Document:

ex10_5.htm

    Exhibit
      10.5

     

     

    CYTOGEN
      CORPORATION

     

    2004
      NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN

     

    1.           Purpose

     

    The
      purpose of this 2004 Non-Employee Director Stock Incentive Plan (the “Plan”) of
      Cytogen Corporation, a Delaware corporation (the
“Company”), is to advance the interests of the Company’s stockholders by
      enhancing the Company’s ability to attract, retain and motivate persons who act
      as Non-Employee Directors of the Company (as such term is defined in the
      Securities Exchange Act of 1934, as amended), by providing such persons with
      equity ownership opportunities and performance-based incentives and thereby
      better aligning the interests of such persons with those of the Company’s
      stockholders.  Except where the context otherwise requires, the term
“Company” shall include any of the Company’s present or future parent or
      subsidiary corporations as defined in Sections 424(e) or (f) of the
      Internal Revenue Code of 1986, as amended, and any regulations promulgated
      thereunder (the “Code”) and any other business venture (including, without
      limitation, joint venture or limited liability company) in which the Company
      has
      a controlling interest, as determined by the Board of Directors of the Company
      (the “Board”).

     

    2.           Eligibility

     

    All
      of
      the Company’s Non-Employee Directors are eligible to be granted options (each,
      an “Option”) and Compensation Shares, as defined in Section 5(a)(5) hereof,
      under the Plan.  Each person who has been granted an Option or
      Compensation Shares under the Plan shall be deemed a “Participant.”

     

    3.           Administration
      and Delegation

     

    (a)           Administration
      by Board.  The Plan will be administered by the
      Board.  The Board shall have authority to adopt, amend and repeal such
      administrative rules, guidelines and practices relating to the Plan as it shall
      deem advisable.  The Board may correct any defect, supply any omission
      or reconcile any inconsistency in the Plan or any award of options or issuance
      of Compensation Shares in the manner and to the extent it shall deem expedient
      to carry the Plan into effect and it shall be the sole and final judge of such
      expediency.  All decisions by the Board shall be made in the Board’s
      sole discretion and shall be final and binding on all persons having or claiming
      any interest in the Plan or in any Option or Compensation Shares.  No
      Director or person acting pursuant to the authority delegated by the Board
      shall
      be liable for any action or determination relating to or under the Plan made
      in
      good faith.

     

    (b)           Appointment
      of Committees.  To the extent permitted by applicable
      law, the Board may delegate any or all of its powers under the Plan to one
      or
      more committees or subcommittees of the Board (a “Committee”).  All
      references in the Plan to the “Board” shall mean the Board or a Committee of the
      Board to the extent that the Board’s powers or authority under the Plan have
      been delegated to such Committee.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.           Stock
      Available Under the Plan

     

    Subject
      to adjustment under Section 6, Options and Compensation Shares may be made
      under
      the Plan for up to seven hundred fifty thousand (750,000) shares of common
      stock, $0.01 par value per share, of the Company (the “Common
      Stock”).  If any Option expires or is terminated, surrendered or
      canceled without having been fully exercised or is forfeited in whole or in
      part
      (including as the result of shares of Common Stock subject to such Option being
      repurchased by the Company at the original issuance price pursuant to a
      contractual repurchase right) or results in any Common Stock not being issued,
      the unused Common Stock covered by such Option shall again be available for
      the
      grant of Options under the Plan.  Shares issued under the Plan may
      consist in whole or in part of authorized but unissued shares or treasury
      shares.

     

    5.           Stock
      Options

     

    (a)           Option
      Grants.

     

    (1)           Each
      person who is newly-elected a Director of the Company at an annual meeting
      of
      the stockholders of the Company, such person not having previously served as
      a
      Director of the Company and such person not being an employee of the Company,
      shall, as of the date of such annual meeting, be granted an Option to purchase
      ten thousand (10,000) shares of Common Stock; provided, however, that the Board
      may, from time to time, by resolution of the Board, increase or decrease the
      number of shares granted to such newly elected Directors.

     

    (2)           Each
      person who is appointed a Director of the Company after the date of the most
      recent annual meeting of the stockholders of the Company, and who is not an
      employee of the Company as of such date of appointment, shall be granted on
      such
      date an Option to purchase a pro rata portion of ten thousand (10,000) shares
      of
      Common Stock, based upon the number of full calendar months remaining after
      the
      date of appointment until but not including the one year anniversary month
      of
      such preceding annual meeting; provided, however, the Board may, from time
      to
      time, by resolution of the Board, increase or decrease such number of shares
      of
      Common Stock.

     

    (3)           Effective
      upon approval of the Plan by the stockholders, each person who, upon the
      conclusion of such meeting of stockholders, is a Director and not an employee
      of
      the Company (an “Eligible Director”), shall be granted an option to purchase ten
      thousand (10,000) shares of Common Stock.

