granted at the same time the Incentive Stock Option is granted.
(c)
Term of SARs.
The
term of a SAR granted under the Plan shall be determined by the Committee; provided, however, no SAR shall be exercisable
later than the 10th anniversary of the Grant Date.
(d)
Vesting of SARs.
The
Committee (or an Officer if given authority to grant SARs by resolution of the Board) at the time of granting an Award may provide
for vesting terms based upon time of service to the Company and/or other criteria. Awards which do not vest shall be forfeited
and the underlying Common Stock shall be available for future grant. The Committee may, but shall not be required to provide for
an acceleration of vesting and exercisability in the terms of any Award Agreement upon the occurrence of a specified event.
(e)
Exercise and Payment.
Upon
exercise of a SAR, if a stock settled SAR the holder shall be entitled to receive from the Company an amount equal to the number
of shares of Common Stock subject to the SAR that is being exercised multiplied by the excess of (i) the Fair Market Value of
a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the SAR or related Option.
Otherwise, if a cash settled SAR, the holder shall be paid cash using the same formula. Payment with respect to the exercise of
a SAR shall be made on the date of exercise. Payment shall be made in the form of shares of Common Stock (with or without restrictions
as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination
thereof, as determined by the Committee.
(f)
Exercise Price.
The
exercise price of a Free Standing Rights SAR shall be determined by the Committee, but shall not be less than 100% of the Fair
Market Value of one share of Common Stock on the Grant Date of such SAR. A Related Right granted simultaneously with or subsequent
to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the
related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable
only to the same extent as the related Option; provided, however, that a SAR, by its terms, shall be exercisable
only when the Fair Market Value per share of Common Stock subject to the SAR and related Option exceeds the exercise price per
share thereof and no SARs may be granted in tandem with an Option unless the Committee determines that the requirements of Section
6 are satisfied.
(g)
Reduction in the Underlying Option Shares.
Upon
any exercise of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall
be reduced by the number of shares for which the SAR has been exercised. The number of shares of Common Stock for which a Related
Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for
which such Option has been exercised.
7.2
Restricted Awards.
(a)
General.
A
Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock units
(“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Common
Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed
of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose
for such period (the “Restricted Period”) as the Committee shall determine. Each Restricted Award granted under the
Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in
this Section 7.2, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b)
Restricted Stock and Restricted Stock Units.
(i)
Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted
Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines
that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release
of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A)
an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the
Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock
and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth
in the Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including
the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and
stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and
interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the
Committee. The cash dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee,
in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of
restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.
(ii)
The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No shares of Common Stock
shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside a fund for the
payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
At the discretion of the Committee, each Restricted Stock Unit (representing one share of Common Stock) may be credited with cash
and stock dividends paid by the Company in respect of one share of Common Stock (“Dividend Equivalents”). Dividend
Equivalents shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of
cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited
to a Participant’s account and attributable to any particular Restricted Stock Unit (and earnings thereon, if applicable)
shall be distributed in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal
to the amount of such Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such Restricted
Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have no right to such Dividend Equivalents.
(c)
Restrictions.
(i)
Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement
is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions
on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further
obligation on the part of the Company.
(ii)
Restricted Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period
to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units are forfeited, all rights
of the Participant to such Restricted Stock Units shall terminate without further obligation on the part of the Company and (B)
such other terms and conditions as may be set forth in the applicable Award Agreement.
(iii)
The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Restricted Stock Units
whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date
the Restricted Stock or Restricted Stock Units are granted, such action is appropriate.
(d)
Vesting of Restricted Awards.
The
Committee at the time of granting an Award may provide for vesting terms based upon time of service to the Company and/or other
criteria. Awards which do not vest shall be forfeited and the underlying Common Stock shall be available for future grant. The
Committee may, but shall not be required to provide for an acceleration of vesting and exercisability in the terms of any Award
Agreement upon the occurrence of a specified event.
No
Restricted Award may be granted or settled for a fraction of a share of Common Stock. The Committee may, but shall not be required
to, provide for an acceleration of vesting in the terms of any Award Agreement upon the occurrence of a specified event.
(e)
Delivery of Restricted Stock and Settlement of Restricted Stock Units.
