Document:

EXHIBIT 10.1

 

HARDINGE INC.

 

2002 INCENTIVE STOCK PLAN

 

1.  ESTABLISHMENT OF PLAN.

 

Hardinge
Inc. (hereafter referred to as the “Company”) proposes to grant to selected
employees of the Company and its subsidiaries: (a) Incentive Stock Options, (b) Non-Qualified
Stock Options, (c) Stock Appreciation Rights, (d) Restricted Stock
Incentives, and (e) Performance Share Incentives (collectively hereinafter
sometimes referred to as “Incentives”) for the purpose of enhancing the
profitability and value of the Company for the benefit of its shareholders by
providing stock awards to attract, retain and motivate officers and other key
employees who make important contributions to the success of the Company.

 

The
Company also proposes to grant to Outside Directors options to purchase common
stock of the Company pursuant to the Plan. The purpose of such Director Options
is to provide incentives for highly qualified individuals to stand for election
to the Board and to continue service on the Board and to encourage increased
stock ownership by Outside Directors in order to promote long-term stockholder
value. Restricted Stock Incentives, Incentive Stock Options (as defined in Section 422A
of the Internal Revenue Code), Stock Appreciation Rights, Performance Share
Incentives and Dividend Equivalents will not be granted to Outside Directors
under the Plan.

 

Incentives
shall be granted pursuant to the plan herein set forth, which shall be known as
the Hardinge Inc. 2002 Incentive Stock Plan (hereinafter referred to as the “Plan”).

 

2.  DEFINITIONS OF CERTAIN TERMS USED IN THE
PLAN.

 

a.         “Affiliate”
means any subsidiary, whether directly or indirectly owned, or parent of the
Company, or any other entity designated by the Committee.

b.        “Board”
means the Company’s Board of Directors.

c.         “Change of
Control” is defined in Section 18 of the Plan.

d.        “Code” means
the Internal Revenue Code of 1986, as amended, or any successor code thereto.

e.         “Committee”
means the Incentive Compensation Committee of the Board of Directors of the
Company or any successor committee the Board of Directors may designate to
administer the Plan.

f.           “Common
Stock” means the Hardinge Inc. Common Stock, par value $.01 per share.

g.        “Competition”
means to manage, operate, join, control, participate in, provide consulting
advice to, act as an agent or director of, or have any financial interest in
(as a partner, stockholder, investor or otherwise), any firm, corporation,
partnership, association, joint stock company, joint venture, unincorporated
organization, limited liability company or any such similar business operation
or activity (or any portion thereof), directly or indirectly, in competition
with any of the business operations or activities of the Company or its
Affiliates or affecting or attempting to affect a Change of Control.

h.        “Director
Stock Option” means a Nonqualified Option granted to Outside Directors pursuant
to Section 7 of the Plan.

i.            “Employee”
means any person who is employed by the Company or a subsidiary of the Company.

j.            “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

k.         “Fair Market
Value” of Stock means the fair and reasonable value thereof as determined by
the Committee according to prices in trades as reported on the NASDAQ National
Market. If there are no prices so reported or if, in the opinion of the
Committee, such reported prices do not represent the fair and reasonable value
of the Stock, then the Committee shall determine Fair Market Value by any means
it deems reasonable under the circumstances.

 

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l.            “Incentive
Stock Options” means stock options granted under the Plan that meet the
definition of Incentive Stock Options under Section 422 of the Code.

m.                                    “Nonqualified
Options” means stock options granted under the Plan that are not Incentive
Stock Options.

n.        “Outside
Director” means any member of the Company’s Board of Directors who is not also
an Employee.

o.        “Participant”
shall mean any employee or director selected to receive a grant under the Plan.

p.        “Performance
Share Incentives” means Incentives granted under Section 9 of the Plan.

q.        “Restricted
Stock Incentives” means Incentives granted under Section 10 of the Plan.

r.           “Retirement”
means retirement under any pension or retirement plan of the Company or of a
subsidiary, or termination of employment with the Company or a subsidiary, by
action of the employing company, because of disability.

s.         “Stock”
means the Common Stock or any other authorized class or series of common stock
or any such other security outstanding upon the reclassification of any of such
classes or series of common stock, including, without limitation, any stock
split-up, stock dividend, creation of targeted stock, or other distributions of
stock in respect of stock, or any reverse stock split-up, or recapitalization
of the Company or any merger or consolidation of the Company with any
Affiliate. 

t.           “Stock
Appreciation Rights” means Incentives granted under Section 8 of the Plan.

u.        “Stock
Options” means Incentive Stock Options and Nonqualified Options granted under
the Plan.

v.        A “subsidiary”
means any corporation in which the Company owns, directly or indirectly, at
least thirty-five percent (35%) of the total combined voting power of all
classes of stock; except that for purposes of any option subject to the
provisions of Section 424 of the Internal Revenue Code, as amended, the
term “subsidiary” means any corporation in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of an Option, each of
the corporations, other than the last corporation in the unbroken chain, owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of one of the other corporations in such chain.

w.      “Termination
for Cause” means an Employee’s termination of employment with the Company or an
Affiliate or an Outside Director’s removal from office as a director of the
Company, in each case because of such person’s willful engaging in gross
misconduct; provided, however, that a Termination for Cause shall not include
termination attributable to (i) poor work performance, bad judgment or
negligence, (ii) an act or omission believed by such person in good faith
to have been in or not opposed to the best interests of the Company and
reasonably believed by such person to be lawful, or (iii) the good faith
conduct of such person in connection with a Change of Control (including
opposition to or support of such Change of Control).

 

3.  STOCK RESERVED FOR INCENTIVES.

 

A
maximum of 450,000 shares of Common Stock or the number of securities to which
said number of shares may be adjusted in accordance with Section 4 below,
may be issued upon granting of Restricted Stock Incentives, Performance Share
Incentives, and the exercise of Stock Options and Stock Appreciation Rights
under the Plan. Such shares may be either authorized and unissued shares or
previously issued shares purchased by the Company for purposes of the Plan.
Subject to adjustment in accordance with Section 4 below, a maximum of one
percent (1%) of the outstanding shares of the Company’s Common Stock as of the
first business day of any calendar year may be the subject of Incentives
granted under the Plan in that calendar year. The shares available for granting
Incentives in any year shall be increased by the number of shares available
under the Plan in previous years but not covered by Incentives granted under
the Plan in those years plus any shares as to which options or other benefits
granted under the Plan have lapsed, expired, terminated or been cancelled. Any
shares subject to stock options, grants or Incentives may thereafter be subject
to new stock options, grants or Incentives under the Plan if there is a
forfeiture of any such grants or Incentives, or the lapse, expiration or
termination of any such option but not if there is a surrender of an option or
portion thereof pursuant to a Stock Appreciation Right as provided hereafter in
Section 8. The maximum number of shares in respect of which Incentives may
be granted during the term of the Plan to an individual recipient of Incentives
shall be 112,500.

 

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The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which counsel to Company deems necessary to the proper issuance
and sale of any shares hereunder, shall relieve the Company from any liability
for failure to issue or sell such shares as to which such authority has not
been obtained.

 

4.  ADJUSTMENT PROVISIONS

 

In
the event of any extraordinary dividend, reorganization, recapitalization,
stock dividend, stock split-up, change in par or no par value, combination of
shares, merger, consolidation, sale of all or substantially all of the assets
of the Company, warrant or rights offering or combination, exchange or
reclassification of Common Stock or any other similar event or any other change
in the corporate structure or shares of the Company, the Committee or its
delegate shall cause such equitable adjustment as it deems appropriate to be
made in the number and kind of shares then remaining available for issue under
the Plan, and in the terms of the outstanding Incentives to reflect such event
and preserve the value of such Incentives. In the event the Committee determines
that any such event has a minimal effect on the value of Incentives, it may
elect not to cause any such adjustments to be made. In all events, the determination
of the Committee or its delegee shall be conclusive. If any such adjustment
would result in a fractional security being issuable or awarded under the Plan,
such fractional security shall be disregarded. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect and no adjustment
by reason hereof shall be made with respect to the number or price of shares
subject to a grant.

