Document:

Employment Agreement of Randy S. Bayne

 
Exhibit 10.1

 
EMPLOYMENT AGREEMENT 
 
THIS AGREEMENT is made and entered into this 15th day of October, 2002, between RANDY BAYNE (hereinafter referred to as “Employee”) and VARITEK INDUSTRIES,
INC., a Texas corporation, by and through its Board of Directors (hereinafter referred to as “Employer”, “Company”, or “Varitek”). 
 
IN CONSIDERATION of the mutual promises set forth below, Employee and Employer hereby agree as follows:

 
1. Employment. Employer hereby agrees to
employ Employee and Employee hereby agrees to provide services to Employer in the position of PRESIDENT and CHIEF EXECUTIVE OFFICER upon the terms and conditions hereinafter set forth. 
 
2. Duties. Employee shall perform the duties and
responsibilities set forth in Exhibit “A” during the term of this Agreement. Employer and Employee agree that Employee will be nominated to serve as a full voting member of the Board of Directors of Employer during the term of his
employment and thereafter so long as he is re-elected by the then voting shareholders of the Company. 
 
3. Term of Agreement. The parties agree that the initial term of this Agreement shall be three (5) years commencing October 15,
2002 (each year being referred to herein as a “Contract Year”), in addition Employee shall have the option, in Employee’s sole discretion, subject to the provisions regarding termination set forth in this Agreement, to extend and
renew this Agreement twice, for one (1) additional Contract Year (as defined herein) period per renewal. Such renewals shall become automatically effective so long as Employee has not provided Employer with written notice of Employee’s
intention to terminate. In the event Employee intends to not renew this Agreement, then Employee shall be required to provide written notice of termination no less than 60 days in advance of the expiration date of the then current Contract Year.

 
4. Termination. Should Employer terminate
this Agreement and Employee’s employment for any reason other than for Cause as defined herein, and/or breach of any material provisions of this Agreement, and further excluding the case in which Employee shall resign in the absence of
Employer’s breach, Employer shall within thirty (30) days thereafter (“Severance Payment Date”) tender to Employee a lump sum cash payment equal to: (A) Employee’s then current wages and projected bonus for the remainder of the
current Contract Year plus, (B) an amount equal to the total compensation that would have been due for the following full Contract Year including any and all benefits, projected bonuses, vacation pay, and incentives in place at the time of such
termination. On the first anniversary of the Severance Payment Date, the Employer shall pay a sum equal to the present value (10% discount rate) of the balance due based on the full value for the remainder of the existing term of this Agreement
including all extensions available to Employee hereunder, plus an amount equal to all taxes, penalties, or assessments of any nature that Employee shall incur in connection with such lump sum payment as described in Section 11. The amount of such
tax payment shall be computed by a reputable un-conflicted accounting firm selected by Employee and paid for by the Company. In addition, at the time of such termination, all unvested options shall become fully vested and exercisable 
 

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pursuant to the terms of the
Employee Stock Option Agreement attached hereto as Exhibit “B”, and as it may be amended from time to time during the term of this Agreement. 
 
Notwithstanding any contrary provision set forth hereinabove, Employer shall have the right, at its option, to terminate this Agreement
for Cause as defined herein, provided, however, that prior to terminating Employee for Clause, Employer shall give Employee at least sixty (60) business days’ written notice of an intent to terminate for Cause, which notice shall specify the
nature and detail of such Cause, and, if Employee cures such Cause within such sixty (60) day period, this Agreement shall remain in full force and effect. 
 
Employer may also terminate the employment of Employee hereunder upon the death of Employee or upon Employee’s inability by reason of
sickness or disability to perform his obligations for a period of more than one hundred eighty (180) days consecutively without payment of the lump sum described above, however upon such termination, the Company shall exercise every reasonable
effort to insure that Employee’s vesting schedule for any and all unvested options for shares of Employer’s stock shall be immediately accelerated so that all unvested options shall become fully vested at the time of such termination.

 
Employee may terminate his employment hereunder
for Good Reason as defined herein, upon at least thirty (30) days’ prior written notice to Employer, which notice shall specify the Good Reason, provided that if Employer cures such Good Reason within such thirty (30) day period, this Agreement
shall remain in full force and effect. In the event of a termination by Employee with Good Reason as aforesaid, the severance payments and vesting of employee stock options as described above shall be due and paid as if Employee had been terminated
without cause. 
 
5. Employee Working
Conditions. Employer agrees that, during the term of this Agreement, Employer: (1) shall treat Employee with respect and professional courtesy commensurate with Employee’s position; (2) shall provide, establish and maintain reasonable
working conditions for Employee and abide by all state, federal and local employment regulations and laws; (3) shall not, without the express written consent of Employee, alter or significantly reduce the duties and responsibilities assigned to
Employee as set forth in Exhibit “A” to this Agreement; (4) shall not, without Employee’s express written consent, reduce or relocate the facilities and perquisites made available to Employee at the time this Agreement is executed and
as enhanced during the term of this Agreement; (5) shall not materially reduce the type or level of Employee benefits to which Employee is entitled at the time this Agreement is executed and as enhanced during the term of this Agreement; and (6)
shall allow Employee to perform his duties from locations other than the Employer’s place of business. At such time as the parties mutually agree to location of the corporate offices, Employee shall within a reasonable time thereafter arrange
to be present at the corporate offices from time to time on a regular basis demonstrating a presence commensurate with his position. 
 
6. Salary and Performance Bonuses: As consideration for Employee’s services as set forth in Exhibit “A” to this
Agreement, Employee agrees to accept and Employer agrees to pay Employee an initial salary of Two Hundred Thousand Dollars ($200,000) per year, to be paid twice per month in twenty-four equal installments. The base salary will be
reviewed immediately after the Employer raises additional capital of not less than $3.5 million after March 
 

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1, 2003. Additionally,
Employee shall be entitled to annual review and increase in annual salary commensurate with executives in a similar position of responsibility. As further consideration for Employee’s services, Employee shall be eligible to participate in the
Profit Sharing Plan attached as Exhibit “C”. 
 
7. Expenses: In addition, Employer will reimburse Employee for all reasonable expenses incurred in the course of performing services for Employer, including but not limited to travel and entertainment expenses. The
CEO or CFO of the Employer must approve any expense in excess of $10,000. Upon execution of this Agreement, the Employee shall submit for approval his expenses incurred on behalf of the Employer to the date of this
Agreement. 
 
