Document:

exhibit_10-1.htm

EXHIBIT 10.1

 

CAMELOT ENTERTAINMENT GROUP, INC.

AMENDED AND RESTATED 2009 STOCK OPTION/STOCK ISSUANCE PLAN,

DATED APRIL 26, 2010

 

 

ARTICLE ONE

 

GENERAL PROVISIONS

 

	
  

	
I.   PURPOSE OF THE PLAN

 

This Amended and Restated 2009 Stock Option/Stock Issuance Plan is intended to promote the interests of Camelot Entertainment Group, Inc., a California corporation, by providing eligible persons in the Corporation’s employ or service with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service.

 

Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.

 

	
  

	
II.   STRUCTURE OF THE PLAN

 

A.           The Plan shall be divided into two separate equity programs:

 

(i)           the Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, and

 

(ii)           the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary).

 

B.           The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan.

 

	
  

	
III.   ADMINISTRATION OF THE PLAN

 

A.           The Plan shall be administered by the Board.  However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee.  Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time.  The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.

 

B.           The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issuances thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option grant or stock issuance thereunder.

 

 

  

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IV.    ELIGIBILITY

 

A.           The persons eligible to participate in the Plan are as follows:

 

(i)           employees,

 

(ii)           non-employee members of the Board or the non-employee members of the board of directors of any Parent or Subsidiary, and

 

(iii)           consultants and other independent advisors who provide Services to the Corporation (or any Parent or Subsidiary).

 

B.           The Plan Administrator shall have full authority to determine, (i) with respect to the grants made under the Option Grant Program, which eligible persons are to receive such  grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and (ii) with respect to stock issuances made under the Stock Issuance Program, which eligible persons are to receive such issuances, the time or times when those issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid by the Participant for such shares.

 

C.           The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program.

 

	
  

	
V.    STOCK SUBJECT TO THE PLAN

 

A.           The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock.  The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 6,000,000,000 shares.

 

B.           Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent: (i) the options expire or terminate for any reason prior to exercise in full; or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two.  Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan.

 

 

  

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C.           Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to: (i) the maximum number and/or class of securities issuable under the Plan; and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder.  The adjustments determined by the Plan Administrator shall be final, binding and conclusive.  In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation’s preferred stock into shares of Common Stock.

 

ARTICLE TWO

 

OPTION GRANT PROGRAM

 

	
  

	
I.   OPTION TERMS

 

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below.  Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options.

A.           Exercise Price.

 

1.           The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions:

 

(i)           The exercise price per share shall not be less than 100% of the Fair Market Value per share of Common Stock on the option grant date.

 

(ii)           If the person to whom the option is granted is a 10% Stockholder, then the exercise price per share shall not be less than 110% of the Fair Market Value per share of Common Stock on the option grant date.

 

2.           The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation.  Should the Common Stock be registered under Section 12 of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows:

 

(i)           in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

 

(ii)           to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions (A) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (B) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.

 

 

  

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Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

 

B.           Exercise and Term of Options.  Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option grant.  However, no option shall have a term in excess of ten years measured from the option grant date.

 

C.           Effect of Termination of Service.

 

1.           The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

 

(i)           Should the Optionee cease to remain in Service for any reason other than death, Disability or Misconduct, then the Optionee shall have a period of three months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee.

 

(ii)           Should Optionee’s Service terminate by reason of Disability, then the Optionee shall have a period of 12 months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee.

 

(iii)           If the Optionee dies while holding an outstanding option, then the personal representative of his or her estate or the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or the Optionee’s designated beneficiary or beneficiaries of that option shall have a 12 month period following the date of the Optionee’s death to exercise such option.

 

(iv)           Under no circumstances, however, shall any such option be exercisable after the specified expiration of the option term.

 

(v)           During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service.  Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised.  However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding with respect to any and all option shares for which the option is not otherwise at the time exercisable or in which the Optionee is not otherwise at that time vested.

 

 

 

  

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(vi)           Should Optionee’s Service be terminated for Misconduct or should Optionee otherwise engage in Misconduct while holding one or more outstanding options under the Plan, then all those options shall terminate immediately and cease to remain outstanding.

 

2.           The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:

 

(i)           extend the period of time for which the option is to remain exercisable following Optionee’s cessation of Service or death from the limited period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term; and/or

 

(ii)           permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service.

 

D.           Stockholder Rights.  The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become the recordholder of the purchased shares.

 

E.           Unvested Shares.  The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock.  Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares.  The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.  The Plan Administrator may not impose a vesting schedule upon any option grant or the shares of Common Stock subject to that option which is more restrictive than 20% per year vesting, with the initial vesting to occur not later than one year after the option grant date.  However, such limitation shall not be applicable to any option grants made to individuals who are officers of the Corporation, non-employee Board members or independent consultants.

