EX-4.1



 






EXHIBIT 4.1




EARTHBLOCK TECHNOLOGIES, INC.




2006 DIRECTORS, OFFICERS AND CONSULTANTS

STOCK OPTION, STOCK WARRANT AND STOCK AWARD PLAN




SECTION 1. PURPOSE OF THE PLAN. The purpose of the 2006 Directors, Officers and Consultants Stock
Option, Stock Warrant and Stock Award Plan (“Plan”) is to maintain the ability of Earthblock
Technologies, Inc., a Nevada corporation (the “Company”) and its subsidiaries to attract and retain
highly qualified and experienced directors, employees and consultants and to give such directors,
employees and consultants a continued proprietary interest in the success of the Company and its
subsidiaries. In addition the Plan is intended to encourage ownership of common stock, $.001 par
value (“Common Stock”), of the Company by the directors, employees and consultants of the Company
and its Affiliates (as defined below) and to provide increased incentive for such persons to render
services and to exert maximum effort for the success of the Company’s business. The Plan provides
eligible employees and consultants the opportunity to participate in the enhancement of shareholder
value by the grants of warrants, options, restricted common or convertible preferred stock,
unrestricted common or convertible preferred stock and other awards under this Plan and to have
their bonuses and/or consulting fees payable in warrants, restricted common or convertible
preferred stock, unrestricted common or convertible preferred stock and other awards, or any
combination thereof. In addition, the Company expects that the Plan will further strengthen the
identification of the directors, employees and consultants with the stockholders. Certain options
and warrants to be granted under this Plan are intended to qualify as Incentive Stock Options
(“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), while
other options and warrants and preferred stock granted under this Plan will be nonqualified options
or warrants which are not intended to qualify as ISOs (“Nonqualified Options”), either or both as
provided in the agreements evidencing the options or warrants described in Section 5 hereof and
shares of preferred stock. As provided in the designation described in Section 7. Employees,
consultants and directors who participate or become eligible to participate in this Plan from time
to time are referred to collectively herein as “Participants”. As used in this Plan, the term
“Affiliates” means any “parent corporation” of the Company and any “subsidiary corporation” of the
Company within the meaning of Code Sections 424(e) and (f), respectively.



SECTION 2. ADMINISTRATION OF THE PLAN.




(a) Composition of Committee. The Plan shall be administered by the Board of Directors of the
Company (the “Board”). When acting in such capacity the Board is herein referred to as the
“Committee,” which shall also designate the Chairman of the Committee. If the Company is governed
by Rule 16b-3 promulgated by the Securities and Exchange Commission (“Commission”) pursuant to the
Securities Exchange Act of 1934, as amended (“Exchange Act”), no director shall serve as a member
of the Committee unless he or she is a “disinterested person” within the meaning of such Rule
16b-3.



(b) Committee Action. The Committee shall hold its meetings at such times and places as it may
determine. A majority of its members shall constitute a quorum, and all determinations of the
Committee shall be made by not less than a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be fully as effective as if it had
been made by a majority vote of its members at a meeting duly called and held. The Committee may
designate the Secretary of the Company or other Company employees to assist the Committee in the
administration of the Plan, and may grant authority to such persons to execute award agreements or
other documents on behalf of the Committee and the Company. Any duly constituted committee of the
Board satisfying the qualifications of this Section 2 may be appointed as the Committee.



 









 





(c) Committee Expenses. All expenses and liabilities incurred by the Committee in the
administration of the Plan shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants or other persons.



SECTION 3. STOCK RESERVED FOR THE PLAN. Subject to adjustment as provided in Section 5(d)(xiii)
hereof, the aggregate number of shares of Common Stock that may be optioned, subject to conversion
or issued under the Plan is 45,000,000. The shares subject to the Plan shall consist of authorized
but unissued shares of Common Stock and such number of shares shall be and is hereby reserved for
sale for such purpose. Any of such shares which may remain unsold and which are not subject to
issuance upon exercise of outstanding options or warrants or conversion of outstanding shares of
preferred stock at the termination of the Plan shall cease to be reserved for the purpose of the
Plan, but until termination of the Plan or the termination of the last of the options or warrants
granted under the Plan, whichever last occurs, the Company shall at all times reserve a sufficient
number of shares to meet the requirements of the Plan. Should any option or warrant expire or be
cancelled prior to its exercise in full, the shares theretofore subject to such option or warrant
may again be made subject to an option, warrant or shares of convertible preferred stock under the
Plan.



