Document:

Exhibit 10.12

 

GEORGIA GULF CORPORATION

 

DEFERRED COMPENSATION PLAN

 

As amended and restated effective as of January 1, 2012

 

Revised February 10, 2012

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
PURPOSE
    	
 
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
1.01.
    	
Account
    	
1
    
	
1.02.
    	
Affiliate
    	
1
    
	
1.03.
    	
Beneficiary Designation Form
    	
1
    
	
1.04.
    	
Board
    	
2
    
	
1.05.
    	
Cash Bonus
    	
2
    
	
1.06.
    	
Change in Control
    	
2
    
	
1.07.
    	
Code
    	
3
    
	
1.08.
    	
Committee
    	
3
    
	
1.09.
    	
Company
    	
3
    
	
1.10.
    	
Company Account
    	
3
    
	
1.11.
    	
Company Benefit
    	
3
    
	
1.12.
    	
Compensation
    	
3
    
	
1.12A
    	
Consultant
    	
3
    
	
1.13.
    	
Control Change Date
    	
3
    
	
1.14.
    	
Controlled Group
    	
4
    
	
1.15.
    	
Deferral Election Form
    	
4
    
	
1.16.
    	
Deferral Year
    	
4
    
	
1.17.
    	
Deferred Benefit
    	
4
    
	
1.17A
    	
Deferred Benefit Account
    	
4
    
	
1.18.
    	
Designated Beneficiary
    	
4
    
	
1.19.
    	
Disability or Disabled
    	
4
    
	
1.20.
    	
Distribution Election Form
    	
5
    
	
1.21.
    	
Election Date
    	
5
    
	
1.22.
    	
Eligible Employee
    	
5
    
	
1.23.
    	
Employer
    	
5
    
	
1.24.
    	
Exchange Act
    	
5
    
	
1.25.
    	
Investment Measure or Investment Measures
    	
5
    
	
1.25A
    	
Match-Eligible Participant
    	
5
    
	
1.25B
    	
Matching Restoration Benefit Account
    	
6
    
	
1.25C
    	
Matching Restoration Credits
    	
6
    
	
1.26.
    	
Normal Retirement Date
    	
6
    
	
1.27.
    	
Participant
    	
6
    
	
1.28.
    	
Plan
    	
6
    
	
1.28A
    	
Plan Year
    	
6
    
	
1.29.
    	
Salary
    	
6
    
	
1.30.
    	
Separation from Service
    	
6
    
	
1.31.
    	
Unforeseeable Emergency
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
PARTICIPATION
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
DEFERRAL ELECTIONS
    	
8
    
	
 
    	
 
    	
 
    
	
3.01.
    	
Eligibility to Make Deferral Election
    	
8
    
	
3.02.
    	
Effectiveness of Deferral Election
    	
8
    

 

 

TABLE OF CONTENTS

(Continued)

 

	
 
    	
 
    	
Page
    
	
3.03.
    	
Compensation That May Be Deferred
    	
8
    
	
3.04.
    	
Deferral Election Irrevocable
    	
9
    
	
3.05.
    	
Rejection of Deferral Election
    	
9
    
	
3.06.
    	
Effect of No Election
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
CREDITING DEFERRALS TO   ACCOUNTS
    	
10
    
	
 
    	
 
    	
 
    
	
4.01.
    	
Date Credited
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
EMPLOYER CONTRIBUTION   CREDITS TO ACCOUNTS
    	
10
    
	
 
    	
 
    	
 
    
	
5.01.
    	
Company Credits
    	
10
    
	
5.02.
    	
Matching Restoration Credit
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
INVESTMENT MEASURES
    	
11
    
	
 
    	
 
    	
 
    
	
6.01.
    	
Investment Subaccounts
    	
11
    
	
6.02.
    	
Investment Measures
    	
11
    
	
6.03.
    	
Investment Direction
    	
12
    
	
6.04.
    	
New Investment Directions
    	
12
    
	
6.05.
    	
Investment Transfers
    	
12
    
	
6.06.
    	
Crediting Earnings and Losses
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
VESTING
    	
13
    
	
 
    	
 
    	
 
    
	
7.01.
    	
Account Immediately Vested
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
DISTRIBUTIONS
    	
13
    
	
 
    	
 
    	
 
    
	
8.01.
    	
Distribution Elections
    	
13
    
	
8.02.
    	
Commencement of Distributions
    	
13
    
	
8.03.
    	
Medium of Payment
    	
14
    
	
8.04.
    	
Form of Payment
    	
14
    
	
8.05.
    	
Changing Distribution Election
    	
15
    
	
8.06.
    	
Distributions Upon Unforeseeable Emergency
    	
16
    
	
8.07.
    	
Distribution of Company Benefit Account
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
RESTRICTIONS ON   TRANSFER OF BENEFITS
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
AMENDMENT OR   TERMINATION
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
ADMINISTRATION
    	
17
    
	
 
    	
 
    	
 
    
	
11.01.
    	
Committee
    	
17
    
	
11.02.
    	
Indemnification
    	
18
    
	
11.03.
    	
Interpretation of the Plan and Findings of Fact
    	
18
    
	
11.04.
    	
Information to Committee
    	
19
    
	
11.05.
    	
Notices
    	
19
    
	
11.06.
    	
Waiver
    	
19
    
	
11.07.
    	
Claims Procedures
    	
19
    

 

ii

 

TABLE OF CONTENTS

(Continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
GENERAL
    	
23
    
	
 
    	
 
    	
 
    
	
12.01.
    	
Plan Creates No Separate Rights
    	
23
    
	
12.02.
    	
Funding
    	
23
    
	
12.03.
    	
Plan Binding
    	
23
    
	
12.04.
    	
Interpretation of Plan
    	
23
    
	
12.05.
    	
Construction
    	
24
    
	
12.06.
    	
Tax Effects
    	
24
    
	
12.07.
    	
Correction of Participant’s Accounts
    	
24
    
	
12.08.
    	
Action of Employer, Committee and Plan   Administrator
    	
24
    
	
12.09.
    	
Employer Records
    	
24
    
	
12.10.
    	
Legal References
    	
25
    
	
12.11.
    	
Electronic Means of Communication
    	
25
    

 

iii

 

GEORGIA GULF CORPORATION
 DEFERRED COMPENSATION PLAN

 

As amended and restated effective as of January 1, 2012

 

PURPOSE

 

The Plan is intended to constitute a deferred compensation plan for a select group of management and highly compensated employees of the Employer and its Affiliates.  The Plan was originally effective prior to January 1, 2005.  The Plan was amended and restated effective as of January 1, 2005.  During the period from January 1, 2005 through December 31, 2008, the Plan was administered in good faith compliance with the requirements of section 409A of the Internal Revenue Code of 1986.

 

The Plan is herein again amended and restated effective as of January 1, 2012.

 

ARTICLE I

DEFINITIONS

 

The following definitions apply to this Plan and to the related Deferral Election Forms and Beneficiary Designation Forms.

 

1.01.                     Account

 

Account means an unfunded deferred compensation account established to record a Participant’s interest in the Plan and shall be the sum of the Deferred Benefit Account, the Company Account (if applicable) and the Matching Restoration Benefit Account.  The term Account encompasses the subaccounts within the Deferred Benefit Account and the Matching Restoration Benefit Account established for each Investment Measure.

 

1.02.                     Affiliate

 

Affiliate means any entity that is a member of a controlled group of corporations, as defined in Code section 414(b) or a group of business entities described in Code section 414(c) or 414(m), of which the Employer is a member according to Code section 414(b) or Code section 414(c) or 414(m), and which has, with the approval of the Board, adopted the Plan by action of its board or other governing person or body.

 

1.03.                     Beneficiary Designation Form

 

Beneficiary Designation Form means a form acceptable to the Committee used by a Participant according to this Plan to name his Designated Beneficiary who will receive all Deferred Benefit payments under this Plan if he dies.

 

 

1.04.                     Board

 

Board means the Board of Directors of Georgia Gulf Corporation.

 

1.05.                     Cash Bonus

 

Cash Bonus, with respect to a Deferral Year, means any bonus or other similar payment from the Employer that is (i) payable to an Eligible Employee in cash, and (ii) is based on the performance of the Employer, the Company, the Controlled Group, the Eligible Employee, or any of them, during the Deferral Year, even if payable after the close of the Deferral Year.

 

1.06.                     Change in Control

 

Change in Control means the occurrence of any one or more of the following events described in subsections (a) through (c), subject to the provisions of subsection (d) hereof:

 

(a)           The acquisition on one day (or during the 12-month period ending on the date of the most recent acquisition) by one person, or more than one person acting as a group, of assets from Georgia Gulf Corporation that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of Georgia Gulf Corporation immediately before such acquisition or acquisitions.  For this purpose, gross fair market value means the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.  Notwithstanding the foregoing, a transfer of assets by Georgia Gulf Corporation shall not be treated as an acquisition described in this subsection (a) if the transfer is described in Treas. Regs. section 1.409A-3(i)(5)(vii)(B)(i) through (iv);

 

(b)           The acquisition by one person or more than one person acting as a group (determined in accordance with the standards of Sections 13(d)(3) and 14(d)(2) of the Exchange Act), during the 12-month period ending on the date of the most recent acquisition by such person or persons of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of the voting power of the then-outstanding voting securities of Georgia Gulf Corporation; provided, however, that the foregoing does not apply to any such acquisition that is made directly from the Company or that is made by (i) the Company or any subsidiary; (ii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary;

 

(c)           a majority of the members of the Board of Directors are replaced within a 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election; or

 

(d)           Notwithstanding the foregoing provisions of this Section 1.06, a “Change in Control” shall not be deemed to have occurred for purposes of subsection (a) or (b) of this Section 1.06 solely because there occurs a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company (a “Reorganization Transaction”) if:  (i) no person (excluding any entity resulting from such Reorganization Transaction or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Reorganization Transaction or any subsidiary of either of them) beneficially owns, directly or indirectly, 33% or more of the voting power of the

 

2

 

entity resulting from such Reorganization Transaction, and (ii) at least half of the members of the board of directors of the corporation resulting from such Reorganization Transaction were members of the Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Reorganization Transaction.

 

1.07.                     Code

 

Code means the Internal Revenue Code of 1986, as amended.

 

1.08.                     Committee

 

Committee means the committee appointed by the Board to administer this Plan.

 

1.09.                     Company

 

Company means Georgia Gulf Corporation, a Delaware corporation.

 

1.10.                     Company Account

 

Company Account means the account established under this Plan to record the Participant’s Company credits that are described generally in Section 5.01.

 

1.11.                     Company Benefit

 

Company Benefit means the portion of a Participant’s interest in this Plan that is attributable to the Company credits that are recorded in the Company Account.

 

1.12.                     Compensation

 

Compensation, in the case of an Eligible Employee, means the Eligible Employee’s Salary and the Eligible Employee’s Cash Bonus.  In the case of a Director, Compensation means all cash remuneration for service as a member of the Board for a Deferral Year.  In the case of a Consultant, Compensation means all cash remuneration for services provided to the Company or an Affiliate.

 

1.12A     Consultant.

 

Consultant means any person who provides services to the Company or an Affiliate in the capacity of an independent contractor and who is not classified by the Company or the Affiliate as an Eligible Employee or as a Director, and who is designated by the Committee as eligible to receive a Deferred Benefit.

 

1.13.                     Control Change Date

 

Control Change Date means the date on which a Change in Control occurs.  If a Change in Control occurs on account of a series of transactions, the Control Change Date is the date of the last of such transactions.

 

3

 

1.14.                     Controlled Group

 

Controlled Group means the group of business entities consisting of the Company and all of its Affiliates.

 

1.15.                     Deferral Election Form

 

Deferral Election Form means a document governed by the provisions of Articles III, V and VIII of this Plan, including (i) the portion that is the Distribution Election Form and (ii) the related Beneficiary Designation Form that applies to all of that Participant’s Deferred Benefits under the Plan.

 

1.16.                     Deferral Year

 

Deferral Year means a calendar year for which a Participant has an operative Deferral Election Form.

