Document:

PECO II, INC.

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) is made as of the 4th day of January 2010 (the “Effective Date”), among PECO II Global Services, Inc., a Delaware corporation (the “Employer”), John G. Heindel, an individual and resident of the State of New Jersey (the “Employee”), and PECO II, Inc., an Ohio corporation and parent company of the Employer (“PECO”).

1.

Definitions.

 

 

For the purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1. 

 

“Affiliate(s)” – means any Person(s), that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Employer or any other referenced person.

“Agreement” – means this Employment Agreement, as amended from time to time. 

 

“Benefits” – is defined in Section 3.4 of this Agreement. 

 

“Board of Directors” – means the board of directors of the Employer.

“Board of Directors of PECO” – means the board of directors of PECO. 

 

“Cause” – means the occurrence of any of the following events during the Employment Period:  (a) conduct amounting to fraud or dishonesty against the Employer or any Affiliate of the Employer; (b) the Employee’s repeated unreasonable refusal to follow the reasonable directions of the Board of Directors of PECO, which refusal continues for thirty (30) days after written notice of same to the Employee by the Employer; (c) a material breach of this Agreement, which breach shall remain uncured by the Employee for a period of thirty (30) days following written notice of same to the Employee by the Employer; (d) repeated intoxication with alcohol or drugs while on the Employer’s business during regular business hours; (e) a conviction or plea of guilty or nolo contendere to a felony; or (f) the Employee’s failure to observe and comply with the requirements in Sections 8 or 9 hereof. 

“Change of Control” – is defined in Section 7.4 of this Agreement. 

“Compensation” – means Salary and Benefits. 

“Confidential Information” – means any and all: 

(a)

trade secrets concerning the business and affairs of the Employer or any Affiliate, product or service specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned manufacturing, marketing or distribution

methods and processes, customer lists, prospective customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures, and architectures (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries concepts, ideas designs methods and information), and any other information, however documented, that is a “trade secret” either under common law or as such term is defined by statute under the laws of any applicable jurisdiction. 

 

(b)

information concerning the business and affairs of the Employer or its Affiliates (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and background of key personnel, personnel training and techniques and materials), however documented; and 

 

(c)

notes, analysis, compilations, studies, summaries, and other material prepared by or for the Employer or Affiliates of the Employer, containing or based, in whole or in part, on any information included in the foregoing. 

 

“Disability” – is defined in Section 6.2 of this Agreement. 

 

“Effective Date” – is defined in the preamble to this Agreement.

“Employee” – is defined in the preamble to this Agreement.  

 

“Employee Invention” – means any idea, invention, technique, modification, process, or improvement (whether patent able or not), and any work of authorship (whether or not copyrights protection may be obtained for it) created, conceived, or developed by the Employee, either solely or in conjunction with others, during the Employment Period, or a period that includes a portion of the Employment Period, that relates in any way to, or is useful in any manner in, the business then being conducted or proposed to be conducted by the Employer, and any such item created by the Employee, either solely or in conjunction with others, following termination of the Employee’s employment with the Employer, that is based upon or uses Confidential Information; provided, however, that any item so created by the Employee that is based upon or uses Confidential Information that the Employee demonstrates was or became generally available to the public, other than as a result of a disclose by the Employee, will not be deemed to be an Employee Invention for any purposes. 

“Employer” – is defined in the preamble to this Agreement and includes Employer’s Affiliates and successors and assigns. 

 

“Employment Period” – means the Term of the Employee’s employment under this Agreement. 

 

“Good Reason” – means the occurrence of any of the following events during the Employment Period: 

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(a)

any material diminution and/or reassignment of Employee’s: (i) title, appointment and authority as an executive officer, and/or (ii) duties, responsibilities and/or reporting relationship; 

(b)

the assignment or relocation of the Employee to a location outside of a fifty (50) mile radius from the Employer’s headquarters or Employee’s residence; 

(c)

the relocation of Employer’s corporate headquarters to a location outside of a 50 (fifty) mile radius from Employer’s current headquarters in the State of Ohio; 

(d)

the failure by the Employer to pay the Salary as provided in Section 3.1 or any amounts otherwise vested and due hereunder or under any plan or policy of the Employer or; 

(e)

failure of Employee to remain a director and Chairman of the Board of Director of PECO at any time during the term of this Agreement.

 

“Non-competition Period” – means the period beginning on the Effective Date and ending on the date that is one year following the Employee’s termination date of employment from Employer (irrespective of the reason for such termination).

“PECO” – is defined in the preamble to this Agreement.

 

“Person” –  any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or governmental body. 

 

“Proprietary Items” – is defined in Section 8.2(a)(iv) of this Agreement. 

 

“Salary” – is defined in Section 3.1 of this Agreement. 

  

2.

Employment Term and Duties.

2.1

Employment.  The Employer hereby employs the Employee, effective as of the date hereof, and the Employee hereby accepts employment by the Employer, effective as of the date hereof, upon the terms and conditions set forth in this Agreement. 

2.2

Term.  Subject to earlier termination as provided in Section 6 hereof, the term of the Employee’s employment under this Agreement shall become effective on the date hereof and continue until December 31, 2011 (the “Term”).  At the end of the Term, including any renewal extensions thereof, this Agreement will automatically renew for an additional one-year period, unless either party gives 90 days prior written notice to the other party of its intention not to renew this Agreement.

 

2.3

Duties.  The Employee will be employed as the Chief Executive Officer and President of PECO and Employer.  Employee will perform his duties and responsibilities as reasonably requested in good faith by the Board of Directors of PECO consistent with such 

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position.  The Employee will (a) devote the Employee’s entire business time, energy and skill (vacations and reasonable absences due to illness excepted) to fulfill the duties of his position; (b) use his best efforts to promote the success of the business of the Employer and PECO, and (c) cooperate fully with the reasonable requests of the Board of Directors of PECO in the advancement of the best interests of the Employer and its Affiliates.  During the Employment Period, the Employee shall not be engaged in or provide services to any other business or enterprise (whether engaged in for profit or not) which interferes with the Employee’s obligations under this Agreement. However, Employee will be allowed to participate as a member of the board of directors of any outside business or enterprise (whether engaged in for profit or not) provided Employee obtains the approval of the Board of Directors of PECO.

3.

Compensation

3.1

Salary.  The Employer shall pay to the Employee an annualized Salary at a rate of $300,000 per calendar year, subject to the provisions of Section 6 of this Agreement (the “Salary”), effective as of January 1, 2010, which Salary shall be payable in equal bi-weekly installments in accordance with the Employer’s customary payroll practices and as may be increased from time to time by the Board of Directors.  

3.2

Restricted Stock Grant.  Provided this Agreement is in effect on such dates, PECO shall grant to the Employee such number of shares of restricted stock under PECO’s Amended 2000 Performance Plan, or any successor plan, equal to (i) $40,000 divided by (ii) the closing price of PECO’s common stock on the date of grant, on each of January 4, 2010 and January 3, 2011.   The grants of restricted stock pursuant to this Section 3.2 will vest on December 31, 2010 and December 31, 2011, respectively, and are subject to Employee entering into an award agreement under the Amended 2000 Performance Plan and availability of such shares under the Amended 2000 Performance Plan.   

3.3

Bonus Plans.  The Employee will be eligible to participate in any Employer or PECO executive cash bonus programs that are in place from time to time, in an amount determined by the Compensation Committee of PECO’s Board of Directors (the “Committee”),  which bonuses may be based on such performance criteria as the Committee may in its discretion determine from time to time.  The Employee will also be eligible for awards under PECO’s Amended 2000 Performance Plan, at the discretion of the Committee, which awards may be based on such performance criteria as the Committee may in its discretion determine from time to time.  Except as otherwise provided in Section 6 hereof (or any award agreement for awards granted under the Amended 2000 Performance Plan or successor plan), if this Agreement is terminated prior to the payment date of any bonus provided for in this paragraph, no bonus payment shall be made following the termination date of the Agreement unless otherwise agreed by PECO.