Upon
the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section
7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth
in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant,
or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then
been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends
or stock dividends credited to the Participant’s account with respect to such Restricted Stock and the interest thereon,
if any. Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall
deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding Restricted
Stock Unit (“Vested Unit”) and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit
in accordance with Section 7.2(b)(ii) hereof and the interest thereon or, at the discretion of the Committee, in shares of Common
Stock having a Fair Market Value equal to such Dividend Equivalents and the interest thereon, if any; provided, however,
that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or
part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made
in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common
Stock as of the date on which the Restricted Period lapsed with respect to each Vested Unit.
(f)
Stock Restrictions.
Each
certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
8.
Securities Law Compliance. Each Award Agreement shall provide
that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of
state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel
and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment
intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek
to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant
Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking
shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable
pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission
or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards
unless and until such authority is obtained.
9.
Use of Proceeds from Stock. Proceeds from the sale of Common
Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.
10.
Miscellaneous.
10.1
Acceleration of Exercisability and Vesting. The Committee shall have the power to accelerate the time at which an Award
may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding
the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.
10.2
Shareholder Rights. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until
such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for
which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 11 hereof.
10.3
No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto
shall confer upon any Participant any right to continue to serve the Company or a subsidiary in the capacity in effect at the
time the Award was granted or shall affect the right of the Company or a subsidiary to terminate (a) the employment of an Employee
with or without notice and with or without Cause or (b) the service of a Director pursuant to the By-laws of the Company or a
subsidiary, and any applicable provisions of the corporate law of the state in which the Company or a subsidiary is incorporated,
as the case may be.
10.4
Transfer; Approved Leave of Absence. For purposes of the Plan, no termination of employment by an Employee shall be deemed
to result from either (a) a transfer to the employment of the Company [from a subsidiary or from the Company to a subsidiary,
or from one subsidiary to another], or (b) an approved leave of absence for military service or sickness, or for any other purpose
approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under
the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either
case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
10.5
Withholding Obligations. To the extent provided by the terms of an Award Agreement and subject to the discretion of the
Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition
of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation
paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company
to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with
a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned
and unencumbered shares of Common Stock of the Company.
11.
Adjustments Upon Changes in Stock. In the event of changes
in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend,
stock split, combination or reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization,
merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any
Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and SARs, the maximum number of shares
of Common Stock subject to all Awards stated in Section 4 and the maximum number of shares of Common Stock with respect to which
any one person may be granted Awards during any period stated in Section 4 and Section 7.2 will be equitably adjusted or substituted,
as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary
to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Committee
specifically determines that such adjustment is in the best interests of the Company, the Committee shall, in the case of Incentive
Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the
Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-Qualified Stock Options, ensure
that any adjustments under this Section 11 will not constitute a modification of such Non-Qualified Stock Options within the meaning
of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect
the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied
a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding for all purposes.
12.
Effect of Change in Control.
12.1
Unless otherwise provided in an Award Agreement, notwithstanding any provision of the Plan to the contrary:
In
the event of a Participant’s termination of Continuous Service without Cause or for Good Reason during the 12-month period
following a Change in Control, notwithstanding any provision of the Plan or any applicable Award Agreement to the contrary, all
Options and SARs shall become immediately exercisable with respect to 100% of the shares subject to such Options or SARs, and/or
the Restricted Period shall expire immediately with respect to 100% of the shares of Restricted Stock or Restricted Stock Units
as of the date of the Participant’s termination of Continuous Service.
To
the extent practicable, any actions taken by the Committee under the immediately preceding clause shall occur in a manner and
at a time which allows affected Participants the ability to participate in the Change in Control with respect to the shares of
Common Stock subject to their Awards.
12.2
In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance
notice to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination
thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders
of the Company in the event. In the case of any Option or SAR with an exercise price (or SAR Exercise Price in the case of a SAR)
that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may
cancel the Option or SAR without the payment of consideration therefor.
12.3
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to
all or substantially all of the assets and business of the Company, taken as a whole.
13.
Amendment of the Plan and Awards.
13.1
Amendment of Plan. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided
in Section 11 relating to adjustments upon changes in Common Stock and Section 13.3, no amendment shall be effective unless approved
by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time
of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder
approval.
