Document:

exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), effective as of October 10, 2007 (the
“Effective Date”), is between TRI-ISTHMUS GROUP, INC., a Delaware corporation (the
“Company”), and DENNIS M. SMITH (“Smith”). The Company and Smith are collectively
referred to in this Agreement as the “Parties.”

Background

The company wishes to employ Smith as its Chief Financial Officer, and the Parties desire to
provide for the employment of Smith as of the Effective Date in accordance with the terms of this
Agreement.

Terms of Agreement

The Parties agree as follows:

1. EMPLOYMENT. The Company employs Smith to devote his personal services to the business
and affairs of the Company, and Smith accepts such employment, on the terms and conditions stated
in this Agreement.

1.1. Duties. Smith’s title and position shall be Chief Financial Officer of the Company.
Smith’s duties will be those customarily performed by persons acting in that capacity and
those that may be designated by the Board of Directors and the Chief Executive Officer of
the Company consistent with the title and position of Chief Financial Officer of the
Company. Smith shall report directly to the Company’s Chief Executive Officer. Smith shall
also serve, upon request and without additional compensation, as an officer or a director,
or both, of any subsidiary, division, or affiliate of the Company or any other entity in
which the Company holds an equity interest or which it sponsors.

1.2. Full-Time Employee. Smith shall devote his full time (except for reasonable vacation
time and absence for any disability), attention, and best efforts to the performance of his
duties described in Article 1.1. Provided, however, that Smith shall be permitted to
continue his service as a non-executive director of Research Pharmaceutical Services, Inc.;
VSource Asia Berhad; and Transpac Media Limited.

2. TERM. The term of Smith’s employment under this Agreement (the “Term”) shall
commence on the Effective Date and shall continue until terminated pursuant to Article 5.

3. COMPENSATION. As compensation for the services rendered by Smith under this Agreement,
the Company shall, during the Term, pay or provide Smith the following:

3.1. Base Salary. The Company shall pay Smith during the Term a base salary equal to Two
Hundred Seventy Five Thousand Dollars ($275,000.00) per fiscal year of the Company
(“Base Salary”). Base Salary shall be paid in equal installments every two weeks,
in arrears, at the Company’s regular and routine payroll dates, or at such intervals

 

 

as may otherwise be agreed upon by the Parties, and in accordance with any other payroll
procedures of the Company. Base Salary shall be prorated in any fiscal year during which
Smith is employed under this Agreement for less than the entire fiscal year, in accordance
with the number of days in that fiscal year during which Smith is so employed. Base Salary
shall also be prorated (on a daily basis) for any partial payroll period of employment under
this Agreement.

3.2. Annual Incentive Bonus. Smith shall be eligible to receive an annual incentive bonus
as determined by the Company’s Board of Directors (the “Board”) or the Compensation
Committee of the Board.

3.3. Option. Smith shall be eligible to participate in any stock option, performance share,
phantom stock, or similar long-term stock-based incentive plan adopted by the Company for
its employees in effect during the Term, including the Option Plan. The extent to which
Smith shall participate in any such plan will be determined by the Board or the Compensation
Committee of the Board. Concurrently, with the Effective Date of this Agreement, Smith
shall receive seven (7) year options to purchase up to six hundred thousand (600,000) shares
of the Company’s common stock at a strike price of $0.3125 per share. Such options shall
vest on the following schedule: options to purchase up to one hundred fifty thousand
(150,000) shares shall vest immediately; options to purchase up to one hundred fifty
thousand (150,000) shares shall vest on the first anniversary of the Effective Date of this
Agreement; and options to purchase up to an additional three hundred thousand (300,000)
            shares shall vest on the second anniversary of the Effective Date of this Agreement.
Provided, however, that Smith must be employed by the Company on the vesting dates set forth
above in order to receive these options, The terms and conditions of these options shall be
as set forth in an option grant agreement between the Company and Smith.

3.4. Savings and Retirement Plans. Smith shall be eligible to participate in any bonus,
savings, deferred compensation, retirement or pension, or death benefit plan adopted by the
Company for its employees generally in effect during the Term.

3.5. Welfare Benefit Plans. Smith shall be eligible to participate in any life insurance,
medical, dental, and hospitalization insurance, disability insurance benefit, or other
similar employee welfare benefit plan or program adopted by the Company covering its
employees generally in effect during the Term. In addition, until such time as the Company
adopts a medical/hospitalization plan, Smith shall be reimbursed for the cost of his
individual health insurance premium with Blue Cross/Blue Shield of South Carolina or such
other major medical insurance carrier that Smith may choose.

3.6. Paid Time Off. Smith shall be entitled to twenty (20) days of paid vacation or time
off (“PTO”) per fiscal year of the Company, in accordance with the Company’s PTO
policies, practices, and procedures in effect during the Term. Such PTO shall, however, be
prorated in any fiscal year during which Smith is employed under this Agreement for less
than the entire fiscal year, in accordance with the number of days in that fiscal year
during which Smith is so employed.

2

 

3.7. Tax Withholding. The Company may deduct from any compensation or other amount payable
to Smith under this Agreement (including under Article 5) social security (FICA) taxes and
all federal, state, municipal, and other taxes or governmental charges as may, in the
Company’s judgment, be required.

3.8. Participation in Compensation and Benefit Plans. Smith’s participation during the Term
in any or all of the plans or programs adopted by the Company described in Articles 3.3
through 3.5 (“Compensation and Benefit Plans”) will be subject to the terms and
conditions of those Compensation and Benefit Plans as they now exist or may hereafter be
adopted, amended, restated, or discontinued by the Company, including the satisfaction of
all applicable eligibility requirements and vesting provisions of those Compensation and
Benefit Plans. The Company shall have no obligation under this Agreement to continue any or
all of the Compensation and Benefit Plans that now exist or are hereafter adopted. To the
extent that Smith is eligible to participate in any Compensation and Benefit Plan existing
on the date of this Agreement for which a plan description or plan materials are available,
the Company has provided to Smith, and Smith hereby acknowledges receipt of, a copy of the
correct and complete written plan description or plan materials distributed to participants
or prospective participants.

4. EXPENSE REIMBURSEMENT. During the Term, Smith may incur, and shall be reimbursed by the
Company for, reasonable, ordinary and necessary, and documented business expenses to the extent
that Smith complies with, and reimbursement is permitted by, the Company’s policies, practices, and
procedures.

