Document:

EX-10.1

Exhibit 10.1

SEPARATION AND GENERAL RELEASE AGREEMENT

 

THIS SEPARATION AND GENERAL RELEASE AGREEMENT (“Agreement”) is voluntarily entered into on
this 3rd day of July, 2012 by and between Richard A. Navarre (“Executive”) and Peabody
Energy Corporation, a Delaware corporation (the “Company”).

 

WHEREAS, until June 30, 2012, Executive was employed by the Company as its President Americas
pursuant to an Employment Agreement entered into between the Company and Executive, dated as of May
19, 1998, which agreement was subsequently restated as of December 31, 2008 (the “Employment
Agreement”); and

 

WHEREAS, the Company and Executive have mutually agreed to conclude their employment
relationship on an amicable basis and have reached agreement regarding Executive’s separation from
the Company’s employ, and the parties wish to enter into this Agreement in order to memorialize
their agreement and to further define the obligations that the parties have to one another.

 

NOW, THEREFORE, in consideration of the mutual understandings, covenants, and the releases
contained herein, and for other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto hereby voluntarily agree as follows:

1. Separation and Effective Dates. Executive’s employment with the Company and, to the
extent applicable, with its direct and indirect subsidiaries and affiliates (the “Company
Affiliates”), terminated effective June 30, 2012 (the “Separation Date”). Executive understands and
agrees that from and after the Separation Date he was not, and continues to not be, authorized to
incur any expenses, obligations or liabilities on behalf of the Company or the Company Affiliates.
Executive and the Company agree that (a) for purposes of the Employment Agreement, the termination
described in this Paragraph 1 hereof shall be considered a termination by Executive for a
reason other than Good Reason, Disability or death (as described Section 6.3(a)(ii) of the
Employment Agreement), and (b) the terms hereof satisfy all provisions of the Employment Agreement.
Executive and the Company have waived any and all rights and obligations to provide or receive
notice of termination of Executive’s employment under the Employment Agreement.

2. No Claims. Executive represents and agrees that he has not filed any notices,
claims, complaints, charges, or lawsuits of any kind whatsoever against the Executive Releasees (as
defined in Paragraph 10 hereof) with any court, any governmental agency, any regulatory
body or any other third party with respect to any matter related to the Company, a Company
Affiliate or any Executive Releasee, or arising out of his employment with and/or separation from
the Company.

3. Payment of Amounts Owed. Executive and the Company acknowledge that the Company
will promptly pay all remuneration owed to Executive as a result of his employment with and
separation from the Company related to (a) his salary through the Separation Date, (b) all business
expenses incurred by him through the Separation Date as a result of his employment with the
Company, provided that such expenses are authorized under and consistent with the expense
reimbursement policies of the Company, and (c) all unused current vacation and the value of his
banked vacation as of the Separation Date. Except as specifically provided for in Paragraphs
3, 5 and 9 hereof, Executive shall not be entitled to receive any compensation
or benefits of employment from the Company or any Company Affiliate following the Separation Date
(other than benefits to which Executive is entitled by law, such as vested benefits under any
qualified retirement plan of the Company and the right to continue coverage under certain welfare
plans of the Company pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended).

4. Non-Admission of Liability and Acknowledgement of Compliance. This Agreement and
the fact that it was offered are not and shall not in any way be construed as admissions by the
Company that it violated any federal, state or local law, statute or regulation, or that it acted
wrongfully with respect to Executive or to any other person or entity in any manner. The Company
specifically disclaims any liability to, or wrongful acts against, Executive or any other person or
entity. Further, Executive acknowledges and agrees that it is the policy of the Company to comply
with all applicable federal, state and local laws and regulations.

5. Consideration.

(a) In exchange for the promises and agreements made by Executive contained in this
Agreement (including, but not limited to, the release provided pursuant to Paragraph
10 hereof), the Company will:

(i) cause the 41,356 shares of restricted stock of the Company granted to
Executive on January 3, 2012 (the “Shares”) to become fully vested and
non-forfeitable as of the day immediately following the expiration of the revocation
period described in Paragraph 19 hereof; and

(ii) pay Executive an amount equal to $630,000.00, which will be paid in a lump
sum cash payment on the regular payroll date of the Company next following
expiration of the revocation period described in Paragraph 19 hereof.

(b) The amounts and benefits described in Paragraph 5(a) hereof shall
collectively be referred to herein as the “Severance Payment.”

(c) Prior to the Separation Date, the Company caused the forfeiture of the Shares that,
pursuant to the applicable equity plan of the Company, would have occurred automatically as
of the Separation Date, to be held in abeyance for thirty (30) days following the Separation
Date such that, as of the date hereof, the Shares remain outstanding but unvested. If this
Agreement is revoked pursuant to Paragraph 19 hereof, the Shares shall automatically
be forfeited by Executive on the date of such revocation. So long as this agreement is not
so revoked, the provisions of Paragraph 5(a)(i) shall control with respect to the
Shares.

(d) Executive and the Company agree that Executive will not be entitled to any
Severance Payment, including any amount already paid, if he revokes any part of the release
contained in Paragraph 10 hereof (which revocation may only be accomplished pursuant
to Paragraph 19 hereof).

(e) Executive acknowledges that (i) he is not entitled to receive any of the payments
or benefits described in Sections 6.2, 6.4 or 6.5 of the Employment Agreement, (ii) all or a
portion of the monies and benefits set forth in this Paragraph 5 constitute
additional consideration above and beyond anything to which Executive is already entitled,
in exchange for his execution of this Agreement and the non-revocation of the release
provided in Paragraph 10 hereof, and (iii) except as specifically set forth in this
Paragraph 5, all of Executive’s awards outstanding under equity plans of the Company
shall remain subject to the terms thereof and are not amended hereby.

6. Return of Company Property. Executive represents, warrants and covenants that he
will promptly comply with the requirements of Section 6.7 of the Employment Agreement and will
promptly return to the Company all of its property and all confidential information that is in
Executive’s possession, custody, or control, including, but not limited to, all originals and
copies of any keys, access cards, security badges, credit cards, telephone cards, telephones and
other equipment, computer hardware (including, but not limited to, all computers, mobile phone
devices, and personal data assistants), all contents of all such hardware, all passwords and codes
needed to obtain access to or operate effectively all or part of any such hardware, all electronic
storage devices (including, but not limited to, all hard drives, disk drives, diskettes, CDs,
CD-ROMs, DVDs, and DVD-ROMs, and flash or “thumb” drives), all contents of all such electronic
storage devices, all passwords and codes needed to obtain access to or operate effectively all or
part of any such electronic storage device, and all computer software and programs, financial
information, accounting records, computer printouts, manuals, flow charts, policies, customer
information, customer lists, client lists, vendor information and lists, consultant lists, data,
materials, papers, books, files, documents, records, policies, marketing information,
specifications, plans, database information and lists, mailing lists, and notes, and all materials
describing or containing any such confidential information (whether those materials are on paper or
electronically stored).  Executive agrees not to keep any originals, copies, or embodiments of any
such property or information in any form, and not to disclose any of their contents to any other
person. So long as Executive does not violate any other part of this Agreement, nothing in this
Paragraph 6 precludes Executive from retaining (a) documents describing any benefits to
which he may be entitled as a former employee of the Company, and (b) a copy of Executive’s contact
lists that were stored on the mobile telephone and laptop computer issued to Executive by the
Company (which lists shall not be deleted prior to returning said telephone and computer to the
Company).

7. Confidential Information, Non-Competition, Non-Solicitation and Survival of Employment
Agreement. The parties to this Agreement hereby reaffirm the provisions of Section 13 of the
Employment Agreement and agree to abide by the terms thereof. For the purpose of clarity, the
parties hereto (a) agree that the termination of the employment of Executive as described in
Paragraph 1 hereof shall constitute a termination of the Employment Agreement effective as
of the Separation Date, and (b) acknowledge that the survival provisions set forth in Section 20 of
the Employment Agreement continue to apply and the surviving provisions of the Employment Agreement
shall remain in full force and effect except as specifically provided herein or amended hereby.
Executive’s compliance with these obligations is a material term of this Agreement, and in the
event Executive breaches any such obligations, in addition to any remedies and enforcement
mechanisms set forth in the Employment Agreement and any other remedies available to the Company
(including equitable and injunctive remedies), Executive shall forfeit any additional payments
owing, and shall be obligated to promptly return to the Company (within two (2) business days of
any breach) the full gross value of the Severance Payment, as reported on Executive’s 2012 Form W-2
(the “Severance Value”).