13.2
Shareholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
13.3
Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified
deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance
therewith.
13.4
No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment
of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
13.5
Amendment of Awards. The Committee at any time, and from time to time, may amend the terms of any one or more Awards; provided,
however, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under
any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
14.
General Provisions.
14.1
Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits
with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain
events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition,
non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable
to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant
that is detrimental to the business or reputation of the Company.
14.2
Clawback. Except as provided in a written agreement with the Participant, all Awards shall be subject to possible clawback
as provided below. Any clawback as may be required to be made pursuant to any law, government regulation or stock exchange listing
requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement)
shall be automatic without further action by the Board or Committee and be incorporated in this Plan and all Award Agreements.
The following clawback provisions shall be deemed to be incorporated in any Award Agreement, unless otherwise specified to the
contrary.
(a)
The Awardholder is dismissed as an employee for Cause;
(b)
The Awardholder purchases or sells securities of the Company in violation of the Company’s insider trading guidelines then
in effect;
(c)
The Awardholder breaches any duty of confidentiality including that required by the Company’s insider trading guidelines
then in effect;
(d)
The Awardholder competes with the Company by soliciting customers located within or otherwise where the Company is doing business
within any state, or where the Company expects to do business within three months following ceasing to perform the Services and,
in this later event, the Awardholder has actual knowledge of such plans;
(e)
The Awardholder is unavailable for consultation after termination of the Awardholder if such availability is a condition of any
agreement between the Company and the Awardholder;
(f)
The Awardholder recruits Company personnel for another entity or business; within 24 months following termination of employment;
(g)
The Awardholder fails to assign any invention, technology, or related intellectual property rights to the Company if such assignment
is a condition of any agreement between the Company and the Awardholder;
(h)
The Awardholder acts in a disloyal manner to the Company; or
(i)
A finding by the Board that the Awardholder has acted against the interests of the Company.
14.3
Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
14.4
Sub-plans. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue sky,
securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain
such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be
deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was
designed.
14.5
Deferral of Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the
opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other
event that absent the election would entitle the Participant to payment or receipt of shares of Common Stock or other consideration
under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments
of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms,
conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.
14.6
Unfunded Plan. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish
any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
14.7
Recapitalizations. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.
14.8
Delivery. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due
within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have,
for purposes of this Plan, 30 days shall be considered a reasonable period of time.
14.9
No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee
shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional
shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
14.10
Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with
this Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.
14.11
Section 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly,
to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described
in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not
be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the
Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would
otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six month period immediately
following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the
six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding
the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of
any excise tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have
any liability to any Participant for such tax or penalty.
14.12
Disqualifying Dispositions. Any Participant who shall make a “disposition” (as defined in Section 424 of the
Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from
the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon
exercise of such Incentive Stock Option (a “Disqualifying Disposition”) shall be required to immediately advise the
Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.
14.13
Section 16. If the Company has a class of Common Stock registered under Section 12(b) or (g) of the Exchange Act, it is
the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of
Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3,
or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section
16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in
this Section 14.13, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.
14.14
Section 162(m). To the extent the Committee issues any Award that is intended to be exempt from the deduction limitation
of Section 162(m) of the Code, the Committee may, without shareholder or grantee approval, amend the Plan or the relevant Award
Agreement retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification
of Section 162(m) of the Code required to preserve the Company’s federal income tax deduction for compensation paid pursuant
to any such Award.
14.15
Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by
whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior
designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when
filed by the Participant in writing with the Company during the Participant’s lifetime.
14.16
Expenses. The costs of administering the Plan shall be paid by the Company.
14.17
Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable,
whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity,
illegality or unenforceability and the remaining provisions shall not be affected thereby.
14.18
Section Headings. The Section headings in the Plan are for purposes of convenience only and are not intended to define
or limit the construction of the provisions hereof.
14.19
Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively
among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the
Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform
and selective Award Agreements.
15.
