EXHIBIT 10.23
 
DIGITAL ALLY, INC.
 
2011 Stock OPTION AND RESTRICTED STOCK PLAN
1.           PURPOSES.
 
(a) Background. This 2011 Stock Option and Restricted Stock Plan was adopted on
March 18, 2011 by the Board of Directors, subject to the approval of the
Company’s stockholders. Options granted under the Plan prior to the
stockholders’ approval will be effective upon approval of the stockholders as of
their respective dates of grant.
 
(b) Eligible Award Recipients. The persons eligible to receive Awards are the
Employees and Directors of the Company and its Affiliates.
 
(c) Available Awards. The purpose of the Plan is to provide a means by which
eligible recipients may be given an opportunity to benefit from increases in
value of the Common Stock through the granting of the following: (i) Incentive
Stock Options, (ii) Nonqualified Stock Options, (iii) rights to acquire
restricted stock, and (iv) stock appreciation rights.
 
(d) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Awards, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
 
2.           DEFINITIONS.
 
(a) “Affiliate” means any entity that controls, is controlled by, or is under
common control with the Company.
 
(b) “Award” means any right granted under the Plan, including an Option, a right
to acquire restricted Common Stock, and a stock appreciation right.
 
(c) “Award Agreement” means a written agreement between the Company and a holder
of an Award (other than an Option) evidencing the terms and conditions of an
individual Award grant.
 
(d) “Board” means the board of directors of the Company.
 
(e) “Code” means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
 
(f) “Committee” means a pre-existing or newly formed committee of members of the
Board appointed by the Board in accordance with subsection 3(c).
 
(g) “Common Stock” means the shares of the Company’s common stock par value
$0.001 and other rights with respect to such shares.
 
(h) “Company” means Digital Ally, Inc., a Nevada corporation.
 
(i) “Continuous Service” means that the Participant’s service with the Company
or an Affiliate, whether as an Employee or Director is not interrupted or
terminated. Unless otherwise provided in an Award Agreement or Option Agreement,
as applicable, the Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee or Director or a
change in the entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s service to the
Company or an Affiliate as an Employee or Director. The Board, in its sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence, including sick leave, military
leave or any other personal leave.
 
 
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(j) “Covered Employee” means the Company’s chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
 
(k) “Director” means a member of the Board of the Company.
 
(l) “Disability” means the Participant’s inability, due to illness, accident,
injury, physical or mental incapacity or other disability, to carry out
effectively the duties and obligations to the Company and its Affiliates
performed by such person immediately prior to such disability for a period of at
least six (6) months, as determined in the good faith judgment of the Board.
 
(m) “Dollars” or “$” means United States dollars.
 
(n) “Employee” means any person employed by the Company or an Affiliate. Service
as a Director or payment of a director’s fee by the Company or an Affiliate
alone shall not be sufficient to constitute “employment” by the Company or an
Affiliate.
 
(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(p) “Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:
 
(i) If the Common Stock is listed on any established stock exchange, or traded
on the Nasdaq Global Market, the Nasdaq Capital Market or the Nasdaq OTC
Bulletin Board, the Fair Market Value of the Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in Common Stock if such stock is traded on more than one such
exchange or market) on the last market trading day prior to the day of
determination, as reported by such exchange or market or such other source as
the Board reasonably deems reliable.
 
(ii) In the absence of such markets for the Common Stock, the Fair Market Value
shall be determined in good faith by the Board.
 
(q) “Incentive Stock Option” means an option designated as an incentive stock
option in an Option Agreement and that is granted in accordance with the
requirements of, and that conforms to the applicable provisions of, Section 422
of the Code.
 
(r) “Independent Director” means (i) a Director who satisfies the definition of
Independent Director or similar definition under the applicable stock exchange
or Nasdaq rules and regulations upon which the Common Stock is traded from time
to time and (ii) a Director who either (A) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” receiving compensation
for prior services (other than benefits under a tax qualified pension plan), was
not an officer of the Company or an “affiliated corporation” at any time and is
not currently receiving direct or indirect remuneration from the Company or an
“affiliated corporation” for services in any capacity other than as a Director
or (B) is otherwise considered an “outside director” for purposes of
Section 162(m) of the Code.
 