 

F.           Limited Transferability of Options.  An Incentive Stock Option shall be exercisable only by the Optionee during his or her lifetime and shall not be assignable or transferable other than by will or by the laws of inheritance following the Optionee’s death. A Non-Statutory Option may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s family or to a trust established exclusively for one or more such family members or to Optionee’s former spouse, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order.  The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Non-Statutory Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate.  Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under the Plan, and  those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options.  Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

 

 

  

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II.   INCENTIVE OPTIONS

 

The terms specified below shall be applicable to all Incentive Options.  Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Four shall be applicable to Incentive Options.  Options which are specifically designated as Non-Statutory Options shall not be subject to the terms of this Section II.

 

A.           Eligibility.  Incentive Options may only be granted to Employees.

 

B.           Exercise Price.  The exercise price per share shall not be less than 100% of the Fair Market Value per share of Common Stock on the option grant date.

 

C.           Dollar Limitation.  The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of $1,000,000.  To the extent the Employee holds two or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

 

	
  

	
III.   CORPORATE TRANSACTION

 

A.           The shares subject to each option outstanding under the Plan at the time of a Corporate Transaction shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock.  However, the shares subject to an outstanding option shall not vest on such an accelerated basis if and to the extent:  (i) such option is assumed by the successor corporation (or parent thereof) in the Corporate Transaction and any repurchase rights of the Corporation with respect to the unvested option shares are concurrently assigned to such successor corporation (or parent thereof); or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested option shares; or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant.

 

 

  

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B.           All outstanding repurchase rights under the Option Grant Program shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction; or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

C.           Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof).

 

D.           Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction, had the option been exercised immediately prior to such Corporate Transaction.  Appropriate adjustments shall also be made to: (i) the number and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction; and (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same.  To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Corporate Transaction, the successor corporation may, in connection with the assumption of the outstanding options under this Plan, substitute one or more shares of its own Common Stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Corporate Transaction.

 

E.           The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to structure one or more options so that those options shall automatically accelerate and vest in full (and any repurchase rights of the Corporation with respect to the unvested shares subject to those options shall immediately terminate) upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed in the Corporate Transaction.

 

F.           The Plan Administrator shall also have full power and authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to structure such option so that the shares subject to that option will automatically vest on an accelerated basis should the Optionee’s Service terminate by reason of an Involuntary Termination within a designated period (not to exceed 18 months) following the effective date of any Corporate Transaction in which the option is assumed and the repurchase rights applicable to those shares do not otherwise terminate.  Any option so accelerated shall remain exercisable for the fully-vested option shares until the expiration or sooner termination of the option term.  In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate on an accelerated basis, and the shares subject to those terminated rights shall accordingly vest at that time.

 

 

  

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G.           The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded.  To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

 

H.           The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

	
  

	
IV.   CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Plan and to grant in substitution therefor new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date.

 

ARTICLE THREE

 

STOCK ISSUANCE PROGRAM

 

	
  

	
I.    STOCK ISSUANCE TERMS

 

Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants.  Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below.

 

A.           Purchase Price.

 

1.           The purchase price per share shall be fixed by the Plan Administrator but shall not be less than 100% of the Fair Market Value per share of Common Stock on the issue date.  However, the purchase price per share of Common Stock issued to a 10% Stockholder shall not be less than 110% of such Fair Market Value.

 

2.           Subject to the provisions of Section I of Article Four, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:

 

  

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(i)           cash or check made payable to the Corporation; or

 

(ii)           past Services rendered to the Corporation (or any Parent or Subsidiary).

 

B.           Vesting Provisions.

 

1.           Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives.  However, the Plan Administrator may not impose a vesting schedule upon any stock issuance effected under the Stock Issuance Program which is more restrictive than 20% per year vesting, with initial vesting to occur not later than one year after the issuance date.  Such limitation shall not apply to any Common Stock issuances made to the officers of the Corporation, non-employee Board members or independent consultants.

 

2.           Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

 

3.           The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested.  Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

 

4.           Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares.  To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to such surrendered shares.

 

5.           The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to those shares.  Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies.  Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives.

 

 

  

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II.   CORPORATE TRANSACTION

 

A.           Upon the occurrence of a Corporate Transaction, all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction; or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

 

B.           The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation’s repurchase rights with respect to those shares remain outstanding, to provide that those rights shall automatically terminate on an accelerated basis, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant’s Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed 18 months) following the effective date of any Corporate Transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof).

 

	
  

	
III.    SHARE ESCROW/LEGENDS

 

Unvested shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.

 

ARTICLE FOUR

 

MISCELLANEOUS

 

	
  

	
I.   FINANCING

 

The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Option Grant Program or the purchase price for shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments and secured by the purchased shares.  However, any promissory note delivered by a consultant must be secured by collateral in addition to the purchased shares of Common Stock.  In no event may the maximum credit available to the Optionee or Participant exceed the sum of: (i) the aggregate option exercise price or purchase price payable for the purchased shares; plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase.

