Document:

ex10-1.htm

Exhibit 10.1

 

MEDBOX, INC.

 

2014 EQUITY INCENTIVE PLAN

 

Medbox, Inc., a Nevada corporation (the “Company”), sets forth herein the terms of its 2014 Equity Incentive Plan (the “Plan”), as follows:

 

	
1.  

	
PURPOSE

 

The Plan is intended to enhance the ability of the Company and its Affiliates (as defined herein) to attract and retain highly qualified officers, non-employee members of the Board, key employees, consultants and advisors, and to motivate such officers, non-employee members of the Board, key employees, consultants and advisors to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company.  To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, other stock-based awards and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

 

	
2.  

	
DEFINITIONS

 

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

 

2.1. “Acquiror” shall have the meaning set forth in Section 15.2.1.

 

2.2. “Affiliate” means any company or other trade or business that “controls,” is “controlled by” or is “under common control” with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

 

2.3. “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-based Award or cash award under the Plan.

 

2.4. “Award Agreement” means a written agreement between the Company and a Grantee, or notice from the Company or an Affiliate to a Grantee that evidences and sets out the terms and conditions of an Award.

 

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

 

2.6. “Business Combination” shall have the meaning set forth in Section 15.2.2.

 

2.7. “Cause” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Cause” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement: (i) the commission of any act by a Grantee constituting financial dishonesty against the Company or its Affiliates (which act would be chargeable as a crime under applicable law); (ii) a Grantee’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment which, as determined in good faith by the Board, would: (A) materially adversely affect the business or the reputation of the Company or any of its Affiliates with their respective current or prospective customers, suppliers, lenders and/or other third parties with whom such entity does or might do business; or (B) expose the Company or any of its Affiliates to a risk of civil or criminal legal damages, liabilities or penalties; (iii) the repeated failure by a Grantee to follow the directives of the chief executive officer of the Company or any of its Affiliates or the Board, or (iv) any material misconduct, violation of the Company’s or Affiliates’ policies, or willful and deliberate non-performance of duty by the Grantee in connection with the business affairs of the Company or its Affiliates.

 

  

  

  

 

2.8. “Change in Control” shall have the meaning set forth in Section 15.2.2.

 

2.9. “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. References to the Code shall include the valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder.

 

2.10. “Committee” means the Compensation Committee of the Board, or such other committee as determined by the Board.  The Compensation Committee of the Board may, in its discretion, designate a subcommittee of its members to serve as the Committee (to the extent the Board has not designated another person, committee or entity as the Committee).  The Board will cause the Committee to satisfy the applicable requirements of any stock exchange on which the Common Stock may then be listed. For purposes of Awards to Covered Employees intended to constitute Performance Awards, to the extent required by Code Section 162(m), Committee means all of the members of the Compensation Committee who are “outside directors” within the meaning of Section 162(m) of the Code. For purposes of Awards to Grantees who are subject to Section 16 of the Exchange Act, Committee means all of the members of the Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3 adopted under the Exchange Act.

 

2.11. “Company” shall have the meaning set forth in the preamble.

 

2.12. “Common Stock” or “Stock” means a share of common stock of the Company, par value $.0001 per share.

 

2.13. “Consultant” means a consultant or advisor that provides bona fide services to the Company or any Affiliate and who qualifies as a consultant or advisor under Rule 701 of the Securities Act (during any period in which the Company is not a public company subject to the reporting requirements of the Exchange Act) or Form S-8 (during any period in which the Company is a public company subject to the reporting requirements of the Exchange Act).

 

2.14. “Covered Employee” means a Grantee who is a “covered employee” within the meaning of Section 162(m)(3) of the Code as qualified by Section 12.4.

 

2.15. “Disability” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Disability” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement, the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee’s Service, “Disability” means “permanent and total disability” as set forth in Section 22(e)(3) of the Code.

 

  

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2.16.  “Effective Date” means August 6, 2014, the date the Plan was approved by the Board; provided, however, that if, and only if, certain options are intended to qualify as Incentive Stock Options, the Plan must subsequently be approved by majority vote of the Company’s stockholders no later than August 5, 2015, and further, that in the event certain Option grants hereunder are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, the requirements as to stockholder approval set forth in Section 162(m) of the Code are satisfied..

 

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

 

2.18. “Fair Market Value” of a share of Common Stock as of a particular date shall mean (1) if the Common Stock is listed on a national securities exchange, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, the trading day immediately preceding the applicable date, or (2) if the shares of Common Stock are not then listed on a national securi­ties ex­change but is quoted on the OTCBB, OTCQB or OTC Pink, ­the closing or last price of the Common Stock on the OTCQB, OTCBB, or OTC Pink, or (iii) if the Common Stock is not then listed on a national securities exchange or quoted on the OTCQB, OTCBB or OTC Pink, such value as de­ter­mined by the Board in good faith in its sole discretion.

 

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

 

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

 

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

 

2.22. “Holder” means, with respect to any Issued Shares, the person holding such Issued Shares, including the initial Grantee or any Permitted Transferee.

 

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

 

2.24. “Incumbent Directors” shall have the meaning set forth in Section 15.2.2.

 

2.25. Intentionally Omitted.

 

  

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2.26. “Issued Shares” means, collectively, all outstanding shares of Stock issued pursuant to Awards (including without limitation, outstanding shares of Restricted Stock prior to or after vesting and shares issued in connection with the exercise of an Option or SAR).

 

2.27. “New Shares” shall have the meaning set forth in Section 15.1.

 

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

 

2.29. Intentionally Omitted..

 

2.30. “Offering” shall have the meaning set forth in Section 17.5.

 

2.31. “Option” means an option to purchase one or more shares of Stock pursuant to the Plan. An Option may be either an Incentive Stock Option or a Non-qualified Stock Option.

 

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

 

2.33. “Other Stock-based Awards” means Awards consisting of Stock units, or other Awards, valued in whole or in part by reference to, or otherwise based on, Common Stock.

 

2.34. “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 12) over a performance period of at least one year.

 

2.35. “Permitted Transferee” means any of the following to whom a Holder may transfer Issued Shares hereunder (as set forth in Section 17.13.3): the Holder’s spouse, children (natural or adopted), stepchildren or a trust for their sole benefit of which the Holder is the settlor; provided however, that any such trust does not require or permit distribution of any Issued Shares during the term of this Agreement unless subject to its terms. Upon the death of the Holder, the term Permitted Transferees shall also include such deceased Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees, as the case may be.

 

2.36. “Plan” shall have the meaning set forth in the preamble.

 

2.37. Not used

 

2.38. “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock.

 

2.39. “Restricted Period” shall have the meaning set forth in Section 10.1.

 

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

 

2.41. “Restricted Stock Unit” means a bookkeeping entry representing the equivalent of shares of Stock, awarded to a Grantee pursuant to Section 10.

 

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

 

2.43. “SEC” means the United States Securities and Exchange Commission.

 

  

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2.44. “Section 409A” means Section 409A of the Code.

 

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

 

2.46. “Separation from Service” means a termination of Service by a Service Provider, as determined by the Board, which determination shall be final, binding and conclusive; provided, however, that if any Award governed by Section 409A is to be distributed on a Separation from Service, then the definition of Separation from Service for such purposes shall comply with the definition provided in Section 409A.

 

2.47. “Service” means service as a Service Provider to the Company or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate.

 

2.48. “Service Provider” means an employee, officer, non-employee member of the Board, or Consultant of the Company or an Affiliate.

 

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

 

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

 

2.51. “Substitute Award” means any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a Subsidiary or with which the Company or an Affiliate combines.

 

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

 

2.53. “Termination Date” means the date that is ten (10) years after the Effective Date, unless the Plan is earlier terminated by the Board under Section 5.2.

 

2.54. Intentionally Omitted.

 

2.55.  “Voting Securities” shall have the meaning set forth in Section 15.2.2.

 

	
3.  

