EXHIBIT 10.2

 

Form of Employee Stock Option Award Notice and Agreement

 

Pernix Group, Inc.

Incentive Stock Option Plan

2012 STOCK OPTION AWARD AGREEMENT

 

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT of 1933, AS
AMENDED.

 

This Stock Option Agreement (“Agreement”) is made and entered into as of the
date of grant set forth below (the “Date of Grant”)

 

BETWEEN:

 

Pernix Group, Inc. (the “Company), a corporation organized and existing under
the laws of the State of Delaware, with its head office located at: 151 East
22nd Street, Lombard, Illinois 60148

 

 

 

AND:

 

Insert Name ( Pernix Group, Inc. President and Chief Executive Officer) (the
“Optionee”), an individual with his or her main address at: Insert Address

 

 

Capitalized terms not defined herein shall have the meaning ascribed to them in
the Pernix Group, Inc. 2012 Incentive Stock Option Plan (the “Plan”).

 

Total Option Stock:

 

Exercise Price Per Share: Equal to the fair market value of the Pernix
Group, Inc. Common Stock (“Common Stock” or “Stock”) as of the Date of Grant.
Fair market value shall be determined in accordance with the Plan document as
defined.

 

Date of Grant:

 

Vesting Date: One          of the total number of options granted under this
Agreement shall become exercisable in cumulative fashion on the first
anniversary (            )  through the          anniversary (              ) 
of the Date of Grant.

 

Expiration Date for Exercise of Options:  Each option granted under the Plan
shall by its terms expire and shall not be exercisable after the expiration of
ten years from the Date of Grant and shall be subject to earlier termination as
expressly provided in the Plan.

 

Type of Stock Option:       Qualified Incentive Stock Option

 

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Terms and Conditions

 

1.              GRANT OF OPTION

 

The Company hereby grants to Optionee an option (the “Option”) to purchase the
total number of shares of Stock of the Company set forth above (the “Stock”) at
the Exercise Price Per Share set forth above (the “Exercise Price”), subject to
all of the terms and conditions of this Agreement and the Plan. If designated as
an Incentive Stock Option above, the Option is intended to qualify as an
“incentive stock option” (“ISO”) within the meaning of Section 422 of the
Internal Revenue Code, as amended (the “Code”). Only Employees of the Company
shall receive ISOs.

 

2.              EXERCISE PRICE

 

The aggregate fair market value of the Stock, with respect to which options are
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000. For purposes of this determination, according to Section 5.5 of
the Plan, (i) options shall be taken into account in the order in which they
were granted, (ii) the fair market value of any Stock shall be determined as of
the time the option with respect to such Stock was granted, and (iii) the term
“Stock” shall mean any stock of the Company or of its parent or subsidiary
(within the meaning of Sections 424(e) and (f) of the Code) with respect to
which the optionee has been granted incentive stock options (as defined in
Section 422 of the Code).

 

Notwithstanding the provisions of Section 5.1 of the Plan, an option may be
granted, consistent with the other terms of the Plan, to an employee who owns
(within the meaning of Sections 422(b)(6) and 424(d) of the Code) more than 10%
of the total combined voting power of all classes of stock of the Company or a
parent or subsidiary of the Company if, at the time such option is granted, the
option price is an amount which equals or exceeds 110% of the fair market value
of the Stock subject to the option, and such option by its terms is not
exercisable more than five (5) years after it is granted. The Plan shall be
managed by the Company in its grant and administration practices so as not to
incur additional tax under Section 409A of the Code.

 

3.              EXERCISE OF OPTION

 

Option Exercisability. Subject to earlier termination of the Option as otherwise
provided herein and unless otherwise provided by the Committee, an Option shall
terminate immediately upon the Optionee’s termination of Service to the extent
that it is then unvested and shall be exercisable after the Optionee’s
termination of Service to the extent it is then vested only during the
applicable time period set forth in Section 7.1 of the Plan.

 

An option granted under the Plan shall not be exercisable until the expiration
of six months from the date of its grant and in the case of a grant which is
conditioned upon subsequent shareholder approval of the Plan, six months from
the date of such shareholder approval. Unless otherwise provided in any option
grant under the Plan, following the expiration of the applicable six-month
holding period, up to one-fifth (ignoring fractional stock) of the total number
of shares of stock subject to an option granted under the Plan shall become
exercisable in cumulative fashion on the first through fifth anniversary dates
of the grant of the option. In no case may an option be exercised as to less
than one hundred (100) shares of stock at any one time (or the remaining shares
of stock covered by the option if less than one hundred (100)). The options
subject to this Agreement shall be exercisable as set forth under “Vesting Date”
above, subject to the other restrictions of this paragraph.

 

EXERCISE NOTICE

 

Exercise Notice and Methods of Payment. An option granted under the Plan shall
be exercised by the delivery by the holder thereof to the Company at its
principal office (attention of the Chief Financial Officer with a copy to
Corporate Counsel) of written notice of the number of shares of stock with
respect to which the option is being exercised accompanied by payment in full of
the purchase price of such stock. A Pernix Group, Inc. ISOP Exercise Notice form
is provided as Exhibit A to this Agreement. Payment for such stock may be made
(as determined by the Committee) (i) in cash, (ii) by certified check payable to
the order of the Company in the amount of such purchase price, (iii) by delivery
of Stock to the Company having a fair market value equal to said purchase price,
or (iv) by any combination of the methods of payment described in (i) through
(iii) above.

