Document:

exhibit10-2.htm

CONVERSION AGREEMENT

           This Conversion Agreement (the “Agreement”) is entered into on July 8, 2011 between Green Eagle Capital Corp. as principal and agent for those parties listed hereto on Schedule A (each a “Subscriber”) and Novo Energies Corporation (the “Company”).

WHEREAS, on June 9, 2011, Green Eagle entered into a debt assignment agreement, attached hereto as Schedule B, with Trafalgar Capital SARL (“Trafalgar”), Trafalgar Capital Specialized Investment Fund-FIS, and the Company pursuant to which the Subscriber acquired, in the capacity as principal and agent enumerated above, all of Trafalgar’s rights, title and interest in the following transaction documents attached hereto as Schedule C (the “Transaction Documents”): (i) a securities purchase agreement, (ii) a secured convertible debenture (the “Debenture”) (as amended pursuant to an amendment and waiver dated June 9, 2011), (iii) a security Agreement, (iv) a joinder to security agreement, and (v) an escrow agreement;

WHEREAS, the current principal and accrued but unpaid interest on the Debenture amounts to $682,162.75;

WHEREAS, the Subscriber, as principal and as an agent for those parties found in Schedule A, desires to convert the Debenture into shares of common stock of Novo Energies Corporation in exchange for waiving and terminating all rights under and related to the Transaction Documents, including all security interests and other liens;

WHEREAS, the parties believe that a calculation of the conversion price pursuant to the Debenture is impossible due to the persistently low trading volume of the Company’s common stock;

WHEREAS, the parties have agreed to settle the debt owed pursuant to the Debenture for 10,000,000 shares of the Company’s common stock;

NOW, THEREFORE, the Subscriber and the Company hereby agree as follows:

1.           Conversion/Subscription. Simultaneously with the execution of this Agreement, the Subscriber shall convert $682,162.75 (the “Conversion”), representing all amounts due under the Debenture (including, without limitation, all accrued and unpaid Interest), into 10,000,000 shares (the “Conversion Shares”) of the Company’s common stock (the “Common Stock”) and the Company shall issue the Conversion Shares to each Subscriber in his pro-rata amount. Simultaneously with the execution of this Agreement, (i) Subscriber shall surrender to the Company the Debenture free and clear of all pledges, security interests, liens, mortgages, charges and other encumbrances and the Debenture shall at such time be paid in full, immediately cancelled and of no further force and effect, (ii) all outstanding indebtedness (including, without limitation, for principal, interest and fees) and other obligations of the Company under the Transaction Documents shall be cancelled and indefeasibly satisfied in full and irrevocably discharged, terminated and released, (iii) all security interests and other liens granted to or held

  

  

  

by Subscriber (or any affiliate, agent or other designee of Subscriber) in any property of the Company and/or any of its affiliates pursuant to the Transaction Documents shall be forever and irrevocably satisfied, released and discharged and (iii) all Transaction Documents shall terminate and be of no further force or effect. Immediately following the execution of this Agreement, the Subscriber (1) shall deliver to the Company any collateral and/or instruments in its possession in which its has been granted liens and security interests under the Transaction Documents and/or any other documents, agreements or instruments related thereto and UCC-3 termination statements, releases of liens, discharges, terminations and other release documentation, as applicable, releasing Subscriber’s liens and security interests in all of the assets and property of the Company; and (2) shall take (or cause to be taken) such additional steps as requested by the Company (or its designee) as may be necessary to release its security interests and liens, as applicable, in the property and (3) hereby authorizes the Company or any agent or designee thereof to file or otherwise deliver, as applicable, any Uniform Commercial Code termination statements and such other documents and instruments of release and discharge, pertaining to the security interests and liens of Subscriber as are necessary to effectuate, or reflect of public record, the release and irrevocable discharge of all such security interests and liens.

2.           Subscriber’s Waiver and Release. Simultaneously with the consummation of the Conversion, the Subscriber hereby absolutely, unconditionally and irrevocably waives any right to and releases and forever discharges the Company and each of its affiliates, shareholders, related organizations, agents, employees, officers, directors, advisors, successors and assigns (collectively, the “Released Parties”) from any and all manner of causes of action, damages, liabilities, obligations, promises, judgments, claims and demands of any nature whatsoever, in law or in equity, of every kind and description, whether known or unknown, suspected, absolute or contingent, which the Subscriber (in any capacity whatsoever) ever had, now have or hereafter can, shall or may have against any Released Party, in connection with the Transaction Documents.

3.           Representations of each Subscriber. By executing this Agreement, each Subscriber represents, warrants, acknowledges and agrees as follows:

3.1         Such Subscriber acknowledges that he has received, carefully read and understands in their entirety this Agreement and all information necessary to verify the accuracy and completeness of the Company’s representations, warranties and covenants made herein.

3.2         Such Subscriber understands that (i) the Conversion Shares being acquired hereunder have not been registered under the Securities Act, any applicable state securities laws or the laws of any foreign jurisdiction; (ii) Subscriber cannot sell the Conversion Shares unless they are registered under the Securities Act and any applicable state securities laws or unless exemptions from such registration requirements are available; (iii) the Company will place stop transfer instructions against the Conversion Shares and the certificates for the Conversion Shares to restrict the transfer thereof if such transfer would violate securities laws; and (iv) the Company has no obligations to register the Conversion Shares or assist the Subscriber in obtaining an exemption from the various registration requirements except as set forth herein.

  

  

  

3.3         Such Subscriber understands that an investment in the Conversion Shares involves substantial risks, and Subscriber recognizes and understands the risks relating to the acquisition of the Conversion Shares, including the fact that the Subscriber could lose the entire amount of the Subscriber’s investment in the Conversion Shares.

3.4         Such Subscriber has substantial investment expertise in start-up businesses and is extremely familiar with the Company’s business plan, and is knowledgeable about the risks associated with the business in which the Company is engaged, namely, and has either alone or together with the Subscriber’s Purchaser Representative (as that term is defined in Regulation D under the Securities Act), such knowledge and experience in financial and business matters that the Subscriber is capable of evaluating the merits and risks of an investment in the Company.

 

 

3.5         Such Subscriber’s investment in the Company is reasonable in relation to his net worth and financial needs, and the Subscriber is able to bear the economic risk of losing its entire investment in the Conversion Shares without substantially affecting his present manner or mode of living.

3.6         Such Subscriber shall not sell, assign, encumber or transfer all or any part of, or take any action with respect to, any of the Conversion Shares, unless the Company has determined, upon the advice of counsel for the Company, that no applicable federal or state securities laws will be violated as a result of such sale, assignment, encumbrance or transfer (as the case may be). The Company may require an opinion of counsel acceptable to the Company to the effect that such sale, assignment, encumbrance or transfer (as the case may be) (i) may be effected without registration of any of the Conversion Shares under the Securities Act and (ii) does not violate any applicable federal, state or other securities laws.

