Document:

Exhibit 10.1 Share Exchange Agreement

 

SHARE EXCHANGE AGREEMENT

 

This Share Exchange Agreement, dated as of July 31, 2017, (this “Agreement”) by and among 12 Retech Corporation, Nevada corporation (“RETC”) and 12 Japan Limited, a corporation formed under the laws of Japan (“12 Japan”), and the Shareholders of 12 Japan (the “12 Japan Shareholders”). For purposes of this Agreement RETC, 12 Japan, and the 12 Japan Shareholders are sometimes collectively referred to as the “Parties” and individually as a “Party.”

 

RECITALS

 

WHEREAS, the 12 Japan Shareholders and 12 Japan believe it is in their respective best interests for the 12 Japan Shareholders to exchange, One Hundred One Thousand (101,000) shares of 12 Japan common stock, representing One Hundred (100%) percent of the issued and outstanding shares of 12 Japan (the “12 Japan Shares”) for RETC stock consisting of: (i) Five Million (5,000,000) shares of RETC Common Stock; and, (ii) Five Hundred Thousand (500,000) shares of RETC Series A Preferred Stock (such shares being hereinafter referred to as the “RETC Shares”); and, RETC believes it is in its best interest and the best interest of its stockholders to acquire the 12 Japan Shares in exchange for the RETC Shares, all upon the terms and subject to the conditions set forth in this Agreement (the “Share Exchange”); and,

 

WHEREAS, it is the intention of the parties that: (i) the Share Exchange shall qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the “Code”); and (ii) the Share Exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended and in effect on the date of this Agreement (the “Securities Act”); and,

 

WHEREAS, it is the intention of the parties that upon the Closing (as hereinafter defined) 12 Japan shall become a wholly owned subsidiary of RETC; and, 

 

WHEREAS, the Parities agree that the foregoing Recitals are true and correct and are hereby incorporated into this Agreement by this reference; and, 

 

NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto agree as follows:

 

ARTICLE I

 

EXCHANGE OF 12 JAPAN SHARES FOR RETC SHARES

 

Section 1.1 Agreements to Exchange 12 Japan Shares for RETC Shares. On the Closing Date (as hereinafter defined) and upon the terms and subject to the conditions set forth in this Agreement, the 12 Japan Shareholders shall assign, transfer, convey and deliver the 12 Japan Shares to RETC in consideration and exchange for the 12 Japan Shares, RETC shall issue, transfer, convey and deliver the RETC Shares to the 12 Japan Shareholders. 

  

Section 1.2 Closing and Actions at Closing. The closing of the Share Exchange (the “Closing”) shall take place remotely via the exchange of documents and signatures at such time and date as the parties hereto shall agree orally or in writing (the “Closing Date”). 

 

Section 1.3Share Exchange. After Closing and contingent upon the satisfaction of the terms and conditions set forth in this Agreement, One Hundred One Thousand (101,000) shares of 12 Japan common stock, representing One Hundred (100%) percent of the 12 Japan Shares shall be exchanged and delivered to RETC and in exchange RETC shall exchange and deliver RETC stock consisting of: (i) Five Million (5,000,000) shares of RETC Common Stock; and, (ii) Five Hundred Thousand (500,000) shares of RETC Series A Preferred Stock to the 12 Japan Shareholders.  

 

Section 1.4Restrictions on RETC Shares Issued Pursuant to this Agreement. The RETC shares to be issued by RETC pursuant to this Agreement have not been registered and are being issued pursuant to a specific exemption under the Securities Act, as well as under certain state securities laws for transactions by an issuer not involving any public offering or in reliance on limited federal preemption from such state securities registration laws, based on the suitability and investment representations made by the 12 Japan Shareholders to RETC. The RETC Shares of to be issued by RETC pursuant to this Agreement must be held and may not be sold, transferred, or otherwise disposed of for value unless such securities are subsequently registered under the Securities Act or an exemption from such registration is available, and that the certificates representing the Shares of RETC Common Stock issued in the Share Exchange will bear a legend in substantially the following form so restricting the sale of such securities: 

The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are “restricted securities” within the meaning of Rule 144 promulgated under the Securities Act. The securities have been acquired for investment and may not be sold or transferred without complying with Rule 144 in the absence of an effective registration or other compliance under the Securities Act.

 

Section 1.5Share Exchange Procedure. The 12 Japan Shareholders may exchange their certificates representing the 12 Japan Shares by delivering such certificate(s) to RETC duly executed and endorsed in blank (or accompanied by duly executed stock powers duly endorsed in blank), in each case in proper form for transfer, with signatures guaranteed, and, if applicable, with all stock transfer and any other required documentary stamps affixed thereto and with appropriate instructions to allow the transfer agent to issue certificates for the RETC Shares to the holder thereof. 

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF RETC

 

RETC represent, warrant and agree that all of the statements in the following subsections of this Article II are true and complete as of the date hereof.

 

Section 2.1 Corporate Organization

 

A.12 Retech Corporation is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and has all requisite corporate power and authority to own its properties and assets and governmental licenses, authorizations, consents and approvals to conduct its business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its activities makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a Material Adverse Effect on the activities, business, operations, properties, assets, condition or results of operation of RETC. “Material Adverse Effect” means, when used with respect to RETC, any event, occurrence, fact, condition, change or effect, which, individually or in the aggregate, would reasonably be expected to be materially adverse to the business, operations, properties, assets, condition (financial or otherwise), or operating results of RETC, or materially impair the ability of RETC to perform its obligations under this Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement; or (ii) changes in the U.S. securities markets generally. 

 

B.Copies of the Articles of Incorporation and Bylaws of RETC with all amendments thereto, as of the date hereof (the “RETC Charter Documents”), have been furnished to 12 Japan, if so requested, and such copies are accurate and complete as of the date hereof. The minute books of RETC are current as required by law, contain the minutes of all meetings of the RETC Board and its stockholders from its date of incorporation to the date of this Agreement, and adequately reflect all material actions taken by the RETC Board and its stockholders. RETC is not in violation of any of the provisions of the RETC Charter Documents. 

 

Section 2.2 Capitalization of RETC. 

 

A.The authorized capital stock of RETC consists of: (i) 100,000,000 shares of common stock, par value $0.00001, of which 75,692,024 shares of common stock are issued and outstanding immediately prior to the Share Exchange; (ii) 100,000,000 shares of preferred stock, par value $0.00001, of which 5,000,000 shares of preferred stock are issued and outstanding immediately prior to the Share Exchange.  

