Document:

form8k031708ex10-1.htm

    
      

      

    

    EMPLOYMENT
AGREEMENT

    

    

    This
Employment Agreement (this  "Agreement") is made and entered into as
of the 12th day of
March, 2008 (the "Effective Date"), by and between Cistera Networks, Inc., a
Nevada corporation (the "Company"), and Richard P. McDowell, a resident of
Plano, Texas ("Employee").

     

    BACKGROUND:

     

    WHEREAS,
the Company is engaged in the business of designing, developing, marketing,
selling and distributing computer hardware and software solutions for
integrating voice, video and data over internal and external computer based
networks;

     

    WHEREAS,
the Company has, in its business, developed or acquired and will continue to
develop and acquire commercially valuable technical and non-technical
information, the safeguarding of which by holding the same secret and
confidential, is necessary and the Company must be protected from divulgence by
Employee, either directly or indirectly, of any such information;
and

     

    WHEREAS,
Employee acknowledges that the remuneration, receipt of confidential
information, and special and unique professional growth opportunities available
through employment with the Company constitute fair and adequate consideration
for entry into this Agreement, and he understands that he need not accept or
continue employment with the Company; that he has freely chosen to enter into
the terms of this Agreement, and that compliance with the terms of this
Agreement are conditions of his employment or continued employment with the
Company.

     

    AGREEMENTS:

     

    NOW,
THEREFORE, in consideration of the mutual covenants and acknowledgments of the
parties which are incorporated and made a part hereof, and in further
onsideration of and as part of the terms and conditions of the employment or
continued employment of Employee, it is hereby agreed as follows:

     

     Appointment and Term.
The Company hereby employs Employee, and Employee hereby accepts employment with
the Company upon the terms and conditions, and for the consideration set forth
in this Agreement. The term of this Agreement, and Employee's employment
hereunder shall commence on the Effective Date, and, unless sooner terminated
pursuant to the terms of Section 8 of this Agreement, shall continue for an
initial period of one (1) year (the "Initial Period").  Subject to the
provisions of Section 7, following the completion of the Initial Period,
Employee's employment under this Agreement shall be "at will".

     

     Duties and
Responsibilities.  Employee will serve as the Company's Chief
Financial Officer, and as such will perform those duties which are normal and
customary in the industry for like positions and will be responsible for other
similar areas which relate thereto for the Company's subsidiaries and
affiliates.

     

    
      
         

      

      
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    Employee
will report directly to the Company's Chief Executive Officer or his designee.
Employee will perform full-time service on an exclusive basis for the Company
and its affiliates.  Employee shall strictly comply with all Company
policies and procedures in place from time to time and shall conduct himself in
a manner befitting of an employee of the Company.  Employee's
principal base of employment shall initially be in Dallas, Texas, and may change
from time to time.  If asked to move by the Company, the Company will
pay all closing costs associated with the move including, but not limited to,
real estate fees and commissions but excluding pre-paid items. Employee
acknowledges that Company is required to actually utilize Employee's services
hereunder, but that Company's sole obligation shall be to pay Employee the
compensation and provide Employee the benefits set forth herein, subject to the
terms and conditions of this agreement. For all purposes, Employee shall be an
employee of only the Company, and only this Agreement shall control and govern
any and all relationships between Employee and the Company and its divisions,
subsidiaries and other affiliated entities.

     

     Employment
Compensation.  The Company shall pay or provide to Employee,
during the period in which this Agreement is in effect, the following
compensation in consideration of Employee's performance of his obligations
hereunder other than the performance of his obligations under Section
5:

     

     Salary. As
compensation for Employee's services hereunder, Company shall pay Employee, and
Employee shall accept, an initial annual base salary of One
Hundred  Forty-five Thousand US Dollars  ($145,000.00 US),
less all  appropriate  deductions
and  withholdings,  payable in accordance with the schedule
Company may adopt or alter from time to time in its discretion, but in any event
not less frequently than monthly.  The Company shall review the
performance of Employee's duties hereunder on at least an annual
basis.  In addition, the Executive Management Committee of the Company
may increase Employee's annual base salary at such times as it, in its sole
discretion, deems appropriate.

     

     Bonuses.  In
addition to annual base salary, the Company may enter into supplemental
agreements or memorandums in writing with Employee for the award and payment to
Employee of additional compensation or bonuses upon such terms and conditions as
Company shall deem to be in its business interest. In the event of the execution
by Company of any such agreements or memorandums, Employee's right to additional
compensation or bonuses shall be determined in accordance with the applicable
provisions thereof, subject, however, to the provisions of this
sub-Section.  In the absence of any such supplemental agreements or
memorandums, Company shall not be obligated to pay Employee any additional
compensation or bonus whatsoever, irrespective of the payment of additional
compensation or bonus in any past or succeeding year or the payment or
additional compensation or bonus to other executives in any year, but may do so
in its sole discretion.

     

     Incentive
Compensation.  From time to time, Company may offer phantom
stock, stock appreciation rights, stock options or other equity interests in
Company and its affiliates and/or other forms of long-term upon such terms and
conditions as Company shall determine to be in its business
interests.

     

    
      
         

      

      
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     Reimbursements.  The
Company recognizes that in the course of performing Employee's duties hereunder,
Employee will necessarily incur expenses in connection with Employee's duties
for such items as entertainment, traveling, hotels, and similar
items.  Employee shall be entitled to have paid or be reimbursed all
reasonable expenses incurred by Employee in the performance of Employee's duties
hereunder,  subject to such  requirements,
procedures,  and rules as may be established by Company for
similarly  situated employees from time to time in its
discretion,  including,  without limitation,
the  requirement of submission of appropriate  receipts for
such expenses prior to reimbursement.

     

     Employee Benefits.
Employee shall be entitled to participate in the employee benefit plans that the
Company makes available to employees in the same or similar positions from time
to time, if any.  Employee's participation in such employee benefit
plans shall be in accordance with the terms and conditions thereof and the
Company's policies and practices in effect from time to time.

     

    The
foregoing compensation shall constitute the entire consideration to be paid by
the Company to Employee for all services that Employee performs for the Company
and its divisions, subsidiaries and other affiliated entities hereunder other
than Employee's performance of his obligations under Section 5.

     

     Conflicts of
Interest.  Employee shall devote his time, attention, energies
and business efforts to his duties as an employee of the Company and to the
business of the Company.  During the period in which this Agreement is
in effect, without the prior written consent of the Company, Employee (a) shall
not engage, directly or indirectly, in any other business
activity,  (b) shall not act as a proprietor, partner, director,
officer, employee, consultant, advisor, agent, representative or any other
capacity  (except as a beneficial owner of less than 5% of the
outstanding  voting  securities  of an entity
whose voting securities  are traded  publicly)" of any
entity other than the Company and its divisions, subsidiaries and other
affiliated  entities, regardless of whether such activity is for gain,
profit or other pecuniary advantage, and ( c) shall not allow or cause the
Company to participate in any transaction  with Employee, any of
his  relatives,  or any entity in which  Employee
or any of his relatives has an interest.

     

     Competitive
Activities.

     

     Competition.  As
an independent covenant, Employee shall not directly or indirectly engage, and
shall not directly or indirectly become involved with (except as a beneficial
owner of less than 5% of the outstanding voting securities of an entity whose
voting securities are traded publicly) any entity that directly or indirectly
engages, in any business in which the Company or any of its divisions,
subsidiaries or other affiliated entities is engaged.  This covenant
shall be effective during the Term and the Post Termination Period (as defined
below).

