Document:

ex10-1.htm

Exhibit 10.1

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT (this “Agreement”), effective as of this 2nd day of May, 2011 (the "Effective Date"), is entered into by and between Urban Barns Foods Inc., a corporation formed under the laws of the State of Nevada (“URBF”), Non Industrial Manufacture Inc., a private corporation formed under the laws of the Province of Alberta (“Non Industrial”), and the shareholders of Non Industrial (the “Non Industrial Shareholders”), as listed on Exhibit A attached hereto.

WHEREAS the Non Industrial Shareholders are the registered and beneficial owners of all of the issued and outstanding shares of Class A common stock of Non Industrial (the “Non Industrial Class A Shares”);

WHEREAS Urban Barns is a publicly traded corporation, which shares of common stock trade on the OTC Bulletin Board under the symbol “URBF”;

WHEREAS subject to approval by the respective Board of Directors, URBF desires to acquire one hundred percent (100%) of the total issued and outstanding Non Industrial Class A Shares in exchange for 2,500,000 shares of the Class B common stock, par value $0.001, of URBF, which upon conversion into shares of common stock of URBF shall represent approximately 45% of the total issued and outstanding shares of URBF (the “URBF Class B Shares”);

WHEREAS the Board of Directors of URBF shall create the URBF Class B Shares whereby each URBF Class B Share shall: (i) have 20 votes per share; (ii) be convertible twelve (12) months from issuance into twenty (20) shares of common stock of URBF (the “Conversion Ratio”), which common stock shall be designated as URBF Class A Shares; and (iii) in the event URBF shall in any manner, subsequent to the issuance of the URBF Class B Shares, approve a reclassification involving a reverse stock split and subdivision of issued and outstanding shares of common stock of URBF, the Conversion Ratio shall forthwith be adjusted by proportionately increasing the Conversion Ratio on the date that such subdivision shall become effective;

WHEREAS URBF desires to acquire Non Industrial in exchange for all of the issued and outstanding Non Industrial Class A Shares resulting in Non Industrial becoming a wholly-owned subsidiary of URBF in a tax-free exchange;

WHEREAS, the parties to this Agreement have agreed to the share exchange subject to the terms and conditions set forth below.

NOW THEREFORE THIS AGREEMENT WITNESSES that for and in consideration of the mutual premises and the mutual covenants and agreements contained herein, the parties covenant and agree each with the other as follows:

  

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ARTICLE I

EXCHANGE OF STOCK

Section 1.01.   Exchange.  Upon the terms and subject to the conditions of this Agreement, the Non Industrial Shareholders agree to exchange the Non Industrial Class A Shares for the URBF Class B Shares and URBF agrees to proportionately issue to the Non Industrial Shareholders an aggregate of 2,500,000 URBF Class B Shares on a one-for-twenty basis for each Non Industrial Class A Share held of record by the Non Industrial Shareholder. The parties intend that the share exchange shall qualify as a tax free reorganization under Section 368 of the Internal Revenue Code. However, URBF makes no representations or warranties regarding the qualification of the share exchange as “tax free”. URBF shall cooperate with Non Industrial in executing any reasonably necessary documents to qualify the share exchange as tax free.

Section 1.02.   Delivery of Stock.  (a) Upon the execution hereof, the Non Industrial Shareholders shall deliver to URBF all of the stock certificates representing the total issued and outstanding Non Industrial Class A Shares, duly endorsed in blank;

(b) Upon execution hereof, URBF shall deliver to Non Industrial  stock certificates representing the URBF Class B Shares in the names and denominations as set forth on Exhibit A hereto.

(c) The execution and delivery of this Agreement shall take place on May 2, 2011 or by counterpart signatures to be sent to such offices by facsimile transmission. Closing shall occur as soon as possible after the effective date of this Agreement but in no event after June 30, 2011 unless extend by agreement by the parties hereto (the “Closing”).

