Document:

exv10w1

Exhibit 10.1

IOMAI CORPORATION

2005 INCENTIVE PLAN

1. DEFINED TERMS

     Exhibit A, which is incorporated by reference, defines the terms used in the Plan and sets
forth certain operational rules related to those terms.

2. PURPOSE

     The Plan has been established to advance the interests of the Company by providing for the
grant to Participants of Stock-based and other incentive Awards.

3. ADMINISTRATION

     The Administrator has discretionary authority, subject only to the express provisions of the
Plan, to interpret the Plan; determine eligibility for and grant Awards; determine, modify or waive
the terms and conditions of any Award; prescribe forms, rules and procedures; and otherwise do all
things necessary to carry out the purposes of the Plan. In the case of any Award intended to be
eligible for the performance-based compensation exception under Section 162(m), the Administrator
will exercise its discretion consistent with qualifying the Award for that exception.
Determinations of the Administrator made under the Plan will be conclusive and will bind all
parties.

4. LIMITS ON AWARDS UNDER THE PLAN

     (a) Number of Shares. A maximum of 3,740,000 shares of Stock may be delivered in
satisfaction of Awards under the Plan.  The number of shares of Stock delivered in
satisfaction of Awards shall, for purposes of the preceding sentence, be determined net of shares
of Stock withheld by the Company in payment of the exercise price of the Award or in satisfaction
of tax withholding requirements with respect to the Award. The limit set forth in this Section
4(a) shall be construed to comply with Section 422 of the Code and regulations thereunder. To the
extent consistent with the requirements of Section 422 of the Code and regulations thereunder, and
with other applicable legal requirements (including applicable listing requirements), Stock issued
under awards of an acquired company that are converted, replaced, or adjusted in connection with
the acquisition shall not reduce the number of shares available for Awards under the Plan.

     (b) Type of Shares. Stock delivered by the Company under the Plan may be authorized
but unissued Stock or previously issued Stock acquired by the Company. No fractional shares of
Stock will be delivered under the Plan.

     (c) Section 162(m) Limits. The maximum number of shares of Stock for which Stock
Options may be granted to any person in any calendar year and the maximum number of shares of Stock
subject to SARs granted to any person in any calendar year will each be 780,000. The maximum
number of shares subject to other Awards granted to any person in any calendar year will be 140,000
shares. The maximum amount payable to any person in any year under

 

 

Cash Awards will be $2 million. The foregoing provisions will be construed in a manner
consistent with Section 162(m).

5. ELIGIBILITY AND PARTICIPATION

     The Administrator will select Participants from among those key Employees and directors of,
and consultants and advisors to, the Company or its Affiliates who, in the opinion of the
Administrator, are in a position to make a significant contribution to the success of the Company
and its Affiliates. Eligibility for ISOs is limited to employees of the Company or of a “parent
corporation” or “subsidiary corporation” of the Company as those terms are defined in Section 424
of the Code.

6. RULES APPLICABLE TO AWARDS

     (a) All Awards

          (1) Award Provisions. The Administrator will determine the terms of all Awards,
subject to the limitations provided herein. By accepting any Award granted hereunder, the
Participant agrees to the terms of the Award and the Plan. Notwithstanding any provision of this
Plan to the contrary, awards of an acquired company that are converted, replaced or adjusted in
connection with the acquisition may contain terms and conditions that are inconsistent with the
terms and conditions specified herein, as determined by the Administrator.

          (2) Term of Plan. No Awards may be made after November 16, 2015, but previously
granted Awards may continue beyond that date in accordance with their terms.

          (3) Transferability. Neither ISOs nor, except as the Administrator otherwise
expressly provides, other Awards may be transferred other than by will or by the laws of descent
and distribution, and during a Participant’s lifetime. ISOs (and, except as the Administrator
otherwise expressly provides, other non-transferable Awards requiring exercise) may be exercised
only by the Participant.

          (4) Vesting, Etc. The Administrator may determine the time or times at which an
Award will vest or become exercisable and the terms on which an Award requiring exercise will
remain exercisable. Without limiting the foregoing, the Administrator may at any time accelerate
the vesting or exercisability of an Award, regardless of any adverse or potentially adverse tax
consequences resulting from such acceleration. Unless the Administrator expressly provides
otherwise, however, the following rules will apply: immediately upon the cessation of the
Participant’s Employment, each Award requiring exercise that is then held by the Participant or by
the Participant’s permitted transferees, if any, will cease to be exercisable and will terminate,
and all other Awards that are then held by the Participant or by the Participant’s permitted
transferees, if any, to the extent not already vested will be forfeited, except that:

