Document:

Exhibit 10.1

 

GREAT LAKES DREDGE & DOCK CORPORATION

2007 LONG-TERM INCENTIVE PLAN

Great Lakes Dredge &
Dock Corporation (the “Corporation”) has established this Great Lakes Dredge
& Dock Corporation 2007 Long-Term Incentive Plan to provide an additional
inducement for Eligible Individuals to provide services to the Corporation or
an Affiliate as an employee, consultant, non-employee director, or independent
contractor, to reward such Eligible Individuals by providing an opportunity to
acquire incentive awards, and to provide a means through which the Corporation
may attract able persons to enter the employment of or engagement with the
Corporation or one of its Affiliates. 
Awards may, in the discretion of the Board or Committee, and subject to
such restrictions as the Board or Committee may determine or as provided
herein, consist of Incentive Stock Options, Non-Qualified Stock Options,
Restricted Stock, Restricted Stock Units, Performance Units, Stock Appreciation
Rights, or any combination of the foregoing.

ARTICLE
1

DEFINITIONS

Whenever used in the Plan, the following terms have
the meanings set forth below, and when the meaning is intended, the initial
letter of the word is capitalized:

“Affiliate” means any corporation that is a parent
or subsidiary corporation (as Code Sections 424(e) and (f) define those terms)
with respect to the Corporation.

“Award” means an Incentive Stock Option,
Non-Qualified Stock Option, Restricted Stock Award, Stock Appreciation Rights,
Performance Units or Restricted Stock Units granted under the Plan.

“Award
Agreement” means
an agreement entered into between the Corporation and the applicable
Participant, setting forth the terms and provisions applicable to the Award
then being granted under the Plan, as further described in Section 2.4 of the
Plan.

“Award
Date” means, with
respect to any Award, the date of the grant or award specified by the Committee
in a resolution or other writing, duly adopted, and as set forth in the Award
Agreement, provided that such Award Date will not be earlier than the date of
the Committee action.

“Board” means the Board of Directors of the
Corporation.

“Cause”  will have the meaning
set forth in any employment, consulting, or other written agreement between the
Participant and the Corporation.  If there
is no employment, consulting, or other written agreement between the
Corporation or an Affiliate and the Participant or if such agreement does not
define “Cause,” then “Cause” will have the meaning specified in the Award
Agreement; provided that, if the Award Agreement does not so specify, “Cause”
will mean, as determined by the Committee in its sole discretion, the Participant’s:  (i) willful and continued failure to
substantially perform his material duties as an executive of the Corporation
(other than any such failure resulting from incapacity due to physical or
mental illness) after a written demand for substantial performance is delivered
to the Participant by the Board, (ii) willful

 

misconduct, which is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, (iii) engaging in
egregious misconduct involving serious moral turpitude to the extent that his
creditability and reputation no longer conforms to the standard of senior
executive officers of the Corporation (iv) conviction of, or plea of guilty or nolo contendere to, a felony, (v) material breach of a
material written policy of the Corporation, (vi) failure to reasonably
cooperate with any audit or investigation involving the Corporation or its
business practices; or (vii) material breach of this Agreement.  The Board must give the Participant at least
thirty (30) days written notice of its intent to terminate him for Cause,
specifying the act(s) or omission(s) alleged to justify the for Cause
termination, and an opportunity to cure such act(s) or omission(s), where
feasible, within the thirty (30) day period. 
In addition, the Participant’s Service will be deemed to have terminated
for Cause if, after the Participant’s Service has terminated, facts and
circumstances are discovered that would have justified a termination for
Cause.  For purposes of this Plan, no act
or failure to act on the Participant’s part will be considered “knowing” or “willful”
unless it is done, or omitted to be done, by him or her in bad faith or without
reasonable belief that his or her action or omission was in the best interests
of the Corporation or an Affiliate.  Any
act, or failure to act, based upon authority given pursuant to a resolution
duly of the Board or based upon the advice of counsel for the Corporation will
be conclusively presumed to be done, or omitted to be done, in good faith and
in the best interests of the Corporation or an Affiliate.  In no event will a termination be deemed to
occur for “Cause” unless such termination occurs within 90 days after the Board
becomes aware of the circumstance or event giving rise thereto.

“Change
in Control” means
the first to occur of the following:

(a)                                  The “beneficial ownership” (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of
securities representing more than 331/3% of the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the “Corporation
Voting Securities”) is accumulated, held or acquired by a Person (as defined in
Section 3(a)(9) of the Exchange Act, as modified, and used in Sections 13(d)
and 14(d) thereof) (other than the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, holders
of capital stock of the Corporation as of the date hereof or an affiliate
thereof, any corporation owned, directly or indirectly, by the Corporation’s
stockholders in substantially the same proportions as their ownership of stock
of the Corporation); provided, however that any acquisition from the
Corporation or any acquisition pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subparagraph (c) of this paragraph will not be a
Change in Control under this subparagraph (a), and provided further, that
immediately prior to such accumulation, holding or acquisition, such Person was
not a direct or indirect beneficial owner of twenty-five percent (25%) or more
of the Corporation Voting Securities; or

(b)                                 Individuals who, as of the date of the Agreement,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Corporation’s 

 

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stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board will be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board of Directors; or

(c)                                  Consummation by the Corporation of a reorganization,
merger or consolidation, or sale or other disposition of all or substantially
all of the assets of the Corporation or the acquisition of assets or stock of
another entity (a “Business Combination”), in each case, unless immediately
following such Business Combination:  (i)
more than 50.1% of the combined voting power of then outstanding voting
securities entitled to vote generally in the election of directors of (x) the
corporation resulting from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, a corporation that as a result of such
transaction owns the Corporation or all or substantially all of the Corporation’s
assets either directly or through one or more subsidiaries (the “Parent
Corporation”), is represented, directly or indirectly by Corporation Voting
Securities outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Corporation Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Corporation Voting Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Corporation or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly, 331/3%
or more of the combined voting power of the then outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) except to the extent that such
ownership of the Corporation existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or

(d)                                 Approval by the Corporation’s stockholders of a
complete liquidation or dissolution of the Corporation.

“Code” means the Internal Revenue Code of 1986,
as amended.  A reference to any provision
of the Code will include reference to any successor provision of the Code.

“Committee” means the Compensation Committee, if
any, or such similar or successor committee appointed by the Board.  If the Board has not appointed a Committee,
the Board will function in place of the Committee.

 

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“Consultant” means an individual who is not an
Employee or Director of the Corporation or an Affiliate, but who is providing
services to the Corporation or an Affiliate as an independent contractor.

“Corporation” means Great Lakes Dredge & Dock
Corporation.

“Director” means any individual who is a member of
the Board.

“Disabled
Participant”
means the Participant becoming 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 that has lasted or can be expect to
last for a continuous period of not less than 12 months, within the meaning of
Code Section 422(c)(6).

“Dividend
Equivalent” means
a right to receive on the payment date for any dividend on the shares of Stock
underlying an Award, cash compensation from the Corporation equal to the
dividend that would have been paid on such shares of Stock (or the Fair Market
Value of such dividend, if such dividend would not have been paid in cash), if
such shares had been issued and outstanding, fully vested and held by the
Participant on the record date for payment of such dividend.  Notwithstanding the foregoing, if such
dividend would not have been paid in cash, the Dividend Equivalent with respect
thereto will not be paid unless and until certificates evidencing the shares of
Stock with respect to which it is paid are issued to the Participant.  Dividend Equivalents may be provided, in the
Committee’s discretion, in connection with any Award under the Plan, subject to
Section 2.6.

“Eligible
Individual” means
any Employee, Consultant, or non-employee Director.

“Employee” means any common law employee of the
Corporation or one of its Affiliates.

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

“Fair
Market Value” will
mean (a) if the Common Stock is readily tradeable on a national securities
exchange or other market system, the closing sales price of the Common Stock on
the Award Date, time of exercise, or other date of calculation (or on the last
preceding trading date if Common Stock was not traded on such date), or (b) if
the Common Stock is not readily tradeable on a national securities exchange or
other market system, the fair market value as determined in good faith by the
Board or the Committee, by the reasonable application of a reasonable valuation
method consistent with the Code, or Treasury Regulations thereunder, as the
Board or the Committee will in its discretion select and apply at the time of
the Award Date, time of exercise, or other date of calculation.

“Freestanding SAR” means a Stock Appreciation Right that is granted
independently of any Options, as described in Article 6.

“Incentive
Stock Option” or “ISO” means an option that is intended to
qualify as an “Incentive Stock Option” within the meaning of Code Section
422.  Any Option that does not qualify
under Code Section 422 will be treated as a Non-Qualified Stock Option.

“Non-Qualified
Stock Option”
means an Option that is not an Incentive Stock Option.

 

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“Option” means an option to purchase Stock at an
Exercise Price determined on the Award Date, subject to the applicable
provisions of Article 3, awarded in accordance with the terms of the Plan, and
which may be an Incentive Stock Option or a Non-Qualified Stock Option.

“Participant” means an Eligible Individual who the
Committee has selected to participate in the Plan in accordance with Section
2.2 of the Plan.

“Performance
Unit” means a
performance unit subject to the requirements of Article 4 and awarded in
accordance with the terms of the Plan.

“Performance
Goals” will mean
performance goals established by the Committee prior to the grant of an Award
based on the attainment of one or any combination of the following, in each
case of the Corporation, an Affiliate, or business unit by or within which the
Participant is primarily employed or a combination thereof, and that are
intended to qualify under Section 162(m): 
(a) net earnings; (b) operating earnings or income; (c) earnings growth;
(d) net income; (e) net income applicable to shares; (f) gross revenue or
revenue by pre-defined business; (g) revenue backlog; (h) margins realized on
delivered services; (i) cash flow, including operating cash flow, free cash
flow, discounted cash flow return on investment, and cash flow in excess of
cost of capital; (j) earnings per share; (k) return on stockholders’ equity;
(l) stock price; (m) return on common stockholders’ equity; (n) return on
capital; (o) return on assets; (p) economic value added (income in excess of
cost of capital); (q) customer satisfaction; (r) cost control or expense
reduction; and (s) ratio of operating expenses to operating revenues, in each
case, absolute or relative to peer-group comparative.

The Committee also may
base Performance Goals upon attaining specified levels of Corporation
performance under one or more of the measures described above relative to the
performance of other corporations.  The
Committee will set such Performance Goals within the time prescribed by Section
162(m).  The Committee will have the
discretion to adjust targets set for preestablished performance
objectives.  If the Committee determines
it is advisable to grant Awards that will not qualify for the performance-based
exception of Section 162(m), the Committee may grant Awards that do not so
qualify.

“Plan” means the Great Lakes Dredge & Dock
Corporation 2007 Long-Term Incentive Plan, as set forth herein, as the same may
be amended, administered or interpreted from time to time.

“Public Offering” means any sale of the Corporation’s common stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended from time to time, or any successor act thereto, filed with
the Securities and Exchange Commission on Form S-1 (or any successor form
adopted by the Securities and Exchange Commission); provided that the following
will not be considered a public offering: (i) any issuance of common equity
securities by the Corporation as consideration for a merger or acquisition,
(ii) any issuance of common securities to employees, directors or consultants
of any of the Corporation or any of its Affiliates as part of an incentive or
compensation plan, (iii) any issuance of common equity securities as part of a
unit with debt or preferred stock or any similar structure in which the common
equity securities are being offered primarily as a means of enhancing the
Corporation’s ability to sell the debt or preferred stock and (iv) the issuance
of common stock by the Corporation upon conversion of any preferred stock of
the Corporation.

 

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“Restricted
Stock” means an
award of shares of Stock delivered under the Plan subject to the requirements
of Article 5 and such other restrictions as the Committee deems appropriate or
desirable, including restrictions on transferability, a risk of forfeiture, and
certain other terms and conditions under the Plan or specified by the
Committee.  The restrictions on, and risk
of forfeiture of, Restricted Stock generally will expire on a specified date,
upon the occurrence of an event or achievement of Performance Goals, or on an
accelerated basis under certain circumstances specified in the Plan or the
Award Agreement.