Effective Date of Plan. The Plan shall be effective as of
the Effective Date; provided, however, that the Plan shall be approved by the shareholders of the Company at an annual meeting
or any special meeting of shareholders of the Company within 12 months before or after the Effective Date, and such approval by
the shareholders of the Company shall be a condition to the right of each Participant to receive Awards hereunder. Any Award granted
under the Plan prior to the approval by the shareholders of the Company shall be effective as of the date of grant (unless the
Committee specifies otherwise at the time of grant), but no such Award may vest, be paid out, exercised or otherwise be disposed
of (or, in the case of a stock Award, be issued) prior to such shareholder approval. If the shareholders of the Company fail to
approve the Plan in accordance with this Section 15, any Award granted under the Plan shall be automatically cancelled without
payment of any consideration to the recipient of such Award.
16.
Termination or Suspension of the Plan. The Plan shall terminate
automatically on April 29, 2025. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted
may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof.
No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
17.
Choice of Law. The law of the State of Delaware shall govern
all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict
of law rules.
As adopted by the Board of Directors of Vapor Corp. on April 29,
2015.
As approved by the shareholders of Vapor Corp. on [DATE].
Annex B
CERTIFICATE OF AMENDMENT TO CERTIFICATE
OF INCORPORATION OF VAPOR CORP.
Vapor Corp. (the “Company”),
a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Delaware General Corporation
Law”), hereby certifies as follows:
1. Pursuant to Sections
242 and 228 of the Delaware General Corporation Law, the amendment herein set forth has been duly approved by the Board of Directors
and holders of a majority of the outstanding capital stock of the Company.
2. Section 4 of the
Certificate of Incorporation is amended to read as follows:
4.
The total number of shares of stock which the Corporation is authorized to issue is 151,000,000. 150,000,000 shares shall be common
stock, par value $0.001 per share (“Common Stock”), and 1,000,000 shall be preferred stock, par value
$0.001 per share (“Preferred Stock”). Except as otherwise provided in this Corporations Certificate
of Incorporation, authority is hereby vested in the Board of Directors of the Corporation from time to time to provide for the
issuance of shares of one or more series of Preferred Stock and in connection therewith to fix by resolution or resolutions providing
for the issue of any such series, the number of shares to be included therein, the voting powers thereof, and such of the designations,
preferences and relative participating, optional or other special rights and qualifications, limitations and restrictions of each
such series, including, without limitation, dividend rights, voting rights, rights of redemption, or conversion into Common Stock
rights, and liquidation preferences, to the fullest extent now or hereafter permitted by the Delaware General Corporation Law
and any other provisions of this Amended and Restated Certificate of Incorporation. The Board of Directors is further authorized
to increase or decrease (but not below the number of such shares of such class or series then outstanding) the number of shares
of any such class or series subsequent to the issuance of shares of that class or series.
3. This Certificate
of Amendment to Certificate of Incorporation was duly adopted and approved by the shareholders of this Company on the _____th
day of July 2015 in accordance with Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the
undersigned has executed this Certificate of Amendment to Certificate of Incorporation as of the ___st day of ______
2015.
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VAPOR CORP. |
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By: |
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,
__ ____________ |
Annex C
CERTIFICATE OF AMENDMENT TO CERTIFICATE
OF INCORPORATION OF VAPOR CORP.
Vapor Corp. (the “Company”),
a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Delaware General Corporation
Law”), hereby certifies as follows:
1. Pursuant to Sections
242 and 228 of the Delaware General Corporation Law, the amendment herein set forth has been duly approved by the Board of Directors
and holders of a majority of the outstanding capital stock of the Company.
2. Section 4 of the Certificate of Incorporation
is amended by adding the following at the end thereof:
Upon the filing and effectiveness (the “Effective
Time”) pursuant to the Delaware General Corporation Law of this Certificate of Amendment to the Certificate of Incorporation
of the Corporation, each [NUMBER] shares of Common Stock either issued and outstanding or held by the Corporation in treasury
stock immediately prior to the Effective Time shall, automatically and without any action on the part of the respective holders
thereof, be combined and converted into one (1) share of Common Stock (the “Reverse Stock Split”). No fractional
shares shall be issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive fractional
shares of Common Stock shall be entitled to receive cash (without interest or deduction) from the Corporation’s transfer
agent in lieu of such fractional share interests upon the submission of a transmission letter by a stockholder holding the shares
in book-entry form and, where shares are held in certificated form, upon the surrender of the stockholder’s Old Certificates
(as defined below), in an amount equal to the product obtained by multiplying (a) the closing price per share of the Common Stock
as reported on the [NAME OF SECURITIES EXCHANGE] as of the date of the Effective Time, by (b) the fraction of one share owned
by the stockholder. Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old
Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock
represented by the Old Certificate shall have been combined, subject to the elimination of fractional share interests as described
above.”