     (A) subject to (B), (C) and (D) below, all Stock Options and SARs held by the
Participant or the Participant’s permitted transferees, if any, immediately prior to the
cessation of the Participant’s Employment, to the extent then exercisable, will remain
exercisable for the lesser of (i) a period of three months or (ii) the period ending on the
latest date on which such Stock Option or SAR could have been exercised without regard

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to this Section 6(a)(4), and will thereupon terminate;

     (B) all Stock Options and SARs held by a Participant or the Participant’s permitted
transferees, if any, immediately prior to the Participant’s death, to the extent then
exercisable, will remain exercisable for the lesser of (i) the one year period ending with
the first anniversary of the Participant’s death or (ii) the period ending on the latest
date on which such Stock Option or SAR could have been exercised without regard to this
Section 6(a)(4), and will thereupon terminate;

     (C) all Stock Options and SARs held by a Participant or the Participant’s permitted
transferees, if any, immediately prior to the cessation of the Participant’s Employment will
immediately terminate upon such cessation if the Administrator in its sole discretion
determines that such cessation of Employment has resulted for reasons which cast such
discredit on the Participant as to justify immediate termination of the Award; and

     (D) all Stock Options and SARs held by a Non-Employee Director Participant or such
Participant’s permitted transferees, if any, immediately prior to the cessation of the
Participant’s Employment, to the extent then exercisable, will remain exercisable for the
lesser of (i) a period of one year or (ii) the period ending on the latest date on which
such Stock Option or SAR could have been exercised without regard to this Section 6(a)(4),
and will thereupon terminate. 

          (5) Taxes. The Administrator will make such provision for the withholding of taxes as
it deems necessary. The Administrator may, but need not, hold back shares of Stock from an Award
or permit a Participant to tender previously owned shares of Stock in satisfaction of tax
withholding requirements (but not in excess of the minimum withholding required by law).

          (6) Dividend Equivalents, Etc. The Administrator may provide for the payment of
amounts in lieu of cash dividends or other cash distributions with respect to Stock subject to an
Award.

          (7) Rights Limited. Nothing in the Plan will be construed as giving any person the
right to continued employment or service with the Company or its Affiliates, or any rights as a
stockholder except as to shares of Stock actually issued under the Plan. The loss of existing or
potential profit in Awards will not constitute an element of damages in the event of termination of
Employment for any reason, even if the termination is in violation of an obligation of the Company
or Affiliate to the Participant.

          (8) Section 162(m). This Section 6(a)(8) applies to any Performance Award intended to
qualify as performance-based for the purposes of Section 162(m) other than a Stock Option or SAR.
In the case of any Performance Award to which this Section 6(a)(8) applies, the Plan and such Award
will be construed to the maximum extent permitted by law in a manner consistent with qualifying the
Award for such exception. With respect to such Performance Awards, the Administrator will
preestablish, in writing, one or more specific Performance Criteria no later than 90 days after the
commencement of the period of service to which the

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performance relates (or at such earlier time as is required to qualify the Award as
performance-based under Section 162(m)). Prior to grant, vesting or payment of the Performance
Award, as the case may be, the Administrator will certify whether the applicable Performance
Criteria have been attained and such determination will be final and conclusive. No Performance
Award to which this Section 6(a)(8) applies may be granted after the first meeting of the
stockholders of the Company held in 2010 until the listed performance measures set forth in the
definition of “Performance Criteria” (as originally approved or as subsequently amended) have been
resubmitted to and reapproved by the stockholders of the Company in accordance with the
requirements of Section 162(m) of the Code, unless such grant is made contingent upon such
approval.

     (b) Awards Requiring Exercise

          (1) Time And Manner Of Exercise. Unless the Administrator expressly provides
otherwise, an Award requiring exercise by the holder will not be deemed to have been exercised
until the Administrator receives a notice of exercise (in form acceptable to the Administrator)
signed by the appropriate person and accompanied by any payment required under the Award. If the
Award is exercised by any person other than the Participant, the Administrator may require
satisfactory evidence that the person exercising the Award has the right to do so.

          (2) Exercise Price. The exercise price (or the base value from which appreciation is
to be measured) of each Award requiring exercise shall be 100% (in the case of an ISO granted to a
ten-percent shareholder within the meaning of Section 422(b)(6) of the Code, 110%) of the fair
market value of the Stock subject to the Award, determined as of the date of grant, or such higher
amount as the Administrator may determine in connection with the grant. No such Award, once
granted, may be repriced other than in accordance with the applicable stockholder approval
requirements of The NASDAQ Stock Market.

