Document:

hancocks8091708exhibit40.htm

    Exhibit
4.0

    

    

    

    HANCOCK
FABRICS, INC.

     

    2001
STOCK INCENTIVE PLAN

     

    AMENDED
AND RESTATED

     

    1.           Purpose.

     

    The
purpose of the HANCOCK FABRICS, INC. 2001 STOCK INCENTIVE PLAN (the "Plan") is
to further the earnings of HANCOCK FABRICS, INC., a Delaware corporation, and
its subsidiaries (collectively, the "Company") by assisting the Company in
attracting, retaining and motivating key employees and directors of high caliber
and potential.  The Plan provides for the award of long-term
incentives to those key employees and directors who make substantial
contributions to the Company by their loyalty, industry and
invention.

     

    2.           Administration.

     

    The Plan
shall be administered by the Stock Plan Committee (the "Committee") selected by
the Board of Directors of the Company (the "Board of Directors") consisting
solely of two or more members who are "outside directors" as described in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").  Except to the extent permitted under paragraph 6(g) hereof
or Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "1934
Act") (or any successor rule of similar import), each Committee member shall be
ineligible to receive, and shall not have been, during the one-year period prior
to appointment thereto, granted or awarded stock options or restricted stock
pursuant to this Plan or any other similar plan of the Company or any affiliate
of the Company.  Without limiting the foregoing, the Committee shall
have full and final authority in its discretion to interpret the provisions of
the Plan and to decide all questions of fact arising in its
application.  Subject to the provisions hereof, the Committee shall
have full and final authority in its discretion to determine the employees and
directors to whom awards shall be made under the Plan; to determine the type of
awards to be made and the amount, size and terms and conditions of each such
award; to determine the time when awards shall be granted; to determine the
provisions of each agreement evidencing an award; and to make all other
determinations necessary or advisable for the administration of the
Plan.

     

    3.           Stock
Subject to the Plan.

     

    The
Company may grant awards under the Plan with respect to not more than a total of
6,300,000 shares of $.01 par value common stock of the Company (the "Shares"),
(subject to adjustment as provided in paragraph 18, below).  Such
Shares may be authorized and unissued Shares or treasury
Shares.  Except as otherwise provided herein, any Shares subject to an
option which for any reason is surrendered before exercise or expires or is
terminated unexercised as to such Shares shall again be available for the
granting of awards under the Plan.  Similarly, if any Shares granted
pursuant to restricted stock awards are forfeited, such forfeited Shares shall
again be available for the granting of awards under the Plan.

     

    4.           Eligibility
to Receive Awards.

     

    Persons
eligible to receive awards under the Plan shall be limited to those officers,
other key employees and directors of the Company who are in positions in which
their decisions, actions and counsel have a significant impact upon the
profitability and success of the Company (but excluding members of the
Committee, except as provided in paragraph 6(g)).

     

    5.           Form
of Awards.

     

    Awards
may be made from time to time by the Committee in the form of stock options to
purchase Shares, restricted stock, or any combination of the above. Stock
options shall be limited to options which do not qualify (“Nonqualified Stock
Options”) as incentive stock options within the meaning of Section 422(b) of the
Code.

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.           Stock
Options; Nonemployee Director Grants.

     

    Stock
options for the purchase of Shares shall be evidenced by written agreements in
such form not inconsistent with the Plan as the Committee shall approve from
time to time; provided that the maximum number of options which may be granted
to any one grantee during any twelve-month period is 100,000 (except that (i) the Committee in its
discretion may exceed such limitation as to executive officers of the Company
and (ii) such
limitation shall be adjusted pursuant to paragraph 18 below).  Such
agreement shall contain the terms and conditions applicable to the options,
including in substance the following terms and conditions:

     

    
      	
               
      

            	
              (a)

            	
              Number
      of Shares.  Each option agreement shall identify the options
      represented as Nonqualified Stock Options, and shall set forth the number
      of Shares subject to the option (as adjusted pursuant to paragraph 18,
      below).