(s) “Nonqualified Stock Option” means an option that is not designated in an
Option Agreement as an Incentive Stock Option or was not granted in accordance
with the requirements of, and does not conform to the applicable provisions of,
Section 422 of the Code.
 
 
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(t) “Officer” means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
 
(u) “Option” means an Incentive Stock Option or a Nonqualified Stock Option
granted pursuant to the Plan.
 
(v) “Option Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
 
(w) “Optionholder” means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
 
(x) “Participant” means a person to whom an Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Award.
 
(y) “Plan” means this Digital Ally, Inc. 2011 Stock Option and Restricted Stock
Plan.
 
(z) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
 
(aa) “Securities Act” means the Securities Act of 1933, as amended.
 
(bb) “Ten Percent Stockholder” means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any parent corporation or any subsidiary corporation, both as defined in
Section 424 of the Code.
 
3.           ADMINISTRATION.
 
(a) Administration by Board. The Board shall administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c). The Board may, at any time and for any reason in its sole
discretion, rescind some or all of such delegation.
 
(b) Powers of Board. The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
 
(i) To determine from time to time which of the persons eligible under the Plan
shall be granted Awards; when and how each Award shall be granted; what type or
combination of types of Award shall be granted; the provisions of each Award
granted (which need not be identical), including the time or times when a person
shall be permitted to receive Common Stock pursuant to an Award; and the number
of shares of Common Stock with respect to which an Award shall be granted to
each such person.
 
(ii) To construe and interpret the Plan, Awards granted under it, Option
Agreements and Award Agreements, and to establish, amend and revoke rules and
regulations for their administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Option
Agreement or Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
 
(iii) To amend the Plan, an Award, an Award Agreement or an Option Agreement as
provided in Section 12, provided that the Board shall not amend the exercise
price of an option, the Fair Market Value of an Award or extend the term of an
Option or Award without obtaining the approval of the stockholders if required
by the rules of any stock exchange upon which the Common Stock is listed.
 
 
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(iv) Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Company which
are not in conflict with the provisions of the Plan.
 
(c) Delegation to Committee.
 
(i) General. The Board may delegate administration of the Plan and its powers
and duties thereunder to a Committee or Committees, and the term “Committee”
shall apply to any person or persons to whom such authority has been delegated.
Upon such delegation, the Committee shall have the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be deemed to include the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under this Plan, except
respecting matters under Rule 16b-3 of the Exchange Act or Section 162(m) of the
Code, or any rules or regulations issued thereunder, which are required to be
determined in the sole discretion of the Committee.
 
(ii) Committee Composition. A Committee shall consist solely of two or more
Independent Directors. Within the scope of its authority, the Board or the
Committee may (1) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant Awards to eligible
persons who are either (a) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such Award
or (b) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code, and/or (2) delegate to a committee of one or more
members of the Board who are not Independent Directors or to the Company’s Chief
Executive Officer the authority to grant Awards to eligible persons who are not
then subject to Section 16 of the Exchange Act.
 
(d) Effect of Board’s Decision; No Liability. All determinations,
interpretations and constructions made by the Board in good faith shall not be
subject to review by any person and shall be final, binding and conclusive on
all persons. No member of the Board or the Committee or any person to whom
duties hereunder have been delegated shall be liable for any action,
interpretation or determination made in good faith, and such persons shall be
entitled to full indemnification and reimbursement consistent with applicable
law and in the manner provided in the Company’s Articles of Incorporation and
Bylaws, as the same may be amended from time to time, or as otherwise provided
in any agreement between any such member and the Company.
 
4.           STOCK SUBJECT TO THE PLAN.
 
(a) Stock Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the shares of Common Stock that may be
issued pursuant to Awards shall not exceed in the aggregate five hundred
thousand (500,000) shares of Common Stock.
 
(b) Reversion of Stock to the Stock Reserve. If any Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Award
shall revert to and again become available for issuance under the Plan.
 
(c) Source of Stock. The Common Stock subject to the Plan may be unissued stock
or reacquired stock, bought on the market or otherwise.
 
