Document:

Exhibit 10.5

CONOLOG CORPORATION

SELLING AGENT AGREEMENT

Dated as of July
29, 2009                    

Garden State Securities, Inc. 

Parkway 109 Office Center 

328 Newman Springs Road 

Red Bank, New Jersey 07701

Gentlemen:

                    Conolog
Corporation (the “Company”) proposes to offer for sale (the “Offering”) in a
private offering pursuant to Regulation D promulgated under the Securities Act
of 1933, as amended (the “Act”) (i) up to One Million Dollars ($l,000,000) of
convertible debentures convertible into shares of common stock (“Convertible
Debentures”); (ii) common stock warrants (the “Warrants”); and (iii) Class B
warrants (“Class B Warrants”) exercisable for 36 months into the Convertible
Debentures (collectively, the “Securities”). Offers and sales of the Securities
shall be to Accredited Investors (as defined in Regulation D promulgated by the
Securities and Exchange Commission) or “qualified institutional buyers” as
defined under Rule 144A. This letter agreement shall confirm our agreement concerning
Garden State Securities, Inc. acting as exclusive selling or placement agent
(the “Selling Agent” or “GSS”)) in connection with the sale of the Securities.

                    1.
Appointment of Selling Agent.

                    On
the basis of the representations and warranties contained herein, and subject
to the terms and conditions set forth herein, the Company hereby appoints
Garden State Securities, Inc.. as exclusive selling agent/placement agent for a
period beginning on the date hereof and terminating on August 31, 2009 (unless
terminated sooner pursuant to the terms hereof) and grants to GSS the right to
offer, as its agent, the Securities pursuant to the terms of this Agreement.
However, GSS will be compensated directly from the Company within 1 business
day of the receipt of the proceeds from any exercise of the Class B Warrants
based on the amount of gross proceeds received by the Company from investors
upon the exercise of the Class B Warrants and such compensation shall survive
the termination of the Offering. On the basis of such representations and
warranties, and subject to such conditions, GSS hereby accepts such appointment
and agree to use its reasonable best efforts to secure subscriptions to
purchase subscriptions for the Securities. The Company understands that the
Selling Agent is being retained to obtain subscriptions on a “best efforts”
basis and has not guaranteed the sale of any Securities.

                    2.
Terms of the Offering.

                              (a)
The Offering shall consist of (i) Convertible Debentures; (ii) Warrants; and
(iii) Class B Warrants. The Offering is being made on a “best efforts” basis
with no minimum offering amount of subscriptions, and the parties shall use
their reasonable efforts to consummate a closing of subscriptions prior to
August 31, 2009. In the event a subscription is not accepted, such rejected
subscription funds will be returned to the subscriber without interest or
deduction.

                              (b)
The Company has prepared a subscription agreement (the “Securities Purchase
Agreement”) and form of Warrant and form of Class B Warrant to be delivered to
all

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prospective investors. The Securities Purchase
Agreement, and form of Warrant and Class B Warrants, including all supplements,
exhibits and appendices thereto and documents delivered therewith, are referred
to herein as the “Documents” and shall include any supplements or amendments in
accordance with this Agreement. The Offering shall commence on the date hereof,
and shall expire at 5:00 p.m., New York time, on August 31, 2009, unless
extended as provided above. Such period, as same may be so extended, shall
hereinafter be referred to as the “Offering Period.”

                              
(c) Each prospective investor (“Prospective Investor”) who desires to purchase
Securities shall deliver, in immediately available funds in the amount
necessary to purchase the amount of Securities such Prospective Investor
desires to purchase, to Grushko & Mittman, P.C. as Escrow Agent (the
“Escrow Agent”), in accordance with the wire transfer instructions set forth in
the Escrow Agreement between the Company, the Escrow Agent and the Prospective
Investor. The Prospective Investor shall also deliver their executed Securities
Purchase Agreement to the Selling Agent for delivery to the Escrow Agent. The
Selling Agent shall not have any obligation to independently verify the
accuracy or completeness of any information contained in any Purchase Agreement
or the authenticity, sufficiency, or validity of any check delivered by any
Prospective Investor in payment for Securities. Purchasers in the Offering
shall be “accredited investors” or “qualified Institutions” as determined in
accordance with Regulation D.

                    3.
Closing/Release of Funds.

                              The
closing (“Closing”) shall be held at such time as the conditions as provided in
the Securities Purchase Agreement have been satisfied. References herein to the
actual closing date thereof shall be referred to as a “Closing Date.”

                    4.
Representations and Warranties of the Selling Agent.

                              The
Selling Agent represents and warrants to the Company as follows:

                              (a)
The Selling Agent is duly incorporated and validly existing and in good
standing under the laws of its State of incorporation.

                              (b)
The Selling Agent is, and at the time of each Closing will be, a member in good
standing of the FINRA.

                              (c)
Offers and sales of Securities by the Selling Agent will be made only in
accordance with this Placement Agreement and in compliance with the provisions
of Regulation S and/or Regulation D (it being understood and agreed that the Selling
Agent shall be entitled to rely upon the information and statements provided by
the Prospective Investor in the Purchase Agreement), and the Selling Agent will
furnish to each investor a copy of the Documents prior to accepting any
subscription for the Securities.

