Document:

Exhibit 10.1

 

ARBOR REALTY TRUST, INC.

 

2014 OMNIBUS STOCK INCENTIVE PLAN

 

Approved by the Company’s Stockholders on May 20, 2014

 

Section 1.                                          General Purpose of Plan; Definitions.

 

The name of this plan is the Arbor Realty Trust, Inc. 2014 Omnibus Stock Incentive Plan (the “Plan”).

 

The purpose of the Plan is to enable the Company to attract and retain highly qualified personnel who will contribute to the Company’s success and to provide incentives to Participants (defined below) that are linked directly to stockholder value and will therefore inure to the benefit of all stockholders of the Company.

 

For purposes of the Plan, the following terms shall be defined as set forth below:

 

(a)                                 “Administrator” means the Board, or if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 2 below.

 

(b)                                 “Award” means any award under the Plan.

 

(c)                                  “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award.

 

(d)                                 “Board” means the Board of Directors of the Company.

 

(e)                                  “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

 

(f)                                   “Committee” means a committee of the Board, which shall consist of two or more individuals, each of whom shall qualify as (i) an “outside director” within the meaning of Section 162(m) of the Code, (ii) a “nonemployee director” within the meaning of Rule 16b-3 and (iii) an “independent director” within the meaning of the New York Stock Exchange Listed Company Manual. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Committee.

 

(g)                                  “Common Stock” means the common stock, par value $0.01 per share, of the Company.

 

(h)                                 “Company” means Arbor Realty Trust, Inc., a Maryland corporation (or any successor corporation).

 

(i)                                     “Disability” means the inability of a Participant to perform substantially his or her duties and responsibilities to the Company or to any Parent or Subsidiary by reason of a physical or mental disability or infirmity (i) for a continuous period of six months, or (ii) at such earlier time as the Participant submits medical evidence satisfactory to the Administrator that the Participant has a physical or mental disability or infirmity that will likely prevent the Participant from returning to the performance of the Participant’s work duties for six months or longer. The date of such Disability shall be the last day of such six-month period or the day on which the Participant submits such satisfactory medical evidence, as the case may be.

 

(j)                                    “Eligible Recipient” means an officer, director, employee, consultant (including employees of the Manager who provide services to the Company) or advisor of the Company or of any Parent or Subsidiary.

 

(k)                                 “Exercise Price” means the per share price, if any, at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.

 

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(l)                                     “Fair Market Value” as of a particular date shall mean the fair market value of a share of Common Stock as determined by the Administrator in its sole discretion in accordance with Section 409A of the Code; provided, however, that (i) if the Common Stock is admitted to trading on a national securities exchange, fair market value of a share of Common Stock on any date shall be the closing sale price reported for such share on such exchange on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, (ii) if the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation (“Nasdaq”) System or other comparable quotation system and has been designated as a National Market System (“NMS”) security, fair market value of a share of Common Stock on any date shall be the closing sale price reported for such share on such system on such date or, if no sale was reported on such date, on the last date preceding such date on which a sale was reported, or (iii) if the Common Stock is admitted to quotation on the Nasdaq System but has not been designated as an NMS security, fair market value of a share of Common Stock on any date shall be the average of the highest bid and lowest asked prices of such share on such system on such date or, if no bid and ask prices were reported on such date, on the last date preceding such date on which both bid and ask prices were reported.

 

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

 

(n)                                 “Manager” means Arbor Commercial Mortgage, LLC, a New York limited liability company.

 

(o)                                 “Nonqualified Stock Option” means any Option that is not an Incentive Stock Option, including any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option.

 

(p)                                 “Option” means an option to purchase Shares granted pursuant to Section 6 below.

 

(q)                                 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations in the chain (other than the Company) owns stock possessing 50% or more of the combined voting power of all classes of stock in one of the other corporations in the chain.

 

(r)                                    “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority in Section 2 below, to receive grants of Options and/or awards of Restricted Stock.

 

(s)                                   “Restricted Stock” means Shares subject to certain restrictions granted pursuant to Section 7 below.

 

(t)                                    “Shares” means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to Sections 3 and 4, and any successor security.

 

(u)                                 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations (other than the last corporation) in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

 

Section 2.                                          Administration.