3.7         Such Subscriber represents that the Subscriber is in a position regarding the Company, which, based upon economic bargaining power, enabled and enables Subscriber to obtain information from the Company in order to evaluate the merits and risks of this investment; and that Subscriber has been advised concerning the risks and merits of this investment.  Further, Subscriber acknowledges that the Company has made available to Subscriber the opportunity to ask questions of, and receive answers from the Company, its officers, directors and other persons acting on its behalf, including Antonio Treminio, Chief Executive Officer of the Company, concerning the terms or conditions of the Conversion and to obtain any additional information Subscriber, to the extent the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information disclosed to Subscriber.  Further, Subscriber represents that no statement, printed material or inducement was given or made by the Company or anyone on its behalf which is contrary to the information disclosed to Subscriber.

3.9         Such Subscriber is aware that the Company has not paid any cash dividends on its Common Stock since its inception and, by reason of its present financial status and its contemplated financial requirements, does not contemplate or anticipate paying any dividends upon its Common Stock in the foreseeable future.

  

  

  

3.10       Such Subscriber is aware that the Company is contemplating completing a financing of at least $5,000,000 in aggregate gross proceeds for the issuance of common stock and warrants that could amount to more than 33% of the Company’s current issued and outstanding Common Stock.

4.           Representations of Company. Upon the completion of the Conversion, the Conversion Shares being acquired hereby will be duly authorized, validly issued, fully paid and nonassessable.

5.           Indemnification. Subscriber hereby agrees to indemnify and hold harmless the Company and the Company's officers, directors, employees, agents, counsel and affiliates from and against any and all damages, losses, costs, liabilities and expenses (including, without limitation, reasonable attorneys' fees) which they, or any of them, may incur by reason of the Subscriber's failure to fulfill, or comply with, any of the terms and conditions of this Agreement or by reason of the Subscriber's breach of any of his representations and warranties contained herein.  This Agreement and the representations and warranties contained herein shall be binding upon the Subscriber's heirs, executors, administrators, representatives, successors and assigns. THE COMPANY HAS BEEN ADVISED THAT THE INDEMNIFICATION OF THE COMPANY, ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, COUNSEL AND AFFILIATES IS DEEMED TO BE VOID AS AGAINST PUBLIC POLICY AND UNENFORCEABLE IN SOME STATES.

6.           Applicable Law, Venue and Jurisdiction.  This Agreement shall be construed in accordance with and governed by the laws applicable to contracts made and wholly performed in the State of New York.  The parties hereto agree that any dispute not settled directly between the parties shall be brought exclusively in the state and federal courts located in New York County, New York and the parties hereto submit to the jurisdiction of the state and federal courts located in New York County, New York.

7.           Execution in Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

8.           Persons Bound. This Agreement shall inure to the benefit of, and be binding on the Company and its successors and assigns and the Subscriber and its heirs, executors, administrators, permitted successors and permitted assigns.

  

  

  

9.           Entire Agreement. This Agreement, when accepted by the Company, will constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. This Agreement may not be modified, changed, waived or terminated other than by a writing executed by all the parties hereto. No course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the provisions hereof.

10.         Assignability; Severability. The Subscriber acknowledges that he may not assign any of his rights to, or interest in or under, this Agreement without the prior written consent of the Company, and any attempted assignment without such consent shall be void and without force or effect. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, it is agreed that the court making such determination shall have the power to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

11.         Interpretation. When the context in which words are used in this Agreement indicates that such is the intent, singular words shall include the plural, and vice versa, and masculine words shall include the feminine and neuter genders, and vice versa. Captions are inserted for convenience only, are not a part of this Agreement, and shall not be used in the interpretation of this Agreement.

 

 

 

 

 

 

 

 

 

[signature page follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

 

IN WITNESS WHEREOF, each of the parties hereto signs this Conversion Agreement as of the date first written above.

NOVO ENERGIES CORPORATION

/s/ Antonio Treminio

Name: Antonio Treminio

Title: Chief Executive Officer and Chairman

	
 

SUBSCRIBER, as principal and agent for those parties found on Schedule A

 

Green Eagle Capital Corp.

 

 

Seth M. Shaw

Name: Seth M. Shaw

Title: President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

  

SCHEDULE A

Subscriber                                                                                                Dollar Amountex10-1.htm

Exhibit 10.1

 

 

 

 

 

 

 

__________________________________________________________________

AMENDED AND RESTATED

CHINA ARMCO METALS, INC.

2009 STOCK INCENTIVE PLAN

__________________________________________________________________

 

 

 

 

 

 

 

 

 

 

  

 

  

 

TABLE OF CONTENTS

 Page

	1.	PURPOSE	
2

	2.	DEFINITIONS	
2

	3.	ADMINISTRATION OF THE PLAN	
2

	 	
3.1.

	
Board

	
2

	 	
3.2.

	
Committee

	
2

	 	
3.3.

	
Jurisdictions

	
2

	 	
3.4.

	
Terms of Awards

	
2

	 	
3.5.

	
No Repricing.

	
2

	 	
3.6.

	
Deferral Arrangement

	
2

	 	
3.7.

	
No Liability

	
2

	 	
3.8.

	
Share Issuance/Book-Entry

	
2

	4.	STOCK SUBJECT TO THE PLAN	
2

	 	
4.1.

	
Number of Shares Available for Awards

	
2

	 	
4.2.

	
Adjustments in Authorized Shares

	
2

	 	
4.3.

	
Share Usage

	
2

	5.	EFFECTIVE DATE, DURATION AND AMENDMENTS	
2

	 	
5.1.

	
Effective Date

	
2

	 	
5.2.

	
Term

	
2

	 	
5.3.

	
Amendment and Termination of the Plan

	
2

	6.	AWARD ELIGIBILITY AND LIMITATIONS	
2

	 	
6.1.

	
Service Providers and Other Persons

	
2

	 	
6.2.

	
Limitation on Shares of Stock Subject to Awards and Cash Awards.

	
2

	 	
6.3.

	
Adjustments in Authorized Shares

	
2

	7.	AWARD AGREEMENT	
2

	8.	TERMS AND CONDITIONS OF OPTIONS	
2

	 	
8.1.

	
Option Price

	
2

	 	
8.2.

	
Vesting

	
2

	 	
8.3.

	
Term

	
2

	 	
8.4.

	
Termination of Service

	
2

	 	
8.5.

	
Limitations on Exercise of Option

	
2

	 	
8.6.

	
Method of Exercise

	
2

	 	
8.7.

	
Rights of Holders of Options

	
2

	 	
8.8.

	
Delivery of Stock Certificates

	
2

	 	
8.9.

	
Transferability of Options

	
2

	 	
8.10.

	
Family Transfers

	
2

	 	
8.11.

	
Limitations on Incentive Stock Options

	
2

	 	
8.12.

	
Notice of Disqualifying Disposition

	
2

	9.	TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS	
2

	 	
9.1.

	
Right to Payment and Grant Price

	
2

	 	
9.2.

	
Other Terms

	
2

 

  

2

  

 

	 	
9.3.

	
Term

	
2

	 	
9.4.

	
Transferability of SARS

	
2

	 	
9.5.

