Document:

Advanced Materials Group, Inc. 1998 Stock Option Plan

    Exhibit
      4.4

    ADVANCED
      MATERIALS GROUP, INC.

    1998
      STOCK OPTION PLAN

     

    1.
      PURPOSE OF THE PLAN; EFFECTIVENESS.

     

    The
      purpose of this 1998 Stock Option Plan ("Plan") of Advanced Materials Group,
      Inc., a Nevada corporation ("Company"), is to provide the Company with a means
      of attracting and retaining the services of highly motivated and qualified
      employees (including officers), directors and consultants. The Plan is intended
      to advance the interests of the Company by affording to employees (including
      officers, directors and consultants, upon whose skill, judgment, initiative
      and
      efforts the Company is largely dependent for the successful conduct of its
      business, an opportunity for investment in the Company and the incentives
      inherent in stock ownership in the Company. In addition, the Plan contemplates
      the opportunity for investment in the Company by employees of companies that
      do
      business with the Company. For purposes of this Plan, the term Company shall
      include subsidiaries of the Company.

     

    This
      Plan
      will become effective on the date of its adoption by the Board of Directors
      of
      the Company (the "Board"), provided the Plan is approved by the stockholders
      of
      the Company (excluding holders of shares of Stock issued by the Company pursuant
      to the exercise of options granted under this Plan) within twelve months after
      that date. If the Plan is not so approved by the stockholders of the Company,
      any options granted under this Plan will be rescinded and will be void. This
      Plan will be governed by, and construed in accordance with, the laws of the
      State of California.

     

    2.
      LEGAL
      COMPLIANCE.

     

    It
      is the
      intent of the Plan that all options granted under it ("Options") shall be either
      "Incentive Stock Options" ("ISOs"), as such term is defined in Section 422
      of
      the Internal Revenue Code of 1986, as amended ("Code"), or non-qualified stock
      options ("NQOs"); provided, however, ISOs shall be granted only to employees
      of
      the Company. An Option shall be identified as an ISO or an NQO in writing in
      the
      document or documents evidencing the grant of the Option. All Options that
      are
      not so identified as ISOs are intended to be NQOs. In addition, the Plan
      provides for the grant of NQOs to employees of companies that do business with
      the Company. It is the further intent of the Plan that it conform in all
      respects with the requirements of Rule 16b-3 of the Securities and Exchange
      Commission under the Securities Exchange Act of 1934, as amended ("Rule 16b-3").
      To the extent that any aspect of the Plan or its administration shall at any
      time be viewed as inconsistent with the requirements of Rule 16b-3 or, in
      connection with ISOs, the Code, such aspect shall be deemed to be modified,
      deleted or otherwise changed as necessary to ensure continued compliance with
      such provisions.

     

    3.
      NON-EXCLUSIVITY OF THE PLAN.

     

    Nothing
      contained in the Plan is intended to amend, modify, or rescind any previously
      approved compensation plans, programs or options entered into by the Company.
      This Plan shall be construed to be in addition to and independent of any and
      all
      such other arrangements. Neither the adoption of the Plan by the Board nor
      the
      submission of the Plan to the stockholders of the Company for approval shall
      be
      construed as creating any limitations on the power or authority of the Board
      to
      adopt, with or without stockholder approval, such additional or other
      compensation arrangements as the Board may from time to time deem
      desirable.

    

    4.
      ADMINISTRATION OF THE PLAN.

     

    4.1
      PLAN
      COMMITTEE.

     

    The
      Plan
      shall be administered by a committee ("Committee") consisting of two (2) or
      more
      members of the Board. In the event the Committee is at any time not properly
      constituted, the Plan will be administered by the Board, and references to
      the
      Committee herein shall in such event be then deemed to refer to the
      Board.

     

    4.2
      GRANTS OF OPTIONS BY THE COMMITTEE.

     

    In
      accordance with the provisions of the Plan, the Committee, by resolution, shall
      select those eligible persons to whom Options shall be granted ("Optionees");
      shall determine the time or times at which each Option shall be granted, whether
      an Option is an ISO or an NQO and the number of shares to be subject to each
      Option; and shall fix the time and manner in which the Option may be exercised,
      the Option exercise price, and the Option period.

     

    The
      Committee shall determine the form of option agreement to evidence the foregoing
      terms and conditions of each Option, which need not be identical, in the form
      provided for in SECTION 8. Such option agreement may include such other
      provisions as the Committee may deem necessary or desirable consistent with
      the
      Plan, the Code and Rule 16b-3.

     

    4.3
      COMMITTEE PROCEDURES.

     

    The
      Committee from time to time may adopt such rules and regulations for carrying
      out the purposes of the Plan as it may deem proper and in the best interests
      of
      the Company. The Committee shall keep minutes of its meetings and records of
      its
      actions. A majority of the members of the Committee shall constitute a quorum
      for the transaction of any business by the Committee.