Immediately upon the grant of any option, warrant, shares of preferred stock or award, the number
of shares of Common Stock that may be issued or optioned under the Plan will be increased. The
number of shares of such increase shall be an amount such that immediately after such increase the
total number of shares issuable under the Plan and reserved for issuance upon exercise of
outstanding options, warrants or conversion of shares of preferred stock will equal 15% of the
total number of issued and outstanding shares of Common Stock of the Company. Such increase in the
number of shares subject to the Plan shall occur without the necessity of any further corporate
action of any kind or character.



SECTION 4. ELIGIBILITY. The Participants shall include directors, employees, including officers,
of the Company and its divisions and subsidiaries, and consultants and attorneys who provide bona
fide services to the Company. Participants are eligible to be granted warrants, options,
restricted common or convertible preferred stock, unrestricted common or convertible preferred
stock and other awards under this Plan and to have their bonuses and/or consulting fees payable in
warrants, restricted common or convertible preferred stock, unrestricted common or convertible
preferred stock and other awards. A Participant who has been granted an option, warrant or
preferred stock hereunder may be granted an additional option, warrant options, warrants or
preferred stock, if the Committee shall so determine.



SECTION 5. GRANT OF OPTIONS OR WARRANTS.




(a) Committee Discretion. The Committee shall have sole and absolute discretionary authority (i)
to determine, authorize, and designate those persons pursuant to this Plan who are to receive
warrants, options, restricted common or convertible preferred stock, or unrestricted common or
convertible preferred stock under the Plan, (ii) to determine the number of shares of Common Stock
to be covered by such grant or such options or warrants and the terms thereof, (iii) to determine
the type of Common Stock granted: restricted common or convertible preferred stock, unrestricted
common or convertible preferred stock or a combination of restricted and unrestricted common or
convertible preferred stock, and (iv) to determine the type of option or warrant granted: ISO,
Nonqualified Option or a combination of ISO and Nonqualified Options. The Committee shall
thereupon grant options or warrants in accordance with such determinations as evidenced by a
written option or warrant agreement. Subject to the express provisions of the Plan, the Committee
shall have discretionary authority to prescribe, amend and rescind rules and regulations relating
to the Plan, to interpret the Plan, to prescribe and amend the terms of the option or warrant
agreements (which need not be identical) and to make all other determinations deemed necessary or
advisable for the administration of the Plan.



(b) Stockholder Approval. All ISOs granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the stockholders prior to the first anniversary date
of the Board meeting held to approve the Plan, by the affirmative vote of the holders of a majority
of the outstanding shares of the Company present, or represented by proxy, and entitled to vote
thereat, or by written consent in accordance with the laws of the State of Nevada, provided that if
such approval by the stockholders of the Company is not forthcoming, all options or warrants and
stock awards previously granted under this Plan other than ISOs shall be valid in all respects.



(c) Limitation on Incentive Stock Options and Warrants. The aggregate fair market value
(determined in accordance with Section 5(d)(ii) of this Plan at the time the option or warrant is
granted) of the Common Stock with respect to




 










 







which ISOs may be exercisable for the first time by
any Participant during any calendar year under all such plans of the Company and its Affiliates
shall not exceed $1,000,000.