5. EMPLOYMENT TERMINATION. Either Party may terminate Smith’s employment under this
Agreement by giving written notice of termination to the other Party. If the Company is
terminating, it shall include in that notice a statement whether the termination is because of
Disability or for Cause or without Cause. The Parties’ respective rights and obligations upon the
termination of Smith’s employment under this Agreement are as follows:

5.1. Termination Generally. Upon any termination of Smith’s employment under this
Agreement, the Company shall pay or provide Smith the following:

5.1.a. Any amount of Base Salary earned by, but not yet paid to, Smith through the
effective date of termination of employment, as further described below (the
“Termination Date”);

5.1.b. All benefits that have been earned by or vested in, and are payable to, Smith
under, and subject to the terms (including all eligibility requirements) of, the
Compensation and Benefit Plans in which Smith participated through the Termination
Date;

5.1.c. All reimbursable expenses due, but not yet paid, to Smith as of the
Termination Date under Article 4; and

5.1.d. An amount equal to all accrued and unused PTO, calculated in accordance with
the Company’s PTO policies, practices, and procedures (including

3

 

authorized deductions and the deductions required by law), through the Termination
Date.

The amount of Base Salary due under Section 5.1.a shall be paid no later than thirty (30)
business days after the Termination Date; the amounts or benefits due under Section 5.1.b
shall be paid or provided in accordance with the terms of the Compensation and Benefit Plans
under which such amounts or benefits are due to Smith; and the amounts due under Sections
5.1.c and 5.1.d shall be paid in accordance with the terms of the Company’s policies,
practices, and procedures regarding reimbursable expenses and PTO, respectively. Except as
expressly provided below in this Article 5, upon paying or providing Smith the preceding
amounts or benefits, the Company shall have no further obligation or liability under this
Agreement for base salary or any other cash compensation or for any benefits under any of
the Compensation and Benefit Plans. Upon termination of Smith’s employment, Smith shall be
deemed to have resigned from any position as an officer or director, or both, of any
subsidiary, division, or affiliate of the Company or any other entity in which the Company
holds an equity interest or which it sponsors that Smith then holds; no written resignation
need be given or delivered to the Company.

In this Agreement, the Termination Date shall be (i) the date of Smith’s death, (ii) the
third business day after the date on which the Company gives notice of termination because
of Disability, or (iii) the date of termination specified in any other notice of
termination, or if not specified in the notice of termination, the date that notice of
termination is given.

In this Agreement, “Disability” means Smith’s permanent and total disability, which
shall be deemed to exist if he is unable reasonably to perform his duties under this
Agreement because of any 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 at least
ninety (90) consecutive days. Any Disability shall be determined by the Board or an
authorized committee or representative thereof (“Representative”), in its sole and
absolute discretion, upon receipt of competent medical advice from a qualified physician
selected by or acceptable to the Board or its Representative. Smith shall, if there is any
question about his Disability, submit to a physical examination by a qualified physician
selected by the Board or its Representative.

In this Agreement, “Cause” means any of the following: (i) Smith’s failure to
substantially perform his duties under this Agreement, other than any such failure resulting
from his incapacity due to physical or mental illness or Disability; (ii) Smith’s engaging
in any action which, or omitting to engage in any action the omission of which, has been,
is, or is reasonably expected to be substantially injurious (monetarily or otherwise) to the
Company or its business or reputation; (iii) Smith’s performance of any act or omission
constituting dishonesty that results, directly or indirectly, in significant gain or
enrichment of Smith or his family or affiliates at the expense of the Company; or (iv) any
breach by Smith of any obligation under any of Articles 6, 7, 8, and 9. Whether an event or
circumstance constituting Cause exists will be determined in good faith by the Board or its
Representative. If the Company believes that Cause for termination exists

4

 

under clause (i) above in this paragraph, the Company shall notify Smith of that belief, and
that notice shall describe the event or circumstance believed to constitute Cause for
termination. If that event or circumstance may reasonably be remedied or corrected, Smith
shall have thirty (30) days to effect that correction or remedy. If not corrected or
remedied within that thirty (30) day period, Cause for termination shall immediately be
deemed to exist, and Smith’s employment shall be deemed terminated. If the Company believes
that Cause for termination exists under any of clauses (ii), (iii), and (iv) above in this
paragraph, the Company shall notify Smith of that belief, and that notice shall constitute
immediate termination of Smith’s employment.

Smith may voluntarily terminate his employment under this Agreement only by giving at least
thirty (30) days’ prior written notice to the Company. Smith shall not be liable to the
Company for breach of this Agreement because of his termination of employment in accordance
with the preceding sentence.

5.2. Termination Without Cause or Upon Death or Disability. If Smith’s employment is
terminated by death or by the Company because of Disability or without Cause, (or his legal
representative, estate, or heirs) shall be entitled to receive from the Company, as
liquidated damages:

5.2.a. The continued payment of Base Salary, at the rate in effect at the
Termination Date, for six (6) consecutive months following the Termination Date (the
“Severance Payments”). Once Smith has been employed by the Company for at
least twelve (12) consecutive months, the continued payment of Base Salary in effect
at the Termination Date shall be for a period of twelve (12) months following the
Termination date; and

5.2.b. If Smith elects and maintains continued coverage under the Consolidated
Omnibus Benefits Reconciliation Act of 1985 and corresponding regulations
(“COBRA”), then for up to the twelve (12) consecutive months immediately
after the Termination Date, payments in an amount equal to the difference between
(i) the premiums paid or payable by Smith for coverage under COBRA for himself and
his dependents (if any) and (ii) the premiums that he would have paid for comparable
coverage under the Company’s then current group insurance plan or plans if his
employment under this Agreement had not ceased (the “Insurance Payments”);
except that the Insurance Payments shall expire or terminate immediately upon
Smith’s becoming eligible for coverage under another employer’s plan or policy.

The Severance Payments shall be paid at the dates on which Smith’s Base Salary would have
been payable if his employment under this Agreement had not been terminated. The Company
will commence the Severance Payments and the Insurance Payments within ten (10) business
days after the first business day on which the release executed and delivered in accordance
with Section 5.3.a becomes irrevocable by Smith (or his legal representative, estate, or
heirs). The Company’s obligations for the Insurance Payments are not intended to negate or
impair any obligation of the Company or right of Smith under COBRA. The Severance Payments
and the Insurance Payments shall be in

5

 

addition to the amounts or benefits to which Smith is entitled under Article 5.1. Any
Severance Payments or Insurance Payments (or both) under this Article 5.2 shall not be
deemed the continuation of Smith’s employment for any purpose.

