Document:

Exhibit 10.26

EXHIBIT 10.26

The Quantum Group, Inc. 

2007 Equity Incentive Plan 

1.

Purpose and Objectives

The Quantum Group, Inc. 2007 Equity Incentive Plan (the "Plan") is designed to align the interests of (i)  employees of The Quantum Group, Inc. (the "Company") and its subsidiaries, and (ii) non-employee members of the board of directors of the Company, and (iii) consultants of the Company and its subsidiaries with the interests of the Company's stockholders and to provide incentives for such persons to exert maximum efforts for the success of the Company. By extending the opportunity to receive grants of stock options and stock awards, the Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company's shareholders, and will align the economic interests of the participants with those of the shareholders. The Plan may furthermore be expected to benefit the Company and its stockholders by making it possible for the Company to attract and retain the best available talent. The Plan shall be effective as of September 24, 2007, subject to approval by the shareholders of the Company.

2.

Definitions

Whenever used in this Plan, the following terms will have the respective meanings set forth below:

(a)

"Board" means the Company's Board of Directors.

(b)

"Cause" means, except to the extent otherwise specified by the Committee, a finding by the Committee of a Participant's incompetence in the performance of duties, disloyalty, dishonesty, theft, embezzlement, or unauthorized disclosure of customer lists, product lines, processes or trade secrets of the Employer, individually or as an employee, partner, associate, officer or director of any organization.

(c)

"Change of Control" shall be deemed to have occurred if:

(i)

Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the shareholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the parent corporation would be entitled in the election of directors;

(ii)

The consummation of (i) a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such shareholders to more than 50% of all votes to which all shareholders of the surviving corporation would be entitled in the election of directors, (ii) a sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company; or

(d)

"Code" means the Internal Revenue Code of 1986, as amended.

(e)

"Committee" means the Compensation Committee of the Board or another committee appointed by the Board to administer the Plan. Grants that are intended to be "qualified performance-based compensation" under section 162(m) of the Code shall be made by a committee that consists of two or more persons appointed by the Board, all of whom shall be "outside directors" as defined under section 162(m) of the Code and related Treasury regulations.

(f)

"Company" means The Quantum Group, Inc. and any successor corporation.

(g)

"Company Stock" means the common stock of the Company.

(h)

"Disability" means a Participant's becoming disabled within the meaning of section 22(e)(3) of the Code, within the meaning of the Employer's long-term disability plan applicable to the Participant, or as otherwise determined by the Committee.

(i)

"Effective Date" of the Plan means September 24, 2007, subject to approval of the Plan by the shareholders of the Company.

(j)

"Employee" means an employee of the Employer (including an officer or director who is also an employee).

(k)

"Employer" means the Company and its subsidiaries.

(l)

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

(m)

"Exercise Price" means the per share price at which shares of Company Stock may be purchased under an Option, as designated by the Committee.

(n)

"Fair Market Value" of Company Stock means, unless the Committee determines otherwise with respect to a particular Non-Qualified Stock Option Grant the Volume Weighted Average Price (“VWAP”) of the Company’s Common Stock for the thirty days preceding the Grant.  "Fair Market Value" of Company Stock means, unless the Committee determines otherwise with respect to a particular Incentive Stock Option Grant (i) if the principal trading market for the Company Stock is the American Stock Exchange, the New York Stock Exchange or another national securities exchange, the "closing transaction" price at which shares of Company Stock are traded on such securities exchange on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, (ii) if the Company Stock is not principally traded on a national securities exchange, but is quoted on The Nasdaq Stock Market, Inc. National Market System ("NMS") or Small-Cap Market ("Small-Cap"), the NASD OTC Bulletin Board ("OTCBB") or the Pink Sheets, the last reported "closing transaction" price of Company Stock on the relevant date, as reported by the NMS, Small-Cap, OTCBB or Pink Sheets, or, if not so reported, as reported in a customary financial reporting service, as the Committee determines.  Notwithstanding the foregoing if the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transaction prices the Fair Market Value per share shall be determined by the Committee; for federal, state and local income tax purposes, the Fair Market Value may be determined by the Committee in accordance with uniform and non-discriminatory standards adopted by it from time to time.

(o)

"Grant" means an Option or Stock Award granted under the Plan.

(p)

"Grant Agreement" means the written instrument that sets forth the terms and conditions of a Grant, including all amendments thereto.