     

    
      
         

      

      
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     Business
Opportunities.  As an independent covenant, Employee shall not
directly or indirectly divert, take, solicit or accept or attempt to divert or
take, whether on his own or on behalf of any other party, and shall not directly
or indirectly become involved with  (except as a beneficial owner of
less than 5% of the outstanding voting securities of an entity whose voting
securities are traded publicly) any entity that, whether on its own behalf or on
behalf of any other party, directly or indirectly diverts, takes, solicits or
accepts or  attempts to divert or take, to the exclusion of the
Company or the effect of which would be to reduce the Company's business with,
any third party who, during  Employee's employment with the Company,
was a customer of the Company or any of its  divisions, subsidiaries
or other  affiliated  entities.  This covenant
shall be effective during the Term and the Post Termination Period.

     

     Employees.  As
an independent covenant, Employee shall not directly or indirectly induce or
influence or attempt to induce or influence, whether on his own behalf or on
behalf of any other party, and shall not directly or indirectly become involved
with (except as a beneficial owner of less than 5% of the outstanding voting
securities of an entity whose voting securities are traded publicly) any entity
that directly or indirectly induces or influences or attempts to induce or
influence, whether on its own behalf or on behalf of any other party, any
employee of the Company to terminate his employment with the
Company.  This covenant shall be effective during the Term and the
Post Termination Period.

     

    Employee
understands and agrees that the purpose of the foregoing covenants is to protect
the legitimate business interests of the Company and is not to restrict
Employee's mobility or to prevent him from utilizing his general technical
skills.  By way of clarification, the covenants and obligations of
Employee set forth in this Section 5 shall be binding upon Employee during the
Post Termination Period regardless of the reason for termination; provided that
such covenants and obligations shall immediately be terminated if Employee is
entitled under Section 7 of this Agreement to receive a Termination Payment and
the Company fails to pay the Termination Payment in accordance with Section
7.

     

     Employee-Developed
Intellectual Property.

     

     Assignment of
Inventions.  Unless otherwise agreed to in writing by both
parties, Employee agrees to disclose promptly, completely and in writing to the
Company and hereby assigns and agrees to assign and bind Employee's heirs,
executors, or administrators to assign to the Company or its designee, its
assigns, successors or legal representatives, any and all inventions,
discoveries, processes, diagrams, methods and apparatus, and all related
analyses, computer programs and software, data, designs, financial figures,
formulae, ideas, improvements, know-how, specifications and other information
and materials and any improvements thereon and all intellectual property related
thereto, whatsoever, that are  conceived,  created
or  developed  by Employee, whether as a sole or joint
originator,  whether within or out of normal working hours, and
whether on the premises of the Company or  elsewhere, in connection
with his  employment with the Company, or using or influenced by the
Company's time, data, facilities and/or materials, provided the subject matter
is within the field of interest of the Company
("Inventions").  Employee's obligations under this paragraph apply
without regard to whether an idea for an Invention or a solution to a problem
occurs to Employee on the job, at home, or elsewhere. Employee further agrees
that all such Inventions are the Company's

     

    
      
         

      

      
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     exclusive
property, whether or not patent applications are filed thereon. It is expressly
understood that this Section does not apply to any of Employee's patents or
patent applications filed or based on inventions made prior to Employee's
employment with the Company or to matters (other than matters within a field of
interest of the Company) which are exclusively of personal
interest.

     

     Property
Rights.  Employee shall assist the Company at any time during
or after Employee's employment is terminated, at the Company's expense in the
preparation, execution, and delivery of any disclosures, patent applications or
papers within the scope and intent of this Agreement required to obtain patents
in this or in other countries and in  connection  with such
other  proceedings  as may be necessary to enforce the
Company's  rights in the Inventions against others  or to
vest  title  thereto in the  Company as its
assigns,  successors or legal representatives. If such assistance
takes place after Employee's employment is terminated, Employee shall be paid by
the Company at a reasonable rate for any time that Employee actually spends in
such work at the Company's request.

     

     Copyrights.  Employee
agrees that the Company shall be the copyright proprietor in all copyrightable
works of every kind and description created or developed by Employee solely or
jointly with others during Employee's employment with the Company which works
are created pursuant to the performance of Employee's duties as those duties may
be assigned or reassigned from time to time. Employee further agrees, if so
requested and at no further expense to the Company, to execute in writing any
acknowledgments or assignments of copyright ownership of works within this
Agreement as may be necessary for the preservation of the worldwide
proprietorship in the Company of such copyrights.

     

     Indemnification.  The
Company agrees to indemnify and hold Employee harmless from any costs
(including, but not limited to, court costs and reasonable attorneys' fees) and
damages against Employee for any action based on a claim of patent infringement
or copyright as a result of the Company's commercial exploitation of the
Inventions, provided that (a) Employee has not acted in bad faith in connection
with the assignment of such Invention to the Company, (b) Employee notifies the
Company in writing of any potential claim, ( c) Employee permits the Company to
defend,  compromise or settle the claim, and (d) Employee gives the
Company all available information, reasonable assistance, and authority to
enable the Company to do so.

     

     Termination.

     

     Termination by the
Parties.  Notwithstanding Section 2, this Agreement and the
employment relationship created hereby shall terminate upon the occurrence of
any of the following events  (each, a "Termination
Event"):

     

     The death
of Employee;

     

     The
Disability (as hereinafter defined) of Employee;

     

    
      
         

      

      
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     Written
notice to Employee from Employer of termination for Just Cause (as hereinafter
defined);

     

     Written
notice to Employee from Employer of termination after the Initial Period for any
reason other than Just Cause;

     

     Written
notice to Employer from Employee of termination for Just Reason (as hereinafter
defined);

     

     Written
notice to Employer from Employee of termination for any reason other than Just
Reason.

     

     Effect of
Termination. In the event of the occurrence of a termination under
Sections 7.1(a),  (b), (c) or (f), Employee shall be entitled to only
the compensation earned by Employee as of, and payable for the period prior to,
the date of such Termination Event. In the event of the occurrence of a valid
termination under Section 7 .1 (d) or (e) above, or a termination by the Company
for any reason within twelve months of a Change in Control (as defined below),
Employee shall be entitled to receive an aggregate payment equal to two times
Employee's annualized base salary at the time of such termination (the
"Termination Payment").  The Termination Payment will be due and
payable in equal installments during the eighteen-month period beginning on the
day immediately following the date of the Termination Event (the "Post
Termination Period").  Installments of the Termination Payment shall
be due and payable to Employee on each of the Company's regularly scheduled pay
dates during the Post Termination Period  (as in effect at the time of
such Termination Event), and the amount of the installment shall be calculated
based upon the frequency of such scheduled pay dates.  The first
installment of the Termination Payment shall be due and payable to Employee on
the: first such pay date immediately following the date of the Termination
Event. Any bonuses, incentive compensation and reimbursement accrued to Employee
as of the date of termination of this Agreement shall be immediately paid to
Employee regardless of the reason for such termination. To the extent permitted
under the Company's then existing health plans, if Employee is entitled to a
Termination Payment, then Employee's health benefits at the time of such
termination shall be continued during the Post Termination Period, as
if  Employee were still employed by the Company during such
period.