            

    

     

    
      	
               
      

            	
              (b)

            	
              Option
      Price.  The option exercise price to be paid by the optionee to
      the Company for each Share purchased upon the exercise of an option shall
      be determined by the Committee, but shall in no event be less than 100
      percent of the fair market value per Share on the date the option is
      granted, as determined by the Committee.  Notwithstanding
      anything herein to the contrary, the Committee shall not reprice any
      options to a lower exercise price at any time during the term of any
      option granted under this Plan.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Exercise
      Term.  Each option agreement shall state the period or periods
      of time within which the option may be exercised, in whole or in part, as
      determined by the Committee and subject to such terms and conditions as
      are prescribed for such purpose by the Committee, provided that no option
      shall be exercisable, except as provided in paragraph 16 or in the event
      of Retirement (as defined below), death or Disability (as defined below),
      any more rapidly than from (i) the first anniversary of the date of grant
      thereof, to the extent of 25% of the Shares covered thereby, (ii) the
      thirteenth month from the date of grant thereof, and each additional month
      thereafter, to the extent of an additional 1/36th of the Shares covered
      thereby.  The Committee, in its discretion, may provide in the
      option agreement that the option shall become immediately exercisable, in
      whole or in part, in the event of Retirement, death or
      Disability.  Notwithstanding the foregoing, no option shall be
      exercisable after seven years from the date of
  grant.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Payment
      for Shares.  The purchase price of the Shares with respect to
      which an option is exercised shall be payable in full at the time of
      exercise in cash, Shares at fair market value (i.e., in either a “net”
      exercise or a “cashless” exercise), or by delivery of an executed
      promissory note secured by the shares so purchased, or a combination
      thereof, as the Committee may determine and all subject to such terms and
      conditions as may be prescribed by the Committee for such
      purpose.  If the purchase price is paid by tendering Shares, the
      Committee in its discretion may grant the optionee a new stock option for
      the number of Shares used to pay the purchase
  price.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Rights
      Upon Termination.  In the event of Termination (as defined
      below) of an optionee's status as an employee or director of the Company
      for any cause other than Retirement, death or Disability, all unexercised
      options shall terminate immediately unless otherwise specified in the
      Option Grant Agreement or unless the Committee shall determine otherwise.
      (As used herein, "Termination" means, (i) in the case of an employee, the
      cessation of the grantee's employment by the Company for any reason, and
      (ii) in the case of a director, the cessation of the grantee's service as
      a director of the Company; and "Terminates" has the corresponding
      meaning.  As used  herein, "Retirement" means (in the
      case of an employee) termination of employment under circumstances
      entitling the participant to elect immediate payment of retirement
      benefits under the Hancock Fabrics, Inc. Consolidated Retirement Plan or
      any successor plan, or (in the case of a director), the same meaning as
      Termination or Terminates and “Retires” has the corresponding
      meaning.  As used herein, "Disability" means failure to return
      to full-time employment duties immediately after the participant has
      exhausted the short term disability benefits under the then applicable
      short term disability policy or procedures of the Company, and "Disabled"
      has the corresponding meaning).  In the event that an optionee
      Retires, dies or becomes Disabled prior to the expiration of his option
      and without having fully exercised his option, the optionee or his
      Beneficiary (as defined below) shall have the right to exercise the option
      during its term within a period of (i) one year after Termination due to
      Retirement, death or Disability, or (ii) one year after death if death
      occurs either within one year after Termination due to Retirement or
      Disability to the extent that the option was exercisable at the time of
      death or Termination, or within such other period, and subject to such
      terms and conditions, as may be specified by the Committee.  (As
      used herein, "Beneficiary" means the person or persons designated in
      writing by the grantee as his Beneficiary with respect to an award under
      the Plan; or, in the absence of an effective designation or if the
      designated person or persons predecease the grantee, the grantee's
      Beneficiary shall be the person or persons who acquire by bequest or
      inheritance the grantee's rights in respect of an award).  In
      order to be effective, a grantee's designation of a Beneficiary must be on
      file with the Committee before the grantee's death, but any such
      designation may be revoked and a new designation substituted therefor at
      any time before the grantee's
death.

            

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
               
      

            	
              (f)

            	
              Nontransferability.  Except
      as provided in paragraph 14(b), options granted under the Plan shall not
      be sold, assigned, transferred, exchanged, pledged, hypothecated, or
      otherwise encumbered, other than by will or by the laws of descent and
      distribution.  Except as provided in paragraph 14(b), during the
      lifetime of the optionee the option is exercisable only by the
      optionee.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Grants
      to Nonemployee Directors.  Notwithstanding any other provision
      of the Plan, the grant of options and/or restricted stock hereunder to
      directors who are not also employees of the Company ("Nonemployee
      Directors") shall be subject to the following terms and
      conditions:

            

    

     

    
      	
               
      

            	
              (i)

