Document:

Exhibit
10.1

    

    interCLICK,
INC.

     

    AMENDED
AND RESTATED

    

    2007
INCENTIVE STOCK AND AWARD PLAN

     

    1. Purpose of the
Plan.

     

    This 2007
Incentive Stock and Award Plan (the “Plan”) is intended as
an incentive, to retain in the employ of and as directors, officers,
consultants, advisors and employees to InterCLICK, Inc., a Delaware corporation
(the “Company”), and any
Subsidiary of the Company, within the meaning of Section 424(f) of the United
States Internal Revenue Code of 1986, as amended (the “Code”), persons of
training, experience and ability, to attract new directors, officers,
consultants, advisors and employees whose services are considered valuable, to
encourage the sense of proprietorship and to stimulate the active interest of
such persons in the development and financial success of the Company and its
Subsidiaries.

     

    It is
further intended that certain options granted pursuant to the Plan shall
constitute incentive stock options within the meaning of Section 422 of the Code
(the “Incentive
Options”) while certain other options granted pursuant to the Plan shall
be nonqualified stock options (the “Nonqualified
Options”). Incentive Options and Nonqualified Options are hereinafter
referred to collectively as “Options.”

     

    The
Company intends that the Plan meet the requirements of Rule 16b-3 (“Rule 16b-3”)
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
that transactions of the type specified in subparagraphs (c) to (f) inclusive of
Rule 16b-3 by officers and directors of the Company pursuant to the Plan will be
exempt from the operation of Section 16(b) of the Exchange Act. Further, the
Plan is intended to satisfy the performance-based compensation exception to the
limitation on the Company’s tax deductions imposed by Section 162(m) of the Code
with respect to those Options for which qualification for such exception is
intended. In all cases, the terms, provisions, conditions and limitations of the
Plan shall be construed and interpreted consistent with the Company’s intent as
stated in this Section 1.

     

    2. Administration of
the Plan.

     

    The Board
of Directors of the Company (the “Board”) shall appoint
and maintain as administrator of the Plan a Committee (the “Committee”)
consisting of two or more directors who are (i) “Independent Directors” (as such
term is defined under the rules of the NASDAQ Stock Market), (ii) “Non-Employee
Directors” (as such term is defined in Rule 16b-3) and (iii) “Outside Directors”
(as such term is defined in Section 162(m) of the Code), which shall serve at
the pleasure of the Board. The Committee, subject to Sections 3, 5 and 6 hereof,
shall have full power and authority to designate recipients of Options and
restricted stock (“Restricted Stock”)
and to determine the terms and conditions of the respective Option and
Restricted Stock agreements (which need not be identical) and to interpret the
provisions and supervise the administration of the Plan. The Committee shall
have the authority, without limitation, to designate which Options granted under
the Plan shall be Incentive Options and which shall be Nonqualified Options. To
the extent any Option does not qualify as an Incentive Option, it shall
constitute a separate Nonqualified Option.

     

    Subject
to the provisions of the Plan, the Committee shall interpret the Plan and all
Options and Restricted Stock granted under the Plan, shall make such rules as it
deems necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defects or supply any omission or reconcile any inconsistency
in the Plan or in any Options or Restricted Stock granted under the Plan in the
manner and to the extent that the Committee deems desirable to carry into effect
the Plan or any Options or Restricted Stock. The act or determination of a
majority of the Committee shall be the act or determination of the Committee and
any decision reduced to writing and signed by all of the members of the
Committee shall be fully effective as if it had been made by a majority of the
Committee at a meeting duly held for such purpose. Subject to the provisions of
the Plan, any action taken or determination made by the Committee pursuant to
this and the other Sections of the Plan shall be conclusive on all
parties.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    In the
event that for any reason the Committee is unable to act or if the Committee at
the time of any grant, award or other acquisition under the Plan does not
consist of two or more Non-Employee Directors, or if there shall be no such
Committee, or if the Board otherwise determines to administer the Plan, then the
Plan shall be administered by the Board, and references herein to the Committee
(except in the proviso to this sentence) shall be deemed to be references to the
Board, and any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3;
provided, however, that grants
to the Company’s Chief Executive Officer or to any of the Company’s other four
most highly compensated officers that are intended to qualify as
performance-based compensation under Section 162(m) of the Code may only be
granted by the Committee.

     

    

    3. Designation of
Optionees and Grantees.

     

    The
persons eligible for participation in the Plan as recipients of Options (the
“Optionees”) or
Restricted Stock (the “Grantees” and
together with Optionees, the “Participants”) shall
include directors, officers and employees of, and consultants and advisors to,
the Company or any Subsidiary; provided that Incentive Options may only be
granted to employees of the Company and any Subsidiary. In selecting
Participants, and in determining the number of shares to be covered by each
Option or award of Restricted Stock granted to Participants, the Committee may
consider any factors it deems relevant, including, without limitation, the
office or position held by the Participant or the Participant’s relationship to
the Company, the Participant’s degree of responsibility for and contribution to
the growth and success of the Company or any Subsidiary, the Participant’s
length of service, promotions and potential. A Participant who has been granted
an Option or Restricted Stock hereunder may be granted an additional Option or
Options, or Restricted Stock if the Committee shall so determine.

     

    In the
absence of any date specified for grant, the Committee’s grant of Options or
award of Restricted Stock shall be deemed to have been made effective on the
first business day of each March, June, September or December of any calendar
year, or on such other pre-determined dates as maybe set by the Committee (the
“Pre-Determined Grant
Dates”). Notwithstanding the foregoing, the Committee may grant Options
or award restricted Stock to any employee, officer, director or consultant to
the Company as an inducement to such person, in consideration for such person to
enter into any agreement or to provide to the Company, for prior services
rendered, or for any other reason determined by the Committee for award, in its
sole discretion other than on a Pre-Determined Grant Date.

     

    4. Stock Reserved for
the Plan.

     

    Subject
to adjustment as provided in Section 8 hereof, a total of 4,512,500shares of the
Company’s common stock, par value $0.001 per share (the “Stock”), shall be
subject to the Plan. The maximum number of shares of Stock that may be subject
to Options shall conform to any requirements applicable to performance-based
compensation under Section 162(m) of the Code, if qualification as
performance-based compensation under Section 162(m) of the Code is intended. The
shares of Stock subject to the Plan shall consist of unissued shares, treasury
shares or previously issued shares held by any Subsidiary of the Company, and
such amount of shares of Stock shall be and is hereby reserved for such purpose.
Any of such shares of Stock that may remain unsold and that are not subject to
outstanding Options at the termination of the Plan shall cease to be reserved
for the purposes of the Plan, but until termination of the Plan the Company
shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. Should any Option or Restricted Stock expire or be
canceled prior to its exercise or vesting in full or should the number of shares
of Stock to be delivered upon the exercise or vesting in full of any Option or
Restricted Stock be reduced for any reason, the shares of Stock theretofore
subject to such Option or Restricted Stock may be subject to future Options or
Restricted Stock under the Plan, except where such reissuance is inconsistent
with the provisions of Section 162(m) of the Code where qualification as
performance-based compensation under Section 162(m) of the Code is
intended.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5. Terms and Conditions
of Options.

