Document:

Exhibit 4.1

    
      

      

    

    
       

      EXHIBIT
        4.1

      

      VERIDIUM
        CORPORATION

      

      2005
        Employee Incentive Plan

      

      Article
        1. Establishment and Purpose

      

      1.1 
        Establishment
        of the Plan.
        Veridium Corporation, a Delaware corporation (the “Company” or “Veridium”),
        hereby establishes an incentive compensation plan (the “Plan”), as set forth in
        this document.

      

      1.2 
        Purpose
        of the Plan.
        The
        purpose of the Plan is to promote the success and enhance the value of the
        Company by linking the personal interests of Participants to those of the
        Company's
        shareholders, and by providing Participants with an incentive for outstanding
        performance. The Plan is further intended to attract and retain the services
        of
        Participants upon whose judgment, interest, and special efforts the successful
        operation of Veridium and its subsidiaries is dependent. 

      

      1.3 
        Effective
        Date of the Plan.
        The
        Plan shall become effective on November 23, 2005.

      

      Article
        2. Definitions

      

      Whenever
        used in the Plan, the following terms shall have the meanings set forth below
        and, when the meaning is intended, the initial letter of the word is
        capitalized:

      

      (a) 
        “Award” means, individually or collectively, a grant under this Plan of Stock,
        Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, or
        Performance Shares.

      

      (b) 
        “Award Agreement” means an agreement which may be entered into by each
        Participant and the Company, setting forth the terms and provisions applicable
        to Awards granted to Participants under this Plan.

      

      (c) 
        “Board” or “Board of Directors” means the Company’s Board of
        Directors.

      

      (d) 
        “Cause” shall mean willful and gross misconduct on the part of an Eligible
        Person that is materially and demonstrably detrimental to the Company or
        any
        Subsidiary as determined by the Committee in its sole discretion.

      

      

      
        
          
          

        

        
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      (e)
         “Change in Control” shall be deemed to have occurred if (i) any “person”
        (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
        than (A) a person who on November 23, 2005 was the beneficial owner of more
        than
        25% of the outstanding Shares, (B) a trustee or other fiduciary holding
        securities under an employee benefit plan of the Company or (C) a corporation
        owned directly or indirectly by the shareholders of the Company in substantially
        the same proportions as their ownership of stock of the Company, is or becomes
        the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or
        indirectly, of securities of the Company representing fifty percent (50%)
        or
        more of the total voting power represented by the Company's then outstanding
        voting securities, or (ii) during any period of two (2) consecutive years,
        individuals who at the beginning of such period constitute the Board of
        Directors of the Company and any new Director whose election by the Board
        of
        Directors or nomination for election by the Company's shareholders was approved
        by a vote of at least two-thirds (2/3) of the Directors then still in office
        who
        either were Directors at the beginning of the period or whose election or
        nomination for election was previously so approved, cease for any reason
        to
        constitute a majority thereof, or (iii) the shareholders of the Company approve
        a merger or consolidation of the Company with any other corporation, other
        than
        a merger or consolidation which would result in the voting securities of
        the
        Company outstanding immediately prior thereto continuing to represent (either
        by
        remaining outstanding or by being converted into voting securities of the
        surviving entity) at least fifty-five percent (55%) of the total voting power
        represented by the voting securities of the Company or such surviving entity
        outstanding immediately after such merger or consolidation, or the shareholders
        of the Company approve a plan of complete liquidation of the Company or an
        agreement for the sale or disposition by the Company of all or substantially
        all
        the Company’s assets.

      

      (f)
         “Code” means the Internal Revenue Code of 1986, as amended from time to
        time.

      

      (g) 
        “Committee” means the committee or committees, as specified in Article 3,
        appointed by the Board to administer the Plan with respect to grants of
        Awards.

      

      (h) 
        “Consultant” means a natural person under contract with the Company to provide
bona
        fide
        services
        to the Company which are not in connection with the offer or sale of securities
        in a capital-raising transaction and do not directly or indirectly promote
        or
        maintain a market for the Company’s securities.

      

      (i)
         “Director” means any individual who is a member of the Veridium Board of
        Directors.

      

      (j) 
        “Disability” shall mean the Participant’s inability to perform the Participant’s
        normal Employment functions due to any medically determinable physical or
        mental
        disability, which can last or has lasted 12 months or is expected to result
        in
        death.

      

      (k)
         “Eligible Person” means an Employee, Director or Consultant.

      

      (l) 
        “Employee” means any officer or employee of the Company or of one of the
        Company's Subsidiaries. Directors who are not otherwise employed by the Company
        shall not be considered Employees under this Plan.

      

      

      
        
          
          

        

        
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      (m)
         “Employment,” with reference to an Employee, means the condition of being
        an officer or employee of the Company or one of its Subsidiaries. “Employment,”
        with reference to a Consultant, means the condition of being a Consultant.
        “Employment,” with reference to a Director, means the condition of being a
        Director. The change in status of an Eligible Person among the categories
        of
        Employee, Director and Consultant shall not be deemed a termination of
        Employment. 

      

      (n)
         “Exchange Act” means the Securities Exchange Act of 1934, as amended from
        time to time, or any successor Act thereto.

      

      (o)
         “Exercise Price” means the price at which a Share may be purchased by a
        Participant pursuant to an Option, as determined by the Committee.