8. No Disparagement or Encouragement of Claims. Neither Executive nor the Company
shall, at any time following the Separation Date, make statements or representations, or otherwise
communicate in writing, orally or otherwise, or take any action which may disparage or be damaging
to (a) Executive (or Executive’s family members, heirs or legal beneficiaries) if any such
statement, representation or communication is the Company, or (b) the Company, any Company
Affiliate or the Executive Releasees if any such statement, representation or communication is by
Executive; provided, that nothing in this Paragraph 8 shall preclude Executive or
any executive officer or director of the Company from making truthful statements or disclosures
that are required by applicable law, regulation or legal process. In furtherance of the foregoing
obligations, (i) Executive agrees that he will advise all persons or entities seeking employment
verification to direct those inquiries to Company’s Human Resources Department, and (ii) the
Company agrees that it will respond to all such inquiries directed its Human Resources Department
by providing only Executive’s dates of employment and job title and will state that it is limiting
its response to these items in accordance with Company’s policy.

9. Cooperation. For purposes of transitioning Executive’s duties as the Company’s
President Americas, Executive hereby agrees to consult with the Company on an as-needed basis
during the sixty (60) day period following the Separation Date. While performing such consulting
services, Executive will be acting as an independent contractor, and not an employee, of the
Company. In exchange for providing such consulting services, and so long as Executive does not
revoke this Agreement as provided in Paragraph 19 hereof, the Company shall pay to
Executive two (2) payments, each in the amount of $75,000.00 (the aggregate amount thereof, the
“Consulting Payments”), the first of which shall be payable on July 31, 2012, and the second of
which shall be paid on August 31, 2012. In addition, in the event of any pending or threatened
legal action against the Company or the Company Affiliates, Executive acknowledges and agrees that
he will promptly and diligently cooperate as requested in the investigation, preparation,
prosecution, or defense of the Company’s or the Company Affiliate’s case, including, but not
limited to, meeting with and fully answering the questions of the Company or the Company Affiliates
or its or their attorneys, representatives or agents; preparing, reviewing and executing documents,
including subpoenas; and testifying and preparing to testify at any deposition, trial, or other
proceeding without subpoena. Reasonable out-of-pocket expenses related to such assistance will be
reimbursed by the Company, if the Company’s written approval is obtained in advance. Nothing in
this Paragraph 9 should be construed as suggesting or implying that Executive should
testify in any way other than truthfully or provide anything other than accurate, truthful
information. Executive further agrees to provide truthful and timely answers to any reasonable
questions the Company may have from time to time about the work Executive performed during his
employment. A failure on the part of Executive to reasonably cooperate with the Company shall
constitute and be treated as a material breach of this Agreement.

10. Executive’s General Release, Discharge of All Executive Claims and Agreement Not to
Sue. In consideration of the payments referred to in Paragraph 5 hereof from the
Company to Executive as set forth herein and other consideration the receipt and sufficiency of
which is hereby acknowledged, except as provided in Paragraph 11 hereof, Executive, on
behalf of himself, his dependents, heirs, executors, administrators, assigns, predecessors and
successors, and each of them hereby:

(a) knowingly, irrevocably, unconditionally voluntarily and forever releases and
forever discharges the Company, the Company Affiliates, and associated organizations, past
and present, and each of them, as well as its and their trustees, directors, officers,
agents, attorneys, employees, contractors, insurers, representatives assigns, predecessors
and successors, past and present, of each of them (hereinafter the “Executive Releasees”),
with respect to and from any and all legally waivable claims, wages, demands, rights, liens,
agreements, contracts, covenants, actions, suits, causes of action, obligations, debts,
costs, expenses, attorneys’ fees, damages, judgments, orders, liabilities, complaints, and
promises whatsoever, in law or equity, known or unknown, suspected or unsuspected, and
whether or not concealed or hidden (collectively, the “Executive Claims”), which he now owns
or holds or he has at any time heretofore owned or held or may in the future hold as against
any or all said Executive Releasees, arising on or before the date this Agreement is
executed, including, but not limited to, any Executive Claim arising out of or in any way
connected with his employment with and/or separation from the Company, any Executive Claim
arising under the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age
Discrimination in Employment Act of 1967 (the “ADEA”), Older Workers Benefit Protection Act
of 1991 (“OWBPA”), the Americans with Disabilities Act, the Family and Medical Leave Act of
1993, the Fair Labor Standards Act, the False Claims Act, the Employee Retirement Income
Security Act of 1974, Missouri civil rights laws and regulations, Missouri wage/hour laws
and regulations, or any other federal, state or local law, regulation, ordinance or public
policy, and any Executive Claim for severance pay, bonus pay, sick leave, holiday pay,
vacation pay, life insurance, health, medical or disability insurance or any other fringe
benefit or the common law of any state relating to employment contracts, wrongful discharge,
defamation or any other matter; and

(b) agrees not to sue any or all of the Executive Releasees with respect to any matter
released or discharged herein, except that Executive may seek a determination of the
validity of the waiver of his rights under the ADEA.

Nothing in this Agreement is intended to reflect any party hereto’s belief that the waiver of
Executive’s claims under the ADEA is invalid or unenforceable, it being the intent of the parties
hereto that such claims are waived.

11. Exclusions from Executive’s General Release and Discharge. Notwithstanding the
provisions of Paragraph 10 hereof, Executive does not release and discharge (a) any right
to continue his group health insurance coverage pursuant to applicable law; (b) any vested benefits
in any qualified retirement plan; (c) any claim for breach of this Agreement; (d) any right he may
have to insurance coverage under the Company’s directors and officers or other insurance policies
and self-insurance programs for acts or omissions during his period of employment; (e) any right he
may have to indemnification by the Company pursuant to (i) the indemnification agreement between
him and the Company dated December 5, 2002, (ii) the Company’s Third Amended and Restated
Certificate of Incorporation, or (iii) the Amended and Restated By-Laws of the Company; and (f) any
claim that cannot be released by law, including, but not limited to, the right to file a charge
with or participate in an investigation by the Equal Employment Opportunity Commission (“EEOC”).
Executive does, however, hereby waive any right to recover any money should the EEOC or any other
agency or individual pursue any claims on his behalf.

12. The Company’s General Release, Discharge of All Company Claims and Agreement Not to
Sue. In consideration of Executive’s release provided pursuant to Paragraph 10 hereof
and other consideration the receipt and sufficiency of which is hereby acknowledged, except as
provided in Paragraph 13 hereof, the Company, on behalf of itself and the Company
Affiliates hereby:

(a) knowingly, irrevocably, unconditionally voluntarily and forever releases and
forever discharges Executive, his heirs, executors, administrators, assigns, predecessors
and successors, (hereinafter, the “Company Releasees”), with respect to and from any and all
legally waivable claims, demands, rights, liens, agreements, contracts, covenants, actions,
suits, causes of action, obligations, debts, costs, expenses, attorneys’ fees, damages,
judgments, orders, liabilities, complaints, and promises whatsoever, in law or equity, known
or unknown, suspected or unsuspected, and whether or not concealed or hidden (collectively,
the “Company Claims”), which the Company or any Company Affiliate now owns or holds or has
at any time heretofore owned or held or may in the future hold as against any or all said
Company Releasees, arising on or before the date this Agreement is executed, including, but
not limited to, any Company Claim arising out of or in any way connected with his employment
with and/or separation from the Company, any Company Claim arising under any federal, state
or local law, regulation, ordinance or public policy, and any Company Claim for any other
matter; and

(b) agrees not to sue any or all of the Company Releasees with respect to any matter
released or discharged herein.

13. Exclusions from the Company’s General Release and Discharge; Indemnification.
Notwithstanding the provisions of Paragraph 12 hereof, the Company does not release and
discharge (a) any Company Claim for breach of this Agreement (specifically including, but not
limited to, Paragraph 7 hereof); (b) any Company Claim arising under Sarbanes Oxley, or the
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; (c) any Company Claim for fraud
against the Company, theft or conversion of Company property or assets, or other Company Claim
alleging deliberate dishonesty in dealing with the Company’s property or assets; and (d) any claim
that cannot be released by law.  In addition, (i) Executive hereby agrees to indemnify the Company
and hold the Company harmless against any claim by a third party alleging conduct which, if proven,
would be a violation of provisions of the Company’s Code of Business Conduct and Ethics relating to
conduct toward employees of the Company; however, in no event shall Executive’s liability pursuant
to this clause (i) exceed the sum of the Severance Value and Consulting Payments; and (ii)
notwithstanding the provisions of Paragraph 12 hereof, the Company does not release and
discharge any right to the indemnity provided by Executive pursuant to the foregoing clause (i).