     

    Options
granted under the Plan shall be subject to the following conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable:

     

    (a) Option
Price. The purchase price
of each share of Stock purchasable under an Incentive Option shall be determined
by the Committee at the time of grant, but shall not be less than 100% of the
Fair Market Value (as defined below) of such share of Stock on the date the
Option is granted; provided, however, that with respect to an Optionee who,
at the time such Incentive Option is granted, owns (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or of any Subsidiary, the purchase price per
share of Stock shall be at least 110% of the Fair Market Value per share of
Stock on the date of grant. The purchase price of each share of Stock
purchasable under a Nonqualified Option shall not be less than 100% of the Fair
Market Value of such share of Stock on the date the Option is granted. The
exercise price for each Option shall be subject to adjustment as provided in
Section 8 below. “Fair Market
Value” means the closing
price on the final trading day immediately prior to the grant of the Stock on
the principal securities exchange on which shares of Stock are listed (if the
shares of Stock are so listed), or on the NASDAQ Stock Market or OTC Bulletin
Board (if the shares of Stock are regularly quoted on the NASDAQ Stock Market or
OTC Bulletin Board, as the case may be), or, if not so listed, the mean between
the closing bid and asked prices of publicly traded shares of Stock in the over
the counter market, or, if such bid and asked prices shall not be available, as
reported by any nationally recognized quotation service selected by the Company,
or as determined by the Committee in a manner consistent with the provisions of
the Code. Anything in this Section 5(a) to the contrary notwithstanding, in no
event shall the purchase price of a share of Stock be less than the minimum
price permitted under the rules and policies of any national securities exchange
on which the shares of Stock are listed.

     

    (b) Option
Term. The term of each
Option shall be fixed by the Committee, but no Option shall be exercisable more
than ten years after the date such Option is granted and in the case of an
Incentive Option granted to an Optionee who, at the time such Incentive Option
is granted, owns (within the meaning of Section 424(d) of the Code) more than
10% of the total combined voting power of all classes of stock of the Company or
of any Subsidiary, no such Incentive Option shall be exercisable more than five
years after the date such Incentive Option is granted.

     

    (c) Exercisability. Subject to Section 5(j) hereof,
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at the time of grant;
provided, however, that in the absence of any Option
vesting periods designated by the Committee at the time of grant, Options shall
vest and become exercisable as to one-third of the total number of shares
subject to the Option on each of the first, second and third anniversaries of
the date of grant; and provided further that no Options shall be exercisable
until such time as any vesting limitation required by Section 16 of the Exchange
Act, and related rules, shall be satisfied if such limitation shall be required
for continued validity of the exemption provided under Rule
16b-3(d)(3).

     

    Upon the
occurrence of a “Change in Control” (as hereinafter defined), the Committee may
accelerate the vesting and exercisability of outstanding Options, in whole or in
part, as determined by the Committee in its sole discretion. In its sole
discretion, the Committee may also determine that, upon the occurrence of a
Change in Control, each outstanding Option shall terminate within a specified
number of days after notice to the Optionee thereunder, and each such Optionee
shall receive, with respect to each share of Company Stock subject to such
Option, an amount equal to the excess of the Fair Market Value of such shares
immediately prior to such Change in Control over the exercise price per share of
such Option; such amount shall be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or a
combination thereof, as the Committee shall determine in its sole
discretion.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    For
purposes of the Plan, unless otherwise defined in an employment agreement
between the Company and the relevant Optionee, a Change in Control shall be
deemed to have occurred if:

     

    (i) a tender offer (or series of related
offers) shall be made and consummated for the ownership of 50% or more of the
outstanding voting securities of the Company, unless as a result of such tender
offer more than 50% of the outstanding voting securities of the surviving or
resulting corporation shall be owned in the aggregate by the stockholders of the
Company (as of the time immediately prior to the commencement of such offer),
any employee benefit plan of the Company or its Subsidiaries, and their
affiliates;

     

    (ii) the Company shall be merged or
consolidated with another corporation, unless as a result of such merger or
consolidation more than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the
stockholders of the Company (as of the time immediately prior to such
transaction), any employee benefit plan of the Company or its Subsidiaries, and
their affiliates;

     

    (iii) the Company shall sell substantially
all of its assets to another corporation that is not wholly owned by the
Company, unless as a result of such sale more than 50% of such assets shall be
owned in the aggregate by the stockholders of the Company (as of the time
immediately prior to such transaction), any employee benefit plan of the Company
or its Subsidiaries and their affiliates; or

     

    (iv) a Person (as defined below) shall
acquire 50% or more of the outstanding voting securities of the Company (whether
directly, indirectly, beneficially or of record), unless as a result of such
acquisition more than 50% of the outstanding voting securities of the surviving
or resulting corporation shall be owned in the aggregate by the stockholders of
the Company (as of the time immediately prior to the first acquisition of such
securities by such Person), any employee benefit plan of the Company or its
Subsidiaries, and their affiliates.

     

    Notwithstanding
the foregoing, if Change of Control is defined in an employment agreement
between the Company and the relevant Optionee, then, with respect to such
Optionee, Change of Control shall have the meaning ascribed to it in such
employment agreement.

     

    For
purposes of this Section 5(c), ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act. In
addition, for such purposes, “Person” shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; provided, however, that a
Person shall not include (A) the Company or any of its Subsidiaries; (B) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Subsidiaries; (C) an underwriter temporarily holding
securities pursuant to an offering of such securities; or (D) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the
Company.

     

    (d) Method of
Exercise. Options to the
extent then exercisable may be exercised in whole or in part at any time during
the option period, by giving written notice to the Company specifying the number
of shares of Stock to be purchased, accompanied by payment in full of the
purchase price, in cash, or by check or such other instrument as may be
acceptable to the Committee. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part may be made at the
election of the Optionee (i) in the form of Stock owned by the Optionee (based
on the Fair Market Value of the Stock which is not the subject of any pledge or
security interest, (ii) in the form of shares of Stock withheld by the Company
from the shares of Stock otherwise to be received with such withheld shares of
Stock having a Fair Market Value equal to the exercise price of the Option, or
(iii) by a combination of the foregoing, such Fair Market Value determined by
applying the principles set forth in Section 5(a), provided that the combined
value of all cash and cash equivalents and the Fair Market Value of any shares
surrendered to the Company is at least equal to such exercise price and except
with respect to (ii) above, such method of payment will not cause a
disqualifying disposition of all or a portion of the Stock received upon
exercise of an Incentive Option. An Optionee shall have the right to dividends
and other rights of a stockholder with respect to shares of Stock purchased upon
exercise of an Option at such time as the Optionee (i) has given written notice
of exercise and has paid in full for such shares, and (ii) has satisfied such
conditions that may be imposed by the Company with respect to the withholding of
taxes.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    e) Transfer of
Options.

    

    (i)           No
Incentive Option granted under this Plan shall be assignable or transferable by
the grantee except by will or by the laws of descent and distribution, and
during the lifetime of the grantee, each ISO shall be exercisable only by him,
his guardian or legal representative.

    

    (ii)           Except
for Incentive Options, all Options are transferable subject to compliance with
applicable securities laws.  Provided, however, if
the Company’s Stock is registered under Section 12 of the Exchange Act, the
Stock shall not be sold, assigned or transferred by the grantee until at least
six months elapse from the date of the grant thereof.

