Document:

Exhibit 10.1 2015 Stock Incentive Plan (Amended March 27, 2019)

 

VOLITIONRX LIMITED

2015 STOCK INCENTIVE PLAN

 

As amended March 27, 2019

 

ARTICLE 1

 

PURPOSES OF THE PLAN

 

1.1Purposes. The purposes of the Plan are (a) to enhance the Company’s ability to attract and retain the services of qualified employees, officers, directors, consultants and other service providers upon whose judgment, initiative and efforts the successful conduct and development of the Company’s business largely depends and (b) to provide additional incentives to such persons or entities to devote their utmost effort and skill to the advancement and betterment of the Company, by providing them an opportunity to participate in the ownership of the Company and thereby have an interest in the success and increased value of the Company. 

 

ARTICLE 2

 

DEFINITIONS

 

For purposes of this Plan, terms not otherwise defined herein will have the meanings indicated below:

 

2.1“Affiliate” means (i) any entity that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing. 

 

2.2 “Award” means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or Performance Awards. 

 

2.3 “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan. 

 

2.4 “Board” means the Board of Directors of the Company. 

 

2.5 “Cause” means termination of Service because of (a) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent, Subsidiary or Affiliate of the Company, the Participant’s conviction for or guilty plea to a felony or a crime involving moral turpitude or any willful perpetration by the Participant of a common law fraud; (b) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company; (c) any material breach by the Participant of any provision of any agreement or understanding between the Company or any Parent, Subsidiary or Affiliate of the Company and the Participant regarding the terms of the Participant’s Service, including the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an Employee, Officer, Director, Non-Employee Director or Consultant of the Company or a Parent, Subsidiary or Affiliate of the Company, other than as a result of having a Disability or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Parent, Subsidiary or Affiliate of the Company and the Participant; (d) Participant’s disregard of the policies of the Company or any Parent, Subsidiary or Affiliate of the Company so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent, Subsidiary or Affiliate of the Company or (e) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of or is otherwise materially injurious to the Company or a Parent, Subsidiary or Affiliate of the Company. The determination as to whether a Participant is being terminated for Cause will be made in good faith by the Company and will be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time as provided in Section 13.11, and the term “Company” will be interpreted to include any Affiliate, Subsidiary or Parent, as appropriate. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement or Award Agreement with any Participant, provided that such document supersedes the definition provided in this Section 2.5. 

 

2.6 “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. 

 

2.7 “Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan or part of the Plan has been delegated as permitted by law. 

1

 

 

2.8 “Common Stock” means the Common Stock of the Company. 

 

2.9 “Company” means VolitionRx Limited or any successor corporation. 

 

2.10 “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity. 

 

2.11 “Corporate Transaction” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this clause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Company) or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by member of the Board whose appointment or election is not endorsed by as majority of the members of the Board prior to the date of the appointment or election; provided, however, that for purposes of this clause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Section 409A of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time. 

 

2.12 “Director” means a member of the Board. 

 

2.13 “Disability” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. 

 

2.14 “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock or other property dividends in amounts equal equivalent to cash, stock or other property dividends for each Share represented by an Award held by such Participant. 

 

2.15 “Effective Date” means October 30, 2015, the date on which the Plan was approved by the affirmative vote of the holders of a majority of the Shares of Common Stock of the Company which are entitled to be voted and are voted on the proposal to approve this Plan (and for such purpose, any “broker non-votes” will not be counted as being entitled to be voted on that proposal, but will be counted for quorum purposes). 

 

2.16 “Employee” means any person, including Officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company. 

 

2.17 “Exchange Act” means the United States Securities Exchange Act of 1934, as amended. 

 

2.18 “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof. 

2

 

 

2.19 “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows: (a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable; (b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable or (c) if none of the foregoing is applicable, by the Board or the Committee in good faith using any reasonable method of evaluation in a manner consistent with the valuation principles under Section 409A of the Code. 

 

2.20 “Insider” means an officer or director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act. 

 

2.21 “IRS” means the United States Internal Revenue Service. 

 

2.22 “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent or Subsidiary. 

 

2.23 “Option” means an award of an option to purchase Shares pursuant to Article 4 or Article 10. 

 

2.24 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

 

2.25 “Participant” means a person who holds an Award under this Plan. 

 

2.26 “Performance Award” means cash or stock granted pursuant to Article 9 or Article 10. 

 

2.27 “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target or index or group of comparator companies, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied: (a) profit before tax; (b) billings; (c) revenue; (d) net revenue; (e) earnings (which may include earnings before interest; earnings before interest and taxes; earnings before interest, taxes and depreciation; earnings before interest, taxes, depreciation and amortization; net earnings and other metrics based on or derived from earnings); (f) operating income; (g) operating margin; (h) operating profit; (i) controllable operating profit; (j) net operating profit; (k) net profit; (l) gross margin; (m) operating expenses or operating expenses as a percentage of revenue; (n) net income; (o) earnings per share; (p) total stockholder return; (q) market share; (r) return on assets or net assets; (s) the Company’s stock price; (t) growth in stockholder value relative to a pre-determined index; (u) return on equity; (v) return on invested capital; (w) cash flow (including free cash flow or operating cash flows); (x) cash conversion cycle; (y) economic value added; (z) individual confidential business objectives; (aa) contract awards or backlog; (bb) overhead or other expense reduction; (cc) credit rating; (dd) strategic plan development and implementation; (ee) succession plan development and implementation; (ff) improvement in workforce diversity; (gg) customer indicators; (hh) new product invention or innovation; (ii) attainment of research and development milestones; (jj) improvements in productivity; (kk) bookings and (ll) attainment of objective operating goals and employee metrics. The Committee may provide for one or more adjustments to the Performance Factors in accordance with Section 11.3. 

 

2.28 “Performance Period” means the period of service determined by the Committee, not to exceed five (5) years, during which years of service or performance is to be measured for the Award. 

 

2.29 “Performance Share” means an Award granted pursuant to Article 9 or Article 10. 

 

2.30 “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests. 

 

2.31 “Plan” means this VolitionRx Limited 2015 Stock Incentive Plan, as amended. 

 

2.32 “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR. 

 

2.33 “Restricted Stock Award” means an award of Shares pursuant to Article 5 or Article 10 or issued pursuant to the early exercise of an Option. 

3

 

 

2.34 “Restricted Stock Unit” means an Award granted pursuant to Article 8 or Article 10. 

 

2.35 “SEC” means the United States Securities and Exchange Commission. 

 

2.36 “Securities Act” means the United States Securities Act of 1933, as amended. 

 

2.37 “Service” means service as an Employee, Consultant, Director or Non-Employee Director, to the Company or a Parent, Subsidiary or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave; (b) military leave or (c) any other leave of absence approved by the Company; provided, that such leave is for a period of not more than 90 days (x) unless reemployment upon the expiration of such leave is guaranteed by contract or statute or (y) unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification of vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide services to the Company throughout the leave on the same terms as he or she was providing services immediately prior to such leave. An employee will have terminated employment as of the date he or she ceases to provide services (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment will not be extended by any notice period or garden leave mandated by local law, provided however, that a change in status from an employee to a consultant or advisor will not terminate the service provider’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Services and the effective date on which the Participant ceased to provide Services. 

 

2.38 “Shares” means shares of the Company’s Common Stock and the common stock of any successor entity. 

 

2.39 “Stock Appreciation Right” means an Award granted pursuant to Article 7 or Article 10. 

 

2.40 “Stock Bonus” means an Award granted pursuant to Article 6 or Article 10. 

 

2.41 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

 

2.42 “Treasury Regulations” means regulations promulgated by the United States Treasury Department. 

 

2.43 “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto). 

 

ARTICLE 3

 

PLAN SHARES

 

3.1Number of Shares Available. Subject to adjustment as provided in Section 3.5, the total number of Shares reserved and available for grant and issuance pursuant to this Plan is four million two hundred fifty thousand (4,250,000) Shares. 

 

3.2Lapsed, Returned Awards. If any Shares subject to an Award are forfeited, an Award expires or otherwise terminates without issuance of Shares or an Award is settled for cash (in whole or in part) or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award (including on payment in Shares on exercise of a SAR), such Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, be added to the Shares available for grant under the Plan. If (i) any Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company or (ii) withholding tax liabilities arising from such Award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then in each such case the Shares so tendered or withheld shall be added to the Shares available for grant under the Plan on a one-for-one basis. 

 

3.3Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan. 

4

 

 

3.4Limitations; Eligibility. No more than four million two hundred fifty thousand (4,250,000) Shares will be issued pursuant to the exercise of ISOs. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. Subject to adjustment as provided in Section 3.5, no Participant may be granted (a) Options or SARs during any 12-month period with respect to more than five hundred thousand (500,000) Shares and (b) Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards or Stock Bonus Awards during any calendar year that are intended to comply with the performance-based exception under Section 162(m) of the Code and are denominated in Shares under which more than five hundred thousand (500,000) Shares may be earned for each twelve (12) months in the vesting period or Performance Period. Each of the limitations in the preceding sentence of this Section 3.4 shall be multiplied by two (2) with respect to Awards granted to a Participant during the first calendar year in which the Participant commences employment with the Company and its Subsidiaries. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable limitation in this Section 3.4. 