 

Rights as an Optionee Not as a Stockholder. An Optionee shall have no rights as
a stockholder with respect to any stock covered by an award granted until the
date of the issuance of such stock (as evidenced by the appropriate

 

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entry on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such stock are issued,
except as provided in this Plan.

 

Disability. If the Optionee’s Service terminates because of the Disability
(within the meaning of Section 22(e)(3) of the Code)  of the Optionee, the
Option, to the extent unexercised and exercisable and vested on the date on
which the Optionee’s Service terminated, may be exercised by the Optionee (or
the Optionee’s guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee’s Service
terminated, but in any event no later than the date of expiration of the
Option’s term as set forth in this Agreement evidencing such Option (the Option
Expiration Date).

 

Death. If the Optionee’s Service terminates because of the death of the
Optionee, then the Option, to the extent unexercised and exercisable and vested 
on the date on which the Optionee’s Service terminated, may be exercised by the
Optionee’s legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee’s death at any time prior to the
expiration of twelve (12) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee’s Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee’s termination of
Service.

 

Termination for Cause. Notwithstanding any other provision of the Plan to the
contrary, if the Optionee’s Service is terminated for Cause or if, following the
Optionee’s termination of Service and during any period in which the Option
otherwise would remain exercisable, the Optionee engages in any act that would
constitute Cause, the Option shall terminate in its entirety and cease to be
exercisable immediately upon such termination of Service or act.  Cause means,
unless such term or an equivalent term is otherwise defined with respect to an
Award by a written contract of employment or service, any of the following:
(i) the Optionee’s theft, dishonesty, willful misconduct, breach of fiduciary
duty for personal profit, or falsification of any Company documents or records;
(ii) the Optionee’s material failure to abide by the Company’s code of conduct
or other policies (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (iii) the Optionee’s
unauthorized use, misappropriation, destruction or diversion of any tangible or
intangible asset or corporate opportunity of the Company (including, without
limitation, the Optionees improper use or disclosure of the Company’s
confidential or proprietary information); (iv) any intentional act by the
Optionee which has a material detrimental effect on the Company’s reputation or
business; (v) the Optionee’s repeated failure or inability to perform any
reasonable assigned duties after written notice from the Company of, and a
reasonable opportunity to cure, such failure or inability; (vi) any material
breach by the Optionee of any employment, service, non-disclosure,
non-competition, non-solicitation or other similar agreement between the
Optionee and the Company, which breach is not cured pursuant to the terms of
such agreement; or (vii) the Optionee’s conviction (including any plea of guilty
or nolo contendere) of any criminal act involving fraud, dishonesty,
misappropriation or moral turpitude, or which impairs the Optionee’s ability to
perform his or her duties with the Company.

 

Retirement. Upon the termination of the employment of a holder of an option
under the Plan by reason of such holder’s qualified retirement, such holder may
exercise any options, to the extent such options were exercisable at the date of
such termination of employment, provided that such exercise occurs both within
the remaining option term and within the three-month period after the date of
termination of employment due to retirement.  “Qualified Retirement” means with
respect to an Employee a termination from employment from the Company or any of
its subsidiaries that occurs after the Employee attains age 65 and at the time
of the termination the Employee has 10 or more years of continuous service as a
full-time Employee of the Company.

 

Other Termination of Service. If the Optionee’s Service terminates for any
reason, except Disability, death, Retirement or Cause, the Option, to the extent
unexercised and exercisable and vested on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee at any time prior to the
expiration of three (3) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date.

 

Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the
exercise of an Option within the applicable time periods set forth in this
Section is prevented by the provisions of Section 12 below, the Option shall
remain exercisable until thirty (30) days after the date such exercise first
would no longer be prevented by such provisions, but in any event no later than
the Option Expiration Date.

 

Transferability of Options. During the lifetime of the Optionee, an Option shall
be exercisable only by the Optionee or the Optionee’s guardian or legal
representative. An Option shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Optionee or the Optionee’s beneficiary, except
transfer by will or by the laws of descent and distribution. Notwithstanding the

 

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foregoing, to the extent permitted by the Committee, in its discretion, and set
forth in the this agreement evidencing such Option, an Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 under the Securities Act.

 

Leave of Absence. The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence taken by the recipient of any option. Without limiting
the generality of the foregoing, the Committee shall be entitled to determine
(i) whether or not any such leave of absence shall constitute a termination of
employment within the meaning of the Plan and (ii) the impact, if any, of any
such leave of absence on the grant of options under the Plan theretofore made to
any recipient who takes such leave of absence.