                    5.
Compensation.

                              (a)
The Selling Agent shall be entitled, on each Closing Date, as compensation for
its services as Selling Agent under this Agreement, to selling Commissions
payable in cash equal to 10% of the gross subscription proceeds received by the
Company through subscriptions made by investors introduced by GSS to the
Company and through the exercise of the Class B Warrants (based on the amount
of gross proceeds received by the Company from the Holders of the Class B
Warrants upon

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exercise of the Class B Warrants).

                              (b)
In addition to the compensation payable to the Selling Agent set forth in
clause (a) above, the Company shall grant the Selling Agent (or its assigns or
designees) warrants (“Selling Agent Warrants”) to purchase a number of shares
of Common Stock equal to (i) 20% of the shares of Common Stock underlying the
Convertible Debentures sold in the Offering and (ii) 20% of the number of shares
of Common Stock issuable upon the exercise of the Class B Warrants which shall
be due and issuable after the exercise of such Class B Warrants and shall be
based on the number of shares of the Company’s Common Stock issuable upon the
Notes actually issued upon exercise of the Class B Warrants including but not
limited to the shares of Common Stock underlying the Convertible Debentures
from the exercise of the Class B Warrants, and the Selling Agent Warrants shall
have an exercise price equal to the exercise price of the Warrants being issued
to the investors. The Selling Agent Warrants shall be exercisable for a period
of five (5) years from the Final Closing Date and the Selling Agent shall not
be entitled to registration rights with respect to the shares of Common Stock
underlying the Selling Agent Warrants. The Selling Agent Warrants shall allow
for “cashless exercise”. The Selling Agent Warrants may be issued up to 10
employees and/or affiliates of the Selling Agent in such amounts as the Selling
Agent shall notify in writing to the Company prior to the Closing.

                    6.
Representations and Warranties of the Company.

                    (a)
The Company represents and warrants to, and agrees with, the Selling Agent
that:

                              (i)
No Documents or information provided by the Company to Prospective Investors,
including, without limitation the SEC Reports (as defined in the Purchase
Agreement), shall contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein in light of circumstances made therein not misleading.

                              (ii)
The Company is, and at all times during the period from the date hereof to and
including each Closing Date will be, a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
full corporate power and authority, and has obtained all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits and
declarations of and from, and has made filings with, all federal, state and
local authorities, to own, lease, license, and use its properties and assets
and to conduct its business as presently conducted and/or in any such case
where the failure to have any of the foregoing would not have a material
adverse effect on the Company’s presently conducted business. As of the date
hereof, the Company is, and at all times during the period from the date hereof
to and including each Closing Date, duly qualified to do business and is in
good standing in every jurisdiction in which its ownership, leasing, licensing,
or use of property and assets or the conduct of its business makes such
qualification necessary except where the failure to be so qualified would not
have a material adverse effect on the Company’s business.

                              (iii)
As of the date hereof, except as disclosed in the Securities Purchase
Agreement, there is no, and as of each Closing Date there shall not be any,
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending or to the Company’s knowledge threatened,
with respect to the Company, or its respective operations, businesses, properties,
or assets, except as properly described in the Purchase Agreement or such as
individually or in the aggregate do not now have and will not in the future
have a material adverse effect upon the operations, business, properties, or
assets of the Company.

                              (iv)
The Company is not in violation or breach of, or in default with respect to,
any term of its Certificate of Incorporation or By-Laws.

3

                              (v)
The Company has all requisite corporate power and authority to execute,
deliver, and perform this Agreement and to consummate the transactions
contemplated hereby. All necessary corporate proceedings of the Company have
been duly taken to authorize the execution, delivery, and performance by the
Company of this Agreement and the Purchase Agreement and the consummation of
the transactions contemplated hereby and thereby.

                              (vi)
The Securities and the Selling Agent’s Warrants, when issued and delivered to
the Prospective Investor pursuant to the terms of the Offering shall be duly
authorized, validly issued, fully paid and non-assessable, without any personal
liability attaching to the ownership thereof solely by being such holder and
shall not have been issued in violation of any preemptive rights of
stockholders.

                              (vii)
Neither the Company nor any of its officers, directors, or affiliates, has
engaged or will engage, directly or indirectly, in any act or activity that may
jeopardize the status of the offering and sale of the Securities as an exempt
transaction under Regulation D of the Securities Act of 1933, as amended.

                    7.
Covenants of the Company.

                              The
Company covenants that it will:

                              (a)
Deliver without charge to the Selling Agent such number of copies of the
Documents and any supplement or amendment thereto as may reasonably be
requested by the Selling Agent.

                              (b)
Notify the Selling Agent promptly of the acceptance or rejection of any
subscription. The Company shall not (i) accept subscriptions from, or make
sales of Securities to, any Prospective Investors who are not, to the Company’s
knowledge, accredited investors, or (ii) unreasonably reject any subscription
for Securities.