 

B.Concurrently with the Closing, RETC’s current management shall facilitate the cancellation of Five Million (5,000,000) of RETC Common Stock currently beneficially owned by the Company’s officers and directors and shall facilitate the cancellation of Five Hundred Thousand (500,000) of RETC Series A Preferred Stock currently beneficially owned by the Company’s officers and directors. Collectively, such shares shall be cancelled and returned to the Company’s treasury.  

 

C.All of the issued and outstanding shares of common stock of RETC immediately prior to this Share Exchange are, and all shares of common stock of RETC when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable U.S. federal and state securities laws and state corporate laws, and will have been issued free of preemptive rights of any security holder. The issuance of all of the shares of RETC described in this Section 2.2 have been, or will be, as applicable, in compliance with U.S. federal and state securities laws and state corporate laws and no stockholder of RETC has any right to rescind or bring any other claim against RETC for failure to comply with the Securities Act, or state securities laws. 

Section 2.3Shell Status. As of the date of this Agreement, RETC represents that is not a “shell company” as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.  

 

Section 2.4Authorization, Validity and Enforceability of Agreements. RETC has all corporate power and authority to execute and deliver this Agreement and all agreements, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement (collectively the “Agreements”) to perform its obligations hereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Agreements by RETC and the consummation by RETC of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of RETC, and no other corporate proceedings on the part of RETC are necessary to authorize the Agreements or to consummate the transactions contemplated hereby and thereby. The Agreements constitute the valid and legally binding obligation of RETC and is enforceable in accordance with its terms, except as such enforcement may be limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally. RETC does not need to give any notice to, make any filings with, or obtain any authorization, consent or approval of any government or governmental agency or other party in order for it to consummate the transactions contemplated by any of the Agreements, resulting from the issuance of the RETC Shares in connection with the Share Exchange. 

 

Section 2.5No Conflict or Violation. Neither the execution and delivery of the Agreements by RETC, nor the consummation by RETC of the transactions contemplated thereby will: (i) contravene, conflict with, or violate any provision of the RETC Charter Documents; (ii) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, court, administrative panel or other tribunal to which RETC is subject; (iii) conflict with, result in a breach of, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which RETC is a party or by which it is bound, or to which any of its assets or properties are subject; or (iv) result in or require the creation or imposition of any encumbrance of any nature upon or with respect to any RETC asset, including without limitation, the RETC Shares. 

 

Section 2.6Litigation. There is no action, suit, proceeding or investigation (“Action”) pending or, to the knowledge of RETC, currently threatened against RETC or any of its affiliates, that may affect the validity of this Agreement or the right of RETC to enter into this Agreement or to consummate the transactions contemplated hereby or thereby. There is no Action pending or, to the knowledge of RETC, currently threatened against RETC or any of its affiliates, before any court or by or before any governmental body or any arbitration board or tribunal, nor is there any judgment, decree, injunction or order of any court, governmental department, commission, agency, instrumentality or arbitrator against or relating to RETC or any of its affiliates. Neither RETC nor any of its affiliates is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no Action by RETC or any of its affiliates currently pending or which RETC or any of its affiliates intends to initiate. 

 

Section 2.7Compliance with Laws. RETC has been and is in compliance with, and has not received any notice of any violation of any, applicable law, order, ordinance, regulation or rule of any kind whatsoever, including without limitation the Securities Act, the Exchange Act, the applicable rules and regulations of the SEC or the applicable securities laws and rules and regulations of any state. 

 

Section 2.8Financial Statements. RETC’s financial statements (the “Financial Statements”) have been prepared in accordance with generally accepted accounting principles applicable in the United States of America (“U.S. GAAP”) applied on a consistent basis, except that those Financial Statements that are not audited do not contain all footnotes required by U.S. GAAP. The Financial Statements fairly present the financial condition and operating results of RETC as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments. RETC has no material liabilities (contingent or otherwise). RETC is not a guarantor or indemnitor of any indebtedness of any other person, entity or organization. RETC maintains a standard system of accounting established and administered in accordance with U.S. GAAP. 

 

Section 2.9Books, Financial Records and Internal Controls. All the accounts, books, registers, ledgers, RETC Board minutes and financial and other records of whatsoever kind of RETC have been fully, properly and accurately kept and completed; there are no material inaccuracies or discrepancies of any kind contained or reflected therein; and they give and reflect a true and fair view of the financial, contractual and legal position of RETC. RETC maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences. 

  

Section 2.10No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or anticipated by RETC to arise, between RETC and any accountants and/or lawyers formerly or presently engaged by RETC. RETC is current with respect to fees owed to its accountants and lawyers. 

 

 

Section 2.11Absence of Undisclosed Liabilities. Except as specifically disclosed herein: (A) there has been no event, occurrence or development that has resulted in or could result in a Material Adverse Effect; (B) RETC has not incurred any liabilities, obligations, claims or losses, contingent or otherwise, including debt obligations, other than professional fees to be paid prior to Closing; (C) RETC has not declared or made any dividend or distribution of cash or property to its shareholders, purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, or issued any equity securities other than with respect to transactions contemplated hereby; (D) RETC has not made any loan, advance or capital contribution to or investment in any person or entity; (E) RETC has not discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business; (F) RETC has not suffered any losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business; and (G) except for the Share Exchange, RETC has not entered into any transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business. 

 

Section 2.12No Undisclosed Events or Circumstances. No event or circumstance has occurred or exists with respect to RETC or its respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by RETC but which has not been so publicly announced or disclosed. RETC has not provided to 12 Japan, or the 12 Japan Shareholder, any material non-public information or other information which, according to applicable law, rule or regulation, was required to have been disclosed publicly by RETC but which has not been so disclosed, other than with respect to the transactions contemplated by this Agreement and/or the Share Exchange. 

 

Section 2.13Disclosure. This Agreement and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of RETC in connection with the transactions contemplated by this Agreement, when taken together, do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained herein and/or therein not misleading. 

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF 12 JAPAN

 

12 Japan represents, warrants and agrees that all of the statements in the following subsections of this Article III, pertaining to 12 Japan, are true and complete as of the date hereof.