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF NON INDUSTRIAL

AND NON INDUSTRIAL SHAREHOLDERS

Section 2.01. Organization, Standing and Authority; Foreign Qualification.  (a) Non Industrial  is a corporation duly organized, validly existing and in good standing under the laws of the Province of Alberta with all requisite power and authority to enter into, and perform the obligations under this Agreement.  Non Industrial  has all requisite power and authority to own, lease and operate its assets, properties and business and to carry on its business as now being and as heretofore conducted.

(b) Non Industrial is duly qualified or otherwise authorized as a corporation to transact business and is in good standing in each jurisdiction as necessary to conduct business as required by law.  Non Industrial  does not file any franchise, income or other tax returns in any other jurisdiction other than the Province of Alberta, if applicable, based upon the ownership or use of property therein or the derivation of income there from.

  

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Section 2.02.  Capitalization. The authorized capital of Non Industrial consists of 50,000,000 Class A Shares of common stock and 30,000,000 Class B Shares of common stock. A total of 50,000,000 Class A Shares of common stock are issued and outstanding. There are no Class B Shares of common stock issued and outstanding. The Non Industrial Class A Shares are the only class of Non Industrial’s capital stock that is outstanding. All of the outstanding Non Industrial Class A Shares are duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights.

Section 2.03.  Certificate of Incorporation and By-Laws.  Non Industrial has heretofore delivered to URBF true, correct and complete copies of its Articles of Incorporation or other documentation evidencing a corporation and By-laws. The minute books of Non Industrial  accurately reflect all actions taken at all meetings and consents in lieu of meetings of its stockholders, and all actions taken at all meetings and consents in lieu of meetings of each of their boards of directors and all committees.

Section 2.04.  Execution and Delivery.  This Agreement has been duly executed and delivered by each Non Industrial Shareholder and each constitutes the valid and binding agreement of each Non Industrial Shareholder enforceable against the Non Industrial Shareholders in accordance with its terms.

Section 2.05.  Consents and Approvals.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof do not require any Non Industrial  Shareholder to obtain any consent, approval or action of, or make any filing with or give any notice to, any person or entity.

Section 2.06.  No Conflict.  The execution, delivery and performance of each of this Agreement and the consummation of the transactions contemplated hereby and thereby in accordance with the terms and conditions hereof and thereof will not (a) violate any provisions of the Articles of Incorporation, By-laws or organizational document of Non Industrial ; (b) violate, conflict with or result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both, constitute) a default under, and contract to which any Non Industrial  Shareholder or Non Industrial  is a party to by or to which any of them or any of their respective assets or properties may be bound or subject; (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon any Non Industrial  Shareholder or Non Industrial  or upon the Non Industrial  Shares or the properties or business of Non Industrial ; (d) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to any Non Industrial  Shareholders or Non Industrial ; or (e) result in the breach of any of the terms or conditions of, constitute a default under, or otherwise cause an impairment of, any permit.

Section 2.07.  Title to Stock.  Each Non Industrial Shareholder has valid title to their respective portion of the Non Industrial Class A Shares free and clear of all liens or encumbrances, including, without limitation, any community property claim.  Upon delivery of the Non Industrial Class A Shares to be made on the Closing, URBF shall acquire good and marketable title thereto, free and clear of any lien, including, without limitation, any community property claim.

Section 2.08.  Options or Other Rights.   (a) There are no outstanding rights, subscriptions, warrants, calls, preemptive rights, options, contracts or other agreements of any kind to purchase or otherwise to receive from any Non Industrial  Shareholder or from Non Industrial  any of the outstanding, unauthorized or treasury shares of the Non Industrial  Shares; and (b)  there is no outstanding security of any kind convertible into any security of Non Industrial  and there is no outstanding contract or other agreement to purchase, redeem or otherwise acquire any of the Non Industrial  Class A Shares.

Section 2.09.  Material Information. This Agreement, the financial statements of Non Industrial and all other information provided in writing by the Non Industrial Shareholders or Non Industrial or representatives thereof to URBF, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make any statement contained herein or therein not misleading.  There are no facts or conditions, which have not been disclosed to URBF in writing which, individually or in the aggregate, could have a material adverse effect on URBF or a material adverse effect on the ability of any Non Industrial Shareholder to perform any of his or her obligations pursuant to this Agreement.

