Document:

sinx_ex101.htm

EXHIBIT 10.1

 

SIONIX  CORPORATION

 

2010 EQUITY INCENTIVE PLAN

 

1.      ESTABLISHMENT OF PLAN; DEFINITIONS

 

1.1   Purpose.  The purpose of the 2010 Equity Incentive Plan is to encourage certain officers, employees, directors, and consultants of Sionix Corporation, a Nevada corporation (the “Company”), to acquire and hold stock in the Company as an added incentive to remain with the Company and increase their efforts in promoting the interests of the Company, and to enable the Company to attract and retain capable individuals.

 

1.2   Definitions.  Unless the context clearly indicates otherwise, the following terms shall have the meanings set forth below:

 

1.2.1  “Award” shall mean, individually or collectively, a grant under this Plan of Stock Options or Stock Awards.

 

1.2.2 “Award Agreement” shall mean a written agreement containing the terms and conditions of an Award, not inconsistent with this Plan.

 

1.2.3 “Beneficiary” and “Beneficial Ownership” shall mean the person, persons, trust, or trusts that have been designated by a Grantee in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under this Plan upon such Grantee's death or to which Awards or other rights are transferred if and to the extent permitted under Section 7.2.4 hereof.  If, upon a Grantee's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary shall mean the person, persons, trust, or trusts entitled by will or the laws of descent and distribution to receive such benefits.

 

1.2.4 “Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

 

1.2.5 "Board" shall mean the board of directors of the Company.

 

1.2.6 “Change in Control” shall mean a Change in Control as defined in Section 7.1.1(b).

 

1.2.7 "Code" shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

 

1.2.8 "Committee" shall mean the Board or a committee of the Board appointed pursuant to Section 1.4 of this Plan.

 

1.2.9 “Common Stock” shall mean the Company’s common stock, par value $0.001 per share.

 

1.2.10 "Company" shall mean Sionix Corporation, a Nevada corporation.

 

1.2.11 "Consultants" shall mean individuals who provide services to the Company and any Subsidiary who are not also Employees or Directors and which services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.

 

  

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1.2.12 “Covered Employee” shall mean a Grantee who, as of the date of vesting and/or payout of an Award, or the date the Company or any of its Subsidiaries is entitled to a tax deduction as a result of the Award, as applicable, is one of the group of “covered employees,” as defined in the regulations promulgated under Code Section 162(m), or any successor statute.

 

1.2.13 “Designated Officer” shall mean any executive officer of the Company to whom duties and powers of the Board or Committee hereunder have been delegated pursuant to Section 1.4.3.

 

1.2.14 "Directors" shall mean those members of the Board or the board of directors of any Subsidiary who are not also Employees.

 

1.2.15 "Disability" shall mean a medically determinable physical or mental condition that causes an Employee, Director, or Consultant to be unable to engage in any substantial gainful activity and that can be expected to result in death or to be of long-continued and indefinite duration.

 

1.2.16 “Effective Date” shall mean the effective date of this Plan, which shall be the Shareholder Approval Date.

 

1.2.17 "Employee" shall mean any common law employee, including Officers, of the Company or any Subsidiary as determined under the Code and the Treasury Regulations thereunder.

 

1.2.18 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

 

1.2.19 "Fair Market Value" shall mean (i) if the Common Stock is listed on a national securities exchange or the NASDAQ system, the mean between the highest and lowest sales prices for the Common Stock on such date, or, if no such prices are reported for such day, then on the next preceding day on which there were reported prices; (ii) if the Common Stock is not listed on a national securities exchange or the NASDAQ system, the mean between the bid and asked prices for the shares on such date, or if no such prices are reported for such day, then on the next preceding day on which there were reported prices; or (iii) as determined in good faith by the Board.

 

1.2.20 "Grantee" shall mean an Officer, Employee, Director, or Consultant granted an Award.

 

1.2.21 "Incentive Stock Option" shall mean a Stock Option that meets the requirements of Code Section 422 and is granted pursuant to the Incentive Stock Option provisions as set forth in Section 2.

 

1.2.22 “Incumbent Board” shall mean the Incumbent Board as defined in Section 7.1.1(b)(ii).

 

1.2.23 "Non-Statutory Stock Option" shall mean a Stock Option that does not meet the requirements of Code Section 422 and is granted pursuant to the Non-Statutory Stock Option provisions as set forth in Section 3.

 

  

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1.2.24 “Officer” shall mean a person who is an officer of the Company or a Subsidiary within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

1.2.25  “Performance Award” shall mean an Award under Section 6 hereof.