 

Section 3.1Corporate Organization 

 

A.12 Japan Limited is a corporation duly formed under the law of the country of Japan, and has all requisite corporate power and authority to own its properties and assets and governmental licenses, authorizations, consents and approvals to conduct its business as now conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its activities makes such qualification and being in good standing necessary, except where the failure to be so qualified and in good standing will not have a Material Adverse Effect on the activities, business, operations, properties, assets, condition or results of operation of 12 Japan. “Material Adverse Effect” means, when used with respect to 12 Japan, any event, occurrence, fact, condition, change or effect, which, individually or in the aggregate, would reasonably be expected to be materially adverse to the business, operations, properties, assets, condition (financial or otherwise), or operating results of 12 Japan, or materially impair the ability of 12 Japan to perform its obligations under this Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement; or (ii) changes in the U.S. securities markets generally. 

 

B.Copies of the formation documents of 12 Japan, or their equivalent, with all amendments thereto, as of the date hereof (the “12 Japan Charter Documents”), have been furnished to RETC, if so requested, and such copies are accurate and complete as of the date hereof. The minute books of 12 Japan are current as required by law, contain the minutes of all meetings of the 12 Japan Board and its stockholders from its date of formation to the date of this Agreement, and adequately reflect all material actions taken by the 12 Japan Board and its stockholders. 12 Japan is not in violation of any of the provisions of the 12 Japan Charter Documents. 

 

Section 3.2 Capitalization of 12 Japan.  

 

A.12 Japan represents and warrants that it currently has, and shall continue to have as of the date of Closing, One Hundred One Thousand (101,000) shares of common stock issued and outstanding and NIL shares of Preferred Stock issued.  

 

B.All of the issued and outstanding shares of common stock of 12 Japan immediately prior to this Share Exchange are, and all shares of common stock of 12 Japan when issued in accordance with the terms hereof will be, duly authorized, validly issued, fully paid and non-assessable, will have been issued in compliance with all applicable securities laws and corporate laws of Japan and will have been issued free of preemptive rights of any security holder.  

 

Section 3.3Shareholders of 12 Japan’s Common Stock. 12 Japan has provided RETC a true and complete list of the holders of all issued and outstanding shares of 12 Japan including number of RETC shares held as of the date of this Agreement. 

 

Section 3.4Directors and Officers of 12 Japan. The duly elected or appointed directors and the duly appointed officers of 12 Japan are as set out in Schedule 3.4. 

 

Section 3.5Financial Statements. 12 Japan has kept all books and records since inception and such financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) consistently applied throughout the periods involved. The balance sheets are true and accurate and present fairly as of their respective dates the financial condition of 12 Japan. As of the date of such balance sheets, except as and to the extent reflected or reserved against therein, including but not limited to any previous tax liability 12 Japan had no liabilities or obligations (absolute or contingent) which should be reflected in the balance sheets or the notes thereto prepared in accordance with GAAP, and all assets reflected therein are properly reported and present fairly the value of the assets of 12 Japan, in accordance with GAAP. The statements of operations, stockholders’ equity and cash flows reflect fairly the information required to be set forth therein by GAAP. 

 

The books and records, financial and otherwise, of 12 Japan are, in all material aspects, complete and correct and have been maintained in accordance with good business and accounting practices.

 

All of 12 Japan’s assets are reflected on its financial statements, and 12 Japan has no material liabilities, direct or indirect, matured or unmatured, contingent or otherwise which is not reflected on its financial statements.

 

Section 3.6Information. The information concerning 12 Japan set forth in this Agreement is complete and accurate in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements made, in light of the circumstances under which they were made, not misleading. 

 

Section 3.7Personal Property. 12 Japan possesses, and has good and marketable title of all property necessary for the continued operation of the business of 12 Japan as presently conducted and as represented to RETC. All such property is used in the business of 12 Japan. All such property is in reasonably good operating condition (normal wear and tear excepted), and is reasonably fit for the purposes for which such property is presently used. All material equipment, furniture, fixtures and other tangible personal property and assets owned or leased by 12 Japan and its subsidiaries is owned by 12 Japan or its subsidiaries free and clear of all liens, security interests, charges, encumbrances, and other adverse claims. 

 

Section 3.8Intellectual Property. 12 Japan represents and warrants that all trademarks and trademark applications, and all patents and patent applications, as set forth in Schedule 3.8, and any trade secrets, and “know-how” held relating to business of 12 Japan, and all other intangible assets, in 12 Japan’s possession or that may be reasonably acquired by 12 Japan any other proprietary information and trade secrets relating to the business of 12 Japan (collectively the “Intellectual Property”) shall remain the intellectual property of 12 Japan as of the date of Closing of this Agreement and that 12 Japan shall take any steps reasonable to assign or otherwise transfer any Intellectual Property right to RETC, as necessary to protect RETC’s rights to the same. Further, 12 Japan owns, free and clear of any encumbrance, or has the valid right to sell all Intellectual Property used by 12 Japan in its business, as currently conducted. 12 Japan represents that it has not received any written complaint, claim or notice alleging any such infringement, violation or misappropriation. Additionally, 12 Japan has taken reasonable precautions (i) to protect its rights in its Intellectual Property and (ii) to maintain the confidentiality of its trade secrets, know-how and other confidential Intellectual Property, related to the business and to 12 Japan’s knowledge, there have been no acts or omissions by the managers, members, employees and agents of 12 Japan, the result of which would be to materially compromise the rights of 12 Japan to apply for or enforce appropriate legal protection of 12 Japan’s Intellectual Property. 

Section 3.9Material Contracts and Transactions. Schedule 3.9 attached hereto lists each material contract, agreement, license, permit, arrangement, commitment, instrument or contract to which 12 Japan or any of its subsidiaries is a party (each, a “Contract”). Each Contract is in full force and effect, and there exists no material breach or violation of or default by 12 Japan or any of its subsidiaries under any Contract, or any event that with notice or the lapse of time, or both, will create a material breach or violation thereof or default under any Contract by 12 Japan or any of its subsidiaries. The continuation, validity, and effectiveness each Contract will in no way be affected by the consummation of the Transaction or any of the transactions contemplated in this Agreement. There exists no actual or threatened termination, cancellation, or limitation of, or any amendment, modification, or change to any Contract. 