 

The Plan shall be administered by the Board or, at the Board’s sole discretion, by the Committee, which shall be appointed by the Board, and which shall serve at the pleasure of the Board. Pursuant to the terms of the Plan, the Administrator shall have the power and authority:

 

(a)                                 to select those Eligible Recipients who shall be Participants;

 

(b)                                 to determine whether and to what extent Options or awards of Restricted Stock are to be granted hereunder to Participants;

 

(c)                                  to determine the number of Shares to be covered by each Award granted hereunder;

 

(d)                                 to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder; and

 

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(e)                                  to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Options or awards of Restricted Stock granted hereunder.

 

The Administrator shall have the authority, in its sole discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto); and to otherwise supervise the administration of the Plan.

 

All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants.

 

Section 3.                                          Shares Subject to Plan.

 

The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 2,000,000 shares, all of which may be granted in respect of Incentive Stock Options.  Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

 

To the extent that (i) any Shares subject to an Option terminate or expire without exercise of the Option, or (ii) any Shares subject to any award of Restricted Stock are forfeited, such terminated, expired or forfeited Shares shall again be available for issuance in connection with future Awards granted under the Plan.

 

Section 4.                                          Corporate Transactions.

 

In the event of any merger, reorganization, consolidation, recapitalization, spin-off, combination, stock repurchase, stock split, reverse stock split, stock dividend, extraordinary dividend, or other change in corporate structure affecting the Common Stock, an equitable substitution or proportionate adjustment shall be made in (i) the aggregate number of Shares reserved for issuance under the Plan, (ii) the kind, number and Exercise Price of Shares subject to outstanding Options granted under the Plan, (iii) the kind, number and purchase price of Shares subject to outstanding awards of Restricted Stock granted under the Plan and (iv) the limitation set forth in Section 6(i), in each case as may be determined by the Administrator, in its sole discretion. Such other substitutions or adjustments shall be made as may be determined by the Administrator, in its sole discretion. [In connection with any event described in this paragraph, the Administrator may provide, in its sole discretion, for the cancellation of any outstanding awards and payment in cash or other property therefor.]

 

Section 5.                                          Eligibility.

 

Eligible Recipients may be granted Options and/or awards of Restricted Stock.  The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from among the Eligible Recipients.

 

The Administrator shall have the authority to grant to any Eligible Recipient who is an employee of the Company or of any Parent or Subsidiary (including directors who are also officers of the Company) Incentive Stock Options, Nonqualified Stock Options, or both types of Options, and/or Restricted Stock. Non-employee Directors of the Company or of any Parent or Subsidiary, consultants (including employees of the Manager who provide services to the Company) or advisors who are not also employees of the Company or of any Parent or Subsidiary may only be granted Options that are Nonqualified Stock Options and/or Restricted Stock.

 

Section 6.                                          Options.

 

Options may be granted alone or in addition to other awards of Restricted Stock granted under the Plan. Any Option granted under the Plan shall be in such form as the Administrator may from time to time approve, and the provisions of each Option need not be the same with respect to each Participant. Participants who are granted Options shall enter into an Award Agreement with the Company, in such form as the Administrator shall determine, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option granted thereunder.

 

The Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. To the extent that any Option does not qualify as an Incentive Stock Option, it shall constitute a separate Nonqualified Stock Option. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder.

 

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Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable:

 

(a)                                 Option Exercise Price. The per share Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant but shall not, (i) in the case of Incentive Stock Options, be less than 100% of the Fair Market Value of the Common Stock on such date (110% of the Fair Market Value per Share on such date if, on such date, the Eligible Recipient owns (or is deemed to own under Section 424(d) of the Code) stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company, or any Parent or Subsidiary), and (ii) in the case of Nonqualified Stock Options, be less than 100% of the Fair Market Value of the Common Stock on such date.

 

(b)                                 Option Term. The term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten years after the date such Option is granted; provided, however, that if an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company or of any Parent or Subsidiary and an Incentive Stock Option is granted to such employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five years from the date of grant.

 

(c)                                  Exercisabilitv. Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator at or after the time of grant. The Administrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine, in its sole discretion.

