Other Matters
At the date of this
proxy statement the Company’s management knows of no other matters which may come before the annual meeting. However, if
any other matters properly come before the meeting, it is the intention of the persons named in the accompanying proxy form to
vote such proxies received by the Company in accordance with their judgment on such matters.
The Notice you
received in the mail contains instructions on how to access this proxy statement and our 2015 Annual Report to Shareholders. The
Annual Report includes, among other things, the consolidated balance sheets of the Company as of January 2, 2016 and January 3,
2015, and the related consolidated statements of comprehensive income (loss), shareholders’ equity and cash flows for fiscal
years ended January 2, 2016 and January 3, 2015. If you desire a copy of the Annual Report or a copy of the Company’s Form
10-K filed with the SEC, you may obtain one (excluding exhibits) without charge by addressing a request to Investor Relations,
Appliance Recycling Centers of America, Inc., 175 Jackson Avenue North, Suite 102, Minneapolis, Minnesota 55343. You may also access
a copy of the Company’s Form 10-K on the SEC’s website at www.sec.gov.
|
By Order of the Board of Directors
|
|
|
|
Denis E. Grande, Secretary
|
November 18, 2016
APPENDIX A:
Amendment to Articles of Incorporation
Article 3 of the
Restated Articles of Incorporation of the Company shall be amended in its entirety to read as follows:
ARTICLE
3.
Authorized
shares
The total number
of shares of capital stock which the corporation shall have authority to issue is fifty-two million (52,000,000) shares, of which
fifty million (50,000,000) shares shall be Common Stock, without par value, and two million (2,000,000) shares shall be preferred
stock.
The Preferred Stock
may be issued from time to time in one or more series. The Board of Directors is expressly authorized, in the resolution or resolutions
providing for the issuance of any wholly unissued series of Preferred Stock to fix, state and express the powers, rights, designations,
preferences, qualifications, limitations and restrictions thereof, including without limitation: the par value; the rate of dividends
upon which and the times at which dividends of shares of such series shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or classes or any other series of stock of the corporation; whether
such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which dividends on shares of such
series shall be cumulative; the voting rights, if any, to be provided for shares of such series; the rights, if any, which the
holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the corporation; the rights, if any, which the holders of stock of the corporation, and the terms and conditions,
including price and rate of exchange of such conversion or exchange; and the redemption rights (including sinking fund provisions),
if any, for shares of such series; and such other powers, rights, designations, preferences, qualifications, limitations and restrictions
as the Board of Directors may desire to so fix. The Board of Directors is also expressly authorized to fix the number of shares
constituting such series and to increase or decrease the number of shares of any series prior to the issuance of shares of that
series and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but
not to decrease such number below the number of shares outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
APPENDIX B:
PLAN OF CONVERSION
of
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
a
Minnesota corporation
to
APPLIANCE
RECYCLING CENTERS OF AMERICA, INC.
a
Nevada corporation
This Plan of Conversion
(“Plan of Conversion”) is entered into by Appliance Recycling Centers of America, Inc., a Minnesota corporation, which
desires to convert to Appliance Recycling Centers of America, Inc., a Nevada corporation.
1.
Converting Corporation
. The name of the Converting Corporation before the conversion is Appliance Recycling Centers
of America, Inc., a Minnesota corporation.
2.
Converted Corporation
. After conversion, the name of the Converting Corporation shall be Appliance Recycling Centers
of America, Inc., a Nevada corporation.
3.
Organizational Documents
. The Articles of Incorporation attached hereto as
Attachment A
shall be the Articles
of Incorporation of the Converted Corporation. The Bylaws of the Converting Corporation shall terminate on the Effective Date and
shall be superseded and replaced by the Bylaws of the Converted Corporation.
4.
Effective Date
. The Conversion shall become effective upon filing the Articles of Conversion and the Articles of
Incorporation with the Nevada Secretary of State.
5.
Conversion of Ownership Shares
.
As of the Effective Date, each share of the Converting Corporation
that is outstanding immediately prior thereto, shall be unchanged and shall continue to represent the shares of stock of the Converted
Corporation and shall remain in effect immediately after consummation of the conversion.
6.
Officers and Directors
. The Board of Directors of the Converting Corporation holding office immediately before the
Effective Date shall constitute the Board of Directors of the Converted Corporation immediately upon the Effective Date. The Officers
of the Converting Corporation holding office immediately before the Effective Date shall constitute the Officers of the Converted
Corporation immediately upon the Effective Date.
7.
Continuation
. As of the Effective Date, the Converted Corporation shall possess all rights, privileges, powers, franchises,
assets, property and immunities of the Converting Corporation. The title to any real property or any interest therein vested by
deed or otherwise in the Converting Corporation shall remain vested in the Converted Corporation. All rights of creditors, and
all liens up on any property of the Converting Corporation, shall be preserved unimpaired, limited in lien to the property affected
by such liens at the Effective Date, and all other debts, liabilities and duties of the Converting Corporation shall continue as
debts, liabilities, and duties of the Converted Corporation.
8.
Instruments of Further Assurance
. If at any time after the Effective Date, the Converted Corporation shall determine
or be advised that any instrument of further assurance is needed in order to evidence the continued vesting in it of the title
of the Converting Corporation to any of the property rights of the Converting Corporation, the appropriate officers or managers
of the Converted Corporation and the Converting Corporation are hereby authorized to execute, acknowledge, and deliver all such
instruments of further assurance and to do all acts or things, in the name of the Converted Corporation and the Converting Corporation,
as may be required or desirable to carry out the provisions of this Plan of Conversion.
APPENDIX C:
Proposed Nevada Articles of Incorporation
CONTINUATION OF ARTICLES OF INCORPORATION
OF
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
Article 3: Authorized Stock
The total number of shares of capital stock
which the Corporation shall have authority to issue is twelve million (12,000,000) shares, of which ten million (10,000,000) shares
shall be Common Stock, $0.001 par value per share, and two million (2,000,000) shares shall be Preferred Stock, $0.001 par value
per share.
The Preferred Stock may be issued from time
to time in one or more series. The Board of Directors is expressly authorized, in the resolution or resolutions providing for
the issuance of any wholly unissued series of Preferred Stock to fix, state and express the powers, rights, designations, preferences,
qualifications, limitations and restrictions thereof, including without limitation: the par value; the ra te of dividends upon
which and the times at which dividends of shares of such series shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or classes or any other series of stock of the corporation; whether
such dividends shall be cumulative or noncumulative, and if cumulative, the date or dates from which dividends on shares of such
series shall be cumulative; the voting rights, if any, to be provided for shares of such series; the rights, if any, which the
holders of shares of such series shall have in the event of any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the corporation; the rights, if any, which the holders of stock of the corporation, and the terms and conditions,
including price and rate of exchange of such conversion or exchange; and the redemption rights (including sinking fund provisions),
if any, for shares of such series; and such other powers, rights, designations, preferences, qualifications, limitations and restrictions
as the Board of Directors may desire to so fix. The Board of Directors is also expressly authorized to fix the number of shares
constituting such series and to increase or decrease the number of shares of any series prior to the issuance of shares of that
series and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but
not to decrease such number below the number of shares outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
Article 4: Names and Addresses of the Board of Directors/Trustees
|
3)
|
Dennis Gao
175 Jackson Ave North, Suite 102
Minneapolis, MN 55343
|
|
4)
|
Timothy M. Matula
175 Jackson Ave North, Suite 102
Minneapolis, MN 55343
|
Article 9: Limitation of Liability
The personal liability of the directors of
the corporation is hereby eliminated to the fullest extent permitted by the General Corporation Law of the State of Nevada, as
the same may be amended and supplemented.
Article 10: Indemnification
The Corporation shall, to the maximum extent
and in the manner permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented,
indemnify and hold harmless any and all persons whom it shall have power to indemnify under said provisions from and against any
and all liabilities (including expenses) imposed upon or reasonably incurred by him or her in connection with any action, suit
or other proceeding in which he or she may be involved or with which he or she may be threatened, or other matters referred to
in or covered by said provisions both as to action in his or her official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director or officer of the corporation.
APPENDIX D:
Proposed Nevada Bylaws
BYLAWS
OF
APPLIANCE RECYCLING
CENTERS OF AMERICA, INC.
A Nevada corporation
As adopted ____,
2016
TABLE OF CONTENTS
|
Page
|
ARTICLE 1. OFFICES
|
1
|
1.1)
|
Registered Office
|
1
|
1.2)
|
Offices
|
1
|
ARTICLE 2. SHAREHOLDERS
|
1
|
2.1)
|
Regular Meeting
|
1
|
2.2)
|
Frequency of Regular Meetings
|
1
|
2.3)
|
Special Meetings
|
1
|
2.4)
|
Quorum
|
1
|
2.5)
|
Voting
|
2
|
2.6)
|
Voting of Shares by Certain Holders
|
2
|
2.7)
|
Notice of Meeting
|
2
|
2.8)
|
Proxies
|
2
|
2.9)
|
Record Date
|
2
|
2.10)
|
Presiding Officer
|
3
|
2.11)
|
Conduct of Meetings of Shareholders
|
3
|
2.12)
|
Order of Business
|
3
|
2.13)
|
Inspectors of Election
|
4
|
ARTICLE 3. DIRECTORS
|
4
|
3.1)
|
General Powers
|
4
|
3.2)
|
Number
|
4
|
3.3)
|
Qualifications and Term of Office
|
4
|
3.4)
|
Quorum
|
4
|
3.5)
|
Regular Meetings
|
4
|
3.6)
|
Special Meetings
|
5
|
3.7)
|
Electronic Communications
|
5
|
3.8)
|
Absent Director
|
5
|
3.9)
|
Notice
|
5
|
3.10)
|
Manner of Action
|
5
|
3.11)
|
Compensation
|
5
|
3.12)
|
Salaries
|
5
|
3.13)
|
Executive Committee
|
6
|
Table
of Contents
(continued)
|
|
Page
|
3.14)
|
Vacancies
|
6
|
3.15)
|
Order of Business
|
6
|
3.16)
|
Informal Action by Directors
|
6
|
ARTICLE 4. OFFICERS
|
6
|
4.1)
|
Number
|
6
|
4.2)
|
Election, Term of Office and Qualifications
|
6
|
4.3)
|
The Chief Executive Officer
|
7
|
4.4)
|
Assistant Executive Officers
|
7
|
4.5)
|
Secretary
|
7
|
4.6)
|
Chief Financial Officer
|
7
|
4.7)
|
Assistant Officers
|
7
|
4.8)
|
Officers Shall not Lend Corporate Credit
|
8
|
ARTICLE 5. INDEMNIFICATION
|
8
|
5.1)
|
Authority of the Board of Directors
|
8
|
5.2)
|
Standard for Indemnification
|
8
|
5.3)
|
No Presumptions Resulting From Termination of Actions
|
8
|
5.4)
|
Mandatory Indemnification
|
8
|
5.5)
|
Determination
|
8
|
5.6)
|
Advance Payment
|
9
|
5.7)
|
Continuance of Indemnification
|
9
|
5.8)
|
Not Exclusive Remedy
|
9
|
5.9)
|
Insurance
|
9
|
5.10)
|
Notice of Indemnification
|
9
|
ARTICLE 6. SHARES AND THEIR TRANSFER
|
9
|
6.1)
|
Establishment and Issuance of Shares
|
9
|
6.2)
|
Uncertificated Shares of Stock; Stock Certificates
|
10
|
6.3)
|
Transfer of Shares
|
10
|
6.4)
|
Stock Records; Transfer Agent and Registrar
|
10
|
6.5)
|
Facsimile Signature
|
11
|
6.6)
|
Lost Certificates
|
11
|
6.7)
|
Treasury Stock
|
11
|
Table
of Contents
(continued)
|
|
Page
|
6.8)
|
Inspection of Books by Shareholders
|
11
|
ARTICLE 7. DIVIDENDS, DISTRIBUTIONS, ETC
|
11
|
7.1)
|
Dividends
|
11
|
7.2)
|
Other Distributions, Reserves
|
11
|
ARTICLE 8. FINANCIAL AND PROPERTY MANAGEMENT
|
12
|
8.1)
|
Fiscal Year
|
12
|
8.2)
|
Audit of Books and Accounts
|
12
|
8.3)
|
Contracts
|
12
|
8.4)
|
Checks
|
12
|
8.5)
|
Deposits
|
12
|
8.6)
|
Voting Securities Held by Corporation
|
12
|
ARTICLE 9. WAIVER OF NOTICE
|
12
|
9.1)
|
Requirement of Waiver In Writing
|
12
|
ARTICLE 10. AMENDMENTS
|
12
|
10.1)
|
Action by Board of Directors
|
12
|
BYLAWS
OF
APPLIANCE RECYCLING
CENTERS OF AMERICA, INC.