(q)

"Incentive Stock Option" means an Option that is intended to meet the requirements of an incentive stock option under section 422 of the Code.

(r)

"Non-Employee Director" means a member of the Board who is not an employee of the Employer.

(s)

"Nonqualified Stock Option" means an Option that is not intended to be taxed as an incentive stock option under section 422 of the Code.

(t)

"Option" means an option to purchase shares of Company Stock, as described in Section 7.

(u)

"Participant" means an Employee, Consultant or Non-Employee Director designated by the Committee to participate in the Plan.

(w)

"Plan" means this 2007 Equity Incentive Plan, as in effect from time to time.

(x)

"Stock Award" means an award of Company Stock as described in Section 9.

3.

Administration

(a)

Committee.  The Plan shall be administered and interpreted by the Committee. Ministerial functions may be performed by an administrative committee comprised of Company employees appointed by the Committee.

(b)

Committee Authority.  The Committee shall have the sole authority to (i) determine the Participants to whom Grants shall be made under the Plan, (ii) determine the type, size and terms and conditions of the Grants to be made to each such Participant, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms and conditions of any previously issued Grant, subject to the provisions of Section 15 below, and (v) deal with any other matters arising under the Plan.

(c)

Committee Determinations.  The Committee shall have full power and express discretionary authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee's interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated Participants.

4.

Grants

(a)

Grants under the Plan may consist of Options as described in Section 7 and Stock Awards as described in Section 8. All Grants shall be subject to such terms and conditions as the Committee deems appropriate and as are specified in writing by the Committee to the Participant in the Grant Agreement.

(b)

All Grants shall be made conditional upon the Participant's acknowledgement, in writing or by acceptance of the Grant, that all decisions and determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under such Grant. Grants under a particular Section of the Plan need not be uniform as among the Participants.

5.

Shares Subject to the Plan

(a)

Shares Authorized.  The aggregate number of shares of Company Stock that may be issued under the Plan is 750,000 shares, subject to adjustment as described in subsection (e) below.

(b)

Limit on Stock Awards.  Within the aggregate limit described in subsection (a), the maximum number of shares of Company Stock that may be issued under the Plan pursuant to Stock Awards during the term of the Plan is 375,000  shares, subject to adjustment as described in subsection (e) below.

(c)

Source of Shares; Share Counting.  Shares issued under the Plan may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised, and if and to the extent that any Stock Awards are forfeited or terminated, or otherwise are not paid in full, the shares reserved for such Grants shall again be available for purposes of the Plan.

(d)

Individual Limits.  All Grants under the Plan shall be expressed in shares of Company Stock. The maximum number of shares of Company Stock with respect to which all Incentive Stock Option Grants may be made under the Plan to any individual during any calendar year shall be the lesser of any restriction imposed under Section 422 of the Code or 100,000 shares, subject to adjustment as described in subsection (e) below. The individual limits of this subsection (d) shall apply without regard to whether the Grants are to be paid in Company Stock or cash. All cash payments shall equal the Fair Market Value of the shares of Company Stock to which the cash payments relate. There shall be no restriction with respect to the number of shares of Company Stock subject to Non-Qualified Stock Option Grants made to any individual during any calendar year

(e)

Adjustments.  If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, or if the value of outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company's payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for issuance under the Plan, the maximum number of shares of Company Stock for which any individual may receive Grants in any year, the number of shares covered by outstanding Grants, the kind of shares issued and to be issued under the Plan, and the price per share or the applicable market value of such Grants may be appropriately adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding and conclusive.  To the extent that any Grant is subject to section 409A of the Code, or becomes subject to section 409A of the Code as a result of any adjustment made hereunder, such adjustment shall be made in compliance with section 409A of the Code.

6.

Eligibility for Participation

(a)

Eligible Persons.  All Employees, Consultants and Non-Employee Directors shall be eligible to participate in the Plan.

(b)

Selection of Participants.  The Committee shall select the Employees, Consultants and Non-Employee Directors to receive Grants and shall determine the number of shares of Company Stock subject to each Grant.

7.

Options

(a)

General Requirements.  The Committee may grant Options to an Employee or Non-Employee Director upon such terms and conditions as the Committee deems appropriate under this Section 7. The Committee shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees and Non-Employee Directors.

