Document:

Exhibit 10.1

 

EXECUTIVE
EMPLOYMENT AGREEMENT MARK SCIALDONE

 

THIS
EMPLOYMENT AGREEMENT, dated May 1, 2015 (the "Agreement"), is between VAPE HOLDINGS, INC., a Delaware corporation
(the "Company"), and Dr. Mark Scialdone ("Executive"), an individual. Company and Executive may be referred
to herein individually as a "Party" or collectively as the "Parties."

 

RECITALS

 

WHEREAS,
Executive is currently the chief executive officer of BetterChem Consulting, L.L.C., a Pennsylvania limited liability company
("BetterChem"); and

 

WHEREAS,
Company and Executive mutually desire to enter into an employment relationship whereby Executive shall provide services to the
Company in the position of Chief Science Officer;

 

NOW,
THEREFORE, in consideration of the mutual promises herein contained, the parties hereto hereby agree as follows:

 

AGREEMENT

 

1.         POSITION
AND RESPONSIBILITIES

 

a.                 
Position. Pursuant to this
Agreement, Executive shall render services to the Company as its Chief Science Officer. Executive shall report to the Chief Executive
Officer ("CEO") and will have such duties, powers, and responsibilities customary for the chief science officer of a
corporation of the size, type, and nature of the Company. Executive shall apply his best efforts, skill, knowledge, and attention
to the business of the Company in the performance of his duties to the Company. Unless otherwise agreed, Executive shall be offered
the position of a Director on the Board of Directors of the Company, which position shall require the formal approval of the Board
of the Company. Executive shall in addition be appointed to the position of Co-Chairman of the Advisory Board of the Company.

 

b.                 
Other Activities. Except upon
the prior written consent of the Company, which may be granted or withheld in the Company's sole discretion, Executive will not,
while employed by the Company, (i) engage, directly or indirectly, in any other business activity (whether or not pursued for
pecuniary advantage) that might create a conflict of interest with the Company; (ii) engage, directly or indirectly, in any other
business activity or revenue stream (whether or not pursued for pecuniary advantage) presented to or identified by Executive in
the same or similar businesses to those of the Company or related to or arising from the operations of the Company. The Company
and Executive agree that services rendered by Executive by and through BetterChem, and that are approved by Company in writing,
are exempt from the requirements of this paragraph.

 

    	-1-

    	 

    

 

c.                  
No Conflict. Executive represents
and warrants that Executive's execution of this Agreement, Executive's employment with the Company, and the performance of Executive's
proposed duties under this Agreement, does not and will not violate any obligations the Executive may have to any other employer,
person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.

 

d.                 
Location of Services. Company
acknowledges that Executive maintains a primary residence in Pennsylvania. Nothing in this Agreement shall be construed as requiring
Executive to relocate his primary residence as a condition of commencing or continuing employment under this Agreement. Company
acknowledges and agrees that Executive may perform some of Executive's duties hereunder remotely, so long as it does not interfere
materially with the performance of Executive's duties. Notwithstanding the foregoing, Employee acknowledges and agrees that Employee
frequently will be required to travel to the Company's offices and to other locations as requested by the Company's Chief Executive
Officer from time to time, at the Company's sole expense. The Parties agree to revisit the amount of time Executive works remotely
and adjust it as necessary in accordance with the needs of the Company.

 

2.         COMPENSATION
AND BENEFITS

 

a.                 
Base Salary.In consideration
of the services to be rendered under this Agreement, the Company shall pay Executive an annual salary at the rate of $102,000
per annum, less all applicable wage deductions ("Base Salary"). The Base Salary shall be paid in accordance with the
Company's regularly established payroll practice. To the extent Executive and the Company agree by mutual written agreement which
specifically refers to this Section 2(a) to defer any Base Salary earned within a taxable year, this deferred compensation shall
paid to Executive within two and a half months of the end of the Company's tax year in which the compensation is earned. The Base
Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries
for similarly situated Executives and may be adjusted in the sole discretion of the Company.

 

b.                 
Bonus. Executive shall receive
bonus compensation associated with revenue generated from consulting services revenues generated by BetterChem over the term of
this Agreement such bonus compensation to be calculated in accordance with Schedule A hereto. Executive may be eligible to receive
a discretionary annual bonus compensation based upon the Board's evaluation of the performance of Executive, the Company's operating
results and such other criteria as may be determined by the Board to be relevant. Executive must be employed on the date such
discretionary bonus, if any, is paid in order to be eligible for same.

 

c.                  
Stock Options. Subject to the
approval of the Company's Board of Directors, the Company may grant options to purchase shares of common stock of the Company
to Executive (OTCQB:VAPE) pursuant to an approved stock option plan (the "Stock Options"). The Stock Options will vest
as determined by the Board of Directors in its sole discretion. The exercise price per share will be equal to the fair market
value per share on the date the Stock Option is granted.

 

    	-2-

    	 

    

 

d.               
Royalty Sharing. Company agrees
that in the event that revenue is realized by the Company or one of the Company's wholly owned or partially owned subsidiaries
("VAPE Affiliates"), as applicable, from the exploitation of intellectual property that is developed with Executive
as the inventor or co-inventor, then the Company will pay Executive as follows:

 

i.         For
licenses to parties other than the Company or VAPE Affiliates, fifteen percent (15%) of Net Royalties received by the Company
and/or applicable VAPE Affiliate on all such licenses and extensions thereof in perpetuity;

 

ii.        For
licenses to or other exploitation by the Company or a VAPE Affiliate, 5% of Net Profit received by the Company or applicable VAPE
Affiliate from the sales of products incorporating the intellectual property in perpetuity.

 

iii.        For
purposes this of Subsection 2(d):

 

(1)              
"Net Royalties" shall be calculated by determining gross royalties received and subtracting any unrecouped out-of-pocket
costs incurred by the Company and/or applicable VAPE Affiliate for filing, prosecution, licensing and patent defense directly
related to the specific rights that are licensed.

 

(2)              
"Net Profit" shall be calculated by determining the net profit received by the Company or applicable VAPE Affiliate
from the sales of the product incorporating the invention starting with the gross revenue from sales and subtracting the costs
incurred by the Company, and any returns, sales allowances and sales discounts.