 

 

  

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II.   EFFECTIVE DATE AND TERM OF PLAN

 

A.           The Plan shall become effective when adopted by the Board, but no option granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders.  If such stockholder approval is not obtained within 12 months after the date of the Board’s adoption of the Plan, then all options previously granted under the Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan.  Subject to such limitation, the Plan Administrator may grant options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan.

 

B.           The Plan shall terminate upon the earliest of: (i) the expiration of the ten year period measured from the date the Plan is adopted by the Board; (ii) the date on which all shares available for issuance under the Plan shall have been issued as vested shares; or (iii) the termination of all outstanding options in connection with a Corporate Transaction.  All options and unvested stock issuances outstanding at the time of a clause (i) termination event shall continue to have full force and effect in accordance with the provisions of the documents evidencing those options or issuances.

 

	
  

	
III.    AMENDMENT OF THE PLAN

 

A.           The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects.  However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification.  In addition, certain amendments may require stockholder approval pursuant to applicable laws and regulations.

 

B.           Options may be granted under the Option Grant Program and shares may be issued under the Stock Issuance Program which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan.  If such stockholder approval is not obtained within 12 months after the date the first such excess grants or issuances are made, then: (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding; and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding.

 

	
  

	
IV.   USE OF PROCEEDS

 

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

 

 

  

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V.   WITHHOLDING

 

The Corporation’s obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

 

	
  

	
VI.   REGULATORY APPROVALS

 

The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock: (i) upon the exercise of any option; or (ii) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the shares of Common Stock issued pursuant to it.

 

	
  

	
VII.   NO EMPLOYMENT OR SERVICE RIGHTS

 

Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.

 

	
  

	
VII.    FINANCIAL REPORTS

 

The Corporation shall deliver a balance sheet and an income statement at least annually to each individual holding an outstanding option under the Plan, unless such individual is a key Employee whose duties in connection with the Corporation (or any Parent or Subsidiary) assure such individual access to equivalent information.

 

 

 

 

 

  

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APPENDIX

 

The following definitions shall be in effect under the Plan:

 

A.           Board shall mean the Corporation’s Board of Directors.

 

B.           Code shall mean the Internal Revenue Code of 1986, as amended.

 

C.           Committee shall mean a committee of two or more Board members appointed by the Board to exercise one or more administrative functions under the Plan.

 

D.           Common Stock shall mean the Corporation’s common stock.

 

E.           Corporate Transaction shall mean either of the following stockholder-approved transactions to which the Corporation is a party:

 

(i)           a merger or consolidation in which securities possessing more than 50% of the total combined voting power of the Corporation’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; or

 

(ii)           the sale, transfer or other disposition of all or substantially all of the Corporation’s assets in complete liquidation or dissolution of the Corporation.

 

F.           Corporation shall mean Camelot Entertainment Group, Inc., a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of Camelot Entertainment Group, Inc. which shall by appropriate action adopt the Plan.

 

G.           Disability shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment and shall be determined by the Plan Administrator on the basis of such medical evidence as the Plan Administrator deems warranted under the circumstances.

 

H.           Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

 

I.           Exercise Date shall mean the date on which the Corporation shall have received written notice of the option exercise.

 

J.           Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions:

 

 

  

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(i)           If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market and published in The Wall Street Journal.  If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

 

(ii)           If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in The Wall Street Journal.  If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.

 

(iii)           If the Common Stock is at the time neither listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate.

 

K.           Incentive Option shall mean an option which satisfies the requirements of Code Section 422.

 

L.           Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of:

 

(i)           such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct; or

 

(ii)           such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by more than 15% or (C) a relocation of such individual’s place of employment by more than 50 miles, provided and only if such change, reduction or relocation is effected without the individual’s consent.

 

M.           Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner.  The foregoing definition shall not in any way preclude or restrict the right of the Corporation (or any Parent or Subsidiary) to discharge or dismiss any Optionee or Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct.

 

 

  

A-2

  

 

 

N.           1934 Act shall mean the Securities Exchange Act of 1934, as amended.

 

O.           Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

 

P.           Option Grant Program shall mean the option grant program in effect under the Plan.

 

Q.           Optionee shall mean any person to whom an option is granted under the Plan.

 

R.           Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, 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.

 

S.           Participant shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.

 

T.           Plan shall mean the Corporation’s 2009 Stock Option/Stock Issuance Plan, as set forth in this document.

 

U.           Plan Administrator shall mean either the Board or the Committee acting in its capacity as administrator of the Plan.

 

V.           Service shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant.

 

W.           Stock Exchange shall mean the Nasdaq Stock Exchange, American Stock Exchange or the New York Stock Exchange.

 

X.           Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program.

 

Y.           Stock Issuance Program shall mean the stock issuance program in effect under the Plan.

 

 

 

  

A-3

  

 

 

Z.           Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, 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.

 

AA.           10% Stockholder shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than 10% of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).