	
ADMINISTRATION OF THE PLAN

3.1. General.

 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s articles of incorporation and bylaws and applicable law. The Board shall have the power and authority to delegate its responsibilities hereunder to the Committee, which shall have full authority to act in accordance with its charter (as in effect from time to time), and with respect to the authority of the Board to act hereunder, all references to the Board shall be deemed to include a reference to the Committee, to the extent such power or responsibilities have been delegated.  Except as specifically provided in Section 14 or as otherwise may be required by applicable law, regulatory requirement or the articles of incorporation or the bylaws of the Company, the Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan.  Subject to the foregoing, he Committee shall administer the Plan; provided, however, the Board shall retain the right to exercise the authority of the Committee to the extent consistent with applicable law and the applicable requirements of any securities exchange on which the Common Stock may then be listed. The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive. Without limitation, the Board shall have full and final authority, subject to the other terms and conditions of the Plan, to:

 

  

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(i)           designate Grantees;

 

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

 

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

 

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

 

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

 

(vi)           amend, modify, or supplement the terms of any outstanding Award including the authority, in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.

 

3.2. Award Agreements; Clawbacks.

 

The grant of any Award may be contingent upon the Grantee executing the appropriate Award Agreement.  The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee.  Furthermore, the Company may annul an Award if the Grantee is terminated for “cause” as defined in the applicable Award Agreement.

 

Awards shall be subject to the requirements of (i) Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations thereunder,, (ii) similar rules under the laws of any other jurisdiction, (iii) any compensation recovery policies adopted by the Company to implement any such requirements or (iv) any other compensation recovery policies as may be adopted from time to time by the Company, all to the extent determined by the Committee in its discretion to be applicable to a Grantee.

 

  

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3.3. Deferral Arrangement.

 

The Board may permit or require the deferral of any Award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish and in accordance with Section 409A, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock units.

 

3.4. No Liability.

 

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

 

3.5. Book Entry.

 

Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through the use of book-entry.

 

	
4.  

	
STOCK SUBJECT TO THE PLAN

 

4.1. Authorized Number of Shares.

 

Subject to adjustment under Section 15, the aggregate number of shares of Common Stock that may be initially issued pursuant to the Plan is 2,000,000.  The total number of shares of Common Stock described in the preceding sentence shall be available for issuance under Incentive Stock Options  Shares issued under the Plan may consist in whole or in part of authorized but unissued shares, treasury shares, or shares purchased on the open market or otherwise, all as determined by the Company from time to time. The maximum number of shares for each type of Stock-based Award, and the maximum amount of cash for any cash-based Award, intended to constitute “performance-based compensation” under Code Section 162(m) granted to any Grantee in any specified period shall be established by the Company and approved by the Company’s stockholders.

 

4.2. Share Counting.

 

Any Award settled in cash shall not be counted as shares of Common Stock for any purpose under this Plan.  If any Award under the Plan expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan.  If shares of Common Stock issued pursuant to the Plan are repurchased by, or are surrendered or forfeited to the Company at no more than cost, such shares of Common Stock shall again be available for the grant of Awards under the Plan. If shares of Common Stock issuable upon exercise, vesting or settlement of an Award, or shares of Common Stock owned by a Grantee (which are not subject to any pledge or other security interest), are surrendered or tendered to the Company in payment of the Option Price or Purchase Price of an Award or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement, such surrendered or tendered shares of Common Stock shall again become available for issuance under the Plan.  In addition, in the case of any Substitute Award, such Substitute Award shall not be counted against the number of shares reserved under the Plan.

 

  

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5.  

	
EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1. Term.

 

The Plan shall be effective as of the Effective Date.  The Plan shall terminate automatically on the ten (10) year anniversary of the Effective Date and may be terminated on any earlier date as provided in Section 5.2.

 

5.2. Amendment and Termination of the Plan.

 

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Awards which have not been made. An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements.  No Awards shall be made after the Termination Date. The applicable terms of the Plan, and any terms and conditions applicable to Awards granted prior to the Termination Date shall survive the termination of the Plan and continue to apply to such Awards.  No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, materially impair rights or obligations under any Award theretofore awarded.

 

	
6.  

	
AWARD ELIGIBILITY AND LIMITATIONS

 

6.1. Service Providers.

 

Subject to this Section 6, Awards may be made to any Service Provider as the Board shall determine and designate from time to time in its discretion.

 

6.2. Successive Awards.

 

An eligible person may receive more than one Award, subject to such restrictions as are provided herein.

 

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

 

Awards may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Board shall have the right to require the surrender of such other Award in consideration for the grant of the new Award.  Subject to the requirements of applicable law, the Board shall have the right, in its discretion, to make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, Restricted Stock Units or Restricted Stock).

 

  

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7.  

	
AWARD AGREEMENT

 

Each Award shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine.  Without limiting the foregoing, an Award Agreement may be provided in the form of a notice which provides that acceptance of the Award constitutes acceptance of all terms of the Plan and the notice.  Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.  Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

 

	
8.  

	
TERMS AND CONDITIONS OF OPTIONS

 

8.1. Option Price.

 

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

 

8.2. Vesting.

 

Subject to Section 8.3, each Option shall become exercisable at such times and under such conditions (including, without limitation, performance requirements) as shall be determined by the Board and stated in the Award Agreement.

 

8.3. Term.

 

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

 

8.4. Limitations on Exercise of Option.

 

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, after the occurrence of an event which results in termination of the Option.

 

  

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8.5. Method of Exercise.

 

An Option that is exercisable may be exercised by the Grantee’s delivery of a notice of exercise to the Company, setting forth the number of shares of Stock with respect to which the Option is to be exercised, accompanied by full payment for the shares.  To be effective, notice of exercise must be made in accordance with procedures established by the Company from time to time.  

 

8.6. Rights of Holders of Options.

 

Unless otherwise stated in the related Award Agreement, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock ) until the shares of Stock covered thereby are fully paid and issued to him. Except as provided in Section 15 or the related Award Agreement, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

 

8.7. Delivery of Stock Certificates.

 

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

 

8.8. Limitations on Incentive Stock Options.

 

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

 

	
9.  

	
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1. Right to Payment.

 

A SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR Exercise Price, as determined by the Board. The Award Agreement for an SAR shall specify the SAR Exercise Price.  SARs may be granted alone or in conjunction with all or part of an Option or at any subsequent time during the term of such Option or in conjunction with all or part of any other Award.

 

9.2. Other Terms.

 

The Board shall determine at the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Separation from Service or upon other conditions, the method of exercise, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

 

  

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9.3. Term of SARs.

 

The term of a SAR granted under the Plan shall be determined by the Board, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.

 

9.4. Payment of SAR Amount.

 

Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in cash or Stock, as determined by the Board) in an amount determined by multiplying:

 

(i)   the difference between the Fair Market Value of a share of Stock on the date of exercise over the SAR Exercise Price; by

 

(ii)   the number of shares of Stock with respect to which the SAR is exercised.

 

	
10.  

	
TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

10.1. Restrictions.

 

At the time of grant, the Board may, in its sole discretion, establish a period of time (a “Restricted Period”) and any additional restrictions including the satisfaction of corporate or individual performance objectives applicable to an Award of Restricted Stock or Restricted Stock Units in accordance with Section 12.1 and 12.2. Each Award of Restricted Stock or Restricted Stock Units may be subject to a different Restricted Period and additional restrictions. Neither Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other applicable restrictions.

 

10.2. Restricted Stock Certificates.

 

The Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates or other evidence of ownership representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee; provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

 

10.3. Rights of Holders of Restricted Stock.

 

Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have rights as stockholders of the Company, including voting and dividend rights.

 

  

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10.4. Rights of Holders of Restricted Stock Units.

 

10.4.1. Settlement of Restricted Stock Units.

 

Restricted Stock Units may be settled in cash or Stock, as determined by the Board and set forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock Units shall be settled (i) within the time period specified in Section 17.11 for short term deferrals or (ii) otherwise within the requirements of Section 409A, in which case the Award Agreement shall specify upon which events such Restricted Stock Units shall be settled.

 

10.4.2. Voting and Dividend Rights.

 

Unless otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units shall not have rights as stockholders of the Company, including no voting or dividend or dividend equivalents rights.

 

10.4.3. Creditor’s Rights.

 

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

 

10.5. Purchase of Restricted Stock.

 

The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a form described in Section 11 or, in the discretion of the Board, in consideration for past Services rendered.

 

10.6. Delivery of Stock.

 

Upon the expiration or termination of any Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

 

	
11.  

	
FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

11.1. General Rule.

 

Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company, except as provided in this Section 11.

 

  

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11.2. Surrender of Stock.

