Document:

Exhibit 10.7

 

 

 

NEUTRON ENERGY, INC.

 

2011 EQUITY INCENTIVE PLAN

 

 

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
1.
    	
PURPOSE
    	
1
    
	
2.
    	
DEFINITIONS
    	
1
    
	
3.
    	
ADMINISTRATION OF THE PLAN
    	
6
    
	
 
    	
3.1.
    	
Board
    	
6
    
	
 
    	
3.2.
    	
Committee
    	
6
    
	
 
    	
3.3.
    	
Terms of Awards
    	
7
    
	
 
    	
3.4.
    	
Deferral Arrangement
    	
8
    
	
 
    	
3.5.
    	
No Liability
    	
9
    
	
 
    	
3.6.
    	
Stock Issuance/Book-Entry
    	
9
    
	
4.
    	
STOCK SUBJECT TO THE PLAN
    	
9
    
	
 
    	
4.1.
    	
Number   of Shares of Stock Available for Awards
    	
9
    
	
 
    	
4.2.
    	
Adjustments   in Authorized Shares of Stock
    	
9
    
	
 
    	
4.3.
    	
Share   Usage
    	
9
    
	
5.
    	
EFFECTIVE DATE, DURATION AND   AMENDMENTS
    	
10
    
	
 
    	
5.1.
    	
Effective Date
    	
10
    
	
 
    	
5.2.
    	
Term
    	
10
    
	
 
    	
5.3.
    	
Amendment and Termination of   the Plan
    	
10
    
	
6.
    	
AWARD ELIGIBILITY AND   LIMITATIONS
    	
10
    
	
 
    	
6.1.
    	
Service Providers and Other   Persons
    	
10
    
	
 
    	
6.2.
    	
Limitation on Shares of   Stock Subject to Awards and Cash Awards
    	
11
    
	
 
    	
6.3.
    	
Stand-Alone, Additional,   Tandem and Substitute Awards
    	
11
    
	
7.
    	
AWARD AGREEMENT
    	
12
    
	
8.
    	
TERMS AND CONDITIONS OF   OPTIONS
    	
12
    
	
 
    	
8.1.
    	
Option Price
    	
12
    
	
 
    	
8.2.
    	
Vesting
    	
12
    
	
 
    	
8.3.
    	
Term
    	
12
    
	
 
    	
8.4.
    	
Termination of Service
    	
13
    
	
 
    	
8.5.
    	
Limitations   on Exercise of Option
    	
13
    
	
 
    	
8.6.
    	
Method of Exercise
    	
13
    
	
 
    	
8.7.
    	
Rights of Holders of Options
    	
13
    
	
 
    	
8.8.
    	
Delivery of Stock   Certificates
    	
13
    
	
 
    	
8.9.
    	
Transferability of Options
    	
13
    
	
 
    	
8.10.
    	
Family Transfers
    	
14
    
	
 
    	
8.11.
    	
Limitations on Incentive   Stock Options
    	
14
    
	
 
    	
8.12.
    	
Notice of Disqualifying   Disposition
    	
14
    
	
9.
    	
TERMS AND CONDITIONS OF   STOCK APPRECIATION RIGHTS
    	
15
    
	
 
    	
9.1.
    	
Right to Payment and Grant   Price
    	
15
    
	
 
    	
9.2.
    	
Other Terms
    	
15
    
	
 
    	
9.3.
    	
Term
    	
15
    

 

i

 

	
 
    	
9.4.
    	
Transferability of SARS
    	
15
    
	
 
    	
9.5.
    	
Family Transfers
    	
15
    
	
10.
    	
TERMS AND CONDITIONS OF   RESTRICTED STOCK AND STOCK UNITS
    	
16
    
	
 
    	
10.1.
    	
Grant of Restricted Stock or   Stock Units
    	
16
    
	
 
    	
10.2.
    	
Restrictions
    	
16
    
	
 
    	
10.3.
    	
Restricted Stock   Certificates
    	
16
    
	
 
    	
10.4.
    	
Rights of Holders of   Restricted Stock
    	
17
    
	
 
    	
10.5.
    	
Rights of Holders of Stock   Units
    	
17
    
	
 
    	
 
    	
10.5.1.
    	
Voting and Dividend Rights
    	
17
    
	
 
    	
 
    	
10.5.2.
    	
Creditor’s Rights
    	
17
    
	
 
    	
10.6.
    	
Termination of Service
    	
17
    
	
 
    	
10.7.
    	
Purchase of Restricted Stock   and Shares of Stock Subject to Stock Units
    	
17
    
	
 
    	
10.8.
    	
Delivery of Shares of Stock
    	
18
    
	
11.
    	
TERMS AND CONDITIONS OF   UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS
    	
18
    
	
12.
    	
FORM OF PAYMENT FOR   OPTIONS AND RESTRICTED STOCK
    	
18
    
	
 
    	
12.1.
    	
General Rule
    	
18
    
	
 
    	
12.2.
    	
Surrender of Shares of Stock
    	
18
    
	
 
    	
12.3.
    	
Cashless Exercise
    	
19
    
	
 
    	
12.4.
    	
Other Forms of Payment
    	
19
    
	
13.
    	
TERMS AND CONDITIONS OF   DIVIDEND EQUIVALENT RIGHTS
    	
19
    
	
 
    	
13.1.
    	
Dividend Equivalent Rights
    	
19
    
	
 
    	
13.2.
    	
Termination of Service
    	
20
    
	
14.
    	
TERMS AND CONDITIONS OF   PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS
    	
20
    
	
 
    	
14.1.
    	
Grant of Performance Awards   and Annual Incentive Awards
    	
20
    
	
 
    	
14.2.
    	
Value of Performance Awards   and Annual Incentive Awards
    	
20
    
	
 
    	
14.3.
    	
Earning of Performance   Awards and Annual Incentive Awards
    	
20
    
	
 
    	
14.4.
    	
Form and Timing of   Payment of Performance Awards and Annual Incentive Awards
    	
20
    
	
 
    	
14.5.
    	
Performance Conditions
    	
21
    
	
 
    	
14.6.
    	
Performance Awards or Annual   Incentive Awards Granted to Designated Covered Employees
    	
21
    
	
 
    	
 
    	
14.6.1.
    	
Performance Goals Generally
    	
21
    
	
 
    	
 
    	
14.6.2.
    	
Timing For Establishing   Performance Goals
    	
21
    
	
 
    	
 
    	
14.6.3.
    	
Settlement of Awards; Other   Terms
    	
22
    
	
 
    	
 
    	
14.6.4.
    	
Performance Measures
    	
22
    
	
 
    	
 
    	
14.6.5.
    	
Evaluation of Performance
    	
23
    
	
 
    	
 
    	
14.6.6.
    	
Adjustment of   Performance-Based Compensation
    	
23
    
	
 
    	
 
    	
14.6.7.
    	
Board Discretion
    	
24
    
	
 
    	
14.7.
    	
Status of Awards Under Code   Section 162(m)
    	
24
    

 

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15.
    	
PARACHUTE LIMITATIONS
    	
24
    
	
16.
    	
REQUIREMENTS OF LAW
    	
25
    
	
 
    	
16.1.
    	
General
    	
25
    
	
 
    	
16.2.
    	
Rule 16b-3
    	
26
    
	
17.
    	
EFFECT OF CHANGES IN   CAPITALIZATION
    	
26
    
	
 
    	
17.1.
    	
Changes in Stock
    	
26
    
	
 
    	
17.2.
    	
Reorganization in Which the   Company Is the Surviving Entity Which Does not Constitute a Change in Control
    	
27
    
	
 
    	
17.3.
    	
Change in Control in which   Awards are not Assumed
    	
27
    
	
 
    	
17.4.
    	
Change   in Control in which Awards are Assumed
    	
28
    
	
 
    	
17.5.
    	
Adjustments
    	
28
    
	
 
    	
17.6.
    	
No Limitations on Company
    	
29
    
	
18.
    	
RESTRICTIONS   ON TRANSFER OF SHARES OF STOCK
    	
29
    
	
 
    	
18.1.
    	
Right of First Refusal
    	
29
    
	
 
    	
18.2.
    	
Repurchase and Other Rights
    	
29
    
	
 
    	
18.3.
    	
Installment Payments
    	
29
    
	
 
    	
18.4.
    	
Publicly Traded Stock
    	
29
    
	
 
    	
18.5.
    	
Legend
    	
30
    
	
19.
    	
GENERAL PROVISIONS
    	
30
    
	
 
    	
19.1.
    	
Disclaimer of Rights
    	
30
    
	
 
    	
19.2.
    	
Nonexclusivity of the Plan
    	
30
    
	
 
    	
19.3.
    	
Withholding Taxes
    	
30
    
	
 
    	
19.4.
    	
Captions
    	
31
    
	
 
    	
19.5.
    	
Other Provisions
    	
31
    
	
 
    	
19.6.
    	
Number and Gender
    	
31
    
	
 
    	
19.7.
    	
Severability
    	
32
    
	
 
    	
19.8.
    	
Governing Law
    	
32
    
	
 
    	
19.9.
    	
Section 409A of the   Code
    	
32
    

 

iii

 

NEUTRON ENERGY, INC.

 

2011 EQUITY INCENTIVE PLAN

 

Neutron Energy, Inc., a Nevada corporation (the “Company”), sets forth herein the terms of its 2011 Equity Incentive Plan (the “Plan”), as follows:

 

1.                                      PURPOSE

 

This Plan is intended to (a) provide incentive to eligible persons to stimulate their efforts towards the success of the Company and to operate and manage its business in a manner that will provide for the long term growth and profitability of the Company; and (b) provide a means of obtaining, rewarding and retaining key personnel.  To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units (including deferred stock units), dividend equivalent rights, other equity-based awards and cash bonus awards.  Any of these awards may, but need not, be made as performance incentives to reward attainment of annual or long-term performance goals in accordance with the terms hereof.  Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

 

2.                                      DEFINITIONS

 

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

 

2.1                                 “Affiliate” means, with respect to the Company, any company or other trade or business that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.  For purposes of granting Options or Stock Appreciation Rights, an entity may not be considered an Affiliate of the Company unless the Company holds a “controlling interest” in such entity, where the term “controlling interest” has the same meaning as provided in Treasury Regulation Section 1.414(c)-2(b)(2)(i), provided that the language “at least 50 percent” is used instead of “at least 80 percent” and, provided further, that where granting of Options or Stock Appreciation Rights is based upon a legitimate business criteria, the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Treasury Regulation Section 1.414(c)-2(b)(2)(i).

 

2.2                                 “Annual Incentive Award” means an Award, denominated in cash, made subject to attainment of performance goals (as described in Section 14) over a Performance Period of up to one (1) year (the Company’s fiscal year, unless otherwise specified by the Board).