 

3.5Adjustment of Shares. If the number of outstanding Shares is changed by a stock dividend, extraordinary dividends or distributions (whether in cash, shares or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, reclassification, spin-off or similar change in the capital structure of the Company, then (a) the number of Shares reserved for issuance and future grant under the Plan set forth in Section 3.1; (b) the Exercise Prices of and number of Shares subject to outstanding Options and SARs; (c) the number of Shares subject to other outstanding Awards; (d) the maximum number of shares that may be issued as ISOs or other Awards set forth in Section 3.4 and (e) the maximum number of Shares that may be issued to an individual or to a new Employee in any one calendar year set forth in Section 3.4, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws, provided that fractions of a Share will not be issued. 

 

ARTICLE 4

 

OPTIONS

 

4.1Options. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this Section 4.1. 

 

4.2Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria. 

 

4.3Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 

 

4.4Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines. 

 

4.5Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 13.1 and the Award Agreement and in accordance with any procedures established by the Company. 

5

 

 

4.6Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third party administrator) and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 3.5. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 

 

4.7Termination of Service. Unless otherwise provided in the Award Agreement, if the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s Service terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options. Unless otherwise provided in the Award Agreement, if the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative or authorized assignee no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options. Unless otherwise provided in the Award Agreement, if the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options. Unless otherwise provided in the Award Agreement, if the Participant is terminated for Cause, then Participant’s Options will expire on such Participant’s date of termination of Service or at such later time and on such conditions as are determined by the Committee, but in any no event later than the expiration date of the Options. Unless otherwise provided in the Award Agreement, Cause will have the meaning set forth in the Plan. 

 

4.8Limitations on Exercise. The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable. 

 

4.9Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 4.9, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 

 

4.10Modification or Extension. Subject in all cases to Section 13.8, the Committee may modify or extend outstanding Options (but not beyond their original term) and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended or otherwise altered will be treated in accordance with Section 424(h) of the Code. 

 

4.11No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code. 

6

 

 

ARTICLE 5

 

RESTRICTED STOCK AWARDS

 

5.1Restricted Stock Awards. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price (if any), the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan. 

 

5.2Award Agreement. All Restricted Stock Awards will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price (if any), within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise. 

 

5.3Purchase Price. The Purchase Price (if any) for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price (if any) must be made in accordance with Section 13.1, the Award Agreement and any procedures established by the Company. 

 

5.4Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria. 

 

5.5Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee). 

 

ARTICLE 6

 

STOCK BONUS AWARDS

 

6.1Stock Bonus Awards. A Stock Bonus Award is an award to an eligible Employee, Consultant or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award. 

 

6.2Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee will: (a) determine the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals (if any) and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria. 

 

6.3Form of Payment to Participant. Payment may be made in the form of cash, whole Shares or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee. 

 

6.4Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee). 

7

 

 

ARTICLE 7

 

STOCK APPRECIATION RIGHTS

 

7.1Stock Appreciation Rights. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement. 

 

7.2Terms of SARs. The Committee will determine the terms of each SAR, including: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of the SAR and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for each SAR and (y) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria. 

 

7.3Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement will set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 4.7 also will apply to SARs. 

 

7.4Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code. 

 

7.5Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee). 

 

ARTICLE 8

 

RESTRICTED STOCK UNITS

 

8.1Restricted Stock Units. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant or Director covering a number of Shares that may be settled in cash and/or by issuance of Shares (which may consist of Restricted Stock). All RSUs will be made pursuant to an Award Agreement. 

 

8.2Terms of RSUs. The Committee will determine the terms of an RSU including: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be settled; (c) the amount (including any minimum amount), nature (which may include cash, Shares or a combination of both) and valuation of the consideration to be paid or distributed on settlement; (d) the effect of the Participant’s termination of Service on each RSU; and (e) such other terms as the Committee may determine. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from among the Performance Factors to be used to measure the performance, if any and (z) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria. 

 

8.3Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee may permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code. 

8

 

 

8.4Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee). 

 

ARTICLE 9

 

PERFORMANCE AWARDS

 

9.1Performance Awards. A Performance Award is an award to an eligible Employee, Consultant or Director of a cash bonus or an award of Performance Shares denominated in Shares that may be settled in cash or by issuance of those Shares (which may consist of Restricted Stock). Grants of Performance Awards will be made pursuant to an Award Agreement. 

 

9.2Terms of Performance Shares. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including: (a) the amount of any cash bonus; (b) the number of Shares deemed subject to an award of Performance Shares; (c) the Performance Factors and Performance Period that will determine the time and extent to which each Performance Award will be settled; (d) the consideration to be distributed on settlement and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (x) determine the nature, length and starting date of any Performance Period; (y) select from among the Performance Factors to be used and (z) determine the number of Shares deemed subject to the award of Performance Shares. Prior to settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria. During any calendar year no Participant may be granted Performance Awards that are intended to comply with the performance-based exception under Section 162(m) of the Code and are denominated in cash under which more than $10,000,000 may be earned for each twelve (12) months in the Performance Period. This limitation shall be multiplied by two (2) with respect to Awards granted to a Participant during the first calendar year in which the Participant commences employment with the Company and its Subsidiaries. If an Award is cancelled, the cancelled Award shall continue to be counted toward the limitation in this Section 9.2. 

 

9.3Value, Earning and Timing of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. After the applicable Performance Period has ended, the holder of Performance Shares will be entitled to receive a payout of the number of Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Factors or other vesting provisions have been achieved. The Committee, in its sole discretion, may pay earned Performance Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Shares at the close of the applicable Performance Period) or in a combination thereof. 

 

9.4Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). 

 

ARTICLE 10

 

GRANTS TO NON-EMPLOYEE DIRECTORS

 

10.1Grants To Non-Employee Directors. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Article 10 may be automatically made pursuant to policy adopted by the Board or made from time to time as determined in the discretion of the Board. No Non-Employee Director may be granted Awards pursuant to this Article 10 in any calendar year with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of more than $1,000,000. The limitation in the preceding sentence of this Section 10.1 shall be multiplied by two (2) with respect to Awards granted to a Non-Employee Director during the first calendar year in which the Non-Employee Director provides services as a Non-Employee Director. 

 

10.2Eligibility. Awards pursuant to this Article 10 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Article 10. 

 

10.3Vesting, Exercisability and Settlement. Except as set forth in Article 12, Awards will vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted. 

 

10.4Election to receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, as determined by the Committee. Such Awards will be issued under the Plan. An election under this Section 10.4 will be filed with the Company on the form prescribed by the Company. 

9

 

ARTICLE 11

 

ADMINISTRATION OF THE PLAN

 

11.1Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award; (c) select persons to receive Awards; (d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, including the exercise price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine; (e) determine the number of Shares or other consideration subject to Awards; (f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary; (g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of or as alternatives to other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company; (h) grant waivers of Plan or Award conditions; (i) determine the vesting, exercisability and payment of Awards; (j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement; (k) determine whether an Award has been earned; (l) reduce or waive any criteria with respect to Performance Factors (subject to any applicable requirements or limitations under Section 162(m) of the Code); (m) adjust Performance Factors in accordance with Section 11.3 with respect to persons whose compensation is subject to Section 162(m) of the Code; (n) adopt terms and conditions, rules and procedures (including the adoption of any sub-plan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States; (o) make all other determinations necessary or advisable for the administration of this Plan and (p) delegate any of the foregoing to a subcommittee consisting of one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law. 

 

11.2Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant. 

 

11.3Section 162(m) of the Code and Section 16 of the Exchange Act. When necessary or desirable for an Award to qualify as “performance-based compensation” under Section 162(m) of the Code the Committee will include at least two persons who are “outside directors” (as defined under Section 162(m) of the Code) and at least two of such “outside directors” (or a majority if more than two “outside directors” then serve on the Committee) will approve the grant of such Award and timely determine (as applicable) the Performance Period and any Performance Factors upon which vesting or settlement of any portion of such Award is to be subject. If the Committee determines that an Award (other than an Option or SAR) is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the Performance Factors. Such performance goals (and any exclusions) shall (a) be set by the Committee prior to the earlier of 90 days after the commencement of the applicable Performance Period and the expiration of 25% of the Performance Period and (b) otherwise comply with the requirements of Section 162(m) of the Code and the regulations thereunder. When required by Section 162(m) of the Code, prior to settlement of any such Award at least two (or a majority if more than two then serve on the Committee) of such “outside directors” then serving on the Committee will determine and certify in writing the extent to which such Performance Factors have been timely achieved and the extent to which the Award has thereby been earned, and the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act). With respect to Participants whose compensation is subject to Section 162(m) of the Code, the Committee may specify, in its sole discretion, at the time of the initial grant of the Award, the manner of adjustment of any Performance Factors upon which vesting or settlement of any portion of such Award is to be subject to the extent necessary to prevent dilution or enlargement of any Award as a result of extraordinary events or circumstances, as determined by the Committee, or to exclude the effects of an event or occurrence which the Committee determines should appropriately be excluded, including: extraordinary, unusual, infrequent, or non-recurring items; an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; changes in applicable laws, regulations or accounting principles or standards; currency fluctuations; discontinued operations; non-cash items, such as amortization, depreciation, or reserves; asset impairment; or any recapitalization, restructuring, reorganization, merger, acquisition, divestiture, consolidation, spin-off, split-up, combination, liquidation, dissolution, sale of assets, or other similar corporate transaction, but only to the extent such adjustments would be permitted under Section 162(m) of the Code. 