(d) Terms and Conditions. Each option or warrant granted under the Plan shall be evidenced by an
agreement, in a form approved by the Committee, which shall be subject to the following express
terms and conditions and to such other terms and conditions as the Committee may deem appropriate:



(i) Option or Warrant Period. The Committee shall promptly notify the Participant of the option or
warrant grant and a written agreement shall promptly be executed and delivered by and on behalf of
the Company and the Participant, provided that the option or warrant grant shall expire if a
written agreement is not signed by said Participant (or his agent or attorney) and returned to the
Company within 60 days from date of receipt by the Participant of such agreement. The date of
grant shall be the date the option or warrant is actually granted by the Committee, even though the
written agreement may be executed and delivered by the Company and the Participant after that date.
Each option or warrant agreement shall specify the period for which the option or warrant
thereunder is granted (which in no event shall exceed ten years from the date of grant) and shall
provide that the option or warrant shall expire at the end of such period. If the original term of
an option or warrant is less than ten years from the date of grant, the option or warrant may be
amended prior to its expiration, with the approval of the Committee and the Participant, to extend
the term so that the term as amended is not more than ten years from the date of grant. However,
in the case of an ISO granted to an individual who, at the time of grant, owns stock possessing
more than 10 percent of the total combined voting power of all classes of stock of the Company or
its Affiliate (“Ten Percent Stockholder”), such period shall not exceed five years from the date of
grant.



(ii) Option or Warrant Price. The purchase price of each share of Common Stock subject to each
option or warrant granted pursuant to the Plan shall be determined by the Committee at the time the
option or warrant is granted and, in the case of ISOs, shall not be less than 100% of the fair
market value of a share of Common Stock on the date the option or warrant is granted, as determined
by the Committee. In the case of an ISO granted to a Ten Percent Stockholder, the option or
warrant price shall not be less than 110% of the fair market value of a share of Common Stock on
the date the option or warrant is granted. The purchase price of each share of Common Stock
subject to a Nonqualified Option or Warrant under this Plan shall be determined by the Committee
prior to granting the option or warrant. The Committee shall set the purchase price for each share
subject to a Nonqualified Option or Warrant at either the fair market value of each share on the
date the option or warrant is granted, or at such other price as the Committee in its sole
discretion shall determine.



At the time a determination of the fair market value of a share of Common Stock is required to be
made hereunder, the determination of its fair market value shall be made by the Committee in such
manner as it deems appropriate.



(iii) Exercise Period. The Committee may provide in the option or warrant agreement that an option
or warrant may be exercised in whole, immediately, or is to be exercisable in increments. In
addition, the Committee may provide that the exercise of all or part of an option or warrant is
subject to specified performance by the Participant.



(iv) Procedure for Exercise. Options or warrants shall be exercised in the manner specified in the
option or warrant agreement. The notice of exercise shall specify the address to which the
certificates for such shares are to be mailed. A Participant shall be deemed to be a stockholder
with respect to shares covered by an option or warrant on the date specified in the option or
warrant agreement. As promptly as practicable, the Company shall deliver to the Participant or
other holder of the warrant, certificates for the number of shares with respect to which such
option or warrant has been so exercised, issued in the holder’s name or such other name as holder
directs; provided, however, that such delivery shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited such certificates with a carrier for
overnight delivery, addressed to the holder at the address specified pursuant to this Section 6(d).



(v) Termination of Employment. If an executive officer to whom an option or warrant is granted
ceases to be employed by the Company for any reason other than death or disability, any option or
warrant which is exercisable on the date of such termination of employment may be exercised during
a period beginning on such date and ending at the time set forth in the option or warrant
agreement; provided, however, that if a Participant’s employment is terminated because of the
Participant’s theft or embezzlement from the Company, disclosure of trade secrets of the Company or
the commission of a willful, felonious act while in the employment of the Company (such reasons
shall hereinafter be



 









 







collectively referred to as “for cause”), then any option or warrant or
unexercised portion thereof granted to said Participant shall expire upon such termination of
employment. Notwithstanding the foregoing, no ISO may be
exercised later than three months after an employee’s termination of employment for any reason
other than death or disability.