 

Section 3.10Subsidiaries. Except as set forth on Schedule 3.10,12 Japan does not have any subsidiaries or agreements of any nature to acquire any subsidiary or to acquire or lease any other business operations. Each subsidiary of 12 Japan is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has the requisite corporate power and authority to own, lease and to carry on its business as now being conducted. Each subsidiary of 12 Japan is duly qualified to do business and is in good standing as a corporation in each of the jurisdictions in which 12 Japan owns property, leases property, does business, or is otherwise required to do so, where the failure to be so qualified would have a material adverse effect on the business of 12 Japan and its subsidiaries taken as a whole. 12 Japan owns all of the shares of each subsidiary of 12 Japan and there are no outstanding options, warrants, subscriptions, conversion rights, or other rights, agreements, or commitments obligating any subsidiary of 12 Japan to issue any additional common shares of such subsidiary, or any other securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire from any subsidiary of 12 Japan any shares of such subsidiary. 

 

Section 3.11Absence of Certain Changes or Events. As of the date of this Agreement, (a) there has not been any material adverse change in the business, operations, properties, assets, or condition (financial or otherwise) of 12 Japan; and (b) 12 Japan has not: (i) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its shares; (ii) made any material change in its method of management, operation or accounting; (iii) entered into any other material transaction other than in the ordinary course of its business; or (iv) made any increase in or adoption of any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement made to, for, or with its officers, directors, or employees. 

 

Section 3.12Litigation and Proceedings. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of 12 Japan after reasonable investigation, threatened by or against 12 Japan or affecting 12 Japan or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. 12 Japan does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality. 

  

Section 3.13Compliance with Laws and Regulations. To the best of its knowledge, 12 Japan has complied with all applicable statutes and regulations, except to the extent that noncompliance would not materially and adversely affect the business, operations, properties, assets, or condition of 12 Japan or except to the extent that noncompliance would not result in the occurrence of any material liability for 12 Japan. This compliance includes, but is not limited to, the filing of all reports to date with relevant authorities. 

 

Section 3.14Approval of Agreement. The Board of Directors of 12 Japan has authorized the execution and delivery of this Agreement by 12 Japan and has approved this Agreement and the transactions contemplated hereby. 

 

Section 3.15Valid Obligation. This Agreement and all agreements and other documents executed by 12 Japan in connection herewith constitute the valid and binding obligation of 12 Japan, enforceable in accordance with its or their terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought. 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF 12 JAPAN SHAREHOLDERS

 

The 12 Japan Shareholders hereby severally and not jointly represents and warrants to RETC:

 

Section 4.1Authority. The 12 Japan Shareholders have the right, power, authority and capacity to execute and deliver this Agreement to which such 12 Japan Shareholders are a party, to consummate the transactions contemplated by this Agreement, and to perform such 12 Japan Shareholder’s obligations under this Agreement. This Agreement has been duly and validly authorized and approved, executed and delivered by the 12 Japan Shareholders. Assuming this Agreement has been duly and validly authorized, executed and delivered by the parties thereto other than such 12 Japan Shareholders, this Agreement is duly authorized, executed and delivered by the 12 Japan Shareholders and constitutes the legal, valid and binding obligations of the 12 Japan Shareholders, enforceable against the 12 Japan Shareholders in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally. 

  

Section 4.2No Conflict. Neither the execution or delivery by the 12 Japan Shareholders of this Agreement to which the 12 Japan Shareholders are a party nor the consummation or performance by the 12 Japan Shareholders of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the organizational documents of the 12 Japan Shareholders; (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which any of the 12 Japan Shareholders are a party or by which the properties or assets of the 12 Japan Shareholders is bound; or (c) contravene, conflict with, or result in a violation of, any law or order to which any of the 12 Japan Shareholders, or any of the properties or assets of the 12 Japan Shareholders, may be subject. 

 

Section 4.3Litigation. There is no pending Action against the 12 Japan Shareholders that involves the 12 Japan Shares or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement or the business of 12 Japan and, to the knowledge of the 12 Japan Shareholders, no such Action has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such Action. 

  

Section 4.4Ownership of Shares. The 12 Japan Shareholders are the record and beneficial owners of the 12 Japan Shares. The 12 Japan Shareholder are not the record or beneficial owners of any other shares of 12 Japan. The 12 Japan Shareholders have and shall transfer at the Closing, good and marketable title to the 12 Japan Shares, free and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever, excepting only restrictions on future transfers imposed by applicable law. 

 

Section 4.5Pre-emptive Rights. The 12 Japan Shareholders have no pre-emptive rights or any other rights to acquire any shares of 12 Japan that have not been waived or exercised. 

 

ARTICLE V

 

CONDITIONS TO THE OBLIGATIONS OF 12 JAPAN AND THE 12 JAPAN SHAREHOLDERS

 

The obligations of 12 Japan to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by 12 Japan or the 12 Japan Shareholders, as the case may be, in their sole discretion:

 

Section 5.1Representations and Warranties of RETC. All representations and warranties made by RETC in this Agreement shall be true and correct in all material respects on and as of the Closing Date. 

 

Section 5.2Agreements and Covenants. RETC shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with on or prior to the Closing Date. 

 

Section 5.3Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement shall be in full force and effect on the Closing Date. 

 

Section 5.4No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, which declares this Agreement invalid in any respect or prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of RETC shall be in effect; and no action or proceeding before any court or governmental or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person or entity, which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement. 

 

Section 5.5Obligations Prior to Closing. RETC must have caused the following to occur prior to Closing:  

 

A.RETC shall, at Closing, have caused the cancellation of Five Million (5,000,000) shares of RETC restricted Common Stock and shall facilitate the cancellation of Five Hundred Thousand (500,000) shares of RETC Series A Preferred Stock. Collectively, such shares shall be cancelled and returned to authorized but unissued status; and,  

 

B.RETC shall deliver the following documents to 12 Japan: (i) share certificates evidencing the RETC Shares registered in the name of the 12 Japan Shareholder; (ii) this Agreement duly executed; (iii) such other documents as 12 Japan or the 12 Japan Shareholder may reasonably request for the purpose of evidencing the accuracy of any of the representations and warranties of RETC, evidencing the performance of, or compliance by RETC with any covenant or obligation required to be performed or complied with by RETC, evidencing the satisfaction of any condition referred to in this Article V, or otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement.  

 

Section 5.6 No Material Adverse Effect. There shall not have been any event, occurrence or development that has resulted in or could result in a Material Adverse Effect on or with respect to RETC. 

 

Section 5.7Employment Agreements. RETC will have received from 12 Japan copies of all agreements or arrangements that evidence the employment of all of the hourly and salaried employees of 12 Japan as set forth on Schedule 5.7 attached hereto, which constitute all of the employees reasonably necessary to operate the business of 12 Japan substantially as presently operated. 