8. Common Stock Options.
Subject to customary anti-dilution clauses, and as further consideration for Employee’s services, upon execution of this Agreement, Employee shall receive options to acquire common stock of the Employer in accordance with the following
schedule: One million two hundred thousand (1,200,000) options to purchase the common stock of the Company, with a two year vesting period with one Million (1,000,000) options vesting immediately and an additional 100,000 options vesting on each
anniversary until all options are fully vested; provided, however, that the vesting schedule shall immediately accelerate with all options being fully vested if this Agreement shall terminate for reasons other than Employee’s termination by the
Company for Cause or Employee’s resignation, where such resignation occurs in the absence of Good Reason or Employer’s breach of this Agreement. In the case of a termination with Cause, or an Employee resignation without Good Reason, the
Option Agreement shall instead provide for vesting only through the date of termination and upon termination, an exercise period of ninety (90) days thereafter shall apply. The exercise price of all stock options granted under this Agreement shall
be $1.00 per share. Said stock options shall be granted pursuant to a Stock Option Plan. The Stock Option Grant Agreement shall be attached to this Agreement as Exhibit “B”. 
 
9. Acceleration of Options. In addition to the provisions for acceleration set forth in paragraphs 8
and 14, upon the occurrence of any of the following events at a time while Employee holds outstanding options or is entitled to future options to purchase Company Stock, the Company shall take whatever measures are necessary to insure that all such
options shall be immediately vested and exercisable in full: 
 
(i) the acquisition described in clause (i) of the definition of Change of Control; 
 
(ii) the change in the composition of the Board of Directors described in clause (ii) of such definition; 
 
(iii) the shareholder approval or adoption
described in clauses (iii) or (iv) of such definition; 
 
(iv) the commencement date of any tender offer subject to the terms of Section 14(d)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or exchange offer subject to the terms of the
Securities Act of 1933, as amended (the “Securities Act”), or any other offer or series of offers to purchase for cash, or to 
 

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exchange for securities of a person other than the Company or any of its affiliates,
Varitek Common Stock by any “person” or “group” of persons (as such terms are used in Rule 13d of the Exchange Act) other than an offer or offers by Varitek or by employee benefit plan(s) sponsored by Varitek (“Tender
Offer”) if such person or group would hold 30% or more of the then outstanding Varitek Common Stock after the consummation of the Tender Offer. 
 
10. Benefits. Employee shall be provided health and welfare benefits including but not limited to medical (Employee and family),
dental (Employee and family), disability and life insurance and vacation and sick leave on the same terms and conditions as similarly situated senior executive level employees. Long-term disability insurance shall be fully paid during all periods of
eligibility requiring premium. Employee shall be eligible to participate in any Employer provided 401(k) plans on the same terms and conditions as Randy Bayne or the most senior executive officer of the company. In addition, Employee shall be
entitled to qualify for and participate in all other Employer benefit plans, bonus programs and stock option programs, if any, in accordance with the terms of such plans and programs. Employee will also be provided other benefits as described by
exhibit hereto. 
 
11. Gross-Up of Parachute
Payments 
 
(a) To provide
Employee with adequate protection in connection with Employee’s ongoing employment with the Company, this Agreement or other incentive plans of the Company provide Employee with various benefits in the event of termination of Employee’s
employment with the Company pursuant to Section 4, or during the Protected Period. If Employee’s employment is terminated in connection with a “change of control” of the Company, within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”), then a portion of those benefits could be characterized as “excess parachute payments” within the meaning of Section 280G of the Code. The parties hereto acknowledge that the
protections set forth in this Section 11 are important, and it is agreed that Employee should not have to bear the burden of the excise tax that might be levied under Section 4999 of the Code or any similar provision of state or federal law, in the
event that any portion of the benefits payable to Employee pursuant to this Agreement or the other incentive plans of the Company are treated as an excess parachute payment. The parties, therefore, have agreed as set forth in this Section 11.

 
(b) Anything in this Agreement
to the contrary notwithstanding, if it shall be determined that any payment or distribution (including income recognized by Employee upon the early vesting of restricted property or upon the exercise of options whose exercise date has been
accelerated) by the Company or any other person to, or for the benefit of Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 11) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any similar provision of state or federal law or any interest or penalties are incurred by Employee with
respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Company shall pay an additional payment (a “Gross-Up Payment”),
in an amount such that after payment by Employee of all taxes 
 

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(including
any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment, Employee retains an amount
of the Gross-Up Payment equal to one hundred percent (100%) of the Excise Tax imposed on the Payments. 
 
(c) In the event of any dispute as to the applicability or amount of any Gross-Up Payment, all determinations required to
be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accounting
firm regularly employed by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and to Employee within 15 business days after the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne by the Company. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall furnish Employee with a
written statement that failure to report the Excise Tax on Employee’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding on the
Company and Employee unless and until a final determination is received from the Internal Revenue Service indicating a contrary result. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments may not have been made by the Company that should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. If the
Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and the Company to or for the benefit of Employee shall promptly pay any such Underpayment,
consistent with the maximum limitation stated in paragraph 11(b) above. In the event it is determined by the Accounting Firm that the Gross Payments previously made by the Company exceeded the limitations stated in paragraph 11(b) above, upon
written notice from the Company, accompanied by a copy of the Accounting Firm’s calculation of same, the amount of such overpayment shall be promptly paid by the Employee to the Company. 
 
12. Salary/Bonus Deferral. Employer may request
Employee to defer payment and receipt of a portion of salary and bonuses due to Employee for a period of not more than six (6) months from the date this Agreement is executed, provided Employer agrees to pay, a.) that portion of the deferred
compensation necessary to pay any and all taxes on the deferred amount plus, b.) reasonable interest on the deferred amount, both a) and b) are as determined by Employee’s accountant, and provided that deferrals shall be limited as follows.
Employee’s gross monthly income excluding the tax payment for the deferred amount shall not be less than Ten Thousand and 00/100 Dollars ($10,000.00) as a result of the deferral. 
 
13. Other Interests. In addition, during the term of this Agreement, Employee shall be allowed to
pursue other business interests and/or professional pursuits, provided that Employee’s pursuit of other business interests shall not materially diminish Employee’s performance of his duties as set forth herein. 
 

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14.
Termination Due To Disability. In the event Employee becomes permanently disabled and Employee’s physician determines Employee is unable to perform his regular or customary duties as a result of the disability (and the Employer is unable
to reasonably accommodate Employee’s disability), Employer agrees to pay Employee’s then current compensation for a six-month period or until such time as Employee’s long term disability insurance benefits in an amount not less than
sixty percent (60%) of his then-current salary shall commence. In addition, upon such termination, the Company will exercise every reasonable effort to cause Employee’s vesting schedule for any and all unvested options granted herein for shares
of Employer’s stock to be immediately accelerated such that all unvested options shall become fully vested at the time of such termination. 
 