ARTICLE
1. OFFICES
1.1)
Registered
Office
. The registered office of the corporation shall be 701 S. Carson Street, Suite #200, Carson, City, Nevada 89701. The
Board of Directors shall have authority to change the registered office of the corporation from time to time, and any such change
shall be registered by the Secretary with the Secretary of State of Nevada.
1.2)
Offices
.
The corporation may have such other offices, including its principal business office, either within or without the State of Minnesota,
as the Board of Directors may designate or as the business of the corporation may require from time to time.
ARTICLE
2. SHAREHOLDERS
2.1)
Regular
Meeting
. Regular meetings of the shareholders of the corporation shall be held at the principal business office of the corporation,
or at such place as is designated by the Board of Directors, at which time the shareholders, voting as provided in the Articles
of Incorporation, shall elect a Board of Directors for the ensuing year, and shall transact such other business as shall properly
come before them.
2.2)
Frequency
of Regular Meetings
. Regular meetings which may also be referred to as annual meetings of shareholders may be called at any
time by a majority of the Board of Directors. If a regular meeting of shareholders has not been held during the immediately preceding
thirteen (13) months, a shareholder or shareholders holding three percent (3%) or more of all voting shares may demand a regular
meeting of shareholders by written notice of demand given to the Chief Executive Officer or Secretary of the corporation. Within
thirty (30) days after receipt of the demand by one of those officers, the Board shall cause a regular meeting of shareholders
to be called and held on notice no later than ninety (90) days after receipt of the demand, all at the expense of the corporation.
2.3)
Special
Meetings
. Special meetings of the shareholders may be called by the Secretary at any time upon request of the Chief Executive
Officer, or two of the members of the Board of Directors, or upon a written request of shareholders holding ten percent (10%) or
more of the capital stock entitled to vote. The written request shall be given to the Chief Executive Officer and shall contain
the purpose of the meeting. Notice shall be given in accordance with the provisions of Section 2.7 hereof.
2.4)
Quorum
.
The holders of a majority of the shares outstanding and entitled to vote, represented either in person or by proxy, shall constitute
a quorum for the transaction of business. The shareholders present at a duly called or held meeting, at which a quorum of the shareholders
is present, may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. In case a quorum is not present at any meeting, those present shall have the power to adjourn the meeting from
time to time, without notice or other announcement at the meeting, until the requisite number of voting shares shall be represented;
any business may be transacted at such reconvened meeting which might have been transacted at the meeting which was adjourned.
2.5)
Voting
.
At each meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy
duly appointed by an instrument in writing subscribed by such shareholder. Each shareholder shall have one (1) vote for each share
having voting power standing in his name on the books of the corporation. Upon the demand of any shareholder, the vote for director,
or the vote upon any question before the meeting shall be by ballot. All elections shall be had and all questions decided by a
majority vote of the number of shares entitled to vote and represented at any meeting at which there is a quorum, except in such
cases as shall otherwise be required or permitted by statute, the Articles of Incorporation, these Bylaws or by agreement approved
by a majority of all shareholders.
2.6)
Voting
of Shares by Certain Holders
. Shares standing in the name of another corporation may be voted by such officer, agent or proxy
as the articles or bylaws of such corporation may prescribe, or in the absence of such provision, as that corporation’s board
of directors may prescribe. Shares under control of a personal representative, administrator, guardian, conservator, attorney-in-fact,
or other similar person may be voted by that person, either in person or by proxy, without registration of those shares in the
name of that person. Shares under the control of a trustee in bankruptcy or a receiver may be voted by the trustee or receiver
if authority to do so is contained in an appropriate order of the court by which the trustee or receiver was appointed. A shareholder
whose shares are pledged may vote those shares until the shares are registered in the name of the pledgee. Shares held by a trust
shall be registered in the name of a trustee, as trustee for the trust, and may be voted by that named trustee in person or by
proxy.
2.7)
Notice
of Meeting
. There shall be mailed to each shareholder shown by the books of the corporation to be a holder of record of voting
shares, at his address as shown by the books of the corporation, a notice setting out the time and place of the regular meeting
or any special meeting, which notice shall be mailed at least ten (10) days prior thereto. Every notice of any special meeting
shall state the purpose or purposes of the proposed meeting, and the business transacted at all special meetings shall be confined
to purposes stated in the call. Notice thereof may be waived in writing either before, at, or after such meeting.
2.8)
Proxies
.
At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxies shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.
2.9)
Record
Date
. The Board of Directors may fix in advance a date, not exceeding sixty (60) days preceding the date of any of the aforesaid
events, as a record date for the determination of shareholders entitled to notice of and to vote at any such meeting and any adjournment
thereof, or to receive any such dividend or allotment of rights, or to exercise the rights in respect to any change, conversion
or exchange of capital stock or to give such consent, and in such case only such shareholders on the record date so fixed shall
be entitled to notice of and to vote at such meeting and any adjournment thereof, or to receive such dividend or allotment of rights,
or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books
of the corporation after any such record date so fixed. If the stock transfer books are not closed and no record date is fixed
for such determination of the shareholders of record, the date on which notice of the meeting is mailed, or the date of adoption
of a resolution of the Board of Directors declaring a dividend, allotment of rights, change, conversion or exchange of capital
stock or to give such consent, whichever is earlier, shall be the record date for such determination of shareholders. The determination
of shareholders entitled to vote at the meeting as called shall apply to any adjournment of such meeting except when the date of
determination or the closing of the stock transfer book is more than ninety (90) days prior to such adjourned meeting, in which
event a new meeting must be called.
2.10)
Presiding
Officer
. The appropriate officers of the corporation shall preside over all meetings of the shareholders; provided, however,
that in the absence of an appropriate corporate officer at any meeting of the shareholders, the meeting shall choose any person
present to act as presiding officer of the meeting.
2.11)
Conduct
of Meetings of Shareholders
. Subject to the following, meetings of shareholders generally shall follow accepted rules of parliamentary
procedure:
1. The
chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of
the chairman. If the chairman, in his absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure
as to any one meeting of shareholders or part thereof, the chairman shall so state and shall clearly state the rules under which
the meeting or appropriate part thereof shall be conducted.
2. If
disorder should arise which prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and
announce the adjournment of the meeting; and upon his so doing, the meeting is immediately adjourned.
3. The
chairman may ask or require that anyone not a bona fide shareholder or proxy leave the meeting.
2.12)
Order
of Business
. The suggested order of business at the annual meeting of shareholders, and so far as possible at all other meetings
of the shareholders, shall be:
1. Reading
and disposal of any unapproved minutes.
2. Annual
reports of all officers and committees.
3. Election
of directors.
4. Unfinished
business.
5. New
business.
6. Adjournment.
2.13)
Inspectors
of Election
. The Board of Directors in advance of any meeting of shareholders may appoint Inspectors to act at such meeting
or any adjournment thereof. If inspectors of election are not so appointed, the officer or person acting as chairman of any such
meeting may, and on the request of any shareholder or his proxy, shall make such appointment. In case any person appointed as inspector
shall fail to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting,
or at the meeting by the officer or person acting as chairman. The inspectors of election shall determine the number of shares
outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity
and effect of proxies, receive votes, ballots, assents or consents, hear and determine all challenges and questions in any way
arising and announce the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.
No inspector whether
appointed by the Board of Directors or by the officer or person acting as chairman need be a shareholder.
ARTICLE
3. DIRECTORS
3.1)
General
Powers
. The property, affairs, and business of the corporation shall be managed by the Board of Directors.
3.2)
Number
.
The number of directors shall be two (2) but the number of directors may be increased or diminished by a majority vote of the board
of directors.
3.3)
Qualifications
and Term of Office
. Directors need not be shareholders or residents of the State of Nevada. Directors shall be elected by the
shareholders at a regular meeting for an indefinite term until the next regular meeting of shareholders and until a successor shall
have been elected and qualified. Each of the directors of the corporation shall hold office until the regular meeting next following
or closely coinciding with the expiration of his term of office and until his successor shall have been elected and shall qualify,
or until he shall resign, or shall have been removed as provided by statute.
3.4)
Quorum
.
A majority of the Board of Directors shall constitute a quorum for the transaction of business; provided, however, that if any
vacancies exist by reason of death, resignation or otherwise, a majority of the remaining directors shall constitute a quorum for
the conduct of business. If less than a quorum is present at any meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice.
3.5)
Regular
Meetings
. As soon as practical after each regular meeting of shareholders, the Board of Directors shall meet for the purposes
of organization, choosing the officers of the corporation and for the transaction of other business at the place where the shareholders
meeting is held or at the place where regular meetings of the Board of Directors are held. No notice of such meeting need be given.
Such first meeting may be held at any other time and place which shall be specified in a notice given as hereinafter provided for
special meetings or in a consent and waiver of notice signed by all the directors.
Other regular meetings
of the Board of Directors shall be held from time to time at such time and place as may from time to time be fixed by resolution
adopted by a majority of the whole Board of Directors. Unless notice shall be waived by all directors entitled to notice, notice
shall be given in the same manner as prescribed for notice of special meetings.
3.6)
Special
Meetings
. Special meetings of the Board of Directors may be held at such time and place as may from time to time be designated
in the notice or waiver of notice of the meeting. Special meetings of the Board of Directors may be called by the Chief Executive
Officer, or by any director. Unless notice shall be waived by all directors entitled to notice, notice of the special meeting shall
be given by the Secretary, who shall give at least twenty-four (24) hours notice thereof to each director by mail, telegraph, telephone,
or in person.
3.7)
Electronic
Communications
. A Board of Directors meeting may be had entirely or partially by any means of communication through which the
directors may simultaneously hear each other, provided notice is given of the meeting pursuant to Section 3.9 and there is a sufficient
number of participants to constitute a quorum.
3.8)
Absent
Director
. A director may give advance written consent or opposition to a proposal to be acted on at a board of directors meeting.
Such written consent or opposition does not constitute presence for purposes of determining the existence of a quorum. Written
consent or opposition shall be counted as a vote on the proposal if the proposal acted on is substantially the same or has substantially
the same effect as the proposal to which the director has consented or objected.
3.9)
Notice
.
Unless notice is waived by all directors entitled to notice, a regular meeting of the Board of Directors may be called by giving
ten (10) days notice to all directors. A special meeting of the Board of Directors may be called by giving at least twenty-four
(24) hours’ notice to all directors. Notice may be given by mail, telegraph, telephone, or in person. If given by mail such
notice shall be deemed given when deposited in the United States mails. Notice by mail may not be used if the meeting is called
less than four (4) days from the date of notice. The notice must specify the date, time and place of the meeting, and if a special
meeting, the purpose of the meeting.
3.10)
Manner
of Action
. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the
Board of Directors.
3.11)
Compensation
.
Directors and any members of any committee of the Corporation contemplated by these Bylaws or otherwise provided for by resolution
of the Board of Directors, shall receive such compensation therefor as may be determined from time to time by resolution of the
Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other
capacity and receiving proper compensation therefor.
3.12)
Salaries
.
Salaries and other compensation of all officers of the corporation shall be fixed by the Board of Directors, which action may be
taken informally without the benefit of written resolutions. Nothing herein contained shall be construed to preclude any officer
from serving the corporation as a director, consultant or in any other capacity and receiving proper compensation therefor.
3.13)
Executive
Committee
. A two-thirds (2/3) majority vote of the Board of Directors present at a meeting may pass a resolution establishing
committees having the authority of the Board to the extent provided in the resolution. A committee shall consist of three or more
persons who need not be members of the Board. A majority of the committee present at a meeting shall constitute a quorum for the
purpose of transacting business. In all other respects committees shall conduct meetings in the same manner prescribed for the
Board of Directors. Committees shall be subject at all times to the control and direction of the Board.
3.14)
Vacancies
.