 

1.17.                     Deferred Benefit

 

Deferred Benefit means the benefit payable under the Plan that is attributable to a Participant’s own voluntary deferrals of Compensation that the Participant has elected to defer in accordance with an election under Article III.

 

1.17A     Deferred Benefit Account.

 

Deferred Benefit Account shall mean the account established under this Plan to record a Participant’s interest attributable to contributions under Article III.

 

1.18.                     Designated Beneficiary

 

Designated Beneficiary means a person or persons or other entity designated on a Beneficiary Designation Form by a Participant as allowed in Article VIII of this Plan to receive a Deferred Benefit payment.  If there is no valid designation by the Participant, or if the Designated Beneficiary fails to survive the Participant or otherwise fails to take the Deferred Benefit, the Participant’s Designated Beneficiary is the first of the following who survives the Participant:  the Participant’s spouse (the person legally married to the Participant when the Participant dies); the Participant’s children, by right of representation; and the Participant’s estate.

 

1.19.                     Disability or Disabled

 

A Participant shall be considered to have experienced a “Disability” or to be “Disabled,” for purposes of this Plan, if the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Employer.

 

4

 

1.20.                     Distribution Election Form

 

Distribution Election Form means that part of a Deferral Election Form used by a Participant according to this Plan to establish the duration of deferral and the frequency of payments of a Deferred Benefit.  If a Deferred Benefit has no Distribution Election Form that is operative according to Article III, distribution of that Deferred Benefit is governed by Article VIII.

 

1.21.                     Election Date

 

Election Date means the date established as the date before which an Eligible Employee, or a Director, or a Consultant must submit a valid Deferral Election Form to the Committee; in general, with respect to any calendar year the Election Date shall be December 31, of the preceding calendar year.  However, for an individual who becomes an Eligible Employee, or a Director, or a Consultant during a Deferral Year, the Election Date is the thirtieth day following the date that he becomes an Eligible Employee, or a Director, or a Consultant.

 

1.22.                     Eligible Employee

 

Eligible Employee means an employee of the Company or an Affiliate that has become an Employer, who is a member of a select group of management or highly compensated employees (as such terms are used in Section 201(2) of the Employee Retirement Income Security Act of 1974), and who is designated by the Committee as eligible to elect a Deferred Benefit under Article III.  Once an individual is so designated by the Committee, such employee shall continue to be an Eligible Employee until the end of the year in which occurs the date he is no longer a member of management or a highly compensated employee or the date as of which the Committee determines he is no longer eligible to elect a Deferred Benefit, which date shall in all cases be the last day of a calendar year.

 

1.23.                     Employer

 

Employer means the Company and each Affiliate of the Company that has adopted this Plan, as a participating employer, with the consent of the Board.

 

1.24.                     Exchange Act

 

Exchange Act means the Securities Exchange Act of 1934, as amended.

 

1.25.                     Investment Measure or Investment Measures

 

Investment Measure or Investment Measures shall mean the investment measure or measures selected and announced by the Committee from time to time pursuant to Section 5.02.

 

1.25A     Match-Eligible Participant

 

Match-Eligible Participant means a Participant who satisfies the additional criteria specified in Section 5.02(b).

 

5

 

1.25B     Matching Restoration Benefit Account

 

Matching Restoration Benefit Account mean the account established for a Participant under this Plan to record the Matching Restoration Credits under Section 5.02(a) of the Plan.

 

1.25C     Matching Restoration Credits

 

Matching Restoration Credits means the credits to Eligible Employees’ Matching Restoration Benefit Accounts, as specified in Section 5.02(a) of this Plan.

 

1.26.                     Normal Retirement Date

 

Normal Retirement Date means the date on which the Participant attains the age of 62.

 

1.27.                     Participant

 

Participant, with respect to any Deferral Year, means an Eligible Employee whose Deferral Election Form is operative for that Deferral Year according to Article III of this Plan.  In addition, effective as of January 1, 2010, Participant shall include an Eligible Employee who, although he or she has not filed a Deferral Election Form for a year has been selected by the Employer to receive a Company Benefit under Section 5.01.  In addition, effective as of January 1, 2012, a Participant shall include a member of the Board (a “Director”) and a Consultant, in either case who has a Deferral Election that is operative for the Deferral Year according to Article III of this Plan.

 

1.28.                     Plan

 

Plan means this Georgia Gulf Corporation Deferred Compensation Plan, as amended and restated, as set forth herein.

 

1.28A     Plan Year.

 

Plan Year means the calendar year.

 

1.29.                     Salary

 

Salary means an Eligible Employee’s base salary and does not include bonuses or other payments from the Employer or an Affiliate that are not made on a regular basis.

 

1.30.                     Separation from Service

 

Separation from Service means the condition that exists when an Eligible Employee who is a Participant in this Plan and the Employer reasonably anticipate that no further services will be performed after a certain date or that the level of bona fide services that the Eligible Employee will perform after such date (whether as an employee or an independent contractor) would permanently decrease to no more than 20% of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the Employer if the Eligible

 

6

 

Employee has been providing services to the Employer for less than 36 months).  For purposes of this Section 1.30, for periods during which an Eligible Employee is on a paid bona fide leave of absence and has not otherwise experienced a Separation from Service, the Eligible Employee is treated as providing bona fide services at the level equal to the level of services that the Eligible Employee would have been required to perform to receive the compensation paid with respect to such leave of absence.  Periods during which an Eligible Employee is on an unpaid bona fide leave of absence and has not otherwise experienced a Separation from Service are disregarded for purposes of this Section 1.30 (including for purposes of determining the applicable 36-month (or shorter) period).  For purposes of this Section 1.30, the Employer shall be considered to include all members of the Controlled Group; provided, however, that in applying Code section 414(b), the language “at least 50 percent” shall be used instead of “at least 80 percent”; and in applying Code section 414(c), the phrase “at least 50 percent” shall be used instead of the phrase “at least 80 percent.”

 

In the case of a Director, “Separation from Service” means the condition that exists when the Director’s term as a Director has ended; provided that no amount will be paid to the Director before a date at least 12 months after the day on which ends the Director’s term as a Director of Georgia Gulf Corporation; provided, further, that no amount payable to the Director on that date (12 months after the end of the Director’s term) will be paid to the Director if, after the end of the Director’s term as a Director and before that date, the Director performs services for Georgia Gulf Corporation or for a member of the Controlled Group as either an employee or an independent contractor.

 

In the case of a Consultant, “Separation from Service” means the expiration of the contract under which the Consultant performs services for the Company and all Affiliates; provided that no amount shall be paid to the Consultant before a date at least 12 months after the day on which such contract expires; provided, further, that no amount payable to the Consultant on that date (12 months after the expiration of the contract) will be paid to the Consultant if, after the expiration of the contract and before that date, the Consultant performs services for Georgia Gulf Corporation or for a member of the Controlled Group as either an employee or an independent contractor.

 

1.31.                     Unforeseeable Emergency

 

Unforeseeable Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

 

ARTICLE II

PARTICIPATION

 

An Eligible Employee or a Director or a Consultant may become a Participant for any Deferral Year by filing a valid Deferral Election Form according to Article III on or before the applicable Election Date but only if his Deferral Election Form is operative according to Article III; provided, however, that a Participant who is selected by the Employer to receive

 

7

 

Company  Benefits under Section 5.01 is not required to file a Deferral Election Form in order to become a Participant.  An Eligible Employee or a Director or a Consultant who becomes a Participant will continue to be a Participant as long as an Account is being maintained (or is required to be maintained under the terms of the Plan) for him.

 

ARTICLE III
 DEFERRAL ELECTIONS

 

3.01.                     Eligibility to Make Deferral Election

 

An individual may elect a Deferred Benefit for any Deferral Year if he is an Eligible Employee, or a Director, or a Consultant at the beginning of that Deferral Year or becomes an Eligible Employee, or a Director, or a Consultant during that Deferral Year.  Each Eligible Employee, Director, and Consultant will be provided a Deferral Election Form by the Committee before the first day of a Deferral Year and each individual who becomes an Eligible Employee, or a Director or a Consultant will be provided a Deferral Election Form by the Committee as soon as administratively practicable after the individual becomes an Eligible Employee, a Director, or a Consultant.

 

3.02.                     Effectiveness of Deferral Election

 

A Deferral Election Form is effective when it is completed, signed by the electing Eligible Employee, Director, or Consultant and received by the Committee.  A single Deferral Election Form may apply to each element of an Eligible Employee’s Compensation (e.g., Salary, Cash Bonus) for a Deferral Year.  Alternatively, an Eligible Employee may have more than one Deferral Election Form for a Deferral Year; provided, however, that only one Deferral Election Form will be effective with respect to a particular element of the Eligible Employee’s Compensation.  In the case of a Director, the Deferral Election Form shall apply to all of the Director’s remuneration for service as a member of the Board of Directors for the Deferral Year.  In the case of a Consultant, the Deferral Election Form shall apply to all of the Consultant’s fees for services provided to the Company or Affiliate for the Deferral Year.  With respect to the 2005 plan year, if a Participant in December 2004 made both an “on-line” election for 2005 Salary and also a “contingent” election for 2005 Salary on a paper form, the contingent election will be given priority.  That is, if a Participant made a contingent election for 2005 Salary, the contingent election will be implemented and any on-line election for 2005 Salary will not be given effect; provided, however, if the Participant made an on-line election for 2005 Salary and did not make a contingent election for 2005 Salary, then the on-line election will be put into effect.

 

3.03.                     Compensation That May Be Deferred

 

(a)           A Deferral Election Form is operative, i.e., it may result in the deferral of Compensation, only with respect to Compensation with an Election Date that will occur after the date that the Deferral Election Form is effective under Section 3.02.  If an individual becomes an Eligible Employee or a Director or a Consultant during a Deferral Year the election to defer Compensation shall apply only to Compensation paid for services to be performed after the election; provided, however, that in the case of Compensation that is based upon a specified

 

8

 

performance period (e.g., a Cash Bonus) where a deferral election is made in the first year of eligibility but after the beginning of the performance period the election shall apply to no more than an amount equal to (i) the total amount of the Compensation for the performance period multiplied by (ii) a fraction the numerator of which is the number of days remaining in the performance period after the election and the denominator of which is the total number of days in the performance period.

 

(b)           Subject to the requirements of Section 3.03(a), with respect to each element of Compensation, an Eligible Employee may elect to defer up to 90% of Salary and up to 100% of any Cash Bonus.  Subject to the requirements of Section 3.03(a), (i) a Director may elect to defer up to 100% of his or her remuneration for service as a Director of Georgia Gulf Corporation for the Deferral Year, and (ii) a Consultant may elect to defer up to 100% of his or her fees for services rendered to the Company or an Affiliate for the Deferral Year.

 

3.04.                     Deferral Election Irrevocable

 

An Eligible Employee or a Director or a Consultant may not revoke a Deferral Election Form as to an element of Compensation after the applicable Election Date, except in situations described in the next paragraph.  Any revocation before the applicable Election Date is the same as a failure to submit a Deferral Election Form or a Distribution Election Form as to the particular element or elements of Compensation covered by the revocation.  Any writing signed by an Eligible Employee or a Director or a Consultant expressing an intention to revoke his Deferral Election Form, in whole or in part, and delivered to the Committee before the close of business on the applicable Election Date is a revocation.

 

Notwithstanding any other provision in this Article III, a Participant may elect during the 2005 calendar year to terminate participation in the plan or cancel or reduce an operative deferral election with regard to any or all elements of Compensation.  Any writing signed by a Participant expressing an intention to terminate his participation in the plan or to cancel or reduce his deferral and delivered to the Committee before the close of business on November 30, 2005 is a termination or cancellation election.  The Committee may reject any termination or cancellation election, in whole or in part, and the Committee is not required to state a reason for any rejection.  A termination or cancellation election will only apply to Compensation earned or accrued after the date of the election and after the Committee approves and implements the election.  The Committee will implement approved elections as soon as reasonably possible after the Committee’s approval.

