Document:

Exhibit101ExecutiveMgntAICPRegulations

Administrative Regulations for the
Executive Management Annual Incentive Compensation Program
under the United States Steel Corporation 2010 Annual Incentive Compensation Plan
As amended by the Compensation & Organization Committee on January 27, 2014

		
	1.
	Administration.  The Compensation & Organization Committee (the “Committee”) shall administer the Annual Incentive Compensation Program (the “Program”) under and pursuant to the authority provided in the Board of Directors’ April 27, 2010 delegation to the Committee and Section 3 of the United States Steel Corporation 2010 Annual Incentive Compensation Plan (the “Plan”).

		
	A.
	Definitions.  Unless otherwise defined herein, capitalized terms used herein shall have the meanings set forth in the Plan.

		
	B.
	Compensation consultant.  The Committee may engage a compensation consultant to assess the competitiveness of various target Award levels and advise the Committee.

		
	2.
	Participation/Eligibility.  All management employees of the Corporation, its Subsidiaries and affiliates are eligible to participate in the Program upon designation by the Committee, in the case of Covered Employees, or, in the case of other management employees, upon designation by Senior Officers (“Participants”). 

		
	A.
	Executive Management.  All Executive Management employees of USS, its subsidiaries and affiliates designated via written notice as participants by the Committee are eligible to participate (“Eligible Employees” or “Participants”).

		
	B.
	New Participants.  A Participant who was not a Participant on the first day of the Performance Period may, subject to the Committee’s discretion, become a Participant during the Performance Period participating on a pro rata basis for the remaining portion of the period in which such Participant first becomes eligible to participate but shall be ineligible to participate in this Program for any portion of a year during which the Participant participates in any other cash incentive or bonus plan or program; provided, however, that a Covered Employee (as defined in Section 162(m) of the Internal Revenue Code) may so participate only if he or she becomes a Participant effective not later than 90 days after the beginning of the Performance Period.

		
	C.
	Rights.  No Participant or other employee shall have any claim to be granted an Award under the Program, and nothing contained in the Program or any Award Agreement shall confer upon any Participant any right to continue in the employ of the Corporation, its Subsidiaries or affiliates or interfere in any way with the right of the Corporation, its Subsidiaries or affiliates to terminate a Participant's employment at any time.

    

		
	3.
	Performance Period.

		
	A.
	Calendar year.  Unless otherwise determined by the Committee at the commencement of each Performance Period, each such Performance Period shall be a calendar year.

		
	4.
	Award Pool.

		
	A.
	Amount of the Total Award Pool.  The amount of the total award pool (the “Total Award Pool”) shall be established by the Committee, considering the Individual Incentive Targets, during the first 90 days of the Performance Period.  The funding of the Total Award Pool will be dependent on the achievement of the Funding Goal, which shall also be established by the Committee during the first 90 days of the Performance Period in conformance with Section 162(m) of the Internal Revenue Code.  Unless otherwise determined by the Committee, the Funding Goal shall be a level of Shipment Tons as defined in Section 5 below.

		
	B.
	Funding the Pool.  If the Funding Goal is achieved, the Total Award Pool will be funded at the level established by the Committee with respect to the degree of attainment of the Funding Goal.  The actual award paid to each Participant from the Total Award Pool will be determined by reference to the Individual Incentive Target, and by applying the Incentive Award Calculation Formula, as described below, for each Participant; provided further that any forfeitures or reductions, whether through exercise of downward discretion or otherwise, shall not be permitted to result in any increase in the amount of any Individual Incentive Target or Incentive Award payable to any other Participant.

Should the Company fail to meet the Funding Goal, the Total Award Pool shall not be funded and no awards shall be made under the Plan for the Performance Period.  

		
	5.
	Performance Goal Setting.  

		
	A.
	Corporate Performance Goals.  The Corporate Performance Goals for the Performance Period shall be the targets assigned to each of the Corporate performance measures, which shall be set by the Committee during the first 90 days of the Performance Period.  Unless otherwise determined by the Committee at the beginning of the relevant Performance Period, the Corporate performance measures will be the following objective measures:

		
	(1)
	Segment Income and Total Income.  Segment Income shall mean, for the Performance Period, income from operations (including minority interests) for each business unit (reportable segments and other businesses).  Total 

2

Income shall mean, for the Performance Period, total consolidated income from operations (including minority interests).

Income from operations (including minority interests) for each business unit (reportable segment) and in total shall mean segment income (loss) and total income (loss) from operations as reported in the notes to the consolidated financial statements of United States Steel Corporation for the Performance Period.  

		
	(2)
	Cash Flow.  Cash Flow shall mean, for the Performance Period, earnings before interest, taxes, depreciation, depletion, and amortization (EBITDA) for consolidated worldwide operations (including minority interests), less consolidated worldwide capital spending and net investments in affiliates, plus the change in consolidated worldwide restricted cash.

EBITDA for consolidated worldwide operations (including minority interests) shall mean income from operations as reported in the consolidated statements of operations of United States Steel Corporation, plus or minus the effect of items not allocated to segments (excluding postretirement benefit expenses) as disclosed in the notes to the consolidated financial statements of United States Steel Corporation, plus depreciation, depletion and amortization as reported in the consolidated statements of cash flows of United States Steel Corporation.  

Consolidated worldwide capital spending, net investments in affiliates, and change in consolidated worldwide restricted cash shall mean those amounts reported on the consolidated statements of cash flows of United States Steel Corporation.

		
	(3)
	Shipment Tons.  Shipment Tons shall mean the number of worldwide net tons of steel products shipped for the Performance Period, determined consistently with external reporting practices.  It is intended that the target for this measure and its related performance calculation be consistent with the target and performance calculations for Segment Income, Total Income and Cash Flow, including the Business Plan Target Segment Income, Total Income and Cash Flow, such that, to the extent an asset is excluded for any reason from the target calculation for Business Plan Target Segment Income, Total Income and Cash Flow, the corresponding shipment tons, if any, are to be excluded from the Shipment Tons target and performance calculations, and, if an asset is included in the target calculation for the Business Plan Target Segment Income, Total Income and Cash Flow, the corresponding shipment tons, if any, are to be included in the Shipment Tons target and performance calculations.  Subject to the foregoing, this performance measure is to be adjusted in accordance with relevant provisions of Section 5.B.(3)(a) of these Regulations.