                              (c)
Cause, at its cost and expense, all “blue sky” filings related to the Offering
and required by applicable law to be made in due and proper form and substance
and in a timely manner as required under the laws of the states in which
Securities are sold (“Blue Sky Filings”). In addition, the Company shall cause,
at its cost and expense, a Form D related to the Offering to be filed with the
Securities Exchange Commission “SEC” in due and proper form and substance in a
timely manner. The Company shall deliver true and correct copies of all Blue
Sky Filings and the Form D, as filed with the SEC, to the Selling Agent within
15 days after final Closing.

                    8.
Conditions of Closing.

                              The
obligations of the Selling Agent pursuant to this Agreement shall be subject,
in its discretion, to the continuing accuracy of the representations and
warranties of the Company contained herein and in each certificate and document
contemplated under this Agreement to be delivered to the Selling Agent, as of
the date hereof and as of each Closing Date, with respect to the performance by
the Company of its obligations hereunder, and to the following conditions:

                              (a)
At each Closing, the Selling Agent and the Company shall have executed
documents in form and substance reasonably acceptable to them.

                              (b)
All proceedings taken in connection with the issuance, sale, and delivery of 

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the Securities shall be satisfactory in form and
substance to GSS and the Company.

                    9.
Termination.

                              This
Agreement may be terminated by the Selling Agent (i) at anytime in the event
the Selling Agent has determined, in good faith, that the Documents fail to
contain a material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) upon three days written notice. The
Company may not terminate this Agreement in the absence of a material breach of
any covenant, representation or warranty contained in this Agreement made by
the Selling Agent. Notwithstanding anything to the contrary herein, this
Agreement shall automatically terminate on August 31, 2009.

                    10.
Indemnification and Contribution.

                              (a)
The Company agrees to indemnify and hold harmless the Selling Agent, its
officers, directors, partners, employees, agents, and counsel, and each person,
if any, who controls the Selling Agent within the meaning of Section 15 of the
Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), against any and all loss, liability, claim, damage, and
expense whatsoever (which shall include, for all purposes of this Section 10,
but not be limited to, attorneys’ fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid
in settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained in the Documents, or any omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement
or omission was made in reliance upon and in conformity with written
information furnished to the Company as stated in Section 10(b) with respect to
the Selling Agent expressly for inclusion in the Documents or (ii) any breach
of any representation, warranty, covenant, or agreement of the Company
contained in this Agreement. The foregoing agreement to indemnify shall be in
addition to any liability the Company may otherwise have, including liabilities
arising under this Agreement.

                              If
any action is brought against the Selling Agent or any of its officers,
directors, partners, employees, agent, or counsel, or any controlling persons
of the Selling Agent (an “indemnified party”), in respect of which indemnify
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company (the
“indemnifying party”) in writing of the institution of such action (but the
failure so to notify shall not relieve the indemnifying party from any
liability it may have other than pursuant to this Section 10(a)) and the
indemnifying party shall promptly assume the defense of such action, including
the employment of counsel (reasonably satisfactory to such indemnified party or
parties) and payment of expenses. Such indemnified party shall have the right
to employ its own counsel in any such case, but the fees and expense of such
counsel shall be at the expense of such indemnified party unless the employment
of such counsel shall have been authorized in writing by the indemnifying party
in connection with the defense of such action or the indemnifying party shall
not have promptly employed counsel satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to one or more of the
indemnifying parties, in any of which events such reasonable fees and expenses
of one such counsel shall be borne by the indemnifying party and the
indemnifying party shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this
paragraph to the contrary notwithstanding, the indemnifying party shall not be
liable for any settlement of any such

5

claim or action effected without its written consent.
The Company agrees promptly to notify the Selling Agent of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Securities, the Documents, or any
application.

                              (b)
The Selling Agent agrees to indemnify and hold harmless the Company, its
officers, directors, employees, agents, and counsel, and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Selling Agent in Section 10(a), with respect
to any and all loss, liability, claim, damage, and expense whatsoever (which
shall include, for all purposes of this Section 10, but not be limited to,
attorneys’ fees and any and all expense whatsoever incurred in investigating,
preparing, or defending against any litigation, commenced or threatened, or any
claim whatsoever and any and all amounts paid in settlement of any claim or
litigation) as and when incurred arising out of, based upon, or in connection
with (i) statements or omissions, if any, made in the Documents in reliance
upon and in conformity with written information furnished to the Company with
respect to the Selling Agent expressly for inclusion in the Documents, and (ii)
or any breach of any representation, warranty, covenant or agreement of the
Selling Agent contained in this Agreement. If any action shall be brought
against the Company or any other person so indemnified based on the Documents
and in respect of which indemnity may be sought against the Selling Agent
pursuant to this Section, the Selling Agent shall have the rights and duties
given to the indemnifying party, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified parties,
by the provisions of Section 10(a) hereof.