3. This Certificate
of Amendment to Certificate of Incorporation was duly adopted and approved by the shareholders of this Company on the _____th
day of July 2015 in accordance with Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned has executed
this Certificate of Amendment to Certificate of Incorporation as of the ___st day of ______ 2015.
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VAPOR CORP. |
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By: |
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,
__ ____________ |
VAPOR
CORP.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF SHAREHOLDERS – JULY 7, 2015 AT 2:00 PM
VOTING
INSTRUCTIONS |
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If
you vote by phone or internet, please DO NOT mail your proxy card. |
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MAIL: |
Please
mark, sign, date, and return this Proxy Card promptly using the enclosed envelope. |
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PHONE: |
Call 1 (800) 690-6903 |
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INTERNET: |
https://www.proxyvote.com |
Control
ID: |
|
Proxy ID: |
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Password: |
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING: [ ]
MARK
HERE FOR ADDRESS CHANGE [ ] New Address (if applicable):
IMPORTANT:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation,
please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign
in partnership name by authorized person.
Dated:
_______, 2015
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(Print
Name of Shareholder and/or Joint Tenant) |
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(Signature
of Shareholder) |
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(Second
Signature if held jointly) |
The
shareholder(s) hereby appoints Jeffrey Holman and James Martin, or either of them, as proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of
the shares of voting stock of VAPOR CORP. that the shareholder(s) is/are entitled to vote at the Annual Meeting of Shareholder(s)
to be held at 2:00 p.m., New York time on July 7, 2015, at Vapor ’s headquarters, located at 3001 Griffin Road, Dania Beach,
Florida 33312, and any adjournment or postponement thereof.
This
proxy, when properly executed, will be voted in the manner directed herein. If no such direction
is made, this proxy will be voted “FOR” all of the nominees in Proposal 1 and “FOR” Proposals 2, 3, 4
(three years) 5, 6 and 7 (all three ratios). If any other business is presented at the meeting, this proxy will be voted by the
above-named proxies at the direction of the Board of Directors. At the present time, the Board of Directors knows of no other
business to be presented at the meeting.
Proposal:
1. To elect
members to Vapor’s Board of Directors.
Jeffrey
Holman |
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FOR
[ ] |
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WITHHELD
[ ] |
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Daniel
MacLachlan |
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FOR
[ ] |
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WITHHELD
[ ] |
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Gregory Brauser |
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FOR [ ]
|
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WITHHELD
[ ] |
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Angela Courtin |
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FOR [ ] |
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WITHHELD
[ ] |
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William C. Conway
III |
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FOR [ ] |
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WITHHELD
[ ] |
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2.
To approve and ratify the adoption of the 2015 Equity Incentive Plan. |
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
3.
To approve Vapor’s Named Executive Officer compensation. |
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
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4. To vote, on
a non-binding advisory basis, whether a non-binding advisory vote on Vapor’s executive compensation, should be held
every one, two or three years. |
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1
YEAR [ ] 2 YEARS [ ]
3
YEARS [ ] ABSTAIN [ ] |
5.
To ratify the appointment of Vapor’s independent registered public accounting firm for fiscal 2015. |
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
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|
|
6. To approve the amendment to Vapor’s Certificate of Incorporation
to increase the authorized shares of common stock to 150,000,000 shares. |
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
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7. To approve
the amendment to Vapor’s Certificate of Incorporation to: |
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effect
a reverse split of our common stock at an exchange ratio of 1 for 2.
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
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effect
a reverse split of our common stock at exchange ratio of 1 for 5.
|
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
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effect a reverse split
of our common stock at an exchange ratio between 1 for 2 and 1 for 5. |
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FOR
[ ] AGAINST [ ] ABSTAIN [ ] |
Control
ID:
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ID:
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