 

3.05.                     Rejection of Deferral Election

 

If the Committee so chooses before the applicable Election Date, the Committee may reject any Deferral Election Form, in whole or in part, and the Committee is not required to state a reason for any rejection.  The Committee’s rejections must be made on a uniform basis with respect to similarly situated Participants.  If the Committee rejects a Deferral Election Form, the Participant must be paid the Compensation he would have been entitled to receive if he had not submitted the rejected Deferral Election Form.

 

9

 

3.06.                     Effect of No Election

 

An Eligible Employee or a Director or a Consultant who has not submitted a valid Deferral Election Form to the Committee on or before the applicable Election Date may not defer any Compensation for the Deferral Year under this Plan.

 

ARTICLE IV
 CREDITING DEFERRALS TO ACCOUNTS

 

4.01.                     Date Credited

 

Compensation that is deferred under this Plan pursuant to a Participant’s compensation deferral election shall be credited to the Participant’s Account as follows:

 

(a)           Salary deferrals shall be credited to the Participant’s Account as of the last day of the payroll period in which the deferred Salary would have been paid to the Participant;

 

(b)           Cash Bonus deferrals shall be credited to the Participant’s Account as of the date such amount would have been paid to the Participant;

 

(c)           In the case of a Director or a Consultant, deferrals of remuneration shall be credited to the Participant’s Account as of the date such amount would have been paid to the Participant.

 

ARTICLE V
 EMPLOYER CONTRIBUTION CREDITS TO ACCOUNTS

 

5.01.                     Company Credits

 

With respect to any Plan Year beginning on or after January 1, 2010, the Employer shall credit additional amounts to the Accounts under the Plan for Eligible Employees (whether or not the Eligible Employee has elected to file a Deferral Election Form in order voluntarily to defer Compensation under this Plan).  Such additional amounts shall be credited to a Company Account.

 

Prior to the end of each Plan Year, the Employer will determine the amounts of any such credits, which may be contained in other written agreements between the Employer and the Eligible Employee in question.  The amounts credited to the Company Account (adjusted for any amounts debited from such Account) shall constitute the Company Benefit.

 

5.02.                     Matching Restoration Credit

 

(a)           With respect to Plan Years beginning on and after January 1, 2011, there shall be credited to the Matching Restoration Benefit Account of each Match-Eligible Participant a Matching Restoration Credit, which shall be equal to:

 

(1)           100% of the amount of the Participant’s Compensation that the Participant has elected to defer for the year under this Plan (to the extent that such contributions do

 

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not exceed 3% of the amount of the Compensation in excess of the applicable annual limit on compensation that may be taken into account under section 401(a)(17) of the Code (“Section 401(a)(17) Limit Amount”) for the year); plus

 

(2)           50% of the amount of the Participant’s Compensation that the Participant has elected to defer for the year under this Plan (to the extent that such deferred amount exceeds 3%, but does not exceed 5%, of the amount of the Participant’s Compensation in excess of the Section 401(a)(17) Limit Amount for that year).

 

(b)           For purposes of this Plan, a “Match-Eligible Participant” shall be a Participant in this Plan who:

 

(1)           participates in the Georgia Gulf Corporation 401(k) Retirement Savings Plan (“401(k) Plan”) with respect to the year;

 

(2)           makes contributions to the 401(k) Plan for the year in the maximum amount permitted under Code section 402(g) for the year and receives from the Employer “Compensation” (as defined in the 401(k) Plan) for the calendar year in an amount greater than the Section 401(a)(17) Limit Amount for that year and receives the maximum amount of “Matching Elective Contributions” (as defined in the 401(k) Plan) for the year; and

 

(3)           has in effect for the year a Deferral Election Form under which the Participant has chosen to defer a percentage of Compensation (as defined in Section 1.10 of this Plan) greater than the Section 401(a)(17) Limit Amount for that year.

 

ARTICLE VI
 INVESTMENT MEASURES

 

6.01.                     Investment Subaccounts

 

The Committee shall establish investment subaccounts within the Account of each Participant who has elected to defer Compensation in accordance with Article III.  The investment subaccounts shall be established only for bookkeeping purposes.  An investment subaccount shall be established for each Investment Measure.  The Company Account shall not be adjusted for earnings and losses in accordance with the Investment Measures, and this Article VI shall not apply to the Company Account.

 

6.02.                     Investment Measures

 

The Investment Measures shall be determined by the Committee and identified on Exhibit I to the Plan.  If the Investment Measures in effect at a given time were determined by the Committee, or if the Employer so authorizes the Committee, the Committee may change, delete or modify any of the Investment Measures without the necessity of amending the Plan.

 

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6.03.                     Investment Direction

 

The Participant shall choose one or more of the Investment Measures in integral multiples permitted in the communication materials provided to Participants, at the time an Eligible Employee or a Director or a Consultant first becomes a Participant.  Such Investment Measures will be used as a measure of the investment performance of the Participant’s Account.  An Investment Direction shall remain in effect with respect to all future deferrals until a new Investment Direction is made by the Participant in accordance with Section 6.04.  To the extent a Participant fails to select an Investment Measure, he shall be deemed to have elected the default Investment Measure specified in the communication materials provided to Participants.

 

6.04.                     New Investment Directions

 

At the time or times specified in the communication materials provided to Participants, a Participant may change the Investment Measures for future deferrals credited to his Account in accordance with procedures established by the Committee.  An election to change an Investment Measure shall be made on forms designated for this purpose by the Committee and shall specify the Investment Measures that will be used to measure the investment performance of future deferrals in integral multiples permitted in the communication materials.  Until a Participant delivers a new election form to the Committee and the new election has become effective in accordance with procedures established by the Committee, his prior Investment Measure selection, if any, shall control the measure of investment performance of his Account.

 

6.05.                     Investment Transfers

 

At the time or times specified in the communication materials provided to Participants, a Participant or a Designated Beneficiary (after the death of the Participant) may transfer to one or more different Investment Measures (in integral multiples permitted in the communication materials) all or a part of the amount credited to the Participant under an Investment Measure.  The transfer election shall be made on forms designated for this purpose by the Committee.  A Participant may transfer among Investment Measures, and any transfer election will become effective, in accordance with procedures established by the Committee.

 

6.06.                     Crediting Earnings and Losses

 

Earnings and losses will be credited to, or debited from, a Participant’s Deferred Benefit Account and Matching Restoration Benefit Account (i) as if such account balances were invested and the earnings reinvested in the Investment Measures selected by the Participant or (ii) if no Investment Measures were selected for a portion of the Participant’s accounts, as if such account balances were invested according to the last sentence of Section 6.03 in the manner set forth in the following sentence.  As of the last business day of each month in which any amount remains credited to the Deferred Benefit Account or Matching Restoration Benefit Account of a Participant, each portion of such Account deemed invested in a particular Investment Measure shall either be credited or debited with an amount equal to the amount determined by multiplying the balance of such portion of such account as of the last day of the preceding month by the return rate for that month for the applicable Investment Measure.  As to any amount distributed or transferred from an Investment Measure since the last day of the preceding month, the

 

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Employer shall cease crediting and debiting the Participant’s subaccount for that Investment Measure with earnings and losses on the last day of the month preceding the date of distribution.

 

ARTICLE VII

VESTING

 

7.01.                     Account Immediately Vested

 

A Participant’s interest in his Account under this Plan is always fully vested and nonforfeitable.

 

ARTICLE VIII

DISTRIBUTIONS

 

8.01.                     Distribution Elections

 

Each Distribution Election Form is part of the Deferral Election on which it appears or to which it states it is related.  A Participant must file a separate Distribution Election Form for his Deferred Benefits Account and Matching Restoration Benefit Account with respect to each year for which he has elected a deferral of compensation.  The same election as to a distribution form shall apply to both the Deferred Benefit Account and the Matching Restoration Benefit Account; provided, however, that the election shall not apply to the Company Account, which shall be governed by Section 8.07.  The portion of a Deferred Benefit Account or a Matching Restoration Benefit Account that is attributable to the contributions or credits to the account for a particular Plan Year is sometimes referred to herein as the “yearly portion” of the account.

 

8.02.                     Commencement of Distributions

 

(a)           Except as provided in the following subsections (b), (c) and (d), payments from the Deferred Benefit Account and the Matching Restoration Benefit Account to a Participant shall begin on the date elected on the Participant’s Distribution Election Form from among the following dates:  (i) the first day of the month following the Participant’s Separation from Service with the Employer or an Affiliate (other than due to death or Disability), (ii) the first day of a month and year specified by the Participant, provided, however, that the Participant may not specify a date that is less than two years after the date on which he elects this alternative.  Any yearly portion of the Deferred Benefit Account and the Matching Restoration Benefit Account for which a Participant has not filed a valid Distribution Election Form shall be paid to the Participant upon Separation from Service with Georgia Gulf Corporation and all members of the Controlled Group.  Notwithstanding any other provision herein, no amount will be paid to a Director, on account of Separation from Service until the date at least 12 months after the day on which ends the Director’s term as a Director of Georgia Gulf Corporation; provided that no amount payable to the Director on that day (12 months after the end of the Director’s term) will be paid if, after the end of the Director’s term as a Director and before that date, the Director performs services for Georgia Gulf Corporation or a member of the Controlled Group as either an employee or as an independent contractor.  Notwithstanding any other provision herein, no amount will be paid to a Consultant, on account of Separation from Service until the date at least 12 months after the date of expiration of the contact under which the Consultant performs services for Georgia Gulf Corporation or any Affiliate; provided that no amount payable to the

 

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Consultant on that day (12 months after the expiration of the contract) will be paid if, after the expiration of the contract and before that date, the Consultant performs services for Georgia Gulf Corporation or a member of the Controlled Group as either an employee or as an independent contractor.

 

(b)           If a Participant terminates employment with the Employer or an Affiliate as a result of Disability, each yearly portion of the Deferred Benefit Account and Matching Restoration Benefit Account will be paid to the Participant in installments over the same period of time as would apply under Section 8.04 to a distribution upon a Separation from Service for a reason other than Disability, commencing on the first day of the first month that begins after the date his Disability is certified by the Committee.  If, after his termination as a result of Disability, the Participant recovers and is no longer Disabled and resumes employment with the Employer or an Affiliate before the balance in his Account is exhausted, his distributions will be suspended and any remaining yearly portion of the Deferred Benefit Account and Matching Restoration Benefit Account will be paid in accordance with his Distribution Election Form and this Article VIII.  If, after his termination as of a result of Disability, the Participant recovers and is no longer Disabled, but does not resume employment with the Employer or an Affiliate, and he had previously elected a distribution upon Separation from Service (as defined in Section 1.28), then distributions will continue to be paid in accordance with the applicable schedule.

 

(c)           Upon the death of a Participant, the balance in his Deferred Benefit Account and Matching Restoration Benefit Account will be paid to his Designated Beneficiary in a lump sum (or in annual installments, if the Participant has previously elected a distribution in installments for a distribution upon Separation from Service) on the first day of the month following the month in which the Participant’s death occurs.

 

(d)           The balance of the Participant’s Account shall be paid to the Participant (or his Designated Beneficiary) in a lump sum on the 30th day after a Control Change Date.

 

8.03.                     Medium of Payment

 

All distributions from the Plan shall be paid in cash.

 

8.04.                     Form of Payment

 

The yearly portion of the Deferred Benefit Account and Matching Restoration Benefit Account with respect to a calendar year shall be paid in the form elected on the Participant’s Distribution Election Form in accordance with the following, taking into account any override by Plan Section 8.02(d):

 

The Participant may elect (in his initial Distribution Election Form) to have his benefits paid in a lump sum or in annual installments over any period of years from 2 years to 15 years, inclusive, as elected by the Participant (in his initial Distribution Election Form);

 

The yearly portion of the Deferred Benefit Account and Matching Restoration Benefit Account attributable to a calendar year will be paid in accordance with the Participant’s prior election, in a lump sum or in annual installments over any period of years from 2 years to 15

 

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years, inclusive, beginning on the 30th day after Separation from Service (whether that Separation from Service occurs before, at, or after Normal Retirement Date).