15. Health and Welfare. As further consideration for Employee’s services, Employer agrees to provide after termination of this
Agreement and at the Employer’s expense, health and welfare insurance benefits to Employee under the same terms and conditions as provided to Employee during the term of this Agreement to the maximum extent allowed by COBRA. Employee’s
benefits shall also include a life insurance policy in a death benefit amount of not less than One Million ($1,000,000) naming Megan Bayne, or such other parties as Employee may designate from time to time, as beneficiary; also
remaining in effect for the period of time COBRA health insurance benefits continue. 
 
16. No Mitigation Obligation. The Company acknowledges that it will be difficult and may be impossible (i) for Employee to find reasonably comparable employment following termination of
Employee’s employment and (ii) to measure the amount of damages which Employee may suffer as a result of the termination of Employee’s employment. Accordingly, all amounts paid to Employee under this Agreement following Employee’s
termination of employment are acknowledged by the Company to be reasonable and to be liquidated damages, and Employee will not be required to mitigate the amount of such payments by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever (including from other employment) create any mitigation, offset, reduction or any other obligation on the part of Employee under this Agreement. 
 
17. Trade Secrets. Employee will, in the course of his
duties on behalf of Employer, be advised of certain business matters and affairs of Employer regarding its clients and the management of its business. The duties performed by Employee for Employer place him in a position of trust and confidence with
respect to certain trade secrets relating to the business of Employer and not generally known to the public. Employee will not, either during the term of his employment or any time in the future, directly or indirectly: 
 
(a) disclose or furnish, directly or
indirectly, to any other person, firm, agency, corporation, client, business, or enterprise, any trade secrets acquired by him during the term of this Agreement except in confidence in the ordinary course of the Company’s business where
appropriate to serve the interests of the Company. 
 
(b) individually or in conjunction with any other person, firm, agency, company, client, business, or corporation, employ or cause to be employed any trade secret in any manner whatsoever, except in furtherance of the
business of Employer. 
 

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Notwithstanding any contrary provision set forth hereinabove, and without limiting the scope of the covenants made by Employee in this Paragraph 17, Employee agrees that Employee shall, from time to time, subscribe to and execute
agreements with the Company in the form and content subscribed to and executed by other employees of the Company to protect the Company’s trade secrets and proprietary information. 
 
18. Corporate Authority. Employer acknowledges and agrees that Employer has the full authorization of
its Board of Directors to enter into and perform all aspects of this Agreement from and after the date it is executed. 
 
19. Breach. Each party to this Agreement shall indemnify and hold the other harmless for any and all losses, costs, damages,
expenses, (including attorneys’ fees) incurred by the indemnified party arising out of such party’s breach of this Agreement or any part thereof, regardless of the judgment or decisions arising therefrom. All such losses, costs, damages,
expenses and fees shall be paid within thirty (30) days following tender of a written request. The provisions of this Section 19 will survive the term of this Agreement, and termination of Employee’s employment for any reason whatsoever.

 
20. Policies. No change in Employer
policy, rules or regulations shall alter, modify or revoke any provision of this Employment Agreement to the detriment of Employee. 
 
21. Indemnity and Hold Harmless. To the fullest extent provided by the law, Employer agrees Employer shall indemnify and hold
Employee harmless from any and all liabilities and/or losses, costs, damages or expenses, (including attorney’s fees) incurred by Employee in the course and scope of Employee’s duties for Employer or related in any way to Employee’s
association with Employer as an employee, officer and/or director, including but not limited to, liabilities arising from shareholder derivative or direct law suits. Employer shall fully insure Employer’s ability to so indemnify Employee and
shall present evidence of such insurance coverage reasonably satisfactory to Employee within thirty (30) days of the execution of this Agreement and from time to time thereafter as may be reasonably requested by Employee. The provisions of
this Section 21 will survive the Term of this Agreement, and termination of Employee’s employment for any reason whatsoever. 
 
22. Successors. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns. 
 
23. Assignment. This Agreement is personal to Employee, and Employee shall not, outside the normal course of business, assign any of Employee’s rights or delegate any of Employee’s duties hereunder without the prior
written consent of the Company. Neither Employee nor Employee’s spouse will have the right to commute, encumber, or otherwise dispose of any future payments due under this Agreement. The Company shall have the right to assign this Agreement to
a successor in interest in connection with a merger, sale of substantially all assets, or the like; provided however, that an assignment of this Agreement to an entity with operations, products or services outside of the industries in which the
Company is then active shall not be deemed to expand the scope of Employee’s covenant not to compete with such operations, products or services without Employee’s written consent. The Company shall 
 

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require any Person who is the
successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform, by a written agreement in
form and substance reasonably satisfactory to Employee, all of the obligations of the Company under this Agreement. As used in this Agreement, the term “Company” means the Company as defined herein and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or otherwise. 
 
24. Severability. Employer and Employee agree that should any provision of this Agreement be declared or be determined by any court
of competent jurisdiction to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining parts, terms and provisions shall not be affected thereby, and said illegal, unenforceable or invalid part, term or
provision will be deemed not to be part of this Agreement. 
 
25. Confidentiality. Employee and Employer agree that they shall keep the terms of this Agreement entirely confidential, except as and to the extent required to be disclosed by applicable law, code or regulation. 
 
26. Jurisdiction and Venue. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of Texas. The parties agree that any claim or action arising out of this Agreement shall be arbitrated in accordance with the arbitration provisions and guidelines set forth on
Exhibit ”D” attached hereto and incorporated herein by this reference. The parties anticipate that all disputes hereunder shall be arbitrated; provided, however, that any matter not subject to arbitration as a matter of law shall be
brought in a court of competent jurisdiction in the county and judicial district in which the principal offices of the Company are located at the time the action is commenced. 
 
27. Entire Understanding. This Agreement contains all the understandings and agreements between the
parties concerning Employee’s employment. This Agreement replaces any and all prior agreements between Employee and Employer related to Employee’s employment and any and all such prior Agreements are hereby canceled. 
 
28. Attorney’s Fees Reimbursement. Employer agrees
to reimburse Employee for Employee’s reasonable attorney fees incurred by Employee in connection with the negotiation, interpretation, arbitration and/or execution of this Agreement. 
 