 

ARTICLE VI

 

CONDITIONS TO THE OBLIGATIONS OF RETC

 

The obligations of RETC to consummate the transactions contemplated by this Agreement are subject to the fulfillment, at or before the Closing Date, of the following conditions, any one or more of which may be waived by RETC in its sole discretion:

 

Section 6.1Representations and Warranties of 12 Japan and the 12 Japan Shareholder. All representations and warranties made by 12 Japan and the 12 Japan Shareholder on behalf of themselves individually in this Agreement shall be true and correct on and as of the Closing Date. 

 

Section 6.2Approval by Majority Consent. The holders of at least a majority (51%) of the outstanding shares of common stock of 12 Japan must approve this Agreement by written consent prior to the Closing Date.  

 

Section 6.3Agreements and Covenants. 12 Japan and the 12 Japan Shareholder shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by each of them on or prior to the Closing Date. 

 

Section 6.4Consents and Approvals. All consents, waivers, authorizations and approvals of any governmental or regulatory authority, domestic or foreign, and of any other person, firm or corporation, required in connection with the execution, delivery and performance of this Agreement, shall have been duly obtained and shall be in full force and effect on the Closing Date. 

 

Section 6.5No Violation of Orders. No preliminary or permanent injunction or other order issued by any court or other governmental or regulatory authority, domestic or foreign, nor any statute, rule, regulation, decree or executive order promulgated or enacted by any government or governmental or regulatory authority, domestic or foreign, that declares this Agreement invalid or unenforceable in any respect or which prevents the consummation of the transactions contemplated hereby, or which materially and adversely affects the assets, properties, operations, prospects, net income or financial condition of 12 Japan shall be in effect; and no action or proceeding before any court or government or regulatory authority, domestic or foreign, shall have been instituted or threatened by any government or governmental or regulatory authority, domestic or foreign, or by any other person or entity, which seeks to prevent or delay the consummation of the transactions contemplated by this Agreement or which challenges the validity or enforceability of this Agreement. 

Section 6.6Documents. 12 Japan and the 12 Japan Shareholder must deliver to RETC at the Closing: 

 

A.  share certificates evidencing the number of 12 Japan Shares, along with executed share transfer forms transferring such 12 Japan Shares to RETC; 

 

B.this Agreement to which the 12 Japan and the 12 Japan Shareholder are each a party, duly executed; and 

 

C. such other documents as RETC may reasonably request for the purpose of (i) evidencing the accuracy of any of the representations and warranties of 12 Japan and the 12 Japan Shareholder, (ii) evidencing the performance of, or compliance by 12 Japan and the 12 Japan Shareholder with, any covenant or obligation required to be performed or complied with by 12 Japan and the 12 Japan Shareholder, as the case may be, (iii) evidencing the satisfaction of any condition referred to in this Article VI, or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement. 

 

Section 6.7No Claim Regarding Stock Ownership or Consideration. There must not have been made or threatened by any person, any claim asserting that such person (a) is the holder of, or has the right to acquire or to obtain beneficial ownership of the 12 Japan Shares, or any other stock, voting, equity, or ownership interest in, 12 Japan, or (b) is entitled to all or any portion of the RETC Shares. 

 

ARTICLE VII

 

SURVIVAL AND INDEMNIFICATION

 

Section 7.1Survival of Provisions. The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall expire on the first day of the three-year anniversary of the Closing Date (the “Survival Period”). The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations. 

 

Section 7.2Indemnification. 

 

A.Indemnification Obligations in favor of RETC. From and after the Closing Date until the expiration of the Survival Period, 12 Japan shall reimburse and hold harmless RETC and its shareholders (such person and their heirs, executors, administrators, agents, successors and assigns is referred to herein as a “RETC Indemnified Party”) against and in respect of any and all damages, losses, settlement payments, in respect of deficiencies, liabilities, costs, expenses and claims suffered, sustained, incurred or required to be paid by such RETC Indemnified Party, and any and all actions, suits, claims, or legal, administrative, arbitration, governmental or other procedures or investigation against any RETC Indemnified Party, which arises or results from a third-party claim brought against a RETC Indemnified Party to the extent based on a breach of the representations and warranties with respect to the business, operations or assets of 12 Japan. All claims of RETC pursuant to this Section 7.2 shall be brought by RETC on behalf of RETC and those Persons who were stockholders of RETC immediately prior to the Closing Date. In no event shall any such indemnification payments exceed $50,000 in the aggregate from 12 Japan. No claim for indemnification may be brought under this Section 7.2(A) unless all claims for indemnification, in the aggregate, total more than $10,000. 

 

B.Indemnification Obligations in favor of 12 Japan and the 12 Japan Shareholder. From and after the Closing Date until the expiration of the Survival Period, RETC and the RETC shareholders shall indemnify and hold harmless 12 Japan, the 12 Japan Shareholder, and his respective officers, directors, agents, attorneys and employees, and each person, if any, who controls or may “control” (within the meaning of the Securities Act) any of the forgoing persons or entities (each a “12 Japan Indemnified Person”) from and against any and all losses, costs, damages, liabilities and expenses arising from claims, demands, actions, causes of action, including, without limitation, legal fees (collectively, “Damages”) arising out of: (i) any breach of representation or warranty made by RETC in this Agreement and in any certificate delivered by RETC pursuant to this Agreement; (ii) any breach by RETC of any covenant, obligation or other agreement made by RETC in this Agreement; and (iii) a third-party claim based on any acts or omissions by RETC. In no event shall any such indemnification payments exceed $50,000 in the aggregate from RETC. No claim for indemnification may be brought under this Section 7.2(B) unless all claims for indemnification, in the aggregate, total more than $10,000. 

ARTICLE VIII

 

MISCELLANEOUS PROVISIONS

 

Section 8.1Successors and Assigns. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns; provided that no party shall assign or delegate any of the obligations created under this Agreement without the prior written consent of the other parties. 

 

Section 8.2Fees and Expenses. Except as otherwise expressly provided in this Agreement, all legal and other fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by each Party, as incurred respectively. 

 

Section 8.3Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been given or made if in writing and delivered personally or 7 days after being sent by registered or certified mail (postage prepaid, return receipt requested) to the parties at the addresses set forth in the Preamble of this Agreement, or to such other persons or at such other addresses as shall be furnished by any party by like notice to the others, and such notice or communication shall be deemed to have been given or made as of the date so delivered or mailed. No change in any of such addresses shall be effective insofar as notices under this Section 8.3 are concerned unless notice of such change shall have been given to such other party hereto as provided in this Section 8.3. 