 

4.              CHANGES IN CAPITALIZATION

 

Adjustments for Changes in Capital Structure. Subject to any required action by
the stockholders of the Company, in the event of any change in the Stock
effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of stock, exchange of stock, or similar change
in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other than
Stock (excepting normal cash dividends) that has a material effect on the Fair
market value of the Stock, appropriate and proportionate adjustments shall be
made in the number and class of stock subject to the Plan and to any outstanding
Awards, and in the exercise or purchase price per share of any outstanding
Awards in order to prevent dilution or enlargement of Optionee’s rights under
the Plan. For purposes of the foregoing, conversion of any convertible
securities of the Company shall not be treated as effected without receipt of
consideration by the Company. If a majority of the stock which are of the same
class as the stock that are subject to outstanding Awards are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) stock of another corporation (the New Stock), the Committee may
unilaterally amend the outstanding Awards to provide that such Awards are for
New Stock. In the event of any such amendment, the number of shares of stock
subject to, and the exercise or purchase price per share of, the outstanding
Awards shall be adjusted in a fair and equitable manner as determined by the
Committee, in its discretion.

 

Fractional Stock. The Company shall not be required to issue fractional shares
of stock upon the exercise or settlement of any Award. Any fractional share
resulting from an adjustment pursuant to this Section shall be rounded down to
the nearest whole number, and the exercise price per share shall be rounded up
to the nearest whole cent. In no event may the exercise price of any Award be
decreased to an amount less than the par value, if any, of the stock subject to
the Award. The Committee in its sole discretion, may also make such adjustments
in the terms of any Award to reflect, or related to, such changes in the capital
structure of the Company or distributions as it deems appropriate. The
adjustments determined by the Committee pursuant to this Section shall be final,
binding and conclusive.

 

5.              FURTHER CONDITIONS OF EXERCISE

 

Representations. The Optionee understands that unless prior to the exercise of
the option the Stock issuable upon such exercise have been registered with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, the notice of exercise shall be accompanied by a representation or
agreement of the individual exercising the option to the Company to the effect
that such stock is being acquired for investment and not with a view to the
resale or distribution thereof or such other documentation as may be required by
the Company unless in the opinion of counsel to the Company such representation,
agreement or documentation is not necessary to comply with the said Act.

 

Compliance Requirement. The Optionee understands that the Company shall not be
obligated to deliver any shares of the Stock until they have been listed on each
securities exchange on which the Stock may then be listed or until there has
been qualification under or compliance with such state or federal laws, rules or
regulations as the Company may deem applicable.

 

Restrictions on Resale. The Optionee understands that certain officers and
directors of the Company may be deemed to be “affiliates” of the Company as that
term is defined under the Securities Act. The Stock acquired under the Plan by
an affiliate may be reoffered or resold in the United States only pursuant to an
effective registration statement or pursuant to Rule 144 under the Securities
Act or another exemption from the registration requirements of the Securities
Act.

 

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6.              CHANGE IN CONTROL

 

Effect of Change in Control on Awards. Subject to the requirements and
limitations of Section 409A if applicable, the Committee may provide for any one
or more of the following:

 

(a) Accelerated Vesting. The Committee may, take such actions as it deems
appropriate to provide for the acceleration of the exercisability, vesting
and/or settlement in connection with such Change in Control of each or any
outstanding Award or portion thereof and stock acquired pursuant thereto upon
such conditions, including termination of the Optionee’s Service prior to, upon,
or following such Change in Control, to such extent as the Committee shall
determine. Change in Control shall be defined as set forth in Section 2.1(f) of
the Plan which is intended to mirror Section 409A of the Code.

 

(b) Assumption, Continuation or Substitution. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent thereof, as the case may be (the “Acquiror”),
may, without the consent of any Optionee, either assume or continue the
Company’s rights and obligations under each or any Award or portion thereof
outstanding immediately prior to the Change in Control or substitute for each or
any such outstanding Award or portion thereof a substantially equivalent award
with respect to the Acquiror’s stock, as applicable. For purposes of this
Section, if so determined by the Committee, in its discretion, an Award
denominated in Stock shall be deemed assumed if, following the Change in
Control, the Award confers the right to receive, subject to the terms and
conditions of the Plan and the applicable Award Agreement, for each share of
Stock subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective date
of the Change in Control was entitled; provided, however, that if such
consideration is not solely stock of the Acquiror, the Committee may, with the
consent of the Acquiror, provide for the consideration to be received upon the
exercise or settlement of the Award, for each share of Stock subject to the
Award, to consist solely of stock of the Acquiror equal in Fair market value to
the per share consideration received by holders of Stock pursuant to the Change
in Control. If any portion of such consideration may be received by holders of
Stock pursuant to the Change in Control on a contingent or delayed basis, the
Committee may, in its sole discretion, determine such Fair market value per
share as of the time of the Change in Control on the basis of the Committees
good faith estimate of the present value of the probable future payment of such
consideration. Any Award or portion thereof which is neither assumed or
continued by the Acquiror in connection with the Change in Control nor exercised
or settled as of the time of consummation of the Change in Control shall
terminate and cease to be outstanding effective as of the time of consummation
of the Change in Control.