            	
              The
      Nonemployee Directors of the Company installed pursuant to the Company’s
      Plan of Reorganization approved on August 1, 2008, shall receive an
      initial grant of 50,000 Shares of restricted stock (granted at August 4,
      2008), vesting to the extent of 50% of the shares so granted on the first
      anniversary of the date of grant, and 25% and 25% on the successive second
      and third such anniversary dates.  Subsequent grants of
      restricted stock and/or Nonqualified Stock Options to Nonemployee
      Directors may be made at the discretion of the Compensation Committee,
      subject to any limitations under Section 16 of the Securities Exchange Act
      of 1934.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Each
      Nonemployee Director of the Company may elect annually (at the time of his
      initial election and subsequently at the time of the annual meeting of
      stockholders for the election of directors), in advance, to receive all or
      a portion of his compensation for services rendered as a Nonemployee
      Director in Shares of restricted stock issued under this Plan in lieu of
      cash, which Shares shall be granted at the time of such annual election,
      vesting to the extent of 1/12th
      of the shares so awarded on the same date of each subsequent
      month.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      exercise price of stock subject to an option granted to Nonemployee
      Directors and the price used to calculate the number of Shares of
      restricted stock to be issued in  lieu of cash consideration
      under this paragraph 6(g) shall be equal to 100 percent of the fair market
      value of such stock on the date the option is granted or the compensation
      would otherwise have been paid in cash, all as determined by the
      Committee.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Except
      as provided in paragraph 16, each option granted to Nonemployee Directors
      under this paragraph 6(g) shall not be exercisable until one year after
      the date of grant; provided, however, that no portion of the option shall
      be exercisable any earlier than the date the Plan is approved by the
      stockholders of the Company.

            

    

     

    
      	
               
      

            	
              (v)

            	
              Unless
      otherwise provided in the Plan, all provisions with respect to the terms
      of Nonqualified Stock Options hereunder shall be applicable to options
      granted to Nonemployee Directors under this paragraph
  6(g).

            

    

     

    
      	
               
      

            	
              (vi)

            	
              The
      grants described in this paragraph 6(g) shall constitute the only awards
      under the Plan permitted to be made to Nonemployee
    Directors.

            

    

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.           Restricted
Stock Awards.

     

    Restricted
stock awards under the Plan shall consist of Shares free of any purchase price,
or for such purchase price as may be established by the Committee, restricted
against transfer, subject to forfeiture, and subject to such other terms and
conditions (including attainment of performance objectives) as may be determined
by the Committee.  Shares of restricted stock issued to Nonemployee
Directors shall be governed by Section 6(g) above if that section is
inconsistent with this Section 7.  Restricted stock shall be evidenced
by written restricted stock agreements in such form not inconsistent with the
Plan as the Committee shall approve from time to time, which agreement shall
contain the terms and conditions applicable to such awards, including in
substance the following terms and conditions:

     

    
      	
               
      

            	
              (a)

            	
              Restriction
      Period.  Restrictions shall be imposed for such period or
      periods as may be determined by the Committee.  The Committee,
      in its discretion, may provide in the agreement circumstances under which
      the restricted stock shall become immediately transferable and
      nonforfeitable, or under which the restricted stock shall be forfeited,
      provided that no restricted stock award shall become immediately
      transferable and nonforfeitable, except as provided in paragraph 16 or in
      the event of Retirement, death or Disability, any more rapidly than from
      (i) the first anniversary of the date of grant thereof, to the extent of
      50% of the Shares covered thereby, (ii) the second anniversary of the date
      of grant thereof, to the extent of an additional 25% of the Shares covered
      thereby, and (iii) the third anniversary of the date of grant thereof, to
      the extent of an additional 25% of the Shares covered
    thereby.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Restrictions
      Upon Transfer.  Restricted stock and the right to vote such
      Shares and to receive dividends thereon, may not be sold, assigned,
      transferred, exchanged, pledged, hypothecated, or otherwise encumbered,
      except as herein provided, during the restriction period applicable to
      such Shares.  Notwithstanding the foregoing, and except as
      otherwise provided in the Plan, the grantee shall have all of the other
      rights of a stockholder, including, but not limited to, the right to
      receive dividends and the right to vote such Shares.  Any right
      to receive dividends shall be limited to a right to receive such dividends
      at the same time and in the same amount as dividends which are paid to
      holders of unrestricted shares of capital stock of the
      Company.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Certificates.  A
      certificate or certificates representing the number of restricted Shares
      granted shall be registered in the name of the grantee.  The
      Committee, in its sole discretion, shall determine when the certificate or
      certificates shall be delivered to the grantee (or, in the event of the
      grantee's death, to his Beneficiary), may provide for the holding of such
      certificate or certificates in escrow or in custody by the Company or its
      designee pending their delivery to the grantee or Beneficiary, and may
      provide for any appropriate legend to be borne by the certificate or
      certificates.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Lapse
      of Restrictions.  The restricted stock agreement shall specify
      the terms and conditions upon which any restriction upon restricted stock
      awarded under the Plan shall expire, lapse, or be removed, as determined
      by the Committee.  Upon the expiration, lapse, or removal of
      such restrictions, Shares free of the restrictive legend shall be issued
      to the grantee or his legal
representative.

