Document:

exhibit10_1_SECURITIES PURCHASE AGREEMENT

 EXHIBIT 10.1 
   

 SECURITIES PURCHASE AGREEMENT
 This Securities Purchase Agreement (this “Agreement”) is dated as of July 15, 2014, between CopyTele, Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and permitted assigns, a “Purchaser” and collectively the “Purchasers”). 
 WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act (as defined below), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
 WHEREAS, to facilitate the transaction contemplated hereby, the parties hereto are entering into an Escrow Agreement (as defined below).
 WHEREAS, the Company has engaged Alere Financial Partners, a division of Summer Street Research Partners, as placement agent (the “Placement Agent”). 
 NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
 ARTICLE I.
DEFINITIONS
 1.1              Definitions.  In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings set forth in this Section 1.1:
 “Action” shall have the meaning ascribed to such term in Section 3.1(j).
 “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.  
 “Board of Directors” means the board of directors of the Company.
 “Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
 “Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
 “Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than the third Trading Day following the date hereof.
  
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“Commission” means the United States Securities and Exchange Commission.
 “Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed. 
 “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
 “Company Counsel” means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New York, New York 10105. 
 “Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.
 “Escrow Agent” means Signature Bank, a New York State chartered bank, with offices at 261 Madison Avenue, New York, New York 10016.
 “Escrow Agreement” means the escrow agreement entered into prior to the date hereof, by and among the Company and the Escrow Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions contemplated hereunder. 
 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
  
 “FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.
 “GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
 “Indemnified Party” shall have the meaning ascribed to such term in Section 4.7.
 “Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
 “Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction (other than restrictions on transfer under securities laws).
 “Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

  
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 “Material Permits” shall have the meaning ascribed to such term in Section 3.1(m).
 “Per Share Purchase Price” equals $0.25. 
 “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
 “Placement Agent” has the meaning set forth in the recitals.  
 “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), that has been commenced or to the Company’s knowledge threatened.
 “Prospectus” means the final prospectus filed for the Registration Statement.
 “Prospectus Supplement” means the supplement to the Prospectus complying with Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the Company to each Purchaser, in each case, at the Closing.
 “Registration Statement” means the effective registration statement with Commission file No. 333-193869 which registers the sale of the Shares, the Warrants and the Warrant Shares.
 “Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
 “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule. 
 “Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
 “SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
 “Securities” means the Shares, the Warrants and the Warrant Shares.   
 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 “Shares” means the shares of Common Stock issued or issuable to each Purchaser pursuant to this Agreement.
  

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 “Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 
 “Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
 “Subsidiary” as to any Person, means any corporation, partnership, limited liability company, joint venture, trust or estate of or in which more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class of such corporation may have voting power upon the happening of a contingency), (b) the interest in the capital or profits of such partnership, limited liability company, or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary”  or to “Subsidiaries”  in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. 
 “Trading Day” means a day on which the principal Trading Market is open for trading.
 “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the QB Tier of the OTC Markets (or any successors to any of the foregoing).
 “Transaction Documents” means this Agreement, the Warrants and the Escrow Agreement.
  “Transfer Agent” means American Stock Transfer and Trust Company, the current transfer agent of the Company, with a mailing address of 6201 15th Avenue Brooklyn, NY 11219, and a facsimile number of 718.765.8719, and any successor transfer agent of the Company.
 “Warrants” means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable immediately upon issuance and have a term of exercise equal to five (5) years from the date such Warrants become exercisable, in the form of Exhibit A attached hereto.
 “Warrant Shares” means the shares of Common Stock issuable upon exercise of the Warrants.
  

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 ARTICLE II.
PURCHASE AND SALE
 2.1              Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $4,000,000  of Shares and Warrants.  Each Purchaser shall deliver to the Escrow Agent, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser their respective Shares and Warrants, and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.
 2.2              Deliveries. 
 (a)                On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser (and, with respect to subsections (i), (iv), (v) and (vi) of this Section 2.2(a), to the Placement Agent) the following:
 (i)                 this Agreement duly executed by the Company;
 (ii)               a copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver on an expedited basis via The Depository Trust Company Deposit or Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;
 (iii)             a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of such Purchaser’s Shares, with an exercise price equal to $0.40, subject to adjustment as provided therein (such Warrant certificate may be delivered within three Trading Days of the Closing Date); 
 (iv)             the Prospectus and Prospectus Supplement (which may be delivered in accordance with Rule 172 under the Securities Act); 
 (v)               a certificate signed by an executive officer on behalf of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties and performance of covenants contained herein as of the Closing Date; and
 (vi)             a legal opinion of Company Counsel addressed to each such Purchaser and the Placement Agent substantially in the form attached hereto as Exhibit A.  
  

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 (b)               On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company or the Escrow Agent, as applicable, the following:

 (i)                 this Agreement duly executed by such Purchaser; and
 (ii)               such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement, except as otherwise arranged between the Company and any Purchaser as described in the Prospectus Supplement under “Plan of Distribution.” 
 2.3              Closing Conditions. 
 (a)        The obligations of the Company hereunder in connection with the Closing are subject to only the following conditions being met:
 (i)                 the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate as of such date); 
 (ii)               all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and
 (iii)             the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
 (b)               The respective obligations of each Purchaser hereunder in connection with the Closing are subject to only the following conditions being met:
 (i)                 the representations and warranties of the Company contained in this Agreement and any certificate delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date of this Agreement and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date); 
 (ii)               all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; 
 (iii)             the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; and
 (iv)             there shall have been no Material Adverse Effect with respect to the Company since the date hereof.
  

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 ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 3.1              Representations and Warranties of the Company.  Except as set forth in the Disclosure Schedules or disclosed in the SEC Reports (other than with respect to Sections 3.1 (b), (c), (d), (e) and (f); exceptions to such sections must be set forth in the Disclosure Schedule), both of which shall qualify any representation made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules or as reasonably evident in the SEC Reports (other than with respect to Sections 3.1 (b), (c), (d), (e) and (f); exceptions to such sections must be set forth in the Disclosure Schedule), the Company hereby makes the following representations and warranties to each Purchaser and the Placement Agent: 
 (a)                Subsidiaries.  All of the direct and indirect Subsidiaries of the Company are set forth on the SEC Reports.  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock.  If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.     
 (b)               Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries (whether or not “significant”), taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
  

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 (c)                Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals.  This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
 (d)               No Conflicts.  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) subject to obtaining the Required Approvals, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.
 (e)                Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and Warrant Shares for trading thereon in the time and manner required thereby, (iv) such filings as are required to be made under applicable state securities laws and (v) in all other cases, where failure to obtain such consent, waiver, authorization or order, or to give such notice or make such filing or registration would not have a Material Adverse Effect (collectively, the “Required Approvals”). 
  