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	(4)
	Safety Performance.  Safety Performance, for target and actual performance purposes, shall mean the number of serious injury cases occurring during the Performance Period involving the represented and non-represented employees at the properties and operations of United States Steel Corporation and its subsidiaries as contemplated by the targets set by the Committee at the beginning of the Performance Period.  A serious injury case shall mean a work-related injury that prevents an employee from returning to work for 31 or more calendar days, or an employee work-related fatality.  Whether an employee injury or fatality is “work-related,” or not, will be determined by the Corporation’s top safety officer consistent with OSHA guidelines.

 
		
	B.
	Adjustments.  

		
	(1)
	Adjustment to Segment Income, Total Income and Cash Flow Performance Goals.  The following adjustment provisions shall apply to  the Segment Income, Total Income and to the Cash Flow performance calculations (to the extent included in such amount):

		
	(a)
	exclude the gain or loss related to a business disposition or divestiture (whether or not completed during the Performance Period) and all amounts related to a permanent facility shutdown/closure, and assume that the business achieved (for the time period following such disposition, divestiture or shutdown/closure) the performance level included in the Business Plan Target Segment Income, Total Income or Business Plan Target Cash Flow (as defined below);

		
	(b)
	exclude the gain or loss related to an asset sale not made in the ordinary course of business; 

		
	(c)
	exclude all amounts related to long-lived asset impairments; 

		
	(d)
	exclude all amounts related to an acquisition or startup (defined as the startup of a previously closed facility or the startup of a new facility);

		
	(e)
	exclude all amounts related to workforce reductions and other restructuring charges;

		
	(f)
	except for retiree benefits, exclude amounts not allocated to segments; and

		
	(g)
	exclude all amounts related to changes in accounting standards and changes in law that affect reported results; 

provided, however, none of the above adjustments shall be made to the Segment Income, Total Income or Cash Flow calculations to the extent the events or occurrences relating to the adjustments are recognized and/or contemplated in the Corporation’s Business Plan Target Segment Income, Total Income or Business Plan Target Cash Flow, as approved by the Committee within the first 90 days of the year represented by the relevant Performance Period;

4

provided, further, no adjustment pursuant to any adjustment category, identified as (a) through (g), above, shall be made to the Segment Income, Total Income or Cash Flow calculations to the extent the total adjustment for such category is less than $10 million;

provided, further, all the above adjustments shall be calculated in accordance with generally accepted accounting principles at the time of calculation to the extent the nature of the adjustment is addressed therein;

provided, further, none of the above adjustments shall be made to the Segment Income, Total Income or Cash Flow calculations to the extent the relevant data is not available;

provided, further, the Segment Income, Total Income and Cash Flow calculations, including all adjustments thereto, shall be determined at the time the Committee makes its award decisions and in accordance with the reporting requirements applicable to the Corporation’s reports on Forms 10-K and 10-Q; and

provided, further, the above adjustments shall not limit the Committee’s authority to exercise additional downward discretion in calculating any related award.

		
	(2)
	Adjustments between Segments.  Adjustments to the actual Segment Income results shall be made for the purposes of measuring the achievement of Performance Goals in the event that business decisions are made during the year that are not anticipated in the Business Plan Target Segment Income and that disadvantage the results of one business Segment in favor of another Segment for the benefit of overall Corporate objectives.  The amount of the adjustment will be equal to the impact on the Segment recognizing the detriment; 

provided, however, no adjustment shall be made to the Segment Income calculation to the extent the total adjustment related to the business decision is less than $5 million;

provided, further, the positive adjustment to the reporting Segment which recognized the detriment in the actual results due to the business decision shall be offset by a corresponding negative adjustment to the reporting Segment which recognized the benefit;

provided, further, all adjustment between Segments will be determined by the Vice President & Controller and will be reported to the Committee at the time final performance results are approved; and 

5

provided, further, the adjustments between Segments shall not limit the Committee’s authority to exercise additional downward discretion in calculating any related award.

		
	(3)
	Adjustments to Shipment Tons Performance Goal.  Consistent with Section 5.B.(1) hereof, all adjustments to the Funding Goal performance measure, whether identified in this section or not, are conditioned upon the requirement that such adjustments can be accomplished in conformance with Section 162(m) of the Internal Revenue Code.

		
	(a)
	Shipment Tons

Consistent with the adjustment provisions for Segment Income, Total Income and Cash Flow, intending that operating performance shall track with financial performance for the operating assets, the Shipment Tons performance measure shall be adjusted:
		
	i.
	in the event of an acquisition or startup (as defined in Section 5.B.(1).(d)) to exclude from the target and from the related performance calculation, all shipment tons, to the extent all relevant data is available, relating to such business or production facility for the Performance Period during which the acquisition or startup occurs:

		
	ii.
	in the case of a business disposition, divestiture, or permanent facility shutdown/closure, the Shipment Tons performance calculation shall be adjusted, to the extent all relevant data is available, to assume that the business achieved (for the time period following such disposition, divestiture or shutdown/closure) the shipment performance level contemplated in the Business Plan Target Segment Income, Total Income and Cash Flow;

provided, however, that the foregoing adjustments will not pertain to the Shipment Tons performance measure to the extent and for the period such acquisition, startup, disposition, divestiture, or permanent facility shutdown/closure is recognized and/or contemplated in the shipment tons making up the Business Plan Target Segment Income, Total Income and Cash Flow.