3.4

Benefits.  The Employee will, during the Employment Period, be entitled to participate in such deferred compensation, profit sharing, bonus, life insurance, hospitalization and medical plans or insurance coverage, disability, and other employee benefit plans, programs and policies of the Employer in effect from time to time (collectively, the “Plans”), vacation and holidays (as further provided in Section 5 below), and any other plan which may be made 

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available by the Employer to its employees from time to time in the future, if, and to the extent that, the Employee is eligible under the terms of such Plans.  All of the plans, agreements, and undertakings of the Employer set forth above shall be called, collectively, the “Benefits.” Any Benefits hereunder shall be subject to local, state, or federal tax reporting requirements as may be in effect at any time during the Employment Period. 

 

3.5

Performance Review. The Employee shall be given performance reviews during the Term of this Agreement not less or greater than annually by the Board of Directors of PECO. 

3.6

Automobile.  Employee shall be granted a $750.00 per month car allowance during the Term of this Agreement or any extensions thereof.  Employee shall be furnished such tax forms relative to the value and Employee shall be responsible to make such adjustments on his personal income tax return based on business use.

3.7

Insurance Policy.  Employer agrees to obtain a life insurance policy for a duration  not less than the Term of this Agreement upon the life of Employee in the amount of $1,000,000, which policy shall be payable $500,000 together with gross up of premiums to the designated beneficiaries of Employee and any balance to Employer, if Employee shall become deceased at any time during the Term of this agreement or extensions or renewals thereof as defined in said policy.

4.

Facilities and Expenses.  The Employer will furnish the Employee with office space, equipment, supplies, computer and facsimile equipment, telephone and such other facilities, support staff and personnel as the Employer deems necessary or appropriate for the performance of the Employee’s duties under this Agreement. The Employer will reimburse the Employee for reasonable business expenses incurred by him on behalf of the Employer in the performance of his duties; provided, that Employee furnishes to Employer documentation of such expenses as is required by the Internal Revenue Service, as well as such other documentation as the Employer may reasonably request. The Employee must file authorization requests, to the extent required by the Employer’s employment policies and, in all instances, expense reports with respect to such expenses in accordance with the Employer’s policies. 

5.

Vacations and Holidays.  The Employee will be entitled to five (5) weeks paid vacation each calendar year during the Employment Period.  Such vacation will be taken in accordance with the vacation policies of the Employer in effect from time to time.  The Employee must take vacation at such time or times as mutually agreed by the Employee and the Employer.  The Employee will also be entitled to the paid holidays as set forth in the Employer’s policies.  Vacation days and holidays during any calendar year that are not used by the Employee during such calendar year may not be used in subsequent calendar year, nor will the Employee be paid for unused vacation or holidays.

6.     Termination

6.1

Events of Termination and Effects of Termination.

 

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(a)

Death or Disability.  In the event of the Employee’s death or Disability, his employment with the Employer shall be deemed terminated as of the end of the month in which such death occurs or such Disability is determined, and Employee, or his beneficiary, shall be entitled to Compensation for a period of ninety (90) days from the deemed termination date; provided, however, in the case of termination because of Disability, if the Employee is a “specified employee” as defined in Internal Revenue Code Section 409A and the regulations thereunder (“Code Section 409A”), the Employee shall not be entitled to any such payments until the earlier of (1) the date that is six months after the date of termination, or (2) the date of the Employee’s death.  In addition, Employee’s stock options will immediately vest 100% upon death or Disability and may be exercised at any time within ninety (90) days from the deemed termination date (but not later than the expiration date of the stock option agreement).  Except as set forth in this Section 6.1(a), all other rights, duties and obligations of the parties hereunder shall thereupon cease upon the date of death or the date such Disability is determined, except for the Employee’s obligations under Section 7 and 8 hereof (in the case of a termination due to Disability), and rights to insurance proceeds under Section 3.7 hereof (in the case of Employee’s death).   Payments due Employee after death will be made to the Employee’s designated beneficiary, which will be such individual beneficiary or trust located at such address as the Employee may designate by notice to the Employer from time to time or, if the Employee fails to give notice to the Employer of such a beneficiary, the Employee’s estate.

(b)

For Cause.  The Employee’s employment with the Employer may be terminated for Cause, if determined by the Board of Directors of PECO.  Upon written notice of Employee’s termination for Cause from the Employer to the Employee, all rights, obligations and duties of the parties hereunder shall immediately cease (including, but not limited to, the payment by the Employer of all Compensation), except for the Employee’s obligations under Section 7 and 8 hereof.

(c)

By the Employer Without Cause.  The Employer may terminate the Employee’s employment without Cause at any time upon not less than (90) days advance written notice.  In addition to any other benefits owed to Employee and/or as otherwise required by law, the Employer will continue to pay the Employee Salary for an additional period of twelve (12) months in accordance with normal payroll practices and will pay an amount equal to any accrued cash bonuses (which are accrued at the time of termination) for each of the remaining years of the Term of this Agreement within three (3) months after such termination; provided, however, that if the Employee is a “specified employee” as defined in Code Section 409A, the Employee shall not be entitled to any such payments until the earlier of (1) the date that is six months after the date of termination, or (2) the date of the Employee’s death.  If payment does not commence until six months after the Employee’s date of the Employee’s termination, the payments that otherwise would have been made during such six-month period but for the delay will be aggregated and paid on the same date as the next regularly scheduled payment.  The Employer may accelerate the effective date of such termination without Cause, if in lieu of the benefits provided by the preceding two sentences, the Employer increases the amount payable to the Employee to an amount equal to the amount of payments provided in Section 7.2 of this Agreement.  In addition, any and all stock options, restricted stock or other award pursuant to a Company stock or incentive plan then awarded to the Employee shall immediately vest 100% and Employee shall have a period of ninety (90) days from date of termination to exercise any such options or awards (but not later than the expiration date of the stock option or award). If at 

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any time during the twelve (12) month period the Employee accepts a position of full-time employment with another employer, then Employer’s obligation to make any further payments of wages, salaries, or bonuses shall immediately terminate, except in the case of Employee’s acceptance of any consulting agreement with a third party during this same twelve (12) month period.  Except as set forth in this Section 6.1(c), upon the effective date of the termination without Cause, all rights, obligations and duties of the parties hereunder shall immediately cease, except for the Employee’s obligations under Section 7 and 8 hereof.

(d)

Voluntary Termination without Good Reason By Employee.  The Employee may terminate his employment with the Employer without Good Reason upon not less than ninety (90) days advance written notice to the Employer; provided, however, that after the receipt of such notice, the Employer may, in its discretion accelerate the effective date of such termination at any time by written notice to the Employee.  The Employee shall be entitled to Salary and any other benefits owed to the Employee or as otherwise required by law for a period of time of ninety (90) days from the date of such notice, payable over such ninety-day period in accordance with Employer’s normal payroll practices.  Notwithstanding the foregoing, if the Employee is a “specified employee” as defined in Code Section 409A, the Employee shall not be entitled to any such payments until the earlier of (1) the date that is six months after the date of termination, or (2) the date of the Employee’s death.   The Employee shall have ninety (90) days from the date of termination to exercise any vested stock option or other award pursuant to a Company option or stock plan (but not later than the expiration date of the stock option or award).  Vesting of any stock option, restricted stock, or other award pursuant to a Company option or stock plan shall continue until the termination date.  Except as set forth in this Section 6.1(d), upon the effective date of any such voluntary termination without Good Reason, all rights, obligations and duties of the parties hereunder shall immediately cease, except for the Employee’s obligations under Sections 7 and 8 hereof.

(e)

Termination with Good Reason by the Employee. The Employee may terminate his employment with the Employer with Good Reason upon written notice to Employer.  Employee will be entitled to receive the payments at the time and in the amount provided in Section 7.2 of this Agreement.  In addition, any and all stock options, restricted stock or other awards pursuant to a Company stock or incentive plan then awarded to the Employee shall immediately vest 100% and Employee shall have a period of ninety (90) days from date of termination to exercise any such options or awards (but not later than the expiration date of the stock option or award).  Except as set forth in this Section 6.1(d), upon the effective date of any termination by Employee for Good Reason, all rights, obligations and duties of the parties hereunder shall immediately cease except for the Employee’s obligations under Sections 7 and 8 hereof.