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 (f)                Issuance of the Securities; Registration.  The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on April 25, 2014 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement.  The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and regulations of the Commission, proposes to file the Prospectus, with the Commission pursuant to Rule 424(b).  At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
 (g)               Capitalization.  The capitalization of the Company is as set forth in the Prospectus Supplement.  The Company has not issued any capital stock since its most recently filed periodic or current report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act.  No Person has any Company-granted right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities or as set forth in the Prospectus Supplement, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents.  The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance in all material respects with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities granted by the Company.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
  

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 (h)               SEC Reports; Financial Statements.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, since January 1, 2013 (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
 (i)                 Material Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest audited financial statements included within the SEC Reports, except as disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not altered its method of accounting except as required by GAAP, (iii) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (iv) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans.  The Company does not have pending before the Commission any request for confidential treatment of information. 
  

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 (j)                 Litigation.  There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) is required to be disclosed and is not disclosed in the SEC Reports.  Neither the Company nor any Subsidiary, nor, the Company’s knowledge any director or officer thereof, is or has been within the past three (3) years the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  To the knowledge of the Company, there has not been and there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.  The Company is not disqualified from using Regulation D under the Securities Act as a result of the “bad actor” disqualification under Rule 506(d) thereunder.
 (k)               Labor Relations.  No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect.  None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters that would have a Material Adverse Effect. To the knowledge of the Company, the Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
  

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 (l)                 Compliance.  Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) to the knowledge of the Company is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.
 (m)             Regulatory Permits.  To the knowledge of the Company, the Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
 (n)               Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all tangible personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties, and (iii) except as would not reasonably be expected to result in a Material Adverse Effect.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance except as would not reasonably be expected to result in a Material Adverse Effect.
  

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 (o)               Intellectual Property.  Other than as disclosed in the SEC Reports, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would reasonably be expected to result in a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the material Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement that would reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not reasonably be expected to have a Material Adverse Effect.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 (p)               Insurance.  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost. 
 (q)               Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, there are no transactions that are required by Item 404 to be set forth in the SEC Reports that are not set forth in such reports.
 (r)                 Sarbanes-Oxley; Internal Accounting Controls.  The Company and the Subsidiaries are in material compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all rules and regulations applicable to smaller reporting companies promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date.  
 (s)                Certain Fees.  Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. To the Company’s knowledge, the Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.
  

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 (t)                 Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 (u)               Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market, except such as has been cured. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.
 (v)               Anti-Takeover Matters.  The Company has not adopted any shareholder rights agreement, rights plan, “poison pill” or other similar agreement or plan.
 (w)             Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might reasonably constitute material, non-public information which is not otherwise disclosed in the Prospectus Supplement.  The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  None of the representations made by the Company in this Agreement, as modified by the Disclosure Schedule and the SEC Reports, taken as a whole, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.
 (x)               No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
 (y)               Tax Status.  Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.
  

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 (z)                Foreign Corrupt Practices.  Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.
 (aa)            Accountants.  The Company’s accounting firm is set forth on Schedule 3.1(cc) of the Disclosure Schedules.  To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act.      
 (bb)           Regulation M Compliance.  Within the past 30 days, the Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clause (iii), an agreement with a placement agent in connection with the placement of the Securities which is now terminated.
 (cc)            Office of Foreign Assets Control.  Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”). 
 3.2              Representations and Warranties of the Purchasers.  Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
 (a)                Organization; Authority.  Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out his, her or its obligations hereunder and thereunder. The execution and delivery of this Agreement and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership, limited liability company or similar corporate or shareholder action, as applicable, on the part of such Purchaser.  Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

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 (b)               Understandings or Arrangements.  Such Purchaser is acquiring the Securities as principal for his, her or its own account (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).  
 (c)                Purchaser Status.  At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be an “accredited investor” as defined in Rule 501(a) under the Securities Act.
 (d)               Experience of Such Purchaser.  Such Purchaser, either alone or together with his, her or its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. Purchaser represents that it, he or she has had an opportunity to review the Transaction Documents (including all exhibits and schedules thereto), to ask questions of and receive answers from the Company regarding the terms and conditions of the transactions contemplated by the Transaction Documents, to ask questions of and receive answers from the Company regarding the business, properties, prospects, financial condition and results of operations of the Company and to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment..  Such Purchaser has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Securities, and in connection with his, her or its decision to purchase the Securities, has reviewed the Prospectus and Prospectus Supplement and the documents incorporated therein by reference and is relying only upon the Prospectus and the Prospectus Supplement and the documents incorporated by reference therein and the representations and warranties of the Company contained herein.
 (e)                Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not and will not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed or agreed to enter into, and will not enter into, any purchase, sale or other transaction in securities of the Company, including, without limitation Short Sales, during the period commencing as of the time that such Purchaser first received information (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder, and ending immediately prior to the execution hereof.  Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no material knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.  Other than to other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures of non-public information made to it in connection with this transaction (including the existence and terms of this transaction).
  

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 (f)                Each Purchaser hereby acknowledges that it is acting independently from any other Purchaser (and has engaged separate legal counsel) in connection with this Agreement, and that it is not acting as a member of a “group” (as such term is defined in Rule 13d of the Exchange Act) with any other investor in connection with the transactions contemplated hereby.
 (g)               Such Purchaser represents that (i) it has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company and (ii) it is not, and as of the Closing will not be, a member of the Financial Industry Regulatory Authority or an “associated person” (as such term is defined under the rules of the Financial Industry Regulatory Authority).   
 The Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement (except to the extent any breach of any representation or warranty by a Purchaser renders any representation or warranty of the Company untrue or incapable of being true).
 ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
 4.1              Warrant Shares.  If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is exercised via cashless exercise subject to the terms of the Warrant, the Warrant Shares issued pursuant to any such exercise shall be issued free of all legends.  If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Warrant Shares) is not effective or is not otherwise available for the sale or resale of the Warrant Shares, the Company shall notify the holders of the Warrants in writing that such registration statement is not then effective and thereafter shall notify such holders when the registration statement is effective again and available for the sale or resale of the Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Warrant Shares in compliance with applicable federal and state securities laws).  The Company shall use best efforts to keep a registration statement (including the Registration Statement) registering the issuance or resale of the Warrant Shares effective during the term of the Warrants.
  