5.3. Conditions to Severance Payments. Except as provided in Section 5.2.b and below in
this Article 5.3, none of the Severance Payments and the Insurance Payments under Article
5.2 will be subject to reduction as the result of future compensation earned or received by
Smith (including by self-employment), and Smith shall have no duty to mitigate his damages.
The Severance Payments and the Insurance Payments shall, however, be conditioned upon:

5.3.a. The Company’s receipt of a Settlement Agreement, General Release, and
Covenant Not to Sue executed and performed by Smith (or his legal representative,
estate, or heirs) in substantially the form of Exhibit “A” to this Agreement
(the “Release Agreement”); and

5.3.b. the compliance by Smith (or his legal representative, estate, or heirs) with
Articles 6, 7, 8, and 9 after the Termination Date as specified in those Articles,
as well as with the Release Agreement.

The Company may cease or reduce the Severance Payments or the Insurance Payments (or both)
if, and the Company shall be entitled to a return of the Severance Payments and the
Insurance Payments (or both) made to the extent that, there is or has been any material
violation by Smith (or his legal representatives, estate, or heirs) of any of Articles 6, 7,
8, and 9 or of the Release Agreement.

5.4. Termination for Cause or by Smith. If Smith’s employment is terminated by the Company
for Cause or is voluntarily terminated by Smith, then Smith shall not be entitled to any
payments under this Agreement other than the amounts or benefits to which he is entitled
under Article 5.1.

5.5. Post-Termination Survival. The provisions of this Article 5 shall survive the
termination of Smith’s employment by the Company and its subsidiaries to the extent
necessary to effect the post-termination payments or benefits to which Smith is entitled
under the terms of this Article 5.

6. CONFIDENTIAL INFORMATION. The Company shall provide to Smith, during the Term, access
to various trade secrets, confidential information, and proprietary information of the Company
(which, in this Article 6 as well as in Articles 7, 8, and 9, shall include the Company’s
subsidiaries and affiliates) which are valuable and unique to the Company (“Confidential
Information”). Confidential Information includes the Company’s plans, policies, and procedures
as well as the plans, policies and procedures of other persons having relationships that are
material to the Company’s business and affairs. Smith shall not, either while in the employ of the
Company or at any time thereafter, (i) use any of the Confidential Information, or (ii) disclose
any of the Confidential Information to any person not an employee of the Company or not engaged to
render services to the Company, except (in either case) to perform his duties under this Agreement
or otherwise with the Company’s prior written consent.

6

 

Nothing in this Article 6 shall preclude Smith from the use or disclosure of information generally
known to the public or not considered confidential by the Company or from any disclosure to the
extent required by law or court order (though Smith must give the Company prior notice of any such
required disclosure and must cooperate with any reasonable requests of the Company to obtain a
protective order regarding, or to narrow the scope of, the Confidential Information required to be
disclosed). All files, records, documents, information, data, and similar items relating to the
business or affairs of the Company, whether prepared by Smith or otherwise coming into his
possession, shall remain the exclusive property of the Company and shall not be removed from the
premises from the Company, except in the ordinary course of business as part of Smith’s performance
of his duties under this Agreement, and (in any event) shall be promptly returned or delivered to
the Company (without Smith’s retaining any copies) upon the termination of employment under this
Agreement.

7. NONCOMPETITION. Smith acknowledges that, in addition to his access to and possession of
Confidential Information, during the Term he will acquire valuable experience and special training
regarding the Company’s business and that the knowledge, experience, and training he will acquire
would enable him to injure the Company if he were to engage in any business that is competitive
with the business of the Company. Therefore, Smith shall not, at any time during the Term and for
the twelve (12) consecutive months immediately after the Termination Date, directly or indirectly
(as an employee, employer, consultant, agent, principal, partner, shareholder, officer, director,
or manager or in any other individual or representative capacity), engage, invest, or participate
in any business in direct competition with the business of the Company within a fifty (50)-mile
radius of each location, or set or group of locations, (i) at, from, or to which the Company
conducts or has conducted business or renders, provides, or delivers, or has rendered, provided, or
delivered, services or products during the Measurement Period (as defined below) or (ii) that is or
has been, during the Measurement Period, the subject of a Proposal (as defined below) to conduct
business or render, provide, or deliver services or products thereat, therefrom, or thereto.
“Measurement Period” means, with respect to Smith’s activity (A) at any time during the
Term, the Term, and (B) at any time on or after the Termination Date, the six (6) consecutive
months preceding, and including, the Termination Date. “Proposal” means a written or
formal proposal, bid, arrangement, understanding, or agreement by the Company to or with another
person that reflects or contains negotiated or substantive terms, but does not include any
marketing contact by the Company where the other person has not solicited that contact or indicated
any interest in doing business with the Company. (Smith shall not be prohibited, however, from
owning, as a passive investor, less than five percent (5%) of the publicly traded stock or other
securities of any entity engaged in a business competitive with that of the Company.) Smith
represents and agrees that (x) the Company has agreed to provide him, and he will receive from the
Company, special experience and knowledge, including Confidential Information, (y) because the
Confidential Information is valuable to the Company, its protection (particularly from any
competitive business) constitutes a legitimate interest to be protected by the Company by
enforcement of the restriction in this Article 7, and (z) the enforcement of the restriction in
this Article 7 would not be unduly burdensome to Smith and that, in order to induce the Company to
enter into this Agreement (which contains various benefits to Smith and obligations of the Company
with respect to Smith’s employment), Smith is willing and able to engage, invest, or participate in
business after the Termination Date so as not to violate this Article 7. The Parties agree that
the restrictions in

7

 

this Article 7 regarding scope of activity, duration, and geographic area are reasonable; however,
if any court should determine that any of those restrictions is unenforceable, that restriction
shall not thereby be terminated, but shall be deemed amended to the extent required to render it
enforceable. It is understood and accepted that Smith currently serves as a non-executive director
of: (a) Research Pharmaceutical Services, Inc., (b) VSource Asia Berhad and (c) Transpac Media
Limited and that such service does not constitute business that is competitive to the Company.

8. NONSOLICITATION. Smith shall not, at any time within the twelve (12) consecutive months
immediately after the Termination Date, either directly or indirectly:

8.1. Disclose Contact Information. Make known to any person the names and addresses, or
other contact information, of any of the customers, suppliers, or other persons having
significant business relationships with the Company within the information technology
industry, so that such person could affect, or attempt to affect, any of those relationships
to the detriment of the Company; or

8.2. Solicit Employees. Solicit, recruit, or hire, or attempt to solicit, recruit, or hire,
any employee or consultant of the Company, or in any other manner attempt to induce any
employee or consultant of the Company to leave the employ of the Company or cease his or her
consulting or similar business relationship with the Company. References in this Article
8.2 to “any employee or consultant” shall include any person who was an employee or
consultant of the Company at any time within the six (6) consecutive months preceding, and
including, the Termination Date.