 

6.2

Definition of Disability.  For purposes of this Agreement, the Employee will be deemed to have a “Disability” if (a) the Employee is unable to perform the essential duties of the Employee’s employment due to physical or emotional incapacity or illness, where such inability is reasonably expected to be of long-continued and indefinite duration (i.e., for at least nine (9) months); or (b) the Employee is entitled to (i) disability retirement benefits under the federal Social Security Act or (ii) recover benefits under any long-term disability plan or policy maintained by the Employer.  In the event of a dispute, the determination of Employee’s 

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disability shall be the reasonable decision of the Board of Directors of PECO and shall be supported by the medical opinion of a physician (mutually agreed and approved by both the Employee and Employer) with the expertise and competency to render such an opinion.  The Employee shall cooperate with all reasonable requests by such physician.

6.3

Definition of Termination

..  All payments to be made upon the Employee’s termination of employment under this Agreement may only be made upon a “separation from service” as defined under Code Section 409A and any guidance promulgated thereunder.  

7.

Change of Control.

7.1

Certain Termination Following a Change of Control.  If at any time during the Term of this Agreement, including any renewal or extension thereof, a change of control (as defined below) occurs, and within six (6) months of the date of such change control either (a) Employee terminates his employment for any reason, or (b) Employer terminates Employee’s employment for any reason other than for Cause, then Employee shall be entitled to the benefits provided in Section 7.2 of this Agreement.

7.2

Payments Due for Certain Terminations Following a Change of Control.  If Employee’s employment is terminated as set forth in Section 7.1, Employee shall be entitled to a payment equal to 2.0 times the sum of (a) Employee’s annual Salary in effect on the date of the termination (salary shall be defined as the combination of cash payments and restricted stock grant as set forth in Section 3.1 and 3.2 herein), and (b) any accrued cash bonuses (which are accrued at the time of termination) for each of the remaining years of the Term of this Agreement, payable as soon as reasonably practicable, and (c) additional bonuses to which employee became eligible under the current bonus program for the calendar year 2009 and (d) the continuing payment of Employee's Family COBRA Health Insurance coverage for a maximum of 18 months from the of termination.  If the Employee is a "specified employee" as defined in Code Section 409A, the Employee shall not be entitled to any such payments until the earlier of (1) the date that is six months after the date of terminate, (2) the date of the Employee's death, or (3) such earlier time that will not subject the Employee to excise tax under Code Section 409A.

7.3

Treatment of Awards for Certain Terminations Following a Change of Control.  If Employee’s employment is terminated as set forth in Section 7.1 within six (6) months following a change of control, then any and all stock options, restricted stock or stock plans then awarded to the Employee shall immediately vest 100% (one hundred percent) and Employee shall have a period of twelve (12) months from his date of termination to exercise said options (but not later than the expiration date of the stock option or award).

7.4

Change in Control Defined.  For purposes of this agreement “change of control” shall mean the occurrence of any of the following events:

(a)

any “person” (as that term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” on the date hereof) including any “group” (as that term is used in Section 13 (d)(3) of the Exchange Act on the date hereof) 

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shall acquire (or disclose the previous acquisition of) beneficial ownership (as that term is defined in Section 13(d) of the Exchange Act and the rules thereunder on the date hereof) of shares of the outstanding stock of any class or classes of PECO which results in such person or group possessing more than 20% (twenty percent) of the combined voting power of PECO’s then outstanding securities; provided, however, that ownership by Delta International Holding Ltd., or its affiliates, shall not be considered a change of control event pursuant to this subparagraph (a) of Section 7.4.

(b)

the stockholders of PECO shall approve a definitive agreement to merge or other business combination of PECO with or into another corporation or to sell or otherwise dispose of all or substantially all of its assets, or its patents, or adopt a plan of liquidation;

(c)

as the result of, or in connection with, any tender or exchange offer, merger or any other business combination, or contested election or exercise of stock options and/or warrants, or any combination or contested election, or a combination of the foregoing transactions (a “Transaction”), the shareholders of the voting shares of PECO outstanding immediately before the Transaction own 55% or less (fifty-five percent) of the combined voting power in the then outstanding securities of PECO after the Transaction; or PECO becomes a subsidiary of an international parent company whose domicile, headquarters and operations are located outside of the United States; or PECO becomes a subsidiary of a domestic parent company which is itself controlled by an international parent whose domicile headquarters and operations are located outside of the United States; or

(d)

at any time during a period of twenty-four (24) consecutive months, individuals who were Directors at the beginning of the period no longer constitute a majority of the members of the Board of Directors of PECO, unless the election, or the nomination for election by PECO’s shareholders, of each Director who was not a Director at the beginning of the period is approved by at least a majority of the Directors who are in office at the time of the election or nomination and were either Directors at the beginning of the period or are Continuing Directors.

8.

Non-Disclosure Covenant: Employee Inventions.

8.1

Acknowledgements by the Employee.  The Employee acknowledges that (a) during the Employment Period and as a part of his employment, the Employee will be afforded access to Confidential Information; (b) public disclosure of such Confidential Information could have an adverse effect on the Employer and its business; (c) since the Employee possesses substantial expertise and skill with respect to the Employer’s business, the Employer desires to obtain exclusive ownership of each Employee Invention, and the Employer will be at a substantial competitive disadvantage if it fails to acquire exclusive ownership of each Employee Invention; (d) the compensation provided to Employee hereunder, constitutes good and sufficient consideration for the Employee’s agreements and covenants in this Section 8; and (e) the provisions of this Section 8 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information and to provide the Employer with exclusive ownership of all Employee Inventions.

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8.2

Agreements of the Employee.  In consideration of the compensation to be paid or provided to the Employee by the Employer under this Agreement, the Employee covenants as follows:

(a)

Confidentiality.  

(i)

During and at all times following the Employment Period, the Employee will hold in confidence the Confidential Information and will not disclose it to any Person except with the specific prior written consent of the Employer or except as otherwise expressly permitted by the terms of this Agreement. 

(ii)

Any trade secrets of the Employer will be entitled to all of the protections and benefits under applicable trade secret laws.  If any information that the Employer deems to be a trade secret is found by a court of competent jurisdiction not to be a trade secret for purposes of this Agreement, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement.  The Employee hereby waives any requirement that the Employer submits proof of the economic value of any trade secret or posts a bond or other security.

(iii)

None of the foregoing obligations and restrictions applies to any part of the Confidential Information that the Employee demonstrates was or became generally available to the public other than as a result of a disclosure by the Employee or any other Person in violation of an agreement with the Employer.

(iv)

The Employee will not remove from the Employer’s (or any Affiliate’s) premises (except to the extent such removal is for purposes of the performance of the Employee’s duties at home or while traveling, or except as otherwise specifically authorized by the Employer) any document, record, notebook, plan, model, component, device, or computer software or code, whether embodied in a disk or in any other form (collectively, the “Proprietary Items”).  The Employee recognizes that, as between the Employer and the Employee, all of the Proprietary Items, whether or not developed by the Employee, are the exclusive property of the Employer.  Upon termination of this Agreement by either party, the Employee will return to the Employer all of the Proprietary Items in the Employee’s possession or subject to the Employee’s control, and the Employee shall not retain any copies, abstracts, sketches, or other physical embodiment of any of the Proprietary Items.

(b)

Employee Inventions.  Each Employee Invention will belong exclusively to the Employer.  The Employee acknowledges that all of the Employee’s writing, works of authorship, and other Employee Inventions are works made for hire and the property of the Employer, including any copyrights, patents, or other intellectual property rights pertaining thereto.  If it is determined that any such works are not works made for hire, the Employee hereby assigns to the Employer all of the Employee’s right, title, and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Employee Inventions.  The Employee covenants that he will promptly:

(i)

disclose to the Employer in writing any Employee Invention;

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(ii)

assign to the Employer or to a party designated by the Employer, at the Employer’s request and without additional compensation, all of the Employee’s right to the Employee Invention for the United States and all foreign jurisdictions;

(iii)

execute and deliver to the Employer such applications, assignments, and other documents as the Employer may request in order to apply for and obtain patents or other registrations with respect to any Employee Invention in the United States or any foreign jurisdictions;

(iv)

sign all other papers necessary to carry out the above obligations; and 

(v)

give testimony and render any other assistance at Employer’s expense, in support of the Employer’s rights to any Employee Invention.