	
Family Transfers

	
2

	10.	TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS	
2

	 	
10.1.

	
Grant of Restricted Stock or Stock Units

	
2

	 	
10.2.

	
Restrictions

	
2

	 	
10.3.

	
Restricted Stock Certificates

	
2

	 	
10.4.

	
Rights of Holders of Restricted Stock

	
2

	 	
10.5.

	
Rights of Holders of Stock Units

	
2

	 	 	 
10.5.1.

	
Voting and Dividend Rights

	
2

	 	 	10.5.2.	Creditor’s Rights	2
	 	
10.6.

	
Purchase of Restricted Stock and Shares Subject to Stock Units

	
2

	 	
10.7.

	
Delivery of Stock

	
2

	11.	TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS	
2

	12.	TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS	
2

	 	
12.1.

	
Dividend Equivalent Rights

	
2

	 	
12.2.

	
Termination of Service

	
2

	13.	PAYMENT	
2

	14.	TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS	
2

	 	
14.1.

	
Grant of Performance-Based Awards.

	
2

	 	
14.2.

	
Value of Performance-Based Awards.

	
2

	 	
14.3.

	
Earning of Performance-Based Awards.

	
2

	 	
14.4.

	
Form and Timing of Payment of Performance-Based Awards.

	
2

	 	
14.5.

	
Performance Conditions.

	
2

	 	
14.6.

	Performance-Based Awards Granted to Designated Covered Employees.	
2

	 	 	 
14.6.1.

	Performance Goals Generally.	2
	 	 	 
14.6.2.

	Timing For Establishing Performance Goals.	2
	 	 	 
14.6.3.

	 
Settlement of Awards; Other Terms.

	2
	 	 	 
14.6.4.

	 
Performance Measures.

	2
	 	 	 
14.6.5.

	 
Evaluation of Performance.

	2
	 	 	 
14.6.6.

	 
Adjustment of Performance-Based Compensation.

	2
	 	 	 
14.6.7.

	 
Committee Discretion.

	2
	 	
14.7.

	
Status of Awards Under Code Section 162(m).

	
2

	15.	 	
PARACHUTE LIMITATIONS

	
2

	16.	 	
REQUIREMENTS OF LAW

	
2

	 	
16.1.

	
General

	
2

	 	
16.2.

	
Rule 16b-3

	
2

	17.	 	
EFFECT OF CHANGES IN CAPITALIZATION

	
2

 

  

3

  

 

	 	
17.1.

	
Changes in Stock

	
2

	 	
17.2.

	
Reorganization in Which the Company Is the Surviving Entity Which does not Constitute a Corporate Transaction

	
2

	 	
17.3.

	
Corporate Transaction in which Awards are not Assumed

	
2

	 	
17.4.

	
Corporation Transaction in which Awards are Assumed

	
2

	 	
17.5.

	
Adjustments

	
2

	 	
17.6.

	
No Limitations on Company

	
2

	18.	 	
GENERAL PROVISIONS

	
2

	 	
18.1.

	
Disclaimer of Rights

	
2

	 	
18.2.

	
Nonexclusivity of the Plan

	
2

	 	
18.3.

	
Withholding Taxes

	
2

	 	
18.4.

	
Captions

	
2

	 	
18.5.

	
Other Provisions

	
2

	 	
18.6.

	
Number and Gender

	
2

	 	
18.7.

	
Severability

	
2

	 	
18.8.

	
Governing Law

	
2

	 	
18.9.

	
Code Section 409A

	
2

	 	
18.10.

	
Legend.

	
2

 

  

4

  

AMENDED AND RESTATED

CHINA ARMCO METALS, INC.

 

2009 STOCK INCENTIVE PLAN

 

 

China Armco Metals, Inc., a Nevada corporation (the “Company”), sets forth herein the terms of its Amended and Restated 2009 Stock Incentive Plan (the “Plan”), as follows:

 

	
1.

	
PURPOSE

 

The Plan is intended to enhance the Company’s and its Affiliates’ (as defined herein) ability to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate such persons to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company.  To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units (including deferred stock units), unrestricted stock, dividend equivalent rights, and cash bonus awards.  Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein, except that stock options granted to outside directors and any consultants or advisers providing services to the Company or an Affiliate shall in all cases be non-qualified stock options.

 

	
2.

	
DEFINITIONS

 

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

 

2.1           “Affiliate” means, with respect to the Company, any company or other trade or business that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.  For purposes of granting stock options or stock appreciation rights, an entity may not be considered an Affiliate unless the Company holds a “controlling interest” in such entity, where the term “controlling interest” has the same meaning as provided in Treasury Regulation 1.414(c)-2(b)(2)(i), provided that the language “at least 50 percent” is used instead of “at least 80 percent” and, provided further, that where granting of stock options or stock appreciation rights is based upon a legitimate business criteria, the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation 1.414(c)-2(b)(2)(i).

 

2.2           “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate, securities, tax and other laws, rules, regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards granted to residents therein.

 

  

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2.3           “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend Equivalent Right, a Performance Share or other Performance-Based Award under the Plan.

 

2.4           “Award Agreement” means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.

 

2.5           “Benefit Arrangement” shall have the meaning set forth in Section 15 hereof.

 

2.6           “Board” means the Board of Directors of the Company.

 

2.7           “Cause” means, as determined by the Board and unless otherwise provided in an applicable agreement with the Company or an Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

 

2.8           “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

 

2.9           “Committee” means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section 3.2.

 

2.10         “Company” means China Armco Metals, Inc.

 

2.11         “Corporate Transaction” means (i) the dissolution or liquidation of the Company or a merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) which results in any person or entity (other than persons who are stockholders immediately prior to the transaction) owning 50% or more of the combined voting power of all classes of stock of the Company.

 

2.12         “Covered Employee” means a Grantee who is a “covered employee” within the meaning of Code Section 162(m)(3).

 

2.13         “Disability” means the Grantee is unable to perform each of the essential duties of such Grantee's position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee's Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

  

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2.14         “Dividend Equivalent Right” means a right, granted to a Grantee under Section 12 hereof, to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.

 

2.15         “Effective Date” means the date the Plan was approved by the Board.

 

2.16         “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

 

2.17         “Fair Market Value” means the value of a share of Stock, determined as follows:  if on the Grant Date or other determination date the Stock is listed on an established national or regional stock exchange, or is publicly traded on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (if there is more than one such exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the next preceding day on which any sale shall have been reported.  If the Stock is not listed on such an exchange or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the Board by the reasonable application of a reasonable valuation method, in a manner consistent with Section 409A of the Code (“Code Section 409A”).

 

2.18         “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent of the voting interests.

 

2.19         “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof, or (iii) such other date as may be specified by the Board.

 

2.20         “Grantee” means a person who receives or holds an Award under the Plan.

 

2.21         “Incentive Stock Option” means an “incentive stock option” within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

 

2.22         “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

 

  

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2.23         “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

 

2.24         “Option Price” means the exercise price for each share of Stock subject to an Option.

 

2.25         “Other Agreement” shall have the meaning set forth in Section 15 hereof.