 

Section 8.4Entire Agreement. This Agreement, together with the exhibits hereto, represents the entire agreement and understanding of the parties with reference to the transactions set forth herein and no representations or warranties have been made in connection with this Agreement other than those expressly set forth herein or in the exhibits, certificates and other documents delivered in accordance herewith. This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating to the subject matter of this Agreement and all prior drafts of this Agreement, all of which are merged into this Agreement. No prior drafts of this Agreement and no words or phrases from any such prior drafts shall be admissible into evidence in any action or suit involving this Agreement. 

 

Section 8.5Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible so as to be valid and enforceable. 

 

Section 8.6Titles and Headings. The Article and Section headings contained in this Agreement are solely for convenience of reference and shall not affect the meaning or interpretation of this Agreement or of any term or provision hereof. 

 

Section 8.7Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. Fax and PDF copies shall be considered originals for all purposes. 

 

Section 8.8Convenience of Forum; Consent to Jurisdiction. The parties to this Agreement, acting for themselves and for their respective successors and assigns, without regard to domicile, citizenship or residence, hereby expressly and irrevocably elect as the sole judicial forum for the adjudication of any matters arising under or in connection with this Agreement, and consent and subject themselves to the jurisdiction of, the courts of the State of Nevada, and/or the U.S. District Court for Nevada, in respect of any matter arising under this Agreement. Service of process, notices and demands of such courts may be made upon any party to this Agreement by personal service at any place where it may be found or giving notice to such party as provided in Section 8.3. 

 

Section 8.9Enforcement of the Agreement. The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereto, this being in addition to any other remedy to which they are entitled at law or in equity. 

 

Section 8.10Governing Law. This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the State of Nevada without giving effect to the choice of law provisions thereof. 

 

Section 8.11Amendments and Waivers. Except as otherwise provided herein, no amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the parties hereto. No waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any such prior or subsequent occurrence. 

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

 

 

12 RETECH CORPORATION

 

 

Per: /s/ Angelo Ponzetta 

 Name: Angelo Ponzetta 

Title: President and Chief Executive Officer

  

 

12 JAPAN LIMITED

 

 

Per: /s/Angelo Ponzetta 

 Name: Angelo Ponzetta 

Title: Director

 

12 JAPAN LIMITED SHAREHOLDERS

 

 

Per: /s/ Angelo Ponzetta  

 Name: Angelo Ponzetta 

 

 

Per: /s/ Daniele Monteverde 

 Name: Daniele Monteverde 

 

 

Per: /s/ Micquel Robles 

 Name: Santos Torres LLC by Miguel Robles 

DISCLOSURE SCHEDULE

to the

SHARE EXCHANGE AGREEMENT 

By and Among

12 RETECH CORPORATION, 

12 JAPAN LIMITED, 

AND 

THE SHAREHOLDERS OF 12 JAPAN LIMITED

 

These Disclosure Schedules have been prepared pursuant to the Share Exchange Agreement (the “Agreement”) by and among 12 RETECH CORPORATION, a Nevada corporation (“RETC”), 12 JAPAN LIMITED (“12 Japan”), and the individual shareholders of 12 Japan. Except as otherwise defined herein, capitalized terms used herein will have the same meaning given to them in the Share Exchange Agreement. Schedule and paragraph numbers herein correspond to the Section and Subsection numbering in applicable Article of the Share Exchange Agreement. Section and Subsection headings contained herein are included for purposes of identifying the relevant disclosures and for the convenience of the reader and are not intended to supplement or modify the meaning of the disclosures in any way. 

 

 

 

SCHEDULE 3.4

DIRECTORS AND OFFICERS OF 12 JAPAN LIMITED

 

Angelo Ponzetta:Director 

Daniele Monteverde:Director  

SCHEDULE 3.8

INTELLECTUAL PROPERTY

 

	Country:

	Application #:

	Description:

	Filing Date:

	  

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

SCHEDULE 3.9

MATERIAL CONTRACTS

 

	 

	With:

	Dated:

	Material Terms/Description:

	1. 

	TechFirm Inc. Japan

	Nov 24, 2016

	Joint Collaboration for the distribution of 12 USXS.

	2. 

	 

	 

	 

	3. 

	 

	 

	 

SCHEDULE 3.10

SUBSIDIARIES OF 12 JAPAN

SCHEDULE 5.7

12 JAPAN EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

 

As of the date of this Agreement, the following hourly and salaried employees of 12 Japan are reasonably necessary to operate the business of 12 Japan as substantially presently operated:

 

	 

	Name of Party

	Date of Agreement 

	1. 

	Mamoru Wakimoto

	June 8, 2016

	2. 

	Shohei Murata

	May 27, 2016msft-ex103_878.htm

 

Exhibit 10.3

MICROSOFT CORPORATION

1999 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS

(amendments approved by Shareholders November 19, 2008)

	
 
	
1.
	
Purpose

The purpose of the Microsoft Corporation 1999 Stock Plan for Non-Employee Directors (the "Plan") is to attract and retain the services of experienced and knowledgeable independent directors of Microsoft Corporation (the "Corporation") for the benefit of the Corporation and its stockholders and to provide additional incentive for such directors to continue to work for the best interests of the Corporation and its stockholders through continuing ownership of its common stock.

	
 
	
2.
	
Shares Subject to the Plan

The total number of shares of common stock of the Corporation ("Shares") for which Awards (as defined in Section 4) may be granted under the Plan shall not exceed 3,550,214 in the aggregate, subject to adjustment in accordance with Section 12 hereof.  Within the foregoing limitation, Shares underlying Awards that have been granted pursuant to the Plan but which Awards have lapsed or otherwise terminated without delivery of Shares shall become available for the grant of additional Awards.  

	
 
	
3.
	
Administration of Plan

The Board of Directors of the Corporation shall administer the Plan.  The Board may delegate responsibility for administration of the Plan to a Board committee (the "Committee") composed solely of two or more directors, each of whom is a "Non-Employee Director" (as that term is defined in Rule 16b-3(b) promulgated by the Securities and Exchange Commission pursuant to its authority under the Securities Exchange Act of 1934 (the “Exchange Act”)).  The Board or the Committee, as the case may be, shall have the power to construe the Plan and the terms of the Shares, to determine all questions arising thereunder, and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable; provided that, no consent of an Awardee is necessary where the modification, amendment, acceleration, or deferral in the reasonable judgment of the Board confers a benefit upon the Awardee, or is made pursuant to an adjustment in accordance with Section 12.  References to the "Board" in this Plan shall be deemed to refer to either the Board or the Committee, whichever is appropriate in the context in which the word is used.