10

 

 

11.4Documentation. The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements. 

 

11.5Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs and practices; (d) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such sub-plans and/or modifications will be attached to this Plan as appendices); provided, however, that no such sub-plans and/or modifications will increase the share limitations contained in Section 3.4 hereof and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code or any other applicable United States governing statute or law. 

 

ARTICLE 12

 

CORPORATE TRANSACTIONS

 

12.1Assumption or Replacement of Awards by Successor. In the event of a Corporate Transaction, any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, then notwithstanding any other provision in this Plan to the contrary, such Awards will have their vesting accelerate as to all shares subject to such Award (and any applicable right of repurchase fully lapse) immediately prior to the Corporate Transaction. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participants in writing or electronically that such Award will be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction. 

 

12.2Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan (“Substitute Awards”). Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards shall not reduce the Shares authorized for grant under the Plan or the limitations on grants to a Participant under Section 3.4, nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards shall not be added to the Shares available for Awards under the Plan); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not Employees or Directors prior to such acquisition or combination. 

 

12.3Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors will accelerate and such Awards will become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines. 

11

 

 

ARTICLE 13

 

MISCELLANEOUS

 

13.1Payment For Share Purchases. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement): (a) by cancellation of indebtedness of the Company to the Participant; (b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled; (c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary of the Company; (d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan; (e) by any combination of the foregoing or (f) by any other method of payment as is permitted by applicable law. 

 

13.2Withholding Taxes. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or the applicable tax event occurs, the Company may require the Participant to remit to the Company or to the Parent or Subsidiary employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax requirements or any other tax or social insurance liability legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable U.S. federal, state, local and international withholding tax or social insurance requirements or any other tax liability legally due from the Participant. The Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such tax withholding obligation or any other tax liability legally due from the Participant, in whole or in part by paying cash, electing to have the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld (or such other amount that will not cause an adverse accounting consequence or cost), delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum amount required to be withheld or withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. 

 

13.3Transferability. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participant’s lifetime only by (i) the Participant or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees and (c) in the case of all awards except ISOs, by a Permitted Transferee. 

 

13.4Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement will be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant’s Purchase Price or Exercise Price, as the case may be, pursuant to Section 13.5. 

 

13.5Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be. Dividend Equivalent Rights will not be granted in connection with any Options or SARs. 

12

 

 

13.6Certificates. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject. 

 

13.7Escrow; Pledge of Shares. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid. 

 

13.8Repricing Prohibited. Other than pursuant to Section 3.5, the Committee will not (a) amend the terms of outstanding Options or SARs to reduce the Exercise Price of outstanding Options or SARs; (b) cancel outstanding Options or SARs when the Exercise Price per Share exceeds the Fair Market Value of one Share in exchange for cash or another Award (other than in connection with a Corporate Transaction); or (c) take any other action with respect to an Option or SAR that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Shares are listed, in any case without prior stockholder approval. 

 

13.9Deferrals. The Committee may determine that the delivery of Shares, payment of cash or a combination thereof upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants. Deferrals by Participants will be made only in accordance with Section 409A of the Code. Consistent with Section 409A of the Code, the Committee may provide for distributions while a Participant is providing Services to the Company or any Parent or Subsidiary. 

 

13.10Securities Law and Other Regulatory Compliance. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 

 

13.11No Obligation To Employ. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of or to continue any other relationship with the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time. 

 

13.12Adoption and Stockholder Approval. This Plan was submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months after the date this Plan is adopted by the Board, and such approval was obtained on October 30, 2015. 

 

13.13Term of Plan; Governing Law. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate on August 18, 2025, which is ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules). 

 

13.14Amendment or Termination of Plan. The Board may at any time terminate or amend this Plan in any respect, including amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval or amend Section 13.8; provided further, that a Participant’s Award will be governed by the version of this Plan then in effect at the time such Award was granted. 

13

 

 

13.15Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 

 

13.16Insider Trading Policy. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company. 

 

13.17All Awards Subject to Company Clawback or Recoupment Policy. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards. 

 

13.18Compliance with Section 409A of the Code. This Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. To the extent that an Award or the payment, settlement or deferral thereof is subject to Section 409A of the Code, the Award shall be granted, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including regulations or other guidance issued with respect thereto, except as otherwise determined by the Committee. Any provision of this Plan that would cause the grant of an Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A) that are otherwise required to be made under the Plan or any Award Agreement to a “specified employee” (as defined under Section 409A) as a result of his or her “separation from service” (as defined below) (other than a payment that is not subject to Section 409A) shall be delayed for the first six (6) months following such “separation from service” and shall instead be paid (in a manner set forth in the Award Agreement) on the payment date that immediately follows the end of such six-month period (or, if earlier, within 10 business days following the date of death of the specified employee) or as soon as administratively practicable within 60 days thereafter, but in no event later than the end of the applicable taxable year. A termination of employment shall not be deemed to have occurred for purposes of any provision of the Plan or any Award Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A. For purposes of any such provision of the Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment,” “termination of continuous Service” or like terms shall mean “separation from service.” 

14Exhibit 10.1

 

DEVELOPMENT LOAN AGREEMENT

 

This Development Loan
Agreement (“Agreement”) is made and entered into effective as of June 17, 2019 (the “Effective Date”),
among BOKF, NA dba Bank of Albuquerque (the “Lender”); and Lomas Encantadas Development Company, LLC, a New Mexico
limited liability company (the “Borrower”), with reference to the following:

 

(a)        Borrower
has requested that Lender lend to Borrower up to Two Million Four Hundred Seventy-Five Thousand and No/100 Dollars ($2,475,000.00),
to partially finance Borrower’s development of 103 residential Lots (defined below) within Lomas Encantadas Unit 2C (Phase
3) on the real property more particularly described on Exhibit “A” attached hereto and made a part hereof (the
“Mortgaged Property”).

 

(b)        Subject
to the terms, provisions, covenants and agreements hereinafter set forth, Lender has agreed to make the requested extension of
credit.

 

NOW, THEREFORE, in
consideration of the mutual covenants contained herein and the loan to be made hereunder, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, Lender and Borrower hereby covenant and agree as follows:

 

1.          LENDING
AGREEMENT: Subject to the terms, provisions, covenants and agreements set forth in this Agreement, Lender agrees to lend to
Borrower, and the Borrower agrees to borrow from Lender, up to the principal sum of Two Million Four Hundred Seventy-Five Thousand
and No/100 Dollars ($2,475,000.00), to be used by Borrower for the purposes of: (a) paying contractors, mechanics, materialmen,
and suppliers pursuant to the terms of contracts for services in fact performed and materials purchased for and either incorporated
into the development of the Mortgaged Property or suitably stored on the Mortgaged Property for later incorporation (such development
work and the Mortgaged Property are hereinafter collectively referred to as the “Development”); (b) reimbursing Lender
for reasonable expenses incurred by Lender pursuant to this Agreement; and (c) paying other reasonable costs that are incidental
or related to the cost of completing or financing the Development to the extent included in the Development Budget (defined below).

 

2.          BORROWER’S
NOTE: The loan shall be evidenced by a Non-Revolving Line of Credit Promissory Note (the “Note”) in the principal
amount of Two Million Four Hundred Seventy-Five Thousand and No/100 Dollars ($2,475,000.00), which Note shall bear interest at
the rate specified in the Note.

 

3.          COLLATERAL
SECURITY: The performance of all covenants and agreements contained in this Agreement and in the other documents executed or
delivered as a part of this transaction and the payment of the Note shall be secured as follows:

 

     

     

    

 

3.1.          Security
Documents Covering Mortgaged Property: Borrower shall grant to Lender a first-lien mortgage covering all of the Mortgaged Property
and a security interest in all personal property relating to such Mortgaged Property, which mortgage lien and security interest
are evidenced by a Mortgage, Security Agreement and Financing Statement dated the same day as this Agreement made by Borrower in
favor of Lender (the “Mortgage”).

 

3.2.          Hazardous
Substances Indemnification Agreement: Borrower and Guarantor shall sign and deliver to Lender a Hazardous Substances Indemnification
Agreement in the form required by Lender (the “HSIA”).

 

3.3.          Guaranty:
AMREP Southwest, Inc. (the “Guarantor”) shall sign and deliver to Lender a Guaranty Agreement in the form required
by Lender (the “Guaranty”).

 

3.4.          Collateral
Assignment of Contracts: The Borrower shall assign to Lender and grant a security interest to Lender in all contracts with
contractors, architects and engineers (the “Assignment”).

 

3.5.          Additional
Documents: Borrower shall also sign and deliver such Closing Certificates, Lien Affidavits, Closing Statements and other documents
that Lender may reasonably request (collectively, the “Additional Documents”). Further, any and all collateral documents
executed by Borrower in favor of Lender as security for any indebtedness of Borrower to Lender shall also expressly secure Borrower’s
obligations hereunder and under the Note and all documents that secure payment of the Note.