 

2.26         “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for “qualified performance-based compensation” paid to Covered Employees.  Notwithstanding the foregoing, nothing in the Plan shall be construed to mean that an Award which does not satisfy the requirements for “qualified performance-based compensation” within the meaning of and pursuant to Code Section 162(m) does not constitute performance-based compensation for other purposes, including the purposes of Code Section 409A.

 

2.27         “Performance-Based Award” means an Award of Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock Units, Performance Shares or Other Equity-Based Awards made subject to the achievement of performance goals (as provided in Section 14) over a Performance Period specified by the Committee.

 

2.28         “Performance Measures” means measures as specified in Section 14 on which the performance goals under Performance-Based Awards are based and which are approved by the Company’s stockholders pursuant to, and to the extent required by, the Plan in order to qualify such Performance-Based Awards as Performance-Based Compensation.

 

2.29         “Performance Period” means the period of time during which the performance goals under Performance-Based Awards must be met in order to determine the degree of payout and/or vesting with respect to any such Performance-Based Awards.

 

2.30         “Performance Shares” means a Performance-Based Award representing a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, made subject to the achievement of performance goals (as provided in Section 14) over a Performance Period of up to ten (10) years.

 

2.31         “Plan” means this Amended and Restated China Armco Metals, Inc. 2009 Stock Incentive Plan.

 

2.32         “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock, Stock Units or Unrestricted Stock.

 

2.33         “Reporting Person” means a person who is required to file reports under Section 16(a) of the Exchange Act.

 

2.34         “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 10 hereof.

 

  

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2.35         “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 9 hereof.

 

2.36         “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

 

2.37         “Service” means service as a Service Provider to the Company or an Affiliate.  Unless otherwise stated in the applicable Award Agreement, a Grantee's change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate.  Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive.

 

2.38         “Service Provider” means an employee, officer or director of the Company or an Affiliate, or a consultant or adviser (who is a natural person) currently providing services to the Company or an Affiliate.

 

2.39         “Stock” means the ordinary shares, par value $0.001 per share, of the Company.

 

2.40         “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9 hereof.

 

2.41         “Stock Unit” means a bookkeeping entry representing the equivalent of one share of Stock awarded to a Grantee pursuant to Section 10 hereof.

 

2.42         “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

 

2.43         “Substitute Awards” means Awards granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity acquired by the Company or any Affiliate or with which the Company or any Affiliate combines.

 

2.44         “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its parent or any of its Subsidiaries.  In determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.

 

2.45         “Unrestricted Stock” means an Award pursuant to Section 11 hereof.

 

2.46         “U.S. Grantee” means any Grantee who is or becomes a taxpayer in the United States.

 

  

9

  

 

	
3.

	
ADMINISTRATION OF THE PLAN

 

	
  

	
3.1.

	
Board

 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation and by-laws and applicable law.  The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement.  All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company’s certificate of incorporation and by-laws and applicable law.  The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive.

 

	
  

	
3.2.

	
Committee

 

The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and other applicable provisions, as the Board shall determine, consistent with the certificate of incorporation and by-laws of the Company and applicable law.

 

In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in this Section.  Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive.  To the extent permitted by law, the Committee may delegate its authority under the Plan to a member of the Board.

 

	
  

	
3.3.

	
Jurisdictions

 

In order to assure the viability of Awards granted to Grantees employed in various jurisdictions, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom applicable in the jurisdiction in which the Participant resides or is employed.  Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Section 4.1 of the Plan.  Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate any Applicable Laws.

 

  

10

  

 

	
  

	
3.4.

	
Terms of Awards

 

Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to:

 

(i)           designate Grantees,

 

(ii)          determine the type or types of Awards to be made to a Grantee,

 

(iii)         determine the number of shares of Stock to be subject to an Award,

 

(iv)         establish the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, the treatment of an Award in the event of a change of control, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options),

 

(v)          prescribe the form of each Award Agreement evidencing an Award, and

 

(vi)         amend, modify, or supplement the terms of any outstanding Award.  Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to U.S. Grantees and eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.  Notwithstanding the foregoing, no amendment, modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee’s rights under such Award.

 

The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee.  In addition, the Company may annul an Award if the Grantee is an employee of the Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.

 

	
  

	
3.5.

	
No Repricing.

 

Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, shares of Stock, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of Stock or other securities or similar transaction), the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for or substitution of Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.

 

  

11

  

 

	
  

	
3.6.

	
Deferral Arrangement

 

The Board may permit or require the deferral of any award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock equivalents.  Any such deferrals shall be made in a manner that complies with Code Section 409A.

 

	
  

	
3.7.

	
No Liability

 

No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement.

 

	
  

	
3.8.

	
Share Issuance/Book-Entry

 

Notwithstanding any provision of this Plan to the contrary, the issuance of the Stock under the Plan may be evidenced in such a manner as the Board, in its discretion, deems appropriate, including, without limitation, book-entry registration or issuance of one or more Stock certificates.

 

	
4.

	
STOCK SUBJECT TO THE PLAN

 

	
  

	
4.1.

	
Number of Shares Available for Awards

 

Subject to adjustment as provided in Section 17 hereof, the number of shares of Stock available for issuance under the Plan shall be no greater than 2,200,000 (two million two-hundred thousand) shares of Stock, all of which may be granted as Incentive Stock Options.  Stock issued or to be issued under the Plan shall be authorized but unissued shares; or, to the extent permitted by applicable law, issued shares that have been reacquired by the Company.

 

	
  

	
4.2.

	
Adjustments in Authorized Shares

 

The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies. The number of shares of Stock reserved pursuant to Section 4 shall be increased by the corresponding number of Awards assumed and, in the case of a substitution, by the net increase in the number of shares of Stock subject to Awards before and after the substitution.

 

  

12

  

 

	
  

	
4.3.

	
Share Usage

 

Shares covered by an Award shall be counted as used as of the Grant Date.  Any shares of Stock that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1) share for every one (1) share subject to an Award.  If any shares covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without delivery of any Stock subject thereto or is settled in cash in lieu of shares, then the number of shares of Stock counted against the aggregate number of shares available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same amount as such shares were counted against the limit set forth in Section 4.1.  The number of shares of Stock available for issuance under the Plan shall not be increased by (i) any shares of Stock tendered or withheld or Award surrendered in connection with the purchase of shares of Stock upon exercise of an Option as described in Section 13, or (ii) any shares of Stock deducted or delivered from an Award payment in connection with the Company’s tax withholding obligations as described in Section 18.3.

 

	
5.

	
EFFECTIVE DATE, DURATION AND AMENDMENTS

 

	
  

	
5.1.

	
Effective Date

 

The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the Company’s stockholders within one year of the Effective Date.  Upon approval of the Plan by the stockholders of the Company as set forth above, all Awards made under the Plan on or after the Effective Date shall be fully effective as if the stockholders of the Company had approved the Plan on the Effective Date.  If the stockholders fail to approve the Plan within one year of the Effective Date, any Awards made hereunder shall be null and void and of no effect.