8.3

Disputes and Controversies.  The Employee recognizes that should a dispute or controversy arising from or relating to this agreement would be made public in any way, that the Employer would suffer irreparable damages based upon the failure to preserve the secrecy of confidential information.  The parties mutually agree that any disagreements relative to this agreement or terms thereof shall be submitted to arbitration under the rules of arbitration of the Ohio Revised Code (ORC 2711.01 et seq.) with each party appointing an arbitrator of their choice and each of the arbitrators appointing a third arbitrator for a panel which will make a binding decision relative to such disputes. All of the parties involved herein shall agree in advance and in writing to receive and maintain all such information and secrecy except as may be limited by written agreement among them or as required by law. 

9.

Non-Competition and Non-Interference.

9.1

Acknowledgements by the Employee.  The Employee acknowledges that (a) the services to be performed by him under this Agreement are of a special, unique and unusual character; (b) the compensation provided to the Employee hereunder, constitutes good and sufficient consideration for the Employee’s agreements and covenants in this Section 9; and (c) the provisions of this Section 9 are reasonable and necessary to protect the Employer’s business.

9.2

Covenants of the Employee.  In consideration of the acknowledgments by the Employee, and in consideration of the compensation to be paid or provided to the Employee by the Employer, the Employee covenants that he will not, directly or indirectly:

(a)

during the Non-competition Period, (i) solicit business from, or compete with the Employer or any of its Affiliates for the business of, any customer of the Employer or any of its Affiliates in the same or similar business as the business conducted by the Employer or any of its Affiliates; (ii) own, operate, control, finance, manage, advise, be employed or engaged by, perform any services for, invest in or otherwise become associated in any capacity with, any business, company, partnership, organization, proprietorship, or other entity, whose activities compete in whole or in part with the activities of the Employer or any of its Affiliates in any 

11

geographical area in which the Employer or any of its Affiliates conducted or conducts its business; provided that any such business is in or is any way related to the communications business (a “Competitive Business”); or (iii) engage in any practice the purpose or effect of which is to intentionally evade the provisions of this covenant; provided, however, that the Employee may purchase or otherwise acquire up to (but not more than) three percent (3%) of any class of securities of any Competitive Business (but without otherwise participating in the activities of such Competitive Business) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934; or 

(b)

whether for the Employee’s own account or the account of any other person (i) solicit or induce, directly or indirectly, whether or not for consideration, any employee or agent of the Employer to terminate his or her relationship with the Employer; or (ii) induce or attempt to induce any supplier or contractor of the Employer to terminate or adversely change its relationship with the Employer or otherwise interfere with any relationship between the Employer and any of its suppliers or contractors. 

9.3

Enforceability: Notice.  If any covenant in Section 9.2 is held to be unreasonable, arbitrary, or against public policy, such covenant will be considered to be divisible with respect to scope, time, and geographic area, and such lesser scope, time, or geographic area, or all of them, as a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not against public policy, will be effective, binding, and enforceable against the Employee.  The period of time applicable to any covenant in Section 9.2 will be extended by the duration of any violation by the Employee of such covenant.  The Employee will, while the covenant under Section 9.2 is in effect, give notice to the Employer, within ten (10) days after accepting any other employment, of the identity of the Employee’s employer.  The Employer may notify such employer that the Employee is bound by this Agreement and, at the Employer’s election, furnish such employer with a copy of this Agreement or relevant portions thereof.

10.

General Provisions.

 

10.1

Injunctive Relief and Additional Remedy.  The Employee acknowledges that the injury that would be suffered by the Employer as a result of a breach of the provisions of this Agreement (including any provision of Sections 8 and 9) would be irreparable and that an award of monetary damages to the Employer for such a breach would be an inadequate remedy. Consequently, the Employer will have the right, in addition to any other rights it may have, at Employer’s cost, to obtain injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce any provision of this Agreement, and the Employer will not be obligated to post bond or other security in seeking such relief.

 

10.2

Covenants of Sections 8 and 9 are Essential and Independent.  The covenants by the Employee in Sections 8 and 9 are essential elements of this Agreement, and without the Employee’s agreement to comply with such covenants, the Employer would not have entered into this Agreement, offered employment to the Employee or offered the Employee the Salary and Benefits and other consideration provided hereunder. The Employee’s covenants in Sections 

12

8 and 9 are independent covenants and the existence of any claim by the Employee against the Employer under this Agreement or otherwise, or against any Affiliate of the Employer, will not excuse the Employee’s breach of any covenant in Sections 8 or 9.  If the Employee’s employment hereunder expires or is terminated, this Agreement will continue in full force and effect as is necessary or appropriate to enforce the covenants and agreements of the Employee in Section 8 or 9.

10.3

Representations and Warranties by Employee.  The Employee represents and warrants to the Employer that the execution and delivery by the Employee of this Agreement does not, and the performance by the Employee of the Employee’s obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Employee; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Employee is a party or by which the Employee is or may be bound.

10.4

Waiver.   The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by either party in exercising any right, power, or privilege under this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable law: (a) no claim or right arising out of this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement.

10.5

Binding Effect; Delegation of Employee’s Duties Prohibited.  This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective successors, assigns, heirs, and legal representatives, including any Affiliate to which Employer may assign this Agreement or any entity with which the Employer may merge or consolidate or to which all or substantially all of its assets may be transferred.  The duties and covenants of the Employee under this Agreement, being personal, may not be delegated or assigned.

10.6

Notices.  All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered to the address(es) below, or (b) one business day after deposit with a nationally recognized overnight delivery service (receipt and next day delivery requested), in each case to the appropriate addresses set forth below (or to such other addresses as a party may designate by notice to the other parties):

If to Employer:

PECO II, Inc.

1376 State Route 598

Galion, Ohio 44833

Attention: Chief Financial Officer

with a copy to 

13

Porter, Wright, Morris & Arthur LLP

41 S. High Street

Columbus, Ohio 4315

Attention:  Curtis A. Loveland

If to Employee:

John G. Heindel

3 Emerald Valley Way

Basking Ridge, New Jersey 07920

10.7

Entire Agreement Amendments.  This Agreement, as it may be amended from time to time, contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior employment arrangements (as the same may have been amended from time to time) and other agreements or understandings, oral or written, between the parties hereto with respect to the subject matter hereof, including but not limited to the Prior Agreement. This Agreement may not be amended orally, but only by an agreement in writing signed by the parties hereto. 

 

10.8

Governing Law.  This Agreement shall be governed by and construed under Ohio law, without regard to conflict of laws principles. 

 

10.9

Section Headings: Constructions.  The section headings in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Section” or “Sections” refer to the corresponding Section or Sections of this Agreement unless otherwise specified.  All words used in this Agreement will be construed to be of such gender or number as the circumstances required.  Unless otherwise expressly provided, the word “including” does not limit the preceding words or terms. 

 

10.10

Severability.  If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 

 

10.11

Counterparts.  This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 

10.12

PECO Guarantee.  PECO hereby guarantees to the Employee the complete payment and performance of the obligations of the Employer under this Agreement. 

 

14

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

			
	 
	PECO II GLOBAL SERVICES, INC.

	 
	(EMPLOYER)

	 
	 
	 

	 
	 
	 

	                                                                        

	By: 

	/s/ Eugene Peden

	 
	 
	 

	 
	Name:

	Eugene Peden

	 
	 
	 

	 
	Its:

	Senior Vice President

	 
	 
	 

	 
	 
	 

	 
	JOHN G. HEINDEL, AN INDIVIDUAL

	 
	(EMPLOYEE)

	 
	 
	 

	 
	 
	 

	 
	 
	/s/ John G. Heindel

	 
	 
	 

	 
	 
	 

	 
	PECO II, INC.

