Document:

EXHIBIT 4.1

 

AUDIOEYE, INC.

 

2014 INCENTIVE COMPENSATION PLAN

 

 

AUDIOEYE, INC.

2014 INCENTIVE COMPENSATION PLAN

 

	
1.
    	
Purpose
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Definitions
    	
1
    
	
 
    	
 
    	
 
    
	
3.
    	
Administration
    	
6
    
	
 
    	
 
    	
 
    
	
4.
    	
Shares Subject to Plan
    	
7
    
	
 
    	
 
    	
 
    
	
5.
    	
Eligibility; Per-Person Award Limitations
    	
8
    
	
 
    	
 
    	
 
    
	
6.
    	
Specific Terms of Awards
    	
8
    
	
 
    	
 
    	
 
    
	
7.
    	
Certain Provisions Applicable to Awards
    	
14
    
	
 
    	
 
    	
 
    
	
8.
    	
Code Section 162(m) Provisions
    	
16
    
	
 
    	
 
    	
 
    
	
9.
    	
Change in Control
    	
18
    
	
 
    	
 
    	
 
    
	
10.
    	
General Provisions
    	
19
    

 

 

AUDIOEYE, INC.

2014 INCENTIVE COMPENSATION PLAN

 

1.                                      Purpose.  The purpose of this AUDIOEYE, INC. 2014 INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist AudioEye, Inc., a Delaware corporation (the “Company”) and its Related Entities (as hereinafter defined) in attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants and other persons who provide services to the Company or its Related Entities by enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company’s stockholders, and providing such persons with annual and long term performance incentives to expend their maximum efforts in the creation of stockholder value.

 

2.                                      Definitions.  For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof and elsewhere herein.

 

(a)                                 “Award” means any Option, Stock Appreciation Right, Restricted Stock Award, Deferred Stock Award, Share granted as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based Award or Performance Award, together with any other right or interest, granted to a Participant under the Plan.

 

(b)                                 “Award Agreement” means any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder.

 

(c)                                  “Beneficiary” means the person, persons, trust or trusts that have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant’s death or to which Awards or other rights are transferred if and to the extent permitted under Section 10(b) hereof.  If, upon a Participant’s death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

 

(d)                                 “Beneficial Owner” and “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

 

(e)                                  “Board” means the Company’s Board of Directors.

 

(f)                                   “Cause” shall, with respect to any Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause” or “for cause” set forth in any employment, consulting, or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the failure by the Participant to perform, in a reasonable manner, his or her duties as assigned by the Company or a Related Entity, (ii) any violation or breach by the Participant of his or her employment, consulting or other similar agreement with the Company or a Related Entity, if any, (iii) any violation or breach by the Participant of any non-competition, non-solicitation, non-disclosure and/or other 

 

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similar agreement with the Company or a Related Entity, (iv) any act by the Participant of dishonesty or bad faith with respect to the Company or a Related Entity, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the Participant’s work performance, or (vi) the commission by the Participant of any act, misdemeanor, or crime reflecting unfavorably upon the Participant or the Company or any Related Entity.  The good faith determination by the Committee of whether the Participant’s Continuous Service was terminated by the Company for “Cause” shall be final and binding for all purposes hereunder.

 

(g)                                  “Change in Control” means a Change in Control as defined in Section 9(b) of the Plan.

 

(h)                                 “Code” means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

 

(i)                                     “Committee” means a committee designated by the Board to administer the Plan; provided, however, that if the Board fails to designate a committee or if there are no longer any members on the committee so designated by the Board, or for any other reason determined by the Board, then the Board shall serve as the Committee.  While it is intended that the Committee shall consist of at least two directors, each of whom shall be (i) a “non-employee director” within the meaning of Rule 16b-3 (or any successor rule) under the Exchange Act, unless administration of the Plan by “non-employee directors” is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) “Independent,” the failure of the Committee to be so comprised shall not invalidate any Award that otherwise satisfies the terms of the Plan.

 

(j)                                    “Consultant” means any Person (other than an Employee or a Director, solely with respect to rendering services in such Person’s capacity as a director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(k)                                 “Continuous Service” means the uninterrupted provision of services to the Company or any Related Entity in any capacity of Employee, Director, Consultant or other service provider.  Continuous Service shall not be considered to be interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entities, or any successor entities, in any capacity of Employee, Director, Consultant or other service provider, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director, Consultant or other service provider (except as otherwise provided in the Award Agreement).  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.

 

(l)                                     “Covered Employee” means the Person who, as of the end of the taxable year, either is the principal executive officer of the Company or is serving as the acting principal executive officer of the Company, and each other Person whose compensation is required to be disclosed in the Company’s filings with the Securities and Exchange Commission by reason of that person being among the three highest compensated officers of the Company as of the end of 

 

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a taxable year, or such other person as shall be considered a “covered employee” for purposes of Section 162(m) of the Code.

 

(m)                             “Deferred Stock” means a right to receive Shares, including Restricted Stock, cash measured based upon the value of Shares or a combination thereof, at the end of a specified deferral period.

 

(n)                                 “Deferred Stock Award” means an Award of Deferred Stock granted to a Participant under Section 6(e) hereof.

 

(o)                                 “Director” means a member of the Board or the board of directors of any Related Entity.

 

(p)                                 “Disability” means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee.

 

(q)                                 “Dividend Equivalent” means a right, granted to a Participant under Section 6(g) hereof, to receive cash, Shares, other Awards or other property equal in value to dividends paid with respect to a specified number of Shares, or other periodic payments.

 

(r)                                    “Effective Date” means the effective date of the Plan, which shall be January 27, 2014.

 

(s)                                   “Eligible Person” means each officer, Director, Employee, Consultant and other person who provides services to the Company or any Related Entity.  The foregoing notwithstanding, only Employees of the Company, or any parent corporation or subsidiary corporation of the Company (as those terms are defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible Persons for purposes of receiving any Incentive Stock Options.  An Employee on leave of absence may, in the discretion of the Committee, be considered as still in the employ of the Company or a Related Entity for purposes of eligibility for participation in the Plan.

 

(t)                                    “Employee” means any person, including an officer or Director, who is an employee of the Company or any Related Entity.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(u)                                 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

 

(v)                                 “Fair Market Value” means the fair market value of Shares, Awards or other property as determined by the Committee, or under procedures established by the Committee.  Unless otherwise determined by the Committee, the Fair Market Value of a Share as of any given date shall be the closing sale price per Share reported on a consolidated basis for stock listed on the principal stock exchange or market on which Shares are traded on the date immediately preceding the date as of which such value is being determined (or as of such later measurement date as determined by the Committee on the date the Award is authorized by the Committee), or, if there is no sale on that date, then on the last previous day on which a sale was reported.

 

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(w)                               “Good Reason” shall, with respect to any Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award Agreement, “Good Reason” shall have the equivalent meaning or the same meaning as “good reason” or “for good reason” set forth in any employment, consulting or other agreement for the performance of services between the Participant and the Company or a Related Entity or, in the absence of any such agreement or any such definition in such agreement, such term shall mean (i) the assignment to the Participant of any duties inconsistent in any material respect with the Participant’s duties or responsibilities as assigned by the Company or a Related Entity, or any other action by the Company or a Related Entity which results in a material diminution in such duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; (ii) any material failure by the Company or a Related Entity to comply with its obligations to the Participant as agreed upon, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company or a Related Entity promptly after receipt of notice thereof given by the Participant; or (iii) the Company’s or Related Entity’s requiring the Participant to be based at any office or location outside of fifty (50) miles from the location of employment or service as of the date of Award, except for travel reasonably required in the performance of the Participant’s responsibilities.

 

(x)                                 “Incentive Stock Option” means any Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code or any successor provision thereto.

 

(y)                                 “Independent,” when referring to either the Board or members of the Committee, shall have the same meaning as used in the rules of the Listing Market.

 

(z)                                  “Incumbent Board” means the Incumbent Board as defined in Section 9(b)(ii) hereof.

 

(aa)                          “Listing Market” means the OTC Bulletin Board or any other national securities exchange on which any securities of the Company are listed for trading, and if not listed for trading, by the rules of the Nasdaq Market.

 

(bb)                          “Non-Qualified Stock Option” means any option that is not an Incentive Stock Option.

 

(cc)                            “Option” means a right granted to a Participant under Section 6(b) hereof, to purchase Shares or other Awards at a specified price during specified time periods.

 

(dd)                          “Optionee” means a person to whom an Option is granted under this Plan or any person who succeeds to the rights of such person under this Plan.

 

(ee)                            “Other Stock-Based Awards” means Awards granted to a Participant under Section 6(i) hereof.

 

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

 

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(gg)                            “Performance Award” means any Award of Performance Shares or Performance Units granted pursuant to Section 6(h) hereof.

 

(hh)                          “Performance Period” means that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured.

 

(ii)                                  “Performance Share” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

 

(jj)                                “Performance Unit” means any grant pursuant to Section 6(h) hereof of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter.

 

(kk)                          “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

 

(ll)                                  “Related Entity” means any Subsidiary, and any business, corporation, partnership, limited liability company or other entity designated by the Board, in which the Company or a Subsidiary holds a substantial ownership interest, directly or indirectly.

 

(mm)                  “Restriction Period” means the period of time specified by the Committee that Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose.

 

(nn)                          “Restricted Stock” means any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such risks of forfeiture and other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

(oo)                          “Restricted Stock Award” means an Award granted to a Participant under Section 6(d) hereof.

 

(pp)                          “Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

 

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(qq)                          “Shares” means the shares of common stock of the Company, par value $.00001 per share, and such other securities as may be substituted (or resubstituted) for Shares pursuant to Section 10(c) hereof.