    

    The
      Committee may act at any time by an affirmative vote of a majority of those
      members voting. Such vote may be taken at a meeting (which may be conducted
      in
      person or by any telecommunication medium) or by written consent of Committee
      members without a meeting.

    

    4.4
      FINALITY OF COMMITTEE ACTION.

     

    The
      Committee shall resolve all questions arising under the Plan and option
      agreements entered into pursuant to the Plan. Each determination,
      interpretation, or other action made or taken by the Committee shall be final
      and conclusive and binding on all persons, including, without limitation, the
      Company, its stockholders, the Committee and each of the members of the
      Committee, and the directors, officers, employees and consultants of the
      Company, including Optionees and their respective successors in
      interest.

     

    4.5
      NON-LIABILITY OF COMMITTEE MEMBERS.

     

    No
      Committee member shall be liable for any action or determination made by him
      in
      good faith with respect to the Plan or any Option granted under it.

     

    4.6
      DIRECTOR NQOS.

     

    (a)
      As of
      the date of their first election or appointment as directors each director
      of
      the Company shall be automatically granted an NQO to purchase 20,000 shares
      of
      the Company's Common Stock (as defined in SECTION 6), and thereafter on each
      January 19 following their first election or appointment as director, each
      director of the Company shall be automatically granted an NQO to purchase 15,000
      shares of the Company's Common Stock (as defined in SECTION 6).

     

    (b)
      Except as expressly authorized by this SECTION 4.6, directors of the Company
      who
      are members of the Committee are not otherwise eligible to participate in the
      Plan.

     

    (c)
      Upon
      the grant of an NQO to a director, the director shall receive a written option
      agreement substantially in the form provided for in SECTION 8. Such director
      shall not be an "Optionee" as defined in SECTION 4.2 of the Plan.

     

    (d)
      The
      exercise price for each NQO granted under this Section shall be one hundred
      percent (100%) of the Fair Market Value (as defined in SECTION 9) of the
      Company's Common Stock (as defined in SECTION 6) on the date of grant as
      determined by the Committee pursuant to Section 9 of the Plan. Each NQO granted
      under this Section shall be for a term of five years and shall be subject to
      earlier termination as hereinafter provided.

     

    (e)
      An
      NQO granted under this Section may be exercised in whole or consecutive
      installments, cumulative or otherwise, during its term. In addition, NQOs
      granted under this Section are subject to the rights and obligations of
      Optionees, as provided in SECTION 12 of the Plan; provided, however, that the
      "stock swap feature" provided for in SECTION 12 of the Plan shall be available
      with respect to all NQOs granted under this Section.

     

    (f)
      NQOs
      granted under this Section shall be subject to the exercise and
      nontransferability terms of SECTION 15 of the Plan. In the event of the
      termination of service on the Board by the holder of any NQO granted under
      this
      Section, then the outstanding NQOs of such holder shall expire one year after
      such termination, or their stated expiration date, whichever occurs
      first.

     

    5.
      BOARD
      POWER TO AMEND, SUSPEND, OR TERMINATE THE PLAN.

     

    Subject
      to the requirements of applicable laws, regulations and Nasdaq or exchange
      requirements, the Board may, from time to time, make such changes in or
      additions to the Plan as it may deem proper and in the best interests of the
      Company and its stockholders. The Board may also suspend or terminate the Plan
      at any time, without notice, and in its sole discretion.

     

    Notwithstanding
      the foregoing, no such change, addition, suspension, or termination by the
      Board
      shall (i) materially impair any option previously granted under the Plan without
      the express written consent of the Optionee; or (ii) reprice any option
      previously granted under the Plan; (iii) materially increase the number of
      shares subject to the Plan; (iv) materially increase the benefits accruing
      to
      Optionees under the Plan; (v) materially modify the requirements as to
      eligibility to participate in the Plan or (vi) alter the method of determining
      the option exercise price described in SECTION 9, without stockholder
      approval.

     

    6.
      SHARES
      SUBJECT TO THE PLAN

     

    For
      purposes of the Plan, the Committee is authorized to grant Options for up to
      1,250,000 shares of the Company's common stock ("Common Stock"), or the number
      and kind of shares of stock or other securities which, in accordance with
      SECTION 14, shall be substituted for such shares of Common Stock or to which
      such shares shall be adjusted, provided however that at no time shall the total
      number of shares issuable upon exercise of all outstanding options and the
      total
      number of shares provided for under the Plan or any stock bonus or similar
      plan
      exceed the applicable percentage permitted under California law. The Committee
      is authorized to grant options under the Plan with respect to such shares.
      Any
      or all unsold shares subject to an Option which for any reason expires or
      otherwise terminates (excluding shares returned to the Company in payment of
      the
      exercise price for additional shares) may again be made subject to grant
      under

    the
      Plan.