 

5.  ADMINISTRATION OF THE PLAN.

 

The
authority to grant Incentives to employees under the Plan shall be vested in
the Committee; provided, however, that the Committee shall have no authority
regarding the granting of Director Stock Options to Outside Directors, which
grants shall be non-discretionary. The Committee shall determine those eligible
to receive Incentives and the amount, type and terms of each Incentive, subject
to the provisions of the Plan. Each member of the Committee shall be (i) an
“outside director” within the meaning of Section 162(m) of the Code,
subject to any transitional rules applicable to the definition of outside
director, and (ii) a “disinterested person” within the meaning of Rule 16b-3
under the Exchange Act, or otherwise qualified to administer this Plan as
contemplated by that Rule or any successor Rule under the Exchange
Act. In making any determinations under the Plan, the Committee shall be
entitled to rely on reports, opinions or statements of officers or employees of
the Company, as well as those of counsel, public accountants and other
professional or expert persons. All determinations, interpretations and other
decisions under or with respect to the Plan or any Incentives by the Committee
shall be final, conclusive and binding upon all parties, including without
limitation, the Company, any Employee, and any other person with rights to any
Incentive under the Plan, and no member of the Committee shall be subject to
individual liability with respect to the Plan.

 

Subject
to the provisions of the Plan, the Committee from time to time shall determine
the individuals to whom, and the time or times at which, Incentives shall be
granted and the terms thereof. In the case of officers to whom Incentives may
be granted, the selection of such officers and all of the foregoing
determinations shall be made directly by the Committee in its sole discretion.
In the case of key employees other than officers, the selection of such
employees and all of the foregoing determinations may be delegated by the Committee
to an administrative group of officers chosen by the Committee. Incentives
granted to one employee need not be identical to those granted other employees.

 

The
Committee shall administer and shall have full power to construe and interpret
the Plan; prescribe, amend and rescind rules and regulations relating to
the Plan; and make all other determinations and take all other actions that the
Committee believes reasonable and proper, including the power to delegate
responsibility to others to assist it in administering the Plan. The
determinations of the Committee shall be made in accordance with its judgment
as to the best interests of the Company and its stockholders and in accordance
with the purposes of the Plan. The Committee’s determinations shall in all
cases be conclusive.

 

A
majority of the members of the Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of the entire
Committee. Any determination of the Committee may be made, without notice or
meeting, by the written consent of a majority of the Committee members.

 

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6.  ELIGIBILITY.

 

Any
Employee selected by the Committee, except a member of the Committee, shall be
eligible for any Incentive contemplated under the Plan. In making its
determination, the Committee shall take into account the present and potential
contributions of the Employees to the success of the Company and such other
such factors as the Committee shall deem relevant. Outside Directors of the
Company shall be eligible for grants of Director Stock Options under Section 7
of the Plan. An Employee or Director who has been granted an Incentive under this
or any other plan of the Company or any of its Affiliates may or may not be granted
additional Incentives under the Plan at the discretion of the Committee. As a
condition to the exercise of a grant, the Company may require the Participant
exercising the grant to represent and warrant that at the time of exercise the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel to
the Company, such a representation is required by applicable law.

 

7.  STOCK OPTIONS.

 

The
Committee may grant Incentive Stock Options, other statutory options under the
Code, and Nonqualified Options to eligible Employees, and such Stock Options
shall be subject to the terms and conditions of this Section 7 of the Plan
and such other terms and conditions as the Committee may prescribe.

 

(a) OPTION PRICE. The option price per
share with respect to each Stock Option shall be determined by the Committee,
but shall not be less than 100% of the fair market value of the Common Stock on
the date the Stock Option is granted, as determined by the Committee. Except as
provided in Section 4 hereof, under no circumstances shall the Board or
the Committee lower the exercise price of outstanding options issued under the
Plan.

 

(b) PERIOD OF OPTION. The period of each
Stock Option shall be fixed by the Committee; provided, however, that such
period shall not exceed ten (10) years from the grant date in the case of
Incentive Stock Options.

 

(c) PAYMENT. The option price shall be
payable at the time the Stock Option or the Director Stock Option is exercised
in cash or, at the discretion of the Committee, in whole or in part in the form
of shares of Common Stock already owned by the grantee (based on the fair market
value of the Common Stock on the date the option is exercised by the
Committee). No shares shall be issued until full payment therefor has been
made. A grantee of a Stock Option or a Director Stock Option shall have none of
the rights of a stockholder until the shares are issued.

 

(d) EXERCISE OF OPTION. The shares covered
by a Stock Option may be purchased in such installments and on such exercise
dates as the Committee may determine. Any shares not purchased on the
applicable exercise date may be purchased thereafter at any time prior to the final
expiration of the Stock Option. In no event (including those specified in
paragraphs (e), (f) and (g) of this section below) shall any Stock
Option or any Director Stock Option be exercisable after its specified
expiration period and in no event shall a Stock Option or Director Stock Option
be exercised after the expiration of ten (10) years from the date such option
is granted. The Committee may provide that, subject to such conditions as it
considers appropriate, upon the delivery of shares of Common Stock to the
Company in payment of the exercise price of a Stock Option, the grantee of such
Stock Option automatically be awarded a Stock Option for up to the number of
shares of Common Stock so delivered.

 

(e) RETIREMENT AND TERMINATION. Upon
Retirement or termination of employment of the Stock Option grantee for reasons
other than those described in Section 14 of the Plan, Stock Option
privileges shall apply only to those Options immediately exercisable at the
date of such Retirement or termination. The Committee, however, in its discretion,
may provide on a case by case basis that any Stock Options outstanding but not
yet exercisable upon such Retirement or termination of the Stock Option grantee
may become exercisable in accordance with a schedule to be determined by the
Committee. Options exercisable upon Retirement shall remain exercisable for
three (3) years after Retirement; Options exercisable upon termination for reasons
other than Retirement or those described in Section 14 of the Plan shall
remain exercisable for six (6) months after such termination.

 

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(f) DEATH. Upon the death of a Stock Option
or Director Stock Option grantee, Stock Option or Director Stock Option
privileges shall apply only to those shares which were immediately exercisable
at the time of death, and options exercisable upon death shall remain exercisable
for three (3) years after death. The Committee, in its discretion, may
provide that any Stock Options or Director Stock Options outstanding but not
yet exercisable upon the death of a Stock Option or Director Stock Option
grantee may become exercisable in accordance with a schedule to be determined
by the Committee. Such privileges shall expire unless exercised by legal
representatives within such period of time as determined by the Committee but
in no event later than the date of the expiration of the Stock Option or Director
Stock Option.

 

(g) LIMITS ON INCENTIVE STOCK OPTIONS.
Except as may otherwise be permitted by the Code, the Committee shall not, in
the aggregate, grant to any Employee Incentive Stock Options that are first exercisable
during any one calendar year (under all such plans of such Employee’s employer
corporation and its parent and subsidiary corporations) to the extent that the
aggregate fair market value of the Common Stock, at the time the Incentive
Stock Options are granted, exceeds $100,000.

 

Commencing
with the 2002 annual meeting of the stockholders of the Company, Director Stock
Options with an option period of ten (10) years and an option price equal
to 100% of the fair market value of the Common Stock on the date the Director
Stock Option is granted, shall be granted to each Outside Director for 750
shares of the Company’s Common Stock effective as of the close of each annual
meeting of the stockholders of the Company (i) at which such individual is
elected a director, or (ii) following which such individual will continue
to serve as a director or member of a continuing class of directors, and except
as specifically provided in this paragraph, such Director Stock Options shall
be subject to the terms and conditions of this Section 7 of the Plan.