“Restricted Stock Unit” or “RSU”
means a notional account established pursuant to an Award granted to a
Participant, as described in Article 5, that is (a) valued solely by reference
to shares of Stock, (b) subject to restrictions specified in the Award
Agreement, and (c) payable only in Stock. 
The RSUs awarded to the Participant will vest according to the
time-based or performance-based criteria specified in the Award Agreement.

“Section 162(m)” will mean Code Section 162(m), as
amended, and the Treasury Regulations thereunder.

“Service” means the provision of personal services
to the Corporation or its Affiliates in the capacity of (i) an Employee, (ii) a
Director, or (iii) a Consultant.

“Stock” means the Common Stock of the
Corporation.

“Stock
Appreciation Right”
or “SAR” means the award of the
contingent right to receive Stock or cash, as specified in the Award Agreement,
in the future, based on the value or the appreciation in the value of Stock,
pursuant to the terms of Article 6.  The
Committee may grant SARs alone or in connection with a related Option.  Stock Appreciation Rights may be either
Freestanding SARs or Tandem SARs.

“Tandem SAR” means a SAR that is granted in connection with a
related Option pursuant to Article 6, the exercise of which requires forfeiture
of the right to purchase a share of Stock under the related Option (and when a
share of Stock is purchased under the Option, the Tandem SAR similarly will be
canceled).

“Termination” means a cessation of the
employee-employer relationship between a Participant and the Corporation and
its Affiliates (other than by reason of transfer of the Employee among the
Corporation and its Affiliates), a cessation of an individual’s Director or
Consultant relationship with the Corporation, or the consummation of a
transaction whereby a Participant’s employer (other than the Corporation)
ceases to be an Affiliate of the Corporation.

ARTICLE 2

PLAN ADMINISTRATION

Section
2.1            Administration. 
The Committee will administer the Plan. 
The Committee will interpret the Plan and prescribe such rules,
regulations, and procedures in connection with the operation of the Plan, as it
will deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. 
Without limiting the foregoing, the Committee will have the authority
and complete discretion to:

 

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(a)                                  Prescribe, amend, and rescind rules and
regulations relating to the Plan;

(b)                                 Select Eligible Individuals to receive
Awards under the Plan as provided in Section 2.2 of the Plan;

(c)                                  Determine the form and terms of Awards;

(d)                                 Determine the number of shares of Stock
or other consideration subject to Awards under the Plan as provided in Articles
3 through 6 of the Plan;

(e)                                  Determine whether Awards will be granted
singly, in combination or in tandem with, in replacement of, or as alternatives
to, other Awards under the Plan or grants or awards under any other incentive
or compensation plan of the Corporation;

(f)                                    Construe and interpret the Plan, any
Award Agreement in connection with an Award and any other agreement or document
executed pursuant to the Plan;

(g)                                 Correct any defect or omission, or
reconcile any inconsistency in the Plan, any Award, or any Award Agreement;

(h)                                 Accelerate or, with the consent of the
Participant, defer the vesting of any Award or the exercise date of any Award,
subject to the limitations of Code Section 409A;

(i)                                     Authorize any person to execute on behalf
of the Corporation any instrument required to effectuate the grant of an Award
and delegate to officers of the Corporation the authority to perform
administrative functions under the Plan subject to any legal requirements that
the Committee as a whole take action with respect to such function, other than
any such delegation that would cause Awards or other transactions under the
Plan to cease to (i) be exempt from Section 16(b) of the Exchange Act, (ii)
satisfy the “independent director” requirements of the Nasdaq Global Market, or
(iii) qualify as “performance-based compensation” under Section 162(m);

(j)                                     Modify the terms of any Award, and
authorize the exchange or replacement of Awards; provided, however, that (i) no
such modification, exchange or substitution will be to the detriment of a
Participant with respect to any Award previously granted without the affected
Participant’s written consent, (ii) in no event will the Committee be permitted
to reduce the Exercise Price of any outstanding Option or to exchange or
replace an outstanding Option with a new Option with a lower Exercise Price,
except pursuant to Section 2.5, and (iii) the Committee shall use reasonable
efforts to ensure that any such modification, exchange or substitution will not
violate Code Section 409A;

(k)                                  Determine whether a Participant has
engaged in the operation or management of a business that is in competition
with the Corporation or any of its Affiliates, or whether a Participant has
violated the restrictive covenants of Section 10.13; and

 

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(l)                                     Make all other determinations deemed
necessary or advisable for the administration of the Plan.

The Committee will keep
records of action taken at its meetings. 
A majority of the Committee will constitute a quorum at any meeting, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the Committee, will be
the acts of the Committee.

Section
2.2                                   Eligibility.  Those Eligible Individuals, who share the
responsibility for the management, growth or protection of the business of the
Corporation or any Affiliate or who, in the opinion of the Committee, provide
services yielding significant benefits to the Corporation or any Affiliate will
be eligible to receive Awards as described herein.  Subject to the provisions of the Plan, the
Committee will have full and final authority, in its discretion, to grant
Awards as described herein and to determine the Eligible Individuals to whom
Awards will be granted.

Section
2.3                                   Shares Available Under
the Plan.  Subject to adjustment as set forth in
Section 2.5, the maximum number of shares of Stock that may be issued or
delivered and as to which Awards may be granted under the Plan will be equal to
the sum of: (i) 5,800,000 shares of Stock; and (ii) shares of Stock delivered
(either actually or by attestation) to or withheld by the Corporation in
connection with the exercise of an Option awarded under the Plan, or in payment
of any required income tax withholding for the exercise of an Option or the
vesting of Restricted Stock awarded under the Plan.

Notwithstanding anything
to the contrary in this Section 2.3, (i) in no event will more than 1,000,000
shares of Stock be cumulatively available for Awards of Incentive Stock Options
under the Plan, and (ii) in no event will more than 3,000,000 shares of Stock
be cumulatively available for Awards other than Options or Stock Appreciation
Rights.  Subject to adjustment as set
forth in Section 2.5, the maximum number of shares of Stock with respect to
which Awards may be granted in any calendar year to any Participant under the
Plan will be 580,000 shares.

If any Award granted
under the Plan is canceled by mutual consent or terminates or expires for any
reason without having been exercised in full, or, if and to the extent that an
award of Performance Units, or RSUs is paid in cash rather than the issuance of
shares of Stock, the number of shares subject to such Award (or in the case of
Performance Units or RSUs, the number of shares of Stock for which payment was
made in cash) will again be available for purposes of the Plan, except that, to
the extent that Stock Appreciation Rights granted in conjunction with an Option
under the Plan are exercised and the related Option surrendered, the number of
shares available for purposes of the Plan will be reduced by the number of
shares, if any, of Stock issued or delivered upon exercise of such Stock
Appreciation Rights.

The shares that may be
issued or delivered under the Plan may be either authorized but unissued
shares, repurchased shares, or partly each.

If, in connection with an
acquisition of another company or all or part of the assets of another company
by the Corporation or an Affiliate, or in connection with a merger or other
combination of another company with the Corporation or an Affiliate, the
Corporation either (A) assumes stock options or other stock incentive
obligations of such other company, or (B) grants stock options or other stock
incentives in substitution for stock options or other stock incentive 

 

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obligations of such other
company, then none of the shares of Stock that are issuable or transferable
pursuant to such stock options or other stock incentives that are assumed or
granted in substitution by the Corporation will be charged against the
limitations set forth in this Section.

Section
2.4                                   Award Agreement.  Each Award granted under the Plan will be evidenced by
a written Award Agreement, in a form approved by the Committee.  Such Award Agreement will be subject to and
incorporate the express terms and conditions, if any, required under the Plan
or as required by the Committee for the form of Award granted and such other
terms and conditions as the Committee may specify, and will be executed by the
Chief Executive Officer, the President (if other than the Chief Executive
Officer), or any person designated as an executive officer by the Board for
Section 16 purposes, on behalf of the Corporation, and by the Participant to
whom such Award is granted.  With the
consent of the Participant to whom such Award is granted, the Board may at any
time and from time to time amend an outstanding Award Agreement in a manner
consistent with the Plan.  Without
consent of the Participant, the Board of Directors may at any time and from
time to time modify or amend Award Agreements with respect to Options intended
as of the Award Date to be Incentive Stock Options in such respects as it deems
necessary in order that Incentive Stock Options granted under the Plan will
comply with the appropriate provisions of the Code and regulations thereunder
which are in effect from time to time with respect to Incentive Stock Options.

Section
2.5                                   Adjustment and
Substitution of Shares. 
If a
dividend or other distribution will be declared upon the Stock, payable in
shares of Stock, the number of shares of Stock then subject to any outstanding
Award or by reference to which the amount of any other Award is determined and
the number of shares that may be issued or delivered under the Plan will be
adjusted by adding thereto the number of shares that would have been
distributable thereon if such shares had been outstanding on the date fixed for
determining the stockholders entitled to receive such stock dividend or
distribution.  An increase in the number
of shares subject to an Award will not occur when the Committee has awarded
Dividend Equivalent with respect to such Award.

If the outstanding shares
of Stock will be changed into or exchangeable for a different number or kind of
shares of Stock or other securities of the Corporation or another corporation,
whether through reorganization, reclassification, recapitalization, stock
split-up, combination of shares, merger or consolidation, then the Committee
will substitute for each share of Stock subject to any then outstanding Award
and for each share of Stock, which may be issued or delivered under the Plan
but is not then subject to an outstanding Award, the number and kind of shares
of Stock or other securities into which each outstanding share of Stock is so
changed or for which each such share is exchangeable; provided, that, in the
event of a merger, acquisition or other business combination of the Corporation
with or into another entity, any adjustment provided for in the applicable
agreement and plan of merger (or similar document) will be conclusively deemed
to be appropriate for purposes of this Section 2.5.

In the case of any
adjustment or substitution as provided for in this Section 2.5, the aggregate
Exercise Price for all shares subject to each then outstanding Option prior to
such adjustment or substitution will be the aggregate Exercise Price for all
shares of Stock or other securities (including any fraction) to which such
shares will have been adjusted or which will have been substituted for such
shares.  Any new Exercise Price per share
will be carried to at least three decimal places with the last decimal place
rounded upwards to the nearest whole number. 
No 

 

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adjustment or
substitution provided for in this Section 2.5 will require the Corporation to
issue or sell a fraction of a share or other security.

If any such adjustment or
substitution provided for in this Section 2.5 requires the approval of
stockholders in order to enable the Corporation to grant Incentive Stock
Options, then no such adjustment or substitution of ISOs will be made without
prior stockholder approval.  If the
effect of any adjustment or substitution would be to cause an Option to fail to
continue to qualify as an ISO or to cause a modification, extension or renewal
of such Option within the meaning of Code Sections 409A or 424, the Committee
may elect that such adjustment or substitution not be made but rather will use
reasonable efforts to effect such other adjustment of each then outstanding
Option as the Committee in its sole discretion will deem equitable and which
will not result in any disqualification, modification, extension or renewal
(within the meaning of Code Sections 409A or 424) of such Incentive Stock
Option.

Section
2.6                                   Corporation’s Obligation
to Deliver Stock.  The obligation of the Corporation to issue or
deliver shares of Stock under the Plan will be subject to (i) the effectiveness
of a registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for the
Corporation; (ii) the condition that the shares will have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange on which such shares may then be listed; and (iii) all other
applicable laws, regulations, rules and orders which may then be in effect.

ARTICLE 3

STOCK OPTIONS

Section
3.1                                   Grant of Stock Options.  The Committee will have authority, in its discretion,
to grant Incentive Stock Options, Non-Qualified Stock Options or both types of
Options.  Notwithstanding the above, the
Committee may grant Incentive Stock Options to Employees only.  Subject to adjustment as set forth in Section
2.5, no Participant will be granted an Option or Options under the Plan
(disregarding canceled, terminated, or expired stock options) for an aggregate
number of shares in excess of 1,160,000.

Section
3.2                                   Terms and Conditions of
Options.  Options granted under the Plan will be
subject to the following terms and conditions:

(a)                                  The purchase price at which each Option
may be exercised (the “Exercise Price”) will be such price as the Committee, in
its discretion, will determine, except that, the Exercise Price will not be
less than one hundred percent (100%) of the Fair Market Value per share of
Stock covered by the Option as determined on the Award Date.