                              (c)
To provide for just and equitable contribution, if (i) an indemnified party
makes a claim for indemnification pursuant to Section 10(a) or 10(b) hereof but
it is found in a final judicial determination, not subject to further appeal,
that such indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee, agent, or
counsel of the Company, or any controlling person of the Company), on the one
hand, and the Selling Agent (including for this purpose any contribution by or
on behalf of an indemnified party), on the other hand, shall contribute to the
losses, liabilities, claims, damages, and expenses whatsoever to which any of
them may be subject, in such proportions as are appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Selling
Agent, on the other hand; provided, however, that if applicable law does not
permit such allocation, then other relevant equitable considerations such as
the relative fault of the Company and the Selling Agent in connection with the
facts which resulted in such losses, liabilities, claims, damages, and expenses
shall also be considered. The relative benefits received by the Company, on the
one hand, and the Selling Agent, on the other hand, shall be deemed to be in
the same proportion as (x) the total proceeds from the Offering (net of
compensation payable to the Placement Agent pursuant to Section 5(a) hereof but
before deducting expenses) received by the Company, and (y) the compensation received
by the Selling Agent pursuant to Section 5(a) hereof.

                              The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by the Selling Agent, and the
parties’ relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Selling Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Selling Agent
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any other
method of allocation that

6

does not reflect the equitable considerations referred
to in this Section 10(c). In no case shall the Selling Agent by responsible for
a portion of the contribution obligation in excess of the compensation received
by it pursuant to Section 5(a) hereof. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section
10(c), each person, if any, who controls the Selling Agent within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partners, employee, agent, and counsel of the Selling Agent, shall
have the same rights to contribution as the Selling Agent, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, employee, agent,
and counsel of the Company, shall have the same rights to contribution as the
Company, subject in each case to the provisions of this Section 10(c). Anything
in this Section 10(c) to the contrary notwithstanding, no party shall be liable
for contribution with respect to the settlement of any claim or action effected
without its written consent.

                    11.
Non-Solicitation.

                    The
Company agrees that, for a period of 12 months from the date hereof, it shall
not solicit any offer to buy from or offer to sell to any Prospective Investor
set forth on Exhibit A attached hereto, directly or indirectly, any securities
of the Company or of any other entity, or provide the name of any such person
to any other securities broker or dealer or selling agent. In the event that
during the Non-Solicitation Period, the Company or any of its affiliates,
directly or indirectly, solicits, offers to buy from or offers to sell to any
such Prospective Investor set forth on Exhibit A any such securities, or
provides the name of any such person set forth on Exhibit A to any other
securities broker or dealer or selling agent, and such person purchases such
securities or purchases securities from any other securities broker or dealer
or selling agent, the Company shall pay to the Selling Agent an amount equal to
10% of the aggregate purchase price of the securities so purchased by such
person and the Company shall grant the Selling Agent (or its assigns) 5 year
warrants to purchase a number of shares of Common Stock equal to 20% of the
shares of Common Stock (or shares of Common Stock underlying any convertible
securities) sold, with an exercise price equal to the price of the securities
sold to the Prospective Investor set forth on Exhibit A. Upon receipt of
written request by the Selling Agent, the Company shall promptly deliver to the
Selling Agent the names of any investors in any offering that the Company
completes within 12 months from the date hereof. However, the compensation
entitled to GSS pursuant to the exercise of the Class B Warrants shall be valid
throughout the term of the Class B Warrant. This section shall survive any
termination.

                    12.
Representations and Agreements to Survive Delivery.

                    All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and, such representations, warranties,
covenants, and agreements, including the indemnification and contribution
agreements contained in Section 10, shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of the Selling
Agent or any indemnified person, or by or on behalf of the Company or any
person or entity which is entitled to be indemnified under Section 10(b), and
shall survive termination of this Agreement or the issuance, sale, and delivery
of the Securities. In addition, notwithstanding any election hereunder or any
termination of this Agreement, and whether or not the terms of this Agreement
are otherwise carried out, the provisions of Sections 5 and 10 shall survive
termination of this Agreement and shall not be affected in any way by such
election or termination or failure to carry out the terms of this Agreement or
any part thereof.

7

                    13. Notices.

                    All communications hereunder, except as may
be otherwise specifically provided herein, shall be in writing and shall be
either (i) mailed by first class mail in which case delivery shall be deemed to
be made three days following deposit in the United States mail; or (ii) sent by
overnight courier service in case delivery shall be deemed to be made upon
receipt, to the Selling Agent: Garden State Securities, Inc., Parkway 109
Office Center, 328 Newman Springs Road, Red Bank, New Jersey 07701 Attention:
Ernest Pellegrino; to the Company: Conolog Corporation 5 Columbia Road,
Somerville, New Jersey 07701, Attention Robert Benou, with a copy to Sichenzia
Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006, Attention:
David B. Manno, Esq.
____________________________________________________.

                    14. Parties.

                    This Agreement shall inure solely to the
benefit of, and shall be binding upon, the Selling Agent and the Company and
the persons and entities referred to in Section 10 who are entitled to
indemnification or contribution, and their respective successors, legal
representatives, and assigns (which shall not include any purchaser, as such,
of Securities), and no other person shall have or be construed to have any
legal or equitable right remedy, or claim under or in respect of or by virtue
of this Agreement or any provision herein contained.

                    15. Construction.

                    This Agreement shall be construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws.

                    16. Counterparts.

                    This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

                    If the foregoing correctly sets forth the
understanding between us, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
us.

	
  

 	
  

 	
  

 
	
  

 	
 Very truly yours, 

 
	
  

 	
  

 	
  

 
	
  

 	
 Conolog Corporation.