	
 
	
4.
	
Discretionary Award Grants

Pursuant to this Plan, the Board may grant in its discretion an Award (as defined in this Section 4) to any person who is elected a director of the Corporation, and (b) is not an employee of the Corporation or any subsidiary of the Corporation.  An “Award” may be either (i) a grant of a stock option (an “Option”) or (ii) a grant of Shares or of a right to receive Shares or their cash equivalent (or both) (a “Stock Award”).  No Awards under this Section 4 may be granted to any individual director with respect to more than 20,000 shares for any fiscal year of the Corporation.  No director shall have any claim or right to be granted an Award under this Plan.  Having received an Award under this Plan shall not give a director any right to receive any other Award under this Plan and the Board may determine that any or all director(s) are not eligible to receive an Award under this Plan for an indefinite period or for a specified year or years

	
 
	
5.
	
Award Agreement

Each Award granted under the Plan shall be evidenced by an Award agreement (the "Agreement") duly executed on behalf of the Corporation and by the director to whom such Award is granted, which Agreements may but need not be identical and which shall (a) comply with and be subject to the terms and conditions of the Plan and (b) provide that the director agrees to continue to serve as a director of the Corporation during the term for which he or she was elected.  Each Award shall vest over a period of not less than three (3) years from the date of grant, except with respect to Awards that are granted in lieu of cash compensation.  Any Agreement may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the Board.  No Award shall be deemed granted within the meaning of the Plan and no purported grant of any Award shall be effective, until such Agreement shall have been duly executed on behalf of the Corporation and the director to whom the Award is to be granted.

 

 

	
 
	
6.
	
Stock Awards

	
 
	
(a)
	
Stock Awards may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan.  After the Board determines that it will offer a Stock Award, it will advise the director in writing or electronically, by means of an Agreement, of the terms, conditions and restrictions, including vesting, if any, related to the offer, including the number of Shares that the director shall be entitled to receive or purchase, the price to be paid, if any, and, if applicable, the time within which the director must accept the offer.  The offer shall be accepted by execution of an Agreement or as otherwise directed by the Board. 

	
 
	
(b)
	
Unless the Board determines otherwise, the Agreement shall provide for the forfeiture of the non-vested Shares underlying such Stock Award upon the director ceasing to be a director for any reason, including death.  To the extent that the director purchased the Shares granted under such Stock Award and any such Shares remain non-vested at the time the director ceases to be a director, the cessation of director status shall cause an immediate sale of such non-vested Shares to the Company at the original price per Share paid by the director.

	
 
	
7.
	
Options 

	
 
	
(a)
	
The Board shall set the exercise price for an Option granted pursuant to Section 4 of the Plan in its discretion.

	
 
	
(b)
	
Each Option shall expire no more than ten years from the date of the granting thereof, but shall be subject to earlier termination as follows:

	
 
	
(i)
	
In the event of the death of an Option holder, the Option granted to such person may be exercised to the extent exercisable on the date of death, within the earlier of (x) 180 days after the date of death of such person and (y) the date on which the Option expires by its terms, by the estate of such person, or by any person or persons who acquired the right to exercise such Option by will or by the laws of descent and distribution.  

	
 
	
(ii)
	
In the event that an Option holder ceases to be a director of the Corporation, other than by reason of his or her death, an Option granted to such person may be exercised, to the extent exercisable on the date such person ceases to be a director, within the earlier of (x) 180 days after the date such person ceases to be a director and (y) the date on which the Option expires by its terms.

	
 
	
8.
	
Vesting and Exercise of Awards

	
 
	
(a)
	
The Board shall set the vesting schedule for Awards granted pursuant to Section 4 of the Plan in its discretion.

	
 
	
(b)
	
To the extent that the right to exercise an Option has vested and is in effect, the Option may be exercised from time to time, by giving written notice, signed by the person or persons exercising the Option, to the Corporation, stating the number of whole Shares with respect to which the Option is being exercised, accompanied by payment in full for such Shares, which payment may be in whole or in part in shares of the common stock of the Corporation already owned by the person or persons exercising the Option, valued at fair market value on the date of payment.  For purposes hereof, the fair market value of the Shares covered by an Option shall be the closing price of the Shares on the applicable date as reported in the National Market List of the National Association of Securities Dealers Inc. Automated Quotation System or on the principal national securities exchange on which the Shares are then listed for trading.

	
 
	
(c)
	
Upon exercise of the Option, delivery of a certificate for fully paid and non-assessable Shares shall be made at the principal office of the Corporation in the State of Washington to the person or persons exercising the Option as soon as practicable (but in no event more than 30 days) after the date of receipt of the notice of exercise by the Corporation, or at such time, place, and manner as may be agreed upon by the Corporation and the person or persons exercising the Option.

	
 
	
(d)
	
Upon a Stock Award becoming fully vested and nonforfeitable, delivery of a certificate for fully paid and non-assessable Shares shall be made at the principal office of the Corporation in the State of Washington to the person to whom the Stock Award was granted as soon as practicable (but in no event more than 30 days) after the date on which the Stock Award becomes fully vested and nonforfeitable, or at such time, place, and manner as may be agreed upon by the Corporation and the holder of the Stock Award.

	
 
	
(e)
	
Prior to issuance of the Shares in connection with an Award, the director receiving the Award may request the Corporation to withhold and pay on the director’s behalf any federal, state, and local income tax obligations applicable to such Award by having the Corporation withhold Shares having a value equal to the amount requested to be withheld, and any Award under the Plan may permit that such withholding tax 

 

 

	
 
		
be paid by having the Corporation withhold Shares having a value equal to the amount requested to be withheld.  The value of the Shares to be withheld shall equal the fair market value of the Shares on the day the Award is exercised or granted, as applicable. The right of a director to dispose of Shares to the Corporation in satisfaction of withholding tax obligations shall be deemed to be approved as part of the initial grant of an Award, unless thereafter rescinded, and shall otherwise be made in compliance with Rule 16b-3 and other applicable regulations.

	
 
	
9.
	