9. DEVELOPMENTS. Smith shall promptly disclose to the Company all inventions, discoveries,
improvements, processes, formulas, ideas, know-how, methods, research, compositions, and other
developments, whether or not patentable or copyrightable, that Smith, by himself or in conjunction
with any other person, conceives, makes, develops, or acquires during the Term which (i) are or
relate to the properties, assets, or existing or contemplated business or research activities of
the Company, (ii) are suggested by, arise out of, or result from, directly or indirectly, Smith’s
association with the Company (including, but not limited to, any finders’ fees payable to Smith as
a result of financing transactions undertaken by the Company), or (iii) arise out of or result
from, directly or indirectly, the use of the Company’s time, labor, materials, facilities, or other
resources (“Developments”).

Smith hereby assigns, transfers, and conveys to the Company, and hereby agrees to assign, transfer,
and convey to the Company during or after the Term, all of his right and title to and interest in
all Developments. Smith shall, from time to time upon the request of the Company during or after
the Term, execute and deliver any and all instruments and documents and take any and all other
actions which, in the judgment of the Company or its counsel, are or may be necessary or desirable
to document any such assignment, transfer, and conveyance to the Company or to enable the Company
to file and process applications for, and to acquire, maintain, and enforce, any and all patents,
trademarks, registrations, or copyrights with respect to any of the Developments, or to obtain any
extension, validation, re-issue, continuance, or renewal of any such patent, trademark,
registration, or copyright. The Company will be responsible for the preparation of any such
instrument or document and for the implementation of any such

8

 

proceedings and will reimburse Smith for all reasonable expenses incurred by him in complying with
this Article 9.

10. INDEMNIFICATION. To the extent Smith is an officer or director of the Company, the
Company shall include Smith under any existing or future (i) directors’ and officers’ liability
insurance policy that the Company obtains and maintains or (ii) indemnification agreements between
the Company and other executives of the Company. Subject to the foregoing sentence, the Company
will indemnify Smith to the fullest extent permitted by the laws of the Company’s state of
incorporation in effect at that time or by the articles or certificate of incorporation and by-laws
of the Company, whichever affords the greater protection to Smith.

11. CERTAIN REMEDIES. Any breach or violation by Smith of any of Articles 6, 7, 8, and 9
shall entitle the Company, as a matter of right, to an injunction issued by any court of competent
jurisdiction, restraining any further or continued breach or violation, or to specific performance
requiring the compliance with Smith’s covenants. This right to an injunction or other equitable
relief shall be in addition to, and not in lieu of, any other remedies to which the Company may be
entitled. The existence of any claim or cause of action of Smith against the Company, or any
subsidiary or affiliate of the Company, whether based on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of Smith’s covenants in any of Articles 6,
7, 8, and 9. The covenants in Articles 6, 7, 8, and 9 and in this Article 11 shall survive the
termination of Smith’s employment under this Agreement.

12. BINDING AGREEMENT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
shall inure to the benefit of, the Company and Smith and their respective legal representatives,
heirs, executors, administrators, and successors and assigns (as permitted by this Article 12),
including any successor to the Company by merger, consolidation, or reorganization and any other
person that acquires all or substantially all of the business and assets of the Company. The
Company shall have the right, without the need for any consent from Smith, to assign its rights,
benefits, remedies, and obligations under this Agreement to one or more other persons. The rights,
benefits, remedies, and obligations of Smith under this Agreement are personal to Smith, however,
and may not be assigned or delegated by him; except that this shall not preclude (i) Smith from
designating one or more beneficiaries to receive any amount or benefit that may be paid or provided
after Smith’s death or (ii) the legal representative of Smith’s estate from assigning any right or
benefit under this Agreement to the person or persons entitled thereto under Smith’s will or the
laws of intestacy applicable to Smith’s estate, as the case may be.

13. SEVERABILITY. If any provision of this Agreement is found to be invalid or
unenforceable for any reason, then (i) that provision shall be severed from this Agreement, (ii)
this Agreement shall be construed and enforced as if that invalid or unenforceable provision never
constituted a part of this Agreement, and (iii) the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest extent permitted by
applicable law. Further, in lieu of that invalid or unenforceable provision, there shall be added
to this Agreement a provision as similar in its terms to that invalid or unenforceable provision as
may be possible and be valid and enforceable.

9

 

14. NOTICES. Any notice, request, or other communication to be given by either Party under
this Agreement by to the other shall be in writing and either (i) delivered in person, (ii)
delivered by prepaid same-day or overnight courier service, (iii) sent by certified mail, postage
prepaid with return receipt requested, or (iv) transmitted by facsimile, in any case addressed to
the other Party as follows:

	 	 	 	 	 
	 

	 	To the Company:
	 	Tri-Isthmus Group, Inc.
	 

	 	 	 	149 South Barrington Avenue, Suite 808
	 

	 	 	 	Los Angeles, California 90049
	 

	 	 	 	Attention: David Hirschhorn, Chief Executive Officer
	 

	 	 	 	Facsimile:                                          
	 
	 	 	 	 
	 

	 	with a copy (which shall not constitute notice) to:

	 
	 	 	 	 
	 

	 	 	 	Hughes & Luce, LLP
	 

	 	 	 	1717 Main Street, Suite 2800
	 

	 	 	 	Dallas, TX 75201
	 

	 	 	 	Attn: I. Bobby Majumder, Esq.
	 

	 	 	 	Facsimile: (214) 939-5849
	 
	 	 	 	 
	 

	 	To Smith:
	 	Dennis M. Smith
	 

	 	 	 	33 Gull Point Drive
	 

	 	 	 	Hilton Head Island, SC 29928
	 

	 	 	 	Facsimile: (603) 843-9266

or to such other address or facsimile number as the Party to be notified may have designated by
notice previously given in accordance with this Article 14. Communications delivered in person or
by courier service or transmitted by facsimile shall be deemed given and received as of actual
receipt (or refusal) by the addressee. Communications mailed as described above in this Article 14
shall be deemed given and received three (3) business days after mailing or upon actual receipt,
whichever is earlier.

15. CERTAIN DEFINED TERMS. In this Agreement, (i) “person” means an individual or
any corporation, partnership, trust, unincorporated association, limited liability company, or
other legal entity, whether acting in an individual, fiduciary, or other capacity, and any
government, court, or governmental agency, (ii) “include” and “including” do not
signify any limitation, (iii) “Article” and “Section” means any Article and any
Section, respectively, of this Agreement, unless otherwise indicated, (iv) an “affiliate”
of a person means any other person controlling, controlled by, or under common control with that
person, and (v) “business day” means any Monday through Friday, other than any such weekday
on which the executive offices of the Company are closed. In addition, the use in this Agreement
of “year,” “annual,” “month,” or “monthly” (or similar terms) to
indicate a measurement period shall not itself be deemed to grant rights to Smith for employment or
compensation for that period.