            

    

     

    8.           Loans
and Supplemental Cash.

     

    The
Committee, in its sole discretion to further the purpose of the Plan, may
provide for supplemental cash payments or loans to individuals in connection
with all or any part of an award under the Plan.  Supplemental cash
payments shall be subject to such terms and conditions as shall be prescribed by
the Committee at the time of grant, provided that in no event shall the amount
of payment exceed:

     

    
      	
               
      

            	
              (a)

            	
              In
      the case of an option, the excess fair market value of a Share on the date
      of exercise over the option price multiplied by the number of Shares for
      which such option is exercised, or

            

    

     

    
      	
               
      

            	
              (b)

            	
              In
      the case of a restricted stock award, the value of the Shares issued in
      payment of such award.

            

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Any loan
shall be evidenced by a written loan agreement or other instrument in such form
and containing such terms and conditions (including, without limitation,
provisions for interest, payment schedules, collateral, forgiveness or
acceleration) as the Committee may prescribe from time to time.

     

    9.           General
Restrictions.

     

    Each
award under the Plan shall be subject to the requirement that if at any time the
Company shall determine that (i) the listing, registration or qualification of
the Shares subject or related thereto upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any regulatory body, or
(iii) an agreement by the recipient of an award with respect to the disposition
of Shares, or (iv) the satisfaction of withholding tax or other withholding
liabilities is necessary or desirable as a condition of or in connection with
the granting of such award or the issuance or purchase of Shares thereunder,
such award shall be consummated in whole or in part only if such listing,
registration, qualification, consent, approval, agreement, or withholding shall
have been effected or obtained on terms acceptable to the
Company.  Any such restriction affecting an award shall not extend the
time within which the award may be exercised; and neither the Company nor its
directors or officers nor the Committee shall have any obligation or liability
to the grantee or to a Beneficiary with respect to any Shares with respect to
which an award shall lapse or with respect to which the grant, issuance or
purchase of Shares shall not be effected, because of any such
restriction.

     

    10.           Single
or Multiple Agreements.

     

    Multiple
awards, multiple forms of awards, or combinations thereof may be evidenced by a
single agreement or multiple agreements, as determined by the
Committee.

     

    11.           Rights
of the Shareholder.

     

    The
recipient of any award under the Plan, shall have no rights as a shareholder,
except as provided in Paragraph 7(b), with respect thereto unless and until
certificates for Shares are issued to him, and the issuance of Shares shall
confer no retroactive right to dividends.

     

    12.           Rights
to Terminate.

     

    Nothing
in the Plan or in any agreement entered into pursuant to the Plan shall confer
upon any person the right to continue in the employment of the Company or to
serve as a director, or affect any right which the Company may have to terminate
the employment or directorship of such person.

     

    13.           Withholding.

     

    Prior to
the issuance or transfer of Shares under the Plan, the recipient shall remit to
the Company an amount sufficient to satisfy any federal, state or local
withholding tax requirements. The amount to be withheld shall be determined by
the Company and shall be the based on the minimum statutory requirements. The
recipient may satisfy the withholding requirement in whole or in part by
electing to have the Company withhold Shares having a value equal to the amount
required to be withheld.  The value of the Shares to be withheld shall
be the fair market value, as determined by the Committee, of the stock on the
date that the amount of tax to be withheld is determined (the "Tax
Date").  Such election must be made prior to the Tax Date, must comply
with all applicable securities law and other legal requirements, as interpreted
by the Committee, and may not be made unless approved by the Committee, in its
discretion.

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    14.           Non-Assignability.

     

    
      	
               
      

            	
              (a)

            	
              Except
      as provided in paragraph 14(b), no award under the Plan shall be sold,
      assigned, transferred, exchanged, pledged, hypothecated, or otherwise
      encumbered, other than by will or by the laws of descent and distribution,
      or by such other means as the Committee may approve.  Except as
      provided in paragraph 14(b), or as otherwise provided herein, during the
      life of the recipient, such award shall be exercisable only by such person
      or by such person's guardian or legal
  representative.

            

    

     

    
      	
               
      

            	
              (b)

            	
              The
      Committee may, in its sole discretion from time to time, permit the
      assignment of any Nonqualified Stock Option to one or more of an
      optionee’s “Immediate Family” (as defined herein).  As used
      herein, members of an optionee’s “Immediate Family” shall include only (i)
      persons who, at the time of transfer, are the optionee’s spouse or natural
      or adoptive lineal ancestors or descendants, and (ii) trusts established
      for the exclusive benefit of the optionee and/or one or more of the
      persons described in clause (i) of this paragraph
  14(b).