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29.
Definitions: 
 
(a)
Cause: When used in connection with the termination of employment with the Company, means the termination of Employee’s employment by the Company by reason of (i) the conviction of Employee of a crime involving a felony by a court of
competent jurisdiction as to which no further appeal can be taken; (ii) the proven commission by Employee of an act of fraud upon the Company; (iii) the willful and proven misappropriation of any funds or property of the Company by Employee; (iv)
the willful, continued and unreasonable failure by Employee to perform material duties assigned to Employee and agreed to by Employee after reasonable notice and opportunity to cure such performance; (v) the knowing engagement by Employee in any
direct, material conflict of interest with the Company and which is a specific violation of the Company’s conflict of interest policy, if any, then in effect; (vi) the knowing engagement by Employee, without the written approval of the Board of
Directors of the Company, in any activity which directly competes with the business of the Company or any of its Affiliates or which would result in material injury to the Company; or (vii) the knowing engagement in any activity which would
constitute a material violation of the provisions of the Company’s Insider Trading Policy or Business Ethics Policy, if any, then in effect. 
 
(b) Change of Control: means: 
 
(i) The acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act (a “Designated Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) of 30% or more of
either: (1) the then outstanding shares of Common Stock of Varitek (the “Outstanding Varitek Common Stock”) or (2) the combined voting power of the then outstanding voting securities of Varitek entitled to vote generally in the election of
directors (the “Outstanding Varitek Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control if, (i) any acquisition of Common Stock of Varitek or Outstanding Varitek Voting
Securities directly from Varitek, (ii) any acquisition of Common Stock of Varitek or Outstanding Varitek Voting Securities by Varitek, (iii) any acquisition of Common Stock of Varitek or voting securities of Varitek by any employee benefit plan(s)
(or related trust(s)) sponsored or maintained by Varitek or any Outstanding Varitek Voting Securities by any corporation controlled by Varitek and approved by the Incumbent Board, or (iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such reorganization, merger or consolidation, the conditions described in clauses (1), (2) and (3) of paragraph (iii) of this definition are satisfied; or 
 
(ii) individuals who, as of the date hereof,
constitute the entire Board of Directors of Varitek (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors of Varitek (the “Board “); provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination for election by Varitek shareholders, was approved 
 

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by a vote of at least a majority of the directors then comprising the Incumbent Board
(including, without limitation, the proposed Board members, plus the slot designated for the chairman of the audit committee to be elected at our next meeting of shareholders) shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either (1) an actual or threatened election contest (as such terms are used in Rule l4a-1 1 of the Regulation 14A
promulgated under the Exchange Act), or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or (2) a plan or agreement to replace a majority of the members of the Board then comprising the
Incumbent Board; or 
 
(iii)
approval by the shareholders of Varitek of a reorganization, merger or consolidation, in each case unless, immediately following such reorganization, merger or consolidation, (1) more than 60% (or such greater percentage as may be approved by the
Incumbent Board) of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation (including, without limitation, a corporation which as a result of such transaction owns Varitek through
one or more subsidiaries) and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Varitek Common Stock and Outstanding Varitek Voting Securities immediately prior to such reorganization, merger or consolidation in substantially
the same proportions as their ownership immediately prior to such reorganization, merger or consolidation, of the Outstanding Varitek Common Stock or Outstanding Varitek Voting Securities, as the case may be, (2) no Designated Person (excluding
Varitek, any employee benefit plan(s) (or related trust(s)) of Varitek and/or its subsidiaries or any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 30% (or such lesser
percentage as may be approved by the Incumbent Board) or more of the Outstanding Varitek Common Stock or Outstanding Varitek Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be
approved by the Incumbent Board) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of directors, and (3) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members
of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or 
 
(iv) approval by the shareholders of the Varitek of: (1) a complete liquidation or dissolution of Varitek or (2) the sale
or other disposition of all or substantially all of the assets of Varitek, other than to a corporation, with respect 
 

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to which
immediately following such sale or other disposition, (A) more than 60% (or such greater percentage as may be approved by the Incumbent Board) of the then outstanding shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were beneficial
owners, respectively, of the Outstanding Varitek Common Stock and Outstanding Varitek Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or
other disposition, of the Outstanding Varitek Common Stock and Outstanding Varitek Voting Securities, as the case may be, (B) no Designated Person (excluding the Varitek and any employee benefit plan (or related trust) of Varitek and/or its
subsidiaries or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of the Outstanding
Varitek Stock or Outstanding Varitek Voting Securities, as the case may be) beneficially owns, directly or indirectly, 30% (or such lesser percentage as may be approved by the Incumbent Board) or more of, respectively, the then outstanding shares of
common stock of such corporation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors, and (C) at least a majority of the members of the board of directors
of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of Varitek. 
 
(c) Confidential Information: includes
information conveyed or assigned to the Company by Employee or conceived, compiled, created, developed, discovered or obtained by Employee from and during his employment relationship with the Company, whether solely by Employee or jointly with
others, which concerns the affairs of the Company or its Affiliates and which the Company could reasonably be expected to desire be held in confidence, or the disclosure of which would likely be embarrassing, detrimental or disadvantageous to the
Company or its Affiliates and without limiting the generality of the foregoing includes information relating to inventions, and the trade secrets, technologies, products, services, finances, business plans, marketing plans, legal affairs, supplier
lists, client lists, potential clients, business prospects, business opportunities, personnel assignments, contracts and assets of the Company or any of its Affiliates and information made available to the Company or any of its Affiliates by other
parties under a confidential relationship. Confidential Information, however, shall not include information (a) which is, at the time in question, in the public domain through no wrongful act of Employee, (b) which is later disclosed to Employee by
one not under obligations of confidentiality to the Company or any of its Affiliates or Employee, (c) which is required by court or governmental order, law or regulation to be disclosed, or (d) which the Company has expressly given Employee the
right to disclose pursuant to written agreement. 
 

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(d) Contract Year: shall mean during the term of employment, each year of the Employee’s employment with the company beginning on the anniversary date of execution of this Employment Agreement and continuing 365 days
thereafter, ending on that day which is immediately preceding the execution anniversary date for the following year.  
 