     

     Termination
Definitions. For purposes of this Section 7 the following terms have the
following meanings:

     

     "Disability"
of Employee shall mean Employee's inability, because of mental or physical
illness or incapacity, to perform Employee's duties under this Agreement for a
continuous period of 90 consecutive days or for any 120 days out of a 360-day
period.  In the event of any disagreement between Employer and
Employee regarding the existence or non-existence of any such disability, upon
written request from either party to the other, Employer and Employee or
Employee's legal guardian or duly authorized attorney-in-fact (IF Employee is
not legally competent) shall each designate one Texas licensed physician and the
two physicians so designated shall designate a third.  AU three
physicians so appointed shall personally examine Employee, and the decision
of

     

    
      
         

      

      
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    a
majority of such panel of physicians shall determine whether such disability
exists. Employee hereby authorizes the disclosure and release to Employer of
such determination and all supporting medical records, and both parties hereby
agree to be bound by such determination.

     

     "Just
Cause" shall mean:  (i) the commission by Employee of any act
involving moral turpitude or the commission by Employee of any act or the
suffering by Employee of any occurrence or state of facts, which renders
Employee incapable of performing Employee's duties under this Agreement (other
than Disability), or adversely affects or could reasonably be expected to
adversely affect the business reputation of Employer and its affiliates; (ll)
Employee being convicted of a felony; (ill) any breach by Employee of any of the
material terms of, or the failure to perform any material covenant contained in,
this Agreement  and  following written notice
thereof  from  Employer to Employee (describing in
reasonable detail the alleged breach and stating that it is a
notice  under this  Section 7), Employee does not cure such
breach or failure within fifteen (15) days thereafter;  provided,
however, that Employee will not be entitled to cure any breach or failure under
this sub-clause (ill) more than one time in any consecutive six month period; or
(iv) the violation by Employee of reasonable and
appropriate  instructions or policies established by the Company's
Board of Directors which have been communicated to Employee  with
respect to the operation of the businesses and affairs of Employer or Employee's
failure to carry out the reasonable instructions of the Company's Board of
Directors and following written notice thereof from the Company to Employee
(describing in reasonable detail the alleged violation and stating that it is a
notice pursuant to this Section 7), Employee does not cure any such violation or
failure within fifteen (15) days thereafter; provided, however, that Employee
will not be entitled to cure any violation or failure under this sub-clause (iv)
more than one time in any consecutive six month period.

     

     "Just
Reason" shall mean: (i) any breach by Employer of any of the material terms of,
or the failure to perform any material covenant contained in, this Agreement and
following written notice thereof from Employee to Employer (describing in
reasonable detail the alleged breach and stating that it is a notice under this
Section 7), Employer does not cure such breach or failure within fifteen (15)
days thereafter; provided, however, that Employer will not be entitled to cure
any such breach or failure more than one time in any consecutive six month
period; or (ii) a material reduction in Employee's duties and responsibilities
without Employee's consent.

     

     "Change
in Control" shall mean the occurrence of one or more of the following
events:

     

     Any
person within the meaning of Section 13(d) and 14(d) of the Securities Exchange
Act or 1934, as amended (the  "Exchange Act"), other than the Company
(including its subsidiaries, directors or executive officers) has become the
beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act, of 50
percent or more of the combined voting power of the Company's then outstanding
Common Stock or equivalent in voting power of any

     

    
      
         

      

      
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    class or
classes of the Company's outstanding securities ordinarily entitled to vote in
elections of directors ("voting securities"), unless such person owned
beneficial interest in at least 35 percent or more of the
outstanding  voting securities of the Company as of the Effective
Date;

     

     Shares
representing 50 percent or more of the combined voting power of the Company's
voting securities are purchased pursuant to a tender offer or exchange
offer  (other than an offer by the Company or its subsidiaries or
affiliates);

     

     As a
result of, or in connection with, any tender offer or exchange offer, merger or
other business combination, sale of assets or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons who
were directors of the Company before the Transaction shall cease to constitute a
majority of the Board of Directors of the Company or of any successor to the
Company;

     

     Following
the Effective Date, the Company is merged or consolidated with another
corporation and as a result of such merger or consolidation less than 50 percent
of the outstanding voting securities of the surviving or resulting corporation
shall then be owned in the aggregate by the former shareholders of the Company,
other than (A) any party to such merger or consolidation, or (B) any affiliates
of any such party, unless in each such case, the party to the merger or
consolidation, or its affiliates owned a beneficial  interest in at
least 35 percent of the outstanding  voting securities of the Company
as of the Effective Date; or

     

     The
Company transfers more than 50 percent of its assets, or the last of a series of
transfers results in the transfer of more than 50 percent of the assets of the
Company, to another entity that is not wholly-owned by the
Company.  For purposes of this subsection (v), the determination of
what constitutes 50 percent of the assets of the Company shall be made by the
Board of Directors of the Company, as constituted immediately prior to the
events that would constitute a change of control if 50 percent of the Company's
assets were transferred in connection with such events, in its sole
discretion.

     

     General
Confidentiality.

     

     Confidential
Information.  All Company information with which Employee deals
and all non-public information concerning the Company's operations, business
methods, business strategies and plans, including Company Intellectual Property
shall constitute confidential information of the Company ("Confidential
Information").  Employee shall hold all Confidential Information in
the strictest confidence and shall protect all Confidential Information with the
same degree of care that he exercises with respect to its own proprietary
information.  Without the prior written consent of the Company, the
Employee shall neither use, disclose, divulge or otherwise disseminate any
Confidential Information to any person or entity; provided,

     

    
      
         

      

      
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    however,
that Employee may disclose, distribute, publish or use any Confidential
Information in situations in which and to the extent that the disclosure,
distribution, publication or use thereof either (a) is necessary for the
performance of his obligations hereunder or (b) is required to be disclosed in
connection with a bona fide legal proceeding (including, but not limited to a
proceeding to enforce the provisions of this Agreement) or governmental
investigation, provided that Employee shall limit the
disclosure,  distribution, publication and use of such Confidential
Information to the maximum extent practicable under the
circumstances.

     

     Limitations on Confidential
Information.  Notwithstanding Section 8.1 hereof, Employee
shall have no obligations with respect to any Confidential Information which (a)
is or becomes within the public domain through no act of the Employee in breach
of this Agreement, (b) is lawfully received from another source subsequent to
the date of this Agreement without any restriction on use or disclosure, (c) is
deemed in writing by the Company no longer to be Confidential Information, or
(d) is required to be disclosed by order of any court of competent jurisdiction
or other  governmental authority (provided in such latter case,
however, that the Employee shall timely inform the Company of all such legal or
governmental  proceedings so that the Company may attempt by
appropriate legal means to limit such  disclosure, and the Employee
shall further use its best reasonable efforts to limit the disclosure and
maintain confidentiality to the maximum extent possible).

     

     Miscellaneous
Provisions.

     

     Insurance.  The
Company, in its sole discretion, may apply for and obtain insurance on the life
of Employee in such forms and amounts as the Company may determine from time to
time. Any such insurance policy shall be owned by the Company for its own
benefit, and Employee shall not have any interest therein or right to the
proceeds thereof. Upon request by the Company, Employee shall submit to such
medical examinations, supply such information, and execute and deliver such
documents and instruments as any insurance company to which the Company has
applied for such insurance may require.

     

     Notices.  All
notices and other communications given by any party hereto in connection
herewith (a) must be in writing and (b) may be served only by (i) depositing the
same in the United States mail, properly addressed as provided herein, postage
prepaid, registered or certified mail, and with return receipt requested, or
(ii) delivering the same in person. Any notice or other communication deposited
in the mail in the manner provided herein shall be effective upon the earlier to
occur of receipt by the addressee or the expiration of3 days after the date on
which it is so deposited, and any notice or other communication delivered in
person shall be effective when it is received by the addressee. For the purpose
hereof, the addresses of the parties hereto shall be as follows:

     

    Company:                              Cistera
Networks, Inc.