 

(rr)                                “Stock Appreciation Right” means a right granted to a Participant under Section 6(c) hereof.

 

(ss)                              “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.

 

(tt)                                “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, Awards previously granted, or the right or obligation to make future Awards, by a company (i) acquired by the Company or any Related Entity, (ii) which becomes a Related Entity after the date hereof, or (iii) with which the Company or any Related Entity combines.

 

3.                                      Administration.

 

(a)                                 Authority of the Committee.  The Plan shall be administered by the Committee except to the extent (and subject to the limitations imposed by Section 3(b) hereof) the Board elects to administer the Plan, in which case the Plan shall be administered by only those members of the Board who are Independent members of the Board, in which case references herein to the “Committee” shall be deemed to include references to the Independent members of the Board.  The Committee shall have full and final authority, subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award Agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award Agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.  In exercising any discretion granted to the Committee under the Plan or pursuant to any Award, the Committee shall not be required to follow past practices, act in a manner consistent with past practices, or treat any Eligible Person or Participant in a manner consistent with the treatment of any other Eligible Persons or Participants.

 

(b)                                 Manner of Exercise of Committee Authority.  The Committee, and not the Board, shall exercise sole and exclusive discretion (i) on any matter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act, (ii) with respect to any Award that is intended to qualify as “performance-based compensation” under Section 162(m), to the extent necessary in order for such Award to so qualify; and (iii) with respect to any Award to an Independent Director.  Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, its 

 

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Related Entities, Eligible Persons, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and stockholders.  The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee.  The Committee may delegate to officers or managers of the Company or any Related Entity, or committees thereof, the authority, subject to such terms and limitations as the Committee shall determine, to perform such functions, including administrative functions as the Committee may determine to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company and will not cause Awards intended to qualify as “performance-based compensation” under Code Section 162(m) to fail to so qualify.  The Committee may appoint agents to assist it in administering the Plan.

 

(c)                                  Limitation of Liability.  The Committee and the Board, and each member thereof, shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or Employee, the Company’s independent auditors, Consultants or any other agents assisting in the administration of the Plan.  Members of the Committee and the Board, and any officer or Employee acting at the direction or on behalf of the Committee or the Board, 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.                                      Shares Subject to Plan.

 

(a)                                 Limitation on Overall Number of Shares Available for Delivery Under Plan.  Subject to adjustment as provided in Section 10(c) hereof, the total number of Shares reserved and available for delivery under the Plan shall be five million (5,000,000).  Any Shares delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.

 

(b)                                 Application of Limitation to Grants of Awards.  No Award may be granted if the number of Shares to be delivered in connection with such an Award exceeds the number of Shares remaining available for delivery under the Plan, minus the number of Shares deliverable in settlement of or relating to then outstanding Awards.  The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of Shares actually delivered differs from the number of Shares previously counted in connection with an Award.

 

(c)                                  Availability of Shares Not Delivered under Awards and Adjustments to Limits.

 

(i)                                     If any Awards are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares to which those Awards were subject, shall, to the extent of such forfeiture, expiration, termination, cash

 

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settlement or non-issuance, again be available for delivery with respect to Awards under the Plan, subject to Section 4(c)(iv) below.

 

(ii)                                  In the event that any Option or other Award granted hereunder is exercised through the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, or withholding tax liabilities arising from such option or other award are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, then only the number of Shares issued net of the Shares tendered or withheld shall be counted for purposes of determining the maximum number of Shares available for grant under the Plan.

 

(iii)                               Substitute Awards shall not reduce the Shares authorized for delivery under the Plan or authorized for delivery to a Participant in any period.  Additionally, in the event that a company acquired by the Company or any Related Entity or with which the Company or any Related Entity combines has shares available under a pre-existing plan approved by its stockholders, the shares available for delivery pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for delivery under the Plan; if and to the extent that the use of such Shares would not require approval of the Company’s stockholders under the rules of the Listing Market.

 

(iv)                              Any Share that again becomes available for delivery pursuant to this Section 4(c) shall be added back as one (1) Share.

 

(v)                                 Notwithstanding anything in this Section 4(c) to the contrary but subject to adjustment as provided in Section 10(c) hereof, the maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be five million (5,000,000) Shares.

 

5.                                      Eligibility; Per-Person Award Limitations.  Awards may be granted under the Plan only to Eligible Persons.  Subject to adjustment as provided in Section 10(c), in any fiscal year of the Company during any part of which the Plan is in effect, no Participant may be granted (i) Options or Stock Appreciation Rights with respect to more than 500,000 Shares or (ii) Restricted Stock, Deferred Stock, Performance Shares and/or Other Stock-Based Awards with respect to more than 500,000 Shares.  In addition, the maximum dollar value payable to any one Participant with respect to Performance Units is (x) $250,000 with respect to any 12 month Performance Period and (y) with respect to any Performance Period that is more than 12 months, $500,000.

 

6.                                      Specific Terms of Awards.

 

(a)                                 General.  Awards may be granted on the terms and conditions set forth in this Section 6.  In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including

 

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terms requiring forfeiture of Awards in the event of termination of the Participant’s Continuous Service and terms permitting a Participant to make elections relating to his or her Award.  Except as otherwise expressly provided herein, the Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan.  Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of Delaware law, no consideration other than services may be required for the grant (as opposed to the exercise) of any Award.

 

(b)                                 Options.  The Committee is authorized to grant Options to any Eligible Person on the following terms and conditions:

 

(i)                                     Exercise Price.  Other than in connection with Substitute Awards, the exercise price per Share purchasable under an Option shall be determined by the Committee, provided that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of the Option and shall not, in any event, be less than the par value of a Share on the date of grant of the Option.  If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted.

 

(ii)                                  Time and Method of Exercise.  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 time or times at which Options shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including in the discretion of the Committee a cashless exercise procedure), the form of such payment, including, without limitation, cash, Shares (including without limitation the withholding of Shares otherwise deliverable pursuant to the Award), other Awards or awards granted under other plans of the Company or a Related Entity, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis provided that such deferred payments are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law), and the methods by or forms in which Shares will be delivered or deemed to be delivered to Participants.

 

(iii)                               Incentive Stock Options.  The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code.  Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options (including any Stock Appreciation Right issued in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any Incentive Stock Option under Section 422 of the Code, unless the Participant has first requested, or consents to, the change that will

 

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result in such disqualification.  Thus, if and to the extent required to comply with Section 422 of the Code, Options granted as Incentive Stock Options shall be subject to the following special terms and conditions:

 

(A)                               the Option shall not be exercisable for more than ten years after the date such Incentive Stock Option is granted; provided, however, that if a Participant owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Participant, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five years from the date of grant; and

 

(B)                               The aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of the Shares with respect to which Incentive Stock Options granted under the Plan and all other option plans of the Company (and any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) that become exercisable for the first time by the Participant during any calendar year shall not (to the extent required by the Code at the time of the grant) exceed $100,000.

 

(c)                                  Stock Appreciation Rights.  The Committee may grant Stock Appreciation Rights to any Eligible Person in conjunction with all or part of any Option granted under the Plan or at any subsequent time during the term of such Option (a “Tandem Stock Appreciation Right”), or without regard to any Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms and conditions as the Committee may establish in its sole discretion, not inconsistent with the provisions of the Plan, including the following:

 

(i)                                     Right to Payment.  A Stock Appreciation Right shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one Share on the date of exercise over (B) the grant price of the Stock Appreciation Right as determined by the Committee.  The grant price of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of a Share on the date of grant, in the case of a Freestanding Stock Appreciation Right, or less than the associated Option exercise price, in the case of a Tandem Stock Appreciation Right.

 

(ii)                                  Other Terms.  The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a Stock Appreciation Right may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Stock Appreciation Rights shall cease to be or become exercisable following termination of Continuous Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Shares will be delivered or deemed to be delivered to Participants, whether or not a Stock Appreciation Right shall be in tandem or in combination with any other Award, and any other terms and conditions of any Stock Appreciation Right.

 

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(iii)                               Tandem Stock Appreciation Rights. Any Tandem Stock Appreciation Right may be granted at the same time as the related Option is granted or, for Options that are Non-Qualified Stock Options, at any time thereafter before exercise or expiration of such Option.  Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the exercise price at which Shares can be acquired pursuant to the Option.  In addition, if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies. Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation Right shall no longer be exercisable to the extent the related Option has been exercised.

 

(d)                                 Restricted Stock Awards.  The Committee is authorized to grant Restricted Stock Awards to any Eligible Person on the following terms and conditions:

 

(i)                                     Grant and Restrictions.  Restricted Stock Awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, or as otherwise provided in this Plan during the Restriction Period.  The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan.  The 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, as the Committee may determine at the date of grant or thereafter.  Except to the extent restricted under the terms of the Plan and any Award Agreement relating to a Restricted Stock Award, 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 (subject to any mandatory reinvestment or other requirement imposed by the Committee).  During the period that the Restriction Stock Award is subject to a risk of forfeiture, subject to Section 10(b) below and except as otherwise provided in the Award Agreement, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

 

(ii)                                  Forfeiture.  Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable Restriction Period, the Participant’s Restricted Stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited and reacquired by the Company; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to Restricted Stock Awards shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 

(iii)                               Certificates for Stock.  Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine.  If certificates representing

 

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Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock.

 

(iv)                              Dividends and Splits.  As a condition to the grant of a Restricted Stock Award, the Committee may require or permit a Participant to elect that any cash dividends paid on a Share of Restricted Stock be automatically reinvested in additional Shares of Restricted Stock or applied to the purchase of additional Awards under the Plan.  Unless otherwise determined by the Committee, Shares 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 Shares or other property have been distributed.