A director may resign at any time by giving written notice of same to the Board of Directors, or to the President. Such resignation
shall be effective upon receipt unless a later date is specified in the notice. If at any time and for any reason, including the
creation of a new directorship, a vacancy occurs in the Board of Directors, the remaining directors of the Board, though less than
a quorum, may elect a successor to fill such vacancy, or the Board may leave the vacancy unfilled until the next regular meeting
of the shareholders, or until an intervening special meeting of the shareholders is called and held for the purpose of electing
a successor. A director elected to fill the vacancy shall hold his office for the unexpired term of his predecessor, or until his
successor is duly elected and qualified.
3.15)
Order
of Business
. The following order of business shall be observed at all meetings of the Board of Directors so far as is practicable:
|
2.
|
Proof of due notice of meeting, or unanimous consent, or unanimous presence and declaration by
president.
|
|
3.
|
Reading and disposal of any unapproved minutes.
|
|
4.
|
Reports of officers and committees.
|
3.16)
Informal
Action by Directors
. Any action required to be taken at a meeting of the directors, or any other action which may be taken
at a meeting of the directors, may be taken without a meeting and notice thereof if a consent in writing, setting forth the action
so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter set forth.
ARTICLE
4. OFFICERS
4.1)
Number
.
The officers of the corporation may include a Chief Executive Officer, a Chief Financial Officer, and such other officers as may
from time to time be chosen by the Board of Directors. Any number of offices may be held by one person.
4.2)
Election,
Term of Office and Qualifications
. At any regular meeting of the Board of Directors, the board may elect a Chief Executive
Officer, a Chief Financial Officer, and such other officers and assistant officers as may be deemed advisable. Such officers shall
hold office until their successors are elected and qualify; provided, however, that any officer may be removed with or without
cause by the affirmative vote of a majority of the whole Board of Directors.
4.3)
The
Chief Executive Officer
. The Chief Executive Officer, who may also be referred to as the President shall: (a) have general
active management of the business of the corporation; (b) when present, preside at all meetings of the Board and of the shareholders;
(c) see that all orders and resolutions of the Board are carried into effect; (d) sign and deliver in the name of the corporation
any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the corporation, except in cases in which
the authority to sign and deliver is required by law to be exercised by another person or is expressly delegated by the articles
or bylaws or by the Board to some other officer or agent of the corporation; (e) maintain records of and, whenever necessary, certify
all proceedings of the Board and the shareholders; and (f) perform other duties prescribed by the Board. The Chief Executive Officer
may also be referred to as the President.
4.4)
Assistant
Executive Officers
. Each assistant executive officer shall have such powers and shall perform such duties as may be prescribed
by the Board of Directors. In the event of absence or disability of the Chief Executive Officer, an assistant executive officer
shall succeed to his powers and duties in the order in which they are elected or as otherwise prescribed by the Board of Directors.
The Assistant Executive Officers may also be referred to as Vice Presidents.
4.5)
Secretary
.
The Secretary shall be secretary of and shall attend all meetings of the shareholders and Board of Directors. The Secretary shall
act as clerk thereof and shall record all the proceedings of such meetings in the minute book of the corporation. The Secretary
shall give proper notice of meetings of shareholders and directors. The Secretary shall keep the seal of the corporation, if any,
and shall affix the same to any instrument requiring it and shall attest the seal by his signature. The Secretary shall, with the
Chief Executive Officer or Chief Financial Officer, acknowledge all certificates for shares of the corporation and shall perform
such other duties as may be prescribed from time to time by the Board of Directors.
4.6)
Chief
Financial Officer
. The Chief Financial Officer, who may also be referred to as the Treasurer, shall: (a) keep accurate financial
records for the corporation; (b) deposit all money, drafts, and checks in the name of and to the credit of the corporation in the
banks and depositories designated by the Board; (c) endorse for deposit all notes, checks, and drafts received by the corporation
as ordered by the Board, making proper vouchers therefor; (d) disburse corporate funds and issue checks and drafts in the name
of the corporation, as ordered by the Board; (e) render to the Chief Executive Officer and the Board, whenever requested, an account
of all transactions by the Chief Financial Officer and of the financial condition of the corporation; and (f) perform other duties
prescribed by the Board or by the Chief Executive Officer. The Chief Financial Officer may also be referred to as the Treasurer.
4.7)
Assistant
Officers
. In the event of absence or disability of any officer, assistants to such officers shall succeed to the powers and
duties of the absent officer in the order in which they are elected or as otherwise prescribed by the Board of Directors until
such principal officer shall resume his duties or a replacement is elected by the Board of Directors. Such assistant officers shall
exercise such other powers and duties as may be delegated to them from time to time by the Board of Directors, but they shall be
subordinate to the principal officer they are designated to assist.
4.8)
Officers
Shall not Lend Corporate Credit
. Except for the proper use of the corporation, no officer of this corporation shall sign or
endorse in the name or on behalf of this corporation, or in his official capacity, any obligations for the accommodation of any
other party or parties, nor shall any check, note, bond, stock certificate or other security or thing of value belonging to this
company be signed by any officer or director as collateral for any obligation other than valid obligations of this corporation.
ARTICLE
5. INDEMNIFICATION
5.1)
Authority
of the Board of Directors
. The corporation acting through its Board of Directors or as otherwise provided in this bylaw, shall
exercise as fully as may be permitted from time to time by the statutes and decisional law of the State of Nevada or by any other
applicable rules or principles of law its power to indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding, wherever brought, whether civil, criminal, administrative,
or investigative, by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or
was serving at the request of the corporation, as a director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding.
5.2)
Standard
for Indemnification
. Any person described in Section 5.1 may be indemnified by the corporation if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceedings, had no reasonable cause to believe his conduct was unlawful.
5.3)
No
Presumptions Resulting From Termination of Actions
. The determination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, have reasonable cause to believe that his conduct was
unlawful.
5.4)
Mandatory
Indemnification
. To the extent that any such person has been successful on the merits or otherwise in defense of any action,
suit, or proceeding referred to in this bylaw, or in defense of any claim, issue, or matter within this bylaw, he shall be indemnified
against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection therewith.
5.5)
Determination
.
Any indemnification under Section 5.1, unless ordered by a court, shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 5.2. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who are not parties to such action, suit, or proceeding or (2) if such a
quorum is not obtainable, or, even if obtainable if a quorum of disinterested directors so directs, by independent legal counsel
in a written opinion, or (3) by a majority vote of disinterested shareholders.
5.6)
Advance
Payment
. The expenses incurred in defending a civil or criminal action, suit, or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit, or proceeding as authorized by the Board of Directors in the manner provided
in Section 5.5 upon receipt of an undertaking by or on behalf of the director, officer, employee, or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this bylaw.
5.7)
Continuance
of Indemnification
. The indemnification provided by this bylaw shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.
5.8)
Not
Exclusive Remedy
. The indemnification provided by this bylaw shall not exclude any other right to which an officer may be entitled
under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall not imply that the corporation may not provide lawful
indemnification not expressly provided for in this bylaw. Nothing contained in this bylaw shall affect any rights to indemnification
to which corporate personnel other than directors and officers may be entitled by contract or otherwise under law.
5.9)
Insurance
.
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him
in any such capacity, provided, that no indemnification shall be made under any policy of insurance for any act which could not
be indemnified by the corporation under this bylaw.
5.10)
Notice
of Indemnification
. If, under this bylaw, any expenses or other amounts are paid by way of indemnification, otherwise than
by Court order or action by the shareholders, the corporation shall, not later than the next annual meeting of shareholders unless
such meeting is held within three (3) months from the date of such payment, and in any event, within fifteen (15) months from the
date of such payment, mail to its shareholders of record at the time entitled to vote for the election of directors a statement
specifying the persons paid, the amounts paid, and the nature and status of the litigation or threatened litigation at the time
of such payment.
ARTICLE
6. SHARES AND THEIR TRANSFER
6.1)
Establishment
and Issuance of Shares
. Subject to the provisions of the Articles of Incorporation and as provided by law, the Board of Directors
is authorized to designate and cause to be issued, classes and series of shares of the corporation, with designated voting rights,
preferences, and other characteristics, at such times and for such consideration as the Board of Directors may determine.
6.2)
Uncertificated
Shares of Stock; Stock Certificates
. The corporation may provide, to the extent and in the manner permitted by applicable law,
that some or all of any or all classes and series of shares of capital stock in the corporation shall be issued in uncertificated
form. Except as otherwise expressly provided by statute, the rights and obligations of the holders of certificated and uncertificated
shares of the same class and series are identical. Any action providing for uncertificated shares shall not apply to shares then
represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the foregoing, upon written
request delivered to the Secretary of the Corporation, an owner of stock of the corporation shall be entitled to a certificate,
to be in such form as the Board of Directors prescribes, certifying the number of shares of stock of the corporation owned by him.
In the case of shares represented by certificates, the certificates for such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the corporation by the Chief Executive Officer, and by the Secretary or any
other proper officer of the corporation authorized by the Board of Directors. Within a reasonable time after the issuance or transfer
of uncertificated shares, the corporation shall send to the registered owner of the shares a written notice containing the information
required to be set forth or stated on certificates pursuant to applicable law, unless such notice is not required by law.
6.3)
Transfer
of Shares
. Transfer of certificated and uncertificated shares of the corporation shall be made only on the books of the corporation.
The shareholder in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof for all purposes
as regards the corporation; provided, that when any transfer of shares shall be made as collateral security, and not absolutely,
such facts, if known to the Secretary of the corporation, or to the transfer agent, shall be so expressed in the entry of transfer.
Transfers of uncertificated shares shall be made only by the holder thereof (or his legal representative or duly authorized attorney-in-fact)
upon presentment of proper evidence of authority to transfer. Transfers of certificated shares shall be made only by the stockholder
named in the certificate (or his legal representative or duly authorized attorney-in-fact) and upon surrender for cancellation
of the certificate or certificates for such shares, with duly executed assignment and power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures as the corporation or its transfer agent may reasonably require.
Every certificate surrendered to the corporation for exchange or transfer shall be cancelled and no other certificate or certificates
or evidence of uncertificated shares shall be issued in exchange for any existing certificates until such existing certificate
shall have been so cancelled except in cases provided for in Section 6.6 of this Article 6.
6.4)
Stock
Records; Transfer Agent and Registrar
. The corporation shall keep, at its principal executive office or at another place or
places within the United States determined by the Board, a share register not more than one year old containing the names and addresses
of the shareholders and the number and classes of shares held by each shareholder. The corporation shall also keep at its principal
executive office or at another place or places within the United States determined by the Board, a record of the dates on which
certificates representing shares were issued, or on which uncertificated shares were issued, and in the case of cancellation, the
respective dates of cancellation. The Board of Directors may appoint one or more transfer agents or transfer clerks, and may require
all certificates for shares to bear the signature or signatures of any of them.
6.5)
Facsimile
Signature
. Where any certificate is manually signed by a transfer agent, a transfer clerk or by a registrar appointed by the
Board of Directors to perform such duties, a facsimile or engraved signature of the Chief Executive Officer and Secretary or other
proper officer of the corporation authorized by the Board of Directors may be inscribed on the certificate in lieu of the actual
signature of such officer. The fact that a certificate bears the facsimile signature of an officer who has ceased to hold office
shall not affect the validity of such certificate if otherwise validly issued.
6.6)
Lost
Certificates
. Any shareholder claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation
of that fact in such form as the Board of Directors may require, and shall, if the directors so require, give the corporation a
bond of indemnity in form and with one or more sureties satisfactory to the Board, in an amount determined by the Board of Directors
not exceeding double the value of the stock represented by such certificate to indemnify the corporation, against any claim that
may be made of such certificate; whereupon a new certificate may be issued in the same tenor and for the same number of shares
as the one alleged to have been destroyed or lost.
6.7)
Treasury
Stock
. Treasury stock shall be held by the corporation subject to disposal by the Board of Directors, in accordance with the
Articles of Incorporation and these Bylaws, and shall not have voting rights nor participate in dividends.
6.8)
Inspection
of Books by Shareholders
. Upon written demand shareholders shall for any purpose, as provided by statute, be permitted to examine
and copy the share register; records of shareholder and Board proceedings; the articles of incorporation and amendments; the bylaws
and amendments; reports made to shareholders within the last three (3) years; voting trust agreements; a statement of names and
addresses of its Directors and principal officers; and financial statements prepared for distribution to the shareholders or to
a government agency as a matter of public record. Shareholders shall for any proper purpose and upon written demand be permitted
to examine and copy other corporate records.