 

(d)                                 Method of Exercise. Subject to Section 6(c), Options may be exercised in whole or in part at any time during the Option period, by giving written notice of exercise to the Company specifying the number of Shares to be purchased, accompanied by (i) payment in full of the aggregate Exercise Price of the Shares so purchased in cash, (ii) delivery of outstanding shares of Common Stock with a Fair Market Value on the date of exercise equal to the aggregate Exercise Price payable with respect to the Options’ exercise; (iii) simultaneous sale through a broker reasonably acceptable to the Administrator of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board or (iv) payment of the Exercise Price through such other method as the Administrator may authorize from time to time in its sole discretion.

 

In the event a grantee elects to pay the Exercise Price payable with respect to an Option pursuant to clause (ii) above: (A) only a whole number of share(s) of Common Stock (and not fractional shares of Common Stock) may be tendered in payment, (B) such grantee must present evidence acceptable to the Company that he or she has owned any such shares of Common Stock tendered in payment of the Exercise Price (and that such tendered shares of Common Stock have not been subject to any substantial risk of forfeiture) for at least six months prior to the date of exercise, and (C) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (i) physical delivery of the certificate(s) for all such shares of Common Stock tendered in payment of the Exercise Price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (ii) direction to the grantee’s broker to transfer, by book entry, of such shares of Common Stock from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the Exercise Price is made by delivery of Common Stock, the difference, if any, between the aggregate Exercise Price payable with respect to the Option being exercised and the Fair Market Value of the shares of Common Stock tendered in payment (plus any applicable taxes) shall be paid in cash. No grantee may tender shares of Common Stock having a Fair Market Value exceeding the aggregate Exercise Price payable with respect to the Option being exercised (plus any applicable taxes).

 

(e)                                  Non-Transferability of Options. Except as otherwise provided by the Administrator or in the Award Agreement, Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution.

 

(f)                                   Termination of Employment or Service. The rights of Participants granted Options upon termination of employment or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary for any reason prior to the exercise of such Options shall be set forth in the Award Agreement governing such Options.

 

(g)                                  Annual Limit on Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date the Incentive Stock Option is granted) of Shares with respect to which Incentive Stock Options granted to a Participant under this Plan and all other option plans of the Company or of any Parent or Subsidiary become exercisable for the first time by the Participant during any calendar year exceeds $100,000 (as determined in accordance with Section 422(d) of the Code), the portion of such Incentive Stock Options in excess of $100,000 shall be treated as Nonqualified Stock Options.

 

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(h)                                 Rights as Stockholder. An Optionee shall have no rights to dividends or any other rights of a stockholder with respect to the Shares subject to the Option until the Optionee has given written notice of exercise, has paid in full for such Shares, has satisfied the requirements of Section 10(d) hereof and, if requested, has given the representation described in Section 10(b) hereof.

 

(i)                                     Annual Limitation.  No Eligible Recipient will be granted Options for more than 250,000 shares of Common Stock during any single calendar year.

 

(j)                                    No Repricing.  Other than with respect to an adjustment described in Section 4, in no event shall the Exercise Price of an Option be reduced following the grant of an Option, nor shall an Option be cancelled in exchange for a replacement Option with a lower exercise price or in exchange for another type of Award or cash payment without approval of the Company’s stockholders.

 

Section 7.                                          Restricted Stock.

 

Awards of Restricted Stock may be issued either alone or in addition to Options granted under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, awards of Restricted Stock shall be made; the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock; and the Restricted Period (as defined in Section 7(b)), if any, applicable to awards of Restricted Stock. The Administrator may also condition the grant of the award of Restricted Stock upon the exercise of Options or upon such other criteria as the Administrator may determine, in its sole discretion. The provisions of the awards of Restricted Stock need not be the same with respect to each Participant.

 

(a)                                 Awards and Certificates. The prospective recipient of awards of Restricted Stock shall not have any rights with respect to any such Award, unless and until such recipient has executed an Award Agreement evidencing the Award (a “Restricted Stock Award Agreement”) and delivered a fully executed copy thereof to the Company, within a period of sixty days (or such other period as the Administrator may specify) after the award date. Except as otherwise provided below in Section 7(b), each Participant who is granted an award of Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, which certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to any such Award.

 

The Company may require that the stock certificates evidencing Restricted Stock granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Shares covered by such Award.