 

(e)                                  Deferred Stock Award.  The Committee is authorized to grant Deferred Stock Awards to any Eligible Person on the following terms and conditions:

 

(i)                                     Award and Restrictions.  Satisfaction of a Deferred Stock Award shall occur upon expiration of the deferral period specified for such Deferred Stock Award by the Committee (or, if permitted by the Committee, as elected by the Participant).  In addition, a Deferred Stock Award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine.  A Deferred Stock Award may be satisfied by delivery of Shares, cash equal to the Fair Market Value of the specified number of Shares covered by the Deferred Stock, or a combination thereof, as determined by the Committee at the date of grant or thereafter.  Prior to satisfaction of a Deferred Stock Award, a Deferred Stock Award carries no voting or dividend or other rights associated with Share ownership.

 

(ii)                                  Forfeiture.  Except as otherwise determined by the Committee, upon termination of a Participant’s Continuous Service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award Agreement evidencing the Deferred Stock Award), the Participant’s Deferred Stock Award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided that, subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee may provide, by rule or regulation or in any Award Agreement, or may determine in any individual case, that forfeiture conditions relating to a Deferred Stock Award shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of any Deferred Stock Award.

 

(iii)                               Dividend Equivalents.  Unless otherwise determined by the Committee at the date of grant, any Dividend Equivalents that are granted with respect to any Deferred Stock Award shall be either (A) paid with respect to such Deferred Stock Award at the dividend payment date in cash or in Shares of unrestricted stock having a Fair Market Value

 

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equal to the amount of such dividends, or (B) deferred with respect to such Deferred Stock Award and the amount or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect.  The applicable Award Agreement shall specify whether any Dividend Equivalents shall be paid at the dividend payment date, deferred or deferred at the election of the Participant.  If the Participant may elect to defer the Dividend Equivalents, such election shall be made within 30 days after the grant date of the Deferred Stock Award, but in no event later than 12 months before the first date on which any portion of such Deferred Stock Award vests.

 

(f)                                   Bonus Stock and Awards in Lieu of Obligations.  The Committee is authorized to grant Shares to any Eligible Persons as a bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, provided that, in the case of Eligible Persons subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Shares or other Awards are exempt from liability under Section 16(b) of the Exchange Act.  Shares or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.

 

(g)                                  Dividend Equivalents.  The Committee is authorized to grant Dividend Equivalents to any Eligible Person entitling the Eligible Person to receive cash, Shares, other Awards, or other property equal in value to the dividends paid with respect to a specified number of Shares, or other periodic payments.  Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award.  The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Shares, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify.  Any such determination by the Committee shall be made at the grant date of the applicable Award.

 

(h)                                 Performance Awards.  The Committee is authorized to grant Performance Awards to any Eligible Person payable in cash, Shares, or other Awards, on terms and conditions established by the Committee, subject to the provisions of Section 8 if and to the extent that the Committee shall, in its sole discretion, determine that an Award shall be subject to those provisions.  The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award; provided, however, that a Performance Period shall not be shorter than twelve (12) months nor longer than five (5) years.  Except as provided in Section 9 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period.  The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 8(b), or in the case of an Award that the Committee determines shall not be subject to Section 8 hereof, any other criteria that the Committee, in its sole discretion, shall determine should be used for that purpose.  The amount of the Award to be distributed shall be conclusively determined by the Committee.  Performance Awards may be paid in a lump sum or in installments following the close of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis.

 

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(i)                                     Other Stock-Based Awards.  The Committee is authorized, subject to limitations under applicable law, to grant to any Eligible Person 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, Shares, as deemed by the Committee to be consistent with the purposes of the Plan.  Other Stock-Based Awards may be granted to Participants either alone or in addition to other Awards granted under the Plan, and such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan.  The Committee shall determine the terms and conditions of such Awards.  Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(i) shall be purchased for such consideration, (including without limitation loans from the Company or a Related Entity provided that such loans are not in violation of Section 13(k) of the Exchange Act, or any rule or regulation adopted thereunder or any other applicable law) paid for at such times, by such methods, and in such forms, including, without limitation, cash, Shares, other Awards or other property, as the Committee shall determine.

 

7.                                      Certain 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 Related Entity, or any business entity to be acquired by the Company or a Related Entity, or any other right of a Participant to receive payment from the Company or any Related Entity.  Such additional, tandem, and substitute or exchange Awards may be granted at any time.  If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award.  In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Related Entity, in which the value of Shares subject to the Award is equivalent in value to the cash compensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Shares minus the value of the cash compensation surrendered (for example, Options or Stock Appreciation Right granted with an exercise price or grant price “discounted” by the amount of the cash compensation surrendered), provided that any such determination to grant an Award in lieu of cash compensation must be made in compliance with Section 409A of the Code.

 

(b)                                 Term of Awards.  The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option or Stock Appreciation Right exceed a period of ten years (or in the case of an Incentive Stock Option such shorter term as may be required under Section 422 of the Code).

 

(c)                                  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 Related Entity 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, Shares, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis, provided that any determination to pay in installments or

 

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on a deferred basis shall be made by the Committee at the date of grant.  Any installment or deferral provided for in the preceding sentence shall, however, be subject to the Company’s compliance with applicable law and all applicable rules of the Listing Market, and in a manner intended to be exempt from or otherwise satisfy the requirements of Section 409A of the Code.  Subject to Section 7(e) hereof, the settlement of any Award may be accelerated, and cash paid in lieu of Shares in connection with such settlement, in the sole discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control).  Any such settlement shall be at a value determined by the Committee in its sole discretion, which, without limitation, may in the case of an Option or Stock Appreciation Right be limited to the amount if any by which the Fair Market Value of a Share on the settlement date exceeds the exercise or grant price.  Installment or deferred payments may be required by the Committee (subject to Section 7(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award Agreement) or permitted at the election of the Participant on terms and conditions established by the Committee.  The Committee may, without limitation, make provision for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Shares.

 

(d)                                 Exemptions from Section 16(b) Liability.  It is the intent of the Company that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant).  Accordingly, if any provision of this Plan or any Award Agreement does not comply with the requirements of Rule 16b-3 then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

 

(e)                                  Code Section 409A.

 

(i)                                     The Award Agreement for any Award that the Committee reasonably determines to constitute a Section 409A Plan, and the provisions of the Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A, and the Committee, in its sole discretion and without the consent of any Participant, may amend any Award Agreement (and the provisions of the Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A of the Code.

 

(ii)                                  If any Award constitutes a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”), then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code:

 

(A)                               Payments under the Section 409A Plan may not be made earlier than the first to occur of (u) the Participant’s “separation from service,” (v) the date the Participant becomes “disabled,” (w) the Participant’s death, (x) a “specified time (or pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such compensation, (y) a “change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets” of the Company, or (z) the occurrence of an “unforeseeble emergency;”

 

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(B)                               The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;

 

(C)                               Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Section 409A(a)(4) of the Code; and

 

(D)                               In the case of any Participant who is “specified employee,” a distribution on account of a “separation from service” may not be made before the date which is six months after the date of the Participant’s “separation from service” (or, if earlier, the date of the Participant’s death).

 

For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.  The Company does not make any representation to the Participant that any Awards awarded under this Plan will be exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless any Participant or Beneficiary for any tax, additional tax, interest or penalties that any Participant or Beneficiary may incur in the event that any provision of this Plan, any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.

 

(iii)                               Notwithstanding the foregoing, the Company does not make any representation to any Participant or Beneficiary that any Awards made pursuant to this Plan are exempt from, or satisfy, the requirements of Section 409A, and the Company shall have no liability or other obligation to indemnify or hold harmless the Participant or any Beneficiary for any tax, additional tax, interest or penalties that the Participant or any Beneficiary may incur in the event that any provision of this Plan, or any Award Agreement, or any amendment or modification thereof, or any other action taken with respect thereto, is deemed to violate any of the requirements of Section 409A.

 

8.                                      Code Section 162(m) Provisions.

 

(a)                                 Covered Employees.  Unless otherwise specified by the Committee, the provisions of this Section 8 shall be applicable to any Performance Award granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee.

 

(b)                                 Performance Criteria.  If a Performance Award is subject to this Section 8, then the payment or distribution thereof or the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be contingent upon achievement of one or more objective performance goals.  Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.”  One or more of the following business criteria for the Company, on a consolidated basis, and/or for Related Entities, or for business or geographical units of the Company and/or a

 

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Related Entity (except with respect to the total stockholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total stockholder return; (13) debt reduction; (14) market share; (15) entry into new markets, either geographically or by business unit; (16) customer retention and satisfaction; (17) strategic plan development and implementation, including turnaround plans; and/or (18) the Fair Market Value of a Share.  Any of the above goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor’s 500 Stock Index or a group of companies that are comparable to the Company.  In determining the achievement of the performance goals, the Committee shall exclude the impact of any (i) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (iii) change in accounting standards required by generally accepted accounting principles.

 

(c)                                  Performance Period; Timing For Establishing Performance Goals.  Achievement of performance goals in respect of Performance Awards shall be measured over a Performance Period no shorter than twelve (12) months and no longer than five (5) years, as specified by the Committee.  Performance goals shall be established not later than 90 days after the beginning of any Performance Period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code.

 

(d)                                 Adjustments.  The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with Awards subject to this Section 8, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of an Award subject to this Section 8.  The Committee shall specify the circumstances in which such Awards shall be paid or forfeited in the event of termination of Continuous Service by the Participant prior to the end of a Performance Period or settlement of Awards.