     

    (4)           On
      the day following each annual meeting of the stockholders of the Company,
      commencing with the 2004 annual meeting, each person who is on that date an
      Eligible Director and who was re-elected at that meeting shall be granted an
      Option to purchase ten thousand (10,000) shares of Common Stock; provided,
      however, that the Board may, from time to time, by resolution of the Board,
      increase or decrease the number of shares granted to such re-elected
      Directors.  In addition, on each such date, the then Chairman of the
      Board shall receive an Option to purchase an additional seven thousand five
      hundred (7,500) shares of Common Stock; provided, however, that the Board may,
      from time to time, by resolution of the Board, increase or decrease the number
      of shares so granted to the Chairman of the Board.

     

     

    
      
        
        

      

      
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    (5)           Eligible
      Directors shall receive, at the sole discretion of and after formal action
      by
      the Board, Compensation Shares, as defined below, in such number of shares
      of
      Common Stock that is equal to each respective Eligible Director’s Cash
      Component, as defined below, compensation divided by the Fair Market Value
      of
      the Company’s Common Stock as of the date of issuance of such Compensation
      Shares, which shall be no earlier than the date on which the applicable Cash
      Component compensation becomes due and payable by the Company, subject to the
      terms and conditions set forth herein.  Compensation Shares shall not
      be issued for services not yet rendered by an Eligible Director to the
      Company.  As used herein:  (i) Compensation Shares means any
      shares of Common Stock issued to Eligible Directors hereunder in payment of
      such
      Eligible Director’s Cash Component of compensation; and (ii) Cash Component
      means Director cash compensation, including but not limited to annual services
      fees, fees payable for board and committee meetings attended and fees for
      committees chaired.

     

    (6)           Subject
      to Section 5(a)(5) hereof, and subject to adjustment under Section 6, Eligible
      Directors shall receive Compensation Shares in lieu of the Cash Component of
      such Eligible Director’s compensation until at least such time
      as:  (i) such Eligible Director owns two thousand (2,000) shares of
      the Company’s Common Stock, excluding options or other rights to acquire shares
      of the Company’s Common Stock, whether exercisable or unexercisable; or (ii) if
      fewer than 2,000 shares are so owned, such smaller number of shares having
      a
      Fair Market Value, as defined below, of in excess of one hundred thousand
      dollars ($100,000), excluding the value, if any, of options to purchase Common
      Stock, whether exercisable or unexercisable, or other rights to acquire Common
      Stock of the Company.

     

    (7)           Upon
      achieving either of the milestones (i) or (ii) set forth in Section 5(a)(6)
      hereof, each such Eligible Director may, at his or her option, elect to cease
      receiving his or her Cash Component to which he or she is entitled in shares
      of
      Common Stock under the Plan; provided, however, that such Eligible
      Director must make such election by providing notice of such election to the
      Company.  Additionally, any Director who has reached either of the
      milestones (i) or (ii) set forth in Section 5(a)(6) hereof may thereafter choose
      to receive subsequent compensation in cash or Compensation Shares upon written
      election made from time to time and to the Company in advance of the provision
      of all services provided therefor.

     

    (8)           Each
      Option and Compensation Shares provided for in this Section 5 shall be granted
      automatically and without further action by the Board or the Company’s
      stockholders.  Promptly after the date of grant of each Option
      provided for in this Section 5, the Company shall cause an Option Agreement
      to
      be executed and delivered to the holder of the Option.  No other
      Options may be granted at any time under this Plan.  All Compensation
      Shares required to be issued pursuant to the terms of this Section 5 shall
      be
      valued at, and issued on, the next business day immediately following the date
      upon which the Cash Component becomes due and payable to such Eligible
      Director.

     

    (b)           Exercise
      Price.  The exercise price of each Option will be 100% of the Fair
      Market Value of the Common Stock on the date of grant of the Option (the
“Exercise Price”).  Fair Market value shall mean: (i) if the Common
      Stock is traded in a market in which actual transactions are reported, the
      average of the high and low prices at which the Common Stock is reported to
      have
      traded on the relevant date in all markets on which trading in the Common Stock
      is reported, or if there is no reported sale of the Common Stock on the relevant
      date, the

     

     

    
      
        
        

      

      
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    mean
      of
      the highest reported bid price and lowest reported asked price for the Common
      Stock on the relevant date, (ii) if the Common Stock is publicly traded but
      only
      in markets in which there is no reporting of actual transactions, the mean
      of
      the highest reported bid price and the lowest reported asked price for the
      Common Stock on the relevant date, or (iii) if the Common Stock is not publicly
      traded, the value of a share of Common Stock as determined by the
      Board.

     

    (c)           Duration
      of Options.

     

    (1)           No
      Option granted under this Plan may be exercised more than 10 years after the
      date of grant of the option.

     

    (2)           Except
      as provided in Sections 5(f) and 5(g), Options shall become exercisable in
      full
      on the first anniversary of the date of grant.