5.           ELIGIBILITY.
 
(a) Eligibility for Specific Awards. Incentive Stock Options may be granted only
to Employees. Awards other than Incentive Stock Options may be granted to
Employees and Directors.
 
 
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(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
 
6.           OPTION PROVISIONS.
 
Each Option Agreement shall be subject to the terms and conditions of this Plan.
Each Option and Option Agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonqualified Stock Options at
the time of grant, and, if certificates are issued, a separate certificate or
certificates will be issued for the shares of Common Stock purchased on exercise
of each type of Option. The provisions of separate Options need not be
identical.
 
(a) Provisions Applicable to All Options.
 
(i) Consideration. The purchase price of the shares of Common Stock acquired
pursuant to an Option shall be paid as follows: (a) in cash or by certified or
official bank check, payable to the order of the Company, in the amount (the
“Purchase Price”) equal to the exercise price of the Option multiplied by the
number of shares plus payment of all taxes applicable upon such exercise; (b)
with shares owned by the Optionholder having a Fair Market Value at the time the
Option is exercised equal to the Purchase Price plus payment in cash of all
taxes applicable upon such exercise, with the prior approval of the Board;
(c) by surrendering to the Company the right to acquire a number of shares
having an aggregate value such that the amount by which the Fair Market Value of
such shares exceeds the aggregate exercise price is equal to the Purchase Price
plus payment in cash of all taxes applicable upon such exercise, with the prior
approval of the Board; (d) any combination of the foregoing; or (e) a manner
acceptable to the Board.
 
(ii) Vesting Generally. An Option may (A) vest, and therefore become
exercisable, in periodic installments that may, but need not, be equal, or
(B) be fully vested at the time of grant. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions, if any, of individual Options may vary. The
provisions of this subsection 6(a)(ii) are subject to any Option Agreement
provisions governing the minimum number of Common Stock as to which an Option
may be exercised.
 
(iii) Termination of Continuous Service. Unless otherwise provided in the Option
Agreement, in the event an Optionholder’s Continuous Service terminates (other
than upon the Optionholder’s death, Disability, retirement or as a result of a
Change of Control), all Options held by the Optionholder shall immediately
terminate; provided, however, that an Option Agreement may provide that if an
Optionholder’s Continuous Service is terminated for reasons other than for
cause, all vested Options held by such person shall continue to be exercisable
until the earlier of the expiration date of such Option or ninety (90) days
after the date of such termination. All such vested Options not exercised within
the period described in the preceding sentence shall terminate.
 
(iv) Disability or Death of Optionholder. Unless otherwise provided in the
Option Agreement, in the event of an Optionholder’s Disability or death, all
unvested Options shall immediately terminate, and all vested Options held by
such person shall continue to be exercisable for twelve months after the date of
such Disability or death. All such vested Options not exercised within such
twelve-month period shall terminate.
 
 (v) Retirement. Unless otherwise provided in the Option Agreement, in the event
of the Optionholder’s retirement, all unvested Options shall automatically vest
on the date of such retirement and all Options shall be exercisable for the
earlier of twelve (12) months after such retirement date or the expiration date
of such Options. All such Options not exercised within the period described in
the preceding sentence shall terminate.
 
 
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(b) Provisions Applicable to Incentive Stock Options.
 
(i) Term. Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted. Further, no grant of
an Incentive Stock Option shall be made under this Plan more than ten (10) years
after the date the Plan is approved by the stockholders of the Company.
 
(ii) Exercise Price of an Incentive Stock Option. Subject to the provisions of
subsection 5(b) regarding Ten Percent Stockholders, the exercise price of each
Incentive Stock Option shall be not less than one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted.
 
(iii) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder.
 
(iv) Incentive Stock Option $100,000 Limitation. Notwithstanding any other
provision of the Plan or an Option Agreement, the aggregate Fair Market Value of
the Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by an Optionholder in any calendar year, under the Plan or
any other option plan of the Company or its Affiliates, shall not exceed One
Hundred Thousand Dollars ($100,000). For this purpose, the Fair Market Value of
the Common Stock shall be determined as of the time an Option is granted. The
Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonqualified Stock Options.
 