 

  

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Section 2.10.  Financial Statements.  Non Industrial  has or will have prior to the Closing furnished to URBF certain financial statements of Non Industrial  as set forth in Section 4.11 hereof (the “Financial Statements”).  The Financial Statements shall be true, correct and complete in all material respects and fairly present the financial condition of Non Industrial  and the results of its operations for the period then ended and shall be prepared in conformity with U.S. generally accepted accounting principles applied on a consistent basis.

Section 2.11.  Absence of Certain Changes.  Since the date of the Financial Statements, there has been no event, change or development which could have a material adverse effect on Non Industrial .

Section 2.12.  Undisclosed Liabilities.  Except as reflected or reserved against in the Financial Statements, as of and for the period reflected therein, Non Industrial  was not on that date subject to, and since that date Non Industrial  has not incurred, any direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated or un liquidated, secured or unsecured, accrued, absolute, contingent or otherwise, of a kind required by generally accepted accounting principles to be reflected or reserved against on a financial statement (“Liabilities”), which individually or in the aggregate exceeds $10,000.

Section 2.13.  Compliance with Laws.  Non Industrial  is not in violation of any applicable order, judgment, injunction, award or decree nor is it in violation of any Federal, provincial, state, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on Non Industrial , neither Non Industrial  nor any Non Industrial  Shareholder has received written notice that any violation is being alleged.

Section 2.14.  Actions and Proceedings.  There are no outstanding orders, judgments, injunctions, awards or decrees of any court, governmental or regulatory body or arbitration tribunal against or involving Non Industrial , or against or involving any of the Non Industrial  Shares.  There are no actions, suits or claims or legal, regulatory, administrative or arbitration proceedings pending or, to the knowledge of any of the Non Industrial  Shareholders threatened against or involving Non Industrial .

Section 2.15.  Contracts.  Exhibit B sets forth all of the contracts to which Non Industrial  is a party or by or to which Non Industrial  or its assets or properties are bound or subject. There have been delivered or made available to URBF true, correct and complete copies of each of the contracts set forth in Exhibit B.  Each such contract is valid, subsisting, in full force and effect and binding upon the parties thereto in accordance with its terms, and neither Non Industrial  nor any of Non Industrial ’s other affiliates, as the case may be, is in default in any respect under any of them.

Section 2.16.  Liens.  Non Industrial has marketable title to all of its assets and properties free and clear of any lien.

Section 2.17.  Brokerage.  No brokerage fees are to be paid in relation to this transaction.

 

  

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF URBF

URBF represents and warrants to Non Industrial and to the Non Industrial Shareholders as follows:

Section 3.01.  Organization, Standing and Authority of URBF.  URBF is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own or lease its assets as now owned or leased by it and to otherwise conduct its business. All corporate proceedings required by law or by the provisions of this Agreement to be taken by URBF on or before the Closing in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been or will be duly and validly taken.

Section 3.02.  Execution and Delivery.  This Agreement has been duly authorized, executed and delivered by URBF and constitutes the valid and binding agreement of URBF enforceable against URBF in accordance with its terms.

Section 3.03.  Consents and Approvals.  The execution, delivery and performance by URBF of this Agreement and the consummation by URBF of the transactions contemplated hereby do not require URBF to obtain any consent, approval or action of, or make any filing with or give any notice to, any person.

Section 3.04.  No Conflict.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the terms and conditions hereof will not: (a) violate any provision of the Certificate of Incorporation, By-laws or other organizational document of URBF; (b) violate, conflict with or result in the breach of any of the terms of, result in any modification of the effect of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract to which URBF is a party or by or to which its assets or properties may be bound or subject; (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, or any agreement with, or condition imposed by, any governmental or regulatory body, foreign or domestic, binding upon URBF or upon the securities, assets or business of URBF; or (d) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation relates to URBF or to the securities, properties or business of URBF.

Section 3.05.  Capitalization.  The authorized capital of URBF consists of 100,000,000 shares of common stock, par value $0.001, of which a total of 49,804,768 shares are issued and outstanding. The shares of common stock of URBF are the only class of URBF’s capital stock that is outstanding. All of the outstanding shares of common stock of URBF are duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights. There are no outstanding options or warrants of URBF.