            

    

     

    15.           Non-Uniform
Determinations.

     

    The
Committee's determinations under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the agreements
evidencing same, and the establishment of values and performance targets) need
not be uniform and may be made selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.

     

    16.           Change
In Control Provisions.

     

    
      	
               
      

            	
              (a)

            	
              In
      the event of a Change in Control (as defined below), the Committee in its
      sole discretion may cause any stock options awarded under the Plan to vest
      and restrictions on restricted stock granted under the Plan to lapse, all
      in accordance with terms determined by the Committee in such event, even
      though such determination is made after the date of award or grant (so
      long as such terms are not more restrictive than those contained in any
      prior agreement with the optionees/grantees relating to the affected
      options or restricted stock).  The Committee may provide in
      grant/award agreements issued pursuant to this Plan that the following
      acceleration and valuation provisions shall be available in the event of a
      Change in Control (provided that more restrictive provisions may be
      applicable in the discretion of the Committee) for individual officers who
      (i) are involuntarily terminated upon a Change in Control as a direct
      result of the Change in Control or (ii) terminate their own employment for
      cause upon a Change in Control (e.g., material increase in duties,
      reduction of authority, reduction of compensation or change in location)
      (which determination of causation in (i) and (ii) is to be made by the
      Board of Directors):

            

    

     

    
      	
               
      

            	
              (i)

            	
              Any
      stock options awarded under the Plan not previously exercisable and vested
      shall become fully exercisable and
vested.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Any
      restrictions and deferral limitations applicable to any restricted stock
      to the extent not already vested under the Plan, shall lapse and such
      shares shall be deemed fully
vested.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      value of all outstanding stock options and restricted stock, in each case
      to the extent vested, shall, unless otherwise determined by the Committee
      in its sole discretion at or after grant but prior to any Change in
      Control, be cashed out on the basis of the Change in Control Price (as
      defined) as of the date such Change in Control is determined to have
      occurred or such other date as the Committee may determine prior to the
      Change in Control.

            

    

     

    
      	
               
      

            	
              (b)

            	
              As
      used herein, the term "Change in Control" means the happening of any of
      the following:

            

    

     

    
      	
               
      

            	
              (i)

            	
              Any
      person or entity, including a "group" as defined in Section 13(d)(3) of
      the 1934 Act, other than the Company, a subsidiary of the Company, or any
      employee benefit plan of the Company or its subsidiaries, becomes the
      beneficial owner of the Company's securities having 51 percent or more of
      the combined voting power of the then outstanding securities of the
      Company that may be cast for the election for directors of the Company
      (other than as a result of an issuance of securities initiated by the
      Company in the ordinary course of business),
or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              As
      the result of, or in connection with, any cash tender or exchange offer,
      merger or other business combination, sale of assets or contested
      election, or any combination of the foregoing transactions, less than a
      majority of the combined voting power of the then outstanding securities
      of the Company or any successor corporation or entity entitled to vote
      generally in the election of directors of the Company or such other
      corporation or entity after such transaction, are held in the aggregate by
      holders of the Company's securities entitled to vote generally in the
      election of directors of the Company immediately prior to such
      transactions.

            

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      	
               
      

            	
              (c)

            	
              As
      used herein, the term "Change in Control Price" means, as to (b)(i) above,
      the average closing price per share as reported on the exchange on which
      the Shares are then traded during the 60 day period immediately preceding
      the occurrence of the Change in Control, or as to (b)(ii) above, the
      actual price paid in any transaction (or the weighted average price paid
      in the case of a combination of transactions) related to the Change in
      Control, in each case as determined by the
  Committee.

            

    

     

    17.           Non-Competition
Provision.

     

    Unless
the award agreement relating to a stock option or restricted stock specifies
otherwise, a grantee shall forfeit all unexercised, unearned and/or unpaid
awards, including, but not by way of limitation, awards earned but not yet paid,
all unpaid dividends and dividend equivalents, and all interest, if any, accrued
on the foregoing, if the grantee, without the written consent of the Company,
engages directly or indirectly in any manner or capacity as principal, agent,
partner, officer, director, employee or otherwise, in any business or activity
which is, in the opinion of the Committee, (i) competitive with the business
conducted by the Company or any of its subsidiaries, or (ii) inimical to the
best interests of the Company or any of its subsidiaries.