 

(b)                                 Restrictions and Conditions. The awards of Restricted Stock granted pursuant to this Section 7 shall be subject to the following restrictions and conditions:

 

(i)                                     Subject to the provisions of the Plan and the Restricted Stock Award Agreement governing any such Award, during such period, if any, as may be set by the Administrator commencing on the date of grant (the “Restricted Period”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock awarded under the Plan; provided, however, that the Administrator may, in its sole discretion, provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part based on such factors and such circumstances as the Administrator may determine, in its sole discretion.

 

(ii)                                  Except as provided in Section 7(b)(i), the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted Stock during the Restricted Period. Certificates for unrestricted Shares shall be delivered to the Participant promptly after, and only after, the Restricted Period shall expire without forfeiture in respect of such awards of Restricted Stock except as the Administrator, in its sole discretion, shall otherwise determine.

 

(iii)                               The rights of Participants granted awards of Restricted Stock upon termination of employment or service as a director, consultant or advisor to the Company or to any Parent or Subsidiary for any reason during the Restricted Period shall be set forth in the Restricted Stock Award Agreement governing such Awards.

 

Section 8.                                          Amendment and Termination.

 

The Board may amend, alter or discontinue the Plan, but no amendment, alteration, or discontinuation shall be made that would impair the rights of a Participant under any Award theretofore granted without such Participant’s consent. The Board shall

 

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obtain approval of the Company’s stockholders for an amendment to the extent such approval is required in order to comply with applicable law or stock exchange listing requirement.

 

The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 4 of the Plan, no such amendment shall impair the rights of any Participant without his or her consent.

 

Section 9.                                          Unfunded Status of Plan.

 

The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.

 

Section 10.                                   General Provisions.

 

(a)                                 Shares shall not be issued pursuant to any Award granted hereunder unless such Award and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the requirements of any stock exchange upon which the Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

(b)                                 The Administrator may require each person acquiring Shares to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend which the Administrator deems appropriate to reflect any restrictions on transfer.

 

All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and other restrictions as the Administrator may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable Federal or state securities law, and the Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.

 

(c)                                  Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval, if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of the Plan shall not confer upon any Eligible Recipient any right to continued employment or service with the Company or any Parent or Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Parent or Subsidiary to terminate the employment or service of any of its Eligible Recipients at any time.

 

(d)                                 Unless otherwise determined by the Administrator, a Participant may elect to deliver shares of Common Stock (or have the Company withhold shares) to satisfy, in whole or in part, the amount the Company is required to withhold for taxes in connection with the exercise of an Option or the delivery of Restricted Stock upon grant or vesting, as the case may be. Such election must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The fair market value of the Shares to be withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined. In the event a Participant elects to deliver Shares of Common Stock pursuant to this Section 10(d), such delivery must be made subject to the conditions and pursuant to the procedures set forth in Section 6(d) with respect to the delivery of Common Stock in payment of the Exercise Price of Options.

 

(e)                                  No member of the Board or the Administrator, nor any officer or employee of the Company acting on behalf of the Board or the Administrator, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Administrator and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

 

Section 11.                                   Effective Date of Plan.

 

The Plan has been adopted and approved by the Board and shall become effective as of April 3, 2014 (the “Effective Date”), subject to the approval of the stockholders of the Company.

 

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Section 12.                                   Term of Plan.

 

No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.

 

Section 13.                                   Governing Law.

 

This Plan and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York, notwithstanding any New York or other conflict-of-law provisions to the contrary.

 

A - 7Exhibit 10.1

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (the "Agreement") is made as of the 19th day of February, 2014, between PowerSource Solutions, Inc,, a Virginia corporation (PowerSource), and Integral Technologies, Inc., a Nevada corporation ("Integral"), on behalf of itself and its affiliates (Client).

 

WITNESSETH:

 

WHEREAS, PowerSource has significant business and consulting experience and desires to be retained by the Client upon the terms and conditions hereinafter set forth; and

 

WHEREAS, the Client desires to retain PowerSource upon the terms and conditions hereinafter set forth. Client is a development stage company, and engages in the research, development, and commercialization of an electrically conductive resin-based material known as 'ElectriPlast'

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants, agreements and obligations set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

	 	
1.