 

iv.       With
respect to intellectual property in which Executive is a co-inventor but not the sole inventor, Executive's share of Net Royalties
or Net Profit, as applicable, will be will be prorated in accordance with Executive's percentage contribution to the subject invention
("Co-Inventor Percentage"). Company and Executive agree to negotiate Executive's Co-Inventor Percentage for each such
invention, on a case-by-ease basis, upon first issuance of a patent covering the invention.

 

e.                  
Benefits. Executive shall be
eligible to participate in the benefits made generally available by the Company to similarly situated employees, if any, in accordance
with the benefit plans established by the Company and subject to the terms, conditions, limitations and exclusions of the applicable
plans, and as may be amended from time to time in the Company's sole discretion. The foregoing shall not, in any way, require
the Company to establish any such benefits or continue to maintain any such benefits.

 

f.                   
Expenses. Upon presentation
of verifiable invoices and other documentation as may be requested by the Company, the Company shall reimburse Executive for reasonable
business expenses incurred in the performance of Executive's duties hereunder in accordance with the Company's expense reimbursement
guidelines. The Parties have expressly agreed that necessary and reasonable legal fees and costs incurred by Executive in connection
with this Agreement not to exceed $3,000.00.

 

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3.         TERM
OF EMPLOYMENT

 

a.         Employment
Term. The employment of Executive shall be for a period of two (2) years and may be terminated at any time for any reason
or no reason by the Company or Executive upon thirty (30) days' written notice. Either Party hereto shall have the right to terminate
this Agreement without notice in the event of the death, bankruptcy, insolvency, or assignment for the benefit of creditors of
the other Party.

 

b.         Severance.
Except in situations where the employment of Executive is terminated For Cause, By Death or By Disability (as defined in Section
4 below), in the event that the Company terminates the employment of Executive at any time, Executive will be eligible to receive
an amount equal to the then-current Base Salary of the Executive payable in the form of salary continuation for a six month period
following termination. Executive shall not be entitled to any severance payments if Executive's employment is terminated For Cause,
By Death or By Disability (as defined in Section 4 below) or if Executive's employment is terminated by Executive (in accordance
with Section 5 below).

 

4.         TERMINATION

 

a.         Termination
Without Cause. Either Party may terminate this Agreement at any time for any reason or no reason, upon thirty (30) days
advance written notice. During such notice period Executive shall continue to diligently perform all of Executive's duties hereunder.
The Company shall have the option, in its sole discretion, to make Executive's termination effective at any time prior to the
end of such notice period as long as the Company pays Executive all compensation to which Executive is entitled up through the
last day of the thirty-day notice period. Thereafter all obligations of the Company to the Executive shall cease.

 

b.         Termination
by Company on Account of Cause. Notwithstanding anything in this Agreement to contrary, if Executive's employment is terminated
by the Company on account of Cause (as defined below), Executive shall not receive any benefits or compensation following the
date of termination except for accrued but unpaid salary, which shall be paid to Executive. "Cause" means (i) an intentional
tort (excluding any tort relating to a motor vehicle) which causes substantial loss, damage, or injury to the property or reputation
of the Company or its subsidiaries; (ii) any serious crime or intentional, material act of fraud or dishonesty against the Company,
(iii) the commission of a felony that results in other than immaterial harm to the Company's business or the reputation of the
Company or Executive, (iv) habitual neglect of Executive's reasonable duties (for reason other than illness or incapacity) which
is not cured within thirty (30) days after written notice thereof by the CEO to Executive, (v) the disregard of written, material
policies of the Company which causes other than immaterial loss, damage, or injury to the property or reputation of the Company
which is not cured within ten days after written notice thereof by the Board to Executive, and (vi) any material breach of Executive's
ongoing obligation not to disclose confidential information.

 

c.         Termination
By Death. Executive's employment shall terminate automatically upon the Executive's death. The Company shall pay to Executive's
beneficiaries or estate, as appropriate, any compensation then due and owing up through the date of Executive's death. Thereafter
all obligations of the Company under this Agreement shall cease. Nothing in this Section 4(c) shall affect any entitlement of
Executive's heirs or devisees to the benefits of any life insurance plan or other applicable benefits.

 

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d.               
Termination By Disability. If
Executive becomes eligible for the Company's long term disability benefits or if, in the sole opinion of the Company, Executive
is unable to carry out the responsibilities and functions of the position held by Executive by reason of any physical or mental
impairment for more than ninety consecutive days or more than one hundred and twenty days in any twelve-month period, then, to
the extent permitted by law, the Company may terminate Executive's employment. The Company shall pay to Executive all compensation
to which Executive is entitled up through the date of termination, and thereafter all obligations of the Company under this Agreement
shall cease. Nothing in this Section 4(d) shall affect Executive's rights under any disability plan in which Executive is a participant.

 

5.         TERMINATION
OBLIGATIONS

 

a.                 
Return of Property. Executive
agrees that all property (including without limitation all electronic devices, equipment, tangible proprietary information, documents,
records, notes, contracts and computer-generated materials) which was furnished, created, or prepared incidentally to Executive's
employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive's employment.

 

b.                 
Resignation and Cooperation.
Upon termination of Executive's employment, Executive shall be deemed to have resigned from all officer and management positions
then held with the Company. Following any termination of employment and prior to the last day of Executive's employment, Executive
shall reasonably cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer
of work to other employees. Executive shall also cooperate with the Company in the defense of any action brought by any third
party against the Company that relates to Executive's employment by the Company at the Company's sole cost and expense. Finally,
because Executive is expressly expected during the scope of employment to contribute to and develop intellectual property that
is owned and/or managed by the Company, Executive warrants and agrees that he will provide prompt and reasonable cooperation to
Company during and following his employment with Company on the administrative and legal prosecution and defense of intellectual
property of Company in which Executive has participated directly or indirectly during his employment with Company.