14. No Representation. Executive represents and acknowledges that in executing this
Agreement he does not rely and has not relied on any representation or statement by the Company or
its agents, representatives or attorneys with regard to the subject matter, basis or effect of this
Agreement.

15. No Assignment.

(a) By Executive. Executive represents that he has not heretofore assigned or
transferred, or purported to assign or transfer, to any person or entity, any Executive
Claim or any portion thereof or interest therein, and Executive agrees to indemnify, defend
and hold harmless each and all of the Executive Releasees against any and all disputes based
on, arising out of, or in connection with any such transfer or assignment, or purported
transfer or assignment, of any Executive Claim or any portion thereof or interest therein
which were otherwise released pursuant to Paragraph 10 hereof.

(b) By the Company. The Company represents that it has not heretofore assigned
or transferred, or purported to assign or transfer, to any person or entity, any Company
Claim or any portion thereof or interest therein, and the Company agrees to indemnify,
defend and hold harmless each and all of the Company Releasees against any and all disputes
based on, arising out of, or in connection with any such transfer or assignment, or
purported transfer or assignment, of any Company Claim or any portion thereof or interest
therein which were otherwise released pursuant to Paragraph 12 hereof.

16. Severability. If any provision of this Agreement or the application thereof is
held invalid, the invalidity shall not affect other provisions or applications of this Agreement
which can be given their intended effect without the invalid provisions or applications, and to
this end the provisions of this Agreement are declared to be severable. If, however, a court of
competent jurisdiction finds that any release by Executive or the Company in Paragraph 10
or 12 hereof is illegal, void, or unenforceable, then Executive or the Company, as
applicable, agrees to promptly sign a release, waiver, and/or agreement that is legal and
enforceable to the greatest extent permitted by law.

17. No Continuing Employment Relationship. Executive and the Company acknowledge that
any employment relationship between Executive and the Company was terminated as of the Separation
Date and that they have no further employment relationship. Executive waives any right or claim to
reinstatement as an employee of the Company.

18. Voluntary Execution of Agreement and Consultation with Counsel. Executive
acknowledges that he has been advised by the Company to consult, and has consulted, with an
attorney prior to executing this Agreement. Executive represents, warrants and agrees that he has
carefully read this Agreement and understands its meaning and has sought independent legal advice
from an attorney of his choice with respect to the advisability of this Agreement and is signing
this Agreement, knowingly, voluntarily and without any coercion or duress. Executive further
acknowledges that he has been given a period of twenty-one (21) days within which to consider
whether to sign this Agreement. Executive may execute this Agreement at any time within the
twenty-one (21) day period and by doing so Executive waives any right to the remaining days.

19. Revocability of Agreement. Executive has the right to revoke this Agreement,
solely with respect to his release of claims under the ADEA and the OWBPA, for up to seven (7) days
after Executive signs it. In order to revoke this Agreement, Executive must sign and send a written
notice of the decision to do so, following the notice provisions set forth in Paragraph 20
hereof, which must be received no later than the eighth (8th) day after Executive
executes this Agreement. If Executive revokes this Agreement pursuant to this Paragraph 19,
Executive will not be entitled to the consideration from the Company described herein (including,
but not limited to, the Severance Payment or the release provided pursuant to Paragraph 12
hereof, which, upon such revocation by Executive, shall be immediately, and without the requirement
of any action on the part of the Company, null and void and of no further force or effect).

20. Notice. All notices, requests, demands and other communications hereunder to
either party to this Agreement shall be in writing and shall be delivered, either by hand, by
facsimile, by overnight courier or by certified mail, return receipt requested, duly addressed as
indicated below or to such changed address as the party may subsequently designate:

To the Company:

Executive Vice President and Chief Administrative Officer

Peabody Energy Corporation

701 Market Street, Suite 1400

St. Louis, Missouri 63101-1826

With a copy to:

Katten Muchin Rosenman LLP

525 W. Monroe

Suite 1900

Chicago, Illinois 60661

Attention: David R. Shevitz and Daniel B. Lange

To Executive:

At the most recent address set forth in the Company’s personnel records (unless
Executive notifies the Company at the address above of a different address to be
used for notice purposes hereunder).

With a copy to:

	 	 	 
	Miner, Marnhill & Galland, P.C.

	14 W. Erie Street

	 	

	Chicago, Illinois 60654

	Attention:

	 	George F. Galland, Jr.

21. Tax and Section 409A. All amounts payable to Executive hereunder which are
considered compensation shall be subject to all withholding by the Company required under
applicable law. It is intended that the Severance Payments not be considered compensation deferred
under a “non-qualified deferred compensation plan” within the meaning of Section 409A of the
Internal Revenue Code of 1986 (“Section 409A”). It is further intended that any income or payments
to Executive pursuant to this Agreement (any such income or payments being referred to as
“Payments”) will not be subject to the additional tax and interest (a “Section 409A Tax”) under
Section 409A. The provisions of this Agreement will be interpreted and construed in favor of
complying with any applicable requirements of Section 409A necessary in order to avoid the
imposition of a Section 409A Tax. Notwithstanding the foregoing, Executive agrees and acknowledges
that, to the extent a Section 409A Tax becomes due with respect to any Payment, the liability for
any such tax and interest, and any additional amounts related thereto, shall be the sole
responsibility of Executive.

22. Governing Law. This Agreement is made and entered into in the State of Missouri
and shall be interpreted, enforced and governed under Missouri law, without regard to its conflict
of laws principles.

23. Dispute Resolution. The parties hereto agree that the provisions of Section 15 of
the Employment Agreement shall govern any dispute arising under this Agreement.

24. Binding Effect. This Agreement shall be binding upon Executive and upon his
dependents, heirs, representatives, executors, administrators, successors and assigns, and shall
inure to the benefit of the Company and others released in this Agreement, and to their respective
dependents, heirs, representatives, executors, administrators, successors and assigns.

25. No Presumption. This Agreement shall be construed and interpreted as if all of its
language were prepared jointly by Executive and the Company. No language in this Agreement shall be
construed against a party hereto on the ground that such party drafted or proposed that language.

26. Waiver. No waiver by Executive or the Company 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 any other term or covenant contained in this Agreement. 

27. Headings; References to Law. The headings in this Agreement are included solely
for convenience of reference and shall not be construed as limiting or in any other way modifying
the text of the Agreement. All references to any law hereunder shall be deemed a reference to such
law as it may be amended, updated or superseded from time to time.

28. Execution of Counterparts. This Agreement may be executed in counterparts, but
shall be construed as if signed in one document.

29. Entire Agreement; Amendment. This Agreement constitutes and contains the entire
agreement and understanding concerning Executive’s employment with and separation from the Company
and the other subject matters addressed herein between the parties hereto, and supersedes and
replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matters hereof, except for the portions of the Employment Agreement which
remain in effect, but subject to any amendment thereof resulting from the terms hereof. Executive
represents and agrees that no promises, statements or inducements have been made to him which
caused him to sign this Agreement other than those which are expressly stated in this Agreement.
This is an integrated document and may not be altered except by written agreement signed by a
properly authorized officer of the Company and Executive.

[Signature Page Follows]

1

IN WITNESS WHEREOF, the Company and Executive have entered into this Separation and General
Release Agreement effective as of the date first written above.

/s/ Richard A. Navarre

     

Richard A. Navarre

PEABODY ENERGY CORPORATION

	 	 	 
	By:

Name:

Title:
	 	/s/ Sharon Fiehler

     

Sharon Fiehler

Executive Vice President and Chief

Administrative Officer

2sapx_ex101.htm

 

SEVEN ARTS ENTERTAINMENT INC.

2012 STOCK INCENTIVE PLAN (2)

For Employees and Other Service Providers

Established June 22, 2012

 

	
Section 1.  

	
Purpose.