 

8.  STOCK APPRECIATION RIGHTS.

 

The
Committee may, in its discretion, grant a right to receive the appreciation in
the fair market value of shares of Common Stock either singly or in combination
with an underlying Stock Option granted hereunder. Such Stock Appreciation
Rights shall be subject to the following terms and conditions and such other
terms and conditions as the Committee may prescribe:

 

(a) TIME AND PERIOD OF GRANT. If a Stock
Appreciation Right is granted in connection with an underlying Stock Option, it
may be granted at the time of the Stock Option Grant or at any time thereafter
but prior to the expiration of the Stock Option Grant. If a Stock Appreciation
Right is granted in connection with an underlying Stock Option, at the time the
Stock Appreciation Right is granted the Committee may limit the exercise period
for such Stock Appreciation Right, before and after which period no Stock
Appreciation Right shall attach to the underlying Stock Option. In no event
shall the exercise period for a Stock Appreciation Right granted with respect
to an underlying Stock Option exceed the exercise period for such Stock Option.
If a Stock Appreciation Right is granted without an underlying Stock Option,
the period for exercise of the Stock Appreciation Right shall be set by the
Committee.

 

(b) VALUE OF STOCK APPRECIATION RIGHT. If a
Stock Appreciation Right is granted in connection with an underlying Stock
Option, the grantee will be entitled to surrender the Stock Option which is
then exercisable and receive in exchange therefor an amount equal to the excess
of the fair market value of the Common Stock on the date the election to
surrender is received by the Company over the Stock Option price multiplied by
the number of shares covered by the Stock Options which are surrendered. If a
Stock Appreciation Right is granted without an underlying Stock Option, the
grantee will receive upon exercise of the Stock Appreciation Right an amount
equal to the excess of the fair market value of the Common Stock on the date
the election to surrender such Stock Appreciation Right is received by the
Company over the fair market value of the Common Stock on the date of grant multiplied
by the number of shares covered by the grant of the Stock Appreciation Right.

 

(c) PAYMENT OF STOCK APPRECIATION RIGHT.
Payment of a Stock Appreciation Right shall be in the form of shares of Common
Stock, cash, or any combination of shares and cash. The form of payment upon exercise
of such a right shall be determined by the Committee either at the time of the
grant of the Stock Appreciation Right or at the time of exercise of the Stock
Appreciation Right.

 

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9.  PERFORMANCE SHARE INCENTIVES.

 

The
Committee may grant awards under which payment may be made in shares of Common
Stock, cash or any combination of shares and cash if the performance of the
grantee, the Company or any subsidiary or division of the Company selected by
the Committee during the award period meets certain goals established by the
Committee. Such Performance Share Incentives shall be subject to the following
terms and conditions and such other terms and conditions as the Committee may
prescribe.

 

(a) INCENTIVE PERIOD AND PERFORMANCE GOALS.
The Committee shall determine and include in a Performance Share Incentive
grant the period of time for which a Performance Share Incentive is made (“Incentive
Period”), which period must be a minimum of one year. The Committee shall also
establish performance objectives (“Performance Goals”) to be met by the
Company, subsidiary or division or the grantee during the Incentive Period as a
condition to payment of the Performance Share Incentive. The Performance Goals
may include earnings per share, return on stockholders’ equity, return on
assets, net income, Company earnings performance compared to its domestic competition
or any other financial or other measurement established by the Committee. The
Performance Goal may include minimum and optimum objectives or a single set of
objectives.

 

(b) PAYMENT OF PERFORMANCE SHARE
INCENTIVES. The Committee shall establish the method of calculating the amount
of payment to be made under a Performance Share Incentive if the Performance
Goals are met, including the fixing of a maximum payment. The Performance Share
Incentive shall be expressed in terms of shares of Common Stock referred to as “Performance
Shares”. After the completion of an Incentive Period, the performance of the
grantee, the Company, subsidiary or division shall be measured against the
Performance Goals and the Committee shall determine whether all, none or any
portion of a Performance Share Incentive shall be paid. The Committee, in its discretion,
may elect to make payment in shares of Common Stock, cash or a combination of
shares and cash. Any cash payment shall be based on the fair market value of
Performance Shares on, or as soon as practicable prior to, the date of payment.

 

(c) REVISION OF PERFORMANCE GOALS. At any
time prior to the end of an Incentive Period, the Committee may revise the
Performance Goals and the computation of payment if unforeseen events occur
which have a substantial effect on the performance of the Company, subsidiary
or division and which in the judgment of the Committee make the application of
the Performance Goals unfair unless a revision is made.

 

(d) REQUIREMENT OF EMPLOYMENT. A grantee of
a Performance Share Incentive must remain in the employment of the Company
until the completion of the Incentive Period in order to be entitled to payment
under the Performance Share Incentive; provided that the Committee may, in its
sole discretion, provide for a partial payment where such an exception is
deemed equitable.

 

(e) DIVIDENDS. The Committee may, in its
discretion, at the time of the granting of a Performance Share Incentive,
provide that any dividends declared on the Common Stock during the Incentive
Period, and which would have been paid with respect to the Performance Shares had
they been owned by a grantee, be (i) paid to the grantee, or (ii) accumulated
for the benefit of the grantee and used to increase the number of Performance
Shares of the grantee.

 

10.
RESTRICTED STOCK INCENTIVES.

 

The
Committee may issue shares of Common Stock to a grantee which shares shall be
subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe:

 

(a) REQUIREMENT OF EMPLOYMENT. A grantee of
a Restricted Stock Incentive must remain in the employment of the Company
during a period designated by the Committee (“Restriction Period”). If the grantee
leaves the employment of the Company prior to the end of the Restriction
Period, the Restricted Stock Incentive shall terminate and the shares of Common
Stock shall be returned immediately to the Company; provided that

 

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the
Committee may, at the time of the grant, provide for the employment restriction
to lapse with respect to a portion or portions of the Restricted Stock
Incentive at different times during the Restriction Period. The Committee may,
in its discretion, also provide for such complete or partial exceptions to the
employment restriction as it deems equitable, but in no event shall the
Restriction Period be less than three years.

 

(b) RESTRICTIONS ON TRANSFER AND LEGEND ON
STOCK CERTIFICATES. During the Restriction Period, the grantee may not sell,
assign, transfer, pledge or otherwise dispose of the shares of Common Stock except
as provided under Section 11 hereof. Each certificate for shares of Common
Stock issued hereunder shall contain a legend giving appropriate notice of the
restrictions in the grant.

 

(c) ESCROW AGREEMENT. The Committee may
require the grantee to enter into an escrow agreement providing that the
certificates representing the Restricted Stock Incentive will remain in the physical
custody of an escrow holder until all restrictions are removed or expire.

 

(d) LAPSE OF RESTRICTIONS. All restrictions
imposed under the Restricted Stock Incentive shall lapse upon the expiration of
the Restriction Period if the conditions as to employment set forth above have
been met. The grantee shall then be entitled to have the legend removed from
the certificates.

 

(e) DIVIDENDS. The Committee shall, in its
discretion, at the grant of the Restricted Stock Incentive, provide that any
dividends declared on the Common Stock during the Restriction Period shall either
be (i) paid to the grantee, or (ii) accumulated for the benefit of
the grantee and paid to the grantee only after the expiration of the
Restriction Period.

 

11.
DIVIDEND EQUIVALENTS.

 

The
Committee is hereby authorized to grant to eligible employees Dividend
Equivalents under which the employee shall be entitled to receive payments in
cash equivalent to the amount of cash dividends paid by the Company to holders
of Common Stock with respect to a number of shares of Common Stock granted
under the Plan as determined by the Committee. Subject to the terms of the Plan
and any applicable agreement, such Dividend Equivalents may have such terms and
conditions as the Committee shall determine.