 

 

 

 

 

 

 

A-4Mount Knowledge Holdings Inc.: Exhibit 10.1 - Prepared by newsfilecorp.com

LETTER OF INTENT

April 26, 2010

Mr. Simon Arnison 
Mount Knowledge USA, Inc. 
Vice
President, Secretary and Director
39555 Orchard Hill Place 
Novi, Michigan
48375 

Dear Mr. Arnison:

This letter confirms our non-binding mutual intentions with
respect to the potential transaction described herein between MOUNT KNOWLEDGE
HOLDINGS, INC., a fully reporting public Nevada corporation (“Purchaser and/or
MKHD”) and MOUNT KNOWLEDGE USA, INC. (“MTKUSA”), a privately-held Nevada
corporations and its Shareholders (“Shareholders”), hereinafter MTKUSA and the
Shareholders shall be collectively referred to as (the “Sellers”). This
document, in and of itself, does not represent an enforceable legal contract.

1. Definitive Purchase Agreement. All of the
terms and conditions of the proposed transaction shall be set forth in a
definitive agreement (the “Stock Purchase and Share Exchange Agreement”) to be
executed on or before June 30, 2010, with a subsequent date of closing (the
“Closing Date”), to be mutually agreed to by Sellers and Purchaser. Neither
party intends to be bound by any oral or written statements nor may
correspondence concerning the proposed Stock Purchase and Share Exchange
Agreement arising during the course of negotiations, notwithstanding that the
same be expressed in terms signifying a partial, preliminary or interim
agreement between the parties. 

2. Purchase of Stock. Sellers have agreed,
subject to the final approval by its shareholders and the execution of any
subsequent and/or required documentation, to sell to the Purchaser and the
Purchaser has agreed, subject to the completion of its due diligence and the
execution of a definitive agreement, to purchase from the Sellers any and all of
the issued and outstanding shares of Common and Preferred Stock, including any
issued Warrants for the right to purchase of Common Stock and/or Preferred Stock
of MTKUSA (collectively referred to as the “Shares”) owned and held by the
Shareholders of record of MTKUSA on the date of closing consisting of one
hundred (100%) percent of the beneficial ownership of MTKUSA. The proposed
transaction would make MTKUSA as wholly-owned and operated subsidiary of the
Company. 

3. Share Exchange (Consideration). In
consideration for the purchase by the Purchaser from Shareholders of any and all
of the issued and outstanding Shares of MTKUSA owned and held by the
Shareholders of record of MTKUSA as set forth in Section 2 hereinabove, the
Purchaser shall pay to the Shareholders of MTKUSA in form of a share exchange
with MKHD the same equivalent number of MKHD shares (one-to-one (1:1) basis) in the same series and/or
class of stock as owned and held in MTKUSA or such other mutually agreed upon
amount of shares, upon the terms and conditions to be set forth in an executed
Stock Purchase and Share Exchange Agreement. 

1

4. Due Diligence Review and Access. Promptly
following the execution of this Letter of Intent, Sellers shall immediately
arrange for the Purchaser to have complete access to MTKUSA’s facilities and any
and all books and records, and shall cause the directors, employees,
accountants, and other agents and representatives (collectively,
"Representatives") of MTKUSA to cooperate fully with Purchaser and/or
Purchaser’s representatives in connection with the performance of any required
due diligence, including, but not limited to a complete examination of MTKUSA’s
assets and liabilities, financials, accounting controls and procedures, business
records, contracts, legal documents, shareholder agreements, offering
documentation or memorandums and/or any other materials deem necessary by
Purchaser generally required to complete a due diligence of MTKUSA as set forth
in the Due Diligence Check List attached hereto as Exhibit A. Any information
obtained by Purchaser as a result thereof will be maintained by Purchaser in
confidence. The parties will cooperate to complete due diligence expeditiously.

5. Conduct in Ordinary Course. In addition to the
conditions discussed herein and any others to be determined after the due
diligence process shall be contained in a Stock Purchase and Share Exchange
Agreement, subject to Sellers having conducted its business(s) in the ordinary
course during the period between the date hereof and the Closing Date and there
having been no material adverse change in the business(s), financial condition
or prospects. Sellers shall promptly notify Purchaser of any conduct of the
Company or material event, circumstance, or impairment to the Company’s business
or continuing operation and of any extraordinary transactions that may have an
effect on the value of the Company or its underlying assets and/or liabilities.

6. Open Private Placement Memorandum. Purchaser
acknowledges that MTKUSA currently has an ongoing Regulation D Rule 506 Private
Placement Memorandum (PPM) to raise a maximum of $1,500,000 dollars in equity
capital in MTKUSA, of which MTKUSA presented to MKHD as of the date of this
Letter of Intent that it has already raised a total of approximately $892,000
dollars to date. Both parties agree that MTKUSA shall be allowed to continue to
raise capital from its PPM during the due diligence period and until the Closing
Date at which time the shareholders of record of MTKUSA at such date would be
acknowledged and included in the executed Stock Purchase and Share Exchange
Agreement. 