     

    7.
      OPTIONEES.

     

    Options
      shall be granted only to full-time elected or appointed officers or other
      full-time employees of the Company, to employees of companies that do business
      with the Company or to consultants to the Company designated by the Committee
      from time to time as Optionees, including, without limitation, members of the
      Board who are also full-time officers or employees at the time of
      grant.

    

    Any
      Optionee may hold more than one option to purchase Common Stock, whether such
      option is an Option held pursuant to the Plan or otherwise. An Optionee who
      is
      an employee of the Company ("Employee Optionee") and who holds an Option must
      remain a continuous full or part-time employee of the Company from the time
      of
      grant of the Option to him until the time of its exercise, except as provided
      in
      SECTION 11.3.

     

    8.
      GRANTS
      OF OPTIONS.

     

    The
      Committee shall have the sole discretion to grant Options under the Plan and
      to
      determine whether any Option shall be an ISO or an NQO. The terms and conditions
      of Options granted under the Plan may differ from one another as the Committee,
      in its absolute discretion, shall determine as long as all Options granted
      under
      the Plan satisfy the requirements of the Plan. Upon determination by the
      Committee that an Option is to be granted to an Optionee, a written option
      agreement evidencing such Option shall be given to the Optionee, specifying
      the
      number of shares subject to the Option, the Option exercise price, whether
      the
      Option is an ISO or an NQO, and the other individual terms and conditions of
      such Option. Such option agreement may incorporate generally applicable
      provisions from the Plan, a copy of which shall be provided to all Optionees
      at
      the time of their initial grants under the Plan. The Option shall be deemed
      granted as of the date specified in the grant resolution of the Committee,
      and
      the option agreement shall be dated as of the date of such
      resolution.

     

    9.
      OPTION
      EXERCISE PRICE.

     

    The
      price
      per share to be paid by the Optionee at the time an ISO is exercised shall
      not
      be less than one hundred percent (100%) of the Fair Market Value (as hereinafter
      defined) of one share of the optioned Common Stock on the date on which the
      Option is granted. No ISO may be granted under the Plan to any person who,
      at
      the time of such grant, owns (within the meaning of Section 424(d) of the Code)
      stock possessing more than ten percent (10%) of the total combined voting power
      of all classes of stock of the Company or of any parent thereof, unless the
      exercise price of such ISO is at least equal to one hundred and ten percent
      (110%) of Fair Market Value on the date of grant. The price per share to be
      paid
      by the Optionee at the time an NQO is exercised shall not be less than
      eighty-five percent (85%) of the Fair Market Value on the date on which the
      NQO
      is granted, as determined by the Committee.

     

    For
      purposes of the Plan, the "Fair Market Value" of a share of the Company’s Common
      Stock as of a given date shall be: (i) the closing price of a share of the
      Company's Common Stock on the principal exchange on which shares of the
      Company's Common Stock are then trading, if any, on such date, or, if shares
      were not traded on such date, then on the next preceding trading day during
      which a sale occurred; or (ii) if the Company's Common Stock is not traded
      on an
      exchange but is quoted on NASDAQ or a successor quotation system, (l) the last
      sales price (if the Common Stock is then listed as a National Market Issue
      under
      the NASD National Market System) or (2) the mean between the closing
      representative bid and asked prices (in all other cases) for the Common Stock
      on
      such date as reported by NASDAQ or such successor quotation system; or (iii)
      if
      the Company's Common Stock is not publicly traded on an exchange and not quoted
      on NASDAQ or a successor quotation system, the mean between the closing bid
      and
      asked prices for the Common Stock on such date as determined in good faith
      by
      the Committee; or (iv) if the Company's Common Stock is not publicly traded,
      the
      fair market value established by the Committee acting in good faith. In
      addition, with respect to any ISO, the Fair Market Value on any given date
      shall
      be determined in a manner consistent with any regulations issued by the
      Secretary of the Treasury for the purpose of determining fair market value
      of
      securities subject to an ISO plan under the Code. 

     

    10.
      CEILING OF ISO GRANTS.

     

    The
      aggregate Fair Market Value (determined at the time any ISO is granted) of
      the
      Common Stock with respect to which an Optionee's ISOs, together with incentive
      stock options granted under any other plan of the Company and any parent, are
      exercisable for the first time by such Optionee during any calendar year shall
      not exceed $100,000. In the event that an Optionee holds such incentive stock
      options that become first exercisable (including as a result of acceleration
      of
      exercisability under the Plan) in any one year for shares having a Fair Market
      Value at the date of grant in excess of $100,000, then the most recently granted
      of such ISOs, to the extent that they are exercisable for shares having an
      aggregate Fair Market Value in excess of such limit, shall be deemed to be
      NQOs.