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 4.2              Furnishing of Information.  Until the earlier of (a) the time that no Purchaser owns Securities or (b) the date that is one year after the Termination Date (as defined in the Warrants), the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.   
 4.3              Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any “security”  (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction. 
 4.4              Securities Laws Disclosure; Publicity.  The Company shall (a) on the date hereof, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.  From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction Documents.  No Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b) and a resaonable opportunity to review and comment on such disclosure. 
 4.5              Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or his, her or its agents or counsel with any information constituting  material non-public information, unless prior thereto such Purchaser shall have consented to receipt of such information in writing.  In the event of any breach of this Section 4.5, the Company shall promptly publicly disclose all such information in accordance  with Regulation FD.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
  

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 4.6              Use of Proceeds.  The Company shall use the net proceeds from the sale of the Securities hereunder consistent with the Use of Proceeds section in the Prospectus Supplement.
 4.7              Indemnification of Purchasers and the Placement Agent.  Subject to the provisions of this Section 4.7, the Company will indemnify and hold the Placement Agent, each Purchaser and their respective directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Placement Agent or such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, an  “Indemnified  Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Indemnified Party may suffer or incur as a result of or relating to (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents and/or (ii) any untrue statement or alleged untrue statement of a material fact in any filing made in connection with the registration or qualification of the issuance of the Securities under the securities or “blue sky” laws of all applicable jurisdictions of the United States, or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  If any action shall be brought against any Indemnified Party in respect of which indemnity may be sought pursuant to this Agreement, such Indemnified Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnified Party.  Any Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party except to the extent that (i) the employment thereof at the expense of the Company has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable written opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Indemnified Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel but only to the extent necessary to comply with clauses (i), (ii) or (iii) of this sentence.  The Company will not be liable to any Indemnified Party under this Agreement (y) for any settlement by a Indemnified Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent that a loss, claim, damage or liability is attributable to any Indemnified Party’s breach of any of the representations, warranties, covenants or agreements made by such Indemnified Party in this Agreement or in the other Transaction Documents. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Indemnified Party against the Company or others and any liabilities the Company may be subject to pursuant to law.
 4.8              Listing of Common Stock. The Company hereby agrees concurrently with the Closing, if applicable, to apply to list or quote all of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible.  The Company will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market (except in the event of any strategic transaction, company sale or other similar voluntary “de-listing” event) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Trading Market. 
  

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 4.9              Reservation of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants.  
 4.10          Equal Treatment of Purchasers.  Subject to Section 5.5, no consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration is also offered to all of the parties to this Agreement.  Subject to Section 5.5, for clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise. 
 4.11          Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither he, she or it nor any Affiliate acting on his, her or its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Disclosure Schedules.  
 4.12          Blue Sky.   The Company shall (i) register and qualify, unless an exemption from registration and qualification applies, the issuance of the Securities pursuant to this Agreement under the securities or “blue sky” laws of Connecticut, Illinois and New York, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times, and (iv) take all other actions reasonably necessary or advisable to qualify the Securities for sale in such jurisdictions.
  

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 ARTICLE V.
MISCELLANEOUS
 5.1              Termination.  This Agreement may be terminated by the Company in its sole discretion.   Any Purchaser may terminate this Agreement with respect to itself to the extent that the Closing Date has not occurred by the third Trading Day following the date hereof.  
 5.2              Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of their advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other similar taxes and duties levied in connection with the delivery of any Securities to the Purchasers.
 5.3              Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
 5.4              Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd)Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.
 5.5              Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchasers holding at least a majority in interest of the Shares then outstanding and held by the original Purchasers or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
 5.6              Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
  

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 5.7              Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may assign this Agreement and any rights or obligations hereunder without the prior written consent of the Purchasers to any successor of the Company.  Each Purchaser may assign any or all of their respective rights under this Agreement without the prior written consent of the Company to an Affiliate of such Purchaser in connection with a transfer of Securities to such Affiliate, provided that such Affiliate transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”   Any rights of a Purchaser under this Agreement shall terminate upon a transfer by a Purchaser of their respective Securities to a person other than an Affiliate in accordance with this Section 5.7.
 5.8              No Third-Party Beneficiaries.  Except for (i) the Placement Agent with respect to Section 2.2(a), Section 3.1, Section 4.7, Section 5.10 and (ii) as otherwise provided in Section 4.7, this Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person. 
 5.9              Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either party shall commence an action, suit or proceeding to enforce any provisions of the Transaction Documents, then, in addition to the obligations of the Company under Section 4.7, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for their reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
 5.10          Survival.  The representations and warranties contained herein shall survive the Closing and the delivery of the Securities; provided, that all “non-fundamental” representations shall expire on the one year anniversary of the Closing Date.  The “non-fundamental”  representations are all representations made under this Agreement by the Company, except the following: Section 3.1(a), (b), (c), (d), (f), (g)  and (h). 
  

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 5.11          Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.
 5.12          Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
 5.13          Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and a customary indemnity.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
 5.14          Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

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 5.15          Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  Each Purchaser shall be entitled to independently protect and enforce his, her or its rights including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and (unless deemed an indispensible party under applicable law) it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.  Each Purchaser has been represented by his, her or its own separate legal counsel in their review and negotiation of the Transaction Documents.  For reasons of administrative convenience only, each Purchaser and his, her or its respective counsel have chosen to communicate with the Company through Haynes and Boone, LLP.  Haynes and Boone, LLP does not represent any of the Purchasers and only represents the Placement Agent.  The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers.  It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.
 5.16          Saturdays, Sundays, Holidays, etc.    If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.
 5.17          Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
 5.18          WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY UNDER THIS AGREEMENT, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 
  
 (Signature Pages Follow)

 24
 
  
      

             IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
  
  	 COPYTELE, INC.
  
  
	 Address for Notice:

	 By:_/s/ Robert A. Berman_______________________ 
     Name: Robert A. Berman
     Title: President and Chief Executive Officer
  
     Dated:
  
 With a copy to (which shall not constitute notice):
	 CopyTele. Inc.
 900 Walt Whitman Road
 Melville, NY 11747
 Fax: 631-549-5974

	  
  
  
  
	 Ellenoff Grossman & Schole LLP
 1345 Avenue of the Americas
 New York, NY 10105-0302
 Attention: Barry I Grossman, Esq,
 Sarah E. Williams, Esq.
 Fax: 212-370-7889

  
  
  
  
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
 SIGNATURE PAGE FOR PURCHASER FOLLOWS]
  
  

 25
 
  
      

 [PURCHASER SIGNATURE PAGES TO COPYTELE SECURITIES PURCHASE AGREEMENT]
  
 IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
 Name of Purchaser: ________________________________________________________
 Signature of Authorized Signatory of Purchaser: _________________________________
 Name of Authorized Signatory: _______________________________________________
 Title of Authorized Signatory: ________________________________________________
 Email Address of Authorized Signatory:_________________________________________
 Facsimile Number of Authorized Signatory: __________________________________________
 Address for Notice to Purchaser:
  
  
  
 Address for Delivery of Securities to Purchaser (if not same as address for notice):
  
  
  
 Subscription Amount: $_________________
  
 Shares: _________________
  
 Warrant Shares: ______________
  
 EIN Number: ____________________
  
 o  Notwithstanding anything contained in this Agreement to the contrary, by checking this box the above-signed agrees that the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed shall be unconditional and all conditions to Closing in favor of the above-signed shall be disregarded.  Notwithstanding the foregoing, in the event the Company accepts the above-signed’s subscription for the Company’s securities and any conditions to Closing contemplated by this Agreement that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) are not satisfied as of the Closing, such deliverable shall be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.
  