 

To the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be made all or in part through the tender to the Company of shares of Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price for Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or surrender.  Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to make payment in the form of already owned shares of Stock may be authorized only at the time of grant.

 

11.3. Cashless Exercise.

 

With respect to an Option only (and not with respect to Restricted Stock)to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may be made all or in part by delivery (on a form acceptable to the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 17.3.

 

11.4. Other Forms of Payment.

 

To the extent the Award Agreement so provides, payment of the Option Price or the Purchase Price for Restricted Stock may be made in any other form that is consistent with applicable laws, regulations and rules, including, but not limited to, the Company’s withholding of shares of Stock otherwise due to the exercising Grantee.

 

	
12.  

	
TERMS AND CONDITIONS OF PERFORMANCE AWARDS

 

12.1. Performance Conditions.

 

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Board. The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions, except as limited under Section 12.2 in the case of a Performance Award intended to qualify under Code Section 162(m).

 

12.2. Performance Awards Granted to Designated Covered Employees.

 

If and to the extent that the Board determines that a Performance Award to be granted to a Grantee who is designated by the Board as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 12.2. Notwithstanding anything herein to the contrary, the Board in its discretion may provide for Performance Awards to Covered Employees that are not intended qualify as “performance-based compensation” for purposes of Code Section 162(m).

 

  

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12.2.1. Performance Goals Generally.

 

The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Board consistent with this Section 12.2.  Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Board result in the achievement of performance goals being “substantially uncertain.” The Board may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards.  Performance goals may, in the discretion of the Board, be established on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or business segments, as applicable.  Performance goals may be absolute or relative (to the performance of one or more comparable companies or indices).  Measurement of performance goals may exclude (in the discretion of the Board) the impact of charges for restructuring, discontinued operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings).  Performance goals may differ for Performance Awards granted to any one Grantee or to different Grantees.

 

12.2.2. Business Criteria.

 

One or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of the Company (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Board in establishing performance goals for such Performance Awards: (i) cash flow; (ii) earnings per share, as adjusted for any stock split, stock dividend or other recapitalization; (iii) earnings measures; (iv) return on equity; (v) total shareholder return; (vi) share price performance, as adjusted for any stock split, stock dividend or other recapitalization; (vii) return on capital; (viii) revenue; (ix) income; (x) profit margin; (xi) return on operating revenue; (xii) brand recognition/acceptance; (xiii) customer satisfaction; (xiv) productivity; (xv) expense targets; (xvi) market share; (xvii) cost control measures; (xviii) balance sheet metrics; (xix) strategic initiatives; (xx) implementation, completion or attainment of measurable objectives with respect to recruitment or retention of personnel or employee satisfaction; or (xxi) any other business criteria established by the the Board; provided, however, that such business criteria shall include any derivations of business criteria listed above (e.g., income shall include pre-tax income, net income, operating income, etc.).

 

12.2.3. Timing for Establishing Performance Goals.

 

Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Code Section 162(m).

 

12.2.4. Settlement of Performance Awards; Other Terms.

 

Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Board. The Board may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards.

 

  

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12.3. Written Determinations.

 

All determinations by the Board as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards, shall be made in writing in the case of any Award intended to qualify under Code Section 162(m) to the extent required by Code Section 162(m). To the extent permitted by Code Section 162(m), the Board may delegate any responsibility relating to such Performance Awards.

 

12.4. Status of Section 12.2 Awards under Code Section 162(m).

 

It is the intent of the Company that Performance Awards under Section 12.2 granted to persons who are designated by the Board as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Board, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Section 12.2, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Board cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Board, at the time of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

 

	
13.  

	
OTHER STOCK-BASED AWARDS

 

13.1. Grant of Other Stock-based Awards.

 

Other Stock-based Awards may be granted either alone or in addition to or in conjunction with other Awards under the Plan.  Other Stock-based Awards may be granted in lieu of other cash or other compensation to which a Service Provider is entitled from the Company or may be used in the settlement of amounts payable in shares of Common Stock under any other compensation plan or arrangement of the Company, including without limitation, the Company’s incentive compensation plan.  Subject to the provisions of the Plan, the Board shall have the sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of such Awards.  Unless the Board determines otherwise, any such Award shall be confirmed by an Award Agreement, which shall contain such provisions as the Board determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.

 

13.2. Terms of Other Stock-based Awards.

 

Any Common Stock subject to Awards made under this Section 13 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

  

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14.  

	
REQUIREMENTS OF LAW

 

14.1. General.

 

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

 

14.2. Section 25102(o) of the California Corporations Code.

 

This Plan is intended to comply with Section 25102(o) of the California Corporations Code.  In that regard, to the extent required by Section 25102(o), (i) the terms of any Options or SARs, to the extent vested and exercisable upon a Grantee’s Separation from Service, shall include any minimum exercise periods following Separation from Service specified by Section 25102(o), and (ii) any repurchase right of the Company with respect to shares of Stock issued under the Plan shall include a minimum 90-day notice requirement.  Any provision of this Plan which is inconsistent with Section 25102(o) shall, without further act or amendment by the Company or the Board, be reformed to comply with the requirements of Section 25102(o).

 

14.3. Rule 16b-3.

 

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

 

  

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15.  

	
EFFECT OF CHANGES IN CAPITALIZATION

 

15.1. Adjustments for Changes in Capital Structure.

 

Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Awards, and in the Option Price, SAR Exercise Price or Purchase Price per share of any outstanding Awards in order to prevent dilution or enlargement of Grantees’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to a Change in Control) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the Option Price, SAR Exercise Price or Purchase Price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion.  Any fractional share resulting from an adjustment pursuant to this Section 15.1 shall be rounded down to the nearest whole number and the Option Price, SAR Exercise Price or Purchase Price per share shall be rounded up to the nearest whole cent.  In no event may the exercise price of any Award be decreased to an amount less than the par value, if any, of the stock subject to the Award. The Board in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate. Adjustments determined by the Board pursuant to this Section 15.1 shall be made in accordance with Section 409A to the extent applicable.

 

15.2. Change in Control.

 

15.2.1. Consequences of a Change in Control.

 

Subject to the requirements and limitations of Section 409A if applicable, the Board may provide for any one or more of the following in connection with a Change in Control:

 

(a) Accelerated Vesting. The Board may, in its discretion, provide in any Award Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Grantee’s Service prior to, upon, or following such Change in Control, to such extent as the Board shall determine.

 

  

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(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Grantee, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section 15.2.1, if so determined by the Board, in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Board may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith estimate of the present value of the probable future payment of such consideration. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.  

 

(c) Cash-Out of Awards. The Board may, in its discretion and without the consent of any Grantee, determine that, upon the occurrence of a Change in Control, each or any Award or a portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Board) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced by the exercise or purchase price per share, if any, under such Award. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith estimate of the present value of the probable future payment of such consideration. In the event such determination is made by the Board, the amount of such payment (reduced by applicable withholding taxes, if any) shall be paid to Grantees in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards. For avoidance of doubt, if the amount determined pursuant to this Section 15.2.1(c) for an Option or SAR is zero or less, the affected Option or SAR may be cancelled without any payment therefore.

 

15.2.2. Change in Control Defined.

 

Except as may otherwise be defined in an Award Agreement, a Change in Control shall mean the occurrence of any of the following events:

 

  

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(a) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than the Company or any subsidiary, affiliate (within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended) or employee benefit plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Voting Securities”); or

 

(b) a reorganization, merger, consolidation or recapitalization of the Company (a “Business Combination”), other than a Business Combination in which more than 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity immediately following the Business Combination is held by the persons who, immediately prior to the Business Combination, were the holders of the Voting Securities; or

 

(c) a complete liquidation or dissolution of the Company, or a sale of all or substantially all of the assets of the Company; or

 

(d) during any period of 24 consecutive months, the Incumbent Directors cease to constitute a majority of the Board of Directors; “Incumbent Directors” shall mean individuals who were members of the Board of Directors at the beginning of such period or individuals whose election or nomination for election to the Board of Directors by the Company's stockholders was approved by a vote of at least a majority of the then Incumbent Directors (but excluding any individual whose initial election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors).   

 

Notwithstanding the foregoing, if it is determined that an Award hereunder is subject to the requirements of Section 409A and payable upon a Change in Control, the Company will not be deemed to have undergone a Change in Control unless the Company is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A.