     

    (d)           Exercise
      of Option.  Options may be exercised, in whole or in part, at any
      time, by delivery to the Company of a written notice of exercise signed by
      the
      proper person or by any other form of notice (including electronic notice)
      approved by the Board together with payment in full as specified in Section
      5(e)
      for the number of shares for which the Option is exercised.

     

    (e)           Payment
      Upon Exercise.  Common Stock purchased upon the exercise of an
      Option granted under the Plan shall be paid for in cash, which may be satisfied
      by a check, in an amount equal to Exercise Price of the Option.

     

    (f)           Termination
      of Service of Director Holding an Option Other Than Because of Death, Disability
      Retirement or Certain Voluntary Resignations.  Subject to the
      provisions of Section 5(c), if there is a termination of service of a Director
      to whom an Option has been granted, other than by reason of the Director’s death
      or disability or retirement or voluntary resignation, after three years’ service
      as an Eligible Director, upon or after turning age 55, each Option held by
      the
      Director may be exercised until the earlier of (x) the end of the three-month
      period immediately following the date of termination of service, or (y) the
      expiration of the term of the option.

     

    (g)           Death
      or Disability of Director Holding an Option.  Notwithstanding the
      provisions of Section 5(c), if there is a termination of service of a Director
      to whom an option has been granted by reason of the Director’s death or
      disability, or a former Director dies within three months following the date
      of
      his or her termination of service, each option held by the Director on the
      date
      of the Director’s termination of service may be exercised in full (i.e., in
      respect of up to 100% of the Option shares, regardless of the time elapsed
      since
      the date of grant) until the earlier of (x) the end of the one-year period
      immediately following the date of termination of service or (y) the expiration
      of the term of the Option.  In the event of an Eligible Director’s
      death, all of such person’s outstanding Options will transfer to the maximum
      extent permitted by law to such person’s designated beneficiary.  Each
      Eligible Director may name, from time to time, any beneficiary or beneficiaries
      (which may be named contingently or successively) as his or her beneficiary
      for
      purposes of this Plan.  Each designation shall be on a form prescribed
      by the Company, will be effective only when delivered to the Company, when
      effective will revoke all prior designations by the Eligible Director and will
      be allowed only to the extent permitted by applicable law.  If an
      Eligible Director dies with no such beneficiary designation in effect,
      such

     

     

    
      
        
        

      

      
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    person’s
      Options will be transferable by will or pursuant to the laws of descent and
      distribution applicable to such person.

     

    (h)           Retirement
      or Certain Voluntary Resignations.  If there is a termination of
      service of a Director by reason of the Director’s retirement or voluntary
      resignation at any time after the Director has reached age 55 and, in each
      such
      case, such Director has provided a minimum of three years’ service as an
      Eligible Director, each Option held by the Director on the date of the
      Director's termination of service may be exercised in full (i.e., in respect
      of
      up to 100% of the option shares, regardless of the time elapsed since the date
      of grant) until the earlier of (x) the end of the five year period immediately
      following the date of termination of service or (y) the expiration of the term
      of the option.

     

    6.           Adjustments
      for Changes in Common Stock and Certain Other Events.

     

    (a)           Changes
      in Capitalization.  In the event of any stock split, reverse stock
      split, stock dividend, recapitalization, combination of shares, reclassification
      of shares, spin-off or other similar change in capitalization or event, or
      any
      distribution to holders of Common Stock other than an ordinary cash dividend,
      (i) the number and class of securities available under this Plan, (ii) the
      number of shares received under Section 5(a)(6) and (iii) the number and class
      of securities and exercise price per share subject to each outstanding Option
      shall be appropriately adjusted by the Company (or substituted Options may
      be
      made, if applicable).  If this Section 6(a) applies and Section 6(d)
      also applies to any event, Section 6(d) shall be applicable to such event,
      and
      this Section 6(a) shall not be applicable.

     

    (b)           Company
      Discretion.  The existence of outstanding Options or Compensation
      Shares shall not affect in any way the right or power of the Company or its
      stockholders to make or authorize any or all adjustments, recapitalizations,
      reorganizations or other changes in the Company's capital structure or its
      business, or any merger or consolidation of the Company, or any issue of bonds,
      debentures, preferred or prior preference stock ahead of or affecting the Common
      Stock or the rights thereof, or the dissolution or liquidation of the Company,
      or any sale or transfer of all or any part of its assets or business or any
      other corporate act or proceeding, whether of a similar character or
      otherwise.  Except as expressly provided herein, the issuance by the
      Company of shares of stock of any class, or securities convertible into shares
      of stock of any class, for cash or property, or for labor or services either
      upon direct sale or upon the exercise of rights or warrants to subscribe
      therefor, or on conversion of shares or obligations of the Company convertible
      into such shares or other securities, shall not affect, and no adjustment by
      reason thereof shall be made with respect to, the number, class or price of
      shares of Common Stock then subject to outstanding options.