	
Consulting Services.

 

(a)      Integral requires an experienced public-company chief financial officer("CFO") to work with the executive team and Board of Directors to realize the strategic value of ElectriPlast and the broader Integral potential. Key duties will include collaborating with the existing team to further develop the business plan and financial model to establish strategic fund-raising initiatives. PowerSource will provide advisory and consulting services to management as part of the outsource CFO role, and will actively work with the team to develop and execute strategic initiatives with the CEO and Chairman. In addition, PowerSource will direct the accounting and financial reporting functions of Integral, which will be performed by a combination of internal and external resources.

 

(b)      PowerSource will use W. Bartlett Snell ("Mr. Snell"), CEO of PowerSource, as its resource as the outsource CFO in a less than full-time commitment on the assignment. Integral will commit to provide the necessary accounting resources to supplement the CFO workload, PowerSource may elect to add resources to supplement Mr. Snell in the event of peak workload or absence from office for vacation or other necessary periods of leave.

 

2.    Data Requirements.    PowerSource shall from time to time during the term of this Agreement review Client's existing financial and business plan, marketing and sales strategy, historical financial data, and provide advice as may be necessary. PowerSource will require ready access to Client leadership and other advisors for information and to discuss alternatives. PowerSource will access external databases and may, with the prior consent of Client, retain additional subject matter experts in potential areas including competitive analysis, intellectual property protection, and similar areas.

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Integral-PowerSource Agreement

	 	
3.

	
Term:

 

(a)    The Base Agreement Period will begin on February 2014 and will end on September 30, 2015.

 

(b)   The Base Agreement Period is expected to be extended by both parties and will automatically extend for multiple one-year periods on the anniversary dates of this agreement, unless either party provides notice to terminate with at least six months notice,

 

(c)     In the event Integral elects to terminate this agreement for reasons other than Cause as defined in Section 7, during the Base Period, Integral will be obligated to pay 6 months of base fees. All unvested options will vest for at the effective date of termination, unless this agreement is ended for Cause.

 

	 	
4.

	
Fee:

 

(a)      General. It is understood by both parties that PowerSource is providing a resource to provide executive services at a Base Equivalent Headcount level of twenty- five to fifty percent (25-50%) workload commitment on behalf of the Client, Client may increase this resource Equivalent Headcount level with the mutual commitment of PowerSource and with a corresponding adjustment to the fee structure.

 

(b)      Monthly Cash Fee

 

	 	
(i)

	
Base Cash Fee: PowerSource will establish a base level of support at 25- 50% of Mr. Snell's standard 160 hour month. The Base Fee will be $7,500.

 

	 	
(ii)

	
Fee for work periods in excess of the base support level: PowerSource will invoice Integral for hours worked above the agreed based level of support at an hourly rate of $125 per hour.

 

(c)      Equity

 

Integral will grant Mr. Snell 250,000 stock options that are fully vested on the effective date of the agreement. Integral will also grant Mr. Snell an additional 500i000 stock options on the signing of the agreement, which will vest: (i)upon the achievement of the individual milestones listed in the following section, or (ii)if terminated for any reason other than cause, fifty percent (50%) of the then unvested options will vest. Vesting will occur as individual milestones are achieved, not to exceed the total milestone option grant of 500,000 stock options, except for the additional stock options to be granted in Sections 4.(d)(iv), 4.(d)(v)(1), 4,(d)(v)(2), and 4.(d)(v)(3).AII options will be issued at the closing price of Integral stock on the day of the signing of this agreement. All options will have a term of 3 years.

 

(d)      Milestones

 

It is understood that PowerSource's immediate priority is to assist the company in achieving certain milestones. For each milestone achieved, the company agrees to vest the stock options associated with the milestone achievement.

 

		(i)	Annual Revenue: Once the company has achieved a trailing 12-month revenue of $2M, the company agrees to vest an incremental 100,000 options,

 

		(ii)	EBITDA: Once the company has achieved a trailing 12-month EBITDA of breakeven or greater, the company agrees to vest and incremental 100,000 options.