 

2.3                                 “Applicable Laws” means the legal requirements relating to the Plan and the Awards under applicable provisions of the corporate, securities, tax and other laws, rules,

 

 

regulations and government orders, and the rules of any applicable stock exchange or national market system, of any jurisdiction applicable to Awards granted to residents therein.

 

2.4                                 “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Units, Dividend Equivalent Right, Performance Award, Annual Incentive Award, or Other Equity-Based Award  under the Plan.

 

2.5                                 “Award Agreement” means the agreement between the Company and a Grantee that evidences and sets out the terms and conditions of an Award.

 

2.6                                 “Benefit Arrangement” shall have the meaning set forth in Section 15.

 

2.7                                 “Board” means the Board of Directors of the Company.

 

2.8                                 “Cause” means, as determined by the Board and unless otherwise provided in an applicable agreement with the Company or an Affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); (iii) a material violation of a Company policy; or (iv) a material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreements, if any, between the Service Provider and the Company or an Affiliate.

 

2.9                                 “Change in Control” means (i) the dissolution or liquidation of the Company or a merger, consolidation or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of substantially all of the assets of the Company to another person or entity, or (iii) any transaction (including without limitation a merger or reorganization in which the Company is a surviving entity) which results in any person or entity owning 50% or more of the combined voting power of all classes of stock of the Company.

 

2.10                           “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended.

 

2.11                           “Committee” means a committee of, and designated from time to time by resolution of, the Board, which shall be constituted as provided in Section 3.2 (or, if no Committee has been designated, the Board itself).

 

2.12                           “Company” means Neutron Energy, Inc., a Nevada corporation.

 

2.13                           “Covered Employee” means a Grantee who is a covered employee within the meaning of Code Section 162(m)(3).

 

2.14                           “Disability” means the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding

 

2

 

expiration of an Incentive Stock Option following termination of the Grantee’s Service, Disability shall mean the Grantee is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

2.15                           “Dividend Equivalent Right” means a right, granted to a Grantee under Section 13, to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.

 

2.16                           “Effective Date” means February 22, 2011, the date the Plan was approved by the Board.

 

2.17                           “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

 

2.18                           “Fair Market Value” means the value of a share of Stock, determined as follows:  if on the Grant Date the shares of Stock are listed on an established national or regional stock exchange, or are publicly traded on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (if there is more than one such exchange or market the Board shall determine the appropriate exchange or market) on (i) the date of grant (if the grant is made before trading commences on the exchange or securities market or while such exchange or securities market is open for trading) or (ii) the next trading day after the date of grant (if the grant is made after the exchange or securities market closes on a trading day or if the grant is made on a day that is not a trading day on such exchange or securities market).  If there is no such reported closing price on the applicable date as specified in the immediately preceding sentence, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on the applicable date as specified in the immediately preceding sentence.  If on the Grant Date the Stock is not listed on such an exchange or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the Board by the reasonable application of a reasonable valuation method, in a manner consistent with Code Section 409A.  For purposes of determining taxable income and the amount of the related tax withholding obligation under Section 19.3, notwithstanding this Section 2.18 or Section 19.3, for any shares of Stock that are sold on the same day that such shares are first legally saleable pursuant to the terms of the applicable award agreement, Fair Market Value shall be determined based upon the sale price of such shares so long as the grantee has provided the Company with advance written notice of such sale.

 

2.19                           “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the Grantee, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent (50%) of the beneficial interest, a foundation in which any one or more of these persons (or the

 

3

 

Grantee) control the management of assets, and any other entity in which one or more of these persons (or the Grantee) own more than fifty percent (50%) of the voting interests.

 

2.20                           “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Company completes the corporate action constituting the Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6, or (iii) such other date as may be specified by the Board.

 

2.21                           “Grantee” means a person who receives or holds an Award under the Plan.

 

2.22                           “Incentive Stock Option” means an “incentive stock option” within the meaning of Code Section 422, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

 

2.23                           “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

 

2.24                           “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

 

2.25                           “Option Price” means the exercise price for each share of Stock subject to an Option.

 

2.26                           “Other Agreement” shall have the meaning set forth in Section 15.

 

2.27                           “Outside Director” means a member of the Board who is not an officer or employee of the Company.

 

2.28                           “Other Equity-Based Award” means a right or other interest that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, other than an Option, Stock Appreciation Right, Restricted Stock, Unrestricted Stock, Stock Units, Dividend Equivalent Right, Performance Award or Annual Incentive Award.

 

2.29                           “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 14) over a Performance Period of up to ten (10) years.

 

2.30                           “Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees.  Notwithstanding the foregoing, nothing in this Plan shall be construed to mean that an Award which does not satisfy the requirements for performance-based compensation under Code Section 162(m) does not constitute performance-based compensation for other purposes, including Code Section 409A.

 

4

 

2.31                           “Performance Measures”  means measures as described in Section 14 on which the performance goals are based and which are approved by the Company’s stockholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation.

 

2.32                           “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.

 

2.33                           “Plan” means this Neutron Energy, Inc. 2011 Equity Incentive Plan, as amended from time to time.

 

2.34                           “Prior Plans” means the Neutron Energy, Inc. 2007 Omnibus Incentive Plan and the Neutron Energy, Inc. 2006 Stock Option and Restricted Stock Plan.

 

2.35                           “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock, Stock Units or Unrestricted Stock.

 

2.36                           “Reporting Person” means a person who is required to file reports under Section 16(a) of the Exchange Act.

 

2.37                           “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 10.

 

2.38                           “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 9.

 

2.39                           “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

 

2.40                           “Service” means service as a Service Provider to the Company or any Affiliate.  Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or any Affiliate.  Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive.

 

2.41                           “Service Provider” means an employee, officer, director, or a consultant or adviser (who is a natural person) currently providing services to the Company or any of its Affiliates.

 

2.42                           “Stock” means the common stock, par value $0.001 per share, of the Company.

 

2.43                           “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9.

 

2.44                           “Stock Unit” means a bookkeeping entry representing the equivalent of one share of Stock awarded to a Grantee pursuant to Section 10.

 

5

 

2.45                           “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Code Section 424(f).

 

2.46                           “Substitute Award” means an Award granted upon assumption of, or in substitution for, outstanding awards previously granted by a company or other entity acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.

 

2.47                           “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding voting securities of the Company, its parent or any of its Subsidiaries.  In determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

 

2.48                           “Unrestricted Stock” shall have the meaning set forth in Section 11.

 

3.                                      ADMINISTRATION OF THE PLAN

 

3.1.                            Board.

 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation and by-laws and Applicable Laws.  The Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Award or any Award Agreement.  All such actions and determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company’s certificate of incorporation and by-laws and Applicable Laws.  The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive.

 

3.2.                            Committee.

 

The Board from time to time may delegate to the Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and other applicable provisions, as the Board shall determine, consistent with the Company’s certificate of incorporation and by-laws and Applicable Laws.

 

(i)                        Except as provided in Subsection (ii) and except as the Board may otherwise determine, the Committee, if any, appointed by the Board to administer the Plan shall consist of two or more Outside Directors of the Company who: (a) qualify as “outside directors” within the meaning of Section 162(m) of the Code and who (b) meet such other requirements as may be established from time to time by the Securities and Exchange Commission for plans intended to qualify for exemption under Rule 16b-3 (or its 

 

6

 

successor) under the Exchange Act and who (c) comply with the independence requirements of the stock exchange on which the Common Stock is listed.

 

(ii)                     The Board may also appoint one or more separate committees of the Board, each composed of one or more directors of the Company who need not be Outside Directors, who may administer the Plan with respect to employees or other Service Providers who are not executive officers (as defined under Rule 3b-7 or the Exchange Act) or directors of the Company, may grant Awards under the Plan to such employees or other Service Providers, and may determine all terms of such Awards, subject to the requirements of Code Section 162(m), Rule 16b-3 and the rules of the stock exchange on which the Common Stock is listed.

 

In the event that the Plan, any Award or any Award Agreement entered into hereunder provides for any action to be taken by or determination to be made by the Board, such action may be taken or such determination may be made by a Committee if the power and authority to do so has been delegated to such Committee by the Board as provided for in this Section.  Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive.

 

3.3.                            Terms of Awards.

 

Subject to the other terms and conditions of the Plan, the Board shall have full and final authority to:

 

(i)                                     designate Grantees;

 

(ii)                                  determine the type or types of Awards to be made to a Grantee;

 

(iii)                               determine the number of shares of Stock to be subject to an Award;

 

(iv)                              establish the terms and conditions of each Award (including, but not limited to, the exercise price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, the treatment of an Award in the event of a Change in Control, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options);

 

(v)                                 prescribe the form of each Award Agreement evidencing an Award; and

 

(vi)                              amend, modify, or supplement the terms of any outstanding Award.  Such authority specifically includes the authority, in order to effectuate the purposes of the Plan but without amending the Plan, to make or modify Awards to eligible individuals who are foreign nationals or are individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.  Notwithstanding the foregoing, no amendment, modification or supplement of any Award shall, without the consent of the Grantee, impair the Grantee’s rights under such Award.

 

7

 

The Board shall have the right, in its discretion, to make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate.  The Committee may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate  thereof or any confidentiality obligation with respect to the Company or any Affiliate  thereof, to the extent specified in such Award Agreement applicable to the Grantee.  Furthermore, the Company may annul an Award if the Grantee is an employee of the Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or the Plan or any other agreement with the Grantee, as applicable.

 

Any Award granted pursuant to this Plan is subject to mandatory repayment by the Grantee to the Company to the extent the Grantee is or in the future becomes subject to any Company “clawback” or recoupment policy that requires the repayment by the Grantee to the Company of compensation paid by the Company to the Grantee in the event that the Grantee fails to comply with, or violates, the terms or requirements of such policy.

 

Furthermore, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 and any Grantee who knowingly engaged in the misconduct, was grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct or was grossly negligent in failing to prevent the misconduct, shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document that contained such material noncompliance.

 

Notwithstanding any other provision of this Plan or any provision of any Award Agreement, if the Company is required to prepare an accounting restatement, then Grantees shall forfeit any cash or Stock received in connection with an Award (or an amount equal to the fair market value of such Stock on the date of delivery if the Grantee no longer holds the shares of Stock) if pursuant to the terms of the Award Agreement for such Award, the amount of the Award earned or the vesting in the Award was explicitly based on the achievement of pre-established performance goals set forth in the Award Agreement (including earnings, gains, or other criteria) that are later determined, as a result of the accounting restatement, not to have been achieved.

 

3.4.                            Deferral Arrangement.

 

The Board may permit or require the deferral of any award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock equivalents.  Any such deferrals shall be made in a 

 

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manner that complies with Code Section 409A.