     

    11.
      DURATION, EXERCISABILITY, AND TERMINATION OF OPTIONS.

     

    11.1
      OPTION PERIOD.

     

    The
      option period shall be determined by the Committee with respect to each Option
      granted. In no event, however, may the option period exceed ten (10) years
      from
      the date on which the Option is granted, or five (5) years in the case of a
      grant of an ISO to an Optionee who is a ten percent (10%) shareholder at the
      date on which the Option is granted as described in SECTION 9.

     

    11.2
      EXERCISEABILITY OF OPTIONS AND ACCELERATION OF EXERCISEABILITY.

     

    Each
      Option shall be exercisable in whole or in consecutive installments, cumulative
      or otherwise, during its term as determined in the discretion of the Committee;
      provided, however, that except as to officers, directors and consultants,
      Options granted to employees shall provide that the Optionee may exercise at
      least 20% of the Options per year over five (5) years from the date the Option
      is granted, subject to the conditions set forth elsewhere herein, including
      such
      as are set forth in SECTION 11.3 and provided for in SECTION 16.

     

    Notwithstanding
      the foregoing, the Committee at the time of grant may provide that the vesting
      of the right to exercise a given Option or portion thereof may be accelerated,
      during the term of the Option, under one or more of the following circumstances:
      (i) if the Common Stock of the Company shall be the subject of a tender offer
      by
      any person other than the Company which, by its terms, could result in the
      offerer acquiring more than twenty-five percent (25%) of the then outstanding
      shares of Common Stock of the Company. or (ii) if the shareholders shall
      consider, or be asked to consider, merging or consolidating the Company with
      any
      other person, or transferring all or substantially all of its assets to any
      other person, or (iii) if more than twenty-five percent (25%) of the Company's
      then outstanding voting shares shall be purchased by any person other than
      the
      Company, such that granted but unexercisable Options may be exercised at any
      time following the first public announcement of such event; provided, however,
      that in no event shall an option be exercised prior to six months after the
      date
      of grant or beyond its stated term.

     

    11.3
      TERMINATION OF OPTIONS DUE TO TERMINATION OF EMPLOYMENT, DISABILITY, OR DEATH
      OF
      OPTIONEE; TERMINATION FOR "CAUSE", OR RESIGNATION IN VIOLATION OF AN EMPLOYMENT
      AGREEMENT.

     

    All
      Options granted under the Plan to any Employee Optionee shall terminate and
      may
      no longer be exercised if the Employee Optionee ceases, at any time during
      the
      period between the grant of the Option and its exercise, to be an employee
      of
      the Company; provided, however, the Committee may alter the termination date
      of
      the Option if the Optionee transfers to an affiliate of the
      Company.

     

    Notwithstanding
      the foregoing, (i) if the Employee Optionee's employment with the Company shall
      have terminated for any reason (other than involuntary dismissal for "cause"
      or
      voluntary resignation in violation of any agreement to remain in the employ
      of
      the Company, including, without limitation, any such agreement pursuant to
      Section 16), he may, at any time before the expiration of three (3) months
      after
      such termination or before expiration of the Option, whichever shall first
      occur, exercise the Option (to the extent that the Option was exercisable by
      him
      on the date of the termination of his employment); (ii) if the Employee
      Optionee's employment shall have terminated due to disability (as defined in
      Section 22(e)(3) of the Code and subject to such proof of disability as the
      Committee may require), such Option may be exercised by the Employee Optionee
      (or by his guardian(s), or conservator(s), or other legal representative(s))
      before the expiration of twelve (12) months after such termination or before
      expiration of the Option, whichever shall first occur (to the extent that the
      Option was exercisable by him on the date of the termination of his employment);
      (iii) in the event of the death of the Employee Optionee, an Option exercisable
      by him at the date of his death shall be exercisable bv his legal
      representative(s), legatee(s), or heir(s), or by his beneficiary or
      beneficiaries so designated by him as permitted by Section 15, as the case
      may
      be, within twelve (12) months after his death or before the expiration of the
      Option, whichever shall first occur (to the extent that the Option was
      exercisable by him on the date of his death); and (iv) if the Employee
      Optionee's employment is terminated for "cause" or in violation of any agreement
      to remain in the employ of the Company, including, without limitation, any
      such
      agreement pursuant to Section 16, he may, at any time before the expiration
      of
      thirty (30) days after such termination or before the expiration of the Option,
      whichever shall first occur, exercise the Option (to the extent that the Option
      was exercisable by him on the date of termination of his employment). For
      purposes of the Plan, "cause" may include, without limitation, any illegal
      or
      improper conduct (1) which injures or impairs the reputation, goodwill, or
      business of the Company; (2) which involves the misappropriation of funds of
      the
      Company, or the misuse of data, information, or documents acquired in connection
      with employment by the Company; or (3) which violates any other directive or
      policy promulgated by the Company.