      

      (p) 
        “Fair Market Value” shall mean (i) at such time as there are closing prices
        quoted for the Shares, the closing price of Shares on the relevant date,
        or (if
        there were no sales on such date) the next preceding trading date, all as
        reported on the principal market for the Shares, or (ii) at such time as
        there
        is a public market quoted without closing prices, the mean of the closing
        high
        bid and low asked on the relevant date, as reported on the principal market
        for
        the Shares, or (iii) at such time as there is no public market for the Shares,
        the value determined from time to time by the Board of Directors.

      

      (q)
         “Incentive Stock Option” or “ISO” means an option to purchase Shares from
        Veridium, granted under this Plan, which is designated as an Incentive Stock
        Option and is intended to meet the requirements of Section 422 of the
        Code.

      

      (r)
         “Insider” shall mean an Eligible Person who is, on the relevant date, an
        officer, director, or ten percent (10%) beneficial owner of the Company,
        as
        those terms are defined under Section 16 of the Exchange Act. 

      

      (s) 
        “Nonqualified Stock Option” or “NQSO” means the option to purchase Shares from
        Veridium, granted under this Plan, which is not intended to be an Incentive
        Stock Option.

      

      (t)
         “Option” or “Stock Option” shall mean an Incentive Stock Option or a
        Nonqualified Stock Option.

      

      (u)
         “Participant” means a person who holds an outstanding Award granted under
        the Plan.

      

      (v) 
        “Performance Share” shall mean an Award granted to an Eligible Person pursuant
        to Article 8 herein.

      

      (w)
         “Plan” means this 2005 Employee Incentive Plan. 

      

      

      
        
          
          

        

        
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      (x) 
        “Restricted Stock” means an Award of Stock granted to an Eligible Person
        pursuant to Article 7 herein.

      

      (y)
         “Restriction Period” means the period during which Shares of Restricted
        Stock are subject to restrictions or conditions under Article 7.

      

      (z) 
        “Shares” or “Stock” means the shares of common stock of the
        Company.

      

      (aa)
         “Subsidiary” shall mean any corporation in which the Company owns
        directly, or indirectly through subsidiaries, more than fifty percent (50%)
        of
        the total combined voting power of all classes of Stock, or any other entity
        (including, but not limited to, partnerships and joint ventures) in which
        the
        Company owns more than fifty percent (50%) of the combined equity
        thereof.

      

      Article
        3. Administration

      

      3.1 
        The
        Committee.
        The
        Plan and all Awards hereunder shall be administered by one or more Committees
        of
        the Board as may be appointed by the Board for this purpose. The Board may
        appoint a Committee specifically responsible for Awards to Insiders (the
        “Disinterested Committee”) where each Director on such Disinterested Committee
        is a “Non-Employee Director” (or any successor designation for determining who
        may administer plans, transactions or awards exempt under Section 16(b) of
        the
        Exchange Act), as that term is used in Rule 16b-3 under the Exchange Act,
        as
        that rule may be modified from time to time. If no specific Committee is
        appointed by the Board, then the Board in its entirety shall be the Committee.
        Any Committee may be replaced by the Board at any time.

      

      3.2 
        Authority
        of the Committee.
        The
        Committee shall have full power, except as limited by law and subject to
        the
        provisions herein, to select the recipients of Awards; to determine the size
        and
        types of Awards; to determine the terms and conditions of such Awards in
        a
        manner consistent with the Plan; to construe and interpret the Plan and any
        agreement or instrument entered into under the Plan; to establish, amend,
        or
        waive rules and regulations for the Plan's administration; and (subject to
        the
        provisions of Article 10 herein) to amend the terms and conditions of any
        outstanding Award to the extent such terms and conditions are within the
        discretion of the Committee as provided in the Plan. Further, the Committee
        shall make all other determinations which may be necessary or advisable for
        the
        administration of the Plan.

      

      No
        Award
        may be made under the Plan after December 31, 2014.

      

      All
        determinations and decisions made by the Committee pursuant to the provisions
        of
        the Plan and all related orders or resolutions of the Board shall be final,
        conclusive, and binding on all persons, including the Company, its stockholders,
        Eligible Persons, Participants, and their estates and
        beneficiaries.

      

      

      
        
          
          

        

        
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      Subject
        to the terms of this Plan, the Committee is authorized, and shall not be
        limited
        in its discretion, to use any of the Performance Criteria specified herein
        in
        its determination of Awards under this Plan.

      

      Article
        4. Shares Subject to the Plan

      

      4.1 
        Number
        of Shares.
        Subject
        to adjustment as provided in Section 4.3 herein, the number of Shares available
        for grant under the Plan shall not exceed fifty million (50,000,000) Shares.
        The
        Shares granted under this Plan may be either authorized but unissued or
        reacquired Shares. 

      

      Without
        limiting the discretion of the Committee under this section, unless otherwise
        provided by the Committee, the following rules will apply for purposes of
        the
        determination of the number of Shares available for grant under the Plan
        or
        compliance with the foregoing limits:

      

      (a) 
        The grant of Stock, a Stock Option or a Restricted Stock Award shall reduce
        the
        Shares available for grant under the Plan by the number of Shares subject
        to
        such Award. However, to the extent the Participant uses previously owned
        Shares
        to pay the Exercise Price or any taxes, or Shares are withheld to pay taxes,
        these Shares shall be available for regrant under the Plan.

      

      (b) 
        With respect to Performance Shares, the number of Performance Shares granted
        under the Plan shall be deducted from the number of Shares available for
        grant
        under the Plan. The number of Performance Shares which cannot be, or are
        not,
        converted into Shares and distributed to the Participant (after any applicable
        tax withholding) following the end of the Performance Period shall increase
        the
        number of Shares available for regrant under the Plan by an equal
        amount.