 

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6.         CONFIDENTIAL
INFORMATION

 

a.         Obligation
to Maintain Confidentiality. Executive acknowledges that the continued success of the Company depends upon the use and
protection of a large body of confidential and proprietary information. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement as "Confidential Information".
Confidential Information will be interpreted as broadly as possible to include all information of any sort (whether merely remembered
or embodied in a tangible or intangible form) that is (i) related to the Company's prior, current or potential business and (ii)
is not generally or publicly known. Confidential Information includes, without specific limitation, the information, observations
and data obtained by Executive during the course of the Employment Term and his performance under this Agreement concerning the
business and affairs of the Company, information concerning acquisition opportunities in or reasonably related to the Company's
business or industry of which Executive is aware or becomes aware during the Employment Term, the persons or entities that are
current, former or prospective suppliers or customers of any one or more of them during the course of Executive's performance
under this Agreement, as well as development, transition and transformation plans, methodologies and methods of doing business,
strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans,
Executive lists and telephone numbers, new and existing programs and services, prices and terms, customer service, integration
processes, requirements and costs of providing service, support and equipment. Therefore, Executive agrees that he shall not disclose
to any unauthorized person or use for his own account any of such Confidential Information without the Company's prior written
consent, unless and to the extent that any Confidential Information: (i) becomes generally known to and available for use by the
public other than as a result of Executive's acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable
law or court order. Executive agrees to deliver to the Company at the end of the Employment Term, or at any other time the Company
may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the
business of the Company (including, without limitation, all Confidential Information) that he may then possess or have under his
control.

 

b.         Ownership
of Intellectual Property. Executive agrees to make prompt and full disclosure to the Company of all ideas, discoveries,
trade secrets, inventions, innovations, improvements, developments, methods of doing business, processes, programs, designs, analyses,
drawings, reports, data, software, firmware, logos and all similar or related information (whether or not patentable and whether
or not reduced to practice) that relate to the Company's actual or anticipated business, research and development, or existing
or future products or services and that are conceived, developed, acquired, contributed to, made, or reduced to practice by Executive
(either solely or jointly with others) while employed by the Company (collectively, "Work Product"). Any copyrightable
work falling within the definition of Work Product shall be deemed a "work made for hire" under the copyright laws of
the United States, and ownership of all rights therein shall vest in the Company. To the extent that any Work Product is not deemed
to be a "work made for hire", Executive hereby assigns and agrees to assign to the Company all right, title and interest,
including without limitation, the intellectual property rights that Executive may have in and to such Work Product. Executive
shall promptly perform all actions reasonably requested by the CEO or his designee (whether during or after the Employment Term)
to establish and confirm the Company's ownership (including, without limitation, providing testimony and executing assignments,
consents, powers of attorney, and other instruments).

 

c.         Third
Party Information. Executive understands that the Company will receive from third parties confidential or proprietary
information ("Third Party Information") subject to a duty on the Company's part to maintain the confidentiality
of such information and to use it only for certain limited purposes. During the Employment Term and thereafter, and without in
any way limiting the provisions of Section 6, Executive will hold Third Party Information in the strictest confidence and will
not disclose to anyone (other than personnel of the Company who need to know such information in connection with their work for
the Company) or use, except in connection with his work for the Company, Third Party Information unless expressly authorized in
writing by the Manager.

 

    	-6-

    	 

    

 

d.         Use
of Information of Prior Employers. Executive represents and warrants and covenants that Executive shall not disclose to
the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others at any time, including
but not limited to any proprietary information or trade secrets of any former employer, if any; and Executive acknowledges and
agrees that any violation of this provision shall be grounds for Executive's immediate termination and could subject Executive
to substantial civil liabilities and criminal penalties. Executive further specifically and expressly acknowledges that no officer
or other Executive or representative of the Company has requested or instructed Executive to disclose or use any such third party
proprietary information or trade secrets.

 

7.         AMENDMENTS;
WAIVERS; REMEDIES

 

This
Agreement may not be amended or waived except by a writing signed by Executive and by a duly authorized representative of the
Company other than Executive. Failure to exercise any right under this Agreement shall not constitute a waiver of such right.
Any waiver of any breach of this Agreement shall not operate as a waiver of any subsequent breaches. All rights or remedies specified
for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable
law.

 

8.         ASSIGNMENT;
BINDING EFFECT

 

a.                 
Assignment. The performance
of Executive is personal hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or
purport to assign any rights or obligations under this Agreement. This Agreement may be assigned or transferred by the Company;
and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially
all of its assets.

 

b.                 
Binding Effect. Subject to
the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be binding upon each of
the parties; the affiliates, officers, managers, agents, successors and assigns of the Company; and the heirs, devisees, spouses,
legal representatives and successors of Executive.

 

9.         NOTICES

 

All
notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly
given if delivered: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by United States first class
registered or certified mail, return receipt requested, to the principal address of the other party. The date of notice shall
be deemed to be the earlier of: (i) actual receipt of notice by any permitted means, or (ii) five business days following dispatch
by overnight delivery service or the United States Mail. Executive shall be obligated to notify the Company in writing of any
change in Executive's address.

 

    	-7-

    	 

    

 

10.       SEVERABILITY

 

If
any provision of this Agreement shall be held by a court or arbitrator to be invalid, unenforceable, or void, such provision shall
be enforced to the fullest extent permitted by law, and the remainder of this Agreement shall remain in full force and effect.
In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to
exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or arbitrator shall reduce
the time period or scope to the maximum time period or scope permitted by law.

 

11.     TAXES

 

All
amounts paid under this Agreement (including without limitation Base Salary) shall be paid less all applicable state and federal
tax withholdings and any other withholdings required by any applicable jurisdiction.