 

15.3. Adjustments.

 

Adjustments under this Section 15 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.

 

	
16.  

	
NO LIMITATIONS ON COMPANY

 

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

 

	
17.  

	
TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN

 

  

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17.1. Disclaimer of Rights.

 

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

 

17.2. Nonexclusivity of the Plan.

 

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

 

17.3. Withholding Taxes.

 

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to an Award, (ii) upon the issuance of any shares of Stock upon the exercise of an Option or SAR, or (iii) otherwise due in connection with an Award.  At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Affiliate to withhold the minimum required number of shares of Stock otherwise issuable to the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 17.3 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

 

  

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17.4. Intentionally Omitted.

 

17.5. Market Standoff Requirement.

 

Except as otherwise expressly provided in an Award Agreement, stockholders’ agreement or other agreement to which a Grantee is a party, in connection with any underwritten public offering of its Common Stock (“Offering”) and upon request of the Company or the underwriters managing the Offering, Grantees shall not be permitted to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise directly or indirectly dispose of any Common Stock delivered under the Plan (other than those shares of Common Stock included in the Offering) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time from the effective date of the registration statement with respect to such Offering as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters in connection with such Offering.

 

17.6. Captions.

 

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

 

17.7. Other Provisions.

 

Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.  In the event of any conflict between the terms of an employment agreement and the Plan, the terms of the employment agreement govern.

 

17.8. Number and Gender.

 

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

 

17.9. Severability.

 

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

 

17.10. Governing Law.

 

The Plan shall be governed by and construed in accordance with the laws of the State of Nevada without giving effect to the principles of conflicts of law.

 

  

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17.11. Section 409A.

 

The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Grantee’s Separation from Service shall instead be paid on the first payroll date after the six-month anniversary of the Grantee’s Separation from Service (or the Grantee’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Grantee under Section 409A and neither the Company nor the Committee will have any liability to any Grantee for such tax or penalty.

 

17.12. Separation from Service.

 

The Board shall determine the effect of a Separation from Service upon Awards, and such effect shall be set forth in the appropriate Award Agreement.  Without limiting the foregoing, the Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service, including, but not limited to, accelerated vesting or termination, depending upon the circumstances surrounding the Separation from Service.

 

17.13. Transferability of Awards and Issued Shares.

 

17.13.1. Transfers in General.

 

Except as provided in Section 17.13.2, no Award shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution, and, during the lifetime of the Grantee, only the Grantee personally (or the Grantee’s personal representative) may exercise rights under the Plan.

 

17.13.2. Family Transfers.

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this Section 17.13.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 17.13.2, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited except to Family Members of the original Grantee in accordance with this Section 17.13.2 or by will or the laws of descent and distribution.

 

  

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17.13.3. Issued Shares.

 

No Issued Shares shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law, unless (i) such transfer is in compliance with the terms of the applicable Award, all applicable securities laws, and with the terms and conditions of the Plan (including Sections 17.4 and 17.5 and this Section 17.13.3), (ii) such transfer does not cause the Company to become subject to the reporting requirements of the Exchange Act, and (iii) the transferee consents in writing to be bound by the provisions of the Plan (including Sections 17.4 and 17.5 and this Section 17.13.3).  In connection with any proposed transfer, the Board may require the transferor to provide at the transferor’s own expense an opinion of counsel to the transferor, satisfactory to the Board, that such transfer is in compliance with all foreign, federal and state securities laws.  Any attempted disposition of Issued Shares not in accordance with the terms and conditions of this Section 17.13.3 shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Issued Shares as a result of any such disposition, shall otherwise refuse to recognize any such disposition and shall not in any way give effect to any such disposition of Issued Shares. Subject to the foregoing general provisions, and unless otherwise provided in the agreement with respect to a particular Award, Issued Shares may be transferred pursuant to the following specific terms and conditions:

 

(a) Transfers to Permitted Transferees. The Holder may sell, assign, transfer or give away any or all of the Issued Shares to Permitted Transferees; provided, however, that following such sale, assignment, or other transfer, such Issued Shares shall continue to be subject to the terms of this Plan (including Section 17.4 17.5 and this Section 17.13.3) and such Permitted Transferee(s) shall, as a condition to any such transfer, deliver a written acknowledgment to that effect to the Company.

 

(b) Transfers Upon Death. Upon the death of the Holder, any Issued Shares then held by the Holder at the time of such death and any Issued Shares acquired thereafter by the Holder’s legal representative shall be subject to the provisions of this Plan, and the Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees shall be obligated to convey such Issued Shares to the Company or its assigns under the terms contemplated hereby.

 

17.14. Dividends and Dividend Equivalent Rights.

 

If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the Common Stock or other securities covered by an Award.  The terms and conditions of a dividend equivalent right may be set forth in the Award Agreement.  Dividend equivalents credited to a Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or other securities of the Company at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion of the Board.

 

 

Adopted by the Board on August 6, 2014

Termination Date:  August 6, 2024

 

  

23RBC 8K 2014_08_22 Ex10.1

EXHIBIT 10.1

EXCLUSIVE AGREEMENT

This agreement (the “Agreement”) is made as of the 1st day of August, 2014, by and between RBC Life Sciences, Inc., a Nevada corporation with offices at 2301 Crown Court, Irving, Texas, 75038, USA, (“RBC” or “Supplier”), and Coral Club International Inc., an Ontario corporation, with offices at 255 Duncan Mill Road, Suite 806, Toronto, ON, M3B 3H9, Canada (“CCI” or “Purchaser”).
WHEREAS, RBC and CCI entered into an Exclusive Distributorship Agreement dated the 14th day of July, 2004 (the “Former Agreement”), and the parties hereto desire to enter into a new Agreement that supersedes and replaces in all respects the Former Agreement except as otherwise set forth herein;
WHEREAS, RBC manufactures, and has manufactured for itself, a line of quality health, nutritional dietary supplement and personal care products (collectively, “Products”) which are also for sale to the Purchaser; under the RBC brand or under the CCI brand;
WHEREAS, CCI is a corporation of Ontario, Canada, with the power to carry on business as contemplated by this Agreement;
WHEREAS, CCI desires to promote, market, and sell the Products subject to the terms and conditions of this Agreement;
WHEREAS, the parties hereto desire to establish, among other things, the terms and conditions under which orders will be placed by CCI and accepted and filled by RBC.
NOW, THEREFORE, in consideration of the premises stated above and subject to the terms and conditions contained herein, the parties agree as follows:

I.     TERRITORY
A.  As used herein, “CCI’s Exclusive Territory” shall be comprised of the countries in regions as outlined below:
1.  Region A: The countries of the former USSR, commonly known as the Former Soviet Union: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.
2. Region B: Europe comprising the following countries: Albania, Andorra, Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Macedonia, Malta, Monaco, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, and United Kingdom.
2.   Region C: The following countries in Asia: Cyprus, Israel, and Turkey.
B.  As used herein, “RBC’s Exclusive Territory” shall be comprised of the countries in regions as outlined below: 
1.   Region D: North America comprising the following countries: Antigua and Barbuda, The Bahamas, Barbados, Belize, Canada, Costa Rica, Cuba, Dominica, Dominican Republic, El Salvador, Greenland, Grenada, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago and the United States (“US”).

2.   Region E: The following countries in Asia: Taiwan, Australia, New Zealand, Hong Kong, Singapore, Malaysia, Philippines, Thailand, Vietnam, Indonesia, Cambodia, Laos, South Korea, India, Japan and China.
		
	II.
	PRICES

		
	A.
	Current prices for all Products available for purchase by CCI are set forth in Appendix A effective from date of this Agreement (the “Price List”) and shall be paid in US Dollars, ex-factory and export packed at RBC’s facility in Irving, Texas, USA.  The parties acknowledge that such prices are subject to change as set forth in Section II(B) below and that all Products are available for purchase with the RBC brand labels or the CCI brand labels.  CCI shall be responsible for all 

land, sea, or airfreight charges, wharfage, and storage charges.  CCI at its sole expense shall arrange any insurance desired by CCI to cover the Products while in transit.

