Document:

Q4 2014 10-K Exhibit 10.2

EXHIBIT 10.2

FIRST FINANCIAL BANCORP. 
AMENDED AND RESTATED KEY MANAGEMENT SEVERANCE PLAN

I.    Preamble and Statement of Purpose . 

The purpose of this Plan is to assure First Financial Bancorp. (“First Financial”) and its subsidiaries (First Financial, together with its subsidiaries, the “Corporation”) of the continued dedication, loyalty, and service of, and the availability of objective advice and counsel from, key employees of the Corporation notwithstanding the possibility, threat or occurrence of a bid or other action to take over control of the Corporation. 

In the event First Financial receives any proposals from a third party concerning a possible business combination with First Financial, or acquisition of First Financial’s equity securities or a substantial portion of its assets, the Board of Directors of First Financial (the “Board”) believes that it would be imperative that the Board, the Corporation and its senior management be able to rely on the Corporation’s key employees to continue in their positions and be available for advice, if requested, without concern that those individuals might be distracted by the personal uncertainties and risks created by such a proposal, or be influenced to consider other employment opportunities or prospects because of such uncertainties or risks. 

Should First Financial receive any such proposals, in addition to their regular duties, such key employees, in light of their experience and knowledge gained within that portion of the business in which they are principally engaged, may be called upon to assist in the assessment of proposals, advise senior management and the Board as to whether such proposals would be in the best interest of First Financial and its shareholders, and take such other actions as the Board might determine to be appropriate. 

This Plan amends and supersedes the First Financial Bancorp Key Management Severance Plan that was first effective on March 23, 2006 and subsequently amended on February 28, 2008.

II.    Eligible Executives . 

Eligible employees are those key employees of the Corporation who are from time to time designated by the Chief Executive Officer of First Financial (the “CEO”) as eligible to participate in this Plan.   The CEO shall provide the Compensation Committee of the Board (the “Compensation Committee”) a list of those individuals designated as eligible as updated from time-to-time.

Each eligible employee shall become a Participant in the Plan upon his or her execution of a letter agreement in the form, or substantially in the form, of Exhibit A, attached to and incorporated in this Plan (the “Letter Agreement”). The executed Letter Agreement shall constitute the Participant’s agreement to the terms and conditions of participation in this Plan and shall set forth the amount of the Lump Sum Cash Payment under Section 3.2.2, the length of the Coverage Period for welfare benefit continuation under Section 3.2.3, and such other terms and conditions as the Compensation Committee may determine applicable to the Participant. 

A Participant who is no longer employed by the Corporation shall cease to be a Participant in the Plan, unless the Participant’s employment ceases (i) within twelve (12) months after the Effective Date (as defined in Section 3.1.3) or (ii) during any period of time when the Board has knowledge that any third person has taken steps reasonably calculated to effect a Change of Control (as defined in Section 3.1.2) until, in the opinion of the Board, the third party has abandoned or terminated its efforts to effect a Change of Control. Any decision by the Board that, in its opinion, a third party has or has not taken steps reasonably calculated to effect a Change of Control, or that, in its opinion, the third person has abandoned or terminated its efforts to effect a Change of Control, shall be conclusive and binding on the Participants. 

III.    Plan Provisions . 

3.1 Definitions. The following terms, as used in this Plan with capitalized first letters, shall have the meanings as provided in this Section 3.1: 
 
3.1.1. “Cause”. “Cause” means (i) the Participant’s willful and continued failure substantially to perform the duties of his or her position (other than as a result of disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the “Code”), or as a result of termination by the Participant for Good Reason) after written notice to the Participant by the CEO or his/her designate specifying such failure, provided that such “Cause” shall have been found by the CEO in consultation with legal counsel after at least ten (10) days’ written notice to the Participant specifying the failure on the part of the Participant and after an opportunity for the Participant to be heard at a meeting with the CEO or his/her designate; (ii) any willful act or omission by the Participant constituting dishonesty, fraud or other malfeasance, and any act or omission by the Participant constituting immoral conduct, which in any such case is injurious to the financial condition or business reputation of the Corporation; or (iii) the Participant’s indictment of a felony under the laws of the United States or any state thereof or any other jurisdiction in which the Corporation conducts business. For purposes of this definition, no act or failure to act shall be deemed “willful” unless effected by the Participant not in good faith and without a reasonable belief that such action or failure to act was in or not opposed to the best interests of the Corporation. 

3.1.2. “Change of Control”. “Change of Control” has the meaning given such term in the Corporation’s 2009 Executive Stock Plan, as in effect on the effective date of this Plan.   

3.1.3. “Effective Date”. “Effective Date” means the date on which a Change of Control occurs. In the event of a Change of Control occurring within twelve (12) months after a prior Change of Control, “Effective Date” shall mean, for a Participant whose employment terminates prior to the subsequent Change of Control, the date on which the prior Change of Control occurs, and for all other Participants, the date on which the subsequent Change of Control occurs. Notwithstanding anything in this Plan to the contrary, if a Participant’s employment with the Corporation had terminated prior to the date on which the Change of Control occurred, and if it is reasonably demonstrated by the Participant to the Board that such termination of employment either was at the request of a third party who had taken steps reasonably calculated to effect the Change of Control or otherwise arose in connection with or in anticipation of the Change of Control, then, for all purposes of this Plan, “Effective Date” shall mean, with respect to such Participant only, the date immediately prior to the date of such termination of employment. 