 

1.2.26 “Performance Measure” shall mean one or more of the following criteria, or such other operating objectives, selected by the Committee to measure performance of the Company or any Subsidiary for a Performance Period, whether in absolute or relative terms: basic or diluted earnings per share of Stock; earnings per share of Common Stock growth; revenue; operating income; net income (either before or after taxes); earnings and/or net income before interest and taxes; earnings and/or net income before interest, taxes, depreciation, and amortization; return on capital; return on equity; return on assets; net cash provided by operations; free cash flow; Common Stock price; economic profit; economic value; total stockholder return; and gross margins and costs.  Each such measure shall be determined in accordance with generally accepted accounting principles as consistently applied and, as determined by the independent accountants of the Company in the case of a Performance Award to a Covered Employee, to the extent intended to meet the performance-based compensation exception under Code Section 162(m), or as determined by the Committee for other Performance Awards, adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions, and cumulative effects of changes in accounting principles.

 

1.2.27  “Performance Period” shall mean a period of not less than one (1) year over which the achievement of targets for Performance Measures is determined.

 

1.2.28 “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group” as defined in Section 13(d) thereof.

 

1.2.29 "Plan" shall mean the Company’s 2010 Equity Incentive Plan as set forth herein and as amended from time to time.

 

1.2.30 “Related Entity” shall mean any Subsidiary, and any business, corporation, partnership, limited liability company, or other entity designated by the Board, in which the Company or a Subsidiary holds a substantial ownership interest, directly or indirectly.

 

1.2.31 "Restricted Stock" shall mean Common Stock that is issued pursuant to the Restricted Stock provisions as set forth in Section 4.

 

1.2.32 "Restricted Stock Units" shall mean Common Stock that is issued pursuant to the Restricted Stock Unit provisions as set forth in Section 5.

 

1.2.33  “Rule 16b-3” shall mean Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

1.2.34 “Shareholder Approval Date” shall mean the date on which this Plan is approved by the shareholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock exchange or automated quotation system on which the Common Stock may be listed on quoted, and other laws, regulations, and obligations of the Company applicable to this Plan.

 

  

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1.2.35 "Stock Award" shall mean an award of Restricted Stock or Restricted Stock Units granted pursuant to this Plan.

 

1.2.36 "Stock Option" shall mean an option granted pursuant to this Plan to purchase shares of Common Stock.

 

1.2.37 “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with and including the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

1.3           Shares of Common Stock Subject to this Plan.  Subject to the provisions of Section 7.1, the shares of Common Stock that may be issued pursuant to Stock Options and Stock Awards granted under this Plan shall not exceed Five Million (5,000,000) shares in the aggregate.  If a Stock Option shall expire and terminate for any reason, in whole or in part, without being exercised or, if Stock Awards are forfeited because the restrictions with respect to such Stock Awards shall not have been met or have lapsed, the number of shares of Common Stock that are no longer outstanding as Stock Awards or subject to Stock Options may again become available for the grant of Stock Awards or Stock Options.  There shall be no terms and conditions in a Stock Award or Stock Option that provide that the exercise of an Incentive Stock Option reduces the number of shares of Common Stock for which an outstanding Non-Statutory Stock Option may be exercised; and there shall be no terms and conditions in a Stock Award or Stock Option that provide that the exercise of a Non-Statutory Stock Option reduces the number of shares of Common Stock for which an outstanding Incentive Stock Option may be exercised.

 

1.4           Administration of this Plan.

 

1.4.1 The Plan shall be administered by the Board.  In the alternative, the Board may delegate authority to a Committee to administer this Plan on behalf of the Board, subject to such terms and conditions as the Board may prescribe.  Such Committee shall consist of not less than two (2) members of the Board each of whom is a “non-employee director” within the meaning of Rule 16b-3, or any successor rule of similar import, and an “outside director” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder.  Once appointed, the Committee shall continue to serve until otherwise directed by the Board.  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, and remove all members of the Committee and, thereafter, directly administer this Plan.  In the event that the Board is the administrator of this Plan in lieu of a Committee, the term “Committee” as used herein shall be deemed to mean the Board.

1.4.2 The Committee shall meet at such times and places and upon such notice as it may determine.  A majority of the Committee shall constitute a quorum.  Any acts by the Committee may be taken at any meeting at which a quorum is present and shall be by majority vote of those members entitled to vote.  Additionally, any acts reduced to writing or approved in writing by all of the members of the Committee shall be valid acts of the Committee.