 

12.        
GOVERNING LAW; DISPUTE RESOLUTION

 

The
parties agree that any dispute, controversy or claim between Executive and the Company based on, arising out of or relating to
Executive's employment under this Agreement or the termination of same, including, without limitation, any and all claims under
Title VII of the Civil Rights Acts of 1964 as amended, the Civil Rights Act of 1870, the Americans with Disabilities Act of 1990
as amended, the Americans with Disabilities Act Amendments Act of 2008, the Age Discrimination in Employment Act as amended, the
Older Workers Benefit Protection Act, the Fair Labor Standards Act of 1938 as amended by the Equal Pay Act of 1963, the Lilly
Ledbetter Fair Pay Act of 2009, the Family and Medical Leave Act, the Executive Retirement Income Security Act of 1974, the Civil
Rights Act of 1991, the Genetic Information Nondiscrimination Act of 2008, the Consolidated Omnibus Budget Reconciliation Act,
the U.S. Patriot Act, the Sarbanes-Oxley Act of 2002, the Dodd—Frank Wall Street Reform and Consumer Protection Act, and
any other federal, state or local civil rights, disability, discrimination, retaliation or labor law, or any theory of contract,
criminal, arbitral or tort law, shall be settled by final and binding arbitration in Los Angeles County, California, administered
by the American Arbitration Association ("AAA") pursuant to the National Rules for the Resolution of Employment Disputes
of the AAA ("Rules of the AAA"). This Agreement shall be construed in accordance with the laws of the State of California
without reference to the conflict of laws provisions thereof, and judgment upon any resulting arbitration award may be entered
in any court of competent jurisdiction.

 

13.        
INTERPRETATION

 

This
Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. Sections and
section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or
interpretation of this Agreement. Whenever the context requires, references to the singular shall include the plural and the plural
the singular and references to the masculine pronoun shall include the feminine and the neuter, and the singular shall include
the plural. This Agreement and the provisions contained herein shall not be construed or interpreted for or against any party
hereto because that party drafted or caused that party's legal representative to draft any of its proVisions.

 

    	-8-

    	 

    

 

14.        
OBLIGATIONS SURVIVE TERMINATION OF EMPLOYMENT

 

Executive
agrees that any and all of Executive's obligations under this Agreement (other than Section 1) shall survive the termination of
employment and the termination of this Agreement in accordance with their terms. Company agrees that all of Company's obligations
under Paragraph 2(d) shall survive the termination of employment and the termination of this Agreement in accordance with their
terms.

 

15.        
COUNTERPARTS

 

This
Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all
of which together shall constitute one and the same instrument.

 

16.        
AUTHORITY

 

Each
party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and
to perform and discharge all of its obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement
and obligation of such party and is enforceable in accordance with its terms.

 

17.        
ENTIRE AGREEMENT

 

This
Agreement constitutes the entire agreement of the Company and Executive relating to the subject matter hereof and supersedes all
prior oral and written understandings and agreements relating to such subject matter. To the extent that the practices, policies
or procedures of the Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement,
the provisions of this Agreement shall control.

 

18.        
PRESS RELEASES

 

The
Parties shall jointly agree on the language of any press releases or other public announcements concerning Company's employment
of Executive and/or the Proposed Transaction.

 

    	-9-

    	 

    

 

19.        EXECUTIVE
ACKNOWLEDGEMENT

 

EXECUTIVE
ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND
UNDERSTANDS THE AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE HAS ENTERED INTO IT FREELY BASED
ON EXECUTIVE'S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

 

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

 

	VAPE HOLDINGS, INC.:	 	EXECUTIVE:
	 	 	 
	By:	/s/ Kyle Tracey	 	/s/ Mark Scialdone
	 	Kyle Tracey	 	Mark Scialdone, an individual
	 	its Chief Executive Officer	 	 

 

    	-10-

    	 

    

 

SCHEDULE
A: Performance Based Non Discretionary Bonus Compensation

 

Gross
Consulting Revenue* Earned:         Industry Related

 

Year
1 (from May 1, 2015 through April 30, 2016)

 

	Up to $200,000 gross revenue	2,5%
	From $200,000—$400,000 gross revenue	5.0%
	From $400,000—$600,000 gross revenue	7.5%
	Above $600,000 gross revenue	10.0%
	 	 
	Year 2 (from May 1, 2016 through April 30, 2017)	 
	 	 
	Up to $200,000 gross revenue	2.5%
	From $200,000—$400,000 gross revenue	5.0%
	From $400,000—$600,000 gross revenue	7.5%
	Above $600,000 gross revenue	10.0%
	 	 
	Gross Revenue Earned Non Industry
    Related (including Legacy Business Relationships)
	 	 
	50/50 share (payable monthly
    based on actual net revenue collections.

 

 

 

*Gross
Consulting Revenue is defined herein to exclude specific reimbursable vendor costs, travel expenses including airfare.

 

 

-11-Exhibit 10.1

 

CONTRAVIR PHARMACEUTICALS, INC.

 

2013 EQUITY INCENTIVE PLAN

 

1.                                      Purpose of the Plan.

 

This 2013 Equity Incentive Plan (the “Plan”) is intended as an incentive, to retain in the employ of and as directors, officers, consultants, advisors and employees to ContraVir Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and any Subsidiary of the Company, within the meaning of Section 424(f) of the United States Internal Revenue Code of 1986, as amended (the “Code”), persons of training, experience and ability, to attract new directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage the sense of proprietorship and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries.

 

It is further intended that certain options granted pursuant to the Plan shall constitute incentive stock options within the meaning of Section 422 of the Code (the “Incentive Options”) while certain other options granted pursuant to the Plan shall be nonqualified stock options (the “Nonqualified Options”).  Incentive Options and Nonqualified Options are hereinafter referred to collectively as “Options.”

 

The Company intends that the Plan meet the requirements of Rule 16b-3 (“Rule 16b-3”) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that transactions of the type specified in subparagraphs (c) to (f) inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the Plan will be exempt from the operation of Section 16(b) of the Exchange Act.  Further, the Plan is intended to satisfy the performance-based compensation exception to the limitation on the Company’s tax deductions imposed by Section 162(m) of the Code with respect to those Options for which qualification for such exception is intended.  In all cases, the terms, provisions, conditions and limitations of the Plan shall be construed and interpreted consistent with the Company’s intent as stated in this Section 1.