 

	
  

	
5.2.

	
Term

 

The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.3.

 

	
  

	
5.3.

	
Amendment and Termination of the Plan

 

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any shares of Stock as to which Awards have not been made.  An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements.  No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.

 

	
6.

	
AWARD ELIGIBILITY AND LIMITATIONS

 

	
  

	
6.1.

	
Service Providers and Other Persons

 

Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider to the Company or of any Affiliate, including any Service Provider who is an officer or director of the Company, or of any Affiliate, as the Board shall determine and designate from time to time and (ii) any other individual or entity whose participation in the Plan is determined to be in the best interests of the Company by the Board.

 

  

13

  

 

	
  

	
6.2.

	
Limitation on Shares of Stock Subject to Awards and Cash Awards.

 

During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act:

 

(a)           the maximum number of shares of Stock subject to Options or SARs that may be granted under the Plan in a calendar year to any person eligible for an Award under Section 6 is one million three hundred thousand (1,300,000);

 

(b)           the maximum number of shares of Stock that may be granted under the Plan, other than pursuant to Options or SARs, in a calendar year to any person eligible for an Award under Section 6 is one million three hundred thousand (1,300,000); and

 

(c)           the maximum amount that may be paid as a cash-settled Performance-Based Award for a performance period of twelve (12) months or less to any person eligible for an Award shall be one million dollars ($1,000,000) and the maximum amount that may be paid as a cash-settled Performance-Based Award for a performance period of greater than twelve (12) months to any person eligible for an Award shall be five million dollars ($5,000,000).

 

The preceding limitations in this Section 6.2 are subject to adjustment as provided in Section 17.

 

	
  

	
6.3.

	
Adjustments in Authorized Shares

 

An eligible person may receive more than one Award, subject to such restrictions as are provided herein.  The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Section 424(a) of the Code applies. The number of Shares reserved pursuant to Section 4 shall be increased by the corresponding number of Substitute Awards.

 

	
7.

	
AWARD AGREEMENT

 

Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine.  Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.  Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

 

  

14

  

 

	
8.

	
TERMS AND CONDITIONS OF OPTIONS

 

	
  

	
8.1.

	
Option Price

 

The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option.  Except in the case of Substitute Awards, the Option Price of each Option shall be at least the Fair Market Value on the Grant Date of a share of Stock; provided, however, that in the event that a Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the Grant Date.   In no case shall the Option Price of any Option be less than the par value of a share of Stock.

 

	
  

	
8.2.

	
Vesting

 

Subject to Sections 8.3 and 17.3 hereof, each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement.  For purposes of this Section 8.2, fractional numbers of shares of Stock subject to an Option shall be rounded down to the next nearest whole number.

 

	
  

	
8.3.

	
Term

 

Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten years from the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such Option; provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five years from its Grant Date.  If on the day preceding the date on which a Grantee’s Options would otherwise terminate, the Fair Market Value of shares of Stock underlying a Grantee’s Options is greater than the Option Price of such Options, the Company shall, prior to the termination of such Options and without any action being taken on the part of the Grantee, consider such Options to have been exercised by the Grantee.  The Company shall deduct from the shares of Stock deliverable to the Grantee upon such exercise the number of shares of Stock necessary to satisfy payment of the Option Price and all withholding obligations.

 

	
  

	
8.4.

	
Termination of Service

 

Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee’s Service.  Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

 

	
  

	
8.5.

	
Limitations on Exercise of Option

 

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the stockholders of the Company as provided herein or after the occurrence of an event referred to in Section 17 hereof which results in termination of the Option.

 

  

15

  

 

	
  

	
8.6.

	
Method of Exercise

 

Subject to the terms of Section 13 and Section 18.3, an Option that is exercisable may be exercised by the Grantee’s delivery to the Company of notice of exercise on any business day, at the Company’s principal office, on the form specified by the Company.  Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award.

 

	
  

	
8.7.

	
Rights of Holders of Options

 

Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to him.  Except as provided in Section 17 hereof, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.  The Grantee’s rights with respect to the shares of Stock issued after exercising the Option shall be governed by the deposit agreement among the Company, the Depositary and the shareholders.

 

	
  

	
8.8.

	
Delivery of Stock Certificates

 

Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option.

 

	
  

	
8.9.

	
Transferability of Options

 

Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise an Option.  Except as provided in Section 8.10, no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

 

	
  

	
8.10.

	
Family Transfers

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Stock Option to any Family Member.  For the purpose of this Section 8.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless applicable law does not permit such transfers, a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity.  Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and shares of Stock acquired pursuant to the Option shall be subject to the same restrictions on transfer of shares as would have applied to the Grantee.  Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in accordance with this Section 8.10 or by will or the laws of descent and distribution.  The events of termination of Service of Section 8.4 hereof shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4.

 

  

16

  

 

	
  

	
8.11.

	
Limitations on Incentive Stock Options

 

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000.  This limitation shall be applied by taking Options into account in the order in which they were granted.

 

	
  

	
8.12.

	
Notice of Disqualifying Disposition

 

If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days thereof.

 

	
9.

	
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

	
  

	
9.1.

	
Right to Payment and Grant Price

 

A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Board.  The Award Agreement for a SAR shall specify the grant price of the SAR, which shall be at least the Fair Market Value of a share of Stock on the date of grant.  SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Price that is no less than the Fair Market Value of one share of Stock on the SAR Grant Date.

 

	
  

	
9.2.

	
Other Terms

 

The Board shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

 

  

17

  

 

	
  

	
9.3.

	
Term

 

Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten years from the date such SAR is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such SAR.

 

	
  

	
9.4.

	
Transferability of SARS

 

Except as provided in Section 9.5, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's guardian or legal representative) may exercise a SAR.  Except as provided in Section 9.5, no SAR shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

 

	
  

	
9.5.

	
Family Transfers

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of a SAR to any Family Member.  For the purpose of this Section 9.5, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless applicable law does not permit such transfers, a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity.  Following a transfer under this Section 9.5, any such SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and shares of Stock acquired pursuant to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to the Grantee.  Subsequent transfers of transferred SARs are prohibited except to Family Members of the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and distribution.

 

	
10.

	
TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

 

	
  

	
10.1.

	
Grant of Restricted Stock or Stock Units

 

Awards of Restricted Stock or Stock Units may be made for no consideration (other than par value of the shares which is deemed paid by Services already rendered).

 

	
  

	
10.2.

	
Restrictions

 

At the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole discretion, (a) establish a period of time (a “Restricted Period”) applicable to such Restricted Stock or Stock Units and (b) prescribe restrictions in addition to or other than the expiration of the Restricted Period, including the satisfaction of corporate or individual performance goals, which may be applicable to all or any portion of such Restricted Stock or Stock Units as provided in Section 14.  Awards of Restricted Stock and Stock Units may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the Board with respect to such Awards.

 

  

18

  

 

	
  

	
10.3.

	
Restricted Stock Certificates

 

The Company shall issue, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date.  The Board may provide in an Award Agreement that either (i)  the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii)  such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

 

	
  

	
10.4.