ARTICLE
7. DIVIDENDS, DISTRIBUTIONS, ETC.
7.1)
Dividends
.
Subject to the provisions of the Articles of Incorporation, these bylaws, and, the applicable laws, the Board of Directors may
declare a distribution in the form of a dividend whenever, and in such amounts as, in its opinion, the condition and the affairs
of the corporation shall render it advisable.
7.2)
Other
Distributions, Reserves
. Subject to the provisions of the Articles of Incorporation and of these bylaws, the Board of Directors
in its discretion may purchase or acquire any of the shares of the capital stock of this corporation in accordance with law, or
any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness, or from time to time may set aside
from its net assets or net profits such sum or sums as it, in its absolute discretion, may think proper as a reserve fund to meet
contingencies, or for the purpose of maintaining or increasing the property or business of the corporation or for any other purpose
it may think conducive to the best interests of the corporation.
ARTICLE
8. FINANCIAL AND PROPERTY MANAGEMENT
8.1)
Fiscal
Year
. The fiscal year of the corporation shall be set by the Board of Directors.
8.2)
Audit
of Books and Accounts
. The books and accounts of the corporation shall be audited at such times as may be ordered by the Board
of Directors.
8.3)
Contracts
.
The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
8.4)
Checks
.
All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the
corporation shall be signed by the treasurer or such other officer or officers, agent or agents of the corporation and in such
manner as shall from time to time be determined by resolution of the Board of Directors.
8.5)
Deposits
.
All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors may select.
8.6)
Voting
Securities Held by Corporation
. The Chief Executive Officer or other agent designated by the Board of Directors, shall have
full power and authority on behalf of the corporation to attend, act and vote at any meeting of security holders of other corporations
in which this corporation may hold securities. At such meeting the Chief Executive Officer, or such other agent, shall possess
and exercise any and all rights and powers incident to the ownership of such securities which the corporation might possess and
exercise.
ARTICLE
9. WAIVER OF NOTICE
9.1)
Requirement
of Waiver in Writing
. Whenever any notice whatever is required to be given by these bylaws or the Articles of Incorporation
of the corporation or any of the corporate laws of the State of Nevada, a waiver thereof in writing, signed by the person or persons
entitled to said notice, either before, at, or after the time stated therein, shall be deemed equivalent thereto. Attendance by
a director at a meeting of the Board of Directors or attendance by a shareholder at a meeting of the shareholders shall constitute
a waiver of the notice of said meeting.
ARTICLE
10. AMENDMENTS
10.1)
Action
by Board of Directors
. The Board of Directors of the corporation is expressly authorized to make bylaws of the corporation
and from time to time to alter or repeal bylaws so made. In so acting, the Board of Directors may do so only upon vote of a majority
of the entire Board of Directors then in office and present at any meeting called for that purpose, provided that notice of such
proposed amendment shall have been given to the directors in the notice of such meeting. Such authority in the Board of Directors
is subject to the powers of the voting shareholders to enact, change or repeal such bylaws by majority vote of the shareholders
to enact, change or repeal such bylaws by majority vote of the shareholders present and represented at any annual meeting or at
any special meeting called for that purpose, and the Board of Directors shall not make or alter any bylaws fixing the number, qualifications
or term of office of members of the Board.
CERTIFICATION OF BYLAWS
The above Amended and
Restated Bylaws of the Corporation are certified to have been adopted by the Board of Directors of the Corporation on the _____
day of ________, 2016.
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_____________________________
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Secretary
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APPENDIX E:
Description of Dissenter’s Rights
302A.471 Rights Of Dissenting Shareholders.
Subdivision 1.
Actions
creating rights.
A
shareholder
of a
corporation
may dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a)
unless
otherwise provided in the articles, an amendment of the articles that materially and adversely affects the rights or preferences
of the shares of the dissenting shareholder in that it:
(1)
alters
or abolishes a preferential right of the shares;
(2)
creates,
alters, or abolishes a right in respect of the redemption of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3)
alters
or abolishes a preemptive right of the holder of the shares to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4)
excludes or limits the right of a shareholder to vote on a matter, or to cumulate votes, except as
the right may be excluded or limited through the authorization or issuance of securities of an existing or new class or series
with similar or different voting rights; except that an amendment to the articles of an issuing public
corporation
that
provides that section 302A.671 does not apply to a control share acquisition does not give rise to
the right to
obtain payment under this section
; or
(5)
eliminates
the right to obtain payment under this subdivision
;
(b)
a
sale, lease, transfer, or other disposition of property and assets of the
corporation
that
requires shareholder approval under section 302A.661, subdivision 2, but not including a disposition in dissolution described
in section 302A.725, subdivision 2, or a disposition pursuant to an order of a court, or a disposition for cash on terms requiring
that all or substantially all of the net proceeds of disposition be distributed to the shareholders in accordance with their respective
interests within one year after the date of disposition;
(c)
a
plan of merger, whether under this chapter or under chapter 322B or 322C, to which the
corporation
is
a constituent organization, except as provided in subdivision 3, and except for a plan of merger adopted under section 302A.626;
(d)
a
plan of exchange, whether under this chapter or under chapter 322B or 322C, to which the
corporation
is
a party as the
corporation
whose shares will be acquired by the acquiring organization, except
as provided in subdivision 3;
(e)
a
plan of conversion is adopted by the
corporation
and becomes effective;
(f)
an
amendment of the articles in connection with a combination of a class or series under section 302A.402 that reduces the number
of shares of the class or series owned by the shareholder to a fraction of a share if the
corporation
exercises
its right to repurchase the fractional share so created under section 302A.423; or
(g)
any
other corporate action taken pursuant to a shareholder vote with respect to which the articles, the bylaws, or a resolution approved
by the board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2.
Beneficial
owners.
(a)
A
shareholder shall not assert dissenters' rights as to less than all of the shares registered in the name of the shareholder, unless
the shareholder dissents with respect to all the shares that are beneficially owned by another person but registered in the name
of the shareholder and discloses the name and address of each beneficial owner on whose behalf the shareholder dissents. In that
event, the rights of the dissenter shall be determined as if the shares as to which the shareholder has dissented and the other
shares were registered in the names of different shareholders.
(b)
A
beneficial owner of shares who is not the shareholder may assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting shareholder under the terms of this section and section
302A.473
,
if the beneficial owner submits to the
corporation
at the time of or before the assertion of
the rights a written consent of the shareholder.
Subd. 3.
Rights
not to apply.
(a)
Unless
the articles, the bylaws, or a resolution approved by the board otherwise provide,
the right to obtain payment under this
section
does not apply to a shareholder of
(1)
the surviving
corporation
in a merger with respect to shares of the shareholder that are not entitled to be voted on the merger
and are not canceled or exchanged in the merger or
(2)
the
corporation
whose
shares will be acquired by the acquiring organization in a plan of exchange with respect to shares of the shareholder that are
not entitled to be voted on the plan of exchange and are not exchanged in the plan of exchange.
(b)
If
a date is fixed according to section 302A.445, subdivision
1
, for the determination of
shareholders entitled to receive notice of and to vote on
an action described in subdivision 1
,
only shareholders as of the date fixed, and beneficial owners as of the date fixed who hold through shareholders, as provided in
subdivision 2, may exercise dissenters' rights.
(c)
Notwithstanding
subdivision
1
,
the right to obtain payment under this section
,
other than in connection with a plan of merger adopted under section 302A.621, is limited in accordance with the following
provisions:
(1) The right to obtain
payment under this section
is not available for the holders of shares of any class or series of shares
that is listed on the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Market
,
or the
NASDAQ Global Select Market
.
(2)
The
applicability of clause
(1)
is determined as of:
(i)
the record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders
to act upon the
corporate action described in subdivision 1
; or
(ii)
the day before the effective date of
corporate action described in subdivision 1
if there
is no meeting of shareholders.
(3)
Clause
(1)
is not applicable, and
the right to obtain payment
under this section
is available pursuant to subdivision
1
, for
the holders of any class or series of shares who are required by the terms of the
corporate action described in subdivision
1
to accept for such shares anything other than shares, or cash in lieu of fractional shares, of any
class or any series of shares of a domestic or foreign
corporation
, or any other ownership
interest
of any other organization, that satisfies the standards set forth in clause
(1)
at the time the corporate action becomes effective.
Subd. 4.
Other
rights.
The
shareholders of a
corporation
who have a right under this section to obtain payment for their
shares, or who would have the right to obtain payment for their shares absent the exception set forth in paragraph (c) of subdivision
3, do not have a right at law or in equity to have a
corporate action described in subdivision 1
set
aside or rescinded, except when the corporate action is fraudulent with regard to the complaining shareholder or the
corporation
.
302A.473 Procedures For Asserting
Dissenters' Rights.
Subdivision 1.
Definitions.
(a)
For
purposes of this section, the terms defined in this subdivision have the meanings given them.
(b)
"
Corporation
"
means the issuer of the shares held by a dissenter before the corporate action referred to in section
302A.471
,
subdivision
1
or the successor by merger of that issuer.
(c)
"
Fair
value of the shares
" means the value of the shares of a
corporation
immediately
before the effective date of the corporate action referred to in section
302A.471
, subdivision
1.
(d)
"
Interest
"
means
interest
commencing five days after the effective date of the corporate action referred
to in section
302A.471
, subdivision
1
, up to and including
the date of payment, calculated at the rate provided in section
549.09
,
subdivision
1
, paragraph
(c)
, clause
(1)
.
Subd. 2.
Notice
of action.
If
a
corporation
calls a shareholder meeting at which any action described in section
302A.471
,
subdivision
1
is to be voted upon, the notice of the meeting shall inform each shareholder
of the right to dissent and shall include a copy of section
302A.471
and this section
and a brief description of the procedure to be followed under these sections.
Subd. 3.
Notice
of dissent.
If
the proposed action must be approved by the shareholders and the
corporation
holds a shareholder
meeting, a shareholder who is entitled to dissent under section
302A.471
and who
wishes to exercise dissenters' rights must file with the
corporation
before the vote on the
proposed action a written notice of intent to demand the
fair value of the shares
owned by
the shareholder and must not vote the shares in favor of the proposed action.
Subd. 4.
Notice
of procedure; deposit of shares.
(a)
After the proposed action has been approved by the board and, if necessary, the shareholders, the
corporation
shall
send to (i) all shareholders who have complied with subdivision
3
, (ii) all shareholders who
did not sign or consent to a written action that gave effect to the action creating
the right to obtain payment under section 302A.471
,
and (iii) all shareholders entitled to dissent if no shareholder vote was required, a notice that contains:
(1)
the address to which a demand for payment and certificates of certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2)
any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received;
(3)
a form to be used to certify the date on which the shareholder, or the beneficial owner on whose behalf
the shareholder dissents, acquired the shares or an
interest
in them and to demand payment;
and
(4)
a copy of section
302A.471
and this section and a brief description of the procedures
to be followed under these sections.
(b)
In order to receive the
fair value of the shares
, a dissenting shareholder must demand payment
and deposit certificated shares or comply with any restrictions on transfer of uncertificated shares within 30 days after the notice
required by paragraph
(a)
was given, but the dissenter retains all other rights of a shareholder
until the proposed action takes effect.
Subd. 5.
Payment;
return of shares.
(a)
After the corporate action takes effect, or after the
corporation
receives a valid demand for
payment, whichever is later, the
corporation
shall remit to each dissenting shareholder who
has complied with subdivisions
3
and 4 the amount the
corporation
estimates
to be the
fair value of the shares
, plus
interest
, accompanied
by:
(1)
the
corporation
's closing balance sheet and statement of income for a fiscal year ending not
more than 16 months before the effective date of the corporate action, together with the latest available interim financial statements;
(2)
an estimate by the
corporation
of the
fair value of the shares
and
a brief description of the method used to reach the estimate; and
(3)
a
copy of section
302A.471
and this section, and a brief description of the procedure
to be followed in demanding supplemental payment.
(b)
The
corporation
may withhold the remittance described in paragraph
(a)
from
a person who was not a shareholder on the date the action dissented from was first announced to the public or who is dissenting
on behalf of a person who was not a beneficial owner on that date. If the dissenter has complied with subdivisions 3 and 4, the
corporation
shall forward to the dissenter the materials described in paragraph
(a)
,
a statement of the reason for withholding the remittance, and an offer to pay to the dissenter the amount listed in the materials
if the dissenter agrees to accept that amount in full satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount offered. If the dissenter makes demand, subdivisions
7 and 8 apply.