    6509
Windcrest Drive, Suite 160

    Plano,
Texas 75024 Fax: 972-381-4635

    Attention:
President and CEO

    

    Employee:                   
          Richard P.
McDowell

    
      
         

      

      
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    Any party
hereto may change its address for the purposes hereof by giving written notice
of such change of address to the other parties as specified herein.

     

     Superseding
Agreement.  This Agreement supersedes all prior negotiations,
understandings and agreements among the parties hereto relating to the subject
matters hereof.

     

     Amendments.  No
alterations, modifications, amendments or changes in this Agreement shall be
effective or binding on any party hereto, unless the same shall be in writing
and executed by all of the parties hereto.

     

     Enforceability.  This
Agreement and all agreements and covenants made by the parties hereto under this
Agreement shall inure to the benefit of, and be enforceable by and against,
their respective heirs, successors, legal representatives and permitted
assignees.

     

     Assignments.  The
Company may not assign, convey, transfer or otherwise dispose of all or any
portion of its interest in this Agreement or its rights or obligations hereunder
without the prior written consent of Employee.  The rights and
obligations of Employee hereunder are personal; therefore, Employee shall not
assign, convey, transfer or otherwise dispose of, voluntarily or involuntarily,
all or any portion of his interest in this Agreement or his rights or
obligations hereunder.  Any such assignment, conveyance, transfer or
other disposition made or attempted by the Company or Employee in breach or
violation of this Section 9.6 shall be null and void and of no
effect.

     

     Governing  Law.  This
Agreement shall be governed by, construed under, and enforced in accordance with
the laws of Texas.

     

     Modification and
Severability.  If a court of competent jurisdiction declares
that any provision of this Agreement is illegal, invalid or unenforceable, then
such provision shall be modified automatically to the extent necessary to make
such provision fully enforceable.  If such court does not modify any
such provision as contemplated herein, but instead declares it to be wholly
illegal, invalid or unenforceable, then such provision as severed from this
Agreement, and such declaration shall in no way affect the legality, validity
and enforceability of the other provisions of this Agreement to which such
declaration does not relate.  In this event, this Agreement shall be
construed as if it did not contain the particular provision held to be illegal,
invalid or unenforceable, the rights and obligations of the parties hereto shall
be construed and enforced accordingly, and this Agreement otherwise shall remain
in full force and effect.

     

     Captions.  The
captions contained herein are for the purpose of reference only and shall not
affect in any way the meaning, interpretation or scope of this
Agreement.

     

     Waivers.  Any
waiver by any party hereto of any breach or violation of any provision of this
Agreement by any other party shall not operate or be construed as a waiver by
such party of any subsequent breach or violation thereof.

     

    
      
         

      

      
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     Remedies.  Employee
understands and hereby agrees that any breach or violation or threatened breach
or violation by Employee of any of his obligations under Sections 5,6 and 8 will
result in immediate and irreparable harm to the Company, and no adequate remedy
at law is available to the Company for any such breach or violation or
threatened breach or violation; therefore, upon any breach or violation or
threatened breach or violation by Employee of any of his obligations under
Sections 5, 6 and 8, the Company shall be entitled to injunctive relief in any
court of competent  jurisdiction, provided that nothing contained
herein shall be construed to prohibit the Company from pursuing any
other  remedy at law or in equity available to the Company therefore.
The remedies of each party hereto under this Agreement shall be cumulative of
each other and of the remedies at law or in equity available to the
parties.  Each party's full or partial exercise of any such remedy
shall not preclude any subsequent exercise by such party of the same or any
other remedy.

     

     Multiple
Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original for all purposes,
and all of which together shall constitute one and the same
instrument.

     

     Dispute
Resolution.  Except as provided in Section 9.11 of this
Agreement, any and all disputes, controversies, or claims arising out of or
relating to your employment or cessation of employment with Company shall be
settled exclusively by final and binding arbitration in Dallas, Texas before an
arbitrator selected -in accordance with the Employment Dispute Resolution Rules
of the American Arbitration Association ("AAA "). Such disputes include, but are
not limited to, claims arising under this Agreement as well as other
employment-related legal claims such as discrimination or tort. Any arbitration
shall be conducted in accordance with the Employment Dispute Resolution Rules of
the AM.

     

    This
Agreement is executed by the parties hereto on the Effective Date.

     

    

     CISTERA
NETWORKS,
INC.                                                                    EMPLOYEE

    

    By:/s/
Derek
Downs                                                                                     By:
/s/ Richard P. McDowell

    

    Name:
Derek
Downs                                                                                    Name:
Richard P. McDowell

    

    Title:
Chief Executive Officer

    

    11Employees' and Directors' Equity Incentive Plan

 

Exhibit 10.5

IVANHOE ENERGY INC.

EMPLOYEES’ AND DIRECTORS’ EQUITY INCENTIVE PLAN

AMENDED AND RESTATED
MAY 3, 2007

PART 1 — INTRODUCTION

1.1 Purpose

The purpose of the Plan is to secure for the Company and its shareholders the benefits of incentive
inherent in share ownership by the directors and key employees of the Company and its Affiliates
who, in the judgement of the Board, will be largely responsible for its future growth and success.
It is generally recognized that share plans of the nature provided for herein aid in retaining and
encouraging employees and directors of exceptional ability because of the opportunity offered to
them to acquire a proprietary interest in the Company.

1.2 Definitions

	(a)	 	“Affiliate” has the meaning set forth in Section 1(2) of the Ontario Securities Act, as
amended, and includes those issuers that are similarly related, whether or not any of the
issuers are corporations, companies, partnerships, limited partnerships, trusts, income trusts
or investment trusts or any other organized entity issuing securities.
	 
	(b)	 	“Associate” has the meaning assigned to it in the Ontario Securities Act, as amended.
	 
	(c)	 	“Board” means the board of directors of the Company.

	(d)	 	“Blackout Period” means a period in which the trading of Shares or other securities of the
Company is restricted under the Company’s Corporate Disclosure, Confidentiality and Securities
Trading Policy, or under an insider trading policy or other policy of the Company then in
effect.
	 
	(e)	 	“Code” means the United States Internal Revenue Code of 1986, as amended.

	(f)	 	“Company” means Ivanhoe Energy Inc., a company incorporated under the laws of the Yukon
Territory.
	 
	(g)	 	“Committee” has the meaning attributed thereto in Section 6.1.

	(h)	 	“Eligible Directors” means the directors of the Company or any Affiliate thereof who are, as
such, eligible for participation in the Plan.

	(i)	 	“Eligible Employees” means full time and part time employees (including employees who are
officers and directors) of the Company or any Affiliate thereof, whether or not they have a
written employment contract with the Company, determined by the Board, upon recommendation of
the Committee, to be employees, eligible for participation in the Plan. “Eligible Employees”
shall include Service Providers eligible for participation in the Plan as determined by the
Board.

	(j)	 	“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

 

 

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	(k)	 	“Fair Market Value” means, with respect to a Share subject to Option, the weighted average
price of the Shares on the Stock Exchange for the five days on which Shares were traded
immediately preceding the date in respect of which Fair Market Value is to be determined. If
the Shares are not listed and posted for trading on a Stock Exchange on such day, the Fair
Market Value shall be such price per Share as the Board, acting in good faith, may determine.

	(l)	 	“Foreign Private Issuer” has the meaning assigned to it in the rules promulgated under the
Exchange Act.