 [SIGNATURE PAGES CONTINUE]
  

 26Exhibit 10.1

 

SEMILEDS CORPORATION

 

2010 EQUITY INCENTIVE PLAN

 

(AS ADOPTED NOVEMBER 2, 2010 AND EFFECTIVE DECEMBER 8, 2010)
 (AS AMENDED JANUARY 9, 2014 AND APPROVED BY STOCKHOLDERS ON APRIL 10, 2014)

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 1.
    	
 
    	
INTRODUCTION
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 2.
    	
 
    	
ADMINISTRATION
    	
 
    	
1
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.1
    	
 
    	
Committee   Composition
    	
 
    	
1
    
	
2.2
    	
 
    	
Committee   Responsibilities
    	
 
    	
1
    
	
2.3
    	
 
    	
Non-Officer   Grants
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 3.
    	
 
    	
SHARES AVAILABLE FOR GRANTS
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.1
    	
 
    	
Basic   Limitation
    	
 
    	
2
    
	
3.2
    	
 
    	
Shares   Returned to Reserve
    	
 
    	
2
    
	
3.3
    	
 
    	
Dividend   Equivalents
    	
 
    	
2
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 4.
    	
 
    	
GENERAL
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.1
    	
 
    	
Eligibility
    	
 
    	
3
    
	
4.2
    	
 
    	
Incentive   Stock Options
    	
 
    	
3
    
	
4.3
    	
 
    	
Other   Grants
    	
 
    	
3
    
	
4.4
    	
 
    	
Restrictions   on Shares
    	
 
    	
3
    
	
4.5
    	
 
    	
Beneficiaries
    	
 
    	
3
    
	
4.6
    	
 
    	
Performance   Conditions
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 5.
    	
 
    	
OPTIONS
    	
 
    	
3
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.1
    	
 
    	
Stock   Option Agreement
    	
 
    	
3
    
	
5.2
    	
 
    	
Number   of Shares
    	
 
    	
4
    
	
5.3
    	
 
    	
Exercise   Price
    	
 
    	
4
    
	
5.4
    	
 
    	
Exercisability   and Term
    	
 
    	
4
    
	
5.5
    	
 
    	
Modification   or Assumption of Options
    	
 
    	
4
    
	
5.6
    	
 
    	
Buyout   Provisions
    	
 
    	
4
    
	
5.7
    	
 
    	
Assignment   or Transfer of Options
    	
 
    	
4
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 6.
    	
 
    	
PAYMENT FOR OPTION SHARES
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
6.1
    	
 
    	
General   Rule
    	
 
    	
5
    
	
6.2
    	
 
    	
Surrender   of Stock
    	
 
    	
5
    
	
6.3
    	
 
    	
Exercise/Sale
    	
 
    	
5
    
	
6.4
    	
 
    	
Other   Forms of Payment
    	
 
    	
5
    

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 7.
    	
 
    	
STOCK APPRECIATION RIGHTS
    	
 
    	
5
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
7.1
    	
 
    	
SAR   Agreement
    	
 
    	
5
    
	
7.2
    	
 
    	
Number   of Shares
    	
 
    	
5
    
	
7.3
    	
 
    	
Exercise   Price
    	
 
    	
6
    
	
7.4
    	
 
    	
Exercisability   and Term
    	
 
    	
6
    
	
7.5
    	
 
    	
Exercise   of SARs
    	
 
    	
6
    
	
7.6
    	
 
    	
Modification   or Assumption of SARs
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 8.
    	
 
    	
RESTRICTED SHARES
    	
 
    	
6
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
8.1
    	
 
    	
Restricted   Stock Agreement
    	
 
    	
6
    
	
8.2
    	
 
    	
Payment   for Awards
    	
 
    	
6
    
	
8.3
    	
 
    	
Vesting   Conditions
    	
 
    	
7
    
	
8.4
    	
 
    	
Voting   and Dividend Rights
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 9.
    	
 
    	
STOCK UNITS
    	
 
    	
7
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
9.1
    	
 
    	
Stock   Unit Agreement
    	
 
    	
7
    
	
9.2
    	
 
    	
Payment   for Awards
    	
 
    	
7
    
	
9.3
    	
 
    	
Vesting   Conditions
    	
 
    	
7
    
	
9.4
    	
 
    	
Voting   and Dividend Rights
    	
 
    	
8
    
	
9.5
    	
 
    	
Form and   Time of Settlement of Stock Units
    	
 
    	
8
    
	
9.6
    	
 
    	
Death   of Recipient
    	
 
    	
8
    
	
9.7
    	
 
    	
Creditors’   Rights
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 10.
    	
 
    	
PROTECTION AGAINST DILUTION
    	
 
    	
8
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
10.1
    	
 
    	
Adjustments
    	
 
    	
8
    
	
10.2
    	
 
    	
Dissolution   or Liquidation
    	
 
    	
9
    
	
10.3
    	
 
    	
Change   in Control
    	
 
    	
9
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 11.
    	
 
    	
AWARDS UNDER OTHER PLANS
    	
 
    	
10
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 12.
    	
 
    	
PAYMENT OF DIRECTOR’S FEES IN SECURITIES
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
12.1
    	
 
    	
Effective   Date
    	
 
    	
11
    
	
12.2
    	
 
    	
Elections   to Receive NSOs, Restricted Shares or Stock Units
    	
 
    	
11
    
	
12.3
    	
 
    	
Number   and Terms of NSOs, Restricted Shares or Stock Units
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 13.
    	
 
    	
LIMITATION ON RIGHTS
    	
 
    	
11
    

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
13.1
    	
 
    	
Retention   Rights
    	
 
    	
11
    
	
13.2
    	
 
    	
Stockholders’   Rights
    	
 
    	
11
    
	
13.3
    	
 
    	
Regulatory   Requirements
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 14.
    	
 
    	
WITHHOLDING TAXES
    	
 
    	
11
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
14.1
    	
 
    	
General
    	
 
    	
11
    
	
14.2
    	
 
    	
Share   Withholding
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 15.
    	
 
    	
FUTURE OF THE PLAN
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
15.1
    	
 
    	
Term   of the Plan
    	
 
    	
12
    
	
15.2
    	
 
    	
Amendment   or Termination
    	
 
    	
12
    
	
15.3
    	
 
    	
Stockholder   Approval
    	
 
    	
12
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 16.
    	
 
    	
DEFINITIONS
    	
 
    	
12
    

 

iii

 

SEMILEDS CORPORATION
 2010 EQUITY INCENTIVE PLAN

 

ARTICLE 1.                        INTRODUCTION.