(c)
If the
corporation
fails to remit payment within 60 days of the deposit of certificates or
the imposition of transfer restrictions on uncertificated shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the
corporation
may again give notice under subdivision 4 and require
deposit or restrict transfer at a later time.
Subd. 6.
Supplemental
payment; demand.
If
a dissenter believes that the amount remitted under subdivision 5 is less than the
fair value of the shares
plus
interest
, the dissenter may give written notice to the
corporation
of
the dissenter's own estimate of the
fair value of the shares
, plus
interest
,
within 30 days after the
corporation
mails the remittance under subdivision 5, and demand payment
of the difference. Otherwise, a dissenter is entitled only to the amount remitted by the
corporation
.
Subd. 7.
Petition;
determination.
If
the
corporation
receives a demand under subdivision 6, it shall, within 60 days after receiving
the demand, either pay to the dissenter the amount demanded or agreed to by the dissenter after discussion with the
corporation
or file in court a petition requesting that the court determine the
fair value of the shares
,
plus
interest
. The petition shall be
filed
in the county
in which the registered office of the
corporation
is located, except that a surviving foreign
corporation
that receives a demand relating to the shares of a constituent domestic
corporation
shall file the petition in the county in this state in which the last registered office of the constituent
corporation
was located. The petition shall name as parties all dissenters who have demanded
payment under subdivision 6 and who have not reached agreement with the
corporation
. The
corporation
shall, after filing the petition, serve all parties with a summons and copy of the petition under
the
Rules of Civil Procedure
. Nonresidents of this state may be served by registered or certified
mail or by publication as provided by law. Except as otherwise provided, the Rules of Civil Procedure apply to this proceeding.
The jurisdiction of the court is plenary and exclusive. The court may appoint appraisers, with powers and authorities the court
deems proper, to receive evidence on and recommend the amount of the
fair value of the shares
.
The court shall determine whether the shareholder or shareholders in question have fully complied with the requirements of this
section, and shall determine the
fair value of the shares
, taking into account any and all
factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit
to use, whether or not used by the
corporation
or by a dissenter. The
fair value of
the shares
as determined by the court is binding on all shareholders, wherever located. A dissenter
is entitled to judgment in cash for the amount by which the
fair value of the shares
as determined
by the court, plus
interest
, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the
corporation
for the amount, if any, by which the amount, if any,
remitted to the dissenter under subdivision 5 exceeds the
fair value of the shares
as determined
by the court, plus
interest
.
Subd. 8.
Costs;
fees; expenses.
(a)
The court shall determine the costs and expenses of a proceeding under subdivision 7, including the reasonable expenses and compensation
of any appraisers appointed by the court, and shall assess those costs and expenses against the
corporation
,
except that the court may assess part or all of those costs and expenses against a dissenter whose action in demanding payment
under subdivision 6 is found to be arbitrary, vexatious, or not in good faith.
(b)
If the court finds that the
corporation
has failed to comply substantially with this section,
the court may assess all fees and expenses of any experts or attorneys as the court deems equitable. These fees and expenses may
also be assessed against a person who has acted arbitrarily, vexatiously, or not in good faith in bringing the proceeding, and
may be awarded to a party injured by those actions.
(c)
The court may award, in its discretion, fees and expenses to an attorney for the dissenters out of the amount awarded to the dissenters,
if any.
APPENDIX F:
Appliance Recycling Centers of America, Inc.
2016 Equity
Incentive Plan
APPLIANCE RECYCLING CENTERS OF AMERICA,
INC.
2016 EQUITY INCENTIVE PLAN
SECTION 1.
DEFINITIONS
As used herein, the
following terms shall have the meanings indicated below:
(a) “Administrator”
shall mean the Board of Directors of the Company, or one or more Committees appointed by the Board of Directors, as the case may
be.
(b) “Affiliate(s)”
shall mean a Parent or Subsidiary of the Company.
(c) “Agreement”
shall mean the written agreement entered into by the Participant and the Company evidencing the grant of an Award. Each Agreement
shall be in such form as may be approved from time to time by the Administrator and may vary from Participant to Participant.
(d) “Annual
Award Limit” or “Annual Award Limits” shall have the meaning set forth in Section 6(d) of the Plan.
(e) “Award”
shall mean any grant pursuant to the Plan of an Incentive Stock Option, Nonqualified Stock Option, Restricted Stock Award or Restricted
Stock Unit.
(f) “Change
of Control” shall mean the occurrence, in a single transaction or in a series of related transactions, of any one or more
of the events in subsections (i) through (iv) below. For purposes of this definition, a person, entity or group shall be deemed
to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership”
of securities if such person, entity or group directly or indirectly, through any contract, arrangement, understanding, relationship
or otherwise, has or shares Voting Power, which includes the power to vote or to direct the voting, with respect to such securities.
(i) Any
person, entity or group becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined Voting Power of the Company’s then outstanding securities other than by virtue of a merger, consolidation,
exchange, reorganization or similar transaction. Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
(A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other person, entity
or group from the Company in a transaction or series of related transactions the primary purpose of which is to obtain financing
for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any person, entity
or group (the “Subject Person”) exceeds the designated percentage threshold of the Voting Power as a result of a repurchase
or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change of
Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company,
and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase
or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject
Person over the designated percentage threshold, then a Change of Control shall be deemed to occur;
(ii) There
is consummated a merger, consolidation, exchange, reorganization or similar transaction involving (directly or indirectly) the
Company and, immediately after the consummation of such merger, consolidation, exchange, reorganization or similar transaction,
the shareholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities
representing more than fifty percent (50%) of the combined outstanding Voting Power of the surviving entity in such merger, consolidation
or similar transaction or (B) more than fifty percent (50%) of the combined outstanding Voting Power of the parent of the surviving
entity in such merger, consolidation, exchange, reorganization or similar transaction, in each case in substantially the same proportions
as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) There
is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the total gross value of the
consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially
all of the total gross value of the consolidated assets of the Company and its subsidiaries to an entity, more than fifty percent
(50%) of the combined Voting Power of the voting securities of which are Owned by shareholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease,
license or other disposition (for purposes of this Section 1(f)(iii), “gross value” means the value of the assets of
the Company or the value of the assets being disposed of, as the case may be, determined without regard to any liabilities associated
with such assets); or
(iv) Individuals
who, at the beginning of any consecutive twelve-month period, are members of the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the members of the Board at any time during that consecutive twelve-month period;
provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended
by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of the Plan,
be considered as a member of the Incumbent Board.
For the avoidance of doubt, the term “Change
of Control” shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing
the domicile of the Company. To the extent required, the determination of whether a Change of Control has occurred shall be made
in accordance with Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.
(g) “Close
of Business” of a specified day shall mean 5:00 p.m., Central Time, without regard to whether such day is a Saturday, Sunday,
bank holiday, or other day on which no business is conducted.
(h) “Committee”
shall mean a Committee of two or more Directors who shall be appointed by and serve at the pleasure of the Board. To the extent
necessary for compliance with Rule 16b-3, each of the members of the Committee shall be a “non-employee director.”
Solely for purposes of this Section 1(h), “non-employee director” shall have the same meaning as set forth in Rule
16b-3. Further, to the extent necessary for compliance with the limitations set forth in Internal Revenue Code Section 162(m),
each of the members of the Committee shall be an “outside director” within the meaning of Code Section 162(m) and the
regulations issued thereunder.
(i) “Common
Stock” shall mean the common stock of the Company (subject to adjustment as provided in Section 13 of the Plan).
(j) The
“Company” shall mean Appliance Recycling Centers of America, Inc., a Minnesota corporation.
(k) “Consultant”
shall mean any person, including an advisor, who is engaged by the Company or any Affiliate to render consulting or advisory services
and is compensated for such services; provided, however, that no person shall be considered a Consultant for purposes of the Plan
unless such Consultant is a natural person, renders bona fide services to the Company or any Affiliate, and such services are not
in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities. For purposes of the Plan, “Consultant” shall also include a director
of an Affiliate who is compensated for services as a director.
(l) “Covered
Employee” shall mean any key salaried Employee who is or may become a “Covered Employee,” as defined in Code
Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Administrator within the
shorter of (i) ninety (90) days after the beginning of the Performance Period, or (ii) twenty-five percent (25%) of the Performance
Period has elapsed, as a “Covered Employee” under the Plan for such applicable Performance Period.
(m) “Director”
shall mean a member of the Board of Directors of the Company.
(n) “Effective
Date” shall mean the date the Board of Directors of the Company approves the adoption of the Plan.
(o) “Employee”
shall mean a common law employee of the Company or any Affiliate, including “officers” as defined by Section 16 of
the Exchange Act; provided, however, that service solely as a Director or Consultant, regardless of whether a fee is paid for such
service, shall not cause a person to be an Employee for purposes of the Plan.
(p) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(q) “Fair
Market Value” of specified stock as of any date shall mean (i) if such stock is listed on the Nasdaq Global Select Market,
Nasdaq Global Market, Nasdaq Capital Market or an established stock exchange, the price of such stock at the close of the regular
trading session of such market or exchange on such date, as reported by The Wall Street Journal or a comparable reporting service,
or, if no sale of such stock shall have occurred on such date, on the next preceding date on which there was a sale of stock; (ii)
if such stock is not so listed on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital Market, or an established
stock exchange, the average of the closing “bid” and “asked” prices quoted by the OTC Bulletin Board, the
National Quotation Bureau, or any comparable reporting service on such date or, if there are no quoted “bid” and “asked”
prices on such date, on the next preceding date for which there are such quotes; or (iii) if such stock is not publicly traded
as of such date, the per share value as determined by the Board or the Committee in its sole discretion by applying principles
of valuation with respect to Common Stock.
(r) “Incentive
Stock Option” shall mean an Option granted pursuant to Section 9 of the Plan that is intended to satisfy the provisions of
Code Section 422, or any successor provision.
(s) “Insider”
shall mean an individual who is, on the relevant date, an officer or Director of the Company, or an individual who beneficially
owns more than ten percent (10%) of any class of equity securities of the Company that is registered under Section 12 of the Exchange
Act, as determined by the Board of Directors in accordance with Section 16 of the Exchange Act.
(t) The
“Internal Revenue Code” or “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time. References to sections of the Code are intended to include applicable treasury regulations and successor statutes and regulations.
(u) “Option”
shall mean an Incentive Stock Option or Nonqualified Stock Option granted pursuant to the Plan.
(v) “Nonqualified
Stock Option” shall mean an Option granted pursuant to Section 10 of the Plan or an Option (or portion thereof) that does
not qualify as an Incentive Stock Option.
(w) “Parent”
shall mean any parent corporation of the Company within the meaning of Code Section 424(e), or any successor provision.
(x) “Participant”
shall mean an Employee to whom an Incentive Stock Option has been granted or an Employee, a Director, or a Consultant to whom a
Nonqualified Stock Option, Restricted Stock Award or Restricted Stock Unit has been granted.
(y) “Performance-Based
Compensation” shall mean compensation under an Award that is intended to satisfy the requirements of Code Section 162(m)
for certain performance-based compensation paid to Covered Employees. Notwithstanding the foregoing, nothing in the Plan shall
be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section
162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.
(z) “Performance
Objective(s)” shall mean one or more performance objectives set forth in Section 7 and established by the Administrator,
in its sole discretion, for Awards granted under the Plan.
(aa) “Performance
Period” shall mean the period, established at the time any Award is granted or at any time thereafter, during which any Performance
Objectives specified by the Administrator with respect to such Award are to be measured.
(bb) “Plan”
means the Appliance Recycling Centers of America, Inc. 2016 Equity Incentive Plan, as amended hereafter from time to time, including
the form of Agreements as they may be modified by the Administrator from time to time.
(cc) “Restricted
Stock Award” shall mean any grant of restricted shares of Common Stock pursuant to Section 11 of the Plan.
(dd) “Restricted
Stock Unit” shall mean any grant of any restricted stock units pursuant to Section 12 of the Plan.
(ee) “Rule
16b-3” shall mean Rule 16b-3, or any successor provision, as then in effect, of the General Rules and Regulations under the
Exchange Act.
(ff) A “Subsidiary”
shall mean any subsidiary corporation of the Company within the meaning of Code Section 424(f), or any successor provision.