		
	B.
	The Product order process shall consist of two (2) stages, preorder and confirmed order, as follows:

1.     Preorder - CCI shall send a preorder for Products to RBC. The quantity of each Product preordered shall be a production run quantity.  The preorder shall include all information reasonably required by RBC to provide a quote.  Within two (2) weeks of receipt of the preorder, RBC shall provide a written quote to CCI or the reason why a quote cannot be provided at that date.  The quote provided to CCI shall include, at a minimum, the following information: the price of Product(s) preordered, the date through which each quoted price is effective (which RBC shall endeavor to make not less than 90 days) and the lead time to deliver each Product from the date the confirmed order for such product is placed.
2.     Confirmed Order - Prior to the expiration date of the quoted price(s), CCI shall place a confirmed order for Product(s) at its discretion and pay the deposit required by Section V.  Upon placement of a confirmed order by CCI, RBC shall confirm the date on which each ordered Product is to be delivered (“Quoted Delivery Date”).
III.    DELIVERY
		
	A.
	RBC shall Deliver (as hereinafter defined) Products ordered by CCI in accordance with the Product Specifications (as defined in Section VI(F). RBC shall endeavor to ensure that the quoted lead time for Delivery of each Product ordered is no more than eight (8) weeks from the time the confirmed order is placed

		
	B.
	“Delivery” shall be defined as the date CCI is notified that Products are segregated in RBC’s warehouse for CCI’s account and available for shipment. Upon Delivery, title to the Products and all risk of loss or damage shall pass to CCI, except loss or damage that occurs while Products are located in RBC’s warehouse.

		
	C.
	RBC will consider requests from CCI for new products, modified formulations or modified packaging. RBC, at its sole discretion, shall determine whether and under what terms such requests shall be fulfilled.

		
	D.
	For any Product that has been registered by CCI with a governmental authority in any country in which distribution of such Product is permitted under the terms of this Agreement, CCI shall provide to RBC any registered specification related to such Product that, at CCI’s discretion, is to be included in the Product Specifications. Upon receipt of notification from CCI, RBC shall incorporate the registered specification into the Product Specifications.

		
	E.
	RBC shall not be obliged to proceed with the fulfillment of any order for which payment has not been received pursuant to the provisions of Section V below.

IV.    DELAYS

		
	A.
	RBC is not liable for failure to perform its obligations under this Agreement if such failure is as a result of acts of God (including fire, flood, earthquake, storm, tornados, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalization, government sanction, acts or the failure to act by any government authority, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service. No party is entitled to terminate this Agreement under Section XVI in such circumstances.

		
	B.
	If RBC asserts that any event described in Section IV(A) is a reason for its failure to perform obligation(s) under this Agreement, RBC shall timely provide CCI written notice that shall include a description of the event(s), the impact the event(s) had on RBC’s ability to meet its obligation(s) and the reasonable steps RBC took to minimize delay or damages caused by such event(s).

		
	C.
	RBC acknowledges that its failure to timely Deliver Products to CCI that are timely ordered in accordance with the terms of this Agreement can adversely affect CCI’s business. Therefore, if RBC fails to Deliver a Product by the date thirty (30) days after the Quoted Delivery Date, RBC will grant to CCI a ten percent (10%) discount on the purchase price of such Product.  If RBC fails to Deliver a Product by the date sixty (60) days after the Quoted Delivery Date, RBC will grant to CCI an additional five percent (5%) discount on the purchase price of such Product. If RBC fails to Deliver a Product by the date one hundred twenty (120) days after the Quoted Delivery Date, CCI may cancel the purchase order for such Product, at its option.  In addition, CCI will receive a credit from RBC equal to fifteen percent (15%) of the purchase price of the Product on the cancelled Purchase order for use against a future purchase order.

V.    PAYMENT
		
	A.
	Payment for Products ordered shall be made in two installments or as otherwise mutually agreed to by the parties in writing.  The first payment is due at the time CCI places its confirmed order with RBC. The payment will be sent via wire transfer or check drawn in US funds on a US funds bank account to RBC, in the amount of twenty-five percent (25%) of the order amount. The remaining balance payment of seventy-five percent (75%) will be sent to RBC via wire transfer or check drawn in US funds on a US funds bank account, upon Delivery of the Products.

		
	B.
	CCI agrees to remit to RBC a logistics fee equal to Nine Thousand Six Hundred US Dollars (US$9,600) per month for warehousing and product fulfillment services rendered with respect to the Products.  The logistics fee is due on the first day of each month for such month and shall be paid to RBC via wire transfer or check drawn in US funds on a US funds bank account.  At its discretion, CCI may terminate these services upon thirty (30) days written notice.  Should CCI provide written notice of termination of these services on any day other than the 1st of the month, the next month’s payment will be prorated accordingly.

VI.    GOVERNMENTAL AUTHORIZATION
		
	A.
	All sales hereunder shall be subject to the export control laws and regulations of the US.

		
	B.
	CCI shall be responsible for the timely obtaining of any governmental authorizations required such as import licenses, exchange permits, registration, or any other specific governmental authorization in any country where CCI imports and/or sells Products under the terms of this Agreement.

		
	C.
	RBC shall provide to CCI at no charge the documents it maintains to comply with US good manufacturing practice regulations (“GMP” or “GMPs,” as the case may be) promulgated by the US Food and Drug Administration and to conduct business as an international distributor of foods, dietary supplements and cosmetics (such as Certificate of Analysis, Certificate of Manufacture, Certificate of Free Sale, Certificate of Composition and GMP Certification), or other documentation that may be reasonably requested by a country’s government as proof that the Products comply with any applicable standards, requirements, tests, or procedures within the country. Should CCI require additional information or additional tests not required by GMPs, CCI shall be responsible for all costs associated with obtaining such information or tests.

		
	D.
	RBC shall not be liable if any approval/authorization described in this Section VI is delayed, denied, revoked, restricted, or not renewed, and CCI shall not be relieved thereby of its obligations to pay RBC for any Products already ordered and/or Delivered to CCI at its request.

E.  RBC at its cost shall comply with GMPs, which may from time-to-time require the inspection of the facilities of its suppliers. Nothing in this Agreement shall be construed to obligate RBC (i) to pay for the inspection of its facilities or the facilities of any supplier to satisfy governmental agencies or authorities in any country other than the US, or (ii) to otherwise incur any costs or expenses to qualify its facilities or the facilities of any supplier pursuant to the governmental regulations of any country other than the US.  If the governmental regulations of any country in which CCI desires to sell Products require an inspection of RBC’s facilities, RBC shall cooperate with such inspection at CCI’s sole cost and expense.
F.  RBC shall Deliver to CCI Products manufactured in accordance with the product specifications (the “Product Specifications”), which are attached hereto as Appendix B. Products not in conformity with the Product Specifications, or which may otherwise be defective, may, at RBC’s option, be destroyed or returned by CCI to RBC at RBC’s expense upon written authorization from RBC. Products that do not conform to the Product Specifications shall not be deemed Delivered for purposes of determining whether a delay has occurred pursuant to Section IV(C).

VII.    EXCLUSIVITY

		
	A.
	RBC agrees that it will not sell or deliver the Products to any person or entity in CCI’s Exclusive Territory without obtaining the written consent of CCI.  In addition, RBC shall use commercially reasonable efforts to preclude any other person or entity from selling or delivering the Products in CCI’s Exclusive Territory. 

		
	B.
	With respect to the sale or delivery of Products by CCI, CCI agrees that it will not sell or deliver the Products to any person or entity except as permitted by the terms of the group(s) to which each Product is assigned, as set forth in Appendix C.  The terms of each group are as follows:

		
	a.
	Group A - Products in Group A may be sold or delivered by CCI with either the RBC brand label or the CCI brand label in any country except countries in Regions D and E.

		
	b.
	Group B - Products in Group B may be sold or delivered by CCI with CCI brand labels in any country.

		
	c.
	Group C - Products in Group C may be sold or delivered by CCI with CCI brand labels in any country, except the CCI brand label may not use or refer in any way to the trade name under which such Product is sold when labeled with the RBC brand label.

		
	d.
	Group D - Products in Group D may not be sold or delivered by CCI in any country in Regions D and E.

CCI shall use commercially reasonable efforts to preclude any other person or entity (except those authorized by RBC) from selling or delivering the Products contrary to the provisions of this paragraph.  

		
	C.
	CCI shall notify RBC in writing of its intention to sell or deliver any Product in any country not included in CCI’s Exclusive Territory prior to such sale or delivery.