          (3) Payment Of Exercise Price. Where the exercise of an Award is to be accompanied by
payment, the Administrator may determine the required or permitted forms of payment, subject to the
following: all payments will be by cash or check acceptable to the Administrator, or, if so
permitted by the Administrator and if legally permissible, (i) through the delivery of shares of
Stock that have been outstanding for at least six months (unless the Administrator approves a
shorter period) and that have a fair market value equal to the exercise price, (ii) by delivery to
the Company of a promissory note of the person exercising the Award, payable on such terms as are
specified by the Administrator, (iii) through a broker-assisted exercise program acceptable to the
Administrator, (iv) by other means acceptable to the Administrator, or (v) by any combination of
the foregoing permissible forms of payment. The delivery of shares in payment of the exercise
price under clause (a)(i) above may be accomplished either by actual delivery or by constructive
delivery through attestation of ownership, subject to such rules as the Administrator may
prescribe.

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     (c) Awards Not Requiring Exercise

     Restricted Stock and Unrestricted Stock, whether delivered outright or under Awards of Stock
Units or other Awards that do not require exercise, may be made in exchange for such lawful
consideration, including services, as the Administrator determines.

7. EFFECT OF CERTAIN TRANSACTIONS

     (a) Mergers, etc. Except as otherwise provided in an Award, the following provisions
shall apply in the event of a Covered Transaction in which the Company is not the surviving entity:

          (1) Assumption or Substitution. If the Covered Transaction is one in which there is
an acquiring or surviving entity, the Administrator may provide for the assumption of some or all
outstanding Awards or for the grant of new awards in substitution therefor by the acquiror or
survivor or an affiliate of the acquiror or survivor.

          (2) Cash-Out of Awards. If the Covered Transaction is one in which holders of Stock
will receive upon consummation a payment (whether cash, non-cash or a combination of the
foregoing), the Administrator will provide for payment (a “cash-out”), with respect to all
outstanding Awards, equal in the case of each affected Award to the excess, if any, of (A) the fair
market value of one share of Stock (as determined by the Administrator in its reasonable
discretion) times the number of shares of Stock subject to the Award, over (B) the aggregate
exercise or purchase price, if any, under the Award (in the case of an SAR, the aggregate base
price above which appreciation is measured), in each case on such payment terms (which need not be
the same as the terms of payment to holders of Stock) and other terms, and subject to such
conditions, as the Administrator determines. 

          (3) Other Actions. If the Covered Transaction (whether or not there is an acquiring
or surviving entity) is one in which there is no assumption, substitution or cash-out, each Award
requiring exercise will become fully exercisable, and the delivery of shares of Stock deliverable
under each outstanding Award of Stock Units (including Restricted Stock Units and Performance
Awards to the extent consisting of Stock Units) will be accelerated and such shares will be
delivered, prior to the Covered Transaction, in each case on a basis that gives the holder of the
Award a reasonable opportunity, as determined by the Administrator, following exercise of the Award
or the delivery of the shares, as the case may be, to participate as a stockholder in the Covered
Transaction.

          (4) Termination of Awards Upon Consummation of Covered Transaction. Each Award
(unless assumed pursuant to Section 7(a)(1) above), other than outstanding shares of Restricted
Stock (which shall be treated in the same manner as other shares of Stock, subject to Section
7(a)(5) below), will terminate upon consummation of the Covered Transaction.

          (5) Additional Limitations. Any share of Stock delivered pursuant to Section 7(a)(2)
or Section 7(a)(3) above with respect to an Award may, in the discretion of the Administrator,
contain such restrictions, if any, as the Administrator deems appropriate to reflect any
performance or other vesting conditions to which the Award was subject. In the case of

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Restricted Stock, the Administrator may require that any amounts delivered, exchanged or
otherwise paid in respect of such Stock in connection with the Covered Transaction be placed in
escrow or otherwise made subject to such restrictions as the Administrator deems appropriate to
carry out the intent of the Plan.

          (6) Section 409A. In the case of an Award subject to and intended to comply with the
requirements of Section 409A of the Code, the payment provisions of this Section 7(a) shall be
applied in a manner consistent with the objective of continued compliance with such requirements.

     (b) Change of Control Events. Immediately prior to the occurrence of a Change of
Control Event, each outstanding Award granted to a Non-Employee Director that requires exercise
will become fully exercisable, and the delivery of shares of Stock deliverable under each
outstanding Award of Stock Units (including Restricted Stock Units and Performance Awards to the
extend consisting of Stock Units) granted to a Non-Employee Director will be accelerated and such
shares will be delivered.

     (c) Change in and Distributions With Respect to Stock.

          (1) Basic Adjustment Provisions. In the event of a stock dividend, stock split or
combination of shares (including a reverse stock split), recapitalization or other change in the
Company’s capital structure, the Administrator will make appropriate adjustments to the maximum
number of shares specified in Section 4(a) that may be delivered under the Plan and to the maximum
share limits described in Section 4(c), and will also make appropriate adjustments to the number
and kind of shares of stock or securities subject to Awards then outstanding or subsequently
granted, any exercise prices relating to Awards and any other provision of Awards affected by such
change.