 

Notwithstanding any other provision herein, in the case of a Participant who is a “specified employee” (within the meaning of Code section 409A and the Treasury Regulations issued pursuant to that section) payment of the Deferred Benefit Account and Matching Restoration Benefit Account upon the Participant’s Separation from Service (other than in the event of death or Disability) shall be made or begin on the first day of the 7th month after the date of the Participant’s Separation from Service with the Company and all Affiliates.  Installment payments shall reduce the Participant’s interest under each Investment Measure pro rata.

 

8.05.                     Changing Distribution Election

 

(a)           In General.

 

A Participant may amend his Distribution Election Form with respect to the commencement of distribution of the yearly portions of the Deferred Benefit Account and the Matching Restoration Benefit Account, the form of distributions or both if (i) the amendment is approved by the Committee in its discretion and (ii) if all of the following requirements are met:

 

(1)           the amendment of the distribution election shall not take effect until at least 12 months after the date on which such amendment is made;

 

(2)           in the case of an amendment of a distribution election related to a payment not made on account of the Participant’s death or Disability, the first payment with respect to which the amendment is made shall in all cases be deferred for a period of not less than 5 years from the date on which such payment otherwise would have been made;

 

(3)           in the case of an amendment of a distribution election related to a payment that is to be made at a specified time or pursuant to a fixed schedule, such an amendment of the election must be made at least 12 months prior to the date of the first scheduled payment.

 

In the absence of an effective election of a form of distribution, a Participant’s Deferred Benefit Account and Matching Restoration Benefit Account shall be distributed in the form of a lump sum.

 

(b)           Special Rule for 2008

 

With respect to the Plan Year 2008 only, the Committee or its delegate is authorized to prescribe rules and procedures under which eligible Participants may amend elections as to the time and form of distribution in accordance with Internal Revenue Service Notice 2005-1; Section XI of the Preamble to the Proposed Regulations under Section 409A, 70 Fed. Reg. 57930; Internal Revenue Service Notice 2006-79; and Internal Revenue Service Notice 2007-86.  Notwithstanding the foregoing, no amendment of an election pursuant to this subsection (b) shall affect the time or form of payment of an amount that otherwise would be payable in 2008 (under the Participant’s prior election or under the provisions of this Plan), nor shall such an amendment

 

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of an election accelerate into 2008 the payment of an amount that otherwise would be paid in a year later than 2008.

 

8.06.                     Distributions Upon Unforeseeable Emergency

 

(a)           At its sole discretion and at the request of a Participant before or after the Participant’s termination of employment with the Employer or an Affiliate, or at the request of any of the Participant’s Designated Beneficiaries after the Participant’s death, the Committee may accelerate and pay all or part of a Participant’s Deferred Benefits under this Plan.  Accelerated distributions shall be allowed only in the event of an Unforeseeable Emergency (as defined in Article I of this Plan).  An accelerated distribution must be limited to the amount determined by the Committee to be necessary to satisfy the financial emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which the financial emergency is or may be relieved through insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause financial hardship).  This section shall be interpreted in a manner consistent with Code section 409A and applicable provisions of the Treasury Regulations.

 

(b)           A distribution under this Section shall be paid in cash, and is in lieu of that portion of the Deferred Benefit that would have been paid otherwise.  A Deferred Benefit is adjusted for a distribution under this Section by reducing the Participant’s Account balance by the amount of the distribution.  Such a reduction of the Account balance shall be applied to the subaccounts for amounts deferred with respect to different years of participation as equitably decided by the Committee.

 

8.07.                     Distribution of Company Benefit Account

 

(a)           Notwithstanding any other provision herein, the Company Account will be distributed on the later of (1) the first day of the year following the Participant’s attainment of the age of 65 years or (2) the first day of the seventh month after the month in which Participant experiences a Separation from Service; provided, however, that with respect to 2013 and later Plan Years, a Participant may elect, prior to the start of the Plan Year, to have the portion of the Company Account that is attributable to the Plan Year distributed in three annual installments provided that such election constitutes a permissible initial deferral election under the rules of Treasury Regulations § 1.409A-2(b) or superseding Treasury Regulations (if any) of similar import.  The first such installment shall be paid on the later of the first day of the year following the Participant’s attainment of the age of 65 years or the first day of the seventh month after the month in which the Participant attains the age of 65 years.  The second and third installments shall be paid on the second and third anniversaries of the date of the first payment.

 

(b)           Upon the death of the Participant prior to the full distribution to him of his Company Account, the balance in his Company Account will be paid to his Designated Beneficiary in a lump sum on the later of (1) the first day of the month following the month in which the Participant’s death occurs, and (2) (if the Participant dies after reaching the age of 65 years but before the end of the year in which the Participant reaches that age, or if the Participant dies prior to the year in which the Participant would have reached the age of 65 years if the Participant had lived to that age) the first day of the year following the year in which the

 

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Participant reached the age of 65 years or the first day of the year following the year in which the Participant would have attained the age of 65 years if the Participant had lived to the age of 65, as the case may be.  Notwithstanding the foregoing, if the Participant’s termination of employment is due to “gross misconduct,” as determined by the Board in its sole discretion, and additional credits to the Company Account cease for that reason, then upon the death of the Participant prior to the full distribution to him of his Company Account, the balance in the Company Account will be paid to his Designated Beneficiary in a lump sum on the first day of the year following the year with respect to which the final credit to the Company Account is made.

 

ARTICLE IX
 RESTRICTIONS ON TRANSFER OF BENEFITS

 

A Participant has no control over Deferred Benefits, Matching Restoration Credits or Company Benefits except according to his Deferral Election Forms, his Distribution Election Forms, his Beneficiary Designation Form, and any Investment Measures elected on the form specified by the Committee. No right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void.  No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities, or torts of the person entitled to such benefit.  If any Participant or Designated Beneficiary under the Plan should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right to a benefit hereunder, then such right or benefit, in the discretion of the Committee, shall cease and terminate, and, in such event, the Committee may hold or apply the same or any part thereof for the benefit of such Participant or Designated Beneficiary, his or her spouse, children, or other dependents, or any of them, in such manner and in such portion as the Committee may deem proper.

 

ARTICLE X
 AMENDMENT OR TERMINATION

 

Except as otherwise provided in this Article X, this Plan may be altered, amended, suspended, or terminated at any time by the Board.  Notwithstanding any other provision herein, an amendment, suspension or termination of this Plan may not have the effect of reducing a Participant’s Account balance (as adjusted in accordance with the Plan’s provisions on investment gains and losses) at the time of the amendment, suspension or termination.

 

ARTICLE XI

ADMINISTRATION

 

11.01.              Committee

 

The Plan shall be administered by the Committee.  Any references in this Plan to actions to be taken by the Committee must be interpreted and implemented in accordance with the preceding sentence.  Subject to the provisions of the Plan, the Committee may adopt such rules and regulations as may be necessary to carry out the purposes hereof.

 

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11.02.              Indemnification

 

The Employer shall indemnify and save harmless each member of the Committee and the Board against any and all expenses and liabilities arising out of membership on the Committee and the Board and relating to administration of the Plan, excepting only expenses and liabilities arising out of a member’s own willful misconduct.  Expenses against which a member of the Committee or the Board shall be indemnified hereunder shall include, without limitation, the amount of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted, or a proceeding brought or settlement thereof.  The foregoing right of indemnification shall be in addition to any other rights to which any such member may be entitled.

 

11.03.              Interpretation of the Plan and Findings of Fact

 

In addition to the powers hereinabove specified, the Committee shall have the power to select which employees of the Employer and its Affiliates will be eligible to elect a Deferred Benefit under the Plan.  The Committee shall have sole and absolute discretion to interpret the provisions of the Plan (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of the Plan), to make factual findings with respect to any issue arising under the Plan, to determine the rights and status under the Plan of Eligible Employees, Directors, Consultants, Participants, Beneficiaries, and other persons, to decide disputes arising under the Plan and to make any determinations and findings (including factual findings) with respect to the benefits payable thereunder and the persons entitled thereto as may be required for the purposes of the Plan.  In furtherance of, but without limiting, the foregoing, the Committee is hereby granted the following specific authorities, which it shall discharge in its sole and absolute discretion in accordance with the terms of the Plan (as interpreted, to the extent necessary, by the Committee):

 

(a)           To designate the employees who shall participate in the Plan;

 

(b)           To determine the amount of benefits, if any, payable to any Participant, Beneficiary, or other person under the Plan (including, to the extent necessary, making any factual findings with respect thereto); and

 

(c)           To conduct the review procedure specified in Section 11.07 (Claims Procedures).

 

All decisions of the Committee as to the facts of the case, as to the interpretation of any provision of the Plan or its application to any case, and as to any other interpretative matter or other determination or question under the Plan shall be final and binding on all parties affected thereby, subject to the provisions of Section 11.07 (Claims Procedures).  The Committee shall direct the applicable person or entity relative to benefits to be paid under the Plan and shall furnish such person or entity with any information reasonably required by it for the purpose of paying benefits under the Plan.  The Committee may delegate to other persons all or such portion of their duties hereunder as the Committee, in its sole discretion, may decide.

 

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11.04.              Information to Committee

 

To enable the Committee to perform its functions, the Employer and any Affiliate shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their retirement, death or other cause for Separation from Service, and such other pertinent facts as the Committee may require.

 

11.05.              Notices

 

Subject to Section 12.11, notices and elections under this Plan generally must be in writing.  A notice or election is deemed delivered if it is delivered personally or if it is mailed by registered or certified mail to the person or business at his or its last known address.

 

11.06.              Waiver

 

The waiver of a breach of any provision in this Plan does not operate as and may not be construed as a waiver of any later breach.

 

11.07.              Claims Procedures

 

(a)           Claims Not Involving a Determination of Disability

 

(1)           The Committee shall determine the rights of any Eligible Employee or Participant to any benefits hereunder, if such determination does not require a decision on the question of whether the Eligible Employee or Participant is Disabled.  Any person who believes that he has not received the benefits to which he is entitled under the Plan may file a claim in writing with the Committee.  The Committee shall, no later than 90 days after the receipt of a claim (plus an additional period of 90 days if required for processing, provided that notice of the extension of time is given to the claimant within the first 90-day period), either allow or deny the claim in writing.  If a claimant does not receive written notice of the Committee’s decision on his claim within the above-mentioned period, the claim shall be deemed to have been denied in full.

 

(2)           A denial of a claim by the Committee, wholly or partially, shall be written in a manner calculated to be understood by the claimant and shall include:

 

(A)          the specific reasons for the denial;

 

(B)          specific reference to pertinent Plan provisions on which the denial is based;

 

(C)          a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

 

(D)          an explanation of the claim review procedure.

 

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(3)           A claimant whose claim is denied (or his duly authorized representative) may within 60 days after receipt of denial of a claim file with the Committee a written request for a review of such claim.  If the claimant does not file a request for review of his claim within such 60-day period, the claimant shall be deemed to have acquiesced in the original decision of the Committee on his claim.  If such an appeal is so filed within such 60-day period, the Committee (or its delegate) shall conduct a full and fair review of such claim.

 

(4)           The Company shall mail or deliver to the claimant a written decision on the matter based on the facts and the pertinent provisions of the Plan within 60 days after the receipt of the request for review (unless special circumstances require an extension of up to 60 additional days, in which case written notice of such extension shall be given to the claimant prior to the commencement of such extension period).  Such decision shall be written in a manner calculated to be understood by the claimant, shall state the specific reasons for the decision and the specific Plan provisions on which the decision was based and shall, to the extent permitted by law, be final and binding on all interested persons.  If the decision on review is not furnished to the claimant within the above-mentioned time period, the claim shall be deemed to have been denied on review.