 

12.
NONTRANSFERABILITY.

 

Each
Incentive granted under the Incentive Stock Plan shall not be transferable
other than by Will or the laws of descent and distribution, and with respect to
Stock Options, shall be exercisable during the grantee’s lifetime by the
grantee only or the grantee’s guardian or legal representative.

 

13.
NO RIGHT OF EMPLOYMENT.

 

The
Incentive Stock Plan and the Incentives granted hereunder shall not confer upon
any eligible employee the right to continued employment with the Company or
affect in any way the right of the Company to terminate the employment of an
eligible employee at any time and for any reason.

 

14.
TAXES.

 

The
Company shall be entitled to withhold, or otherwise collect from the recipient,
the amount of any tax attributable to any amount payable or shares deliverable
under the Plan after giving the person entitled to receive such amount or
shares notice as far in advance as practicable. The recipient may elect,
subject to approval by the Committee, to have shares withheld by the Company in
satisfaction of such taxes, or to deliver other shares of Stock owned by the
recipient in satisfaction of such taxes. With respect to officers of the Company
or a subsidiary or other recipients subject to Section 16(b) of the Exchange
Act, the Committee may impose such other conditions on the recipient’s election
as it deems necessary or appropriate in order to exempt such withholding from
the penalties set forth in said Section. The number of shares to be withheld or
delivered shall be calculated by reference to the Fair Market Value of the
appropriate class or series of Stock on the date that such taxes are
determined.

 

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15.
FORFEITURE OF INCENTIVES.

 

Unless
the Committee shall have determined otherwise, the recipient of an Incentive
shall forfeit all amounts not payable or privileges with respect to Stock
Options not immediately exercisable upon the occurrence of any of the following
events:

 

a.     The
recipient is Terminated for Cause.

b.     The
recipient voluntarily terminates his or her employment other than by Retirement
after attainment of age 55, or such other age as may be provided for in the
Incentive.

c.     The
recipient engages in Competition with the Company or any Affiliate.

d.     The
recipient engages in any activity or conduct contrary to the best interests of
the Company or any Affiliate.

 

Stock
Options and Director Stock Options immediately exercisable upon the occurrence
of any of the preceding events shall remain exercisable for seven (7) days
after the occurrence of such event unless the Committee in its sole discretion
shall provide that such Stock Options and Director Stock Options shall remain
exercisable for a longer period.

 

The
Committee may include in any Incentive any additional or different conditions
of forfeiture it may deem appropriate. The Committee also, after taking into
account the relevant circumstances, may waive any condition of forfeiture
stated above or in the Incentive contract.

 

In
the event of forfeiture, the recipient shall lose all rights in and to the
Incentive. Except in the case of Restricted Stock Incentives as to which the
restrictions have not lapsed, this provision, however, shall not be invoked to
force any recipient to return any Stock already received under an Incentive.

 

Such
determinations as may be necessary for application of this Section, including
any grant of authority to others to make determinations under this Section,
shall be at the sole discretion of the Committee, and its determinations shall
be conclusive.

 

16.
ACCELERATION.

 

The
Committee may, in its sole discretion, accelerate the date of exercise,
vesting, lapse of restrictions or other receipt of any Incentive, provided that
in no event shall the Restriction Period for Restricted Stock Incentives be
less than three years.

 

17.
RIGHTS AS A SHAREHOLDER.

 

A
recipient of an Incentive shall, unless the terms of the Incentive provide
otherwise, have no rights as a shareholder, with respect to any options or
shares which may be issued in connection with the Incentive until the issuance
of a Stock certificate for such shares, and no adjustment other than as stated
herein shall be made for dividends or other rights for which the record date is
prior to the issuance of such Stock certificate. In addition, with respect to
Restricted Stock Incentives, recipients shall have only such rights as a
shareholder as may be set forth on the certificate or in the terms of the
Incentive.

 

18.
FOREIGN NATIONALS.

 

Incentives
may be awarded to persons who are foreign nationals or employed outside the
United States on such terms and conditions different from those specified in
the Plan as the Committee considers necessary or advisable to achieve the
purposes of the Plan or to comply with applicable laws.

 

19.
CHANGE IN CONTROL PROVISIONS.

 

(a)   Impact of
Event. Notwithstanding any other provision of the Plan to the contrary, in the
event of a Change in Control, any Incentives outstanding as of the date such
Change in Control is determined

 

A-8

 

to
have occurred and not then exercisable and vested shall become fully
exercisable and vested to the full extent of the original grant and all
restrictions on Incentives shall immediately lapse.

 

(b)   Change in
Control Cash Out. Notwithstanding any other provision of the Plan, upon the
occurrence of a Change of Control all outstanding Stock Options shall
immediately become fully exercisable, and during the 60-day period from and
after such Change in Control (the “Exercise Period”), an optionee shall have
the right, in lieu of the payment of the exercise price for the shares of Stock
being purchased under the Stock Option or Director Stock Option and by giving notice
to the Company, to elect (within the Exercise Period) to surrender all or part
of the Stock Option or Director Stock Option to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change in Control Price per share of Stock on the date of such election
shall exceed the exercise price per share of Stock under the Stock Option or
Director Stock Option (the “Spread”) multiplied by the number of shares of Stock
granted under the Stock Option or Director Stock Option as to which the right
granted under this section shall have been exercised; provided, however, that
if the end of such 60-day period from and after a Change in Control is within six
months of the date of grant of a Stock Option or Director Stock Option held by
an optionee who is an officer or director of the Company and is subject to Section 16(b) of
the Exchange Act, such Stock Option or Director Stock Option shall be cancelled
in exchange for a cash payment to the optionee, effected on the day which is
six months and one day after the date of grant of such Option, equal to the
Spread multiplied by the number of shares of Stock granted under the Stock
Option or Director Stock Option. For purposes of this paragraph only, the date
of grant of any Stock Option or Director Stock Option approved by the Committee
prior to the date on which the Plan is approved by the Company’s shareholders
shall be deemed to be the date on which the Plan is approved by the Company’s
shareholders.

 

(c)   Definition
of Change in Control. For purposes of the Plan, a “Change in Control” shall
mean the happening of any of the following events:

 

(i)            An
acquisition by any individual, entity or group within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a “Person”) resulting in beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (x) the then outstanding shares of Common Stock of the
Company (the “Outstanding Company Common Stock”) or (y) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); excluding, however, the following acquisitions of Outstanding
Company Common Stock and Outstanding Company Voting Securities: (1) any
acquisition directly from the Company (other than an acquisition pursuant to
the exercise of a conversion privilege), (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation or other
entity controlled by the Company or (4) any acquisition by any person pursuant
to a reorganization, merger or consolidation if, following such reorganization,
merger or consolidation, the conditions described in clauses (1), (2) and (3) of
subsection (iii) of this section are satisfied, or

 

(ii)           Individuals
who, as of the effective date of the Plan, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual who becomes a member of the Board subsequent
to such effective date, whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of
directors then comprising the Incumbent Board, shall be considered as though
such individual were a member of the incumbent Board; but, provided further,
that any such individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) or other actual or

 

A-9

 

threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board shall not be so considered as a member of the Incumbent Board; or

 

(iii)          Approval by
the shareholders of the Company of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (“Business Combination”); excluding, however, such a Business
Combination pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation or other entity resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company’s assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (2) no person (other than the Company, any employee benefit plan or
related trust sponsored or maintained by the Company or any corporation or
other entity controlled by the Company or such corporation resulting from such
Business Combination and any person beneficially owning, immediately prior to such
Business Combination, directly or indirectly, 20% or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, as the case may
be) will beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the corporation or
other entity resulting from such Business Combination or the combined voting
power of the outstanding voting securities of such corporation or other entity
entitled to vote generally in the election of directors and (3) at least a
majority of the members of the board of directors of the corporation or other
entity resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or

 

(iv)                  The approval
by the shareholders of the Company of a plan of partial or complete liquidation
or dissolution of the Company.