 

(c) Cash-Out of Awards. The Committee may, in its discretion and without the
consent of any Optionee, determine that, upon the occurrence of a Change in
Control, each or any Award or a portion thereof outstanding immediately prior to
the Change in Control and not previously exercised or settled shall be canceled
in exchange for a payment with respect to each vested share (and each unvested
share, if so determined by the Committee) of Stock subject to such canceled
Award in (i) cash, (ii) stock of the Company or of a corporation or other
business entity a party to the Change in Control, or (iii) other property which,
in any such case, shall be in an amount having a Fair market value equal to the
Fair market value of the consideration to be paid per share of Stock in the
Change in Control, reduced by the exercise or purchase price per share, if any,
under such Award. If any portion of such consideration may be received by
holders of Stock pursuant to the Change in Control on a contingent or delayed
basis, the Committee may, in its sole discretion, determine such Fair market
value per share as of the time of the Change in Control on the basis of the
Committees good faith estimate of the present value of the probable future
payment of such consideration. In the event such determination is made by the
Committee, the amount of such payment (reduced by applicable withholding taxes,
if any) shall be paid to Optionees in respect of the vested portions of their
canceled Awards as soon as practicable following the date of the Change in
Control and in respect of the unvested portions of their canceled Awards in
accordance with the vesting schedules applicable to such Awards.

 

(d)         Federal Excise Tax Under Section 4999 of the Code.

 

(i) Excess Parachute Payment. In the event that any acceleration of vesting
pursuant to an Award and any other payment or benefit received or to be received
by a Optionee would subject the Optionee to any excise tax pursuant to
Section 4999 of the Code due to the characterization of such acceleration of
vesting, payment or benefit as an excess parachute payment under Section 280G of
the Code, the Optionee may elect, in his or her sole discretion, to reduce the
amount of any acceleration of vesting called for under the Award in order to
avoid such characterization.

 

(ii) Determination by Independent Accountants. To aid the Optionee in making any
election called for under Section 12.2(a) of the Plan, no later than the date of
the occurrence of any event that might reasonably be anticipated to result in an
excess parachute payment to the Optionee as described in Section 12.2(a) of the
Plan, the Company shall request a determination in writing by independent public
accountants selected by the Company (the

 

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Accountants). As soon as practicable thereafter, the Accountants shall determine
and report to the Company and the Optionee the amount of such acceleration of
vesting, payments and benefits which would produce the greatest after-tax
benefit to the Optionee. For the purposes of such determination, the Accountants
may rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish
to the Accountants such information and documents as the Accountants may
reasonably request in order to make their required determination. The Company
shall bear all fees and expenses the Accountants may reasonably charge in
connection with their services contemplated by this Section 12.2(b) of the Plan.

 

7. FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE AND EXERCISE OF OPTIONS

 

This summary of the principal U.S. federal income tax consequences generally
applicable to option awards under the Plan does not purport to consider all of
the possible U.S. federal tax consequences of the awards and is not intended to
reflect the particular tax position of any award recipient. This summary is
based upon the U.S. federal tax laws and regulations now in effect and as
currently interpreted and does not take into account possible changes in such
tax laws or such interpretations, any of which may be applied retroactively.
Award recipients are strongly advised to consult their own tax advisors for
additional information.

 

Grant of an Option.  The grant of an option is not expected to result in any
taxable income for the recipient as of the date of the grant, except that in the
event non-statutory options are granted with an exercise price lower than the
then-current fair market value of the Stock, the difference between the exercise
price and the then-current fair market value may be treated as deferred
compensation income recognized as of the date the non-statutory options are
granted.

 

Exercise of Incentive Stock Option.  The holder of an incentive stock option
generally will have no taxable income upon exercising the option if the
rules for Incentive Stock Options under Section 422 of the Code and accompanying
regulations are followed (except that a tax liability may arise pursuant to the
alternative minimum tax), and the Company will not be entitled to a tax
deduction.

 

Exercise of Nonqualified Stock Option.  Generally, subject to Code Section 409A,
upon exercising a nonqualified stock option (which can occur if the proper
rules for Incentive Stock Options under Section 422 of the Code and accompanying
regulations are not followed—see below), the award recipient must recognize
ordinary income equal to the excess of the fair market value of the stock
acquired on the date of exercise over the exercise price. The income will be
treated as compensation income subject to payroll and withholding tax
obligations. The Company would be entitled to a compensation deduction in the
amount of income recognized by the award recipient.

 

Disposition of Stock Acquired Through an Option.  The tax consequence to a
holder of an option upon a disposition of stock acquired through the exercise of
an option will depend on how long the stock has been held and upon whether such
stock was acquired by exercising an incentive stock option or by exercising a
nonqualified stock option.

 

Generally, the disposition of stock which was acquired by exercise of an
incentive stock option will be taxable as long-term capital gain or loss if the
award recipient disposes of the stock more than two years after the option was
granted and at least one year after exercising the option. If the award
recipient fails to satisfy the holding period requirements for treatment as an
incentive stock option, a disposition will result in any gain being treated as
compensation income subject to ordinary tax rates. If the award recipient is
still an employee of the Company at the time of the disposition, the amount of
gain treated as compensation will also be subject to payroll and withholding
taxes.