(e) Good Reason: means the occurrence of any of the following events: 
 
(i) Employee is assigned any duties
materially inconsistent with, or diminished from, Employee’s positions, duties, responsibilities and status with the Company immediately prior to the commencement of the Protected Period, or Employee’s status, reporting responsibilities,
titles or offices are materially diminished from those in effect immediately prior to the commencement of the Protected Period, or Employee is removed from or is not re-elected or appointed to any of such responsibilities, titles, offices or
positions, or Employee’s duties and responsibilities are materially increased without a corresponding increase in the Employee’s compensation (such increase in compensation to be satisfactory to Employee, in Employee’s sole reasonable
judgment), except in each case in connection with the termination of Employee’s employment by the Company for Cause or on account of disability, or as a result of the Employee’s death, or by the Employee for other than Good Reason; or

 
(ii) Employee’s Annual
Base Salary is reduced from that in effect immediately prior to the commencement of the Protected Period or as the same may be increased from time to time thereafter; or 
 
(iii) The Company fails to continue in effect any benefit or compensation plan, including,
but not limited to, the annual bonus plan, qualified retirement plan, executive life insurance plan and/or health and accident plan, in which Employee is participating immediately prior to the commencement of the Protected Period, or plans
providing, in the sole reasonable judgment of Employee, Employee with substantially similar benefits, or the Company takes any action that would adversely affect Employee’s participation in or reduce Employee’s benefits or compensation
under any of such plans (excluding any such action by the Company that is required by law); or 
 
(iv) The Company’s principal executive offices are relocated at any time following a Change in Control more than 20
miles from where such offices were located immediately prior to such Change in Control; or 
 
(v) The Company requires Employee at any time following a Change in Control to relocate more than 20 miles from where
Employee’s office was located immediately prior to such Change in Control; or 
 
(vi) The amendment, modification or repeal of any provision of the Certificate of Incorporation or Bylaws of the Company
that was in effect immediately prior to the commencement of the Protected Period, if such 
 

Page 12 

amendment, modification or repeal would materially adversely affect Employee’s rights
to indemnification by the Company; or 
 
(vii) The Company shall violate or breach any obligation of the Company in effect immediately prior to the commencement of the Protected Period (regardless whether such obligation be set forth in the Bylaws of the Company and/or in
this Agreement or any other separate agreement entered into between the Company and Employee) to indemnify Employee against any claim, loss, expense or liability sustained or incurred by Employee by reason, in whole or in part, of the fact that
Employee is or was an officer or director of the Company; or 
 
(viii) The Company shall violate or breach any other material obligation of the Company owing to Employee in effect immediately prior to the commencement of the Protected Period relating to
Employee’s employment with the Company, but only if such violation or breach (if capable of being remedied) shall continue unremedied for more than 15 days after written notice thereof is given by Employee to the Company; or 
 
(ix) The Board (or any nominating committee
of the Board) fails to recommend and support Employee’s re-election as a director of the Company if the Employee is a director of the Company immediately prior to the commencement of the Protected Period; or 
 
(x) The Company shall fail to keep in force,
for the benefit of Employee, directors’ and officers’ insurance policy with coverage amounts and scope equal to the coverage amounts and scope under such policy immediately prior to the commencement of the Protected Period; or

 
(xi) The Company fails to
obtain from a successor (including a successor to a material portion of the business or assets of the Company a satisfactory assumption in writing of the Company’s obligations under this Agreement; or 
 
(xii) The Company fails to provide Employee
with office space, related facilities and support personnel (including, but not limited to, administrative and secretarial assistance) that are both commensurate with the Employee’s position and Employee’s responsibilities to and position
with the Company immediately prior to the Change of Control and not materially dissimilar to the office space, related facilities and support personnel provided to other executive officers of the Company or executive officers of similar stature in
other businesses; or 
 
(xiii) The
Company notifies Employee of the Company’s intention not to observe or perform one or more of the obligations of the Company under this Agreement. 
 

Page 13 

 
IN WITNESS
WHEREOF the parties have executed this Agreement the day and year first written above at Houston, Texas. 
 
EMPLOYEE: 
 

Randy Bayne 
 

	 Notices in Care of:
	 	 Randy Bayne
 3319 Mahrian Court
 Friendswood, Texas 77546

	
	 And to:
	 	 Varitek Industries, Inc.
 Randy Bayne, President & CEO

 
 
VARITEK INDUSTRIES, INC. 
 

By: Richard C. Webb 
Its: Chairman 
 

	 And to:
	 	 Roger V. Davidson, Esq
 Ballard, Spahr, Andrews & Ingersoll, LLP
 1225 17th Street, Suite 2300
 Denver, CO 80202

 

Page 14 

 
Exhibit
“A” 
 
Duties of the President and
Chief Executive Officer 
 
The President and Chief Executive
Officer shall report directly to the Board of Directors. All other officers and managers of the Company shall report through the appropriate channels to the Chief Executive Officer. The Chief Executive Officer shall be responsible for carrying out
the mandates of the Board of Directors and generally shall have the ultimate responsibility for day-to-day operations of the Company and its operating divisions and subsidiaries. The Chief Financial Officer shall manage, supervise and direct all of
the activities of the Company. Further, there may be one or more Vice Presidents designated to assist the Chief Financial Officer in the performance of his duties. The President and Chief Executive Officer generally shall do or cause to be done all
things necessary or proper n carrying out the business of the Company in accordance with the provisions of applicable law, regulation and the mandates of the Board of Directors. 
 
 

A-1 

 
Exhibit
“B” 
 
VARITEK INDUSTRIES, INC.

 
STOCK OPTION GRANT NOTICE

UNDER THE STOCK OPTION PLAN 
 
Varitek Industries, Inc., a Texas corporation (the “Company”), pursuant to its Stock Option Plan
(the “Plan”), hereby grants to the Optionee named below an option to purchase the number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions set forth herein and in
Attachments I, II and III, which are incorporated herein in their entirety. If applicable, it is also subject to Optionee’s employment agreement. 
 

	 Optionee:
	  	 Randy Bayne

	
	 Date of Grant:
	  	 October 15, 2002

	 Shares Subject to Option:
	  	 1,200,000

	 Exercise Price Per Share:
	  	 $1.00

	 Expiration Date:
	  	 October 15, 2012

	
	     X     Incentive Stock Option 
	  	              Non-statutory Stock
Option

	
	 Vesting Schedule:
	  	 
	
	 This option shall vest and become exercisable in the following installments based on the Optionee’s
Continuous Status as an Employee over a two-year period commencing as of October 15, 2002:

 

	 Number of Shares (Installment)

	  	 Date of Earliest Exercise (Vesting)

	 1,000,000
	  	 October 15, 2002

	    100,000
	  	 October 15, 2003

	    100,000
	  	 October 15, 2004

	
	 In addition, this option shall become fully vested pursuant to the terms specified in Section 10(b) of the
Plan.

 
 
Payment: Payment of the exercise price of the option upon exercise thereof shall be by cash or check or by delivery of previously owned shares of the
Company’s Common Stock. 
 