(c) Provisions Applicable to Nonqualified Stock Options.
 
(i) Exercise Price of a Nonqualified Stock Option. The exercise price of each
Nonqualified Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted.
 
(ii) Transferability of a Nonqualified Stock Option. A Nonqualified Stock Option
shall be transferable, if at all, to the extent provided in the Option
Agreement. If the Option Agreement does not provide for transferability, then
the Nonqualified Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder.
 
7.           PROVISIONS OF AWARDS OTHER THAN OPTIONS.
 
(a) Restricted Stock Awards. Each restricted stock Award agreement shall be in
such form and shall contain such restrictions, terms and conditions, if any, as
the Board shall deem appropriate and shall be subject to the terms and
conditions of this Plan. The terms and conditions of restricted stock Award
Agreements may change from time to time, and the terms and conditions of
separate restricted stock Award Agreements need not be identical, but each
restricted stock Award Agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
 
(i) Consideration. A restricted stock Award may be awarded in consideration for
past services actually rendered, or for future services to be rendered, to the
Company or an Affiliate for its benefit.
 
(ii) Vesting. Common Stock awarded under the restricted stock Award Agreement
may (A) be subject to a vesting schedule to be determined by the Board or (B) be
fully vested at the time of grant.
 
 
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(iii) Termination of Participant’s Continuous Service. Unless otherwise provided
in the restricted stock Award Agreement, in the event a Participant’s Continuous
Service terminates prior to a vesting date set forth in the restricted stock
Award Agreement, any unvested restricted stock Award shall be forfeited and
automatically transferred to and reacquired by the Company at no cost to the
Company, and neither the Participant nor his or her heirs, executors,
administrators or successors shall have any right or interest in the restricted
stock Award. Notwithstanding the foregoing, unless otherwise provided in the
restricted stock Award agreement, in the event a Participant’s Continuous
Service terminates as a result of (A) being terminated by the Company for
reasons other than for cause, (B) death, (C) Disability, (D) retirement, or
(E) a Change of Control (subject to the provisions of Section 11(c) hereof),
then any unvested restricted stock Award shall vest immediately upon such date.
 
(iv) Transferability. Rights to acquire Common Stock under the restricted stock
Award Agreement shall be transferable by the Participant only upon such terms
and conditions as are set forth in the restricted stock Award Agreement, as the
Board shall determine in its discretion, so long as Common Stock awarded under
the restricted stock Award Agreement remain subject to the terms of the
restricted stock Award Agreement.
 
(b) Grant of Stock Appreciation Rights. Stock appreciation rights to receive in
shares of Common Stock the excess of the Fair Market Value of Common Stock on
the date the rights are surrendered over the Fair Market Value of Common Stock
on the date of grant may be granted to any Employee or Director selected by the
Board. A stock appreciation right may be granted (i) in connection and
simultaneously with the grant of another Award, (ii) with respect to a
previously granted Award, or (iii) independent of another Award. A stock
appreciation right shall be subject to such terms and conditions not
inconsistent with this Plan as the Board shall impose and shall be evidenced by
a written stock appreciation right agreement, which shall be executed by the
Participant and an authorized officer of the Company. The Board, in its
discretion, may determine whether a stock appreciation right is to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
and stock appreciation right agreements evidencing stock appreciation rights
intended to so qualify shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the Code. The
Board may, in its discretion and on such terms as it deems appropriate, require
as a condition of the grant of a stock appreciation right that the Participant
surrender for cancellation some or all of the Awards previously granted to such
person under this Plan or otherwise. A stock appreciation right, the grant of
which is conditioned upon such surrender, may have an exercise price lower (or
higher) than the exercise price of the surrendered Award, may contain such other
terms as the Board deems appropriate, and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, exercise period
or any other term or condition of such surrendered Award.
 
8.           AVAILABILITY OF STOCK. Subject to the restrictions set forth in
Section 4(a), during the terms of the Awards, the Company shall keep available
at all times the number of shares of Common Stock required to satisfy such
Awards.
 
9.           USE OF PROCEEDS FROM STOCK.
 
Proceeds from the sale of Common Stock pursuant to Awards shall constitute
general funds of the Company.
 