		
	C.
	Setting of Individual Incentive Targets and Payout Scales.  The Individual Incentive Target, defined as a percent of base salary (expressed for the Participant, grade level and/or position), and the Payout Scales for all levels of Performance Goals shall be set by the Committee during the first 90 days of each Performance Period, except that the Individual Incentive Target for an employee who becomes 

6

a new Participant under Section 2.B. of these Regulations after the first 90 days of the Performance Period shall be established when the new Participant first becomes eligible to participate in this Program.  The Individual Incentive Target shall be calculated by reference to the Participant’s highest base salary in each grade level and/or position during the relevant portions of the Performance Period.  The Payout Scale applied to all Performance Goals based on the actual performance achieved will determine the payout percent applied in the Incentive Award Calculation Formula under section 6, subject to negative adjustment by the Committee in its discretion and to the fixed maximum amount set forth in the Plan.

		
	D.
	Assignment of Segment Income Performance Goal to Participants.  The Committee shall assign to each Participant a Segment Income Performance Goal representing the reportable segment’s performance for which the Participant is responsible for driving.  Participants who are “corporate staff” executives responsible for multiple segments shall be assigned a Weighted Segment Income Performance Goal, which shall be determined by the Committee and reflect a relative weighting of the segments for which the Participant is responsible.  Certain Participants (i.e. the Chief Executive Officer) may be assigned a Total Income Performance Goal.

Should a Participant’s responsibilities change during the Performance Period with respect to the segments that are supported, the Committee shall assign the established Segment, Weighted Segment, or Total Income Performance Goal to apply for the portion of the Performance Period related to the period for which the new responsibilities are effective.  

		
	E.
	Individual Performance.  Individual Performance relative to individual performance goals as specified in the Participant’s goal plan for the Performance Period will be assessed for each Participant by the Chief Executive Officer with input from the Participant’s direct manager following the end of the Performance Period.  The Chief Executive Officer’s Individual Performance will be assessed by Committee with input from the full Board of Directors.  The Individual Performance assessment may impact the Participant’s award payout as set forth under the Incentive Award Calculation Formula.  The assessment shall be quantified as a percentage between 50% (representing individual performance at a level of “needs improvement”) and 130% (representing individual performance at a level of “far exceeds expectations”), with 100% representing a level of “meets expectations”.  The assessment of Individual Performance does not preclude the Committee from exercising downward discretion and/or determining that no award should be paid to a Participant for a Performance Period.

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	6.
	Incentive Award Calculation Formula.

		
	A.
	Relative weighting.  Unless otherwise determined by the Committee when establishing the Performance Goals, the relative weighting assigned to each of the performance measures shall be as follows:

		
	(1)
	Segment Income/Total Income.  Segment Income/Total Income shall be weighted at 60% of the Total Corporate Payout Percent.

		
	(2)
	Cash Flow.  Cash Flow shall be weighted at 40% of the Total Corporate Payout Percent.

		
	(3)
	Individual Performance.  Individual Performance shall be applied as a modifier to the Total Corporate Payout Percent, which is the sum of the weighted Segment Income/Total Income and Cash Flow payout percentages.  

		
	(4)
	Safety.  Safety shall add 5% of the Individual Incentive Target value if the Safety goal is met.  If the Safety goal is not met, there shall be no impact to the award calculation.

  
		
	B.
	Calculated award.  The calculated award for each Participant shall be determined by adding the product of the Individual Incentive Target and the Total Corporate Payout Percent, modified for Individual Performance, to the product of the Individual Incentive Target and the Safety payout percent, as illustrated below:

(Individual Incentive Target x Total Corporate Payout Percent x Individual Performance modifier) + (Individual Incentive Target x Safety Performance)

		
	C.
	Maximum award level.  The maximum award level shall be 233% of the Individual Incentive Target value with achievement of the highest level of performance for the Segment Income, Total Income, Cash Flow, Individual Performance, and Safety Goals, further subject to the individual per‐employee maximum set forth in the Plan.

		
	7.
	Performance Measurement Mechanics.

		
	A.
	Payout determination.  

		
	(1)
	Evaluation.  The Committee shall evaluate actual Corporate performance against the Corporate Performance Goals for the Performance Period during the first 60 days following the end of the relevant Performance Period.  

		
	(2)
	Calculation.

		
	(a)
	Rounding Performance Calculations.  The calculation of actual performance for each performance measure shall be rounded to the nearest decimal place consistent with the number of decimal places 

8

approved by the Committee at the time it set the relevant target, rounding up in the case of 5 or more and rounding down in the case of 4 or less.

		
	(b)
	Interpolation.  Interpolation will be used to determine an Incentive Award for performance that correlates to performance between the pre-determined Segment Income, Total Income and Cash Flow Performance Goals.  The interpolated payout percentages for Segment Income, Total Income and Cash Flow shall be rounded  independently to the nearest whole percentage point, rounding up in the case of 5 or more and rounding down in the case of 4 or less.

		
	(c)
	Maximum award.  No one Participant may receive more than $7 million in Incentive Awards for any one calendar year under this Program.

		
	(d)
	Adjustments.  At the commencement of each Performance Period, the Committee may also determine that unusual items or certain specified events or occurrences will be excluded from, or considered in connection with, any or all of the calculations for such Performance Period; provided, however, that all such adjustments must satisfy the requirements of Section 162(m) of the Internal Revenue Code.

		
	(3)
	Negative discretion.  The Committee retains negative discretion to reduce any and all Incentive Awards to amounts below the amounts that would be payable as a result of performance measured against the Performance Goals, provided that any exercise of downward discretion shall not be permitted to result in any increase in the amount of any Individual Incentive Target or Incentive Award payable to any other Participant.  The Committee may not increase Incentive Awards above the amount payable as a result of performance measured against the Performance Goals.

		
	B.
	Form of Payout.  

		
	(1)
	Cash and/or Common Stock.  The Committee may determine to pay the awards in the form of cash or common stock, or any combination thereof, which determination may be made on a non-uniform basis among Participants.  

		
	(2)
	Common Stock Awards.  The determination to pay awards in the form of common stock shall be a determination to satisfy the award through shares available under the 2005 Stock Incentive Plan (or any successor plan thereto), subject to the terms and conditions of such plan, and provided that the performance period under this Program shall also count toward any 

9

minimum performance period required for an unrestricted grant of shares under such plan.