     

    (c)           Liquidation
      or Dissolution.  In the event of a proposed liquidation or
      dissolution of the Company, the Board shall upon written notice to the
      Participants provide that all then unexercised Options will (i) become
      exercisable in full as of a specified time at least 10 business days prior
      to
      the effective date of such liquidation or dissolution and (ii) terminate
      effective upon such liquidation or dissolution, except to the extent exercised
      before the effective date.

     

     

    
      
        
        

      

      
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    (d)           Corporate
      Transactions; Major Events.

     

    (1)           If
      as a result of any (i) reorganization, (ii) merger or consolidation of the
      Company with or into another entity as a result of which all of the Common
      Stock
      of the Company is converted into or exchanged for the right to receive cash,
      securities or other property, or (iii) any exchange of all of the Common Stock
      of the Company for cash, securities or other property pursuant to a share
      exchange transaction (each of (i), (ii) and (iii) being a “Corporate
      Transaction”) while an Option is outstanding, or the execution by the Company of
      any agreement with respect to a Corporate Transaction, then (regardless of
      whether the transaction will also constitute a Major Event (as defined below))
      the Board shall provide that all outstanding Options shall be assumed, or
      equivalent options shall be substituted, by the acquiring or succeeding
      corporation (or an affiliate thereof).  For purposes hereof, an Option
      shall be considered to be assumed if, following consummation of the Corporate
      Transaction, the Option confers the right to purchase, for each share of Common
      Stock subject to the Option immediately prior to the consummation of the
      Corporate Transaction, the consideration (whether cash, securities or other
      property) received as a result of the Corporate Transaction by holders of Common
      Stock for each share of Common Stock held immediately prior to the consummation
      of the Corporate Transaction (and if holders were offered a choice of
      consideration, the type of consideration chosen by the holders of a majority
      of
      the outstanding shares of Common Stock); provided, however, that if the
      consideration received as a result of the Corporate Transaction is not solely
      common stock of the acquiring or succeeding corporation (or an affiliate
      thereof), the Company may, with the consent of the acquiring or succeeding
      corporation, provide for the consideration to be received upon the exercise
      of
      Options to consist solely of common stock of the acquiring or succeeding
      corporation (or an affiliate thereof) equivalent in fair market value to the
      per
      share consideration received by holders of outstanding shares of Common Stock
      as
      a result of the Corporate Transaction.

     

    Notwithstanding
      the foregoing, if the
      acquiring or succeeding corporation (or an affiliate thereof) does not agree
      to
      assume, or substitute for, such Options, or in the event of a liquidation or
      dissolution of the Company, the Board shall, upon written notice to the
      Participants, provide that all then unexercised Options will become exercisable
      in full as of a specified time prior to the Corporate Transaction and will
      terminate immediately prior to the consummation of such Corporate Transaction,
      except to the extent exercised by the Participants before the consummation
      of
      such Corporate Transaction; provided, however, that in the event of a Corporate
      Transaction under the terms of which holders of Common Stock will receive upon
      consummation thereof a cash payment for each share of Common Stock surrendered
      pursuant to such Corporate Transaction (the “Acquisition Price”), then the Board
      may instead provide that all outstanding Options shall terminate upon
      consummation of such Corporate Transaction and that each Participant shall
      receive, in exchange therefor, a cash payment equal to the amount (if any)
      by
      which (A) the Acquisition Price multiplied by the number of shares of Common
      Stock subject to such outstanding Options (whether or not then exercisable)
      exceeds (B) the aggregate exercise price of such Options.

     

    In
      the event of a Corporate
      Transaction, Compensation Shares shall be adjusted in the same manner as the
      Company’s Common Stock.

     

    
      
        
        

      

      
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    (2)           Upon
      the occurrence of a Major Event (regardless of whether such event also
      constitutes a Corporate Transaction), all of the Option Shares covered by an
      Option shall become immediately available for purchase upon exercise of the
      option, without regard to the vesting provisions of Section
      5(c)(2).  “Major Event” shall mean when (i) the Company enters into
      one or more definitive agreements to merge or consolidate the Company with
      or
      into another corporation, or to sell or otherwise dispose of all or
      substantially all of the Company’s assets, or to effect any other transaction,
      share exchange consolidation or reorganization having similar results or effect;
      (ii) any person other than the Company makes a tender or exchange offer for
      more
      than 50% of Common Stock pursuant to which purchases of any amount of Common
      Stock are made; (iii) stock representing more than 50% of the voting power
      of
      the Company is acquired by any person other than the Company in any one or
      more
      transactions occurring in any 24 month period.