 

(b)           Claims Involving a Determination of Disability

 

(1)           Claims involving Disability initially shall be reviewed by the Vice President of Human Resources (VPHR) of Georgia Gulf Corporation.  If the claim is wholly or partially denied by the VPHR, the VPHR shall, within a reasonable period of time, but not later than 45 days (unless such period is extended as provided in paragraph (2) below) after receipt of the claim by the VPHR, notify the claimant in writing of such denial.  Such notice shall be written in a manner calculated to be understood by the claimant and shall:

 

(A)          state the specific reason(s) for the denial of the claim,

 

(B)          make references to the specific provisions of the Plan on which the denial of the claim is based,

 

(C)          contain a description of any additional material or information necessary for the claimant to perfect his claim and an explanation of why it is necessary,

 

(D)          contain a description of the Plan’s review procedures under paragraph (3) below, and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review, and

 

(E)           if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, contain either the specific rule, guideline, protocol, or other similar criterion, or a statement that such rule, guideline, protocol, or other similar criterion was relied

 

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upon in making the adverse determination and that a copy of such rule, guideline, protocol, or other similar criterion will be provided free of charge to the claimant upon request.

 

(2)           The 45-day period set forth above may be extended by the VPHR for up to 30 days, provided that the VPHR determines that such an extension is necessary due to matters beyond the control of the VPHR and notifies the claimant, prior to the expiration of the initial 45-day period, of the circumstances requiring the extension of time and the date by which the VPHR expects to render a decision.  Additionally, if, prior to the end of the first 30-day extension period, the VPHR determines that, due to matters beyond the control of the VPHR, a decision cannot be rendered within that extension period, the period for making the determination may be extended for up to an additional 30 days, provided that the VPHR notifies the claimant, prior to the expiration of the first 30-day extension period, of the circumstances requiring the extension and the date as of which the VPHR expects to render a decision.  In the event of any extension under this paragraph (2), the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve the issues.  The claimant shall be afforded at least 45 days within which to provide the specified information.  Additionally, in the event that a period of time is extended due to a claimant’s failure to submit information necessary to decide a claim, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

 

(3)           Within 180 days after receipt of a notification of a denial of a claim, the claimant or his duly authorized representative may appeal such denial by filing with the VPHR his written request for a review of his claim.  If such an appeal is so filed within 180 days, the Committee shall conduct a full and fair review of such claim.  During such full and fair review, the claimant shall be provided with the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits and reasonable access to and copies of, upon request and free of charge, all documents, records, and other information relevant to the claimant’s claim for benefits.  In addition, such full and fair review shall:

 

(A)          take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination,

 

(B)          not afford deference to the initial adverse benefit determination,

 

(C)          be conducted by the Committee, which is not the individual who made the adverse benefit determination that is the subject of the appeal, nor the subordinate of such individual,

 

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(D)          provide that, in deciding any appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, the Committee shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment and who is neither the individual who was consulted in connection with the adverse benefit determination that is the subject of the appeal, nor the subordinate of any such individual, and

 

(E)           provide for the identification of medical or vocational experts whose advice was obtained on behalf of the Plan in connection with the claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the initial benefit determination.

 

The decision of the Committee shall be made in a writing delivered to the claimant within a reasonable time, but in no event later than 45 days after the receipt of the request for review unless special circumstances require an extension of time for processing.  If the Committee determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant setting forth the special circumstances requiring an extension of time and the date by which the Committee expects to render a decision on review, and shall be furnished prior to the termination of the initial 45-day period.  In no event shall such extension exceed a period of 45 days from the end of the initial 45-day period.  In the case of an adverse benefit determination on review, the notice of the determination:

 

(I)            shall be written in a manner calculated to be understood by the claimant,

 

(II)          shall state the specific reasons for the determination,

 

(III)        shall make reference(s) to specific provisions of the Plan on which the determination is based,

 

(IV)         shall contain a statement that the claimant is entitled to receive, upon request, and free of charge, reasonable access to, and copies of all documents, records, and other information relevant to the claimant’s claim for benefits,

 

(V)          shall contain a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain information about such procedures and a statement of the claimant’s right to bring an action under section 502(a) of ERISA, and

 

(VI)         if an internal rule, guideline, protocol or other similar criterion was relied upon in making the adverse determination, shall contain either the specific rule, guideline, protocol, or other similar criterion, or a statement that such rule, guideline, protocol, or other similar criterion was relied upon in making the adverse determination and that a copy of the rule, guideline, protocol or other similar criterion will be provided free of charge to the claimant upon request.

 

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To the extent permitted by applicable law, the determination on review shall be final and binding on all interested persons.  In performing the duties under this paragraph (3), the Committee shall have complete power to interpret the Plan and make factual findings with respect thereto.

 

ARTICLE XII
 GENERAL

 

12.01.              Plan Creates No Separate Rights

 

The Plan does not in any way limit the right of the Employer or any participating Affiliate at any time and for any reason to terminate the employment of a Participant in its employ.  In no event shall the Plan, by its terms or by implication, constitute an employment contract of any nature whatsoever between the Employer and a Participant (or Eligible Employee).

 

12.02.              Funding

 

(a)           All Plan Participants and Designated Beneficiaries are general unsecured creditors of the Employer with respect to the benefits due hereunder and the Plan constitutes a mere promise by the Employer to make benefit payments in the future.  It is the intention of the Employer that the Plan be considered unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended.

 

(b)           The Employer may purchase life insurance in amounts sufficient to secure the benefits provided under this Plan.

 

(c)           The Employer may, but prior to a Control Change Date is not required to, establish a grantor trust which may be used to hold assets of the Employer which are maintained as reserves against the Employer’s unfunded, unsecured obligations hereunder.  Such reserves shall at all times be subject to the claims of the Employer’s creditors and the creditors of any Affiliate that is an employer of a Participant.  To the extent such trust or other vehicle is established, the Employer’s obligations hereunder shall be reduced to the extent such assets are utilized to meet its obligations hereunder.

 

12.03.              Plan Binding

 

The Plan shall be binding upon the Company, any participating Affiliate and their successors and assigns, and, subject to the powers set forth in Article X, upon a Participant, his Designated Beneficiary, or any of their assigns, heirs, executors and administrators.

 

12.04.              Interpretation of Plan

 

To the extent not preempted by federal law, the Plan shall be governed and construed under the laws of the State of Georgia (other than its choice of law rules) as in effect from time to time.

 

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12.05.              Construction

 

Headings and captions are only for convenience; they do not have substantive meaning.  If a provision of this Plan is not valid or not enforceable, that fact in no way affects the validity or enforceability of any other provision.  Use of one gender includes both, and the singular and plural include each other.

 

12.06.              Tax Effects

 

It is intended that this Plan will meet, both in form and operation, the requirements of Code section 409A, and the Plan shall be construed and interpreted with this intent in mind.  However, neither the Company nor any Employer makes any warranties or representations with regard to the tax effects or results of this Plan.  Any Participant electing to make any deferrals under this Plan shall be deemed to have relied upon his own tax and/or financial advisors with regard to such effects.

 

12.07.              Correction of Participant’s Accounts

 

If an error or omission is discovered in the Account of a Participant, or in the amount distributed to a Participant, the Plan Administrator will make such equitable adjustments in the records of the Plan as may be necessary or appropriate to correct such error or omission.  Further, the Employer may, in its discretion, make a special contribution or allocation under the Plan which will be allocated by the Plan Administrator only to the Account of one or more Participants to correct such error or omission.

 

12.08.              Action of Employer, Committee and Plan Administrator

 

Except as may be specifically provided, any action required or permitted to be taken by the Employer, Committee, or the Plan Administrator may be taken on behalf of such person by any entity or individual who has been delegated the proper authority.

 

12.09.              Employer Records

 

Records of the Employer or of the Company, as to an employee’s or Participant’s period of employment, Separation from Service and the reason therefor, leaves of absence, reemployment, compensation, and elections or designations under this Plan will be conclusive on all persons, unless determined by the Committee to be incorrect.

 

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12.10.              Legal References

 

Any references in this Plan to a provision of law which is, subsequent to the Effective Date of this Plan, revised, modified, finalized or redesignated, shall automatically be deemed a reference to such revised, modified, finalized or redesignated provision of law.

 

12.11.              Electronic Means of Communication

 

Whenever, under this Plan, a Participant or Beneficiary is required or permitted to make an election, provide a notice, give a consent, request a distribution, or otherwise communicate with the Employer, the Committee, the Plan Administrator, the trustee of a rabbi trust associated with the Plan, or a delegate of any of them, to the extent permitted by law, the election, notice, consent, distribution request or other communication may be transmitted by means of telephonic or other electronic communication, if the administrative procedures under the Plan provide for such means of communication.

 

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SUPPLEMENTAL RETIREMENT
 PROGRAM AGREEMENT

 

This Supplemental Retirement Program Agreement (the “Agreement”) is entered into this            day of                               , 2012, by and between Georgia Gulf Corporation, a Delaware corporation (the “Company”), and the executive officer named in Attachment A hereto (“Executive”), with reference to the following facts:

 

A.            The Company sponsors for the benefit of eligible employees the Georgia Gulf Corporation Retirement Plan (the “Retirement Plan”), a defined benefit pension plan intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Georgia Gulf Corporation 401(k) Retirement Savings Plan, an individual account plan also intended to qualify under Section 401(a) of the Code (“401(k) Plan”).

 

B.            The Company wishes to provide to the Executive certain deferred compensation benefits above and beyond what can be provided pursuant to the Retirement Plan and the 401(k) Plan, under a nonqualified deferred compensation program.

 

C.            The Company has adopted the Georgia Gulf Corporation Deferred Compensation Plan (“Deferred Compensation Plan”).

 

D.            On December 6, 2010, the Board of Directors of the Company approved the “Company Account” feature of the Deferred Compensation Plan and the specific benefits for the Executive that are set forth in this Agreement.

 

E.             The Company and Executive wish to have this Agreement to comply with the provisions of Section 409A of the Code and to memorialize the specific provisions of the “Company Account” feature of the Deferred Compensation Plan that apply to the Executive.  References to Section 409A of the Code include applicable regulations and other guidance relating to Section 409A published by the Internal Revenue Service or the U.S. Treasury Department from time to time.

 

F.             Capitalized terms used in this Agreement but not defined will have the meaning set forth in the Deferred Compensation Plan.  As used in this Agreement, the terms “termination of employment” and “terminates employment” refer to Executive’s “separation from service” within the meaning of such term under Section 409A of the Code; and the term “Company” includes all persons or entities with which the Company is considered to be a single employer under Section 414(b) or Section 414(c) of the Code, determined by applying an 80% control test under Section 414(b) and Section 414(c) of the Code for all purposes, including whether Executive has had a separation from service.

 

THEREFORE, the parties agree as follows:

 

1.             Retirement Benefit.  The Company will credit to Executive’s “Company Account” under the Deferred Compensation Plan an amount determined as follows:

 

 

An amount was credited to the Executive’s Company Account under the Deferred Compensation Plan as of December 31, 2010 and as of December 31, 2011.  The Company Account balance at the end of each Plan Year beginning with the 2011 Plan Year shall be equal to (a) the amount of the Company Account balance at January 1 of that year, multiplied by the “Crediting Factor” for the Plan Year, plus (b) for any Plan Year prior to the Executive’s attainment of the age of 65 years, the Executive’s annual rate of base salary from Georgia Gulf Corporation at December 31 of the Plan Year (or the Participant’s final annual rate of base salary if the Participant terminates employment prior to the end of the Plan Year), multiplied by the Executive’s Participant Percentage Factor as set forth in Attachment A to this Agreement; plus (c) for the Plan Year in which the Executive attains the age of 65 years, the Executive’s annual rate of base salary from Georgia Gulf Corporation at the age of 65 years (or the Participant’s final annual rate of base salary if the Executive terminates employment prior to the age of 65 years), prorated (based on months of employment and counting any partial month of employment as a full month) for the portion of the Plan Year through the date of his attainment of the age of 65 years, and multiplied by the Executive’s Participant Percentage Factor as set forth in Attachment A to this Agreement.

 

For purposes of this Section 1 the “Crediting Factor” shall be the rate of interest that is used in determining “interest credits” under the Cash Balance Accounts (as defined in the Retirement Plan) under the Retirement Plan.  That is, the Crediting Factor shall equal the greater of (i) 4% and (ii) the 30-year Treasury rate as of the last day of October prior to the Plan Year (as defined in the Retirement Plan) with respect to which the credit is made, as reported to Georgia Gulf Corporation by the Company’s actuarial consulting firm.