(b)                                 The Exercise Price will be payable in
full in any one or more of the following ways, as will be determined by the
Committee to be applicable to any such Award:

(i)                                     in cash; or

 

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(ii)                                  in shares of Stock (which are owned by
the Participant free and clear of all liens and other encumbrances and which
are not subject to the restrictions set forth in Article 5) having an aggregate
Fair Market Value on the date of exercise of the Option equal to the Exercise
Price for the shares being purchased; or

(iii)                               by requesting that the Corporation withhold such
number of shares of Stock then issuable upon exercise of the Option as will
have an aggregate Fair Market Value equal to the Exercise Price for the shares
being acquired upon exercise of the Option (and any applicable withholding
taxes); or

(iv)                              by waiver of compensation due or accrued
to the Participant for services rendered; or

(v)                                 provided that a public market for the
Corporation’s stock exists, and to the extent permitted by the Sarbanes-Oxley
Act of 2002:

(A)                              through a “same day sale” commitment from
the Participant and a broker-dealer that is a member of the National
Association of Securities Dealers (an “NASD Dealer”) whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the shares
so purchased to pay the purchase price (or a larger number of the shares so
purchased), and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the purchase price directly to the Corporation (and any
excess to the Participant); or

(B)                                through a “margin” commitment from the
Participant and an NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the purchase price, and whereby the NASD Dealer irrevocably commits upon
receipt of such shares to forward the purchase price directly to the
Corporation; or

(vi)                              to the extent permitted by the
Sarbanes-Oxley Act of 2002, by promissory note executed by the Participant,
evidencing his or her obligation to make future cash payment thereof, secured
by an applicable number of shares of Stock or such other security as may be
determined by the Committee; provided, however, that in no event may the
Committee accept a promissory note for an amount in excess of the difference
between the aggregate Exercise Price and the par value of the shares; or

(vii)                           by any combination of the foregoing.

If the Exercise Price is paid in whole or in part in shares of Stock,
any portion of the Exercise Price representing a fraction of a share must be
paid in cash.  The date of exercise of an
Option will be determined under procedures established by 

 

11

 

the Committee, and the Exercise Price will be payable at such time or
times as the Committee, in its discretion, will determine.  No shares will be issued or delivered upon
exercise of an Option until full payment of the Exercise Price has been made,
provided that, for this purpose, if permitted by the Committee, tender of a
promissory note will constitute full payment of the principal amount of such
promissory note.  When full payment of
the Exercise Price has been made, the Participant will be considered for all
purposes to be the owner of the shares with respect to which payment has been
made, subject to the restrictions set forth in Article 7.

(c)                                  An Option may be exercised (i) at such
time as the Option vests; or (ii) if and to the extent set forth in the
applicable Award Agreement, prior to the date on which the Option vests
provided that such Stock obtained will be subject to the same requirements that
are applicable to grants of Restricted Stock set forth in Article 5.  No Non-Qualified Stock Option will be
exercisable after the expiration of ten years from the Award Date, provided
that if an exercise would violate applicable securities laws, the Non-Qualified
Stock Option will be exercisable no more than 30 days after the exercise of the
Option first would no longer violate applicable securities laws.  Subject to this Section 3.2(c), and Sections
3.3(e), and 2.6, Options may be exercised at such times, in such amounts and
subject to such restrictions as will be determined by the Committee, in its
discretion.

(d)                                 Unless otherwise determined by the
Committee and set forth in the Award Agreement referred to in Section 2.4 or an
amendment thereto, following a Participant’s Termination for any reason, such
Participant must exercise any outstanding Option, if at all, within one year
from the date of Termination.

Section
3.3                                   Special Provisions
Applicable to ISOs. 
Notwithstanding any other provision of this Article 3, the following
special provisions will apply to any award of Incentive Stock Options:

(a)                                  The Committee will not award an Incentive
Stock Option under this Plan if it would cause the aggregate Fair Market Value
of Stock with respect to which Incentive Stock Options are exercisable by the
Participant for the first time during a calendar year (under all plans of the
Corporation and its Affiliates) to exceed $100,000.

(b)                                 If the Employee to whom the Incentive
Stock Option is granted is a Ten Percent Owner of the Corporation, then: (A)
the Exercise Price for each share subject to an Option will be at least one
hundred ten percent (110%) of the Fair Market Value of the Stock on the Award
Date; and (B) the Option will expire upon the earlier of (i) the time specified
by the Committee in the Award Agreement, or (ii) the fifth anniversary of the
Award Date.

(c)                                  No Option that is intended to be an
Incentive Stock Option may be granted under the Plan until the Corporation’s
stockholders approve the Plan.  If such
stockholder approval is not obtained within 12 months after the Board’s
adoption 

 

12

 

of the Plan, then no Options may be granted under the Plan that are
intended to be Incentive Stock Options.

(d)                                 The maximum number of shares of Stock
with respect to which any one Participant may be granted Options that are
intended to be Incentive Stock Options in any one calendar year will be
100,000, subject to adjustment as set forth in Section 2.5.

(e)                                  An Incentive Stock Option must be
exercised, if at all, within three months after the Participant’s Termination
for a reason other than death or becoming a Disabled Participant, and within
twelve months after the Participant’s Termination for death or becoming a
Disabled Participant; provided that, an Option that is intended to be an
Incentive Stock Option may be exercised more than three months, but not more
than twelve months, after the Participant’s Termination for a reason other than
death or becoming a Disabled Participant, in which case the Option will be a
Nonqualified Stock Option.

(f)                                    For purposes of this Section, “Ten
Percent Owner” means an individual who, at the time an Option is granted under
this Plan, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or any
Affiliate.  For purposes of this Section
3.3(f), a Participant will be considered as owning (i) not only shares of the
Stock owned individually, but also all shares that are at the time owned,
directly or indirectly, by or for the spouse, ancestors, lineal descendants and
brothers and sisters (whether by the whole or half blood) of such individual
and (ii) proportionately any shares of Stock owned, directly or indirectly, by
or for any corporation, partnership, estate or trust in which such individual
will be a stockholder, partner or beneficiary.

ARTICLE 4

PERFORMANCE UNITS

Section
4.1                                   Performance Period and
Objectives.  The Committee will have authority, in its
discretion, to award Performance Units to Eligible Individuals.  The Committee will determine a performance
period (the “Performance Period”) of one or more years and will determine the Performance
Goals for grants of Performance Units. 
Performance Goals may vary from Participant to Participant.  Performance Periods may overlap and
Participants may participate simultaneously with respect to Performance Units
for which different Performance Periods are prescribed.

Section
4.2                                   Eligibility.  At the beginning of a Performance Period, the
Committee will determine for each Participant or group of Participants eligible
for Performance Units with respect to that Performance Period the range of dollar
values, if any, which may be fixed or may vary in accordance with such
performance or other criteria specified by the Committee, which will be paid to
a Participant as an Award if the relevant Performance Goals for the Performance
Period are met.

Section
4.3                                   Significant Event.  If during the course of a Performance Period there
will occur a significant event or events (a “Significant Event”) as determined
by the Committee, including, 

 

13

 

but not limited to, a
reorganization of the Corporation or a Change in Control, which the Committee
expects to have a substantial effect on a Performance Goal during such period,
the Committee may revise such objective.

Section
4.4                                   Termination.  If a Participant terminates Service with the
Corporation or any of its Affiliates during a Performance Period because of
death or becoming a Disabled Participant, as determined by the Committee, that
Participant will be entitled to payment in settlement of each Performance Unit for
which the Performance Period was prescribed (i) based upon the Performance
Goals satisfied at the end of such period; and (ii) prorated for the portion of
the Performance Period during which the Participant was in Service with the
Corporation or any of its Affiliates; provided, however, the Committee may
provide for an earlier payment in settlement of such Performance Unit in such
amount or amounts and under such terms and conditions as the Committee deems
appropriate or desirable with the consent of the Participant.  If a Participant terminates Service with the
Corporation or any of its Affiliates during a Performance Period for any other
reason, the Participant will not be entitled to any payment with respect to that
Performance Period unless the Committee will otherwise determine.

Section
4.5                                   Award.  Each Performance Unit will be paid in cash either as a
lump sum payment or in annual installments, as the Committee will determine at
the time of grant of the Performance Unit or otherwise, commencing as soon as
practicable after the end of the relevant Performance Period.

Section
4.6                                   Section 409A. 
If required, Performance Units granted under this Article 4 will be
subject to and conform to the requirements of Code Section 409A.

ARTICLE 5

RESTRICTED STOCK AND RESTRICTED STOCK
UNITS

Section
5.1                                   Award.  Subject to the terms and provisions of the Plan, the
Committee may grant, at any time and from time to time, Restricted Stock or
Restricted Stock Units to any Eligible Individual in the number and form, and
subject to such restrictions on transferability and other restrictions as the
Committee may determine in its discretion, including without limitation the
achievement of Performance Goals. 
Restricted Stock also may be received by a Participant as the result of
an exercise of an Option, when such award has not vested.  Restricted Stock and RSUs will be subject to
a restriction period (after which restrictions will lapse), which means a
period commencing on the Award Date and ending on such date or upon the achievement
of such Performance Goals or other criteria as the Committee will determine
(the “Restriction Period”).  The
Committee may provide for the lapse of restrictions in installments where it
deems appropriate.

Section
5.2                                   Restriction Period.  Except as otherwise provided in this Article 5, no
shares of Restricted Stock received by a Participant will be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of during the
Restriction Period.  Except as otherwise
provided in the Award Agreement, the Restriction Period for any recipient of
Restricted Stock or RSUs will expire and all restrictions on shares of
Restricted Stock will lapse upon a Participant’s Death or becoming a Disabled
Participant.

 

14

 

Section
5.3                                   Termination.  Except as otherwise provided in Section 5.2 above, if
a Participant’s Termination occurs before the expiration of the Restriction
Period, all shares of Restricted Stock still subject to restriction, will be
forfeited by the recipient, unless the Committee otherwise determines, and will
be reacquired by the Corporation.  In the
case of Restricted Stock purchased through the exercise of an Option, the
Corporation will refund the Exercise Price paid on the exercise of the
Option.  Such forfeited shares of
Restricted Stock will again become available for award under the Plan.

Section
5.4                                   Exchange of Shares.  Nothing in this Article 5 will preclude a recipient of
Restricted Stock from exchanging any shares of Restricted Stock subject to the
restrictions contained herein for any other shares of Stock that are similarly
restricted.

Section
5.5                                   Dividend Equivalents. 
Any Award of Restricted Stock under the Plan may earn, in the discretion
of the Committee and if the shares are unissued, Dividend Equivalents.  In respect of any such Award that is
outstanding on a dividend record date for Stock, the Participant may be
credited with an amount equal to the cash or stock dividends or other
distributions that would have been paid on the shares of Stock covered by such
Award had such covered shares been issued and outstanding on such dividend
record date.  The Committee will
establish such rules and procedures governing the crediting of Dividend
Equivalents, including the timing, form of payment and payment contingencies of
such Dividend Equivalents, as it deems are appropriate or necessary.

Section
5.6                                   Deferral of Restricted
Stock.  If the applicable Award Agreement so
provides, a Participant may elect, in accordance with such procedures as the
Committee may specify from time to time, to defer the delivery of such
Restricted Stock and, if the deferral election so specifies, of the Dividend
Equivalents with respect thereto, until the date or dates specified in such
election.  Any deferral under this Section
must comply with the provisions of Code Section 409A.  Deferred Restricted Stock will not be issued
until the date or dates that it is to be delivered to the Participant in
accordance with his or her deferral election, at which time certificates evidencing
Stock will be delivered to the Participant (unless such Deferred Restricted
Stock has previously been forfeited pursuant to Section 5.3).  From the Award Date of Deferred Restricted
Stock through the earlier of (i) the date such Deferred Restricted Stock is
forfeited, and (ii) the date certificates evidencing such Deferred Restricted
Stock are delivered to the Participant, the Participant will be entitled to
receive Dividend Equivalents with respect thereto, but will have none of the
rights of a stockholder with respect to such shares; provided, that if the
deferral election made with respect to such Deferred Restricted Stock specifies
that the Dividend Equivalents will be deferred, the Dividend Equivalents will
not be paid until the date or dates specified in such deferral election.