3.1.4. “Good Reason”. “Good Reason” means, without the Participant’s consent, (i) a material reduction in the Participant’s base compensation, as in effect immediately preceding the Effective Date; (iii) relocation of the Participant’s principal workplace to a location which is more than fifty (50) miles from the Participant’s principal workplace on the Effective Date; or (iii) any material failure by First 

Financial to comply with and satisfy the requirements of Section 3.5.6, provided that the successor shall have received at least ten (10) days’ prior written notice from First Financial or the Participant of the requirements of Section 3.5.6, and shall have failed to remedy such material failure within thirty (30) days after receipt of such notice. For purposes of clauses (i), (ii) or (iii) of the preceding sentence, an isolated and inadvertent action not taken in bad faith and which is remedied by First Financial promptly after receipt of notice thereof given by the Participant shall be excluded. For the purposes of clauses (i) and (ii), Good Reason shall not exist unless the Participant notifies the Corporation of the existence of the condition specified under the applicable clause no later than ninety (90) days after the initial existence of any such condition, and the Corporation fails to remedy such condition within thirty (30) days after receipt of such notice. Notwithstanding the foregoing, Good Reason shall not exist unless the termination of employment from the Corporation occurs no later than one year following the initial existence of any of the conditions provided under this Section 3.1.4. 

3.2 Benefits. 

3.2.1. Triggering Event. In the event the Participant’s employment with the Corporation is terminated without Cause by the Corporation, or for Good Reason by the Participant, on or within twelve (12) months after the Effective Date, First Financial shall (in addition to any compensation or benefits to which the Participant may otherwise be entitled under any other agreement, plan or arrangement with the Corporation, other than amounts excluded by Section 3.5.2) make the payments and provide the benefits to the Participant as specified under Sections 3.2.2 through 3.2.6, subject to Section 3.4 and 3.5.2. Solely for purposes of this Section 3.2.1, a Participant’s employment with the Corporation will be deemed to have terminated on the earlier of the date the Participant’s employment with the Corporation ceases or the date that written notice of any such termination is received by the Participant or by the Corporation, as the case may be, even though the parties may agree in connection therewith that the Participant’s employment with the Corporation will continue for a specified period thereafter. The failure by the Participant or the Corporation to set forth in any such notice sufficient facts or circumstances showing Good Reason or Cause, as the case may be, shall not waive any right of the Participant or the Corporation or preclude either party from asserting such facts or circumstances in the enforcement of any such right. 

3.2.2. Lump Sum Cash Payment. On or within 30 days after the Participant’s termination of employment from the Corporation, First Financial shall pay to the Participant as compensation for services rendered to the Corporation a Lump Sum Cash Payment (subject to any applicable payroll or other taxes required to be withheld) equal to the sum of (a) (12) months (such period to be determined by the CEO) of the Participant’s then current annual base salary; and (b) accrued but unused vacation allotment for the current year,  such amount determined in accordance with the Letter Agreement. 

3.2.3. Continued Employee Benefits.  If the Corporation’s severance plan of general applicability as in effect on Participant’s date of termination provides for continued payment by the Corporation of all or a portion of the cost of the premiums for continuation coverage under the Corporation’s health care plan pursuant to Section 4980B of the Code (“COBRA”) and if the Participant timely and properly elects such coverage, then the Corporation shall pay on the Participant’s behalf the difference between the monthly COBRA premium that would otherwise be paid by the Participant for himself and his dependents and the monthly premium amount paid by similarly situated active executives for the same coverage.  Such payments shall be paid directly to the COBRA administrator and shall be treated as a taxable benefit to the Participant. The Participant shall be eligible to receive such payments until the earliest of: (i) the twelve-month anniversary of the Participant’s termination of employment; (ii) the date the Participant is no longer eligible to receive COBRA; and (iii) the date on which the Participant otherwise becomes eligible to receive substantially similar coverage from another employer.  The Corporation reserves the 

right to modify or terminate the COBRA benefit provided hereunder to the extent necessary to comply with applicable law.

3.2.4. Outplacement Assistance. Participant shall be entitled to outplacement assistance with an agency selected by First Financial with the fee paid by First Financial in an amount not to exceed two (2) to five (5) percent of the Participant’s annual base salary as determined by the CEO, such amount determined in accordance with the Letter Agreement.

3.2.5. Target Bonus Payment. Participant shall be entitled to his/her target bonus (“Target Bonus”) as defined in the Short Term Bonus Plan for the year of the Effective Date.  The Target Bonus will be paid on the date when annual bonuses for other key management employees are normally paid.  In no event shall the Target Bonus be paid later than March 15 in the year following the Effective Date.

3.3 Adjustment of Lump Sum Cash Payment. 

3.3.1. Adjustment. Notwithstanding anything in this Plan or any Letter Agreement to the contrary, in the event the Law or Accounting Firm (as defined in Section 3.3.2) shall determine that the Lump Sum Cash Payment and any other payment or distribution in the nature of compensation by the Corporation to or for the benefit of the Participant, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the Lump Sum Cash Payment, together with such other payments and distributions, the “Payments”), would cause any portion of such Payments to be subject to the excise tax imposed by Section 4999 (or any successor provision) of the Code (the “Parachute Payments”), the Participant’s Lump Sum Cash Payment shall be reduced to the extent necessary (but not below zero) so that no portion of the Payments shall be subject to the excise tax imposed by Section 4999 of the Code, provided that no such reduction shall be made if the Participant’s Payments, after the reduction and after the application of Federal income tax at the highest rate applicable to individual taxpayers, would not be greater than the present value (determined in accordance with Section 280G of the Code) of the Payments before the reduction but after the application of (i) excise tax under Section 4999 of the Code and (ii) Federal income tax at the highest rate applicable to individual taxpayers. 
 