 

(d)   Change in
Control Price. For purposes of the Plan, “Change in Control Price” means the
higher of (i) the highest reported sales price, regular way, of a share of
Stock in any transaction reported on the NASDAQ National Market or other
national securities exchange on which such shares are listed, as applicable,
during the 60-day period prior to and including the date of a Change in Control
and (ii) if the Change in Control is the result of a tender or exchange
offer or a Business Combination, the highest price per share of Stock paid in
such tender or exchange offer or Business Combination; provided, however, that
in the case of a Stock Option which (A) is held by an optionee who is an
officer or director of the Company and is subject to Section 16(b) of
the Exchange Act and (B) was granted within 240 days of the Change in
Control, then the Change in Control Price for such Stock Option shall be the
Fair Market Value of the Stock on the date such Stock Option is exercised, cancelled
or cashed out pursuant to the terms of the Plan. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Board.

 

20.
AMENDMENT OF INCENTIVE.

 

The
Committee may amend, modify or terminate any outstanding Incentive, including
substituting therefor another Incentive of the same or a different type,
changing the date of exercise or realization and converting an 

 

A-10

 

Incentive
Stock Option to a Nonstatutory Stock Option, provided that the holder’s consent
to such action shall be required unless the Committee determines that the
action, taking into account any related action, would not materially and
adversely affect the Employee and provided further that under no circumstances,
except as provided in Section 4 hereof, shall the exercise price of
outstanding stock options issued under the Plan be reduced.

 

21.
AMENDMENT TO PRIOR PLAN.

 

No
grants shall be made under the Company’s 1996 Incentive Stock Plan on or after
shareholder approval of the Plan.

 

22.
EFFECTIVE DATE AND TERM.

 

This
Plan shall be effective upon adoption by the shareholders of the Company at its
2002 Annual Meeting to be held on May 7, 2002. The Plan shall continue in
effect until May 6, 2012, when it shall terminate. Upon termination, any
balances of shares reserved for issuance under the Plan shall be cancelled, and
no Incentives shall be granted under the Plan thereafter. The Plan shall continue
in effect, however, insofar as is necessary to complete all of the Company’s
obligations under outstanding Incentives to conclude the administration of the
Plan.

 

23.
TERMINATION AND AMENDMENT OF PLAN.

 

The
Plan may be terminated at any time by the Board of Directors except with
respect to any Stock Options, Director Stock Options, Restricted Stock
Incentives, Stock Appreciation Rights or Performance Share Incentives then outstanding.
Also, the Board may, from time to time, amend the Plan as it may deem proper
and in the best interests of the Company or as may be necessary to comply with
any applicable laws or regulations, provided that no such amendment shall,
without approval of the holders of a majority of the outstanding shares of
Common stock, (i) increase the total number of shares which may be issued under
the Plan, (ii) reduce the minimum purchase price or otherwise materially increase
the benefits under the Plan, (iii) change the basis for valuing Stock Appreciation
Rights, (iv) impair any outstanding Incentives without the consent of the
holder, (v) alter the class of employees eligible to receive Incentives, or
(vi) withdraw the administration of the Plan from the Committee.

 

24.
CONSTRUCTION OF PLAN.

 

The
place of administration of the Plan shall be in the State of New York, and the
validity, construction, interpretation, administration and effect of the Plan
and of its rules and regulations, and rights relating to the Plan, shall
be determined solely in accordance with the laws, but not the laws pertaining
to choice of laws, of the State of New York.

 

25.
OTHER LAWS.

 

The
Committee may refuse to issue or transfer any shares or other consideration
under a grant if, acting in its sole discretion, it determines that the
issuance or transfer of such shares or such other consideration might violate
any applicable law or regulation or entitle the Company to recover the same
under Section 16(b) of the Exchange Act, and any payment tendered to
the Company by a Participant, other holder or beneficiary in connection with
the exercise of such grant shall be promptly refunded to the relevant
Participant, holder, or beneficiary. Without limiting the generality of the
foregoing, no grant granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws and any other laws to which such offer, if made, would
be subject.

 

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Exhibit 10.11

 
 

  EMPLOYMENT AGREEMENT
  OF
  PETER SANTORI    
    

        In consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of
which the parties acknowledge, INVESTOOLS INC., a corporation having an address of 13947 S. Minuteman Drive, Draper, UT, 84020, (the "Company") and  PETER SANTORI ("Executive") intending to be legally bound, hereby agree as follows:
 

        1.     EMPLOYMENT.    The Company agrees to employ Executive and Executive hereby accepts such employment on an
at-will basis pursuant to the terms and conditions of this Agreement until terminated in accordance with Section 5 of this Agreement. Executive represents that he shall not disclose
to the Company any confidential information obtained from a third party or otherwise violate any confidentiality obligations Executive may have incurred with a third party. 

        2.     SERVICES.    During the term of this Agreement, Executive shall be employed as "Senior Vice President and
General Counsel/Chief Legal Officer" for Thinkorswim Group, Inc. with job responsibilities related thereto. Executive shall report to the Chief Executive Officer and shall devote his full time
efforts to the faithful performance of his duties on behalf of the Company. Executive shall also perform such other duties, and may have job responsibilities modified from time to time as may be
requested by the Chief Executive Officer, provided such duties are generally consistent with the level of responsibility currently held by Executive. Executive's principal place of performance of his
duties during the term of this Agreement shall be the corporate offices located at 600 W. Chicago Avenue, Chicago, IL. Executive shall not engage in additional gainful employment of any kind or
undertake any role or position which would affect his ability to perform his responsibilities, whether or not for compensation, with any person or entity during the term of this Agreement without
advance written approval of the Chief Executive Officer. 

        3.     ADHERENCE TO COMPANY RULES.    Executive, at all times during the term of this Agreement, shall strictly adhere
to and obey all of the Company's written rules, regulations and policies, including without limitation the Investools Code of Business Ethics (attached hereto as Exhibit A), which will be
provided to Executive and are now in effect, or as subsequently adopted or modified by the Company and provided to Executive which govern the operation of the Company's business and the conduct of
employees of the Company. 

        4.     COMPENSATION.

        a.     Salary.    Executive shall receive an annual base salary of $285,000.04 payable in bi-weekly gross
amounts of $10,961.54, which amount shall be subject to annual review by the Compensation Committee of the Company for possible increases. Executive shall receive all compensation and reimbursements
pursuant to this Agreement in accordance with the customary payroll practices of the Company with respect to time and manner of payment. 

        b.     Relocation Allowance.    Executive shall be entitled, without limitation, to a relocation allowance of
$40,000.00 to cover all relocation related expenses in accordance with Company Policy. 

        c.     Benefits.    On the first day of the month following Executive's start date, Executive shall be entitled to
participate in the Executive benefit plans provided by the Company for all Executives generally, subject to the terms and conditions of the applicable plan. Additionally, Executive shall be entitled
to additional travel insurance (Accidental Life & Dismemberment). The Company shall be entitled to change, amend or terminate such plans from time to time in its sole discretion. 