 

  

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1.4.3 The Board may, in its sole discretion, divide the duties and powers of the Committee by establishing one or more secondary Committees to which certain duties and powers of the Board hereunder are delegated (each of which shall be regarded as a “Committee” under this Plan with respect to such duties and powers), or delegate all of its duties and powers hereunder to a single Committee.  Additionally, if permitted by applicable law, the Board or Committee may delegate any or all of its duties and powers hereunder to a Designated Officer subject to such conditions and limitations as the Board or Committee shall prescribe.  However, only the Committee described under Section 1.4.1 may designate and grant Awards to Grantees who are subject to Section 16 of the Exchange Act or Section 162(m) of the Code.  The Committee shall also have the power to establish sub-plans (which may be included as appendices to this Plan or the respective Award Agreement), which may constitute separate programs, for the purpose of establishing programs that meet any special tax or regulatory requirements of jurisdictions other than the United States and its subdivisions.  Any such interpretations, rules, administration and sub-plans shall be consistent with the basic purposes of this Plan.

1.4.4 Powers of the Committee.  The Committee shall have all the powers vested in it by the terms of this Plan, such powers to include authority, in its sole and absolute discretion, to grant Awards under this Plan, prescribe Award Agreements and establish programs for granting Awards.  The Committee shall have full power and authority to take all other actions necessary to carry out the purpose and intent of this Plan, including, but not limited to, the authority to:

   (a)         determine the Grantees to whom, and the time or times at which, Awards shall be granted;

   (b)         determine the types of Awards to be granted;

   (c)         determine the number of shares of Common Stock and/or amount of cash to be covered by or used for reference purposes for each Award;

   (d)        impose such terms, limitations, vesting schedules, restrictions, and conditions upon any such Award as the Committee shall deem appropriate, including without limitation establishing, in its discretion, Performance Measures that must be satisfied before an Award vests and/or becomes payable, the term during which an Award is exercisable, the purchase price, if any, under an Award, and the period, if any, following a Grantee’s termination of employment or service with the Company or any Subsidiary during which the Award shall remain exercisable;

   (e)         modify, extend, or renew outstanding Awards, accept the surrender of outstanding Awards, and substitute new Awards, provided that no such action shall be taken with respect to any outstanding Award that would materially and adversely affect the Grantee without the Grantee’s consent, or constitute a repricing of stock options without the consent of the holders of the Company’s voting securities under Section 1.4.4(f) below;

   (f)          only with the approval of the holders of the voting securities of the Company to the extent that such approval is required by applicable law, regulation, or the rules of a national securities exchange or automated quotation system to which the Company is subject, reprice Incentive Stock Options and Non-Statutory Stock Options either by amendment to lower the exercise price or by accepting such stock options for cancellation and issuing replacement stock options with a lower exercise price or through any other mechanism;

   (g)         accelerate the time in which an Award may be exercised or in which an Award becomes payable and waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to an Award;

   (h)         establish objectives and conditions, including targets for Performance Measures, if any, for earning Awards and determining whether Awards will be paid after the end of a Performance Period; and

 

  

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   (i)          permit the deferral of, or require a Grantee to defer such Grantee’s receipt of or the delivery of Stock and/or cash under an Award that would otherwise be due to such Grantee and establish rules and procedures for such payment deferrals, provided the requirements of Code Section 409A are met with respect to any such deferral.

The Committee shall have full power and authority to administer and interpret this Plan and to adopt such rules, regulations, agreements, guidelines, and instruments for the administration of this Plan as the Committee deems necessary, desirable or appropriate in accordance with the bylaws of the Company.

1.4.5           To the maximum extent permitted by law, no member of the Board or Committee or a Designated Officer shall be liable for any action taken or decision made in good faith relating to this Plan or any Award thereunder.

1.4.6           The members of the Board and Committee and any Designated Officer shall be indemnified by the Company in respect of all their activities under this Plan in accordance with the procedures and terms and conditions set forth in the articles of incorporation and bylaws of the Company as in effect from time to time.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s articles of incorporation and bylaws, as a matter of law, or otherwise.

1.4.7           All actions taken and decisions and determinations made by the Committee or a Designated Officer on all matters relating to this Plan pursuant to the powers vested in it hereunder shall be in the Committee’s or Designated Officer’s sole and absolute discretion and shall be conclusive and binding on all parties concerned, including the Company, its stockholders, any Grantees, and any other Employee, and their respective successors in interest.