 

	
(a)  

	
The purpose of this 2012 Stock Incentive Plan (the “Plan”) is to enable Seven Arts Entertainment Inc. (the “Company”) and its Subsidiaries to attract, retain, motivate, and reward employees, and other service providers of the Company and its Subsidiaries, to provide for equitable and competitive compensation opportunities, to recognize individual contributions and reward achievement of Company goals, and to promote the creation of long-term value for stockholders by strengthening the mutuality of interests between those employees and other service providers and the Company’s stockholders.

 

	
(b)  

	
The Plan authorizes stock-based incentives for Participants.  Awards may be made in the form of (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) Restricted Stock; and (iv) any combination of the foregoing.

 

	
Section 2.  

	
Definitions.  The following terms have the respective meanings, in addition to the capitalized terms defined in Section 1 hereof or as otherwise defined throughout this document:

 

	
(a)  

	
 “Award” means any Option, Restricted Stock, or Stock granted for services rendered, together with any related right or interest, granted to a Participant under the Plan.

 

	
(b)  

	
“Award Agreement” means any Option Agreement, Restricted Stock Agreement, or any other agreement under which the Company (or a Subsidiary) grants an Eligible Person an Award.

 

	
(c)  

	
“Beneficiary” means the person(s) or trust(s) designated as being entitled to receive the benefits under a Participant’s Award upon and following a Participant’s death. Unless otherwise determined by the Committee, a Participant may designate one or more persons or one or more trusts as his or her Beneficiary.

 

	
(d)  

	
“Board” means the Company’s Board of Directors.

 

	
(e)  

	
“Cause” means, unless otherwise provided by the Committee, (i) “Cause” as defined in any Individual Agreement to which the Participant is a party, or (ii) if there is no such Individual Agreement or if it does not define Cause: (A) conviction of the Participant for committing a felony under federal law or in the law of the state in which such action occurred, (B) dishonesty in the course of fulfilling the Participant’s employment or service duties, (C) willful and deliberate failure on the part of the Participant to perform the Participant’s employment or service duties in any material respect, or (D) prior to a Corporate Transaction, such other events as shall be determined by the Committee.  The Committee shall, unless otherwise provided in an Individual Agreement with the Participant, have the sole discretion to determine whether “Cause” exists, and its determination shall be final.

 

	
(f)  

	
“Code” means the Internal Revenue Code of 1986, as amended from time to time, any successor thereto, and including any regulations promulgated thereunder.

 

	
(g)  

	
“Committee” means the Compensation Committee created and appointed by the Board.

 

  

1

  

 

	
(h)  

	
“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any of the following: (i) any person or group of persons (as defined in Sections 13(d) and 14(d) of the Exchange Act) together with his/her/their affiliates, excluding employee benefit plans of the Company, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities; or (ii) a merger or consolidation of the Company with any other corporation or entity is consummated regardless of which entity is the survivor, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity or its parent) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iii) the Company is completely liquidated or all or substantially all of the Company’s assets are sold.

 

	
(i)  

	
“Covered Employee” means an Eligible Person who is an employee of the Company, or a Subsidiary.

 

	
(j)  

	
“Covered Service Provider” means an Eligible Person who is an independent contractor providing services to the Company.

 

	
(k)  

	
“Date of Grant” means  the date on which the Committee has completed all corporate action necessary to give the Participant a legally binding right to the Award, including the setting of the number of shares of Stock subject to the Award and the exercise price.

 

	
(l)  

	
“Disability” means a permanent and total disability resulting from a physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, as determined by the Committee based on medical evaluation.

 

	
(m)  

	
“Effective Date” means June 22 2012.

 

	
(n)  

	
“Eligible Persons” means those persons who are designated by the Committee under Section 5(a) of this Plan to receive Awards.

 

	
(o)  

	
 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and shall include any successor thereto.

 

	
(p)  

	
“Fair Market Value” or “FMV” means, as of any date, the fair market value of a share of the Company’s Stock, as determined in good faith and under procedures established by the Committee as follows:

 

(i)  if on the Date of Grant or other determination date the Stock is listed on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (if there is more than one such exchange or market, the Committee shall determine the appropriate exchange or market) on the Date of Grant or such other determination date;

 

(ii)  if on the Date of Grant or other determination date the Stock is listed on an established securities market, but there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on the Date of Grant or other determination date;

 

(iii)  if on the Date of Grant or other determination date the Stock is listed on an established securities market, but no sale of Stock is reported for such trading day, the Fair Market Value shall be the closing price on the next preceding day on which any sale shall have been reported before the Date of the Grant or other determination date; or

 

(iv) if the Stock is not listed or admitted to trading on a national securities exchange, the  Fair Market Value shall be the value of the Stock as determined by the reasonable application by the Committee of a reasonable valuation method in conformance with the requirements of Treasury Regulations Sections 1.422-2(e)(20(iii) and 1.409A-1(b)(5)(iv)(B).

 

  

2

  

 

	
(q)

	
“Incentive Stock Option” or “ISO” means any Option intended to be, designated as, and that otherwise qualifies as an “Incentive Stock Option” within the meaning of Code Section 422.

 

	
(r)   

	
“Individual Agreement” means an employment or similar agreement between a Participant and the Company or one of its Subsidiaries.

 

	
(s)

	
“Non-Employee Director” has the meaning set forth under Section 16 of the Exchange Act.

 

	
(t)  

	
“Nonstatutory Stock Option” means any Option that is not an Incentive Stock Option.

 

	
(u)  

	
“Option” means a right to purchase Stock granted under Section 6(b) of the Plan.

 

	
(v)  

	
“Outside Director” has the meaning set forth in Code Section 162(m).

 

	
(w)  

	
“Other Stock-Based Awards” means Awards granted to a Participant that are valued, in whole or in part, by reference to, or otherwise based on, shares of Stock.

 

	
(x)  

	
“Participant” means a person who has been granted an Award under the Plan that remains outstanding, including a person who is no longer an Eligible Person.

 

	
(y)  

	
“Plan” means Seven Arts Entertainment Inc. 2012 Stock Incentive Plan.

 

	
(z)  

	
“Restricted Stock” means Stock granted under this Plan, which is subject to certain restrictions and to a risk of forfeiture.

 

	
(aa)  

	
“Section 16 Participant” means a Participant under the Plan who is subject to Section 16 of the Exchange Act.

 

	
(bb)  

	
“Stock” means shares of the Company’s stock which is common stock for purposes for purposes of Section 305 of the Code and the implementing regulations, with $0.01 par value per share, and any other equity securities of the Company that may be substituted or resubstituted for such Stock.  In all cases under this plan, Stock shall constitute “service recipient stock” within the meaning of Treasury Regulation Section 1.409A-1(b)(5)(iii).

 

	
(cc)  

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

 

	
(dd)  

	
“Ten Percent or More Stockholder”  means an Eligible Person who owns or is deemed to own (by reason of the attribution rules of Code Section 424(d)) more than 10% of the combined voting power of all classes of Stock of the Company or any parent or subsidiary corporation.

 

  

3

  

 

	
Section 3.  

	
Administration.

 

	
(a)  

	
Authority of the Committee.  The Plan shall be administered by the Committee.  Any interpretation or administration of the Plan by the Committee, and all actions and determinations of the Committee, shall be final, binding and conclusive on the Company, its stockholders, Subsidiaries, all Participants in the Plan, their respective legal representatives, successors and assigns, and all persons claiming under or through any of them. The Committee shall consider such factors as it deems relevant to making such decisions, determinations, and interpretations. A Participant or other holder of an Award may contest a decision or action of the Committee with respect to such person or Award only on the grounds that such decision or action is arbitrary or capricious or was unlawful.

 

	
(b)  

	
Composition of the Committee.  The Committee shall consist of directors of the Company appointed in accordance with the Articles and By-Laws of the Company.

 

	
(c)  

	
Manner of Exercise of Committee Authority. The Committee shall have the full power and authority to interpret and administer the Plan in its sole discretion, including exercising all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan.  The Committee’s powers and authorities include, without limitation, the following: (i) the sole ability to determine: eligibility criteria for Awards; (ii) to select the Eligible Persons to whom Awards may from time to time be granted; (iii) to determine the time or times at which Awards shall be granted; (iv)  to determine the number of shares of Stock to be covered by each Award; (v)  to determine and modify from time to time the specific terms and conditions , including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and  to approve the form of written instruments evidencing the Awards; (vi) to determine the vesting and exercisability of any Award and to accelerate at any time the vesting or exercisability of all or any portion of any Award; (vii) subject to the provisions of this Plan, to extend at any time the period in which Stock Options may be exercised; (viii) to determine the exercise or purchase price of such shares of Stock; (ix) to determine if and when Awards are forfeited or expire under their terms; (x) to interpret and construe the Plan provisions; any amendments, and any rules and regulations relating to the Plan; (xi) to make exceptions to any Plan provisions in good faith and for the benefit of the Company; and (xii) to make all other determinations deemed necessary or advisable for the administration of the Plan.