(vi) Disability or Death of Participant. In the event of the determination of disability or death
of a Participant under the Plan while he or she is employed by the Company, the options or warrants
previously granted to him may be exercised (to the extent he or she would have been entitled to do
so at the date of the determination of disability or death) at any time and from time to time,
within a period beginning on the date of such determination of disability or death and ending at
the time set forth in the option or warrant agreement, by the former employee, the guardian of his
estate, the executor or administrator of his estate or by the person or persons to whom his rights
under the option or warrant shall pass by will or the laws of descent and distribution, but in no
event may the option or warrant be exercised after its expiration under the terms of the option or
warrant agreement. Notwithstanding the foregoing, no ISO may be exercised later than one year
after the determination of disability or death. A Participant shall be deemed to be disabled if,
in the opinion of a physician selected by the Committee, he or she is incapable of performing
services for the Company of the kind he or she was performing at the time the disability occurred
by reason of any medically determinable physical or mental impairment which can be expected to
result in death or to be of long, continued and indefinite duration. The date of determination of
disability for purposes hereof shall be the date of such determination by such physician.



(vii) Assignability. An option or warrant shall be assignable or otherwise transferable, in whole
or in part, by a Participant as provided in the option, warrant or designation of the series of
preferred stock.



(viii) Incentive Stock Options. Each option or warrant agreement may contain such terms and
provisions as the Committee may determine to be necessary or desirable in order to qualify an
option or warrant designated as an incentive stock option.



(ix) Restricted Stock Awards. Awards of restricted stock under this Plan shall be subject to all
the applicable provisions of this Plan, including the following terms and conditions, and to such
other terms and conditions not inconsistent therewith, as the Committee shall determine:



(A) Awards of restricted stock may be in addition to or in lieu of option or warrant grants.
Awards may be conditioned on the attainment of particular performance goals based on criteria
established by the Committee at the time of each award of restricted stock. During a period set
forth in the agreement (the “Restriction Period”), the recipient shall not be permitted to sell,
transfer, pledge, or otherwise encumber the shares of restricted stock; except that such shares may
be used, if the agreement permits, to pay the option or warrant price pursuant to any option or
warrant granted under this Plan, provided an equal number of shares delivered to the Participant
shall carry the same restrictions as the shares so used. Shares of restricted stock shall become
free of all restrictions if during the Restriction Period, (i) the recipient dies, (ii) the
recipient’s directorship, employment, or consultancy terminates by reason of permanent disability,
as determined by the Committee, (iii) the recipient retires after attaining both 59 1/2 years of
age and five years of continuous service with the Company and/or a division or subsidiary, or (iv)
if provided in the agreement, there is a “change in control” of the Company (as defined in such
agreement). The Committee may require medical evidence of permanent disability, including medical
examinations by physicians selected by it. Unless and to the extent otherwise provided in the
agreement, shares of restricted stock shall be forfeited and revert to the Company upon the
recipient’s termination of directorship, employment or consultancy during the Restriction Period
for any reason other than death, permanent disability, as determined by the Committee, retirement
after attaining both 59 1/2 years of age and five years of continuous service with the Company
and/or a subsidiary or division, or, to the extent provided in the agreement, a “change in control”
of the Company (as defined in such agreement), except to the extent the Committee, in its sole
discretion, finds that such forfeiture might not be in the best interests of the Company and,
therefore, waives all or part of the application of this provision to the restricted stock held by
such recipient. Certificates for restricted stock shall be registered in the name of the recipient
but shall be imprinted with the appropriate legend and returned to the Company by the recipient,
together with a stock power endorsed in blank by the recipient. The recipient shall be entitled to
vote shares of restricted stock and shall be entitled to all dividends paid thereon, except that
dividends paid in Common Stock or other property shall also be subject to the same restrictions.



 









 





(B) Restricted Stock shall become free of the foregoing restrictions upon expiration of the
applicable Restriction Period and the Company shall then deliver to the recipient Common Stock
certificates evidencing such stock. Restricted stock and any Common Stock received upon the
expiration of the restriction period shall be subject to such other transfer restrictions and/or
legend requirements as are specified in the applicable agreement.