(gg) “Voting
Power” shall mean any and all classes of securities issued by the applicable entity which are entitled to vote in the election
of directors of the applicable entity.
SECTION 2.
PURPOSE
The purpose of the
Plan is to promote the success of the Company and its Affiliates by facilitating the employment and retention of competent personnel
and by furnishing incentives to those Employees, Directors, and Consultants upon whose efforts the success of the Company and its
Affiliates will depend to a large degree. It is the intention of the Company to carry out the Plan through the granting of Incentive
Stock Options, Nonqualified Stock Options, Restricted Stock Awards and Restricted Stock Units.
SECTION 3.
EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall be effective
on the Effective Date; provided, however, that adoption of the Plan shall be and is expressly subject to the condition of approval
by the shareholders of the Company within twelve (12) months before or after the Effective Date. Although Awards may be granted
prior to the date the Plan is approved by the shareholders of the Company, any Incentive Stock Options granted after the Effective
Date shall be treated as Nonqualified Stock Options if shareholder approval is not obtained within such twelve-month period.
The Administrator may
grant Awards pursuant to the Plan from time to time until the Administrator discontinues or terminates the Plan; provided, however,
that in no event may Incentive Stock Options be granted pursuant to the Plan after the earlier of (i) the date the Administrator
discontinues or terminates the Plan, or (ii) the Close of Business on the day immediately preceding the tenth anniversary of the
Effective Date.
SECTION 4.
ADMINISTRATION
(a)
Administration
by the Board of Directors or Committee(s)
. The Plan shall be administered by the Board of Directors of the Company (hereinafter
referred to as the “Board”); provided, however, that the Board may delegate some or all of the administration of the
Plan to a Committee or Committees. The Board and any Committee appointed by the Board to administer the Plan are collectively referred
to in the Plan as the “Administrator.”
(b)
Delegation
by Administrator
. The Administrator may delegate to one or more Committees and/or sub-Committees, or to one or more officers
of the Company and/or its Affiliates, or to one or more agents and/or advisors, such administrative duties or powers as it may
deem advisable. The Administrator or any Committees or individuals to whom it has delegated duties or powers as aforesaid may employ
one or more individuals to render advice with respect to any responsibility of the Administrator or such Committees or individuals
may have under the Plan. The Administrator may, by resolution, authorize one or more officers of the Company to do one or both
of the following on the same basis as can the Administrator: (i) designate Employees to be recipients of Awards and (ii) determine
the size of any such Awards; provided, however, (x) the Committee shall not delegate such responsibilities to any such officer
for Awards granted to an Employee who is considered an Insider; (y) the resolution providing such authorization sets forth the
total number of Awards such officer(s) may grant; and (z) the officer(s) shall report periodically to the Administrator regarding
the nature and scope of the Awards granted pursuant to the authority delegated.
(c)
Powers
of Administrator
. Except as otherwise provided herein, the Administrator shall have all of the powers vested in it under the
provisions of the Plan, including but not limited to exclusive authority to determine, in its sole discretion, whether an Award
shall be granted; the individuals to whom, and the time or times at which, Awards shall be granted; the number of shares subject
to each Award; the exercise price of Options granted hereunder; and the performance criteria, if any, and any other terms and conditions
of each Award. The Administrator shall have full power and authority to administer and interpret the Plan, to make and amend rules,
regulations and guidelines for administering the Plan, to prescribe the form and conditions of the respective Agreements evidencing
each Award (which may vary from Participant to Participant), to amend or revise Agreements evidencing any Award (to the extent
the amended terms would be permitted by the Plan and provided that no such revision or amendment, except as is authorized in Section
13, shall impair the terms and conditions of any Award which is outstanding on the date of such revision or amendment to the material
detriment of the Participant in the absence of the consent of the Participant), and to make all other determinations necessary
or advisable for the administration of the Plan (including to correct any defect, omission or inconsistency in the Plan or any
Agreement, to the extent permitted by law and the Plan). The Administrator’s interpretation of the Plan, and all actions
taken and determinations made by the Administrator pursuant to the power vested in it hereunder, shall be conclusive and binding
on all parties concerned.
(d)
Limitation
on Liability; Actions of Committees
. No member of the Board or a Committee shall be liable for any action taken or determination
made in good faith in connection with the administration of the Plan. In the event the Board appoints a Committee as provided hereunder,
or the Administrator delegates any of its duties to another Committee or sub-Committee, any action of such Committee with respect
to the administration of the Plan shall be taken pursuant to a majority vote of the Committee members or pursuant to the written
resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Administrator may
grant Awards under the Plan to any Employee, Director, or Consultant; provided, however, that only Employees are eligible to receive
Incentive Stock Options. In designating Participants, the Administrator shall also determine the number of shares or cash units
to be optioned or awarded to each such Participant and any Performance Objectives applicable to Awards. The Administrator may from
time to time designate individuals as being ineligible to participate in the Plan. The power of the Administrator under this Section
5 shall be exercised from time to time in the sole discretion of the Administrator and without approval by the shareholders.
SECTION 6.
STOCK
(a)
Number
of Shares Reserved
. The stock to be awarded or optioned under the Plan (the “Share Authorization”) shall consist
of authorized but unissued or reacquired shares of Common Stock. Subject to Section 13 of the Plan, the maximum aggregate number
of shares of Common Stock reserved and available for Awards under the Plan is Two Million (2,000,000) shares; provided, however,
that all shares of Stock reserved and available under the Plan shall constitute the maximum aggregate number of shares of Stock
that may be issued through Incentive Stock Options.
(b)
Share
Usage
. The following shares of Common Stock shall not reduce the Share Authorization and shall continue to be reserved and
available for Awards granted pursuant to the Plan: (i) all or any portion of any outstanding Restricted Stock Award or Restricted
Stock Unit that expires or is forfeited for any reason, or that is terminated prior to the vesting or lapsing of the risks of forfeiture
on such Award, and (ii) shares of Common Stock covered by an Award to the extent the Award is settled in cash. Any shares of Common
Stock withheld to satisfy tax withholding obligations on an Award, shares of Common Stock withheld to pay the exercise price of
an Option, and shares of Common Stock subject to a broker-assisted cashless exercise of an Option shall reduce the Share Authorization.
(c)
Annual
Award Limits
. Unless and until the Administrator determines that an Award to a Covered Employee shall not be Performance-Based
Compensation, the following limits (each, an “Annual Award Limit,” and collectively, “Annual Award Limits”)
shall apply to grants of such Awards under the Plan:
(i)
Options
.
The maximum number of shares of Common Stock subject to Options granted in any one calendar year to any one Participant shall be,
in the aggregate, One Million (1,000,000) shares, subject to adjustment as provided in Section 13.
(ii)
Restricted
Stock Awards and Restricted Stock Units
. The maximum grant with respect Restricted Stock Awards and Restricted Stock Units
in any one calendar year to any one Participant shall be, in the aggregate, One Million (1,000,000) shares, subject to adjustment
as provided in Section 13.
SECTION 7.
PERFORMANCE OBJECTIVES
(a)
Performance
Objectives
. For any Awards to Covered Employees that are intended to qualify as “Performance-Based Compensation”
under Code Section 162(m), the Performance Objectives shall be limited to any one, or a combination of, (i) revenue or net sales,
(ii) operating income, (iii) net income (before or after taxes), (iv) earnings per share, (v) earnings before or after taxes, interest,
depreciation and/or amortization, (vi) gross profit margin, (vii) return measures (including, but not limited to, return on invested
capital, assets, capital, equity, sales), (viii) increase in revenue or net sales, (ix) operating expense ratios, (x) operating
expense targets, (xi) productivity ratios, (xii) gross or operating margins, (xiii) cash flow (including, but not limited to, operating
cash flow, free cash flow, cash flow return on equity and cash flow return on investment), (xiv) working capital targets, (xv)
capital expenditures, (xvi) share price (including, but not limited to, growth measures and total shareholder return), (xvii) appreciation
in the fair market value or book value of the Common Stock, (xviii) debt to equity ratio or debt levels, and (xix) market share,
in all cases including, if selected by the Administrator, threshold, target and maximum levels.
Any Performance Objective
may be used to measure the performance of the Company and/or Affiliate, as a whole or with respect to any business unit, or any
combination thereof as the Administrator may deem appropriate, or any of the specified Performance Objectives as compared to the
performance of a group of competitor companies, or published or special index that the Administrator, in its sole discretion, deems
appropriate. The Administrator also has the authority to provide for accelerated vesting of any Award based on the achievement
of performance goals pursuant to the Performance Objectives; provided, however, that such authority shall be subject to Code Section
162(m) with respect to Awards intended to qualify as Performance-Based Compensation.
(b)
Evaluation
of Performance Objectives
. The Administrator may provide in any Award based on Performance Objectives that any evaluation of
performance may include or exclude any of the following events that occurs during a Performance Period: (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles, or other laws
or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) extraordinary nonrecurring items
as described in FASB Accounting Standards Codification 225-20—Extraordinary and Unusual Items and/or in Management's Discussion
and Analysis of financial condition and results of operations appearing in the Company's annual report to shareholders for the
applicable year, (vi) acquisitions or divestitures, and (vii) foreign exchange gains and losses. To the extent such inclusions
or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section
162(m) for deductibility.
(c)
Adjustment
of Performance-Based Compensation
. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted
upward. The Administrator shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis
or any combination, as the Administrator determines.
(d)
Administrator
Discretion
. In the event that applicable tax and/or securities laws change to permit Administrator discretion to alter the
governing Performance Objectives without obtaining shareholder approval of such changes, the Administrator shall have sole discretion
to make such changes without obtaining shareholder approval. In addition, in the event that the Administrator determines that it
is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Administrator may make such grants without
satisfying the requirements of Code Section 162(m) and, in such case, may apply performance objectives other than those set forth
in this Section 7.
SECTION 8.
PAYMENT OF OPTION EXERCISE PRICE
Upon the exercise of
an Option, Participants may pay the exercise price of an Option (i) in cash, or with a personal check, certified check, or other
cash equivalent, (ii) by the surrender by the Participant to the Company of previously acquired unencumbered shares of Common Stock
(through physical delivery or attestation), (iii) through the withholding of shares of Common Stock from the number of shares otherwise
issuable upon the exercise of the Option (
e.g
., a net share settlement), (iv) through broker-assisted cashless exercise
if such exercise complies with applicable securities laws and any insider trading policy of the Company, (v) such other form of
payment as may be authorized by the Administrator, or (vi) by a combination thereof. In the event the Participant elects to pay
the exercise price, in whole or in part, with previously acquired shares of Common Stock or through a net share settlement, the
then-current Fair Market Value of the stock delivered or withheld shall equal the total exercise price for the shares being purchased
in such manner.
The Administrator may,
in its sole discretion, limit the forms of payment available to the Participant and may exercise such discretion any time prior
to the termination of the Option granted to the Participant or upon any exercise of the Option by the Participant. “Previously
acquired shares of Common Stock” means shares of Common Stock which the Participant owns on the date of exercise (or for
the period of time, if any, as may be required by generally accepted accounting principles or any successor principles applicable
to the Company).
With respect to payment
in the form of Common Stock, the Administrator may require advance approval or adopt such rules as it deems necessary to assure
compliance with Rule 16b-3, if applicable.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE
STOCK OPTIONS
Each Incentive Stock
Option shall be evidenced by an Incentive Stock Option Agreement, which shall comply with and be subject to the following terms
and conditions:
(a)
Number
of Shares and Exercise Price
. The Incentive Stock Option Agreement shall state the total number of shares covered by the Incentive
Stock Option. Except as permitted by Code Section 424(a), or any successor provision, the exercise price per share shall not be
less than one hundred percent (100%) of the per share Fair Market Value of the Common Stock on the date the Administrator grants
the Incentive Stock Option; provided, however, that if a Participant owns stock possessing more than ten percent (10%) of the total
combined Voting Power of all classes of stock of the Company or of its Parent or any Subsidiary, the exercise price per share of
an Incentive Stock Option granted to such Participant shall not be less than one hundred ten percent (110%) of the per share Fair
Market Value of Common Stock on the date of the grant of the Incentive Stock Option. The Administrator shall have full authority
and discretion in establishing the exercise price and shall be fully protected in so doing.
(b)
Exercisability
and Term
. The Incentive Stock Option Agreement shall state when the Incentive Stock Option becomes exercisable (
i.e.