 

3.5.                            No Liability.

 

No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award or Award Agreement.

 

3.6.                            Stock Issuance/Book-Entry.

 

Notwithstanding any provision of this Plan to the contrary, the issuance of the shares of Stock under the Plan may be evidenced in such a manner as the Board, in its discretion, deems appropriate, including, without limitation, book-entry registration or issuance of one or more share certificates.

 

4.                                      STOCK SUBJECT TO THE PLAN

 

4.1.                            Number of Shares of Stock Available for Awards.

 

Subject to adjustment as provided in Section 17, the number of shares of Stock available for issuance under the Plan shall equal that number of shares that when added together with the number of shares of Stock authorized for issuance under the Prior Plans equals 10% of the total issued and outstanding shares of Stock at the time of any such issuance under the Plan.  Not withstanding the foregoing, the number of shares of Stock available for issuance under the Plan shall be no less than 1,000,000 and no more than 3,000,000.  Subject to adjustment as provided in Section 17, the number of shares of Stock available for issuance as Incentive Stock Options shall be all of the shares of Stock available for issuance under the Plan.  Shares of Stock to be issued under the Plan shall be authorized but unissued shares; or, to the extent permitted by Applicable Laws, issued shares that have been reacquired by the Company.

 

4.2.                            Adjustments in Authorized Shares of Stock.

 

The Board shall have the right to substitute or assume Awards in connection with mergers, reorganizations, separations, or other transactions to which Code Section 424(a) applies.  The number of shares of Stock reserved pursuant to Section 4 shall be increased by the corresponding number of awards assumed and, in the case of a substitution, by the net increase in the number of shares of Stock subject to awards before and after the substitution.  Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the number of shares of Stock available under the Plan, subject to applicable stock exchange requirements.

 

4.3.                            Share Usage.

 

Shares of Stock covered by an Award shall be counted as used as of the Grant Date.  Any shares of Stock that are subject to Awards shall be counted against the limit set forth in Section 4.1 as one (1) share of Stock for every one (1) share of Stock subject to an Award.  With respect to SARs, the number of shares of Stock subject to an award of SARs will be counted against the 

 

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aggregate number of shares of Stock available for issuance under the Plan regardless of the number of shares of Stock actually issued to settle the SAR upon exercise.  If any shares of Stock covered by an Award granted under the Plan are not purchased or are forfeited or expire, or if an Award otherwise terminates without delivery of any shares of Stock subject thereto or is settled in cash in lieu of shares of Stock, then the number of shares of Stock counted against the aggregate number of shares of Stock available under the Plan with respect to such Award shall, to the extent of any such forfeiture, termination or expiration, again be available for making Awards under the Plan in the same amount as such shares of Stock were counted against the limit set forth in Section 4.1.  Moreover, if the Option Price of an Option granted under the Plan, or if pursuant to Section 19.3 the withholding obligation of any Grantee with respect to an Option or other Award, is satisfied by tendering shares of Stock to the Company (by either actual delivery or by attestation) or by withholding shares of Stock, such tendered or withheld shares of Stock will again by available for issuance under the Plan.

 

5.                                      EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1.                            Effective Date.

 

The Plan shall be effective as of the Effective Date, subject to approval of the Plan by the Company’s stockholders within one (1) year of the Effective Date.  Upon approval of the Plan by the stockholders of the Company as set forth above, all Awards made under the Plan on or after the Effective Date shall be fully effective as if the stockholders of the Company had approved the Plan on the Effective Date.  If the stockholders fail to approve the Plan within one (1) year of the Effective Date, any Awards made hereunder shall be null and void and of no effect.

 

5.2.                            Term.

 

The Plan shall terminate automatically ten (10) years after the Effective Date and may be terminated on any earlier date as provided in Section 5.3.

 

5.3.                            Amendment and Termination of the Plan.

 

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any shares of Stock as to which Awards have not been made.  An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by Applicable Laws or required by applicable stock exchange listing requirements.  No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, impair rights or obligations under any Award theretofore awarded under the Plan.

 

6.                                      AWARD ELIGIBILITY AND LIMITATIONS

 

6.1.                            Service Providers and Other Persons.

 

Subject to this Section 6, Awards may be made under the Plan to: (i) any Service Provider, as the Board shall determine and designate from time to time and (ii) any other individual whose participation in the Plan is determined to be in the best interests of the Company by the Board.

 

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6.2.                            Limitation on Shares of Stock Subject to Awards and Cash Awards.

 

During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act and the transition period under Treasury Regulation Section 1.162-27(f)(2) has lapsed or does not apply:

 

(i) the maximum number of shares of Stock subject to Options or SARs that can be granted under the Plan to any person eligible for an Award under Section 6 is 250,000 in a calendar year; provided, however, that the maximum number of shares of Stock subject to Options or SARs that can be granted under the Plan to any employee eligible for an Award under Section 6 in the year that the person is first employed by the Company or an Affiliate is 500,000;

 

(ii) the maximum number of shares of Stock that can be granted under the Plan, other than pursuant to an Option or SARs, to any person eligible for an Award under Section 6 is 100,000 in a calendar year; provided, however, that the maximum number of shares of Stock subject to Awards, other than Options, or SARs that can be granted under the Plan to any employee eligible for an Award under Section 6 in the year that the person is first employed by the Company or an Affiliate is 200,000; and

 

(iii) the maximum amount that may be paid as an Annual Incentive Award in a calendar year to any person eligible for an Award shall be one hundred thousand dollars ($100,000) and the maximum amount that may be paid as a cash-settled Performance Award in respect of a performance period by any person eligible for an Award shall be two hundred fifty thousand dollars ($250,000); provided, however, the maximum amount that may be paid as an Annual Incentive Award in a calendar year to any employee eligible for an Award under Section 6 in the year that the person is first employed by the Company or an Affiliate, is two hundred thousand dollars ($200,000) and the maximum amount that may be paid as a cash-settled Performance Award in respect of a Performance Period by any employee eligible for an Award for a Performance Period commencing with or immediately following the year that the person is first employed by the Company or an Affiliate shall be five hundred thousand dollars ($500,000).

 

The preceding limitations in this Section 6.2 are subject to adjustment as provided in Section 17.

 

6.3.                            Stand-Alone, Additional, Tandem and Substitute Awards.

 

Awards granted under the Plan may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate.  Such additional, tandem, and substitute or exchange Awards may be granted at any time.  If an Award is granted in substitution or exchange for another Award, the Board shall require the surrender of such other Award in consideration for the grant of the new Award.  In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate.  Notwithstanding

 

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Section 8.1 and Section 9.1, the Option Price of an Option or the grant price of an SAR that is a Substitute Award may be less than 100% of the Fair Market Value of a Share on the original date of grant; provided, that, the Option Price or grant price is determined in accordance with the principles of Code Section 424 and the regulations thereunder for any Incentive Share Option and consistent with Code Section 409A for any other Option or SAR.

 

7.                                      AWARD AGREEMENT

 

Each Award granted pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine.  Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.  Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

 

8.                                      TERMS AND CONDITIONS OF OPTIONS

 

8.1.                            Option Price.

 

The Option Price of each Option shall be fixed by the Board and stated in the Award Agreement evidencing such Option.  Except in the case of Substitute Awards,  the Option Price of each Option shall be at least the Fair Market Value of a share of Stock on the Grant Date; provided, however, that in the event that a Grantee is a Ten Percent Stockholder, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the Grant Date.  In no case shall the Option Price of any Option be less than the par value of a share of Stock.

 

8.2.                            Vesting.

 

Subject to Sections 8.3 and 17.3, each Option granted under the Plan shall become exercisable at such times and under such conditions as shall be determined by the Board and stated in the Award Agreement. For purposes of this Section 8.2, fractional numbers of shares of Stock subject to an Option shall be rounded down to the next nearest whole number.

 

8.3.                            Term.

 

Each Option granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10) years from the date such Option is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such Option; provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five (5) years from its Grant Date.

 

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8.4.                            Termination of Service.

 

Each Award Agreement shall set forth the extent to which the Grantee shall have the right to exercise the Option following termination of the Grantee’s Service.  Such provisions shall be determined in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service.

 

8.5.                            Limitations on Exercise of Option.

 

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, prior to the date the Plan is approved by the stockholders of the Company as provided herein or after the occurrence of an event referred to in Section 17 which results in termination of the Option.

 

8.6.                            Method of Exercise.

 

Subject to the terms of Section 12 and Section 19.3, an Option that is exercisable may be exercised by the Grantee’s delivery to the Company of notice of exercise on any business day, at the Company’s principal office, on the form specified by the Company and in accordance with any additional procedures specified by the Board.  Such notice shall specify the number of shares of Stock with respect to which the Option is being exercised and shall be accompanied by payment in full of the Option Price of the shares of Stock for which the Option is being exercised plus the amount (if any) of federal and/or other taxes which the Company may, in its judgment, be required to withhold with respect to an Award.

 

8.7.                            Rights of Holders of Options.

 

Unless otherwise stated in the applicable Award Agreement, an individual or entity holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to him.  Except as provided in Section 17, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

 

8.8.                            Delivery of Stock Certificates.

 

Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option.

 

8.9.                            Transferability of Options.

 

Except as provided in Section 8.10, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative)

 

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may exercise an Option.  Except as provided in Section 8.10, no Option shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

 

8.10.                     Family Transfers.

 

If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of an Option which is not an Incentive Stock Option to any Family Member.  For the purpose of this Section 8.10, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity.  Following a transfer under this Section 8.10, any such Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and shares of Stock acquired pursuant to the Option shall be subject to the same restrictions on transfer of shares as would have applied to the Grantee.  Subsequent transfers of transferred Options are prohibited except to Family Members of the original Grantee in accordance with this Section 8.10 or by will or the laws of descent and distribution.  The events of termination of Service of Section 8.4 shall continue to be applied with respect to the original Grantee, following which the Option shall be exercisable by the transferee only to the extent, and for the periods specified, in Section 8.4.

 

8.11.                     Limitations on Incentive Stock Options.

 

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000.  Except to the extent provided in the regulations under Code Section 422, this limitation shall be applied by taking Options into account in the order in which they were granted.

 

8.12.                     Notice of Disqualifying Disposition.

 

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

 

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9.                                      TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1.                            Right to Payment and Grant Price.

 

A SAR shall confer on the Grantee to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the SAR Exercise Price as determined by the Board.  The Award Agreement for a SAR shall specify the SAR Exercise Price, which shall be at least the Fair Market Value of a share of Stock on the Grant Date.  SARs may be granted in conjunction with all or part of an Option granted under the Plan or at any subsequent time during the term of such Option, in conjunction with all or part of any other Award or without regard to any Option or other Award; provided that a SAR that is granted subsequent to the Grant Date of a related Option must have a SAR Exercise Price that is no less than the Fair Market Value of one share of Stock on the SAR Grant Date.