 

4.          CONDITIONS
OF LENDING: The obligation of Lender to perform this Agreement and to make an initial or any future advance or extension of
credit hereunder is subject to the performance and existence of the following conditions precedent:

 

4.1.          No
Events of Default: There shall not have occurred and be continuing any Event of Default, and the representations and warranties
set forth in the Loan Documents shall be true and accurate in all material respects.

 

4.2.          Loan
Documents: This Agreement, the Note, the Mortgage, the Assignment, the Guaranty, the HSIA, and the Additional Documents (collectively,
the “Loan Documents”) shall be duly authorized, executed and delivered to Lender.

 

4.3.          Recording
of Security Documents: The Mortgage and a Uniform Commercial Code Financing Statement naming Borrower as debtor and Lender
as secured party shall be recorded in the appropriate county or state offices.

 

4.4.          Title
Evidence: Borrower shall provide to Lender a loan policy of title insurance with pending disbursements clause, issued by a
title insurance company acceptable to Lender (the “Title Company”), evidencing that Borrower has good and indefeasible
fee simple title to the Mortgaged Property and that the Mortgage constitutes a valid first mortgage lien on the Mortgaged Property,
subject only to those matters waived by Lender. The title policy shall not include an exception based upon mechanics’ and
materialmen’s liens. The premiums for the title policy shall be paid by Borrower.

 

    	 	2	 

     

    

 

4.5.          Appraisal:
Borrower shall pay for an independent appraisal evaluation of the Mortgaged Property by an appraiser selected and approved by Lender,
which appraisal must comply with the standards set forth by the Comptroller of the Currency of National Banks.

 

4.6.          Survey
or Plat: Borrower shall deliver to Lender and the Title Company a plat of the Mortgaged Property in a form which is acceptable
to Lender and the Title Company and will enable the issuer of the required loan policy of title insurance to delete all survey
exceptions.

 

4.7.          Insurance:
Borrower shall obtain and maintain the insurance required to be maintained by the Mortgage.

 

4.8.          Zoning
and Use: If requested by Lender, Borrower shall furnish Lender satisfactory evidence that the Mortgaged Property is presently
zoned for its intended use and that the Mortgaged Property is in full compliance with all municipal ordinances, codes, rules or
regulations.

 

4.9.          Permits:
Borrower shall obtain and deliver to Lender copies of all permits required to commence, and thereafter to continue, work on the
Development or any part thereof, including, without limitation, permits issued by the City of Rio Rancho, New Mexico.

 

4.10.        Cost
Breakdown and Budget: The Borrower shall submit, for approval by Lender, complete plans for the Development and a detailed
cost breakdown and budget of the work entailed in the Development showing the total costs involved (both direct and indirect) (collectively,
the “Development Budget”), which approval shall not be unreasonably withheld or delayed. Following approval by Lender,
the Development Budget shall not be changed in any material respect without the prior written consent of Lender.

 

4.11.        Existence
and Authority: If requested by Lender, Borrower shall provide to Lender true and correct copies of the documents that created
and evidence Borrower and all amendments thereto including: (i) filed Articles of Organization and Certificate of Organization
from the New Mexico Secretary of State (“NMSOS”); (ii) a Certificate of Good Standing issued by the NMSOS; (iii) authorization
from Borrower to enter into this agreement, and any other Loan Documents required by Lender in connection with this Agreement;
and (iii) the operating agreement of Borrower and all amendments thereto.

 

4.12.        Cash
Equity. In addition to any other equity or loan to value requirements Borrower shall have provided evidence reasonably satisfactory
to Lender that Borrower has invested cash equity in the Development, as determined by Lender, of not less than fifteen percent
(15%) of the “as completed” appraised value of the Development as of the date of the initial advance under the Note.
Borrower’s equity in the Mortgaged Property, including without limitation its investment in the offsite infrastructure supporting
the Mortgaged Property, shall be included in any calculation of the cash equity required by this Section 4.12.

 

    	 	3	 

     

    

 

4.13.        Loan
Origination Fee: At the time the Note is signed, Borrower shall remit to Lender a fully earned, non-refundable loan origination
fee of Twelve Thousand Three Hundred Seventy Five and No/100s Dollars ($12,375.00).

 

5.          REPRESENTATIONS
AND WARRANTIES: In addition to all other representations and warranties of Borrower to Lender, Borrower represents and warrants
that:

 

5.1.          Existence;
Compliance with Law: Borrower (i) is duly organized or formed, as applicable, validly existing and (if relevant) in good standing
under the laws of the jurisdiction of its organization or formation, as the case may be, (ii) has the limited liability company
power and authority and the legal right, to own and operate its property and assets, to lease the property and assets it leases
and causes to be operated as lessee, and to conduct the business in which it is currently engaged under the governmental requirements
of each jurisdiction in which it owns, leases and/or operates its property or assets, (iii) is duly qualified as a foreign limited
liability company, and (if relevant) in good standing under the laws of each jurisdiction where its ownership, lease or operation
of property or assets or the conduct of its business requires such qualification, (iv) is in material compliance with its applicable
organizational documents, and (v) is in compliance with all governmental requirements, except to the extent that the failure to
comply therewith could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on Borrower.

 

5.2.          Entity
Power; Authorization; Enforceable Obligations: Borrower has the power and authority, and the legal right, to make, deliver
and perform the Loan Documents and to borrow hereunder, and has taken all necessary limited liability company or other action to
authorize the execution, delivery and performance of the Loan Documents and to authorize the borrowings on the terms and conditions
of this Agreement and the other Loan Documents. No consent or authorization of, filing with, notice to or other act by or in respect
of, any governmental authority or any other person is required in connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other Loan Documents, except consents, authorizations,
filings and notices which have been obtained or made and are in full force and effect. Each Loan Document has been duly executed
and delivered on behalf of Borrower. This Agreement constitutes, and each other Loan Document upon execution shall constitute,
a legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

 

    	 	4	 

     

    

 

5.3.          No
Legal Bar: The execution, delivery and performance of this Agreement, the other Loan Documents, the borrowings hereunder and
the use of the proceeds thereof shall not violate any governmental requirement or any contractual or other obligation of Borrower
and shall not result in, or require, the creation or imposition of any lien on any of Borrower’s assets, properties or revenues
pursuant to any governmental requirement or any such contractual or other obligation (other than the liens created by the Loan
Documents). No governmental requirement or contractual or other obligation applicable to Borrower or Borrower’s properties
or assets could reasonably be expected to have a material adverse effect on Borrower. No performance of a contractual or other
obligation by Borrower, either unconditionally or upon the happening of an event, would result in the creation of a lien (other
than a permitted lien) on the property, assets or revenues of Borrower.

 

5.4.          No
Conflicting Agreements: There is no provision of any existing agreement, mortgage, indenture, instrument, document or contract
binding on Borrower or affecting any property or asset of Borrower, which would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement and the other Loan Documents.

 

5.5.          Ownership
of Properties; Liens: Borrower has good and indefeasible title to the Mortgaged Property, and the Mortgaged Property is not
subject to any deed of trust, mortgage, pledge, security interest, encumbrance, lien or charge of any kind, excluding only: (a)
deposits to secure payment of worker’s compensation (if any), unemployment insurance and other similar benefits; (b) liens
for property taxes not yet due; (c) statutory liens, against which there are established reserves in accordance with generally
accepted accounting principles, and which arise in the ordinary course of business and secure obligations of Borrower which are
not yet due and not in default; (d) encumbrances in favor of Lender and (e) matters reflected in the loan policy of title insurance.

 

5.6.          Financial
Condition: The financial statements, information and materials of Borrower heretofore delivered to Lender fairly and accurately
present in all material respects Borrower’s consolidated financial condition (including its assets and liabilities) as of
the date or dates thereof (subject, in the case of the interim financial statements, to normal year-end adjustments and the absence
of notes), and there have been no material adverse changes in Borrower's financial condition or operations since the date or dates
thereof. Borrower does not currently have material guarantee obligations, contingent liabilities and liabilities for taxes, or
any long-term leases or unusual forward or long-term commitments, which are not reflected in the most recent financial statements,
information and materials referred to in this section.

 

5.7.          Licenses,
Permits, Etc.: Borrower possesses or will possess prior to the commencement of construction and construction of each subsequent
phase of the Development, all licenses, permits, consents, approvals, franchises and intellectual property (or otherwise possesses
the right to use such intellectual property without violation of the rights of any other person) which are necessary for the completion
of the Development, except for those licenses, permits, consents, approvals, franchises and intellectual property the failure of
which to possess could not reasonably be expected to have a material adverse effect on Borrower. Borrower is not in violation in
any material respect of the terms under which it possesses any such licenses, permits, consents, approvals, franchises and intellectual
property or the right to use such licenses, permits, consents, approvals, franchises and intellectual property.

 

    	 	5	 

     

    

 

5.8.          Contractual
Default: Borrower is not in default under or with respect to any of their respective contractual obligations in any respect
that could reasonably be expected to have a material adverse effect on Borrower.

 

5.9.          No
Change: Since May 1, 2019, there has been no development or event that has had or could reasonably be expected to have a material
adverse effect on the Mortgaged Property or Borrower.

 

5.10.        Litigation:
There is no litigation, investigation or proceeding of or before any arbitrator, mediator or any governmental authority or, to
Borrower’s knowledge, threatened by or against Borrower or against any of any Borrower’s assets, properties or revenues:
(a) with respect to any of the Loan Documents or any of the transactions contemplated hereby, or (b) that could reasonably be expected
to have a material adverse effect on the Mortgaged Property or Borrower.