 

If an award recipient disposes of stock acquired through the exercise of a
nonqualified option, any gain or loss will be treated as a capital gain or loss.
To the extent such stock has been held for at least one year after exercise of
the nonqualified option, the gain or loss will be treated as long-term capital
gain or loss.

 

Generally, there will be no tax consequence to the Company in connection with
the disposition of stock acquired under an option, except that the Company may
be entitled to a tax deduction in the case of the disposition of stock acquired
under an incentive stock option before the applicable incentive stock option
holding periods set forth in the Code have been satisfied or other disqualifying
event occurs to make the options become nonqualified stock options.

 

The above description is not meant to constitute specific tax advice. For that,
the reader should consult his or her individual tax advisor. The Company does
not intend, through this Agreement or the Plan, to provide tax advice.

 

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Application of Section 16 of the Securities Exchange Act of 1934.  Special
rules may apply in the case of individuals subject to Section 16 of the
Securities Exchange Act of 1934, as amended. In particular, unless a special
election is made pursuant to the Code, stock received pursuant to the exercise
of a stock option may be treated as restricted as to transferability and subject
to a substantial risk of forfeiture for a period of up to six months after the
date of exercise. Accordingly, the amount of any ordinary income recognized, and
the amount of the Company’s tax deduction, are determined as of the end of such
period.

 

Delivery of Stock to Satisfy Tax Obligation.  Under the Plan, Optionees may
deliver shares of Stock (either stock received upon the receipt or exercise of
the award or stock previously owned by the holder of the option) to the Company
to satisfy federal and state tax obligations unless the Board provides to the
contrary in the award agreement.

 

No Acceleration of Distributions. Notwithstanding anything to the contrary
herein, this Plan does not permit the acceleration of the time or schedule of
any distribution under this Plan pursuant to any Award subject to Section 409A
of the Code, except as provided by Section 409A and Section 409A Regulations.

 

Tax Withholding in General. The Company shall have the right to deduct from any
and all payments made under the Plan, or to require the Optionee, through
payroll withholding, cash payment or otherwise, to make adequate provision for,
the federal, state, local and foreign taxes, if any, required by law to be
withheld by the Company with respect to an Award or the stock acquired pursuant
thereto. The Company shall have no obligation to deliver Stock, to release Stock
from an escrow established pursuant to an Award Agreement, or to make any
payment in cash under the Plan until the Company’s tax withholding obligations
have been satisfied by the Optionee.

 

Withholding in Shares of Stock. The Company shall have the right, but not the
obligation, to deduct from the Stock issuable to Optionee upon the exercise or
settlement of an Award, or to accept from the Optionee the tender of, a number
of whole Stock having a Fair market value, as determined by the Company, equal
to all or any part of the tax withholding obligations of the Company. The Fair
market value of any Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates.

 

Deferral and/or Distribution Elections. See the Plan document for requirements
pertaining to deferral and / or distribution elections.

 

8.              EFFECTIVE DATE AND TERM; TERMINATION, MODIFICATION AND
AMENDMENT.

 

Life of the Plan. The Plan shall became effective on December  8, 2011 on the
date it was approved by the Board of Directors of the Company and the Plan (but
not options granted under the Plan) shall terminate ten (10) years from the date
of its adoption by the Board (December 8, 2021) . The Plan may from time to time
be terminated, modified or amended by the affirmative vote of the holders of a
majority of the outstanding stock of the Company’s Stock entitled to vote
thereon. See the Plan for additional rules pertaining to the governance of the
Plan.

 

Amendment Protocols. The Committee may, without further action by the
shareholders and without receiving further consideration from the Optionees,
amend the Plan or condition or modify grants of options under the Plan in
response to changes in securities or other laws or rules, regulations or
regulatory interpretations thereof applicable to the Plan or to comply with NASD
rules or requirements. Except as provided by the next sentence, no amendment,
suspension or termination of the Plan may adversely affect any then outstanding
Award without the consent of the Optionee. Notwithstanding any other provision
of the Plan or any Award Agreement to the contrary, the Committee may, in its
sole and absolute discretion and without the consent of any Optionee, amend the
Plan or any Award Agreement, to take effect retroactively or otherwise, as it
deems necessary or advisable for the purpose of conforming the Plan or such
Award Agreement to any present or future law, regulation or rule applicable to
the Plan, including, but not limited to, Section 409A of the Code and all
applicable guidance promulgated thereunder.

 

9.              COMPLIANCE WITH SECURITIES LAW.

 

The grant of Awards and the issuance of  Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Award may be exercised or stock issued pursuant to an Award unless (a) a
registration statement under the Securities Act shall at the time of such
exercise or issuance be in effect with respect to the stock issuable pursuant to
the Award or (b) in the opinion of

 

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legal counsel to the Company, the stock issuable pursuant to the Award may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company’s legal counsel to be necessary to the lawful issuance and
sale of any stock hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such stock as to which such requisite
authority shall not have been obtained. As a condition to issuance of any Stock,
the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

 

10.       MISCELLANEOUS PROVISIONS.

 

Repurchase Rights. Stock issued under the Plan may be subject to one or more
repurchase options, or other conditions and restrictions as determined by the
Committee in its discretion at the time the Award is granted. The Company shall
have the right to assign at any time any repurchase right it may have, whether
or not such right is then exercisable, to one or more persons as may be selected
by the Company. Upon request by the Company, each Optionee shall execute any
agreement evidencing such transfer restrictions prior to the receipt of  Stock
hereunder and shall promptly present to the Company any and all certificates
representing Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

 

Forfeiture Events.