16. ENTIRE AGREEMENT. This Agreement, with Exhibit “A”, constitutes the entire
agreement between the Company and Smith with respect to the subject matter hereof and

10

 

supersedes any prior agreement between the Company and Smith with respect to the same subject
matter.

17. MODIFICATION AND WAIVER. No amendment to or modification of this Agreement, or waiver
of any term, provision, or condition of this Agreement, will be binding upon a Party unless the
amendment, modification, or waiver is in writing and signed by the Party to be bound. Any waiver
by a Party of a breach or violation of any provision of this Agreement by the other Party shall not
be deemed a waiver of any other provision or of any subsequent breach or violation.

18. GENDER. Whenever the context requires in this Agreement, words denoting gender in this
Agreement include the masculine, feminine, and neuter.

19. GOVERNING LAW; VENUE. This Agreement, and the rights, remedies, obligations, and
duties of the Parties under this Agreement, shall be governed by, construed in accordance with, and
enforced under the laws of the State of Delaware. The exclusive venue of any action or proceeding
relating to this Agreement or its subject matter shall be in Los Angeles, California.

20. COUNTERPARTS. This Agreement may be executed in counterparts, each of which
constitutes an original, but all of which constitute one and the same document.

The Parties have executed this Agreement to be effective as of the date stated in the first
paragraph.

	 	 	 	 	 	 	 
	THE COMPANY:	 	 	 	EMPLOYEE:
	TRI-ISTHMUS GROUP, INC.	 	 	 	 
	a Delaware corporation	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Signature
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	DAVID HIRSCHHORN
	 	 	 	Printed Name
	Its:

	 	Chief Executive Officer	 	 	 	 

11

 

EXHIBIT “A”

Settlement Agreement, General Release, and Covenant Not to Sue

12

 

EXHIBIT “A”

SETTLEMENT AGREEMENT,

GENERAL RELEASE, AND COVENANT NOT TO SUE

     This Settlement Agreement, General Release, and Covenant Not to Sue (“Agreement”) is
made and entered into as of the                      day of                     , ___, by and between
                                         (“Employee”) and                                         , a                                         
corporation (the “Company”), hereinafter collectively referred to as the “parties”.

Recitals

     WHEREAS, Employee was employed by the Company as                                          under the terms of
an Executive Employment Agreement dated as of
                    , 200___ (the “Employment
Agreement”);

     WHEREAS, Employee’s employment under the Employment Agreement shall terminate effective
                    ,
___ (the “Termination Date”); and

     WHEREAS, the parties desire to settle fully and finally, in the manner set forth herein, all
differences between them which have arisen, or which may arise, prior to, or at the time of, the
execution of this Agreement, including, but in no way limited to, any and all claims and
controversies arising out of the Employment Agreement, the employment relationship between Employee
and the Company, and the termination thereof;

Agreement

     NOW, THEREFORE, in consideration of the Recitals and the mutual promises, covenants and
agreements set forth herein, the parties covenant and agree as follows:

     1. Employee, for himself or herself and on behalf of his or her attorneys, heirs, assigns,
successors, executors, and administrators, IRREVOCABLY AND UNCONDITIONALLY RELEASES, ACQUITS, AND
FOREVER DISCHARGES the Company, its current and former parent, subsidiary, affiliated, and related
corporations, firms, associations, partnerships, limited liability companies, and other entities,
their successors and assigns, and the current and former owners, members, shareholders, managers,
directors, officers, partners, employees, agents, attorneys, representatives, and insurers of said
corporations, firms, associations, partnerships, limited liability companies, and other entities,
and their guardians, successors, assigns, heirs, executors, and administrators (hereinafter
collectively referred to as the “Releasees”), from any and all claims, complaints,
grievances, liabilities, obligations, promises, agreements, damages, causes of action, rights,
debts, demands, controversies, costs, losses, damages, and expenses (including, without limitation,
attorneys’ fees and expenses) whatsoever, other than any arising under this Agreement, under any
municipal, local, state, or federal law, common or statutory — including, but in no way limited
to, claims

13

 

under the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq. — for any
actions or omissions whatsoever, whether known or unknown and whether or not connected with the
Employment Agreement, the employment of Employee by the Company, or the termination thereof, which
existed or may have existed prior to, or contemporaneously with, the execution of this Agreement.

     2. Employee, for himself or herself and on behalf of his or her attorneys, heirs, assigns,
successors, executors, and administrators, COVENANTS NOT TO SUE OR OTHERWISE CONSENT TO PARTICIPATE
IN ANY ACTION AGAINST, any of the Releasees based upon any of the claims and other matters released
in paragraph 1 of this Agreement.

     3. Employee agrees that he or she will keep the terms, amount, and fact of this Agreement
STRICTLY AND COMPLETELY CONFIDENTIAL and that he or she will not communicate or otherwise disclose
to any employee (past, present, or future) of the Company or any of the other Releasees or to a
member of the general public the terms, amount, or fact of this Agreement, except as may be
required by law or compulsory process.

     4. Employee waives and releases forever any right or rights he or she might have to
employment, reemployment, or reinstatement with the Company or any of the other Releasees, except
as may be provided under the terms of this Agreement.

     5. Upon the expiration of seven (7) days after Employee’s execution of this Agreement, the
Company agrees to pay or provide Employee the Severance Payment as provided (and defined) in the
Employment Agreement.

     6. The parties hereto recognize that, by entering into this Agreement, the Company does not
admit, and does specifically deny, any violation of any local, state, or federal law, common or
statutory. The parties further recognize that this Agreement has been entered into in release and
compromise of any claims which might be asserted by Employee in connection with his or her
employment by the Company, or the termination thereof, and to avoid the expense and burden of any
litigation related thereto.

     7. The parties acknowledge and agree that in the event Employee materially breaches any
provision of this Agreement, (a) Employee will indemnify and hold the Company harmless from and
against any and all resulting damages, expense, or loss incurred by the Company (including, without
limitation, attorneys’ fees and expenses), (b) Employee will immediately repay to the Company in
full any payment made to him or her under the provisions of this Agreement, and (c) the Company
will be entitled to file counterclaims against Employee for breach of the covenant not to sue and
may recover from Employee any payment not repaid to the Company, as required by clause (b) of this
paragraph 7, as well as any and all other resulting actual or consequential damages.

     8. One or more waivers of a breach of any covenant, term, or provision of this Agreement by
either party shall not be construed as a waiver of a subsequent breach of the same covenant, term,
or provision, nor shall it be considered a waiver of any other then existing or subsequent breach
of a different covenant, term, or provision.