10.           MISCELLANEOUS.
 
(a) Exercise of Awards. Awards shall be exercisable at such times, or upon the
occurrence of such event or events as the Board shall determine at or subsequent
to grant. Awards may be exercised in whole or in part. Common Stock purchased
upon the exercise of an Award shall be paid for in full at the time of such
purchase.
 
(b) Acceleration of Exercisability and Vesting. The Board shall have the power
to accelerate the time at which an Award may first be exercised or the time
during which an Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Award stating the time at which it may
first be exercised or the time during which it will vest.
 
 
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(c) Stockholder Rights.
 
(i) Options. Unless otherwise provided in and upon the terms and conditions in
the Option Agreement, no Participant shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any Common Stock subject to
an Option unless and until such Participant has satisfied all requirements for
exercise of, and has exercised, the Option pursuant to its terms.
 
(ii) Restricted Stock. Unless otherwise provided in and upon the terms and
conditions in the restricted stock Award Agreement, a Participant shall have the
right to receive all dividends and other distributions paid or made respecting
such restricted stock, provided, however, no unvested restricted stock shall
have any voting rights of a stockholder respecting such unvested restricted
stock unless and until such unvested restricted stock become vested.
 
(d) No Employment or other Service Rights. Nothing in the Plan or any instrument
executed or Award granted pursuant thereto shall confer upon any Participant any
right to continue to serve the Company or an Affiliate in the capacity in effect
at the time the Award was granted, or any other capacity, or shall affect the
right of the Company or an Affiliate to terminate with or without notice and
with or without cause (i) the employment of an Employee or an Affiliate or
(ii) the service of a Director of the Company or an Affiliate.
 
(e) Withholding Obligations. If the Company has or will have a legal obligation
to withhold the taxes related to the grant, vesting or exercise of the Award,
such Award may not be granted, vested or exercised in whole or in part, unless
such tax obligation is first satisfied in a manner satisfactory to the Company.
To the extent provided by the terms of an Award Agreement or Option Agreement,
the Participant may satisfy any federal, state or local tax withholding
obligation relating to the exercise or acquisition of Common Stock under an
Award by any of the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment in Dollars;
(ii) authorizing the Company to withhold Common Stock from the Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of Common Stock under the Award, provided, however, that no shares of Common
Stock are withheld with a value exceeding the minimum amount of tax required to
be withheld by law; or (iii) delivering to the Company owned and unencumbered
Common Stock.
 
(f) Listing and Qualification of Stock. This Plan and the grant and exercise of
Awards hereunder, and the obligation of the Company to sell and deliver Common
Stock under such Awards, shall be subject to all applicable United States
federal and state laws, rules and regulations, and any other laws applicable to
the Company, and to such approvals by any government or regulatory agency as may
be required. The Company, in its discretion, may postpone the issuance or
delivery of Common Stock upon any exercise of an Award until completion of any
stock exchange listing, or the receipt of any required approval from any stock
exchange or other qualification of such Common Stock under any United States
federal or state law rule or regulation as the Company may consider appropriate,
and may require any individual to whom an Award is granted, such individual’s
beneficiary or legal representative, as applicable, to make such representations
and furnish such information as the Board may consider necessary, desirable or
advisable in connection with the issuance or delivery of the Common Stock in
compliance with applicable laws, rules and regulations.
 
(g) Non-Uniform Determinations. The Board’s determinations under this Plan
(including, without limitation, determinations of the persons to receive Awards,
the form, term, provisions, amount and timing of the grant of such Awards and of
the agreements evidencing the same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, Awards under
this Plan, whether or not such persons are similarly situated.
 
 
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11.           ADJUSTMENTS UPON CHANGES IN STOCK.
 
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of stock, exchange of
stock, change in corporate structure or other transaction), the Plan will be
appropriately adjusted in the class(es) and maximum number of securities subject
to the Plan pursuant to subsection 4(a) and the maximum number of securities
subject to award to any person pursuant to subsection 5(c), and the outstanding
Awards will be appropriately adjusted in the class(es) and number of securities
and price per stock of Common Stock subject to such outstanding Awards. The
Board shall make such adjustments, and its determination shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a transaction “without receipt of consideration” by the
Company.)
 