 

1.5           Amendment or Termination.

 

1.5.1           The Committee, without further approval of the Company’s stockholders, may amend or terminate this Plan or any portion thereof at any time, except that no amendment shall become effective without prior approval of the stockholders of the Company to increase the number of shares of Common Stock subject to this Plan or if stockholder approval is necessary to comply with any tax or regulatory requirement or rule of any national securities exchange or national automated quotation system upon which the Common Stock is listed or quoted (including for this purpose stockholder approval that is required for continued compliance with Rule 16b-3 or stockholder approval that is required to enable the Committee to grant Incentive Stock Options pursuant to this Plan).

 

1.5.2           The Committee shall be authorized to make minor or administrative amendments to this Plan as well as amendments to this Plan that may be dictated by the requirements of U.S. federal or state laws applicable to the Company or that may be authorized or made desirable by such laws.  The Committee may amend any outstanding Award in any manner as provided in Section 1.4.4 and to the extent that the Committee would have had the authority to make such Award as so amended.

1.5.3           No amendment to this Plan or any Award may be made that would materially adversely affect any outstanding Award previously made under this Plan without the approval of the Grantee.  Further, no amendment to this Plan or an Award shall be made that would cause any Award to fail to either comply with or meet an exception from Code Section 409A.

1.6           Effective Date and Duration of this Plan.  This Plan shall become effective on the Effective Date.  This Plan shall terminate at such time as may be determined by the Board, and no Stock Award or Stock Option may be issued or granted under this Plan thereafter, but such termination shall not affect any Stock Award or Stock Option theretofore issued or granted.

 

  

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2.      INCENTIVE STOCK OPTION PROVISIONS

 

2.1           Granting of Incentive Stock Options.

 

2.1.1           Only Employees of the Company shall be eligible to receive Incentive Stock Options under this Plan.  Officers, Directors, and Consultants of the Company who are not also Employees shall not be eligible to receive Incentive Stock Options.

 

2.1.2           The purchase price of each share of Common Stock subject to an Incentive Stock Option shall not be less than 100% of the Fair Market Value of a share of the Common Stock on the date the Incentive Stock Option is granted.  If an Employee owns or is deemed to own (by reason of the attribution rules applicable under Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock Option is granted to such Employee, the exercise price of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no less than 110% of the Fair Market Value of a Share on the date such Incentive Stock Option is granted.

 

2.1.3           No Incentive Stock Option shall be exercisable more than ten (10) years from the date the Incentive Stock Option was granted; provided however, that if a Grantee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10% of the combined voting power of all classes of stock of the Company (or any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Code, respectively) and the Incentive Stock Option is granted to such Grantee, the term of the Incentive Stock Option shall be (to the extent required by the Code at the time of the grant) for no more than five (5) years from the date of grant.

 

2.1.4           The Committee shall determine and designate from time to time those Employees who are to be granted Incentive Stock Options and specify the number of shares subject to each Incentive Stock Option.

 

2.1.5           The Committee, in its sole discretion, shall determine whether any particular Incentive Stock Option shall become exercisable in one or more installments, specify the installment dates, and, within the limitations herein provided, determine the total period during which the Incentive Stock Option is exercisable.  Further, the Committee may make such other provisions as may appear generally acceptable or desirable to the Committee or necessary to qualify its grants under the provisions of Section 422 of the Code.

 

  

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2.1.6           The Committee may grant at any time new Incentive Stock Options to an Employee who has previously received Incentive Stock Options or other options whether such prior Incentive Stock Options or other options are still outstanding, have previously been exercised in whole or in part, or are cancelled in connection with the issuance of new Incentive Stock Options.  The purchase price of the new Incentive Stock Options may be established by the Committee without regard to the existing Incentive Stock Options or other options.

 

2.1.7           Notwithstanding any other provisions hereof, the aggregate Fair Market Value (determined at the time the option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the Employee during any calendar year (under all such plans of the Grantee's employer corporation and its parent corporation or subsidiary corporation as those terms are defined in Sections 424(e) and (f) of the Code, respectively) shall not (to the extent required by the Code at the time of the grant) exceed One Hundred Thousand Dollars ($100,000).  To the extent that such aggregate Fair Market Value shall exceed One Hundred Thousand Dollars ($100,000), or other applicable amount, such Stock Options to the extent of the Common Stock in excess of such limit shall be treated as Non-Statutory Stock Options.  In such case, the Company may designate the shares of Common Stock that are to be treated as Stock acquired pursuant to the exercise of an Incentive Stock Option.