(b)

Type of Option, Price and Term

(i)

The Committee may grant Incentive Stock Options or Nonqualified Stock Options or any combination of the two, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees of the Company or its parents or subsidiaries, as defined in section 424 of the Code. Nonqualified Stock Options may be granted to Employees or Non-Employee Directors.

(ii)

The Exercise Price of Company Stock subject to an Option shall be determined by the Committee; provided, however, that the Exercise Price for an Option (including Incentive Stock Options or Nonqualified Stock Options) will be equal to, or greater than, the Fair Market Value of a share of Company Stock on the date the Option is granted and further provided that an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, unless the Exercise Price per share is not less than 110% of the Fair Market Value of the Company Stock on the date of grant

(iii)

The Committee shall determine the term of each Option, which shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary, as defined in section 424 of the Code, may not have a term that exceeds five years from the date of grant.

(c)

Exercisability of Options.

(i)

Options shall become exercisable in accordance with such terms and conditions as may be determined by the Committee and specified in the Grant Agreement. The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason.

(ii)

The Committee may provide in a Grant Agreement that the Participant may elect to exercise part or all of an Option before it otherwise has become exercisable. Any shares so purchased shall be restricted shares and shall be subject to a repurchase right in favor of the Company during a specified restriction period, with the repurchase price equal to the lesser of (A) the Exercise Price or (B) the Fair Market Value of such shares at the time of repurchase, or such other restrictions as the Committee deems appropriate.  Notwithstanding the foregoing, to the extent that an Option would otherwise be exempt from section 409A of the Code, the Committee may only include such a provision in a Grant Agreement for such an Option if the inclusion of such a provision will not cause that Option to become subject to section 409A of the Code.  

(iii)

Options granted to persons who are non-exempt employees under the Fair Labor Standards Act of 1938, as amended, may not be exercisable for at least six months after the date of grant (except that such Options may become exercisable, as determined by the Committee, upon the Participant's death, Disability or retirement, or upon a Change of Control or other circumstances permitted by applicable regulations).

(d)

Termination of Employment or Service.  Except for a Non-Qualified Option the Grant Agreement for which contains a specific provision that conflicts with any of the following (in which case the provisions in the Grant Agreement shall govern), upon termination of employment or the services of a Participant, an Option may only be exercised as follows:

(i)

In the event that a Participant ceases to be employed by, or provide service to, the Employer for any reason other than Disability, death, or termination for Cause, any Option which is otherwise exercisable by the Participant shall terminate unless exercised within one month after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Participant's Options that are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

(ii)

In the event the Participant ceases to be employed by, or provide service to, the Employer on account of a termination for Cause by the Employer, any Option held by the Participant shall terminate as of the date the Participant ceases to be employed by, or provide service to, the Employer. In addition, notwithstanding any other provisions of this Section 7, if the Committee determines that the Participant has engaged in conduct that constitutes Cause at any time while the Participant is employed by, or providing service to, the Employer or after the Participant's termination of employment or service, any Option held by the Participant shall immediately terminate and the Participant shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Participant for such shares. Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture.

(iii)

In the event the Participant ceases to be employed by, or provide service to, the Employer on account of the Participant's Disability, any Option which is otherwise exercisable by the Participant shall terminate unless exercised within one year after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Participant's Options which are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

(iv)

If the Participant dies while employed by, or providing service to, the Employer or while an Option remains outstanding under Section 7(d)(i) or 7(d)(iii) above (or within such other period of time as may be specified by the Committee), any Option that is otherwise exercisable by the Participant shall terminate unless exercised within one year after the date on which the Participant ceases to be employed by, or provide service to, the Employer (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Participant's Options that are not otherwise exercisable as of the date on which the Participant ceases to be employed by, or provide service to, the Employer shall terminate as of such date.

(e)

Exercise of Options.  Prior to the expiration of an Option, a Participant may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company. The Participant shall pay the Exercise Price for the Option (i) in cash, (ii) if permitted by the Committee, by delivering shares of Company Stock owned by the Participant and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation to ownership of shares of Company Stock having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (iv) by such other method as the Committee may approve. Shares of Company Stock used to exercise an Option shall have been held by the Participant for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. Payment for the shares pursuant to the Option, and any required withholding taxes, must be received by the time specified by the Committee depending on the type of payment being made, but in all cases prior to the issuance of the Company Stock.