3.3.2. Determination. All determinations required to be made under this Section 3.3, including the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized law or accounting firm (the “Law or Accounting Firm”), which shall provide detailed supporting calculations both to First Financial and the Participant (i) within fifteen (15) business days after the receipt of a notice from the Participant that he or she may have a Parachute Payment, or (ii) at such earlier time as may be requested by First Financial. The Law or Accounting Firm may employ and rely upon the opinions of actuarial or accounting professionals to the extent it deems necessary or advisable. All fees and expenses of the Law or Accounting Firm shall be borne solely by First Financial. Any determination by the Law or Accounting Firm shall be binding upon First Financial and the Participant. 

3.4 Terms and Conditions of Participation 

3.4.1. Conditions of Participation. As a condition to being covered by the Plan, each Participant, by executing the Letter Agreement, shall acknowledge and agree that (i) except as may otherwise be expressly provided under any other executed agreement between the Participant and the Corporation, nothing contained in this Plan (including, but not limited to, using the term “Cause” to determine benefits under this Plan) is intended to change the fact that the employment of the Participant by the Corporation is “at will” and, prior to the Effective Date, may be terminated by either the Participant or the Corporation at any time, (ii) the Participant shall be bound by, and comply with, the requirements of Sections 3.5.3 and 

3.5.4, and (iii) the Participant consents to the modifications to the options as provided in Section 3.2.4. Moreover, except as provided in Section 3.1.3, if prior to the Effective Date, the Participant’s employment with the Corporation terminates, then the Participant shall have no further rights under this Plan. 

3.4.2. Non-Duplication. As a condition to being covered by this Plan, and notwithstanding any other prior agreement to the contrary, each Participant, by executing the Letter Agreement, shall agree that the payments under this Plan shall be in lieu of any severance or similar payments that otherwise might be payable under any plan, program, policy or agreement. 

3.4.3. Amendment and Termination. The Plan may not be amended or terminated after the Effective Date. Prior to the Effective Date, the Compensation Committee of the Board (the “Compensation Committee”) may, in its sole discretion, modify or amend this Plan in any respect, or terminate the Plan (including with respect to individuals then participating in the Plan), provided such action is taken and becomes effective at least one (1) year prior to the Effective Date and such action is communicated to the Participants prior to the Effective Date. First Financial may amend the Plan to provide greater or lesser benefits to particular employees by sending the affected employees a letter setting forth the applicable benefit modification.  Notwithstanding the foregoing provisions of this Section 3.4.3, the Plan may be amended by the Compensation Committee at any time, retroactively if required, if found necessary, in the opinion of the Compensation Committee, in order to conform the Plan to the provisions of section 409A of the Code and the Treasury Regulations or other authoritative guidance issued thereunder and to conform the Plan to the provisions and other requirements of any applicable law. No such amendment shall be considered prejudicial to any interest of a Participant under the Plan or require the Participant’s written consent. The Corporation shall promptly notify affected Participants of any such amendment adopted by the Compensation Committee. 

3.5 General 

3.5.1. Indemnification. If litigation or arbitration shall be brought to enforce or interpret any provision of this Plan which relates to First Financial’s obligation to make payments hereunder, then First Financial, to the extent permitted by applicable law and First Financial’s Articles of Incorporation, shall indemnify the Participant for his or her reasonable attorneys’ fees and disbursements incurred in such proceedings, and shall pay pre-judgment interest on any money judgment obtained by the Participant calculated at the prime rate of interest published from time to time by The Wall Street Journal , northeast edition (“Prime Rate”) from the date that payment(s) to him or her should have been made under this Plan. 
 
 3.5.2. Payment Obligations; Overdue Payments . The Corporation’s obligations to make the payments and provide the benefits to the Participant under this Plan shall be absolute and unconditional and shall not be affected in any way by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense or other right which First Financial may have against the Participant or anyone else, provided, however, that as a condition to payment of amounts under this Plan, the Participant shall execute by no later than the scheduled payment date a general release and waiver (the “Waiver”), in form and substance reasonably satisfactory to First Financial, of all claims relating to the Participant’s employment by the Corporation and the termination of such employment, including, but not limited to, discrimination claims, employment-related tort claims, contract claims and claims under this Plan (other than claims with respect to benefits under the Corporation’s tax-qualified retirement plans, continuation of coverage or benefits solely as required by Part 6 of Title I of the Employee Retirement Income Security Act of 1974, or any obligation of First Financial to provide future performance under Section 3.2.3). All amounts payable by First Financial hereunder shall be paid without notice or demand, except as may be 

required with respect to the Waiver. Each and every payment made hereunder by First Financial shall be final. The Corporation shall not seek to recover all or any part of such payment from the Participant or from whosoever may be entitled thereto, for any reason whatsoever. The Participant shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Plan, and the obtaining of any such other employment shall in no event effect any reduction of First Financial’s obligations to pay the Lump Sum Cash Payment. The Participant shall be entitled to receive interest at the Prime Rate on any payments under this Plan that are overdue, provided, however, that no payments shall be deemed to be overdue until the Participant executes the Waiver and any rescission period with respect to such Waiver has expired or to the extent that payments are delayed pursuant to the requirements of Section 409A of the Code. 