          (2) Certain Other Adjustments. The Administrator may also make adjustments of the
type described in Section 7(c)(1) above to take into account distributions to stockholders other
than those provided for in Section 7(a) and 7(c)(1), or any other event, if the Administrator
determines that adjustments are appropriate to avoid distortion in the operation of the Plan and to
preserve the value of Awards made hereunder, having due regard for the qualification of ISOs under
Section 422 of the Code and for the performance-based compensation rules of Section 162(m), where
applicable.

          (3) Continuing Application of Plan Terms. References in the Plan to shares of Stock
will be construed to include any stock or securities resulting from an adjustment pursuant to this
Section 7.

8. LEGAL CONDITIONS ON DELIVERY OF STOCK

     The Company will not be obligated to deliver any shares of Stock pursuant to the Plan or to
remove any restriction from shares of Stock previously delivered under the Plan until: (i) the
Company is satisfied that all legal matters in connection with the issuance and delivery of such
shares have been addressed and resolved; (ii) if the outstanding Stock is at the time of delivery
listed on any stock exchange or national market system, the shares to be delivered have been listed
or authorized to be listed on such exchange or system upon official notice of issuance; and

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(iii) all conditions of the Award have been satisfied or waived. If the sale of Stock has not
been registered under the Securities Act of 1933, as amended, the Company may require, as a
condition to exercise of the Award, such representations or agreements as counsel for the Company
may consider appropriate to avoid violation of such Act. The Company may require that certificates
evidencing Stock issued under the Plan bear an appropriate legend reflecting any restriction on
transfer applicable to such Stock, and the Company may hold the certificates pending lapse of the
applicable restrictions.

9. AMENDMENT AND TERMINATION

     The Administrator may at any time or times amend the Plan or any outstanding Award for any
purpose which may at the time be permitted by law, and may at any time terminate the Plan as to any
future grants of Awards; provided, that except as otherwise expressly provided in the Plan the
Administrator may not, without the Participant’s consent, alter the terms of an Award so as to
affect adversely the Participant’s rights under the Award, unless the Administrator expressly
reserved the right to do so at the time of the Award. Any amendments to the Plan shall be
conditioned upon stockholder approval only to the extent, if any, such approval is required by law
(including the Code or applicable listing requirements), as determined by the Administrator.

10. OTHER COMPENSATION ARRANGEMENTS

     The existence of the Plan or the grant of any Award will not in any way affect the Company’s
right to Award a person bonuses or other compensation in addition to Awards under the Plan.

11. WAIVER OF JURY TRIAL

     By accepting an Award under the Plan, each Participant waives any right to a trial by jury in
any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under
any amendment, waiver, consent, instrument, document or other agreement delivered or which in the
future may be delivered in connection therewith, and agrees that any such action, proceeding or
counterclaim shall be tried before a court and not before a jury. By accepting an Award under the
Plan, each Participant certifies that no officer, representative, or attorney of the Company has
represented, expressly or otherwise, that the Company would not, in the event of any action,
proceeding or counterclaim, seek to enforce the foregoing waivers.

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EXHIBIT A

Definition of Terms

     The following terms, when used in the Plan, will have the meanings and be subject to the
provisions set forth below:

     “Administrator”: The Compensation Committee, except that the Compensation Committee may
delegate (i) to one or more of its members such of its duties, powers and responsibilities as it
may determine; (ii) to one or more officers of the Company the power to grant rights or options to
the extent permitted by Section 157(c) of the Delaware General Corporation Law; (iii) to one or
more officers of the Company the authority to allocate other Awards among such persons (other than
officers of the Company) eligible to receive Awards under the Plan as such delegated officer or
officers determine consistent with such delegation; provided, that with respect to any delegation
described in this clause (iii) the Compensation Committee (or a properly delegated member or
members of such Committee) shall have authorized the issuance of a specified number of shares of
Stock under such Awards and shall have specified the consideration, if any, to be paid therefor;
and (iv) to such Employees or other persons as it determines such ministerial tasks as it deems
appropriate. In the event of any delegation described in the preceding sentence, the term
“Administrator” shall include the person or persons so delegated to the extent of such delegation.

     “Affiliate”: Any corporation or other entity owning, directly or indirectly, 50% or more of
the outstanding Stock of the Company, or in which the Company or any such corporation or other
entity owns, directly or indirectly, 50% of the outstanding capital stock (determined by aggregate
voting rights) or other voting interests.

     “Award”: Any or a combination of the following:

	 	(i)	 	Stock Options.
	 
	 	(ii)	 	SARs.
	 