(f)

Limits on Incentive Stock Options.  Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, as defined in section 424 of the Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary, as defined in section 424 of the Code.

8.

Stock Awards

(a)

General Requirements.  The Committee may issue shares of Company Stock to an Employee, Consultant or Non-Employee Director under a Stock Award, upon such terms and conditions as the Committee deems appropriate under this Section 8. Shares of Company Stock issued pursuant to Stock Awards may be issued for cash consideration or for no cash consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including restrictions based upon the achievement of specific performance goals. The Committee shall determine the number of shares of Company Stock to be issued pursuant to a Stock Award.

(b)

Requirement of Employment or Service.  The Committee shall determine in the Grant Agreement under what circumstances a Participant may retain Stock Awards after termination of the Participant's employment or service, and the circumstances under which Stock Awards may be forfeited.

(c)

Restrictions on Transfer.  While Stock Awards are subject to restrictions, a Participant may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except upon death as described in Section 12(a). Each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Participant shall be entitled to have the legend removed when all restrictions on such shares have lapsed. The Company may retain possession of any certificates for Stock Awards until all restrictions on such shares have lapsed.

(d)

Right to Vote and to Receive Dividends.  The Committee shall determine to what extent, and under what conditions, the Participant shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares during the restriction period.

9.

Qualified Performance-Based Compensation

(a)

Designation as Qualified Performance-Based Compensation.  The Committee may determine that Stock Awards granted to an Employee shall be considered "qualified performance-based compensation" under section 162(m) of the Code, in which case the provisions of this Section 9 shall apply to such Grants. The Committee may also grant Options under which the exercisability of the Options is subject to achievement of performance goals as described in this Section 9 or otherwise.

(b)

Performance Goals.  When Grants are made under this Section 9, the Committee shall establish in writing (i) the objective performance goals that must be met, (ii) the period during which performance will be measured, (iii) the maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the requirements of section 162(m) of the Code for "qualified performance-based compensation." The performance goals shall satisfy the requirements for "qualified performance-based compensation," including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the performance goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable, but may reduce the amount of compensation that is payable, pursuant to Grants identified by the Committee as "qualified performance-based compensation."

(c)

Criteria Used for Objective Performance Goals.  The Committee shall use objectively determinable performance goals based on one or more of the following criteria: stock price, earnings per share, price-earnings multiples, gross profit, net earnings, operating earnings, revenue, revenue growth, number of days sales outstanding in accounts receivable, number of days of cost of sales in inventory, productivity, margin, EBITDA (earnings before interest, taxes, depreciation and amortization), net capital employed, return on assets, shareholder return, return on equity, return on capital employed, growth in assets, unit volume, sales, cash flow, market share, relative performance to a comparison group designated by the Committee, debt reduction, market capitalization or strategic business criteria consisting of one or more objectives based on meeting specified R&D programs, new product releases, revenue goals, market penetration goals, customer growth, geographic business expansion goals, cost targets, quality improvements, cycle time reductions, manufacturing improvements and/or efficiencies, human resource programs, customer programs, goals relating to acquisitions or divestitures or goals relating to regulatory approvals. The performance goals may relate to one or more business units or the performance of the Company as a whole, or any combination of the foregoing. Performance goals need not be uniform as among Participants. Performance goals may be set on a pre tax or after tax basis, may be defined by absolute or relative measures, and may be valued on a growth or fixed basis.

(d)

Timing of Establishment of Goals.  The Committee shall establish the performance goals in writing either before the beginning of the performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of the performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code.

(e)

Certification of Results.  The Committee shall certify the performance results for the performance period specified in the Grant Agreement after the performance period ends. The Committee shall determine the amount, if any, to be paid pursuant to each Grant based on the achievement of the performance goals and the satisfaction of all other terms of the Grant Agreement.

(f)

Death, Disability or Other Circumstances.  The Committee may provide in the Grant Agreement that Grants under this Section 9 shall be payable, in whole or in part, in the event of the Participant's death or Disability, a Change of Control or under other circumstances consistent with the Treasury regulations and rulings under section 162(m) of the Code.

10.

Deferrals

The Committee may permit or require a Participant to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to the Participant in connection with any Grant. The Committee shall establish rules and procedures for any such deferrals, consistent with applicable requirements of section 409A of the Code.