Notwithstanding the preceding, RBC may sell or deliver the Products to customers residing in CCI’s Exclusive Territory as long as (i) the customer purchases the Products only for personal use and not for resale (ii) the customer does not recruit other customers or otherwise attempt to build a downline organization, and (iii) RBC notifies CCI of the existence of such customer.

VIII. SALES ACTIVITIES & PURCHASER RESPONSIBILITIES/OBLIGATIONS

		
	A.
	CCI shall use commercially reasonable efforts to promote and sell the Products in CCI’s Exclusive Territory and any other country where CCI sells Products under the terms of this Agreement in compliance with applicable government laws and regulations.  CCI hereby acknowledges that it is its obligation to ensure that its business policies, procedures and practices conform to the legal requirements in each country where it promotes and sells the Products.

		
	B.
	CCI is not an agent of RBC for any purpose and is not granted any express or implied right to assume or create any obligation in the name of RBC or to bind RBC in any manner.  

		
	C.
	Upon reasonable request, RBC will make available to CCI samples of audio, video, and photography used in its US-based training, promotional, and business sales aids materials for use by CCI. In turn, CCI will develop at its own expense all training, promotional and business sales aids, including any translation and printing costs, for use in countries where CCI promotes and sells the Products under the terms of this Agreement.  

		
	D.
	At CCI’s sole cost and expense, RBC shall produce Product labels, including artwork and copy layout, as required by CCI to facilitate the sale of Products in countries permitted under the terms of this Agreement, These Product labels shall be produced in accordance with specifications provided by CCI based on legal requirements and other considerations and, at CCI’s discretion, include artwork supplied by CCI.

		
	E.
	RBC and CCI each acknowledge that the other has its own independent distributor commission plan and related computer software.

IX.     CONFIDENTIALITY

		
	A.
	As used in this Section, “Confidential Information” means information disclosed by one party to the other, or known by either party as a consequence of, or through, the affiliation with the other, not generally known in the industry in which RBC and CCI are active or may become engaged, specific examples of which are set forth in the following Section IX(B).

		
	B.
	Neither RBC nor CCI shall disclose any information pertaining to the other party that is not publicly known about the Products, processes, and services; including but not limited to information relating to research and development, customer lists, Product formulations, inventions, manufacturing, manufacturing methods, purchasing, suppliers, accounting, engineering, marketing, merchandising, selling, pricing, business methods, software systems, internal policies, and any lawsuits, legal work, communications with attorneys or other information received as a consequence of the business affiliation between RBC and CCI.

		
	C.
	The parties shall not, at any time, divulge to any person, firm, or corporation any of the Confidential Information received by it during the term of the Former Agreement or this Agreement, and all such information shall be kept confidential and shall not, in any manner, be revealed to anyone except as may be required by legal process or the order of any court of competent jurisdiction. The obligations of the parties set forth in this Section IX shall survive the termination of this Agreement for a period of five (5) years.

		
	D.
	Notwithstanding the preceding, the parties shall not be precluded from disclosing the terms of this Agreement, if RBC or CCI shall reasonably determine that disclosure is required for compliance with governmental regulations or laws, including the requirements of the US Securities and Exchange Commission.

X.     TAXES

		
	A.
	All US taxes, whether federal or state, are included in the prices, except sales, use, excise, and similar taxes, which have been excluded on the basis that the transaction is presumed to involve resale and/or export by CCI. CCI shall furnish evidence of export or other appropriate tax exemption evidence acceptable to the taxing authorities if requested by RBC.

XI.    WARRANTIES

		
	A.
	RBC hereby warrants that the Products shall be manufactured in accordance with the Product Specifications and in conformity with all applicable GMPs and that Products shall conform to the Product Specifications at time of Delivery.  RBC further warrants that it will make no changes to the Product Specifications without CCI’s written approval.

		
	B.
	CCI’s exclusive remedy for any cause of action relating to a breach of this warranty shall be limited to (i) the prompt replacement by RBC of the defective Product; or a financial amount, issued as a credit against a future purchase order, agreed upon by both parties, for any loss of sales, calculated as described below, due to the unavailability of the Product plus (ii) reimbursement of any freight and delivery charges incurred by CCI to ship the defective Product from RBC’s warehouse to CCI’s warehouse, if such Product was defective at the time of shipment.  For purposes of this paragraph, loss of sales shall be calculated by multiplying ten percent (10%) of CCI’s average daily sales of such Product for the preceding six (6) calendar months by the number of days the Product is out of stock.  For purposes of this calculation, the number of days the Product is out of stock is the number of days between the date that RBC and CCI mutually agree that this warranty has been breached, or the date that CCI ships the last available unit of such Product in its inventory, whichever is later, and the date that replacement Product is Delivered.  CCI agrees to provide, at RBC’s reasonable request, supporting documentation from CCI’s books and records used to determine CCI’s average daily sales of any Product for which a financial claim is made pursuant to this paragraph.

		
	C.
	EXCEPT AS OTHERWISE PROVIDED HEREIN, RBC MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTIES EITHER EXPRESSED OR IMPLIED, OR ANY AFFIRMATION OF FACT OR REPRESENTATION.  RBC SHALL NOT BE LIABLE TO CCI FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE OF ANY KIND OR FOR ANY DIRECT, CONSEQUENTIAL, COLLATERAL, OR INCIDENTAL DAMAGES RELATIVE TO OR ARISING FROM OR CAUSED DIRECTLY OR INDIRECTLY BY THE PRODUCTS OR THE USE THEREOF, UNLESS EXPRESSLY SET FORTH IN OR CONTEMPLATED BY THIS AGREEMENT.  EXCEPT AS OTHERWISE PROVIDED HEREIN, CCI’S EXCLUSIVE REMEDY FOR ANY CAUSE OF ACTION RELATING TO BREACH OF THIS WARRANTY SHALL BE LIMITED TO THE PROMPT REPLACEMENT BY RBC OF THE DEFECTIVE PRODUCT, AND RBC’S LIABILITY TO THE CONSUMER FOR ANY AND ALL LOSSES OR DAMAGES RESULTING FROM ANY BREACH OF ANY PRODUCT WARRANTY, INCLUDING NEGLIGENCE, SHALL IN NO EVENT EXCEED THE PURCHASE PRICE OF THE PRODUCT AS SET FORTH IN THE PRICE LIST, OR, AT THE ELECTION OF RBC, THE REPLACEMENT OF THE PRODUCT, EXCEPT AS CONTEMPLATED BY SECTION XI(D) BELOW.

		
	D.
	Product Liability Insurance - RBC hereby agrees, at its expense, during the Term of this Agreement, to maintain product liability insurance with the named insured thereon being RBC. The insured limits shall be no less than $1,000,000 per occurrence, and not less than $2,000,000 in aggregate. This product liability insurance shall cover all Products sold by RBC to CCI.  A Certificate of Insurance evidencing such coverage is attached hereto as Appendix D. CCI shall undertake to obtain its own product liability insurance to cover potential claims either not covered by RBC’s product liability coverage or associated with causes of action attributable to the conduct of CCI.  Should a judgment be entered by a court of competent jurisdiction against CCI and/or RBC with respect to a product liability claim related to one or more Products sold or delivered by CCI to the plaintiff, where such claim is based on a Product defect (not including Product labeling), RBC shall bear the cost of such judgment to the extent such judgment is not covered by applicable product liability insurance.

XII.     PATENTS

		
	A.
	If CCI receives a claim that any Product or part thereof manufactured or distributed by RBC infringes any patent in the US, unless the Product formula or infringing part thereof was provided by CCI to RBC, CCI shall notify RBC promptly in writing and give RBC information, assistance, and exclusive authority to evaluate, defend, and settle such claim.

		
	B.
	Upon receipt of such notice, RBC shall at its own expense and option:

		
	a.
	Settle such claim,

		
	b.
	Procure for CCI the right to use and sell such Product,

		
	c.
	Replace or modify the Product to avoid infringement,

		
	d.
	Remove the Product and refund CCI’s purchase price, or

		
	e.
	Defend against such claim.

		
	C.
	Provided timely notice has been given by CCI, should any court of competent jurisdiction hold such Product to constitute infringement, RBC shall indemnify CCI for all costs and damages finally awarded on account of such infringement and, if the use of such Product is enjoined, RBC shall at its option and sole expense, take one or more of the actions listed in Section XII(B) above.