     

    (f) Termination
by Death. Unless otherwise
determined by the Committee, if any Optionee’s employment with or service to the
Company or any Subsidiary terminates by reason of death, the Option may
thereafter be exercised, to the extent then exercisable (or on such accelerated
basis as the Committee shall determine at or after grant), by the legal
representative of the estate or by the legatee of the Optionee under the will of
the Optionee, for a period of one (1) year after the date of such death (or, if
later, such time as the Option may be exercised pursuant to Section 14(d)
hereof) or until the expiration of the stated term of such Option as provided
under the Plan, whichever period is shorter.

     

    (g) Termination
by Reason of Disability.
Unless otherwise determined by the Committee, if any Optionee’s employment with
or service to the Company or any Subsidiary terminates by reason of Disability
(as defined below), then any Option held by such Optionee may thereafter be
exercised, to the extent it was exercisable at the time of termination due to
Disability (or on such accelerated basis as the Committee shall determine at or
after grant), but may not be exercised after ninety (90) days after the date of
such termination of employment or service (or, if later, such time as the Option
may be exercised pursuant to Section 14(d) hereof) or the expiration of the
stated term of such Option, whichever period is shorter; provided, however, that, if the Optionee dies within
such ninety (90) day period, any unexercised Option held by such Optionee shall
thereafter be exercisable to the extent to which it was exercisable at the time
of death for a period of one (1) year after the date of such death (or, if
later, such time as the Option may be exercised pursuant to Section 14(d)
hereof) or for the stated term of such Option, whichever period is shorter.
“Disability” shall mean an Optionee’s total and permanent disability;
provided, that if Disability is defined in an
employment agreement between the Company and the relevant Optionee, then, with
respect to such Optionee, Disability shall have the meaning ascribed to it in
such employment agreement

     

     (h) Termination
by Reason of Retirement.
Unless otherwise determined by the Committee, if any Optionee’s employment with
or service to the Company or any Subsidiary terminates by reason of Normal or
Early Retirement (as such terms are defined below), any Option held by such
Optionee may thereafter be exercised to the extent it was exercisable at the
time of such Retirement (or on such accelerated basis as the Committee shall
determine at or after grant), but may not be exercised after ninety (90) days
after the date of such termination of employment or service (or, if later, such
time as the Option may be exercised pursuant to Section 14(d) hereof) or the
expiration of the stated term of such Option, whichever date is earlier;
provided, however, that, if the Optionee dies within
such ninety (90) day period, any unexercised Option held by such Optionee shall
thereafter be exercisable, to the extent to which it was exercisable at the time
of death, for a period of one (1) year after the date of such death (or, if
later, such time as the Option may be exercised pursuant to Section 14(d)
hereof) or for the stated term of such Option, whichever period is
shorter.

     

    For
purposes of this paragraph (h), “Normal Retirement”
shall mean retirement from active employment with the Company or any Subsidiary
on or after the normal retirement date specified in the applicable Company or
Subsidiary pension plan or if no such pension plan, age 65, and “Early Retirement”
shall mean retirement from active employment with the Company or any Subsidiary
pursuant to the early retirement provisions of the applicable Company or
Subsidiary pension plan or if no such pension plan, age 55.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (i) Other
Terminations. Unless
otherwise determined by the Committee upon grant, if any Optionee’s employment
with or service to the Company or any Subsidiary is terminated by such Optionee
for any reason other than death, Disability, Normal or Early Retirement or Good
Reason (as defined below), the Option shall thereupon terminate, except that the
portion of any Option that was exercisable on the date of such termination of
employment or service may be exercised for the lesser of ninety (90) days after
the date of termination (or, if later, such time as the Option may be exercised
pursuant to Section 14(d) hereof) or the balance of such Option’s term, which
ever period is shorter. The transfer of an Optionee from the employ of or
service to the Company to the employ of or service to a Subsidiary, or vice
versa, or from one Subsidiary to another, shall not be deemed to constitute a
termination of employment or service for purposes of the
Plan.

     

    (i) In the event that the Optionee’s
employment or service with the Company or any Subsidiary is terminated by the
Company or such Subsidiary for “cause” any unexercised portion of any Option
shall immediately terminate in its entirety. For purposes hereof, unless
otherwise defined in an employment agreement between the Company and the
relevant Optionee, “Cause” shall exist upon a good-faith determination by the
Board, following a hearing before the Board at which an Optionee was represented
by counsel and given an opportunity to be heard, that such Optionee has been
accused of fraud, dishonesty or act detrimental to the interests of the Company
or any Subsidiary of Company or that such Optionee has been accused of or
convicted of an act of willful and material embezzlement or fraud against the
Company or of a felony under any state or federal statute; provided, however, that it is specifically understood
that “Cause” shall not include any act of commission or omission in the
good-faith exercise of such Optionee’s business judgment as a director, officer
or employee of the Company, as the case may be, or upon the advice of counsel to
the Company. Notwithstanding the foregoing, if Cause is defined in an employment
agreement between the Company and the relevant Optionee, then, with respect to
such Optionee, Cause shall have the meaning ascribed to it in such employment
agreement.

     

    (ii) In the event that an Optionee is
removed as a director, officer or employee by the Company at any time other than
for “Cause” or resigns as a director, officer or employee for “Good Reason” the
Option granted to such Optionee may be exercised by the Optionee, to the extent
the Option was exercisable on the date such Optionee ceases to be a director,
officer or employee. Such Option may be exercised at any time within one (1)
year after the date the Optionee ceases to be a director, officer or employee
(or, if later, such time as the Option may be exercised pursuant to Section
14(d) hereof), or the date on which the Option otherwise expires by its terms;
which ever period is shorter, at which time the Option shall terminate;
provided, however, if the Optionee dies before the
Options terminate and are no longer exercisable, the terms and provisions of
Section 5(f) shall control. For purposes of this Section 5(i), and unless
otherwise defined in an employment agreement between the Company and the
relevant Optionee, Good Reason shall exist upon the occurrence of the
following:

     

    
      	 
      	
              (A)

            	
              the
      assignment to Optionee of any duties inconsistent with the position in the
      Company that Optionee held immediately prior to the
      assignment;

            

    

     

    
      	 
      	
              (B)

            	
              a
      Change of Control resulting in a significant adverse alteration in the
      status or conditions of Optionee’s participation with the Company or other
      nature of Optionee’s responsibilities from those in effect prior to such
      Change of Control, including any significant alteration in Optionee’s
      responsibilities immediately prior to such Change in Control;
      and

            

    

     

    
      	 
      	
              (C)

            	
              the
      failure by the Company to continue to provide Optionee with benefits
      substantially similar to those enjoyed by Optionee prior to such
      failure.

            

    

     

    Notwithstanding
the foregoing, if Good Reason is defined in an employment agreement between the
Company and the relevant Optionee, then, with respect to such Optionee, Good
Reason shall have the meaning ascribed to it in such employment
agreement.

     

    (j) Limit on
Value of Incentive Option.
The aggregate Fair Market Value, determined as of the date the Incentive Option
is granted, of Stock for which Incentive Options are exercisable for the first
time by any Optionee during any calendar year under the Plan (and/or any other
stock option plans of the Company or any Subsidiary) shall not exceed
$100,000.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6. Terms and Conditions
of Restricted Stock.