(x) Bonuses and Past Salaries and Fees Payable in Unrestricted Stock.



(A) In lieu of cash bonuses otherwise payable under the Company’s or applicable division’s or
subsidiary’s compensation practices to employees and consultants eligible to participate in this
Plan, the Committee, in its sole discretion, may determine that such bonuses shall be payable in
unrestricted Common Stock or partly in unrestricted Common Stock and partly in cash. Such bonuses
shall be in consideration of services previously performed and as an incentive toward future
services and shall consist of shares of unrestricted Common Stock subject to such terms as the
Committee may determine in its sole discretion. The number of shares of unrestricted Common Stock
payable in lieu of a bonus otherwise payable shall be determined by dividing such bonus amount by
the fair market value of one share of Common Stock on the date the bonus is payable, with fair
market value determined as of such date in accordance with Section 5(d)(ii).



(B) In lieu of salaries and fees otherwise payable by the Company to employees, attorneys and
consultants eligible to participate in this Plan that were incurred for services rendered during,
prior or after the year of 2006, the Committee, in its sole discretion, may determine that such
unpaid salaries and fees shall be payable in unrestricted Common Stock or partly in unrestricted
Common Stock and partly in cash. Such awards shall be in consideration of services previously
performed and as an incentive toward future services and shall consist of shares of unrestricted
Common Stock subject to such terms as the Committee may determine in its sole discretion. The
number of shares of unrestricted Common Stock payable in lieu of a salaries and fees otherwise
payable shall be determined by dividing each calendar month’s of unpaid salary or fee amount by the
average trading value of the Common Stock for the calendar month during which the subject services
were provided.



(xi) No Rights as Stockholder. No Participant shall have any rights as a stockholder with respect
to shares covered by an option or warrant until the option or warrant is exercised as provided in
clause (d) above.



(xii) Extraordinary Corporate Transactions. The existence of outstanding options or warrants shall
not affect in any way the right or power of the Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations, exchanges, or other changes in the
Company’s capital structure or its business, or any merger or consolidation of the Company, or any
issuance of Common Stock or other securities or subscription rights thereto, or any issuance of
bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of
all or any part of its assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise. If the Company recapitalizes or otherwise changes its capital
structure, or merges, consolidates, sells all of its assets or dissolves (each of the foregoing a
“Fundamental Change”), then thereafter upon any exercise of an option or warrant theretofore
granted the Participant shall be entitled to purchase under such option or warrant, in lieu of the
number of shares of Common Stock as to which option or warrant shall then be exercisable, the
number and class of shares of stock and securities to which the Participant would have been
entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental
Change, the Participant had been the holder of record of the number of shares of Common Stock as to
which such option or warrant is then exercisable. If (i) the Company shall not be the surviving
entity in any merger or consolidation (or survives only as a subsidiary of another entity), (ii)
the Company sells all or substantially all of its assets to any other person or entity (other than
a wholly-owned subsidiary), (iii) any person or entity (including a “group” as contemplated by
Section 13(d)(3) of the Exchange Act) acquires or gains ownership or control of (including, without
limitation, power to vote) more than 50% of the outstanding shares of Common Stock, (iv) the
Company is to be dissolved and liquidated, or (v) as a result of or in connection with a contested
election of directors, the persons who were directors of the Company before such election shall
cease to constitute a majority of the Board (each such event in clauses (i) through (v) above is
referred to herein as a “Corporate Change”), the Committee, in its sole discretion, may accelerate
the time at which all or a portion of a Participant’s option or warrants may be exercised for a
limited period of time before or after a specified date.



 









 





(xiii) Changes in Company’s Capital Structure. If the outstanding shares of Common Stock or other
securities of the Company, or both, for which the option or warrant is then exercisable at any time
be changed or exchanged by
declaration of a stock dividend, stock split, combination of shares, recapitalization, or
reorganization, the number and kind of shares of Common Stock or other securities which are subject
to the Plan or subject to any options or warrants theretofore granted, and the option or warrant
prices, shall be adjusted only as provided in the option or warrant.