XIII.     TRADEMARKS

		
	A.
	The Products shall be delivered to CCI with RBC branded labels or CCI branded labels at CCI’s discretion in accordance with the terms of this Agreement. CCI acknowledges that RBC is, to its knowledge, the owner of or has rights to certain trademarks and trade names, including but not limited to, “RBC Life Sciences”, “Pure Life”, “Royal BodyCare”, Stem-Kine”, and “Royal Botanica”.

		
	B.
	The Products Delivered to CCI with a CCI branded label may be labeled with the trademark CCI logo or any other logo affiliated with CCI.

		
	C.
	CCI acknowledges that its only right with respect to the trademark and trade name “RBC”, “RBC Life Sciences” and “Royal BodyCare”, or any other RBC trademark or trade name, is to sell and promote the Products bearing such trademark(s) and trade name(s) in CCI’s Exclusive Territory and other countries in accordance with the terms of this Agreement.

		
	D.
	CCI shall not register any RBC trademark and/or trade name in its own name or in the name of any other entity other than RBC.  CCI is authorized to use the name “RBC” or “Royal BodyCare” or “RBC Life Sciences” as CCI reasonably sees fit.  CCI’s right to use any RBC trademark and/or trade name shall immediately cease upon termination or expiration of this Agreement.

XIV.     LIMITATION OF LIABILITY

		
	A.
	EXCEPT AS OTHERWISE PROVIDED HEREIN, THE TOTAL LIABILITY OF RBC TO CCI ON ANY CLAIM, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM THE MANUFACTURE, SALE, DELIVERY, RESALE, REPLACEMENT OR USE OF ANY PRODUCTS SHALL NOT EXCEED THE PRICE ALLOCABLE TO THE PRODUCTS OR PART THEREOF WHICH GIVES RISE TO THE CLAIM.

		
	B.
	EXCEPT AS OTHERWISE PROVIDED HEREIN, IN NO EVENT SHALL RBC BE LIABLE TO CCI FOR ANY SPECIAL OR CONSEQUENTIAL DAMAGES INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF REVENUE, COST OF CAPITAL, CLAIMS OF CUSTOMERS FOR SUPPLY INTERRUPTIONS OR FAILURE OF SUPPLY, AND COSTS AND EXPENSES INCURRED IN CONNECTION WITH TRANSPORTAION OR SUBSTITUTE FACILITIES OR SUPPLY SOURCES. THE FOREGOING NOTWITHSTANDING, EACH PARTY MAY BE LIABLE FOR DAMAGES CAUSED TO THE OTHER PARTY BY MEANS OF FRAUD, TRANSMISSION OF FALSE INFORMATION, OR VIOLATIONS OF LAW.  SUCH DAMAGES WILL BE LIMITED TO COST OF GOODS, FREIGHT, AND ACTUAL DAMAGES.

XV.    MUTUAL INDEMNIFICATION AND HOLD HARMLESS
		
	A.
	RBC HEREBY UNDERTAKES TO INDEMNIFY AND HOLD HARMLESS CCI FROM ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, DEBTS, DUTIES, ACCOUNTS, BONDS, CONTRACTS, CLAIMS AND DEMANDS WHATSOEVER RESULTING FROM ANY ACTION OR OMISSION; INCLUDING WITHOUT LIMITATION ANY FAILURE TO FILE ANY CORPORATE OR OTHER RETURNS OR REPORTS ON BEHALF OF RBC ARISING OUT OF ANY CAUSE, MATTER OR THING WHATSOEVER EXISTING FROM SIGNING OF THIS AGREEMENT TO THE TERMINATION OF THIS AGREEMENT.

		
	B.
	CCI HEREBY UNDERTAKES TO INDEMNIFY AND HOLD HARMLESS RBC FROM ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, DEBTS, DUTIES, ACCOUNTS, BONDS, CONTRACTS, CLAIMS AND DEMANDS WHATSOEVER RESULTING FROM ANY ACTION OR OMISSION; INCLUDING WITHOUT LIMITATION ANY FAILURE TO FILE ANY CORPORATE OR OTHER RETURNS OR REPORTS ON BEHALF OF CCI ARISING OUT OF ANY CAUSE, MATTER OR THING WHATSOEVER EXISTING FROM SIGNING OF THIS AGREEMENT TO THE TERMINATION OF THIS AGREEMENT.  

		
	C.
	In case any claim, demand, or action shall be brought by any third party including, but not limited to, any governmental authority, against a party entitled to indemnity under Section XV(A) or XV(B) above, such party shall promptly notify the other party from whom indemnity is or may validly be sought, in writing, and the indemnifying party or parties shall assume the defense thereof.  Any settlement of any action subject to indemnity hereunder shall require the consent of the indemnified and the indemnifying party, which consent shall not be unreasonably withheld.  The indemnifying party shall not be liable for any settlement of any action effected without its consent, but if settled with the consent of the indemnifying party, or if there be a final judgment for the plaintiff in any such action, the indemnifying party shall indemnify and hold harmless the indemnified party from and against any loss or liability by reason of such settlement or judgment.  If requested by the indemnifying party, the indemnified party shall cooperate with the indemnifying party and its counsel and use its best efforts in contesting any such claim or, if appropriate, in making any counter-claim or cross-complaint against the party asserting the claim, provided that the indemnifying party will reimburse the indemnified party for reasonable expenses incurred in so 

cooperating.  The indemnifying party and its representatives shall have full and complete access during reasonable hours to all books, records, and files of the indemnified party expressly related to the defense of any claim for indemnification undertaken by the indemnifying party pursuant to this Section, or for any other purpose in connection therewith, provided that the indemnifying party shall safeguard and maintain the confidentiality of all such books, records, and files.

		
	D.
	The provisions hereof shall inure to the benefit of, and shall be binding upon the successors, assigns and representatives of each of the parties.

XVI.    TERM AND TEMINATION

		
	A.
	This Agreement will be effective as of the date first written above and shall continue for two (2) years thereafter. Unless one party provides written notice of termination to the other in no less than one hundred and eighty (180) days prior to the end of the term of this Agreement, this agreement shall automatically renew for a successive one-year period (a “Renewal Term”).

		
	B.
	The proceeding notwithstanding, this Agreement may be terminated at any time by mutual agreement by both parties or otherwise in accordance with the terms hereof.

		
	C.
	In addition to the provisions of Section XVI(A) above, this Agreement may be terminated with immediate effect upon the occurrence of any for the following events:

		
	a.
	The insolvency of either party; its suffering or committing any act of insolvency, or the inability of either party to pay its debts when due or within one hundred and eighty (180) days of the due date; 

		
	b.
	Either party’s bankruptcy or liquidation, whether voluntary or involuntary, or the appointment for it of a receiver or liquidator;

		
	c.
	An attempted assignment of this Agreement, except as provided in Section XVIII below;

		
	d.
	Any non-payment by CCI to RBC of any indebtedness under this Agreement, provided CCI has received written notice of such default and has had thirty (30) days to rectify such default but failed to do so;

		
	e.
	The failure of a breaching party to remedy a breach of this Agreement within thirty (30) days after written notice of a breach has been served on the breaching party by the non-breaching party indicating the nature of the breach or purported breach.

		
	D.
	Upon termination of this Agreement, CCI will immediately cease to use in any manner all RBC trademarks and/or trade names, including, but not limited to, “Royal BodyCare” “RBC Life Sciences” and “RBC”, and will not sell any goods under such trademarks or trade names or any similar names and marks.

		
	E.
	To permit each party to protect its respective business interests, each party hereby agrees to give reasonable notice to the other in the event of a material adverse change in its business or financial condition.  Any event so reported shall not constitute a breach of this Agreement, unless such event is an event as set forth in Section XVI(C) above.

XVII.    MINIMUM PERFORMANCE STANDARDS

		
	A.
	In consideration of the rights granted to CCI in this Agreement, CCI agrees to purchase Products from RBC in the aggregate minimum amount of Three Million Six Hundred Thousand US Dollars (US$3,600,000) during each year of this Agreement’s term.