		
	(3)
	Award Unit Determination Procedure.  If the Committee determines to pay all or a portion of an award in the form of common stock, the value of such award, or portion thereof, under this Program shall be converted into a number of shares of common stock by dividing (i) the value of such award, or portion thereof, by (ii) the Common Stock Unit Value, which is to be determined as follows:

		
	(a)
	Common Stock Unit Value.  The Common Stock Unit Value shall be equal to the Fair Market Value (as defined in the 2005 Stock Incentive Plan, or any successor plan thereto) of a share of common stock on the date of award (Date of Award).  The Date of Award shall be established prospectively by the Committee at the time it determines the award, with the goal of setting the date close in proximity to the related payroll processing date for awards under the Plan.  Unless otherwise established by the Committee, the Date of Award shall be the day prior to the date the Corporation files its report on Form 10-K with the Securities and Exchange Commission for the period ending on the last date of the relevant Performance Period.

		
	(4)
	Netting of Common Stock Shares.  To the extent permitted under the 2005 Stock Incentive Plan and unless otherwise determined by the Committee or an election with respect to a different medium of payment is offered to and elected by a Participant in accordance with procedures approved by the Company, the shares of common stock delivered in connection with any common stock award under this Program shall be net of any tax withholding obligation.

		
	8.
	Timing of Payments.  Unless otherwise determined by the Committee in its discretion, payment of Annual Incentive Compensation, if any, under this Program with respect to any Performance Period will be paid, following the Committee’s determination of such Incentive Award, within 5 business days following the date the Corporation files its report on Form 10-K with the Securities and Exchange Commission for the period ending on the last date of relevant Performance Period; provided, however, the payment of any such award shall be paid on or before March 15 of the year following the end of the relevant calendar year Performance Period and as provided in Section 6 of the Plan.

		
	9.
	Termination of Employment.  The following provisions apply in the case of a Participant’s termination of employment during the Performance Period:

		
	A.
	Retirement, Death, or Disability.  Following a Participant’s Retirement, Death or Disability, a prorated value of such Participant’s target Award may be awarded 

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by the Committee based upon the number of complete months worked during the Performance Period; provided that (i) such Award is calculated and delivered following the relevant Performance Period in accordance with the terms of the Plan, (ii) the relevant Performance Goals are achieved, (iii) the Participant is employed for at least six (6) months during the Performance Period and (iv) the Committee retains its negative discretion with respect to such awards. 

		
	(1)
	Retirement.  Retirement shall mean, for all purposes under the Program, the applicable Participant’s termination of employment that constitutes a separation from service under Section 409A of the Code after having satisfied the age, service and/or other requirements necessary to commence an immediate pension under either: (i) the applicable defined benefit pension plan for the Participant’s home country, regardless of whether the Participant is a participant in such pension plan, or (ii) in the case of a home country for which there is no applicable defined benefit plan, the applicable local law or regulation; provided, however, such term does not include, unless the Committee consents with knowledge of the specific facts, retirement under circumstances in which the Participant accepts employment with a company that owns, or is owned by, a business that competes with the Corporation, or its Subsidiaries or affiliates.  Further, to the extent necessary under applicable local law, Retirement may have such other meaning adopted by the Committee and set forth in the applicable Award notice. 

		
	(2)
	Disability.  Disability shall be as defined in the Plan.

		
	B.
	Resignation, Early Retirement and Other Termination.  Following a Participant’s Resignation, Early Retirement or other termination, all pending Incentive Awards are forfeited.

		
	(1)
	Early Retirement.  Early Retirement shall mean a retirement other than a Retirement. 

		
	10.
	Forfeiture and Repayment.  The Committee may determine that an Incentive Award shall be forfeited and/or any value received from the Incentive Award shall be repaid to the Corporation pursuant to any recoupment policies, rules or regulations in effect at the time of the Incentive Award.

11exh_101.htm

Exhibit 10.1

 

 

MOBETIZE CORP.

2014 STOCK OPTION PLAN

 

 

This 2014 Stock Option Plan (the "Plan") provides for the grant of options to acquire common shares (the "Common Shares") in the capital of Mobetize Corp., a corporation formed under the laws of the State of Nevada (the "Corporation").  Stock options granted under this Plan that qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") are referred to in this Plan as "Incentive Stock Options" and stock options that do not qualify under Section 422 of the Code are referred to as "Non-Qualified Stock Options".  Incentive Stock Options and Non-Qualified Stock Options granted under this Plan are collectively referred to as "Options".

 

	
1.

	
PURPOSE

 

1.1           The purpose of this Plan is to retain the services of valued key employees and consultants of the Corporation and such other persons as the Plan Administrator shall select in accordance with Section 3 below, and to encourage such persons to acquire a greater proprietary interest in the Corporation, thereby strengthening their incentive to achieve the objectives of the shareholders of the Corporation, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the Plan Administrator.

 

1.2           This Plan shall at all times be subject to all legal requirements relating to the administration of stock option plans, if any, under applicable corporate laws, applicable United States federal and state securities laws, the Code, the rules of any applicable stock exchange or stock quotation system, and the rules of any foreign jurisdiction applicable to Options granted to residents therein (collectively, the "Applicable Laws").

 

	
2.

	
ADMINISTRATION

 

2.1           This Plan shall be administered initially by the Board of Directors of the Corporation (the "Board"), except that the Board may, in its discretion, establish a committee composed of two (2) or more members of the Board or two (2) or more other persons to administer the Plan, which committee (the "Committee") may be an executive, compensation or other committee, including a separate committee especially created for this purpose.  The Board or, if applicable, the Committee is referred to herein as the "Plan Administrator".

 

2.2            If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Corporation wishes to grant Incentive Stock Options, then the Board shall consider in selecting the Plan Administrator and the membership of any Committee, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside directors" as contemplated by Section 162(m) of the Code, and (b) "Non-Employee Directors" as contemplated by Rule 16b-3 under the Exchange Act.

 

2.3           The Committee shall have the powers and authority vested in the Board hereunder (including the power and authority to interpret any provision of the Plan or of any Option).  The members of any such Committee shall serve at the pleasure of the Board.  A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee shall be taken by a majority of the members present.  Any action may be taken by a written instrument signed by all of the members of the Committee and any action so taken shall be fully effective as if it had been taken at a meeting.