 

9.2.                            Other Terms.

 

The Board shall determine on the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of Service or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which shares of Stock will be delivered or deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

 

9.3.                            Term.

 

Each SAR granted under the Plan shall terminate, and all rights thereunder shall cease, upon the expiration of ten (10) years from the date such SAR is granted, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such SAR.

 

9.4.                            Transferability of SARS.

 

Except as provided in Section 9.5, during the lifetime of a Grantee, only the Grantee (or, in the event of legal incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise a SAR.  Except as provided in Section 9.5, no SAR shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.

 

9.5.                            Family Transfers.

 

If authorized in the applicable Award Agreement and by the Board, in its sole discretion, a Grantee may transfer, not for value, all or part of a SAR to any Family Member.  For the purpose of this Section 9.5, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) unless

 

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Applicable Law does not permit such transfers, a transfer to an entity in which more than fifty percent (50%) of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity.  Following a transfer under this Section 9.5, any such SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, and shares of Stock acquired pursuant to a SAR shall be subject to the same restrictions on transfer or shares as would have applied to the Grantee.  Subsequent transfers of transferred SARs are prohibited except to Family Members of the original Grantee in accordance with this Section 9.5 or by will or the laws of descent and distribution.

 

10.                               TERMS AND CONDITIONS OF RESTRICTED STOCK AND STOCK UNITS

 

10.1.                     Grant of Restricted Stock or Stock Units.

 

Awards of Restricted Stock or Stock Units may be made for no consideration (other than par value of the shares of Stock which is deemed paid by past or future Services to the Company or an Affiliate).

 

10.2.                     Restrictions.

 

At the time a grant of Restricted Stock or Stock Units is made, the Board may, in its sole discretion, establish a period of time (a “restricted period”) applicable to such Restricted Stock or Stock Units.  Each Award of Restricted Stock or Stock Units may be subject to a different restricted period.  The Board may in its sole discretion, at the time a grant of Restricted Stock or Stock Units is made, prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock or Stock Units as described in Section 14.  Neither Restricted Stock nor Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other restrictions prescribed by the Board with respect to such Restricted Stock or Stock Units.

 

10.3.                     Restricted Stock Certificates.

 

Subject to Section 3.6, the Company shall issue, in the name of each Grantee to whom Restricted Stock have been granted, stock certificates representing the total number of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date.  The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the shares of Restricted Stock are forfeited to the Company or the restrictions lapse and the Grantee shall deliver a stock power to the Company with respect to each certificate, or (ii) such certificates shall be delivered to the Grantee, provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under the Plan and the Award Agreement.  Pursuant to Section 3.6, to the extent Restricted Stock is represented by a book entry, such book entry will contain an appropriate legend or restriction similar to the foregoing.

 

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10.4.                     Rights of Holders of Restricted Stock.

 

Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such shares of Stock and the right to receive any dividends declared or paid with respect to such shares of Stock.  The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and restrictions applicable to such Restricted Stock.  All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of stock, or other similar transaction shall be subject to the restrictions applicable to the original Grant.

 

10.5.                     Rights of Holders of Stock Units.

 

10.5.1.           Voting and Dividend Rights.

 

Holders of Stock Units shall have no rights as stockholders of the Company.  The Board may provide in an Award Agreement evidencing a grant of Stock Units that the holder of such Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding shares of Stock, a cash payment for each Stock Unit held equal to the per-stock dividend paid on the shares of Stock.  Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Stock Units at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid.

 

10.5.2.           Creditor’s Rights.

 

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

 

10.6.                     Termination of Service.

 

Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Restricted Stock or Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.  Upon forfeiture of Restricted Stock or Stock Units, the Grantee shall have no further rights with respect to such Award, including but not limited to any right to vote Restricted Stock or any right to receive dividends with respect to Restricted Stock or Stock Units.

 

10.7.                     Purchase of Restricted Stock and Shares of Stock Subject to Stock Units.

 

The Grantee shall be required, to the extent required by Applicable Laws, to purchase the Restricted Stock or shares of Stock subject to vested Stock Units from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or Stock Units or (ii) the Purchase Price, if any, specified in the Award Agreement relating to such Restricted Stock or Stock Units.  The Purchase Price shall

 

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be payable in a form described in Section 12 or, in the discretion of the Board, in consideration for past or future Services rendered to the Company or an Affiliate.

 

10.8.                     Delivery of Shares of Stock.

 

Upon the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to Restricted Stock or Stock Units settled in shares of Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares of Stock shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.  Neither the Grantee, nor the Grantee’s beneficiary or estate, shall have any further rights with regard to a Stock Unit once the share of Stock represented by the Stock Unit has been delivered.

 

11.                               TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS AND OTHER EQUITY-BASED AWARDS

 

The Board may, in its sole discretion, grant (or sell at par value or such other higher purchase price determined by the Board) an Unrestricted Stock Award to any Grantee pursuant to which such Grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”) under the Plan.  Unrestricted Stock Awards may be granted or sold as described in the preceding sentence in respect of past or future services and other valid consideration, or in lieu of, or in addition to, any cash compensation due to such Grantee.

 

The Board may, in its sole discretion, grant Awards to Participants in the form of Other Equity-Based Awards, as deemed by the Board to be consistent with the purposes of the Plan.  Awards granted pursuant to this paragraph may be granted with vesting, value and/or payment contingent upon the attainment of one or more performance goals.  The Board shall determine the terms and conditions of such Awards at the date of grant or thereafter.  Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any Other Equity-Based Awards held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.  Upon forfeiture of Other Equity-Based Awards, the Grantee shall have no further rights with respect to such Award.

 

12.                               FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

12.1.                     General Rule.

 

Payment of the Option Price for the shares of Stock purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company.

 

12.2.                     Surrender of Shares of Stock.

 

To the extent the Award Agreement so provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option or the Purchase Price for Restricted

 

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Stock may be made all or in part through the tender or attestation to the Company of shares of Stock, which shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price has been paid thereby, at their Fair Market Value on the date of exercise or surrender.

 

12.3.                     Cashless Exercise.

 

With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price for shares of Stock purchased pursuant to the exercise of an Option may be made all or in part by delivery (on a form acceptable to the Board) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 19.3,  or, with the consent of the Company, by issuing the number of shares of Stock equal in value to the difference between the Option Price and the Fair Market Value of the shares of Stock subject to the portion of the Option being exercised.

 

12.4.                     Other Forms of Payment.

 

To the extent the Award Agreement so provides and/or unless otherwise specified in an Award Agreement, payment of the Option Price for shares of Stock purchased pursuant to exercise of an Option or the Purchase Price for Restricted Stock may be made in any other form that is consistent with Applicable Laws, regulations and rules, including, without limitation, Service to the Company or an Affiliate or net exercise.

 

13.                               TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS

 

13.1.                     Dividend Equivalent Rights.

 

A Dividend Equivalent Right is an Award entitling the recipient to receive credits based on cash distributions that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares of Stock had been issued to and held by the recipient.  A Dividend Equivalent Right may be granted hereunder to any Grantee.  The terms and conditions of Dividend Equivalent Rights shall be specified in the grant.  Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents.  Any such reinvestment shall be at Fair Market Value on the date of reinvestment.  Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments, all determined in the sole discretion of the Board.  A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other award.  A Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award; provided, however, that Dividend Equivalent rights

 

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credited pursuant to a Dividend Equivalent Right granted as a component of another Award which vests or is earned based upon achievement of performance goals shall not vest or be paid unless the performance goals for such underlying Award are achieved.

 

13.2.                     Termination of Service.

 

Unless the Board otherwise provides in an Award Agreement or in writing after the Award Agreement is issued, a Grantee’s rights in all Dividend Equivalent Rights or interest equivalents shall automatically terminate upon the Grantee’s termination of Service for any reason.

 

14.                               TERMS AND CONDITIONS OF PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS

 

14.1.                     Grant of Performance Awards and Annual Incentive Awards.

 

Subject to the terms and provisions of this Plan, the Board, at any time and from time to time, may grant Performance Awards and/or Annual Incentive Awards to a Plan participant in such amounts and upon such terms as the Committee shall determine.

 

14.2.                     Value of Performance Awards and Annual Incentive Awards.

 

Each Performance Award and Annual Incentive Award shall have an initial value that is established by the Board at the time of grant.  The Board shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Awards that will be paid out to the Plan participant.

 

14.3.                     Earning of Performance Awards and Annual Incentive Awards.

 

Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Awards or Annual Incentive Awards shall be entitled to receive payout on the value and number of the Performance Awards or Annual Incentive Awards earned by the Plan participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.

 

14.4.                     Form and Timing of Payment of Performance Awards and Annual Incentive Awards.

 

Payment of earned Performance Awards and Annual Incentive Awards shall be as determined by the Board and as evidenced in the Award Agreement.  Subject to the terms of this Plan, the Board, in its sole discretion, may pay earned Performance Awards in the form of cash or in shares of Stock (or in a combination thereof) equal to the value of the earned Performance Awards at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period; provided that, unless specifically provided in the Award Agreement pertaining to the grant of the Award, such payment shall occur no later than the 15th day of the third month following the end of the calendar year in which the Performance Period ends.  Any shares of Stock may be granted subject to any restrictions deemed appropriate by the Committee.

 

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The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.

 

14.5.                     Performance Conditions.

 

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Board.  The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions.  If and to the extent required under Code Section 162(m), any power or authority relating to an Award intended to qualify under Code Section 162(m), shall be exercised by the Committee and not the Board.

 

14.6.                     Performance Awards or Annual Incentive Awards Granted to Designated Covered Employees.

 

If and to the extent that the Board determines that a Performance or Annual Incentive Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 14.6.

 

14.6.1.           Performance Goals Generally.

 

The performance goals for Performance or Annual Incentive Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 14.6.  Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.”  The Committee may determine that such Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two (2) or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Awards.  Performance goals may differ for Awards granted to any one Grantee or to different Grantees.

 

14.6.2.           Timing For Establishing Performance Goals.

 

Performance goals shall be established not later than the earlier of (i) 90 days after the beginning of any performance period applicable to such Awards and (ii) the day on which twenty-five percent (25%) of any performance period applicable to such Awards has expired, or at such other date as may be required or permitted for “performance-based compensation” under Code Section 162(m).

 

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14.6.3.           Settlement of Awards; Other Terms.

 

Settlement of such Awards shall be in cash, shares of Stock, other Awards or other property, in the discretion of the Committee.  The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Awards.  The Committee shall specify the circumstances in which such Performance or Annual Incentive Awards shall be paid or forfeited in the event of termination of Service by the Grantee prior to the end of a performance period or settlement of Awards.