 

2.                                      Administration of the Plan.

 

The Board of Directors of the Company (the “Board”) shall appoint and maintain as administrator of the Plan a Committee (the “Committee”) consisting of two or more directors who are (i) “Independent Directors” (as such term is defined under the rules of the NASDAQ Stock Market), (ii) “Non-Employee Directors” (as such term is defined in Rule 16b-3) and (iii) “Outside Directors” (as such term is defined in Section 162(m) of the Code), which shall serve at the pleasure of the Board.  The Committee, subject to Sections 3, 5 and 6 hereof, shall have full power and authority to designate recipients of Options and restricted stock (“Restricted Stock”) and to determine the terms and conditions of the respective Option and Restricted Stock agreements (which need not be identical) and to interpret the provisions and supervise the administration of the Plan.  The Committee shall have the authority, without limitation, to designate which Options granted under the Plan shall be Incentive Options and which shall be Nonqualified Options.  To the extent any Option does not qualify as an Incentive Option, it shall constitute a separate Nonqualified Option.

 

Subject to the provisions of the Plan, the Committee shall interpret the Plan and all Options and Restricted Stock granted under the Plan, shall make such rules as it deems necessary for the proper administration of the Plan, shall make all other determinations necessary or advisable for the administration of the Plan and shall correct any defects or supply any omission or reconcile any inconsistency in the Plan or in any Options or Restricted Stock granted under the Plan in the manner and to the extent that the Committee deems desirable to carry into effect the Plan or any Options or Restricted Stock.  The act or determination of a majority of the Committee shall be the act or determination of the Committee and any decision reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority of the Committee at a meeting duly held for such purpose.  Subject to the provisions of the Plan, any action taken or determination made by the Committee pursuant to this and the other Sections of the Plan shall be conclusive on all parties.

 

In the event that for any reason the Committee is unable to act or if the Committee at the time of any grant, award or other acquisition under the Plan does not consist of two or more Non-Employee Directors, or if there shall be no such Committee, or if the Board otherwise determines to administer the Plan, then the Plan shall be

 

 

administered by the Board, and references herein to the Committee (except in the proviso to this sentence) shall be deemed to be references to the Board, and any such grant, award or other acquisition may be approved or ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3; provided, however, that grants to the Company’s Chief Executive Officer or to any of the Company’s other four most highly compensated officers that are intended to qualify as performance-based compensation under Section 162(m) of the Code may only be granted by the Committee.

 

3.                                      Designation of Optionees and Grantees.

 

The persons eligible for participation in the Plan as recipients of Options (the “Optionees”) or Restricted Stock (the “Grantees” and together with Optionees, the “Participants”) shall include directors, officers and employees of, and consultants and advisors to, the Company or any Subsidiary; provided that Incentive Options may only be granted to employees of the Company and any Subsidiary. In selecting Participants, and in determining the number of shares to be covered by each Option or award of Restricted Stock granted to Participants, the Committee may consider any factors it deems relevant, including, without limitation, the office or position held by the Participant or the Participant’s relationship to the Company, the Participant’s degree of responsibility for and contribution to the growth and success of the Company or any Subsidiary, the Participant’s length of service, promotions and potential. A Participant who has been granted an Option or Restricted Stock hereunder may be granted an additional Option or Options, or Restricted Stock if the Committee shall so determine.

 

4.                                      Stock Reserved for the Plan.

 

Subject to adjustment as provided in Section 8 hereof, a total of 1,500,000 shares of the Company’s common stock, par value $0.0001 per share (the “Stock”), shall be subject to the Plan. The shares of Stock subject to the Plan shall consist of unissued shares, treasury shares or previously issued shares held by any Subsidiary of the Company, and such number of shares of Stock shall be and is hereby reserved for such purpose.  Any of such shares of Stock that may remain unissued and that are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purposes of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan.  Should any Option or award of Restricted Stock expire or be canceled prior to its exercise or vesting in full or should the number of shares of Stock to be delivered upon the exercise or vesting in full of an Option or award of Restricted Stock be reduced for any reason, the shares of Stock theretofore subject to such Option or Restricted Stock may be subject to future Options or Restricted Stock under the Plan, except where such reissuance is inconsistent with the provisions of Section 162(m) of the Code where qualification as performance-based compensation under Section 162(m) of the Code is intended.

 

5.                                      Terms and Conditions of Options.

 

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

 

(a)                                 Option Price.  The purchase price of each share of Stock purchasable under an Incentive Option shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value (as defined below) of such share of Stock on the date the Option is granted; provided, however, that with respect to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, the purchase price per share of Stock shall be at least 110% of the Fair Market Value per share of Stock on the date of grant.  The purchase price of each share of Stock purchasable under a Nonqualified Option shall not be less than 100% of the Fair Market Value of such share of Stock on the date the Option is granted.  The exercise price for each Option shall be subject to adjustment as provided in Section 8 below.  “Fair Market Value” means the closing price on the final trading day immediately prior to the grant date of the Stock on the principal securities exchange on which shares of Stock are listed (if the shares of Stock are so listed), or on the NASDAQ Stock Market or OTC Bulletin Board (if the shares of Stock are regularly quoted on the NASDAQ Stock Market or OTC Bulletin Board, as the case may be), or, if not so listed, the mean between the closing bid and asked prices of publicly traded shares of Stock in the over the counter market, or, if such bid and asked prices shall not be available, as reported by any nationally recognized quotation service selected by the Company, or as determined by the

 

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Committee in a manner consistent with the provisions of the Code.  Anything in this Section 5(a) to the contrary notwithstanding, in no event shall the purchase price of a share of Stock be less than the minimum price permitted under the rules and policies of any national securities exchange on which the shares of Stock are listed.

 

(b)                                 Option Term.  The term of each Option shall be fixed by the Committee, but no Option shall be exercisable more than ten years after the date such Option is granted and in the case of an Incentive Option granted to an Optionee who, at the time such Incentive Option is granted, owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of any Subsidiary, no such Incentive Option shall be exercisable more than five years after the date such Incentive Option is granted.