	(m)	 	“Insider” has the meaning assigned to it in the Ontario Securities Act, as amended, and also
includes an Associate or Affiliate of any person who is an Insider.
	 
	(n)	 	“Option” means an option granted under the terms of the Share Option Plan.
	 
	(o)	 	“Option Period” means the period during which an Option may be exercised.

	(p)	 	“Optionee” means an Eligible Employee or Eligible Director to whom an Option has been granted
under the terms of the Share Option Plan.

	(q)	 	“Participant” means, in respect of any Plan, an Eligible Employee or Eligible Director who
participates in such Plan.

	(r)	 	“Plan” means, collectively the Share Option Plan, the Share Bonus Plan and the Share Purchase
Plan and “Plan” means any such plan as the context requires.

	(s)	 	“Service Provider” means a person or company engaged to provide ongoing management or
consulting services for the Company or for any entity controlled by the Company.

	(t)	 	“Share Bonus Plan” means the plan established and operated pursuant to Part 3 and Part 5
hereof.

	(u)	 	“Share Option Plan” means the plan established and operated pursuant to Part 2 and Part 5
hereof.

	(v)	 	“Share Purchase Plan” means the plan established and operated pursuant to Part 4 and Part 5
hereof.
	 
	(w)	 	“Shares” means the common shares of the Company.

	(x)	 	“Stock Exchange” means the principal stock exchange upon which the Shares are listed or upon
which the Shares have been approved for listing.

(y) “U.S. Optionee” has the meaning assigned to it in Section 2.14 of this Plan.

PART 2 — SHARE OPTION PLAN

2.1 Participation

Options shall be granted only to Eligible Employees and Eligible Directors.

 

 

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2.2 Administration of Share Option Plan

The Share Option Plan shall be administered by the Committee.

2.3 Price

The exercise price per Share of any Option shall be not less than one hundred per cent (100%) of
the Fair Market Value on the date of grant.

2.4 Grant of Option

The Board, on the recommendation of the Committee, may at any time authorize the granting of
Options to such Eligible Employees and Eligible Directors as it may select for the number of Shares
that it shall designate, subject to the provisions of the Share Option Plan. The date of grant of
an Option shall be (i) the date such grant was approved by the Committee for recommendation to the
Board, provided the Board approves such grant; or (ii) for a grant of an Option not approved by the
Committee for recommendation to the Board, the date such grant was approved by the Board.

Each Option granted to an Eligible Employee or to an Eligible Director shall be evidenced by a
stock option agreement with terms and conditions consistent with the Share Option Plan and as
approved by the Board on the recommendation of the Committee (which terms and conditions need not
be the same in each case and may be changed from time to time, subject to section 5.7 of the Plan
and the approval of any material changes by the Stock Exchange).

2.5 Terms of Options

The Option Period shall be ten years from the date such Option is granted or such lesser duration
as the Board, on the recommendation of the Committee, may determine at the date of grant, and may
thereafter be reduced with respect to any such Option as provided in Section 2.8 hereof covering
termination of employment or death of the Optionee; provided, however, that at any time the expiry
date of the Option Period in respect of any outstanding Option under this Plan (either before or
after its amendment or restatement on May 3, 2007) should be determined to occur either during a
Blackout Period or within ten business days following the expiry of the Blackout Period, the expiry
date of such Option Period shall be deemed to be the date that is the tenth business day following
the expiry of the Blackout Period.

Unless otherwise determined from time to time by the Board, on the recommendation of the Committee,
Options may be exercised (in each case to the nearest full Share) during the Option Period as
follows:

	(a)	 	at any time during the first year of the Option Period, the Optionee may purchase up to 33
1/3% of the total number of Shares reserved for issuance pursuant to his or her Option; and

	(b)	 	at any time during each additional year of the Option Period the Optionee may purchase an
additional 33 1/3% of the total number of Shares reserved for issuance pursuant to his or her
Option plus any Shares not purchased in accordance with the preceding subsection (a) until, in
the third year of the Option Period, 100% of the Option will be exercisable.

 

 

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Notwithstanding the foregoing, Options shall become exercisable at the rate of at least 20% per
year over five years from the date the Option is granted, subject to reasonable conditions such as
continued employment. However, in the case of an Option granted to officers, directors or
consultants of the Company or any of its Affiliates, the Option may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time or during any period
established by the Company or any of its Affiliates.

Except as set forth in Section 2.8, no Option may be exercised unless the Optionee is at the time
of such exercise:

	(a)	 	in the case of an Eligible Employee, in the employ of the Company or an Affiliate and shall
have been continuously so employed since the grant of his Option, but absence on leave, having the
approval of the Company or such Affiliate, shall not be considered an interruption of employment
for any purpose of the Share Option Plan; or
	 
	(b)	 	in the case of an Eligible Director, a director of the Company or an Affiliate and shall have
been such a director continuously since the grant of his Option.

The exercise of any Option will be contingent upon receipt by the Company of cash payment of the
full purchase price of the Shares being purchased. No Optionee or his legal representatives or
legatees will be, or will be deemed to be, a holder of any Shares subject to an Option, unless and
until certificates for such Shares are issued to him or them under the terms of the Share Option
Plan.

2.6 Share Appreciation Right

A Participant may, if at any time determined by the Board, on the recommendation of the Committee,
have the right (the “Right”), when entitled to exercise an Option, to terminate such Option in
whole or in part (the “Terminated Option”) by notice in writing to the Company and, in lieu of
receiving the Shares (the “Option Shares”) to which the Terminated Option relates, to receive the
number of Shares, disregarding fractions, which is equal to the quotient obtained by:

	(a)	 	subtracting the Option exercise price per Share from the Fair Market Value per Share on the day
immediately prior to the exercise of the Right and multiplying the remainder by the number of
Option Shares; and
	 
	(b)	 	dividing the product obtained under Section 2.6(a) by the Fair Market Value per Share on the
day immediately prior to the exercise of the Right.

If a Right is granted in connection with an Option, it is exercisable only to the extent and on the
same conditions that the related Option is exercisable. For greater certainty, for purposes of the
aggregate number of shares reserved for issuance under Section 5.1 of the Plan, in the event of an
exercise of a Right in respect of an Option, the number of Shares available for issuance under the
Plan will be reduced by the number of Shares to which the Terminated Option relates rather than the
number of Shares issued upon exercise of the Right in respect of such Option.

2.7 Lapsed Options

If Options are surrendered, terminated or expire without being exercised in whole or in part, new
Options may be granted covering the Shares not purchased under such lapsed Options,

 

 

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subject, in the case of the cancellation of an Option in connection with the grant of a new Option
to the same person on different terms, to the consent of the Stock Exchange.

2.8 Effect of Termination of Employment or Death

If an Optionee:

	(a)	 	dies while employed by or while a director of the Company or its Affiliate, any Option held by
him at the date of death shall become exercisable in whole or in part, but only by the person or
persons to whom the Optionee’s rights under the Option shall pass by the Optionee’s will or
applicable laws of descent and distribution. Unless otherwise determined by the Board, on the
recommendation of the Committee, all such Options shall be exercisable only to the extent that the
Optionee was entitled to exercise the Option at the date of his death and only for six months after
the date of death or prior to the expiration of the Option Period in respect thereof, whichever is
sooner;
	 
	(b)	 	ceases to be employed by or act as a director of the Company or its Affiliate for cause, no
Option held by such Optionee will, unless otherwise determined by the Board, on the recommendation
of the Committee, be exercisable following the date on which such Optionee ceases to be so employed
or ceases to be a director, as the case may be; or
	 
	(c)	 	ceases to be employed by or act as a director of the Company or its Affiliate for any reason
other than cause then, unless otherwise determined by the Board, on the recommendation of the
Committee, any Option held by such Optionee at the effective date thereof shall become exercisable
in whole or in part for a period of up to six months thereafter, but in no event less than 30 days,
subject to the earlier expiration of the Option Period.