3.5.3. Confidential Information. The Participant shall at all times hold in a fiduciary capacity for the benefit of the Corporation all secret, confidential or proprietary information, knowledge or data relating to the Corporation, and its respective businesses, which shall have been obtained by the Participant during the Participant’s employment by the Corporation and which shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Plan) including, but not limited to, the following: (i) performance characteristics of the Corporation’s products; (ii) marketing plans, business plans, strategies, forecasts, budgets, projections and costs; (iii) personnel information; (iv) customer, vendor and supplier lists; (v) customer, vendor and supplier needs, transaction histories, contacts, volumes, characteristics, agreements and prices; (vi) promotions, operations, sales, marketing, and research and development; (vii) business operations, internal structures, and financial affairs; (viii) systems and procedures; (ix) pricing structure of the Corporation’s services and products; (x) proposed services and products; (xi) contracts with other parties; and (xii) any other information that the Corporation is obligated by law, rule or regulation to maintain as confidential (the “Confidential Information”). During the Participant’s employment with the Corporation and after termination of such employment at any time or for any reason, and regardless of whether any payments are made to the Participant under this Plan as a result of such termination, the Participant shall not, without the prior written consent of the Corporation or as may otherwise be required by law or legal process, communicate or divulge any Confidential Information to any person other than the Corporation, its employees and those designated by it or use any Confidential Information except for the benefit of the Corporation. Immediately upon termination of the Participant’s employment with the Corporation at any time or for any reason, the Participant shall return to the Corporation all Confidential Information, including, but not limited to, any and all copies, reproductions, notes or extracts of Confidential Information. “Confidential Information” shall not include (v) Confidential Information which at the time of disclosure is already in the public domain; (w) Confidential Information which the Participant can demonstrate by written evidence was in his possession or known to him prior to his employment with the Corporation which is not subject to an obligation of confidentiality to the Corporation; (x) Confidential Information which subsequently becomes part of the public domain through no fault of the Participant; (y) Confidential Information which becomes known to the Participant through a third party who is under no obligation of confidentiality to the Corporation; and (z) Confidential Information which is required to be disclosed by law or by judicial administrative proceedings. Upon service to the Participant, or anyone acting on the Participant’s behalf, of any subpoena, court order, or other legal process requiring the Participant to disclose information that would be Confidential Information but for the preceding sentence, the Participant shall immediately provide written notice to the Corporation of such service and of the content of any testimony or information to be disclosed. 
 
3.5.4. Solicitation of Employees and Customers. (a) During the Participant’s employment with the Corporation and for a period of twelve (12) months after termination of such employment at any time and for any reason, and regardless of whether any payments are made to the Participant under this Plan as a 

result of such termination, the Participant shall not solicit, participate in or promote the solicitation of any person who was employed by the Corporation at the time of the Participant’s termination of employment with the Corporation to leave the employ of the Corporation, or, on behalf of himself or any other person, hire, employ or engage any such person. The Participant further agrees that, during such time, if an employee of the Corporation contacts the Participant about prospective employment, the Participant will inform such employee that he or she cannot discuss the matter further without informing the Corporation. 

(b) During the Participant’s employment with the Corporation, and for a period of twelve (12) months after termination of such employment and at any time and for any reason, and regardless of whether any payments are made to the Participant under this Plan as a result of such termination, the Participant will not, directly or indirectly, on behalf of himself or herself or on behalf of any other individual, association or entity, as an agent or otherwise:
		
	(i)
	contact any of the customers of Corporation for whom the Participant directly performed any services or had any direct business contact for the purpose of soliciting business or inducing such customer to acquire any product or service that currently is provided or under development by the Corporation; or

		
	(ii)
	contact any of the customers or prospective customers of the Corporation whose identity or other customer specific information the Participant discovered or gained access to as a result of his/her access to the Confidential Information for the purpose of soliciting or inducing any of such customers or prospective customers to acquire any product or service that currently is provided or under development by the Corporation; or 

		
	(iii)
	utilize the Confidential Information to solicit, influence, or encourage any customers or prospective customers of the Corporation to divert or direct their business to me or any other person, association or entity by or with whom the Participant is employed, associated, engaged as agent or otherwise affiliated.  

3.5.5. Application of Restrictions Respecting Confidential Information and Solicitation of Employees. The requirements and obligations of the Participant under Sections 3.5.3 and 3.5.4 shall be in addition to, and not a limitation under, any other requirements and obligations of the Participant, at law or otherwise. The term “person” for purposes of Sections 3.5.3 and 3.5.4 shall include any individual or entity, including any corporation, trust or partnership. 

3.5.6. Successors. All right under this Plan are personal to the Participant and without the prior written consent of First Financial shall not be assignable by the Participant otherwise than by will or the laws of descent and distribution. This Plan shall inure to the benefit of and be enforceable by the Participant’s legal representative. This Plan shall inure to the benefit of and be binding upon First Financial and its successors and assigns. First Financial will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of First Financial to assume expressly and agree to perform this Plan in the same manner and to the same extent that First Financial would be required to perform it. 