     

    Restricted
Stock may be granted under this Plan aside from, or in association with, any
other award and shall be subject to the following conditions and shall contain
such additional terms and conditions (including provisions relating to the
acceleration of vesting of Restricted Stock upon a Change of Control), not
inconsistent with the terms of the Plan, as the Committee shall deem
desirable:

     

    (a) Grantee
rights. A Grantee shall
have no rights to an award of Restricted Stock unless and until Grantee accepts
the award within the period prescribed by the Committee and, if the Committee
shall deem desirable, makes payment to the Company in cash, or by check or such
other instrument as may be acceptable to the Committee. After acceptance and
issuance of a certificate or certificates, as provided for below, the Grantee
shall have the rights of a stockholder with respect to Restricted Stock subject
to the non-transferability and forfeiture restrictions described in Section 6(d)
below.

     

    (b) Issuance of
Certificates. The Company
shall issue in the Grantee’s name a certificate or certificates for the shares
of Common Stock associated with the award promptly after the Grantee accepts
such award.

     

    (c) Delivery of
Certificates. Unless
otherwise provided, any certificate or certificates issued evidencing shares of
Restricted Stock shall not be delivered to the Grantee until such shares are
free of any restrictions specified by the Committee at the time of
grant.

     

    (d) Forfeitability,
Non-transferability of Restricted Stock. Shares of Restricted Stock are
forfeitable until the terms of the Restricted Stock grant have been satisfied.
Shares of Restricted Stock are not transferable until the date on which the
Committee has specified such restrictions have lapsed. Unless otherwise provided
by the Committee at or after grant, distributions in the form of dividends or
otherwise of additional shares or property in respect of shares of Restricted
Stock shall be subject to the same restrictions as such shares of Restricted
Stock.

     

    (e) Change of
Control. Upon the
occurrence of a Change in Control as defined in Section 5(c), the Committee may
accelerate the vesting of outstanding Restricted Stock, in whole or in part, as
determined by the Committee, in its sole discretion.

     

    (f) Termination
of Employment. Unless
otherwise determined by the Committee at or after grant, in the event the
Grantee ceases to be an employee or otherwise associated with the Company for
any other reason, all shares of Restricted Stock theretofore awarded to him
which are still subject to restrictions shall be forfeited and the Company shall
have the right to complete the blank stock power. The Committee may provide (on
or after grant) that restrictions or forfeiture conditions relating to shares of
Restricted Stock will be waived in whole or in part in the event of termination
resulting from specified causes, and the Committee may in other cases waive in
whole or in part restrictions or forfeiture conditions relating to Restricted
Stock.

     

    7. Term of
Plan.

     

    No Option
or award of Restricted Stock shall be granted pursuant to the Plan on or after
the date which is ten years from the effective date of the Plan, but Options and
awards of Restricted Stock theretofore granted may extend beyond that
date.

     

    8. Capital Change of
the Company.

     

    In the
event of any merger, reorganization, consolidation, recapitalization, stock
dividend, or other change in corporate structure affecting the Stock, the
Committee shall make an appropriate and equitable adjustment in the number and
kind of shares reserved for issuance under the Plan and in the number and option
price of shares subject to outstanding Options granted under the Plan, to the
end that after such event each Optionee’s proportionate interest shall be
maintained (to the extent possible) as immediately before the occurrence of such
event. The Committee shall, to the extent feasible, make such other adjustments
as may be required under the tax laws so that any Incentive Options previously
granted shall not be deemed modified within the meaning of Section 424(h) of the
Code. Appropriate adjustments shall also be made in the case of outstanding
Restricted Stock granted under the Plan.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
adjustments described above will be made only to the extent consistent with
continued qualification of the Option under Section 422 of the Code (in the case
of an Incentive Option) and Section 409A of the Code.

     

    9. Purchase for
Investment/Conditions.

     

    Unless
the Options and shares covered by the Plan have been registered under the
Securities Act of 1933, as amended (the “Securities Act”), or
the Company has determined that such registration is unnecessary, each person
exercising or receiving Options or Restricted Stock under the Plan may be
required by the Company to give a representation in writing that he is acquiring
the securities for his own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof. The Committee may
impose any additional or further restrictions on awards of Options or Restricted
Stock as shall be determined by the Committee at the time of award.

     

    10. Taxes.

     

    (a) The Company may make such provisions as
it may deem appropriate, consistent with applicable law, in connection with any
Options or Restricted Stock granted under the Plan with respect to the
withholding of any taxes (including income or employment taxes) or any other tax
matters.

     

    (b) If any Grantee, in connection with the
acquisition of Restricted Stock, makes the election permitted under Section
83(b) of the Code (that is, an election to include in gross income in the year
of transfer the amounts specified in Section 83(b)), such Grantee shall notify
the Company of the election with the Internal Revenue Service pursuant to
regulations issued under the authority of Code Section
83(b).

     

    (c) If any Grantee shall make any
disposition of shares of Stock issued pursuant to the exercise of an Incentive
Option under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), such Grantee shall notify the Company of
such disposition within ten (10) days hereof.

     

    11. Effective Date of
Plan.

     

    The Plan
shall be effective on November 13, 2007; provided, however, that if, and only
if, certain options are intended to qualify as Incentive Stock Options, the Plan
must subsequently be approved by majority vote of the Company’s stockholders no
later than November 13, 2008, and further, that in the event certain Option
grants hereunder are intended to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code, the requirements as to
stockholder approval set forth in Section 162(m) of the Code are
satisfied.

     

    12. Amendment and
Termination.

     

    The Board
may amend, suspend, or terminate the Plan, except that no amendment shall be
made that would impair the rights of any Participant under any Option or
Restricted Stock theretofore granted without the Participant’s consent, and
except that no amendment shall be made which, without the approval of the
stockholders of the Company would:

     

    (a) materially increase the number of
shares that may be issued under the Plan, except as is provided in
Section 8;

     

    (b) materially increase the benefits
accruing to the Participants under the Plan;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c) materially modify the requirements as
to eligibility for participation in the Plan;

     

    (d) decrease the exercise price of an
Incentive Option to less than 100% of the Fair Market Value per share of Stock
on the date of grant thereof or the exercise price of a Nonqualified Option to
less than 100% of the Fair Market Value per share of Stock on the date of grant
thereof; or

     

    (e) extend the term of any Option beyond
that provided for in Section 5(b).

     

    (f) except as otherwise provided in
Sections 5(d) and 8 hereof, reduce the exercise price of outstanding Options or
effect repricing through cancellations and re-grants of new
Options.

     

    Subject
to the forgoing, the Committee may amend the terms of any Option theretofore
granted, prospectively or retrospectively, but no such amendment shall impair
the rights of any Optionee without the Optionee’s consent.

     

    It is the
intention of the Board that the Plan comply strictly with the provisions of
Section 409A of the Code and Treasury Regulations and other Internal Revenue
Service guidance promulgated thereunder (the “Section 409A Rules”)
and the Committee shall exercise its discretion in granting awards hereunder
(and the terms of such awards), accordingly. The Plan and any grant of an award
hereunder may be amended from time to time (without, in the case of an award,
the consent of the Participant) as may be necessary or appropriate to comply
with the Section 409A Rules.