ARTICLE 6

STOCK APPRECIATION RIGHTS

Section 6.1                                   Grant of Stock
Appreciation Rights. 
The
Committee will have the authority, in its discretion, to grant Stock
Appreciation Rights to Participants at any time and from time to time.  Within the limits of Article 2 and this
Article 6, the Committee will have sole discretion to determine the number of
SARs granted to each Participant and, consistent with the provisions of the
Plan, to determine the terms and conditions pertaining to SARs.  The Committee may grant 

 

15

 

Freestanding SARs, Tandem SARs or any combination of
the two, as specified in the Award Agreement. 
Stock Appreciation Rights granted in conjunction with a Non-Qualified
Stock Option may be granted either at the time such Non-Qualified Stock Option
is granted or at any time thereafter during the term of such Non-Qualified
Stock Option.  Stock Appreciation Rights
granted in conjunction with an Incentive Stock Option may only be granted at
the time such Incentive Stock Option is granted.

The Exercise Price of a Freestanding SAR will equal
the Fair Market Value of a share of Stock on the Award Date of the SAR.  If a Tandem SAR is granted after the grant of
the related Option, or if an Option is granted after the grant of the Tandem
SAR, the later granted Award will have the same Exercise Price as the earlier
granted Award, but the Exercise Price for the later granted Award may be less
than the Fair Market Value of the Stock at the time of such grant.  SARs may be subject to Code Section 409A.

Section 6.2                                   Exercise of Tandem SARs. 
Tandem SARs may be exercised for all or part of the shares subject to
the related Option, upon the surrender of the right to exercise the equivalent
portion of the related Option.  A Tandem
SAR may be exercised only with respect to the shares for which its related
Option is then exercisable.

Section 6.3                                   Exercise of Freestanding
SARs.  Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes,
and sets forth in the Award Agreement.

Section 6.4                                   Term of SARs. 
The Committee will determine the term of an SAR, in its sole discretion,
which it will set forth in the Award Agreement. 
The term of an SAR may not exceed ten years.

Section 6.5                                   Payment of SAR Amount. 
Upon exercise of an SAR, a Participant will be entitled to receive
payment from the Corporation in an amount determined by multiplying:

(a)                                  the excess (or some portion of the excess
as determined at the time of the grant by the Committee) if any, of the Fair
Market Value of a share on the date of exercise of the SAR over the Exercise
Price specified in the Award Agreement; by

(b)                                 the number of shares of Stock as to which
the SAR is exercised.

The Committee will set forth in the Award Agreement
whether the payment upon SAR exercise will be made in cash, in shares of Stock
of equivalent Fair Market Value or in some combination of the two.

ARTICLE 7

CERTIFICATES FOR AWARDS OF STOCK

Section
7.1                                   Stock Certificates.  Except as otherwise provided in this Section 7.1, each
Participant entitled to receive shares of Stock under the Plan will be issued a
certificate for such shares.  Such
certificate will be registered in the name of the Participant and will bear an
appropriate legend reciting the terms, conditions and restrictions, if any,
applicable to the Stock and will be subject to appropriate stop-transfer
orders.  To the extent that the Plan
provides for issuance of stock certificates to reflect the issuance of shares
of Stock, the issuance may be 

 

16

 

effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange. 
If the issuance of shares under the Plan is effected on a
non-certificated basis, the issuance of shares to a Participant will be
reflected by crediting (by means of a book entry) the applicable number of
shares of Stock to an account maintained by the Corporation in the name of such
Participant, which account may be an account maintained by the Corporation for
such Participant under any dividend reinvestment program offered by the
Corporation.  The Committee may require,
under such terms and conditions as it deems appropriate or desirable, that the
certificates for Restricted Stock delivered under the Plan be held in custody
by a bank or other institution, or that the Corporation may itself hold such
shares in custody until the Restriction Period expires or until restrictions
thereon otherwise lapse, and may require, as a condition of any receipt of
Restricted Stock, that the recipient will have delivered a stock power endorsed
in blank relating to the Restricted Stock. 
Certificates for shares of unrestricted Stock may be delivered to the
Participant after, and only after, the Restricted Period will have expired
without forfeiture in respect of such shares of Restricted Stock.

Section
7.2                                   Compliance With Laws and
Regulations.  The Corporation will not be required to
issue or deliver any certificates for shares of Stock, or to effect the
issuance of any non-certificated shares as provided in Section 7.1, prior to
(a) the listing of such shares on any stock exchange or quotation system on
which the Stock may then be listed; and (b) the completion of any registration
or qualification of such shares under any Federal or state law, or any ruling
or regulation of any government body which the Corporation will, in its sole
discretion, determine to be necessary or advisable.

Section 7.3                                   Restrictions. 
All certificates for shares of Stock delivered under the Plan (and all
non-certificated shares credited to a Participant’s account as provided in
Section 7.1) also will be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Securities and Exchange Commission, any stock
exchange or quotation system upon which the Stock is then listed and any
applicable Federal or state securities laws; and the Committee may cause a
legend or legends to be placed on any such certificates to make appropriate
reference to such restrictions.  The
foregoing provisions of this Section 7.3 will not be effective if and to the
extent that the shares of Stock delivered under the Plan are covered by an
effective and current registration statement under the Securities Act of 1933,
or if and so long as the Committee determines that application of such
provisions is no longer required or desirable. 
In making such determination, the Committee may rely upon an opinion of
counsel for the Corporation.

Section
7.4                                   Rights of Stockholders.  Except for the restrictions on Restricted Stock under
Article 5, each Participant who receives an award of Stock will have all of the
rights of a stockholder with respect to such shares, including the right to
vote the shares and receive dividends and other distributions.  No Participant awarded an Option, a Stock
Appreciation Right, a Performance Unit or an RSU will have any right as a stockholder
with respect to any shares subject to such Award prior to the date of issuance
to him or her of a certificate or certificates for such shares, or if
applicable, the crediting of non-certificated shares to an account maintained
by the Corporation in the name of such Participant.

 

17

 

ARTICLE 8

NORMAL OR EARLY RETIREMENT

At the time of any
Awards, the Committee, in its sole discretion, may add such provisions,
including, but not limited to, provisions for fully or partial vesting and
lapse of restrictions, to Participants’ Awards relating to an Employee’s normal
or early retirement, which the Committee shall define.

ARTICLE 9

CHANGE IN CONTROL

The Committee will have
the discretion to provide in applicable Award Agreements that, in the event of
a Change in Control or Significant Event, the following provisions will apply:

(a)                                  Each outstanding Option will immediately
become vested and exercisable in full;

(b)                                 The restrictions on each share of
Restricted Stock, RSU, or Performance Unit will lapse; and

(c)                                  Each outstanding SAR will immediately
become vested and exercisable in full;

provided that, full
vesting of all outstanding Awards will occur upon consummation of a Change in
Control unless the Corporation is the surviving entity and any adjustments
reasonably necessary to preserve the value of the Participant’s outstanding
Awards have been made, or the Corporation’s successor at the time of the Change
in Control irrevocably assumes the Corporation’s obligations under this Plan or
replaces each Participant’s outstanding Award with an award of equal or greater
value and having terms and conditions no less favorable to the Participant than
those applicable to the Participant’s Award immediately prior to the Change in
Control.

In the event of a Change
in Control or Significant Event, the Committee will have the discretion to
provide for (a) the termination of any or all outstanding Options and SARs as
of the effective date of such Change in Control or Significant Event and/or (b)
the settlement and termination of any or all outstanding Options and SARs for
consideration equal to the consideration paid to holders of Stock (in their
capacity as such) in such Change in Control or Significant Event over the
Exercise Price for such Option or SAR being settled and terminated (and, if the
Exercise Price exceeds such price per share, at no consideration); provided,
that, no Option or SAR will be terminated (without the consent of the
Participant) pursuant to clause (a) foregoing prior to the expiration of the
later of (x) twenty (20) days following the date on which the Participant
received written notice of the Change in Control or Significant Event and (y)
the date of consummation of such Change in Control or Significant Event.

ARTICLE 10

MISCELLANEOUS

Section
10.1                            Effect of the Plan on
the Rights of Employees and Employer.  Neither the
adoption of the Plan nor any action of the Board or the Committee pursuant to
the Plan will be deemed to give any Eligible Individual any right to be granted
an Award under the Plan and 

 

18

 

nothing in the Plan, in
any Award granted under the Plan or in any Award Agreement will confer any
right to any Participant to continue in the employment of the Corporation or
any Affiliate or to continue to be retained to provide Services to the
Corporation or any Affiliate as a Director, or Consultant or interfere in any
way with the rights of the Corporation or any Affiliate to terminate a
Participant’s Service at any time.

Section
10.2                            Amendment.  The Board specifically reserves the right to alter and
amend the Plan at any time and from time to time and the right to revoke or
terminate the Plan or to suspend the granting of Awards pursuant to the Plan;
provided always that no such revocation, termination, alteration or suspension
of any Award will terminate any outstanding Award theretofore granted under the
Plan, unless there is a liquidation or a dissolution of the Corporation; and
provided further that no such alteration or amendment of the Plan will, without
prior stockholder approval (i) increase the total number of shares which may be
issued or delivered under the Plan; (ii) make any changes in the class of
Eligible Individuals; (iii) extend the period set forth in the Plan during
which Awards may be granted; or (iv) make any changes that require stockholder
approval under the rules and regulations of any securities exchange or market
on which the Stock is traded.  No
alteration, amendment, revocation, or termination of the Plan or suspension of
any Award will adversely affect, without the written consent of the holder of
an Award theretofore granted under the Plan, the rights of such holder with
respect to such Award.  The Committee may
not amend any Award to extend the exercise period beyond a date that is later
than the earlier of the latest date upon which the Award could have expired by
its original terms under any circumstances or the tenth anniversary of the
original date of grant of the Award, or otherwise cause the Award to become
subject to Code Section 409A.  However,
if the exercise period of an Option is extended at a time when the Exercise
Price of the Option equals or exceeds the Fair Market Value of the Stock that
could be purchased (in the case of an Option) or the Fair Market Value of the
Stock used to determine the payment to the Participant (in the case of a Stock
Appreciation Right), it is not an extension of the original Award.

Section
10.3                            Effective Date and
Duration of Plan.  The Plan will be effective as of
September 18, 2007 (the “Effective Date”), the date of its adoption by the
Board, provided that the stockholders of the Corporation thereafter approve it
at a duly held stockholders’ meeting.  If
the Plan is not so approved by stockholders, the Plan (and any Award granted
under the Plan) will be null, void and of no force or effect.  If so approved, the Plan will remain in
effect until the earliest of the date (i) all shares authorized to be issued or
transferred hereunder have been issued or transferred (ii) the Plan is
terminated by the Board of Directors, or (iii) the tenth anniversary of the
Effective Date, and will continue in effect thereafter with respect to any
Awards outstanding at the time of such termination.  In no event will an Incentive Stock Option be
granted under the Plan more than ten (10) years from the date the Plan is
adopted by the Board, or the date the Plan is approved by the Corporation’s
stockholders, whichever is earlier, unless within such ten year period stockholders
approve an increase in the number of shares available for grants under the
Plan, in which case more than ten (10) years from the last date on which the
stockholders so approve any such increase.

Section
10.4                            Unfunded Status of Plan.  The Plan will be unfunded.  The Corporation will not be required to
establish any special or separate fund nor to make any other segregation of
assets to assume the payment of any benefits under the Plan.  With respect to any payments not yet made to
a Participant pursuant to an Award, nothing contained in the Plan or any Award
will 

 

19

 

give any such Participant
any rights that are greater than those of a general unsecured creditor of the
Corporation; provided, however, that the Committee may authorize the creation
of trusts or make other arrangements to meet the Corporation’s obligations
under the Plan to deliver cash, shares or other property pursuant to any Award,
which trusts or other arrangements will be consistent with the “unfunded”
status of the Plan unless the Committee otherwise determines. Any provision of
this Plan that becomes subject to Code Section 409A, will be interpreted and
applied consistent with that Section.