    

    A
      termination for "cause" may also include any resignation in anticipation of
      discharge for "cause" or resignation accepted by the Company in lieu of a formal
      discharge for "Cause." 

     

    12.
      MANNER OF OPTION EXERCISE; RIGHTS AND OBLIGATIONS OF OPTIONEES.

     

    12.1
      WRITTEN NOTICE OF EXERCISE.

     

    An
      Optionee may elect to exercise an Option in whole or in part, from time to
      time,
      subject to the terms and conditions contained in the Plan and in the agreement
      evidencing such Option, by giving written notice of exercise to the Company
      at
      its principal executive office.

     

    12.2
      CASH
      PAYMENT FOR OPTIONED SHARES.

     

    If
      an
      Option is exercised for cash, such notice shall be accompanied by a cashier's
      or
      personal check, or money order, made payable to the Company for the full
      exercise price of the shares purchased. 

     

    12.3
      STOCK SWAP OR STOCK SALE FEATURE.

     

    At
      the
      time of the Option exercise, and subject to the discretion of the Committee
      to
      accept payment in cash only, the Optionee may determine whether the total
      purchase price of the shares to be purchased shall be paid solely in cash or
      by
      transfer from the Optionee to the Company of previously acquired shares of
      Common Stock acceptable to the Committee. or by a combination thereof. The
      Commitee may, further, in its sole discretion, provide, in lieu of payment
      of
      the exercise price in cash, that the Optionee may (i) forfeit Option shares
      equal to the value of the exercise price, pursuant to a so-called "immaculate
      cashless exercise," or (ii) immediately sell a portion of the Option shares
      to a
      third party in a broker-assisted sale. In the event that the Optionee elects
      to
      pay the total purchase price in whole or in part with previously acquired shares
      of Common Stock, and subject to the discretion of the Committee to accept
      payment in cash only, the value of such shares shall be equal to their Fair
      Market Value on the date of exercise, determined by the Committee in the same
      manner used for determining Fair Market Value at the time of grant for purposes
      of Section 9.

     

    12.4
      INVESTMENT REPRESENTATION FOR NON-REGISTERED SHARES AND LEGALITY OF
      ISSUANCE.

     

    The
      receipt of shares of Common Stock upon the exercise of an Option shall be
      conditioned upon the Optionee (or any other person who exercises the Option
      on
      his or her behalf as permitted by Section 11.3) providing to the Committee
      a
      written representation that, at the time of such exercise, it is the intent
      of
      such person(s) to acquire the shares for investment only and not with a view
      toward distribution. The certificate for unregistered shares issued for
      investment shall be restricted by the Company as to transfer unless the Company
      receives an opinion of counsel satisfactory to the Company to the effect that
      such restriction is not necessary under then pertaining law. The providing
      of
      such representation and such restrictions on transfer shall not, however, be
      required upon any person's receipt of shares of Common Stock under the Plan
      in
      the event that, at the time of grant of the Option relating to such receipt
      or
      upon such receipt, whichever is the appropriate measure under applicable federal
      or state securities laws. the shares subject to the Option shall be (i) covered
      by an effective and current registration statement under the Securities Act
      of
      1933, as amended, and (ii) either qualified or exempt from qualification under
      applicable state securities laws. The Company shall, however, under no
      circumstances be required to sell or issue any shares under the Plan if, in
      the
      opinion of the Committee, (i) the issuance of such shares would constitute
      a
      violation by the Optionee or the Company of any applicable law or regulation
      of
      any governmental authority, or (ii) the consent or approval of any governmental
      body is necessary or desirable as a condition of, or in connection with, the
      issuance of such shares.

     

    12.5
      STOCKHOLDER RIGHTS OF OPTIONEE.

     

    Upon
      exercise, the Optionee (or any other person who exercises the Option on his
      behalf as permitted by SECTION 11.3) shall be recorded on the books of the
      Company as the owner of the shares, and the Company shall deliver to such record
      owner one or more duly issued stock certificates evidencing such ownership.
      No
      person shall have any rights as a stockholder with respect to any shares of
      Common Stock covered by an Option granted pursuant to the Plan until such person
      shall have become the holder of record of such shares. Except as provided in
      SECTION 14, no adjustments shall be made for cash dividends or other
      distributions or other rights as to which there is a record date preceding
      the
      date such person becomes the holder of record of such shares.

     

    12.6
      HOLDING PERIODS FOR TAX PURPOSES.

     

    The
      Plan
      does not provide that an Optionee must hold shares of Common Stock acquired
      under the Plan for any minimum period of time. Optionees are urged to consult
      with their own tax advisors with respect to the tax consequences to them of
      their individual participation in the Plan. 

     

    13.
      SUCCESSIVE GRANTS.

     

    Successive
      grants of Options may be made to any Optionee under the Plan.