      

      4.2 
        Lapsed
        Awards.
        If any
        Award granted under this Plan is canceled, terminates, expires, or lapses
        for
        any reason, Shares subject to such Award shall be again available for the
        grant
        of an Award under the Plan.

      

      4.3 
        Adjustments
        in Authorized Plan Shares.
        In the
        event of any merger, reorganization, consolidation, recapitalization,
        separation, liquidation, Stock dividend, split-up, Share combination, or
        other
        change in the corporate structure of the Company affecting the Shares, an
        adjustment shall be made in the number and class of Shares which may be
        delivered under the Plan, and in the number and class of and/or price of
        Shares
        subject to outstanding Awards granted under the Plan, and/or the number of
        outstanding Options, Shares of Restricted Stock, and Performance Shares
        constituting outstanding Awards, as may be determined to be appropriate and
        equitable by the Committee, in its sole discretion, to prevent dilution or
        enlargement of rights.

      

      

      
        
          
          

        

        
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      Article
        5. Stock Grant

      

      5.1 
        Grant
        of Stock.
        Subject
        to the terms and provisions of the Plan, the Board of Directors, at any time
        and
        from time to time, may grant Shares of Stock to Eligible Persons in such
        amounts
        and upon such terms and conditions as the Board of Directors shall determine.
        

      

      Article
        6. Stock Options

      

      6.1 
        Grant
        of Options.
        Subject
        to the terms and provisions of the Plan, Options may be granted to Eligible
        Persons at any time and from time to time, and under such terms and conditions,
        as shall be determined by the Committee. The Committee shall have discretion
        in
        determining the number of Shares subject to Options granted to each Eligible
        Person. The Committee may grant ISOs, NQSOs, or a combination thereof. ISOs,
        however, may be granted only to Employees and only if this Plan is approved
        by
        the shareholders of the Company within one year after it is adopted by the
        Board
        of Directors.

      

      6.2 
        Form
        of Issuance.
        Each
        Option grant may be issued in the form of an Award Agreement and/or may be
        recorded on the books and records of the Company for the account of the
        Participant. If an Option is not issued in the form of an Award Agreement,
        then
        the Option shall be deemed granted as determined by the Committee. The terms
        and
        conditions of an Option shall be set forth in the Award Agreement, in the
        notice
        of the issuance of the grant, or in such other documents as the Committee
        shall
        determine. Such terms and conditions shall include the Exercise Price, the
        duration of the Option, the number of Shares to which an Option pertains
        (unless
        otherwise provided by the Committee, each Option may be exercised to purchase
        one Share), and such other provisions as the Committee shall determine,
        including, but not limited to whether the Option is intended to be an ISO
        or a
        NQSO.

      

      6.3 
        Exercise
        Price.
        

      

      (a) 
        Unless a greater Exercise Price is determined by the Committee, the Exercise
        Price for each ISO awarded under this Plan shall be equal to one hundred
        percent
        (100%) of the Fair Market Value of a Share on the date the Option is granted.
        If, however, the Eligible Person owns 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, then the Exercise Price of an
        ISO
        shall be not less than one hundred ten percent (110%) of the Fair Market
        Value
        of a Share on the date the Option is granted.

      

      (b) 
        The Exercise Price of a NQSO shall be determined by the Committee in its
        sole
        discretion.

      

      6.4 
        Duration
        of Options.
        Each
        Option shall expire at such time as the Committee shall determine at the
        time of
        grant (which duration may be extended by the Committee); provided, however,
        that
        no Option shall be exercisable later than the tenth (10th)
        anniversary date of its grant. If, however, the Eligible Person owns 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,
        then no Option shall be exercisable later than the fifth (5th)
        anniversary date of its grant.

      

      

      
        
          
          

        

        
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      6.5 
        Vesting
        of Options.
        Options
        shall vest at such times and under such terms and conditions as determined
        by
        the Committee; provided, however, unless a different vesting period is provided
        by the Committee at or before the grant of an Option, the Options will vest
        on
        the first anniversary of the grant.

      

      6.6 
        Exercise
        of Options.
        Options
        granted under the Plan shall be exercisable at such times and be subject
        to such
        restrictions and conditions as the Committee shall in each instance approve,
        which need not be the same for each grant or for each Participant.

      

      Options
        shall be exercised by delivery of a written notice (including e-mail and
        telecopies) to the Secretary of the Company (or, if so provided by the Company,
        to its designated agent), which notice shall be irrevocable, setting forth
        the
        exact number of Shares with respect to which the Option is being exercised
        and
        including with such notice payment of the Exercise Price. When Options have
        been
        transferred, the Company or its designated agent may require appropriate
        documentation that the person or persons exercising the Option, if other
        than
        the Participant, has the right to exercise the Option. No Option may be
        exercised with respect to a fraction of a Share.

      

      6.7 
        Payment.
        The
        Exercise Price shall be paid in full at the time of exercise. No Shares shall
        be
        issued or transferred until full payment has been received
        therefor.