 
	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 

 
	
  

 	
  

 	

 

 
	
  

 	
 Name: Robert S. Benou 

 
	
  

 	
   Title: Chief
 Executive Officer

 
	
  

 	
  

 	
  

 
	
 Accepted as of the date 

 	
  

 	
  

 
	
 first above written:

 	
  

 	
  

 

8

	
  

 	
  

 	
  

 
	
 Garden State Securities,
 Inc.

 	
  

 
	
  

 	
  

 	
  

 
	
 By: 

 	
 

 	
  

 
	
  

 	

 

 	
  

 

	
  

 	
  

 	
  

 
	
 Title: 

 	
 Ernest Pellegrino

 	
  

 
	
  

 	
 Director of Corporate Finance

 	
  

 

9

EXHBIT A TO THE
SELLING AGENT AGREEMENT BETWEEN CONOLOG CORPORATION 

AND GARDEN STATE SCURITIES, INC. DATED JULY ___, 2009

	
  

 	
  

 	
  

 
	
  

 	
 1.

 	
 LH Financial/Alpha Capital/Osher Capital

 
	
  

 	
 2.

 	
 Whalehaven Capital

 

10Exhibit 10.1

2010 EMPLOYEE STOCK PLAN

1.

Purpose.  This 2010 Employee Stock Plan (the “Plan”) is intended to provide incentives: (a) to the officers and other employees of American Realty Funds Corporation. (the “Company”), its parent (if any) and any present or future subsidiaries of the Company (collectively, “Related Corporations”) by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as “incentive stock options” under Section 422(b) of the Internal Revenue Code of 1986 (the “Code”) (“ISO” or “ISOs”); (b) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs (“Non-Qualified Option” or “Non-Qualified Options”); (c) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with awards of stock in the Company (“Awards”); and (d) to directors, officers, employees and consultants of the Company and Related Corporations by providing them with opportunities to make direct purchases of stock in the Company (“Purchases”).  Both ISOs and Non-Qualified Options are referred to hereafter individually as an “Option” and collectively as “Options”.  Options, Awards, and authorizations to make Purchases are referred to hereafter collectively as “Stock Rights.”  As used herein, the terms “parent” and “subsidiary” mean “parent corporation” and “subsidiary corporation” respectively, as those terms are defined in Section 425 of the Code.

2.

Administration of the Plan.

A.

The Plan shall be administered by either (i) the Board of Directors of the Company (the “Board”); or (ii) a Stock Plan Committee (the “Committee”), appointed by the Board, pursuant to the requirements of paragraph 2.D. herein.  Subject to paragraph 2.D. herein and the terms of the Plan, the Committee, if so appointed, shall have the authority to (i) determine the employees of the Company and Related Corporations (from among the class of employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine (from among the class of individuals and entities eligible under paragraph 3 to receive Non-Qualified Options and Awards and to make Purchases) to whom Non-Qualified Options, Awards and authorizations to make Purchases may be granted; (ii) determine the time or times at which Options or Awards may be granted or Purchases made; (iii) determine the option price of shares subject to each Option, which price shall not be less than the minimum price specified in paragraph 6, and the purchase price of shares subject to each Purchases; (iv) determine whether each Option granted shall be an ISO or a Non-Qualified Option; (v) determine (subject to paragraph 7) the time or times when each Option shall become exercisable and the duration of the exercise period; (vi) determine whether restrictions such as repurchase options are to be imposed on shares subject to Options, Awards and Purchases and the nature of such restrictions, if any, and (vii) interpret the Plan and prescribe and rescind rules and regulations relating to it.  All references in this Plan to the Committee shall mean the Board if no Committee has been appointed.  If the Committee determines to issue a Non-Qualified Option, it shall take whatever actions it deems necessary, under Section 422A of the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO.  The interpretation and construction by the Committee of any provisions of the Plan or of any Stock Right granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best.  No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Stock Right granted under it.

B.

The Committee may select one of its members as its chairman, and shall hold meetings at such time and places it may determine.  Acts by a majority of the Committee, or actions reduced to or approved 

EX-10.1 – Pg. 1

C.

in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.  From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer the Plan.

D.

Stock Rights may be granted to members of the Board in accordance with paragraph 2.D. herein and the provisions of this Plan applicable to other eligible persons.  Members of the Board who are either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been granted Stock Rights may vote on any matters affecting the administration of the Plan or the grant of any Stock Rights pursuant to the Plan.

E.