     

    13. Government
Regulations.

     

    The Plan,
and the grant and exercise of Options or Restricted Stock hereunder, and the
obligation of the Company to sell and deliver shares under such Options and
Restricted Stock shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies, national securities
exchanges and interdealer quotation systems as may be required.

     

    14. General
Provisions.

     

    (a) Certificates. All certificates for shares of Stock
delivered under the Plan shall 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, or other
securities commission having jurisdiction, any applicable Federal or state
securities law, any stock exchange or interdealer quotation system upon which
the Stock is then listed or traded and the Committee may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions.

     

    (b) Employment
Matters. Neither the
adoption of the Plan nor any grant or award under the Plan shall confer upon any
Participant who is an employee of the Company or any Subsidiary any right to
continued employment or, in the case of a Participant who is a director,
continued service as a director, with the Company or a Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or any
Subsidiary to terminate the employment of any of its employees, the service of
any of its directors or the retention of any of its consultants or advisors at
any time.

     

    (c) Limitation
of Liability. No member of
the Committee, or any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (d) Registration
of Stock. Notwithstanding
any other provision in the Plan, no Option may be exercised unless and until the
Stock to be issued upon the exercise thereof has been registered under the
Securities Act and applicable state securities laws, or are, in the opinion of
counsel to the Company, exempt from such registration in the United States. The
Company shall not be under any obligation to register under applicable federal
or state securities laws any Stock to be issued upon the exercise of an Option
granted hereunder in order to permit the exercise of an Option and the issuance
and sale of the Stock subject to such Option, although the Company may in its
sole discretion register such Stock at such time as the Company shall determine.
If the Company chooses to comply with such an exemption from registration, the
Stock issued under the Plan may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of the Stock
represented thereby, and the Committee may also give appropriate stop transfer
instructions with respect to such Stock to the Company’s transfer
agent.

     

    15. Non-Uniform
Determinations.

     

    The
Committee’s determinations under the Plan, including, without limitation, (i)
the determination of the Participants to receive awards, (ii) the form, amount
and timing of such awards, (iii) the terms and provisions of such awards and
(ii) the agreements evidencing the same, need not be uniform and may be made by
it selectively among Participants who receive, or who are eligible to receive,
awards under the Plan, whether or not such Participants are similarly
situated.

     

    16. Governing
Law.

     

    The
validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with the internal laws of
the State of Delaware, without giving effect to principles of conflicts of laws,
and applicable federal law.Unassociated Document

    EMPLOYMENT
AGREEMENT

     

    EMPLOYMENT AGREEMENT (the
"Agreement") dated as of August 13, 2010 between POWER EFFICIENCY CORPORATION,
a Delaware corporation (the "Corporation"), with principal executive offices
located at 3960 Howard Hughes Parkway, Suite 460, Las Vegas, NV 89169; and
Steven Z. Strasser (the "Executive").

     

    W
I T N E SS E T H:

     

    WHEREAS, the Corporation
desires to employ Executive as the Corporation's Chairman of the Board and Chief
Executive Officer to engage in such activities and to render such services under
the terms and conditions hereof and has authorized and approved the execution of
this Agreement; and

     

    WHEREAS, Executive desires to
be employed by the Corporation under the terms and conditions hereinafter
provided;

     

    NOW, THEREFORE, in
consideration of the mutual covenants and undertakings herein contained, the
parties agree as follows:

     

    1. Employment,
Duties and Acceptance.

     

    1.1 Services.  The
Corporation hereby employs the Executive for the Term (as defined in Section 2
hereof), to render services with respect to the business and affairs of the
Corporation in the office referenced in the recitals hereof and, in connection
therewith, to perform such duties as directed by the Board of Directors of the
Corporation (the "Board") from time to time, in its reasonable discretion, and
to perform such other duties as shall be consistent with the responsibilities of
such office (collectively the "Services").  Executive shall use his
best efforts, skills and abilities to promote the interests of the Corporation
and its subsidiaries.

     

    1.2 Acceptance.  Executive
hereby accepts such employment and agrees to render the Services.

     

    1.3 Representations of the
Executive.  The Executive represents and warrants to the
Corporation that his execution and delivery of this Agreement, his performance
of the Services hereunder and the observance of his other obligations
contemplated hereby will not (i) violate any provisions of or require the
consent or approval of any party to any agreement, letter of intent or other
document to which he is a party or (ii) violate or conflict with any arbitration
award, judgment or decree or other restriction of any kind to or by which he is
subject or bound.

     

    2. Term of
Employment.

     

    The term
of Executive's employment under this Agreement (the "Term") shall commence on
June 1, 2010 (the "Commencement Date") and shall terminate on June 1, 2015,
unless sooner terminated pursuant to Section 9 of this Agreement.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    3. Base
Salary and Expense Reimbursement.

     

    3.1 Base Salary.  During
the Term, as full compensation for the Services, the Corporation agrees to pay
Executive a minimum base salary ("Base Salary") at the annual rate of $300,000
for each year from June 1, 2010 to June 1, 2015.  The Base Salary is
subject to withholding and other applicable taxes, and is payable during the
term of this Agreement in accordance with the Corporation's customary payment
practices, but not less frequently than monthly.

     

    3.2 Stock Options.  The
parties hereby agree that the Corporation shall on the date hereof grant the
Executive stock options (the "Options") to purchase up to four million
(4,000,000) shares of Common Stock, at a per share exercise price of $0.18. The
Options shall be exercisable for a period of five (5) years commencing on the
date hereof for incentive stock options, and ten (10) years commencing on the
date hereof for non-qualified stock options, and shall be allocated between
incentive stock options and non-qualified stock options as provided in the
option agreement executed pursuant to this section 3.2 and shall vest in
substantially equal quarterly installments, beginning September 1,
2010.  To evidence the grant of options under this Section 3.2, the
Corporation and the Executive will execute and deliver an option agreement in
the form currently approved by the Board for use under the Corporation's 2000
Stock Option and Restricted Stock Plan.

     

    3.3 Business Expense
Reimbursement.  Upon submission to, and approval by, an officer
of the Corporation designated by the Board of Directors of the Corporation of a
statement of expenses, reports, vouchers or other supporting information, which
approval shall be granted or withheld based on the Corporation's policies in
effect at such time, the Corporation shall promptly reimburse the Executive for
all reasonable business expenses actually incurred or paid by him during the
Term thereof in the performance of the Services, including, but not limited to,
expenses for entertainment, travel and similar items.

     

    4. Bonuses;
Change in Control.

     

    4.1 Bonus.  The
Executive shall be eligible to receive bonuses in such amount(s) as the
Corporation's Compensation Committee shall determine in its absolute discretion.
If there is no Compensation Committee, such determinations shall be made by the
entire Board of Directors.