      

      Payment
        may be made:

      

      (a)
         in cash, or

      

      (b) 
        unless otherwise provided by the Committee at any time, and subject to such
        additional terms and conditions and/or modifications as the Committee or
        the
        Company may impose from time to time, and further subject to suspension or
        termination of this provision by the Committee or Company at any time, by
        delivery of Shares of Stock owned by the Participant in partial (if in partial
        payment, then together with cash) or full payment (if a fractional Share
        remains
        after payment of the Exercise Price in full by previously owned Shares, then
        the
        fractional Share shall be withheld for taxes); provided, however, as a condition
        to paying any part of the Exercise Price in Stock, at the time of exercise
        of
        the Option, the Participant must establish to the satisfaction of the Company
        that the Stock tendered to the Company has been held by the Participant for
        a
        minimum of six (6) months preceding the tender; or

      

      If
        payment is made by the delivery of Shares of Stock, the value of the Shares
        delivered shall be equal to the Fair Market Value of the Shares on the day
        preceding the date of exercise of the Option.

      

      

      
        
          
          

        

        
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      6.8 
        Termination
        of Employment.
        Unless
        otherwise provided by the Committee, the following limitations on exercise
        of
        Options shall apply upon termination of Employment:

      

      (a) 
        Termination
        by Death or Disability.
        In the
        event the Employment of a Participant shall terminate by reason of death
        or
        Disability, all outstanding Options granted to that Participant shall
        immediately vest as of the date of termination of Employment and may be
        exercised, if at all, no more than three (3) years from the date of the
        termination of Employment, unless the Options, by their terms, expire earlier.
        

      

      (b) 
        Termination
        for Cause.
        If the
        Employment of a Participant shall be terminated by the Company for Cause,
        all
        outstanding Options held by the Participant shall immediately be forfeited
        to
        the Company and no additional exercise period shall be allowed, regardless
        of
        the vested status of the Options.

      

      (c) 
        Retirement
        or Other Termination of Employment.
        If the
        Employment of a Participant shall terminate for any reason other than the
        reasons set forth in (a) or (b) above, all outstanding Options which are
        vested
        as of the effective date of termination of Employment may be exercised, if
        at
        all, no more than thirty (30) days from the date of termination of Employment,
        unless the Options, by their terms, expire earlier. In the event of the death
        of
        the Participant after termination of Employment, this paragraph (c) shall
        still
        apply and not paragraph (a), above.

      

      (d) 
        Options
        not Vested at Termination.
        Except
        as provided in paragraph (a) above, all Options held by the Participant which
        are not vested on or before the effective date of termination of Employment
        shall immediately be forfeited to the Company (and shall once again become
        available for grant under the Plan).

      

      (e) 
        Notwithstanding the foregoing, the Committee may, in its sole discretion,
        establish different terms and conditions pertaining to the effect of termination
        of Employment, but no such modification shall shorten the terms of Options
        issued prior to such modification.

      

      6.9 
        Restrictions
        on Exercise and Transfer of Options.
        Unless
        otherwise provided by the Committee:

      

      (a) 
        During the Participant's lifetime, the Participant’s Options shall be
        exercisable only by the Participant or by the Participant’s guardian or legal
        representative. After the death of the Participant, an Option shall only
        be
        exercised by the holder thereof (including, but not limited to, an executor
        or
        administrator of a decedent's estate) or his guardian or legal
        representative.

      

      (b)
         No Option shall be transferable except: (i) in the case of the
        Participant, only upon the Participant’s death; and (ii) in the case of any
        holder after the Participant’s death, only by will or by the laws of descent and
        distribution.

      

      

      
        
          
          

        

        
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      6.10 
        Competition.
        Notwithstanding anything in this Article 6 to the contrary, in the event
        the
        Committee determines, in its sole discretion, that a Participant is engaging
        in
        activity competitive with the Company, any Subsidiary, or any business in
        which
        any of the foregoing have a substantial interest (the “Veridium Businesses”),
        the Committee may cancel any Option granted to such Participant, whether
        or not
        vested, in whole or in part. Such cancellation shall be effective as of the
        date
        specified by the Committee. Competitive activity shall mean any business
        or
        activity if a substantially similar business activity is being carried on
        by an
        Veridium Business, including, but not limited to, representing or providing
        consulting services to any person or entity that is engaged in competition
        with
        a Veridium Business or that takes a position adverse to a Veridium Business.
        However, competitive activity shall not include, among other things, owning
        a
        nonsubstantial interest as a shareholder in a competing business.

      

      Article
        7. Restricted Stock

      

      7.1 
        Grant
        of Restricted Stock.
        Subject
        to the terms and provisions of the Plan, the Committee, at any time and from
        time to time, may grant Shares of Restricted Stock to Eligible Persons in
        such
        amounts and upon such terms and conditions as the Committee shall determine.
        In
        addition to any other terms and conditions imposed by the Committee, vesting
        of
        Restricted Stock may be conditioned upon the attainment of Performance Goals
        based on Performance Criteria in the same manner as provided in Section 8.3,
        herein with respect to Performance Shares. 

      

      7.2 
        Restricted
        Stock Agreement.
        The
        Committee may require, as a condition to an Award, that a recipient of a
        Restricted Stock Award enter into a Restricted Stock Award Agreement, setting
        forth the terms and conditions of the Award. In lieu of a Restricted Stock
        Award
        Agreement, the Committee may provide the terms and conditions of an Award
        in a
        notice to the Participant of the Award, on the Stock certificate representing
        the Restricted Stock, in the resolution approving the Award, or in such other
        manner as it deems appropriate.

      

      7.3 
        Transferability.
        Except
        as otherwise provided in this Article 7, the Shares of Restricted Stock granted
        herein may not be sold, transferred, pledged, assigned, or otherwise alienated
        or hypothecated until the end of the applicable Restriction Period established
        by the Committee, if any.