 

(e)                                  Committee Certification.  No Participant shall receive any payment under the Plan that is subject to this Section 8 unless the Committee has certified, by resolution or other appropriate action in writing, that the performance criteria and any other material terms previously established by the Committee or set forth in the Plan, have been satisfied to the extent necessary to qualify as “performance based compensation” under Section 162(m) of the Code.

 

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9.                                      Change in Control.

 

(a)                                 Effect of “Change in Control.”  If and only to the extent provided in any employment or other agreement between the Participant and the Company or any Related Entity, or in any Award Agreement, or to the extent otherwise determined by the Committee in its sole discretion and without any requirement that each Participant be treated consistently, upon the occurrence of a “Change in Control,” as defined in Section 9(b):

 

(i)                                     Any Option or Stock Appreciation Right that was not previously vested and exercisable as of the time of the Change in Control, shall become immediately vested and exercisable, subject to applicable restrictions set forth in Section 10(a) hereof.

 

(ii)                                  Any restrictions, deferral of settlement, and forfeiture conditions applicable to a Restricted Stock Award, Deferred Stock Award or an Other Stock-Based Award subject only to future service requirements granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof.

 

(iii)                               With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, the Committee may, in its discretion, deem such performance goals and conditions as having been met as of the date of the Change in Control.

 

(b)                                 Definition of “Change in Control.”  Unless otherwise specified in any employment agreement between the Participant and the Company or any Related Entity, or in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following:

 

(i)                                     The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the value of then outstanding equity securities of the Company (the “Outstanding Company Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities) (the foregoing Beneficial Ownership hereinafter being referred to as a “Controlling Interest”); provided, however, that for purposes of this Section 9(b), the following acquisitions shall not constitute or result in a Change in Control:  (v) any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below; or

 

(ii)                                  During any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be

 

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considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(iii)                               Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its Related Entities, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company or any of its Related Entities (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the Board of Directors or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

 

(iv)                              Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

10.                               General Provisions.

 

(a)                                 Compliance With Legal and Other Requirements.  The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Shares or payment of other benefits under any Award until completion of such registration or qualification of such Shares or other required action under any federal or state law, rule or regulation, listing or other required action with respect to the Listing Market, 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

 

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issuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.

 

(b)                                 Limits on Transferability; Beneficiaries.  No Award or other right or interest granted under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party, or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than Incentive Stock Options and Stock Appreciation Rights in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award Agreement (subject to any terms and conditions which the Committee may impose thereon).  A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant 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.

 

(c)                                  Adjustments.

 

(i)                                     Adjustments to Awards.  In the event that any extraordinary dividend or other distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Shares and/or such other securities of the Company or any other issuer such that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee shall, in such manner as it may deem equitable, substitute, exchange or adjust any or all of (A) the number and kind of Shares which may be delivered in connection with Awards granted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under Section 4 hereof, (C) the number and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate.

 

(ii)                                  Adjustments in Case of Certain Transactions.  In the event of any merger, consolidation or other reorganization in which the Company does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of the following approaches, without the requirement of obtaining any consent or agreement of a Participant as such, as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (b) the assumption or substitution for, as those terms are defined in Section 9(a)(iv) hereof, the outstanding Awards by the surviving entity or its parent or subsidiary, (c) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (d) settlement of the value of the outstanding Awards in

 

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cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Options or Stock Appreciation Rights, shall be measured by the amount, if any, by which the Fair Market Value of a Share exceeds the exercise or grant price of the Option or Stock Appreciation Right as of the effective date of the transaction).  The Committee shall give written notice of any proposed transaction referred to in this Section 10(c)(ii) at a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that Participants may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction).  A Participant may condition his exercise of any Awards upon the consummation of the transaction.

 

(iii)                               Other Adjustments.  The Committee (and the Board if and only to the extent such authority is not required to be exercised by the Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards, or performance goals and conditions relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit, or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee’s assessment of the business strategy of the Company, any Related Entity or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Options, Stock Appreciation Rights, Performance Awards granted pursuant to Section 8(b) hereof to Participants designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder.  Adjustments permitted hereby may include, without limitation, increasing the exercise price of Options and Stock Appreciation Rights, increasing performance goals, or other adjustments that may be adverse to the Participant.

 

(d)                                 Taxes.  The Company and any Related Entity are authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Shares, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company or any Related Entity and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to withhold or receive Shares or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

 

(e)                                  Changes to the Plan and Awards.  The Board may amend, alter, suspend, discontinue or terminate the Plan, or the Committee’s authority to grant Awards under the Plan, without the consent of stockholders or Participants, except that any amendment or alteration to

 

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the Plan shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of the Listing Market, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under the terms of any previously granted and outstanding Award.  The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award Agreement relating thereto, except as otherwise provided in the Plan; provided that, except as otherwise permitted by the Plan or Award Agreement, without the consent of an affected Participant, no such Committee or the Board action may materially and adversely affect the rights of such Participant under terms of such Award.  Notwithstanding anything to the contrary, the Committee shall be authorized to amend any outstanding Option and/or Stock Appreciation Right to reduce the exercise price or grant price without the prior approval of the stockholders of the Company.  In addition, the Committee shall be authorized to cancel outstanding Options and/or Stock Appreciation Rights replaced with Awards having a lower exercise price without the prior approval of the stockholders of the Company.

 

(f)                                   Limitation on Rights Conferred Under Plan.  Neither the Plan nor any action taken hereunder or under any Award 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 Related Entity; (ii) interfering in any way with the right of the Company or a Related Entity to terminate any Eligible Person’s or Participant’s Continuous Service at any time, (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 including, without limitation, any right to receive dividends or distributions, any right to vote or act by written consent, any right to attend meetings of stockholders or any right to receive any information concerning the Company’s business, financial condition, results of operation or prospects, unless and until such time as the Participant is duly issued Shares on the stock books of the Company in accordance with the terms of an Award.  None of the Company, its officers or its directors shall have any fiduciary obligation to the Participant with respect to any Awards unless and until the Participant is duly issued Shares pursuant to the Award on the stock books of the Company in accordance with the terms of an Award.  Neither the Company nor any of the Company’s officers, directors, representatives or agents is granting any rights under the Plan to the Participant whatsoever, oral or written, express or implied, other than those rights expressly set forth in this Plan or the Award Agreement.

 

(g)                                  Unfunded Status of Awards; Creation of Trusts.  The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation.  With respect to any payments not yet made to a Participant or obligation to deliver Shares 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 trusts and deposit therein cash, Shares, other Awards or other property, or make other arrangements to meet the Company’s obligations under the Plan.  Such trusts or

 

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other arrangements shall be consistent with the “unfunded” status of the Plan unless the Committee otherwise determines with the consent of each affected Participant.  The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law.

 

(h)                                 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 arrangements as it may deem desirable including incentive arrangements and awards which do not qualify under Section 162(m) of the Code.

 

(i)                                     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 or other consideration, the Participant shall be repaid the amount of such cash or other consideration.  No fractional Shares 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.

 

(j)                                    Governing Law.  The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflict of laws, and applicable federal law.

 

(k)                                 Non-U.S. Laws.  The Committee shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.

 

(l)                                     Plan Effective Date and Stockholder Approval; Termination of Plan.  The Plan shall become effective on the Effective Date, subject to subsequent approval, within 12 months of its adoption by the Board, by stockholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted, and other laws, regulations, and obligations of the Company applicable to the Plan.  Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained.  The Plan shall terminate at the earliest of (a) such time as no Shares remain available for issuance under the Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of the Effective Date.  Awards outstanding upon expiration of the Plan shall remain in effect until they have been exercised or terminated, or have expired.

 

23Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is entered into as of April 23, 2014, between Lime Energy Services Co. (the “Company”), which is a Massachusetts corporation and a wholly-owned subsidiary of Lime Energy Co., a Delaware corporation (“Lime”), and Mary Colleen Brennan (the “Executive”).

 

WHEREAS, the Company and the Executive knowingly and voluntarily desire to enter into an employment relationship on and subject to the terms and conditions set forth below;

 

NOW, THEREFORE, in consideration of the covenants and other terms and conditions set forth below, the Company and the Executive hereby agree and contract as follows:

 

1)                                     Employment Duties.

 

Conditioned on the Executive successfully passing a background check and drug testing to be performed by the Company (or its designee), the Company agrees to employ the Executive as the Chief Financial Officer, and the Executive hereby accepts such employment on and subject to the terms set forth in this Agreement.  The Executive will report to and be subject to the authority and direction of Chief Executive Officer of the Company (“CEO”).

 

The Executive agrees to use her best and full-time efforts to perform her duties as CFO, and perform such other services and responsibilities for the Company as the Company may from time to time request.  Without limiting the generality of the foregoing, the Executive will ordinarily devote not less than five (5) days per week to the Company’s business (except for vacations and regular business holidays observed by the Company) on a full-time basis, during normal business hours Monday through Friday.

 

2)                                     Period of Employment.