 

The Plan was adopted by the Board effective as of the IPO Date.  The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership.  The Plan seeks to achieve this purpose by providing for Awards in the form of Restricted Shares, Stock Units, Options (which may constitute ISOs or NSOs) or stock appreciation rights.

 

The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except their choice-of-law provisions).

 

ARTICLE 2.                        ADMINISTRATION

 

2.1                               Committee Composition.  The Compensation Committee of the Board shall administer the Plan.  The Committee shall consist exclusively of members of the Board, who shall be appointed by the Board.  In addition, each member of the Committee shall meet the following requirements:

 

(a)                                 Any listing standards prescribed by the principal securities market on which the Company’s equity securities are traded;

 

(b)                                 Such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under section 162(m)(4)(C) of the Code;

 

(c)                                  Such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and

 

(d)                                 Any other requirements imposed by applicable law, regulations or rules.

 

2.2                               Committee Responsibilities.  The Committee shall (a) select the Employees, Outside Directors and Consultants who are to receive Awards under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of such Awards, (c) amend any outstanding Awards, (d) accelerate the vesting or extend the post-termination exercise term of Awards at any time and under such terms and conditions as it deems appropriate, (e) correct any defect, supplying any omission or reconciling any inconsistency in

 

 

the Plan or any agreement evidencing an Award, (f) interpret the Plan, (g) make all other decisions relating to the operation of the Plan, (h) adopt such plans or subplans as may be deemed necessary or appropriate to provide for the participation by service providers of the Company, its Parent, Subsidiaries and Affiliates who reside outside of the U.S., which plans and/or subplans shall be attached hereto as Appendices and (i) carry out any other duties delegated to it by the Board under the Plan.  The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan.  The Committee’s determinations under the Plan shall be final and binding on all persons.

 

2.3                               Non-Officer Grants.  The Board may also appoint additional committees of the Board composed of one or more directors of the Company.  The additional committees need not satisfy the requirements of Section 2.1.  Such committees may (a) administer the Plan with respect to Employees and Consultants who are not Outside Directors and are not considered executive officers of the Company under section 16 of the Exchange Act, (b) grant Awards under the Plan to such Employees and Consultants and (c) determine all features and conditions of such Awards.  Within the limitations of this Section 2.3, any reference in the Plan to the Committee shall include these additional committees to whom the Board has delegated the required authority under this Section 2.3.

 

ARTICLE 3.                        SHARES AVAILABLE FOR GRANTS.

 

3.1                               Basic Limitation.  Common Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares.  The aggregate number of Common Shares issued under the Plan shall not exceed (a) five million two hundred fourteen thousand two hundred eighty-five (5,214,285)(1) Common Shares plus (b) the additional Common Shares described in Sections 3.2.  The number of Common Shares that are subject to Awards outstanding at any time under the Plan shall not exceed the number of Common Shares that then remain available for issuance under the Plan.  All Common Shares available under the Plan may be issued upon the exercise of ISOs.  The limitation of this Section 3.1 shall be subject to adjustment pursuant to Article 10.

 

3.2                               Shares Returned to Reserve.  If Options, SARs or Stock Units are forfeited or terminate for any other reason before being exercised or settled, then the Common Shares subject to such Options, SARs or Stock Units shall again become available for issuance under the Plan.  If SARs are exercised, then only the number of Common Shares (if any) actually issued in settlement of such SARs shall reduce the number available under Section 3.1 and the balance shall again become available for issuance under the Plan.  If Stock Units are settled, then only the number of Common Shares (if any) actually issued in settlement of such Stock Units shall reduce the number available under Section 3.1 and the balance shall again become available for issuance under the Plan.  If Restricted Shares or Common Shares issued upon the exercise of Options are reacquired by the Company pursuant to a forfeiture provision or for any other reason, then such Common Shares shall again become available for issuance under the Plan.

 

(1)  Such amount as well as all other share numbers in this Plan have been adjusted to reflect the one-for-fourteen reverse stock split effective as of the IPO date.

 

2

 

3.3                               Dividend Equivalents.  Any dividend equivalents paid or credited under the Plan shall not be applied against the number of Common Shares that may be issued under the Plan, whether or not such dividend equivalents are converted into Stock Units.

 

ARTICLE 4.                        GENERAL.

 

4.1                               Eligibility.  Only Employees, Outside Directors, and Consultants shall be eligible to participate in the Plan.

 

4.2                               Incentive Stock Options.  Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs.  In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO unless the additional requirements set forth in section 422(c)(5) of the Code are satisfied.

 

4.3                               Other Grants.  Only Employees, Outside Directors and Consultants shall be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs.

 

4.4                               Restrictions on Shares.  Any Shares issued pursuant to an Award shall be subject to such rights of repurchase and other transfer restrictions as the Committee may determine, in its sole discretion.  Such restrictions shall apply in addition to any restrictions that may apply to holders of Shares generally and shall also comply to the extent necessary with applicable law.  In no event shall the Company be required to issue fractional Shares under this Plan.

 

4.5                               Beneficiaries.  Unless stated otherwise in an agreement evidencing an Award and then only to the extent permitted by applicable law, a Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company.  A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death.  If no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate.

 

4.6                               Performance Conditions.  The Committee may, in its discretion, include performance conditions in an Award.  If performance conditions are included in Awards to Covered Employees and such Awards are intended to qualify as “performance-based compensation” under Code Section 162(m), then such Awards will be subject to the achievement of Performance Goals with respect to a Performance Period established by the Committee.  Such Awards shall be granted and administered pursuant to the requirements of Code Section 162(m).  Before any Shares underlying an Award or any Award payments are released to a Covered Employee with respect to a Performance Period, the Committee shall certify in writing that the Performance Goals for such Performance Period have been satisfied.  Awards with performance conditions that are granted to Participants who are not Covered Employees need not comply with the requirements of Code Section 162(m).

 

3

 

ARTICLE 5.                        OPTIONS.

 

5.1                               Stock Option Agreement.  Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company.  Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.  The Stock Option Agreement shall specify whether the Option is an ISO or an NSO.  The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.  Subject to an Optionee’s consent, Options may be granted in consideration of a reduction in the Optionee’s other compensation.

 

5.2                               Number of Shares.  Each Stock Option Agreement shall specify the number of Common Shares subject to the Option, which shall be subject to adjustment in accordance with Article 10.  Options granted to an Optionee in a single fiscal year of the Company shall not cover more than 214,286 Common Shares, except that Options granted to a new Employee in the fiscal year of the Company in which his or her Service commences may cover up to 285,714 Common Shares.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 10.

 

5.3                               Exercise Price.  Each Stock Option Agreement shall specify the Exercise Price.  In the case of an ISO (a) granted to an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries, the Exercise Price shall be no less than 110% of the Fair Market Value on the date of grant; and (b) granted to any other Employee, the Exercise Price shall be no less than 100% of the Fair Market Value on the date of grant.