 

2.2           Exercise of Incentive Stock Options.  The exercise price of an Incentive Stock Option shall be payable on exercise of the option (i) in cash or by check, bank draft, or postal or express money order, (ii) ) if provided in the written Award agreement and permitted by applicable law, by the surrender of Common Stock then owned by the Grantee, which Common Stock such Grantee has held for at least six (6) months, (iii) the proceeds of a loan from an independent broker-dealer whereby the loan is secured by the option or the stock to be received upon exercise, or (iv) any combination of the foregoing; provided, that each such method and time for payment and each such borrowing and terms and conditions of repayment shall then be permitted by and be in compliance with applicable law.  Shares of Common Stock so surrendered in accordance with clause (ii) or (iv) shall be valued at the Fair Market Value thereof on the date of exercise, surrender of such Common Stock to be evidenced by delivery of the certificate(s) representing such shares in such manner, and endorsed in such form, or accompanied by stock powers endorsed in such form, as the Committee may determine.

 

2.3           Termination of Employment.

 

2.3.1           If a Grantee's employment with the Company is terminated other than by Disability or death, the terms of any then outstanding Incentive Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or three (3) months after such termination of employment, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment.

 

2.3.2           If a Grantee's employment with the Company is terminated by reason of Disability, the term of any then outstanding Incentive Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve (12) months after such termination of employment, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment.

 

2.3.3           If a Grantee's employment with the Company is terminated by reason of death, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right during the period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve (12) months after such date of death, to exercise any then outstanding Incentive Stock Options in whole or in part.  If a Grantee dies without having fully exercised any then outstanding Incentive Stock Options, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right to exercise such Stock Options in whole or in part.

 

3.      NON-STATUTORY STOCK OPTION PROVISIONS

 

3.1           Granting of Stock Options.

 

3.1.1           Officers, Employees, Directors, and Consultants shall be eligible to receive Non-Statutory Stock Options under this Plan.

 

  

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3.1.2           The Committee shall determine and designate from time to time those Officers, Employees, Directors, and Consultants who are to be granted Non-Statutory Stock Options and the amount subject to each Non-Statutory Stock Option.

 

3.1.3           The Committee may grant at any time new Non-Statutory Stock Options to an Employee, Director, or Consultant who has previously received Non-Statutory Stock Options or other Stock Options, whether such prior Non-Statutory Stock Options or other Stock Options are still outstanding, have previously been exercised in whole or in part, or are cancelled in connection with the issuance of new Non-Statutory Stock Options.

 

3.1.4           The Committee shall determine the purchase price of each share of Common Stock subject to a Non-Statutory Stock Option.  Such price shall not be less than 100% of the Fair Market Value of such Common Stock on the date the Non-Statutory Stock Option is granted.

 

3.1.5           The Committee, in its sole discretion, shall determine whether any particular Non-Statutory Stock Option shall become exercisable in one or more installments, specify the installment dates, and, within the limitations herein provided, determine the total period during which the Non-Statutory Stock Option is exercisable.  Further, the Committee may make such other provisions as may appear generally acceptable or desirable to the Committee, including the extension of a Non-Statutory Stock Option, provided that such extension does not extend the option beyond the period specified in Section 3.1.6 below.

 

3.1.6           No Non-Statutory Stock Option shall be exercisable more than ten (10) years from the date such option is granted.

 

3.2           Exercise of Stock Options.   The exercise price of a Non-Statutory Stock Option shall be payable on exercise of the Stock Option (i) in cash or by check, bank draft, or postal or express money order, (ii) if provided in the written Award agreement and permitted by applicable law, by the surrender of Common Stock then owned by the Grantee, which Common Stock such Grantee has held for at least six (6) months, (iii) the proceeds of a loan from an independent broker-dealer whereby the loan is secured by the option or the stock to be received upon exercise, or (iv) any combination of the foregoing; provided, that each such method and time for payment and each such borrowing and terms and conditions of repayment shall then be permitted by and be in compliance with applicable law.  Shares of Common Stock so surrendered in accordance with clause (ii) or (iv) shall be valued at the Fair Market Value thereof on the date of exercise, surrender of such Common Stock to be evidenced by delivery of the certificate(s) representing such shares in such manner, and endorsed in such form, or accompanied by stock powers endorsed in such form, as the Committee may determine.

 

3.3           Termination of Relationship.

 

3.3.1           If a Grantee's employment with the Company is terminated, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant, other than by reason of Disability or death, the terms of any then outstanding Non-Statutory Stock Option held by the Grantee shall extend for a period ending on the earlier of the date established by the Committee at the time of grant or three (3) months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of the date of termination of employment or cessation of being a Director or Consultant.