7. Expediency. All the parties would use all
reasonable efforts to complete and sign a Stock Purchase and Share Exchange
Agreement on or before June 30, 2010 and to close the transaction as promptly as
practicable thereafter. 

8. Expenses. The parties agree that each party is
responsible for the payment of their respective expenses associated with the
execution, duties and responsibilities and enforcement of this Letter of Intent,
the Stock Purchase and Share Exchange Agreement and the transactions
contemplated hereby and thereby. 

2

9. Broker’s Fee. All parties have represented to
each other that no brokers or finders have been employed who would be entitled
to a fee from Sellers by reason of the transaction contemplated by this letter
of intent and that if any such fee is required in the future, it shall be the
responsibility of the Sellers to make such payment(s). 

10. Public Announcements. Neither Sellers nor
Purchaser will make any announcement of the proposed transaction contemplated by
this Letter of Intent prior to the execution of the Stock Purchase and Share
Exchange Agreement without the prior written approval of the other, which
approval will not be unreasonably withheld or delayed, unless otherwise required
by rules and regulations imposed on Purchaser as a publicly traded company as
set forth by the Securities and Exchange Commission of the United States of
America. The foregoing shall not restrict in any respective ability to
communicate hereby to any of our respective affiliates’, officers, directors,
employees and professional advisors, and, to the extent relevant, to third
parties whose consent is required in connection with the transaction
contemplated by this Letter of Intent. 

11. Exclusive Negotiating Rights. In order to
induce Purchaser to commit the resources, forego other potential opportunities,
and incur the legal, accounting and incidental expenses necessary properly to
evaluate the possibility of acquiring the assets and business described above,
and to negotiate the terms of, and consummated, the transaction contemplated
hereby, Sellers agree that for a period of ninety [90] days after the date
hereof, Sellers nor its affiliates and their respective officers, directors,
employees and agents shall not initiate, solicit, encourage, directly or
indirectly, or accept any offer or proposal, regarding the possible acquisition
of MTKUSA by any other person other than Purchaser, including, without
limitation, by way of a purchase of shares, assets or otherwise. Purchase of
assets or merger, of all or any substantial part of MTKUSA equity securities or
assess, and shall not (other than in the ordinary course of business as
heretofore conducted) provide any confidential information regarding collective
assets or business(s) to any person other than Purchaser and our
representatives. 

12. Consents. Unless and until this Letter of
Intent has been terminated, Purchaser and Sellers and/or representatives of each
respective company as directed shall cooperate with each other and proceed, as
promptly as reasonably possible, to prepare and file the notifications required
by the SEC, or any other applicable Authority, and any other regulatory
governing body and will further seek to obtain all necessary consents and
approvals wherever needed or required from all other third parties, as may be
applicable, and to endeavor to comply with all other legal or contractual
requirements for or preconditions to the execution of a Stock Purchase and Share
Exchange Agreement. 

13. Confidentiality. Except as and
to the extent required by law, Purchaser shall not disclose or use, and shall
direct its representatives not to disclose or use, any Confidential Information
(as defined below) obtained from the Sellers and/or representatives of the
Company by Purchaser or its representatives in connection herewith at any time
or in any manner other than in connection with its evaluation of the transaction
proposed in this Letter.

For purposes of this Paragraph, "Confidential Information"
means any information about the Sellers and/or the Company stamped
"confidential", or identified in writing as such to Purchaser by the Sellers
and/or Company; provided that it does not include information which; (i) is or
becomes generally available to or known by the public other than as a result of
improper disclosure by Purchaser or (ii) is obtained by Purchasers from a source
other than Sellers and/or representatives of the Company, provided that
Purchaser is unaware that such source was not bound by a duty of confidentiality
to Company or another party with respect to such information. If the Binding
Provisions of this Letter are terminated, Purchaser shall promptly return to
Company any Confidential Information in its possession and certify in writing to
Company that it has done so. Purchaser and Company acknowledge and affirm a Non
Disclosure and Non Circumvent Agreement was executed between the parties prior
to or on the date of this Letter of Intent. 

3 

14. Non-Circumvention. Both parties to this
Letter of Intent shall not directly or indirectly circumvent, avoid, bypass, or
in any way obviate each other’s rights under this Letter of Intent, including
but not limited to the right to enter into any type of contractual relationship
or otherwise with relationships brought to or developed by the other and/or
together in this transaction without prior written consent by the other unless
authorization is otherwise provided for under a provision in the proposed Stock
Purchase and Share Exchange Agreement. 

15. Indemnifications. Purchaser and
Sellers agree that on or before the date of execution of the Stock Purchase and
Share Exchange Agreement, Sellers will insure, hold harmless and indemnify
Purchaser against any and all claims, liens, judgments and/or any other
obligation against the Company prior to the execution of the Purchase Agreement
and that the Company will be free and clear of any liens, claims and or
encumbrances whatsoever, except those disclosed and accepted by Purchaser.