Additional Terms/Acknowledgments:
The Optionee acknowledges receipt of, and understands and agrees to, this Grant Notice, the Stock Option Agreement and the Plan. Optionee further acknowledges that as of the date of grant set forth above, this Grant Notice, the Stock Option
Agreement and the Plan set forth the entire understanding between the Optionee and the Company regarding the acquisition of stock in the Company and supersede all prior oral and 
 

B-1 

 
written agreements on that
subject with the exception of (i) options previously granted and delivered to the Optionee under the Plan, and (ii) the following agreements only: 
Other Agreements: 
 

 

 

 

	 VARITEK INDUSTRIES, INC.
 a Texas corporation
	 	 Randy Bayne
	 	 
	
	 By:
	 	
	 	

	
	 Title:
	 	
	 	 Printed Name:
	 	

	
	 Date Signed:
	 	
	 	 ,
	 	
	 	 Date Signed:
	 	
	 	 ,
	 	

 

B-2 

 
Exhibit
“C” 
 
Profit Sharing Pool Plan

 
This Profit Sharing Pool Plan
(“Plan”) is being adopted to provide incentive compensation to Employer’s most highly-compensated executive officers. Certain employees shall be eligible to participate in the Plan available for Employer’s senior executives,
which shall be based on the financial performance of Employer as follows: 
 
Level 1: If Employer reaches an annual sales level of $5 million, 10% of Employer’s total Net Profit before interest payments, taxes, depreciation and amortization (“EBITDA”) for such
period shall be contributed to the pool. 
 
Level 2: If Employer reaches an annual sales level of $10 million, 8% of Employer’s EBITDA for such period shall be contributed to the pool. 
 
Level 3: If Employer reaches an annual sales level of $20 million, 4% of Employer’s
EBITDA for such period shall be contributed to the pool. 
 
Level 4: If Employer reaches an annual sales level of $40 million, 2% of Employer’s EBITDA for such period shall be contributed to the pool. 
 
Level 5: If Employer reaches an annual sales level of $80 million, 1% of Employer’s
EBITDA for such period shall be contributed to the pool. 
 
The sales levels and amounts of contributions referred to above shall be cumulative and determined in accordance with generally accepted accounting principles consistently applied, except to the extent expressly provided otherwise
herein. All milestone incentive package payments shall be determined and made annually based on the Employer’s results of operations for such fiscal year period, as audited by the Employer’s independent certified public accountants and
shall be payable within 30 days of the receipt of the audit report. 
 
No compensation payments will be due to any participant under the Plan until Employer reaches the annual sales level referred to in Level 1. The total pool shall in no case exceed the lesser of 10% of EBITDA or $2 million.
Payments shall be made hereunder only to the extent determined to be financially feasible in the sole good faith discretion of Employer’s audit committee, which shall consist of that number of independent directors as may be required by SEC
rules or rules promulgated by any securities exchange or Nasdaq. 
 
Each executive officer’s participation in the pool shall be based on the sole discretion of the Employer’s compensation committee. Notwithstanding that, an employee’s participation may be negotiated as part of his or
her employment agreement. If in the judgment of the members of the compensation committee, the Employer’s results for the year were impacted positively by the extraordinary contribution of the employee, the employee’s percentage share of
the pool may be increased at the sole discretion of the compensation committee. 
 
 

C-1 

 
Exhibit
“D” 
 
Arbitration Provisions and
Guidelines 
 
ARBITRATION AGREEMENT

 
A. Any dispute(s) or difference(s) which
arise during the course of this Agreement and which either involve its interpretation or meaning, or relate to performance required hereunder shall be submitted to and resolved by binding arbitration; provided, however, that the parties are not
waiving and are expressly reserving their right to seek injunctive relief by judicial process. Nevertheless, the parties may, by subsequent consent, agree to submit requests for injunctive relief to an arbitrator or arbitration panel. 
 
B. If either party shall, in the opinion of the other party,
be in breach of or default in the performance or observance of any term or condition of this Agreement, the non-defaulting party shall notify the defaulting party in writing of such fact, and the defaulting party shall have thirty (30) days from the
receipt of such notice to remedy or correct such breach or default. If the non-defaulting party asserts that the breach of default has not been timely and properly cured, it may commence arbitration as described herein and ask the arbitrator to deem
this Agreement terminated and/or to grant such relief as is shown to be appropriate. 
 
C. In the event the parties are unable to agree upon an arbitrator to hear and resolve their differences (hereinafter the “Dispute”), each party shall designate one person licensed as an
attorney in the state containing the headquarters of the Company. Said two attorneys shall select the neutral arbitrator. Unless agreed upon by the parties to the contrary, arbitration shall be by a single, neutral arbitrator (hereinafter, the
“Arbitrator”). 
 
D. If the two attorneys
designated in the immediately preceding paragraph cannot agree on the selection of the Arbitrator, the matter of the selection of the Arbitrator shall be submitted to the presiding judge of the District Court for the jurisdictionally appropriate
county in which the Company’s principal office is located. In such event, the selection shall be limited to one person from a panel of retired judges, each party hereto submitting three names for the court to consider and from which the
Arbitrator shall be selected. 
 
E. The Arbitrator
shall have the full and absolute authority to interpret this Agreement, to deem conduct by the parties as either in compliance with or in breach of this Agreement, to terminate this Agreement, and (if a breach is found) to award appropriate damages
or relief. 
 
F. The Dispute shall be settled in
accordance with then existing law of the state in which the Company’s headquarters are located. While evidence may be accepted, omitted, considered or excluded in the discretion of the Arbitrator, the Arbitrator shall be bound by that
state’s rules of evidence and by the application of that state’s uniform act, if any, governing arbitration. The final decision of the Arbitrator shall be served on the parties, in writing, within 20 days after the conclusion of the
arbitration hearing. 
 
G. The Arbitrator’s
decision shall be binding and conclusive. Neither party shall pursue, prosecute or otherwise file any legal action or proceeding (other than to seek injunctive 
 

D-1 

 
relief as described above).
Except as provided in the uniform act, if applicable, as provided above, no appeal shall be taken from the Arbitrator’s decision or from any subsequent court order confirming said decision. 
 
H. The parties shall equally advance the costs incurred by
arbitration. The Arbitrator, however, shall have the discretion to award such costs as well as attorneys’ fees to the party prevailing in the arbitration proceedings. 
 

D-2Varitek Industries, Inc. 2002 Stock Option Plan

Exhibit 10.2 
 
VARITEK INDUSTRIES, INC. 
 
2002 STOCK OPTION PLAN 
 
1. Purpose. 
 
(a) The purpose of this 2002 Stock Option Plan (the “Plan”) of Varitek Industries, Inc., a Texas corporation, is to provide a
means by which key Employees and Directors of and Consultants to the Company and its Affiliates may be given an opportunity to purchase Common Stock of the Company. 
 