	
Rights of Holders of Restricted Stock

 

Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock and the right to receive any dividends declared or paid with respect to such Stock.  The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock.  All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Grant.

 

	
  

	
10.5.

	
Rights of Holders of Stock Units

 

10.5.1.   Voting and Dividend Rights

 

Holders of Stock Units shall have no rights as stockholders of the Company.  The Board may provide in an Award Agreement evidencing a grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding Stock, a cash payment for each Stock Unit held equal to the per-share dividend paid on the Stock.  Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid.

 

10.5.2.   Creditor’s Rights

 

A holder of Stock Units shall have no rights other than those of a general creditor of the Company.  Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

 

	
  

	
10.6.

	
Purchase of Restricted Stock and Shares Subject to Stock Units

 

The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock or Shares subject to vested Stock Units from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or Stock Units (ii) the Purchase Price, if any, specified in the Award Agreement relating to such Restricted Stock or Stock Units.  The Purchase Price shall be payable in a form described in Section 13 or, in the discretion of the Board, in consideration for past or future Services rendered to the Company or an Affiliate.

 

  

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10.7.

	
Delivery of Stock

 

Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.  Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have any further rights with regard to a Stock Unit once the share of Stock represented by the Stock Unit has been delivered.

 

	
11.

	
TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS

 

The Board may, in its sole discretion, grant (or sell at the par value of a share of Stock or at such other higher purchase price as shall be determined by the Board) an Award to any Grantee pursuant to which such Grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”) under the Plan.  Unrestricted Stock Awards may be granted or sold to any Grantee as provided in the immediately preceding sentence in respect of past or, if so provided in the related Award Agreement or a separate agreement, the promise by the Grantee to perform future Service to the Company or an Affiliate or other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.

 

	
12.

	
TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

 

	
  

	
12.1.

	
Dividend Equivalent Rights

 

A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the recipient.  A Dividend Equivalent Right may be granted hereunder to any Grantee.  The terms and conditions of Dividend Equivalent Rights shall be specified in the grant.  Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents.  Any such reinvestment shall be at Fair Market Value on the date of reinvestment.  Dividend Equivalent Rights may be settled in cash or Stock or a combination thereof, in a single installment or installments, all determined in the sole discretion of the Board.  A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award.  A Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other award.

 

  

20

  

 

	
  

	
12.2.

	
Termination of Service

 

Except as may otherwise be provided by the Board either in the Award Agreement or in writing after the Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the Grantee’s termination of Service for any reason.

 

	
13.

	
PAYMENT

 

The Committee shall determine the methods by which the Option Price, SAR Exercise Price or Purchase Price for an Award may be paid, the form of payment, including, without limitation (i) cash or check denominated in U.S. Dollars, (ii) to the extent permissible under the Applicable Laws, cash or check in Chinese Renminbi, (iii) cash or check denominated in any other local currency as approved by the Committee, (iv) shares of Stock held for such period of time as may be required by the Committee in order to avoid adverse financial accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate Option Price or SAR Exercise Price of the Option or SAR, respectively, or exercised portion thereof, or Purchase Price for Restricted Stock, (v) the delivery of a notice that the Grantee has placed a market order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option Price, provided that payment of such proceeds is then made to the Company upon settlement of such sale; notwithstanding anything in the Plan to the contrary, such method shall be the only method a Grantee who is a resident for tax purposes in the People’s Republic of China may exercise an Option, (vi) other property acceptable to the Committee with a Fair Market Value equal to the Option Price, SAR Exercise Price or Purchase Price, (vii) withholding shares otherwise issuable upon exercise or vested shares having a Fair Market Value on the date of exercise equal to the aggregate Option Price or SAR Exercise Price of the Option or SAR, respectively, or exercised portion thereof, or the Purchase Price for Restricted Stock or (viii) any combination of the foregoing.  Notwithstanding any other provision of the Plan to the contrary, no Grantee who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the Option Price, SAR Exercise Price or Purchase Price in any method that would violate Section 13(k) of the Exchange Act.

 

A Grantee may be required to provide evidence that any currency used to pay the Option Price, SAR Exercise Price or Purchase Price of an Award were acquired and taken out of the jurisdiction in which the Grantee resides in accordance with Applicable Laws, including foreign exchange control laws and regulations.  In the event the Option Price, SAR Exercise Price or Purchase Price for an Award is paid in Chinese Renminbi or other foreign currency, as permitted by the Committee, the amount payable will be determined by conversion from U.S. dollars at the official rate promulgated by the People’s Bank of China for Chinese Renminbi, or for jurisdictions other than the People’s Republic of China, the exchange rate as selected by the Committee on the date of exercise or purchase.

 

  

21

  

 

	
14.

	
TERMS AND CONDITIONS OF PERFORMANCE-BASED AWARDS

 

	
  

	
14.1.

	
Grant of Performance-Based Awards.

 

Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance-Based Awards to a Plan participant in such amounts and upon such terms as the Committee shall determine.

 

	
  

	
14.2.

	
Value of Performance-Based Awards.

 

Each grant of a Performance-Based Award shall have an initial value or target number of shares of Stock that is established by the Board at the time of grant.  The Committee shall set performance goals in its discretion which, depending on the extent to which they are achieved, shall determine the value and/or number of shares subject to a Performance-Based Award that will be paid out to the Grantee thereof.

 

	
  

	
14.3.

	
Earning of Performance-Based Awards.

 

Subject to the terms of the Plan, after the applicable Performance Period has ended, the Grantee of Performance-Based Awards shall be entitled to receive a payout on the value or number of the Performance-Based Awards earned by such Grantee over such Performance Period.

 

	
  

	
14.4.

	
Form and Timing of Payment of Performance-Based Awards.

 

Payment of earned Performance-Based Awards shall be as determined by the Committee and as evidenced in the applicable Award Agreement.  Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance-Based Awards in the form of cash or shares of Stock (or a combination thereof) equal to the value of such earned Performance-Based Awards and shall pay the Awards that have been earned at the close of the applicable Performance Period, or as soon as reasonably practicable after the Committee has determined that the performance goal or goals have been achieved; provided that, unless specifically provided in the Award Agreement for such Awards, such payment shall occur no later than the 15th day of the third month following the end of the calendar year in which such Performance Period ends.  Any shares of Stock paid out under such Awards may be granted subject to any restrictions deemed appropriate by the Board.  The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement for the Awards.

 

	
  

	
14.5.

	
Performance Conditions.

 

The right of a Grantee to exercise or receive a grant or settlement of any Performance-Based Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee.  The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions.  If and to the extent required under Code Section 162(m), any power or authority relating to an Award intended to qualify under Code Section 162(m) shall be exercised by the Committee and not by the Board.

 

  

22

  

 

	
  

	
14.6.

	
Performance-Based Awards Granted to Designated Covered Employees.

 

If and to the extent that the Committee determines that a Performance-Based Award to be granted to a Grantee should constitute “qualified performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 14.6.

 

	
  

	
14.6.1.