16. Disclaimer of Liabilities. No party to
this Letter of Intent shall have any liability to any other party for any
liabilities, losses, damages (whether special, incidental or consequential),
costs, or expenses incurred by the party in the event either party decides to
terminate this Letter as provided in paragraph 17. Each party shall be solely
responsible for its own expenses, legal fees and consulting fees related to
their respective obligations of this Letter of Intent, whether or not any of the
transaction contemplated in this Letter of Intent is consummated. 

17. Termination. Each party hereby reaffirms its
intention that this Letter of Intent as a whole or in part, is not intended to
constitute, and shall not constitute, a legal and binding obligation, contract
or agreement between any of the parties, and is not intended to be relied upon
by any party as constituting such. Accordingly, the parties agree that any party
to this Letter of Intent may unilaterally withdraw from negotiation or dealing
at any time for any or no reason at the withdrawing party’s sole discretion by
notifying the other party of the withdrawal in writing. If a Stock Purchase and
Share Exchange Agreement is not executed by the parties to this Letter on or
before the 30th day of June, 2010, then this Letter of Intent shall terminate
and all the terms and conditions set forth herein shall be null and void, unless
an extension of this Letter of Intent is mutually agreed to by both parties in
writing prior to the termination date. 

18. Miscellaneous. This letter shall be governed
by the substantive laws of the State of Nevada without regard to conflict of
laws principles. This letter constitutes the entire understanding and agreement
between the parties hereto and their affiliates with respect to its subject
matter and supersede all prior or contemporaneous agreements, representations,
warranties and understandings of such parties (whether oral or written). No promise, inducement, representation or
agreement, other than as expressly set forth herein, has been made to or by the
parties hereto. This letter may be amended only by written agreement, signed by
the parties to be bound by the amendment. Evidence shall be inadmissible to show
agreement by and between such parties to any term or condition contrary to or in
addition to the terms and conditions contained in this letter. This letter shall
be construed according to its fair meaning and not strictly for or against
either party. 

4 

19. No Binding Obligation. Except for Section 1
and Section 3 though 20, THIS LETTER OF INTENT DOES NOT CONSTITUTE OR CREATE,
AND SHALL NOT BE DEEMED TO CONSTITUTE OR CREATE, ANY LEGALLY BINDING OR
ENFORCEABLE OBLIGATION ON THE PART OF EITHER PARTY TO THIS LETTER OF INTENT. NO
SUCH OBLIGATION SHALL BE CREATED, EXCEPT BY THE EXECUTION AND DELIVERY OF THE
PURCHASE AGREEMENT CONTAINING SUCH TERMS AND CONDITIONS OF THE PROPOSED
TRANSACTION AS SHALL BE AGREED UPON BY THE PARTIES, AND THE ONLY IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF SUCH PURCHASE AGREEMENT. The Confidentiality
Agreement is hereby ratified and confirmed as a separate agreement between the
parties thereto. 

20. ACKNOWLEDGMENT AND ACCEPTANCE.
If the terms and conditions of this Letter of Intent are agreeable to Mount
Knowledge USA, Inc, please have the appropriate officer and/or director sign a
copy of this Letter of Intent and return a signed copy by facsimile to us at
(248) 671-5080 by no later than 5pm on April 27, 2010, followed by a mailed
original signed copy to Mount Knowledge Holdings, Inc., 39555 Orchard Hill
Place, Novi, Michigan 48375. This Letter of Intent may be executed in one or
more counterparts, each of which when so executed shall be deemed an original,
but all of which taken together shall constitute one and the same document. Upon
acceptance of the provisions of this Letter of Intent by each party, the parties
will in good faith prepare to execute a Stock Purchase and Share Exchange
Agreement on the contemplated transaction described herein on or before the 30th
of June, 2010, subject to the termination provisions set forth in paragraph
17. 

If the foregoing terms and conditions are acceptable to Mount
Knowledge USA, Inc, please so indicate by initialing each page and signing the
enclosed copy of this Letter of Intent and returning it to the attention of the
undersigned.

Sincerely, 

MOUNT KNOWLEDGE HOLDINGS, INC. 

By:   /s/ Daniel A.
Carr                                  

        Daniel A. Carr,

        President and CEO 

5 

ACCEPTED AND AGREED 

MOUNT KNOWLEDGE USA, INC. 

By:   /s/ Simon
Arnison                                             

        Simon Arnison

        Vice President, Secretary and
Director 

Date: April 26, 2010 

6 

Exhibit A 

Due Diligence Check List 

MOUNT KNOWLEDGE USA, INC. 