(b) The Company, by means of the Plan, seeks to retain the services of persons who are now Employees or
Directors of or Consultants to the Company or its Affiliates, to secure and retain the services of new Employees, Directors and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its
Affiliates. 
 
(c) The Company intends that the
Options issued under the Plan shall, in the discretion of the Board or any Committee to which responsibility for administration of the Plan has been delegated pursuant to subsection 3(c), be either Incentive Stock Options or Nonstatutory Stock
Options. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and in such form as issued pursuant to Section 6 hereof, and a separate certificate or certificates will be issued for
shares purchased upon exercise of each type of Option. 
 
2.
Definitions. 
 
(a) “Affiliate”
means any parent or subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code. 
 
(b) “Board” means the Board of Directors of the Company. 
 
(c) “Code” means the Internal Revenue Code of 1986. 
 
(d) “Committee” means a Committee appointed by the
Board in accordance with subsection 3(c) of the Plan. 
 
(e) “Common Stock” means the Company’s common stock, no par value. 
 
(f) “Company” means Varitek Industries, Inc., a Texas corporation. 
 
(g) “Consultant” means any person, including an advisor, engaged by the Company or an Affiliate to
render consulting services and who is compensated for such services. 
 
(h) “Continuous Status as an Employee, Director or Consultant” means the employment of the Employee or relationship as a Director or Consultant is not interrupted or 

terminated. The Board, in its sole discretion, may determine whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the Board, including sick leave, military leave or any other personal leave; or (ii) transfers between locations of the Company or among the Company, Affiliates and their
successors. 
 
(i) “Director” means a
member of the Board. 
 
(j) “Employee”
means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment”
by the Company. 
 
(k) “Exchange Act”
means the Securities Exchange Act of 1934, as amended. 
 
(l) “Fair Market Value” means the value of the Common Stock of the Company as determined in good faith by the Board. 
 
(m) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422
of the Code and the regulations promulgated thereunder. 
 
(n) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option. 
 
(o) “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. 
 
(p)
“Option” means a stock option granted pursuant to the Plan. 
 
(q) “Option Agreement” means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan. 
 
(r) “Optionee”
means an Employee, Director or Consultant who holds an outstanding Option. 
 
(s) “Plan” means this Stock Option Plan. 
 
(t) “Rule 16a-12” means Rule 16a-12 under the Exchange Act or any successor to Rule 16a-12. 
 
(u) “Securities Act” means the Securities Act of
1933, as amended. 
 

2 

 
3. Administration.

 
(a) The Plan shall be administered by the Board
unless and until the Board delegates administration to a Committee, as provided in subsection 3(c). 
 
(b) 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 Options; when and how each Option shall be granted; whether an Option will be an Incentive Stock Option or a Nonstatutory Stock Option; the provisions of each Option granted (which need not be
identical), including the exercise price of such Option and time or times such Option may be exercised in whole or in part; and the number of shares for which an Option shall be granted to each such person. 
 
(ii) To construe and interpret the Plan and
Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board in the exercise of this power may correct any defect, omission or inconsistency in the Plan or in any Option 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 or an Option as provided in Section 11. 
 
(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. 
 
(c) The Board may delegate administration of the Plan to a Committee composed of not fewer than two members of the Board. If
administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.

 
4. Shares Subject to the Plan. 
 
(a) Subject to the provisions of Section 10 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to Options shall be Common Stock of the Company and shall not exceed in the aggregate 4,000,000 shares of Common Stock of the Company. If any Option shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, the Common Stock not purchased under such Option shall revert to and again become available for issuance under the Plan. 
 
(b) The Common Stock subject to the Plan may be unissued
shares or reacquired shares purchased on the market or otherwise. 
 

3 

 
5. Eligibility.

 
(a) Subject to the following provisions of this
Section, all Employees and Directors of and Consultants to the Company and its Affiliates are eligible to participate in the Plan. Incentive Stock Options may be granted only to Employees. Nonstatutory Stock Options may be granted to Employees,
Directors and Consultants. 
 
(b) No person shall
be eligible for the grant of an Incentive Stock Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes
of stock of the Company or of any of its Affiliates unless the exercise price of such Option is at least one hundred ten percent of the Fair Market Value of such stock at the date of grant and the Option is not exercisable after the expiration of
five years from the date of grant. 
 
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following provisions: 
 
(a) Term. No Option shall be exercisable after the expiration of ten years from the date it was granted. 
 
(b) Price. The exercise price of each Incentive Stock Option shall be not less than one hundred percent of the Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted. The exercise price of each Nonstatutory Stock Option shall be as determined in the discretion of the Board. 
 
(c) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall be paid, to
the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Board or the Committee, at the time of either the grant or the exercise of the Option, (A) by
delivery to the Company of other Common Stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Common Stock of the Company) with the
person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d), or (C) in any other form of legal consideration that may be acceptable to the Board. In the case of any deferred payment arrangement, interest
shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest under any applicable provisions of the Code of any amounts other than amounts stated to be interest under the
deferred payment arrangement. 
 
(d)
Transferability. 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 person to whom the Incentive Stock Option is granted only by
such person. A Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order satisfying the requirements of Rule 16a-12 (a “QDRO”), and
shall be exercisable during the lifetime of the person to whom the Option is 

 

4 

granted only by such person or any transferee pursuant to a QDRO. The person to whom the Option is granted may, by delivering written notice
to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionee, shall thereafter be entitled to exercise the Option. 
 
(e) Vesting. The total number of shares of Common Stock subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods the Option may become exercisable (“vest”) with respect to some or all
of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. 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 provisions of this subsection are subject to any Option provisions governing the
minimum number of shares as to which an Option may be exercised. 
 
(f) Securities Law Compliance. The Company may require any Optionee, or any person to whom an Option is transferred under subsection 6(d), as a condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and
business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the Common Stock subject to the Option for such person’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of the Option has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement,
a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on Common Stock
certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 
 
(g) Termination of Employment or Relationship as a Director
or Consultant. In the event an Optionee’s Continuous Status as an Employee, Director or Consultant terminates (other than upon the Optionee’s death or disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within such period of time ending on the earlier of (i) the date three months after the termination of the Optionee’s Continuous Status as an Employee, Director or
Consultant, or such longer or shorter period specified in the Option Agreement, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the Common Stock covered by such Option shall revert to and again become available for issuance under the Plan. 
 