“vests”), and, if applicable in the Administrator’s discretion, shall describe the Performance Objectives and
Performance Period upon which vesting is based, the manner in which performance shall be measured and the extent to which partial
achievement of the Performance Objectives may result in vesting of the Option. The Participant may exercise the Incentive Stock
Option, in full or in part, upon or after the vesting date of such Option (or portion thereof). Notwithstanding anything in the
Plan or the Agreement to the contrary, the Participant may not exercise an Incentive Stock Option after the maximum term of such
Option, as such term is specified in the Incentive Stock Option Agreement. Except as permitted by Code Section 424(a), in no event
shall any Incentive Stock Option be exercisable during a term of more than ten (10) years after the date on which it is granted;
provided, however, that if a Participant owns stock possessing more than ten percent (10%) of the total combined Voting Power of
all classes of stock of the Company or of its Parent or any Subsidiary, the Incentive Stock Option granted to such Participant
shall be exercisable during a term of not more than five (5) years after the date on which it is granted. The Administrator may
accelerate the exercisability of any Incentive Stock Option granted hereunder which is not immediately exercisable as of the date
of grant.
(c)
No
Rights as Shareholder
. A Participant (or the Participant’s successors) shall have no rights as a shareholder with respect
to any shares covered by an Incentive Stock Option until the date of the issuance of the Common Stock subject to such Award upon
exercise, as evidenced by a stock certificate or as reflected in the books and records of the Company or its designated agent (
i.e.
,
a “book entry”). No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions or other rights for which the record date is prior to the date such shares are actually issued
(as evidenced in either certificated or book entry form).
(d)
Withholding
.
The Company or its Affiliate shall be entitled to withhold and deduct from any future payments to the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s exercise
of an Incentive Stock Option or a “disqualifying disposition” of shares acquired through the exercise of an Incentive
Stock Option as defined in Code Section 421(b), to require the Participant to remit an amount sufficient to satisfy such withholding
requirements, or to require any combination thereof. In the event the Participant is required under the Incentive Stock Option
Agreement to pay the Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related
taxes, the Administrator may, in its sole discretion, require the Participant to satisfy such obligation, in whole or in part,
by delivering shares of Common Stock or by electing to have the Company withhold shares of Common Stock otherwise issuable to the
Participant as a result of the exercise of the Incentive Stock Option. Such shares shall have a Fair Market Value equal to the
minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from such exercise or disqualifying disposition. In no
event may the Participant deliver shares, nor may the Company or any Affiliate withhold shares, having a Fair Market Value in excess
of such statutory minimum required tax withholding. The Participant’s delivery of shares or the withholding of shares for
this purpose shall occur on or before the later of (i) the date the Incentive Stock Option is exercised or the date of the disqualifying
disposition, as the case may be, or (ii) the date that the amount of tax to be withheld is determined under applicable tax law.
(e)
Vesting Limitation
.
Notwithstanding any other provision of the Plan, the aggregate Fair Market Value (determined as of the date an Incentive Stock
Option is granted) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time
by a Participant during any calendar year (under the Plan and any other “incentive stock option” plans of the Company
or any Affiliate shall not exceed $100,000 (or such other amount as may be prescribed by the Code from time to time); provided,
however, that if the exercisability or vesting of an Incentive Stock Option is accelerated as permitted under the provisions of
the Plan and such acceleration would result in a violation of the limit imposed by this Section 9(e), such acceleration shall be
of full force and effect but the number of shares of Common Stock that exceed such limit shall be treated as having been granted
pursuant to a Nonqualified Stock Option; and provided, further, that the limits imposed by this Section 9(e) shall be applied to
all outstanding Incentive Stock Options under the Plan and any other “incentive stock option” plans of the Company
or any Affiliate in chronological order according to the dates of grant.
(f)
Other
Provisions
. The Incentive Stock Option Agreement authorized under this Section 9 shall contain such other provisions as the
Administrator shall deem advisable. Any such Incentive Stock Option Agreement shall contain such limitations and restrictions upon
the exercise of the Incentive Stock Option as shall be necessary to ensure that such Incentive Stock Option will be considered
an “incentive stock option” as defined in Code Section 422 or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED
STOCK OPTIONS
Each Nonqualified Stock
Option shall be evidenced by a Nonqualified Stock Option Agreement, which shall comply with and be subject to the following terms
and conditions:
(a)
Number
of Shares and Exercise Price
. The Nonqualified Stock Option Agreement shall state the total number of shares covered by the
Nonqualified Stock Option. The exercise price per share shall be equal to one hundred percent (100%) of the per share Fair Market
Value of the Common Stock on the date of grant of the Nonqualified Stock Option, or such higher price as the Administrator determines.
(b)
Exercisability
and Term
. The Nonqualified Stock Option Agreement shall state when the Nonqualified Stock Option becomes exercisable (
i.e.
“vests”) and, if applicable in the Administrator’s discretion, shall describe the Performance Objectives and
Performance Period upon which vesting is based, the manner in which performance shall be measured and the extent to which partial
achievement of the Performance Objectives may result in vesting of the Option. The Participant may exercise the Nonqualified Stock
Option, in full or in part, upon or after the vesting date of such Option (or portion thereof); provided, however, that the Participant
may not exercise a Nonqualified Stock Option after the maximum term of such Option, as such term is specified in the Nonqualified
Stock Option Agreement. Unless otherwise determined by the Administrator and specified in the Agreement governing the Award, no
Nonqualified Stock Option shall be exercisable during a term of more than ten (10) years after the date on which it is granted.
The Administrator may accelerate the exercisability of any Nonqualified Stock Option granted hereunder which is not immediately
exercisable as of the date of grant.
(c)
No
Rights as Shareholder
. A Participant (or the Participant’s successors) shall have no rights as a shareholder with respect
to any shares covered by a Nonqualified Stock Option until the date of the issuance of the Common Stock subject to such Award upon
exercise, as evidenced by a stock certificate or as reflected in the books and records of the Company or its designated agent (
i.e.
,
a “book entry”). No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities
or other property), distributions or other rights for which the record date is prior to the date such shares are actually issued
(as evidenced in either certificated or book entry form).
(d)
Withholding
.
The Company or its Affiliate shall be entitled to withhold and deduct from any future payments to the Participant all legally required
amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s exercise
of a Nonqualified Stock Option, to require the Participant to remit an amount sufficient to satisfy such withholding requirements,
or to require any combination thereof. In the event the Participant is required under the Nonqualified Stock Option Agreement to
pay the Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related
taxes, the Administrator may, in its sole discretion, require the Participant to satisfy such obligation, in whole or in part,
by delivering shares of Common Stock or by electing to have the Company withhold shares of Common Stock otherwise issuable to the
Participant as a result of the exercise of the Nonqualified Stock Option. Such shares shall have a Fair Market Value equal to the
minimum required tax withholding, based on the minimum statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from such exercise. In no event may the Participant deliver
shares, nor may the Company or any Affiliate withhold shares, having a Fair Market Value in excess of such statutory minimum required
tax withholding. The Participant’s delivery of shares or the withholding of shares for this purpose shall occur on or before
the later of (i) the date the Nonqualified Stock Option is exercised, or (ii) the date that the amount of tax to be withheld is
determined under applicable tax law.
(e)
Other
Provisions
. The Nonqualified Stock Option Agreement authorized under this Section 10 shall contain such other provisions as
the Administrator shall deem advisable.
SECTION 11.
RESTRICTED STOCK AWARDS
Each Restricted Stock
Award shall be evidenced by a Restricted Stock Award Agreement, which shall comply with and be subject to the following terms and
conditions:
(a)
Number
of Shares
. The Restricted Stock Award Agreement shall state the total number of shares of Common Stock covered by the Restricted
Stock Award.
(b)
Risks
of Forfeiture
. The Restricted Stock Award Agreement shall set forth the risks of forfeiture, if any, which shall apply to the
shares of Common Stock covered by the Restricted Stock Award and the manner in which such risks of forfeiture shall lapse, including,
if applicable in the Administrator’s discretion, a description of the Performance Objectives and Performance Period upon
which the lapse of risks of forfeiture is based, the manner in which performance shall be measured and the extent to which partial
achievement of the Performance Objectives may result in lapse of risks of forfeiture. The Administrator may, in its sole discretion,
modify the manner in which such risks of forfeiture shall lapse but only with respect to those shares of Common Stock which are
restricted as of the effective date of the modification.
(c)
Issuance
of Shares; Rights as Shareholder
. Except as provided below, the Company shall cause a stock certificate to be issued and shall
deliver such certificate to the Participant or hold such certificate in a manner determined by the Administrator in its sole discretion;
provided, however, that in lieu of a stock certificate, the Company may evidence the issuance of shares by a book entry in the
records of the Company or its designated agent (if permitted by the Company’s designated agent and applicable law, as determined
by the Administrator in its sole discretion). The Company shall cause a legend or notation to be placed on such certificate or
book entry describing the risks of forfeiture and other transfer restrictions set forth in the Participant’s Restricted Stock
Award Agreement and providing for the cancellation and, if applicable, return of such certificate or book entry if the shares of
Common Stock subject to the Restricted Stock Award are forfeited. Until the risks of forfeiture have lapsed or the shares subject
to such Restricted Stock Award have been forfeited, the Participant shall be entitled to vote the shares of Common Stock represented
by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any
other rights as a shareholder with respect to such shares.
(d)
Withholding
Taxes
. The Company or its Affiliate shall be entitled to withhold and deduct from any future payments to the Participant all
legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s
Restricted Stock Award, to require the Participant to remit an amount sufficient to satisfy such withholding requirements, or to
require any combination thereof. In the event the Participant is required under the Restricted Stock Award Agreement to pay the
Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its sole discretion, require the Participant to satisfy such obligations, in whole or in part, by delivering
shares of Common Stock, including shares of Common Stock received pursuant to the Restricted Stock Award on which the risks of
forfeiture have lapsed. Such shares shall have a Fair Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to the supplemental
income resulting from the lapsing of the risks of forfeiture on such Restricted Stock Award. In no event may the Participant deliver
shares having a Fair Market Value in excess of such statutory minimum required tax withholding. The Participant’s delivery
of shares shall occur on or before the date that the amount of tax to be withheld is determined under applicable tax law.
(e)
Other
Provisions
. The Restricted Stock Award Agreement authorized under this Section 11 shall contain such other provisions as the
Administrator shall deem advisable.
SECTION 12.
RESTRICTED STOCK UNITS
Each Restricted Stock
Unit shall be evidenced by a Restricted Stock Unit Agreement, which shall comply with and be subject to the following terms and
conditions:
(a)
Number
of Shares
. The Restricted Stock Unit Agreement shall state the total number of shares of Common Stock covered by the Restricted
Stock Unit.
(b)
Vesting
.
The Restricted Stock Unit Agreement shall set forth the vesting conditions, if any, which shall apply to the Restricted Stock Unit
and the manner in which such vesting may occur, including, if applicable in the Administrator’s discretion, a description
of the Performance Objectives and Performance Period upon which vesting is based, the manner in which performance shall be measured
and the extent to which partial achievement of the Performance Objectives may result in vesting of the Restricted Stock Unit. The
Administrator may, in its sole discretion, accelerate the vesting of any Restricted Stock Unit.
(c)
Issuance
of Shares; Rights as Shareholder
. The Participant shall be entitled to payment of the Restricted Stock Unit as the units subject
to such Award vest. The Administrator may, in its sole discretion, pay Restricted Stock Units in shares of Common Stock, cash in
an amount equal to the Fair Market Value, on the date of payment, of the number of shares of Common Stock underlying the Award
that have vested on the applicable payment date, or any combination thereof, as specified in the Restricted Stock Unit Agreement.
If payment is made in shares of Common Stock, the Administrator shall cause to be issued one or more stock certificates in the
Participant’s name and shall deliver such certificates to the Participant in satisfaction of such units; provided, however,
that in lieu of stock certificates, the Company may evidence such shares by a book entry in the records of the Company or its designated
agent (if permitted by the Company’s designated agent and applicable law, as determined by the Administrator in its sole
discretion). Until the units subject to the Restricted Stock Unit have vested, the Participant shall not be entitled to vote any
shares of Common Stock which may be acquired through the Award, shall not receive any dividends attributable to such shares, and
shall not have any other rights as a shareholder with respect to such shares.