2.9 Effect of Takeover Bid

If a bona fide offer (the “Offer”) for Shares is made to the Optionee or to shareholders generally
or to a class of shareholders which includes the Optionee, which Offer, if accepted in whole or in
part, would result in the offeror exercising control over the Company within the meaning of
subsection 1(3) of the Ontario Securities Act (as amended from time to time), then the Company
shall, immediately upon receipt of notice of the Offer, notify each Optionee currently holding an
Option of the Offer, with full particulars thereof, whereupon, notwithstanding Section 2.5 hereof,
such Option may be exercised in whole or in part by the Optionee so as to permit the Optionee to
tender the Shares received upon such exercise (the “Optioned Shares”) pursuant to the Offer.

2.10 Effect of the Amalgamation or Merger

If the Company amalgamates or merges with or into another corporation, any Shares receivable on the
exercise of an Option shall be converted into the securities, property or cash which the
Participant would have received upon such amalgamation or merger if the Participant had exercised
his Option immediately prior to the record date applicable to such amalgamation or merger, and the
option price shall be adjusted appropriately by the Board and such adjustment shall be binding for
all purposes of the Share Option Plan. Any such adjustment shall be in accordance with regulatory
policies.

 

 

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2.11 Adjustment in Shares Subject to the Plan

If there is any change in the Shares through the declaration of stock dividends of Shares or
consolidations, subdivisions or reclassification of Shares, or otherwise, the number of Shares
available under the Share Option Plan, the Shares subject to any Option, and the Option price
thereof shall be adjusted appropriately by the Board and such adjustment shall be effective and
binding for all purposes of the Share Option Plan.

2.12 Loans to Employees

Subject to applicable law, the Board may at any time authorize the Company to loan money to an
Eligible Employee (which for the purpose of this section 2.12 excludes any director or executive
officer (or equivalent thereof) of the Company), on such terms and conditions as the Board may
reasonably determine, to assist such Eligible Employee to exercise an Option held by him or her.
Such terms and conditions shall include, in any event, interest at prevailing market rates, a term
not in excess of one year, and security in favour of the Company represented by that number of
Shares issued pursuant to the exercise of an Option in respect of which such loan was made or
equivalent security which equals the loaned amount divided by the Fair Market Value of the Shares
on the date of exercise of the Option, which security may be granted on a non-recourse basis.

2.13 Transfer of Options

Options are non-transferable except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Board,
in its discretion, may permit distribution of an Option to an inter vivos or testamentary trust in
which the Option is to be passed to beneficiaries upon the death of the trustor (settlor).

2.14 United States Residents

Subject to Sections 2.14(b), (c) and (d) of this Plan, any Option granted under this Plan to an
Optionee who is a citizen or resident of the United States (including its territories, possessions
and all areas subject to its jurisdiction) (a “U.S. Optionee”) shall be an “incentive stock option”
within the meaning of Section 422 of the Code (provided, for purposes of this Section 2.14 only, a
U.S. Optionee who is a director is then also an officer or employee of the Company or one of its
Affiliates). In addition, no provision of this Plan, as it may be applied to a U.S. Optionee,
shall be construed so as to be inconsistent with any provision of Section 422 of the Code.

Notwithstanding anything in this Plan to the contrary, the following provisions shall apply to each
U.S. Optionee:

	(a)	 	any director of the Company or one of its Affiliates who is a U.S. Optionee shall be ineligible
to vote upon the granting of such Option to themselves;

 

 

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	(b)	 	subject to Section 2.14(d), any Option granted under this Plan to a U.S. Optionee shall be an
incentive stock option within the meaning of Section 422 of the Code provided that the aggregate
Fair Market Value (determined as of the time the Option is granted) of the Shares with respect to
which incentive stock options are exercisable for the first time by such U.S. Optionee during any
calendar year under this Share Option Plan and all other stock option plans of the Company or its
Affiliates does not exceed US$100,000;
	 
	(c)	 	to the extent the aggregate Fair Market Value (determined as of the time the Option is granted)
of the Shares with respect to which incentive stock options are exercisable for the first time by
such U.S. Optionee during any calendar year under this Share Option Plan and all other stock option
plans of the Company or its Affiliates exceeds US$100,000, such Options shall be treated as
nonqualified stock options (i.e. Options which fail to qualify as incentive stock options within
the meaning of Section 422 of the Code) in accordance with Section 422(d) of the Code;
	 
	(d)	 	any U.S. Optionee who is a Service Provider or director (and who is not also an officer or
employee) of the Company or one of its Affiliates will be ineligible to receive incentive stock
options but will be permitted to receive nonqualified stock options pursuant to this Plan;
	 
	(e)	 	the purchase price for Shares under each Option granted to a U.S. Optionee pursuant to this
Plan shall be not less than the Fair Market Value of such Shares at the time the Option is granted;
	 
	(f)	 	if any U.S. Optionee to whom an Option is to be granted under this Plan is at the time of the
grant of such Option the owner of Shares possessing more than 10% of the total combined voting
power of all classes of shares of the Company or any of its Affiliates, then the following special
provisions shall be applicable to the Option granted to such individual:

	 	(i)	 	the purchase price per Share subject to such Option shall not be less than 110%
of the Fair Market Value of one Share at the time of grant, provided however that this
requirement will not apply with respect to any Option granted under the Plan that is
subject to Section 2.14(c);
	 
	 	(ii)	 	for the purpose of this Section 2.14 only, the exercise period shall not exceed
five years from the date of grant, provided however that this requirement will not
apply with respect to any Option granted under the Plan that is subject to Section
2.14(c);
	 
	 	(iii)	 	notwithstanding Section 2.14(f)(i), in respect of California citizens or
residents, the purchase price per Share subject to such Option shall in no event be
less than 110% of the Fair Market Value of one Share at the time of grant;

	(g)	 	no Option may be granted hereunder to a U.S. Optionee following the expiry of 10 years after
the date on which this Plan is adopted by the Board or the date this Plan is approved by the
shareholders of the Company, whichever is earlier; and

	(h)	 	no Option granted to a U.S. Optionee under this Plan shall become exercisable unless and
until this Plan shall have been approved by the shareholders of the Company.

 

 

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PART 3 — SHARE BONUS PLAN

3.1 Participants

The Board on the recommendation of the Committee, shall have the right, subject to Section 3.2, to
issue or reserve for issuance, for no cash consideration, to any Eligible Employee or Eligible
Director any number of Shares as a discretionary bonus subject to such provisos and restrictions as
the Board may determine.

3.2 Number of Shares

The aggregate maximum number of shares that may be issued pursuant to Section 3.1 will be limited
to 2,400,000 Shares. Shares reserved for issuance and issued under the Share Bonus Plan shall be
subject to the limitations set out in Section 5.1.

The Board, on the recommendation of the Committee, in its absolute discretion, shall have the right
to reallocate any of the Shares reserved for issuance under the Share Bonus Plan for future
issuance under the Share Option Plan or the Share Purchase Plan and, in the event that any Shares
specifically reserved under the Share Bonus Plan are reallocated to the Share Option Plan or the
Share Purchase Plan, as the case may be, the aggregate maximum number of Shares reserved under the
Share Bonus Plan will be reduced to that extent. In no event will the number of Shares allocated
for issuance under the Share Bonus Plan exceed 2,400,000 Shares.