 

14.6.4.           Performance Measures.

 

The performance goals upon which the payment or vesting of a Performance or Annual Incentive Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures, with or without adjustment:

 

(a)  net earnings or net income;

 

(b)  operating earnings;

 

(c)  pretax earnings;

 

(d)  earnings per share of stock;

 

(e)  stock price, including growth measures and total stockholder return;

 

(f)  earnings before interest and taxes;

 

(g)  earnings before interest, taxes, depreciation and/or amortization;

 

(h)  sales or revenue growth, whether in general, by type of product or service, or by type of customer;

 

(i)  gross or operating margins;

 

(j)  return measures, including return on assets, capital, investment, equity, sales or revenue;

 

(k)  cash flow, including operating cash flow, free cash flow, cash flow return on equity and cash flow return on investment;

 

(l)  productivity ratios;

 

(m)  expense targets;

 

(n)  market share;

 

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(o)  financial ratios as provided in credit agreements of the Company and its subsidiaries;

 

(p)  working capital targets;

 

(q)  completion of acquisitions of leases, mining claims, businesses or companies;

 

(r)  completion of divestitures and asset sales;

 

(s)  increases in reserves and/or mineralized materials; and

 

(u)  any combination of any of the foregoing business criteria.

 

Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (e) above as compared to various stock market indices.  The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Section 14.

 

14.6.5.           Evaluation of Performance.

 

The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occur during a Performance Period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in the Company’s annual report to stockholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses.  To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to qualify as Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

 

14.6.6.           Adjustment of Performance-Based Compensation.

 

Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward.  The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis, or any combination as the Committee determines.

 

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14.6.7.           Board Discretion.

 

In the event that applicable tax and/or securities laws change to permit Board discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Board shall have sole discretion to make such changes without obtaining stockholder approval provided the exercise of such discretion does not violate Code Sections 162(m) or 409A.  In addition, in the event that the Board determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Board may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 14.6.4.

 

14.7.                     Status of Awards Under Code Section 162(m).

 

It is the intent of the Company that Awards under Section 14.6 granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder.  Accordingly, the terms of Section 14.6, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder.  The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of an Award, as likely to be a Covered Employee with respect to that fiscal year.  If any provision of the Plan or any agreement relating to such Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

 

15.                               PARACHUTE LIMITATIONS

 

If the Grantee is a “disqualified individual,” as defined in Code Section 280G(c), then, notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or an Affiliate, except an agreement, contract, or understanding that expressly addresses Code Section 280G or Code Section 4999 (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), any right to exercise, vesting, payment or benefit to the Grantee under this Plan shall be reduced or eliminated:

 

(i)                                     to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any exercise, vesting,

 

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payment or benefit to the Grantee under this Plan to be considered a “parachute payment” within the meaning of Code Section 280G(b)(2) as then in effect (a “Parachute Payment”) and

 

(ii)                                  if, as a result of receiving such Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment.

 

The Company shall accomplish such reduction by first reducing or eliminating any cash payments (with the payments to be made furthest in the future being reduced first), then by reducing or eliminating any accelerated vesting of Options or SARs, then by reducing or eliminating any accelerated vesting of Restricted Stock or Stock Units, then by reducing or eliminating any other remaining Parachute Payments.

 

16.                               REQUIREMENTS OF LAW

 

16.1.                     General.

 

The Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares of Stock would constitute a violation by the Grantee, any other individual or entity exercising an Option, or the Company or an Affiliate of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations.  If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares of Stock subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares of Stock hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual or entity exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award.  Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any Option or any SAR that may be settled in shares of Stock or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company shall not be required to sell or issue such shares of Stock unless the Board has received evidence satisfactory to it that the Grantee or any other individual or entity exercising an Option may acquire such shares of Stock pursuant to an exemption from registration under the Securities Act.  Any determination in this connection by the Board shall be final, binding, and conclusive.  The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act.  The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or a SAR or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority.  As to any jurisdiction that expressly imposes the requirement that an Option (or SAR that may be settled in shares of Stock) shall not be exercisable until the shares

 

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of Stock covered by such Option (or SAR) are registered or are exempt from registration, the exercise of such Option (or SAR) under circumstances in which the laws of such jurisdiction apply shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

 

16.2.                     Rule 16b-3.

 

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards pursuant to the Plan and the exercise of Options and SARs granted hereunder that would otherwise be subject to Section 16(b) of the Exchange Act will qualify for the exemption provided by Rule 16b-3 under the Exchange Act.  To the extent that any provision of the Plan or action by the Board does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative with respect to such Awards to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan.  In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

 

17.                               EFFECT OF CHANGES IN CAPITALIZATION

 

17.1.                     Changes in Stock.

 

If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of stock or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of stock, exchange of stock, stock dividend or other distribution payable in capital stock, or other increase or decrease in such stock effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of shares of stock for which grants of Options and other Awards may be made under the Plan, including, without limitation, the limits set forth in Section 6.2, shall be adjusted proportionately and accordingly by the Company.  In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event.  Any such adjustment in outstanding Options or SARs shall not change the aggregate Option Price or SAR Exercise Price payable with respect to shares that are subject to the unexercised portion of an outstanding Option or SAR, as applicable, but shall include a corresponding proportionate adjustment in the Option Price or SAR Exercise Price per share.  The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration.  Notwithstanding the foregoing, in the event of any distribution to the Company’s stockholders of securities of any other entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such manner as the Company deems appropriate, adjust (i) the number and kind of shares subject to outstanding Awards and/or (ii) the exercise price of outstanding Options and Stock Appreciation Rights to reflect such distribution.

 

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17.2.                     Reorganization in Which the Company Is the Surviving Entity Which Does not Constitute a Change in Control.

 

Subject to Section 17.3, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities which does not constitute a Change in Control, any Option or SAR theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option or SAR would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Option Price or SAR Exercise Price per share so that the aggregate Option Price or SAR Exercise Price thereafter shall be the same as the aggregate Option Price or SAR Exercise Price of the shares of Stock remaining subject to the Option or SAR immediately prior to such reorganization, merger, or consolidation.  Subject to any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation.  In the event of a transaction described in this Section 17.2, Stock Units shall be adjusted so as to apply to the securities that a holder of the number of shares of Stock subject to the Stock Units would have been entitled to receive immediately following such transaction.

 

17.3.                     Change in Control in which Awards are not Assumed.

 

Upon the occurrence of a Change in Control in which outstanding Options, SARs, Stock Units, Dividend Equivalent Rights, Restricted Stock, or other Equity-Based Awards are not being assumed or continued:

 

(i) in each case with the exception of any Performance Award, all outstanding Restricted Stock shall be deemed to have vested, all Stock Units shall be deemed to have vested and the shares of Stock subject thereto shall be delivered, and all Dividend Equivalent Rights shall be deemed to have vested and the shares of Stock subject thereto shall be delivered, immediately prior to the occurrence of such Change in Control, and

 

(ii) either of the following two actions shall be taken:

 

(A) fifteen (15) days prior to the scheduled consummation of a Change in Control, all Options and SARs outstanding hereunder shall become immediately exercisable and shall remain exercisable for a period of fifteen (15) days, or

 

(B) the Board may elect, in its sole discretion, to cancel any outstanding Awards of Options, Restricted Stock, Stock Units, and/or SARs and pay or deliver, or cause to be paid or delivered, to the holder thereof an amount in cash or securities having a value (as determined by the Board acting in good faith), in the case of Restricted Stock or Stock Units, equal to the formula or fixed price per share paid to holders of shares of Stock and, in the case of Options or SARs, equal to the product of the number of shares of Stock subject to the Option or SAR (the “Award Stock”) multiplied by the amount, if any, by which (I) the formula or fixed price per share paid to

 

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holders of shares of Stock pursuant to such transaction exceeds (II) the Option Price or SAR Exercise Price applicable to such Award Stock.

 

(iii) for Performance Awards denominated in Stock or Stock Units, if less than half of the Performance Period has lapsed, the Awards shall be converted into Restricted Stock or Stock Units assuming target performance has been achieved (or Unrestricted Stock if no further restrictions apply).  If more than half the Performance Period has lapsed, the Awards shall be converted into Restricted Stock or Stock Units based on actual performance to date (or Unrestricted Stock if no further restrictions apply).  If actual performance is not determinable, then Performance Awards shall be converted into Restricted Stock or Stock Units assuming target performance has been achieved, based on the discretion of the Committee (or Unrestricted Stock if no further restrictions apply).

 

(iv) Other-Equity Based Awards shall be governed by the terms of the applicable Award Agreement.

 

With respect to the Company’s establishment of an exercise window, (i) any exercise of an Option or SAR during such fifteen (15)-day period shall be conditioned upon the consummation of the event and shall be effective only immediately before the consummation of the event, and (ii) upon consummation of any Change in Control, the Plan and all outstanding but unexercised Options and SARs shall terminate.  The Board shall send notice of an event that will result in such a termination to all individuals and entities who hold Options and SARs not later than the time at which the Company gives notice thereof to its stockholders.

 

17.4.                     Change in Control in which Awards are Assumed.

 

The Plan, Options, SARs, Stock Units and Restricted Stock theretofore granted shall continue in the manner and under the terms so provided in the event of any Change in Control to the extent that provision is made in writing in connection with such Change in Control for the assumption or continuation of the Options, SARs, Stock Units and Restricted Stock theretofore granted, or for the substitution for such Options, SARs, Stock Units and Restricted Stock for new common stock options and stock appreciation rights and new common stock units and restricted stock relating to the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number of shares (disregarding any consideration that is not common stock) and option and stock appreciation rights exercise prices.

 

17.5.                     Adjustments

 

Adjustments under this Section 17 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.  No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.  The Board shall determine the effect of a Change in Control upon Awards other than Options, SARs, Stock Units and Restricted Stock, and such effect shall be set forth in the appropriate Award Agreement.  The Board may provide in the

 

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Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, for different provisions to apply to an Award in place of those described in Sections 17.1, 17.2,  17.3 and 17.4.  This Section 17 does not limit the Company’s ability to provide for alternative treatment of Awards outstanding under the Plan in the event of change in control events that are not Changes in Control.

 

17.6.                     No Limitations on Company.

 

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

 

18.                               RESTRICTIONS ON TRANSFER OF SHARES OF STOCK

 

18.1.                     Right of First Refusal.

 

Any shares of Stock acquired by, or delivered or issued to, the Grantee under the Plan may be subject to a right of first refusal of the Company as the Board may determine, consistent with applicable law.  Any such right shall be set forth in an Award Agreement or in a shareholders agreement.

 

18.2.                     Repurchase and Other Rights.

 

Stock issued upon exercise of an Option or pursuant to an Award of Restricted Stock or Stock Units may be subject to such right of repurchase upon termination of Service or other transfer restrictions as the Board may determine, consistent with applicable law.  Any additional restrictions shall be set forth in an Award Agreement or in a shareholders agreement.