     

    7.           General
      Provisions Applicable to Options and Compensation Shares.

     

    (a)           (i)           Transferability
      of Options.  Except as the Board may otherwise determine or
      provide in an Option, Options shall not be sold, assigned, transferred, pledged
      or otherwise encumbered by the person to whom they are granted, either
      voluntarily or by operation of law, except by will or the laws of descent and
      distribution, and, during the life of the Participant, shall be exercisable
      only
      by the Participant.  References to a Participant, to the extent
      relevant in the context, shall include references to authorized
      transferees.

     

          
      (ii)          Transferability
      of Compensation Shares.  For one year after the date of issuance
      of Compensation Shares to any Eligible Director, such Compensation Shares shall
      not be transferable by such Eligible Director.  During this one year
      period, Compensation Shares may not be assigned, pledged or hypothecated in
      any
      way, and will not be transferable otherwise than by will or the laws of descent
      and distribution.  The Company will not recognize any attempt to
      assign, transfer, pledge, hypothecate or otherwise dispose of Compensation
      Shares contrary to the provisions of this Plan, or any levy of any attachment
      or
      similar process upon any Compensation Shares, and, except as expressly stated
      in
      this Plan, the Company will not be required to, and will not, remove any related
      restrictive legend from the Compensation Shares until such one year period
      has
      expired.  The Compensation Shares shall bear a restrictive legend
      evidencing such lock-up (the “Lock-up Legend”).  Upon the expiration
      of such one year lock-up period, Compensation Shares shall become fully
      transferable by the holder, subject to the terms of the Securities Act of 1933,
      as amended and state securities laws.  The Company shall take
      reasonable steps to remove the Lock-up Legend from the Compensation Shares
      within a reasonable time after the expiration of such period upon the request
      of
      an Eligible Director.  Notwithstanding such lock-up provision, upon
      the occurrence of a Corporate Transaction, all of the Compensation Shares issued
      hereunder to Eligible Directors shall be treated in a like manner as are the
      outstanding shares of the Company’s Common Stock upon the occurrence of such
      Corporate Transaction.

     

    (b)           Documentation.  Each
      Option shall be evidenced in such form (written, electronic or otherwise) as
      the
      Board shall determine.  Each Option may contain terms and conditions
      in addition to those set forth in the Plan.

     

     

    
      
        
        

      

      
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    (c)           Amendment
      of Option.  Subject to the provisions of the Company’s Bylaws, the
      Board may amend, modify or terminate any outstanding Option, including but
      not
      limited to, substituting therefor another Option of the same or a different
      type, provided that the Participant’s consent to such action shall be required
      unless the Board determines that the action, taking into account any related
      action, would not materially and adversely affect the Participant.

     

    (d)           Conditions
      on Delivery of Stock.  The Company will not be obligated to
      deliver any shares of Common Stock pursuant to the Plan or to remove
      restrictions from shares previously delivered under the Plan until (i) all
      conditions of the Option have been met or removed to the satisfaction of the
      Company, (ii) in the opinion of the Company’s counsel, all other legal
      matters in connection with the issuance and delivery of such shares have been
      satisfied, including any applicable securities laws and any applicable stock
      exchange or stock market rules and regulations, and (iii) the Participant has
      executed and delivered to the Company such representations or agreements as
      the
      Company may consider appropriate to satisfy the requirements of any applicable
      laws, rules or regulations.

     

    (e)           Deferred
      Delivery of Shares Issuable Pursuant to an Option.  The Board may,
      at the time any Option is granted, provide that, at the time Common Stock would
      otherwise be delivered pursuant to the Option, the Participant shall instead
      receive an instrument evidencing the right to future delivery of Common Stock
      at
      such time or times, and on such conditions, as the Board shall
      specify.  The Board may at any time accelerate the time at which
      delivery of all or any part of the Common Stock shall take place.

     

    (f)           Acceleration.  The
      Board may at any time provide that any Award shall become immediately
      exercisable in full or in part, free of some or all restrictions or conditions,
      or otherwise realizable in full or in part, as the case may be.

     

    8.           Miscellaneous

     

    (a)           No
      Rights As Stockholder.  Subject to the provisions of the
      applicable Option, no Participant or designated beneficiary shall have any
      rights as a stockholder with respect to any shares of Common Stock to be
      distributed with respect to an Option until becoming the record holder of such
      shares.  Notwithstanding the foregoing, in the event the Company
      effects a split of the Common Stock by means of a stock dividend and the
      exercise price of and the number of shares subject to such Option are adjusted
      as of the date of the distribution of the dividend (rather than as of the record
      date for such dividend), then an optionee who exercises an Option between the
      record date and the distribution date for such stock dividend shall be entitled
      to receive, on the distribution date, the stock dividend with respect to the
      shares of Common Stock acquired upon such Option exercise, notwithstanding
      the
      fact that such shares were not outstanding as of the close of business on the
      record date for such stock dividend.