3.3 Necessary Approvals

The obligation of the Company to issue and deliver any Shares pursuant to an award made under the
Share Bonus Plan will be subject to all necessary approvals of any securities regulatory authority
having jurisdiction over the Shares.

PART 4 — SHARE PURCHASE PLAN

4.1 Participants

Participants in the Share Purchase Plan will be Eligible Employees who have been continuously
employed by the Company or any of its Affiliates on a full-time basis for at least 12 consecutive
months and who have been designated by the Board, on the recommendation of the Committee, as
participants in the Share Purchase Plan (“Share Purchase Plan Participants”). The Board, on the
recommendation of the Committee, shall have the right, in its absolute discretion, to waive such
12-month period or to refuse any Eligible Employee or group of Eligible Employees the right of
participation or continued participation in the Share Purchase Plan.

4.2 Election to Participate in the Share Purchase Plan and Participant’s Contribution

Any Share Purchase Plan Participant may elect to contribute money (the “Participant’s
Contribution”) to the Share Purchase Plan in any calendar year if the Share Purchase Plan
Participant delivers to the Company a written direction in form and substance satisfactory to the
Company authorizing the Company to deduct from the Share Purchase Plan Participant’s salary, in
equal instalments, the Participant’s Contribution. Such direction will remain effective until
revoked in writing by the Share Purchase Plan Participant or until the Board terminates or suspends
the Share Purchase Plan, whichever is earlier.

 

 

- 9 -

The Share Purchase Plan Participant’s Contribution as determined by the Board, on the
recommendation of the Committee, shall not exceed 10% of the Share Purchase Plan Participant’s
basic annual salary from the Company and its Affiliates at the time of delivery of the direction,
before deductions, exclusive of any overtime pay, bonuses or allowances of any kind whatsoever (the
“Basic Annual Salary”). In the case of a Share Purchase Plan Participant for whom the Board, on
the recommendation of the Committee, has waived the 12-month employment requirement, the Share
Purchase Plan Participant’s Contribution shall not exceed 10% of his Basic Annual Salary from the
Company and its Affiliates at the time of delivery of the direction, prorated over the remainder of
the calendar year, before deductions and exclusive of any overtime pay, bonuses or allowances of
any kind whatsoever.

4.3 Company’s Contribution

Immediately prior to the date any Shares are issued to a Share Purchase Plan Participant in
accordance with Section 4.4, the Company will credit the Share Purchase Plan Participant with, and
thereafter hold in trust for the Share Purchase Plan Participant, an amount (the “Company’s
Contribution”) equal to the Participant’s Contribution then held in trust by the Company.

4.4 Issue of Shares

On March 31, June 30, September 30 and December 31 in each calendar year the Company will issue to
each Share Purchase Plan Participant fully paid and non-assessable Shares, disregarding fractions,
which is equal to the aggregate amount of the Participant’s Contribution and the Company’s
Contribution divided by the Issue Price. For the purposes of this Section 4.4, “Issue Price” means
the weighted average price of the Shares on the Stock Exchange, for the 90-day period immediately
preceding the date of issuance. If the Shares are not traded on a Stock Exchange on the date of
issuance, the Issue Price shall be such price per Share as the Board, acting in good faith, may
determine.

The Company shall hold any unused balance of the Participant’s Contribution for a Share Purchase
Plan Participant until used in accordance with the Share Purchase Plan.

4.5 Delivery of Shares

As soon as reasonably practicable following each issuance of Shares to a Share Purchase Plan
Participant pursuant to Section 4.4, the Company will cause to be delivered to the Share Purchase
Plan Participant a certificate in respect of such Shares provided that, if required by applicable
law or the rules and policies of the Stock Exchange, a restrictive legend shall be inscribed on the
certificate, which legend shall state that the Shares shall not be transferable for such period as
may be prescribed by law or by any regulatory authority or Stock Exchange.

4.6 Effect of Termination of Employment or Death

If a Participant ceases to be employed by the Company or any of its Affiliates for any reason or
receives notice from the Company of the termination of his or her employment, the Share Purchase
Plan Participant’s participation in the Share Purchase Plan will be deemed to be terminated and any
portion of the Participant’s Contribution then held in trust shall be paid to the Share Purchase
Plan Participant or his estate or successor as the case may be.

 

 

- 10 -

4.7 Effect of Amalgamation or Merger

If the Company amalgamates or merges with or into another corporation, each Share Purchase Plan
Participant to whom Shares are to be issued will receive, on the date on which any Shares would
otherwise have been delivered to the Share Purchase Plan Participant in accordance with Section
4.5, the securities, property or cash to which the Share Purchase Plan Participant would have been
entitled on such amalgamation, consolidation or merger had the Shares been issued immediately prior
to the record date of such amalgamation or merger.

PART 5 — GENERAL

5.1 Number of Shares

The aggregate number of Shares that may be reserved for issuance under the Plan shall not exceed
24,000,000 Shares inclusive of those Shares reserved under the Share Bonus Plan pursuant to Section
3.2. In addition, the aggregate number of Shares:

	(a)	 	that may be reserved for issuance to Insiders for options granted under the Plan (or when
combined with all of the Company’s other security based compensation arrangements) shall not exceed
10% of the Company’s outstanding issue from time to time;
	 
	(b)	 	that may be issued to Insiders for options granted under the Plan (or when combined with all of
the Company’s other security based compensation arrangements) within any one-year period shall not
exceed 10% of the Company’s outstanding issue from time to time; and
	 
	(c)	 	that may be issued to any one Insider and his or her Associates for options granted under the
Plan within any one-year period shall not exceed 5% of the Company’s outstanding issue from time to
time.

In no event will the number of Shares at any time reserved for issuance to any Participant exceed
5% of the Company’s outstanding issue from time to time.

For the purposes of this Section 5.1, “outstanding issue” means the total number of Shares, on a
non-diluted basis, that are issued and outstanding as of the date that any Shares are issued or
reserved for issuance pursuant to an award under the Plan to an Insider or such Insider’s
Associates, excluding any Shares issued under the Plan during the immediately preceding 12 month
period.

5.2 Transferability

Any benefits, rights and options accruing to any Participant in accordance with the terms and
conditions of the Plan shall not be transferable unless specifically provided herein. Except as
otherwise provided in Section 2.13, during the lifetime of a Participant, all benefits, rights and
options may only be exercised by the Participant.

5.3 Employment

Nothing contained in any Plan shall confer upon any Participant any right with respect to
employment or continuance of employment with the Company or any Affiliate, or interfere in any

 

 

- 11 -

way with the right of the Company or any Affiliate to terminate the Participant’s employment at any
time. Participation in any Plan by a Participant is voluntary.

5.4 Record Keeping

The Company shall maintain a register in which shall be recorded:

	(a)	 	the name and address of each Participant;
	 
	(b)	 	the Plan or Plans in which the Participant participates;
	 
	(c)	 	any Participant’s Contributions;
	 
	(d)	 	the number of unissued Shares reserved for issuance pursuant to an Option or pursuant to an
award made under the Share Bonus Plan in favour of a Participant; and
	 
	(e)	 	such other information as the Board may determine.

5.5 Necessary Approvals

The Plan shall be effective only upon formal adoption by the Board following the approval of the
shareholders of the Company. Any Option exercised before shareholder approval is obtained shall be
rescinded if shareholder approval is not obtained within 12 months before or after the Plan is
adopted. Such shares shall not be counted in determining whether such approval is obtained.