Section 3.06.  Brokerage.  No broker or finder has acted, directly or indirectly, for URBF, nor has URBF incurred any obligation to pay any brokerage, finder’s fee or other commission in connection with the transactions contemplated by this Agreement.

Section 3.07.  Articles of Incorporation and By-Laws.  URBF has heretofore delivered to Non Industrial and the Non Industrial Shareholders true, correct and complete copies of the Articles of Incorporation and By-laws or comparable instruments of URBF.

Section 3.08.  Status of URBF Class B Shares.  Upon consummation of the transactions contemplated by this Agreement, the URBF Class B Shares to be issued to the Non Industrial Shareholders, when issued and delivered, will be duly authorized and free of any and all liens, claims or encumbrances.

Section 3.09.  No Bankruptcy. Neither URBF nor its assets are the subject of any proceeding involving either a voluntary or an involuntary bankruptcy, insolvency or receivership.

Section 3.10.  Contracts and Commitments.  All agreements which materially affect URBF to which URBF is a party or by which URBF or any of its property is bound which exist as of the date of execution of this Agreement have been reviewed by the parties and URBF is not in default with respect to any material term or condition of any such contract, nor has any event occurred which through the passage of time or the giving of notice, or both, would constitute a default hereunder.

Section 3.11.  Compliance with Laws.  To its knowledge, URBF is not in violation of any applicable order, judgment, injunction, award or decree nor is it in violation of any Federal, state, local or foreign law, ordinance or regulation or any other requirement of any governmental or regulatory body, court or arbitrator, other than those violations which, in the aggregate, would not have a material adverse effect on URBF and URBF has not received written notice that any violation is being alleged.

Section 3.12.  Corporate Records. All of the minute books and corporate and financial records of URBF are, or prior to the Closing will be made available for review.  In the event of the absence of a complete minute book, representation and warranty by the board of directors shall take precedence over the minute book and shall be incorporated to the minute book.

 

  

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ARTICLE IV

COVENANTS AND AGREEMENTS

The Non Industrial Shareholders, Non Industrial and URBF covenant and agree as follows:

Section 4.01.  Conduct of Business in the Ordinary Course.  From the date hereof through the Closing Date, the Non Industrial  Shareholders shall cause Non Industrial  to conduct its business substantially in the manner in which it is currently conducted.

Section 4.02.  Creation of URBF Class B Shares. Subsequent to the Closing, and as set forth in the Articles of Incorporation of URBF which provides the Board of Directors with authority to issue shares of common stock in one or more series, with such voting powers, designations, preferences and rights of qualifications, limitations or restrictions thereof as shall be stated in the resolutions adopted at the time, URBF shall cause a certificate of designation to be filed with the Nevada Secretary of State setting forth the number of shares of such designation and the voting powers, designations, preferences, limitations, restrictions and relative rights of the URBF Class B Shares (the “Designation of URBF Class B Shares”).

Section 4.04.  Board and Shareholder Approval. Prior to the Closing, Non Industrial will obtain from its Board of Directors and the Non Industrial Shareholders approval of this Agreement and the transactions contemplated hereby. Prior to the Closing, URBF will obtain from its Board of Directors approval of this Agreement and the transactions contemplated hereby, including the Designation of URBF Class B Shares and the issuance of the URBF Class B Shares.

 

ARTICLE V

MISCELLANEOUS

Section 5.1.  Timing. Time is of the essence of this Agreement and each party hereto agrees and covenants to use their reasonably best efforts to complete the transactions contemplated hereby in a timely manner.

Section 5.2.  Additional Documentation.  The parties will execute and deliver such further documents and instruments and do all such acts and things as may be reasonably necessary or requisite to carry out the full intent and meaning of this Agreement and to effect the transactions contemplated by this Agreement.

Section 5.3.  Assignment.  This Agreement may not be assigned by any party hereto without the prior written consent of all parties to this Agreement.