(b) Dissolution or Liquidation. In the event of a dissolution or liquidation of
the Company, then all outstanding Awards shall terminate immediately prior to
such event.
 
(c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of a
Change of Control (as defined below), any unvested Awards shall vest immediately
prior to the closing of the Change of Control, and the Board shall have the
power and discretion to provide for the Participant’s election alternatives
regarding the terms and conditions for the exercise of, or modification of, any
outstanding Awards granted hereunder, provided, however, such alternatives shall
not affect the then current exercise provisions without such Participant’s
consent. The Board may provide that Awards granted hereunder must be exercised
in connection with the closing of such transaction, and that if not so exercised
such Awards will expire. Any such determinations by the Board may be made
generally with respect to all Participants, or may be made on a case-by-case
basis with respect to particular Participants. For the purpose of this Plan, a
“Change of Control” shall have occurred in the event one or more persons acting
individually or as a group (i) acquires sufficient additional stock to
constitute more than fifty percent (50%) of (A) the total Fair Market Value of
all Common Stock issued and outstanding or (B) the total voting power of all
shares of capital stock authorized to vote for the election of directors;
(ii) acquires, in a twelve (12) month period, thirty-five percent (35%) or more
of the voting power of all shares of capital stock authorized to vote for the
election of directors, or alternatively a majority of the members of the board
is replaced during any twelve (12) month period by directors whose appointment
was not endorsed by a majority of the members of the board; or (iii) acquires,
during a twelve (12) month period, more than forty percent (40%) of the total
gross fair market value of all of the Company’s assets. Notwithstanding the
foregoing, the provisions of this Section 11(c) shall not apply to (i) any
transaction involving any stockholder that individually or as a group owns more
than fifty percent (50%) of the outstanding Common Stock on the date this Plan
is approved by the Company’s stockholders, until such time as such stockholder
first owns less than forty percent (40%) of the total outstanding Common Stock,
or (ii) any transaction undertaken for the purpose of reincorporating the
Company under the laws of another jurisdiction, if such transaction does not
materially affect the beneficial ownership of the Company’s capital stock.
 
12.           AMENDMENT OF THE PLAN AND AWARDS.
 
(a) Amendment of Plan. The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 11 relating to adjustments upon
changes in Common Stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any
applicable Nasdaq or securities exchange listing requirements.
 
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
 
 
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(c) Contemplated Amendments. It is expressly contemplated that the Board may
amend the Plan in any respect the Board deems necessary or advisable to provide
eligible Employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating
to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
 
(d) No Impairment of Rights. Rights under any Award granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless the
Participant consents in writing.
 
(e) Amendment of Awards. Subject to Section 3(b)(iii), the Board at any time,
and from time to time, may amend the terms of any one or more Awards; provided,
however, that the rights under any Award shall not be impaired by any such
amendment unless the applicable Participant consents in writing.
 
13.           TERMINATION OR SUSPENSION OF THE PLAN.
 
(a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the stockholders of the
Company. No Awards may be granted under the Plan while the Plan is suspended or
after it is terminated.
 
(b) No Impairment of Rights. Suspension or termination of the Plan shall not
impair rights and obligations under any Award granted while the Plan is in
effect except with the written consent of the Participant.
 
(c) Savings Clause. This Plan is intended to comply in all aspects with
applicable laws and regulations. In case any one or more of the provisions of
this Plan shall be held invalid, illegal or unenforceable in any respect under
applicable law or regulation, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby and
the invalid, illegal or unenforceable provision shall be deemed null and void;
however, to the extent permissible by law, any provision which could be deemed
null and void shall first be construed, interpreted or revised retroactively to
permit this Plan to be construed in compliance with all applicable laws so as to
foster the intent of this Plan.
 
14.           EFFECTIVE DATE OF PLAN.
 
The Plan shall become effective as determined by the Board, but no Award shall
be exercised (or, in the case of a restricted stock Award, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
 
15.           CHOICE OF LAW.
 
The law of the state of Nevada shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.
 
(The Plan was adopted by the Board of Directors on March 18, 2011).
 
 
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