     

    4.2 Change in
Control.  For purposes of this Agreement, a "Change in Control"
with respect to the Corporation shall be deemed to have taken place on the
occurrence  of one or more of the following events:

     

    (i) Any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") acquires or becomes a
"beneficial owner" (as defined in Rule 13d-3 or any successor rule under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing 50% or more of the combined voting power of the Corporation's then
outstanding securities entitled to vote generally in the election of directors
("Voting Securities"), provided, however, that the following shall not
constitute a Change in Control pursuant to this Section 4.2:

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (A)   any
acquisition or beneficial ownership by the Corporation or a
subsidiary;

     

    (B)   any
acquisition or beneficial ownership by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or one or more of its
subsidiaries;

     

    (C)   any
acquisition or beneficial ownership by any corporation  with respect
to which, immediately following such acquisition, more than 50% of both the
combined voting power of the Corporation's then outstanding Voting Securities
and shares of the Corporation's Common Stock (the "Shares) is then beneficially
owned, directly or indirectly, by all or substantially all of the persons who
beneficially owned Voting Securities and Shares of the Corporation immediately
prior to such acquisitions in substantially the same proportions as their
ownership of such Voting Securities and Shares, as the case may be, immediately
prior to such acquisitions; or

     

    (D)   any
acquisition or beneficial ownership by Summit Energy Ventures, LLC, or any
person who is an affiliate thereof on the date of this Agreement.

     

    (ii) A
majority of the members of the Board shall not be Continuing
Directors.  "Continuing Directors" shall mean: (A) individuals who, on
the date hereof, are directors of the Corporation, (B) individuals elected as
directors of the Corporation subsequent to the date hereof for whose election
proxies shall have been solicited by the Board or (C) any individual elected or
appointed by the Board to fill vacancies on the Board caused by death or
resignation (but not by removal) or to fill newly-created
directorships;

     

    (iii) Approval
by the stockholders of the Corporation of a reorganization, merger or
consolidation of the Corporation or a statutory exchange of outstanding Voting
Securities of the Corporation, unless, immediately following such
reorganization, merger, consolidation or exchange, all or substantially all of
the persons who were the beneficial owners, respectively, of Voting Securities
and Shares of the Corporation immediately prior to such reorganization, merger,
consolidation or exchange beneficially own, directly or indirectly, more than
50% of, respectively, the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors and the then
outstanding shares of common stock, as the case may be, of the corporation
resulting from such reorganization, merger, consolidation or exchange in
substantially the same proportions as their ownership, immediately prior to such
reorganization, merger, consolidation or exchange, of the Voting Securities and
Shares of the Corporation, as the case may be; or

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (iv) Approval
by the stockholders of the Corporation of (A) a complete liquidation or
dissolution of the Corporation or (B) the sale or other disposition of all or
substantially all of the assets of the Corporation (in one or a series of
transactions), other than to a corporation with respect to which, immediately
following such sale or other disposition, more than 50% of, respectively, the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and the then
outstanding shares of common stock of such corporation is then beneficially
owned, directly or indirectly, by all or substantially all of the persons who
were the beneficial owners, respectively, of the Voting Securities and Shares of
the Corporation immediately prior to such sale or other disposition in
substantially the same proportions as their ownership, immediately prior to such
sale or other disposition, of the Voting Securities and Shares of the
Corporation, as the case may be.

     

    Upon the
occurrence of a Change in Control, the Executive shall then be entitled to
receive a bonus, payable immediately, equal to 2.99 times the sum of (x) the
Executive's then current Base Salary and (y) the most recent annual bonus paid
to the Executive in accordance with Section 4.1 above, and all of the
Executive's granted but unexercised stock options shall immediately vest in full
and be exercisable.

     

    5. Severance.

     

    5.1 Termination for Good
Reason.  In the event that Executive's employment hereunder
shall be terminated by the Executive for Good Reason (as defined in Section 9.5
hereof) at any time prior to the end of the Term, the Executive shall be
entitled to receive from the Corporation, in addition to any Base Salary earned
to the date of termination, a severance payment in an amount equal to 2.99 times
the sum of (x) Executive's current Base Salary and (y) the most recent annual
bonus paid to the Executive in accordance with Section 4.1
above.  Furthermore, all of the Executive's granted but unexercised
stock options shall immediately vest in full. In the event of such termination,
the amounts due hereunder shall be payable without offset or defense or any
obligation of the Executive to mitigate damages.

     

    6. Additional
Benefits.

     

    6.1 In General.  In
addition to the compensation, bonuses, expenses and other benefits to be paid
under Sections 3, 4 and 5 hereof, Executive will be entitled to all rights and
benefits for which he shall be eligible under any insurance, health and medical,
incentive, bonus, profit-sharing, pension or other extra
compensation or "fringe" benefit plan of the Corporation or any of its
subsidiaries now existing or hereafter adopted for the benefit of the executives
or employees generally of the Corporation.  The provisions of this
Agreement which incorporate employee benefit packages shall change as and when
such employee benefit packages change.

     

    7. Vacation.

     

    The
Executive shall be entitled each year during the Term of this Agreement to a
vacation period of four (4) weeks, during which all salary, compensation,
benefits and other rights to which the Executive is entitled to hereunder shall
be provided in full.  Such vacation may be taken in the Executive's
discretion, at such time or times as are not inconsistent with the reasonable
business needs of the Corporation.  Unused vacation days may be
accrued up to a maximum of eight (8) weeks.  Unused vacation days in
excess of eight (8) weeks shall be forfeited.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    8. Insurability; Right to
Insure.

     

    Executive
agrees that the Corporation shall have the right during the Term to insure the
life of Executive by a policy or policies of insurance in such amount or amounts
as it may deem necessary or desirable, and the Corporation shall be the
beneficiary of any such policy or policies and shall pay the premiums or other
costs thereof.  The Corporation shall have the right, from time to
time, to modify any such policy or policies of insurance or to take out new
insurance on the life of Executive.  Executive agrees, upon request,
at any time or times prior to the commencement of or during the Term to sign and
deliver any and all documents and to submit to any physical or other reasonable
examinations which may be required in connection with any such policy or
policies of insurance or modifications thereof.

     

    9. Termination.

     

    9.1 Death.  If Executive
dies during the Term of this Agreement, Executive's employment hereunder shall
terminate upon his death and all obligations of the Corporation hereunder shall
terminate on such date, except that Executive's estate or his designated
beneficiary shall be entitled to payment of any unpaid accrued Base Salary
through the date of his death.  In addition, any accrued and unpaid
Bonus shall be paid in accordance with Section 4 hereof.

     

    9.2 Disability.  Subject
to the provisions of Section 6.1, if Executive shall be unable to perform a
significant part of his duties and responsibilities in connection with the
conduct of the business and affairs of the Corporation and such inability lasts
for (i) a period of at least one hundred eighty (180) consecutive days, or (ii)
periods aggregating at least two hundred seventy (270) days during any three
hundred sixty-five (365) consecutive days, by reason of Executive's physical or
mental disability, whether by reason of injury, illness or similar cause,
Executive shall be deemed disabled, and the Corporation any time thereafter may
terminate Executive's employment hereunder by reason of the
disability.  Upon delivery to Executive of such notice, all
obligations of the Corporation hereunder shall terminate, except that Executive
shall be entitled to (i) payment of any unpaid accrued Base Salary through the
date of termination and (ii) health insurance paid for by the Corporation as
though the Executive's employment continued through June 1, 2015.  In
addition, any accrued and unpaid Bonus shall be paid in accordance with Section
4 hereof.  The obligations of Executive under Section 10 hereof shall
continue notwithstanding termination of Executive's employment pursuant to this
Section 9.2.