	
Performance Goals Generally.

 

The performance goals for Performance-Based Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each such criteria, as specified by the Committee consistent with this Section 14.6.  Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.”  The Committee may determine that such Awards shall be granted, exercised and/or settled upon achievement of any single performance goal or that two (2) or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Awards.  Performance goals may differ for Awards granted to any one Grantee or to different Grantees.

 

	
  

	
14.6.2.

	
Timing For Establishing Performance Goals.

 

Performance goals for any Performance-Based Award shall be established not later than the earlier of (a) 90 days after the beginning of any Performance Period applicable to such Award, and (b) the date on which twenty-five percent (25%) of any Performance Period applicable to such Award has expired, or at such other date as may be required or permitted for compensation payable to a Covered Employee to constitute Performance-Based Compensation.

 

	
  

	
14.6.3.

	
Settlement of Awards; Other Terms.

 

Settlement of Performance-Based Awards shall be in cash, shares of Stock, other Awards or other property, as determined in the sole discretion of the Committee.  The Committee may, in its sole discretion, reduce the amount of a settlement otherwise to be made in connection with such Awards.  The Committee shall specify the circumstances in which such Performance-Based Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a Performance Period or settlement of such Awards.

 

	
  

	
14.6.4.

	
Performance Measures.

 

The performance goals upon which the payment or vesting of a Performance-Based Award to a Covered Employee that is intended to qualify as Performance-Based Compensation may be conditioned shall be limited to the following Performance Measures, with or without adjustment:

 

(a)           net earnings or net income;

 

  

23

  

 

(b)           operating earnings;

 

(c)            pretax earnings;

 

(d)           earnings per share;

 

(e)           share price, including growth measures and total stockholder return;

 

(f)            earnings before interest and taxes;

 

(g)           earnings before interest, taxes, depreciation and/or amortization;

 

(h)           earnings before interest, taxes, depreciation and/or amortization as adjusted to exclude any one or more of the following:

 

	
  

	
·

	
non-cash compensation expense;

 

	
  

	
·

	
income from discontinued operations;

 

	
  

	
·

	
gain on cancellation of debt;

 

	
  

	
·

	
restructuring and/or integration charges and costs;

 

	
  

	
·

	
reorganization and/or recapitalization items;

 

	
  

	
·

	
impairment charges; and

 

	
  

	
·

	
gain or loss related to investments;

 

	
  

	
(i)

	
sales or revenue growth, whether in general, by type of product or service, or by type of customer;

 

	
  

	
(j)

	
gross or operating margins;

 

	
  

	
(k)

	
return measures, including return on assets, capital, investment, equity, sales or revenue;

 

	
  

	
(l)

	
cash flow, including:

 

	
  

	
·

	
operating cash flow;

 

	
  

	
·

	
free cash flow, defined as earnings before interest, taxes, depreciation and/or amortization (as adjusted to exclude any one or more of the items that may be excluded pursuant to the Performance Measure specified in clause (h) above) less capital expenditures; 

 

	
  

	
·

	
levered free cash flow, defined as free cash flow less interest expense;

 

  

24

  

 

	
  

	
·

	
cash flow return on equity;

 

	
  

	
·

	
cash flow return on investment;

 

	
  

	
(m)

	
productivity ratios;

 

	
  

	
(n)

	
plant productivity measures;

 

	
  

	
(o)

	
measures of operating performance;

 

	
  

	
(p)

	
expense targets;

 

	
  

	
(q)

	
market share;

 

	
  

	
(r)

	
financial ratios as provided in credit agreements of the Company and its subsidiaries;

 

	
  

	
(s)

	
working capital measures;

 

	
  

	
(t)

	
entry into and performance of customer and supplier contracts;

 

	
  

	
(u)

	
completion of acquisitions of businesses or companies;

 

	
  

	
(v)

	
completion of divestitures and asset sales; or

 

	
  

	
(w)

	
any combination of the foregoing business criteria.

 

Performance under any of the foregoing Performance Measures (a) may be used to measure the performance of (i) the Company and its Subsidiaries and other Affiliates as a whole, (ii) the Company, any Subsidiary, and/or any other Affiliate or any combination thereof, or (iii) any one or more business units of the Company, any Subsidiary, and/or any other Affiliate, as the Committee, in its sole discretion, deems appropriate and (b) may be compared to the performance of one or more other companies or one or more published or special indices designated or approved by the Committee for such comparison, as the Committee, in its sole discretion, deems appropriate.  In addition, the Committee, in its sole discretion, may select performance under the Performance Measure specified in clause (e) above for comparison to performance under one or more stock market indices designated or approved by the Committee.  The Committee also shall have the authority to provide for accelerated vesting of any Performance-Based Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 14.

 

	
  

	
14.6.5.

	
  Evaluation of Performance.

 

The Committee may provide in any Performance-Based Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance Period: (a) asset write-downs; (b) litigation or claims, judgments or settlements; (c) the effect of changes in tax laws, accounting principles or other laws or provisions affecting reported results; (d) any reorganization or restructuring events or programs; (e) extraordinary, non-core, non-operating or non-recurring items; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses.  To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to qualify as Performance-Based Compensation, such inclusions or exclusions shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

 

  

25

  

 

	
  

	
14.6.6.

	
Adjustment of Performance-Based Compensation.

 

The Committee shall have the sole discretion to adjust Awards that are intended to qualify as Performance-Based Compensation, either on a formula or discretionary basis, or on any combination thereof, as the Committee determines consistent with the requirements of Code Section 162(m) for deductibility.

 

	
  

	
14.6.7.

	
Committee Discretion.

 

In the event that Applicable Laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval, provided that the exercise of such discretion shall not be inconsistent with the requirements of Code Section 162(m).  In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 14.6.4.

 

	
  

	
14.7.

	
Status of Awards Under Code Section 162(m).

 

It is the intent of the Company that Awards under Section 14.6 granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and the regulations promulgated thereunder shall, if so designated by the Committee, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m).  Accordingly, the terms of Section 14.6, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m).  If any provision of the Plan or any agreement relating to any such Award does not comply or is inconsistent with the requirements of Code Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

 

	
15.

	
PARACHUTE LIMITATIONS

 

Notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a U.S. Grantee with the Company or any Affiliate, except an agreement, contract, or understanding that expressly addresses Section 280G or Section 4999 of the Code (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the U.S. Grantee (including groups or classes of U.S. Grantees or beneficiaries of which the U.S. Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the U.S. Grantee (a “Benefit Arrangement”), if the U.S. Grantee is a “disqualified individual,” as defined in Section 280G(c) of the Code, any Option, Restricted Stock, or Stock Unit held by that U.S. Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the U.S. Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the U.S. Grantee under this Plan to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the U.S. Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the U.S. Grantee without causing any such payment or benefit to be considered a Parachute Payment.  The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of Performance-Based Awards, then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of Restricted Stock or Stock Units, then by reducing or eliminating any other remaining Parachute Payments

 

  

26

  

 

	
16.

	
REQUIREMENTS OF LAW

 

	
  

	
16.1.