 

  

 

  

2.4           Subject to the provisions of this Plan and any Applicable Laws, and with a view to effecting the purpose of the Plan, the Plan Administrator shall have sole authority, in its absolute discretion, to:

 

	
  

	
(a)

	
construe and interpret this Plan;

 

	
  

	
(b)

	
define the terms used in the Plan;

 

	
  

	
(c)

	
prescribe, amend and rescind the rules and regulations relating to this Plan;

 

	
  

	
(d)

	
correct any defect, supply any omission or reconcile any inconsistency in this Plan;

 

	
  

	
(e)

	
grant Options under this Plan;

 

	
  

	
(f)

	
determine the individuals to whom Options shall be granted under this Plan and whether the Option is granted as an Incentive Stock Option or a Non-Qualified Stock Option;

 

	
  

	
(g)

	
determine the time or times at which Options shall be granted under this Plan;

 

	
  

	
(h)

	
determine the number of Common Shares subject to each Option, the exercise price of each Option, the duration of each Option and the times at which each Option shall become exercisable;

 

	
  

	
(i)

	
determine all other terms and conditions of the Options; and

 

	
  

	
(j)

	
make all other determinations and interpretations necessary and advisable for the administration of the Plan.

 

2.5           All decisions, determinations and interpretations made by the Plan Administrator shall be binding and conclusive on all participants in the Plan and on their legal representatives, heirs and beneficiaries.

 

	
3.

	
ELIGIBILITY

 

3.1           Incentive Stock Options may be granted to any individual who, at the time the Option is granted, is an employee of the Corporation or any Related Corporation (as defined below) ("Employees").

 

3.2           Non-Qualified Stock Options may be granted to Employees and to such other persons who are not Employees as the Plan Administrator shall select, subject to any Applicable Laws.

 

  

-2-

  

3.3           Options may be granted in substitution for outstanding Options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization between such other corporation and the Corporation or any subsidiary of the Corporation.  Options also may be granted in exchange for outstanding Options.

 

3.4           Any person to whom an Option is granted under this Plan is referred to as an "Optionee".  Any person who is the owner of an Option is referred to as a "Holder".

 

3.5           As used in this Plan, the term "Related Corporation" shall mean any corporation (other than the Corporation) that is a "Parent Corporation" of the Corporation or "Subsidiary Corporation" of the Corporation, as those terms are defined in Sections 424(e) and 424(f), respectively, of the Code (or any successor provisions) and the regulations thereunder (as amended from time to time).

 

	
4.

	
STOCK

 

4.1           The Plan Administrator is authorized to grant Options to acquire up to a total of 3,000,000 Common Shares.  The number of Common Shares with respect to which Options may be granted hereunder is subject to adjustment as set forth in Section 5.1(m) hereof.  In the event that any outstanding Option expires or is terminated for any reason, the Common Shares allocable to the unexercised portion of such Option may again be subject to an Option granted to the same Optionee or to a different person eligible under Section 3 of this Plan; provided however, that any cancelled Options will be counted against the maximum number of shares with respect to which Options may be granted to any particular person as set forth in Section 3 hereof.

 

	
5.

	
TERMS AND CONDITIONS OF OPTIONS

 

5.1           Each Option granted under this Plan shall be evidenced by a written agreement approved by the Plan Administrator (each, an "Agreement").  Agreements may contain such provisions, not inconsistent with this Plan or any Applicable Laws, as the Plan Administrator in its discretion may deem advisable.  All Options also shall comply with the following requirements:

 

	
  

	
(a)

	
Number of Shares and Type of Option

 

Each Agreement shall state the number of Common Shares to which it pertains and whether the Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option; provided that:

 

	
  

	
(i)

	
the number of Common Shares that may be reserved pursuant to the exercise of Options granted to any person shall not exceed 5% of the issued and outstanding Common Shares of the Corporation;

 

	
  

	
(ii)

	
in the absence of action to the contrary by the Plan Administrator in connection with the grant of an Option, all Options shall be Non-Qualified Stock Options;

 

  

-3-

  

	
  

	
(iii)

	
the aggregate fair market value (determined at the Date of Grant, as defined below) of the Common Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (granted under this Plan and all other Incentive Stock Option plans of the Corporation, a Related Corporation or a predecessor corporation) shall not exceed U.S.$100,000, or such other limit as may be prescribed by the Code as it may be amended from time to time (the "Annual Limit"); and

 

	
  

	
(iv)

	
any portion of an Option which exceeds the Annual Limit shall not be void but rather shall be a Non-Qualified Stock Option.

 

	
  

	
(b)

	
Date of Grant

 

Each Agreement shall state the date the Plan Administrator has deemed to be the effective date of the Option for purposes of this Plan (the "Date of Grant").

 

	
  

	
(c)

	
Option Price

 

Each Agreement shall state the price per Common Share at which it is exercisable.  The Plan Administrator shall act in good faith to establish the exercise price in accordance with Applicable Laws; provided that:

 

	
  

	
(i)

	
the per share exercise price for an Incentive Stock Option or any Option granted to a "covered employee" as such term is defined for purposes of Section 162(m) of the Code shall not be less than the fair market value per Common Share at the Date of Grant as determined by the Plan Administrator in good faith;

 

	
  

	
(ii)

	
with respect to Incentive Stock Options granted to greater-than-ten percent (>10%) shareholders of the Corporation (as determined with reference to Section 424(d) of the Code), the exercise price per share shall not be less than one hundred ten percent (110%) of the fair market value per Common Share at the Date of Grant as determined by the Plan Administrator in good faith; and

 

	
  

	
(iii)

	
Options granted in substitution for outstanding options of another corporation in connection with the merger, consolidation, acquisition of property or stock or other reorganization involving such other corporation and the Corporation or any subsidiary of the Corporation may be granted with an exercise price equal to the exercise price for the substituted option of the other corporation, subject to any adjustment consistent with the terms of the transaction pursuant to which the substitution is to occur.