      

      7.4 
        Other
        Restrictions.
        The
        Committee may impose such other conditions and/or restrictions on any Shares
        of
        Restricted Stock granted pursuant to the Plan as it may deem advisable
        including, without limitation, a requirement that Participants pay a stipulated
        purchase price for each Share of Restricted Stock and/or restrictions under
        applicable Federal or state securities laws; and may legend the certificates
        representing Restricted Stock to give appropriate notice of such
        restrictions.

      

      The
        Company shall also have the right to retain the certificates representing
        Shares
        of Restricted Stock in the Company's possession until such time as all
        conditions and/or restrictions applicable to such Shares have been
        satisfied.

      

      

      
        
          
          

        

        
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      7.5 
        Removal
        of Restrictions.
        Except
        as otherwise provided in this Article 7, Shares of Restricted Stock covered
        by
        each Restricted Stock grant made under the Plan shall become freely transferable
        by the Participant after the last day of the Restriction Period and completion
        of all conditions to vesting, if any. However, unless otherwise provided
        by the
        Committee, the Committee, in its sole discretion, shall have the right to
        immediately waive all or part of the restrictions and conditions with regard
        to
        all or part of the Shares held by any Participant at any time.

      

      7.6 
        Voting
        Rights, Dividends and Other Distributions.
        During
        the Restriction Period, Participants holding Shares of Restricted Stock granted
        hereunder may exercise full voting rights and shall receive all regular cash
        dividends paid with respect to such Shares. Except as provided in the following
        sentence, in the sole discretion of the Committee, other cash dividends and
        other distributions paid to Participants with respect to Shares of Restricted
        Stock may be subject to the same restrictions and conditions as the Shares
        of
        Restricted Stock with respect to which they were paid. If any such dividends
        or
        distributions are paid in Shares, the Shares shall be subject to the same
        restrictions and conditions as the Shares of Restricted Stock with respect
        to
        which they were paid.

      

      7.7
         Termination
        of Employment Due to Death or Disability.
        In the
        event the Employment of a Participant shall terminate by reason of death
        or
        Disability, unless otherwise provided by the Committee prior to or at the
        time
        of the Award, all Restriction Periods and all restrictions imposed on
        outstanding Shares of Restricted Stock held by the Participant shall immediately
        lapse and the Restricted Stock shall immediately become fully vested as of
        the
        date of termination of Employment.

      

      7.8 
        Termination
        of Employment for Other Reasons.
        If the
        Employment of a Participant shall terminate for any reason other than those
        specifically set forth in Section 7.7 herein, all Shares of Restricted Stock
        held by the Participant which are not vested as of the effective date of
        termination of Employment immediately shall be forfeited and returned to
        the
        Company.

      

      Article
        8. Performance Shares

      

      8.1 
        Grants
        of Performance Shares.
        A
        Performance Share is equivalent in value to a Share of Stock. Subject to
        the
        terms of the Plan, Performance Shares may be granted to Eligible Persons
        at any
        time and from time to time, as determined by the Committee. The Committee
        shall
        have complete discretion in determining the number of Performance Shares
        awarded
        to each Participant.

      

      8.2 
        Performance
        Period.
        The
        Performance Period for Performance Shares is the period over which the
        Performance Goals are measured. The Performance Period is set by the Committee
        for each Award; however, in no event shall an Award have a Performance Period
        of
        less than six months.

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      

      

      8.3 
        Performance
        Goals.
        For
        each Award of Performance Shares, the Committee shall establish performance
        objectives (“Performance Goals”) for the Company, its Subsidiaries, and/or
        divisions of any of foregoing, based on the Performance Criteria and other
        factors set forth below. Performance Goals shall include payout tables, formulas
        or other standards to be used in determining the extent to which the Performance
        Goals are met, and, if met, the number of Performance Shares distributed
        to
        Participants in accordance with Section 8.5. All Performance Shares which
        may
        not be converted under the Performance Goals or which are reduced by the
        Committee under Section 8.5 or which may not be converted for any other reason
        after the end of the Performance Period shall be canceled at the time they
        would
        otherwise be distributable. When the Committee desires an Award to qualify
        under
        Section 162(m) of the Code, as amended, the Committee shall establish the
        Performance Goals for the respective Performance Shares prior to or within
        90
        days of the beginning of the service relating to such Performance Goal, and
        not
        later than after 25% of such period of service has elapsed. For all other
        Awards, the Performance Goals must be established before the end of the
        respective Performance Period.

      

      (a) 
        The Performance Criteria which the Committee is authorized to use, in its
        sole
        discretion, are any of the following criteria or any combination
        thereof:

      

      
        	
              	(1)	
                Financial
                  performance of the Company (on a consolidated basis), of one or
                  more of
                  its Subsidiaries, and/or a division of any of the foregoing. Such
                  financial performance may be based on net income and/or Value Added
                  (after-tax cash operating profit less depreciation and less a capital
                  charge).

              

      

      

      
        	 	
                (2)

              	
                Service
                  performance of the Company (on a consolidated basis), of one or
                  more of
                  its Subsidiaries, and/or of a division of any of the foregoing.
                  Such
                  service performance may be based upon measured customer perceptions
                  of
                  service quality.

              

      

      

      
        	 	
                (3)

              	
                The
                  Company’s Stock price; return on shareholders' equity; total shareholder
                  return (Stock price appreciation plus dividends, assuming the reinvestment
                  of dividends); and/or earnings per
                  share.