 

Credits to the Company Account shall be made with respect to each Plan Year through and including the year in which the Executive reaches the age of 65 years (and in the case of the Executive’s death prior to reaching the age of 65 years, through and including the year in which the Executive would have reached the age of 65 years if the Executive had lived to that age); provided, however, that no additional credits shall be made to the Company Account after the Executive’s termination of employment due to “gross misconduct” as determined by the Board, in its sole discretion or if the Executive’s termination of employment occurs before he has either reached the age of 55 years or has completed 5 “Years of Vesting Service” as that term is defined in the Retirement Plan; provided, further, that if the Executive terminates employment prior to the attainment of the age of 62 years (except in the case of termination of employment as a result of death or disability), with respect to each credit to the Company Account following that termination of employment, the Participant Percentage Factor shall be reduced by 6% (and not by 6 percentage points) for each full year prior to the attainment of the age of 62 years that the Executive’s termination of employment occurs (except in the case of termination of employment as a result of death or disability).  By way of an example, if the Executive terminates employment at the age of 59 years (other than due to death or disability) and if the Executive's Participant Percentage Factor has been 50%, that Participant Percentage Factor shall be reduced to 41%, because 50% minus 9% (which is 18% of 50%) equals 41%.  The 18% is 6% multiplied by 3 (the number of years prior to age 62 that the termination occurs).

 

If the Executive continues employment with the Company beyond the Plan Year in which the Executive attains the age of 65 years, the Company Account will continue to receive credits due to the “Crediting Factor” for that Plan Year; provided however, the Company Account will not receive additional credits based on the Executive’s earnings past the age of 65 years.  That is,  for any Plan Year after the Plan Year in which the Executive attains the age of 65 years and is still employed with the Company, the Company Account will only receive credits based on the balance at January 1 of that Plan Year, multiplied by the “Crediting Factor’ for the Plan Year.

 

2

 

2.             Vesting.  Executive will be fully vested in each credit to his Company Account immediately following the making of each such credit.  Executive will be fully vested  in the right to receive future credits (as provided in Section 1 of this Agreement) when he has either reached the age of 55 years, or has completed 5 “Years of Vesting Service” as that term is defined in the Retirement Plan, except in cases of termination of employment due to gross misconduct.

 

3.             Payment of Supplemental Retirement Benefit.  Notwithstanding any other provision herein, the Company Account will be distributed on the later of (a) the first day of the year following the Executive’s attainment of the age of 65 years or (b) the first day of the seventh month after the month in which Executive separates from service; provided, however, that with respect to 2013 and later Plan Years, the Executive may elect, prior to the start of the Plan Year, to have the portion of the Company Account that is attributable to the Plan Year distributed in three annual installments provided that such election constitutes a permissible initial deferral election under the rules of Treasury Regulations § 1.409A-2(b) or superseding Treasury Regulations (if any) of similar import.  The first such installment shall be paid on the later of the first day of the year following the Executive’s attainment of the age of 65 years or the first day of the seventh month after the month in which the Executive has both attained the age of 65 years and separated from service.  The second and third installments shall be paid on the second and third anniversaries of the date of the first payment.

 

4.             Payment Upon Death.  Upon the death of the Executive prior to the full distribution to him of his Company Account, the balance in his Company Account will be paid to his Designated Beneficiary in a lump sum on the later of (a) the first day of the month following the month in which the Executive’s death occurs, and (b) (if the Executive dies after reaching the age of 65 years but before the end of the year in which the Executive reaches that age, or if the Executive dies prior to the year in which the Executive would have reached the age of 65 years if the Executive had lived to that age) the first day of the year following the year in which the Executive reached the age of 65 years or the first day of the year following the year in which the Executive would have attained the age of 65 years if the Executive had lived to the age of 65, as the case may be.  Notwithstanding the foregoing, if the Executive’s termination of employment is due to gross misconduct, under Section 1 of this Agreement, and additional credits to the Company Account cease for that reason, then upon the death of the Executive prior to the full distribution to him of his Company Account, the balance in the Company Account will be paid to his Designated Beneficiary in a lump sum on the first day of the year following the year with respect to which the final credit to the Company Account is made.

 

5.             Funding.  Benefits under this Agreement will be considered unfunded for tax purposes under the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and will be paid from the general assets of the Company.  Nothing contained in this Agreement will require the Company or any of its affiliates to set aside or hold in trust any funds for the benefit of Executive or his surviving spouse, who will have the status of general unsecured creditors with respect to the obligation of the Company  to pay benefits under this Agreement.  Any funds of the Company or any affiliate available to pay such benefits will be subject to the claims of general creditors of the Company or such affiliate and may be used for any purpose by the Company or such affiliate.

 

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6.             Claims.  This Agreement is intended to provide benefits for a “management or highly compensated” employee within the meaning of Sections 201, 301 and 401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA.  In the event of any dispute arising under this Agreement, such dispute will be resolved by the Committee under an abuse of discretion standard, and in accordance with Sections 11.03, 11.04 and 11.07 of the Deferred Compensation Plan, as applicable.  The decision of such Committee will be conclusive and binding on all parties.

 

7.             Miscellaneous.

 

(a)           In the event of a conflict between the terms and provisions of the Deferred Compensation Plan and this Agreement, the provisions of the Deferred Compensation Plan shall control.

 

(b)           This Agreement supersedes and replaces in its entirety any prior agreement between the parties with respect to the subject matter of this Agreement.

 

(c)           Nothing in this Agreement will confer upon Executive the right to continue in the employ of the Company or will limit or restrict the right of the Company to terminate the employment of Executive at any time with or without cause.

 

(d)           No right or benefit under this Agreement will be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge such right or benefit will be void.  No such right or benefit will in any manner be subject to the debts, liabilities or torts of Executive or his surviving spouse.

 

(e)           Benefits payable under this Agreement will be reduced by all taxes and other amounts the Company is required by applicable law to withhold.

 

(f)            Notwithstanding any provision in this Agreement to the contrary, this Agreement will be interpreted, applied and to the minimum extent necessary, unilaterally amended by the Company, so that the Agreement does not fail to meet, and is operated in accordance with, the requirements of Section 409A of the Code.

 

(g)           This Agreement will be construed and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of Georgia, including without limitation, the Georgia statute of limitations, but without giving effect to the principles of conflicts of laws of such state.

 

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(h)           Throughout this Agreement the masculine shall be deemed to include the feminine, where appropriate, and the singular shall be deemed to include the plural and the plural shall be deemed to include the singular, where appropriate.  If a provision of this Agreement is not valid or not enforceable, that fact shall in no way affect the validity or enforceability of any other provision.  Section headings are included for convenience of reference and shall not be taken into account in construing or interpreting the provisions of this Agreement.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	
 
    	
GEORGIA GULF CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
EXECUTIVE:   [                                    ]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

5

 

Attachment A

 

Name of Executive:                

 

Title:                  

 

Participant Percentage Factor -           %

 

6ex41.htm

  
Exhibit 4.1

 

 

THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.

 

 

Z TRIM HOLDINGS, INC.

 

8% CONVERTIBLE SENIOR SECURED NOTE

DUE [24 Months from Issuance]

 

 

Issuance Date: _________, 2012                                                                                                                       $_________

For value received, Z TRIM HOLDINGS, INC., an Illinois corporation (the “Company”), hereby promises to pay to the order of [INVESTOR], a __________ (together with its successors and permitted assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of _______________ ($___________) (the “Principal Amount”).  The Company is issuing this convertible senior secured note (this “Note” and, collectively with all other notes issued in connection with the limited convertible debt offering, the “2012 Notes”) to the Holder.  As used herein, the term “Issuance Date” means _________, 2012.

 

The Company hereby promises to pay to the order of the Holder the Principal Amount in United States Dollars in immediately available funds to the Holder at the address of the Holder as set forth in the Security Agreement (as defined below), or at such other place as the Holder may designate from time to time in writing to the Company, on [24 months from issuance] (the “Maturity Date”), with interest to the Holder on the aggregate unconverted and then outstanding Principal Amount in accordance with the provisions hereof.  All interest payments under or pursuant to this Note shall be made in Common Shares (as defined below) pursuant to Section 1.1 hereof.

 

This Note is secured by a Security Agreement dated the date hereof (the “Security Agreement”) among the Company and Holder in favor of the Holder covering certain collateral (the “Collateral”), all as more particularly described and provided therein, and is entitled to the benefits thereof.  The Security Agreement, the Uniform Commercial Code financing statements on form UCC-1 filed in connection with the Security Agreement and any and all other documents executed and delivered by the Company to the Holder under which the Holder is granted Liens on assets of the Company are collectively referred to as the “Security Documents.”

  

  

  

ARTICLE I THE NOTE

 

Section 1.1                      Interest.  Simple interest on the outstanding Principal Amount of this Note shall commence accruing on the Issuance Date and shall accrue daily at a rate of eight percent (8%) per annum (the “Interest Rate”) until payment in full of the Principal Amount and all accrued and unpaid interest and other amounts which may become due hereunder have been made.  Interest shall be computed on the basis of a 365-day year and actual days elapsed.  Accrued interest on the Principal Amount of this Note (the “Interest Amount”) shall either be payable to the Holder, on the Maturity Date or quarterly at the Holder’s option, in shares of common stock of the Company, par value $0.0005 per share (the “Common Shares”).  The number of Common Shares to be issued to the Holder shall be equal to the result obtained by dividing (x) the Interest Amount by (y) the Conversion Price (as defined in Section 3.2(a) below).  Payment of the Interest Amount in Common Shares shall occur pursuant to Section 3.3.

 

Section 1.2                      Ranking and Covenants.

 

(a)           No indebtedness of the Company or any subsidiary of the Company is senior to this Note in right of payment, whether with respect to interest, damages or upon liquidation or dissolution or otherwise.  Until this Note is fully paid and discharged in full, the Company shall not, and shall not permit any subsidiary of the Company to, directly or indirectly, incur any indebtedness for borrowed money (excluding Permitted Indebtedness) unless such indebtedness is expressly subordinated to this Note pursuant to a written subordination agreement acceptable in form, scope and substance to the Holder in its sole and absolute discretion; provided, however, that notwithstanding the foregoing, the Company may issue up to a total of $20 million in aggregate principal amount of 8% convertible senior secured notes (inclusive of this Note and all other 2012 Notes) on substantially similar terms and conditions as this Note.  The 2012 Notes and any note issued by the Company pursuant to such proviso issued under the same terms shall rank pari passu with the Company’s obligations under this Note and may be secured equally and ratably by Liens, on or with respect to any of the Company’s property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom and shall have the benefit, to the full extent that and with such priority as the obligations under this Note.

 

(b) Except for Permitted Liens (as defined in Section 6.14 below), until this Note is fully paid and discharged in full, the Company shall not, and shall not permit any subsidiary of the Company to, directly or indirectly, incur any Lien (as defined in Section 6.14 below) on or with respect to any of the Collateral now owned or hereafter acquired, or any interest therein or any income or profits therefrom, without the prior written consent of the Holders of not less than a simple majority of the then outstanding aggregate principal on the 2012 Notes.

 

 

(c) Until this Note is fully paid and discharged in full, the Company shall not, and shall not permit any subsidiary of the Company to, directly or indirectly, without the prior written consent of the Holders of not less than the simple majority of the then outstanding aggregate principal amount of the 2012 Notes, redeem, purchase or otherwise acquire any of the Company’s capital stock or set aside any monies for such a redemption, purchase or other acquisition.

 

 

(d) The Company shall perform any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement and continuation statement) for filing under the provisions of the Uniform Commercial Code (the “UCC”), and the rules and regulations thereunder, or any other statute, rule or regulation of any applicable jurisdiction which are necessary at the reasonable request of the Holder or its counsel in order to maintain in favor of the Holder of the Note, a valid and perfected Lien on and security interest in the Collateral.

 

 

Section 1.3                       Payment on Non-Business Days. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of Illinois, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the Interest Amount on such date.

 

Section 1.4                       Transfers. This Note may not be sold, transferred or otherwise disposed of by the Holder to any Person without the express written consent of the Company, which consent shall not be unreasonably withheld.