Section
10.5                            Employee Status. 
For purposes of determining questions of Termination and exercise of an
Option or Stock Appreciation Right after a Participant’s Termination, a leave
of absence for military service, illness, short-term disability or other
reasons approved by a duly authorized officer of the Corporation will not be
treated as Termination or interruption of Service; provided, however, that,
with respect to an Incentive Stock Option, if such leave of absence exceeds
ninety (90) days, such Option will be deemed a Non-Qualified Stock Option
unless the Eligible Individual’s right to reemployment with the Corporation or
a Affiliate following such leave of absence is guaranteed by statute or by
contract.

Notwithstanding anything
in the Plan to the contrary, the Committee, in its sole discretion, reserves
the right to designate a Participant’s leave of absence longer than ninety (90)
consecutive days, other than for illness or short-term disability, as “Personal
Leave,” provided that military leaves and approved family or medical leaves
will not be considered Personal Leave.  A
Participant’s unvested Awards will remain unvested during a Personal Leave and
the time spent on a Personal Leave will not count towards the vesting of such
Awards.  A Participant’s vested Options
or SARs that may be exercised will remain exercisable upon commencement of
Personal Leave until the earlier of (i) a period of one year from the date of
commencement of such Personal Leave; or (ii) the remaining exercise period of
such Options.

Section
10.6                            Tax Withholding.  Whenever the Corporation proposes or is required to
distribute Stock under the Plan, the Corporation may require the recipient to
remit to the Corporation an amount sufficient to satisfy any Federal, state and
local tax withholding requirements prior to the delivery of any certificate for
such shares or, in the discretion of the Committee, the Corporation may
withhold from the shares to be delivered the minimum number of shares
sufficient to satisfy all or a portion of such tax withholding requirements.  Whenever under the Plan payments are to be
made in cash, such payments may be net of an amount sufficient to satisfy any
Federal, state and local tax withholding requirements.

Any Award may provide
that the Participant may elect, in accordance with any conditions set forth in
such Award, to pay any withholding taxes in shares of Stock; provided that, the
Participant, by accepting the Award will be deemed to instruct and authorize
the Corporation or its delegatee for such purpose to sell on his or her behalf a
whole number of shares of Stock from those shares of Stock issuable to the
Participant in payment of vested shares of Restricted Stock or units as the
Corporation or its delegatee determines to be appropriate to generate cash
proceeds sufficient to satisfy the minimum tax withholding obligation.  This direction and authorization is intended
to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange
Act, and to be interpreted to comply with the requirements of Rule
10b5-1(c).  Such shares will be sold on
the day the Restricted Stock or units become vested, which is the date the
tax-withholding obligation arises, or as soon thereafter as practicable.  The Participant will be responsible for all
brokerage fees and other costs of sale, and the Participant will agree to 

 

20

 

indemnify and hold the
Corporation harmless from any losses, costs, damages, or expenses relating to
any such sale.  To the extent the
proceeds of such sale exceed the Participant’s minimum tax withholding
obligation (e.g., because of the
need to sell whole shares), the Corporation or its delegatee will pay such
excess in cash to the Participant through payroll as soon as practicable.  The Corporation is under no obligation to arrange
for such sale at any particular price. 
The Participant agrees to pay to the Corporation as soon as practicable,
including through additional payroll withholding, any amount of the tax
withholding obligation that is not satisfied by the sale of shares described
above.

Section
10.7                            Benefits. 
Amounts received under the Plan are not to be taken into account for
purposes of computing benefits under other plans.

Section
10.8                            Successors and Assigns.  The terms of the Plan will be binding upon the Corporation
and its successors and assigns.

Section
10.9                            Headings.  Captions preceding the sections hereof are inserted
solely as a matter of convenience and in no way define or limit the scope or
intent of any provision hereof.

Section
10.10                     Federal and State Laws,
Rules and Regulations. 
The Plan
and the grant of Awards will be subject to all applicable federal and state
laws, rules, and regulations and to such approval by any government or
regulatory agency as may be required.

Section
10.11                     Governing Law. 
To the extent not preempted by federal law, this Plan, any Award
Agreement, and documents evidencing Awards or rights relating to Awards will be
construed, administered and governed in all respects under and by the laws of
the State of Illinois, without giving effect to its conflict of laws
principles.  If any provision of this
Plan will be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof will continue to be fully effective.  The jurisdiction and venue for any disputes
arising under, or any action brought to enforce (or otherwise relating to),
this Plan will be exclusively in the courts in the State of Illinois, County of
Cook, including the Federal Courts located therein (should Federal jurisdiction
exist).

Section
10.12                     Beneficiary Designation. 
Each Participant may name, from time to time, any beneficiary or
beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case the Participant should die or
become a Disabled Participant before receiving any or all of his or her Plan
benefits.  Each beneficiary designation
will revoke all prior designations by the same Participant, must be in a form
prescribed by the Committee, and must be made during the Participant’s
lifetime.  If the Participant’s
designated beneficiary predeceases the Participant or no beneficiary has been
designated, benefits remaining unpaid at the Participant’s death will be paid
to the Participant’s estate or other entity described in the Participant’s
Award Agreement.

Section
10.13                     Restrictive Covenants. 
An Award Agreement may provide that, notwithstanding any other provision
of this Plan to the contrary, if the Participant breaches the non-compete,
non-solicitation, non-disclosure or other restrictive covenants of the Award
Agreement, whether during or after Termination, in addition to any other
penalties or restrictions that may apply under any employment agreement, state
law, or otherwise, the Participant will forfeit:

 

21

 

(a)                                  any and all Awards granted to him or her
under the Plan, including Awards that have become vested and exercisable;
and/or

(b)                                 the profit the Participant has realized
on the exercise of any Options, which is the difference between the Options’
Exercise Price and the Fair Market Value of any Option the Participant
exercised after terminating Service and within the six month period immediately
preceding the Participant’s termination of Service (the Participant may be
required to repay such difference to the Corporation).

Section
10.14                     Indemnification. 
Each person who is or has been a member of the Committee or the Board,
and any individual or individuals to whom the Committee has delegated authority
under Article 2 of the Plan, will be indemnified and held harmless by the
Corporation and its Affiliates from and against any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or as a result of any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken, or failure to act, under the Plan to the extent permitted
by State law.  Each such person will also
be indemnified and held harmless by the Corporation and its Affiliates from and
against any and all amounts paid by him or her in a settlement approved by the
Corporation, or paid by him or her in satisfaction of any judgment, of or in a
claim, action, suit or proceeding against him or her and described in the
previous sentence, so long as he or she gives the Corporation an opportunity,
at its own expense, to handle and defend the claim, action, suit or proceeding
before he or she undertakes to handle and defend it.  The foregoing right of indemnification will
not be exclusive of any other rights of indemnification to which a person who
is or has been a member of the Committee or the Board may be entitled under the
Corporation’s Articles of Incorporation or By-Laws, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify him or her
or hold him or her harmless.

Section
10.15                     Notice. 
Any notice or other communication required or permitted under the Plan
must be in writing and must be delivered personally, sent by certified,
registered, or express mail, or sent by overnight courier, at the sender’s
expense.  Notice will be deemed given (i)
when delivered personally or, (ii) if mailed, three days after the date of
deposit in the United States mail or, (iii) if sent by overnight courier, on
the regular business day following the date sent.  Notice to the Participant should be sent to
the address set forth on the Corporation’s records.  Either party may change the address to which
the other party must give notice under this Section by giving the other party
written notice of such change, in accordance with the procedures described
above.

Section
10.16                     Awards Not Transferable. 
Except as otherwise provided by the Committee, Awards under the Plan are
not transferable other than to a beneficiary designated by the Participant in
the event of a Participant’s death, or by will or the laws of descent and
distribution.  An Award Agreement for a
grant of Non-Qualified Stock Options may permit or may be amended to permit the
Participant who received the Option, at any time prior to the Participant’s
death, to assign all or any portion of the Option granted to him or her to (a)
the Participant’s spouse or lineal descendants; (b) the trustee of a trust for
the primary benefit of the Participant, the Participant’s spouse or lineal
descendants, or any combination thereof; (c) a partnership of which the
Participant, the Participant’s spouse and/or lineal descendants are the only
partners; (d) custodianships for lineal descendants under the Uniform Transfers
to Minors Act or any other similar statute; or (e) upon the termination of a
trust by the custodian or trustee thereof, or the 

 

22

 

dissolution or other
termination of the family partnership or the termination of a custodianship
under the Uniform Transfers to Minors Act or other similar statute, to the
person or persons who, in accordance with the terms of such trust, partnership
or custodianship are entitled to receive Options held in trust, partnership or
custody.  In such event, the spouse,
lineal descendant, trustee, partnership or custodianship will be entitled to
all of the Participant’s rights with respect to the assigned portion of such
Option, and such portion of the Option will continue to be subject to all of
the terms, conditions and restrictions applicable to the Option, as set forth
herein and in the related option agreement. 
Any such assignment will be permitted only if: (x) the Participant does
not receive any consideration therefor; and (y) the applicable Award Agreement
expressly permits the assignment.  The
Committee’s approval of an Award Agreement with assignment rights will not
require the Committee to include such assignment rights in an Award Agreement
with any other Participant.  Any such
assignment will be evidenced by an appropriate written document executed by the
Participant, and the Participant will deliver a copy thereof to the Committee
on or prior to the effective date of the assignment.  An assignee or transferee of an Option must
sign an agreement with the Corporation to be bound by the terms of the
applicable Award Agreement.

Except as otherwise
provided in a Participant’s Award Agreement, no Option, SAR, RSU, Restricted
Stock or Performance Unit granted under the Plan may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution, or pursuant to a domestic relations
order (as defined in Code Section 414(p)). 
The Committee may require, in its discretion, a Participant’s guardian
or legal representative to supply it with the evidence the Committee deems
necessary to establish the authority of the guardian or legal representative to
act on behalf of the Participant.

Section
10.17                     Awards to Foreign
Nationals and Employees Outside the United States. 
To the extent the Committee deems it necessary, appropriate or desirable
to comply with foreign law or practice and to further the purposes of this
Plan, the Committee may, without amending the Plan, (i) establish rules
applicable to Awards granted to Participants who are foreign nationals, are
employed outside the United States, or both, including rules that differ from
those set forth in this Plan, and (ii) grant Awards to such Participants in
accordance with those rules.

Section
10.18                     Compliance With Code
Section 409A.  Notwithstanding any provision of this Plan to
the contrary, all Awards made under this Plan are intended to be exempt from
or, in the alternative, comply with Code Section 409A and the interpretive
guidance thereunder, including the exceptions for stock rights and short-term
deferrals.  The Plan will be construed
and interpreted in accordance with such intent.

 

23Exhibit 10.1

 

EXECUTIVE EMPLOYMENT
AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT
AGREEMENT (the “Agreement”) dated effective as of
November 1, 2007 (“Effective Date”),
is made and entered into by and between EMRISE CORPORATION, a Delaware
corporation (“Employer”), and CARMINE T.
OLIVA (“Executive”).

 

R E C I T A L S

 

Employer desires that
Executive enter into an employment relationship with Employer in order to
provide the necessary leadership and senior management skills that are
important to the success of Employer. Employer believes that obtaining
Executive’s services as an employee of Employer and the benefits of his
business experience are of material importance to Employer and Employer’s
stockholders.

 

NOW, THEREFORE, in
consideration of Executive’s employment by Employer and the mutual promises and
covenants contained herein, the receipt and sufficiency of which is hereby
acknowledged, Employer and Executive intend by this Agreement to specify the
terms and conditions of Executive’s employment relationship with Employer.