3.5.7. Controlling Law; Jurisdiction. This Plan shall in all respects be governed by, and construed in accordance with, the laws of the State of Ohio (without regard to the principles of conflicts of laws). The Corporation and the Participants irrevocably consent and submit to the jurisdiction of the Common Please Court for the county in the State of Oho in which the Corporation’s principal place of business is located, or in any Federal court sitting in the State of Ohio, for the purposes of any controversy, claim, 

dispute or action arising out of or related to this Plan, and hereby waive any defense of an inconvenient forum and any right of jurisdiction on account of the parties’ place of residence or domicile. 
 
3.5.8. Severability. Any provision in this Plan which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

3.5.9. 409A Compliance.
i.    General.  It is intended that the benefits provided under this Plan shall comply with the provisions of Section 409A or qualify for an exemption to Section 409A, and this Plan shall be considered and interpreted in accordance with such intent.  Any payments that qualify for the “short term deferral” exception or another exception under Section 409A shall be paid under the applicable exception.  Each payment provided under this Plan shall be treated as a separate payment for purposes of applying the Section 409A deferral election rules and the “short-term deferral” exemption to Section 409A.  Despite any contrary provision of this Plan, any references to “termination of employment” (or any similar term) shall mean and refer to Participant’s “separation from service,” as that term is defined in Section 409A and Section 1.409A 1(h) of the Treasury Regulations.  In no event may Participant directly or indirectly designate the calendar year of any payment under this Plan.

ii.    Delay of Payments.  Notwithstanding any other provision of this Plan to the contrary, if Participant is considered a “specified employee” for purposes of Section 409A (as determined in accordance with the methodology established by the Corporation as in effect on the date of termination), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A that is otherwise due to Participant under this Plan during the six month period following his separation from service (as determined in accordance with Section 409A) on account of his separation from service shall be accumulated and paid to Participant on the first business day of the seventh month following his separation from service (the “Delayed Payment Date”) together with interest at the short-term applicable federal rate with semiannual compounding under Code Section 1274(d) for the month prior to the month in which the separation from service occurs from the date such amount would have been paid but for this Section 5(h) to the day prior to actual payment date.  If Participant dies during the Section 409A postponement period, the amounts and entitlements delayed on account of Section 409A shall be paid (with interest as provided above) to the personal representative of his estate on the first to occur of the Delayed Payment Date or thirty (30) days after the date of Participant’s death.

iii.    In Kind Benefits and Reimbursements.  Notwithstanding any other provision of this Plan to the contrary, all (1) reimbursements and (2) in kind benefits provided under this Plan shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (a) any reimbursement is for expenses incurred during Participant’s lifetime (or during a shorter period of time specified in this Plan); (b) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (c) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (d) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

Date: January 1, 2013Lexaria Corp.: Exhibit 10.1 - Filed by newsfilecorp.com

 

Letter From the President 

I am pleased to offer this update on Lexaria Corp to all
stakeholders, following many changes in the Company during the past year. It is
a particularly exciting time in the Company’s history. 

2014 delivered the sharpest and most severe decline in oil
prices in over 5 years, and one of the biggest declines of all time. The
fundamentals of the oil industry have been dramatically altered by the emergence
of new production from previously difficult-to-access shale formations in the
USA, and increasingly, in other areas of the world. This is a trend that will
continue. 

Lexaria identified this trend long ago. In 2012 we quietly
initiated efforts to maximize value from our Belmont Lake oil field through any
means possible, including a complete asset sale. Because of our minority
ownership interest and also because of weakening oil prices, it was a difficult
task. Currently oil prices are only about 50% of what they were earlier in the
year, convincing us we made the right decision. With oil prices currently well
under $60, compared to the over $100 average of recent quarters, our ability to
generate positive cash flows would have been severely compromised. 

The company also had to deal with debts incurred as a result of
financing the oil field expansion over the years. At a peak, we owed over $1.7
million to various creditors, much of this to management and directors who had
provided significant loans to enable our operations. We are proud to have paid
all these loans down to a zero balance and that every creditor was paid in full.
Lexaria extends its appreciation to all those loan providers who have helped us
over the years. 

It was not easy to turn away from the oil and gas business –
the only business we had ever been in since the company was formed in 2004/05.
We knew in 2012 that we would have to find another way to create value for our
shareholders, if and when we exited the O&G sector. When changes in the
medical marijuana legislation in Canada in 2013 were announced, despite the
controversial nature of that sector, we identified that this could be a sector
that would allow for the creation of long term value for all our shareholders.

At our annual general meeting in 2014, you responded
overwhelmingly in favor of our entry into this new business sector, and we have
responded with vigor. We signed a joint venture with a Company that at the time
was leading the public markets into the medical marijuana sector in Canada,
Enertopia Corp. As a result of that, we now have a joint venture that has
applied to Health Canada, the governing body of the medical marijuana industry
in Canada, for a license to produce 10,000 kg (approx 22,000 pounds) of medical
marijuana per year. Lexaria owns 49% of that joint venture.

At this time, the JV license application has advanced to Stage
2 of what is now believed to be a 6-stage process. We are currently awaiting
notification of whether we will be accepted into Stage 3 of this process. 

Despite the fact that we have made significant progress in
Canada under the federally regulated licensing system, we also knew we had to
find a way for our public company to participate in the enormous United States
market.

Although we have every expectation of ultimately being awarded
a license by Health Canada for the Canadian production and selling of medical
marijuana, there are a number of political and governmental challenges within
Canada along the way. Meanwhile, we don’t want to either bet the entire company
on a single license application; or ignore the much larger market for
already-legal agricultural hemp products. 