	
General

 

The Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations.  If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award.  Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled in shares of Stock or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares  pursuant to an exemption from registration under the Securities Act.  Any determination in this connection by the Board shall be final, binding, and conclusive.  The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act.  The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority.  As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in shares of Stock) shall not be exercisable until the shares of Stock covered by such Option (or SAR) are registered or are exempt from registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

 

  

27

  

 

	
  

	
16.2.

	
Rule 16b-3

 

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act.  To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan.  In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

 

	
17.

	
EFFECT OF CHANGES IN CAPITALIZATION

 

	
  

	
17.1.

	
Changes in Stock

 

If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares for which grants of Options and other Awards may be made under the Plan, shall be adjusted proportionately and accordingly by the Company.  In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event.  Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share.  The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration.   Notwithstanding the foregoing, in the event of any distribution to the Company's stockholders of securities of any other entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation Rights to reflect such distribution.

 

  

28

  

 

	
  

	
17.2.

	
Reorganization in Which the Company Is the Surviving Entity Which does not Constitute a Corporate Transaction

 

Subject to Section 17.3 hereof, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities which does not constitute a Corporate Transaction, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price of the shares remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation.  Subject to any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation.  In the event of a transaction described in this Section 17.2, Stock Units shall be adjusted so as to apply to the securities that a holder of the number of shares of Stock subject to the Stock Units would have been entitled to receive immediately following such transaction.

 

	
  

	
17.3.

	
Corporate Transaction in which Awards are not Assumed

 

Upon the occurrence of a Corporate Transaction in which outstanding Options, SARs, Stock Units and Restricted Stock are not being assumed or continued:

 

(i)  all outstanding shares of Restricted Stock shall be deemed to have vested, and all Stock Units shall be deemed to have vested and the shares of Stock subject thereto shall be delivered, immediately prior to the occurrence of such Corporate Transaction, and

 

(ii) either of the following two actions shall be taken:

 

(A) fifteen days prior to the scheduled consummation of a Corporate Transaction, all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen days, or

 

(B) the Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Stock, Stock Units, and/or SARs and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Stock or Stock Units, equal to the formula or fixed price per share paid to holders of shares of Stock and, in the case of Options or SARs, equal to the product of the number of shares of Stock subject to the Option or SAR (the “Award Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Shares.

 

With respect to the Company's establishment of an exercise window, (i) any exercise of an Option or SAR during such fifteen-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Corporate Transaction, the Plan and all outstanding but unexercised Options and SARs shall terminate.  The Board shall send notice of an event that will result in such a termination to all individuals who hold Options and SARs not later than the time at which the Company gives notice thereof to its stockholders.

 

  

29

  

 

	
  

	
17.4.

	
Corporation Transaction in which Awards are Assumed

 

The Plan, Options, SARs, Stock Units and Restricted Stock theretofore granted shall continue in the manner and under the terms so provided in the event of any Corporate Transaction to the extent that provision is made in writing in connection with such Corporate Transaction for the assumption or continuation of the Options, SARs, Stock Units and Restricted Stock theretofore granted, or for the substitution for such Options, SARs, Stock Units and Restricted Stock for new common stock options and stock appreciation rights and new common stock units and restricted stock relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation right exercise prices. In the event a Grantee’s Award is assumed, continued or substituted upon the consummation of any Corporate Transaction and his employment is terminated without Cause within one year following the consummation of such Corporate Transaction, the Grantee’s Award will be fully vested and may be exercised in full, to the extent applicable, beginning on the date of such termination and for the one-year period immediately following such termination or for such longer period as the Committee shall determine.

 

	
  

	
17.5.

	
Adjustments

 

Adjustments under this Section 17 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.  No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share. The Board shall determine the effect of a Corporate Transaction upon Awards other than Options, SARs, Stock Units and Restricted Stock, and such effect shall be set forth in the appropriate Award Agreement.  The Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 17.1, 17.2, 17.3 and 17.4.  This Section 17.5 does not limit the Company’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of change of control events that are not Corporate Transactions.

 

	
  

	
17.6.

	
No Limitations on Company

 

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

 

  

30

  

 

	
18.

	
GENERAL PROVISIONS

 

	
  

	
18.1.

	
Disclaimer of Rights

 

No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company.  In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a director, officer, consultant or employee of the Company or an Affiliate.  The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein.  The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

 

	
  

	
18.2.

	
Nonexclusivity of the Plan

 

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of stock options otherwise than under the Plan.

 

	
  

	
18.3.

	
Withholding Taxes

 

No shares of Stock shall be delivered under the Plan to any Grantee until such Grantee has made arrangements acceptable to the Committee for the satisfaction of any income and employment tax withholding obligations under Applicable Laws.  The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Grantee to remit to the Company, an amount sufficient to satisfy federal, state, local or foreign taxes (including the Grantee’s payroll tax obligations) required or permitted by law to be withheld with respect to any taxable event concerning a Grantee arising as a result of this Plan.  The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Grantee to elect to have the Company withhold shares of Stock otherwise issuable under an Award or allow the return of shares of Stock having a Fair Market Value equal to the sums required to be withheld.  Notwithstanding any other provision of the Plan, the number of shares which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Grantee of such Award after such shares of Stock were acquired by the Grantee from the Company) in order to satisfy the Grantee’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall, unless specifically approved by the Committee, be limited to the number of shares of Stock which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

 

  

31

  

 

	
  

	
18.4.

	
Captions

 

The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

 

	
  

	
18.5.

	
Other Provisions

 

Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.

 

	
  

	
18.6.

	
Number and Gender

 

With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

 

	
  

	
18.7.

	
Severability

 

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

 

	
  

	
18.8.

	
Governing Law

 

The validity and construction of this Plan and the instruments evidencing the Awards hereunder shall be governed by the laws of the State of Nevada, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.

 

	
  

	
18.9.

	
Code Section 409A

 

The Board intends to comply with Code Section 409A, or an exemption to Code Section 409A, with regard to Awards hereunder that constitute nonqualified deferred compensation within the meaning of Code Section 409A.  To the extent that the Board determines that a Grantee would be subject to the additional 20% tax imposed on certain nonqualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of any Award granted under this Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax.  The nature of any such amendment shall be determined by the Board.

 

  

32

  

 

	
  

	
18.10.

	
Legend.

 

In order to enforce the restrictions imposed upon shares of Stock under this Plan or as provided in an Award Agreement, the Board may cause a legend or legends to be placed on any certificate representing shares issued pursuant to this Plan that complies with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under it.

 

 

 

*    *    *

 

  

33

  

To record adoption of the Plan by the Board as of  May 19, 2011, and approval of the Plan by the stockholders on July 9, 2011, the Company has caused its authorized officer to execute the Plan.

 

 

 

 

	 	
 
CHINA ARMCO METALS, INC.

 

	 
	 	 	 	 
	
 

	/s/ Kexuan Yao	 
	 	By:	Kexuan Yao	 
	 	Title:	 
Chairman and Chief Executive Officer

	 
	 	 	 	 

 

 

34

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