 

1.             General Duties of Employer and Executive.

 

(a)           Employer agrees to
employ Executive and Executive agrees to accept employment by Employer and to
serve Employer in an executive capacity upon the terms and conditions set forth
herein. Employer hereby employs Executive as President and Chief Executive
Officer of Employer as of the Effective Date, reporting to the Board of
Directors of Employer (the “Board”).
Executive will also serve as Chairman of the Board. Executive’s duties and
responsibilities shall be those normally assumed by the President and Chief
Executive Officer of a publicly-owned company similarly situated to Employer,
as well as such other or additional duties, as may from time-to-time be
assigned to Executive by the Board. Such other or additional duties shall be
consistent with the senior executive functions set forth above.

 

(b)           While employed
hereunder, Executive shall use his best efforts to obey the lawful directions
of the Board. Executive shall also use his best efforts to promote the
interests of Employer and to maintain and to promote the reputation of
Employer. While employed hereunder, Executive shall devote his full business
time, efforts, skills and attention to the affairs of Employer and faithfully
perform his duties and responsibilities hereunder.

 

(c)           While this Agreement is
in effect, Executive may from time to time engage in any activities that do not
compete directly with Employer, provided that such activities do not interfere
with his performance of his duties. Executive shall be permitted to (i) invest
his personal assets as a passive investor in such form or manner as Executive
may choose in his discretion, (ii) participate in various charitable efforts,
and (iii) serve as a member of the Board of Directors of other corporations
which are not competitors of Employer.

 

 

2.             Compensation and Benefits.

 

(a)           As compensation for his
services to Employer, Employer shall pay to Executive an annual base salary of
$350,000, payable in equal semimonthly payments in accordance with Employer’s
regular payroll policy for salaried employees (the “Salary”).
The Compensation Committee of the Board (the “Compensation
Committee”) shall perform an annual review of Executive’s Salary
based on a review of Executive’s performance of his duties and Employer’s other
compensation policies. The Compensation Committee may, at its sole discretion,
increase (but not decrease) the Salary at any time, and from time to time.

 

(b)           In addition to the
foregoing Salary, Executive shall be eligible for an annual incentive bonus (“Incentive Bonus”) based on criteria determined by the
Compensation Committee, at its sole discretion. The Incentive Bonus shall be
payable annually in cash, following the date on which Employer’s Form 10-K for
the previous fiscal year is filed with the Securities and Exchange Commission,
but in no event later than the Short Term Deferral Date as defined in Section 3(a).

 

(c)           Upon Executive’s
furnishing to Employer customary and reasonable documentary support (such as
receipts or paid bills) evidencing costs and expenses incurred by him in the
performance of his services and duties hereunder (including, without
limitation, travel and entertainment, cellular telephone, computer and other
home office expenses) and containing sufficient information to establish the
amount, date, place and essential character of the expenditure, Executive shall
be reimbursed for such costs and expenses in accordance with Employer’s normal
expense reimbursement policy.

 

(d)           Executive shall be
entitled to participate in the medical (including hospitalization), dental,
life and disability insurance plans, to the extent offered by Employer, and in
amounts consistent with Employer’s policy for other senior executive officers
of Employer, with premiums for all such insurance for Executive and his
dependents to be paid by Employer, subject to customary employee contributions.
In addition, Employer shall purchase and maintain in effect a life insurance
policy on Executive’s life, in the amount of $1,000,000, payable to Executive’s
estate in the event of his death during the time Executive is employed by
Employer, or as provided for in Paragraph 7(c)(vi).

 

(e)           Executive shall have
the right to participate in any additional compensation, benefit, bonus,
pension, stock option, stock purchase, 401(k) or other plan or arrangement of
Employer now or hereafter existing for the benefit of other senior executive
officers of Employer, to the extent offered by Employer, and in amounts
consistent with the Employer’s policy.

 

(f)            Executive shall be
entitled to vacation (but in no event less than four (4) weeks per year),
holiday and other paid or unpaid leaves of absence consistent with Employer’s
normal policies for other senior executive officers of Employer or as otherwise
approved by the Board. Executive shall
be entitled to accrue vacation time for one (1) year. If Executive does not
take the accrued vacation during the following year, he shall be paid for the
unused vacation at his Salary rate then in effect.

 

2

 

(g)           Executive shall be
provided a monthly car allowance in the amount of at least $750.00.

 

(h)           Executive shall be
entitled to the non-exclusive use of Employer’s corporate residence.

 

(i)            Employer shall
purchase and maintain in effect a directors’ and officers’ liability insurance
policy with a minimum limit of liability of $10,000,000 and shall enter into an
indemnification agreement with Executive upon terms and conditions mutually
acceptable to Employer and Executive.

 

(j)            Employer agrees, by
action of its Board, to nominate Executive as a Class III member of the Board
and seek stockholder approval of such nomination at the 2008 annual meeting of
the stockholders of Employer.

 

3.             Deferred Compensation.

 

(a)           This
Agreement is not intended to provide for any deferral of compensation payable
during Executive’s employment pursuant to Section 409A of the Internal
Revenue Code (the “Code”) and,
accordingly, any compensation paid to Executive pursuant to this Agreement
during Executive’s employment is intended to be paid not later than the later
of:  (i) the fifteenth (15th)
day of the third (3rd) month following the Executive’s first (1st)
taxable year in which such benefit is no longer subject to a substantial risk
of forfeiture, and (ii) the fifteenth (15th) day of the third (3rd)
month following the first (1st) taxable year of Employer in which
such benefit is no longer subject to a substantial risk of forfeiture, as
determined in accordance with Section 409A of the Code and any Treasury
Regulations and other guidance issued thereunder. The date determined under
this subsection is referred to as the “Short-Term Deferral Date.”  Notwithstanding anything to the contrary
herein, in the event that any compensation paid pursuant to this Agreement
during Executive’s employment is not actually or constructively received by
Executive on or before the Short-Term Deferral Date, to the extent such
compensation, or any portion thereof, constitutes a deferral of compensation
subject to Code Section 409A, then, subject to Section 3(b),
such benefit shall be paid upon Executive’s separation from service, with
respect to Employer and its affiliates within the meaning of Section 409A
of the Code.

 

(b)           In
the event that Executive is a “specified
employee,” as defined in Section 409A(a)(2)(B)(i) of the Code as of
the date of any separation from service with respect to Employer and its
affiliates, no payment of deferred compensation subject to Code
Section 409A may be made to Executive before the date that is six (6)
months after the date of separation from service (or, if earlier, the date of
death of the specified employee), and, in such case, any payments shall be
accumulated and paid on the first date of the seventh (7th) month
following separation from service; provided, however, that any
payment or portion thereof which is subject to an exemption for separation pay
to specified employees as provided under Treasury Regulation § 1.409A, or is
subject to any other exemption provided under Treasury Regulation § 1.409A
allowing for payment to a specified employee prior to the date that is six (6)
months after the date of separation from service, may be paid to Executive upon
separation from service.

 

3

 

4.             Preservation of Business; Fiduciary Responsibility.

 

Executive shall use his
best efforts to preserve the business and organization of Employer and to
preserve the business relations of Employer. So long as the Executive is
employed by Employer, Executive shall observe and fulfill proper standards of
fiduciary responsibility attendant upon his service and office.

 

5.             No Specified Term; Employment at Will.

 

The employment
relationship between Employer and Executive pursuant to this Agreement is not
for any specific term, but may be terminated with or without cause, by Employer
or by Executive, at any time and for any reason, subject to the rights and
obligations of Employer and Executive as set forth in this Agreement. Any
modification to the nature of the at-will employment relationship between
Employer and Executive must be made in writing, and must be signed by Executive
and by Employer.

 

6.             Termination.

 

Employer or Executive may
terminate Executive’s employment under this Agreement at any time, but only on
the following terms:

 

(a)           Employer may terminate
Executive’s employment under this Agreement at any time for “Due Cause” (as
defined in Appendix I attached hereto and incorporated herein by
this reference) upon the good faith determination by the Board that Due Cause
exists for the termination of the employment relationship.

 

(b)           If Executive is
incapacitated by accident, sickness or otherwise so as to render Executive
either:  (i)  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 twelve (12) months; or (ii) 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 twelve (12) months is receiving income replacement benefits for a period
of not less than three (3) months under an accident and health plan covering
employees of Employer; and such incapacity is confirmed by the U.S. Social
Security Administration or in accordance with a disability insurance program
maintained by Employer, Employer may terminate Executive’s employment under
this Agreement upon giving Executive or his legal representative written notice
at least 30 days prior to the termination date, subject to the provisions of Section 7(b).
Notwithstanding anything expressed or implied above to the contrary, Employer
will fully comply with its obligations under the Americans with Disabilities
Act as well as any other applicable federal, state, or local law, regulation,
or ordinance governing the protection of qualified individuals with
disabilities as well as Employer’s obligation to provide reasonable
accommodation thereunder.

 

(c)           This Agreement shall
terminate immediately upon Executive’s death, subject to the provisions of Section 7(b).

 

(d)           Subject to the
provisions of Section 7(c), Employer may terminate Executive’s
employment under this Agreement at any time for any reason whatsoever, even 

 

4

 

without Due Cause, by
giving a written notice of termination to Executive, in which case the
employment relationship shall terminate immediately upon the giving of the
notice. If Employer terminates the employment of Executive other than (i)
pursuant to Section 6(a) for Due Cause, (ii) due to incapacity
pursuant to Section 6(b) or due to Executive’s death pursuant to Section 6(c),
or (iii) Executive’s retirement, then the action by Employer, unless consented
to in writing by Executive, shall be deemed to be a constructive termination by
Employer of Executive’s employment (a “Constructive Termination”),
and, in that event, Executive shall be entitled to receive the compensation set
forth in Section 7(c).

 

(e)           Executive may terminate
this Agreement at any time within ninety (90) days of the occurrence of any
event comprising “Good Reason” (as
defined in Appendix I attached hereto and incorporated herein by
this reference); provided, however, that Executive provides
Employer with written notice of the event or condition constituting Good Reason within thirty (30) days of
the initial existence of such event or condition, and that Employer shall have
a period of thirty (30) days to cure such event or condition and, in the event
that Employer fails to cure such event or condition, Executive shall be
entitled to receive the compensation set forth in Section 7(c).

 

7.             Effect of Termination.

 

(a)           If the employment
relationship is terminated (i) by Employer for Due Cause pursuant to Section 6(a),
(ii) by Executive breaching this Agreement by refusing to continue his
employment, or (iii) by Executive without Good Reason, then all compensation
and benefits shall cease as of the date of termination, other than:
(A) those benefits that are provided by retirement and benefit plans and
programs specifically adopted and approved by Employer for Executive that are
earned and vested by the date of termination; (B) Executive’s pro rata
annual Salary (as in effect as of the date of termination, payable in the
manner as prescribed in the first sentence of Section 2(a) through
the date of termination; (C) any stock options which have vested as of the
date of termination pursuant to the terms of the agreement granting the
options; and (D) accrued vacation as required by California law.

 

(b)           If Executive’s
employment relationship is terminated due to Executive’s incapacity pursuant to
Section 6(b) or due to Executive’s death pursuant to Section 6(c),
Executive or Executive’s estate or legal representative, shall, subject to Section 3
of this Agreement, be entitled to (i) those benefits that are provided by
retirement and benefits plans and programs specifically adopted and approved by
Employer for Executive that are earned and vested at the date of termination,
(ii) a prorated Incentive Bonus, payable in the manner as prescribed in the
second sentence of Section 2(b) (to the extent Executive would
otherwise be eligible) for the fiscal year in which incapacity or death occurs,
and (iii) a lump-sum cash payment, payable within ten (10) business days of
separation from service due to death or disability, but in any event, not later
than the Short-Term Deferral Date, in an amount equal to one (1) year of
Executive’s then current annual Salary as set forth in Section 2(a),
which amount shall be net of all then applicable federal, state and local taxes
payable by Executive relating to such payment (said payment taking into
consideration the full gross-up effect of additional taxes payable with respect
to tax payments).