Section 5.4.  Execution in Counterparts. This Agreement may be executed in several counterparts, each of which will be deemed to be an original and all of which will together constitute one and the same instrument.

Section 5.5.  Expenses. Each party will pay its legal expenses incurred in connection with the transactions contemplated hereby, whether or not such transactions are consummated.

Section 5.6.  Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada, without regard to principles of conflicts of law.

 

  

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IN WITNESS WHEREOF the parties hereto have set their hand and seal as of the day and year first above written.

 

 

	  	  	
URBAN BARNS FOODS INC.

	  	  	  
	
Date: May 2, 2011

	
By:

	
 /s/ Jacob Benne                                           

	  	  	
Jacob Benne

	  	  	
CEO

	  	  	  
	  	  	
NON INDUSTRIAL MANUFACTURE INC.

	  	  	  
	
Date: May 2, 2011

	
By:

	
/s/ Merrill Meikleham

	  	  	
Merrill Meikleham

	  	  	
President

	  	  	  
	  	  	
AS ATTORNEY IN FACT AND AGENT FOR NON INDUSTRIALSHAREHOLDERS LISTED ON EXHIBIT A

	  	  	  
	
Date: May 2, 2011

	
By:

	
/s/ Merrill Meikleham

	  	  	
Merrill Meikleham

 

  

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Exhibit A

 

	
Certificate

	
Shareholder

	
Nationality

	
Shares

	
Class

	
1

	
Meikleham Family Trust

	
Canadian

	
21,750,000

	
Common A

	
2

	
Benne Family Trust

	
Canadian

	
21,750,000

	
Common A

	
3

	
NIM Directors' Exec. Ltd.

	
Canadian

	
4,370,000

	
Common A

	
4

	
NIM Consultants' Management Ltd.

	
Canadian

	
1,930,000

	
Common A

	
5

	
Thomas Marshall

	
Canadian

	
20,000

	
Common A

	
6

	
Prince Investments Inc.

	
Canadian

	
50,000

	
Common A

	
7

	
Christopher O’Connell

	
UK

	
20,000

	
Common A

	
8

	
1000361 Alberta Ltd.

	
Canadian

	
20,000

	
Common A

	
9

	
PiperCo Holdings Ltd.

	
Canadian

	
50,000

	
Common A

	
10

	
Scott LaLumiere

	
Canadian

	
40,000

	
Common A

	  	  	
Total

	
50,000,000

	
Common A

8ex10-1.htm

Exhibit 10.1

 

 

HOKU CORPORATION

 

LONG-TERM INCENTIVE COMPENSATION PLAN

 

ARTICLE I

 

NAME AND PURPOSE

 

1.01           Purpose.  Hoku Corporation, a corporation duly organized and existing under the laws of the State of Delaware (the “Corporation”), hereby establishes the Hoku Corporation Long-Term Incentive Compensation Plan (the “Plan”) in order to provide the Corporation’s executive officers and other select key employees with the opportunity to earn incentive compensation contingent upon the Corporation’s attainment of pre-established performance objectives and their completion of designated service periods.

 

1.02           General.  The benefits provided under the Plan shall be paid, as they become due, from the Corporation’s general assets. The interest of each participant (and his or her beneficiary) in any benefits that become payable under the Plan shall be no greater than that of an unsecured creditor of the Corporation.

 

ARTICLE II

 

ADMINISTRATION OF THE PLAN

 

2.01           Plan Administrator.  The Plan shall be administered by the Compensation Committee of the Board, and the Compensation Committee acting in such capacity shall hereinafter be referred to as the Plan Administrator.  As Plan Administrator, the Compensation Committee shall have full power and authority to administer the Plan and select the Eligible Employees who are to participate in the Plan.

 

2.02           Authority.  The interpretation and construction of any provision of the Plan and the adoption of rules and regulations for plan administration shall be made by the Plan Administrator.  Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan, including (without limitation) all decisions relating to an individual’s eligibility for participation in the Plan, his or her entitlement to benefits hereunder and the amount of any such benefit entitlement.

 

  

  

  

ARTICLE III

 

DEFINITIONS

 

3.01           “Board” shall mean the Corporation’s Board of Directors.