	 	(iii)	 	Restricted Stock.
	 
	 	(iv)	 	Unrestricted Stock.
	 
	 	(v)	 	Stock Units, including Restricted Stock Units.
	 
	 	(vi)	 	Performance Awards.
	 
	 	(vii)	 	Cash Awards.
	 
	 	(viii)	 	Awards (other than Awards described in (i) through (vii) above) that are
convertible into or otherwise based on Stock.

     “Board”: The Board of Directors of the Company.

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     “Cash Award”: An Award denominated in cash.

     “Change of Control Event”: Any or all of the following events:

     (i) The acquisition by a Person (defined as an individual, entity or group, including a group
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (A)
the then outstanding shares of Stock (the “Outstanding Company Stock”) or (B) the combined voting
power of the then outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided, that the following
will not constitute a Change of Control Event: (1) any acquisition directly from the Company; (2)
any acquisition by the Company; or (3) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or its direct or indirect subsidiaries;

     (ii) The individuals who, as of November 17, 2005, constituted the Board (the “Incumbent
Directors”) cease for any reason to constitute at least a majority of the Board; provided, that any
individual who becomes a member of the Board subsequent to November 17, 2005 and whose election or
nomination for election was approved by a vote of at least a majority of the Incumbent Directors,
or a committee of the Board delegated, by a vote of at least a majority of the Incumbent Directors,
the authority to elect or nominate directors, shall be treated as an Incumbent Director unless he
or she assumed office as a result of an actual or threatened election contest with respect to the
election or removal of directors; or

     (iii) The consummation of a Merger, unless following such Merger (A) the Persons who were the
beneficial owners, respectively, of the Outstanding Company Stock and of the combined voting power
of the Outstanding Company Voting Securities immediately prior to the Merger beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock
of the entity resulting from or surviving in such Merger and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors of the entity
resulting from or surviving in such Merger, (B) no Person (excluding an employee benefit plan (or
related trust) of the entity resulting from or surviving in the Merger) beneficially owns, directly
or indirectly, 40% or more of, respectively, the then outstanding shares of common stock of the
entity resulting from or surviving in such Merger or the combined voting power of the then
outstanding voting securities of such entity entitled to vote generally in the election of
directors, and (C) at least a majority of the members of the board of directors of the entity
resulting from or surviving in such Merger were Incumbent Directors at the time of the execution of
the initial agreement, or of the action of the Board, providing for such Merger;

     (iv) The stockholders of the Company approve the complete liquidation or dissolution of the
Company; or

     (v) The consummation of a sale or transfer of all or substantially all of the Company’s
assets.

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     “Code”: The U.S. Internal Revenue Code of 1986 as from time to time amended and in effect, or
any successor statute as from time to time in effect.

     “Compensation Committee”: The Compensation Committee of the Board.

     “Company”: Iomai Corporation

     “Covered Transaction”: Any of (i) a Merger, (ii) a sale or transfer of all or substantially
all the Company’s assets, or (iii) a dissolution or liquidation of the Company.

     “Employee”: Any person who is employed by the Company or an Affiliate.

     “Employment”: A Participant’s employment or other service relationship with the Company and
its Affiliates. Employment will be deemed to continue, unless the Administrator expressly provides
otherwise, so long as the Participant is employed by, or otherwise is providing services in a
capacity described in Section 5 to the Company or its Affiliates. If a Participant’s employment or
other service relationship is with an Affiliate and that entity ceases to be an Affiliate, the
Participant’s Employment will be deemed to have terminated when the entity ceases to be an
Affiliate unless the Participant transfers Employment to the Company or its remaining Affiliates.

     “Exchange Act”: The Securities Exchange Act of 1934, as amended.

     “ISO”: A Stock Option intended to be an “incentive stock option” within the meaning of
Section 422 of the Code. Each option granted pursuant to the Plan will be treated as providing by
its terms that it is to be a non-incentive stock option unless, as of the date of grant, it is
expressly designated as an ISO.

     “Merger”: A consolidation, merger or similar transaction or series of related transactions by
the Company.

     “Non-Employee Director”: Any director of the Company who is not an employee of the Company.

     “Participant”: A person who is granted an Award under the Plan.

     “Performance Award”: An Award subject to Performance Criteria. The Compensation Committee in
its discretion may grant Performance Awards that are intended to qualify for the performance-based
compensation exception under Section 162(m) and Performance Awards that are not intended so to
qualify.