 

The Executive’s employment pursuant to this Agreement has commenced on April 21, 2014 (the “Commencement Date”) and shall terminate on April 30, 2016 (the “Initial Employment Period”), unless earlier terminated pursuant to Section 4 of this Agreement.  Notwithstanding the foregoing sentence, the Executive’s employment shall automatically renew for successive one-year periods (each, a “Renewal Period”) at the end of the Initial Employment Period, and at the end of each Renewal Period, unless notice of non-renewal is given by the Company on or before November 1 of the year before the Initial Employment Period, or any Renewal Period, as applicable, would end, or unless this Agreement is terminated pursuant to Section 4 of this Agreement.  The Initial Employment Period and any Renewal Period, as such periods may be shortened as result of a termination pursuant to Section 4 of this Agreement, shall be known as the “Period of Employment.”  In the event the Company provides the Executive with a timely notice of non-renewal, the Executive shall continue her employment according to the terms of this Agreement, until the end of the Initial Employment Period, or the Renewal Period, as applicable, unless the parties hereto agree on a different date.  Non-renewal of this Agreement by the Company shall be considered a termination in accordance with Section 4(a) of the Agreement, and termination shall take effect on the applicable date the employment ends, in accordance with the immediately preceding sentence.  The parties acknowledge and agree that certain provisions of this Agreement shall continue in effect after the Period of Employment, as set forth herein.  The non-renewal

 

	
Company   Initials:       AP          
    	
Executive Initials:     MCB         
    

 

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of Executive’s employment with the Company shall be at the will of the Company, and there shall be no obligation on the part of the Company or the Executive to continue such employment

 

3)             Compensation and Benefits.

 

a)                                     Salary.

 

During the Period of Employment, the Company will pay the Executive a salary (the “Base Salary”) in periodic installments, timed in accordance with the Company’s deliveries of salary payments to other exempt employees.  The Base Salary will be subject to all payroll deductions and other deductions as may be required to be made pursuant to law, governmental order, or by agreement with, or consent of, the Executive.  Beginning on the Commencement Date, the salary installments will be calculated based on a gross annualized rate of Two Hundred and Twenty Thousand Dollars ($220,000).  During the Period of Employment, the Company will endeavor, but will not be obligated, to review the Executive’s compensation annually, and give consideration to whether any increase in the Base Salary is warranted, in the Company’s sole and absolute discretion.  Upon any change in Base Salary, all references herein to Base Salary shall be to the changed amount.

 

b)                                     Sign-On Bonus.

 

Within 30 days after the Commencement Date, provided that the Executive has not previously resigned her employment with the Company, the Company shall pay the Executive Ten Thousand Dollars ($10,000) as a sign-on bonus (“Sign-On Bonus”).  The Sign On Bonus will be subject to all payroll deductions and other deductions as may be required to be made pursuant to law, governmental order, or by agreement with, or consent of, the Executive.

 

c)                                      Stock.

 

The Company shall issue and sell to the Executive 5,000 shares of common stock of the Company at a purchase price of $0.001 per share (the “Restricted Stock”).  Until such shares of Restricted Stock vest, the Company will have the right and option to repurchase the unvested shares at the same purchase price in the event the Executive resigns her employment with the Company or is terminated by the Company for Cause (as defined in the 2008 Long-Term Incentive Plan, as amended (the “Plan”)).  1,667 shares of Restricted Stock shall vest on December 31, 2014, 1,666 shares shall vest on December 31, 2015, and 1,666 shares shall vest on December 31, 2016, provided that the Executive is employed on each such vesting date.  Further, all unvested shares of Restricted Stock (if any) shall vest in the event of the Executive’s termination of employment with the Company due to the Executive’s death or Disability (as defined in the Plan) or upon the occurrence of a Change in Control of the Company (as defined in the Plan).

 

d)                                     Annual Bonus

 

The Executive shall be eligible to participate in the performance bonus plan generally made available to other senior executives of the Company, with an initial annual bonus target of between 0 to 50 percent of Base Salary.  Payment of an annual bonus shall be at the Company’s sole and absolute discretion and is generally based on the Executive’s performance in combination with the Company’s performance.

 

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e)                                      Reimbursement of Business Expenses.

 

The Company will reimburse the Executive for reasonable business expenses (other than moving expenses) that the Executive actually incurs for the performance of her duties for the Company during the Period of Employment, consistent with the Company’s policies in effect from time to time with respect to reimbursement of business expenses, and subject to the Executive’s prior submissions of complete and truthful expense reports in a form acceptable to the Company, with original invoices and proofs of payment attached.

 

f)                                        Laptop and Cell Phone.

 

During the Period of Employment, the Company agrees to provide the Executive with a laptop computer for her business use and to reimburse the Executive in an amount not to exceed $125 per month for payment of a mobile phone and/or personal digital assistant and/or smartphone for business use.  Such reimbursement is subject to the Executive’s prior submissions of complete and truthful expense reports in a form acceptable to the Company, with original invoices and proofs of payment attached.

 

g)                                     Holidays.

 

During the Period of Employment, the Executive will be entitled to take paid holidays as provided by the Company from time to time to all of its employees, which holidays may change from time to time in the Company’s sole and absolute discretion.  As of the date of this Agreement, the Company observes the following holidays: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, the day after Thanksgiving Day, Christmas Day, and one “Floating Holiday” to be scheduled at the Executive’s discretion.

 

h)                                     Paid Time Off.

 

The Executive will initially be entitled to twenty (20) days of paid time off per Company fiscal year.  Paid time off will accrue at a rate of 3.08 hours per week, beginning on the Commencement Date.  Thereafter, the number of days of paid time off per fiscal year, and the accrual rate of hours per month, may change in the Company’s sole and absolute discretion.  Except in cases of emergency, the Executive will obtain the written approval of the CEO as early as possible and at least thirty (30) days before scheduling any paid time off in excess of five consecutive days.

 

The Executive’s accrual and carry forward of paid time off shall be in accordance with Company policy.  Upon the Executive’s termination, all accrued hours of paid time off will be payable at the next regularly scheduled payroll date (except for any paid time off that has been forfeited previously for lack of use within a particular fiscal year), pursuant to Company policy.

 

i)                                        Other Benefits.

 

Beginning 30 to 90 days after the Commencement Date, depending on the benefit, the Executive will be entitled to participate in whatever benefit plans and programs the Company offers to executive-level employees, subject to the terms of such plans and programs.  Currently, the Company offers medical (employee and Company shared cost), dental (employee and Company shared cost), short term disability (Company paid), long-term disability (Company paid), life insurance at one times salary (Company paid), Flexible Spending Account (employee paid), and 401(k) (Company discretionary match).  The Company reserves the right to cancel or change any and all benefit plans and programs at any time, in the

 

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Company’s sole and absolute discretion, without providing any substitute benefits or compensation to the Executive whatsoever.

 

4)                                     Termination.

 

a)                                     Termination by the Company for Due Cause.

 

In this Agreement, “Due Cause” means any of the following:

 

(i)                                     a material or continued breach by the Executive of this Agreement, if such breach is not remedied, if curable, within ten (10) calendar days following her receipt of written notice thereof from the Company, or, if the breach cannot be remedied within ten (10) days, within such longer time (not to exceed forty-five (45) days) as the Company, in its sole and absolute discretion, may deem to be reasonably necessary for the Executive to remedy the breach if the Company, in its sole and absolute discretion, determines that the Executive has promptly commenced and is diligently and continuously pursuing her best efforts to remedy the breach as quickly as possible;

 

(ii)                                  conviction, or plea of guilty or nolo contendere, or commission by the Executive of a felony or any other crime that has, or is likely to have, a materially adverse impact upon the Company or its Affiliates, their reputation, or their relationship with their employees, suppliers, or customers;

 

(iii)                               action or inaction by the Executive (other than action or inaction taken with the approval of the CEO) which results in a material injury to the business, property, or reputation of the Company and/or any of its Affiliates;

 

(iv)                              refusal to perform or substantial neglect by the Executive of the duties assigned to the Executive pursuant to Section 1 of this Agreement if such refusal or neglect is not remedied within ten (10) calendar days following written notice thereof from the Company;

 

(v)                                 the commission by the Executive of any act constituting embezzlement, fraud, misappropriation, willful misconduct, or breach of fiduciary duty or duty of loyalty owed to the Company;

 

(vi)                              the Company determines that the Executive has made any material misrepresentation of her education or prior work experience;

 

(vii)                           material violation by the Executive of the Company’s employment policies, including all policies set forth in the Company’s Employee Handbook and all drug and alcohol and anti-discrimination policies; or

 

(viii)                        commission by the Executive of an act of moral turpitude.

 

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In this Agreement, “Affiliates” means and includes: Lime and all of the Company’s and Lime’s respective affiliate and subsidiary companies (present and future); and all their respective officers, directors, and shareholders; and each of them.

 

The Company may terminate the Period of Employment for Due Cause at any time by delivering written notice of the termination to the Executive.  Upon the Executive’s separation from employment for Due Cause or as a result of the non-renewal of the Initial Employment Period or the Renewal Period, as applicable, the Company shall have no further obligations to the Executive other than the payment of the Accrued Obligations (as defined below).  Such payment shall be made in accordance with the Company’s normal payroll schedules.

 

In this Agreement, “Accrued Obligations” means (a) any Base Salary earned through the date of termination (or death) and any bonus earned relating to the fiscal year prior to the fiscal year in which such termination (or death) occurs, each to the extent not yet paid, (b) reimbursement for any previously unreimbursed expenses incurred by the Executive pursuant to this Agreement, and (c) such retirement, incentive and other payments and benefits earned and vested (if applicable) by the Executive as of the date of her termination (or death) under any equity, insurance or employee benefit plan of the Company in which the Executive participates, all of the foregoing to be paid in the normal course for such payments and in accordance with the terms of such plans.

 

b)                                     Termination Due to Death or Disability.

 

The Period of Employment will automatically terminate in the event of the Executive’s death or upon 30 days’ written notice in the event of the Disability (as defined below) of the Executive.  Upon such termination, the Company shall have no further obligations to the Executive, or her estate or beneficiaries, other than the payment of the Accrued Obligations.  Such payment shall be made in accordance with the Company’s normal payroll schedules.