11.

Withholding of Taxes

(a)

Required Withholding.  All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company may require that the Participant or other person receiving or exercising Grants pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants.

(b)

Election to Withhold Shares.  If the Committee so permits, a Participant may elect to satisfy the Company's tax withholding obligation with respect to Grants paid in Company Stock by having shares withheld, at the time such Grants become taxable, up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Committee.

12.

Transferability of Grants

(a)

Restrictions on Transfer.  Except as described in subsection (b) below, only the Participant may exercise rights under a Grant during the Participant's lifetime, and a Participant may not transfer those rights except by will or by the laws of descent and distribution. When a Participant dies, the personal representative or other person entitled to succeed to the rights of the Participant may exercise such rights. Any such successor must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Participant's will or under the applicable laws of descent and distribution.

(b)

Transfer of Nonqualified Stock Options to or for Family Members.  Notwithstanding the foregoing, the Committee may provide, in a Grant Agreement, that a Participant may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with the applicable securities laws, according to such terms as the Committee may determine; provided that the Participant receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer.

13.

Consequences of a Change of Control

In the event of a Change of Control, the Committee may take any one or more of the following actions with respect to any or all outstanding Grants, without the consent of any Participant: (i) the Committee may determine that outstanding Options shall be fully exercisable, and restrictions on outstanding Stock Awards shall lapse, as of the date of the Change of Control or at such other time or subject to specific conditions as the Committee determines, (ii) the Committee may require that Participants surrender their outstanding Options in exchange for one or more payments by the Company, in cash or Company Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Participant's unexercised Options  exceeds the Exercise Price, if any, and on such terms as the Committee determines, (iii) after giving Participants an opportunity to exercise their outstanding Options, the Committee may terminate any or all unexercised Options at such time as the Committee deems appropriate, (iv)  the Committee may determine that Grants that remain outstanding after the Change of Control shall be converted to similar grants of the surviving corporation (or a parent or subsidiary of the surviving corporation). Such acceleration, surrender, termination, settlement or assumption shall take place as of the date of the Change of Control or such other date as the Committee may specify.  Notwithstanding the foregoing, to the extent required to comply with section 409A of the Code, a Grant Agreement will include a definition of "Change of Control" that complies with and falls within the definition of "change in control event" set forth in section 409A of the Code and any Internal Revenue Service regulations or other guidance issued thereunder.

14.

Requirements for Issuance of Shares

No Company Stock shall be issued in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance of such Company Stock have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Participant hereunder on such Participant's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Committee shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. No Participant shall have any right as a shareholder with respect to Company Stock covered by a Grant until shares have been issued to the Participant.

15.

Amendment and Termination of the Plan

(a)

Amendment.  The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without approval of the shareholders of the Company if such approval is required in order to comply with the Code or applicable laws, or to comply with applicable stock exchange requirements. No amendment or termination of this Plan shall, without the consent of the Participant, materially impair any rights or obligations under any Grant previously made to the Participant under the Plan, unless such right has been reserved in the Plan or the Grant Agreement, or except as provided in Section 16(b) below. Notwithstanding anything in the Plan to the contrary, the Board may amend the Plan in such manner as it deems appropriate in the event of a change in applicable law or regulations.

(b)

Shareholder Approval for "Qualified Performance-Based Compensation."  If Grants are made under Section 9 above, the Plan must be reapproved by the Company's shareholders no later than the first shareholders meeting that occurs in the fifth year following the year in which the shareholders previously approved the provisions of Section 9, if additional Grants are to be made under Section 9 and if required by section 162(m) of the Code or the regulations thereunder.

(c)

Termination of Plan.  The Plan shall terminate on the day immediately preceding the tenth anniversary of its Effective Date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the shareholders. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant.

16.

Miscellaneous

(a)

Grants in Connection with Corporate Transactions and Otherwise.  Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other stock-based awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation. The terms and conditions of the Grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives, as determined by the Committee.

(b)

Compliance with Law.  The Plan, the exercise of Options and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that Incentive Stock Options comply with the applicable provisions of section 422 of the Code, that Grants of "qualified performance-based compensation" comply with the applicable provisions of section 162(m) of the Code and that, to the extent applicable, Grants comply with the requirements of section 409A of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Participants. The Committee may, in its sole discretion, agree to limit its authority under this Section.