	 
	(PECO)

	 
	 
	 

	 
	 
	 

	 
	By: 

	/s/ Eugene Peden

	 
	 
	 

	 
	Name:

	Eugene Peden

	 
	 
	 

	 
	Its:

	Senior Vice President

15ex10_03.htm

    
      

    

    
      Exhibit
10.03

      

      SECOND
AMENDED AND RESTATED

      GENERAL EMPLOYMENT
ENTERPRISES, INC. 1997 STOCK OPTION PLAN

      

      Section
1. Purpose.

      

      The
purpose of this Second Amended and Restated General Employment Enterprises, Inc.
1997 Stock Option Plan (the "Plan") is to amend and supersede the Amended and
Restated General Employment Enterprises, Inc. 1997 Stock Option Plan and to
benefit General Employment Enterprises, Inc. (the "Company") and its
Subsidiaries (as defined in Section 2) by recognizing the contributions made to
the Company by officers and other key employees (including members of the Board
of Directors of the Company ("the Directors") who are also employees) of the
Company and its Subsidiaries, to provide such persons with additional incentives
to devote themselves to the future success of the Company, and to improve the
ability of the Company to attract, retain and motivate individuals, by providing
such persons with a favorable opportunity to acquire or increase their
proprietary interest in the Company. In addition, the Plan is intended as an
additional incentive to members of the Board of Directors of the Company who are
not employees of the Company ("Non-Employee Directors") to serve on the Board of
Directors of the Company (the "Board") and to devote themselves to the future
success of the Company by providing them with a favorable opportunity to acquire
or increase their proprietary interest in the Company through receipt of options
to acquire common stock of the Company. The Company may grant stock options that
constitute "incentive stock options" ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or stock options
that do not constitute ISOs ("NSOs") (ISOs and NSOs being hereinafter
collectively referred to as "Options").

      

      Section
2. Eligibility.

      

      Non-Employee
Directors shall participate in the Plan only in accordance with the provisions
of Section 5.2 of the Plan. The Committee (as defined in Section 3) shall
initially, and from time to time thereafter, select those officers and other key
employees (including Directors of the Company who are also employees)
(collectively referred to herein as "Key Employees") of the Company or any other
entity of which the Company is the direct or indirect beneficial owner of not
less than fifty percent (50%) of all issued and outstanding equity interests
("Subsidiaries"), to participate in the Plan on the basis of the special
importance of their services in the management, development and operations of
the Company or its Subsidiaries (each such Key Employee receiving Options
granted under the Plan is referred to herein as an "Optionee").  The
determination of whether an individual is an employee shall be made at the time
of grant in accordance with Code Section 3401(c) and the regulations there
under.

      

      Section
3. Administration.

      

      3.1.
The Committee.
The Plan shall be administered by the Compensation Committee (the "Committee")
of the Board of Directors of the Company (the "Board").  The Committee
shall be comprised of two (2) or more members of the Board who are "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934.

      

      3.2.
Authority of the
Committee. No person, other than members of the Committee, shall have any
authority concerning decisions regarding the Plan. Notwithstanding the
foregoing, the Committee may delegate its non-decision making authority,
hereunder, and the person or persons to whom such authority is delegated may in
turn make subsequent delegations.  Subject to the express provisions
of this Plan, the Committee shall have sole discretion concerning matters
relating to the Plan and Options granted hereunder. The Committee, in its sole
discretion, shall determine the Key Employees of the Company and its
Subsidiaries to whom, and the time or times at which Options will be granted,
the number of shares to be subject to each Option, the expiration date of each
Option, the time or times within which the Option may be exercised, the
cancellation of the Option (with the consent of the holder thereof) and the
other terms and conditions of the grant of the Option. The terms and conditions
of the Options need not be the same with respect to each Optionee or with
respect to each Option.

      

      The
Committee may, subject to the provisions of the Plan, establish such rules and
regulations as it deems necessary or advisable for the proper administration of
the Plan, and may make determinations and may take such other action in
connection with or in relation to the Plan as it deems necessary or advisable.
Notwithstanding the foregoing, (i) with respect to any Option intended to be an
ISO, the Plan, and the Option Agreement evidencing said ISO, shall be construed
in a manner consistent with Code Section 422 and the regulations there under,
and (ii) the Plan and any Option Agreement shall be construed in a manner
consistent with Code Section 409A.  Each determination or other action
made or taken pursuant to the Plan, including interpretation of the Plan and the
specific terms and conditions of the Options granted hereunder by the Committee
as evidenced in an Option Agreement, shall be final and conclusive for all
purposes and upon all persons including, but without limitation, the Company,
its Subsidiaries, the Committee, the Board, officers and the affected employees
of the Company and/or its Subsidiaries and their respective successors in
interest. No member of the Committee shall, in the absence of bad faith, be
liable for any act or omission with respect to service on the
Committee.  Service on the Committee shall constitute service as a
Director of the Company so that members of the Committee shall be entitled to
indemnification pursuant to the Company's Certificate of Incorporation and
By-Laws.

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      Section
4. Shares of
Common Stock Subject to Plan.

      

      4.1. The
total number of additional shares of common stock, no par value, of the Company
(the "Common Stock"), that are available for issuances under the Plan may be
issued and sold under the Plan within the Applicable Period (as defined below)
shall be 592,000 (“Additional Plan Shares”).  For purposes of the
preceding sentence, Applicable Period shall be the ten-year period commencing on
September 30, 2009 and ending on September 30, 2019 (“Term of Plan”). The
aforementioned total number of Additional Plan Shares of Common Stock shall be
adjusted in accordance with the provisions of Section 4.2 hereof.
Notwithstanding the foregoing, the total number of shares of Common Stock that
may be subject to ISOs under the Plan shall be 592,000 Additional Plan Shares of
Common Stock, adjusted in accordance with the provisions of Section 4.2
hereof.  Any shares of Common Stock subject to issuance upon exercise
of Options under the Plan or the General Employment Enterprises, Inc. Amended
and Restated 1997 Stock Option Plan but which are not issued because of a
surrender (other than pursuant to Sections 7.2 or 7.3 of the Plan), forfeiture,
expiration, termination or cancellation of any such Option, to the extent
consistent with applicable law, rules and regulations, shall once again be
available for issuance pursuant to subsequent Options (“Unissued Option
Shares”). Therefore, the total aggregate number of shares available for grant
under the Plan shall be the 592,000 Additional Plan Shares plus all Unissued
Option Shares. The maximum number of Options that may be granted during a
calendar year to any one person is 150,000.

      

      4.2  The
number of share of Common Stock subject to the Plan and to Options granted under
the plan shall be adjusted as follows: (a) in the event that the number of
outstanding shares of Common Stock is changed by any stock dividend, stock split
or combination of shares, the number of shares subject to the Plan and to
Options previously granted there under shall be proportionately adjusted; (b) in
the event of any merger, consolidation or reorganization of the Company with any
other corporation or corporations, there shall be substituted on an equitable
basis as determined by the Board, in its sole discretion, for each share of
Common Stock then subject to the Plan and for each share of Common Stock then
subject to an Option granted under the Plan, the number and kind of shares of
stock, other securities, cash or other property to which the holders of Common
Stock of the Company are entitled pursuant to the transaction; and (c) in the
event of any other change in the capitalization of the Company, the Committee,
in its sole discretion, shall provide for an equitable adjustment in the number
of shares of Common Stock then subject to the Plan and to each share of Common
Stock then subject to an Option granted under the Plan.  In the event
of any such adjustment, the exercise price per share shall be proportionately
adjusted.

      

      Section
5. Grants of
Options.

      

      5.1.
Grants of Options to
Key Employees.  Subject to the terms of the Plan, the Committee
may from time to time grant Options, which may be ISOs or NSOs, to Key Employees
of the Company or any of its Subsidiaries.  Unless otherwise expressly
provided at the time of the grant, Options granted under the Plan to Key
Employees will be ISOs.  An Option shall be considered granted when
the Company completes the corporate action constituting an offer of stock for
sale provided, however, that notwithstanding the foregoing, corporate action
shall not be considered complete until the date on which the maximum number of
shares that can be purchased and the minimum Exercise Price are fixed and
determined.