		
	B.
	In the case that CCI in any one year does not purchase Products from RBC in the aggregate minimum amount of Three Million Six Hundred Thousand US Dollars (US$3,600,000), RBC may, at its option, convert the exclusive rights granted to CCI into non-exclusive rights, providing that RBC has fulfilled orders placed by CCI during such year in accordance with the terms of this Agreement.

XVIII.     TRANSFER OF RIGHTS    

		
	A.
	No party hereto shall assign its rights or obligations under this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld or denied.

		
	B.
	Either party can assign this Agreement without the necessity of obtaining prior written consent of the other party where such assignment is to a wholly owned subsidiary or other entity controlled by it, provided that as a condition to any such assignment, the assignee shall assume and become liable for any and all of the assignor’s obligation under this Agreement.

		
	C.
	In the case of a change in ownership of RBC, this Agreement will continue for the full term in accordance with all provisions set forth herein. However, notwithstanding the preceding, if the new owners wish to renegotiate the terms and provisions of this Agreement through RBC’s management, CCI will take this request into consideration.

		
	D.
	Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns.

XIX.    MISCELLANEOUS

		
	A.
	This Agreement, together with any and all Appendices, Exhibits, and attachments hereto, constitutes the entire Agreement between the parties and there are no agreements or commitments except as set forth herein.  

		
	B.
	This Agreement may be amended, modified in whole or in part, or supplemented by an agreement in writing that makes reference to this Agreement and is executed by authorized officers of the parties.

		
	C.
	Any notices required or permitted to be given under this Agreement shall be in writing and shall be given by addressing the same to such other party at the address set forth below.

		
	D.
	Such notices shall be given to all parties by:

		
	a.
	Overnight or highest priority expedited delivery by an internationally recognized air freight courier service (e.g. UPS, FedEx, Purolator) (herein referred to as “Courier Service”),

		
	b.
	Delivery of same; personally to an authorized officer of such other party, or

		
	c.
	Transmitting by facsimile and mailing of the original.

		
	E.
	Any such notice shall be deemed to have been given ten (10) business days after the timely delivery to a Courier Service; if by personal delivery, upon such delivery; or if by facsimile, seven (7) business days following the day of transmission if made within customary business hours, or if not transmitted within customary business hours, eight (8) business days following the day of transmission.

Notices to RBC shall be addressed and delivered to:

RBC Life Sciences, Inc., 
2301 Crown Court, 
Irving, Texas 75038, 
USA
Telephone: (972) 893-4000
Facsimile:     (972) 893-4111
Attn: Steve Brown - President

Notices to CCI shall be addressed and delivered to:
Coral Club International Inc.,
255 Duncan Mill Road, 
Suite 806,
Toronto, ON  M3B 3H9, 
Canada
Telephone:  (416) 663-4425
Email address: lappl@rogers.com
Attn: Leonid Lapp - President

		
	F.
	Separability of Provisions.  A judicial or administrative declaration by any court of competent jurisdiction of the invalidity of any one or more of the provisions hereof shall not invalidate the remaining provisions of the Agreement in any jurisdiction, nor shall such declaration have any effect on the validity or interpretation of this Agreement outside of that jurisdiction. The parties undertake, however, to negotiate in good faith to find a substitute provision as close as possible to the invalid provision, taking into consideration each party’s intention with respect to this Agreement.

		
	G.
	Waiver of Compliance.  Any failure by any party hereto to enforce at any time any term or condition under this Agreement shall not be construed as a waiver of that party’s right to enforce each and every term of this Agreement.

XXX.    DISPUTES

		
	A.
	Any controversy arising out of or in relation to this Agreement, or the breach or alleged breach thereof, which cannot be settled amicably, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the International Arbitration Association and the provisions of this Section.

		
	B.
	Any party may initiate arbitration by giving written notice to the other party of an intention to arbitrate and by filing with JAMS International located in Toronto, Ontario (or such other arbitration and mediation center location as parties may agree) three (3) copies of such notice and three (3) copies of this Agreement together with the appropriate filing fee.

		
	C.
	The arbitration proceedings shall be held at the center location agreed to by the parties and shall be subject to the arbitration rules described in Section XXX(A) above.

		
	D.
	The arbitrator(s) may grant any legal and/or equitable relief to which a party may be entitled under the law and legal theory under which the party seeks relief, provided however, that no claim may be made for any special, indirect, consequential, or punitive damages arising out of or related to this Agreement, or of any act, omission, or event occurring in connection therewith, except that punitive damages may be awarded for willful or wanton misconduct. 

		
	E.
	The arbitration award shall be settled within six (6) months from the date the final arbitration award is granted by the arbitrator(s).

		
	F.
	The award shall not serve as precedent or authority in any subsequent proceeding, provided, however, that if the losing party should fail to comply with the award, the prevailing party may apply to any court having jurisdiction for an order confirming the award in accordance with applicable law.

		
	G.
	The award can be enforced in any court having jurisdiction.

		
	H.
	Unless otherwise required by law or court orders, the substance of any arbitration proceedings shall be kept confidential by all parties and by the arbitrator(s); however, the fact that such a proceeding exists, or that an award has been rendered, need not be kept confidential.

		
	I.
	The costs of the proceedings, including the fees and costs of attorneys, accountants, witnesses, and the compensation of the arbitrator(s) shall be assessed by the arbitrator(s) against the parties according to the arbitrator(s)’ determination of fault.

XXI.     TRANSITION FROM THE FORMER AGREEMENT

		
	A.
	As of the effective date of this Agreement, the Former Agreement is rendered void and without force and effect and is hereby replaced and superseded in all respects by this Agreement except as otherwise provided herein.

		
	B.
	The parties acknowledge that certain provisions in this Agreement with respect to payments between the parties are different than the Former Agreement.  To facilitate the transition between this Agreement and the Former Agreement, the parties agree as follows:

1.   Confirmed Orders.  The price of the Products on all confirmed orders not Delivered as of the effective date of this Agreement shall be increased twenty percent (20%).

2.  Confirmed Order Payments.   The aggregate amount of the first installment payment due to RBC in accordance with Section V of the Former Agreement shall be reduced to 25% of the aggregate amount of all confirmed orders not Delivered as of the effective date of this Agreement, which calculation shall be made after adjustment of the price of the Products in accordance with Section XXI(B)(1).  If this adjustment results in an amount owing to CCI from RBC, this amount shall be applied to the gross payment due from CCI to RBC pursuant to Section XXI (B) (3) below.

3.  Marketing Service Fee.  CCI acknowledges that, as of July 31, 2014, it held unsold Products in its inventory that were purchased under the Former Agreement (the “Unsold Products”). CCI further acknowledges that, in accordance with the terms of the Former Agreement, it will owe RBC a marketing service fee upon sale of the Unsold Products.  The parties hereby agree that, In lieu of calculating and paying such marketing service fee, CCI shall pay to RBC an amount equal to the purchase price of the Unsold Products multiplied by twenty percent (20%). The parties further agree that this payment shall be deemed earned in full by RBC on the effective date of this Agreement and is not contingent upon future sales of the Unsold Products. This payment shall be paid to RBC in eighteen (18) equal monthly installments, the first of which shall be due October 1, 2014 with the remaining installments due on the first day of each successive month thereafter until paid in full. In connection with this payment CCI shall provide to RBC a listing of Unsold Products and their respective purchase prices. Further, the marketing service fee due to RBC under the Former Agreement with respect to sales of Products in July 2014 shall be paid to RBC by August 31, 2014; however, no marketing service fee shall be due to RBC upon the sale of any Products after July 31, 2014.

XXII.     ADDITIONAL SECTIONS

		
	A.
	Governing Law.  The rights and obligations of the parties under this Agreement shall be governed by the provisions of the 2010 United Nations Convention on Contracts for the International Sale of Goods.

		
	B.
	Captions; Counterparts.  The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

		
	C.
	Further Instruments.  The parties hereto agree to execute and deliver such instruments and take such other action as shall be reasonably necessary, or as shall be reasonably requested by any other party, in order to carry out the transactions and agreements contemplated by this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate as of the date first written above, by their duly authorized representatives.

RBC Life Sciences, Inc.,                    Coral Club International Inc.,
a Nevada Corporation                    an Ontario Corporation

By: __/s/ Steven E. Brown_______                By: __/s/ Leonid Lapp________
      Steve Brown, President                       Leonid Lapp, President 

Date: _August 22,_________, 2014                Date: __August 1,_______, 2014

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