              

      

      

      
        	 	
                (4)

              	
                With
                  respect to the Company (on a consolidated basis), to one or more
                  of its
                  Subsidiaries, and/or to a division of any of the foregoing: sales,
                  costs,
                  market share of a product or service, return on net assets, return
                  on
                  assets, return on capital, profit margin, and/or operating revenues,
                  expenses or earnings.

              

      

      

      
        	 	
                (5)

              	
                Completion
                  of a marketing or development project as defined in the Award
                  Agreement.

              

      

      

      (b) 
        Except to the extent otherwise provided by the Committee in full or in part,
        if
        any of the following events occur during a Performance Period and would directly
        affect the determination of whether or the extent to which Performance Goals
        are
        met, they shall be disregarded in any such computation: changes in accounting
        principles; extraordinary items; changes in tax laws affecting net income
        and/or
        Value Added; natural disasters, including floods, hurricanes, and earthquakes;
        and intentionally inflicted damage to property which directly or indirectly
        damages the property of the Company or its Subsidiaries. No such adjustment
        shall be made to the extent such adjustment would cause the Performance Shares
        to fail to satisfy the performance-based exemption of Section 162(m) of the
        Code.

      

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

      

      8.4 
        Dividend
        Equivalents on Performance Shares.
        Unless
        reduced or eliminated by the Committee, a cash payment in an amount equal
        to the
        dividend payable on one Share will be made to each Participant for each
        Performance Share which on the record date for the dividend had been awarded
        to
        the Participant and not converted, distributed or canceled.

      

      8.5 
        Form
        and Timing of Payment of Performance Shares.
        As soon
        as practicable after the applicable Performance Period has ended and all
        other
        conditions (other than Committee actions) to conversion and distribution
        of a
        Performance Share Award have been satisfied (or, if applicable, at such other
        time determined by the Committee at or before the establishment of the
        Performance Goals for such Performance Period), the Committee shall determine
        whether and the extent to which the Performance Goals were met for the
        applicable Performance Shares. If Performance Goals have been met, then the
        number of Performance Shares to be converted into Stock and distributed to
        the
        Participants shall be determined in accordance with the Performance Goals
        for
        such Awards, subject to any limits imposed by the Committee. Conversion of
        Performance Shares shall occur as soon as reasonably administratively possible
        following the determination of the number of Shares to which the Participant
        is
        entitled. At any time prior to the distribution of the Performance Shares,
        unless otherwise provided by the Committee, the Committee shall have the
        authority to reduce or eliminate the number of Performance Shares to be
        converted .

      

      8.6 
        Termination
        of Employment Due to Death or Disability.
        Unless
        otherwise provided by the Committee prior to or at the time of an Award,
        if the
        Employment of a Participant shall terminate by reason of death or Disability,
        the Participant shall receive a distribution of all outstanding Performance
        Shares calculated as if all unfinished Performance Periods had ended with
        100%
        of the Performance Goals achieved, payable in the year following the date
        of
        termination of Employment. 

      

      8.7 
        Termination
        of Employment for Other Reasons.
        If the
        Employment of a Participant shall terminate for other than a reason set forth
        in
        Section 8.6 (and other than for Cause), the number of Performance Shares
        to be
        converted and distributed shall be converted and distributed based upon the
        achievement of the Performance Goals and in accordance with all other terms
        of
        the Award and the Plan; however, the Participant may receive no more than
        a
        prorated

      payout
        of
        all Performance Shares, based on the portions of the respective Performance
        Periods that have been completed.

      

      8.8 
        Termination
        of Employment for Cause.
        In the
        event that a Participant’s Employment shall be terminated by the Company for
        Cause, all Performance Shares shall be forfeited by the Participant to the
        Company.

      

      8.9 
        Nontransferability.
        Performance Shares may not be sold, transferred, pledged, assigned, or otherwise
        alienated or hypothecated, other than by will or laws of intestacy.

      

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      

      Article
        9. Employee Matters

      

      9.1 
        Employment
        Not Guaranteed.
        Nothing
        in the Plan shall interfere with or limit in any way the right of the Company
        or
        any Subsidiary to terminate any Participant's Employment at any time, nor
        confer
        upon any Participant any right to continue in the employ of the Company or
        one
        of its Subsidiaries.

      

      9.2 
        Participation.
        No
        Eligible Person shall have the right to be selected to receive an Award under
        this Plan, or, having been so selected, to be selected to receive a future
        Award.

      

      9.3 
        Claims
        and Appeals.
        Any
        claim under the Plan by a Participant or anyone claiming through a Participant
        shall be presented to the Committee. Any person whose claim under the Plan
        has
        been denied may, within sixty (60) days after receipt of notice of denial,
        submit to the Committee a written request for review of the decision denying
        the
        claim. The Committee shall determine conclusively for all parties all questions
        arising in the administration of the Plan.

      

      Article
        10. Amendment, Modification, and Termination

      

      10.1 
        Amendment,
        Modification, and Termination.
        The
        Board of Directors alone shall have the right to alter, amend or revoke the
        Plan
        or any part thereof at any time and from time to time, provided, however,
        that
        the Board of Directors may not, without the approval of the holders of a
        majority of the voting Shares, make any alteration or amendment to the Plan
        which changes the aggregate number of shares of Common Stock which may be
        issued
        under the Plan, extend the term of the Plan, or change the employees or class
        of
        employees eligible to receive Awards thereunder. The Board may at any time
        suspend or terminate the Plan in whole or in part. 