 

5.11.        Employee
Retirement Income Security Act of 1994 (ERISA): Borrower has not incurred any “accumulated funding deficiency”
within the meaning of Section 302(a)(2) of ERISA as amended from time to time with respect to any employee pension or other benefit
plan or trust maintained by or related to Borrower, and Borrower has not incurred any material liability to the Pension Benefit
Guaranty Corporation (PBGC) as established pursuant to Section 4002 of ERISA in connection with any such plan. No reportable event
described in Sections 4042(a) or 4043(b) of ERISA with respect to any such plan has occurred. The representations contained in
this paragraph 5.11 are subject to the statements and disclosures contained in Note 11 of the AMREP Corporation SEC Form 10-K dated
April 30, 2018 and in the AMREP Corporation SEC Form 8-K dated April 26, 2019.

 

5.12.        Insurance:
All policies of insurance of any kind or nature of any Borrower, including policies of fire, theft, product liability, public liability,
property damage, other casualty, employee fidelity, workers’ compensation and employee health and welfare insurance, if and
as applicable, are in full force and effect as of the date of this Agreement and are of a nature and provide such coverage as is
customarily carried by businesses of the size and character of Borrower. Borrower has not been refused insurance for any material
coverage for which it has applied or has had any policy of insurance terminated (other than at Borrower’s request).

 

    	 	6	 

     

    

 

5.13.         Taxes:
Borrower has timely filed or requested appropriate extensions (or caused to be timely filed or extended) all federal, state and
other tax returns, reports and statements (collectively, “Tax Returns”) that are required to be filed by Borrower with
the appropriate governmental authorities in all jurisdictions in which such Tax Returns are required to be filed; all such Tax
Returns are true and correct in all material respects; Borrower has timely paid, prior to the date on which any fine, penalty,
interest, late charge or loss may be added thereto for non-payment thereof, all taxes shown to be due and payable on said Tax Returns
or on any assessments made against Borrower or any of Borrower’s properties or assets, and all other taxes, fees or other
charges imposed on Borrower or any of Borrower’s properties or assets by or otherwise due and payable to any governmental
authority (other than any for which the amount or validity of which are currently being contested in good faith by appropriate
proceedings); and no tax lien has been filed against the property or assets of Borrower and, to Borrower’s knowledge, no
claim is being asserted, with respect to any such tax, fee or other charge. No Tax Return is under audit or examination by any
governmental authority and no notice of such an audit or examination or any assertion of any claim for taxes has been given or
made by any governmental authority. Proper and accurate amounts have been withheld by Borrower (if and to the extent any such withholdings
are so required) for all periods in full and complete compliance with the tax, social security, health care and unemployment withholding
provisions of applicable governmental requirements, and such withholdings (if any) have been timely paid to the respective governmental
authorities. Borrower (i) does not intend to treat the Loan or any other transaction contemplated hereby as being a “reportable
transaction” (within the meaning of Treasury Regulation 1.6011-4), and (ii) is not aware of any facts or events that would
result in such treatment. Due to Borrower’s date of organization, Borrower has not yet filed any Tax Returns.

 

5.14.         Margin
Regulations: No part of the proceeds of the Loan shall be used for buying or “carrying” any “margin stock”
within the respective meanings of each of the quoted terms under Regulation U (as defined within the applicable governmental requirements
promulgated by the applicable governmental authorities from time to time) as now and from time to time hereafter in effect or for
any purpose that violates the provisions of any governmental authority. If requested by Lender, Borrower shall furnish to Lender
a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred
to in Regulation U.

 

5.15.         Investment
Company Act: Borrower is not an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended. Borrower is not subject to regulation under
any governmental requirement which limits its ability to incur Indebtedness, other than Regulation X (as defined within the applicable
governmental requirements promulgated by the applicable governmental authorities from time to time).

 

5.16.         Patriot
Act: Borrower and its affiliates are in compliance, in all material respects, with the Patriot Act. No part of the proceeds
of the Loan shall be used, directly or indirectly, for any payments to any (i) governmental authority’s officials or employees,
(ii) political party, (ii) official of any political party, (iv) candidate for political office, or (v) anyone other person acting
in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

 

5.17.         OFAC:
None of Borrower or any affiliate of any Borrower: (a) is a sanctioned person; (b) owns assets in sanctioned entities;
or (c) derives any of its operating income from investments in, or transactions with sanctioned persons or sanctioned entities.
None of the proceeds of any Loan shall be used or have been used to fund any operations in, finance any investments or activities
in, or make any payments to, a sanctioned person or a sanctioned entity.

 

    	 	7	 

     

    

 

5.18.         No
Default: No Event of Default has occurred and is continuing.

 

5.19.         Adverse
Circumstances: To Borrower’s knowledge, neither the business nor any property or asset of any Borrower is presently affected
by any fire, explosion, accident, strike, lockout, or other dispute, embargo, act of God, act of public enemy or terrorism, or
similar event or circumstance, nor has any other event or circumstance relating to any Borrower's business, affairs, properties
or assets occurred, any of which could have a material adverse effect on Borrower.

 

5.20.         Accuracy
of Information: To Borrower's knowledge, all factual information provided to Lender in connection with the Loan evidenced by
the Note is and shall be true, accurate and complete in all material respects on the date as of which such information was delivered
to Lender and was not and shall not be incomplete by the omission of any material fact necessary to make such information not misleading,
provided that, with respect to projected financial information, prospect information, geological and geophysical data and engineering
projections, Borrower only represents that such information was prepared in good faith based upon assumptions believed to be reasonable
at the time.

 

5.21.         Environmental:
To Borrower’s knowledge, the conduct of Borrower's business operations and the condition of Borrower's properties or assets
owned, operated or managed by Borrower does not violate any Environmental Law (as defined in the HSIA between Borrower and Lender
of even date herewith). Borrower has not received notice of, nor, to Borrower’s knowledge are there presently existing, any
judicial, administrative, arbitral or other proceeding (including any notice of violation or alleged violation) under or relating
to any Environmental Law or any environmental permit to which any Borrower is, or to Borrower’s knowledge, shall be, named
as a party that is pending or, to any Borrower’s knowledge, threatened. Borrower has not received any written request for
information, or been notified that any Borrower is a potentially responsible party under or relating to any Environmental Law.
Borrower has not entered into or agreed to any consent decree, order, or settlement or other agreement or undertaking, and Borrower
is not subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral or other forum for
dispute resolution, relating to compliance with or liability under any Environmental Law. Borrower has not assumed or retained,
by contract, operation of law or otherwise, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental
Law. Borrower has made available to Lender copies of all significant reports, correspondence and other documents, if any, in its
possession, custody or control regarding compliance by Borrower with, or potential liability of Borrower under, Environmental Laws
or environmental permits.

 

5.22.         Compliance
with Laws: To Borrower’s knowledge, Borrower is presently in compliance in all material respects with all applicable
governmental requirements to which Borrower, or any of Borrower's assets or properties, is subject, except where the failure to
so comply could not reasonably be expected to have a material adverse effect on Borrower.

 

    	 	8	 

     

    

 

5.23.        Solvency;
Compliance with Financial Covenants: Borrower is, and after giving effect to the incurrence of all Indebtedness and obligations
being incurred in connection herewith shall be and shall continue to be, solvent.

 

5.24.        Availability
of Utility Service: All utility services necessary for the maintenance and use of the Mortgaged Property are or will be available
to the Mortgaged Property, including water supply, storm and sanitary sewer facilities, electric and gas utilities and cable television
lines.

 

5.25.        No
Commencement of Work: Prior to recordation of the Mortgage, no work of any kind incident to the Development shall have commenced,
no equipment or material shall have been delivered to or stored upon the Mortgaged Property for any purpose whatsoever, and no
contracts (or memorandum or affidavit thereof) for the supplying of labor or materials for the Development nor affidavit of commencement
of construction shall have been recorded in the real property records of the county in which the Mortgaged Property is located.

 

5.26.        Continuation
of Representations and Warranties; Borrower’s Knowledge: All representations and warranties made under this Agreement
shall be deemed to be made at and as of the closing date and each funding date. Whenever used in this Agreement, the phrase “to
Borrower’s knowledge” means to the actual knowledge of Borrower’s President as of the Effective Date, without
independent inquiry and without review of any files.

 

6.          BORROWER’S
AFFIRMATIVE COVENANTS: Until payment in full of the Note and performance of all obligations owing to Lender under this Agreement
and the instruments executed pursuant hereto, unless the Lender shall otherwise consent in writing, Borrower agrees to perform
or cause to be performed the following:

 

6.1.          Performance
of Obligations: Borrower will promptly and punctually perform all of the obligations hereunder, and under all other instruments
executed or delivered pursuant thereto and under the terms of any other contract or agreement entered into by the Borrower in connection
with the Development.