      

      5.2.
Grants of Options to
Non-Employee Directors.  All grants of Options to Non-Employee
Directors shall be automatic and non-discretionary.  Each individual
who is a Non-Employee Director on the effective date of the Plan shall be
granted automatically a NSO to purchase 15,000 shares of Common Stock on the
effective date of the Plan. Each individual who becomes a Non-Employee Director
(other than a Non-Employee Director who was previously an employee Director)
after the effective date of the Plan shall be granted automatically a NSO to
purchase 15,000 shares of Common Stock on the date he or she becomes a
Non-Employee Director.

      

      5.3.
Option
Agreement.  Each Option shall be evidenced by a written Option
Agreement (in paper or electronic format) specifying the type of Option granted,
the Option exercise price, the terms for payment of the exercise price, the
expiration date of the Option, the number of shares of Common Stock to be
subject to each Option and such other terms and conditions established by the
Committee, in its sole discretion, not inconsistent with the Plan.  In
the event of any inconsistency between the terms of the Plan and the terms of
the Option Agreement, the terms of the Plan shall govern.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      5.4.
Expiration.  Except
to the extent otherwise provided in or pursuant to Section 6, each Option shall
expire, and all rights to purchase shares of Common Stock shall expire, on the
tenth (10th)
anniversary of the date on which the Option was granted.

      

      5.5.
Exercise
Period.  Except to the extent otherwise provided in or pursuant
to Section 6, or in the proviso to this sentence, Options shall become
exercisable pursuant to the following schedule: with respect to one-fifth of the
total number of shares of Common Stock subject to Option on the date twelve
months after the date of its grant and with respect to an additional one-fifth
of the total number of shares of Common Stock subject to the Option at the end
of each twelve-month period thereafter during the succeeding four years;
provided, however, that the Committee, in its sole discretion, shall have the
authority to shorten or lengthen the exercise schedule with respect to any or
all Options, or any part thereof, granted under the Plan.

      

      5.6.
Required Terms and
Conditions of ISOs.  Each ISO granted to a Key Employee shall
be in such form and subject to such restrictions and other terms and conditions
as the Committee may determine, in its sole discretion, at the time of grant,
subject to the general provisions of the Plan, the applicable Option Agreement,
and the following specific rules:

      

      (a)
Except as provided in Section 5.6(d), the per share exercise price of each ISO
shall be the Fair Market Value of the shares of Common Stock on the date such
ISO is granted. For all purposes hereunder, Fair Market Value shall be the price
at which one share of Common Stock is last sold in the principal United States
market for such stock as of the grant date.

      

      (b) The
aggregate Fair Market Value (determined with respect to each ISO at the time
such Option is granted) of the shares of Common Stock with respect to which ISOs
are exercisable for the first time by an individual during any calendar year
(under all incentive stock option plans of the Company and its parent and
subsidiary corporations) shall not exceed $100,000.  For purposes of
this section, an Option is considered to be first exercisable during a calendar
year if the Option will become exercisable at any time during the year, assuming
that any condition on the Optionee's ability to exercise the Option related to
the performance of services is satisfied. If the Optionee's ability to exercise
the Option in the year is subject to an acceleration provision, then the Option
is considered first exercisable in the calendar year in which the acceleration
provision is triggered.  If the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock subject to an Option that
first becomes exercisable in any calendar year exceeds the limitation of this
Section 5.6(b), much of the Option that does not exceed the applicable dollar
limit shall be an ISO and the remainder shall be a NSO; but in all other
respects, the original Option Agreement shall remain in full force and
effect.

      

      (c) As
used of this Section 5, the words "parent" and "subsidiary" shall have the
meanings given to them in Section 424(e) and 424(f) of the Code.

      

      (d)
Notwithstanding anything herein to the contrary, if an ISO is granted to an
individual who owns, after application of the stock attribution rules of
Department of Treasury Regulation § 1.424-1(a), stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of its parent or subsidiary corporations, within the meaning of
Section 422(b)(6) of the Code: (i) the purchase price of each share of Common
Stock subject to the ISO shall be not less than one hundred ten percent (110%)
of the Fair Market Value of the Common Stock on the date the ISO is granted; and
(ii) the ISO shall expire and all rights to purchase shares there under shall
cease no later than the fifth anniversary of the date the ISO was granted. For
purposes of this paragraph: (i) shares of Common Stock that the Optionee may
purchase under existing Options are not treated as shares owned by the Optionee;
and (ii) the combined voting power of all shares of the Company actually owned
and outstanding immediately before the grant of the Option does not include the
voting power of treasury shares or shares of Common Stock authorized for issue
under outstanding Options held by the Optionee or any other person.

      

      (e) No
ISOs may be granted under the Plan after September 30, 2019.

      

      (f) An
inadvertent modification of an ISO shall not be treated as a modification to the
extent the modification is reversed by the earlier of the date the Option is
exercised or the last day of the calendar year during which such change
occurred.

      

      5.7.
Required Terms and
Conditions of NSOs.  Each NSO granted shall be in such form and
subject to such restrictions and other terms and conditions as the Committee may
determine, in its sole discretion, at the time of grant, subject to the general
provisions of the Plan, the applicable Option Agreement, and the following
specific rule: in no event may the exercise price be less than the Fair Market
Value of the shares of Common Stock subject to such NSO.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      Section
6. Effect of
Termination.

      

      6.1.
Key Employee
Termination Generally.  Except as provided in Sections 6.2, 6.3
and 11, or by the Committee in its sole discretion, any Option shall terminate
on the date of the Key Employee's termination of employment with the Company and
its Subsidiaries: (i) for Good Cause (as defined in the Option Agreement); or
(ii) voluntarily, for any other reason other than retirement, death, or
disability.  A Key Employee's transfer of employment from the Company
to a Subsidiary, or from a Subsidiary to the Company, or from a Subsidiary to
another Subsidiary, shall not constitute a termination of employment for
purposes of the Plan.  Options granted under the Plan shall not be
affected by any change of duties in connection with the employment of the Key
Employee or by military leave, sick leave, or other bona fide leave of absence
(such as temporary employment by the government) if the period of such leave
does not exceed 3 months or, if longer, so long as the Optionee's right to
employment with the Company or a Subsidiary is provided either by statute or by
contract.  If the period of leave exceeds 3 months, and the Optionee's
right to reemployment is not provided by either statute or contract, the
Optionees employment relationship is deemed to terminate on the first day
immediately following such three-month period.

      

      6.2.
Death and
Disability.  In the event of an Optionee's death or Disability
(as defined below) during employment or service with the Company or any of its
Subsidiaries, all Options held by the Optionee shall become fully exercisable on
such date of death or Disability.  Each of the Options held by such an
Optionee shall expire on the earlier of: (a) the first anniversary of the date
of the Optionee's death or Disability; and (b) the date that such Option expires
in accordance with its terms.  For purposes of this Section 6.2,
"Disability" shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medical determinable physical or
mental impairment which is expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than twelve (12)
months.  The Committee, in its sole discretion, shall determine the
date of any Disability.

      

      6.3.
Retirement of Key
Employees.  In the event the employment of a Key Employee with
the Company and/or its Subsidiaries shall be terminated by reason of Employee
Retirement, all Options held by the Key Employee shall become fully
exercisable.  Each of the Options held by such a Key Employee shall
expire on the earlier of: (i) the first anniversary of the date of the Employee
Retirement; and (ii) the date that such Option expires in accordance with its
terms.  For purposes of this Section 6.3, "Employee Retirement" shall
mean retirement of a Key Employee after attaining age 55.  In the
event the employment of a Key Employee with the Company and/or its Subsidiaries
shall be terminated by reason of a retirement that is not an Employee Retirement
as herein defined, the Committee may, in its sole discretion, determine that the
exercisability and exercise periods set forth in this Section 6.3 shall be
applicable to Options held by such Key Employee.  Notwithstanding the
foregoing, in the event the employment of a Key Employee who is also a Director
of the Company is terminated by reason of Employee Retirement, all Options held
by the Key Employee shall become fully exercisable, but each of the Options held
by such a Key Employee shall expire on the earlier of: (i) the first anniversary
of the date of the Key Employee's termination of service on the Board for any
reason; and (ii) the date that such Option expires in accordance with its
terms.