 

Section 1.5                       Replacement. Upon receipt of a duly executed and notarized written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof) and a standard indemnity reasonably satisfactory to the Company, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.  The Holder hereby unconditionally agrees to indemnify and hold harmless the Company against any claims, loss, liabilities, damages and expenses that may arise directly or indirectly on account of the actual or alleged loss, mutilation, theft or destruction of the original Note or the issuance of a new Note in exchange for said Note.

 

ARTICLE II

 

EVENTS OF DEFAULT; REMEDIES

 

Section 2.1                       Events of Default. The occurrence of any of the following events shall be an “Event of Default” under this Note:

 

(a) Any default in the payment of (i) the Principal Amount or (ii) Interest Amount on, or liquidated damages in respect of, any Note, in each case free of any claim of subordination, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of a default under clause (ii) above, is not cured within ten Trading Days;

 

(b) the Company’s notice to the Holder, including by way of public announcement, at any time, of its inability to comply or its intention not to comply with proper requests for conversion of this Note into Common Shares;

 

(c) the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to and in accordance with Section 3.3 or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with the requests for conversion of any Notes in accordance with the terms hereof;

 

(d) the Company or any subsidiary shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, (vii) fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due, (viii) call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (ix) by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing, or (x) take any corporate or other action for the purpose of effecting any of the foregoing;

 

(e)           a proceeding or case shall be commenced in respect of the Company or any subsidiary, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with its liquidation or dissolution or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of thirty (30) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Company or any subsidiary or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Company or any subsidiary and shall continue undismissed, or unstayed and in effect for a period of thirty (30) days;

 

(f)           the Company or any subsidiary shall default in any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $50,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

 (g)           if the Company ceases conducting a material portion of its operations as currently in effect as of the date hereof.

 

Section 2.2                                Remedies Upon An Event of Default. If an Event of Default shall have occurred and shall be continuing, the Holder of this Note may at any time at its option:

 

(a) demand that the principal amount of this Note then outstanding shall be converted into Common Shares at the Conversion Price (as defined in Section 3.2(a) below) then in effect; or declare immediately due and payable the full Principal Amount of this Note, together with the Interest Amount and other amounts owing in respect thereof, in cash, which aggregate amount payable upon an Event of Default shall be equal to the Mandatory Repayment amount, defined below; provided, however, that upon the occurrence of an Event of Default described in paragraphs (g) of Section 2.1, the outstanding principal balance and accrued interest hereunder shall be automatically due and payable.  Commencing five (5) days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, the Interest Rate shall accrue at a rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.  All Notes for which the full Mandatory Repayment amount hereunder shall have been paid in accordance herewith shall promptly be surrendered to or as directed by the Company.  The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.   Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a Note holder until such time, if any, as the full payment under this Section shall have been received by it.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

(b)           exercise or otherwise enforce any one or more of the Holder’s rights, powers, privileges, remedies and interests under this Note, the Security Agreement, or applicable law.

 

In connection with the Holder’s exercise of any of its remedies hereunder, the Company shall use its reasonable best efforts to cooperate with the Holder to the end that the Holder’s rights hereunder will be effectuated.

 

ARTICLE III

 

CONVERSION; COMPANY CALL RIGHTS

 

Section 3.1                      Conversion.  At any time on or after the Issuance Date, at the request of the Holder (the “Conversion Election”), this Note shall be convertible, in whole or in part, into such number of fully paid and non-assessable Common Shares as is determined by dividing (x) the outstanding Principal Amount and the Interest Amount then accrued hereon by (y) the Conversion Price (as defined in Section 3.2(a) hereof).  The Holder shall effect a Conversion Election by delivering to the Company the form of Notice of Conversion attached hereto as Exhibit B (a “Notice of Conversion”), specifying therein the principal amount of Notes to be converted and the date on which such conversion is to be effected (a “Conversion Date”).  If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder.  To effect Conversion Elections hereunder, the Holder shall not be required to physically surrender Notes to the company unless the entire Principal Amount of this Note plus the Interest Amount thereon shall have been so converted.  Conversions hereunder shall have the effect of lowering the outstanding Principal Amount in an amount equal to the applicable conversion.  The Holder and the Company shall maintain records showing the Principal Amount converted and the date of such conversions.  The Company shall deliver any objection to any Notice of Conversion within three (3) Trading Days of receipt of such Notice of Conversion.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted Principal Amount of this Note may be less than the amount stated on the face hereof.  However, at the Company’s request, the Holder shall surrender the Note to the Company within five (5) Trading Days following such request so that a new Note reflecting the correct then outstanding Principal Amount may be issued to Holder.

 

Section 3.2 Conversion Price.

 

 

(a) The term “Conversion Price” shall mean $1.00, subject to adjustment under Section 3.4 hereof.  References herein to the Conversion Price mean the Conversion Price as from time to time adjusted pursuant to the provisions of Section 3.4 and in effect on the applicable date.

 

(b) The term “Conversion Shares” shall mean such Common Shares issuable upon conversion of this Note.

 

Section 3.3                       Mechanics of Conversion.  Not later than five (5) Trading Days after each Conversion Date (the last day of each such period, a “Delivery Date”), the Company or its designated transfer agent, as applicable, shall issue and deliver to the Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion Election, registered in the name of the Holder or its designee, for the number of Common Shares to which the Holder shall be entitled.  Notwithstanding the foregoing, in the alternative, not later than the Delivery Date, the Company shall deliver to the applicable Holder by express courier a certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of this Note.  If, in the case of any Conversion Election such DWAC transfer or certificate or certificates are not delivered to or as directed by the applicable Holder by the Delivery Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Note tendered for conversion, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the delivery of such Conversion Election.

 

Section 3.4                       Adjustment of Conversion Price.

 

(a)           The Conversion Price shall be subject to adjustment from time to time as follows:

 

(i) Adjustments for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Issuance Date, effect a stock split of the outstanding Common Shares, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased.  If the Company shall at any time or from time to time after the Issuance Date, combine the outstanding shares of Common Shares, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately increased.  Any adjustments under this Section 3.4(a)(i) shall be effective at the close of business on the date the stock split or combination occurs.

 

(ii) Adjustments for Certain Dividends and Distributions. If the Company shall at any time or from time to time after the Issuance Date make or issue or set a record date for the determination of holders of Common Shares entitled to receive a dividend or other distribution payable in Common Shares, then, and in each event, the applicable Conversion Price in effect immediately prior to such event shall be decreased as of the time of such issuance or, in the event such record date shall have been fixed, as of the close of business on such record date, by multiplying the applicable Conversion Price then in effect by a fraction:

 

(A) the numerator of which shall be the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

 

(B) the denominator of which shall be the total number of Common Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such dividend or distribution.

 

(iii) Adjustments for Reclassification, Exchange or Substitution. If the Common Shares issuable upon conversion of this Note at any time or from time to time after the Issuance Date shall be changed to the same or different number of shares of any class or classes of stock, whether by reclassification, exchange, substitution or otherwise (other than by way of a stock split or combination of shares or stock dividends provided for in clauses (i) and (ii) of Section 3.4(a), or a reorganization, merger, consolidation, or sale of assets provided for in Section 3.4(a)(iv)), then, and in each event, an appropriate revision to the Conversion Price shall be made and provisions shall be made (by adjustments of the Conversion Price or otherwise) so that the Holder shall have the right thereafter to convert this Note into the kind and amount of shares of stock and other securities receivable upon reclassification, exchange, substitution or other change, by holders of the number of Common Shares into which such Note would have been converted immediately prior to such reclassification, exchange, substitution or other change, all subject to further adjustment as provided herein.

 

(iv) Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the Issuance Date there shall be a capital reorganization of the Company (other than by way of a stock split or combination of shares or stock dividends or distributions provided for in clauses (i) and (ii) of Section 3.4(a), or a reclassification, exchange or substitution provided for in Section 3.4(a)(iii)), or a merger or consolidation of the Company with or into another corporation where the holders of outstanding voting securities of the Company prior to such merger or consolidation do not own over fifty percent (50%) of the outstanding voting securities of the merged or consolidated entity, immediately after such merger or consolidation, or any Asset Sale (an “Organic Change”), then as a part of such Organic Change, (A) if the surviving entity in any such Organic Change is a public company that is registered pursuant to the Securities Exchange Act of 1934, as amended, and its Common Shares are listed or quoted on a national exchange or the OTC Bulletin Board, an appropriate revision to the Conversion Price shall be made and provision shall be made (by adjustments of the Conversion Price) so that the Holder shall have the right thereafter to convert such Note into the kind and amount of shares of stock and other securities or property of the Company or any successor corporation as it would have received as a result of such Organic Change if it had converted this Note into Common Shares immediately prior to such Organic Change, and (B) if the surviving entity in any such Organic Change is not a public company that is registered pursuant to the Securities Exchange Act of 1934, as amended, or its Common Shares are not listed or quoted on a national securities exchange or the OTC Bulletin Board, the Holder shall have the right to demand repayment of the then outstanding aggregate Principal Amount at 100% of the Principal Amount thereof (“Mandatory Repayment”).  The Company shall give the Holder at least twenty (20) day’s prior written notice of any Organic Change, during which time the Holder shall have the right to convert any portion of the Note into Common Shares.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 3.4(a)(iv) with respect to the rights of the Holder after the Organic Change to the end that the provisions of this Section 3.4(a)(iv) (including any adjustment in the applicable Conversion Price then in effect and the number of shares of stock or other securities deliverable upon conversion of this Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.

 

 

(b) Obligation Absolute; Partial Liquidated Damages.  The Company shall not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith, assist in the carrying out of all the provisions of this Section 3.4 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holder against impairment.  If the Company fails for any reason to deliver to the Holder any certificate or certificates required pursuant to Section 3.3 by the fifth Trading Day after the Conversion Date at any time when the Common Shares are being quoted on the OTC Bulletin Board or NASDAQ or are listed on a national securities exchange, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $500 of Principal Amount being converted, $5 per Trading Day (increasing to $10 per Trading Day after five Trading Days after such damages begin to accrue) for each Trading Day after such fifth Trading Day until such certificates are delivered.  The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Conversion Shares. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.  Likewise, nothing herein shall prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(c) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion.  In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder any certificate or certificates required pursuant to Section 3.3 by the fifth Trading Day after the Conversion Date at any time when the Common Shares are being quoted on the OTC Bulletin Board or NASDAQ or are listed on a national securities exchange, and if after such fifth Trading Day the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Shares to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder anticipated receiving upon such conversion (a “Buy-In”), then the Company shall (i) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the Common Shares so purchased exceeds (y) the product of (1) the aggregate number of Common Shares that such Holder anticipated receiving from the conversion at issue multiplied by (2) the actual sale price of the Common Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and (ii) at the option of the Holder, either reissue Notes in principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of Common Shares that would have been issued had the Company timely complied with its delivery requirements under Section 3.3.

 

(d) Certificates as to Adjustments. Upon occurrence of each adjustment or readjustment of the Conversion Price or number of Common Shares issuable upon conversion of this Note pursuant to this Section 3.4, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Holder a certificate setting forth such adjustment and readjustment, showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, upon written request of the Holder, at any time, furnish or cause to be furnished to the Holder a like certificate setting forth such adjustments and readjustments, the applicable Conversion Price in effect at the time, and the number of Common Shares and the amount, if any, of other securities or property which at the time would be received upon the conversion of this Note.  Notwithstanding the foregoing, the Company shall not be obligated to deliver a certificate unless such certificate would reflect an increase or decrease of at least one percent (1%) of such adjusted amount.

 

(e)           Issue Taxes. The Company shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be payable in respect of any issue or delivery of Common Shares on conversion of this Note pursuant thereto; provided, however, that the Company shall not be obligated to pay any transfer taxes resulting from any transfer requested by the Holder in connection with any such conversion.

 

(f)           Fractional Shares. No fractional shares of Common Shares shall be issued upon conversion of this Note.  In lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall pay in cash any remainder resulting from after the number of whole Common Shares is determined as a result of any conversion.  If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a Common Share, one whole Common Share.