Each transaction, i.e. each grant of Stock Rights to any eligible participant under the Plan who is an officer or director of the Company,  (i) shall be approved in advance to the granting of such right, by either the full Board or the Committee of the Board which shall be composed solely of two or more Non-Employee Directors; (ii) shall be approved in advance to the granting of such right, or ratified no later than the next annual meeting of shareholders, by the affirmative votes of the holders of a majority of the securities of the issuer present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the state or other jurisdiction in which the Company is incorporated; or the written consent of the holders of a majority of the securities of the issuer entitled to vote; or (iii)  shall be held by the officer or director for a period of six months following the date of such acquisition, provided that with respect to Options, at least six months shall elapse from the date of the acquisition/grant of the Options to the date of disposition of the Options (other than upon exercise or conversion) or its underlying equity security.  A Non-Employee Director is a director who is not, at the time of such grant an officer of the Company or any Related Corporation, or otherwise employed by the Company or any Related Corporation; does not receive compensation, either directly or indirectly, from the Corporation or any Related Corporation, for services rendered as a consultant or in any capacity other than a director, except for an amount that does not exceed the dollar amount for which disclosure is required pursuant to Item 404(a) of Regulation S-K promulgated under the Securities Act of 1933, as amended; does not possess an interest in any other transaction for which disclosure would be required pursuant to Item 404(a) of Regulation S-K; and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K.

3.

Eligible Employees and Others.  ISOs may be granted to any employee of the Company or any Related Corporation.  Those officers and directors of the Company who are not employees may not be granted ISOs under the Plan.  Non-Qualified Options, Awards and authorizations to make Purchases may be granted to any director (whether or not an employee), officer, employee or consultant of the Company or any Related Corporation.  The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.  Granting of any Stock Rights to any individual or entity shall neither entitle that individual or entity to, nor disqualify him from, participation in any other grant of Stock Rights.

4.

Stock.  The stock subject to Options, Awards and Purchases shall be authorized but unissued shares of Common Stock of the Company, no par value (the “Common Stock”), or shares of Common Stock reacquired by the Company in any manner.  The aggregate number of shares that may be issued pursuant to the Plan is 1,200,000, subject to adjustment as provided in paragraph 13.  Any such shares may be issued as ISOs, Non-Qualified Options or Awards, or to persons or entities making Purchases, so long as the number of shares issued does not exceed such number, as adjusted. If any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, or if the Company shall reacquire any unvested shares issued pursuant to Awards or Purchases, the unpurchased shares subject to such Options and any unvested shares so reacquired by the Company shall again be available for grants of Stock Rights under the Plan.

EX-10.1 – Pg. 2

5.

Granting of Stock Rights.  Stock Rights may be granted under the Plan at any time after June 7, 2010 and prior to June 7, 2020. Any Stock Right issued pursuant to subsection (iii) of paragraph 2.D. shall be held for the period of time described in that subsection. The date of grant of a Stock Right under the Plan will be the date specified by the Committee at the time it grants the Stock Right; provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant.  The Committee shall have the right, with the consent of the optionee, to convert an ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 16.  Awards and the price of Purchases shall be at fair market value as determined by the Board of Directors.

6.

Minimum Option Price; ISO Limitations.

A.

The price per share specified in the agreement relating to each Non-Qualified Option granted under the Plan shall in no event be less than the lesser of (i) the book value per share of Common Stock as of the end of the fiscal year of the Company immediately preceding the date of such grant, or (ii) 25 percent of the fair market value per share of Common Stock on the date of such grant.

B.

The price per share specified in the agreement relating to each ISO granted under the Plan shall not be less than the fair market value per share of Common Stock on the date of such grant.  In the case of an ISO to be granted to an employee owning stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Related Corporation, the price per share specified in the agreement relating to such ISO shall not be less than 110 percent of the fair market value per share of Common Stock on the date of the grant.

C.

To the extent that the aggregate fair market value (determined at the time the option is granted) of stock with respect to which options meeting the requirements of Section 422(b) are exercisable for the first time by any individual during any calendar year exceeds $100,000, then such options shall not be treated as incentive stock options pursuant to Section 422(b). The preceding sentence shall be applied by taking options into account in the order in which they were granted.

D.

If, at the time an Option is granted under the Plan, the Company's Common Stock is publicly traded, “fair market value” shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on  which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the NASDAQ National Market List, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the NASDAQ National Market List.  However, if the Common Stock is not publicly traded at the time an Option is granted under the Plan, “fair market value” shall be deemed by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length.

7.

Option Duration.  Subject to earlier termination as provided in paragraphs 9 and 10, each Option shall expire on the date specified by the Committee, but not more than (i) ten years from the date of grant in the case of Non-Qualified Options, (ii) ten years from the date of grant in the case of ISOs generally, and (iii) five years from the date of grant in the case of ISOs granted to an employee owning stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Related Corporation.  Subject to earlier termination as provided in paragraphs 9 and 10, the term of each ISO shall be the term set forth in the original instrument granting such ISO, except with respect to any part of such ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.

8.

Exercise of Option.  Subject to the provisions of paragraphs 9 through 12, each Option granted under the Plan shall be exercisable as follows:

A.

The Option shall either be fully exercisable on the date of grant or shall become exercisable thereafter 

EX-10.1 – Pg. 3

in such installments as the Committee may specify.

B.

Once an installment becomes exercisable it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee.

C.

Each Option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable.

D.

The Committee shall have the right to accelerate the date of exercise of any installment of any Option; provided that the Committee shall not accelerate the exercise date of any installment of any Option granted to any employee as an ISO (and not previously converted into a Non-Qualified Option pursuant to paragraph 16) if such acceleration would violate the annual vesting limitation contained in Section 422A(b)(7) of the Code, as described in paragraph 6(c).