(d)
Withholding
Taxes
. The Company or its Affiliate shall be entitled to withhold and deduct from any future payments to the Participant all
legally required amounts necessary to satisfy any and all withholding and employment-related taxes attributable to the Participant’s
Restricted Stock Unit, to require the Participant to remit an amount sufficient to satisfy such withholding requirements, or to
require any combination thereof. In the event the Participant is required under the Restricted Stock Unit Agreement to pay the
Company, or make arrangements satisfactory to the Company respecting payment of, such withholding and employment-related taxes,
the Administrator may, in its sole discretion, require the Participant to satisfy such obligations, in whole or in part, by delivering
shares of Common Stock, including shares of Common Stock received pursuant to the Restricted Stock Unit. Such shares shall have
a Fair Market Value equal to the minimum required tax withholding, based on the minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes, that are applicable to the supplemental income resulting from the payment of such
Restricted Stock Unit. In no event may the Participant deliver shares having a Fair Market Value in excess of such statutory minimum
required tax withholding. The Participant’s delivery of shares for this purpose shall occur on or before the date that the
amount of tax to be withheld is determined under applicable tax law.
(e)
Other
Provisions
. The Restricted Stock Unit Agreement authorized under this Section 12 shall contain such other provisions as the
Administrator shall deem advisable.
SECTION 13.
RECAPITALIZATION, EXCHANGE,
LIQUIDATION, OR CHANGE OF CONTROL
(a)
In
General
. In the event of an increase or decrease in the number of shares of Common Stock resulting from a stock dividend, stock
split, reverse split, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company, other than due to conversion of the convertible
securities of the Company, the Administrator may, in its sole discretion, adjust the value determinations applicable to outstanding
Awards and the Plan in order to reflect such change, including adjustment of the class and number of shares of stock reserved under
Section 6 of the Plan, the class and number of shares of stock covered by each outstanding Award, and, if and as applicable, the
exercise price per share of each outstanding Award and the Annual Award Limits. Additional shares which may become covered by the
Award pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which
the adjustment relates.
(b)
Liquidation
.
Unless otherwise provided in the Agreement evidencing an Award, in the event of a dissolution or liquidation of the Company, the
Administrator may provide for one or both of the following:
(i) the
acceleration of the exercisability of any or all outstanding Options, the vesting and payment of any or all Restricted Stock Units,
or the lapsing of the risks of forfeiture on any or all Restricted Stock Awards; provided, however, that no such acceleration,
vesting or payment shall occur if the acceleration, vesting or payment would violate the requirements of Code Section 409A; or
(ii) the
complete termination of the Plan and the cancellation of any or all Awards (or portions thereof) which have not been exercised,
have not vested, or remain subject to risks of forfeiture, as applicable, in each case immediately prior to the completion of such
a dissolution or liquidation.
(c)
Change
of Control
. Unless otherwise provided in the Agreement evidencing an Award, in the event of a Change of Control, the Administrator
may provide for one or more of the following:
(i) the
acceleration of the exercisability, vesting, or lapse of the risks of forfeiture of any or all Awards (or portions thereof);
(ii) the
complete termination of the Plan and the cancellation of any or all Awards (or portions thereof) which have not been exercised,
have not vested, or remain subject to risks of forfeiture, as applicable, in each case as of the effective date of the Change of
Control;
(iii) that
the entity succeeding the Company by reason of such Change of Control, or the parent of such entity, shall assume or continue any
or all Awards (or portions thereof) outstanding immediately prior to the Change of Control or substitute for any or all such Awards
(or portions thereof) a substantially equivalent award with respect to the securities of such successor entity, as determined in
accordance with applicable laws and regulations;
(iv) that
Participants holding outstanding Awards shall become entitled to receive, with respect to each share of Common Stock subject to
such Award (whether vested or unvested, as determined by the Administrator pursuant to subsection (c)(i) hereof) as of the effective
date of any such Change of Control, cash in an amount equal to (1) for Participants holding Options, the excess of the Fair Market
Value of such Common Stock on the date immediately preceding the effective date of such Change of Control over the exercise price
per share of Options, or (2) for Participants holding Awards other than Options, the Fair Market Value of such Common Stock on
the date immediately preceding the effective date of such Change of Control.
The Administrator need not take the same
action with respect to all Awards (or portions thereof) or with respect to all Participants. In addition, the Administrator may
restrict the rights of or the applicability of this Section 13 to the extent necessary to comply with Section 16(b) of the Exchange
Act, the Internal Revenue Code or any other applicable law or regulation. The grant of an Award pursuant to the Plan shall not
limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business
or assets.
SECTION 14.
NONTRANSFERABILITY
(a)
In
General
. Except as expressly provided in the Plan or an Agreement, no Award shall be transferable by the Participant, in whole
or in part, other than by will or by the laws of descent and distribution. If the Participant shall attempt any transfer of any
Award, such transfer shall be void and the Award shall terminate.
(b)
Nonqualified
Stock Options
. Notwithstanding anything in this Section 14 to the contrary, the Administrator may, in its sole discretion,
permit the Participant to transfer any or all Nonqualified Stock Options to any member of the Participant’s “immediate
family” as such term is defined in Rule 16a-1(e) of the Exchange Act, or any successor provision, or to one or more trusts
whose beneficiaries are members of such Participant’s “immediate family” or partnerships in which such family
members are the only partners; provided, however, that the Participant cannot receive any consideration for the transfer and such
transferred Nonqualified Stock Option shall continue to be subject to the same terms and conditions as were applicable to such
Nonqualified Stock Option immediately prior to its transfer.
(c)
Beneficiary
Designation
. Each Participant may, from time to time, name any beneficiary or beneficiaries (who may be named contingently
or successively) to whom any benefit under the Plan is to be paid in case of such Participant’s death before receipt of any
or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed
by the Administrator, and will be effective only when filed by the Participant in writing with the Company during the Participant’s
lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the
Participant’s estate.
SECTION 15.
INVESTMENT PURPOSE AND SECURITIES
COMPLIANCE
No shares of Common
Stock shall be issued pursuant to the Plan unless and until there has been compliance, in the opinion of Company’s counsel,
with all applicable legal requirements, including without limitation, those relating to securities laws and stock exchange listing
requirements. As a condition to the issuance of Common Stock to Participant, the Administrator may require Participant to (a) represent
that the shares of Common Stock are being acquired for investment and not resale and to make such other representations as the
Administrator shall deem necessary or appropriate to qualify the issuance of the shares as exempt from the Securities Act of 1933
and any other applicable securities laws, and (b) represent that Participant shall not dispose of the shares of Common Stock in
violation of the Securities Act of 1933 or any other applicable securities laws.
As a further condition
to the grant of any Award or the issuance of Common Stock to a Participant, the Participant agrees to the following:
(a) In
the event the Company advises the Participant that it plans an underwritten public offering of its Common Stock in compliance with
the Securities Act of 1933, as amended, the Participant will execute any lock-up agreement the Company and the underwriter(s) deem
necessary or appropriate, in their sole discretion, in connection with such public offering.
(b) In
the event the Company makes any public offering of its securities and determines in its sole discretion that it is necessary to
reduce the number of outstanding Awards so as to comply with any state’s securities or Blue Sky law limitations with respect
thereto, the Board of Directors of the Company shall have the right (i) to accelerate the exercisability of any Award and the date
on which such Award must be exercised or remove the risks of forfeiture to which the Award is subject, provided that the Company
gives Participant prior written notice of such acceleration or removal, and (ii) to cancel any outstanding Awards (or portions
thereof) which Participant does not exercise prior to or contemporaneously with such public offering.
(c) In
the event of a Change of Control, Participant will comply with Rule 145 of the Securities Act of 1933 and any other restrictions
imposed under other applicable legal or accounting principles if Participant is an “affiliate” (as defined in such
applicable legal and accounting principles) at the time of the Change of Control, and Participant will execute any documents necessary
to ensure compliance with such rules.
The Company reserves
the right to place a legend on any stock certificate (or a notation on any book entry shares permitted by the Administrator) issued
in connection with an Award pursuant to the Plan to assure compliance with this Section 15.
The Company shall not
be required to register or maintain the registration of the Plan, any Award, or any Common Stock issued or issuable pursuant to
the Plan under the Securities Act of 1933 or any other applicable securities laws. If the Company is unable to obtain the authority
that the Company or its counsel deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall
not be liable for the failure to issue and sell Common Stock upon the exercise, vesting, or lapse of restrictions of forfeiture
of an Award unless and until such authority is obtained. A Participant shall not be eligible for the grant of an Award or the issuance
of Common Stock pursuant to an Award if such grant or issuance would violate any applicable securities law.
SECTION 16.
AMENDMENT OF THE PLAN
The Board may from
time to time, insofar as permitted by law, suspend or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such suspension, termination, revision, or amendment, except as is authorized in Section 13, shall impair the terms and
conditions of any Award which is outstanding on the date of such suspension, termination, revision, or amendment to the material
detriment of the Participant without the consent of the Participant. Notwithstanding the foregoing, except as provided in Section
13 of the Plan or to the extent required by applicable law or regulation, the Board may not, without shareholder approval, revise
or amend the Plan to (i) materially increase the number of shares subject to the Plan, (ii) change the designation of Participants,
including the class of Employees, eligible to receive Awards, (iii) decrease the price at which Options may be granted, (iv) cancel,
regrant, repurchase for cash, or replace Options that have an exercise price in excess of the Fair Market Value of the Common Stock,
or amend the terms of outstanding Options to reduce their exercise price, (v) materially increase the benefits accruing to Participants
under the Plan, or (vi) make any modification that will cause Incentive Stock Options to fail to meet the requirements of Code
Section 422.
To the extent applicable,
the Plan and all Agreements shall be interpreted to be exempt from or comply with the requirements of Code Section 409A and, if
applicable, to comply with Code Section 422, in each case including the regulations, notices, and other guidance of general applicability
issued thereunder. Furthermore, notwithstanding anything in the Plan or any Agreement to the contrary, the Board may amend the
Plan or Agreement to the extent necessary or desirable to comply with such requirements without the consent of the Participant.
SECTION 17.
RIGHTS AND OBLIGATIONS ASSOCIATED
WITH AWARDS
(a)
No
Obligation to Exercise
. The granting of an Option shall impose no obligation upon the Participant to exercise such Option.
(b)
No
Employment or Other Service Rights
. The granting of an Award hereunder shall not impose upon the Company or any Affiliate any
obligation to retain the Participant in its employ or service for any period.
(c)
Unfunded
Plan
. Participants shall have no right, title, or interest whatsoever in or to any particular assets of the Company or any
of its Affiliates by reason of the right to receive a benefit under the terms of the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person
acquires a right to receive shares of Common Stock or payments from the Company or any of its Affiliates under the Plan, such right
shall be no greater than the right of an unsecured general creditor of the Company or an Affiliate, as the case may be. All payments
to be made hereunder shall be paid from the general funds of the Company or an Affiliate, as the case may be. In its sole discretion,
the Administrator may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to
deliver the shares of Common Stock or make payments in lieu of or with respect to Awards hereunder; provided, however, that the
existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.
SECTION 18.
MISCELLANEOUS
(a)
Issuance
of Shares
. The Company is not required to issue or remove restrictions on shares of Common Stock granted pursuant to the
Plan until the Administrator determines that: (i) all conditions of the Award have been satisfied, (ii) all legal matters in connection
with the issuance have been satisfied, and (iii) the Participant has executed and delivered to the Company such representations
or agreements as the Administrator may consider appropriate, in its sole discretion, to satisfy the requirements of any applicable
law or regulation.
(b)
Choice
of Law
. The law of the state of Minnesota shall govern all questions concerning the construction, validity, and interpretation
of the Plan, without regard to that state’s conflict of laws rules.
(c)
Severability
.
In the event that any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall
not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
(d)
No
Duty to Notify
. The Company shall have no duty or obligation to any Participant to advise such Participant as to the time and
manner of exercising an Award or as to the pending termination or expiration of such Award. In addition, the Company has no duty
or obligation to minimize the tax consequences of an Award to the Participant.
APPLIANCE
RECYCLING CENTERS OF AMERICA INC.
ATTN:
Investor Relations, CFO
175
JACKSON AVENUE NORTH SUITE 102
MINNEAPOLIS,
MN 55343
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VOTE
BY INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE PROXY MATERIALS
If
you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access
proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP
THIS PORTION FOR YOUR RECORDS
DETACH
AND RETURN THIS PORTION ONLY