It’s important to clearly understand our foray into the United
States market: In the USA we do not sell cannabis and are not involved in the
marijuana trade in any way, even in those states where it is legal to do so
under state law.

Research shows that cannabidiol (CBD) is the major component
that has the potential to make marijuana “medical”. CBD can also be obtained
from legal agricultural (industrial) hemp that contains less that 0.3% THC.
Procured in this manner, CBD is legal in all fifty states and in thirty
countries. CBD is also available in plants like Echinacea. 

We are exceptionally proud about entering this segment of the
market. First, there are still a lot of unanswered questions about how medical
marijuana is going to be regulated. In the United States it is still illegal at
the Federal level. In addition to legality, there are many tax questions and
some negative tax implications of being involved in the legal medical marijuana
sector in the USA.

Federal regulators in various US sectors may be more likely to
apply federal laws than state laws in their day-to-day regulating of companies.
For those reasons we are reticent to enter the medical marijuana market in the
USA, certainly at least until there is greater certainty at the federal
level.

CBD, on the other hand, is truly legal. The links to conditions
are vast and covered elsewhere in this letter. We are proud to help people in
their quest for health and wellness, and we have come to believe that CBD may
play an integral role in general good health. As a publicly traded company we
believe this is not only the more prudent path for our company to take on behalf
of its investors, but also the more profitable one.

Having unveiled our www.vipova.com website and upon selling our first cup
of tea, we became a national company able to sell our CBD infused tea – using
patent-pending technology - anywhere in the United States.

 

ViPovaTMBrand 

In order to attempt to generate sales revenue, and with them,
our expectations of eventual profits, we purchased 51% of PoViva Tea LLC and
launched the ViPovaTM brand of Cannabidiol (CBD) infused teas. Of all
the steps we’ve taken in guiding Lexaria forward over recent years, we are
perhaps most excited about our entry into the CBD business. 

Attached is an article explaining some of what the human
endocannabinoid system is, and how it can regulate so many functions throughout
the human body. Why is Lexaria involved here? Because almost never in life does
a business have the chance to enter a field of business that is truly new, that
also has vast business potential.

Research into the endocannabinoid system has hinted for decades
that there seem to be links to various human health conditions. Perhaps that is
why the US Federal Government has received a patent on certain cannabinoids! The
total market size of these sectors is in the hundreds of billions of
dollars.

According to the US Department of Health and Human Services
Patent number 6,630,507, “Cannabinoids have been found to have antioxidant
properties, unrelated to NMDA receptor antagonism. This new found property makes
cannabinoids useful in the treatment and prophylaxis of wide variety of
oxidation associated diseases, such as ischemic, age-related, inflammatory and
autoimmune diseases. The cannabinoids are found to have particular application
as neuroprotectants, for example in limiting neurological damage following
ischemic insults, such as stroke and trauma, or in the treatment of
neurodegenerative diseases, such as Alzheimer's disease, Parkinson's disease and
HIV dementia. Nonpsychoactive cannabinoids, such as cannabidoil, are
particularly advantageous to use because they avoid toxicity that is encountered
with psychoactive cannabinoids at high doses useful in the method of the present
invention.” 

Does cannabidiol have a role in any treatment? Will cannabidiol
be effective as any treatment? Will cannabidiol-related products or delivery
mechanisms be explored sufficiently in clinical trials to ever permit their
widespread use as a medical treatment? Today we do not know the answers to any
of these questions.

What we DO know is that the endocannabinoid system is a
lipid-based system. We DO know that Lexaria has acquired a patent-pending
formula for infusing cannabidiol within lipids, and we theorize that will result
in higher bioavailability and comfort to those who consume it. For now, the rest
of the questions cannot be answered with 100% certainty. 

Lexaria is playing a leading role in this brand new industry by
delivering CBD through our unique and distinctive lipid-infused process making
it one of the most exciting emerging companies in the business today.

 

Looking Ahead 

2015 will be a very busy year for us – we have a number of
goals and initiatives.

Primary among these is to establish ViPovaTM as a
widely recognized and trusted brand for delivering CBD using our patent pending
process that we believe is more effective and comforting. As brand recognition
grows we intend to broaden the brand with other products, such as flavored teas
and coffee. ViPovaTM sales and product introductions will constantly
be a focus during 2015. 

We will also launch our second brand of products under the
Lexaria EnergyTM brand, keeping a smile on our corporate face as we
use our original name for new purposes. Lexaria EnergyTM will be
launched in the first 6 months of 2015 as a line of nutritional supplements for
active people, once again always using our patent pending technology to infuse
CBD inside for comfort and effectiveness.

We expect our first product to be a CBD/Protein bar of
exceptional quality and taste. We are hoping to make the Lexaria Energy Bar the
only bar in the world that is low on the glycemic index;
gluten-free; and incorporates CBD with our patent-pending technology. It is
currently under development. 

We will also need to increase our ability to provide our
products to consumers along more traditional retail channels. Initially our
products are available only at select special events, or more easily on-line at
our websites (www.vipova.com and (coming soon)
www.lexariaenergy.com) and we are developing a
direct sales force. 

As 2015 unfolds we will begin to make both our ViPova brand and
Lexaria Energy brand products available in other countries of the world where
they are permitted under national regulations. These initiatives could lead to
significant gains in shareholder value over time. 

Meanwhile, in Canada we will also continue to pursue a license
to grow and sell medical marijuana under the Health Canada MMPR act, with
joint-venture partner Enertopia Corp. This remains a goal with potential for
significant value. We have in fact made significant progress already, and not
measured only by our advancement through the licensing process.