14

 

     9. If any provision or term of this Agreement is held to be illegal, invalid, or
unenforceable, (a) such provision or term shall be fully severable, (b) this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision had never
constituted part of this Agreement, and (c) the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal,
invalid, or unenforceable provision or term there shall be added automatically as a part of this
Agreement another provision or term as similar to the illegal, invalid, or unenforceable provision
as may be possible and that is legal, valid, and enforceable.

     10. The parties agree that should one party sue the other party for a breach of any provision
of this Agreement, the prevailing party shall be entitled to recover its attorneys’ fees and costs
of court. Each party shall have the right to sue for specific performance of this Agreement, and
for declaratory and injunctive relief.

     11. Either party may revoke this Agreement, within seven (7) days of the date of its execution
by Employee (the “Revocation Period”), by written notice to the other party. Employee
agrees that if he or she revokes this Agreement, he or she shall receive none of the benefits
provided for under its terms. Employee further understands and agrees that, unless the Company
receives from Employee, prior to the expiration of the Revocation Period, written notice of his or
her revocation of this Agreement, this Agreement and all of its terms shall have full force and
effect, and Employee shall have forever waived his or her right to revoke this Agreement.

     12. This Agreement constitutes the entire agreement of the parties, and supersedes all prior
and contemporaneous negotiations and agreements, oral or written, between the parties. All prior
and contemporaneous negotiations and agreements are deemed incorporated and merged into this
Agreement and are deemed to have been abandoned if not so incorporated. No representations, oral
or written, are being relied upon by either party in executing this Agreement other than the
express representations of this Agreement. This Agreement cannot be changed or terminated without
the express written consent of the parties.

     13. This Agreement shall be governed by and construed in accordance with the laws of the State
of Texas, except where preempted by federal law.

     14. By executing this Agreement, Employee acknowledges that (a) this Agreement has been
reviewed with him or her by a representative of the Company (see Attachment “A”, which is
attached hereto and incorporated herein by reference), (b) he or she has had at least twenty-one
(21) days to consider the terms of the Agreement (see Attachment “A”), and has considered
its terms for that period of time or has knowingly and voluntarily waived his or her right to do
so, (c) he or she has been advised by the Company in writing to consult with an attorney regarding
the terms of the Agreement (see Attachment “A”), (d) he or she has consulted with, or has
had sufficient opportunity to consult with, an attorney of his or her own choosing regarding the
terms of the Agreement, (e) any and all questions regarding the terms of this Agreement have been
asked and answered to his or her complete satisfaction, (f) he or she has read this Agreement and
fully understands its terms and their import, (g) except as provided by this Agreement, he or she
has no contractual right or claim to the benefits described herein, (h)

15

 

the consideration provided for herein is good and valuable, and (i) he or she is entering into
this Agreement voluntarily, of his or her own free will, and without any coercion, undue influence,
threat, or intimidation of any kind or type whatsoever.

16

 

     EXECUTED in                     ,                      this ___ day of                     
, 200___.

	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	THE STATE OF

	 	 	 	§	 	 
	 

	 	 
	 	§	 	 
	COUNTY OF

	 	 	 	§	 	 
	 

	 	 

	 	 	 	 

     BEFORE ME, the undersigned, a Notary Public, on this day personally appeared
                                        , known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he or she executed the same for the purposes and
consideration therein expressed.

     GIVEN
UNDER MY HAND AND SEAL OF OFFICE this ___ day of                     , 200___.

	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Notary Public, State of	 	 	 	 
	 

	 	 	 	 	 	 

[SEAL]

17

 

     EXECUTED
in ____, Texas, this ___day of                                         , 200___.

	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	THE STATE OF

	 	 	 	§	 	 
	 

	 	 
	 	§	 	 
	COUNTY OF

	 	 	 	§	 	 
	 

	 	 

	 	 	 	 

     BEFORE ME, the undersigned, a Notary Public, on this day personally appeared
                                        ,                                     
     of                                         , known to me to be
the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he or
she executed the same as the act of that company for the purposes and consideration therein
expressed.

     GIVEN
UNDER MY HAND AND SEAL OF OFFICE this ___ day of                     , 200___.

	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Notary Public, State of	 	 	 	 
	 

	 	 	 	 	 	 

[SEAL]

18

 

ATTACHMENT “A”

NOTICE OF RIGHTS

     Attached hereto you will find a proposed Settlement Agreement, General Release, and Covenant
Not to Sue (“Agreement”) with respect to the termination of your employment. It is
required by law that you be given at least 21 days from the date of receipt of the proposed
Agreement within which to consider its terms. During this period, please feel free to contact the
person listed below to ask any questions regarding the Agreement, including, but not limited to,
the definitions of words which you do not know and the meanings of phrases, sentences, or
paragraphs which you do not understand. It is recommended that you consult with an attorney
regarding your legal rights with respect to the Agreement during this 21-day period.

ACKNOWLEDGMENT OF RECEIPT

     I acknowledge that I received a copy of                                         ’s proposed Settlement
Agreement, General Release, and Covenant Not to Sue at
___:___.m. this ___ day of
___, ___, and that the Agreement and the Notice of Rights above have been reviewed with
me by the person listed below.

	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

	 	 	 	 	 
	COMPANY:	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	Its:

	 	 

	 	 
	 

	 	 

	 	 

19exv10w2

 

Exhibit 10.2

TRI-ISTHMUS GROUP, INC.

OPTION GRANT AGREEMENT

     This Option Grant Agreement (this “Option Agreement”) is entered into as of October 10, 2007
(the “Date of Grant”), by and between Dennis M. Smith (“Optionee”) and Tri-Isthmus Group, Inc. (the
“Company”). Capitalized terms not otherwise defined herein shall have the meanings assigned to
such terms in Section 13 of this Option Agreement.

     1. Grant of Option. The Company hereby grants to Optionee an option (the “Option”) to
purchase the number of shares of the Company’s Common Stock set forth below (the “Option Shares”),
at the exercise price set forth below, subject to the terms and conditions of the Plan and this
Option Agreement, and upon the occurrence of certain specified events, as follows:

	 	 	 	 	 
	Exercise Price Per Share
	 	 	0.3125	 
	Total Number of Option Shares Granted
	 	 	600,000	 
	Total Exercise Price
	 	$	187,500	 
	Type of Option:
	 	 	Incentive Stock Option	 
	Term/Expiration Date:
	 	 	7 years from Date of Grant	 

     This Option is intended to qualify as an Incentive Stock Option as defined in Section 422(b)
of the Code; provided, however, the Company has not made, and will not be deemed to make hereby,
any representations or warranties to Optionee with respect to such qualification.