 

	
(d)  

	
Delegation of Authority. The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable, and the Committee or any person to whom it has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Committee or such person may have under the Plan; provided, that such delegation may not include the selection or grant of Awards to Participants or Eligible Persons who are executive officers of the Company or any Subsidiary, affiliate or Section 16 Participants.

 

	
(e)  

	
Committee Vacancies. The Board shall fill all vacancies in the Committee.  The Board may from time to time appoint additional members to the Committee and may at any time remove one or more Committee members and substitute others.  One member of the Committee shall be selected by the Board as chairman.  The Committee shall hold its meetings at such times and places as it shall deem advisable.  All determinations of the Committee shall be made by not less than a majority of its members either present in-person or participating by a telephone conference at a meeting or by written consent.  The Committee shall keep minutes of its meetings.  The Committee may appoint a secretary to keep such minutes and may make such rules and regulations for the conduct of its business as it shall deem advisable, but in accordance with the written charter prepared by the Board and which may be amended from time to time by the Board.  The secretary shall not need to be a member of the Committee or a member of the Board.

 

	
(f)  

	
Limitation of Liability.  The Committee and each member thereof, and any person acting pursuant to authority delegated by the Committee, shall be entitled, in good faith, to rely or act upon any report or other information furnished by any executive officer, other officer or employee of the Company or a Subsidiary, the Company’s independent auditors, consultants or any other agents assisting in the administration of the Plan.  Members of the Committee, any person acting pursuant to authority delegated by the Committee, and any officer or employee of the Company or a Subsidiary acting at the direction or on behalf of the Committee or a delegee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

 

  

4

  

 

	
Section 4.  

	
Stock Subject to Plan.

 

	
(a)  

	
Overall Number of Shares Available.  Subject to adjustment as provided under Section 10(c), the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be 20,000,000 shares.  Any shares of Stock issued under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.  The authorized number of reserved and available shares may be increased from time to time by approval of the Board and, if such approval is required, by the stockholders of the Company.

 

	
(b)  

	
Accounting Procedures. The Committee may adopt reasonable accounting procedures to ensure an appropriate accounting of Stock subject to the Plan, avoid double counting (as, for example, in the case of tandem or substitute Awards) and make adjustments in accordance with this Section 4(b).  Shares shall be counted against those reserved to the extent such shares have been delivered and are no longer subject to a risk of forfeiture.  Accordingly, (i) to the extent that an Award under the Plan is canceled, expired, forfeited, settled in cash, settled by delivery of fewer shares than the number underlying the Award, or otherwise terminated without delivery of Stock to the Participant, the Stock retained by or returned to the Company will not be deemed to have been delivered under the Plan; and (ii) Stock that is withheld from such Award or separately surrendered by the Participant in payment of the exercise price or taxes relating to such Award shall be deemed to constitute Stock not delivered and will be available under the Plan.  The Committee may determine that Awards may be outstanding that relate to more Stock than the aggregate shares of Stock remaining available under the Plan so long as Awards will not in fact result in delivery and vesting of shares of Stock in excess of the number then available under the Plan.  In addition, in the case of any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a Subsidiary or affiliate or with which the Company or a Subsidiary or affiliate combines, shares delivered or deliverable in connection with such assumed or substitute Award shall not be counted against the number of shares of Stock reserved under the Plan. The authorized number of reserved and available shares may be increased from time to time by approval of the Board and, if such approval is required, by the stockholders of the Company.

 

	
(c)  

	
Individual Annual Award Limits. No Participant may be granted Options or other Awards under the Plan with respect to an aggregate of more than 500,000 shares of Stock (subject to adjustment as otherwise may be provided for throughout this Plan) during any calendar year.

 

  

5

  

 

	
Section 5.  

	
Eligibility.

 

	
(a)  

	
Eligibility. Grants of Awards may be made from time to time to those officers, employees and Service Providers of the Company or any Subsidiary who are designated by the Committee in its sole and exclusive discretion as eligible to receive such Awards (“Eligible Persons”).  However, Options intended to qualify as ISOs shall be granted only to Eligible Persons while actually employed by the Company or a Subsidiary.  The Committee may grant more than one Award to the same Eligible Person. Awards may be made to members of the Committee and must be approved and granted by a majority of the disinterested members of the Board.

 

	
(b)  

	
Substitutions/Acquisitions. Holders of awards granted by a company or business acquired by the Company or a Subsidiary, or with which the Company or a Subsidiary combines, may be eligible for substitute Awards under this Plan that will be granted in assumption of or in substitution for such outstanding awards in connection with such acquisition or combination transaction; provided that such awards satisfy the requirements of Treasury Regulations Section 1.409A-1(b)(5)(v)(D).  In such cases, holders of the assumed or substituted awards will become Participants in the Plan; provided, however, that such assumption or substitution in no way causes an Award under this Plan to become subject to the terms and conditions of Code Section 409A.

 

	
(c)  

	
Participation.  An Eligible Person shall become a Participant in the Plan and shall perfect his or her Award only after he or she has completed the applicable Award Agreement in a manner that is satisfactory to the Committee and has delivered said Award Agreement to the Committee.  A Participant shall continue his or her participation in the Plan, even if no longer an Eligible Person, until any and all of his or her interests that are held under the Plan expire or are paid.  Participants who are on military leaves of absence, sick leaves, and any other bona fide leaves of absence are not considered to be separated from service and shall be deemed employed so long as the leave does not extend beyond three (3) months or, if longer, the individual retains reemployment rights under an applicable statute or by contract.

 

	
Section 6.  

	
Specific Terms of Awards Granted Under the Plan.

 

	
(a)  

	
General Terms of All Awards.  All Awards granted under the Plan.  Award Agreements may provide for grants of Awards on the specific terms and conditions set forth in this Section 6.  Alternatively, the Committee may impose on any individual Award, as specified in the individual Award Agreement, such additional terms and conditions, not inconsistent with the provisions of the Plan, or applicable law, as the Committee shall determine, including terms relating to the forfeiture of Awards in the event of termination of employment or service by the Participant and terms permitting a Participant to make elections relating to his or her Award.  The Committee shall retain full power and discretion with respect to any term or condition of an Award that is not mandatory under the Plan and the terms of the Award Agreement; provided that the exercise of such discretion shall in no event cause an Award to become subject to the terms and conditions of Code Section 409A, unless otherwise agreed upon between the Company (or Subsidiary) and the Eligible Person.  The Committee shall require the payment of lawful consideration for an Award to the extent necessary to satisfy the requirements of the Nevada Revised Statutes, and may otherwise require payment of consideration for an Award except as limited by the Plan and as otherwise required by applicable law.

 

  

6

  

 

	
  

 

	

If it is determined by the Committee prior to the grant of any Award that such Award would be subject to Code Section 409A, the Award Agreement shall incorporate the terms and conditions required by Code Section 409A. To the extent applicable, this Plan and the Award Agreements shall be interpreted in accordance with Code Section 409A and its implementing regulations.

 

In the event the Committee determines after the Date of Grant that any Award granted hereunder may be subject to Code Section 409A, the Committee may adopt such amendments to the Plan  and/or applicable Award Agreement or adopt other policies and procedures (including those with retroactive effect) or take any other actions that the Committee  determines are necessary and appropriate to (i) exempt the Award from Code Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (ii) comply with the requirements of Code Section 409A.