     

    9.3 Termination For
Cause.  The Corporation may at any time during the Term,
without any prior notice, terminate this Agreement and discharge Executive for
Cause, whereupon the Corporation's obligation to pay compensation or other
amounts payable hereunder to or for the benefit of Executive shall terminate on
the date of such discharge. Furthermore, the Executive shall be entitled to all
options which have vested as of the termination date and all options which have
not vested shall be cancelled. As used herein the term "Cause" shall
mean:  (i) a willful and material breach by Executive of the terms of
this Agreement; (ii) willful violation of specific and lawful written direction
from the Board of Directors of the Corporation; provided such direction is not
inconsistent with the Executive's duties and responsibilities under the office
the Executive is holding at the time of the directive; (iii) conviction of the
Executive of a felony by a federal or state court of competent
jurisdiction.  In the case of (i) or (ii) above, the Corporation's
Board of Directors must deliver to the Executive a notice of Executive's breach
of the Agreement, and Executive shall have thirty (30) days to cure such breach
("Cure Period"). If the Executive fails to take corrective action during this
Cure Period, then the Board of Directors may terminate the Executive for cause.
The obligations of the Executive under Section 10 shall continue notwithstanding
termination of the Executive's employment pursuant to this Section
9.3.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    9.4 Termination by
Executive.  The Executive shall have the right to terminate
this Agreement for Good Reason, as hereinafter defined.  Good Reason
shall mean any of the following:  (i) the assignment to the
Executive of duties inconsistent with the Executive's position, duties,
responsibilities, titles or offices as described herein; (ii) any material
reduction by the Corporation of the Executive's duties and responsibilities as
Chief Executive Officer; or (iii) any material breach by the Corporation of
this Agreement, including a lack of complete payment of Executive's compensation
and benefits as stated throughout this Agreement.  In the event the
Executive terminates this Agreement for Good Reason as defined above, the
Corporation shall pay the Executive upon termination, the amount required
pursuant to Section 5.1.  In addition, all options granted to the
Executive shall immediately vest and be exercisable by the Executive. The
obligations of the Executive under Section 10 hereof shall continue
notwithstanding termination of the Executive's employment pursuant to this
Section 9.4.

     

    In the
event the Executive terminates this Agreement without Good Reason the Executive
shall be entitled to accrued base salary through the date of termination but
shall otherwise be treated as if this Agreement had been terminated pursuant to
Section 9.3.

     

    10. Protection
of Confidential Information.

     

    In view
of the fact that Executive's work for the Corporation will bring him into close
contact with confidential information and plans for future developments,
Executive agrees to the following:

     

    10.1 Secrecy.  To keep
secret and retain in the strictest confidence all confidential matters of the
Corporation, including, without limitation, trade "know how" and trade secrets,
customer lists, pricing policies, marketing plans, technical processes,
formulae, inventions and research projects, and other business affairs of the
Corporation, learned by him heretofore or hereafter, and not to disclose them to
anyone inside or outside of the Corporation, except in the course of performing
the Services hereunder or with the express written consent of the Chief
Executive Officer or Board of Directors of the Corporation and except to the
extent such information is already known to the general public.

     

    10.2 Return Memoranda,
etc.  To deliver promptly to the Corporation on termination of
his employment, or at any other time as the Chief Executive Officer or the Board
of Directors of the Corporation may so request, all memoranda, notes, records,
reports, manuals, drawings, blueprints and other documents (and all copies
thereof) relating to the Corporation's business and all property associated
therewith, which he may then possess or have under his control.

     

    
      
         

      

      
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    10.3 Covenants.

     

    10.3.1                      Non-competition.  Executive
agrees that during the Term, regardless of the reason for termination of his
employment or this Agreement, for a period of one (1) year thereafter, he will
not, as a principal, agent, employee, employer, consultant, stockholder,
investor, director or co-partner of any person, firm, corporation or business
entity other than the Corporation, or in any individual or representative
capacity whatsoever, directly or indirectly, without the express prior written
consent of the Corporation:

     

    (i)           engage
or participate in any business whose products or services are directly
competitive with that of the Corporation, which business is the manufacture and
sale of motor-related energy saving equipment, and which conducts or solicits
business, or transacts with supplier or customers located within the United
States;

     

    (ii)           aid
or counsel any other person, firm, corporation or business entity to do any of
the above;

     

    (iii)           become
employed by a firm, corporation, partnership or joint venture which competes
with the business of the Corporation within the United States; or

     

    (iv)           approach,
solicit business from, or otherwise do business or deal with any customer of the
Corporation in connection with any product or service competitive to any
provided by the Corporation.

     

    10.3.2                      Anti-Raiding.  Executive
agrees that during the Term, regardless of the reason for termination of his
employment or this Agreement, for a period of one (1) year thereafter, he will
not, as a principal, agent, employee, employer, consultant, director or partner
of any person, firm, corporation or business entity other than the Corporation,
or in any individual or representative capacity whatsoever, directly or
indirectly, without the prior express written consent of the Corporation
approach, counsel or attempt to induce any person who is then in the employ of
the Corporation to leave the employ of the Corporation or employ or attempt to
employ any such person or persons who at any time during the preceding six
months was in the employ of the Corporation.

     

    10.3.3                      Executive's
Acknowledgements.  Executive acknowledges (i) that his position
with the Corporation requires the performance of services which are special,
unique, and extraordinary in character and places him in a position of
confidence and trust with the customers and employees of the Corporation,
through which, among other things, he shall obtain knowledge of the
Corporation's "technical information" and "know-how" and become acquainted with
its customers, in which matters the Corporation has substantial proprietary
interests; (ii) that the restrictive covenants set forth above are necessary in
order to protect and maintain such proprietary interests and the other
legitimate business interests of the Corporation; and (iii) that the Corporation
would not have entered into this Agreement unless such covenants were included
herein.

     

    
      
         

      

      
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    Executive
also acknowledges that the business of the Corporation presently will extend
throughout the United States and overseas, and that he will personally supervise
and engage in such business on behalf of Corporation and, accordingly, it is
reasonable that the restrictive covenants set forth above are not more limited
as to geographic area then is set forth therein.  Executive also
represents to the Corporation that the enforcement of such covenants will not
prevent Executive from earning a livelihood or impose an undue hardship on the
Executive.

     

    10.4 Severability.  If
any of the provisions of this Section 10, or any part thereof, is hereinafter
construed to be invalid or unenforceable, the same shall not affect the
remainder of such provision or provisions, which shall be given full effect,
without regard to the invalid portions.  If any of the provisions of
this Section 10, or any part thereof, is held to be unenforceable because of the
duration of such provision, the area covered thereby or the type of conduct
restricted therein, the parties agree that the court making such determination
shall have the power to modify the duration, geographic area and/or other terms
of such provision and, as so modified, said provision(s) shall then be
enforceable.  In the event that the courts of any one or more
jurisdictions shall hold such provisions wholly or partially unenforceable by
reason of the scope thereof or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the Corporation's
right to the relief provided for herein in the courts of any other jurisdictions
as to breaches or threatened breaches of such provisions in such other
jurisdictions, the above provisions as they relate to each jurisdiction being,
for this purpose, severable into diverse and independent covenants.