 

(c)                                  Exercisability.  Subject to Section 5(j) hereof, Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant; provided, however, that in the absence of any Option vesting periods designated by the Committee at the time of grant, Options shall vest and become exercisable as to one-tenth of the total number of shares subject to the Option on each of the three month anniversary of the date of grant; and provided further that no Options shall be exercisable until such time as any vesting limitation required by Section 16 of the Exchange Act, and related rules, shall be satisfied if such limitation shall be required for continued validity of the exemption provided under Rule 16b-3(d)(3).

 

Upon the occurrence of a “Change in Control” (as hereinafter defined), the Committee may accelerate the vesting and exercisability of outstanding Options, in whole or in part, as determined by the Committee in its sole discretion.  In its sole discretion, the Committee may also determine that, upon the occurrence of a Change in Control, each outstanding Option shall terminate within a specified number of days after notice to the Optionee thereunder, and each such Optionee shall receive, with respect to each share of Company Stock subject to such Option, an amount equal to the excess of the Fair Market Value of such shares immediately prior to such Change in Control over the exercise price per share of such Option; such amount shall be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or a combination thereof, as the Committee shall determine in its sole discretion.

 

For purposes of the Plan, unless otherwise defined in an employment agreement between the Company and the relevant Optionee, a Change in Control shall be deemed to have occurred if:

 

(i)                                     a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of the Company, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to the commencement of such offer), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

 

(ii)                                  the Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries, and their affiliates;

 

(iii)                               the Company shall sell substantially all of its assets to another corporation that is not wholly owned by the Company, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by the stockholders of the Company (as of the time immediately prior to such transaction), any employee benefit plan of the Company or its Subsidiaries and their affiliates; or

 

(iv)                              a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Company (as of

 

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the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of the Company or its Subsidiaries, and their affiliates.

 

Notwithstanding the foregoing, if Change of Control is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Change of Control shall have the meaning ascribed to it in such employment agreement.

 

For purposes of this Section 5(c), ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act.  In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided, however, that a Person shall not include (A) the Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company.

 

(d)                                 Method of Exercise.  Options to the extent then exercisable may be exercised in whole or in part at any time during the option period, by giving written notice to the Company specifying the number of shares of Stock to be purchased, accompanied by payment in full of the purchase price, in cash, or by check or such other instrument as may be acceptable to the Committee.  As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may be made at the election of the Optionee (i) in the form of Stock owned by the Optionee (based on the Fair Market Value of the Stock which is not the subject of any pledge or security interest, (ii) in the form of shares of Stock withheld by the Company from the shares of Stock otherwise to be received with such withheld shares of Stock having a Fair Market Value equal to the exercise price of the Option, or (iii) by a combination of the foregoing, such Fair Market Value determined by applying the principles set forth in Section 5(a), provided that the combined value of all cash and cash equivalents and the Fair Market Value of any shares surrendered to the Company is at least equal to such exercise price and except with respect to (ii) above, such method of payment will not cause a disqualifying disposition of all or a portion of the Stock received upon exercise of an Incentive Option.  An Optionee shall have the right to dividends and other rights of a stockholder with respect to shares of Stock purchased upon exercise of an Option at such time as the Optionee (i) has given written notice of exercise and has paid in full for such shares, and (ii) has satisfied such conditions that may be imposed by the Company with respect to the withholding of taxes.

 

(e)                                  Non-transferability of Options.  Options are not transferable and may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution.  The Committee, in its sole discretion, may permit a transfer of a Nonqualified Option to (i) a trust for the benefit of the Optionee, (ii) a member of the Optionee’s immediate family (or a trust for his or her benefit) or (iii) pursuant to a domestic relations order.  Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any Option contrary to the provisions hereof shall be void and ineffective and shall give no right to the purported transferee.

 

(f)                                   Termination by Death.  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of death, the Option may thereafter be exercised, to the extent then exercisable (or on such accelerated basis as the Committee shall determine at or after grant), by the legal representative of the estate or by the legatee of the Optionee under the will of the Optionee, for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or until the expiration of the stated term of such Option as provided under the Plan, whichever period is shorter.

 

(g)                                  Termination by Reason of Disability.  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Disability (as defined below), then any Option held by such Optionee may thereafter be exercised, to the extent it was exercisable at the time of termination due to Disability (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after one (1) year after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever period is shorter; provided, however, that, if the Optionee dies within such ninety (90)

 

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day period, any unexercised Option held by such Optionee shall thereafter be exercisable to the extent to which it was exercisable at the time of death for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter.  “Disability” shall mean an Optionee’s total and permanent disability; provided, that if Disability is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Disability shall have the meaning ascribed to it in such employment agreement

 

(h)                                 Termination by Reason of Retirement.  Unless otherwise determined by the Committee, if any Optionee’s employment with or service to the Company or any Subsidiary terminates by reason of Normal or Early Retirement (as such terms are defined below), any Option held by such Optionee may thereafter be exercised to the extent it was exercisable at the time of such Retirement (or on such accelerated basis as the Committee shall determine at or after grant), but may not be exercised after ninety (90) days after the date of such termination of employment or service (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the expiration of the stated term of such Option, whichever date is earlier; provided, however, that, if the Optionee dies within such ninety (90) day period, any unexercised Option held by such Optionee shall thereafter be exercisable, to the extent to which it was exercisable at the time of death, for a period of one (1) year after the date of such death (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or for the stated term of such Option, whichever period is shorter.

 

For purposes of this paragraph (h), “Normal Retirement” shall mean retirement from active employment with the Company or any Subsidiary on or after the normal retirement date specified in the applicable Company or Subsidiary pension plan or if no such pension plan, age 65, and “Early Retirement” shall mean retirement from active employment with the Company or any Subsidiary pursuant to the early retirement provisions of the applicable Company or Subsidiary pension plan or if no such pension plan, age 55.

 

(i)                                     Other Terminations.  Unless otherwise determined by the Committee upon grant, if any Optionee’s employment with or service to the Company or any Subsidiary is terminated by such Optionee for any reason other than death, Disability, Normal or Early Retirement or Good Reason (as defined below), the Option shall thereupon terminate, except that the portion of any Option that was exercisable on the date of such termination of employment or service may be exercised for the lesser of ninety (90) days after the date of termination (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof) or the balance of such Option’s term, whichever period is shorter.  The transfer of an Optionee from the employ of or service to the Company to the employ of or service to a Subsidiary, or vice versa, or from one Subsidiary to another, shall not be deemed to constitute a termination of employment or service for purposes of the Plan.