 

	
(b)  

	
Option Awards. Options granted under the Plan shall be evidenced by an agreement (“Option Agreement”).  Options that are awarded may be of one of two types which shall be indicated on the face of the Option Agreement: (i) ISOs or (ii) Nonstatutory Stock Options.  The Committee is authorized to grant Options to Participants on the following terms and conditions:

 

	
(i)  

	
Option Term; Time and Method of Exercise.  The Committee shall determine the term of each Option; provided that in no event shall the term of any Option exceed a period of 10 years from the Date of Grant (or with respect to an ISO, 5 years from the Date of Grant in the case of a Participant who at the Date of Grant is a Ten Percent or More Stockholder).  The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid and the form of such payment, including, without limitation, cash, Stock (including by withholding Stock deliverable upon exercise), other Awards or awards granted under other plans of the Company or any Subsidiary, or other property, and the methods by or forms in which Stock will be delivered or deemed to be delivered in satisfaction of Options to Participants. The Committee shall have the right, at any time after the Date of Grant, to reduce or eliminate any restrictions on the Participant’s right to exercise all or part of the Stock Option, except that no Stock Option shall first become exercisable within one year from the Date of Grant.

 

	
(ii)  

	
Exercise Price.  The option price per share of Stock purchasable under a Nonstatutory Stock Option or an Incentive Stock Option shall be determined by the Committee at or immediately prior to the Date of Grant, shall be set forth on the applicable Option Agreement, and shall be not less than 100% of the Fair Market Value of the Stock at the Date of Grant (or, with respect to an Incentive Stock Option, and a Participant who at the Date of Grant is a Ten Percent or More Stockholder, 110% of the Fair Market Value of the Stock at the Date of Grant).  Prior to the Date of Grant, the Committee shall specify the method by and date on which the Fair Market Value of the Option will be determined; said date shall be specified on the Option Agreement.

 

	
(iii)  

	
Non-Transferability of Options.  No Option shall be transferable by any Participant other than by will or by the laws of descent and distribution, except that, if so provided in the Option Agreement, the Participant may transfer the Option, other than an ISO, (i) pursuant to a qualified domestic relations order (as defined in the Code or the Employment Retirement Income Security Act of 1974, as amended); or (ii) during the Participant’s lifetime to one or more members of the Participant’s family, to one or more trusts for the benefit of one or more of the Participant’s family, or to a partnership or partnerships of members of the Participant’s family, or to a charitable organization as defined in Code Section 501(c)(3), provided that the transfer would not result in the loss of any exemption under Rule 16b-3 of the Exchange Act with respect to any Option.  The transferee of an Option will be subject to all restrictions, terms and conditions applicable to the Option prior to its transfer, except that the Option will not be further transferable by the transferee other than by will or by the laws of descent and distribution.

 

  

7

  

 

	
(iv)  

	
Disposition upon Termination of Employment.

 

	
(A)  

	
Termination by Death.  Subject to Sections 6(b)(i) and 6(b)(v), if any Participant’s employment (or service) with the Company or any Subsidiary terminates by reason of death, any Option held by that Participant shall become immediately and automatically vested and exercisable.  If termination of a Participant’s employment (or service) is due to death, then any Option held by that Participant may thereafter be exercised for a period of two years (or with respect to an ISO, for a period of 18 months or such other lesser period as the Committee may specify at or after grant) from the date of death.  Notwithstanding the foregoing, in no event will any Option be exercisable after the expiration of the option period of such Option.  The balance of the Option shall be forfeited if not exercised within two years (or 18 months with respect to ISOs or such lesser period as the Committee may specify).

 

	
(B)  

	
Termination by Reason of Disability.  Subject to Sections 6(b)(i) and 6(b)(v), if a Participant’s employment (or service) with the Company or any Subsidiary terminates by reason of Disability, any Option held by that Participant shall become immediately and automatically vested and exercisable.  If termination of a Participant’s employment (or service) is due to Disability, then any Option held by that Participant may thereafter be exercised by the Participant or by the Participant’s duly authorized legal representative if the Participant is unable to exercise the Option as a result of the Participant’s Disability, for a period of two years (or with respect to an ISO, for a period of one year or such other lesser period as the Committee may specify at or after grant) from the date of such termination of employment. If the Participant dies within that two-year period (or with respect to an ISO, for a period of one year or such other lesser period as the Committee may specify at or after grant), any unexercised Option held by that Participant shall thereafter be exercisable by the estate of the Participant (acting through its fiduciary) for the duration of the two-year period ( or the one year period in the case of an ISO or such lesser period as the Committee may specify) from the date of termination of employment.  Notwithstanding the foregoing, in no event will any Option be exercisable after the expiration of the option period of such Option.  The balance of the Option shall be forfeited if not exercised within two years (or one year with respect to ISOs or such lesser period as the Committee may specify).

 

	
(C)  

	
Termination for Cause.  Unless otherwise determined by the Committee at or after the time of granting any Option, if a Participant’s employment (or service) with the Company or any Subsidiary terminates for Cause, any unvested Options will be forfeited and terminated immediately upon termination and any vested Options held by that Participant shall terminate 30 days after the date employment (or service) terminates.  Notwithstanding the foregoing, in no event will any Option be exercisable after the expiration of the option period of such Option.  The balance of the Option shall be forfeited.

 

  

8

  

 

	
(D)  

	
Other Termination/Retirement.  Unless otherwise determined by the Committee at or after the time of granting any Option, if a Participant retires from employment with the Company (or a Subsidiary) or a Participant’s employment (or service) with the Company (or a Subsidiary) terminates for any reason other than death, Disability, or for Cause, all vested ISOs held by that Participant shall terminate three months after the date employment (or service) terminates, and all vested Nonstatutory Stock Options held by that Participant shall terminate one year after the date employment (or service) terminates.  Notwithstanding the foregoing, in no event will any Option be exercisable after the expiration of the option period (which shall be established in the Option Agreement) of such Option.  The balance of the Option shall be forfeited.

 

	
(E)  

	
Leave of Absence.  In the event a Participant is granted a military leave of absence, a sick leave, or any other bona fide leave of absence by the Company or any Subsidiary, the Participant’s employment with the Company or such Subsidiary will not be considered terminated, and the Participant shall be deemed an employee of the Company or such Subsidiary during such leave of absence or any extension thereof granted by the Company or such Subsidiary.  Notwithstanding the foregoing, in the case of an ISO, a leave of absence of more than three months will be viewed as a termination of employment unless continued employment is guaranteed by contract or statute. If the period of such leave exceeds three months and the Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such three-month period.

 

	
(v)  

	
Incentive Stock Options.  Notwithstanding Sections 6(b)(iii) and 6(b)(iv), an ISO shall be exercisable by (A) a Participant’s authorized legal representative (if the Participant is unable to exercise the ISO as a result of the Participant’s Disability) only if, and to the extent, permitted by Section 422 of the Code and (B) by the Participant’s estate, in the case of death, or authorized legal representative, in the case of Disability, no later than ten years from the date the ISO was granted (in addition to any other restrictions or limitations that may apply).  Notwithstanding anything to the contrary herein, to the extent required for ISO treatment under Code Section 422, the aggregate Fair Market Value as of the Date of Grant under this Plan and any other plan of the Company (or its parent or subsidiary corporations) for the first  time by an Eligible Person during any calendar year shall not exceed $ 100,000.  If and to the extent that any Stocks are issued under a portion of the Stock Option that exceeds the $100,000 limitation under Code Section 422, such Stocks shall not be treated as issued under an ISO notwithstanding any designation otherwise. If an Award Agreement specifies that that a Stock Option is intended to be treated as an ISO, the Stock Option shall to the greatest extent possible comply with the requirements of Code Section 422 and shall be so construed; provided, however, that any such designation shall not be interpreted as a representation, guarantee or other undertaking on the part of the Company that the Stock Option is or will be determined to qualify as an ISO.  Certain decisions, amendments, interpretations by the Committee may cause a Stock Option to cease to qualify as an ISO and, to the extent known beforehand and possible, the Committee shall seek the consent of the affected Participant.

 

	
(c)  

	
Restricted Stock. Restricted Stock granted under the Plan shall be evidenced by an agreement (“Restricted Stock Agreement”).  The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions:

 

	
(i)  

	
Grant and Restrictions.  Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise and under such other circumstances as the Committee may determine at the Date of Grant, and which shall be set forth in the applicable Restricted Stock Agreement, or thereafter.  Except to the extent restricted under the terms of the Plan and any Restricted Stock Agreement, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon; provided, however, that the Committee may require mandatory reinvestment of dividends in additional Restricted Stock, may provide that no dividends will be paid on Restricted Stock or retained by the Participant, or may impose other restrictions on the rights attached to Restricted Stock.

 

  

9

  

 

	
(ii)  

	
Forfeiture.  Except as otherwise determined by the Committee, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Restricted Stock Agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will lapse in whole or in part, including in the event of terminations resulting from specified causes.