 

In the event the Executive becomes physically or mentally disabled so as to become materially unable, for a period of more than 120 consecutive days or for more than 150 days in the aggregate during any 12-month period, to perform the Executive’s duties hereunder on substantially a full-time basis, or over such longer period as may be required by applicable law, the Executive will be deemed to have a “Disability” for purposes of this Agreement.

 

c)                                      Termination by the Company for Any Reason Other Than Due to Due Cause, Disability or Death.

 

The Company may terminate the Period of Employment at any time, for any reason other than Due Cause, Disability or death, by delivery of 30 days written notice of the termination to the Executive.  If the effective date of any such termination is after December 31, 2014, the Company shall pay as severance compensation to Executive (i) six (6) months’ of her Salary at her then annual salary compensation rate, plus (ii) any Accrued Obligations. If the termination is effective prior to January 1, 2015, the Company will have no further obligations to the Executive other than payment of the Accrued Obligations. Any such payments shall be made in accordance with the Company’s normal payroll schedules.  As a condition precedent to Executive’s right to receive any severance compensation hereunder, Executive shall, upon termination of her employment, (i) return all Company property in Executive’s possession, and (ii) enter into a release agreement reasonably acceptable to the Company that releases all claims which may legally released by Executive against Company and its affiliates in connection with or arising out of her employment by the Company.

 

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d)                                     Termination by the Executive for Convenience.

 

The Executive may terminate the Period of Employment for her convenience at any time upon 30 days’ notice by delivering a written notice of termination to the Company.  Upon such a termination, the Company shall have no further obligations to the Executive, other than the payment of the Accrued Obligations.  Such payment shall be made in accordance with the Company’s normal payroll schedules.

 

e)                                      Resignation Effective Upon Termination.

 

Upon any termination of the Period of Employment, regardless of the reason therefor, the Executive will be deemed to have resigned as an employee of the Company and from any and all other positions that the Executive then holds with the Company and any Affiliates.

 

f)                                        Return of All Company Property Upon Termination.

 

Upon the termination of the Period of Employment, regardless of the cause or reason therefore, or at such earlier time as the Company may request, the Executive will immediately deliver to the Company all property provided to her for the Executive’s use in relation to her employment, including but not limited to all Confidential Information provided to her by the Company, and will immediately deliver a detailed written accounting for any and all property of the Company that was lost, stolen, or destroyed while in the Executive’s possession, care, custody, or control.

 

5)                                     Inventions.

 

a)                                     “Inventions.”

 

In this Agreement, the term “Inventions” means and includes: all ideas, inventions, patents, copyrights, copyright designs, trade secrets, trademarks, processes, discoveries, enhancements, software, computer source code, catalogues, prints, business applications, plans, writings, works, and other developments or improvements and all other intellectual property and proprietary rights and any derivative work(s) based thereon that are made, conceived, or completed by the Executive, alone or with others, during the Period of Employment, whether or not during normal working hours.

 

b)                                     Prior Inventions.

 

The Executive has identified on Exhibit A attached hereto all Inventions applicable to the business of the Company or relating in any way to the Company’s business or demonstrably anticipated research and development or business, which were conceived, reduced to practice, created, derived, developed or made by the Executive prior to the Executive’s employment with the Company (collectively, the “Prior Inventions”), and the Executive represents and warrants that such list is complete. The Executive further represents and warrants that the Executive has no rights in any Inventions other than those Prior Inventions specified in Exhibit A. If there is no such list on Exhibit A, the Executive represents and warrants that the Executive has neither conceived, reduced to practice, created, derived, developed nor made any such Prior Inventions at the time of signing this agreement.  Such Prior Inventions are and shall remain the sole and exclusive property of the Executive, and the Executive will not incorporate or use or permit the Company to incorporate any aspect of a Prior Invention as part of her work for the Company unless the Executive discloses such intended use to the Company prior to such use or incorporation and the Company specifically consents to such use or incorporation in writing.  Should the Executive fail to obtain such prior written consent of the Company as required in this Section, the

 

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Executive will be deemed to have granted the Company a perpetual, royalty-free, transferable, worldwide license to utilize the Prior Invention(s), with rights to sublicense through multiple tiers of sublicenses.

 

c)                                      Reporting of New Inventions.

 

During the Period of Employment, and at the end of the Period of Employment, the Executive will promptly and periodically report in writing to the Company any and all Inventions that were developed and/or were under development by the Executive during the Period of Employment, whether solely or working jointly with others, whether or not during normal working hours.

 

d)                                     Ownership of New Inventions.

 

The Executive agrees that all Inventions:

 

(1)                                 that are developed using the Company’s equipment, supplies, facilities, or trade secret information; or

 

(2)                                 that relate to the Company’s business or actual or demonstrably anticipated research or development; or

 

(3)                                 that result from any work performed by the Executive for the Company

 

will be the sole and exclusive property of the Company.

 

e)                                      Assistance Regarding Inventions.

 

At the request of the Company, the Executive will do all things deemed by the Company to be necessary to perfect the Company’s title to the existing Inventions and the new Inventions that are the Company’s property, including by assisting in obtaining for the Company such title, patents, copyrights or other protection as may be provided under law and desired by the Company, and further including but not limited to executing and delivering any and all relevant applications, assignments, and other instruments.  This covenant shall survive the termination of the Period of Employment, provided that the Company, after the termination, will continue to reimburse the Executive for all reasonable expenses that the Executive incurs in performing her continuing obligations under this subsection.

 

To the extent any of the rights, title and interest in and to Company Inventions cannot be assigned by the Executive to the Company, the Executive hereby grants to the Company an exclusive, royalty-free, transferable, irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicenses) to utilize and practice such non-assignable rights, title and interest. To the extent any of the rights, title and interest in and to Company Inventions can be neither assigned nor licensed by the Executive to the Company, the Executive hereby irrevocably waives and agrees never to assert such non-assignable and non-licensable rights, title and interest against the Company or any of the Company’s successors in interest to such non-assignable and non-licensable rights.  The Executive grants to the Company or the Company’s designees a royalty free irrevocable, worldwide license (with rights to sublicense through multiple tiers of sublicenses) to utilize and practice all applicable patent, copyright, moral right, mask work, trade secret and other intellectual property rights relating to any Prior Inventions which the Executive incorporates, or permits to be incorporated, in any Company Inventions.  Notwithstanding the foregoing, the Executive agrees that the Executive will not incorporate, or permit to be incorporated, any Prior Inventions in any Company Inventions without the Company’s prior written consent.

 

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f)                                        Future Inventions

 

The Executive recognizes that Inventions or Trade Secrets relating to the Executive’s activities while working for the Company and conceived, reduced to practice, created, derived, developed, or made by the Executive, alone or with others, within twelve (12) months after termination of the Executive’s employment may have been conceived, reduced to practice, created, derived, developed or made, as applicable, in significant part while employed by the Company.  Accordingly, the Executive agrees that such Inventions and Trade Secrets shall be presumed to have been conceived, reduced to practice, created, derived, developed, or made, as applicable, during the Executive’s employment with the Company and are to be promptly assigned to the Company unless and until the Executive has established the contrary by written evidence satisfying the clear and convincing standard of proof.

 

6)                                     Trade Secrets and Confidential Information.

 

a)                                     “Trade Secrets.”

 

In this Agreement, “Trade Secrets” means and includes business or technical information in the possession of the Company and/or any of its Affiliates, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process, that:

 

(1)                                 derives independent actual or potential commercial value from not being generally known by persons who can obtain economic value from its disclosure or use; and

 

(2)                                 that is subject to reasonable efforts under the circumstances to maintain its secrecy.

 

b)                                     “Confidential Information.”

 

In this Agreement, “Confidential Information” means:

 

(1)                                 all Trade Secrets; and

 

(2)                                 all other business or technical information in the possession of the Company and/or any of its Affiliates that is not generally known outside of the Company and its Affiliates that relates to the business of the Company and any of its Affiliates;

 

and includes, without limitation:  lists and information about customers and/or prospective customers (including names, addresses, attributes, requirements, special needs, and other data about customers and prospective customers); lists and information about contractors subcontractors and/or prospective contractors or subcontractors (including names, addresses, attributes, requirements, special needs, and other data about contractors or subcontractors and prospective contractors or subcontractors); lists and information about vendors and/or prospective vendors (including names, addresses, attributes, requirements, special needs, and other data about vendors and prospective vendors); lists and information about competitors and potential competitors (including names, addresses, attributes, requirements, special needs, and other data about competitors and potential competitors); historical information about past bids, prices, costs, goods, products, performance, projects and contracts; lists and information about upcoming bids and proposals; lists and information about uncompleted contracts; work schedules; information about business plans and business strategies; unreleased advertising materials; market research and analyses;

 

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personnel and hiring information; salary and wage information; bonus information; employment agreements; lists and information about pending and contemplated projects, customer contracts, subcontracts, purchase orders, vendor agreements, joint ventures, and teaming agreements; agreement terms and conditions; cost-to-complete information; completion dates; claims; past litigation; pending litigation; threatened litigation; credit information; financial statements; accounting information; sales projections; licensing agreements and information; pricing information; information about the employees, equipment, properties, and capabilities of the Company and/or its Affiliates; information about research, development, and designs; data, designs, compilations of information, apparatus, computer programs and/or software programing code, programing methods, database information, passwords and user IDs, information about policies and procedures, manufacturing and sales know-how, and any other business information or technical information that has or may have value to the Company and/or any Affiliate, whether or not such information constitutes Trade Secrets.

 

c)                                      Protection of Trade Secrets and Other Confidential Information.