      

      10.2 
        Awards
        Previously Granted.
        No
        termination, amendment, or modification of the Plan shall adversely affect
        in
        any material way any Award previously granted under the Plan, without the
        written consent of the Participant holding such Award.

      

      Article
        11. Change in Control

      

      Upon
        the
        occurrence of a Change in Control:

      

      (a) 
        Any and all Options granted hereunder immediately shall become vested and
        exercisable;

      

      (b) 
        Any Restriction Periods and all restrictions imposed on Restricted Shares
        shall
        lapse and they shall immediately become fully vested;

      

      (c) 
        The 100% Performance Goal for all Performance Shares relating to incomplete
        Performance Periods shall be deemed to have been fully achieved and shall
        be
        converted and distributed in accordance with all other terms of the Award
        and
        this Plan; provided, however,

      notwithstanding
        anything to the contrary in this Plan, no outstanding Performance Share may
        be
        reduced.

      

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      

      Article
        12. Withholding

      

      12.1
         Tax
        Withholding.
        The
        Company shall deduct or withhold an amount sufficient to satisfy Federal,
        state,
        and local taxes (including the Participant's employment tax obligations)
        required by law to be withheld with respect to any taxable event arising
        or as a
        result of this Plan (“Withholding Taxes”).

      

      12.2 
        Share
        Withholding.
        With
        respect to withholding required upon the exercise of Options, upon the lapse
        of
        restrictions on Restricted Stock, upon the distribution of Performance Shares
        in
        the form of Stock, or upon any other taxable event hereunder involving the
        transfer of Stock to a Participant, the Company shall withhold Stock having
        a
        Fair Market Value on the date the tax is to be determined in an amount equal
        to
        the Withholding Taxes on such Stock. Any fractional Share remaining after
        the
        withholding shall be withheld as additional Federal withholding.

      

      Prior
        to
        the end of any Performance Period a Participant may elect to have a greater
        amount of Stock withheld from the distribution of Performance Shares to pay
        withholding taxes; provided, however, the Committee may prohibit or limit
        any
        individual election or all such elections at any time. 

      

      12.3 
        Payment
        In Lieu of Share Withholding.
        In any
        situation in which the Company would be required to withhold Stock pursuant
        to
§12.2 above, the Participant may, in lieu of all or part of such withholding,
        remit to the Company an amount in cash sufficient to satisfy the federal,
        state
        and local withholding tax requirements or may direct the Company to withhold
        from other amounts payable to the Participant, including salary. 

      

      Article
        13. Successors

      

      All
        obligations of the Company under the Plan, with respect to Awards granted
        hereunder, shall be binding on any successor to the Company, whether the
        existence of such successor is the result of a direct or indirect purchase,
        merger, consolidation, or otherwise, of all or substantially all of the business
        and/or assets of the Company.

      

      Article
        14. Legal Construction

      

      14.1 
        Severability.
        In the
        event any provision of the Plan shall be held illegal or invalid for any
        reason,
        the illegality or invalidity shall not affect the remaining parts of the
        Plan,
        and the Plan shall be construed and enforced as if the illegal or invalid
        provision had not been included.

      

      14.2
         Requirements
        of Law.
        The
        granting of Awards and the issuance of Shares under the Plan shall be subject
        to
        all applicable laws, rules, and regulations, and to such approvals by any
        governmental agencies or national securities exchanges as may be
        required.

      

      14.3 
        Securities
        Law Compliance.
        With
        respect to Insiders, transactions under this Plan are intended to comply
        with
        all applicable conditions of Rule 16b-3 or its successors under the Exchange
        Act. To the extent any provision of the plan or action by the Committee fails
        to
        comply with a condition of Rule 16b-3 or its successors, it shall not apply
        to
        the Insiders or transactions thereby.

      

      14.4 
        Governing
        Law.
        To the
        extent not preempted by Federal law, the Plan, and all agreements hereunder,
        shall be construed in accordance with and governed by the laws of the State
        of
        Delaware.

      

       

       

      
        *     *    
          *     *    
          *

14Exhibit 10.1

 

OPTIONHOLDERS

REGISTRATION RIGHTS AGREEMENT

 

THIS OPTIONHOLDERS
REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of December
5, 2005, by and among OUTDOOR CHANNEL HOLDINGS, INC., a Delaware corporation
(the “Company”), and each of the persons named on the signature pages hereto
(referred to herein individually as a “Holder” and, collectively, as “Holders”).

 

RECITALS

 

A.                                   As
of the date of this Agreement, each Holder owns that number of certain options
as specified opposite their respective signature hereto (collectively, the “Options”)
exercisable into shares of Common Stock (the “Shares”).

 

B.                                     The
Company desires to provide the Holders an incentive to exercise the Options by
registering the Shares for resale on a Form S-3 registration statement.

 

In
consideration of the mutual promises, representations, warranties, covenants
and conditions set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto mutually agree as follows:

 

1.                                       Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

“1933
Act” or the “Act” shall mean the United States Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.

 

“Commission”
or “SEC” shall mean the United States Securities and Exchange Commission.

 

“Common
Stock” shall mean the voting shares, $0.001 par value per share, of the
Company.

 

“Proposed
Registration” means a Registration Statement on Form S-3 filed by the Company on
or about December 5, 2005 pursuant to which the Company proposes to
register the Shares for the Holders for resale.

 

“Violation”
shall mean:  (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Proposed Registration, or final prospectus contained therein or any amendments
or supplements thereto, or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or otherwise necessary
to make the statements therein not misleading.