 

	
  

	
(d)

	
Duration of Options

 

  

-4-

  

At the time of the grant of the Option, the Plan Administrator shall designate, subject to Section 5.1(g) below, the expiration date of the Option, which date shall not be later than five (5) years from the Date of Grant; provided, that the expiration date of any Incentive Stock Option granted to a greater-than-ten percent (>10%) shareholder of the Corporation (as determined with reference to Section 424(d) of the Code) shall not be later than five (5) years from the Date of Grant.  In the absence of action to the contrary by the Plan Administrator in connection with the grant of a particular Option, and except in the case of Incentive Stock Options as described above, all Options granted under this Section 5 shall expire five (5) years from the Date of Grant.

 

	
  

	
(e)

	
Vesting Schedule

 

No Option shall be exercisable until it has vested.  The vesting schedule for each Option shall be specified by the Plan Administrator at the time of grant of the Option prior to the provision of services with respect to which such Option is granted.

 

The Plan Administrator may specify a vesting schedule for all or any portion of an Option based on the achievement of performance objectives established in advance of the commencement by the Optionee of services related to the achievement of the performance objectives.  Performance objectives shall be expressed in terms of objective criteria, including but not limited to, one or more of the following:  return on equity, return on assets, share price, market share, sales, earnings per share, costs, net earnings, net worth, inventories, cash and cash equivalents, gross margin or the Corporation's performance relative to its internal business plan.  Performance objectives may be in respect of the performance of the Corporation as a whole (whether on a consolidated or unconsolidated basis), a Related Corporation, or a subdivision, operating unit, product or product line of either of the foregoing.  Performance objectives may be absolute or relative and may be expressed in terms of a progression or a range.  An Option that is exercisable (in full or in part) upon the achievement of one or more performance objectives may be exercised only following written notice to the Optionee and the Corporation by the Plan Administrator that the performance objective has been achieved.

 

	
  

	
(f)

	
Acceleration of Vesting

 

The vesting of one or more outstanding Options may be accelerated by the Plan Administrator at such times and in such amounts as it shall determine in its sole discretion.

 

	
  

	
(g)

	
Term of Option

 

	
  

	
(i)

	
Vested Options shall terminate, to the extent not previously exercised, upon the occurrence of the first of the following events:

 

	
  

	
A.

	
the expiration of the Option, as designated by the Plan Administrator in accordance with Section 5.1(d) above;

 

	
  

	
B.

	
the date of an Optionee's termination of employment or contractual relationship with the Corporation or any Related Corporation for cause (as determined by the Plan Administrator, acting reasonably);

 

  

-5-

  

	
  

	
C.

	
the expiration of three (3) months from the date of an Optionee's termination of employment or contractual relationship with the Corporation or any Related Corporation for any reason whatsoever other than cause, death or Disability (as defined below) unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option; or

 

	
  

	
D.

	
the expiration of one year (1) from termination of an Optionee's employment or contractual relationship by reason of death or Disability (as defined below) unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option.

 

	
  

	
(ii)

	
Notwithstanding Section 5.1(g)(i) above, any vested Options which have been granted to the Optionee in the Optionee's capacity as a director of the Corporation or any Related Corporation shall terminate upon the occurrence of the first of the following events:

 

	
  

	
A.

	
the event specified in Section 5.1(g)(i)A above;

 

	
  

	
B.

	
the event specified in Section 5.1(g)(i)D above; and

 

	
  

	
C.

	
the expiration of three (3) months from the date the Optionee ceases to serve as a director of the Corporation or Related Corporation, as the case may be unless, in the case of a Non-Qualified Stock Option, the exercise period is extended by the Plan Administrator until a date not later than the expiration date of the Option.

 

	
  

	
(iii)

	
Upon the death of an Optionee, any vested Options held by the Optionee shall be exercisable only by the person or persons to whom such Optionee's rights under such Option shall pass by the Optionee's will or by the laws of descent and distribution of the Optionee's domicile at the time of death and only until such Options terminate as provided above.

 

	
  

	
(iv)

	
For purposes of the Plan, unless otherwise defined in the Agreement, "Disability" shall mean medically determinable physical or mental impairment which has lasted or can be expected to last for a continuous period of not less than twelve (12) months or that can be expected to result in death.  The Plan Administrator shall determine whether an Optionee has incurred a Disability on the basis of medical evidence acceptable to the Plan Administrator.  Upon making a determination of Disability, the Plan Administrator shall, for purposes of the Plan, determine the date of an Optionee's termination of employment or contractual relationship.

 

  

-6-

  

	
  

	
(v)

	
Unless accelerated in accordance with Section 5.1(f) above, unvested Options shall terminate immediately upon termination of employment of the Optionee by the Corporation for any reason whatsoever, including death or Disability.

 

	
  

	
(vi)

	
For purposes of this Plan, transfer of employment between or among the Corporation and/or any Related Corporation shall not be deemed to constitute a termination of employment with the Corporation or any Related Corporation.  Employment shall be deemed to continue while the Optionee is on military leave, sick leave or other bona fide leave of absence (as determined by the Plan Administrator).  The foregoing notwithstanding, employment shall not be deemed to continue beyond the first ninety (90) days of such leave, unless the Optionee's re-employment rights are guaranteed by statute or by contract.

 

	
  

	
(h)

	
Exercise of Options

 

	
  

	
(i)

	
Options shall be exercisable, in full or in part, at any time after vesting, until termination.  If less than all of the Common Shares included in the vested portion of any Option are purchased, the remainder may be purchased at any subsequent time prior to the expiration of the Option term. Only whole Common Shares may be issued pursuant to an Option, and to the extent that an Option covers less than one (1) share, it is unexercisable.

 

	
  

	
(ii)

	
Options or portions thereof may be exercised by giving written notice to the Corporation, which notice shall specify the number of Common Shares to be purchased, and be accompanied by payment in the amount of the aggregate exercise price for the Common Shares so purchased, which payment shall be in the form specified in Section 5.1(i) below.  The Corporation shall not be obligated to issue, transfer or deliver a certificate representing Common Shares to the Holder of any Option, until provision has been made by the Holder, to the satisfaction of the Corporation, for the payment of the aggregate exercise price for all Common Shares for which the Option shall have been exercised and for satisfaction of any tax withholding obligations associated with such exercise.  During the lifetime of an Optionee, Options are exercisable only by the Optionee.