 

5.4                               Exercisability and Term.  Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable.  The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant, except that the term of an ISO granted to an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall in no event exceed 5 years from the date of grant.  A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service.  Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited.

 

5.5                               Modification or Assumption of Options.  Within the limitations of the Plan, the Committee may modify, reprice, extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price.  The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such Option.

 

5.6                               Buyout Provisions.  The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an

 

4

 

Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

 

5.7                               Assignment or Transfer of Options.  No Option or interest therein shall be transferred, assigned, pledged or hypothecated by the Optionee during his or her lifetime, whether by operation of law or otherwise, or be made subject to execution, attachment or similar process, other than (i) by will or by the laws of descent and distribution, or (ii) in the case of an NSO, as otherwise expressly permitted by the Committee including, if so permitted, pursuant to a transfer to such Optionee’s Immediate Family.  An Option may be exercised, subject to the terms of the Plan and the applicable Stock Option Agreement, only by the Optionee, the guardian or legal representative of the Optionee, a beneficiary designated pursuant to Section 4.5, or any person to whom such Option is transferred pursuant to this paragraph.

 

ARTICLE 6.                        PAYMENT FOR OPTION SHARES.

 

6.1                               General Rule.  The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except that the Committee at its sole discretion may accept payment of the Exercise Price in any other form(s) described in this Article 6.  However, if the Optionee is an Outside Director or executive officer of the Company, he or she may pay the Exercise Price in a form other than cash or cash equivalents only to the extent permitted by section 13(k) of the Exchange Act.

 

6.2                               Surrender of Stock.  With the Committee’s consent, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee.  Such Common Shares shall be valued at their Fair Market Value on the date when the new Common Shares are purchased under the Plan.

 

6.3                               Exercise/Sale.  With the Committee’s consent, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company.

 

6.4                               Other Forms of Payment.  With the Committee’s consent, all or any part of the Exercise Price and any withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules.

 

ARTICLE 7.                        STOCK APPRECIATION RIGHTS.

 

7.1                               SAR Agreement.  Each grant of an SAR under the Plan shall be evidenced by an SAR Agreement between the Optionee and the Company.  Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.  The provisions of the various SAR Agreements entered into under the Plan need not be identical.  Subject to an Optionee’s consent, SARs may be granted in consideration of a reduction in the Optionee’s other compensation.

 

5

 

7.2                               Number of Shares.  Each SAR Agreement shall specify the number of Common Shares to which the SAR pertains and shall be subject to adjustment in accordance with Article 10.  SARs granted to an Optionee in a single fiscal year shall in no event pertain to more than 214,286 Common Shares, except that SARs granted to a new Employee in the fiscal year of the Company in which his or her Service commences may pertain to a maximum of 285,714 Common Shares.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 10.

 

7.3                               Exercise Price.  Each SAR Agreement shall specify the Exercise Price.

 

7.4                               Exercisability and Term.  Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable and/or may include time-based vesting or performance-based vesting (including Performance Goals pursuant to Section 4.6).  The SAR Agreement shall also specify the term of the SAR, which shall not exceed ten (10) years from the date of grant.  An SAR Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s Service.  SARs may be awarded in combination with Options or Restricted Shares, and such an Award may provide that the SARs will not be exercisable unless the related Options or Restricted Shares are forfeited.  An SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter.  Notwithstanding any other provision of the Plan or the SAR Agreement, no SAR can be exercised after the expiration date provided in the applicable SAR Agreement.

 

7.5                               Exercise of SARs.  Upon exercise of an SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Committee shall determine.  The amount of cash and/or the Fair Market Value of Common Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds the Exercise Price.  If, on the date when an SAR expires, the Exercise Price is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion.  An SAR Agreement may also provide for an automatic exercise of the SAR on an earlier date.

 

7.6                               Modification or Assumption of SARs.  Within the limitations of the Plan, the Committee may modify, reprice, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price.  The foregoing notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such SAR.

 

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ARTICLE 8.                        RESTRICTED SHARES.

 

8.1                               Restricted Stock Agreement.  Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company.  Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.  The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical.

 

8.2                               Payment for Awards.  Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, property, past services and future services.

 

8.3                               Vesting Conditions.  Each Award of Restricted Shares may or may not be subject to vesting.  Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement.  The Committee may include among such conditions the requirement that the performance of the Company or a business unit of the Company for a specified period of one or more fiscal years equal or exceed a target determined in advance by the Committee.  The Committee shall determine such performance.  Such target may be based on one or more of the criteria set forth in the Performance Goals.  The Committee shall identify such target not later than the 90th day of such period.  In no event shall more than 214,286 Restricted Shares that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the Company, except that up to 285,714 Restricted Shares subject to performance-based vesting conditions may be granted to a new Employee in the fiscal year of the Company in which his or her Service commences.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 10.  A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events.

 

8.4                               Voting and Dividend Rights.  The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders.  A Restricted Stock Agreement, however, may require that any cash dividends paid on Restricted Shares (a) be accumulated and paid when such Restricted Shares vest or (b) be invested in additional Restricted Shares.  Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.

 

ARTICLE 9.                        STOCK UNITS.

 

9.1                               Stock Unit Agreement.  Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and the Company.  Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.  The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical.  Subject to a recipient’s consent, Stock Units may be granted in consideration of a reduction in the recipient’s other compensation.

 

9.2                               Payment for Awards.  To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

 

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9.3                               Vesting Conditions.  Each Award of Stock Units may or may not be subject to vesting.  Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement.  The Committee may include among such conditions the requirement that the performance of the Company or a business unit of the Company for a specified period of one or more fiscal years equal or exceed a target determined in advance by the Committee.  The Committee shall determine such performance.  Such target may be based on one or more of the criteria set forth in the Performance Goals.  The Committee shall identify such target not later than the 90th day of such period.  In no event shall more than 214,286 Stock Units that are subject to performance-based vesting conditions be granted to any Participant in a single fiscal year of the Company, except that up to 285,714 Stock Units subject to performance-based vesting conditions may be granted to a new Employee in the fiscal year of the Company in which his or her Service commences.  The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 10.  A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events.

 

9.4                               Voting and Dividend Rights.  The holders of Stock Units shall have no voting rights.  Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents.  Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding.  Dividend equivalents may be converted into additional Stock Units.  Settlement of dividend equivalents may be made in the form of cash, in the form of Common Shares, or in a combination of both.  Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach.

 

9.5                               Form and Time of Settlement of Stock Units.  Settlement of vested Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any combination of both, as determined by the Committee.  The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors.  Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days.  Vested Stock Units may be settled in a lump sum or in installments.  The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date.  The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents.  Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 10.