 

 

2.                                       Registration
Rights.

 

2.1                                 Proposed
Registration.  Subject to the terms
and conditions contained in this Agreement, the Company has agreed to register the
Shares for resale by the Holders.

 

2.2                                 Option
Exercises.  Each Holder agrees to
complete such exercise notices, agreements and other documentation as
reasonably permitted by the Company in order to facilitate the exercise of the
Options and to provide for the direct payment to the Company of that portion of
the proceeds as the Company may request in order to pay the option exercise
price and any required tax withholdings, if applicable.

 

2.3                                 Furnish
Information.  Each Holder agrees to
(i) furnish to the Company such true and correct information regarding such
Holder and the Options held by such Holder for use in connection with the
Proposed Registration as the Company may request, and (ii) cooperate with the
Company and its counsel in connection with the Proposed Registration.  Each Holder agrees to review the disclosures
pertaining to such Holder contained in the prospectus relating to the Proposed
Registration and to promptly notify the Company to the extent any such disclosures
contain an untrue statement of a material fact or otherwise omits to state
therein a material fact required to be stated therein or otherwise necessary to
the make the statements therein not misleading. 
To the extent that any Holder receives any confidential information regarding
the Company in connection with the Proposed Registration, such Holder agrees to
keep such information confidential and not to disclose such information.

 

3.                                       Registration
Expenses; Information.  The Company
shall pay the following expenses incurred by the Company in complying with
Section 2 hereof:  SEC registration fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, transfer taxes, fees of transfer agents and
registrars.  Each Holder shall bear such
Holder’s own selling costs, commissions, underwriters’ discounts, and other
expenses in connection with the Proposed Registration and the sale of the
Shares, including, but not limited to, expenses and fees of counsel for such Holder,
and expenses and fees for a custodian (if necessary).

 

4.                                       Indemnification.

 

4.1                                 Holder’s
Indemnity.  Each Holder whose Shares
are included in the Proposed Registration for resale agrees, severally, and not
jointly, to the extent permitted by law, to indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
registration statement for the Proposed Registration, and each person who
controls the Company (within the meaning of the 1933 Act), against any losses,
claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject (i) under the 1933 Act, or other federal
or state law insofar as such losses, claims, damages or liabilities (or action
with respect thereto) arise out of or are based upon any Violation which occurs
in reliance upon and in conformity with information furnished by such Holder to
the Company for use in

 

2

 

connection with such registration, including information contained in
any applicable questionnaire completed by the Holder or (ii) as a result of any
breach by such Holder of the terms and conditions contained in this Agreement.  Each Holder whose shares are included in the
Proposed Registration agrees to reimburse the Company, each of its directors,
its officers who signed the registration statement for the Proposed
Registration, and each person who controls the Company for any out-of-pocket
legal or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage or liability, as such expenses are incurred.

 

4.2                                 Limitations.  If the indemnification provided for in this
Section 4 is held by a court of competent jurisdiction to be unavailable
to an indemnified party with respect to any losses, claims, damages or
liabilities referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand, and of the
indemnified party on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities as well
as any other relevant equitable considerations. 
The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state
a material fact related to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

 

4.3                                 Additional
Provisions.  The obligations of each
Holder under this Section 4 shall survive the completion of any offering
of such Holder’s Shares in the Proposed Registration pursuant to this
Agreement.

 

5.                                       Miscellaneous

 

5.1                                 Governing
Law.  This Agreement shall be
governed by and construed under the laws of California, without giving effect
to the conflicts of laws principles thereof.

 

5.2                                 Successors
and Assigns.  The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties hereto.  This Agreement and the rights and obligations
hereunder shall not be assignable by Holders without the prior written consent
of the Company.

 

3

 

5.3                                 Severability.  If any provisions of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances shall be interpreted so as best to
reasonably effect the intent of the parties hereto.

 

5.4                                 Entire
Agreement.  This Agreement and the
documents referenced herein constitute the entire understanding and agreement
of the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, among the
parties with respect hereto and thereto.

 

5.5                                 Amendment
and Waivers.  Any term or provision
of this Agreement may be amended with respect to a particular Holder, and the
observance of any term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or prospectively) with respect
to a particular Holder only by a writing signed by the Company and such Holder.

 

5.6                                 Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any party whose
signature appears thereon, and all of which together shall constitute one and
the same instrument.

 

[signature pages follow]

 

4

 

[Company signature page]

 

IN
WITNESS WHEREOF, this Agreement is hereby executed as of the date first above
written.

 

 

	
  “COMPANY”

  	
  OUTDOOR CHANNEL
  HOLDINGS, INC.

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   /s/ Perry T. Massie

  	
   

  
	
   

  	
  Name:

  	
   

  	
   Perry T. Massie

  	
   

  
	
   

  	
  Title:

  	
   

  	
   President & CEO

  	
   

  
							

 

 

	
  “HOLDER”

  	
   

  
	
   

  	
  /s/
  Elizabeth J. Sanderson

  	
   

  
	
  487,500 Options

  	
  Name: Elizabeth J.
  Sanderson

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  710 Cherry St.

  Seattle, WA 98104

  
				

 

 

	
  “HOLDER”

  	
   

  
	
   

  	
  /s/
  Ray V. Miller

  	
   

  
	
  231,484 Options

  	
  Name: Ray V. Miller

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  9449 State Hwy. 197 S.

  Burnsville, NC 28714

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