E.

With respect to any Options granted to any officer or director of the Company pursuant to subsection (iii) of paragraph 2.D. herein, at least six months shall elapse from the date of the acquisition/grant of the Option to the date of disposition of the Option (other than upon exercise or conversion) or its underlying equity security.

9.

Termination of Employment.  If an ISO optionee ceases to be employed by the Company and all Related Corporations other than by reason of death or disability as defined in paragraph 10, no further installments of his ISOs shall become exercisable, and his ISOs shall terminate after the passage of 90 days from the date of termination of his employment, but in no event later than on their specified expiration dates, except to the extent that such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 16.  Employment shall be considered as continuing uninterrupted during any bona fide leave of absence (such as those attributable to illness, military obligations or governmental service) provided that the period of such leave does not exceed 90 days or, if longer, any period during which such optionee's right to reemployment is guaranteed by statute.  A bona fide leave of absence with the written approval of the Committee shall not be considered an interruption of employment under the Plan, provided that such written approval contractually obligates the Company or any Related Corporation to continue the employment of the optionee after the approved period of absence.  ISOs granted under the Plan shall not be affected by any change of employment within or among the Company and Related Corporations, so long as the optionee continues to be an employee of the Company or any Related Corporation.  Nothing in the Plan shall be deemed to give any grantee of any Stock Right the right to be retained in employment or other service by the Company or any Related Corporation for any period of time.

10.

Death; Disability.

A.

If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his death, any ISO of his may be exercised, to the extent of the number of shares with respect to which he could have exercised it on the date of his death, by his estate, personal representative or beneficiary who has acquired the ISO by will or by the laws of descent and distribution, at any time prior to the earlier of the ISO's specified expiration date or one year from the date of the optionee's death.

B.

If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his disability, he shall have the right to exercise any ISO held by him on the date of termination of employment, to the extent of the number of shares with respect to which he could have exercised it on that date, at any time prior to the earlier of the ISO's specified expiration date or one year from the date of the termination of the optionee's employment.  For the purposes of the Plan, the term “disability” shall mean “permanent and total disability” as defined in Section 22(e)(3) of the Code or successor 

EX-10.1 – Pg. 4

statute.

11.

Assignability.  No ISO shall be assignable or transferable by the grantee except by will or by the laws of descent and distribution, and during the lifetime of the grantee each ISO shall be exercisable only by him.  All other Stock Rights shall be freely transferable subject to the limitations imposed by subsection (iii) of paragraph 2.D. herein, if applicable. 

12.

Terms and Conditions of Options.  Options shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve.  Such instruments shall conform to the terms and conditions set forth in paragraphs 6 through 11 hereof and may contain such other provisions as the Committee deems advisable which are not inconsistent with the Plan, including restrictions applicable to shares of Common Stock issuable upon exercise of Options.  In granting any Non­-Qualified Option, the Committee may specify that such Non-Qualified Option shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination and cancellation provisions as the Committee may determine.  The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments.  The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments.

13.

Adjustments.  Upon the occurrence of any of the following events, an optionee's rights with respect to Options granted to him hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such Option:

A.

If the shares of Common Stock shall be subdivided or combined into a greater or small number of shares of it the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend.

B.

If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company's assets or otherwise (an “Acquisition”), the Committee or the Board of Directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding Options, either (i) make appropriate provision for the continuation of such Options by substituting on an equitable basis for the shares then subject to such Options the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition; or (ii) upon written notice to the optionees, provided that all Options must be exercised, to the extent then exercisable, within a specified number of days of the date of such notice, at the end of which period the Options shall terminate; or (iii) terminate all Options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such Options (to the extent then exercisable) over the exercise price thereof.

C.

In the event of a recapitalization or reorganization of the Company (other than a transaction described in subparagraph B above) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, an optionee upon exercising an Option shall be entitled to receive for the purchase price paid upon such exercise the securities he would have received if he had exercised his Option prior to such recapitalization or reorganization.

EX-10.1 – Pg. 5

D.

Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs A, B, or C with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a “modification” of such ISOs (as that term is defined in Section 425 of the Code) or would cause any adverse tax consequences for the holders of such ISOs.  If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments.

E.

In the event of the proposed dissolution or liquidating of the Company, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee.

F.

Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options.  No adjustments shall be made for dividends paid in cash or in property other than securities of the Company.

G.

No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares.

H.

Upon the happening of any of the foregoing events described in subparagraphs A, B, and C above, the class and aggregate number of shares set forth in paragraph 6 hereof that are subject to Stock Rights which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs.  The Committee or the Successor Board shall determine the specific adjustments to be made under this paragraph 13 and, subject to paragraph 2, its determination shall be conclusive.

If any person or entity owning restricted Common Stock obtained by exercise of a Stock Right made hereunder receives shares of securities or cash in connection with a corporate transaction described in subparagraphs A, B, or C above as a result of owning such restricted Common Stock, such shares or securities or cash shall be subject to all of the conditions and restrictions applicable to the restricted Common Stock with respect to which such shares or securities or cash were issued, unless otherwise determined by the Committee or the Successor Board.

14.