 

18.3.                     Installment Payments.

 

In the case of any repurchase of shares of Stock acquired by the Grantee pursuant to the exercise of an Option or under an Award of Restricted Stock or Stock Units, the Company or its permitted assignee may pay the Grantee, transferee, or other registered owner of the Stock the purchase price in three (3) or fewer annual installments.  Interest shall be credited on the installments at the applicable federal rate (as determined for purposes of Section 1274 of the Code) in effect on the date on which the purchase is made.  The Company or its permitted assignee shall pay at least one-third of the total purchase price each year, plus interest on the unpaid balance, with the first payment being made on or before the 60th day after the purchase.

 

18.4.                     Publicly Traded Stock.

 

If the Stock is listed on an established national or regional stock exchange or is publicly traded in an established securities market, the foregoing transfer restrictions terminate as of the first date that the Stock is so listed, quoted or publicly traded.

 

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18.5.                     Legend.

 

In order to enforce the restrictions imposed upon shares of Stock under this Plan or as provided in an Award Agreement, the Board may cause a legend or legends to be placed on any certificate representing shares issued pursuant to this Plan that complies with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under it.

 

19.                               GENERAL PROVISIONS

 

19.1.                     Disclaimer of Rights.

 

No provision in the Plan or in any Award or Award Agreement shall be construed to confer upon any individual or entity the right to remain in the employ or Service of the Company or an Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or an Affiliate either to increase or decrease the compensation or other payments to any individual or entity at any time, or to terminate any employment or other relationship between any individual or entity and the Company or an Affiliate.  In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to provide Service.  The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein.  The Plan and Awards shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

 

19.2.                     Nonexclusivity of the Plan.

 

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its discretion determines desirable, including, without limitation, the granting of stock options otherwise than under the Plan.

 

19.3.                     Withholding Taxes.

 

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any shares of Stock upon the exercise of an Option or pursuant to an Award.  At the time of such vesting, lapse, or exercise, the Grantee shall pay in cash to the Company or an Affiliate, as the case may be, any amount that the Company or an

 

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Affiliate may reasonably determine to be necessary to satisfy such withholding obligation; provided, however, that if there is a same day sale, the Grantee shall pay such withholding obligation on the day that the same day sale is completed.  Subject to the prior approval of the Company or an Affiliate, which may be withheld by the Company or an Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or an Affiliate to withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering to the Company or an Affiliate shares of Stock already owned by the Grantee.  The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations.  The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or an Affiliate as of the date that the amount of tax to be withheld is to be determined.  A Grantee who has made an election pursuant to this Section 19.3 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.  The maximum number of shares of Stock that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of shares of Stock pursuant to such Award, as applicable, cannot exceed such number of shares of Stock having a Fair Market Value equal to the minimum statutory amount required by the Company or an Affiliate to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of shares of Stock.  For purposes of determining taxable income and the amount of the related tax withholding obligation under this Section 19.3, notwithstanding Section 2.18 or this Section 19.3, for any Shares that are sold on the same day that such Shares are first legally saleable pursuant to the terms of the applicable award agreement, Fair Market Value shall be determined based upon the sale price for such Shares so long as the Grantee has provided the Company with advance written notice of such sale.

 

19.4.                     Captions.

 

The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Award Agreement.

 

19.5.                     Other Provisions.

 

Each Award granted under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.

 

19.6.                     Number and Gender.

 

With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

 

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19.7.                     Severability.

 

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

 

19.8.                     Governing Law

 

The validity and construction of this Plan and the instruments evidencing the Awards hereunder shall be governed by the laws of the State of Nevada, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan and the instruments evidencing the Awards granted hereunder to the substantive laws of any other jurisdiction.

 

19.9.                     Section 409A of the Code.

 

The Company intends to comply with Section 409A, or an exemption to Section 409A, with regard to Awards hereunder that constitute nonqualified deferred compensation within the meaning of Section 409A.  To the extent that the Company determines that a Grantee would be subject to the additional twenty percent (20%) tax imposed on certain nonqualified deferred compensation plans pursuant to Section 409A as a result of any provision of any Award granted under this Plan, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax.  The nature of any such amendment shall be determined by the Board.

 

*    *    *

 

To record adoption of the Plan by the Board on February 22, 2011, and approval of the Plan by the stockholders on                           , 2011, the Company has caused its authorized officer to execute the Plan.

 

 

	
 
    	
NEUTRON ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Edward M. Topham
    
	
 
    	
Title:
    

 

32Exhibit 10.11

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT is by and between NEUTRON ENERGY, INC., a Nevada corporation (the “Company”), and Kelsey L. Boltz (the “Executive”) and is effective as of October 29, 2009 (the “Effective Date”).

 

BACKGROUND

 

The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued employment and dedication of the Executive.

 

The Board has further determined that it is desirable to provide the Executive with compensation and benefits terms which adequately compensate the Executive for the services he renders to the Company, and, to ensure that such compensation and benefits are consistent with those of like executives of other companies.

 

AGREEMENT

 

Now, therefore, it is hereby agreed as follows:

 

1.                                       Employment Period.  The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on October 28,2011 ( the “Employment Period”).

 

2.                                       Terms of Employment.

 

2.1                                 Position and Duties.

 

2.1.1                        Position.  During the Employment Period, the Executive shall be employed in executive capacities in the position(s) of Executive Chairman of the Company.

 

2.1.2                        Duties.

 

2.1.2.1                                       During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive will devote his full attention and time to the business and affairs of the Company as its Executive Chairman .  The Executive will supervise the business and affairs of the Company and the performance by all of its other officers of their respective duties, subject to the control of the Board.  The Executive will report to the Board.  The Executive will use his best efforts to perform faithfully and efficiently such duties and responsibilities.

 

2.1.2.2                                       While employed hereunder, the Executive agrees to devote all of his business time, attention, skill and efforts to the faithful and efficient performance of his duties under this Agreement; provided, however, that the Executive may engage in the following activities so long as they are approved in advance by the Board and do

 

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not interfere in any material respect with the performance of Executive’s duties and responsibilities hereunder:  (i) serve on corporate, civic or charitable boards or committees, and (ii) deliver lectures, fulfill speaking engagements or teach on a part-time basis at educational institutions.

 

2.2                                 Compensation.

 

2.2.1                        Base Salary.  The Executive shall receive an annual base salary of One Hundred Forty Thousand dollars ($140,000.00) from the Effective Date. Thereafter, the Board or the Compensation Committee of the Board (the “Compensation Committee”), as the case may be, may review the Executive’s salary and total cash compensation within one hundred twenty (120) days of the end of each of the Company’s fiscal years during the Employment Period to determine what, if any, increases shall be made thereto.  The base salary payable to the Executive in any given year is hereafter referred to as the “Annual Base Salary.”  Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.  The Annual Base Salary shall not be reduced after any increase and the term “Annual Base Salary,” as used in this Agreement, shall refer to the Annual Base Salary as increased.  The Annual Base Salary shall in all instances be payable in twenty-four (24) equal bi-monthly installments.

 

2.2.2                        Annual Bonus and Option Plans.  The Executive shall also be eligible to participate in any applicable Company bonus plan or program, stock option, restricted stock or other plan or program in effect immediately prior to the Effective Date, or put into effect by the Board at any time after the Effective Date.

 

2.2.3                        Incentive, Savings and Retirement Plans.  During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other executives of the Company, as the same may be amended from time to time, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities, savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company to other executives of the Company; provided, however, that the dollar value awarded Executive in the reasonable discretion of management need not be equal to that awarded to all other executives.

 

2.2.4                        Welfare Benefit Plans.  During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other executives of the Company, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs provided generally at any time after the Effective Date to other executives of the Company.

 

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2.2.5                        Expenses.  During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in the conduct of Company business.

 

2.2.6                        Vacation.  During the Employment Period, the Executive shall be entitled to paid vacation of four (4) weeks annually and otherwise be in accordance with the plans, policies, programs and practices of the Company in all respects as in effect for the Executive during the one hundred twenty (120) day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time after the Effective Date with respect to other executives of the Company.

 

2.2.7                        No Director Fees.  In no event shall the Executive be entitled to receive any additional compensation for serving as a director, member and/or manager of the Company or any affiliate of the Company.

 

3.                                       Termination of Employment.

 

3.1                                 Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If the Company determines in good faith that any Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 10.2, of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Executive (the “Disability Effective Date”), provided  that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, the term “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for one hundred twenty (120) consecutive business days as a result of incapacity due to mental or physical illness certified by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.

 

3.2                                 Cause.  The Company may terminate the Executive’s employment during the Employment Period for Cause.  For purposes of this Agreement, the term “Cause” shall mean:  (i) the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company as set forth in Section 2.1.2, “Duties,” (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, accompanied by a resolution adopted by the vote of two-thirds (2/3) of the entire Board, excluding the Executive, at a meeting of the Board held for such purpose, which resolution specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties and Executive has not cured any such failure to perform within ten (10) business days of such demand; (ii) material violation of any of the Company’s policies; (iii) breach by the Executive of his obligations under this Agreement; or (iv) if the Executive is charged with illegal conduct by a governmental body or regulatory authority, or has engaged in gross misconduct that is materially injurious to the Company as determined by a resolution adopted by the vote of three-fourths (3/4) of the entire Board, excluding the Executive, at a meeting of the Board held for such

 

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purpose, which resolution specifically identifies the alleged illegal conduct or gross misconduct.  For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith.  The vote of the Board on the resolutions contemplated in (i) and (iv) of this Section 3.2 will not be taken until after written notice of not less than five (5) business days to the Executive of the meeting and an opportunity for Executive to be heard before the Board at such meeting.

 

3.3                                 Good Reason.  The Executive may terminate his employment for Good Reason at any time within ninety (90) days after the Executive first has actual knowledge of the occurrence of such Good Reason.  For purposes of this Agreement, the term “Good Reason” shall mean:

 

3.3.1                        the assignment to the Executive of any duties that are not consistent with the duties set forth in Section 2.1.2, “Duties,” or any other action by the Company that results in a material diminution in any of the Executive’s positions as set forth in Section 2.1.1, “Position,” or in the Executive’s authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

3.3.2                        any failure by the Company to comply with any of the provisions of Section 2.2, “Compensation,” other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

 

3.3.3                        any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement;

 

3.3.4                        any action taken by the Company or its Board of Directors in connection with a “Change in Control,” as defined in Section 4.5, “Change in Control,” that results in the Executive being removed as an Executive of the Company; or

 

3.3.5                        any failure by the Company to comply with and satisfy Section 9.3.