 

6.2.          Financial
Information: Borrower will maintain adequate and accurate books and records of account. Lender shall have the right to examine
and copy such books and records, including all books and records relating to the Development, to discuss the affairs, finances
and accounts of Borrower and to be informed as to the same from time to time as Lender might reasonably request. Borrower will
provide Lender with: (a) quarterly unaudited and without footnotes financial statements within sixty (60) days of each quarter
end, beginning with the quarter ending July 31, 2019; and (b) annual unaudited and without footnotes financial statements within
one hundred twenty (120) days of fiscal year end. All financial information provided to Lender will be in form and content acceptable
to Lender in its sole discretion.

 

    	 	9	 

     

    

 

6.3.          Notification
of Liens: Other than items identified in the title policy required hereunder, Borrower will notify Lender of the existence
or asserted existence of any mortgages, pledge, lien, charge or encumbrance on the Mortgaged Property, personal or real, tangible
or intangible, forthwith upon Borrower’s obtaining knowledge thereof, excluding only: (a) encumbrances in favor of Lender;
(b) deposits to secure payment of worker’s compensation, unemployment insurance and similar benefits; (c) statutory liens
arising in the ordinary course of Borrower’s business which secure current obligations of Borrower which are not in default.

 

6.4.          Payment
of Taxes: All taxes, assessments and governmental charges or levies imposed on the Borrower or on Borrower’s assets,
income or profits, will be paid prior to delinquency. Notwithstanding the foregoing, the Borrower shall not be required to pay
any tax, assessment, charge or levy which is being contested in good faith by proper proceedings; provided, however, at any time
after a tax lien, of any type, is filed or notice thereof is received, upon request of Lender, Borrower shall deposit with Lender
the amount so contested and unpaid together with all interest that may or might be assessed or be a charge on the Mortgaged Property
or any part thereof.

 

6.5.          Lender’s
Access: Upon one (1) business day’s written notice, Borrower will, during normal business hours and as often as Lender
may reasonably request but not exceeding once per month during the term of this Agreement so long as Borrower is not in default
hereunder, permit any of Lender’s officers or any authorized representatives of Lender to visit and inspect the Development,
to enter upon the Mortgaged Property, to inspect the Development progress thereof and all materials to be used in the Development,
and to examine the current plans and specifications.

 

6.6.          Compliance
with Laws: Borrower will comply with all statutes, laws, rules and regulations in all material respects to which the Borrower
is subject or by which its properties are bound or affected, including, without limitation, (a) ERISA; (b) those pertaining or
relating to environmental standards and controls; (c) those pertaining to occupational health and safety standards (d) those pertaining
to equal employment and credit practices and civil rights, and (e) those pertaining to the ownership, operation and use of the
Development.

 

6.7.          Maintenance:
Borrower will maintain its existence, remain in good standing in each jurisdiction in which it is required to be qualified or licensed,
maintain all franchises, permits, intellectual properties and licenses necessary or useful in the operation of its business heretofore
operated and as to be operated as contemplated hereby, and Borrower will maintain or cause to be maintained its properties in good
and workable condition, repair, and appearance, and protect the same from deterioration, other than normal wear and tear, at all
times.

 

    	 	10	 

     

    

 

6.8.          Further
Assurances: Borrower will, from time to time, promptly cure any defects or omissions in the execution and delivery of, or the
compliance with the Loan Documents, or the conditions described herein, including the execution and delivery of additional documents
reasonably requested by Lender.

 

6.9.          Events
with Respect to ERISA: As soon as possible and in any event within thirty (30) days after Borrower knows or has reason to know
that any reportable event described in Sections 4042(a) or 4043(b) of ERISA with respect to any employee pension or other benefit
plan or trust maintained by or related to Borrower has occurred, or that PBGC has instituted or will institute proceedings under
ERISA to terminate any such plan, Borrower will deliver to Lender (a) a certificate of an officer of Borrower setting forth details
as to such event and the action which Borrower proposes to take with respect thereto, and (b) a copy of any notice delivered by
PBGC evidencing its intent to institute such proceedings. For all purposes of this covenant, Borrower shall be deemed to have all
knowledge or knowledge of all facts attributable to the plan administrator of such plan under ERISA. Borrower will furnish to Lender
(or cause such plan administrator to furnish to Lender) the annual report for each plan covered by ERISA maintained by or related
to Borrower as filed with the Secretary of Labor not later than ten (10) days after the receipt of a request from Lender in writing
for such report.

 

6.10.        Other
Notifications: Borrower will notify Lender as soon as practicable, but in any event within five (5) business days after Borrower
knows or has reason to know that any of the following has occurred: (a) an Event of Default; (b) any material adverse change in
the nature of or property comprising the Mortgaged Property; and (c) any change in the accounting practices and procedures of Borrower,
including a change in the financial conditions, business or operations of Borrower.

 

6.11.        Compliance
with Organizational Documents: Borrower shall timely perform all of its responsibilities and obligations under the Borrower’s
Articles of Organization, Operating Agreement and any other documents now or hereafter evidencing Borrower.

 

6.12.        Completion
of Development: Borrower shall complete the work of the Development on or before December 17, 2021.

 

6.13.        Regulatory
Compliance: Borrower shall at all times cause the Development to remain in full compliance with all required equity thresholds
and capital retention obligations set forth in Part 217 of Chapter II of title 12 of the Code of Federal Regulations (HVCRE regulations)
such that the Development would not, in the determination of Lender need to be classified as High Volatility Commercial Real Estate.

 

6.14.        Continuity
of Construction: Borrower shall prosecute with diligence and continuity the construction of the work and improvements and will
not suspend or cease construction for a period longer than thirty (30) days. Borrower’s obligation under this provision shall
be subject to exception due to events of Force Majeure Delay. "Force Majeure Delay" shall mean a delay in progress of
construction due to weather, act of God, unavailability or shortage of labor or materials, national emergency, fire or other casualty,
natural disaster, war, delays or actions of governmental authorities or utilities, riots, acts of violence, labor strike, injunctions
in connection with litigation, or other cause which is not within the reasonable control of Borrower. Force Majeure Delay does
not include the failure to order and obtain materials in a timely fashion for the continuous development of the Development and
does not include financial difficulties of the Borrower.

 

    	 	11	 

     

    

 

7.          BORROWER’S
NEGATIVE COVENANTS: Until payment in full of the Loan and unless Lender shall otherwise consent in writing, Borrower will not
perform or permit to be performed any of the following acts:

 

7.1.          Creation
or Existence of Liens: Borrower shall not create, assume or suffer to exist any mortgage, pledge, lien, charge or encumbrance
on the Mortgaged Property without the prior approval of Lender, excluding only: (a) encumbrances in favor of the Lender; (b) deposits
to secure payment of workmen’s compensation, unemployment insurance and similar benefits; (c) statutory liens, against which
there are established reserves in accordance with generally accepted accounting principles, and which arise in the ordinary course
of Borrower’s business and secure current obligations of Borrower which are not in default; (d) liens for property taxes
not yet due; and (e) such matters reflected in the mortgagee policy of title insurance and in the Mortgage. Lender understands
and approves Borrower recording on the Mortgaged Property: (i) one or more Final Plats (as defined below) of the Mortgaged Property
which may contain grants of easements, dedications of right-of-way and other encumbrances necessary to create the subdivided Lots
(as defined below); (ii) one or more Supplemental Declarations of Covenants, Conditions and Restrictions bringing the Mortgaged
Property into the Lomas Encantadas Master Homeowners Association, Inc.; and (iii) one or more Notices of Levy in connection with
the Lomas Encantadas Public Improvement District.

 

7.2.          Transfer
of Mortgaged Property: Borrower shall not sell, transfer or convey all or any portion of the Mortgaged Property except as permitted
by this Agreement; and the Borrower shall not transfer, whether voluntarily or involuntarily, sell or assign more than 50% of the
ownership interest of Borrower without the prior consent of Lender. If Borrower transfers, whether voluntarily or involuntarily,
sells or assigns any of the ownership interest of Borrower, Borrower will give written notice to Lender of the percentage of ownership
interest transferred, sold or assigned and the parties to whom the ownership interest was transferred, sold or assigned within
ten (10) days of the effective date of the transfer, sale or assignment.

 

7.3.          Use
of Loan Proceeds: Borrower shall not use or permit any related person, association or entity to use any funds advanced to Borrower
under this Agreement to (a) defray living expenses, (b) anticipate profit, or (c) defray any other items not directly connected
with the costs of the Development and payable to unrelated third parties.

 

7.4.          Modification
of Organizational Documents: Borrower shall not participate in, suffer or permit the material amendment, modification, restatement,
cancellation or termination of any document now or hereafter evidencing Borrower, including, without limitation, the Borrower’s
Articles of Organization or Operating Agreement, without the prior consent of Lender, which consent will not be unreasonably withheld.

 

    	 	12	 

     

    

 

7.5.          Limitation
on Distributions: Except as otherwise provided herein, and if no Default or Event of Default has occurred and is continuing,
Borrower may make distributions of cash or property to its partners or otherwise make distributions on the account of equity interests
in the Borrower, provided, however, that no such distribution would (a) cause Borrower to be in default of any covenant contained
herein or in the Loan Documents, or (b) cause Borrower’s net equity investment in the Development, as determined by Lender,
to be less than fifteen percent (15%).