      

      6.4.
Retirement of
Non-Employee Directors.  In the event the service of a
Non-Employee Director on the Board shall be terminated by reason of the
retirement of such Non-Employee Director of the Company in accordance with the
Company's retirement policy for Directors, any Option or Options granted to such
Non-Employee Director shall continue to vest and remain exercisable pursuant to
Section 5, in the same manner and to the same extent as if such Director had
continued his or her service on the Board during such period.

      

      Section
7. Exercise
of Options.

      

      7.1.
Notice.  A
person entitled to exercise an Option may do so by delivery of a written notice
to that effect specifying the number of shares of Common Stock with respect to
which the Option is being exercised and any other information the Committee may
prescribe.  The notice shall be accompanied by payment as described in
Section 7.2.  The notice of exercise shall be accompanied by the
Optionee's copy of the writing or writings evidencing the grant of the
Option.  All notices or requests provided for herein shall be
delivered to the Secretary of the Company.

      

      7.2.
Exercise
Price.  Except as otherwise provided in the Plan or in any
Option Agreement, the Optionee shall pay the purchase price of the shares of
Common Stock upon exercise of any Option: (a) in cash; (b) in cash received from
a broker-dealer to whom the Optionee has submitted and exercise notice
consisting of a fully endorsed Option (however, in the case of an Optionee
subject to Section 16 of the 1934 Act, this payment option shall only be
available to the extent such insider complies with Regulation T issued by the
Federal Reserve Board); (c) by delivering shares of Common Stock having an
aggregate Fair Market Value on the date of exercise equal to the Option exercise
price; (d) by directing the Company to withhold such number of shares of Common
Stock otherwise issuable upon exercise of such Option having an aggregate Fair
Market Value on the date of exercise equal to the Option exercise price; (e) in
the case of a Key Employee, by such other medium of payment as the Committee, in
its discretion, shall authorize at the time of grant; or (f) by any combination
of (a), (b), (c), (d) and (e).  In the case of an election pursuant to
(a) or (b) above, cash shall mean cash or a check issued by a federally insured
bank or savings and loan, and made payable to the Company.  In the
case of payment pursuant to (b), (c) or (d) above, the Optionee's election must
be made on or prior to the date of exercise and shall be
irrevocable.  In lieu of a separate election governing each exercise
of an Option, an Optionee may file a blanket election with the Committee which
shall govern all future exercises of Options until revoked by the
Optionee.  The Company shall issue, in the name of the Optionee, stock
certificates representing the total number of shares of Common Stock issuable
pursuant to the exercise of any Option as soon as reasonably practicable after
such exercise, provided that any shares of Common Stock purchased by an Optionee
through a broker-dealer pursuant to clause (b) above shall be delivered to such
broker-dealer in accordance with 12 C.F.R §220.3(e)(4) or other applicable
provision of law.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      7.3.
Taxes
Generally.  At the time of the exercise of any Option, as a
condition of the exercise of such Option, the Company may require the Optionee
to pay the Company an amount equal to the amount of the tax the Company or any
Subsidiary may be require to withhold to obtain a deduction for federal and
state income tax purposes as a result of the exercise of such Option by the
Optionee or to comply with applicable law.

      

      7.4.
Payment of
Taxes.  At any time when an Optionee is required to pay an
amount required to be withheld under applicable income tax or other laws in
connection with the exercise of an Option, the Optionee may satisfy this
obligation in whole or in part by: (a) directing the Company to withhold such
number of shares of Common Stock otherwise issuable upon exercise of such Option
having an aggregate Fair Market Value on the date of exercise equal to the
amount of tax required to be withheld; or (b) delivering shares of Common Stock
of the Company having an aggregate Fair Market Value equal to the amount
required to be withheld.  In the case of payment of taxes pursuant to
(a) or (b) above, the Optionee's election must be made on or prior to the date
of exercise and shall be irrevocable.  The Committee may disapprove
any election or delivery or may suspend or terminate the right to make elections
or deliveries.  In lieu of a separate election governing each exercise
of an Option, an Optionee may file a blanket election with the Committee which
shall govern all future exercises of Options until revoked by the
Optionee.

      

      7.5.
Attestation.  Wherever in this
Plan or any Option Agreement an Optionee is permitted to pay the Exercise Price
of an Option or taxes relating to the exercise of an Option by delivering shares
of Common Stock, the Optionee may, subject to procedures satisfactory to the
Committee, satisfy such delivery requirements by presenting proof of beneficial
ownership of such shares in which case the Company shall treat the Option as
exercised without further payment and shall not withheld such number of shares
of Common Stock from the Shares acquired by the exercise of the Option, as
appropriate.

      

      Section
8. Transferability
of Options.

      

      No Option
granted pursuant to the Plan shall be transferable otherwise than by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code.  However, if an ISO is
transferred incident to a divorce (within the meaning Code Section 1041) or
pursuant to a qualified domestic relations order (within the meaning of Code
Section 414(p)), it shall cease to qualify as an ISO.  Notwithstanding
the second preceding sentence, an Optionee, at any time prior to his death, may
assign all or any portion of an Option granted to him (other than an ISO) to (i)
his spouse or lineal descendant, (ii) the trustee of a trust for the primary
benefit of his spouse or lineal descendant, (iii) a partnership of which his
spouse and lineal descendants are the only partners, or (iv) a tax exempt
organization as described in Code Section 501 (c)(3).  In such event,
the spouse, lineal descendant, trustee, partnership or tax exempt organization
will be entitled to all of the rights of the Optionee with respect to the
assigned portion of such Option, and such portion of the Option will continue to
be subject to all of the terms, conditions and restrictions applicable to the
Option, as set forth herein and in the related Option Agreement immediately
prior to the effective date of the assignment.  Any such assignment
will be permitted only if: (i) the Optionee does not receive any consideration
therefore; and (ii) the assignment is expressly permitted by the applicable
Option Agreement as approved by the Committee.  Any such assignment
shall be evidenced by an appropriate written document executed by the Optionee,
and a copy thereof shall be delivered to the Company on or prior to the
effective date of the assignment.  In addition, the transfer of an ISO
to a trust shall not disqualify the ISO if, under Code Section 671 and
applicable state law, the individual is considered to be the sole beneficial
owner of the Option while it is held in trust.

      

      Section
9. Rights as
Shareholder.

      

      An
Optionee or a transferee of an Optionee pursuant to Section 8 shall have no
rights as a shareholder with respect to any Common Stock covered by an Option or
receivable upon the exercise of an Option until the Optionee or transferee shall
have become the holder of record of such Common Stock, and no adjustments shall
be made for dividends in cash or other property or other distributions or rights
in respect to such Common Stock for which the record date is prior to the date
on which the Optionee shall have in fact become the holder of record of the
shares of Common Stock acquired pursuant to the Option.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      Section
10. Change in
Control.

      

      10.1.
Effect of Change in
Control.  Notwithstanding any of the provisions of the Plan or
any Option Agreement evidencing Options granted hereunder, upon a Change in
Control of the Company (as defined in Section 10.2) all outstanding Options
shall become fully exercisable and all restrictions thereon shall terminate in
order that Optionees may fully realize the benefits there
under.  Further, in addition to the Committee's authority set forth in
Section 3, the Committee, as constituted before such Change in Control, is
authorized, and has sole discretion, as to any Option, either at the time such
Option is granted hereunder or any time thereafter, to take any one or more of
the following actions: (a) provide for the purchase of any such Option, upon the
Optionee's request, for an amount of cash equal to the difference between the
exercise price and the then Fair Market Value of the Common Stock covered
thereby had such Option been currently exercisable; (b) make such adjustment to
any such Option then outstanding as the Committee deems appropriate to reflect
such Change in Control; and (c) cause any such Option then outstanding to be
assumed, by the acquiring or surviving corporation, after such Change in
Control.