 

3.4                                 Notice of Termination.  Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 10.2 of this Agreement.  For purposes of this Agreement, the term “Notice of Termination” means a written notice that:

 

3.4.1                        indicates the specific termination provision in this Agreement relied upon;

 

3.4.2                        to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and

 

3.4.3                        if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date, which date shall be not more than thirty

 

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(30) days after the giving of such notice.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the rights of the Executive or the Company under this Agreement.

 

3.5                                 Date of Termination.  The term “Date of Termination” means:

 

3.5.1                        if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be;

 

3.5.2                        if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination; and

 

3.5.3                        if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.

 

3.6                                 Resignation as Director.  If the Executive’s employment under this Agreement is terminated for any reason, the Executive shall resign as a director of the Company and as a director, member and/or manager of all affiliates of the Company of which Executive is a director, member and/or manager.  Such resignation will be effective (i) in the case of a termination by the Executive pursuant to Section 1, “Employment Agreement,” or Section 3, “Termination of Employment,” on the date the Executive delivers the relevant Notice of Termination in accordance with such Sections; (ii) in the case of a termination by the Company, on the date Executive receives the relevant Notice of Termination; and (iii) in the case of a termination for any other reason, no later than the relevant Termination Date.

 

4.                                       Obligations of the Company upon Termination.

 

4.1                                 Termination for Good Reason, Other Than for Cause, Death or Disability.  If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, Death or Disability, or the Executive shall terminate employment for Good Reason, the Company shall pay to the Executive within thirty (30) days after the Date of Termination the aggregate of the amounts set forth in Section 4.1.2 through Section 4.1.6 in a lump sum in cash.

 

4.1.1                        the amount of Annual Base Salary compensation that would be payable to the Executive over a twenty-four (24) month period, provided  that the Company will pay such amount to the Executive over the period that the compensation would have been due had the termination not occurred;

 

4.1.2                        any declared and accrued, but as of then unpaid, bonus or stock options grant (whether or not vested) to which the Execute would have received but for such termination.  Additionally, any stock options owned or granted shall be deemed immediately vested, not forfeitable, and shall be the property of Executive, exercisable according to their terms for the balance of the term of years of the options;

 

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4.1.3                        any accrued vacation pay;

 

4.1.4                        any amounts payable pursuant to the Company’s Defined Benefit Pension Plan, 401(k) plan, including such amounts which would have accrued (whether or not vested) if the Executive’s employment had continued after the Date of Termination for the period then remaining under this Agreement, as it may have been renewed as provided for in Section 1, “Employment Period”;

 

4.1.5                        any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company (such other amounts and benefits shall be referred to as the “Other Benefits”);

 

4.1.6                        for the remaining term of this Agreement, as it may have been renewed pursuant to Section 1, “Employment Period,” or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 2.2.4, “Welfare Benefit Plans,” of this Agreement if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of the Company and their families, provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, and for purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed for the remaining term of this Agreement, as it may have been renewed pursuant to Section 1, “Employment Period,” and to have retired on the last day of such period; and

 

4.2                                 Death.  If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for (i) payment of any death benefit compensation under other contracts;; (ii) full vesting and non-forfeiture of stock options granted to Executive; and (iii) the timely payment or provision of Other Benefits.  Such amounts shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within thirty (30) days of the Date of Termination.  The term “Other Benefits” as utilized in this Section 4.2 shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company to the estates and beneficiaries of other executives of the Company under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other executives and their beneficiaries at any time during the one hundred twenty (120) day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other executives of the Company and their beneficiaries.

 

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4.3                                 Disability.  If the Executive’s employment is terminated by reason of the Executive’s Disability under Section 3.1, “Death or Disability,” during the Employment Period, this Agreement shall terminate without further obligations to the Company, other than for the timely payment or provision of (i) Base Salary through the Termination Date; (ii) accrued bonus through the Termination Date; (iii) payment of pension, 401(k), and Other Disability Benefits; (iv) full vesting and non-forfeiture of stock options; and (v) the receipt of fully-paid Welfare Benefit Plans under Section 2.2.5, “Welfare Benefit Plans,” for the balance of the term of this Agreement.  The term “Other Benefits” as utilized in this Section 4.3 shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other executives and their families at any time during the one hundred twenty (120) day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other executives of the Company and their families.

 

4.4                                 Termination by the Company for Cause; and Termination by the Executive for Other than for Good Reason.  If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Company other than the obligation to pay to the Executive: (i) the Annual Base Salary through the Date of Termination; (ii) the amount of any compensation previously deferred by the Executive; and (iii) Other Benefits under Sections 4.2, “Death,” and Section 4.3, “Disability,” in each case to the extent therefore unpaid.  If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason by the Executive, this Agreement shall terminate without further obligations to the Company, other than for items (i), (ii) and (iii) of this paragraph, accrued but unpaid vacation leave, and the timely payment or provision of Other Benefits.  In such case, all accrued obligations shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of Termination.

 

4.5                                 Change in Control.  If, during the term of this Agreement and within two years after a “Change in Control,” as defined below, the Company shall terminate the Executive’s employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, the Company shall (i) pay to the Executive the amount of compensation that would have been payable to the Executive over the period then remaining under this Agreement and on the same schedule as such payments would have been due had the termination not occurred, provided that the Company shall pay the Executive for a minimum of twenty-four (24) months on this basis; and (ii) cause all stock options issued to the Executive that have not vested as of the termination to be immediately vested.

 

4.5.1                        The term “Change in Control” shall mean an event or the last of a series of related events by which:

 

4.5.2                        the Company merges or consolidates with or into another entity or completes any other corporate reorganization, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such

 

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merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization; or

 

4.5.3                        the Company sells, transfers or otherwise disposes of all or substantially all of the consolidated assets of the Company or its subsidiaries and the Company does not own stock in the purchaser or purchasers having more than fifty percent (50%) of the voting power in elections for directors; or

 

4.5.4                        the composition of the Board changes, as a result of which fewer than one half of the incumbent directors are directors who either:

 

(i)             had been directors of the Company twenty-four (24) months prior to such change; or

 

(ii)          were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors who had been directors of the Company twenty-four (24) months prior to such change and who were still in office at the time of the election or nomination.

 

A transaction shall not constitute a Change of Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately before such transaction; or

 

4.5.5                        any Person acquires direct or indirect beneficial ownership of more than thirty-three percent (33%) of the voting power of the Company, whether in a single transaction or a series of transactions.

 

4.5.6                        As used in this Agreement, a “Person” means any “person,” as that term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, together with all of that person’s “affiliates” and “associates,” as those terms are defined in Rule 12b-2 of such Act.

 

4.6                                 Health Plan Coverage.  If, during the term of this Agreement, the Executive’s employment terminates for any reason other than for Cause and by Executive for other then for Good Reason, the Company shall provide the Executive coverage for a continuation period beginning on the Effective Date and ending on the earlier of (i) balance of the Employment Period plus six (6) months, but not more than a total of two (2) years; or (ii) the date of the Executive’s death. During the Continuation Period, the Executive (and, where applicable, the Executive’s dependents) shall be entitled to continue participation in the group health care plan for employees maintained by the Company as if the Employee were still an employee of the Company.  The coverage provided under this Section 4.6. shall run concurrently with and shall be offset against any continuation coverage under Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended.  Where applicable, the Executive’s compensation for purposes of such plans shall be deemed to be equal to the Executive’s compensation (as defined in such plans) in effect on the date of the employment termination.  To the extent that the Company finds it undesirable to cover the Executive under

 

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the group health plans of the Company, the Company shall provide the Executive (at its own expense) with the same level of coverage under individual policies.

 

5.                                       Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which the Executive may qualify, nor, subject to Section 4, “Obligations of the Company Upon Termination,” shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.  Executive is currently a party to, and in the future may be a party to other, employment arrangements, agreements, and incentive plans, including but not limited to, a death benefit plan, stock option agreements, and a change of control agreement.  This Agreement shall not supersede any of the terms or conditions of such other agreements.  To the extent of any inconsistency in these agreements, the agreements shall be interpreted and applied in the way to confer upon the Executive the greatest benefits.  The agreements shall be read and applied consistent with each other, but in the event of a conflict, the terms most favorable to the Executive will be applied from the various provisions of the agreements in the aggregate.

 

6.                                       Full Settlement; Legal Fees.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be subject to any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against the Executive.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 4.1.6, such amounts shall not be reduced whether or not the Executive obtains other employment.  Provided that the Executive is the prevailing party, the Company will reimburse the Executive to the full extent permitted by law, all legal fees and expenses that the Executive may reasonably incur as a result of any contest by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate (“Applicable Federal Rate”) provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

7.                                       Confidential Information; Noncompetition.

 

7.1                                 Nondisclosure.  The Executive shall hold in fiduciary capacity for the benefit of the Company all secret, proprietary or Confidential Information, knowledge or data relating to the Company and its businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company.  During the period the Executive is employed with the Company, and after termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may

 

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otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it.  The restrictions set forth in this Section 7 will not apply to information which is generally known to the public or in the trade, unless such knowledge results from an unauthorized disclosure by the Executive or representatives of the Executive in violation of this Agreement.  This exception will not affect the application of any other provisions of this Agreement to such information in accordance with the terms of such provision.  All documents and tangible things embodying or containing confidential information are the Company’s exclusive property.  The Executive will protect the confidentiality of their content and will return all copies, facsimiles and specimens of them and any other form of confidential information in the Executive’s possession, custody or control to the Company before leaving the employment with the Company.

 

7.2                                 Definition of Confidential Information.  The term “Confidential Information” includes all information of any nature and in any form which at the time or times concerned is not generally known to the public, other than by act or acts of an employee not authorized by Company to disclose such information, and which relates to any one or more of the aspects of the present and past business of Company or any of its predecessors, including, but not limited to, patents and patent applications, inventions and improvements, whether patentable or not, development projects, policies, processes, formulas, techniques, know-how and other facts relating to sales, advertising, franchising, promotions, financial matters, customers, customer lists, customer purchases or requirements, licenses or trade secrets.

 

7.3                                 Competition.  During the term of the Executive’s employment with the Company, and for the period during which he receives compensation from the Company under Section 4.1.1 after the termination of his employment with the Company, the Executive will not, directly or indirectly, engage, participate or invest in or be employed by any business anywhere in the world which:

 

7.3.1                        acquires, explores, develops or mines uranium properties.

 

7.3.2                        provides advice, assistance or consultation to any company that acquires, explores, develops or mines uranium properties.