(xiv) Acceleration of Options and Warrants. Except as hereinbefore expressly provided, (i) the
issuance by the Company of shares of stock or any class of securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, (ii) the payment of a dividend in
property other than Common Stock or (iii) the occurrence of any similar transaction, and in any
case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number of shares of Common Stock subject to options or warrants
theretofore granted or the purchase price per share, unless the Committee shall determine, in its
sole discretion, that an adjustment is necessary to provide equitable treatment to Participant.
Notwithstanding anything to the contrary contained in this Plan, the Committee may, in its sole
discretion, accelerate the time at which any option or warrant may be exercised, including, but not
limited to, upon the occurrence of the events specified in this Section 5, and is authorized at any
time (with the consent of the Participant) to purchase options or warrants pursuant to Section 6.



SECTION 6. RELINQUISHMENT OF OPTIONS OR WARRANTS.




(a) The Committee, in granting options or warrants hereunder, shall have discretion to determine
whether or not options or warrants shall include a right of relinquishment as hereinafter provided
by this Section 6. The Committee shall also have discretion to determine whether an option or
warrant agreement evidencing an option or warrant initially granted by the Committee without a
right of relinquishment shall be amended or supplemented to include such a right of relinquishment.
Neither the Committee nor the Company shall be under any obligation or incur any liability to any
person by reason of the Committee’s refusal to grant or include a right of relinquishment in any
option or warrant granted hereunder or in any option or warrant agreement evidencing the same.
Subject to the Committee’s determination in any case that the grant by it of a right of
relinquishment is consistent with Section 1 hereof, any option or warrant granted under this Plan,
and the option or warrant agreement evidencing such option or warrant, may provide:



(i) That the Participant, or his or her heirs or other legal representatives to the extent entitled
to exercise the option or warrant under the terms thereof, in lieu of purchasing the entire number
of shares subject to purchase thereunder, shall have the right to relinquish all or any part of the
then unexercised portion of the option or warrant (to the extent then exercisable) for a number of
shares of Common Stock to be determined in accordance with the following provisions of this clause
(i):



(A) The written notice of exercise of such right of relinquishment shall state the percentage of
the total number of shares of Common Stock issuable pursuant to such relinquishment (as defined
below) that the Participant elects to receive;



(B) The number of shares of Common Stock, if any, issuable pursuant to such relinquishment shall be
the number of such shares, rounded to the next greater number of full shares, as shall be equal to
the quotient obtained by dividing (i) the Appreciated Value by (ii) the purchase price for each of
such shares specified in such option or warrant;



(C) For the purpose of this clause (C), “Appreciated Value” means the excess, if any, of (x) the
total current market value of the shares of Common Stock covered by the option or warrant or the
portion thereof to be relinquished over (y) the total purchase price for such shares specified in
such option or warrant;



(ii) That such right of relinquishment may be exercised only upon receipt by the Company of a
written notice of such relinquishment which shall be dated the date of election to make such
relinquishment; and that, for the purposes of this Plan, such date of election shall be deemed to
be the date when such notice is sent by registered or certified mail, or when receipt is
acknowledged by the Company, if mailed by other than registered or certified mail or if delivered
by hand or by any telegraphic communications equipment of the sender or otherwise delivered;
provided, that, in the event



 









 




the method just described for determining such date of election shall
not be or remain consistent with the provisions of Section 16(b) of the Exchange Act or the rules
and regulations adopted by the Commission thereunder, as presently
existing or as may be hereafter amended, which regulations exempt from the operation of Section
16(b) of the Exchange Act in whole or in part any such relinquishment transaction, then such date
of election shall be determined by such other method consistent with Section 16(b) of the Exchange
Act or the rules and regulations thereunder as the Committee shall in its discretion select and
apply;




(iii) That the “current market value” of a share of Common Stock on a particular date shall be
deemed to be its fair market value on that date as determined in accordance with Paragraph
5(d)(ii); and



(iv) That the option or warrant, or any portion thereof, may be relinquished only to the extent
that (A) it is exercisable on the date written notice of relinquishment is received by the Company,
and (B) the holder of such option or warrant pays, or makes provision satisfactory to the Company
for the payment of, any taxes which the Company is obligated to collect with respect to such
relinquishment.