     

    18.           Adjustments.

     

    In the
event of any change in the outstanding common stock of the Company, by reason of
a stock dividend or distribution, recapitalization, merger, consolidation,
reorganization, split-up, combination, exchange of Shares or the like, the Board
of Directors, in its discretion, may adjust proportionately the number of Shares
which may be issued under the Plan, the number of Shares subject to outstanding
awards, and the option exercise price of each outstanding option, and may make
such other changes in outstanding options and restricted stock awards, as it
deems equitable in its absolute discretion to prevent dilution or enlargement of
the rights of grantees, provided that any fractional Shares resulting from such
adjustments shall be eliminated.  Provided, however, that no change in
the terms may provide the holder of options with a direct or indirect reduction
in the ratio of the option exercise price to the fair market value of the
Shares.

     

    19.           Amendment.

     

    The Board
of Directors may terminate, amend, modify or suspend the Plan at any time,
except that the Board shall not, without the authorization of the holders of a
majority of Company's voting securities, modify existing awards respecting the
number of shares, exercise price or extension of terms, issue new awards in
exchange for the cancellation of outstanding awards, increase the maximum number
of Shares which may be issued under the Plan (other than pursuant to paragraph
18 hereof), extend the last date on which awards may be granted under the Plan,
extend the date on which the Plan expires, change the class of persons eligible
to receive awards, or change the minimum option price.  In no event,
however, shall the provisions of paragraph 6(g) be amended more often than once
every six months, other than to comport with changes in the Code, the Employment
Retirement Income Security Act of 1974, as amended, or the rules
thereunder.  No termination, modification, amendment or suspension of
the Plan shall adversely affect the rights of any grantee or Beneficiary under
an award previously granted, unless the grantee or Beneficiary shall consent;
but it shall be conclusively presumed that any adjustment pursuant to paragraph
18 hereof does not adversely affect any such right.

     

    20.           Effect
on Other Plans.

     

    Participation
in this Plan shall not affect a grantee's eligibility to participate in any
other benefit or incentive plan of the Company.  Any awards made
pursuant to this Plan shall not be used in determining the benefits provided
under any other plan of the Company unless specifically provided
therein.

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    21.           Effective
Date and Duration of the Plan.

     

    The Plan
shall become effective when adopted by the Board of Directors, provided that the
Plan is approved by the holders of a majority of the Company's voting securities
on the date of its adoption by the Board or before the first anniversary of that
date.  Unless it is sooner terminated in accordance with paragraph 19
hereof, the Plan shall remain in effect until all awards under the Plan have
been satisfied by the issuance of Shares or payment of cash or have expired or
otherwise terminated, but no award shall be granted more than ten years after
the earlier of the date the Plan is adopted by the Board of Directors or is
approved by the holders of the Company's voting securities.

     

    22.           Unfunded
Plan.

     

    The Plan
shall be unfunded, except to the extent otherwise provided in accordance with
Section 7 hereof.  Neither the Company nor any affiliate shall be
required to segregate any assets that may be represented by stock options and
neither the Company nor any affiliate shall be deemed to be a trustee of any
amounts to be paid under any stock option.  Any liability of the
Company or any affiliate to pay any grantee or Beneficiary with respect to an
option shall be based solely upon any contractual obligations created pursuant
to the provisions of the Plan; no such obligations will be deemed to be secured
by a pledge or encumbrance on any property of the Company or an
affiliate.

     

    23.           Governing
Law.

     

    The Plan
shall be construed and its provisions enforced and administered in accordance
with the laws of the State of Delaware except to the extent that such laws may
be superseded by any federal law.ex107.htm

    Exhibit
10.7

    
 

    CONSULTING
AGREEMENT

     

    This
Consulting Agreement (the “Agreement”) is made and entered into as of the first
day of August 2007, by and between Sequoia Media Group, LC, a Utah limited
liability company (the “Company”), and Amerivon Holdings LLC, a Nevada limited
liability company (the “Consultant”).

     

    RECITALS

     

    A.           The
Company, a private company, is contemplating a merger or similar type of
liquidity event with Secure Alliance Holdings Corp., a publicly traded company
(“SAH”), or an affiliate thereof (the “Transaction”).

     

    B.           The
Consultant has certain skills, knowledge, and abilities relating to advising the
Company on certain aspects relating to operating effectively as a public
company.

     

    C.           The
Company desires to engage the Consultant and the Consultant desires to be
engaged by the Company on the terms and conditions set forth below.

     

    NOW,
THEREFORE, in consideration of the foregoing, the mutual promises and covenants
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as
follows:

     

    AGREEMENT

     

    1. Engagement.  The
Company hereby engages the Consultant and the Consultant hereby accepts
engagement by the Company upon the terms and conditions hereinafter set
forth.