(c)

Enforceability.  The Plan shall be binding upon and enforceable against the Company and its successors and assigns.

(d)

Funding of the Plan; Limitation on Rights.  This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. Nothing contained in the Plan and no action taken pursuant hereto shall create or be construed to create a fiduciary relationship between the Company and any Participant or any other person. No Participant or any other person shall under any circumstances acquire any property interest in any specific assets of the Company. To the extent that any person acquires a right to receive payment from the Company hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

(e)

Rights of Participants.  Nothing in this Plan shall entitle any Employee, Non-Employee Director or other person to any claim or right to receive a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employment or service of the Employer.

(f)

No Fractional Shares.  No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(g)

Employees Subject to Taxation Outside the United States.  With respect to Participants who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws.

(h)

Governing Law.  The validity, construction, interpretation and effect of the Plan and Grant Agreements issued under the Plan shall be governed and construed by and determined in accordance with the laws of the State of Nevada, without giving effect to the conflict of laws provisions thereof.ex10_1.htm

    
      

    

    Exhibit
      10.1

     

    NEITHER
      THIS NOTE NOR THE SHARES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
      OTHER
      APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
      LAWS.  NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON CONVERSION
      HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED
      OF
      EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT
      OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS
      OF
      THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES
      LAWS.

    

    PRIOR
      TO ANY REGISTRATION, TRANSFER OR EXCHANGE OF THIS NOTE, (I) THE LENDER SHALL
      PRESENT OR SURRENDER TO THE COMPANY THIS NOTE, DULY ENDORSED OR ACCOMPANIED
      BY A
      WRITTEN INSTRUCTION OF TRANSFER IN FORM SATISFACTORY TO THE COMPANY DULY
      EXECUTED BY SUCH LENDER, AND (II) THE LENDER SHALL PRESENT TO THE COMPANY AN
      OPINION OF COUNSEL THAT THE TRANSFER OR EXCHANGE OF THE NOTES IS BEING MADE
      IN
      RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
      ACT AND ANY OTHER APPLICABLE SECURITIES LAWS.

    

    PROMISSORY
      NOTE WITH WARRANTS

    

    
      	
              $50,000.00

            	
              Dated:
                September 19, 2007

            

    

    

    FOR
      VALUE
      RECEIVED, uVuMobile, Inc., a Delaware corporation (the “Company”), hereby
      promises to pay Jerry W. Bratton -  an individual and resident of the
      State of  Texas, with a mailing address of 139 S. Moore Rd,
      Coppell, TX 75019 or his or her assigns (the “Lender”) the principal amount
      of Fifty Thousand Dollars ($50,000.00), together with interest accrued thereon
      calculated from the date hereof in accordance with the provisions of this
      Note.

    

    Interest
      from the date hereof on the principal amount outstanding hereunder from time
      to
      time until maturity, and after the maturity hereof until paid, shall be payable
      at a rate of Twelve Percent (12%) per annum. Interest shall be calculated on
      a
      year of three hundred and sixty (360) days based upon the actual number of
      days
      elapsed.

    

    Except
      as
      otherwise described herein, principal together with all accrued and unpaid
      interest thereon shall be payable in a single installment thirty (30) days
      from
      the date of this Note (the “Maturity Date”). Principal and interest shall be
      paid in lawful money of the United States of America in immediately available
      funds at the address of the Lender as first set forth above or at such other
      place as the Lender may from time to time designate.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    As
      additional incentive to the Lender, the Company will issue to the Lender a
      warrant to purchase 100,000 shares of common stock at $.10 per share, which
      warrant will expire five years from the date of issue.  For purposes
      of this provision, the shares of common stock issuable upon exercise of the
      warrants will be issued as restricted shares with the appropriate restrictive
      legend(s) and shall have piggy-back registration rights to be included in the
      Company’s next registration statement filed with the Securities and Exchange
      Commission (other than a registration statement on Form S-4 or Form
      S-8).

    

    The
      unpaid principal balance of this Note may be prepaid in whole or in part at
      any
      time and from time to time without premium or penalty. Each prepayment amount
      with respect to this Note shall be applied first to the principal balance of
      this Note and then to the accrued and unpaid interest of this Note.