 

	
  

	
(i)

	
Payment upon Exercise of Option

 

Upon the exercise of any Option, the aggregate exercise price shall be paid to the Corporation in cash or by certified or cashier's check.  In addition, if pre-approved in writing by the Plan Administrator who may arbitrarily withhold consent, the Holder may pay for all or any portion of the aggregate exercise price by complying with one or more of the following alternatives:

 

  

-7-

  

	
  

	
(i)

	
by delivering a properly executed exercise notice together with irrevocable instructions to a broker promptly to sell or margin a sufficient portion of the Common Shares and deliver directly to the Corporation the amount of sale or margin loan proceeds to pay the exercise price; or

 

	
  

	
(ii)

	
by complying with any other payment mechanism approved by the Plan Administrator at the time of exercise.

 

	
  

	
(j)

	
No Rights as a Shareholder

 

A Holder shall have no rights as a shareholder of the Corporation with respect to any Common Shares covered by an Option until such Holder becomes a record holder of such Common Shares, irrespective of whether such Holder has given notice of exercise.  Subject to the provisions of Section 5.1(m) hereof, no rights shall accrue to a Holder and no adjustments shall be made on account of dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights declared on, or created in, the Common Shares for which the record date is prior to the date the Holder becomes a record holder of the Common Shares covered by the Option, irrespective of whether such Holder has given notice of exercise.

 

	
  

	
(k)

	
Non-transferability of Options

 

Options granted under this Plan and the rights and privileges conferred by this Plan may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will, by applicable laws of descent and distribution, and shall not be subject to execution, attachment or similar process.  Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of any right or privilege conferred by this Plan contrary to the provisions hereof, or upon the sale, levy or any attachment or similar process upon the rights and privileges conferred by this Plan, such Option shall thereupon terminate and become null and void.

 

	
  

	
(l)

	
Securities Regulation and Tax Withholding

 

	
  

	
(i)

	
Common Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Common Shares shall comply with all Applicable Laws, and such issuance shall be further subject to the approval of counsel for the Corporation with respect to such compliance, including the availability of an exemption from prospectus and registration requirements for the issuance and sale of such Common Shares.  The inability of the Corporation to obtain from any regulatory body the authority deemed by the Corporation to be necessary for the lawful issuance and sale of any Common Shares under this Plan, or the unavailability of an exemption from prospectus and registration requirements for the issuance and sale of any Common Shares under this Plan, shall relieve the Corporation of any liability with respect to the non-issuance or sale of such Common Shares.

 

  

-8-

  

	
  

	
(ii)

	
As a condition to the exercise of an Option, the Plan Administrator may require the Holder to represent and warrant in writing at the time of such exercise that the Common Shares are being purchased only for investment and without any then-present intention to sell or distribute such Common Shares.  If necessary under Applicable Laws, the Plan Administrator may cause a stop-transfer order against such Common Shares to be placed on the stock books and records of the Corporation, and a legend indicating that the Common Shares may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided stating that such transfer is not in violation of any Applicable Laws, may be stamped on the certificates representing such Common Shares in order to assure an exemption from registration.  The Plan Administrator also may require such other documentation as may from time to time be necessary to comply with applicable securities laws.  THE CORPORATION HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.

 

	
  

	
(iii)

	
The Holder shall pay to the Corporation by certified or cashier's check, promptly upon exercise of an Option or, if later, the date that the amount of such obligations becomes determinable, all applicable federal, state, local and foreign withholding taxes that the Plan Administrator, in its discretion, determines to result upon exercise of an Option or from a transfer or other disposition of Common Shares acquired upon exercise of an Option or otherwise related to an Option or Common Shares acquired in connection with an Option.  Upon approval of the Plan Administrator, a Holder may satisfy such obligation by complying with one or more of the following alternatives selected by the Plan Administrator:

 

	
  

	
A.

	
by delivering to the Corporation Common Shares previously held by such Holder or by the Corporation withholding Common Shares otherwise deliverable pursuant to the exercise of the Option, which Common Shares received or withheld shall have a fair market value at the date of exercise (as determined by the Plan Administrator) equal to any withholding tax obligations arising as a result of such exercise, transfer or other disposition; or

 

	
  

	
B.

	
by complying with any other payment mechanism approved by the Plan Administrator from time to time.

 

	
  

	
(iv)

	
The issuance, transfer or delivery of certificates representing Common Shares pursuant to the exercise of Options may be delayed, at the discretion of the Plan Administrator, until the Plan Administrator is satisfied that the applicable requirements of all Applicable Laws and the withholding provisions of the Code have been met and that the Holder has paid or otherwise satisfied any withholding tax obligation as described in Section 5.1(l)(iii) above.

 

  

-9-

  

	
  

	
(m)

	
Adjustments Upon Changes In Capitalization

 

	
  

	
(i)

	
The aggregate number and class of shares for which Options may be granted under this Plan, the number and class of shares covered by each outstanding Option, and the exercise price per share thereof (but not the total price), and each such Option, shall all be proportionately adjusted for any increase or decrease in the number of issued Common Shares of the Corporation resulting from:

 

	
  

	
A.

	
a subdivision or consolidation of Common Shares or any like capital adjustment, or

 

	
  

	
B.

	
the issuance of any Common Shares, or securities exchangeable for or convertible into Common Shares, to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend (other than the issue of Common Shares, or securities exchangeable for or convertible into Common Shares, to holders of Common Shares pursuant to their exercise of options to receive dividends in the form of Common Shares, or securities convertible into Common Shares, in lieu of dividends paid in the ordinary course on the Common Shares).