     2. Vesting Schedule. Optionee’s Option to purchase up to six hundred thousand
(600,000) Option Shares shall vest incrementally as follows: (1) the option to purchase up to one
hundred fifty thousand (150,000) Option Shares shall vest immediately on the Date of Grant; (2) the
option to purchase up to one hundred fifty thousand (150,000) Option Shares shall vest on the first
anniversary of the Date of Grant; and (3) the option to purchase the remaining three hundred
thousand (300,000) Option Shares shall vest on the second anniversary of the Date of Grant.

     3. Exercise of Option.

     (a) Right to Exercise; Term of Option. Generally, this Option shall be
exercisable by Optionee with respect to any or all vested Option Shares from the time such
Option Shares vest (in accordance with the vesting schedule in Section 2) until the
seventh anniversary of the Date of Grant (the “Term”), subject to the terms and conditions
set forth in the Plan and this Option Agreement.

     (b) Method of Exercise. This Option shall be exercisable by written notice (in
substantially the form attached hereto as Exhibit A) which shall state the election
to exercise the Option, the number of Option Shares in respect of which the Option is being
exercised, and such other representations and agreements as to the Optionee’s investment
intent with respect to the Option Shares. Such written notice shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the aggregate exercise price
for the Option Shares in respect of which the Option is being exercised, payable in the
manner set forth in Section 4.

     (c) Date of Exercise, Transfer. This Option shall be deemed to be exercised
upon receipt by the Company of such written notice accompanied by the aggregate exercise
price of the

 

 

Option Shares in respect of which the Option is being exercised. Assuming compliance
with all other provisions of this Option Agreement, for income tax purposes the Option
Shares shall be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Option Shares.

     4. Payment of Aggregate Exercise Price.

     (a) Method of Payment. Payment of the aggregate exercise price for the Option
Shares in respect of which the Option is being exercised shall become immediately due upon
exercise of this Option and shall be payable:

     (i) in cash or check made payable to the Company;

     (ii) in shares of Common Stock held for the requisite period necessary to avoid
a charge to the Company’s earnings for financial reporting purposes and valued at
Fair Market Value on the date in which this Option is exercised; or

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

     (b) Taxes. The Optionee shall, upon notification of the amount due (if any) as
a result of the exercise of the Option and prior to or concurrent with delivery of the
certificate representing the Option Shares, pay to the Company the amounts necessary to
satisfy applicable federal, state and local tax withholding requirements.

     5. Restrictions on Exercise. This Option may not be exercised if the issuance of such
Option Shares upon such exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other law or regulation,
including any rule under Part 207 of Title 12 of the Code of Federal Regulations as promulgated by
the Federal Reserve Board.

     6. Limited Transferability of Option. This Option shall be exercisable only by the
Optionee during his lifetime and shall not be assignable or transferable, other than by will or by
the applicable laws of inheritance and as permitted under the Code following the Optionee’s death.
The terms and conditions of this Option Agreement, including (without limitation) the limited time
period during which this Option may be exercised following the Optionee’s death, shall be binding
upon the executors, administrators, heirs, successors and permitted assigns of the Optionee.

     7. Effect of Termination or Death. The following provisions shall govern the exercise
of this Option at or after the time of cessation of Service or death of the Optionee:

     (a) Should the Optionee cease to remain in Service for any reason other than death,
Disability or Misconduct, then the Optionee shall have a period of three (3) months
following the date of such cessation of Service during which to
exercise this Option as to shares that vested on or prior to the date of cessation. Upon such cessation of Service,
this Option shall immediately

2

 

terminate and cease to be outstanding with respect to any and all Option Shares which
are not, at the time, vested.

     (b) Should Optionee’s Service terminate by reason of Disability while holding this
Option, the vesting of this Option will thereupon accelerate and all of the unvested Option
Shares subject thereto will immediately vest and become exercisable. The Optionee shall
have a period of twelve (12) months following the date of such termination of Service during
which to exercise this Option.

     (c) If the Optionee dies while holding this Option, the vesting set forth in
Section 2 will thereupon accelerate and all of the unvested Option Shares subject
thereto will immediately vest and become exercisable. The personal representative of the
Optionee’s estate or the person or persons to whom this Option is transferred pursuant to
the Optionee’s will or the applicable laws of inheritance shall have a period of twelve (12)
months following the date of the Optionee’s death to exercise this Option.

     (d) Under no circumstances, however, shall this Option be exercisable after the
expiration of the Term.

     (e) Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the Term, this Option shall terminate and cease to be outstanding for any
vested Option Shares for which this Option has not been exercised.

     (f) Should Optionee’s Service be terminated for Misconduct or should the Optionee
otherwise engage in Misconduct while holding this Option Agreement, then the Option and this
Option Agreement (whether any or all Option Shares are vested or not) shall terminate
immediately and cease to remain outstanding.

     8. Changes in Capital Structure. The Optionee agrees and acknowledges that the
Company shall have the right at any time and from time to time after the date of this Option
Agreement to authorize additional classes or series of capital stock, some of which may entitle the
holders thereof to greater rights than the holders of the Common Stock into which this Option is
convertible, and to issue shares thereunder, subject only to the limits imposed by applicable laws.

     9. Tax Consequences. The grant and/or exercise of the Option will have federal and
state income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX ADVISOR UPON THE GRANT OF THE
OPTION AND BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE.

     10. Entire Agreement; Governing Law. This Option Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect to the subject
matter hereof, and this Option Agreement may not be amended except by means of a writing signed by
the Company and Optionee. This Option Agreement is governed by Delaware law except for that body
of law pertaining to conflict of laws.

     11. Warranties, Representations and Covenants. The undersigned Optionee warrants and
represents that he: (a) has received, read and understood the Option Agreement and the Plan and
agrees to abide by and be bound by its terms and conditions, (b) is acquiring such shares of Common
Stock for his own account for investment and not for resale or with a view to distribution thereof
in violation of the Securities Act of 1933, as amended, and the regulations promulgated thereunder
(the “Securities Act”);

3

 

and (c) is an “accredited investor” as defined in Rule 501 of Regulation D promulgated under
the Securities Act. The undersigned’s financial condition is such that he is able to bear the risk
of holding such securities for an indefinite period of time and the risk of loss of its entire
investment. The undersigned has sufficient knowledge and experience in investing in companies
similar to the Company so as to be able to evaluate the risks and merits of its investment in the
Company. Optionee hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Plan Administrator upon any questions relating to the Plan or this Option
Agreement. Optionee further agrees to notify the Company upon any change in the residence address
indicated below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH
OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE OPTIONEE’S EMPLOYMENT AT ANY TIME, WITH OR
WITHOUT CAUSE.