 

	
(iii)  

	
Certificates for Stock.  Restricted Stock granted under the Plan shall be evidenced in such manner as the Committee shall determine.  Certificates representing Restricted Stock shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to the Award of such Restricted Stock.  The Company shall retain physical possession of the stock certificates until the time that the restrictions thereon have lapsed, and the Participant shall have delivered a stock power to the Company, endorsed in blank, relating to the Stock covered by such Restricted Stock. The distribution of Stock upon the lapse of restrictions shall be made to the Participant on or before the period ending on the later of: (i) the 15th day of the third month following the end of the Participant’s first taxable year in which the right to payment is no longer subject to restrictions; or (ii) the 15th day of the third month following the end of the Company’s first taxable year in which the right to payment is no longer subject to restrictions.

 

	
(iv)  

	
Dividends and Splits.  As a condition to the grant of an Award of Restricted Stock, the Committee may require that any dividends paid on a share of Restricted Stock shall be either (A) paid with respect to such Restricted Stock at the dividend payment date in cash, in kind, or in a number of shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) automatically reinvested in additional Restricted Stock or held in kind, which shall be subject to the same terms as applied to the original Restricted Stock to which it relates. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

 

	
(d)  

	
Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant to Participants Stock as a bonus, or to grant Stock or other Awards in lieu of obligations of the Company or a Subsidiary or affiliate to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee; provided, that such grants shall not be in lieu of prior promises to pay deferrals of compensation so that any Award under this Plan that would not otherwise be subject to Code Section 409A does not become subject to Code Section 409A due to a grant in lieu of other obligation of the Company or a Subsidiary; provided further, that any distributions of such Stock as a bonus shall be made to the Participant on or before the later of: (i) the 15th day of the third month following the end of the Participant’s first taxable year in which the Participant earned the Bonus; or (ii) the 15th day of the third month following the end of the Company’s first taxable year in which the Participant earned the bonus.

 

	
(e)  

	
Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock or factors that may influence the value of Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries or affiliates or other business units.  The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section.

 

  

10

  

 

	
Section 7.  

	
Additional Provisions Applicable to Awards.

 

	
(a)  

	
Stand-Alone, Additional, Tandem, and Substitute Awards.  Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Subsidiary or affiliate, or any business entity to be acquired by the Company or a Subsidiary or affiliate, or any other right of a Participant to receive payment from the Company or any Subsidiary or affiliate.  Awards granted in addition to or in tandem with other Awards may be granted either as of the same time as or a different time from the grant of such other Awards.  Subject to the Plan’s terms, the Committee may determine that, in granting a new Award, the in-the-money value or fair value of any surrendered Award or award or the value of any other right to payment surrendered by the Participant may be applied to the purchase of any other Award; provided, that such surrender does not result in a “modification,” “extension,” “substitution” or “assumption” of a Stock right, as determined under Treasury Regulation Section 1.409A-1(b)(5)(v) that would cause such Stock rights to be considered the grant of a new Stock right which is subject to the terms and conditions of Code Section 409A.  Any transaction otherwise authorized under this Section 7(a) remains subject to all applicable restrictions under the Plan and may not result in an Award that is subject to the terms and conditions of Code Section 409A by virtue of such transaction; in such event, any transaction that would otherwise be permissible under this Section 7(a) shall be prohibited unless the Participant and the Company mutually agree in writing to cause an Award to become subject to the terms and conditions of Code Section 409A under this Section 7(a).

 

	
(b)  

	
Form and Timing of Payment Under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or a Subsidiary or affiliate upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, or in installments.

 

	
(c)  

	
Certain Limitations on Awards to Ensure Compliance with Code Section 409A.  Other provisions of the Plan notwithstanding, the Award Agreement evidencing any “409A Award” (which for this purpose means only such an Award held by a Participant which is subject to the terms and conditions of Code Section 409A) shall incorporate the terms and conditions necessary to avoid the consequences specified in Code Section 409A(a)(1). Any terms or conditions inconsistent with the requirements of Code Section 409A and its implementing regulations shall be automatically modified and limited (even retroactively) to the extent necessary to conform said Award with Code Section 409A.   Notwithstanding anything to the contrary herein, the Company shall not be liable for any unintended adverse tax consequences which may be imposed on the Participant due to receipt, exercise or settlement of any Stock Option or other Award granted hereunder, including the taxes and penalties of Code Section 409A.

 

  

11

  

 

	
Section 8.  

	
Corporate Transactions.

 

	
(a)  

	
Corporate Transaction in which Awards are not Assumed. Upon the occurrence of a Corporate Transaction in which outstanding Options, Restricted Stock Awards, and Other Stock-Based Awards are not being assumed or continued:

 

	
(i)  

	
All outstanding shares of Restricted Stock shall be deemed to have vested,

 

	
(ii)  

	
Either of the following two actions shall be taken:

 

	
(A)  

	
fifteen days prior to the scheduled consummation of a Corporate Transaction, all Options outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen days, or

 

	
(B)  

	
the Committee may elect, in its sole discretion, to cancel any outstanding Awards of Options or Restricted Stock and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Committee acting in good faith), in the case of Restricted Stock, equal to the formula or fixed price per share paid to holders of shares of Stock and, in the case of Options, equal to the product of the number of shares of Stock subject to the Option (the “Award Shares”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price Exercise Price applicable to such Award Shares.

 

	
(iii)  

	
With respect to the Company’s establishment of an exercise window, (i) any exercise of an Option during such fifteen-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Corporate Transaction, the Plan and all outstanding but unexercised Options shall terminate. The Committee shall send notice of an event that will result in such a termination to all individuals who hold Options not later than the time at which the Company gives notice thereof to its stockholders.

 

	
(b)  

	
Corporate Transaction in which Awards are Assumed. The Plan, Options, Restricted Stock Awards, and Other Stock-Based Awards theretofore granted shall continue in the manner and under the terms so provided in the event of any Corporate Transaction to the extent that provision is made in writing in connection with such Corporate Transaction for the assumption or continuation of the Options, Restricted Stock Awards, and Other Stock-Based Awards theretofore granted, or for the substitution for such Options, Restricted Stock Awards, and Other Stock-Based Awards for new common stock options and restricted stock relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option exercise prices in accordance with the provisions of Sections 5(b) and 10(c) and Treasury Regulation Section.1.409A-1(b)(5)(v)(D).

 

  

12

  

 

	
Section 9.  

	
Additional Award Forfeiture Provisions.

 

The Committee may condition a Participant’s right to receive a grant of an Award, to exercise the Award, to receive a settlement or distribution with respect to the Award or to retain cash, Stock, other Awards, or other property acquired in connection with an Award, upon compliance by the Participant with specified conditions that protect the business interests of the Company and its Subsidiaries and affiliates from harmful actions of the Participant, including conditions relating to non-competition, confidentiality of information relating to or possessed by the Company, non-solicitation of customers, suppliers, and employees of the Company, cooperation in litigation, non-disparagement of the Company and its Subsidiaries and affiliates and the officers and directors of the Company and its Subsidiaries and affiliates, and other restrictions upon or covenants of the Participant, including during specified periods following termination of employment or service to the Company.  Accordingly, an Award Agreement may include terms providing for a “clawback” or forfeiture from the Participant of the profit or gain realized by a Participant in connection with an Award, including cash or other proceeds received upon sale of Stock acquired in connection with an Award.

 

	
Section 10.  

	
General Provisions.

 

	
(a)  

	
Compliance with Legal and Other Requirements.

 

	
(i)  

	
The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Company are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.  The foregoing notwithstanding, in connection with the occurrence of a Corporate Transaction, the Company shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Corporate Transaction.

 

	
(ii)  

	
If the Participant is subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, the grant of this Option shall not be effective until such person complies with the reporting requirement of Section 16(a).

 

  

13

  

 

	
(b)  

	
Limits on Transferability; Beneficiaries.

 

	
(i)  

	
Awards granted under the Plan shall not be transferable other than by will or by the laws of descent, and Options may be exercised as provided for under Section 6(b).  A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant (except in the case of an Option which is governed by Section 6(b)) shall be subject to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.  Any attempted sale, pledge, assignment, hypothecation or other transfer of an Award contrary to the provisions hereof and the levy of any execution, attachment or similar process upon an Award shall be null and void and without force or effect and shall result in automatic termination of the Award.