 

9.6                               Death of Recipient.  Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s beneficiary or beneficiaries.  Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company.  A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipient’s death.  If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s estate.

 

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9.7                               Creditors’ Rights.  A holder of Stock Units shall have no rights other than those of a general creditor of the Company.  Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.

 

ARTICLE 10.                                         PROTECTION AGAINST DILUTION.

 

10.1                        Adjustments.  In the event of a subdivision of the outstanding Common Shares, a stock split, a reverse stock split, a declaration of a dividend payable in Common Shares or a combination or consolidation of the outstanding Common Shares (by reclassification or otherwise) into a lesser number of Common Shares, or any other increase or decrease in the number of issued Common Shares effected without receipt of consideration by the Company, corresponding adjustments shall automatically be made in each of the following:

 

(a)                                 The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Article 3;

 

(b)                                 The limitations set forth in Sections 5.2, 7.2, 8.3 and 9.3;

 

(c)                                  The number of Common Shares covered by each outstanding Option and SAR;

 

(d)                                 The Exercise Price under each outstanding Option and SAR; and

 

(e)                                  The number of Stock Units included in any prior Award that has not yet been settled.

 

In the event of a declaration of an extraordinary dividend with respect to the Common Shares payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a recapitalization, a rights offering, a reorganization, a merger, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of the foregoing, and its determination shall be final, binding and conclusive.  Except as provided in this Article 10, a Participant shall have no rights by reason of any issuance by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class.

 

10.2                        Dissolution or Liquidation.  To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.

 

10.3                        Change in Control.  Individual agreements evidencing Awards may provide for vesting acceleration if the Company is subject to a Change in Control.  In addition, in the event that the Company is subject to a Change in Control, outstanding Options, SARs, Stock Units and Restricted Shares acquired under the Plan shall be subject to the agreement evidencing the Change in Control, which need not treat all outstanding Options, SARs or Stock Units (or portion thereof) in an identical manner.  Such agreement, without each Participant’s consent,

 

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may dispose of Options, SARs or Stock Units (or portions thereof) that are not vested as of the effective date of such Change in Control in any manner permitted by applicable law, including (without limitation) the cancellation of such Options, SARs or Stock Units (or portions thereof) without the payment of any consideration.  Such agreement, without each Participant’s consent, may provide for one or more of the following with respect to Options, SARs or Stock Units (or portions thereof) granted to each Participant that are vested and exercisable as of the closing date of such Change in Control:

 

(a)                                 The continuation of such outstanding Awards (or portion thereof) by the Company (if the Company is the surviving corporation).

 

(b)                                 The assumption of such outstanding Awards (or portion thereof) by the surviving corporation or its parent, provided that the assumption of Options or SARs shall comply with section 424(a) of the Code (whether or not the Options are ISOs).

 

(c)                                  The substitution by the surviving corporation or its parent of new awards for such outstanding Awards (or portion thereof), provided that the substitution of Options or SARs shall comply with section 424(a) of the Code (whether or not the Options are ISOs).

 

(d)                                 The cancellation of outstanding Options and SARs (or portion thereof) and a payment to the Participants equal to the excess of (i) the Fair Market Value of the Common Shares subject to such Options and SARs as of the closing date of such Change in Control over (ii) their Exercise Price.  Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount or any combination of the foregoing consideration.  If the Exercise Price of the Common Shares subject to such Options and SARs exceeds the Fair Market Value of such Common Shares, then such Options and SARs may be cancelled without making a payment to the Optionees.  For purposes of this Subsection (d), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.

 

(e)                                  The cancellation of outstanding Stock Units (or portion thereof) and a payment to the Participants equal to the Fair Market Value of the Common Shares subject to such Stock Units as of the closing date of such Change in Control.  Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount or any combination of the foregoing consideration.  For purposes of this Subsection (e), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.

 

(f)                                   The cancellation of outstanding Options and SARs (or portion thereof) for no consideration.

 

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Immediately following a Change in Control, all outstanding Options, SARs and Stock Units shall terminate and cease to be outstanding, except to the extent such Options, SARs and Stock Units (or portion thereof) have been continued or assumed, as described in Sections 10.3(a) and/or 10.3(b).

 

ARTICLE 11.                                         AWARDS UNDER OTHER PLANS.

 

The Company may grant awards under other plans or programs.  Such awards may be settled in the form of Common Shares issued under this Plan.  Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Common Shares available under Article 3.

 

ARTICLE 12.                                         PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

 

12.1                        Effective Date.  No provision of this Article 12 shall be effective unless and until the Board has determined to implement such provision.

 

12.2                        Elections to Receive NSOs, Restricted Shares or Stock Units.  An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board.  Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan.  An election under this Article 12 shall be filed with the Company on the prescribed form.

 

12.3                        Number and Terms of NSOs, Restricted Shares or Stock Units.  The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board.  The Board shall also determine the terms of such NSOs, Restricted Shares or Stock Units.

 

ARTICLE 13.                                         LIMITATION ON RIGHTS.

 

13.1                        Retention Rights.  Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant.  The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the Service of any Employee, Outside Director or Consultant at any time, with or without cause or notice, subject to applicable laws, the Company’s certificate of incorporation and by-laws and a written employment or consulting agreement (if any).

 

13.2                        Stockholders’ Rights.  A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required notice of exercise and paying any required Exercise Price.  No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan.

 

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13.3                        Regulatory Requirements.  Any other provision of the Plan notwithstanding, the obligation of the Company to issue Common Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required.  The Company reserves the right to restrict, in whole or in part, the delivery of Common Shares pursuant to any Award prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration, qualification or listing or to an exemption from registration, qualification or listing.

 

ARTICLE 14.                                         WITHHOLDING TAXES.

 

14.1                        General.  To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan.  The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied.

 

14.2                        Share Withholding.  To the extent that applicable law subjects a Participant to tax withholding obligations, the Committee may permit such Participant to satisfy all or part of such obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or she previously acquired.  Such Common Shares shall be valued at their Fair Market Value on the date when they are withheld or surrendered.  This Section 14.2 shall apply only to the minimum extent required by applicable tax laws.

 

ARTICLE 15.                                         FUTURE OF THE PLAN.

 

15.1                        Term of the Plan.  The Plan, as set forth herein, shall become effective on the IPO Date.  The Plan shall remain in effect until the earlier of (a) the date when the Plan is terminated under Section 15.2 or (b) the 10th anniversary of the date when the Board adopted the Plan.

 

15.2                        Amendment or Termination.  The Board may, at any time and for any reason, amend or terminate the Plan.  No Awards shall be granted under the Plan after the termination thereof.  The termination of the Plan, or any amendment thereof, shall not affect any Award previously granted under the Plan.