      

      10.2.
Definition
of Change in Control.  A "Change in Control" of the Company is
deemed to occur upon:

      

      (a) The
receipt by the Company of a Schedule 13D or other statement filed under Section
13(d) of the 1934 Act, indicating that any entity, person, or group has acquired
beneficial ownership, as that term is defined in Rule 13d-3 under the 1934 Act,
of more than 30% of the outstanding capital stock of the Company entitled to
vote for the election of directors ("voting stock");

      

      (b) The
commencement by an entity, person, or group (other than the Company or a
Subsidiary) of a tender offer or an exchange offer for more than 20% of the
outstanding voting stock of the Company;

      

      (c) The
effective time of: (i) a merger or consolidation of the Company with one or more
other corporations as a result of which the holders of the outstanding voting
stock of the Company immediately prior to such merger or consolidation hold less
than 80% of the voting stock of the surviving or resulting corporation; or (ii)
a transfer of substantially all of the property of the Company other than to an
entity of which the Company owns at least 80% of the voting stock;
or

      

      (d) The
election to the Board, without the recommendation or approval of the incumbent
Board, of the lesser of: (i) three directors; or (ii) directors constituting a
majority of the number of directors of the Company then in office.

      

      Section
11. Postponement
of Exercise.

      

      The
Committee may postpone any exercise of an Option for such time as the Committee
in its sole discretion may deem necessary in order to permit the Company: (a) to
effect, amend or maintain any necessary registration of the Plan or the shares
of Common Stock issuable upon the exercise of an Option under the Securities Act
of 1933, as amended, or the securities laws of any applicable jurisdiction; (b)
to permit any action to be taken in order to (i) list such shares of Common
Stock on a stock exchange if shares of Common Stock are then listed on such
exchange or (ii) comply with restrictions or regulations incident to the
maintenance of a public market for its shares of Common Stock, including any
rules or regulations of any stock exchange on which the shares of Common Stock
are listed; or (c) to determine that such shares of Common Stock and the Plan
are exempt from such registration or that no action of the kind referred to in
(b)(ii) above needs to be taken; and the Company shall not be obligated by
virtue of any terms and conditions of any Option or any provision of the Plan to
recognize the exercise of an Option or to sell or issue shares of Common Stock
in violation of the Securities Act of 1933 or the law of any government having
jurisdiction thereof.  Any such postponement shall not extend the term
of an Option and neither the Company nor its directors or officers shall have
any obligation or liability to an Optionee, to the Optionee's successor or to
any other person with respect to any shares of Common Stock as to which the
Option shall lapse because of such postponement.

      

      Section
12. Termination
or Amendment of Plan.

      

      The Board
or the Committee may terminate, suspend, or amend the Plan, in whole or in part,
from time to time, without the approval of the shareholders of the Company to
the extent allowed by law, provided, however, that a modification of the maximum
aggregate shares of Company Stock that may be issued under the Plan as set forth
in Section 4.1 or the class of employees eligible to receive them as set forth
in Section 2 shall require shareholder approval. The Committee may correct any
defect or supply an omission or reconcile any inconsistency in the Plan or in
any Option granted hereunder in the manner and to the extent it shall deem
desirable, in its sole discretion, to effectuate the Plan. No amendment or
termination of the Plan shall in any manner affect any Option theretofore
granted without the consent of the Optionee, except that the Committee may amend
the Plan in a manner that does affect Options theretofore granted upon a finding
by the Committee that such amendment is in the best interest of holders of
outstanding Options affected thereby.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      Without
limiting the generality of the foregoing, to the extent applicable,
notwithstanding anything herein to the contrary, the Plan and Options issued
hereunder shall be interpreted in accordance with Code Section 409A and
Department of Treasury Regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or guidance that
may be issued after the Effective Date (as defined in Section
13).  Notwithstanding any provision of the Plan to the contrary, in
the event that the Committee determines that any amounts payable hereunder will
be taxed to an Optionee under Code Section 409A and related Department of
Treasury guidance, prior to payment to such Optionee of such amount, the Company
may (a) adopt such amendments to the Plan and Option Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that the Committee determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by the Plan and Option Agreement
hereunder and (b) take such other actions as the Committee deems necessary or
appropriate to avoid the imposition of an additional tax under Code Section
409A.

      

      Section
13. Effective
Date.

      

      The Plan
is to be adopted and authorized by the Board of Directors for submission to the
shareholders of the Company at the Board’s next meeting scheduled for September
8, 2009.  If the Plan as amended and restated is approved by the
affirmative vote of a majority of the shares of the voting stock entitled to be
voted by the holders of stock represented at a duly held shareholders' meeting,
or if the Plan is duly approved by written consent of a majority of the votes
entitled to be cast without a duly held shareholders’ meeting, the Plan shall be
deemed to have become effective as of September 30, 2009 (the "Effective
Date").  The Committee may award Options under the Plan at any time
after the Effective Date and before the termination of the Plan.  The
Plan will terminate upon the earliest of (i) the tenth anniversary of the
Effective Date, or (ii) the date on which the Board terminates the Plan in
accordance with Section 12; provided, however, that upon Plan termination, all
Options outstanding under the Plan will continue to have full force and effect
in accordance with the terms of the Option Agreement evidencing such
Option.

      

      Section
14. Reporting
and Disclosure of ISO.

      

      By
January 31 of the year following the year an Optionee exercises an ISO (unless
(i) January 31 falls on a Saturday, Sunday, or legal holiday, in which case the
date will be adjusted in accordance with Code Section 7503 and the regulations
thereunder or (ii) an extension of time for good cause is shown pursuant to
Treasury Regulation Section 1.6039-1(a)(2)), an Optionee exercising an ISO shall
be provided with a statement pursuant to Code Section 6039.  The
statement shall include the following information:

      

      (i) the
name, address, and EIN of the Company;

      (ii) the
name, address, and identifying number of the Optionee;

      (iii) the
date the ISO was granted;

      (iv) the
date the shares of Common Stock were transferred to the Optionee;

      (v) the
fair market value of the shares of Common Stock at the time the ISO is
exercised;

      (vi) the
number of shares of Common Stock transferred pursuant to the ISO;

      (vii) the
type of option under which the shares of Common Stock were acquired;
and

      (viii)
the total cost of all of the shares of Common Stock.

      

      If the
Company provides this statement by mail, it will be deemed to be furnished to an
Optionee if it is mailed to his/her last known address.  With the
written consent of the Optionee the statement described in this paragraph can be
furnished electronically rather than in a paper format.  The Company
shall identify any share of the Common Stock acquired through the exercise of an
ISO in a manner sufficient to enable the accurate reporting of the transfer of
record title of such shares.  Such identification may be accomplished
by assigning to the certificates of stock issued pursuant to such Option a
special serial number or color.

      

      Section
15. Beneficiary
Designation.

      

      Each
Optionee may, from time to time, name any beneficiary or beneficiaries (who may
be named contingently or successively and who need not be a natural person) to
whom any benefit under the Plan is to be paid in case the Optionee should die
before receiving any or all of his or her Plan benefits.  Each
beneficiary designation, which will become effective upon receipt by the
Committee, will revoke all prior designations by the same Optionee, must be in a
form prescribed by the Committee, and must be made during the Optionee's
lifetime.  If the Optionee's designated beneficiary predeceases the
Optionee or no beneficiary has been designated, benefits remaining unpaid at the
Optionee's death will be paid to the Optionee's estate or other entity described
in the Optionee's Option Agreement in a manner consistent with Code Section
2518.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      In the
event of any conflict between a designation of beneficiary hereunder and a
designation under an Optionee's will, the designation hereunder shall
prevail.  A designated beneficiary may disclaim any Options
hereunder.

      

      Section
16. 409A
Compliance.

      

      Notwithstanding
any other provisions of this Plan or any Option Agreement hereunder, no Option
shall be granted, deferred, accelerated, extended, paid out or modified under
this Plan in a matter that would result in the imposition of an additional tax
under Code Section 409A upon an Optionee.  In the event it is
reasonably determined by the Committee that, as a result of Code Section 409A,
payment in respect of any Option under the Plan may not be made at the time
contemplated by the terms of the Plan or the relevant Option Agreement, as the
case may be, without causing the Optionee holding such award to be subject to
taxation under Code Section 409A, the Company will make such payment on the
first day that would not result in the Optionee incurring any tax liability
under Code Section 409A.

      

      To Become
Effective on the 30th day
of September, 2009.

       

       

    

    8

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