(b) The Committee shall have sole discretion to consent to or disapprove, and neither the Committee
nor the Company shall be under any liability by reason of the Committee’s disapproval of, any
election by a holder of preferred stock to relinquish such preferred stock in whole or in part as
provided in Paragraph 7(a), except that no such consent to or approval of a relinquishment shall be
required under the following circumstances. Each Participant who is subject to the short-swing
profits recapture provisions of Section 16(b) of the Exchange Act (“Covered Participant”) shall not
be entitled to receive shares of Common Stock when options or warrants are relinquished during any
window period commencing on the third business day following the Company’s release of a quarterly
or annual summary statement of sales and earnings and ending on the twelfth business day following
such release (“Window Period”). A Covered Participant shall be entitled to receive shares of
Common Stock upon the relinquishment of options or warrants outside a Window Period.



(c) The Committee, in granting options or warrants hereunder, shall have discretion to determine
the terms upon which such options or warrants shall be relinquishable, subject to the applicable
provisions of this Plan, and including such provisions as are deemed advisable to permit the
exemption from the operation from Section 16(b) of the Exchange Act of any such relinquishment
transaction, and options or warrants outstanding, and option agreements evidencing such options,
may be amended, if necessary, to permit such exemption. If options or warrants are relinquished,
such option or warrant shall be deemed to have been exercised to the extent of the number of shares
of Common Stock covered by the option or warrant or part thereof which is relinquished, and no
further options or warrants may be granted covering such shares of Common Stock.



(d) Any options or warrants or any right to relinquish the same to the Company as contemplated by
this Paragraph 6 shall be assignable by the Participant, provided the transaction complies with any
applicable securities laws.



(e) Except as provided in Section 6(f) below, no right of relinquishment may be exercised within
the first six months after the initial award of any option or warrant containing, or the amendment
or supplementation of any existing option or warrant agreement adding, the right of relinquishment.



(f) No right of relinquishment may be exercised after the initial award of any option or warrant
containing, or the amendment or supplementation of any existing option or warrant agreement adding
the right of relinquishment, unless such right of relinquishment is effective upon the
Participant’s death, disability or termination of his relationship with the Company for a reason
other than “for cause.”



SECTION 7. GRANT OF CONVERTIBLE PREFERRED STOCK.




Not Applicable at time of original filing.



SECTION 8. AMENDMENTS OR TERMINATION. The Board may amend, alter or discontinue the Plan, but no
amendment or alteration shall be made which would impair the rights of any Participant, without his
consent, under any option, warrant or preferred stock theretofore granted.



 









 





SECTION 9. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and exercise of
options or warrants and grant and conversion of preferred stock thereunder, and the obligation of
the Company to sell and deliver shares under such options, warrants or preferred stock, shall be
subject to all applicable federal and state laws, rules and regulations and to such approvals by
any governmental or regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the completion of any
registration or qualification of such shares under any federal or state law or issuance of any
ruling or regulation of any government body which the Company shall, in its sole discretion,
determine to be necessary or advisable. Any adjustments provided for in subparagraphs 5(d)(xii),
(xiii) and (xiv) shall be subject to any shareholder action required by the corporate law of the
state of incorporation of the Company.



SECTION 10. PURCHASE FOR INVESTMENT. Unless the options, warrants, shares of convertible
preferred stock and shares of Common Stock covered by this Plan have been registered under the
Securities Act of 1933, as amended, or the Company has determined that such registration is
unnecessary, each person acquiring or exercising an option or warrant under this Plan or converting
shares of preferred stock may be required by the Company to give a representation in writing that
he or she is acquiring such option or warrant or such shares for his own account for investment and
not with a view to, or for sale in connection with, the distribution of any part thereof.



SECTION 11. TAXES.