(the “Company”) 

	Document/Information 	 	 	Provided 	 	 	None 	 	 	(Set Forth Reason)
    	 
	 	 	 	 	 	 	 	 	 	 	 
	CORPORATE INFORMATION
      	 	 	  	 	 	  	 	 	  	 
	 	 	 	 	 	 	 	 	 	 	 
	1. 	 	Articles of Incorporation, and any amendments thereto, of the Company.
      	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	2. 	 	Bylaws, as amended, of the Company.
      	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	3. 	 	All shareholders, board of directors and committee minutes of
      the Company during the last three years.
      	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	4. 	 	Schedule of all jurisdictions in
      which the Company is qualified to do business and certificates of such qualification. 	 	 		 	 		 	 		 

7 

  

	 	 	 	 	 	 	 	 	 	 	 	 	 
	5. 	 	Names and addresses of the Company's
      shareholders, officers and directors, together with biographies. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	6. 	 	Description of all classes of stock and
      ownership interests of all shareholders of the Company, including total
      number of issued and outstanding shares. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	7. 	 	All voting trust agreements or other voting
      arrangements relating to any securities (with voting rights) of the
      Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	8. 	 	All warrants, option agreements and other
      agreements or instruments creating or granting rights to acquire or
      dispose of the Company's securities, or containing anti-dilution
      provisions or providing for registration rights for the Company's
      securities. 	 	 		 	 		 	 		 

8 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	9. 	 	All documents relating to all underwritings and
      all major acquisitions or dispositions of the Company during last three
      years other than acquisitions or dispositions of the Company of property
      or goods in the ordinary course of business. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	10. 	 	Schedule and description of the location of all
      offices and operations of the Company, including total land and operations
      areas, ownership and rights of use, condition of property, market value
      and space for expansion. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	EMPLOYMENT INFORMATION 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	11. 	 	Schedule of all employees of the Company by
      location and department, job descriptions, salaries, bonuses and other
      compensation. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	12. 	 	Biographies of all key employees of the
      Company. 	 	 		 	 		 	 		 

9 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	13. 	 	Appraisal of current labor relationships,
      description of any disputes with employees and grievance proceedings
      within the past three years. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	14. 	 	A list of all employees of the the Company who
      have received stock or options (including appreciation rights) and the
      number of such securities received. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	15. 	 	All written employment agreements, consulting
      agreements, severance, confidentiality and non-competition agreements, and
      any labor or collective bargaining agreements. Description of any verbal
      agreements, understanding or promises relating to employees. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	16. 	 	All employee benefit plans, stock option plans
      and fringe benefit plans, including group health and life insurance plans,
      pension plans, cash bonus plans, employee stock purchase plans and salary
      plans. 	 	 		 	 		 	 		 

10 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	17. 	 	Company policy manual. 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	LOAN AND FINANCIAL INFORMATION 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	18. 	 	All debt instruments, loan agreements,
      installment purchase agreements, indentures, security instruments or other
      obligations relating to indebtedness for borrowed money or money loaned to
      others, and all guaranties of obligations therefor to which the Company is
      a party, obligor or beneficiary. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	19. 	 	All correspondence with principal lenders for
      the past 18 months. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	20. 	 	Descriptions of any loans to or from officers,
      directors or employees of the Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	21. 	 	Files of correspondence with any reports from
      the Company's accountants during the past five years. 	 	 		 	 		 	 		 

11 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	22. 	 	All annual and subsequent interim financial
      statements of the Company and any unconsolidated subsidiaries, whether
      audited or unaudited, within the last five years, and all information
      relating to significant or material changes in accounting methods or
      standards used by the Company or its accountants to prepare such financial
      statements. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	23. 	 	Current balance sheet of the Company 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	24. 	 	All deeds to, and other documents, other than
      leases, representing interests in real property owned by the Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	25. 	 	All appraisals, independent or otherwise, made
      within the last three years, as to the value of the Company or any
      property thereof. 	 	 		 	 		 	 		 

12 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	26. 	 	Copies of all tax returns filed by the Company
      within the last five years with the IRS and all state and local tax
      authorities. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	27. 	 	Description of accounting policies, method of
      crediting sales, allowances and returns, bad debts, inventory valuation,
      depreciation methods and rates for different structures and equipment, and
      internal reporting and control procedures. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	28. 	 	Copies of all accounts receivable aging reports
      for the last three years and at the end of the most recent month. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	MATERIAL AGREEMENTS 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	29. 	 	All leases, subleases or options to lease or
      sublease for personal or real property to which the Company is or intends
      to become a party (whether as lessor, lessee, sublessor or sublessee). 	 	 		 	 		 	 		 