1

 

        d.     Paid Time Off.    During the term of this Agreement, Executive shall be entitled to five (5) weeks paid
personal time (PTO) off per year, not to exceed 200 accrued hours, which shall accrue at a rate of 6.1538 hours per bi-weekly pay period. Executive shall take his PTO time in
accordance with Company policies and procedures. 

        e.     Expenses.    Subject to the Company's standard policies and procedures with respect to expense reimbursement as
applied to its executive employees generally, the Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related
purposes, including, but not limited to, dues and fees to approved industry and professional organizations, as well as meetings of such organizations. 

        f.      Discretionary Bonus.    For the calendar year 2008, Executive shall be entitled to a guaranteed,
non-prorated annual bonus at least equal to 30% of Executive's base salary (the "Target Bonus"). For each calendar year subsequent to 2008, beginning with January 1, 2009, the
Target Bonus and the annual bonus associated with the Target Bonus shall be reviewed annually by the Compensation Committee to ascertain whether, in the sole judgment of the reviewing committee, the
Target Bonus and the annual bonus associated with the Target Bonus should be increased. 

        g.     Stock Options.    Executive shall be entitled to receive 15,000 options with an exercise price equal to the
stock's closing bid price on the date the option is approved by the Compensation Committee of the Board of Directors, or your hire date, whichever is later. The option is subject to approval by the
Compensation Committee and all option terms will be set forth in our standard stock option agreement. Executive shall be eligible to receive future additional stock option grants, as determined by the
Compensation Committee, in its sole discretion. The applicable stock option agreement and plan shall govern all other terms and conditions of Executive's options. 

        h.     Restricted Shares.    Executive shall be entitled to receive 15,000 shares of restricted stock of Investools
Common Stock ("Restricted Stock"), subject to the approval by the Compensation Committee, and all terms will be set forth in our standard Restricted Stock Agreement. Executive shall be eligible to
receive future additional Restricted Shares, as determined by the Compensation Committee, in its sole discretion. 

        i.      Retirement Plan.    On the first day of the month following 90 days after Executive's start date,
Executive shall be entitled to participate in the Company's 401(k) retirement plan provided by the Company for all employees generally, subject to the terms and conditions of the applicable plan. The
Company shall be entitled to change, amend or terminate such plan from time to time in its sole discretion. 

        j.      Other.    Subject to applicable law, Executive and, to the extent applicable, Executive's family, dependents and
beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to executive
employees of the Company generally; provided, however, that Executive and Executive's
family shall continue to participate in such health plan under which Executive is currently covered. Such benefits, plans and programs may include, without limitation, a profit sharing plan, a thrift
plan, a health insurance or health care plan, life insurance, disability insurance or a pension plan. The Company shall not, however, by reason of this Section be obligated to institute, maintain, or
refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees of the Company generally. 

2

 

        5.     TERMINATION.    The Company or Executive may terminate this Agreement and Executive's employment as provided
below: 

        a.     Termination by the Company for Cause.    The Company shall have the right to immediately terminate Executive's
employment at any time for any of the following reasons (each of which is referred to herein as "Cause") by giving Executive written notice of the effective date of termination (which effective date
may be the date of such notice): 

          (i)  willful
and material breach by Executive of any provision of this Agreement; 

         (ii)  any
act by Executive of fraud or dishonesty including, but not limited to, stealing or falsification of Company records, with respect to any aspect of the Company's
business; 

        (iii)  failure
by Executive to follow the lawful instructions or directions from the Chief Executive Officer of the Company; 

        (iv)  failure
by Executive to perform in any manner under this Agreement after being given reasonable notice of such failure by the Company, along with an explanation of such
failure of performance; 

         (v)  misappropriation
of Company funds or of any corporate opportunity; 

        (vi)  conviction
of Executive of a felony, or of a crime that the Company, in its sole discretion, determines involves a subject matter which may reflect negatively on the
Company's reputation or business (or a plea of nolo contendere thereto); 

       (vii)  acts
by Executive attempting to secure or securing any personal profit not fully disclosed to and approved by the Chief Executive Officer and/or the Board of Directors
("Board") of the Company in connection with any transaction entered into on behalf of the Company; 

      (viii)  gross,
willful or wanton negligence, misconduct, or conduct which constitutes a breach of any fiduciary duty or duty of loyalty owed to the Company by Executive; 

        (ix)  material
violation of any lawful Company policy, rule, regulation or directive; 

         (x)  conduct
on the part of Executive, even if not in connection with the performance of his duties contemplated under this Agreement, that could result in serious prejudice
to the interests of the Company, as determined by the Company in its sole discretion, and Executive fails to cease such conduct immediately upon receipt of notice to cease such conduct; 

        (xi)  acceptance
by Executive of employment with another employer; or 

       (xii)  violation
of material federal or state securities laws as determined in the sole discretion of the Company. 

        If
the Company terminates Executive's employment for any of the reasons set forth above, the Company shall have no further obligations to Executive hereunder from and after the effective
date of termination and shall have all other rights and remedies available under this or any other agreement and at law or in equity and Executive receives nothing else. 

        b.     Termination by the Company Without Cause.    The Company shall have the right to terminate Executive without
Cause for any reason by providing thirty (30) days' written notice to Executive. If the Company terminates Executive without Cause by providing thirty (30) days' notice, the Company
shall pay Executive through the date of termination and, subject to the limitations set forth below, the Company shall provide Executive with severance compensation in an amount equal to the greater
of (i) six (6) month's base salary (based on Executive's annual salary on the date of termination), less applicable taxes or (ii) the severance pay to which 

3

 

Executive
would be entitled under a severance pay plan, if any, in effect at the time of Executive's termination without Cause. Such severance compensation shall be paid in bi-weekly
installments ("Installment Severance Payments") over the following six (6) months (referred to herein as the "Severance Period") in accordance with the Company's normal payroll practices and
schedule. Executive shall also be entitled to the full vesting of all options and restricted shares granted to the termination date, subject to the terms and conditions of the applicable plan and
agreement. All other provisions of the Stock Options Agreement and Restrictive Stock Award Agreement will remain in force. In the event Executive is in violation of Sections 7, 8, 9, 10 or 12
of this Agreement at any time during the Severance Period, the Company shall be entitled to immediately cease the payment of the Installment Severance Payments, the Company's severance obligation
shall terminate and expire, and the Company shall have no further obligations hereunder from and after the date of such other employment or violation and shall have all other rights and remedies
available under this Agreement or any other agreement and at law or in equity. 

        c.     Voluntary Termination by Executive.    In the event that Executive's employment with the Company is voluntarily
terminated by Executive for any reason, the Company shall have no further obligations hereunder from and after the date of such termination and shall have all other rights and remedies available under
this Agreement or any other agreement and at law or in equity. 

        d.     Termination Upon Death.    In the event that Executive shall die during his employment by the Company, the
Company shall pay to Executive's estate any compensation due that would otherwise have been payable through the date of death. 

        e.     Termination Upon Disability.    In the event that Executive shall become disabled during his employment by the
Company, Executive's employment hereunder shall terminate and the Company shall provide Executive with severance payments equal to three (3) months' salary (based on Executive's monthly salary
on the date of termination), less applicable taxes. Such severance payments shall be paid bi-weekly over a period of three months in accordance with the Company's normal payroll practices
and schedule. For purposes of this Agreement, Executive shall become "disabled" if he shall become, because of illness or incapacity, unable to perform the essential functions of his job under this
Agreement with or without reasonable accommodation for a continuous period of one hundred and eighty (180) days during the term of this Agreement. 

        6.     CHANGE OF CONTROL.

        a.     For purposes of this Agreement, a "Change in Control" of the Company shall be deemed to have occurred at such time as: 

          (i)  The
acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then outstanding
shares of common stock of the Company or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors;
provided, however, that the following acquisitions shall not
constitute a Change of Control under this subsection (i): (x) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege),
(y) any acquisition by the Company, or (z) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the
Company; or 

         (ii)  Individuals
who, as of the effective date hereof constitute the Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent to the effective date hereof whose election, or nomination for election by the Company's stockholders, was 

4

 

approved
by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or 

        (iii)  Approval
by the stockholders of the Company of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the
assets of the Company. 

        b.     Benefits Upon Change in Control.