    

    In
      lieu
      of payment, the Lender shall have the right to convert the then outstanding
      principal amount of this Note into shares or units of the equity securities
      sold
      in any sale of its equity securities (“Qualified Strategic Financing”) at a per
      share sale price or unit sale price equal to the per share sale price or unit
      sale price of the Qualified Strategic Financing (the “Purchase Price”). Should
      Lender exercise this right to convert, then Lender will be awarded an additional
      warrant to purchase 50,000 shares of common stock at an exercise price of $.10
      per share. Each dollar of principal amount then outstanding under this Note
      shall constitute a dollar of Purchase Price for the Qualified Strategic
      Financing equity securities. At the time of conversion, the Company shall have
      the option of converting all accrued and unpaid interest on this Note on the
      same terms as the conversion of principal herein, or the Company may pay accrued
      and unpaid interest in cash at the time of conversion.

    

    In
      the
      event the Qualified Strategic Financing does not occur on or prior to the
      Maturity Date in lieu of the payment of principal together with all unpaid
      and
      accrued interest thereon by the Company on the Maturity Date, the Company will
      be allowed up to an additional 90 days to cure the default as described in
      the
      following paragraph. Should the default not be cured by the 90th day, or
      should the
      Company file for bankruptcy protection during the 90 days, the Lender will
      be
      immediately entitled to all rights under the Security Agreement (as hereinafter
      defined).

    

    Subject
      to the previous paragraph, failure to pay, when due, the principal, any interest
      or any other sum payable with respect to the Note, and continuance of the
      failure for five (5) business days after the date on which the principal,
      installment of interest or other sum is due (whether upon maturity hereof,
      upon
      any prepayment date, upon acceleration, or otherwise) shall constitute an event
      of default (“Event of Default”) with respect to this Note. Upon an Event of
      Default, the interest rate payable in respect of this Note shall increase from
      the date of the Event of Default until the earlier of (1) the date all
      outstanding amounts of this Note are paid in full and (2) the date on which
      such
      Event of Default shall be satisfied or cured, from Twelve Percent (12%) to
      Fourteen (14%) and for each day in default the Lender will receive additional
      $.10 warrants at the rate of .0333% per dollar lent.

    

    The
      Lender understands and agrees that the conversion of this Note into equity
      securities of the Company may require the execution of certain agreements (which
      shall be in form reasonably agreeable to the Lender) relating to the purchase
      and sale of such securities as well as registration, co-sale, and voting rights,
      if any, relating to such equity securities.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    If
      any
      payment on this Note shall be due on a Saturday, a Sunday, or a day which is
      a
      legal holiday, the payment shall be made without default on the next succeeding
      day which is a business day, but any interest-bearing portions of the payment
      shall continue to accrue interest until payment during the
      extension.

    

    The
      Company agrees to pay to the Lender and reimburse the Lender for any and all
      reasonable costs and expenses, including attorney’s fees and court costs, if
      any, incurred by the Lender in connection with the enforcement or collection
      hereof.  The Company waives presentment, protest and demand, notice of
      protest, notice of dishonor and nonpayment of this Note and expressly agrees
      that this Note or any payment hereunder may be extended from time to time
      without in any way affecting the liability of the Company
      hereunder.

    

    The
      rights and remedies of the Lender hereunder, shall be cumulative and concurrent
      and may be pursued singularly, successively or together at the sole discretion
      of the Lender, and may be exercised as often as occasion therefor shall occur,
      and the failure to exercise any such right or remedy shall in no event be
      construed as a waiver or release of the same or any other right or
      remedy.

    

    The
      Company hereby declares, represents, and warrants that the indebtedness
      evidenced hereby is made for the purpose of acquiring or carrying on a business,
      professional, or commercial activity and constitutes a strategic investment
      by
      the Lender in the Company.

    

    The
      Lender represents that he is an accredited investor as defined in Rule 501(a)
      of
      Regulation D promulgated under the Securities Act and is acquiring this Note
      for
      his or her own account as an investment and not with a view to the resale or
      distribution thereof.

    

    After
      all
      principal of, and accrued interest at any time owed on, this Note have been
      paid
      in full, or converted into the Company’s equity securities pursuant to the terms
      of this Note, this Note will be surrendered to the Company for cancellation
      and
      will not be reissued.