     12. Relation to Other Benefits; Termination of Employment. Any economic or other
benefit to the Optionee under this Option Agreement will not be taken into account in determining
any benefits to which the Optionee may be entitled under any profit-sharing, retirement or similar
benefit or compensation plan maintained by the Company and will not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan covering employees of
the Company. No provision of this Option Agreement will limit in any way whatsoever any right that
the Company may otherwise have to terminate the employment or adjust the compensation of the
Optionee at any time.

     13. Certain Definitions. For purposes of this Option Agreement, the following terms
shall have the following meanings:

     (a) “Board” shall mean the Company’s Board of Directors.

     (b) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (c) “Committee” shall mean a committee of two or more Board members appointed by the Board to
exercise one or more administrative functions under the Plan.

     (d) “Common Stock” shall mean the Company’s common stock, par value $0.01 per share.

     (e) “Disability” shall mean the inability of the Optionee, in the opinion of a qualified
physician acceptable to the Company, to perform the major duties of the Optionee’s position with
the Company because of the sickness or injury of the Optionee.

     (f) “Fair Market Value” per share of Common Stock on any relevant date shall be determined in
accordance with the following provisions:

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

4

 

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

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

     (g) “Misconduct” shall mean the commission of any act of fraud, embezzlement or dishonesty by
Optionee, any unauthorized use or disclosure by Optionee of confidential information or trade
secrets of the Company (or any Parent or Subsidiary), or any other intentional misconduct by
Optionee which has a material adverse effect on the business or affairs of the Company (or any
Parent or Subsidiary). The foregoing definition shall not be deemed to be inclusive of all the
acts or omissions which the Company (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of Optionee in the Service of the Company (or any Parent or Subsidiary).

     (h) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of such corporations (other than the Company) owns, at
the time of the determination, stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.

     (i) “Plan” shall mean the Company’s 2001 Stock Option/Stock Issuance Plan.

     (j) “Plan Administrator” shall mean either the Board or the Committee acting in its capacity
as administrator of the Plan.

     (k) “Service” shall mean the services provided to the Company (or any Parent or Subsidiary) by
Optionee pursuant to the Employment Agreement between Optionee and Company dated October 10, 2007.

     (l) “Stock Exchange” shall mean the American Stock Exchange or the New York Stock Exchange.

     (m) "Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of such corporations other than the last
corporation in the such chain owns, at the time of the determination, stock possessing 50 percent
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

5

 

     IN WITNESS WHEREOF, the Company and Optionee have each caused this Option Agreement to be
executed as of the Date of Grant.

	 	 	 	 	 	 	 
	 	 	THE COMPANY:
	 
	 	 	
TRI-ISTHMUS GROUP, INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	  

DAVID
HIRSCHHORN
	 	 
	 

	 	Its:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	OPTIONEE:
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Signature	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Print Name	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Residence Address	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Area Code/Telephone Number	 	 

6

 

Exhibit A to Option Grant Agreement

TRI-ISTHMUS GROUP, INC.

EXERCISE NOTICE

Tri-Isthmus Group, Inc.

149 South Barrington Avenue, Suite 808

Los Angeles, CA 90049

Attention: Secretary

     1. Exercise of Option. Effective as of today, ___, 20___, the undersigned
(“Purchaser”) hereby elects to purchase ___ shares (the “Option Shares”) of the Common Stock of
Tri-Isthmus, Inc. (the “Company”) under and pursuant to the Option Grant Agreement dated October
10, 2007 (the “Option Agreement”). The exercise price for the Option Shares shall be $0.3125 per
share, as specified in the Option Agreement.

     2. Delivery of Payment.

The undersigned Purchaser (check one and complete):

                     herewith encloses the cash or a certified or cashier’s check (drawn in favor of the
Company) in the amount of $                     in payment of the aggregate exercise price.

                     elects to make payment by delivering a number of shares of Common Stock held by
Purchaser for the requisite period necessary to avoid a charge to the Company’s earnings for
financial reporting purposes and valued at a Fair Market Value on the date in which this
Option is exercised equal to the aggregate exercise price of $                     in accordance with
the provisions of Section 4(a)(ii) of the Option Agreement, and includes
certificates and such other documentation necessary to effect such transfer, including, but
not limited to, a duly authorized stock power in balnk.

                     herewith encloses a copy of the applicable broker instructions set forth in
Section 4(a)(iii) of the Option Agreement.

     3. Representations of Purchaser. Purchaser hereby represents and warrants as follows:

     (a) Purchaser acknowledges that he has received, read and understood the Option
Agreement and the Plan and agrees to abide by and be bound by its terms and conditions.

     (b) Purchaser is acquiring such shares of Common Stock for its own account for
investment and not for resale or with a view to distribution thereof in violation of the
Securities Act of 1933, as amended, and the regulations promulgated thereunder (the
“Securities Act”); and

     (c) Purchaser is an “accredited investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act. The undersigned’s financial condition is such that he
is able to bear the risk of holding such securities for an indefinite period of time and the
risk of loss of its entire investment. The undersigned has sufficient knowledge and
experience in investing in

 

 

companies similar to the Company so as to be able to evaluate the risks and merits of
its investment in the Company.

     4. Rights as Shareholder. The Purchaser shall not be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any Option Shares for which such Option is
exercised, including, but not limited to, rights to vote or to receive dividends, unless and until
the Purchaser has satisfied all requirements for exercise of the Option pursuant to its terms, the
certificates evidencing such Option Shares have been issued and the Purchaser has become a record
holder of such Option Shares. A share certificate for the number of Option Shares so acquired
shall be issued to the Purchaser as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date is prior to the
date on which all the conditions set forth above are satisfied, except.

     5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser’s purchase or disposition of the Option Shares. Purchaser
represents that Purchaser has consulted with any tax consultant or consultants Purchaser deems
advisable in connection with the purchase or disposition of the Option Shares and that Purchaser is
not relying on the Company for any tax advice.

     6. Entire Agreement; Governing Law. The Option Agreement is incorporated herein by
reference. This Exercise Notice and the Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof,
and this Exercise Notice may not be amended except by means of a writing signed by the Company and
Purchaser. This Exercise Notice is governed by Delaware law except for that body of law pertaining
to conflict of laws.

	 	 	 	 	 	 	 	 	 
	Submitted by:	 	 	 	Accepted by:	 	 
	 
	 	 	 	 	 	 	 	 
	PURCHASER:	 	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	
TRI-ISTHMUS GROUP, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 
 

Signature

	 	 
	 	By:
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Its:
	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Print Name
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:	 	 	 	Address:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00134-of-00352.parquet"}]]