 

3.02            “Change in Control” shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

 

 (i)           a merger or consolidation in which the Corporation is not the surviving entity and in which one person or a group of related persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) acquires ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities;

 

(ii)           the sale, transfer or other disposition of all or substantially all of the assets of the Corporation in complete liquidation or dissolution of the Corporation;

 

(iii)           any reverse merger in which the Corporation is the surviving entity but in which one person or a group of related persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) acquires ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities;

 

 (iv)           the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities pursuant to a tender or exchange offer made directly to the Corporation’s stockholders: or

 

(v)           a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members cease, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

 

3.03           “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

  

  

  

 

3.04            “Corporation” shall mean Hoku Corporation and any successor or assignee corporation, whether by way of merger, acquisition or other reorganization.

 

3.05           “Eligible Employee” shall mean each executive officer of the Corporation and any other key employee of the Corporation or any Subsidiary who the Plan Administrator deems essential to the growth and financial success of the Corporation.

 

3.06            “Employee” shall mean any person in the employ of the Corporation or any Subsidiary, subject to control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

 

3.07            “Long-Term Incentive Bonus” shall mean the bonus to which the Participant may become entitled with respect to a particular Performance Period on the basis of the Corporation’s attainment of the Performance Milestones which the Plan Administrator establishes for that Performance Period.

 

3.08           “1934 Act” shall mean the Securities Exchange of 1934, as amended.

 

3.09           “Participant” shall mean each Eligible Employee who participates in the Plan.

 

3.10           “Performance Milestones” shall mean one or more specific performance objectives which the Plan Administrator designates for the Corporation to attain in a particular Performance Period in order for each Participant to become entitled to a Long-Term Incentive Bonus for that Performance Period.  Performance Milestones shall be based on one or more of the following criteria:  (i) revenue, (ii) capital expenditure targets, (iii) achievement of specified milestones in the development, commercialization or manufacturing of one or more of the Company’s products, (iv) expense targets, (v) share price (including, but not limited to, growth measures and total shareholder return), (vi) earnings per share, (vii) operating or gross margin, (viii) return measures (including, but not limited to, return on assets, capital, equity, or sales), (ix) productivity ratios, (x) measures of income and profits, (xi) cash flow (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital), (xii) earnings before or after interest, taxes, depreciation, amortization and/or stock-based compensation expense, (xiii) economic value added, (xiv) market share (xv) working capital targets, and (xvi) environmental compliance and employee health and safety measures. Such Performance Milestones may be measured not only in terms of the Company’s performance but also in terms of its performance relative to the performance of other entities or may be measured on the basis of the performance of any of the Company’s business units or divisions or any parent or Subsidiary.

 

3.11           “Performance Period” shall mean the period over which the Corporation must attain the Performance Milestones which the Plan Administrator has established for that period.

 

3.12           “Service” shall mean Participant’s performance of services for the Corporation (or any Subsidiary) in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor. For purposes of this Agreement, Participant shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Corporation (or any Subsidiary) or (ii) the entity for which Participant performs such services ceases to remain a Subsidiary of the Corporation, even though Participant may subsequently continue to perform services for that entity.

 

  

  

  

 

3.13           “Subsidiary” shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

ARTICLE IV

 

PARTICIPATION

 

4.01           Eligibility Rules.  The Plan Administrator shall have absolute discretion in selecting the Eligible Employees who are to participate in each Performance Period implemented under the Plan. The initial Participants for each Performance Period shall be selected not later than the ninetieth (90th) day after the commencement date of that Performance Period. The Plan Administrator may select additional Participants for the Performance Period after such ninetieth (90th) day; provided, however, that the Plan Administrator may, in its sole discretion, pro-rate the Long-Term Incentive Bonus which the Participant may earn for that Performance Period to reflect his or her actual period of Service during that Performance Period.

 

4.02           Cessation of Participation. The Plan Administrator shall have complete discretion to exclude one or more individuals from Participant status for one or more subsequent Performance Periods implemented under the Plan. If any individual is excluded from Participant status for one or more Performance Periods, then such individual shall not be entitled to any Long-Term Incentive Bonus for those Performance Periods.