        Severance Benefits.    If: (1)(i) a Change of Control (as defined herein) occurs within the first two (2) years of the
Executive's employment pursuant to this Agreement and (ii) the Company or its successor terminates Executive's employment; or (2) the Executive tenders his resignation within
180 days following a Change of Control, Executive shall be entitled to receive a cash severance benefit in an amount equal to twelve (12) month's base salary (based on Executive's annual
salary on the date of the Change of Control), less applicable taxes (the "Change of Control Severance Period"). Such amount shall be paid in bi-weekly installments in accordance with the
Company's normal payroll practices and schedule. Executive shall also be entitled to the full vesting of all options and restricted shares granted to the termination date, subject to the terms and
conditions of the applicable plan and agreement. All other provisions of the Stock Options Agreement and Restrictive Stock Award Agreement will remain in force. Provided however, the Company shall
have no obligation to provide Executive with any severance compensation or options vesting under this Section 6 if Executive is in breach or violation of any of the covenants contained in
Sections 7, 8, 9, 10 or 12, during the time period in which the Company is making the severance payments. 

        c.     No Mitigation or Offset.    Executive shall not be required to mitigate the amount of any payment provided for
in this Section 6 of this Agreement by seeking other employment or otherwise. The
Company shall not be entitled to set off or reduce any severance payments owed to Executive under this Section 6 by the amount of earnings or benefits received by Executive in future
employment. 

        7.     NONDISCLOSURE.    During the term of this Agreement, the Company agrees and promises to provide, and Executive
will acquire, knowledge with respect to the Company's business operations, including, by way of illustration, the Company's Work Product (as defined below), trade secrets, processes, methodologies and
methods for analyzing and investing in the stock market, software, databases, and other technical information, business information, customer lists and information, customer preferences, promotional
and marketing materials, marketing plans and strategies, business planning, financial, and costing information related thereto, regardless of the form or media containing such information, and
confidential information relating to the Company's policies and Executives (all of such information herein referred to as the "Confidential Information"). The protection of the Confidential
Information against unauthorized disclosure or use is of critical importance to the Company. Executive agrees that Executive will not, during his employment, divulge to any person, directly or
indirectly, except to the Company or its officers and agents (including Company attorneys or accountants) or as reasonably required in connection with Executive's duties on behalf of the Company, or
use, except on behalf of the Company, any Confidential Information acquired by Executive during his employment. Executive agrees that his confidentiality obligation applies to all Confidential
Information he has received, learned or accessed, no matter when he accessed, learned or received such information. Executive further agrees that Executive will not, at any time after his employment 

5

 

has
ended (for whatever reason), use or divulge to any person directly or indirectly any Confidential Information, or use any Confidential Information in any subsequent employment or business of any
nature; provided however that Executive shall not be liable for disclosure or use of any Confidential Information: 

          (i)  if
it was disclosed after written approval of the Company; or 

         (ii)  the
Confidential Information is required to be disclosed under applicable law or regulation. 

        If
Executive is subpoenaed, or is otherwise required by law to testify concerning Confidential Information, Executive agrees to immediately notify Company upon receipt of a subpoena, or
upon belief that such testimony shall be required. Executive shall not copy or remove from the Company's places of business any of the of the Company's documents, materials or items containing
Confidential Information except with the express written permission of the Company or in the normal course of employment. 

        8.     NON-INTERFERENCE OR SOLICITATION.    Executive agrees that during the term of this Agreement, and
for a period of twelve (12) months following the termination of his employment (for whatever reason), that Executive shall not knowingly, directly or indirectly, induce, solicit, or attempt to
persuade, directly or indirectly, (1) any former, current or future Executive, agent, contractor, manager, consultant, director or other participant in the Company, or (2) any person who
has purchased a program or product of the Company during the term of this Agreement, or (3) any person or entity who has collaborated or was affiliated with the Company during the term of this
Agreement, (all the foregoing three groups being collectively referred to herein as "Participant") to enter into any business relationship with Executive, except for the benefit of the Company, or any
business organization in which Executive is involved or which is in competition with the Restricted Business. In addition, during the term of this Agreement and for a period of twelve
(12) months following the termination of his employment (for whatever reason), Executive shall not (1) directly or indirectly contact any person or entity having a Relationship (as
defined below) with the Company or disclosed by the Company to Executive for the purpose of taking advantage of a business opportunity to the detriment of the Company, (2) otherwise circumvent
a Relationship with the Company or, to the detriment of the Company, establish a Relationship with a party with whom the Company has a Relationship, or (3) seek to establish any rights,
including but not limited to intellectual property rights, anywhere in the world in conflict with any intellectual property rights related to Work Product. 

        For
purposes of this Agreement, the term "Restricted Business" shall mean the area of business dealing with providing telemarketing, and seminar products, workshops, and
self-study programs, all relating to stocks and stock market investing information and analysis, as well as any other area of business in which the Company is engaged; however, the term
shall not mean the practice of securities law at a law firm, government agency, regulatory body, self-regulatory organization, registered investment advisor, registered investment company
or private investment fund. For purposes of this Agreement, "directly or indirectly" means as a paid or unpaid director, officer, agent, representative, manager, employee of, or consultant to any
enterprise, or acting as a proprietor of an enterprise, or holding any direct or indirect participating role in any enterprise as an owner, partner, limited partner, member, manager, joint venturer,
shareholder or creditor. For purposes of this Agreement, the term "Relationship" shall mean a business arrangement, transaction, contract, understanding or other business relationship. The foregoing
prohibition against soliciting Participants shall include Executive agreeing to enter into any such prohibited relationship, even if Participant made the initial contact regarding such relationship. 

        9.     NON-COMPETITION.    In consideration of the numerous mutual promises and agreements contained in
this Agreement between the Company and Executive, including, without limitation, those involving, employment, compensation, and Confidential Information, and in order to protect the 

6

 

Company's
Confidential Information and other legitimate business interests and to reduce the likelihood of irreparable damage which would occur in the event such information is provided to or used by
a competitor of the Company, Executive agrees that during his employment and for an additional period of twelve (12) months immediately following the termination of his employment (for whatever
reason) (the "Noncompetition Term"), he shall not directly or indirectly enter into or attempt to enter into the Restricted Business in the United States or Canada. 

        Executive
hereby acknowledges that the geographic boundaries, scope of prohibited activities and the time duration of the provisions of this Section 9 are reasonable and are no
broader than are necessary to protect the legitimate business interests of the Company. This noncompetition provision shall survive the termination of Executive's employment (for any reason) and can
only be revoked or modified by a writing signed by the parties which specifically states an intent to revoke or modify this provision. Executive acknowledges that the Company would not employ him or
provide him with access to its Confidential Information but for his covenants or promises contained in this Section. 

        The
Company and Executive agree and stipulate that the agreements and covenants not to compete contained in this Section 9 hereof are fair and reasonable in light of all of the
facts and circumstances of the relationship between Executive and the Company; however, Executive and the Company are aware that in certain circumstances courts have refused to enforce certain terms
of agreements not to compete. Therefore, in furtherance of, and not in derogation of the provisions of this Section 9, the Company and Executive agree that in the event a court should decline
to enforce any terms of any of the provisions of this Section 9, that Section 9 shall be deemed to be modified or reformed to restrict Executive's competition with the Company to the
maximum extent, as to time, geography and business scope, which the court shall find enforceable; provided, however, in no event shall the provisions of this Section 9 be deemed to be more
restrictive to Executive than those contained herein. 