 

(i)                                     In the event that the Optionee’s employment or service with the Company or any Subsidiary is terminated by the Company or such Subsidiary for “cause” any unexercised portion of any Option shall immediately terminate in its entirety.  For purposes hereof, unless otherwise defined in an employment agreement between the Company and the relevant Optionee, “Cause” shall exist upon a good-faith determination by the Board, following a hearing before the Board at which an Optionee was represented by counsel and given an opportunity to be heard, that such Optionee has been accused of fraud, dishonesty or act detrimental to the interests of the Company or any Subsidiary of Company or that such Optionee has been accused of or convicted of an act of willful and material embezzlement or fraud against the Company or of a felony under any state or federal statute; provided, however, that it is specifically understood that “Cause” shall not include any act of commission or omission in the good-faith exercise of such Optionee’s business judgment as a director, officer or employee of the Company, as the case may be, or upon the advice of counsel to the Company.  Notwithstanding the foregoing, if Cause is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Cause shall have the meaning ascribed to it in such employment agreement.

 

(ii)                                  In the event that an Optionee is removed as a director, officer or employee by the Company at any time other than for “Cause” or resigns as a director, officer or employee for “Good Reason” the Option granted to such Optionee may be exercised by the Optionee, to the extent the Option was exercisable on the date such Optionee ceases to be a director, officer or employee.  Such Option may be exercised at any time within one (1) year after the date the

 

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Optionee ceases to be a director, officer or employee (or, if later, such time as the Option may be exercised pursuant to Section 14(d) hereof), or the date on which the Option otherwise expires by its terms; which ever period is shorter, at which time the Option shall terminate; provided, however, if the Optionee dies before the Options terminate and are no longer exercisable, the terms and provisions of Section 5(f) shall control.  For purposes of this Section 5(i), and unless otherwise defined in an employment agreement between the Company and the relevant Optionee, Good Reason shall exist upon the occurrence of the following:

 

(A)                               the assignment to Optionee of any duties inconsistent with the position in the Company that Optionee held immediately prior to the assignment;

 

(B)                               a Change of Control resulting in a significant adverse alteration in the status or conditions of Optionee’s participation with the Company or other nature of Optionee’s responsibilities from those in effect prior to such Change of Control, including any significant alteration in Optionee’s responsibilities immediately prior to such Change in Control; and

 

(C)                               the failure by the Company to continue to provide Optionee with benefits substantially similar to those enjoyed by Optionee prior to such failure.

 

Notwithstanding the foregoing, if Good Reason is defined in an employment agreement between the Company and the relevant Optionee, then, with respect to such Optionee, Good Reason shall have the meaning ascribed to it in such employment agreement.

 

(j)                                    Limit on Value of Incentive Option.  The aggregate Fair Market Value, determined as of the date the Incentive Option is granted, of Stock for which Incentive Options are exercisable for the first time by any Optionee during any calendar year under the Plan (and/or any other stock option plans of the Company or any Subsidiary) shall not exceed $100,000.

 

6.                                      Terms and Conditions of Restricted Stock.

 

Restricted Stock may be granted under this Plan aside from, or in association with, any other award and shall be subject to the following conditions and shall contain such additional terms and conditions (including provisions relating to the acceleration of vesting of Restricted Stock upon a Change of Control), not inconsistent with the terms of the Plan, as the Committee shall deem desirable:

 

(a)                                 Grantee rights.  A Grantee shall have no rights to an award of Restricted Stock unless and until Grantee accepts the award within the period prescribed by the Committee and, if the Committee shall deem desirable, makes payment to the Company in cash, or by check or such other instrument as may be acceptable to the Committee.  After acceptance and issuance of a certificate or certificates, as provided for below, the Grantee shall have the rights of a stockholder with respect to Restricted Stock subject to the non-transferability and forfeiture restrictions described in Section 6(d) below.

 

(b)                                 Issuance of Certificates.  The Company shall issue in the Grantee’s name a certificate or certificates for the shares of Common Stock associated with the award promptly after the Grantee accepts such award.

 

(c)                                  Delivery of Certificates.  Unless otherwise provided, any certificate or certificates issued evidencing shares of Restricted Stock shall not be delivered to the Grantee until such shares are free of any restrictions specified by the Committee at the time of grant.

 

(d)                                 Forfeitability, Non-transferability of Restricted Stock.  Shares of Restricted Stock are forfeitable until the terms of the Restricted Stock grant have been satisfied.  Shares of Restricted Stock are not transferable until the date on which the Committee has specified such restrictions have lapsed.  Unless otherwise provided by the Committee at or after grant, distributions in the form of dividends or otherwise of additional shares

 

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or property in respect of shares of Restricted Stock shall be subject to the same restrictions as such shares of Restricted Stock.

 

(e)                                  Change of Control.  Upon the occurrence of a Change in Control as defined in Section 5(c), the Committee may accelerate the vesting of outstanding Restricted Stock, in whole or in part, as determined by the Committee, in its sole discretion.

 

(f)                                   Termination of Employment.  Unless otherwise determined by the Committee at or after grant, in the event the Grantee ceases to be an employee or otherwise associated with the Company for any other reason, all shares of Restricted Stock theretofore awarded to him which are still subject to restrictions shall be forfeited and the Company shall have the right to complete the blank stock power.  The Committee may provide (on or after grant) that restrictions or forfeiture conditions relating to shares of Restricted Stock will be waived in whole or in part in the event of termination resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

 

7.                                      Term of Plan.

 

No Option or award of Restricted Stock shall be granted pursuant to the Plan on or after the date which is ten years from the effective date of the Plan, but Options and awards of Restricted Stock theretofore granted may extend beyond that date.