(a) The Company may make such provisions as it may deem appropriate for the withholding of any
taxes which it determines is required in connection with any options, warrants or preferred stock
granted under this Plan.



(b) Notwithstanding the terms of Paragraph 11 (a), any Participant may pay all or any portion of
the taxes required to be withheld by the Company or paid by him or her in connection with the
exercise of a nonqualified option or warrant or conversion of preferred stock by electing to have
the Company withhold shares of Common Stock, or by delivering previously owned shares of Common
Stock, having a fair market value, determined in accordance with Paragraph 5(d)(ii), equal to the
amount required to be withheld or paid. A Participant must make the foregoing election on or
before the date that the amount of tax to be withheld is determined (“Tax Date”). All such
elections are irrevocable and subject to disapproval by the Committee. Elections by Covered
Participants are subject to the following additional restrictions: (i) such election may not be
made within six months of the grant of an option or warrant, provided that this limitation shall
not apply in the event of death or disability, and (ii) such election must be made either six
months or more prior to the Tax Date or in a Window Period. Where the Tax Date in respect of an
option or warrant is deferred until six months after exercise and the Covered Participant elects
share withholding, the full amount of shares of Common Stock will be issued or transferred to him
upon exercise of the option or warrant, but he or she shall be unconditionally obligated to tender
back to the Company the number of shares necessary to discharge the Company’s withholding
obligation or his estimated tax obligation on the Tax Date.



SECTION 12. REPLACEMENT OF OPTIONS, WARRANTS AND PREFERRED STOCK. The Committee from time to time
may permit a Participant under the Plan to surrender for cancellation any unexercised outstanding
option or warrant or unconverted Preferred stock and receive from the Company in exchange an
option, warrant or preferred stock for such number of shares of Common Stock as may be designated
by the Committee. The Committee may, with the consent of the holder of any outstanding option,
warrant or preferred stock, amend such option, warrant or preferred stock, including reducing the
exercise price of any option or warrant to not less than the fair market value of the Common Stock
at the time of the amendment, increasing the conversion ratio of any preferred stock and extending
the exercise or conversion term of and warrant, option or preferred stock.



SECTION 13. NO RIGHT TO COMPANY EMPLOYMENT. Nothing in this Plan or as a result of any option or
warrant granted pursuant to this Plan shall confer on any individual any right to continue in the
employ of the Company or interfere in any way with the right of the Company to terminate an
individual’s employment at any time. The option,



 









 




warrant or preferred stock agreements may contain
such provisions as the Committee may approve with reference to the effect of approved leaves of
absence.




SECTION 14. LIABILITY OF COMPANY. The Company and any Affiliate which is in existence or
hereafter comes into existence shall not be liable to a Participant or other persons as to:



(a) The Non-Issuance of Shares. The non-issuance or sale of shares as to which the Company has
been unable to obtain from any regulatory body having jurisdiction the authority deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and



(b) Tax Consequences. Any tax consequence expected, but not realized, by any Participant or other
person due to the exercise of any option or warrant or the conversion of any preferred stock
granted hereunder.



SECTION 15. EFFECTIVENESS AND EXPIRATION OF PLAN. The Plan shall be effective on the date the
Board adopts the Plan. The Plan shall expire ten years after the date the Board approves the Plan
and thereafter no option, warrant or preferred stock shall be granted pursuant to the Plan.



SECTION 16. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption by the Board nor the submission of
the Plan to the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements as it may deem
desirable, including without limitation, the granting of restricted stock or stock options,
warrants or preferred stock otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.



SECTION 17. GOVERNING LAW. This Plan and any agreements hereunder shall be interpreted and
construed in accordance with the laws of the state of incorporation of the Company and applicable
federal law.



SECTION 18. CASHLESS EXERCISE. The Committee also may allow cashless exercises as permitted under
Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions. or by any
other means which the Committee determines to be consistent with the Plan’s purpose and applicable
law. The proceeds from such a payment shall be added to the general funds of the Company and shall
be used for general corporate purposes.