 

(g)           Reservation of Common Shares. The Company shall at all times when this Note shall be outstanding, reserve and keep available out of its authorized but unissued Common Shares, solely for the purpose of issuance upon conversion of the Notes and payment of the Interest Amount on the Notes, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders, not less than such number of Common Shares as shall from time to time be sufficient to effect the conversion of this Note, taking into account the adjustments and restrictions of Section 3.4.  The Company shall, from time to time in accordance with Illinois law, seek to increase the authorized number of Common Shares if at any time the unissued number of authorized Common Shares shall not be sufficient to satisfy the Company’s obligations under this Section 3.4(g).  The Company covenants that all Common Shares that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, and nonassessable.

 

(h)           Regulatory Compliance. If any Common Shares to be reserved for the purpose of conversion of this Note require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation or otherwise before such shares may be validly issued or delivered upon conversion, the Company shall, at its sole cost and expense, in good faith and as expeditiously as possible, endeavor to secure such registration, listing or approval, as the case may be.

 

Section 3.5                       No Rights as Stockholder. Nothing contained in this Note shall be construed as conferring upon the Holder, prior to the conversion of this Note, the right to vote or to receive dividends or to consent or to receive notice as a stockholder in respect of any meeting of stockholders for the election of directors of the Company or of any other matter, or any other rights as a stockholder of the Company.

 

Section 3.6                       Calculations.                      All calculations under this ARTICLE III shall be made to the nearest cent or the nearest 1/100th of a Common Share, as the case may be.  The number of Common Shares outstanding at any given time shall not include the Common Shares owned by or held by or for the account of the Company, and the description of any such Common Shares shall be considered on issue or sale of Common Shares.  For purposes of this ARTICLE III, the number of Common Shares deemed to be issued and outstanding as of a given date shall be the sum of the number of Common Shares (excluding treasury shares, if any) issued and outstanding.

 

Section 3.7  Company’s right to call the note.  The Note shall be callable upon demand by the Company at any time prior to the maturity date.  The Note holder shall, within 5 business days of receipt of the Company’s notice of its intent to call the Note, have the option to either convert all or part of the then outstanding Principal Amount of the Note plus all interest accrued thereon through the date of such call into Common Shares, or to have the Company redeem the Note in full through the payment of the aggregate then outstanding Principal Amount plus all interest accrued thereon.  If the Note holder declines to convert the Note or does not respond within 5 business days, the Company shall have the right to so redeem the Note in full satisfaction of the Note.

 

ARTICLE IV

 

NEGATIVE COVENANTS

 

Section 4.                      Negative Covenants.  So long as any portion of this Note is outstanding, the Company will not and will not permit any of its subsidiaries to directly or indirectly:

 

(a)           Consistent with Section 1.2, enter into, create, incur, assume or suffer to exist any indebtedness or Liens of any kind, on or with respect to any of its property or assets or Collateral now owned or hereafter acquired or any interest therein or any income or profits therefrom that is senior to, subordinated to or pari passu with, in any respect, the Company’s obligations under the Notes other than obligations expressly permitted by Section 1.2;

 

(b)           Consistent with Section 1.2, repay, repurchase or offer to repay, repurchase, make any payment in respect of or otherwise acquire any of its Common Shares or other equity securities;

 

(c)           intentionally left blank;

 

(d)           amend its certificate of incorporation, bylaws or charter documents so as to adversely affect any rights of the Holder; provided that reincorporating the Company in Delaware and eliminating cumulative voting rights for directors shall not be deemed a violation of this covenant;

 

(e)           create or acquire any subsidiary after the date hereof unless (i) such subsidiary is a wholly-owned subsidiary of the Company and (ii) such subsidiary becomes party to the Security Documents (either by executing a counterpart thereof or an assumption or joinder agreement in respect thereof) and, to the extent required by the Holder, satisfied each condition of this Agreement as if such subsidiary were a subsidiary on the Issuance Date;

 

(f)           consummate any Organic Change without the prior consent of Holder; or

 

(g)           enter into any agreement with respect to any of the foregoing.

 

ARTICLE V

 

MISCELLANEOUS

 

                           Section 5.1 Notices.

 

(a)           Any notice, demand, request, waiver or other communication required or permitted to be given hereunder, including, without limitation, any Notice of Conversion, shall be in writing and shall be delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company at the address set forth above, facsimile number (847) 549-6028, Attn: Steven J. Cohen, or such other address or facsimile number as the Company may specify for such purposes by notice to the Holders delivered in accordance with this Section.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books and records of the Company, or if no such facsimile number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (central standard time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section later than 5:30 p.m. (central standard time) on any date and earlier than 11:59 p.m. (central standard time) on such date (iii) the second Trading Day following the date of mailing, if sent by nationally recognized overnight courier services, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

(b)            The Company will give written notice to the Holder at least twenty (20) days prior to the date on which the Company takes a record (i) with respect to any dividend or distribution upon the Common Shares, (ii) with respect to any pro rata subscription offer to holders of Common Shares or (z) for determining rights to vote with respect to any Organic Change, dissolution, liquidation or winding-up but in no event shall such notice be provided to the Holder prior to such information being made known to the public.  The Company also will give written notice to the Holder at least twenty (20) days prior to the date on which any Organic Change, dissolution, liquidation or winding-up will take place but in no event shall such notice be provided to the Holder prior to such information being made known to the public.  The Holder is entitled to convert Notes during the 20-day period commencing the date of such notice to the effective date of the event triggering such notice.

 

Section 6.2                      Governing Law; Consent to Jurisdiction. The parties acknowledge and agree that any claim, controversy, dispute or action relating in any way to this agreement or the subject matter of this agreement shall be governed solely by the laws of the State of Illinois, without regard to any conflict of laws doctrines.  The parties irrevocably consent to being served with legal process issued from the state and federal courts located in Illinois and irrevocably consent to the exclusive personal jurisdiction of the federal and state courts situated in the State of Illinois.  The parties irrevocably waive any objections to the personal jurisdiction of these courts.  Said courts shall have sole and exclusive jurisdiction over any and all claims, controversies, disputes and actions which in any way relate to this Note or the subject matter of this agreement.  The parties also irrevocably waive any objections that these courts constitute an oppressive, unfair, or inconvenient forum and agree not to seek to change venue on these grounds or any other grounds.  Nothing in this Section 6.2 shall affect or limit any right to serve process in any other manner permitted by law.

 

Section 6.3                      Absolute Obligation.  Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the Principal Amount, the Interest Amount, and liquidated damages, if any, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct debt obligation of the Company.  This Note ranks pari passu with all other Notes now or hereinafter issued under the terms set forth herein.

 

Section 6.4                      Security Interest.  This note is a direct debt obligation of the Company and, is secured by a first priority perfected security interest in all of the assets of the Company for the benefit of the Holders.

 

Section 6.5                      Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.

 

Section 6.6                       Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note.  Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder hereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach may be inadequate.  Therefore the Company agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

 

Section 6.7                      Enforcement Expenses. The Company agrees to pay all reasonable costs and expenses of the Holder incurred as a result of enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.

 

Section 6.8                      Binding Effect. The obligations of the Company and the Holder set forth herein shall be binding upon the successors and assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof.

 

Section 6.9                       Amendments. This Note may not be modified or amended in any manner except in writing executed by the Company and the Holders of not less than a simple majority of the then outstanding aggregate principal on the 2012 Notes.

 

Section 6.10                       Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment and not with a view to the distribution hereof. This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the following form:

 

“THIS NOTE AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHICATED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.”

 

Section 6.11                      Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege, nor shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

 

Section 6.12                      Company’s Waivers.

 

Except as otherwise specifically provided herein, the Company and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’ and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Company liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

 

Section 6.13                      Seniority.  This Note is senior in right of payment to any and all other indebtedness of the Company.

 

Section 6.14                      Definitions. For the purposes hereof, the following term shall have the following meaning:

 

“Asset Sale” means (i) in one or more transactions, the sale, lease, conveyance or other disposition of any material amount of assets or material rights other than in the ordinary course of business, and (ii) the sale of debt or equity interests in any of the Company’s subsidiaries.

 

“Lien” means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim or preference or priority or other encumbrance upon or with respect to any property of any kind.  A Person shall be deemed to own subject to a Lien any property which such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement.

“Permitted Indebtedness” means (i) indebtedness to the extent existing on the date hereof or any replacement indebtedness not to exceed the amount of such existing indebtedness; (ii) Indebtedness which may, from time to time be incurred or guaranteed by the Company which in the aggregate principal amount does not exceed $500,000; (iii) the endorsement of instruments for the purpose of deposit or collection in the ordinary course of business; (iv) indebtedness relating to contingent obligations of the Company and its subsidiaries under guaranties in the ordinary course of business of the obligations of suppliers, customers, and licensees of the Company and its subsidiaries, including indebtedness of up to $500,000 in the aggregate associated with standby letters of credit issued to manufacturers of the Company’s products; indebtedness relating to loans from the Company to its subsidiaries; (v) indebtedness relating to equipment leases in an amount not to exceed $500,000, and Indebtedness relating to capital leases in an amount not to exceed $100,000; or (vi) accounts or notes payable arising out of the purchase of merchandise, supplies, equipment, software, computer programs or services in the ordinary course of business.

 

“Permitted Lien” means (i) liens for taxes, assessments and other governmental charges, if payment thereof shall not at the time be required to be made, and provided such reserve as shall be required by generally accepted accounting principles consistently applied shall have been made therefor; (ii) liens of workmen, materialmen, vendors, suppliers, mechanics, carriers, warehouseman and landlords or other like liens, incurred in the ordinary course of business for sums not then due or being contested in good faith, if an adverse decision in which contest would not materially affect the business of the Company; (iii) liens securing indebtedness of the Company or any subsidiaries which is in an aggregate principal amount not exceeding $500,000 and which liens are subordinate to liens on the same assets held by the Purchaser; (iv) statutory liens of landlords, statutory liens of banks and rights of set-off, and other liens imposed by law, in each case incurred in the ordinary course of business (x) for amounts not yet overdue or (y) for amounts that are overdue and that are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by generally accepted accounting principles shall have been made for any such contested amounts; (v) liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (vi) any attachment or judgment lien not constituting an Event of Default; (vii) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of the Company or any of its subsidiaries; (viii) any (x) interest or title of a lessor or sublessor under any lease, (y) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (z) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (y), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease; (ix) liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; (xi) liens securing obligations (other than obligations representing debt for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of the Company and its subsidiaries; or (xii) the replacement, extension or renewal of any lien permitted by this Section upon or in the same property theretofore subject or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the indebtedness secured thereby.

 

“Trading Day” means (a) a day on which the Common Shares are traded on the OTC Bulletin Board, NASDAQ, or a national securities exchange or (b) if the Common Shares are not so traded, a day on which the Common Shares are quoted in the over-the-counter market as reported by the Pink Sheets LLC (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Common Shares are not listed or quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of Illinois are authorized or required by law or other government action to close.

 

 

 

[Signatures on Next Page]

  

  

  

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

 

Z TRIM HOLDINGS, INC.

 

 

By:                                                                           

 

 

Print Name:                                                                           

 

 

Title:                                                                           

 

 

 

  

  

  

EXHIBIT A

 

WIRE INSTRUCTIONS

 

Payee:                                                                                                                                

 

Bank:                                                                                                                                

 

Address:                                                                                                                                

 

Bank No.:                                                                                                                                

 

Account No.:                      

 

Account Name:                                                                                                                                

  

  

  

 

EXHIBIT B

 

 

FORM OF NOTICE OF CONVERSION INTO SHARES OF COMMON STOCK

 

(To be Executed by the Registered Holder in order to Convert the Note into Common Shares)

 

The undersigned hereby irrevocably elects to convert $_____ of the principal amount of the above Note into Common Shares of Z TRIM HOLDINGS, INC. (the “Company”) according to the conditions hereof, as of the date written below.

 

Date of Conversion:

 

Applicable Conversion Price:

 

Signature:                                                                                                                                          

 

[Print Name]:

 

Address:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00199-of-00352.parquet"}]]