     

    (b)           Effective
      Date and Term of Plan.  The Plan shall become effective on the
      date on which it is adopted by the Board, but no Option granted to a Participant
      that is intended to comply with Section 162(m) shall become exercisable, vested
      or realizable, as applicable to such Option, unless and until the Plan has
      been
      approved by the Company’s stockholders to the extent stockholder approval is
      required by Section 162(m) in the manner required under Section 162(m)
      (including the vote required under Section 162(m)).  No Options shall
      be granted under the Plan

     

     

    
      
        
        

      

      
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    after
      the
      completion of ten years from the earlier of (i) the date on which the Plan
      was
      adopted by the Board or (ii) the date the Plan was approved by the Company’s
      stockholders, but Options previously granted may extend beyond that
      date.

     

    (c)           Amendment
      of Plan.  Subject to the provisions of the Company’s Bylaws, the
      Board may amend, suspend or terminate the Plan or any portion thereof at any
      time, provided that to the extent required by Section 162(m), no Option granted
      to a Participant that is intended to comply with Section 162(m) after the date
      of such amendment shall become exercisable, realizable or vested, as applicable
      to such Option, unless and until such amendment shall have been approved by
      the
      Company’s stockholders if required by Section 162(m) (including the vote
      required under Section 162(m)).

     

    (d)           Governing
      Law.  The provisions of the Plan and all Options made hereunder
      shall be governed by and interpreted in accordance with the laws of the State
      of
      Delaware, without regard to any applicable conflicts of law.

     

    
       

       

      
        
          
          

        

        
          -9-exhibit1034.htm

    
      

      

    

     

    
      	 	
              EXHIBIT
                10.34

            

    

     

    August
      6,
      2007

     

     

    FIRST
      ALBANY COMPANIES INC.

    677
      Broadway

    Albany,
      New York 12207

    Attn:
      Brian Coad, Chief Financial Officer

     

    
      	 	
              Re:

            	
              LIBOR
                RATE, UNSECURED, loan in the original principal amount of $20,000,000.00
                (the “Loan”) from KeyBank National Association (“KeyBank”) to FIRST ALBANY
                COMPANIES INC. (“Borrower”) pursuant to a Loan Agreement RE:
                $20,000,000.00 TERM LOAN by and between KeyBank and the Borrower
                (the
                “Loan Agreement”), and obligations of the Borrower under Master Lease
                Agreements dated September 25, 1996 and all outstanding schedules
                thereunder (the “Lease”) between Borrower and Key Equipment Finance Inc.
                f/k/a KeyCorp Leasing Ltd (“KEF” and collectively with KeyBank, the
                “Bank”)

            

    

     

    Dear
      Mr.
      Coad:

     

    The
      Bank
      has been informed that Borrower has entered into an agreement (the “MP
      Agreement”) to receive an equity investment from an affiliate of MatlinPatterson
      Global Opportunities Partners II (the substantive consummation of which is
      referred to herein as the “MP Transaction”). The Bank has been further informed
      that Borrower has entered into an agreement (the “DEPFA Agreement”) for the sale
      of the Municipal Capital Markets Group of its wholly owned subsidiary First
      Albany Capital Inc. (the “Subsidiary”) to DEPFA BANK plc (“DEPFA”) and the
      related purchase by DEPFA of First Albany’s municipal bond inventory (the
      substantive consummation of which is referred to herein as the “DEPFA
      Transaction” and together with the MP Transaction, collectively the
“Transactions” and individually a “Transaction”). At the request of the
      Borrower, the Bank has engaged in telephonic discussion with you and
      representatives of MatlinPatterson Global Opportunities Partners II (“MP”). This
      letter shall serve to confirm the agreement reached between the Bank and the
      Borrower with respect to the Borrower’s obligations under the Loan Agreement and
      Lease with respect to the DEPFA Transaction and MP Transaction.. All terms
      used
      herein which are not defined herein but are defined in the Loan Agreement,
      shall
      have that meaning ascribed to such term in the Loan Agreement.

     

    The
      Bank
      and the Borrower (collectively the “Parties”) do each hereby acknowledge that
      the Parties do not agree on the interpretation and/or enforcement of each of
      the
      Parties respective rights under the Loan Agreement and/or the Lease, therefore,
      the Parties acknowledge and agree that neither the Bank nor the Borrower has
      waived or is waiving any of its rights under the Loan Agreement and/or the
      Lease, except for those waivers and/or modifications as expressly set forth
      in
      sub provisions (i), (v), (vi) and/or (vii) herein.