    

    Neither
      this Note nor the shares of common stock issuable upon conversion hereof have
      been registered under the Securities Act or any other applicable securities
      laws
      in reliance upon an exemption from the registration requirements of the
      Securities Act and such other securities laws.  Neither this Note nor
      the shares of common stock issuable upon conversion hereof may be sold, pledged,
      transferred, encumbered or otherwise disposed of except pursuant to an effective
      registration statement under the Securities Act or in a transaction which is
      exempt from registration under the provisions of the Securities Act and any
      other applicable securities laws.  Prior to any registration, transfer
      or exchange of this Note, (i) the Lender shall present or surrender to the
      Company this Note, duly endorsed or accompanied by a written instruction of
      transfer in form satisfactory to the Company duly executed by such Lender or
      by
      his attorney, duly authorized in writing, and (ii) the Lender shall present
      to
      the Company an opinion of counsel that the transfer or exchange of this Note
      is
      being made in reliance upon an exemption from the registration requirements
      of
      the Securities Act and any other applicable securities laws.  Any
      purported transfer of this Note or the shares of common stock issuable upon
      conversion hereof not in compliance with the provisions of this paragraph shall
      be null and void.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Subject
      to the immediately preceding paragraph, this Note may be assigned by the Lender
      or any subsequent lender at anytime or from time to time, provided, however,
      that without the prior written consent of the Company, this Note may not be
      assigned by the Lender: (a) during the three (3) month period following the
      date
      hereof; or (b) to any competitor of the Company. This Note shall inure to the
      benefit of and be enforceable by the Lender and the Lender’s successors and
      assigns and any other person to whom the Lender or any subsequent lender may
      grant an interest in the Company’s obligations hereunder, and shall be binding
      and enforceable against the Company and the Company’s successors and assigns.
      Prior to any sale, assignment, transfer or negotiation of this Note by the
      Lender, the Lender shall notify the Company of such proposed sale, assignment,
      transfer or negotiation at the Company’s address shown above, or at such other
      address as the Company may designate by written notice to the Lender and shall
      comply with the requirements set forth in the immediately preceding paragraph.
      Upon completion of such sale, assignment, transfer or negotiation, the
      subsequent lender shall become a Lender for all purposes hereunder and shall
      be
      entitled to future payments of principal and interest and other distributions
      under this Note, provided that the right to acquire shares or units of equity
      securities of the Company pursuant hereto shall terminate.

    

    This
      Note
      shall be governed by and construed in accordance with the domestic laws of
      the
      State of Georgia, without giving effect to any choice of law or conflict of
      law
      provision or rule (whether of the State of Georgia or any other jurisdiction)
      that would cause the application of the laws of any jurisdiction other than
      the
      State of Georgia. Notwithstanding any other provisions of this Note or any
      other
      instrument or document executed in connection therewith, it is expressly agreed
      and understood that the Company does not intend or expect to pay, nor does
      the
      Lender intend or expect to charge, accept or collect any interest which, when
      added to any other charge upon the principal, shall be in excess of the highest
      lawful rate allowable under the laws of the State of Georgia. Should
      acceleration, prepayment or any other charges upon the principal or any portion
      thereof result in the computation or earning of interest in excess of the
      highest lawful rate allowable under the laws of the State of Georgia, any and
      all such excess is hereby waived and shall be credited to the outstanding
      principal balance or returned to the Company.

    

    The
      Company’s obligations under this Notes are secured by liens on certain assets of
      the Company as specified in that certain Security Agreement of even dated
      herewith (the “Security Agreement”) among the Company, the Holder and the other
      holder(s) of convertible promissory notes named therein.

    

    

    [SIGNATURES
      ON NEXT PAGE]

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned have duly executed this Note, or have caused
      this Note to be duly executed on their behalf, as of the day and year first
      hereinabove set forth.

    

    

    
      	 	
              UVUMOBILE,
                INC.,

            
	 	
              a
                Delaware corporation

            
	 	 
	 	 
	 	 
	 	
              By:

            	
              /s/
                William J. Loughman

            
	 	 	
              Name:  William
                J. Loughman

            
	 	 	
              Title:    Interim
                Chief Executive Officer

            
	 	 
	 	 
	 	
              Accepted: 
                Jerry W. Bratton

            
	 	 
	 	 
	 	
              By:

            	
              /s/
                Jerry W. Bratton

            
	 	
              Name:

            	Jerry
              W. Bratton

    

     

     

    5

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