 

(a) The Optionee’s rights, payments, and benefits with respect to an Award shall
be subject to reduction, cancellation, forfeiture, or recoupment upon the
occurrence of specified events as detailed in the Plan, in addition to any
otherwise applicable vesting or performance conditions of an Award. Such events
may include, but shall not be limited to, termination of Service for Cause or
any act by Optionee, whether before or after termination of Service, that would
constitute Cause for termination of Service.

 

(b) If the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, any Optionee who
knowingly or through gross negligence engaged in the misconduct, or who
knowingly or through gross negligence failed to prevent the misconduct, and any
Optionee who is one of the individuals subject to automatic forfeiture under
Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the
amount of any payment in settlement of an Award earned or accrued during the
twelve- (12-) month period following the first public issuance or filing with
the United States Securities and Exchange Commission (whichever first occurred)
of the financial document embodying such financial reporting requirement.

 

Provision of Information. Each Optionee shall be given access to information
concerning the Company equivalent to that information generally made available
to the Company’s stockholders.

 

Rights as Employee. No person, even though eligible pursuant to Section 5 of the
Plan, shall have a right to be selected as an Optionee, or, having been so
selected, to be selected again as a Optionee. Nothing in the Plan or any Award
granted under the Plan shall confer on any Optionee a right to remain an
Employee or interfere with or limit in any way any right of a Company to
terminate the Optionee’s Service at any time. To the extent that an Employee of
a Company other than the Company receives an Award under the Plan, that Award
shall in no event be understood or interpreted to mean that the Company is the
Employee’s employer or that the Employee has an employment relationship with the
Company.

 

Delivery of Title to Stock. Subject to any governing rules or regulations, the
Company shall issue or cause to be issued the stock acquired pursuant to an
Award and shall deliver such stock to or for the benefit of the Optionee by
means of one or more of the following: (a) by delivering to the Optionee
evidence of book entry Stock credited to the account of the Optionee, (b) by
depositing such Stock for the benefit of the Optionee with any broker with which
the Optionee has an account relationship, or (c) by delivering such  Stock to
the Optionee in certificate form.

 

Retirement and Welfare Plans. Neither Awards made under this Plan nor  Stock or
cash paid pursuant to such Awards shall be included as compensation for purposes
of computing the benefits payable to any Optionee under the Company’s retirement
plans (both qualified and non-qualified) or welfare benefit plans unless such
other plan expressly provides that such compensation shall be taken into account
in computing such benefits.

 

Severability. If any one or more of the provisions (or any part thereof) of this
Plan shall be held invalid, illegal or unenforceable in any respect, such
provision shall be modified so as to make it valid, legal and enforceable, and
the validity, legality and enforceability of the remaining provisions (or any
part thereof) of the Plan shall not in any way be affected or impaired thereby.

 

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No Constraint on Corporate Action. Nothing in this Plan shall be construed to:
(a) limit, impair, or otherwise affect the Company’s or another Participating
Company’s right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (b) limit the right or power of the Company or another
Company to take any action which such entity deems to be necessary or
appropriate.

 

Unfunded Obligation. Optionees shall have the status of general unsecured
creditors of the Company. Any amounts payable to Optionees pursuant to the Plan
shall be unfunded and unsecured obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974 and
Section 409A of the Code and subsequent statutes and regulations. No Company
shall be required to segregate any monies from its general funds, or to create
any trusts, or establish any special accounts with respect to such obligations.
The Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any
trust or any Optionee account shall not create or constitute a trust or
fiduciary relationship between the Committee or any Company and  Optionee, or
otherwise create any vested or beneficial interest in any Optionee or the
Optionee’s creditors in any assets of any Participating Company. The Optionees
shall have no claim against any Company for any changes in the value of any
assets which may be invested or reinvested by the Company with respect to the
Plan.

 

Counterparts. This Agreement may be executed in counterparts each of which shall
be deemed to be an original but all of which taken together shall constitute one
and the same agreement.

 

Choice of Law and Venue. Except to the extent governed by applicable federal
law, the validity, interpretation, construction and performance of the Plan and
each Award Agreement shall be governed by the laws of the State of Delaware,
without regard to its conflict of law rules. Exclusive jurisdiction shall be in
the Courts of the State of Illinois.