The obligation of the Company to sell and deliver Shares in accordance with the Plan is subject to
the approval of any Stock Exchange or governmental authority having jurisdiction in respect of the
Shares which may be required in connection with the authorization, issuance or sale of such Shares
by the Company. If any Shares cannot be issued to any Participant for any reason including,
without limitation, the failure to obtain such approval, the obligation of the Company to issue
such Share shall terminate and any Participant’s Contribution or option price paid to the Company
shall be returned to the Participant.

5.6 Income Taxes

As a condition of, and prior to participation in, the Plan, a Participant shall, at the Company’s
request, authorize the Company in writing to withhold from any remuneration or consideration
whatsoever payable to such Participant hereunder, any amounts required by any taxing authority to
be withheld for taxes of any kind as a consequence of such participation in the Plan.

5.7 Amendments to Plan

The Board shall have the power to, at any time and from time to time, either prospectively or
retrospectively, amend, suspend or terminate the Plan or any Option or other award granted under
the Plan without shareholder approval, including, without limiting the generality of the foregoing:
changes of a clerical or grammatical nature, changes regarding the persons eligible to participate
in the Plan, changes to the exercise price, vesting, term and termination provisions of Options,
changes to the share appreciation right provisions, changes to the share bonus plan provisions
(other than the maximum number of Shares issuable under the Bonus Plan in

 

 

- 12 -

Section 3.2 of the Plan), changes to the authority and role of the Compensation Committee under the
Plan, changes to the acceleration and vesting of Options in the event of a takeover bid, and any
other matter relating to the Plan and the Options and awards granted thereunder, provided however
that:

	(a)	 	such amendment, suspension or termination is in accordance with applicable laws and the rules
of any stock exchange on which the Shares are listed;

	(b)	 	no amendment to the Plan or to an Option granted hereunder will have the effect of impairing,
derogating from or otherwise adversely affecting the terms of an Option which is outstanding
at the time of such amendment without the written consent of the holder of such Option;

	(c)	 	the expiry date of an Option Period in respect of an Option shall not be more than ten years
from the date of grant of an Option except as expressly provided in Section 2.5;
	 
	(d)	 	the Directors shall obtain shareholder approval of:

	 	(i)	 	any amendment to the aggregate maximum number of Shares specified in subsection
3.2 (Share Bonus Plan);
	 
	 	(ii)	 	any amendment to the aggregate number of Shares specified in subsection 5.1
(being the aggregate number of Shares that may be reserved for issuance under the Plan)
other than pursuant to section 2.11;
	 
	 	(iii)	 	any amendment to the limitation on Shares that may be reserved for issuance,
or issued, to Insiders under subsection 5.1(a) and (c); or
	 
	 	(iv)	 	any amendment that would reduce the exercise price of an outstanding Option of
an Insider other than pursuant to section 2.11;
	 
	 	(v)	 	any amendment that would extend the expiry date of the Option Period in respect
of any Option granted under the Plan to an Insider except as expressly contemplated in
subsection 2.5; and
	 
	 	(vi)	 	any amendment to the amending provision set out in subsection 5.7 (Amendments
to Plan).

If the Plan is terminated, the provisions of the Plan and any administrative guidelines and other
rules and regulations adopted by the Board and in force on the date of termination will continue in
effect as long as any Option or any rights pursuant thereto remain outstanding and, notwithstanding
the termination of the Plan, the Board shall remain able to make such amendments to the Plan or the
Options as they would have been entitled to make if the Plan were still in effect.

5.8 Foreign Private Issuer Status

If, and for so long as, the Company is not a Foreign Private Issuer or if the directors and
officers of the Company otherwise become subject to Section 16 of the Exchange Act, then
notwithstanding any provision of the Plan to the contrary:

 

 

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	(a)	 	the Plan shall be administered by a committee consisting of two or more persons (the
“Committee”) appointed by the Board, each of whom is a director qualifying as a
“disinterested” person, as such term is defined, from time to time, in Rule 16b-3 under the
Exchange Act;

	(b)	 	the Committee shall determine and designate, from time to time, the individuals to whom
awards shall be made hereunder, the amount of the awards and the other terms and conditions of
such awards;

	(c)	 	each member of the Committee shall, upon his appointment or election to the Committee for the
first time, automatically be granted an immediately exercisable Option to purchase 10,000
Shares at a price per share equal to the Fair Market Value at the date of grant for an Option
Period of ten years but shall not otherwise be eligible to participate in the Plan;

	(d)	 	no Option granted to a director or officer under the Plan may be exercised during the first
six months following the date of grant;

	(e)	 	directors and officers of the Company will be required to hold Shares acquired under the
Share Purchase Plan for a period of six months, provided that no such hold period will be
required in respect of any such director or officer who makes an irrevocable election to waive
his right to withdraw from the Share Purchase Plan or to change his Participant’s Contribution
at least six months prior to his acquisition of such Shares;

	(f)	 	Subsections 5.8(c), (d) and (e) may only be amended or modified by the Board or the
shareholders of the Company once in any six month period; and

	(g)	 	the Board may, subject to Subsection 5.8(f) and Section 5.7, amend or modify the Plan to the
extent that the Board, based upon the advice of legal counsel, considers necessary or
desirable to bring the Plan into compliance with Rule 16b-3 under the Exchange Act.

5.9 No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued
in accordance with the provisions of the Plan.

5.10 Audited Financial Statements

The Company shall provide annual financial statements of the Company to each Participant holding an
outstanding award under the Plan. Such financial statements need not be audited and need not be
issued to key employees whose duties at the Company assure them access to equivalent information.

 

 

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5.11 Compliance with Applicable Law, etc

If any provision of the Plan or any agreement entered into pursuant to the Plan contravenes any law
or any order, policy, by-law or regulation of any regulatory body or Stock Exchange having
authority over the Company or the Plan then such provision shall be deemed to be amended to the
extent required to bring such provision into compliance therewith.

PART 6 — ADMINISTRATION OF THE PLAN

6.1 Administration by the Committee

	(a)	 	Unless otherwise determined by the Board, the Plan shall be administered by the Compensation
Committee (the “Committee”) appointed by the Board and constituted in accordance with such
Committee’s charter. The members of the Committee serve at the pleasure of the Board and
vacancies occurring in the Committee shall be filled by the Board.

	(b)	 	The Committee shall have the power, where consistent with the general purpose and intent of
the Plan and subject to the specific provisions of the Plan, to:

	 	(i)	 	adopt and amend rules and regulations relating to the administration of the
Plan and make all other determinations necessary or desirable for the administration of
the Plan. The interpretation and construction of the provisions of the Plan and
related agreements by the Committee shall be final and conclusive. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient to
carry the Plan into effect and it shall be the sole and final judge of such expediency;
and
	 
	 	(ii)	 	otherwise exercise the powers delegated to the Committee by the Board and under
the Plan as set forth herein.

6.2 Board Role

	(a)	 	The Board, on the recommendation of the Committee, shall determine and designate from time to
time the individuals to whom awards shall be made, the amounts of the awards and the other
terms and conditions of the awards.

	(b)	 	The Board may delegate any of its responsibilities or powers under the Plan to the Committee,
provided that the grant of all Shares, Options or other awards under the Plan shall be subject
to the approval of the Board. No Option shall be exercisable in whole or in part unless and
until such approval is obtained.

	(c)	 	In the event the Committee is unable or unwilling to act in respect of a matter involving the
Plan, the Board shall fulfill the role of the Committee provided for herein.

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