     

    The
      Bank
      and the Borrower have agreed as follows:

     

    
      	
              
                (i)

              

            	
              Commencing
                on the date of this letter and continuing for so long as (a) the
                Borrower
                shall comply in all material respects with all of the terms of this
                letter, (b) no Event of Default, as defined in the Loan Agreement
                and/or
                the Lease, as the same are expressly modified in sub provisions (i),
                (v),
                (vi) and/or (vii) hereof (each an “EOD”), shall occur and (c) the Borrower
                shall use and take commercially reasonable efforts necessary and/or
                desirable to effectuate the intent of the Borrower to consummate/close
                the
                MP Transaction on or before November 30, 2007 (any event specified
                and/or
                arising as contemplated by provisions (a), (b) and the failure to
                satisfy
                any requirement of provision (c) of this sub provisions (i) being
                referred
                to herein as a “Waiver Termination Event”), but without limiting and/or
                affecting the termination of the Waiver upon the occurrence of a
                Waiver
                Termination Event, KeyBank and KEF waive all EODs (if any) arising
                from,
                in connection with or as a result of the MP Agreement, the MP Transaction,
                the DEPFA Agreement or DEPFA Transaction. Upon the occurrence of
                a Waiver
                Termination Event the waiver set forth in this sub provision (i)
                hereof
                (the “Waiver”) shall automatically terminate and expire without any action
                on the part of the Bank and such Waiver shall be of no force and
                effect
                following the occurrence of any Waiver Termination Event. Notwithstanding
                the forgoing and in limitation thereof, the Bank does hereby acknowledge
                that (i) upon consummation (or “closing” as defined in the DEPFA
                Agreement) of the DEPFA Transaction (the “DEPFA Closing”) and (ii) the
                provision to KeyBank and/or KEF of the remittances/payments
                required/contemplated by sub provision (ii) hereof, KeyBank and KEF
                shall
                and shall be deemed to have irrevocably waived all EODs (if any)
                arising
                from, in connection with or as a result of the DEPFA Agreement or
                DEPFA
                Transaction. Furthermore, without waiving any of the obligations
                of the
                Borrower hereunder, the Bank acknowledges, that (i) the Borrower
                is not
                guaranteeing the occurrence of the MP Closing by November 30, 2007
                and (b)
                the obligations of the Borrower as set forth in sub provision (c)
                of this
                sub provision (i) to use and take necessary and/or desirable commercially
                reasonable efforts, shall not impose upon the Borrower any duty and/or
                obligation to materially change the MP Transaction from the form
                of
                transaction contemplated as of the date of this letter and/or materially
                change the terms of the MP
                Agreement.

            

    

     

    
      	
              (ii)

            	
              Upon
                the DEPFA Closing and subject to the provisions hereof, the Borrower
                will
                (a) repay the outstanding Loan together with unpaid accrued interest
                thereon and all other obligations of the Borrower then outstanding
                under
                the Loan Agreement (collectively the “Loan Agreement Obligations”) and (b)
                pay in full and discharge all of the obligations and/or liabilities
                of the
                Borrower under the Lease, such obligations, including, but not limited
                to,
                those obligations of the Borrower and any Affiliate thereof to KEF
                (the
                “Lease Obligations”); provided however that if the DEPFA Closing should
                occur prior to consummation of the MP Transaction then (x) the Borrower
                shall only be obligated (prior to consummation of the MP Transaction)
                to
                prepay an aggregate amount of the Loan Agreement Obligations and
                the Lease
                Obligations equal to 75% of the net proceeds received by the Borrower
                in
                connection with the DEPFA Transaction (such net proceeds in any event
                to
                be net of amounts required to remain at the subsidiary level in connection
                with (i) any agreement to which none of DEPFA, MP, an Affiliate or
                person
                or entity controlled by, controlling or under common control with
                any of
                them or the Borrower (each a “Borrower Related Entity”), is a party, or
                (ii) the consent of any person or entity that is not a Borrower Related
                Entity (including, without limitation, the NYSE) or the Borrower
                and (y)
                upon the later consummation of the MP Transaction the Borrower shall
                repay
                in full all remaining amounts of the Loan Agreement Obligations and
                the
                Lease Obligations and, without affecting any obligation contained
                herein,
                until the later of (i) the closing and/or consummation of one of
                the
                Transactions and (ii) the payment in full of the Lease Obligations
                and the
                Loan Agreement Obligations, the Borrower shall pay the Loan Agreement
                Obligations and the Lease Obligations as contemplated by the Loan
                Agreement and the Lease, subject to the modifications contained herein.
                The Borrower has requested that prior to the DEPFA Closing KeyBank
                and KEF
                prepare payoff letters with respect thereto which KeyBank and KEF
                undertake to do.