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Integral-PowerSource Agreement

		(iii)	M&A Acquisition: Once the company has closed an acquisition that results in the Integral or an affiliated entity holding at least 10% of the equity of a third party entity, the company agrees to vest an incremental 100,000 options. In addition, the company agrees to pay an incremental cash milestone fee of $25,000. In the event of more than one acquisition occurring that meets the parameters of this section, the company agrees to vest stock options and make the cash fee payment along the identical terms as described for the first M&A transaction.

 

		(iv)	Strategic Funding: Once the company has completed a fund-raising event that results in at least $25M of new cash entering the company as a result of the funding event, the company agrees to vest 100,000 options. The company agrees to make a new stock option grant of 200,000 vested options at the then effective price at the same time as the vesting occurs for the base 100,000 options in this section.

 

		(v)	Market Capitalization Appreciation:

 

(1)    Once the company has reached an average daily market capitalization value of at least $125M for 180 days, the company agrees to vest 250,000 options. The company agrees to make a new stock option grant of 250,000 options once the $125M market capitalization value milestone is reached.

(2)    Once the company has reached an average daily market capitalization value of at least $500M for 180 days, the company agrees to vest the 250,000 options granted in 4.(d)(v)(1). The company agrees to make a new stock option grant of 250,000 options once the $500M market capitalization value milestone is reached.

(3)    Once the company has reached an average daily market capitalization value of at least $750M for 180 days, the company agrees to vest 250,000 options granted in 4.(d)(v)(2). The company agrees to make a new stock option grant of 250,000 options once the $500M market capitalization value milestone is reached.

 

	 	
5.

	
Payment

 

PowerSource operates on fixed monthly retainers from clients. Payment of all monthly cash retainer fees will be due and payable at the beginning of every month, for that month's prospective consulting activities. PowerSource will provide an invoice for information purposes 10 days prior to the beginning of the next consulting period. The first retainer fee payment will be due on or before March 1, 2014 and will not require an invoice. All travel and out-of-pocket expenditures by PowerSource on Integral's behalf will be due and payable 10 business days after the date of invoice.

 

	 	
6.

	
Travel & Out-of-pocket

 

Integral agrees to pay all reasonable and customary travel and out-of-pocket expenses PowerSource incurs on Integral's behalf. PowerSource must receive prior approval from Integral prior to any travel, and will provide Integral the opportunity for prior review and approval of all out-of-pocket expenses greater than $25.

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Integral-PowerSource Agreement

	 	
7.

	
Termination of Agreement

 

(a)    Events of Termination. This Agreement may be terminated as follows:

 

	 	
(i)

	
death of the CFO;

 

	 	
(ii)

	
Disability of the CFOFor purposes of this Agreement, the CFO shall be deemed to have a "Disability" when: (a) the CFO has been unable, by reason of illness or injury, to perform his normal duties on behalf of Integral on a full time basis for a period of 120 days, whether or not consecutive, within the preceding 360-day period; or (b) upon the receipt by the CFO of disability benefits for permanent and total disability under any long-term disability income policy held by or on behalf of the CFO.

 

	 	
(iii)

	
fraud, dishonesty, willful misconduct or gross negligence of the CFO;

 

	 	
(iv)

	
willful breach of this Agreement by the CFO or any breach of Section 8 of this Agreement;

 

	 	
(v)

	
willful damage by the CFO of Integral's property, business, reputation or goodwill;

 

	 	
(vi)

	
if the CFO willfully causes physical injury to any independent contractor, or agent of Integral;

 

	 	
(vii)

	
the conviction of the CFO of, or the entry of a plea of guilty or nolo contendere by the CFO to any felony, or to any misdemeanor involving dishonesty;

 

	 	
(viii)

	
if the CFO sexually harasses any CFO, contractor of Integral or other parties or commits any act which otherwise creates an offensive work environment for CFOs, contractors of Integral or other parties;

 

	 	
(ix)

	
if the CFO solicits business on behalf of a competitor or potential competitor who competes in Integral's market;

 

	 	
(x)

	
if a guardian or conservator is appointed for the CFO by a court of competent jurisdiction; or

 

	 	
(xi)

	
if the CFO uses or is under the influence of any mood altering or controlled substances during work hours, except as prescribed by a physician.