 

8.          ADMINISTRATION
OF LOAN: NOTWITHSTANDING ANY LANGUAGE IN THIS AGREEMENT SEEMINGLY TO THE CONTRARY, BORROWER SHALL NOT BE ENTITLED TO ANY DISBURSEMENT
OF LOAN PROCEEDS HEREUNDER UNLESS AND UNTIL BORROWER HAS SATISFIED ALL OF THE CONDITIONS OF LENDING SET FORTH THIS AGREEMENT. LENDER
SHALL MAKE DISBURSEMENTS UNDER THE LOAN IN THE FOLLOWING MANNER:

 

8.1.          Purpose:
The principal sum to be disbursed under the Note shall be used only to pay development costs as shown in the Development Budget
(the “Development Costs”).

 

8.2.          Compliance
with Development Budget: Notwithstanding any language in this Agreement seemingly to the contrary, all disbursements under
this Agreement and the Note shall be made in accordance with the Development Budget. Deviations from the Development Budget must
be approved in advance in writing by Lender, which approval shall not be unreasonably withheld. The Development Budget will be
monitored monthly on a category-by-category basis. If Development Costs in an individual category exceed the amount budgeted therefore
(plus ten percent (10%) thereof as contained in the contingency line item) in the Development Budget, then Borrower shall pay from
sources other than the Loan the entire excess, unless a budgetary savings in the same or greater amount is realized in a different
category as reasonably determined by Lender.

 

8.3.          Request
for Funds: Borrower shall deliver to Lender a request for funds (a “Request for Funds”) stating the amount of disbursement
requested under the Note. The Request for Funds shall be made on the AIA form G702 Application and Certificate for Payment, and
as applicable, an AIA form G703 Continuation Sheet and shall be delivered to Lender at least five (5) business days before the
requested date of disbursement, properly completed and signed by Borrower’s contractor and reviewed by Huitt-Zollars, Inc.
(the “Engineer/Inspector”). At the option of Lender, all Requests for Funds shall be supported by copies of bills or
statements for all expenses for which a disbursement is requested. Borrower agrees that Lender may disburse automatically from
the Loan an amount sufficient to pay each payment of interest required by the Note, on its due date or any date thereafter as Lender
may choose, provided that such payment of interest has not been theretofore paid by Borrower.

 

    	 	13	 

     

    

 

8.4.        Information:
The Request for Funds shall be accompanied by:

 

8.4.1.          a
Development Budget spreadsheet detailing the requested disbursement and remaining balance to fund;

 

8.4.2.          if
Lender requires, a list of Hard Costs, broken down by subcontractor, to be paid from the requested disbursement and copies of all
invoices for each Hard Cost item in excess of Five Thousand and No/100 Dollars ($5,000). “Hard Costs” are all of the
costs for the visible improvements, including without limitation grading, excavation, concrete, sidewalks, roads, utilities, and
landscaping;

 

8.4.3.          a
list of Soft Costs to be paid from the requested disbursement and copies of the invoices for each Soft Cost item in excess of Five
Thousand and No/100 Dollars ($5,000). “Soft Costs” are all costs that are not Hard Costs;

 

8.4.4.          copies
of all current and pending change orders (AIA Form G701 or equivalent);

 

8.4.5.          copies
of executed conditional lien waivers from the general contractor for the current disbursement. In cases where the general contractor
is owned/controlled by the Borrower, conditional lien waivers for the current disbursement are required for each major subcontractor;

 

8.4.6.          copies
of executed unconditional lien waivers from the general contractor for previous disbursements. In cases where the general contractor
is owned/controlled by the Borrower, unconditional lien waivers for previous disbursements are required for each major subcontractor;

 

8.4.7.          if
requested by Lender, a report by the Engineer/Inspector which shall specify the estimated percentage of completion of the Development,
together with detailed comments on the specific work performed since the date of the last report rendered to Lender;

 

8.4.8.          an
endorsement to the title insurance policy, extending the effective date of the policy to the date of the endorsement, showing no
liens of record or additional encumbrances not acceptable to the Lender, and increasing the effective amount of the coverage to
the total amount outstanding under the Note;

 

8.4.9.          unless
provided with a previous Request for Funds, a copy of the permit applicable to the work covered by the Request for Funds issued
by the City of Rio Rancho, New Mexico or other governmental authority; and

 

8.4.10.         Such
other information as Lender may reasonably request.

 

    	 	14	 

     

    

 

8.5.          Lender’s
Inspection: Lender shall engage the Engineer/Inspector, at Borrower’s sole cost and expense, to review each Request for
Funds and make an examination of the Development for the benefit of Lender prior to Lender making any advance. Regardless of inspections
by the Engineer/Inspector or Lender’s representatives, Lender shall have no responsibility, obligation or liability to Borrower
or any other individual or entity based on, arising from or relating to any such inspections, and Borrower shall at all times have
exclusive control over work on the Development and sole responsibility for compliance with all governmental, quasi-governmental
and private laws, ordinances, rules, regulations, codes, covenants, restrictions, easements and other matters which control, burden,
apply to or otherwise affect the Mortgaged Property and/or the Development.

 

8.6.          Disbursements:
The Lender shall, on the date the requested advance is to be made or as soon thereafter as all conditions precedent to such advance
have been satisfactorily met in all material respects, deposit into an account at Lender designated by Borrower such advance. Advances
under the Note may, at the option of the Lender, be recorded on the Note and/or by deposits to the foregoing account, and such
records shall be conclusive evidence of all advances made under the Note. Notwithstanding the foregoing disbursement procedure,
upon the occurrence of an Event of Default (defined below), the Lender may, at its discretion, until such Event of Default is cured
or for so long as required by the title company issuing the loan title insurance required hereunder, make disbursements to itself
for all sums payable by Borrower to Lender, make disbursements to the appropriate taxing authority to pay all unpaid taxes, make
payments directly to insurers for all premiums due on insurance policies required hereunder, and make all other disbursements to
a title company escrow account, and such title company will draw checks on such account for payment of the items approved by Lender.
Any expense incurred because of the disbursement through a controlled title company escrow account shall be paid by Borrower.

 

8.7.          Development
Budget Overrun: In the event the Lender determines, at any time, that the total cost of completing the Development free of
liens and encumbrances, other than those in favor of the Lender contemplated hereby will, in the reasonable judgment of the Lender,
exceed the available and undisbursed balance of the loan described herein, the Lender may cease making advances and/or require
further security for the payment of the indebtedness evidenced by the Note by requiring the Borrower to post additional collateral
satisfactory to Lender, and/or by requiring Borrower to make cash deposits with Lender to be held in an account with Lender sufficient
in amount to cover such estimated excess cost of completing the Development. For the purpose of this paragraph, the cost of completion
shall be deemed to include, without limitation the following: costs of labor and materials, site and off-site improvements, amounts
paid to contractors, landscaping, professional fees, taxes on the Mortgaged Property, premiums for bonds, if any, survey costs,
appraisal fees, recording costs, interest on the Note, all amounts reimbursable to the Lender for reasonable expenses incurred
hereunder, and the costs of all items necessary to the proper completion of the Development.

 

    	 	15	 

     

    

 

8.8.          Termination
of Advances: At the option of the Lender, monthly advances shall not be made unless: (a) the Loan Documents are in full force
and effect; and (b) an Event of Default does not exist and would not exist but for the giving of notice or the passage of time
under the terms of the Loan Documents.

 

9.          [RESERVED]

 

10.        DEFAULT:
The Events of Default listed in the Mortgage are incorporated in this Agreement by reference and made a part of this Agreement
and shall constitute “Events of Default” hereunder and under each of the other Loan Documents executed pursuant to
this Agreement. In addition, the failure by Guarantor to provide the financial statements required by the Guaranty within thirty
(30) days from the date of written notice from Lender or the failure by Guarantor to maintain the net worth required by the Guaranty
shall each be an “Event of Default” under this Agreement and under each of the other Loan Documents.

 

11.        REMEDIES:
Upon the occurrence of an Event of Default and continuation thereof and the failure by Borrower to cure such Event of Default after
such notice of the Event of Default and such opportunity to cure the Event of Default as may be required by the Mortgage, Lender
may, at its option:

 

11.1.          Acceleration
of the Note: Declare the Note to be immediately due and payable whereupon the Note shall become forthwith due and payable without
presentment, demand, protest or further notice of any kind, and the Lender shall be entitled to proceed simultaneously or selectively
and successively to enforce its rights under the Note, this Agreement and any of the Loan Documents executed pursuant to the terms
hereof, or any note or all of them. Nothing contained herein shall limit Lender’s rights and remedies available under applicable
laws.

 

11.2.          Selective
Enforcement: In the event the Lender shall elect to selectively and successively enforce its rights under any of the Loan Documents,
such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of
the Note until such time as the Lender shall have been paid in full all sums advanced under the Note. The foreclosure of any lien
provided pursuant to this Agreement without the simultaneous foreclosure of all such liens shall not merge the liens granted which
are not foreclosed with any interest which the Lender might obtain as a result of such elective and successive foreclosure.