Means of Exercising Stock Rights.  A Stock Right (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office address.  Such notice shall identify the Stock Right being exercised and specify the number of shares to which such Stock Right is being exercised, accompanied by full payment of the purchase price therefor either (a) in United States dollars in cash or by check, or (b) at the discretion of the Committee, through delivery of shares of Common Stock having a fair market value equal as of the date of the exercise to the cash exercise price of the Stock Right, or (c) at the discretion of the Committee, by delivery of the grantee's personal recourse note bearing interest payable not less than annually at no less than 100% of the lowest applicable Federal rate, as defined in Section 1274 (d) of the Code, or a combination of (a), (b), and (c) above.  If the Committee exercises its discretion to permit payment of the exercise price of an ISO by means of the methods set forth in clauses (a), (b), or (c) of the preceding sentence, such discretion shall be exercised in writing at the time of the grant of the ISO in question.  The holder of a Stock Right shall not have the rights of a shareholder with respect to the shares covered by his Stock Right until the date of issuance of a stock certificate to him for such shares.  Except as expressly provided above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued.

EX-10.1 – Pg. 6

15.

Term and Amendment of Plan. This Plan was adopted by the Board on June 15, 2010, subject to approval of the Plan by the stockholders of the Company at the next Meeting of Stockholders.  If the approval of the stockholders is not obtained by June 15, 2011 any grants of Stock Rights under the Plan made prior to that date will be rescinded.  The Plan shall expire on June 14, 2020 (except as to Options outstanding on that date).  Subject to the provisions of paragraph 5 above, Stock Rights may be granted under the Plan prior to the date of stockholder approval of the Plan. The Board may terminate or amend the Plan in any respect at any time, except that, without the approval of the holders of a majority of the outstanding shares of Common Stock obtained within 12 months before or after the Board adopts a resolution authorizing any of the following actions: (a) the total number of shares that may be issued under the Plan may not be increased (except by adjustments pursuant to paragraph 13); (b) the provisions of paragraph 3 regarding eligibility for grants of ISOs may not be modified (except by adjustment pursuant to Paragraph 13); (c) the provisions of paragraph 6 regarding the exercise price at which shares may be offered pursuant to ISO's may not be modified (except by adjustment pursuant to paragraph 13) and (d) the expiration date of the Plan may not be extended.  Except as provided in the fourth sentence of this paragraph 15, in no event may action of the Board or Stockholders alter or impair the rights of a grantee, without his consent, under any Stock Right previously granted to him.

16.

Conversion of ISOs into Non-Qualified Options; Termination of ISOs.  The Committee, at the written request of any optionee, may in its discretion take such actions as may be necessary to convert such optionee's ISOs (or any installments or portions of installments thereof) that have not been exercised on the date of conversion into Non-Qualified Options at any time prior to the expiration of such ISOs, regardless of whether the optionee is an employee of the Company or a Related Corporation at the time of such conversion.  Such actions may include, but not be limited to, extending the exercise period or reducing the exercise price of the appropriate installments of such options.  At the time of such conversion, the Committee (with the consent of the Optionee) may impose such conditions on the exercise of the resulting Non-Qualified Options as the Committee in its discretion may determine, provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give any optionee the right to have such optionee's ISOs converted into Non-Qualified Options, and no such conversion shall occur until and unless the Committee takes appropriate action.  The Committee, with the consent of the optionee, may also terminate any portion of any ISO that has not been exercised at the time of such termination.

17.

Application of Funds.  The proceeds received by the Company from the sale of shares pursuant to Options granted and Purchases authorized under the Plan shall be used for general corporate purposes.

18.

Governmental Regulation.  The Company's obligation to sell and deliver shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares.

19.

Withholding of Additional Income Taxes.  Upon the exercise of a Non-Qualified Option, the grant of an Award, the making of a Purchase of Common Stock for less than its fair market value, the making of a Disqualifying Disposition (as defined in paragraph 20) or the vesting of restricted Common Stock acquired on the exercise of a Stock Right hereunder, the Company, in accordance with Section 3402(a) of the Code, may require the optionee, Award recipient or purchaser to pay additional withholding taxes in respect of the amount that is considered compensation includible in such person's gross income.  The Committee in its discretion may condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the making of a Purchase of Common Stock for less than its fair market value, or (iv) the vesting of restricted Common Stock acquired by exercising a Stock Right on the grantee's payment of such additional withholding taxes.

EX-10.1 – Pg. 7

20.

Notice to Company of Disqualifying Disposition.  Each employee who receives an ISO must agree to notify the Company in writing immediately after the employee makes a Disqualifying Disposition of any Common Stock acquired pursuant to the exercise of an ISO.  A Disqualifying Disposition is any disposition (including any sale) of such Common Stock before the later of (a) two years after the date the employee was granted the ISO or (b) one year after the date the Common Stock was transferred to the employee. 

21.

Governing Law: Construction.  The validity and construction of the Plan and the instruments evidencing Stock Rights shall be governed by the laws of the State of Tennessee.  In construing this Plan, the singular shall include the plural and the masculine general shall include the feminine and neuter, unless the context otherwise requires.

EX-10.1 – Pg. 8

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