 

ARTICLE V

 

LONG-TERM INCENTIVE BONUSES

 

5.01           Timing and Nature of Awards.  The Plan Administrator shall have complete discretion to implement one or more Performance Periods under the Plan.  The Plan Administrator shall, within the first ninety (90) days of each Performance Period, establish the specific Performance Milestones which must be attained for that Performance Period.  For each Performance Milestone, the Plan Administrator may set threshold, target and above-target levels of attainment. The Plan Administrator shall then establish for each Participant dollar levels for the Long-Term Incentive Bonus to which he or she may become entitled for that Performance Period based on the level at which each Performance Milestone is actually attained.  Such dollar levels may be a specified dollar amount or tied to a percentage or multiple of the annual rate of base salary in effect for the Participant for the applicable Performance Period.

 

  

  

  

 

5.02           Service Requirement.  A Participant shall not become entitled to a Long-Term Incentive Bonus for a particular Performance Period unless the Participant continues in Service through the completion of that Performance Period.

 

5.03           Determination of Bonus Amount.  As soon as practicable, but not later than sixty (60) days following the completion of the Performance Period, the Plan Administrator shall determine the actual level of attainment of each Performance Milestone established for that Performance Period and shall then measure and certify that level of attainment against the levels of attainment established for that Performance Milestone. Except to the extent determined otherwise by the Plan Administrator at the time each Performance Milestone is established, to the extent the actual level of attainment for any Performance Milestone is at a point between two of the levels established by the Plan Administrator, the dollar amount of the portion of each Long-Term Incentive Bonus tied to that Performance Milestone shall be pro-rated between the two points on a straight-line basis. On the basis of the foregoing measurements and certification, the Plan Administrator shall determine the actual Long-Term Incentive Bonus for each Participant entitled to a Long-Term Incentive Bonus for the Performance Period.

 

5.04           Change in Control.  Should a Change in Control transaction be consummated after the first ninety (90) days of the Performance Period but prior to the completion of that Performance Period, then the Performance Period shall terminate upon the consummation of that Change in Control.  In such event, the actual Long-Term Incentive Bonus for each Participant entitled under Section 5.01 to a bonus for that Performance Period shall be in the dollar amount previously set by the Plan Administrator at target level attainment of each Performance Milestone.  Should the Change in Control transaction occur within the first ninety (90) days of the Performance Period, the Plan Administrator shall have complete discretion whether and to what extent any bonuses should be paid under the Plan for that limited Performance Period.

 

ARTICLE VI

 

PAYMENT OF LONG-TERM INCENTIVE BONUSES

 

6.01           Payment.   The Participant’s Long-Term Incentive Bonus shall be paid to the Participant in cash in accordance with the following requirements:

 

(i)           for a full Performance Period coincidental with the Corporation’s fiscal year, the payment shall be made concurrent with payment of regular payroll for the first regular pay period of the succeeding fiscal year or such later date as may be required for administrative purposes, but not later than the last day of the first fiscal quarter of that succeeding fiscal year.

 

  

  

  

 

(ii)           for a Performance Period that is shorter than the Corporation’s fiscal year, other than an abbreviated Performance Period under Section 5.04, the payment shall be made concurrent with payment of regular payroll for the first administratively feasible regular pay period after the last day of the Performance Period, but not later than sixty (60) days after the last day of the Performance Period.

(iii)           for an abbreviated Performance Period under Section 5.04, the payment shall be made within sixty (60) days after the effective date of the Change in Control transaction triggering that abbreviated Performance Period.

6.02           Withholding Taxes.  The Corporation shall collect all federal, state and local income, employment and other payroll taxes (including FICA taxes) required to be withheld from the Participant’s Long-Term Incentive Bonus, as and when those taxes become due under applicable law. The Corporation shall collect such taxes through tax withholdings from the Long-Term Incentive Bonus or other wages and earnings payable to the Participant or by any other means acceptable to the Corporation.