        10.   WORK PRODUCT.    For purposes of this Section 10, "Work Product" shall mean all intellectual property
rights, including all trade secrets, U.S. and international copyrights, trademarks, trade names, patentable inventions, discoveries and other intellectual property rights in any programming, design,
documentation, technology, or other work product that is created in connection with Executive's work. In addition, all rights in any preexisting programming, design, documentation, technology, or
other Work Product provided to the Company during Executive's employment shall automatically become part of the Work Product hereunder, whether or not it arises specifically out of Executive's "Work."
For purposes of this Agreement, "Work" shall mean (1) any direct assignments and required performance by or for the Company, and (2) any other productive output that relates to the
business of the Company and is produced during the course of Executive's employment or engagement by the Company. For this purpose, Work may be considered present even after normal working hours, away
from the Company's premises, on an unsupervised basis, alone or with others. Unless otherwise approved in writing by the Chief Executive Officer of the Company, this Agreement shall apply to all Work
Product created in connection with all Work conducted before or after the date of this Agreement. 

        The
Company shall own all rights in the Work Product. To this end, all Work Product shall be considered work made for hire for the Company. If any of the Work Product may not, by
operation of law or agreement, be considered Work made by Executive for hire for the Company (or if ownership of all rights therein do not otherwise vest exclusively in the Company immediately),
Executive agrees to assign, and upon creation thereof does hereby automatically assign, without further consideration, the ownership thereof to the Company. Executive hereby irrevocably relinquishes
for the benefit of the Company and its assigns any moral rights in the Work Product recognized by applicable law. The Company shall have the right to obtain and hold, in whatever name or capacity it
selects, copyrights, registrations, and any other protection available in the Work Product. 

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        Executive
agrees to perform upon the request of the Company, during or after Executive's Work or employment, such further acts as may be necessary or desirable to transfer, perfect, and
defend the Company's ownership of the Work Product, including by (1) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance,
(2) obtaining and/or aiding in the enforcement of copyrights, trade secrets, and (if applicable) patents with respect to the Work Product in any countries, and (3) providing testimony in
connection with any proceeding affecting the rights of the Company in any Work Product. 

        Executive
also agrees to develop all Work Product in a manner that avoids even the appearance of infringement of any third party's intellectual property rights. 

        11.   NO EXCLUSIONS.    Executive hereby represents that Executive has not heretofore created any Work Product or
prepared any work, which is the subject of any Work Product, that Executive wishes to exclude from the provisions of Section 10 above. 

        12.   RETURN OF DOCUMENTS.    Executive agrees that if Executive's relationship with the Company is terminated (for
whatever reason), Executive shall not take with Executive, but will leave with the Company, all Work Product, Confidential Information, records, files, memoranda, reports, price lists, customer lists,
supplier lists, financial information, documents and other information, in whatever form (including on computer disk), and any copies thereof, or if such items are not on the premises of the Company,
Executive agrees to return such items immediately upon Executive's termination. Executive acknowledges that all such items are and remain the property of the Company. 

        13.   INJUNCTIVE RELIEF.    Executive acknowledges that breach of any of the agreements contained herein, including,
without limitation, the confidentiality, nonsolicitation and noncompetition covenants specified in Sections 7, 8 and 9, will give rise to irreparable injury to the Company, inadequately
compensable in damages. Accordingly, Executive agrees that the Company shall be entitled to injunctive relief to prevent or cure breaches or threatened breaches of the provisions of this Agreement and
to enforce specific performance of the terms and provisions hereof in any court of competent jurisdiction, in addition to any other legal or equitable remedies which may be available. Executive
further acknowledges and agrees that the enforcement of a remedy hereunder by way of injunction shall not prevent Executive from earning a reasonable livelihood. Executive further acknowledges and
agrees that the covenants contained herein are necessary for the protection of the Company's legitimate business interests and Confidential Information and are reasonable in scope and content. 

        14.   SEVERABILITY AND REFORMATION.    If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or obligations of Executive or the Company under this Agreement would not be materially and adversely affected thereby, such provision
shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof, 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 herefrom, and in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision
as may be possible, and the Company and Executive hereby request the court to whom disputes relating to this Agreement are submitted to reform the otherwise unenforceable covenant in accordance with
this Section 14. 

        15.   HEADINGS, GENDER, ETC.    The headings used in this Agreement have been inserted for convenience and do not
constitute matter to be construed or interpreted in connection with this Agreement. Unless the context of this Agreement otherwise requires, (i) words of any gender shall be deemed to include
each other gender; (ii) words using the singular or plural number shall also include 

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the
plural or singular number, respectively; and (iii) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words shall refer to this entire Agreement. 

        16.   GOVERNING LAW.    THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO ANY PRINCIPLE OF CONFLICT OF LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION. 

        17.   VENUE.    The venue for any dispute arising out of this Agreement or Executive's employment with the Company
shall be any state or federal court of competent jurisdiction in the State of New York. 

        18.   SURVIVAL.    Executive's termination from employment and/or the termination of this Agreement, for whatever
reason, shall not reduce or terminate Executive's covenants and agreements set forth herein and all such covenants, including those contained in Sections 7, 8, 9, 10, & 12 shall survive
the termination of this Agreement. 

        19.   NOTICES.    Any notice necessary under this Agreement shall be in writing and shall be considered delivered
three days after mailing if sent certified mail, return receipt requested, or when received, if sent by telecopy, prepaid courier, express mail or personal delivery to the following addresses: 

					
	If to the Company:    Investools Inc.
	

 	
 	

  	
 	

 
	 	 	

  	 	 
	 	 	

  	 	 
	 	 	

  	 	 
	

If to Executive:
	 	 	

  	 	 
	 	 	

  	 	 
	 	 	

  	 	 
	 	 	

  	 	 

        20.   ENTIRE AGREEMENT.    This Agreement contains the entire understanding and agreement between the parties, and
supersedes any other agreement between Executive and the Company, whether oral or in writing, with respect to the subject matter hereof. This Agreement may only be modified pursuant to
Section 24. 

        21.   NO WAIVER.    The forebearance or failure of one of the parties hereto to insist upon strict compliance by the
other with any provisions of this Agreement, whether continuing or not, shall not be construed as a waiver of any rights or privileges hereunder. No waiver of any right or privilege of a party arising
from any default or failure hereunder of performance by the other shall affect such party's rights or privileges in the event of a further default or failure of performance. 

        22.   ASSIGNMENT.    This Agreement is personal to Executive and may not be assigned in any way by Executive without
the prior written consent of the Company. This Agreement shall be assignable or delegable by the Company. The rights and obligations under this Agreement shall inure to the benefit of and shall be
binding upon the heirs, legatees, administrators and personal representatives of Executive and upon the successors, representatives and assigns of the Company. 

        23.   BINDING EFFECT.    This Agreement shall be binding on and inure to the benefit of the parties and their
respective permitted successors and assigns. 

        24.   MODIFICATION.    This Agreement may be modified only by a written agreement signed by both parties. Any such
written modification may only be signed by the President or Chief Executive Officer of the Company. 

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

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        26.   EXECUTIVE ACKNOWLEDGEMENT.    Executive acknowledges that he has had the opportunity to consult legal counsel
in regard to this Agreement, that he has read and understands this Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily and based on his own
judgment and not on any representations or promises other than those contained in this Agreement. 

        IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first above written. 

							
	/s/ PETER SANTORI

 PETER SANTORI	 	 
	 	 	 	 	 	 	 
	Date:	 	5/19/2008

 	 	 	 	 
	 	 	 	 	 	 	 
	INVESTOOLS INC.	 	 
	 	 	 	 	 	 	 
	By

	 	/s/ LEE BARBA

 LEE BARBA

CEO	 	 
	 	 	 	 	 	 	 
	Date:	 	5/19/2008

 	 	 	 	 

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EMPLOYMENT AGREEMENT OF PETER SANTORI

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