 

  

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3.3.2           If a Grantee's employment is terminated by reason of Disability, a Director Grantee ceases to be a Director by reason of Disability or a Consultant Grantee ceases to be a Consultant by reason of Disability, the term of any then outstanding Non-Statutory Stock Option held by the Grantee shall extend for a period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve (12) months after the Grantee's last date of employment or cessation of being a Director or Consultant, and such Stock Option shall be exercisable to the extent it was exercisable as of such last date of employment or cessation of being a Director or Consultant.

 

3.3.3           If a Grantee's employment is terminated by reason of death, a Director Grantee ceases to be a Director by reason of death or a Consultant Grantee ceases to be a Consultant by reason of death, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right during the period ending on the earlier of the date on which such Stock Option would otherwise expire or twelve (12) months following his death to exercise any then outstanding Non-Statutory Stock Options in whole or in part.  If a Grantee dies without having fully exercised any then outstanding Non-Statutory Stock Options, the representative of his estate or beneficiaries thereof to whom the Stock Option has been transferred shall have the right to exercise such Stock Options in whole or in part.

 

	
4.

	
RESTRICTED STOCK AWARDS

 

4.1           Grant of Restricted Stock.

 

4.1.1           Officers, Employees, Directors and Consultants shall be eligible to receive grants of Restricted Stock under this Plan.

 

4.1.2           The Committee shall determine and designate from time to time those Officers, Employees, Directors and Consultants who are to be granted Restricted Stock and the number of shares of Common Stock subject to such Stock Award.

 

4.1.3           The Committee, in its sole discretion, shall make such terms and conditions applicable to the grant of Restricted Stock as may appear generally acceptable or desirable to the Committee.

 

4.2           Termination of Relationship.

 

4.2.1           If a Grantee's employment with the Company is terminated, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant, prior to the lapse of any restrictions applicable to the Restricted Stock, then such Common Stock shall be forfeited and the Grantee shall return the certificates representing such Common Stock to the Company.

 

4.2.2           If the restrictions applicable to a grant of Restricted Stock shall lapse, then the Grantee shall hold such Common Stock free and clear of all such restrictions except as otherwise provided in this Plan.

 

	
5.

	
RESTRICTED STOCK UNIT AWARDS

 

5.1           Grant of Restricted Stock Units.

 

5.1.1           Officers, Employees, Directors, and Consultants shall be eligible to receive grants of Restricted Stock Units under this Plan.

 

5.1.2           The Committee shall determine and designate from time to time those Officers, Employees, Directors, and Consultants who are to be granted Restricted Stock Units and number of shares of Common Stock subject to such Stock Award.

 

  

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5.1.3           The Committee, in its sole discretion, shall make such terms and conditions applicable to the grant of Restricted Stock Units as may appear generally acceptable or desirable to the Committee.

 

5.2           Termination of Relationship.

 

5.2.1           If a Grantee's employment with the Company is terminated, a Director Grantee ceases to be a Director, or a Consultant Grantee ceases to be a Consultant, prior to the lapse of any restrictions applicable to the Restricted Stock Units, then such Common Stock shall be forfeited and the Grantee shall return the certificates representing such Common Stock to the Company.

 

5.2.2           If the restrictions applicable to a grant of Restricted Stock Units shall lapse, then the Grantee shall hold such Common Stock free and clear of all such restrictions except as otherwise provided in this Plan.

 

6.             PERFORMANCE AWARDS

 

6.1           The Committee, in its discretion, may establish targets for Performance Measures for selected Grantees and authorize the granting, vesting, payment, and/or delivery of Performance Awards in the form of Incentive Stock Options, Non-Statutory Stock Options, Restricted Stock, and Restricted Stock Units to such Grantees upon achievement of such targets for Performance Measures during a Performance Period.  The Committee, in its discretion, shall determine the Grantees eligible for Performance Awards, the targets for Performance Measures to be achieved during each Performance Period, and the type, amount, and terms and conditions of any Performance Awards.  Performance Awards may be granted either alone or in addition to other Awards made under this Plan.

6.2           After the Company is subject to Code Section 162(m), in connection with any Performance Awards granted to a Covered Employee that are intended to meet the performance-based compensation exception under Code Section 162(m), the Committee shall (i) establish in the applicable Award Agreement the specific targets relative to the Performance Measures that must be attained before the respective Performance Award is granted, vests, or is otherwise paid or delivered, (ii) provide in the applicable Award Agreement the method for computing the portion of the Performance Award that shall be granted, vested, paid, and/or delivered if the target or targets are attained in full or part, and (iii) at the end of the relevant Performance Period, and prior to any such grant, vesting, payment, or delivery, certify the extent to which the applicable target or targets were achieved and whether any other material terms were in fact satisfied.  The specific targets and the method for computing the portion of such Performance Award that shall be granted, vested, paid, or delivered to any Covered Employee shall be established by the Committee prior to the earlier to occur of (A) ninety (90) days after the commencement of the Performance Period to which the Performance Measure applies and (B) the elapse of twenty-five percent (25%) of the Performance Period and in any event while the outcome is substantially uncertain.  In interpreting Plan provisions applicable to Performance Measures and Performance Awards that are intended to meet the performance-based compensation exception under Code Section 162(m), it is the intent of this Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulations Section 1.162-27(e)(2), and the Committee in interpreting this Plan shall be guided by such provisions.