 

8.                                      Capital Change of the Company.

 

In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, or other change in corporate structure affecting the Stock, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares reserved for issuance under the Plan and in the number and option price of shares subject to outstanding Options granted under the Plan, to the end that after such event each Optionee’s proportionate interest shall be maintained (to the extent possible) as immediately before the occurrence of such event.  The Committee shall, to the extent feasible, make such other adjustments as may be required under the tax laws so that any Incentive Options previously granted shall not be deemed modified within the meaning of Section 424(h) of the Code.  Appropriate adjustments shall also be made in the case of outstanding Restricted Stock granted under the Plan.

 

The adjustments described above will be made only to the extent consistent with continued qualification of the Option under Section 422 of the Code (in the case of an Incentive Option) and Section 409A of the Code.

 

9.                                      Purchase for Investment/Conditions.

 

Unless the Options and shares covered by the Plan have been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the Company has determined that such registration is unnecessary, each person exercising or receiving Options or Restricted Stock under the Plan may be required by the Company to give a representation in writing that he is acquiring the securities for his own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof.  The Committee may impose any additional or further restrictions on awards of Options or Restricted Stock as shall be determined by the Committee at the time of award.

 

10.                               Taxes.

 

(a)                                 The Company may make such provisions as it may deem appropriate, consistent with applicable law, in connection with any Options or Restricted Stock granted under the Plan with respect to the withholding of any taxes (including income or employment taxes) or any other tax matters.

 

(b)                                 If any Grantee, in connection with the acquisition of Restricted Stock, makes the election permitted under Section 83(b) of the Code (that is, an election to include in gross income in the year of transfer the

 

7

 

amounts specified in Section 83(b)), such Grantee shall notify the Company of the election with the Internal Revenue Service pursuant to regulations issued under the authority of Code Section 83(b).

 

(c)                                  If any Grantee shall make any disposition of shares of Stock issued pursuant to the exercise of an Incentive Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Grantee shall notify the Company of such disposition within ten (10) days hereof.

 

11.                               Effective Date of Plan.

 

The Plan shall be effective on       , 2013; provided, however, that if, and only if, certain options are intended to qualify as Incentive Stock Options, the Plan must subsequently be approved by majority vote of the Company’s stockholders no later than       , 2013, and further, that in the event certain Option grants hereunder are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, the requirements as to stockholder approval set forth in Section 162(m) of the Code are satisfied.

 

12.                               Amendment and Termination.

 

The Board may amend, suspend, or terminate the Plan, except that no amendment shall be made that would impair the rights of any Participant under any Option or Restricted Stock theretofore granted without the Participant’s consent, and except that no amendment shall be made which, without the approval of the stockholders of the Company would:

 

(a)                                 increase the number of shares that may be issued under the Plan, except as is provided in Section 8;

 

(b)                                 materially increase the benefits accruing to the Participants under the Plan;

 

(c)                                  materially modify the requirements as to eligibility for participation in the Plan;

 

(d)                                 decrease the exercise price of an Incentive Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof or the exercise price of a Nonqualified Option to less than 100% of the Fair Market Value per share of Stock on the date of grant thereof; or

 

(e)                                  extend the term of any Option beyond that provided for in Section 5(b).

 

(f)                                   except as otherwise provided in Sections 5(d) and 8 hereof, reduce the exercise price of outstanding Options or effect repricing through cancellations and re-grants of new Options.

 

Subject to the forgoing, the Committee may amend the terms of any Option theretofore granted, prospectively or retrospectively, but no such amendment shall impair the rights of any Optionee without the Optionee’s consent.

 

It is the intention of the Board that the Plan comply strictly with the provisions of Section 409A of the Code and Treasury Regulations and other Internal Revenue Service guidance promulgated thereunder (the “Section 409A Rules”) and the Committee shall exercise its discretion in granting awards hereunder (and the terms of such awards), accordingly.  The Plan and any grant of an award hereunder may be amended from time to time (without, in the case of an award, the consent of the Participant) as may be necessary or appropriate to comply with the Section 409A Rules.

 

13.                               Government Regulations.

 

The Plan, and the grant and exercise of Options or Restricted Stock hereunder, and the obligation of the Company to sell and deliver shares under such Options and Restricted Stock shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies, national securities exchanges and interdealer quotation systems as may be required.

 

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14.                               General Provisions.

 

(a)                                 Certificates.  All certificates for shares of Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, or other securities commission having jurisdiction, any applicable Federal or state securities law, any stock exchange or interdealer quotation system upon which the Stock is then listed or traded and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions.

 

(b)                                 Employment Matters.  Neither the adoption of the Plan nor any grant or award under the Plan shall confer upon any Participant who is an employee of the Company or any Subsidiary any right to continued employment or, in the case of a Participant who is a director, continued service as a director, with the Company or a Subsidiary, as the case may be, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any of its employees, the service of any of its directors or the retention of any of its consultants or advisors at any time.

 

(c)                                  Limitation of Liability.  No member of the Committee, or any officer or employee of the Company acting on behalf of the Committee, 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 Committee 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.

 

(d)                                 Registration of Stock.  Notwithstanding any other provision in the Plan, no Option may be exercised unless and until the Stock to be issued upon the exercise thereof has been registered under the Securities Act and applicable state securities laws, or are, in the opinion of counsel to the Company, exempt from such registration in the United States.  The Company shall not be under any obligation to register under applicable federal or state securities laws any Stock to be issued upon the exercise of an Option granted hereunder in order to permit the exercise of an Option and the issuance and sale of the Stock subject to such Option, although the Company may in its sole discretion register such Stock at such time as the Company shall determine.  If the Company chooses to comply with such an exemption from registration, the Stock issued under the Plan may, at the direction of the Committee, bear an appropriate restrictive legend restricting the transfer or pledge of the Stock represented thereby, and the Committee may also give appropriate stop transfer instructions with respect to such Stock to the Company’s transfer agent.

 

15.                               Non-Uniform Determinations.

 

The Committee’s determinations under the Plan, including, without limitation, (i) the determination of the Participants to receive awards, (ii) the form, amount and timing of such awards, (iii) the terms and provisions of such awards and (ii) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, awards under the Plan, whether or not such Participants are similarly situated.

 

16.                               Governing Law.

 

The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law.

 

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