13 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	30. 	 	All material contracts, agreements
      arrangements, commitments, understandings or obligations of the Company,
      any current or former Officer, Director or Affiliate not otherwise called
      for herein, including but not limited to: 	 	 		 	 		 	 		 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(a) 	 	any agreements relating to the acquisition or
      disposition of assets not in the ordinary course of business; 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(b) 	 	any partnership or joint venture in which the
      Company is involved; 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(c) 	 	agreements with significant customers (a
      significant customer is any customer accounting for 5% or more of the
      Company's gross revenues); 		 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(d) 	 	agreements with significant suppliers (a
      significant supplier is any supplier accounting for 5% or more of the costs of goods
      sold to the Company); 	 	 		 	 		 	 		 

14 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(e) 	 	any management, advisory, investment banking,
      marketing, franchise or agency agreements; and 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(f) 	 	any consulting contracts with engineering firms
      or other consultants. 	 	 		 	 		 	 		 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	31. 	 	A list of all transactions, or copies of all
      agreements, between the Company and its present or former officers,
      directors or other affiliated parties (or members of their immediate
      family - which should include spouses, parents, children, siblings,
      mothers and fathers and all in- laws), including indemnity arrangements.
    	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	32. 	 	Copies of all standard form sales agreements,
    form of general invoices, and warranties given to customers. 	 	 	 	 	 	 	 	 	 	 

15 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	33. 	 	A description of any actual or
      likely defaults in any agreement to which the Company is a party. 	 	 		 	 		 	 		 

	 	 	 	 	 	 	 	 	 	 	 
	GENERAL BUSINESS INFORMATION 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	34. 	 	Schedule and description of all Products which
      generate at least 5% of gross revenue, including markets, sales by product
      for current and past two years, dollar and unit volume by product, trends
      in market shares, relative costs and profit margins by product, and
      breakdown of profits by product line. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
		 	(a) Schedule and description of all significant
      customers who purchase Products described in question #34, Including
      annual volume of products purchased, payment history 	 	 		 	 		 	 		 

16 

	 	 	 	 	 	 	 	 	 	 	 	 	 
		 	(b) Description of distribution systems,
      inventory control systems and sales systems, including names, locations,
      type of arrangements and pricing structure regarding products described in
      question #34. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	35. 	 	Schedule and description of all significant
      customers, including annual volume of products purchased, payment history
      and contact person. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	36. 	 	Description of distribution systems, inventory
      control systems and sales systems, including names, locations, type of
      arrangements and pricing structure regarding independent representatives.
    	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	37. 	 	All budgets, plans, forecasts and other
      financial information (including backlog information) prepared during the
      past 12 months or prior thereto if relating to the Company's future. 	 	 		 	 		 	 		 

17 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	38. 	 	A schedule, with relevant coverage data, of all
      insurance policies maintained by the Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	39. 	 	All consultants', engineers' and management
      reports and marketing studies relating to the Company 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	40. 	 	All press clippings and releases concerning the
      Company within the last three years. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	41. 	 	All current price lists, advertising and
      promotional materials, sales literature and other brochures or similar
      information describing the Company or its products. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	42. 	 	All documentation relating to trademarks,
      service marks, trade or brand names, patents and copyrights and
      applications therefor. All license, know-how and technical assistance
      agreements. All material franchises, permits, governmental certifications,
      concessions or other authorizations granted to, owned or used by the
      Company. 	 	 		 	 		 	 		 

18 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	43. 	 	All descriptive brochures and manuals and any
      other documents used with respect to the Company and/or their products or
      the marketing of such products. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	44. 	 	All management reports prepared during the last
      three years. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	45. 	 	All governmental policies and (to the extent
      known) informal or unwritten policies applicable to the business of the
      Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	46. 	 	Description of principal competitors by product
      lines. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	47. 	 	Description of all manufacturing systems,
      production schedules, software and hardware utilized, including special
      skills and know-how. 	 	 		 	 		 	 		 

19 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	48. 	 	Schedule of significant suppliers, including
      annual purchases, description of products and reliability of suppliers,
      relationship, payment terms and history, and contact person. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	49. 	 	Description of typical inventories, valuation
      policy, maximum and minimum limits, return goods policy. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	EXISTING AND POTENTIAL LIABILITIES AND
      ENCUMBRANCES 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	50. 	 	A schedule identifying all existing and
      potential environmental problems and liabilities, if any. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	51. 	 	All material liens, claims, mortgages and
      encumbrances on real or personal property of the Company. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	52. 	 	All attorney audit response letters and
      auditor's management letters. 	 	 		 	 		 	 		 

20 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	53. 	 	All material court filings. 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	54. 	 	All Company material filed with any regulatory
      agencies, including the SEC, IRS (furnish only material filings), EPA,
      FDA, OSHA and any federal or state securities or environmental authorities
      within the last three years. 	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	55. 	 	A list of all litigation or other proceedings
      existing, contemplated or threatened by or against the Company, including
      actions and inquiries by governmental agencies (SEC, IRS, EPA, EEOC, OSHA,
      Labor, etc.), with a brief description of the claims and amounts involved.
    	 	 		 	 		 	 		 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	56. 	 	A list of all contingent or unasserted claims
      or liabilities of or against the Company not described in its most recent
      balance sheet. 	 	 		 	 		 	 		 

21 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	57. 	 	A list of all proceedings to which officers,
      directors or employees of the Company have been subject to during the last
      five years brought by any foreign, U.S. state or federal governmental or
      other agencies. 	 	 		 	 		 	 		 

22

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