 

15.3                        Stockholder Approval.  An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules.  However, section 162(m) of the Code may require that the Company’s stockholders approve:

 

(a)                                 The Plan not later than the first regular meeting of stockholders that occurs in the fourth calendar year following the calendar year in which the IPO Date occurred; and

 

(b)                                 The Performance Goals not later than the first meeting of stockholders that occurs in the fifth year following the year in which the Company’s stockholders previously approved such criteria.

 

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ARTICLE 16.                                         DEFINITIONS.

 

16.1                        “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

 

16.2                        “Award” means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan.

 

16.3                        “Board” means the Company’s Board of Directors, as constituted from time to time.

 

16.4                        “Change in Control” means:

 

(a)                                 The consummation of a merger or consolidation of the Company or any other corporate reorganization or business combination transaction of the Company with or into another corporation, entity or person;

 

(b)                                 The sale, transfer or other disposition of all or substantially all of the Company’s assets;

 

(c)                                  A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either:

 

(i)                                     Had been directors of the Company on the date 24 months prior to the date of such change in the composition of the Board (the “Original Directors”); or

 

(ii)                                  Were appointed to the Board, or nominated for election to the Board, with the affirmative votes of at least a majority of the aggregate of (A) the Original Directors who were in office at the time of their appointment or nomination and (B) the directors whose appointment or nomination was previously approved in a manner consistent with this Paragraph (ii); or

 

(d)                                 Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company’s then outstanding voting securities.  For purposes of this Subsection (d), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company.

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially

 

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the same proportions by the persons who held the Company’s securities immediately before such transaction.

 

16.5                        “Code” means the Internal Revenue Code of 1986, as amended.

 

16.6                        “Committee” means the Compensation Committee of the Board, as further described in Article 2.

 

16.7                        “Common Share” means one share of the common stock of the Company.

 

16.8                        “Company” means SemiLEDs Corporation, a Delaware corporation.

 

16.9                        “Consultant” means a consultant or adviser who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an independent contractor.

 

16.10                 “Covered Employees” means those persons identified by the Company who are or who may be subject to the limitations of Code Section 162(m).

 

16.11                 “Employee” means a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.

 

16.12                 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

16.13                 “Exercise Price,” in the case of an Option, means the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement.  “Exercise Price,” in the case of an SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR.

 

16.14                 “Fair Market Value” means the market price of a Common Share as determined in good faith by the Committee.  Such determination shall be conclusive and binding on all persons.  The Fair Market Value shall be determined by the following:

 

(i)                     If the Common Shares are admitted to trading on any established national stock exchange or market system on the date in question then the Fair Market Value shall be equal to the closing sales price for such Common Shares as quoted on such national exchange or system on such date; or

 

(ii)                  if the Common Shares are admitted to quotation or are regularly quoted by a recognized securities dealer but selling prices are not reported on the date in question, then the Fair Market Value shall be equal to the mean between the bid and asked prices of the Common Shares reported for such date.

 

In each case, the applicable price shall be the price reported in The Wall Street Journal or such other source as the Committee deems reliable; provided, however, that if there is

 

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no such reported price for the Common Shares for the date in question, then the Fair Market Value shall be equal to the price reported on the last preceding date for which such price exists.  If neither (i) or (ii) are applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate.

 

16.15                 “Immediate Family” means, except as otherwise defined by the Committee, any child, sibling, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, sister-in-law, or brother-in-law, including adoptive relationships, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Participant) own more than fifty percent (50%) or more of the voting interests.

 

16.16                 “IPO Date” means the effective date of the registration statement filed by the Company with the Securities and Exchange Commission for its initial offering of Common Shares to the public.

 

16.17                 “ISO” means an incentive stock option described in section 422(b) of the Code.

 

16.18                 “NSO” means a stock option not described in sections 422 or 423 of the Code.

 

16.19                 “Option” means an ISO or NSO granted under the Plan and entitling the holder to purchase Common Shares.

 

16.20                 “Optionee” means an individual, estate or other person holding an Option or SAR.

 

16.21                 “Outside Director” means a member of the Board who is not an Employee.

 

16.22                 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

16.23                 “Participant” means an individual, estate or other person holding an Award.

 

16.24                 “Performance Goals” means specific financial performance criteria determined by the Committee with respect to each Performance Period utilizing one or more of the following factors and any objectively verifiable adjustment(s) thereto permitted and pre-established by the Committee in accordance with Code Section 162(m): revenue, operating income, adjusted operating income (adjusted to add back items such as non-cash stock compensation expense), EBITDA and/or net earnings (either before or after interest, taxes,

 

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depreciation and amortization), adjusted EBITDA, net income (either before or after taxes), earnings per share, earnings as determined other than pursuant to United States generally accepted accounting principles (“GAAP”), return on gross or net assets, return on equity, return on invested capital, cash flow (including, but not limited to, operating cash flow and free cash flow), operating or gross margins, net margins, stock price appreciation, total stockholder return, customer satisfaction metrics, customer count, customer retention, cost per customer acquisition, and transaction volume, any of which may be measured with respect to the Company, or any Subsidiary, affiliate or other business unit of the Company, either in absolute terms, terms of growth or as compared to any incremental increase, as compared to results of a peer group.  Awards that are not intended to comply with Code Section 162(m) may take into account other factors (including subjective factors).

 

The Committee may, in its discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under GAAP; (ix) items attributable to any stock dividend, stock split, combination or exchange of shares occurring during the Performance Period; or (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; or (xiv) items relating to any other unusual or nonrecurring events or changes in applicable laws, accounting principles or business conditions. For all Awards intended to comply with Code Section 162(m), such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.

 

16.25                 “Performance Period” means any period not exceeding seven (7) years as determined by the Committee, in its sole discretion.  The Committee may establish different Performance Periods for different Participants and the Committee may establish concurrent or overlapping Performance Periods.

 

16.26                 “Plan” means this SemiLEDs Corporation 2010 Equity Incentive Plan, as amended from time to time.

 

16.27                 “Restricted Share” means a Common Share awarded under the Plan.

 

16.28                 “Restricted Stock Agreement” means the agreement between the Company and the recipient of a Restricted Share that contains the terms, conditions and restrictions pertaining to such Restricted Share.

 

16.29                 “SAR” means a stock appreciation right granted under the Plan.

 

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16.30                 “SAR Agreement” means the agreement between the Company and a Participant that contains the terms, conditions and restrictions pertaining to his or her SAR.

 

16.31                 “Service” means service as an Employee, Outside Director or Consultant.

 

16.32                 “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his or her Option.

 

16.33                 “Stock Unit” means a bookkeeping entry representing the equivalent of one Common Share, as awarded under the Plan.

 

16.34                 “Stock Unit Agreement” means the agreement between the Company and the recipient of a Stock Unit that contains the terms, conditions and restrictions pertaining to such Stock Unit.

 

16.35                 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

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