 

ARTICLE VII

 

MISCELLANEOUS

 

7.01          Plan Effective Date.  The Plan shall become effective immediately upon approval by the Compensation Committee of the Board.

 

7.02          Benefit Limit. In the event any payment to which Participant becomes entitled under the Plan would otherwise constitute a parachute payment under Code Section 280G, then that payment shall be subject to reduction to the extent necessary to assure that such payment will be limited to the greater of (i)  the dollar amount which can be paid to the Participant without triggering a parachute payment under Code Section 280G or (ii)  the dollar amount of that payment which provides the Participant with the greatest after-tax amount after taking into account any excise tax the Participant may incur under Code Section 4999 with respect to such payment and any other benefits or payments to which the Participant may be entitled in connection with any change in control or ownership of the Corporation or the subsequent termination of the Participant’s Service.

 

7.03          Benefits Not Funded.  The obligation to pay each Participant’s Long-Term Incentive Bonus shall at all times be an unfunded and unsecured obligation of the Corporation. The Corporation shall not have any obligation to establish any trust, escrow arrangement or other fiduciary relationship for the purpose of segregating funds for the payment of the Long-Term Incentives Bonuses which become payable under the Plan, nor shall the Corporation be under any obligation to invest any portion of its general assets in mutual funds, stocks, bonds, securities or other similar investments in order to accumulate funds for the satisfaction of its respective obligations under the Plan.  The Participant (or his or her beneficiary) shall look solely and exclusively to the general assets of the Corporation for the payment of his or her Long-Term Incentive Bonus.

 

  

  

  

 

7.04          No Employment Right.  Neither the action of the Corporation in establishing or maintaining the Plan, nor any action taken under the Plan by the Plan Administrator, nor any provision of the Plan itself shall be construed so as to grant any person the right to remain in the Service of the Corporation for any period of specific duration, and the Participant shall at all times remain an Employee at will and may accordingly be discharged at any time, with or without cause and with or without advance notice of such discharge.

 

7.05          Amendment/Termination.  The Compensation Committee may at any time amend, suspend or terminate the Plan.  Moreover, the Compensation Committee reserves the right to amend this Plan as may be necessary or appropriate to avoid adverse tax consequences under Section 409A of the Code.

 

7.06          Applicable Law.  The provisions of the Plan shall also be construed, administered and governed by the laws of the State of Delaware without resort to its conflict-of-laws provisions.  If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan shall continue in full force and effect.

 

7.07          Satisfaction of Claims.  Any payment made to a Participant or his or her legal representative, beneficiary or estate  in accordance with the terms of this Plan shall to the extent thereof be in full satisfaction of all claims with respect to that payment which such person may have against the Plan, the Plan Administrator (or its designate) or the Corporation (or any parent or Subsidiary), any of whom may require the Participant or his or her legal representative, beneficiary or estate, as a condition precedent to such payment, to execute a receipt and release in such form as shall be determined by the Plan Administrator.

 

7.08          Alienation of Benefits.  No person entitled to benefits under the Plan shall have any right to transfer, assign, alienate, pledge, hypothecate or otherwise encumber his or her interest in such benefits prior to actual receipt of those benefits. The benefits payable under the Plan shall not, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person and shall not, to the maximum extent permitted by law, be transferable by operation of law in the event of the bankruptcy or insolvency of the Participant or any other person.

 

7.09          Successors and Assigns.  The obligation of the Corporation to make the payments required hereunder shall be binding upon the successors and assigns of the Corporation, whether by merger, consolidation, acquisition or other reorganization.

 

7.10          Construction and Interpretation.  The Plan shall be administered, operated and construed in compliance with the requirements of the short-term deferral exception to Internal Revenue Code Section 409A of and Treasury Regulations Section 1.409A-1(b)(4).  Accordingly, to the extent there is any ambiguity as to whether one or more provisions of the Plan would otherwise contravene the requirements or limitations of Internal Revenue Code Section 409A applicable to such short-term deferral exception, then those provisions shall be interpreted and applied in a manner that does not result in a violation of the requirements or limitations of Internal Revenue Code Section 409A and the Treasury Regulations thereunder that apply to such exception.

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