     

    2. Term.  The
Company engages the Consultant hereunder for a term (the “Term”) of twelve (12)
months from August 1, 2007 through July 31, 2008, unless terminated earlier in
accordance with the provisions of Section
6.  The parties may extend the Term by mutual written consent
under terms and conditions mutually agreeable.

     

    3. Duties.  The
Consultant shall assist the Company in reviewing an  updated business
plan for the Company as the control part post- Transaction by, among other
things, advising the Company with respect to (i) the
financial  planning of the Company incorporating the proposed
Transaction, (ii) reviewing the Company processes including Board of Director
compensation, Audit and Compensation Committee formation, (iii)
interviewing  potential new Board of Director members, and (iv) for up
to six months beyond closing of Transaction, continuing to assist the Company
with the identification of market-makers, Sarbanes Oxley requirements planning,
and public and investor relations programs.

     

    4. Extent of
Services.  During the Term, the Consultant shall provide the
services of its personnel as reasonably necessary in order to render services to
the Company.  There is no minimum or maximum limit on the number of
hours that the Consultant is required to expend.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    5. Compensation.  As
consideration for providing consulting services, the Company shall pay the
Consultant a total fee (the “Fee”) of Seven Hundred Seventy-Five Thousand
Dollars ($775,000), subject to adjustment upon termination as set forth in Section
6.   As consideration for providing consulting services,
the Company shall pay the Consultant a total fee (the “Fee”) of Seven Hundred
Seventy-Five Thousand Dollars ($775,000).  The Company shall pay the
Consultant Ten Thousand Dollars ($10,000) on the first day of each month
commencing August 2007 through and including January 2007, and the Company shall
pay the Consultant One Hundred Nineteen Thousand One Hundred Sixty-Seven Dollars
($119,167) on the first day of each month commencing February 2008 through and
including July 2008.  Not­withstanding the foregoing, the Company
shall pay the Consultant all unpaid amounts of the Fee on the closing of the
Transaction.

     

    6. Termination.

     

    (a) On
Notice.  Either party may terminate this Agreement upon thirty
(30)-days prior written notice to the other party.  In the event of
termination the fee shall be adjusted and only that portion of Fee that has
become due through the first day of the calendar month during which the
Agreement was terminated shall be due and payable.  The balance of the
Fee for the months following the date of termination shall be waived except as
provided in Section 6(b).  Upon of the closing of the Transaction, the
Agreement is no longer subject to termination by the Company.

     

    (b) Fee.  If
the Company closes the Transaction within twelve (12)-months after the date of
termination of this Agreement, then the Company shall pay the Consultant all
unpaid amounts of the Fee on the closing of the Transaction.

     

    (c) Survival.  The
following sections of this Agreement shall survive any termination or expiration
of this Agreement: Sections 6(b), 7, and 8.

     

    7. Relationship of
Parties.  The parties intend and agree that the relationship
created between them by this Agreement shall be solely that of company and
consultant, and that nothing contained in this Agreement shall be construed as
creating a joint venture, partnership, tenancy-in-common, joint tenancy, or
co-ownership relationship between the parties.

     

    8. General
Provisions.

     

    (a) Amendment.  All
amendments or modifications of this Agreement shall be in writing and shall be
signed by each of the parties hereto.

     

    (b) Waiver.  Any
waiver of any right, power, or privilege hereunder must be in writing and signed
by the party being charged with the waiver.  No delay on the part of
any party hereto in exercising any right, power, or privilege hereunder shall
operate as a waiver of any other right, power, or privilege hereunder, nor shall
any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.

     

    (c) Notices.  All
notices or other communications required or permitted to be given pursuant to
this Agreement shall be in writing and shall be delivered personally or sent by
overnight courier or by certified mail, return receipt
requested.  Notices delivered personally or sent by overnight courier
shall be effective on the date received, while notices sent by certified mail,
return receipt requested, shall be deemed to have been received and to be
effective three (3) business days after deposit into the
mails.  Notices shall be given to the parties at the following
respective addresses, or to such other addresses as any party shall designate in
writing:

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    If to the
Company                                                                Mr.
Chett B. Paulsen

    Chief Executive Officer

    Sequoia Media Group, LC

    11781 Lone Peak Parkway

    Suite 270

    Draper,
Utah  84020-6884

     

    If to the
Consultant:                                                             Mr.
Tod M. Turley

    Chief Executive Officer

    Amerivon Holdings LLC

    4520 East Thousand Oaks
Boulevard

    Suite 100

    Westlake Village,
California  91362-7209

     

    (d) Assignment.  This
Agreement and each of its provisions shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any successor entity by liquidation, merger, consolidation, reorganization, sale
of assets, or otherwise.