 

5

 

(c)           In the event of a
termination of this Agreement as a result of Constructive Termination, or by
Executive for Good Reason, then Employer shall, subject to Section 3
of this Agreement:

 

(i)            pay to Executive on
the date of termination his Salary in effect as of the date of termination
through the end of the month during which the termination occurs plus credit
for any vacation earned but not taken;

 

(ii)           pay to Executive on the
first business day following the expiration of the revocation period described
in Section 7(d) (provided Executive has not tendered his revocation),
but in any event, not later than the Short-Term Deferral Date, as severance pay
an amount equal to three (3) times Executive’s then current annual Salary,
which amount shall be net of all then applicable federal, state and local taxes
payable by Executive relating to such payment (said payment taking into consideration
the full gross-up effect of additional taxes payable with respect to tax
payments);

 

(iii)          pay to Executive the
prorated Incentive Bonus, to the extent Executive would otherwise be eligible
for any, for the fiscal year during which termination occurs, payable as
provided in Section 2(a); and

 

(iv)          maintain, at Employer’s
expense, in full force and effect, for Executive’s continued benefit, all
medical insurance to which Executive was entitled immediately prior to the date
of termination until the earliest of (i) eighteen (18) months or (ii) the date
or dates that Executive’s continued participation in Employer’s medical
insurance plan is not possible under the terms of the plans (the earliest of
(i) and (ii) is referred to herein as the “Benefits Date”). If Employer’s
medical insurance plan does not allow Executive’s continued participation in
the plan, then Employer will pay to Executive, in monthly installments, from
the date on which Executive’s participation in the medical insurance is prohibited
until the date that is eighteen (18) months after the date of termination, an
amount equal to the monthly premium or premiums for COBRA coverage with respect
to Executive for the discontinued medical insurance; and

 

(v)           pay to Executive on the
date of termination a lump-sum cash payment equal to eighteen (18) times the
estimated monthly COBRA premiums at the time of termination (taking into
account all known or anticipated premium increases) to be used by Executive to
maintain Executive’s continued medical insurance coverage for an additional
period of eighteen (18) months, pursuant to Cal-COBRA, following the expiration
of the COBRA reimbursement payments set forth in Section 7(c)(iv); and

 

(vi)          pay to Executive on the
date of termination a lump-sum cash payment equal to thirty-six (36) times the
estimated monthly life insurance premiums at the time of termination (taking
into account all known or anticipated premium increases) to be used by
Executive to maintain: (i) Executive’s existing group life insurance coverage
in force as of the date of separation; and (ii) the life 

 

6

 

insurance policy on Executive’s life, in the amount of
$1,000,000, each as provided for in Section 2(f), for a period of
thirty-six (36) months after the date of termination.

 

(d)           Executive shall be
entitled to the payments and benefits described in subsections 7(c)(ii) and
(iv) only if Executive signs an appropriate separation agreement in a form
acceptable to Employer, which includes a release of all claims against Employer
to the fullest extent permitted by law, such agreement actually enters into
effect following any revocation period required by law, and Executive complies
fully with any continuing obligations under this Agreement.

 

(e)           Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor shall the amount
of any payment provided for under this Agreement be reduced by any compensation
earned by Executive as the result of employment by another Employer after the
date of termination, or otherwise.

 

(f)            In the event of a
termination of this Agreement for any reason, Employer shall return to
Executive all of Executive’s personal property located at Employer’s offices
and/or corporate residence and shall pay all costs associated with the return
of such property (including Executive’s automobile) to Executive’s principal
place of residence.

 

(g)           Except as expressly
provided herein, the provisions of this Agreement, and any payment or benefit
provided for hereunder, shall not reduce any amounts otherwise payable, or in
any way diminish Executive’s existing rights, or rights which would accrue
solely as a result of the passage of time, under any Employer Benefit Plan,
employment agreement or other contract, plan or arrangement.

 

(h)           The amount of any
payment provided under this Agreement shall not be reduced by reason of any
present value calculation.

 

(i)            Upon termination of
this Agreement, compensation and benefits shall be paid to the Executive as set
forth in the applicable subsection of this Section 7 and stock
grants or options granted to Executive, if any, shall be governed by the
provisions of all stock grant or option agreements between Employer and
Executive. In the event of a termination of this Agreement by Executive for
Good Reason, all other rights and benefits Executive may have under the
employee and/or executive benefit plans and arrangements of Employer generally
shall be determined in accordance with the terms and conditions of those plans
and arrangements.

 

8.             Payment Upon Change in Control.

 

Immediately preceding the
occurrence of a “Change in Control” (as
defined in Appendix I attached hereto and incorporated herein by this
reference), Employer shall pay to Employee, in immediately available funds, an
amount equal to three (3) times Executive’s then current annual Salary, which
amount shall be net of all then applicable federal, state and local taxes
payable by Executive relating to such payment (said payment taking into
consideration the full gross-up effect of additional taxes payable with respect
to tax payments).

 

7

 

9.             Covenants of Confidentiality, Nondisclosure and Noncompetition.

 

(a)           During the term of this
Agreement, Employer will provide to Executive certain confidential and
proprietary information owned by Employer as more fully described below.
Executive acknowledges that he occupies or will occupy a position of trust and
confidence with Employer, and that Employer would be irreparably damaged if
Executive were to breach the covenants set forth in this Section 9(a).
Accordingly, Executive agrees that he will not, without the prior written
consent of Employer, at any time during the term of this Agreement or any time
thereafter, except as may be required by competent legal authority or as
required by Employer to be disclosed in the course of performing Executive’s
duties under this Agreement for Employer, use or disclose to any person, firm
or other legal entity, any confidential records, secrets or information
obtained by Executive during his employment hereunder related to Employer or
any parent, subsidiary or affiliated person or entity (collectively, “Confidential Information”). Confidential Information shall
include, without limitation, information about Employer’s Inventions (as
defined in Section 10(a)), customer lists and product pricing,
data, know-how, formulae, processes, ideas, past, current and planned product
development, market studies, computer software and programs, database and
network technologies, strategic planning and risk management. Executive
acknowledges and agrees that all Confidential Information of Employer and/or
its affiliates will be received in confidence and as a fiduciary of Employer.
Executive will exercise utmost diligence to protect and guard the Confidential
Information.

 

(b)           Executive agrees that
he will not, without the express written consent of the Board, take with him
upon the termination of this Agreement, any document or paper, or any photocopy
or reproduction or duplication thereof, relating to any Confidential
Information.

 

(c)           Executive agrees that
he will, upon the termination of his employment, return all Employer’s property
including but not limited to vehicles leased or owned by Employer, mobile
telephone, fuel card, personal computer, all documents, working papers,
information whether stored on computer disc or otherwise, and all other records
relating to Employer and its business. Executive agrees that he will confirm in
writing that he has complied with this clause, if requested to do so by
Employer, within seven (7) days of receipt of such a request.

 

(d)           Executive agrees that,
while Executive is employed with Employer, he will not, either directly or
indirectly, have an interest in any business (whether as manager, operator,
licensor, licensee, partner, 5% or greater equity holder, employee, consultant,
director, advisor or otherwise) competitive with Employer or any of its
business activities or solicit individuals or other entities that are customers
or competitors of Employer. Executive further agrees that, for a period of
twenty-four (24) months after the date of termination of this Agreement (the “Restricted Period”), Executive shall not use Employer’s
trade secrets, either directly or indirectly, to compete in any way with the
business of Employer and will not solicit individuals or other entities that
are customers or competitors of Employer during the six-month period
immediately prior to the date of termination of this Agreement, to terminate or
change their contracts or business relations with Employer. Executive also
agrees that, for the Restricted Period, he will not, either directly or
indirectly, solicit any employee of Employer to terminate his employment with
Employer.

 

8

 

(e)           For purposes of this Section 9,
“Employer” shall include any of its
parents, subsidiaries or any other entity in which it holds a 50% or greater
equity interest.

 

10.           Inventions.

 

(a)           Any and all inventions,
product, discoveries, improvements, processes, formulae, manufacturing methods
or techniques, designs or styles, software applications or programs
(collectively, “Inventions”) made, developed or
created by Executive, alone or in conjunction with others, during regular hours
of work or otherwise, during the term of Executive’s employment with Employer
and for a period of two years thereafter that may be directly or indirectly
related to the business of, or tests being carried out by, Employer, or any of
its parents, subsidiaries, shall be promptly disclosed by Executive to Employer
and shall be Employer’s exclusive property. The following provisions of the
California Labor Code shall supplement this Section 10(a):

 

SECTION 2870
OF THE CALIFORNIA LABOR CODE

 

Application of Provisions
Providing that Employee Shall Assign or Offer to Assign Rights in Invention to
Employer.

 

(a)           Any provision in an
employment agreement which provides that an employee shall assign, or offer to
assign, any of his or her rights in an invention to his or her employer shall
not apply to an invention that the employee developed entirely on his or her
own time without using employer’s equipment, supplies, facilities, or trade
secret information except for those inventions that either:

 

(1)             Relate at the time of
conception or reduction to practice of the invention to employer’s business, or
actual or demonstrably anticipated research or development of employer; or

 

(2)             Result from any work
performed by the employee for employer.

 

(b)           To the extent a
provision in an employment agreement purports to require an employee to assign
an invention otherwise excluded from being required to be assigned under
subdivision (a), the provision is against the public policy of this state and
is unenforceable.

 

(b)           Executive will, upon
Employer’s request and without additional compensation, execute any documents
necessary or advisable in the opinion of Employer’s legal counsel to direct the
issuance of patents to Employer with respect to Inventions that are to be
Employer’s exclusive property under this Section 10 or to vest in
Employer title to the Inventions; the expense of securing any patent, however,
shall be borne by Employer.

 

9

 

(c)           Executive will hold for
Employer’s sole benefit any Invention that is to be Employer’s exclusive
property under this Section 10 for which no patent is issued.

 

11.           No Violation.

 

Executive represents that
he is not bound by any Agreement with any former employer or other party that
would be violated by Executive’s employment by Employer.

 

12.           Injunctive Relief.

 

Executive acknowledges
that the breach, or threatened breach, by Executive of the provisions of this
Agreement shall cause irreparable harm to Employer, which harm cannot be fully
redressed by the payment of damages to Employer. Accordingly, Employer shall be
entitled, in addition to any other right or remedy it may have at law or in
equity, to seek an injunction or restraining Executive from any violation or
threatened violation of this Agreement.

 

13.           Dispute Resolution.

 

Subject to Section 12,
all claims, disputes and other matters in controversy (“dispute”)
arising, directly or indirectly out of or related to this Agreement, or the
breach thereof, whether contractual or noncontractual, and whether during the
term or after the termination of this Agreement, shall be resolved exclusively
according to the procedures set forth in this Section 13, and not
through resort to any judicial proceedings.

 

(a)           Neither party shall
commence an arbitration proceeding pursuant to the provisions of Section 13(b)
unless that party first gives a written notice (a “Dispute
Notice”) to the other party setting forth the nature of the dispute.
The parties shall attempt in good faith to resolve the dispute by mediation
under the American Arbitration Association Commercial Mediation Rules in effect
on the date of the Dispute Notice. If the parties cannot agree on the selection
of a mediator within twenty (20) days after delivery of the Dispute Notice, the
mediator will be selected by the American Arbitration Association. If the
dispute has not been resolved by mediation within sixty (60) days after
delivery of the Dispute Notice, then the dispute shall be determined by
arbitration in accordance with the provisions below.

 

(b)           Any dispute that is not
settled by mediation as provided in Section 13(a) shall be resolved
by arbitration in Orange County, California, before a single arbitrator
appointed by the American Arbitration Association or its successor. The
determination of the arbitrator shall be final and absolute. The arbitrator
shall be governed by the duly promulgated rules and regulations of the American
Arbitration Association or its successor then in effect, and the pertinent
provisions of the laws of the State of California relating to arbitration. The
decision of the arbitrator may be entered as a final judgment in any court of
the State of California or elsewhere. The prevailing party in any such
arbitration shall also be entitled to recover reasonable attorneys’,
accountants’ and experts’ fees and costs of suit in addition to any other
relief awarded the prevailing party.

 

10

 

14.           Miscellaneous.

 

(a)           If any provisions
contained in this Agreement is for any reason held to be totally invalid or
unenforceable, such provision will be fully severable, and in lieu of such
invalid or unenforceable provision there will be added automatically as part of
this Agreement a provision as similar in terms as may be valid and enforceable.