Merger, Consolidation, Sale of Assets, etc., Resulting in a Change in Control

	
 
	
(a)
	
In the event of a Change in Control (as hereinafter defined), notwithstanding the vesting provisions contained in the Agreement granting an Option or Stock Award, as applicable, to a director pursuant to this Plan, such Option shall become fully exercisable or Stock Award shall become fully vested and nonforfeitable if, within one year of such Change in Control, such director shall cease for any reason to be a member of the Board.  For purposes hereof, a Change in Control of the Corporation shall be deemed to have occurred if (i) there shall be consummated (x) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the common stock of the Corporation would be converted into cash, securities, or other property, other than a merger of the Corporation in which the holders of the common stock of the Corporation immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation; or (ii) the stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation; or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than William H. Gates III, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 30% or more of the Corporation's outstanding common stock; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Corporation's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

	
 
	
(b)
	
Any exercise of an Option permitted pursuant to this Section 9 shall be made within 180 days of the related director's termination as a director of the Corporation.

	
 
	
10.
	
Awards Not Transferable

An Award granted pursuant to the Plan may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the holder of an Award, only by the holder; provided that the Board may permit further transferability, on a general or specific basis, and may impose conditions and limitations on any permitted transferability. 

	
 
	
11.
	
No Rights as Stockholder Until Holder

Neither the recipient of an Award under the Plan nor his successors in interest shall have any rights as a stockholder of the Corporation with respect to any Shares subject to an Award granted to such person until such person becomes a holder of record of such Shares.

	
 
	
12.
	
Adjustments Upon Changes in Capitalization or Merger

If any change is made to the Shares by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Shares as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and/or the price per Share covered by outstanding Awards under the Plan, and (iii) the limits on size of awards permitted pursuant to Section 4 of the Plan.  The Board may also make adjustments described in (i)-(iii) of the previous sentence in the event of any distribution of assets to shareholders other than a normal cash dividend.  In determining adjustments to be made under this Section 12, the Board may take into account such factors as it deems appropriate, including (i) the restrictions of applicable law, (ii) the potential tax consequences of an adjustment, and (iii) the possibility that some Awardees might receive an adjustment and a distribution or other unintended benefit, and in light of such factors or circumstances may make adjustments that are not uniform or proportionate among outstanding Awards, modify vesting dates, defer the delivery of stock certificates or make other equitable adjustments.  Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.  Adjustments, if any, and any determinations or interpretations, including any determination of whether a distribution is other than a 

 

 

normal cash dividend, made by the Board shall be final, binding and conclusive.  For purposes of this Section 12, conversion of any convertible securities of the Corporation shall not be deemed to have been effected “without receipt of consideration.”  Except as expressly provided herein, no issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of common stock subject to an Award.

In the event of the proposed dissolution or liquidation of the Corporation, an outstanding Award (i.e., an Option that has not been exercised or a Stock Award that has not become fully vested and nonforfeitable) will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.  The Board may, in the exercise of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Option holder the right to exercise an Option as to all or any part of the stock covered by such Option, including Shares as to which the Option would not otherwise be exercisable.  In the event of a proposed sale of all or substantially all of the assets of the Corporation, or the merger of the Corporation with or into another corporation, each Award shall be assumed or an equivalent Award shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless such successor corporation does not agree to assume each and every Award or to substitute an equivalent Award, in which case the Board shall, in lieu of such assumption or substitution, provide for the immediate full vesting of any Stock Awards not yet fully vested, or provide for the Option holder to have the right to exercise such Option as to all of the stock covered by such Option, including Shares as to which such Option would not otherwise be exercisable, or both.  If the Board makes an Option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board shall notify the Option holder that the Option shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such period.

	
 
	
13.
	
Restrictions on Issue of Shares

Notwithstanding anything in this Plan to the contrary, the Corporation may delay the issuance of Shares covered by any Award and the delivery of a certificate for such Shares until one of the following conditions shall be satisfied:

	
 
	
(a)
	
the Shares to be issued in connection with the grant or exercise of an Award, as applicable, are at the time of the issue of such Shares by the Corporation effectively registered under applicable federal securities laws now in force or hereafter amended; or

	
 
	
(b)
	
counsel for the Corporation shall have given an opinion, which opinion shall not be unreasonably conditioned or withheld, that such Shares are exempt from registration under applicable federal securities laws now in force or hereafter amended.

It is intended that all grants of Stock Awards and exercises of Options shall be effective.  Accordingly, the Corporation shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Corporation shall be under no obligation to cause a registration statement or a post-effective amendment to any registration statement to be prepared at its expense solely for the purpose of covering the issuance of Shares in connection with the grant or exercise of any Award.

	
 
	
14.
	
Purchase for Investment

Unless the Shares to be issued in connection with the grant or exercise of an Award granted under the Plan have been effectively registered under the Securities Act of 1933 as now in force or hereafter amended, the Corporation shall be under no obligation to issue any Shares covered by any Award unless the person or persons to whom the Shares are to be issued, in whole or in part, shall give a written representation and undertaking to the Corporation, which is satisfactory in form and scope to counsel to the Corporation and upon which, in the opinion of such counsel, the Corporation may reasonably rely, that he or she is acquiring the shares issued or transferred to him or her for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such Shares, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if Shares are issued or transferred without such registration a legend to this effect may be placed upon the certificates representing the Shares.

	
 
	
15.
	
Expenses of the Plan

All costs and expenses of the adoption and administration of the Plan shall be borne by the Corporation and none of such expenses shall be charged to any director.

 

 

	
 
	
16.
	
Termination and Amendment of Plan

Unless sooner terminated as herein provided, the Plan shall terminate on January 1, 2019.  The Board may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that stockholder approval will be required for any amendment that will (a) increase the total number of shares as to which Awards may be granted under the Plan, (b) modify the class of persons eligible to receive Awards, or (c) otherwise require stockholder approval under any applicable law or regulation.   In addition, the Board shall not amend the provisions in the Plan regarding the amount, pricing, and timing for grants pursuant to this Plan more than once every six months, other than to comport with changes in the Internal Revenue Code, or the rules there under.  Except as otherwise provided in Sections 3 and 12, termination or any modification or amendment of the Plan shall not, without the consent of an Award holder, affect his or her rights under an Award previously granted to him or her.

All share numbers in the Plan reflect the 2-for-1 stock split effected February 2003.  The number of shares in Section 2 has also been increased to reflect the adjustments related to the special dividend payable December 2, 2004 to shareholders of record on November 17, 2004.

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