 

	
7.

	
GENERAL PROVISIONS

 

7.1           Adjustment Provisions.

 

7.1.1           Change of Control.

   (a)         Effect of “Change in Control.”  If and only to the extent provided in the Award Agreement, or to the extent otherwise determined by the Committee, upon the occurrence of a “Change in Control,” as defined in Section 7.1.1(b):

 

  

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(i)           The Committee shall take such action as it deems appropriate and equitable to effectuate the purposes of this Plan and to protect the grantees of Awards, which action may include, without limitation, any one or more of the following, provided such action is in compliance with Code Section 409A if applicable:  (i) acceleration or change of the exercise and/or expiration dates of any Award to require that exercise be made, if at all, prior to the Change in Control; and (ii) cancellation of any Award upon payment to the holder in cash of the Fair Market Value of the Stock subject to such Award as of the date of (and, to the extent applicable, as established for purposes of) the Change in Control, less the aggregate exercise price, if any, of the Award.

(ii)           Notwithstanding the foregoing or any provision in any Award Agreement to the contrary, if in the event of a Change in Control, the successor company assumes or substitutes for a Stock Option or Stock Award, then each such outstanding Stock Option or Stock Award shall not be accelerated as described in Sections 7.1.1(a)(i).  For the purposes of this Section 7.1.1(a)(ii), such Stock Option or Stock Award shall be considered assumed or substituted for if following the Change in Control the Award confers the right to purchase or receive, for each share of Common Stock subject to the Stock Option or Stock Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the transaction constituting a Change in Control by holders of Common Stock shares for each Common Stock share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the transaction constituting a Change in Control is not solely common stock of the successor company or its parent or subsidiary, the Committee may, with the consent of the successor company or its parent or subsidiary, provide that the consideration to be received upon the exercise or vesting of a Stock Option or Stock Award, for each Common Stock share subject thereto, will be solely common stock of the successor company or its parent or subsidiary substantially equal in fair market value to the per share consideration received by holders of Common Stock shares in the transaction constituting a Change in Control.  The determination of such substantial equality of value of consideration shall be made by the Committee in its sole discretion and its determination shall be conclusive and binding.

   (b)         Definition of “Change in Control”.  Unless otherwise specified in an Award Agreement, a “Change in Control” shall mean the occurrence of any of the following:

(i)           The acquisition by any Person of Beneficial Ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of either (A) the value of then outstanding equity securities of the Company (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”) (the foregoing Beneficial Ownership hereinafter being referred to as a "Controlling Interest"); provided, however, that for purposes of this Section 7.1.1, the following acquisitions shall not constitute or result in a Change in Control: (v) any acquisition directly from the Company; (w) any acquisition by the Company; (x) any acquisition by any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Entity; or (z) any acquisition by any entity pursuant to a transaction that complies with clauses (A), (B), and (C) of subsection 7.1.1(b)(iii) below; or

 

  

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(ii)           During any period of two (2) consecutive years (not including any period prior to the Effective Date) individuals who constitute the Board on the Effective Date (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii)           Consummation of a reorganization, merger, statutory share exchange, or consolidation or similar transaction involving the Company or any of its Related Entities, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company or any of its Related Entities (each a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the Outstanding Company Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the value of the then outstanding equity securities and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of members of the board of directors (or comparable governing body of an entity that does not have such a board), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or any Person that as of the Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially owns, directly or indirectly, fifty percent (50%) or more of the value of the then outstanding equity securities of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the Board or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or

(iv)           Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

 

7.1.2           Adjustments to Awards.  In the event that any extraordinary dividend or other distribution (whether in the form of cash, Common Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Common Stock and/or such other securities of the Company or any other issuer such that a substitution, exchange, or adjustment is determined by the Committee to be appropriate, then the Committee shall, in such manner as it may deem equitable, substitute, exchange, or adjust any or all of (A) the number and kind of Shares that may be delivered in connection with Awards granted thereafter, (B) the number and kind of Shares by which annual per-person Award limitations are measured under this Plan’s provisions, (C) the number and kind of Shares subject to or deliverable in respect of outstanding Awards, (D) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award, and (E) any other aspect of any Award that the Committee determines to be appropriate.