 

(b)           All notices and other
communications required or permitted hereunder or necessary or convenience in
connection herewith shall be in writing and shall be deemed to have been given
when mailed by registered mail or certified mail, return receipt requested or
hand delivered, as follows (provided that notice of change of address shall be
deemed given only when received):

 

If to
Employer:                      EMRISE
Corporation

9485 Haven Avenue

Rancho Cucamonga, CA 91730

Attention: Board of Directors

 

If to
Executive:                      Carmine
T. Oliva

901 Little River Drive

P.O. Box 2006

Elizabeth City, NC 27906

 

or to such other names or
addresses as Employer or Executive, as the case may be, shall designate by
notice to the other party hereto in the manner specified in this Section 13(b).

 

(c)           This Agreement shall be
binding upon and inure to the benefit of Employer, its successors, legal
representatives and assigns, and Executive, his heirs, executors,
administrators, representatives, legatees and permitted assigns. Executive
agrees that his rights and obligations hereunder are personal to him and may
not be assigned without the express written consent of Employer. If Executive
should die while any amounts are due to him pursuant to this Agreement, all
such amounts shall be paid to Executive’s devisee, legatee or other designee,
or if there be no such designee, to Executive’s estate. Employer will require
any successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Employer, by Agreement in form and substance satisfactory to
Executive and his legal counsel, expressly, absolutely and unconditionally to
assume and agree to perform this Agreement in the same manner and to the same
extent that Employer would be required to perform each of them if no such
succession or assignment had taken place. Any failure of Employer to obtain
such agreement prior to the effectiveness of any such succession or assignment
shall be a material breach of this Agreement and shall entitle Executive to
terminate Executive’s employment for Good Reason. As used in this Agreement, “Employer” means EMRISE Corporation and any successor or
assign to its business and/or assets which executes and delivers the Agreement
provided for in this Section or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law. If at any time
during the term of this Agreement Executive is employed by any company a
majority of the voting securities of which is then owned by Employer, “Employer” as used in this Agreement
shall in addition include that subsidiary company. In that event, Employer
agrees 

 

11

 

that it shall pay or
shall cause the subsidiary company to pay any amounts owed to Executive
pursuant to this Agreement.

 

(d)           This Agreement replaces
and merges all previous agreements and discussions relating to the same or
similar subject matters between Executive and Employer with respect to the
subject matter of this Agreement (other than any option agreement dated prior
to the Effective Date between Executive and Employer), including without
limitation that certain Executive Employment dated effective as of January 1,
2006 between Employer and Executive. This Agreement may not be modified in any
respect by any verbal statement, representation or agreement made by any
employee, officer, or representative of Employer or by any written agreement
unless signed by an officer of Employer who is expressly authorized by Employer
to execute that document.

 

(e)           The laws of the State
of California will govern the interpretation, validity and effect of this
Agreement without regard to principles of conflicts of law, the place of
execution or the place for performance thereof.

 

(f)            Executive and Employer
shall execute and deliver any and all additional instruments and agreements
that may be necessary or proper to carry out the purposes of this Agreement.

 

(g)           The descriptive
headings of the several sections of this Agreement are inserted for convenience
only and do not constitute a party of this Agreement.

 

(h)           This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same Agreement.

 

(i)            Executive acknowledges
that Executive has had the opportunity to read this Agreement and discuss it
with advisors and legal counsel, if Executive has so chosen. Executive also
acknowledges the importance of this Agreement and that Employer is relying on
this Agreement in entering into an employment relationship with Executive.

 

The undersigned,
intending to be legally bound, have executed this Agreement effective as of the
date first written above.

 

	
   

  	
  EMRISE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: November 1, 2007

  	
  By:

  	
  /s/
  Otis W. Baskin

  
	
   

  	
   

  	
  Otis W. Baskin,

  
	
   

  	
   

  	
  Chairman of the
  Compensation Committee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: November 1, 2007

  	
   

  	
  /s/
  Carmine T. Oliva

  
	
   

  	
  CARMINE T. OLIVA

  

 

12

 

APPENDIX I

 

Additional Definitions

 

For purposes of this
Agreement, the following additional capitalized terms shall have the respective
definitions set forth below:

 

Benefit Plan.
The term “Benefit Plan” means any benefit plan
or arrangement (including, without limitation, Employer’s profit sharing or
stock option or stock incentive plans, if any, and medical, disability and life
insurance plans) in which Executive is participating (or any other plans
providing Executive with substantially similar benefits).

 

Change in Control.
The term “Change in Control” means
the occurrence of any of the following events:

 

(a)           the acquisition,
directly or indirectly, by any “person” or “group” (as those terms are defined
in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules
thereunder) of “beneficial ownership” (as determined pursuant to Rule 13d-3
under the Exchange Act) of securities entitled to vote generally in the
election of directors (“voting securities”) of Employer that represent 40% or more of the combined voting
power of Employer’s then outstanding voting securities or 50% or more of the
combined Fair Market Value of Employer’s then outstanding stock, other than:

 

(i)            an acquisition by a
trustee or other fiduciary holding securities under any employee benefit plan
(or related trust) sponsored or maintained by Employer or any person controlled
by Employer or by any employee benefit plan (or related trust) sponsored or
maintained by Employer or any person controlled by Employer, or

 

(ii)           an acquisition of
voting securities by Employer or a corporation owned, directly or indirectly,
by the stockholders of Employer in substantially the same proportions as their
ownership of the stock of Employer.

 

provided,
however, that notwithstanding the foregoing, an acquisition of Employer’s
securities by Employer that (x) causes Employer’s voting securities
beneficially owned by a person or group to represent 40% or more of the combined voting power of Employer’s then
outstanding voting securities or (y) cause Employer’s stock beneficially owned
by a person or group to represent 50% or more of the combined Fair Market Value
of Employer’s then outstanding stock shall not be considered an acquisition by
any person or group for purposes of this subsection (a); provided, however,
that if a person or group shall become the beneficial owner of 40% or more of the combined voting
power of Employer’s then outstanding voting securities or 50% or more of the
combined Fair Market Value of Employer’s then outstanding stock by reason of
share acquisitions by Employer as described above and shall, after such share
acquisitions by Employer, become the beneficial owner of any additional
securities of Employer, then such acquisition shall constitute a Change in
Control;

 

I-1

 

(b)           the date a majority of
members of the Board is replaced during any 12-month period by directors whose
appointment or election is not endorsed by a majority of the members of the
Board before the date of the appointment or election, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than the Board;

 

(c)           the acquisition by any “person”
or “group” (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of
the Exchange Act and the rules thereunder), or combined acquisitions during the
12-month period ending on the date of the most recent acquisition by such
person or group, of ownership of assets from Employer that have a total gross
fair market value equal to or more than 40% of the total gross fair market
value of all of the assets of the corporation immediately before such
acquisition; and

 

(d)           stockholder approval of
a complete liquidation or dissolution of Employer.

 

For purposes of
subsection (a) above, the calculation of voting power shall be made as if the
date of the acquisition were a record date for a vote of Employer’s
stockholders, and for purposes of subsection (c) above, the calculation of
voting power shall be made as if the date of the consummation of the
transaction were a record date for a vote of Employer’s stockholders.

 

Notwithstanding the
foregoing, there is no Change in Control event when there is a transfer to an
entity that is controlled by the stockholders of the Company immediately after
the transfer. A transfer of assets by Employer is not treated as a Change in
Control if the assets are transferred to:

 

(i)            a stockholder of
Employer (immediately before the asset transfer) in exchange for or with
respect to the stockholders’ stock;

 

(ii)           an entity, 50% or more
of the total value or voting power of which is owned, directly or indirectly,
by Employer;

 

(iii)          a person or group that
owns, directly or indirectly, 50% or more of the total value or voting power of
all the outstanding stock of Employer; or

 

(iv)          an entity, at least 50%
of the total value or voting power of which is owned, directly or indirectly,
by a person or group described in (iii) above.

 

Due Cause.
The term “Due Cause” means any of the following
events:

 

(a)           any intentional
misapplication by Executive of Employer’s funds or other material assets, or
any other act of dishonesty injurious to Employer committed by Executive; or

 

(b)           Executive’s conviction
of (i) a felony or (ii) a crime involving moral turpitude; or

 

I-2

 

(c)           Executive’s use or
possession of any controlled substance or chronic abuse of alcoholic beverages,
which use or possession the Board reasonably determines renders Executive unfit
to serve in his capacity as a senior executive of Employer; or

 

(d)           Executive’s breach,
nonperformance or nonobservance of any of the terms of this Agreement,
including but not limited to Executive’s failure to adequately perform his
duties or comply with the reasonable directions of the Board.

 

Notwithstanding anything
in the foregoing subsections (c) or (d) to the contrary, Employer shall not
terminate Executive under subsections (c) or (d) unless the Board first
provides Executive with a written memorandum describing in detail how his
performance hereunder is not satisfactory and Executive is given a reasonable
period of time (not less than thirty (30) days) to remedy the unsatisfactory
performance related by the Board to Executive in that memorandum. A
determination of whether Executive has satisfactorily remedied the unsatisfactory
performance shall be promptly made by a majority of the disinterested directors
of the Board at the end of the period provided to Executive for remedy and
their determination shall be final.

 

Exchange
Act. The term “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

Fair
Market-Value. The term “Fair
Market Value” of a share of Employer’s common stock as of a given
date shall be: (a) if the common stock is listed or admitted for trading on any
United States national securities exchange and/or is quoted on a system of
automated dissemination of quotations of securities prices in common use, the
last reported sale price of a share of common stock on the principal exchange
or system on which shares of common stock are trading on such date (or if no
sale occurred on such date, then on the next preceding date on which a trade
occurred); provided, however, that if the common stock is not a
last sale reported security, then the Fair Market Value shall be the average of
the closing high bid and low asked quotations for a share of common stock on
such principal exchange or system on such date (or if bid and asked prices were
not both reported on such date, then on the next preceding date on which bid
and asked prices were both reported); provided  further, that the
sale, bid and asked prices referred to in this clause (a) shall be as reported
in a newspaper of general circulation or by such other source as the Board
deems reliable; or (b) if the common stock is not listed or admitted for trading
on such an exchange or system on such date, the Fair Market Value of a share of
common stock as established by the Board acting in good faith, taking into
account all material information available with respect to the value of a share
of common stock, including, without limitation, the value of the tangible and
intangible assets of Employer, the present value of its anticipated future cash
flows, the market value of the stock or equity interests in other entities
engaged in substantially the same business, recent arm’s length transactions
involving the sale of common stock, and other relevant factors such as control
premiums or discounts for lack of marketability.

 

Good Reason.
The term “Good Reason” as used in this Agreement
shall mean any of the following which occur without Executive’s written consent
and provided that Executive notifies Employer’s Board  in writing of
the event or condition constituting “Good
Reason” within thirty (30) days of the initial existence of such event
or condition, that Executive intends 

 

I-3

 

to terminate his
employment for such Good Reason, specifying the Good Reason, and Employer fails
to remedy the specified event or condition within thirty (30) days after
receipt of such notice:

 

(a)           the material diminution
in Executive’s authority, duties, or responsibilities; a material diminution in
Executive’s titles or offices; any removal of Executive from or any failure to
reelect Executive to any of his positions as an officer, except in connection
with the termination of his employment for disability; Retirement; Executive’s
death; or by Executive other than for Good Reason;

 

(b)           a purported reduction
by Employer in Executive’s base salary amounting to a material diminution in
such salary to an amount less than the greater of (i) the base salary as in
effect on the date hereof or (ii) 10% below the base salary in effect at the
time of the purported reduction; or

 

(c)           a failure by Employer
to comply with any material provision resulting in a material breach by
Employer of this Agreement which has not been cured within 30 days after notice
of noncompliance has been given by Executive to Employer, or if the failure is
not capable of being cured in that time, a cure shall not have been diligently
initiated by Employer within the 30 day period;

 

provided,
however, that any of the foregoing actions shall not be considered to be
Good Reason if the action is undertaken by Employer as a termination for Due
Cause.

 

I-4

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