     

    (e) Law
Governing.  This Agreement has been negotiated, executed, and
delivered and shall be performed in the State of Utah and shall be governed by
and construed and enforced in accordance with the laws of the State of Utah,
without regard for its conflict of laws rules.  The parties hereby
irrevocably submit to the exclusive jurisdiction of the courts of the State of
Utah and any United States District Court situated in the State of Utah for the
purposes of construing and enforcing this Agreement.

     

    (f) Attorneys’
Fees.  Should a lawsuit be commenced to interpret or enforce
the terms of this Agreement, the prevailing party shall be entitled to recover
costs and attorneys’ fees in addition to any other recovery to which such party
may be entitled.

     

    (g) Arbitration.  If
any dispute arises concerning the interpretation, validity, or perfor­mance
of this Agreement or any of its terms and provisions, including but not limited
to the issue of whether or not a dispute is arbitrable, (i) if the amount
claimed by a party is equal to or less than the jurisdictional limit of the Utah
Small Claims Court, then the parties shall resolve such matter in the Utah Small
Claims Court, or (ii) if the amount claimed by the party exceeds the
jurisdic­tional limit of the Utah Small Claims Court, then the parties shall
submit such dispute for binding determination before a retired judge selected
from JAMS, Inc. or any similar organization mutually acceptable to the
parties.  The parties shall mutually agree on one arbitrator from the
list provided by the arbitrating organization; provided that if the parties
cannot agree, then each party shall select one arbitrator from the list, and the
two arbitrators so selected shall agree upon a third arbitrator chosen from the
same list, which third arbitrator shall determine the dispute.  The
arbitra­tion shall take place in Salt Lake County, and shall be conducted in
accordance with the then prevailing rules of the arbitrating organization,
except as set forth in this Section
8(g).  The parties shall have all rights for depositions and
discovery as provided by the Utah law.  The arbitrator shall apply
Utah substantive law and the Utah Evidence Code to the
proceeding.  The arbitrator shall have the power to grant all legal
and equitable remedies including provisional remedies and award compensatory
damages provided by law, but  the arbitrator may not order relief in
excess of what a court could order.  The arbitrator shall not have
authority to award punitive or exemplary damages.  The arbitrator
shall prepare and provide the parties with a written award including factual
findings and the legal reasoning upon which the award is based.  The
arbitrator shall not have the power to commit errors of law or legal reasoning
or to make findings of fact except upon sufficiency of the
evidence.  Any award that contains errors of law or legal reasoning or
makes findings of fact except upon the sufficiency of the evidence exceeds the
power of the arbitrator, and may be corrected or vacated as provided by
applicable law.  The arbitrator shall award costs and attorneys’ fees
in accordance with the terms and conditions of this Agreement.  Any
court having jurisdiction may enter judgment on the award rendered by the
arbitrator, or correct or vacate such award as provided by applicable
law.  The parties understand that by agreement to binding arbitration
they are giving up the rights they may otherwise have to trial by a court or a
jury and all rights of appeal, and to an award of punitive or exemplary
damages.  Pending resolution of any arbitration proceeding, either
party may apply to any court of competent jurisdiction for any provisional
remedy, including but not limited to a temporary restraining order or a
preliminary injunction but excluding any dispute relating to discovery matters,
and for enforcement of any such order.  The application for or
enforcement of any provisional remedy by a party shall not operate as a waiver
of the within agreement to submit a dispute to binding arbitration.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (h) Counterparts.  This
Agreement may be executed in two or more counterparts, including by facsimile
transmission, all of which together shall constitute a single
instrument.

     

    (i) Severability of
Provisions.  In the event any one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision had never been
contained herein.

     

    (j) Construction.  The
headings in the sections and paragraphs of this Agreement are for convenience
only and shall not constitute a part hereof.  Whenever the context so
requires, the masculine shall include the feminine and the neuter, the singular
shall include the plural, and conversely.  All references to numbered
sections contained herein refer to the sections of this Agreement unless
otherwise expressly stated.  The terms and all parts of this Agreement
shall in all cases be interpreted simply and according to their plain meaning
and neither for nor against any party hereto.

     

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

     

    
      
        	Sequoia
      Media Group, LC	 	Amerivon
      Holdings LLC	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
                /s/

              	 	By:	
                /s/
      

              	 
	 	
                Chett
      B. Paulsen   

              	 	 	
                Tod
      M. Turley

              	 
	 	Chief Executive
      Officer	 	 	Chief Executive
      Officer	 

      

    

     

                                                                                                    

                                                                             

    

     

     

    
5

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