     “Performance Criteria”: Specified criteria, other than the mere continuation of Employment or
the mere passage of time, the satisfaction of which is a condition for the grant, exercisability,
vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance Criterion will mean an
objectively determinable measure of performance relating to

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any or any combination of the following (measured either absolutely or by reference to an
index or indices and determined either on a consolidated basis or, as the context permits, on a
project or program basis or in combinations thereof): sales; revenues; assets; expenses; earnings
before or after deduction for all or any portion of interest, taxes, depreciation, or amortization,
whether or not on a continuing operations or an aggregate or per share basis; return on equity,
investment, capital or assets; one or more operating ratios; market share; capital expenditures;
cash flow; stock price; stockholder return; sales of particular products or services; acquisitions
and divestitures (in whole or in part); joint ventures, license agreements and strategic alliances;
spin-offs, split-ups and the like; reorganizations; regulatory filings or approvals; clinical trial
milestones; reimbursement approvals; manufacturing milestones; or recapitalizations,
restructurings, financings (issuance of debt or equity) or refinancings. A Performance Criterion
and any targets with respect thereto determined by the Administrator need not be based upon an
increase, a positive or improved result or avoidance of loss. To the extent consistent with the
requirements for satisfying the performance-based compensation exception under Section 162(m), the
Administrator may provide in the case of any Award intended to qualify for such exception that one
or more of the Performance Criteria applicable to such Award will be adjusted in an objectively
determinable manner to reflect events (for example, but without limitation, acquisitions or
dispositions) occurring during the performance period that affect the applicable Performance
Criterion or Criteria.

     “Plan”: The Iomai Corporation 2005 Incentive Plan as from time to time amended and in effect.

     “Restricted Stock”: Stock subject to restrictions requiring that it be redelivered or offered
for sale to the Company if specified conditions are not satisfied.

     “Restricted Stock Unit”: A Stock Unit that is, or as to which the delivery of Stock or cash
in lieu of Stock is, subject to the satisfaction of specified performance or other vesting
conditions.

     “Section 162(m)”: Section 162(m) of the Code.

     “SAR”: A right entitling the holder upon exercise to receive an amount (payable in shares of
Stock of equivalent value) equal to the excess of the fair market value of the shares of Stock
subject to the right over the fair market value of such shares at the date of grant.

     “Stock”: Common Stock of the Company, par value $0.01 per share.

     “Stock Option”: An option entitling the holder to acquire shares of Stock upon payment of the
exercise price.

     “Stock Unit”: An unfunded and unsecured promise, denominated in shares of Stock, to deliver
Stock or cash measured by the value of Stock in the future.

     “Unrestricted Stock”: Stock not subject to any restrictions under the terms of the Award.

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This Plan was approved by the Board of Directors on November 17, 2005.

This Plan was approved by the Stockholders on November 30, 2005.

Amendment No. 1 to the Plan was approved by the Board of Directors on January 18, 2007.

Amendment No. 1 to the Plan was approved by the Stockholders on March 6, 2007.

Amendment No. 2 to the Plan was approved by the Board of Directors on March 22, 2007.

Amendment No. 2 to the Plan was approved by the Stockholders on June 5, 2007.

Amendment No. 3 to the Plan was approved by the Board of Directors on March 26, 2008.

Amendment No. 3 to the Plan was approved by the Stockholders on May 14, 2008.

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Exhibit 10.1

EXECUTION VERSION

[Applied Digital Letterhead]

May 15, 2008

The Stanley Works

1000 Stanley Drive

New Britain, Connecticut 06053

Attention: Corporate Secretary

Ladies and Gentlemen:

          Reference is made to that certain Stock Purchase Agreement (as amended, restated, supplemented
or otherwise modified from time to time, the “Agreement”), dated as of the date hereof, by and
among The Stanley Works (the “Beneficiary”) and VeriChip Corporation (the “Seller”). Capitalized
terms used but not defined in this guarantee (this “Guarantee”) are used as defined in the
Agreement.

	 	1.	 	To induce the Beneficiary to enter into the Agreement, the undersigned (the
“Guarantor”) hereby agrees to cause the Seller to comply with its obligations under Section
8.1(a)(iii) of the Agreement to the extent such obligations relate to Third-Party Claims
(the “Obligations”), and shall be directly liable from and after the Closing, as a primary
obligor, to the Beneficiary for the amount of any Obligations that are not completely paid
by the Seller when due. This is an unconditional guarantee of payment and not of
collectibility. It is understood that each of the obligations of Seller under the
Agreement (other than under Section 8.1(a)(iii) of the Agreement) shall not, by itself or
themselves, constitute a liability under Section 8.1(a)(iii), although it is possible that
the existence of a liability that is indemnifiable under Section 8.1(a)(iii) may arise from
the same set of facts that give rise to a breach of a representation, warranty or covenant
under the Agreement.
	 