 

The Executive recognizes and acknowledges that, by virtue of, and in the course of her employment with the Company, the Company and/or Affiliates will reveal some Trade Secrets and other Confidential Information to the Executive, and the Executive will also help discover, develop, generate, and contribute to the Trade Secrets and other Confidential Information.

 

The Executive agrees that, during the Period of Employment, she will use her best efforts to maintain the confidentiality of the Confidential Information, including without limitation by:

 

(1)                                 storing Confidential Information in secure locations only;

 

(2)                                 not making unnecessary copies or transmittals of Confidential Information;

 

(3)                                 utilizing “firewalls,” “anti-spyware”, and passwords for all computer systems and electronic files that contain Confidential Information;

 

(4)                                 complying with any and all Company policies and procedures for the protection of Confidential Information;

 

(5)                                 promptly reporting to the Company all inadvertent and/or unauthorized disclosures and misappropriations of any Confidential Information, whether known, suspected, or threatened; and

 

(6)                                 promptly reporting to the Company all known and suspected deficiencies in, and opportunities for improvement of, the policies and procedures of the Company and its Affiliates for the protection of Confidential Information.

 

d)                                     Return of Trade Secrets and Other Confidential Information.

 

The Executive agrees that all Trade Secrets and other Confidential Information, in whatever forms they exist or were created, whether in the Executive’s memory, or in physical or electronic or computerized form, are and will be the sole and exclusive property of the Company.

 

9

 

The Executive agrees, that upon the termination of the Period of Employment, or at any earlier time(s) that the Company may request, the Executive will immediately return to the Company any and all documents, correspondence, notes, agreements, memoranda, computer files, computer disks, drives and tapes, electronically stored information, and other media and other things in the Executive’s possession, custody, or control that contain or reflect Confidential Information, keeping no copies or extracts of any of the Confidential Information.

 

e)                                      Copying, Use and Disclosure of Trade Secrets.

 

The Executive agrees that during the Period of Employment, she will not copy, use, or disclose any Trade Secrets, whether directly or indirectly, except to the extent that:

 

(1)                                 the copying, use or disclosure is for the benefit of the Company or one of its Affiliates;

 

(2)                                 the Executive has no reason to believe or suspect that the copying, use, or disclosure will result in or contribute to a loss of secrecy of any of the Trade Secrets; and

 

(3)                                 the copying, use, or disclosure is necessary for the Executive to perform her duties as an employee of the Company.

 

The Executive agrees that, at all times after the termination of the Period of Employment, she will not copy, use, or disclose any Trade Secrets of the Company and/or any of its Affiliates, except under subpoena or other compulsion of law.

 

Before making any disclosure of any Trade Secrets under a subpoena or other compulsion of law, the Executive will first inform the Company of the subpoena or other compulsion of law, and the Executive will cooperate with the Company in deciding the substance and manner of the disclosure, provided that the Company will indemnify the Executive for reasonable costs and expenses incurred with respect to the substance and manner of any disclosure that is made in cooperation with the Company.

 

f)                                        Copying, Use and Disclosure of Other Confidential Information.

 

The Executive agrees that during the Period of Employment, she will not copy, use or disclose, whether directly or indirectly, any Confidential Information that is not Trade Secrets, except to the extent that:

 

(1)                                 the copying, use or disclosure is for the benefit of the Company or one of its Affiliates;

 

(2)                                 the Executive has no reason to believe or suspect that the copying, use, or disclosure will result in or contribute to a loss of confidentiality; and

 

(3)                                 the copying, use, or disclosure is necessary for the Executive to perform her duties as an employee of the Company.

 

Furthermore, the Executive agrees that, at all times following the termination of the Period of Employment, she will not copy, use or disclose, whether directly or indirectly, any Confidential Information that is not Trade Secrets, except under subpoena or other compulsion of law.

 

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Before making any disclosure of any Confidential Information that is not Trade Secrets under a subpoena or other compulsion of law, the Executive first will inform the Company of the subpoena or other compulsion of law, and the Executive will cooperate with the Company in deciding the substance and manner of the disclosure, provided that the Company will indemnify the Executive for reasonable costs and expenses incurred with respect to the substance and manner of any disclosure that is made in cooperation with the Company.

 

7)                                     Non-Solicitation of Protected Customers.

 

In this Agreement, “Protected Customers” means and includes all of the customers and prospective customers of the Company that the Executive, in the course of her employment, has any material contact with, or acquires any information about, at any time during the last twenty-four (24) months of the Period of Employment.

 

The Executive agrees that during the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Section 4(b) or (c), for the first three hundred sixty-five (365) days thereafter, the Executive will not solicit any of the Protected Customers, whether directly or indirectly, for the purpose of promoting or selling any goods or services within the Business (as defined below).  Nor shall the Executive assist another person or entity to do so.

 

The Executive agrees that during the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Sections 4(b) or (c), for the first three hundred sixty-five (365) days thereafter, the Executive will not accept any business from any of the Protected Customers, even if not solicited by the Executive, that involves goods or services within the Business.

 

8)                                     Non-Solicitation of Protected Employees.

 

In this Agreement, “Protected Employees” means and includes all persons who at the time of the Executive’s action are, or within the three months prior to the Executive’s action were, employees of the Company and/or any of its Affiliates.

 

The Executive agrees that during the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Sections 4(b) or (c), for the first three hundred sixty-five (365) days thereafter, the Executive will not directly or indirectly (a) solicit, or assist another person or entity to solicit, any Protected Employees for employment or other work-related engagement (e.g., as an independent contractor or consultant), other than on behalf of the Company or its Affiliates, or (b) encourage, or assist another person or entity to encourage, any Protected Employee to end his or her employment relationship with the Company.

 

9)                                     Non-Solicitation of Protected Contractors.

 

In this Agreement, “Protected Contractors” means and includes all persons and companies who were contractors or subcontractors to or of the Company at any time(s) within the twenty-four (24) months prior to the termination of the Period of Employment.

 

The Executive agrees that during the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Sections 4(b) or 4(c), for the first three hundred sixty-five (365) days thereafter, the Executive will not directly or indirectly solicit or encourage, or assist another person or entity to assist or encourage, any Protected Contractor to end or materially reduce its, his or her business relationship with the Company.

 

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10)                              Non-Competition.

 

The Executive agrees that during the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Sections 4(b) or (c), for the first three hundred sixty-five (365) days thereafter, the Executive will not, anywhere within the Restricted Area (as defined below), compete with the Company, whether directly or indirectly, for (a) the sale of energy efficiency program management and implementation services to utilities or other end-use customers or (b) the sale of any goods or services that are the same as, or that are competitive alternatives to, any other goods or services that the Company marketed, developed or sold, or actively planned to market, develop or sell at any time during the last twenty-four (24) months of the Period of Employment (together, the “Business”).

 

The Executive agrees that throughout the Period of Employment, and, if the Executive’s employment is terminated for any reason other than under Sections 4(b) or (c), for the first three hundred sixty-five (365) days thereafter, the Executive will not directly or indirectly provide any support or assistance to, or provided any services to, any person or entity that is engaged or is planning or preparing to engage, in any aspect of the Business, whether as an investor (excluding passive investments representing less than two percent (2%) of the common stock of a publicly traded company), lender, owner, officer, director, consultant, employee, agent, salesperson or in any other capacity, whether part-time or full-time.

 

In this Agreement, the “Restricted Area” shall be: (a) the Eastern United States, (b) the rest of the United States (c) such other areas in which the Company or its Affiliates conducts business, or is actively planning to conduct business as of the end of the Period of Employment.

 

11)                              Reasonableness of Restrictive Covenants.

 

The Executive acknowledges and agrees that by virtue of her employment by the Company, during the Period of Employment, and at the Company’s expense, the Executive will be acquiring goodwill and relationships with, and acquiring special knowledge about, the Company’s customers, employees, contractors and subcontractors that the Executive would not otherwise acquire.

 

The Executive acknowledges and agrees that the Company’s goodwill and relationships and special knowledge concerning its customers, employees, contractors, and subcontractors are valuable, special and unique assets of the Company that the Company has a legitimate interest in protecting.

 

The Executive acknowledges and agrees that the Company engages in business throughout the Restricted Area, and that the geographic scope of the post-employment restrictions in this Agreement are necessary to protect the Company’s legitimate business interests and are reasonable in scope.

 

The Executive acknowledges and agrees that the Executive possesses skills and experience qualifying her for employment in other fields, and that the post-employment restrictions in this Agreement will not unduly impair her ability to earn a living after her employment with the Company ends.

 

12)                              Remedies.

 

The Executive acknowledges and agrees that a breach by the Executive of any of the restrictive covenants set forth above in Sections 6, 7, 8, 9 and 10 is likely to cause the Company irreparable harm, and that the legal remedy of money damages will not be adequate to remedy the harm to the Company.

 

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The Executive agrees that in the event the Executive breaches or threatens to breach any of the restrictive covenants set forth above in Sections 6, 7, 8, 9, and 10, then the Company will be entitled to the immediate issuance of injunctive relief against the Executive to aid in the enforcement of this Agreement and to protect against irreparable harm, without the necessity of posting any bond, including ex-parte temporary restraining orders, and preliminary and permanent injunctions.

 

In addition to such equitable relief, upon a breach of Sections 6, 7, 8, 9, and/or 10, the Company shall be entitled to (a) monetary damages for any breach in an amount deemed reasonable to cover all actual and consequential losses, (b) all monies earned or received by the Executive as a result of said breach, and (c) all reasonable costs and expenses of litigation that the Company incurs to obtain injunctive relief and/or other enforcement of the restrictive covenants.

 

13)                              Prior Restrictive Covenant Agreements.