5 

 
(h)
Disability of Optionee. In the event an Optionee’s Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee’s disability, which the Board may define, the Optionee may exercise his or her Option
(to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date twelve months following such termination (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, at the date of termination, the Optionee is not entitled to exercise his or her entire Option, the Common Stock covered by the
unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the
Common Stock covered by such Option shall revert to and again become available for issuance under the Plan. 
 
(i) Death of Optionee. In the event of the death of an Optionee during, or within a period specified in the Option Agreement after
the termination of, the Optionee’s Continuous Status as an Employee, Director or Consultant, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option at the date of death) by the Optionee’s estate, by a
person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionee’s death pursuant to subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen months following the date of death (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the Common Stock covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after death, the Option is not exercised within the
time specified herein, the Option shall terminate, and the Common Stock covered by such Option shall revert to and again become available for issuance under the Plan. 
 
(j) Early Exercise. The Option may, but need not, include a provision whereby the Optionee may elect
at any time while an Employee, Director or Consultant to exercise the Option as to any part or all of the Common Stock subject to the Option prior to the full vesting of the Option. Any unvested Common Stock so purchased may be subject to a
repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate. 
 
(k) Withholding. To the extent provided by the terms of an Option Agreement, the Optionee may satisfy any federal, state or local
tax withholding obligation relating to the exercise of such Option by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold shares from the shares of the Common Stock of
the Company otherwise issuable to the participant as a result of the exercise of the option; or (3) delivering to the Company owned and unencumbered shares of the Common Stock of the Company. 
 

6 

 
7. Covenants of the
Company. 
 
(a) During the terms of the
Options, the Company shall keep reserved and available at all times the number of shares of Common Stock which may be purchased pursuant to the exercise of such Options. 
 
(b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to issue and sell shares of Common Stock upon exercise of the Options; provided however, that this undertaking shall not require the Company to register under the Securities Act either the Plan, any
Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for
the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless and until such authority is obtained. 
 
8. Use of Proceeds from Sale of Stock. Proceeds from the sale of Common
Stock pursuant to the exercise of Options shall constitute general funds of the Company. 
 
9. Miscellaneous. 
 
(a) The Board shall have the power to accelerate the time at which an Option may first be exercised or the time during which an Option or any part thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in the
Option stating the time at which it may first be exercised or the time during which it will vest. 
 
(b) Neither an Optionee nor any person to whom an Option is transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares of Common Stock subject to such Option unless and until such person has satisfied all requirements for exercise of the Option pursuant to its terms. 
 
(c) Nothing in the Plan or any instrument executed or Option
granted pursuant thereto shall confer upon any Employee, Director, Consultant or Optionee any right to continue in the employ of the Company or any Affiliate (or to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a Director or Consultant of any Employee, Director, Consultant or Optionee with or without cause. 
 
(d) To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year under all plans of the Company and its Affiliates exceeds $100,000, the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. 
 
(e) The Board or the Committee shall have the authority to effect, at any time and from time to time (i) the repricing of any outstanding
Options under the Plan to reduce the 

 

7 

exercise price of such Options and/or (ii) with the consent of the affected holders of Options, the cancellation of any outstanding Options
and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of Common Stock, but having an exercise price per share not less than one hundred percent of the Fair Market Value of the Common
Stock in the case of an Incentive Stock Option or, in the case of a ten percent stockholder (as discussed in subsection 5(b)), not less than one hundred ten percent of the Fair Market Value per share of Common Stock on the new grant date.

 
10. Adjustments Upon Changes in Stock. 
 
(a) If any change is made in the Common Stock subject to the
Plan, or subject to any Option (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the classes and maximum number of Common Stock shares subject to the Plan pursuant to subsection 4(a) and the outstanding Options will be appropriately adjusted in the class(es) and
number of shares and price per share of Common Stock subject to such outstanding Options. 
 
(b) In the event of: (1) a sale of substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the
Company is the surviving corporation but the shares of the Company’s Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or
(4) any other capital reorganization in which the Company’s shareholders receive less than fifty percent of the outstanding voting shares of the new or surviving corporation, then the time during which such Options may be exercised shall be
accelerated to permit the Optionee to exercise all such Options in full prior to such event, and the Options shall terminate if not exercised prior to such event. In the event that any such accelerated option vesting received or to be received by an
Optionee pursuant to this subsection 10(b) (the “Benefit”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection 10(b), be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Benefit shall be reduced to the extent necessary so that no portion of the Benefit will be subject to the Excise Tax, as determined in good faith by the Company; provided, however,
that if, in the absence of any such reduction (or after such reduction), the Optionee believes that the Benefit or any portion thereof (as reduced, if applicable) would be subject to the Excise Tax, the Benefit shall be reduced (or further reduced)
to the extent determined by the Optionee in his or her discretion so that the Excise Tax would not apply. If, notwithstanding any such reduction (or in the absence of such reduction), the Internal Revenue Service (“IRS”) determines that
the Optionee is liable for the Excise Tax as a result of the Benefit, then the Optionee shall be obligated to return to the Company, within thirty days of such determination by the IRS, a portion of the Benefit sufficient such that none of the
Benefit retained by the Optionee constitutes a “parachute payment” within the meaning of Code Section 280G that is subject to the Excise Tax. 
 

8 

 
11. Amendment of the Plan
and Options. 
 
(a) The Board at any time, and
from time to time, may amend the Plan. However, except as provided in Section 10 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company within twelve months before or after
the adoption of the amendment, where the amendment will: 
 
(i) Increase the number of shares of Common Stock reserved for Options under the Plan; 
 
(ii) Modify the requirements as to eligibility for participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements of Section 422 of the Code); or 
 
(iii) Modify the Plan in any other way if such modification requires stockholder approval in order for the Plan to satisfy
the requirements of Section 422 of the Code or to comply with any other regulatory requirements. 
 
(b) 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 promulgated thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers. 
 
(c) It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide Optionees 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) Rights and obligations under any Option granted before amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the Option was granted and (ii) such person consents in writing. 
 
(e) The Board at any time, and from time to time, may amend the terms of any one or more Options; provided however, that the rights
and obligations under any Option shall not be altered or impaired by any such amendment unless (i) the Company requests the consent of the person to whom the Option was granted and (ii) such person consents in writing. 
 

9 

 
12. Termination or
Suspension of the Plan. 
 
(a) The Board may
suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the ten year anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Options
may be granted under the Plan while the Plan is suspended or after it is terminated. 
 
(b) Rights and obligations under any Option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom
the Option was granted. 
 
13. Effective Date of
Plan. The Plan shall become effective as determined by the Board, but no Options granted under the Plan shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve
months before or after the date the Plan is adopted by the Board. 
 

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