We have also built a strong team of professionals who will lead
the facility if the licensing application is successful. This includes growers,
security experts, a process manager, and even a former Chief of Police who is
advising us on security issues.

Lexaria also has a second facility under consideration, in
Eastern Ontario. We have entered an agreement that would provide Lexaria with
financial benefits once a decision is made to proceed; one that we think is
among the strongest in the industry. However we have not made that decision yet,
preferring to concentrate for now on the existing license application in
Burlington; as well as on the separate CBD business launch in the USA.

Finally I would like to take a moment to confirm that it is
true that I have purchased well over 1,400,000 common shares of Lexaria Corp in
the public markets at prices of between $0.06 and $0.115 since November 2014.
These purchases were made for my own investment purposes, because I frankly
believe the prospects for Lexaria are stronger than the prospects of just about
any other public company I could buy. I am by far the largest shareholder of
Lexaria and, over the years, have purchased the majority of my (more than) 6.3
million common shares in the public markets – the same way most of you have come
to be shareholders. 

2014/2015 is a period of change for your company. We know we
made the right move to back away from the oil and gas business, and the
economics in that business have deteriorated even more rapidly than we feared
they might. We have paid all our bills and debts so that the Company is not
burdened or placed at risk. We’ve entered the medical marijuana business through
a license application in Canada. And we are launching two new brands in the USA
aimed at the exciting brand new fields of cannabidiol delivery.

Though there has been a lot of change, one thing in particular
remains constant: our thanks to you our shareholders for your loyalty and
steadfastness over the years. It is hard being a mouse among elephants but we’ve
tried our best to work hard for you all the while we avoid being stepped on. Our
commitment to you remains unchanged and we will work honestly and tirelessly on
your behalf. 

Sincerely,

Chris Bunka 
President and CEO, Lexaria Corp . 

CBD and Your Health 

Cannabidiol (CBD) is a molecule found in
plant species such as agricultural (or industrial) hemp, and Echinacea. CBD is
one of at least 489 distinct compounds within hemp: it is clear that cannabis
and CBD are two entirely different things. Cannabidiol is a phytocannabinoid, it
is not psychoactive
and has anti-psychotic effects. 

	· Alzheimer’s disease and dementia 	· Multiple Sclerosis 
	· Anxiety and Depression 	· Nausea and Vomiting 
	· Appetite 	· Neural Development 
	· Asthma 	· Neuropathic Pain or Chronic Pain

	· Cancer 	· Osteoarthritis & Rheumatoid 
	· Cardiovascular Function 	· Arthritis 
	· Digestion 	· Osteoporosis 
	· Epilepsy 	· Post-traumatic Stress Disorder 
	· Fibromyalgia 	· Parkinson’s Disease 
	· Glaucoma 	· Psychiatric Disease 
	· Headache and Migraine 	· Pscyhomotor Behaviour 
	· Huntingtons Disease 	· Schizophrenia & Psychosis 
	· Immune Function 	· Spinal Cord Injury & Disease

	· Inflammation 	· Stress & Emotional State
      Regulation 
	· Irritable Bowel Syndrome 	· Tourette’s Syndrome 
	· Liver Disease 	· Wake/Sleep Cycles 
	· Memory 	· Wasting Syndrome in AIDs and 
	· Metabolism and Energy Homeostasis 	· Cancer Patients

There is an extensive list of conditions
that have been associated in some fashion to cannabinoids. No claim has been
made and no claim is being made that CBD “cures” or treats any of these
conditions or diseases. However, thousands of researches, usually working
independently of each other, have discovered links or associations of some kind,
between CBD or the endocannabinoid system, and each of these diseases or
conditions. 

It seems clear that, with links or effects
to such a widely varied group of conditions, the endocannabinoid system plays a
central role in human health, even if that role is currently poorly understood.

Perversely, much of the research to date
has been conducted on cannabis, not necessarily with regard to which of the 485 compounds within
the cannabis might be responsible for noted outcomes. The majority of such
studies temper potential beneficial outcomes with remarks of the negative
psychotropic effects that are often associated with tetrahydrocannabinol (THC).

For example, following is a table
summarizing various published clinical trials on smoked or vaporized
cannabis:

	Published Clinical Trials on
      Smoked/Vaporized Cannabis and Assoc.
      Therapeutic Benefits Primary Medical Conditions
      & Associated Secondary end- points (if any)
      for which benefits were observed 	Percent and Dose of Δ9-THC
    	Trial Duration & Number of
      Patients/Participants 	Reference 
	HIV/AIDS
      
associated weight loss 	1
      cannabis cigarette (~800 MG) containing 1.8% or 3.9% THC by weight, smoked
      once daily (i.e. one dose per day) 
(~14-31 mg Δ9- THC/day) 	8
      sessions total 
(3 sessions/week) 
30 participants 	(166) 
	HIV/AIDS —
      
associated weight loss; disease- associated mood and insomnia 	1
      cannabis cigarette (~800 mg) containing 2.0% or 3.9% THC by weight, smoked
      four times/day (i.e. 4 doses/day) 
(~64-125 mg Δ9-THC/day) 	4
      days total; 
10 participants 	(167) 
	Multiple Sclerosis
      — 
associated pain and spasticity 	1
      cannabis cigarette (~800 mg) containing 4% THC by weight, smoked once/day
      (i.e. one dose per day) 
(~32 mg Δ9-THC/day) 	3
      days total; 
30 patients 	(188) 
	Central &
      Peripheral chronic neuropathic pain 
(various etiologies) 	1
      cannabis cigarette (~800 mg) containing either 3.5% or 7 % THC by weight,
      smoked in bouts over 3 h period 
(i.e. one dose/day) 	1
      day total; 
38 patients 	(168) 
	Chronic
      Neuropathic pain from HIV— 
associated sensory neuropathy 	1
      cannabis cigarette (~900 mg) containing 3.56% THC by weight, smoked three
      times/day (i.e. 3 doses/day) 
(~96 mg Δ9-THC/day) 	5
      days total; 
25 patients 	(142) 