 

a)    In the event the CFO is terminated for "Cause," Integral shall pay the CFO his Cash Fee and any earned Milestone payments up to the effective date of such termination. For purposes of this Section 7.a, termination for "Cause" shall include termination for the reasons enumerated in Sections 7.a(iii), 7.a(iv), 7.a(v), 7.a(vi), 7.a(vii), 7.a(viii), 7.a(ix), 7.a(xi). Termination for Cause shall be effective immediately.

 

b)    In the event the CFO is terminated pursuant to Sections 7.a(i), 7.a(ii) or 7.a(x), Integral shall pay the CFO severance cash fees in the amount of six (6) months Base Cash Fee continuation upon the effective date of the termination. The CFO shall be entitled to the payment of a pro rata portion of the CFO's Milestone Payments, if any, already accrued as of the date of termination for the year in which the CFO is terminated.

 

c)    Following the Base Agreement Period defined in Section 3.a, any other provision of this Agreement notwithstanding, Integral shall have the right to terminate the CFO's employment without Cause upon thirty (30) days written notice to the CFO pursuant to

4

Integral-PowerSource Agreement

Section 3. Upon termination of this Agreement without Cause pursuant to Section 3, the CFO will be entitled to the following payments for a period of three (3) months from the cessation of the CFO's engagement: (i) continuing payment of the CFO's Base Cash Fee and continuing payment of the CFO's Milestone Payments if earned, calculated and paid monthly. These payments will be made to the CFO pursuant to the Company's normal business expense reimbursement practices. The payment of the benefits of this Section shall be contingent upon the CFO executing a general release of claims against the Company in a form acceptable to the Company and the CFO's continued compliance with his obligations under the CFO Proprietary Information Agreement.

 

	 	
B.

	
Integral Matters: Restrictive Covenants.

 

(a)    Proprietary Information and Inventions. Concurrently with or prior to the execution of this Agreement, PowerSource shall have signed a copy of the Integral's Confidentiality Agreement. Integral agrees to provide PowerSource with confidential information, as defined in the Confidentiality Agreement, subsequent to execution of the Confidentiality Agreement.

 

(b)    Return of Integral Property. PowerSource agrees that, at the time of leaving the engagement by Integral, PowerSource will deliver to Integral (and will not keep in PowerSource's possession, recreate or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence (including emails), specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items developed by PowerSource pursuant to PowerSource's engagement with Integral or otherwise belonging to Integral, its successors or assigns. PowerSource will retain all work papers created by PowerSource on behalf of its work for Integral.

 

	 	
9.

	
Indemnity

 

(a)      Integral agrees to indemnify PowerSource for any and all services performed directly or indirectly by PowerSource for Integral.

 

(b)      In the event PowerSource is included in any litigation jointly or in part by Integral with any third party for which Integral personnel provided services, Integral agrees to reimburse PowerSource for all actual legal expenses and payments by PowerSource. PowerSource will have the option of selecting its own counsel in such proceedings, and Integral agrees to directly pay in a prompt and timely manner all PowerSource expenses to PowerSource's counsel.

 

	 	
10.

	
Miscellaneous.

 

Independent Contractor. Integral is retaining PowerSource as an independent contractor

 

11.    Entire Agreement: Binding Effect. This Agreement and the Confidentiality Agreement set forth the entire understanding between the parties as to the subject matter of this Agreement and supersede all prior agreements, commitments, representations, writings and discussions between them regarding the subject matter of this Agreement; and neither of the parties shall be bound by any obligations, conditions, warranties or representations with respect to the subject matter of this Agreement or the Confidentiality Agreement, except as expressly provided herein or therein or as duly set forth on or subsequent to the date hereof in a written instrument signed by the proper and fully authorized representative of the party to be bound hereby. This Agreement is binding on PowerSource and on Integral and their successors and assigns (whether by assignment, by operation of law or otherwise); provided that neither this Agreement nor any rights or obligations hereunder may be assigned by PowerSource or Integral without the prior written consent of the other party (except that Integral shall be entitled to assign this Agreement to a successor entity and/or in connection with the sale of all or substantially all of Integral's assets, or a merger or consolidation in which the Integral is not the surviving entity). Except as specifically contemplated by and modified in this Agreement, the terms and conditions of all outstanding equity award agreements shall continue to govern such agreements.

5

Integral-PowerSource Agreement

 

12.    Absence of Conflict. PowerSource represents and warrants that PowerSource's engagement by Integral as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship.