	 	2.	 	The Guarantor hereby waives notice of acceptance of this Guarantee and notice of any
Obligations, and waives presentment, demand for payment, protest, notice of dishonor or
non-payment with respect to any of the Obligations or any suit or the taking of other
action by Beneficiary against, and any other notice to, the Seller, the Guarantor or others
(other than as required by the Agreement). The Beneficiary shall have the right to proceed
first and directly against the Guarantor under this Guarantee without proceeding against
any other Person or exhausting any other remedies that it may have and without resorting to
any other security held by it.
	 
	 	3.	 	The Beneficiary may at any time and from time to time without notice to or consent of
the Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder: (1) agree with the Seller to make any change in the terms of any obligation or
liability of the Seller to the Beneficiary, (2) take or fail to take any action of any kind
in respect of any security for any obligation or liability of the Seller to the
Beneficiary, (3) exercise or refrain from exercising any rights against the Seller or
others, or (4) compromise or subordinate any obligation or liability of the Seller to the
Beneficiary including any security therefor; provided, however, that Beneficiary and Seller
may not make any change to Section 8.1(a)(iii) of the Agreement, or any change to the scope
of this Guarantee without the prior written consent of the Guarantor. All suretyship
defenses are hereby waived by the Guarantor (except as set forth clauses (a) or (b) in the
next paragraph).
	 
	 	4.	 	The Guarantor’s obligations under this Guarantee are absolute, irrevocable and
unconditional and shall not be affected by the validity or enforceability of any Obligation
or any instrument

 

 

	 	 	 	evidencing any Obligation, or by the validity, enforceability, perfection or existence of
any collateral therefor or by any other circumstance relating to any Obligation that might
otherwise constitute a legal or equitable discharge of or defense of a guarantor or surety
(other than as a result of the payment of the Obligations), provided that (a) the Guarantor
may interpose any counterclaim or setoff that the Seller is or would have been entitled to
interpose, except for so long as, and to the extent, such counterclaim or setoff has already
reduced the amount of the Obligations or (b) the Guarantor may interpose any defense that
the Seller is or would have been entitled to interpose (other than any defense arising by
reason of any disability, incapacity, bankruptcy or insolvency of the Seller, including by
reason of any lack of authorization of the Obligations by the Seller). The Guarantor agrees
that this Guarantee shall be reinstated if at any time payment, or any part thereof, of any
of the Obligations, or interest thereon is rescinded or must otherwise be restored or
returned by the Beneficiary upon the bankruptcy, insolvency, dissolution or reorganization
of the Seller.
	 
	 	5.	 	The Guarantor agrees to pay all reasonable out-of-pocket expenses incurred by the
Beneficiary (including the reasonable fees and expenses of counsel), to the extent incurred
after demand under this Guarantee has been made and not timely honored, in connection with
a breach of this Guarantee by the Guarantor.
	 
	 	6.	 	The Guarantor hereby represents as follows:

	 	a.	 	The Guarantor has full power and authority to execute and deliver this
Guarantee.
	 
	 	b.	 	No action on the part of the Guarantor is required to authorize the
execution and delivery of this Guarantee (other than such actions that have been
taken prior to the date hereof). The execution, delivery and performance of this
Guarantee do not contravene the organizational documents of the Guarantor, any Law
or any contractual restriction binding on the Guarantor or the Guarantor’s assets.
	 
	 	c.	 	No actions by, notices to, filings with, consents, licenses,
clearances, authorizations, and approvals of, and registration and declarations
with, any governmental or regulatory authority are necessary for the due execution
and delivery of this Guarantee.
	 
	 	d.	 	This Guarantee constitutes the legal, valid, and binding obligation of
the Guarantor, enforceable against the Guarantor in accordance with all of its
terms and conditions (subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar Law affecting creditors’ rights
generally). The enforceability of the Guarantor’s obligations is also subject to
the effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
	 
	 	e.	 	The Guarantor currently has the financial capacity to pay and perform
the Guarantor’s obligations under this Guarantee.

	 	7.	 	Neither this Guarantee nor any of the rights, interests or obligations hereunder shall
be transferred by either party (whether by operation of law or otherwise) without the prior
written consent of the other party, provided, however, that the Beneficiary
may transfer any of its rights and obligations to any Affiliate of the Beneficiary, but no
such assignment shall relieve the Beneficiary of its obligations hereunder. Any transfer
of any rights, interests or obligations hereunder in violation of this section shall be
null and void.