	Published Clinical Trials on
      Smoked/Vaporized Cannabis and Assoc.
      Therapeutic Benefits Primary Medical Conditions
      & Associated Secondary end- points (if any)
      for which benefits were observed 	Percent and Dose of Δ9-THC
    	Trial Duration & Number of
      Patients/Participants 	Reference 
	HIV—associated
      chronic neuropathic pain refractory to other medications 	1
      cannabis cigarette (~800 mg) containing between 1 & 8% THC by weight,
      smoked four/day 
(i.e. 4 doses/day) 	5
      days total; 
28 patients 	(186) 
	Chronic post-
      traumatic or post- surgical neuropathic pain refractory to other
      medications and associated insomnia 	One 25
      mg dose of cannabis containing 9.4% THC by weight, smoked three times/day
      
(i.e. three doses/day) 
(~7 mg Δ9-THC/day) 	5
      days total; 
21 patients 	(172) 
	Chronic pain of
      various etiologies (musculoskeletal, post-traumatic, arthritic, peripheral
      neuropathy, cancer, fibromyalgia, migraine, multiple sclerosis, sickle
      cell disease, thoracic outlet syndrome) 	One
      0.9 g dose of Vaporized cannabis containing 3.56% THC by weight
      administered three times/day (one dose the first day, three doses /day for
      the next three days, one dose the last day) 
(~96 mg Δ9-THC/day) 	5
      days total; 
21 patients 	(187) 

Much of the research conducted to date has
been with animals or is laboratory research and is not based on human clinical
studies. Pre-clinical animal studies may have predictive value but may not
translate accurately from an animal species to humans. In humans, there is also
always the possibility of placebo effect, though that is not likely possible in
animal studies. 

ViPovaTM has formulated its tea to
infuse CBD within lipids in order to provide a more comforting and bioavailable
delivery to the human digestive system. It will take the collective work and
research of thousands of highly trained professionals to determine whether there
are actually any health benefits associated with ingesting CBD, and if so, how
best to optimize CBD delivery. We do not know the answers today. 

But in the meantime, you have
ViPovaTM.

 

Sources for this article:

Information For Health Care Professionals, Hanan
Abramovici, Ph.D., Health Canada, 2013 
Mayo
Foundation for Medical Education and Research,
Michael Bostwick, 2012
Scientists Uncover How
CBD Treats MS, Alters Cholesterol Metabolism,
FreedomIsGreen.com, Jahan Marcu, May 25, 2011 
Journal of
Pharmacology and Experimental Therapeutics, Alessia Ligresti et.al,
2006 
Phytomedicine, Barbara Romano et al,
2013

Website: www.lexariaenergy.com

Corporate Office: 950, 1130 W. Pender St., Vancouver, BC V6E 4A4

Contact: (O) 604.602.1675 (F) 604.685.1602 

Website: www.vipova.com 
Corporate Office:
A100, 2222 Northern Ave, Phoenix, AZ 85021 
Contact: (O) 602.445.2764 (F)
602.943.2363 

FORWARD-LOOKING STATEMENTS 

This release includes forward-looking statements. Statements
which are not historical facts are forward-looking statements. The Company makes
forward-looking public statements concerning its expected future financial
position, results of operations, cash flows, financing plans, business strategy,
products and services, competitive positions, growth opportunities, plans and
objectives of management for future operations, including statements that
include words such as "anticipate," "if," "believe," "plan," "estimate,"
"expect," "intend," "may," "could," "should," "will," and other similar
expressions are forward-looking statements. Such forward-looking statements are
estimates reflecting the Company's best judgment based upon current information
and involve a number of risks and uncertainties, and there can be no assurance
that other factors will not affect the accuracy of such forward-looking
statements. Access to capital, or lack thereof, is a major risk and there is no
assurance that the Company will be able to raise required working capital.
Factors which could cause actual results to differ materially from those
estimated by the Company include, but are not limited to, government regulation,
managing and maintaining growth, the effect of adverse publicity, litigation,
competition and other factors which may be identified from time to time in the
Company's public announcements and filings. There is no assurance that the
medical marijuana, CBD sector, or alternative health businesses will provide any
benefit to Lexaria, or that the Company will experience any growth through
participation in these sectors. There is no assurance that existing capital is
sufficient for the Company's needs or that it will need to attempt to raise
additional capital. There is no assurance that any cannabinoid-based product
will promote, assist, or maintain any beneficial human health conditions
whatsoever. No statement herein has been evaluated by the Food and Drug
Administration (FDA). ViPovaTM products are not intended to diagnose,
treat, cure or prevent any disease. 

The CSE has not reviewed and does not accept responsibility
for the adequacy or accuracy of this information.

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