 

	 	
13.

	
ARBITRATION.

 

(a)          General. Any controversy or claim arising out of or relating to this Agreement or breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and the judgment upon the award rendered by the arbitration(s) may be entered in any court having jurisdiction thereof.

 

(b)       Procedure. Any arbitration will be administered by JAMS and a neutral arbitrator will be selected in a manner consistent with its Employment Arbitration Rules and Procedures. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The arbitrator shall issue a written decision including findings of fact and conclusions of law on the merits of its award. The arbitrator shall have the power to award any remedies, including attorneys' fees and costs, available under applicable law. To the extent permitted by law, Integral and PowerSource shall each pay one-half of the costs and expenses of such arbitration, with each party paying separately their respective counsel fees and expenses. The arbitrator shall administer and conduct any arbitration in a manner consistent with Employment Arbitration Rules and Procedures of JAMS.

 

(c)         Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute (with the sole exception of those disputes that may arise from the Confidentiality Agreement, which shall be resolved in accordance with the dispute resolution procedures set forth therein) between PowerSource and Integral, Accordingly, except as otherwise provided herein, neither PowerSource nor Integral will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Integral policy, and the arbitrator shall not order or require Integral to adopt a policy not otherwise required by law, which Integral has not adopted.

 

(d)     Availability of Equitable Relief. Any party may also petition the court for injunctive or other equitable relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement, In the event that either party seeks such relief, no bond shall be required and the prevailing party shall be entitled to recover reasonable costs and attorneys1 fees. Any such relief will be filed in any state or federal court serving Fairfax County, Virginia.

6

Integral-PowerSource Agreement

14.    Waivers.  No party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the party to be charged with such waiver. The failure of any party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.

 

15.    Reformation. If any sentence, paragraph or clause of this Agreement, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation. Notwithstanding, the remainder of the Agreement shall remain binding upon the parties,

 

16.     Notices.  All notices, approvals, consents, requests or demands required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier of: (i) actual receipt; (ii) three (3) business days after being deposited in U.S. mail, registered or certified, postage prepaid; (iii) upon delivery, if delivered by hand; (iv) one (1) business day after transmission, if sent by facsimile (confirmation received); or (v) one (1) business day after the business day of deposit with a reputable overnight courier for next business day delivery, freight prepaid. Notice in each case shall be addressed to the party entitled to receive such notice at the following address (or other such addresses as the parties may subsequently designate):

 

		
If to Integral:

	
Integral Technologies, Inc.

805 W. Orchard Dr. Suite 7

Bellingham WA 98225

		
 

	
 

		
If to PowerSource:

	
PowerSource Solutions, Inc. 

PO Box1271 McLean, 

Virginia 22101

                                 

17.     Non-Disparagement. PowerSource and Integral agree to, during PowerSource's engagement with Integral and indefinitely thereafter, refrain from any defamation, libel or slander of PowerSource or Integral or its products, services, officers, directors, CFOs, agents, investors, stockholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations.

 

18.    Governing Law; Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the employment laws and the other laws of the Commonwealth of Virginia as they apply to contracts entered into and wholly to be performed therein by residents thereof.

 

19.    Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision.

 

20.     Effect of Headings. The section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.

7

Integral-PowerSource Agreement

21.     Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.

 

22.     Amendment and Waivers. Any term or provision of this Agreement may be amended or otherwise modified only by a writing signed by each party hereto. The waiver by a party of any breach hereof or default hereunder shall not be deemed to constitute a waiver of any other breach or default. The failure of any party to enforce any provision hereof shall not be construed as or constitute a waiver of the right of such party thereafter to enforce such provision.

 

23.     Construction of Agreement. This Agreement has been negotiated by the respective parties, and the language shall not be construed for or against either party.

 

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

 

PowerSource Solutions, Inc.

 

	By:	
/s/ W. Bartlett Snell

	
 

	Name:	
W. Bartlett Snell

	
 

	Title:	
 CEO

	
 

 

Integral, Inc.:

 

	By:	
/s/ Douglas Bathauer

	
 

	Name:	
Douglas Bathauer

	
 

	Title:	
CEO

	
 

 

 

8

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