     

    14.
      ADJUSTMENTS.

     

    If
      the
      outstanding Common Stock shall be hereafter increased or decreased, or changed
      into or exchanged for a different number or kind of shares or other securities
      of the Company or of another corporation, by reason of a recapitalization,
      reclassification, reorganization, combination, merger, consolidation, share
      exchange, or other business combination in which the Company is the surviving
      parent corporation, stock split-up, combination of shares, or dividend or other
      distribution payable in capital stock or rights to acquire capital stock,
      appropriate adjustment shall be made by the Committee in the number and kind
      of
      shares for which options may be granted under the Plan. In addition, the
      Committee shall make appropriate adjustment in the number and kind of shares
      as
      to which outstanding and unexercised options shall be exercisable, to the end
      that the proportionate interest of the holder of the option shall, to the extent
      practicable, be maintained as before the occurrence of such event. Such
      adjustment in outstanding options shall be made without change in the total
      price applicable to the unexercised portion of the option but with a
      corresponding adjustment in the exercise price per share. In the event of the
      dissolution or liquidation of the Company, any outstanding and unexercised
      options shall terminate as of a future date to be fixed by the
      Committee.

     

    In
      the
      event of a Reorganization (as hereinafter defined), then,

     

    a.
      If
      there is no plan or agreement with respect to the Reorganization
      ("Reorganization Agreement"), or if the Reorganization Agreement does not
      specifically provide for the adjustment, change, conversion, or exchange of
      the
      outstanding and unexercised options for cash or other property or securities
      of
      another corporation, then any outstanding and unexercised options shall
      terminate as of a future date to be fixed by the Committee; or

     

    b.
      If
      there is a Reorganization Agreement, and the Reorganization Agreement
      specifically provides for the adjustment, change, conversion, or exchange of
      the
      outstanding and unexercised options for cash or other property or securities
      of
      another corporation, then the Committee shall adjust the shares under such
      outstanding and unexercised options, and shall adjust the shares remaining
      under
      the Plan which are then available for the issuance of options under the Plan
      if
      the Reorganization Agreement makes specific provisions therefor, in a manner
      not
      inconsistent with the provisions of the Reorganization Agreement for the
      adjustment, change, conversion, or exchange of such options and shares.

     

    The
      term
      "Reorganization" as used in this SECTION 14 shall mean any reorganization,
      merger, consolidation, share exchange, or other business combination pursuant
      to
      which the Company is not the surviving parent corporation after the effective
      date of the Reorganization, or any sale or lease of all or substantially all
      of
      the assets of the Company. Nothing herein shall require the Company to adopt
      a
      Reorganization Agreement, or to make provision for the adjustment, change,
      conversion, or exchange of any options, or the shares subject thereto, in any
      Reorganization Agreement which it does adopt.

     

    The
      Committee shall provide to each optionee then holding an outstanding and
      unexercised option not less than thirty (30) calendar days' advanced written
      notice of any date fixed by the Committee pursuant to this SECTION 14 and of
      the
      terms of any Reorganization Agreement providing for the adjustment, change,
      conversion, or exchange of outstanding and unexercised options. Except as the
      Committee may otherwise provide, each optionee shall have the right during
      such
      period to exercise his option only to the extent that the option was exercisable
      on the date such notice was provided to the optionee. 

    

    Any
      adjustment to any outstanding ISO pursuant to this SECTION 14, if made by reason
      of a transaction described in Section 424(a) of the Code, shall be made so
      as to
      conform to the requirements of that Section and the regulations thereunder.
      If
      any other transaction described in Section 424(a) of the Code affects the Common
      Stock subject to any unexercised ISO theretofore granted under the Plan
      (hereinafter for purposes of this SECTION 14 referred to as the "old option"),
      the Board of Directors of the Company or of any surviving or acquiring
      corporation may take such action as it deems appropriate, in conformity with
      the
      requirements of that Code Section and the regulations thereunder, to substitute
      a new option for the old option in order to make the new option, as nearly
      as
      may be practicable, equivalent to the old option, or to assume the old
      option.

     

    No
      modification, extension, renewal, or other change in any option granted under
      the Plan may be made, after the grant of such option, without the optionee's
      consent, unless the same is permitted by the provisions of the Plan and the
      option agreement. In the case of an ISO, Optionees are hereby advised that
      certain changes may disqualify the ISO from being considered as such under
      Section 422 of the Code, or constitute a modification, extension, or renewal
      of
      the ISO under Section 424(h) of the Code.

     

    All
      adjustments and determinations under this Section 14 shall be made by the
      Committee in good faith in its sole discretion.