 

11.       OPTIONEE’S REPRESENTATIONS

 

By receipt of this Option, by its execution, and by its exercise in whole or in
part, Optionee represents to the Company that Optionee understands that:

 

a.              Both this Option and any Stock purchased upon its exercise are
securities, the issuance by the Company of which requires compliance with
federal and state securities laws;

 

b.              These securities are made available to Optionee only on the
condition that Optionee makes the representations contained in this Section 11
to the Company;

 

c.               Optionee has made a reasonable investigation of the affairs of
the Company sufficient to be well informed as to the rights and the value of
these securities;

 

d.              Optionee understands that the securities have not been
registered under the Securities Act of 1933, as amended (the “Act”) in reliance
upon one or more specific exemptions contained in the Act, which may include
reliance on rules promulgated under the Act, if available, or which may depend
upon (a) Optionee’s bona fide investment intention in acquiring these
securities; (b) Optionee’s intention to hold these securities in compliance with
federal and state securities laws; (c) Optionee having no present intention of
selling or transferring any part thereof (recognizing that the Option is not
transferable) in violation of applicable federal and state securities laws; and
(d) there being certain restrictions on transfer of the Stock subject to the
Option;

 

e.               Optionee understands that the Stock subject to this Option, in
addition to other restrictions on transfer, must be held indefinitely unless
subsequently registered under the Act, or unless an exemption from registration
is available; the usual exemption from registration, is only available after the
satisfaction of certain holding periods and in the presence of a public market
for the Stock; that there is no certainty that a public market for the Stock
will exist, and that otherwise it will be necessary that the Stock be sold
pursuant to another exemption from registration which may be difficult to
satisfy; and

 

f.                Optionee understands that the certificate representing the
Stock will bear a legend prohibiting their transfer in the absence of their
registration or the opinion of counsel for the Company that registration is not
required, and a legend prohibiting their transfer in compliance with applicable
state securities laws unless otherwise exempted.

 

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g.               Optionee shall have sole responsibility to pay the necessary
taxes connected with an option grant and the Company shall have no
responsibility thereunder except to provide the necessary annual reporting form,
if applicable.

 

h.              By accepting this Award, the Optionee voluntarily acknowledges
and consents to the collection, use, processing and transfer of personal data as
described in this section. The Optionee is not obliged to consent to such
collection, use, processing and transfer of personal data. However, failure to
provide the consent may affect the Optionee’s ability to participate in the
Plan. The Corporation holds certain personal information about the Optionee,
which may include the Optionee’s name, home address and telephone number,
facsimile number, e-mail address, family size, marital status, sex, beneficiary
information, emergency contacts, passport/visa information, age, language
skills, driver’s license information, date of birth, birth certificate, social
security number or other employee identification number, nationality, C.V. (or
resume), wage history, employment references, job title, employment or severance
contract, current wage and benefit information, personal bank account number,
tax related information, plan or benefit enrollment forms and elections, equity
or benefit statements, any shares of stock or directorships in the Company,
details of all equity awards or any other entitlements to shares of stock
awarded, canceled, purchased, vested, unvested or outstanding in the Optionee’s
favor, for the purpose of managing and administering the Plan (“Data”). The
Company will transfer Data amongst themselves as necessary for the purpose of
implementation, administration and management of the Optionee’s participation in
the Plan, and the Company may further transfer Data to any third parties
assisting the Company in the implementation, administration and management of
the Plan. These recipients may be located throughout the world, including the
United States of America. The Optionee authorizes such recipients to receive,
possess, use, retain and transfer the Data, in electronic or other form, for the
purposes of implementing, administering and managing the Optionee’s
participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of
shares of Stock or cash on the Optionee’s behalf to a broker or other third
party with whom the Optionee may elect to deposit any lump sum cash payment or
shares of Stock acquired pursuant to the Plan. The Optionee may, at any time,
review Data, require any necessary amendments to it or withdraw the consents
herein in writing by contacting the in house legal counsel for the Company;
however, withdrawing the Optionee’s consent may affect the Optionee’s ability to
participate in the Plan.

 

12.       MARKET STANDOFF

 

Unless the Board of Directors otherwise consents, Optionee agrees hereby not to
sell or otherwise transfer any Stock or other securities of the Company during
the 180 day period following the effective date of a registration statement of
the Company filed under the Act; provided, however, that such restriction shall
apply only to the first two registration statements of the Company to become
effective under the Act which includes securities to be sold on behalf of the
Company to the public in an underwritten public offering under the Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180-day period.

 

13.       COMPLETE AGREEMENT

 

This Agreement constitutes the entire agreement between the parties with respect
to its subject matter, and supersedes all other prior or contemporaneous
agreements and understandings both oral or written; subject, however, that in
the event of any conflict between this Agreement and the Plan, the Plan shall
govern. This Agreement may only be amended in a writing signed by the Company
and the Optionee.

 

14.       CONFIDENTIALITY

 

The Optionee agrees to not disclose the existence or terms of this Agreement to
any other employees of the Company or third parties with the exception of the
Optionee’s accountants, attorneys, or spouse, and shall ensure that none of them
discloses such existence or terms to any other person, except as required to
comply with legal process.