            

    

     

    
      	
              (iii)

            	
              Notwithstanding
                the foregoing, in the event that the DEPFA Closing has not occurred
                on or
                before September 30, 2007 or a DEPFA Closing Termination Event, as
                hereinafter defined, has occurred on or before such date, the Borrower
                will (and hereby covenants to) use and take commercially reasonable
                efforts necessary and/or desirable to obtain a commitment in a form
                and
                from a financial institution/third party lender, both reasonably
                acceptable to the Bank (the “Acceptable Refinancing Commitment”) on or
                before October 31, 2007, in order to remit to the Bank amounts necessary
                to pay in full the Loan Agreement Obligations and the Lease Obligations
                as
                set forth in detail in the payoff letters to be delivered to the
                Borrower
                by KeyBank and KEF set forth in ¶”ii” above (the “Payoff Letters”). The
                Borrower hereby covenants, upon the closing of an Acceptable Refinancing
                Commitment, to remit to KeyBank and KEF amounts necessary to pay
                in full
                the Loan Agreement Obligations and the Lease Obligations as set forth
                in
                detail in the Payoff Letters. A “DEPFA Closing Termination Event” shall
                occur if (1) DEPFA and/or the Borrower determines not to pursue and/or
                abandons the consummation/closing of the DEPFA Transaction, or (2)
                the
                Borrower issues a statement expressly stating that the DEPFA Transaction
                will not be closed/consummated or (3) an event set forth in subsection
                (a)
                – (f) of section 12.1 of the DEPFA Agreement
                occurs.

            

    

     

    
      	
              (iv)

            	
              If
                the Borrower or any Affiliate receives the Termination Fee as contemplated
                by section 12.3 of the DEPFA Agreement or any payment and/or remittance
                in
                lieu or replacement thereof (collectively the “Termination Fee”), then by
                the close of the first Business Day immediately following the day
                the
                Termination Fee is paid/remitted, the Borrower shall remit to the
                Bank or
                cause to be remitted to the Bank an amount equal to the Termination
                Fee
                (the “2007 PrePayment”) and the Bank shall apply the 2007 PrePayment to
                reduce the principal balance of the Loan. The Borrower will (and
                hereby
                covenants to) use and take commercially reasonable efforts necessary
                and/or desirable to enforce its rights under the DEPFA Agreement
                and to
                receive the Termination Fee.

            

    

     

    
      	
              (v)

            	
              In
                the event that the Borrower is required to seek but unable to obtain
                an
                Acceptable Refinancing Commitment by October 31, 2007, then on the
                last
                day of each and every Interest Period, occurring after October 31,
                2007
                until the Maturity Date or the earlier payment in full of the Loan
                Agreement Obligations (and in lieu of scheduled payments of principal
                and
                interest otherwise required by the terms of the Loan Agreement during
                such
                period), the Borrower shall (x) make a payment equal to interest
                at the
                Interest Rate on the unpaid principal balance of the Loan Agreement
                Obligations on the last day of immediately preceding Interest Period
                AND (y) make a payment of $500,000.00 in reduction
                of the principal balance of the Loan Agreement Obligations. With
                respect
                to the Lease, the Borrower shall continue to perform thereunder in
                accordance with its terms.

            

    

     

    
      	
              (vi)

            	
              The
                Bank acknowledges and agrees that any and all payments made by the
                Borrower hereafter with respect to the Loan Agreement Obligations
                or the
                Lease Obligations shall be made without any prepayment penalty or
                breakage
                costs (and the same are hereby waived by the Bank (on its behalf
                and its
                affiliates)).

            

    

     

    
      	
              (vii)

            	
              Commencing
                on the date of this letter and continuing for so long as no Waiver
                Termination Event shall occur, KeyBank and KEF shall waive any and
                all
                EODs arising from, in connection with or as a result of the failure
                of the
                Borrower to comply with the provisions of Section 5.04 of the Loan
                Agreement.

            

    

     

    In
      all
      other respects the Loan Agreement and all other documents delivered by the
      Borrower to the Bank memorializing the Loan and documents memorializing the
      obligations of the Borrower to any Affiliates of the Bank remain in full force
      and effect.

     

    Please
      confirm the Borrower’s (i) agreement with the foregoing and (ii) agreement that
      the Bank has exercised reasonable discretion and acted in good faith and in
      a
      reasonable commercial manner during the course of the relationship between
      the
      Bank and the Borrower from the time of the commencement of the relationship
      through, and including, the date hereof, by executing this letter as provided
      below and faxing a signed copy to the undersigned at (518) 257-8539 within
      forty
      eight (48) hours following your receipt of this letter.

     

    Very
      truly yours,

     

     

    KEYBANK
      NATIONAL ASSOCIATION

     

     

    BY: 
      /s/ Peter A. Landauer

    Name:
      Peter A. Landauer

    Title:
      Vice President

     

     

    KEY
      EQUIPMENT FINANCE INC. F/K/A KEYCORP LEASING LTD.

     

     

    BY: 
      /s/ Peter A. Landauer

    Name:
      Peter A. Landauer

    Title:
      Authorized Signatory

     

     

    ACCEPTED
      AND AGREED THIS 6TH DAY OF AUGUST, 2007.

     

     

    FIRST
      ALBANY COMPANIES INC.

     

     

    By:
      /s/ C. Brian Coad

    Name:
      C.
      Brian Coad

    Title:
      Chief Financial Officer

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