 

	
(ii)  

	
(A) As a condition to the transfer of any shares of Stock issued upon exercise of an Award granted under this Plan, the Company may require an opinion of counsel, satisfactory to the Company, to the effect that such transfer will not be in violation of the Securities Act of 1933 or any other applicable securities laws or that such transfer has been registered under federal and all applicable state securities laws; (B) further, the Company shall be authorized to refrain from delivering or transferring shares of Stock issued under this Plan until the Board determines that such delivery or transfer will not violate applicable securities laws and the Participant has tendered to the Company any federal, state or local tax owed by the Participant as a result of exercising the Award, or disposing of any Stock, when the Company has a legal liability to satisfy such tax; (C) the Company shall not be liable for damages due to delay in the delivery or issuance of any stock certificate for any reason whatsoever, including, but not limited to, a delay caused by listing requirements of any securities exchange or any registration requirements under the Securities Act of 1933, the Securities Exchange Act of 1934, or under any other state or federal law, rule or regulations; (D) the Company is under no obligation to take any action or incur any expense in order to register or qualify the delivery or transfer of shares of Stock under applicable securities laws or to perfect any exemption from such registration or qualification; and (E) furthermore, the Company will have no liability to any Participant for refusing to deliver or transfer shares of Stock if such refusal is based upon the foregoing provisions of this Section.

 

	
(c)  

	
Effect of Certain Changes.  In the event of any merger, reorganization, consolidation, recapitalization, share dividend, share split, combination of shares or other change in corporate structure of the Company affecting the Stock, the Committee shall make appropriate or proportionate substitution or adjustment in: (i) the aggregate number of Stock reserved for issuance under the Plan, (ii) the number and kind of shares of Stock or other securities subject to any then outstanding Awards issued under the Plan; (iii) the price of the shares of Stock subject to outstanding Stock Options granted under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options) as to which such Stock Options remain exercisable; and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award and any other outstanding Awards granted under the Plan. Notwithstanding the foregoing, any substitution or adjustment by the Committee shall comply with Treasury Regulations Sections 1.409A-1(b)(5)(v)(D) and 1.424-1(a) (except 1.424-1(a)(2)) which will be deemed to be satisfied if the ratio of the exercise price to the Fair Market Value of the shares subject to the Awards immediately after the substitution or adjustment is not greater than the ratio of the exercise price to the Fair  Market Value of the shares subject to the Stock right immediately before the substitution or adjustment. The Committee’s substitution or adjustment shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan as a result of any such substitution or adjustment; but the Committee may, in its sole discretion, authorize a cash payment to be made to the Participant in lieu of fractional shares.

 

  

14

  

 

	
(d)  

	
Tax Provisions.

 

	
(i)  

	
Withholding.  The Committee shall so require, as a condition of exercise, each Participant to agree that:  (A) no later than the date of exercise of any Option granted hereunder, the optionee will pay to the Company or make arrangements satisfactory to the Committee regarding payment of any federal, state or local taxes of any kind required by law to be withheld upon the exercise of such Option; and (B) the Company shall, to the extent permitted or required by law, have the right to deduct federal, state and local taxes of any kind required by law to be withheld upon the exercise of such Option from any payment of any kind otherwise due to the Participant.  For withholding tax purposes, the shares of Stock shall be valued on the date the withholding obligations are incurred.  The Company shall not be obligated to advise any optionee of the existence of any such tax or the amount that the Company will be so required to withhold.

 

	
(ii)  

	
Required Consent to and Notification of Code Section 83(b) Election.  No election under Code Section 83(b) or under a similar provision of the laws of a jurisdiction outside the United States may be made unless expressly permitted by the terms of the Award Agreement or by action of the Committee in writing prior to the making of such election.  In any case in which a Participant is permitted to make such an election in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Code Section 83(b) or other applicable provision.

 

	
(iii)  

	
Requirement of Notification upon Disqualifying Disposition under Code Section 421(b). If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (i.e., a disqualifying disposition), such Participant shall notify the Company of such disposition within ten days thereof.

 

	
(iv)  

	
Contest of Tax Rulings.  The Company shall have the right, but not the obligation, to contest, at its expense, any tax ruling or decision, administrative or judicial, on any issue which is related to the Plan and which the Board believes to be important to holders of Options issued under the Plan and to conduct any such contest or any litigation arising therefrom to a final decision.

 

	
(e)  

	
Changes to the Plan.  The Board at any time and from time to time may suspend, terminate, modify or amend the Plan; provided, however, that the Company shall submit for the approval of a majority of the stockholders of the Company presented or represented and entitled to vote at a duly constituted and held meeting of the stockholders, any amendment that would:  (i) materially increase the benefits accruing to Participants under the Plan, (ii) increase the number of shares of Stock as to which Awards may be granted under the Plan, (iii) extend the term of the Plan,  (iv) materially modify the requirements as to eligibility for participation in the Plan, (v) expand the types of Awards provided under the Plan, or (vi) be otherwise required by applicable laws, regulations or rules. Any such increase or modification that may result from adjustments authorized by Section 10(c) hereof shall not require such approval.  In addition, no such amendment or alteration shall be made which would impair the rights of any Participant, without such Participant’s written consent, under any Award theretofore granted, provided that no such consent shall be required with respect to any amendment or alteration either (i) is required or advisable in order for the Company, the Plan or the Award to satisfy or conform to any law or regulation or to meet the requirements of any accounting standard, or (ii) is not reasonably likely to significantly diminish the benefits provided under such Award, or that any such diminishment is adequately compensated.

 

  

15

  

 

	
(f)  

	
Unfunded Status of Awards, Creation of Rabbi Trusts. The Plan is intended to constitute an “unfunded” plan for equity incentive compensation. With respect to any payments not yet made to a Participant or obligations to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of rabbi trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan. Such trusts or other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines.

 

	
(g)  

	
Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive or compensation arrangements, apart from the Plan, as it may deem desirable, including incentive or compensation arrangements and awards that do not qualify under Code Section 162(m) or to which Code Section 409A does apply, and such other arrangements may be either applicable generally or only in specific cases.

 

	
(h)  

	
Payments in the Event of Forfeitures; Fractional Shares.  Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration.  No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award.  The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

	
(i)  

	
Governing Law.  The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of laws, and applicable provisions of federal law.

 

	
(j)  

	
Limitation on Rights Conferred Under The Plan.  Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or a Subsidiary or affiliate, (ii) interfering in any way with the right of the Company or a Subsidiary or affiliate to terminate any Eligible Person’s or Participant’s employment or service at any time (subject to the terms and provisions of any separate written agreements), (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award.  Any Award shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary or affiliate and shall not affect any benefits under any other benefit plan under which the availability or amount of benefits is related to the level of compensation (unless required by any such other plan or arrangement with specific reference to Awards under this Plan).

 

	
(k)  

	
Termination of Right of Action.  Every right of action arising out of or in connection with the Plan by or on behalf of the Company or of any Subsidiary, or by any stockholder of the Company or of any Subsidiary against any past, present or future member of the Board, or against any employer, or by an employee (past, present or future) against the Company or any Subsidiary will, irrespective of the place where an action may be brought and irrespective of the place of residence of any such stockholder, director or employee, cease and be barred as of the expiration of three years from the date of the act or omission in respect of which such right of action is alleged to have risen.

 

  

16

  

 

	
(l)  

	
Assumption.  The terms and conditions of any outstanding Awards granted pursuant to this Plan shall be assumed by, be binding upon and inure to the benefit of any successor company to the Company and shall continue to be governed by, to the extent applicable, the terms and conditions of this Plan.  Such successor Company shall not be otherwise obligated to assume this Plan.

 

	
(m)  

	
Severability; Entire Agreement. If any of the provisions of this Plan or any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability, and the remaining provisions shall not be affected thereby; provided, that, if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder.  The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.  No rule of strict construction shall be applied against the Company, the Committee, or any other person in the interpretation of any terms of the Plan, Award, or agreement or other document relating thereto.

 

	
(n)  

	
Adoption.

 

This Plan was approved by the Board of Directors of the Company at a meeting on July 2, 2012.

 

	 	
SEVEN ARTS ENTERTAINMENT INC.

	 
	 	 	 	 
	 	
By: 

	/s/ Peter M. Hoffman	 
	 	 	Name: Peter M. Hoffman	 
	 	 	Title: CEO	 
	 	 	 	 

 

 

17

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