 

15.       NOTICES

 

Any notice required to be given or delivered to the Company under the terms of
this Agreement shall be in writing and addressed to the in house legal counsel
of the Company at its principal corporate offices. Any notice required to be
given or delivered to Optionee may be either a) delivered in electronic form or
b) may be in delivered in writing and addressed to Optionee at the address
indicated above or to such other address as such party may designate in

 

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writing from time to time to the Company. All notices shall be deemed to have
been given or delivered upon: personal delivery; ten business days after deposit
in the United States of America mail by certified or registered mail (return
receipt requested); ten business day after deposit with any return receipt
express courier (prepaid); or five business days after transmission by fax
provided that a telephonic notice is also provided from our Corporate
Headquarters in Lombard, Illinois, (630) 620-4787.

 

The Company may, in its sole discretion, decide to deliver any documents related
to the plan or options awarded under the Plan or stock acquired pursuant to the
Plan or future awards under the Plan by electronic means or request Optionee’s
consent to participate in the Plan by electronic means. Optionee hereby consents
to receive such documents by electronic delivery and agrees to participate in
the Plan through an on-line or electronic system established and maintained by
the Company or another third party designated by the Company.

 

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES OF STOCK PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING STOCK HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT THIS OPTION, THE COMPANY’S PLAN WHICH IS INCORPORATED HEREIN BY
REFERENCE, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT
TO TERMINATE OPTIONEE’S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH
OR WITHOUT CAUSE.

 

Optionee acknowledges receipt of a copy of the Plan, represents that Optionee is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of this Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board or of the
Committee upon any questions arising under the Plan.

 

Acknowledgement of Optionee

 

 

Optionee Signature

Date

 

 

CONSENT OF SPOUSE IF APPLICABLE

 

The undersigned spouse of the Optionee to the foregoing Stock Option Agreement
acknowledges on his or her own behalf that: I have read the foregoing Stock
Option Agreement and I know its contents. I hereby consent to and approve of the
provisions of the Stock Option Agreement, and agree that the Stock issued upon
exercise of the options covered thereby and my interest in them are subject to
the provisions of the Stock Option Agreement and that I will take no action at
any time to hinder operation of the Stock Option Agreement on those Shares of
Stock or my interest in them.

 

 

 

NAME OF SPOUSE (IF APPLICABLE)

 

 

 

 

 

[ADDRESS], [CITY], [STATE], [ZIP]

 

 

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The Corporation and the Optionee hereby agree to the terms and conditions of
this Agreement and have executed it as of the Date of Grant. Approval by
Optionee

 

 

 

 

 

 

 

Name of Optionee

 

Signature of Optionee

 

Date of Grant

 

 

Approval of Pernix Group, Inc. or of the Compensation Committee of the Board of
Directors *

 

 

 

Chairman of the Board of Directors

N/A

 Ralph Beck

 

 

 

 

 

 

 

 

 

Director

N/A

Don Gunther

 

 

 

 

 

 

 

 

 

Director

N/A

Carl Smith

 

 

 

 

 

 

 

 

 

President and Chief Executive Officer

 

Nidal Z. Zayed

 

 

 

 

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*The approval of the Compensation Committee is required on this Agreement if the
Option award is being granted to the President and Chief Executive Officer of
Pernix Group, Inc. For other Option awards, the approval of the President and
Chief Executive Officer of Pernix Group, Inc. is required on this Agreement and
the Compensation Committee may approve the individual award in the form of a
Compensation Committee Board Resolution.

 

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Exhibit A

 

PERNIX GROUP, INC. 2012 INCENTIVE STOCK OPTION PLAN

 

EXERCISE NOTICE

 

COMPANY NAME:  Pernix Group, Inc.

 

Attention:

 

1. Exercise of Option. Effective as of today,                       , 20    ,
the undersigned Optionee hereby elects to exercise Optionee’s option to purchase
                 Shares of the Common Stock of Pernix Group, Inc. (the Company.)
under and pursuant to the 2012 Incentive Stock Option Plan (the “Plan”) and the
Stock Option Award Agreement dated                 ,            (the “Option
Agreement”).

 

2. Delivery of Payment. Purchaser herewith delivers to the Company the full
purchase price of the Shares, as set forth in the Option Agreement.

 

3. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

 

4. Rights as Shareholder. Until the issuance of the Shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a shareholder shall exist with respect to the optioned Stock, notwithstanding
the exercise of the Option. The Shares shall be issued to the Optionee as soon
as practicable after the Option is exercised. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date of
issuance except as provided under the terms of the Plan.

 

5. Tax Consultation. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee’s purchase or disposition of the Shares. 
Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.

 

6. Successors and Assigns. The Company may assign any of its rights under this
Exercise Notice to single or multiple assignees, and this Exercise Notice shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Exercise Notice shall be
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.

 

7. Interpretation. Any dispute regarding the interpretation of this Exercise
Noticeshall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

 

8. Governing Law; Severability. This Exercise Notice is governed by the laws of
the State of Delaware.

 

9. Entire Agreement. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Notice, the Plan, and the Option Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and

Optionee.

 

Submitted by:

Accepted by:

 

Pernix Group, Inc.

 

 

 

Signature By

 

 

 

Print Name Title

 

 

Address

Address

Date Received

 

 

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