     

    15.
      NON-TRANSFERABILITY OF OPTIONS.

     

    Except
      as
      otherwise permitted by the Committee in compliance with law and regulations,
      an
      Option shall be exercisable only by the Optionee, or in the event of his
      disability, by his guardian(s), conservator(s), or other legal
      representative(s), during the Optionee's lifetime. In the event of the death
      of
      the Optionee, an Option shall be exercisable by his legal representative(s),
      legatee(s), or heir(s), as the case may be, or by such person(s) as he may
      designate as his beneficiary or beneficiaries in a signed statement included
      as
      a part of the option agreement.

     

    No
      Option
      shall be transferable by the Optionee either voluntarily or involuntarily,
      except by will or the laws of descent and distribution or pursuant to a
      qualified domestic relations order as defined by the Code or Title I of the
      Employee Retirement Income Security Act, or the rules thereunder.

     

    Any
      attempt to exercise, transfer or otherwise dispose of an interest in an Option
      in contravention of the terms and conditions of the Plan or of the option
      agreement for the Option, shall immediately void the Option. 

     

    16.
      CONTINUED EMPLOYMENT.

     

    As
      determined in the sole discretion of the Committee at the time of grant and
      if
      so stated in a writing signed by the Company, each Option may have as a
      condition the requirement of an Employee Optionee to remain in the employ of
      the
      Company, or of its affiliates, and to render to it his or her exclusive service,
      at such compensation as may be determined from time to time by it, for a period
      not to exceed the term of the Option, except for earlier termination of
      employment by or with the express written consent of the Company or on account
      of disability or death. The failure of any Employee Optionee to abide by such
      agreement as to any Option under the Plan may result in the termination of
      all
      of his or her then outstanding Options granted pursuant to the
      Plan.

     

    Neither
      the creation of the Plan nor the granting of Option(s) under it shall be deemed
      to create a right in an Employee Optionee to continued employment with the
      Company, and each such Employee Optionee shall be and shall remain subject
      to
      discharge by the Company as though the Plan had never come into existence.
      Except as specifically provided by the Committee in any particular case the
      loss
      of existing or potential profit in options granted under this Plan shall not
      constitute an element of damages in the event of termination of the employment
      of an employee even if the termination is in violation of an obligation of
      the
      Company to the employee by contract or otherwise.

     

    17.
      TAX
      WITHHOLDING.

     

    The
      exercise of any option granted under the Plan is subject to the condition that
      if at any time the Company shall determine, in its discretion, that the
      satisfaction of withholding tax or other withholding liabilities under any
      federal, state or local law is necessary or desirable as a condition of, or
      in
      connection with, such exercise or a later lapsing of time or restrictions on
      or
      disposition of the shares of Common Stock received upon such exercise, then
      in
      such event, the exercise of the option shall not be effective unless such
      withholding shall have been effected or obtained in a manner acceptable to
      the
      Company. When an optionee is required to pay to the Company an amount required
      to be withheld under applicable income tax laws in connection with the exercise
      of any option, the optionee may, subject to the approval of the Committee,
      which
      approval shall not have been disapproved at any time after the election is
      made,
      satisfy the obligation, in whole or in part, by electing to have the Company
      withhold shares of Common Stock having a value equal to the amount required
      to
      be withheld. The value of the Common Stock withheld pursuant to the election
      shall be determined by the Committee in accordance with the criteria set forth
      in SECTION 9, with reference to the date the amount of tax to be withheld is
      determined ("Tax Determination Date"). The optionee shall pay to the Company
      in
      cash any amount required to be withheld that would otherwise result in the
      withholding of a fractional share. The election by an optionee who is a director
      or officer of the Company within the meaning of Section 16 of the Securities
      Exchange Act of 1934, as amended ("Section 16 of the 1934 Act"), to be
      effective, must meet all of the following requirements: (i) the election must
      be
      made on or prior to Tax Determination Date; (ii) the election must be
      irrevocable; (iii) the exercise of an option may only be made six months or
      more
      subsequent to the grant of that option (except that this limitation will not
      apply in the event death or disability of the optionee occurs prior to the
      expiration of the six month period); and (iv) the election must be made either
      (a) six months or more prior to the Tax Determination Date, or (b) within a
      ten-day "window period" beginning on the third business day following the
      release of the Company's annual or quarterly summary statement of sales and
      earnings and ending on the twelfth business day following the date of such
      release. Where the Tax Determination Date of a director or officer of the
      Company within the meaning of Section 16 of the 1934 Act is deferred until
      six
      months after exercise and that director or officer elects to have the Company
      withhold shares pursuant to the terms of this SECTION 17, the full amount of
      option shares shall be issued or transferred to him upon exercise but he Ill
      be
      unconditionally obligated to tender back to the Company on the Tax Determination
      Date the proper number of shares of Common Stock to satisfy withholding
      requirements, plus cash for any fractional amount.