 

The Company respects all valid employee post-separation restrictions, including non-competition and other restrictive covenant agreements, and it strictly prohibits its employees from disclosing or using the confidential information of any third party, including that of a prior employer.  The Executive’s employment is therefore contingent on (a) the Executive’s delivery of and satisfactory review by the Company of any restrictive covenant (including non-competition) agreements applicable to the Executive and any other provisions to which the Executive is subject that would in any way preclude the Executive from performing any services for the Company or accepting such employment with the Company, and (b) the Executive honoring such restrictions, including by not, at any time, using or disclosing any third party confidential information.  In the event the Executive believes that anyone at the Company or its Affiliates is asking her to do something that would violate her obligations to a prior employer, the Executive shall so advise the CEO immediately.  By signing below, the Executive represents that she accepts employment on the terms outlined in this Agreement without any conflict with, or violation of, the terms of any agreement by which the Executive is bound, and without using the confidential or proprietary information of any third party, including any prior employer of the Executive, which information the Executive is strictly prohibited from using while employed by the Company or any affiliate thereof.  The Executive also agrees that she will not bring onto the Company’s premises or transfer onto the Company’s technology systems any unpublished document or proprietary, confidential or trade secret information belonging to any third party unless such third party has consented to the disclosure of such information to, and its use by, the Company.  The Executive shall fully indemnify the Company, its Affiliates, their predecessors and successors, and their respective current and former directors, officers, agents, employees, investors, shareholders, administrators, and assigns for all verdicts, judgments, settlements, and other losses (including reasonable attorneys’ fees) incurred by any of them resulting from the Executive’s alleged or actual breach of her common law or contractual obligations to a third party, except as prohibited by law.

 

14)                              Post-Separation Assistance.

 

After her separation from employment, regardless of the reason for such separation and whether caused by the Executive or the Company, the Executive shall, upon reasonable notice, furnish such information and proper assistance to the Company as may reasonably be requested by the Company in connection with any matter on which she worked while employed by the Company and any litigation in which it or its Affiliates are, or may become, parties.  The Company shall reimburse the Executive for all reasonable expenses she incurs in providing such assistance.

 

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15)                              Governing Law.

 

This Agreement and the relationship contemplated in this Agreement will be governed by and construed under the internal laws of the State of North Carolina.

 

16)                              Jurisdiction and Venue.

 

The exclusive venue for any arbitrations and civil action(s) between the Executive and the Company that arises from or relates to this Agreement or the employment relationship contemplated in this Agreement will be in Mecklenburg County, North Carolina.  The Company and the Executive hereby submit and consent to the courts located in Mecklenburg County, North Carolina exercising personal jurisdiction over them.  Furthermore, the Company and the Executive waive their rights to challenge in another court any judgment that is entered by any court located in Mecklenburg County, North Carolina, or to assert that any civil action instituted against either of them in Mecklenburg County, North Carolina is in an improper venue, or should be transferred to another forum for any reason whatsoever.

 

17)                              Waiver of Right to Jury Trial.

 

The Executive and the Company waive any rights that they or either of them otherwise has or may have to a trial by jury in any action between the Executive and the Company that arises from or relates to this Agreement or the employment relationship that is contemplated in this Agreement.

 

18)                              Severability.

 

If any provision of this Agreement is found invalid or unenforceable for any reason, in whole or in part, then such provision will be deemed modified, restricted, or reformulated to the extent and in the manner necessary to render the same valid and enforceable, or will be deemed stricken from this Agreement, as the case may require, and this Agreement will be construed and enforced to the maximum extent permitted by law, as if such provision had been originally incorporated herein as so modified, restricted, or reformulated or as if such provision had not been originally incorporated herein, as the case may be.  The parties further agree to seek a lawful substitute for any provision that is found to be unlawful; provided, that, if the parties are unable to agree upon a lawful substitute, the parties desire and request that a court or other authority called upon to decide the enforceability of this Agreement modify those restrictions in this Agreement that, once modified, will result in an agreement that is enforceable to the maximum extent permitted by the law in existence at the time of the requested enforcement.

 

19)                              No Inadvertent Waivers or Informal Modifications.

 

The failure of the Company or the Executive to assert any of its rights under this Agreement, and/or the delay or partial enforcement of any rights under this Agreement, will not operate or be construed as a waiver of any breach of this Agreement, except as such waiver may be expressly set forth in a writing signed by the Company or the Executive.

 

The waiver by the Company or the Executive of any breach of any provision of this Agreement will not be construed as a waiver of any subsequent breach(es).

 

This Agreement will not be amended, modified, supplemented, or replaced except in a writing signed by the Company and the Executive that expressly refers to this Agreement.

 

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20)                              Notices.

 

All notices, demands and other communications which may be or are required to be given hereunder or with respect hereto will be given in writing, and delivered by commercial overnight delivery service, signature required for delivery, and will be deemed to have been given or made when delivery is made or refused, addressed as follows:

 

If to the Company to:

 

Lime Energy Services Co.

16810 Kenton Drive, Suite 240

Huntersville, NC 28078

Attention:  Chief Executive Officer

Phone:  (704) 892-4442

 

or to such other address as the Company may from time to time designate to the Executive in accordance with this Section.

 

If to the Executive to:

 

Mary Colleen Brennan

                                                  

                                                  

Phone:                                       

 

or to such other address as the Executive may from time to time designate to the Company in accordance with this Section.

 

No notice, request, demand, instruction, or other document to be given hereunder to any party will be effective for any purpose unless delivered by commercial overnight delivery service, adult signature required for delivery.  Notices sent via commercial overnight delivery service will be deemed to have been delivered as evidenced by the service’s standard means of confirming the delivery and the signature of the recipient.  The address for the purposes of this Section may be changed by giving written notice of such change in the manner herein provided for giving notice.

 

21)                              Compliance with Section 409A.

 

Any payments under this Agreement that may be excluded from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), either as separation pay due to an involuntary separation from service or as a short-term deferral, shall be excluded from Code Section 409A to the maximum extent possible.  For purposes of Code Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments to be made under this Agreement upon a termination of employment shall only be made if such termination of employment constitutes a “separation from service” under Code Section 409A.  Notwithstanding any other provision of this Agreement, if at the time of the Executive’s termination of employment, she is a “specified employee,” determined in accordance with Code Section 409A, any payments and benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Code Section 409A that are provided to the Executive on account of her separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of the Executive’s termination date (“Specified

 

15

 

Employee Payment Date”).  The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date without interest and, thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.  If the Executive dies during the six-month period, any delayed payments shall be paid to the Executive’s estate in a lump sum during the 30-day period following the Executive’s death.

 

22)                              Headings.

 

The section and paragraph headings and captions used herein are intended solely for convenience of reference and will not control or effect the interpretation, meaning or construction of any provision of this Agreement.

 

23)                              Arbitration.

 

At the Company’s or the Executive’s election, any controversy(s), claim(s) or dispute(s) between the Executive and the Company (and/or the Company’s Affiliates) shall be resolved by binding arbitration conducted in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, whether or not the controversy(s), claim(s), or dispute(s) arise from or relate to this Agreement or the relationship that is contemplated in this Agreement.  Judgment upon the arbitration award(s) may be entered in any court having jurisdiction thereof.  To the maximum extent allowed by law, the arbitrator(s) will be authorized to issue subpoenas, compel discovery, grant equitable relief, and award costs and expenses of the arbitration (including reasonable attorney’s fees) for bad faith, stubborn litigiousness, or unnecessary trouble and expense.  This agreement to arbitrate will survive the termination of the Period of Employment.  Notwithstanding the foregoing, this Section shall not apply, and the parties shall have no obligation to arbitrate, any action (including any counterclaims) (a) in which one or both parties assert claims under or pursuant to, or claim a breach of, Sections 5, 6, 7, 8, 9 or 10 of this Agreement or (b) in which preliminary, permanent or other injunctive relief is sought by either party.

 

24)                              Third Party Beneficiaries.

 

This Agreement is intended solely for the benefit of the Executive, the Company, and the Company’s Affiliates.  This Agreement does not and will not be misconstrued to give any other person any cause of action or other rights.

 

25)                              Assignments.

 

This Agreement creates personal rights and obligations on the part of the Executive, and the rights and obligations of the Executive under this Agreement will not be assignable without the express prior written consent of the Company, and the Company will have the authority to withhold its consent to any proposed assignment, in its sole and absolute discretion.  The Company will have the right to assign its rights and obligations under this Agreement, in whole or in part, without obtaining any consent from the Executive.

 

26)                              Complete and Final Agreement.

 

This Agreement nullifies and supersedes any and all earlier agreements and communications between the Executive and the Company, whether oral or written, including the April 16, 2014 offer letter from Adam Procell to the Executive.  This Agreement sets forth the complete and final agreement between the Executive and the Company with respect to the employment relationship contemplated in this

 

16

 

Agreement.  Neither party is entering into this Agreement in reliance upon any representation, promise or inducement by the other party that is not set forth in writing in this Agreement.

 

27)                              The Executive’s Consultation with Independent Legal Counsel.

 

The Executive acknowledges and warrants that she has read and fully understands the terms and conditions set forth herein, that she has had time to reflect on and consider the benefits and consequences of entering into this Agreement, that she has had a fair opportunity to review and discuss this Agreement with an attorney before signing it, and that she is entering into this Agreement freely and voluntarily.

 

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

 

For the Company:

 

	
 
    	
/s/   C. Adam Procell
    
	
 
    	
By:   C. Adam Procell
    

 

For the Executive:

 

	
 
    	
/s/   Mary Colleen Brennan
    

 

17

 

Exhibit A

Prior Inventions

 

None

 

18

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