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	 	8.	 	This Guarantee may not be revoked or terminated and shall remain in full force and
effect and shall be binding on the Guarantor, the Guarantor’s successors and permitted
assignees until all of the Obligations to the extent payable under this Guarantee have been
paid in full. Notwithstanding the foregoing, this Guarantee shall terminate and the
Guarantor shall have no further obligation or liability under this Guarantee as of the
termination of the Agreement in accordance with its terms; provided, that this Guarantee
shall not so terminate as to any claim for which a notice setting forth in reasonable
detail the basis for such claim has been given to the Guarantor prior to such termination
until final resolution of such claim. Notwithstanding the foregoing, in the event that the
Beneficiary asserts in any litigation or other proceeding relating to this Guarantee that
any other provision of this Guarantee is illegal, invalid or unenforceable in whole or in
part, or asserts any theory of liability against the Guarantor or any other Person with
respect to this Guarantee, the Agreement or the transactions contemplated hereby or thereby
other than the liability of the Guarantor under this Guarantee or the liability of the
Seller under the Agreement, then (i) the obligations of the Guarantor under this Guarantee
shall terminate ab initio and shall thereupon be null and void, and (ii) if the Guarantor
has previously made any payments under this Guarantee, the Guarantor shall be entitled to
recover such payments from the Beneficiary.
	 
	 	9.	 	All notices and other communications hereunder shall be in writing and shall be deemed
given if mailed, delivered personally, telecopied (which is confirmed) or sent by an
overnight courier service, such as Federal Express, to the parties at the following
addresses (or at such other address for a party as shall be specified by like notice):

If to the Guarantor:

Applied Digital Solutions, Inc.

1690 South Congress Ave., #201

Delray Beach, FL 33445

Attention: Lorraine Breece

Facsimile: 561-805-8001

with a copy to:

Baker Botts L.L.P.

2001 Ross Avenue

Dallas, Texas 75225

Attention: Sarah M. Rechter

Facsimile: 214-661-4419

	 	 	 	If to the Beneficiary, as provided in the Agreement.
	 
	 	10.	 	To the fullest extent permitted by applicable Law, each party hereto (i) agrees that
any claim, action or proceeding by such party seeking any relief whatsoever arising out of,
or in connection with, this Guarantee or the transactions contemplated hereby shall be
brought only in the United States District Court for the Southern District of New York or
any New York State court, in each case, located in the Borough of Manhattan and not in any
other State or Federal court in the United States of America or any court in any other
country, (ii) agrees to submit to the exclusive jurisdiction of such courts located in the
Borough of Manhattan for purposes of all legal proceedings arising out of, or in connection
with, this Guarantee or the transactions contemplated hereby, (iii) waives and agrees not
to assert any objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court or any claim that any such

3

 

	 	 	 	proceeding brought in such a court has been brought in an inconvenient forum, (iv) agrees
that mailing of process or other papers in connection with any such action or proceeding in
the manner provided in Section 10 or any other manner as may be permitted by Law shall be
valid and sufficient service thereof and (v) agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by applicable Law.
	 
	 	11.	 	This Guarantee (a) constitutes the entire agreement and supersede all prior agreements
and understandings, both written and oral, between the parties with respect to the subject
matter hereof and thereof and (b) are not intended to confer upon any Person other than the
parties hereto and thereto any rights or remedies hereunder.
	 
	 	12.	 	This Guarantee may be amended, modified and supplemented in any and all respects, but
only by a written instrument signed by all of the parties hereto expressly stating that
such instrument is intended to amend, modify or supplement this Guarantee. Either party
hereto may extend the time for the performance of any of the obligations or other acts of
the other party. Any agreement on the part of a party to any such extension shall be valid
only if set forth in an instrument in writing signed by or on behalf of such party. The
failure of either party to this Guarantee to assert any of its rights under this Guarantee
or otherwise shall not constitute a waiver of those rights.
	 
	 	13.	 	This Guarantee may be executed in two or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the other parties.
	 
	 	14.	 	Promptly after entering into any agreement or arrangement with respect to, or
effecting, any proposed sale, exchange, dividend or other distribution or liquidation of
all or a significant portion of its assets in one or a series of transactions, any
significant recapitalization or reclassification of its outstanding securities or any
extraordinary transaction, the Guarantor will notify the Beneficiary in writing thereof
pursuant to Section 9.
	 
	 	15.	 	Each party shall be entitled to equitable relief, including specific performance, in
the event of any breach or threatened breach of this Guarantee.

[remainder of page intentionally left blank]

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	 	 	 	 	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	APPLIED DIGITAL SOLUTIONS, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Joseph J. Grillo 	 	 
	 

	 	 	 	 	 	Name:	 	 
Joseph J. Grillo
	 	 
	 

	 	 	 	 	 	Title:	 	President and Chief Executive Officer 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Accepted and Agreed:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	THE STANLEY WORKS	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	/s/ John F. Lundgren 	 	 	 	 	 	 	 	 
	Name:

	 	 
John F. Lundgren
	 	 	 	 	 	 	 	 
	Title:
	 	Chairman and Chief Executive Officer	 	 	 	 	 	 	 	 

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