     

    18.
      TERM
      OF PLAN.

     

    18.1
      EFFECTIVE DATE.

     

    Subject
      to shareholder approval, the Plan shall become effective on March 20,
      1998.

     

    18.2
      TERMINATION DATE.

     

    Except
      as
      to options previously granted and outstanding under the Plan, the Plan shall
      terminate at midnight on March 19, 2008, and no Option shall be granted after
      that time. Options then outstanding may continue to be exercised in accordance
      with their terms. The Plan may be suspended or terminated at any earlier time
      by
      the Board within the limitations set forth in Section 5.

     

    19.
      GOVERNING LAW.

     

    The
      Plan
      and all rights and obligations under it shall be construed and enforced in
      accordance with the laws of the State of California.

     

    20.
      INFORMATION.

     

    A
      copy of
      this Plan will be delivered to each Optionee at or before the time he or she
      executes an Option Agreement. Optionees (other than key employees whose duties
      in connection with the Company assure them access to equivalent information)
      shall receive financial statements from the Company at least annually as
      required by Rule 260.140.46 under the California Code of
      Regulations.Amendment No. One to the Advanced Materials Group, Inc. 1998 Stock Option Plan

     

    Exhibit
      4.5

    AMENDMENT
      NO. ONE TO THE

    ADVANCED
      MATERIALS GROUP, INC. 

    1998
      STOCK OPTION PLAN

    

     

    Pursuant
      to the authority of Advanced Materials Group, Inc., and the provisions of
      Section 5 thereof, the Advanced Materials Group, Inc. 1998 Stock Option Plan
      (the “Plan”) is hereby amended in the following respects only, effective as of
      January 1, 2005:

     

    1. Section
      9
      of the Plan is hereby amended in its entirety to read as follows:

     

    “9.
      OPTION
      EXERCISE PRICE.

    

    The
      price
      per share to be paid by the Optionee at the time an Option is exercised shall
      not be less than one hundred percent (100%) of the Fair Market Value (as
      hereinafter defined) of one share of the optioned Common Stock on the date
      on
      which the Option is granted. No ISO may be granted under the Plan to any person
      who, at the time of such grant, owns (within the meaning of Section 424(d)
      of
      the Code) stock possessing more than ten percent (10%) of the total combined
      voting power of all classes of stock of the Company or of any parent thereof,
      unless the exercise price of such ISO is at least equal to one hundred and
      ten
      percent (110%) of Fair Market Value on the date of grant.

    

    For
      purposes of the Plan, the “Fair Market Value” of a share of the Company’s Common
      Stock as of a given date shall be: (i) the closing price of a share of the
      Company’s Common Stock on the principal exchange on which shares of the
      Company’s Common Stock are then trading, if any, on such date, or, if shares
      were not traded on such date, then on the next preceding trading day during
      which a sale occurred; or (ii) if the Company’s Common Stock is not traded on an
      exchange but is quoted on NASDAQ or a successor quotation system, (1) the last
      sales price (if the Common Stock is then listed as a National Market Issue
      under
      the NASD National Market System) or (2) the mean between the closing
      representative bid and asked prices (in all other cases) for the Common Stock
      on
      such date as reported by NASDAQ or such successor quotation system; or (iii)
      if
      the Company’s Common Stock is not publicly traded on an exchange and not quoted
      on NASDAQ or a successor quotation system, the mean between the closing bid
      and
      asked prices for the Common Stock on such date as determined in good faith
      by
      the Committee; or (iv) if the Company’s Common Stock is not publicly traded, the
      fair market value established, in good faith, by the Committee in accordance
      with the applicable regulations and guidance promulgated under Section 409A
      of
      the Code (or any successor provision thereto) and published in the Internal
      Revenue Bulletin.”

    

    2. Section
      21 of the Plan is hereby added to read as follows:

     

    “21.
      PROHIBITION
      ON DEFERRED COMPENSATION.
      

     

    The
      Options granted under this Plan are not intended to constitute a “deferral of
      compensation” subject to Section 409A of the Code (or a successor provision
      thereto). Notwithstanding the foregoing, or any provision of this Plan to the
      contrary, any Option issued hereunder that constitutes a deferral of
      compensation under Section 409A of the Code shall be modified or cancelled
      to
      comply with the requirements thereunder (or a successor provision thereto)
      and
      applicable guidance published in the Internal Revenue Bulletin.”

     

    IN
      WITNESS WHEREOF, and as conclusive evidence of the adoption of the foregoing
      instrument comprising Amendment No. One to the Advanced Materials Group, Inc.
      1998 Stock Option Plan, Advanced Materials Group, Inc. has caused these presents
      to be duly executed in its name and on its behalf this 9th day of May,
      2007.

     

    ADVANCED
      MATERIALS GROUP, INC.

    

    

    By: /s/
      William G. Mortensen _____

    

    Its:___President_________________________

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