 

    	 	16	 

     

    

 

12.        GENERAL
PROVISIONS: Lender and Borrower further agree as follows:

 

12.1.          Expenses:
Borrower agrees to pay all reasonable fees, expenses and charges in respect to the Loan contemplated by this Agreement, including,
without limiting the generality thereof, the following: reasonable fees and expenses of counsel employed by Lender in connection
with drafting and negotiating documents and closing of the Loan up to $4,000, plus New Mexico Gross Receipts Tax, and all reasonable
fees and expenses of counsel employed by Lender in regard to any litigation arising out of or relating to this transaction in which
Lender is the prevailing party; title insurance premiums and all expenses incidental to title insurance and title evidence; recording
and filing fees; reasonable fees and expenses of any appraiser who appraises the Mortgaged Property for Lender limited, in the
absence of an Event of Default, to not more than twice during the term of the Loan; reasonable fees and expenses of the environmental
engineering firm which provides the required environmental assessment report to Lender at the closing of the Loan up to a maximum
of two thousand dollars ($2,000.00) and any environmental assessment report required by federal law; reasonable fees and expenses
of the Engineer/Inspector in connection with the construction phase of the Development; and other reasonable fees and expenses
involved in the closing of this loan and the reasonable fees and expenses payable by Lender which are incidental to the enforcement
or defense of this Agreement or any of the other Loan Documents.

 

12.2.          Notices:
Any notices or other communications required or permitted hereunder shall be sufficiently given if delivered personally via a national
overnight delivery service or sent by registered or certified mail, postage prepaid, return receipt requested and addressed as
listed below or to such other address as the party concerned may substitute by written notice to the other. All notices shall be
deemed received: (i) on the date of delivery if personally delivered; (ii) on the day following timely deposit with an overnight
delivery service; or (iii) within three (3) days (excluding Saturdays, Sundays and holidays recognized by national banking associations)
after being mailed:

 

	To Borrower:	Lomas Encantadas Development Company, LLC
	 	333 Rio Rancho Drive, Suite 202
	 	Rio Rancho, New Mexico  87124
	 	Attention:  Vice President
	 	 
	To Lender:	BOKF, NA dba Bank of Albuquerque
	 	100 Sun Avenue NE, Suite 500
	 	Albuquerque, New Mexico 87109
	 	Attention:  Jordan Herrington, Vice President

 

12.3.          Amendment
and Waiver: This Agreement may not be amended or modified in any way, except by an instrument in writing executed by both parties
hereto; provided, however, Lender may, in writing: (a) extend the time for performance of any of the obligations of Borrower; (b)
waive any Event of Default by Borrower; and (c) waive the satisfaction of any condition that is precedent to the performance of
Lender’s obligations under this Agreement. In the event of Lender’s waiver of an Event of Default, such specific Event
of Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Event
of Default or impair any consequence of such subsequent or other Event of Default.

 

12.4.          Non-Waiver;
Cumulative Remedies: No failure on the part of Lender to exercise and no delay in exercising any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any right hereunder preclude any other or further right
of exercise thereof. The remedies herein provided are cumulative and not alternative.

 

    	 	17	 

     

    

 

12.5.          Assignment:
Neither this Agreement, nor the loan proceeds hereunder, shall be assignable by Borrower without the prior written consent of Lender.

 

12.6.          Applicable
Law: THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER
SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW MEXICO, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. BORROWER AND LENDER HEREBY CONSENT TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF SANDOVAL, STATE OF NEW MEXICO, AND IRREVOCABLY AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS. BORROWER AND LENDER EXPRESSLY SUBMIT AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM
NON CONVENIENS. 

 

12.7.          Descriptive
Headings: The descriptive headings of the paragraphs of this Agreement are for convenience only and shall not be used in the
construction of the terms hereof.

 

12.8.          Terms:
As used in this Agreement the singular shall be deemed to include the plural and the plural shall be deemed to include the singular.

 

12.9.          Integrated
Agreement: THIS AGREEMENT AND OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE
ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

12.10.        Time
of Essence: Time is of the essence of this Agreement.

 

12.11.        Binding
Effect: This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns. The obligations of Borrower under this Agreement are joint and several.

 

12.12.        Third
Party Beneficiary: Nothing in this Agreement, express or implied, is intended to confer upon any person other than the parties
hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.

 

    	 	18	 

     

    

 

12.13.         Right
to Defend: Lender shall have the right, but not the obligation, at Borrower’s expense, to commence, to appear in or to
defend any action or proceeding (initiated by a third party against Borrower) purporting to affect the rights or duties of the
parties hereunder and in connection therewith pay out of the funds of the Loan all necessary expenses, including reasonable fees
of counsel, if Borrower fails to so commence, appear in or defend any such action or proceeding with counsel satisfactory to Lender.

 

12.14.         Indemnification:
Borrower agrees to indemnify, defend and hold Lender harmless from and against any loss, cost or expense (including interest, penalties,
reasonable attorneys’ fees and amounts paid in settlement) caused by Borrower’s negligence, breach or wrongful actions
arising out of or based upon the Loan Documents or the Loan, except and to the extent caused by Lender’s negligence, breach,
wrongful actions, gross negligence or willful misconduct.

 

12.15.         Waiver
of Jury Trial. EACH OF BORROWER AND LENDER HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH OF BORROWER AND LENDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, AND THAT EACH SHALL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF BORROWER
AND LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

12.16.         Joint
and Several Obligations. If Borrower consists of more than one party, all representations, warranties, covenants, agreements
and undertakings of such parties under this Agreement shall be deemed joint and several. Whenever the context requires, the representations,
warranties, liabilities, covenants, agreements and undertakings contained in this Agreement shall be deemed to have been individually
given by each of the parties constituting Borrower.

 

    	 	19	 

     

    

 

13.         PARTIAL
RELEASES. From time to time, after the recording of the Final Plats (defined below) in the real property records of Sandoval
County, New Mexico until the Maturity Date (defined in the Note), Lender shall release one or more Lots (defined below) from the
lien of the Mortgage and from the UCC Financing Statement as provided in this Agreement. A request for release (a “Request”)
must identify the Lot or Lots to be released and be made to Lender not less than five (5) Business Days prior to the requested
release date. A “Business Day” is any day in which the Lender is open for business. The release price (the “Release
Price”) for each Lot shall be Thirty Seven Thousand Five Hundred and No/100 Dollars ($37,500.00). The Release Price must
be delivered to the Lender in immediately available funds no later than 1:00 p.m. New Mexico time on the requested release date.
In addition, Borrower has received approval for one or more preliminary plats for the Mortgaged Property from the City of Rio Rancho
(the “City”), which plats the Lender has previously reviewed and approved (the “Lender Approved Preliminary Plats”)
and which will become final plats (the “Final Plats”). Borrower will not materially change the Lender Approved Preliminary
Plats without the prior written approval of Lender. Upon substantial completion of the Lots, Borrower shall record one or more
final plats (the “Final Plats”) for the Mortgaged Property. Each Final Plat may contain land dedicated to the City
or other governmental entity. To the extent any Final Plat contains land dedicated, granted or conveyed to a governmental entity,
the Lender shall execute a partial release with regard to such land without charge. As used in this Agreement, the term “Lot”
means a lot shown on the Lender Approved Preliminary Plats. Notwithstanding anything to the contrary contained in this Agreement
or in any of the Loan Documents, Lender shall not be required or obligated to release any Lot or any land to be dedicated to the
City of other governmental entity if an Event of Default Exists or would exist but for the giving of notice or the lapse of time.
Unless an Event of Default exists or would exist but for the giving of notice of the passage of time, the Release Price shall be
applied to the outstanding principal balance of the Note.

 

14.         REAPPRAISAL.
If, as determined in Lender’s reasonable discretion, there has been a material deterioration in the value of the Mortgaged
Property, Lender shall be entitled, at the expense of Borrower, not more frequently than once every twelve (12) months, to obtain
a re-appraisal of the Mortgaged Property. If such re-appraisal confirms a material deterioration in the value of the Mortgaged
Property compared with the value shown in the previous appraisal on file with Lender, which deterioration causes Borrower to be
in violation of any covenants contained in the Loan Documents, Lender may, at Lender’s option, require Borrower to make an
additional payment of principal sufficient to bring Borrower into compliance with such covenants.

 

IN WITNESS WHEREOF,
the parties have caused this instrument to be duly executed effective as of (but not necessarily on) the day and year first above
written.

 

[SIGNATURES ON NEXT PAGE]

 

    	 	20	 

     

    

 

	“BORROWER”:	LOMAS ENCANTADAS DEVELOPMENT COMPANY, LLC,
	 	a New Mexico limited liability company
	 	 	 
	 	By:	/s/ Carey A. Plant
	 	 	Carey A. Plant, Vice President
	 	 	 
	“LENDER”:	BOKF, NA dba BANK OF ALBUQUERQUE
	 	 	 
	 	By:	/s/ Jordan Herrington
	 	 	Jordan Herrington, Vice President

 

 

    	 	21	 

     

    

 

EXHIBIT “A”

Legal Description

 

Tract "A-1-A" of the Final Plat
of LOMAS ENCANTADAS UNIT 2-C, PHASE 2, A Subdivision of a Portion of Tract A-1 in Lomas Encantadas Unit 2-D, Unit Twenty within
Section 26, T. 13 N., R. 3 E., N.M.P.M., City of Rio Rancho, Sandoval County, New Mexico, as the same is shown and designated on
the Plat thereof, filed in the office of the County Clerk of Sandoval County, New Mexico on December 6, 2018 in Vol. 3, folio 4325
(Rio Rancho Estates Plat Book No. 28, pages 42-44).

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00297-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00297-of-00352.parquet"}]]