 

The foregoing restriction shall apply regardless of the capacity in which the Executive engages or engaged, participates or participated, or invests or invested in or is employed by a given business, whether as owner, partner, shareholder, consultant, agent, Executive, co-venturer or otherwise.  In addition, during the term of the Executive’s employment with the Company, and for a period of twelve (12) months thereafter, the Executive will not, directly or indirectly, without the prior written consent of the Company, hire or solicit for hire with any business any person who is employed by the Company at such time or was employed by the Company within the preceding twelve (12) months.  The provisions of this Section 7 shall not prevent the Executive from acquiring or holding publicly traded stock or other publicly traded securities of a business, so long as the Executive’s ownership does not exceed ten percent (10%) of the outstanding securities of such company of the same class as those held by the Executive or from engaging in any activity or having an ownership interest in any business that is reviewed by the Board.  The Executive understands that the restrictions set out in this Section 7 are intended to protect the Company’s interest in its secret, proprietary or confidential

 

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information and established customer relationships and goodwill, and agrees that such restrictions are reasonable and appropriate for this purpose.

 

7.4                                 Damages.  The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of the promises set forth in this Agreement, and that in any event money damages would be an inadequate remedy for any such breach.  Accordingly, the Executive agrees that in the case of breach, or proposed breach, of any portion of this Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company.

 

8.                                       Dispute Resolution.  If there shall be any dispute between the Company and the Executive (i) in the event of any termination of the Executive’s employment by the Company, provided such termination was not for Cause, or (ii) otherwise arising out of this Agreement, the dispute will be resolved in accordance with the dispute resolution procedures set forth in Exhibit A attached to this Agreement, the provisions of which are incorporated as a part of this Agreement, and the parties of this Agreement agree that such dispute resolution procedures will be the exclusive method for resolution of disputes under this Agreement; provided, however, that (a) either party may seek preliminary judicial relief if, in such party’s judgment, such action is necessary to avoid irreparable injury during the pendency of such procedures, and (b) nothing in Exhibit A will prevent either party from exercising the rights of termination set forth in this Agreement.  IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT, WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND THE EXECUTIVE AGREE, EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 7, “CONFIDENTIAL INFORMATION; NONCOMPETITION,” AND THIS SECTION 8, TO WAIVE COURT OF JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL, ANY DAMAGES, OTHER THAN COMPENSATORY DAMAGES.

 

9.                                       Successors.

 

9.1                                 This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assigned by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

9.2                                 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

9.3                                 The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, the term “Company” shall mean the Company as defined above and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

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10.                                 Miscellaneous.

 

10.1                           This Agreement shall be governed by and construed in accordance with the laws of the State of Arizona, without reference to principles of conflict of laws.  The captions of this Agreement are set forth for convenience only and shall have no separate force or effect.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

10.2                           All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Kelsey L. Boltz

6606 North Hillside Drive

Paradise Valley, AZ 85253

and to

Kelsey L Boltz

c/o Neutron Energy, Inc.

9000 E. Nichols Ave., Suite 225

Englewood, CO   80112

 

If to the Company:

 

Neutron Energy, Inc.

9000 E. Nichols Ave., Suite 225

Englewood, CO   80112With a copy to:

 

President

Neutron Energy, Inc.

9000 E. Nichols Ave., Suite 225

Englewood, CO   80112

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

10.3                           The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

10.4                           The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

10.5                           The failure of the Executive or the Company to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, shall not be deemed to be a waiver of such provision or right or any other provision or

 

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right of this Agreement, except that if the Executive chooses to terminate employment for Good Reason pursuant to Section 3.3, “Good Reason,” and complies with the provisions of Section 3, “Termination of Employment,” the Executive shall only be entitled to compensation and benefits applicable to such event of termination.

 

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IN WITNESS WHEREOF, pursuant to the authorization from the Board, the Company has caused this Agreement to be executed in its name on its behalf, as of the date first above written.

 

 

	
COMPANY:
    	
 
    
	
 
    	
NEUTRON   ENERGY, INC.
    
	
 
    	
a   Nevada corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gary C. Huber
    
	
 
    	
 
    	
Name:   Gary C. Huber
    
	
 
    	
 
    	
Title:   President and CEO
    
	
 
    	
 
    
	
 
    	
 
    
	
EXECUTIVE:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Kelsey L. Boltz
    
	
 
    	
Name:
    	
Kelsey   L. Boltz
    
	
 
    	
Title:
    	
Executive   Chairman of the Board
    
				

 

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State   of Colorado
    	
)
    
	
 
    	
)   ss.
    
	
County   of Arapahoe
    	
)
    
	
 
    	
)
    

 

The foregoing Employment Agreement was subscribed and sworn to before me this 24th day of March, 2010 by Gary C. Huber, President and CEO, on behalf of Neutron Energy, Inc., having authority to so do.

 

	
My   Commission Expires:
    	
 
    	
/s/   Robin M. Johnson
    
	
 
    	
 
    	
Robin   M. Johnson
    
	
 
    	
 
    	
Notary   Public
    
	
 
    	
 
    	
 
    

 

 

	
State   of Colorado
    	
)
    
	
 
    	
)   ss.
    
	
County   of Arapahoe
    	
)
    
	
 
    	
)
    

 

The foregoing Employment Agreement was subscribed and sworn to before me this 24th day of March, 2010 by Kelsey Boltz, Executive Chairman of the Board, of Neutron Energy.

 

 

	
My   Commission Expires:
    	
 
    	
/s/   Robin M. Johnson
    
	
 
    	
 
    	
Robin   M. Johnson
    
	
 
    	
 
    	
Notary   Public
    
	
 
    	
 
    	
 
    

 

15

 

EXHIBIT A

 

DISPUTE RESOLUTION PROCEDURES

 

1.                                       If a controversy arises that is covered by Section 8, “Dispute Resolution,” of the Agreement, then not later than twelve (12) months from the date of the event that is the subject of dispute, either party may serve on the other a written notice specifying the existence of such controversy and setting forth in reasonably specific detail the grounds of the notice (“Notice of Controversy”); provided  that, in any event, the other party will have at least thirty (30) days from and after the date of the Notice of Controversy to serve a written notice of any counterclaim (“Notice of Counterclaim”).  The Notice of Counterclaim will specify the claim or claims in reasonably specific detail.  If the Notice of Controversy or the Notice of Counterclaim, as the case may be, is not served within the applicable period, the claim set forth therein will be deemed to have been waived, abandoned and rendered unenforceable.

 

2.                                       For a three (3) week period following receipt of the Notice of Controversy or the Notice of Counterclaim, as the case may be, the parties will make a good faith effort to resolve the dispute through negotiation (“Period of Negotiation”).  Neither party will take any action during the Period of Negotiation to initiate arbitration proceedings.

 

3.                                       If the parties agree during the Period of Negotiation to mediate the dispute, then the Period of Negotiation will be extended by an amount of time to be agreed upon by the parties to permit such mediation.  In no event, however, may the Period of Negotiation be extended by more than five (5) weeks or, stated differently, in no event may the Period of Negotiation be extended to encompass more than a total of eight (8) weeks.

 

4.                                       If the parties agree to mediate the dispute, but are thereafter unable to agree within a one (1) week period on the format and procedures for the mediation, then the effort to mediate will cease, and the period of Negotiation will terminate four (4) weeks from the Notice of Controversy or the Notice of Counterclaim, as the case may be.

 

5.                                       Following the termination of the Period of Negotiation, the dispute, including the main claim and counterclaim, if any, will be settled by arbitration, governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”), and judgment upon the award may be entered in any court having jurisdiction.  The format and procedures of the arbitration are set forth below (referred to below as the “Arbitration Agreement”).

 

6.                                       A notice of intention to arbitrate (“Notice of Arbitration”) will be served within forty-five (45) days of the termination of the Period of Negotiation.  If the Notice of Arbitration is not served within this period, the claim set forth in the Notice of Controversy or the Notice of Counterclaim, as the case may be, will be deemed to have been waived, abandoned and rendered unenforceable.

 

7.                                       The arbitration, including the Notice of Arbitration, will be governed by the Commercial Rules of the American Arbitration Association (“AAA”) in effect on the date of the Notice of Arbitration, except that the terms of this Arbitration Agreement will control in

 

 

the event of any difference or conflict between such Rules and the terms of this Arbitration Agreement.

 

8.                                       The arbitrator will reach a decision on the merits on the basis of applicable legal principles as embodied in the law of the State of Arizona.  The arbitration hearing will take place in Phoenix, Arizona.

 

9.                                       There will be one arbitrator, regardless of the amount in controversy.  The arbitrator selected, in order to be eligible to serve, will be a lawyer in Phoenix, Arizona with at least fifteen (15) years experience specializing in either general commercial litigation or general corporate and commercial matters.  In the event the parties cannot agree on a mutually acceptable single arbitrator from the list submitted by the AAA, the AAA will appoint the arbitrator who will meet the foregoing criteria.

 

10.                                 At the time of appointment and as a condition of the appointment, the arbitrator will be apprised of the time limitations and other provisions of this Arbitration Agreement and will indicate such dispute resolver’s agreement to the Tribunal Administrator to comply with such provisions and time limitations.

 

11.                                 During the thirty (30) day period following appointment of the arbitrator, either party may serve on the other a request for limited numbers of documents directly related to the dispute.  Such documents will be produced within seven (7) days of the request.

 

12.                                 Following the thirty-day period of document production, there will be a forty-five (45) day period during which limited depositions will be permissible.  Neither party will take more than five (5) depositions, and no deposition will exceed three (3) hours of direct testimony.

 

13.                                 Disputes as to discovery or prehearing matters of a procedural nature will be promptly submitted to the arbitrator pursuant to telephone conference call or otherwise.  The arbitrator will make every effort to render a ruling on such interim matters at the time of the hearing (or conference call) or within five (5) business days thereafter.

 

14.                                 Following the period of depositions, the arbitration hearing will promptly commence.  The arbitrator will make every effort to commence the hearing within thirty (30) days of the conclusion of the deposition period and, in addition, will make every effort to conduct the hearing on consecutive business days to conclusion.

 

15.                                 An award will be rendered, at the latest, within nine (9) months of the date of the Notice of Arbitration and within thirty (30) days of the close of the arbitration hearing.  The award will set forth the grounds for the decision (findings of fact and conclusions of law) in reasonably specific detail.  The award will be final and nonappealable except as provided in the FAA and except that a court of competent jurisdiction will have the power to review whether, as a matter of law, based upon the findings of fact by the arbitrator, the award should be confirmed or should be modified or vacated in order to correct any errors of law made by the arbitrator.  Such judicial review will be limited to issues of law, and the parties agree that the findings of fact made by the arbitrator will be

 

2

 

final and binding on the parties and will serve as the facts to be relied upon by the court in determining the extent to which the award should be confirmed, modified or vacated.

 

16.                                 The award may only be made for compensatory damages, and if any other damages (whether exemplary, punitive, consequential, statutory or other) are included, the award will be vacated and remanded, or modified or corrected, as appropriate to promote this damage limitation.

 

3

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