     

    10.5 Injunctive
Relief.  Executive acknowledges and agrees that, because of the
unique and extraordinary nature of his services, any breach or threatened breach
of the provisions of Sections 10.1, 10.2, or 10.3 hereof will cause irreparable
injury and incalculable harm to the Corporation, and the Corporation shall,
accordingly, be entitled to injunctive and other equitable relief for such
breach or threatened breach and that resort by the Corporation to such
injunctive or other equitable relief shall not be deemed to waive or to limit in
any respect any right or remedy which the Corporation may have with respect to
such breach or threatened breach.  The Corporation and Executive agree
that any such action for injunctive or equitable relief shall be heard in a
state or federal court situate in Nevada and each of the parties hereto, hereby
agrees to accept service of process by registered mail and to otherwise consent
to the jurisdiction of such courts.

     

    10.6 Expenses of Enforcement of
Covenants.  In the event that any action, suit or proceeding at
law or in equity is brought to enforce the covenants contained in
Sections 10.1, 10.2, or 10.3 hereof or to obtain money damages for the
breach thereof, the party prevailing in any such action, suit or other
proceeding shall be entitled upon demand, to reimbursement from the other party
for all expenses (including, without limitation, reasonable attorneys' fees and
disbursements) incurred in connection therewith.

     

    
      
         

      

      
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    10.7 Separate
Agreement.  The provisions of this Section 10 shall be
construed as an agreement on the part of the Executive independent of any other
part of this Agreement or any other agreement, and the existence of any claim or
cause of action of the Executive against the Corporation, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Corporation of the provisions of this Section 10.

     

    11. Indemnification.

     

    The
Corporation shall provide the Executive (including his heirs, executors and
administrators) with coverage under a standard directors and officers liability
insurance policy at the Corporation's expense to the same extent as provided for
any other director, officer or trustee of the Corporation.  In
addition, the Corporation shall indemnify the Executive (and his heirs,
executors and administrators) to the fullest extent permitted under the law of
its state of incorporation against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which the Executive may be involved by reason of his having been a
director or officer of the Corporation or any subsidiary
thereof.  Such expenses and liabilities shall include, but not be
limited to, judgments, court costs and attorneys' fees and the cost of
reasonable settlements, such settlements to be approved by the Board if such
action is brought against the Executive in his capacity as a director or officer
of the Corporation or any subsidiary thereof.  The Corporation shall,
upon the request of the Executive, advance to the Executive such amounts as
necessary to cover expenses, including without limitation legal fees and
expenses, incurred by the Executive in connection with any suit or proceeding in
which the Executive may be involved by reason of his being or having been a
director or officer of the Corporation or of any subsidiary
thereof.  Such indemnity and advance of expenses, however, shall not
extend to matters as to which the Executive is finally adjudged to be liable for
willful misconduct in the performance of his duties.

     

    12. Arbitration.

     

    Except
with respect to any proceeding brought under Section 10 hereof, any controversy,
claim, or dispute between the parties, directly or indirectly, concerning this
Employment Agreement or the breach hereof, or the subject matter hereof,
including questions concerning the scope and applicability of this arbitration
clause, shall be finally settled by arbitration in Clark County, Nevada pursuant
to the rules then applying of the American Arbitration
Association.  The arbitrators shall consist of one representative
selected by the Corporation, one representative selected by the Executive and
one representative selected by the first two arbitrators.  The parties
agree to expedite the arbitration proceeding in every way, so that the
arbitration proceeding shall be commenced within thirty (30) days after request
therefore is made, and shall continue thereafter, without interruption, and that
the decision of the arbitrators shall be handed down within thirty (30) days
after the hearings in the arbitration proceedings are closed.  The
arbitrators shall have the right and authority to assess the cost of the
arbitration proceedings and to determine how their decision or determination as
to each issue or matter in dispute may be implemented or
enforced.  The decision in writing of any two of the arbitrators shall
be binding and conclusive on all of the parties to this
Agreement.  Should either the Corporation or the Executive fail to
appoint an arbitrator as required by this Section 12 within thirty (30) days
after receiving written notice from the other party to do so, the arbitrator
appointed by the other party shall act for all of the parties and his decision
in writing shall be binding and conclusive on all of the parties to this
Employment Agreement.  Any decision or award of the arbitrators shall
be final and conclusive on the parties to this Agreement; judgment upon such
decision or award may be entered in any competent Federal or state court located
in the United States of America; and the application may be made to such court
for confirmation of such decision or award for any order of enforcement and for
any other legal remedies that may be necessary to effectuate such decision or
award.

     

    
      
         

      

      
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    13. Notices.

     

    All
notices, requests, consents and other communications required or permitted to be
given hereunder, shall be in writing and shall be deemed to have been duly given
if delivered personally or sent by prepaid telegram, telecopy or mailed
first-class, postage prepaid, by registered or certified mail (notices sent by
telegram or mailed shall be deemed to have been given on the date sent), to the
parties at their respective addresses hereinabove set forth or to such other
address as either party shall designate by notice in writing to the other in
accordance herewith.

     

    14. General.

     

    14.1 Governing Law.  This
Agreement shall be governed by and construed and enforced in accordance with the
local laws of the State of Nevada, without regard to principles of conflict of
laws.

     

    14.2 Captions.  The
section headings contained herein are for reference purposes only and shall not
in any way affect the meaning or interpretation of this Agreement.

     

    14.3 Entire
Agreement.  This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes in their entirety all prior agreements, arrangements and
understandings, written or oral, relating to the subject matter
hereof.  No representation, promise or inducement has been made by
either party that is not embodied in this Agreement, and neither party shall be
bound by or liable for any alleged representation, promise or inducement not so
set forth.

     

    14.4 Severability.  If
any of the provisions of this Agreement shall be unlawful, void, or for any
reason, unenforceable, such provision shall be deemed severable from, and shall
in no way affect the validity or enforceability of, the remaining portions of
this Agreement.

     

    14.5 Waiver.  The waiver
by any party hereto of a breach of any provision of this Agreement by any other
party shall not operate or be construed as a waiver of any subsequent breach of
the same provision or any other provision hereof.

     

    14.6 Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same Agreement.

     

    
      
         

      

      
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    14.7 Assignability.  This
Agreement, and Executive's rights and obligations hereunder, may not be assigned
by Executive.  The Corporation may assign its rights, together with
its obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets; in any event
the rights and obligations of the Corporation hereunder shall be binding on its
successors or assigns, whether by merger, consolidation or acquisition of all or
substantially all of its business or assets.  This Agreement shall
inure to the benefit of, and be binding upon, the Executive and his executors,
administrators, heirs and legal representatives.

     

    14.8 Amendment.  This
Agreement may be amended, modified, superseded, cancelled, renewed or extended
and the terms or covenants hereof may be waived, only by a written instrument
executed by both of the parties hereto, or in the case of a waiver, by the party
waiving compliance.  No superseding instrument, amendment,
modification, cancellation, renewal or extension hereof shall require the
consent or approval of any person other than the parties hereto.  The
failure of either party at any time or times to require performance of any
provision hereof shall in no matter affect the right at a later time to enforce
the same.  No waiver by either party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.

     

     [Signatures
On Following Page]

     

    
      
         

      

      
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    IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above
written.

     

    
      	
              POWER
      EFFICIENCY CORPORATION

            
	 
      	 
      
	 
      	 
      
	
              By:

            	 
      
	 
      	
              John
      (BJ) Lackland, Chief Financial Officer

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	 
      	 
      	 
      
	 
      	
              Steven
      Z. Strasser

            

    

     

     

    
      
         

      

      
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