 

	
  

	
(ii)

	
Except as provided in Section 5.1(m)(iii) hereof, upon a merger (other than a merger of the Corporation in which the holders of Common Shares immediately prior to the merger have the same proportionate ownership of common shares in the surviving corporation immediately after the merger), consolidation, acquisition of property or stock, separation, reorganization (other than a mere re-incorporation or the creation of a holding Corporation) or liquidation of the Corporation, as a result of which the shareholders of the Corporation, receive cash, shares or other property in exchange for or in connection with their Common Shares, any Option granted hereunder shall terminate, but the Holder shall have the right to exercise such Holder's Option immediately prior to any such merger, consolidation, acquisition of property or shares, separation, reorganization or liquidation, and to be treated as a shareholder of record for the purposes thereof, to the extent the vesting requirements set forth in the Option agreement have been satisfied.

 

	
  

	
(iii)

	
If the shareholders of the Corporation receive shares in the capital of another corporation ("Exchange Shares") in exchange for their Common Shares in any transaction involving a merger (other than a merger of the Corporation in which the holders of Common Shares immediately prior to the merger have the same proportionate ownership of Common Shares in the surviving corporation immediately after the merger), consolidation, acquisition of property or shares, separation or reorganization (other than a mere re-incorporation or the creation of a holding Corporation), all Options granted hereunder shall be converted into options to purchase Exchange Shares unless the Corporation and the corporation issuing the Exchange Shares, in their sole discretion, determine that any or all such Options granted hereunder shall not be converted into options to purchase Exchange Shares but instead shall terminate in accordance with, and subject to the Holder's right to exercise the Holder's Options pursuant to, the provisions of Section 5.1(m)(ii).  The amount and price of converted options shall be determined by adjusting the amount and price of the Options granted hereunder in the same proportion as used for determining the number of Exchange Shares the holders of the Common Shares receive in such merger, consolidation, acquisition or property or stock, separation or reorganization.  Unless accelerated by the Board, the vesting schedule set forth in the option agreement shall continue to apply to the options granted for the Exchange Shares.

 

  

-10-

  

	
  

	
(iv)

	
In the event of any adjustment in the number of Common Shares covered by any Option, any fractional shares resulting from such adjustment shall be disregarded and each such Option shall cover only the number of full shares resulting from such adjustment.

 

	
  

	
(v)

	
All adjustments pursuant to Section 5.1(m) shall be made by the Plan Administrator, and its determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.

 

	
  

	
(vi)

	
The grant of an Option shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge, consolidate or dissolve, to liquidate or to sell or transfer all or any part of its business or assets.

 

	
6.

	
EFFECTIVE DATE; AMENDMENT; SHAREHOLDER APPROVAL

 

6.1           Options may be granted by the Plan Administrator from time to time on or after the date on which this Plan is adopted by the Board (the "Effective Date").

 

6.2           Unless sooner terminated by the Board, this Plan shall terminate on the tenth anniversary of the Effective Date.  No Option may be granted after such termination or during any suspension of this Plan.

 

6.3           Any Incentive Stock Options granted by the Plan Administrator prior to the ratification of this Plan by the shareholders of the Corporation shall be granted subject to approval of this Plan by the holders of a majority of the Corporation's outstanding voting shares, passed without meeting pursuant the Nevada General Corporation Law or by voting either in person or by proxy at a duly held shareholders' meeting within twelve (12) months before or after the Effective Date.  If such shareholder approval is sought and not obtained, all Incentive Stock Options granted prior thereto and thereafter shall be considered Non-Qualified Stock Options and any Options granted to Covered Employees will not be eligible for the exclusion set forth in Section 162(m) of the Code with respect to the deductibility by the Corporation of certain compensation.

 

  

-11-

  

	
7.

	
NO OBLIGATIONS TO EXERCISE OPTION

 

7.1           The grant of an Option shall impose no obligation upon the Optionee to exercise such Option.

 

	
8.

	
NO RIGHT TO OPTIONS OR TO EMPLOYMENT

 

8.1           Whether or not any Options are to be granted under this Plan shall be exclusively within the discretion of the Plan Administrator, and nothing contained in this Plan shall be construed as giving any person any right to participate under this Plan.  The grant of an Option shall in no way constitute any form of agreement or understanding binding on the Corporation or any Related Corporation, express or implied, that the Corporation or any Related Corporation will employ or contract with an Optionee for any length of time, nor shall it interfere in any way with the Corporation's or, where applicable, a Related Corporation's right to terminate Optionee's employment at any time, which right is hereby reserved.

 

	
9.

	
APPLICATION OF FUNDS

 

9.1           The proceeds received by the Corporation from the sale of Common Shares issued upon the exercise of Options shall be used for general corporate purposes, unless otherwise directed by the Board.

 

	
10.

	
INDEMNIFICATION OF PLAN ADMINISTRATOR

 

10.1          In addition to all other rights of indemnification they may have as members of the Board, members of the Plan Administrator shall be indemnified by the Corporation for all reasonable expenses and liabilities of any type or nature, including attorneys' fees, incurred in connection with any action, suit or proceeding to which they or any of them are a party by reason of, or in connection with, this Plan or any Option granted under this Plan, and against all amounts paid by them in settlement thereof (provided that such settlement is approved by independent legal counsel selected by the Corporation), except to the extent that such expenses relate to matters for which it is adjudged that such Plan Administrator member is liable for willful misconduct; provided, that within fifteen (15) days after the institution of any such action, suit or proceeding, the Plan Administrator member involved therein shall, in writing, notify the Corporation of such action, suit or proceeding, so that the Corporation may have the opportunity to make appropriate arrangements to prosecute or defend the same.

 

  

-12-

  

	
11.

	
AMENDMENT OF PLAN

 

11.1          The Plan Administrator may, at any time, modify, amend or terminate this Plan or modify or amend Options granted under this Plan, including, without limitation, such modifications or amendments as are necessary to maintain compliance with the Applicable Laws.  The Plan Administrator may condition the effectiveness of any such amendment on the receipt of shareholder approval at such time and in such manner as the Plan Administrator may consider necessary for the Corporation to comply with or to avail the Corporation and/or the Optionees of the benefits of any securities, tax, market listing or other administrative or regulatory requirements.

 

Effective Date: January 27, 2014

 

 

 

 

 

 

 

 

 

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