 

  

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7.1.3           Adjustments in Case of Certain Transactions.  In the event of any merger, consolidation or other reorganization in which the Company does not survive, or in the event of any Change in Control, any outstanding Awards may be dealt with in accordance with any of the following approaches, as determined by the agreement effectuating the transaction or, if and to the extent not so determined, as determined by the Committee: (a) the continuation of the outstanding Awards by the Company, if the Company is a surviving entity, (b) the assumption or substitution for, as those terms are defined in Section 7.1.1(b)(iv), the outstanding Awards by the surviving entity or its parent or subsidiary, (c) full exercisability or vesting and accelerated expiration of the outstanding Awards, or (d) settlement of the value of the outstanding Awards in cash or cash equivalents or other property followed by cancellation of such Awards (which value, in the case of Stock Options, shall be measured by the amount, if any, by which the Fair Market Value of a share of Common Stock exceeds the exercise or grant price of the Stock Option as of the effective date of the transaction).  The Committee shall give written notice of any proposed transaction referred to in this Section 7.1.3 a reasonable period of time prior to the closing date for such transaction (which notice may be given either before or after the approval of such transaction), in order that Grantees may have a reasonable period of time prior to the closing date of such transaction within which to exercise any Awards that are then exercisable (including any Awards that may become exercisable upon the closing date of such transaction). A Grantee may condition his exercise of any Awards upon the consummation of the transaction.

7.1.4           Other Adjustments. The Committee (and the Board if and only to the extent such authority is not required to be exercised by the Committee to comply with Section 162(m) of the Code) is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards, or performance goals relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, acquisitions and dispositions of businesses and assets) affecting the Company, any Related Entity or any business unit, or the financial statements of the Company or any Related Entity, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee's assessment of the business strategy of the Company, any Related Entity or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Grantee, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Stock Options or Stock Awards granted pursuant to Section 6 to Grantees designated by the Committee as Covered Employees and intended to qualify as “performance-based compensation” under Code Section 162(m) and the regulations thereunder to otherwise fail to qualify as “performance-based compensation” under Code Section 162(m) and regulations thereunder.

 

7.1.5           Fractional Shares.  No adjustment or substitution provided for in this Section 7.1 shall require the Company to sell a fractional share, and the total substitution or adjustment with respect to each outstanding Stock Option shall be limited accordingly.

 

7.1.6           Adjustment Certificates.  Upon any adjustment made pursuant to this Section 7.1 the Company will, upon request, deliver to the Grantee a certificate setting forth the exercise price thereafter in effect and the number and kind of shares or other securities thereafter purchasable on the exercise of such Stock Option.

 

7.2           General.

 

7.2.1           Each Stock Option and Stock Award shall be evidenced by an Award Agreement containing such terms and conditions, not inconsistent with this Plan, as the Committee shall approve.

 

  

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7.2.2           The granting of a Stock Option or Stock Award in any year shall not give the Grantee any right to similar grants in future years or any right to be retained in the employ of the Company, and all Employees shall remain subject to discharge to the same extent as if this Plan were not in effect.

 

7.2.3           No Officer, Employee, Director, or Consultant and no beneficiary or other person claiming under or through him, shall have any right, title or interest by reason of any Stock Option or any Stock Award to any particular assets of the Company, or any shares of Common Stock allocated or reserved for the purposes of this Plan or subject to any Stock Option or any Stock Award except as set forth herein.  The Company shall not be required to establish any fund or make any other segregation of assets to assure the payment of any Stock Option or Stock Award.

 

7.2.4           Limits on Transferability.

 

   (a)         Except to the extent otherwise provided in the respective Award Agreement, no Award, other right, or interest granted under this Plan shall be pledged, hypothecated, or otherwise encumbered or subject to any lien, obligation, or liability of such Grantee to any party, or assigned or transferred by such Grantee otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Grantee.   Unless otherwise determined by the Committee in accordance with the provisions of the immediately preceding sentence, an Award may be exercised during the lifetime of the Grantee only by the Grantee or, during the period the Grantee is under a Disability, by the Grantee’s guardian or legal representative.

 

   (b)         Notwithstanding Section 7.2.4(a), an Award other than an Incentive Stock Option may, in the Committee’s sole discretion, be transferable by gift or domestic relations order to (i) the Grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, daughter-in-law, son-in-law, brother-in-law, or sister-in-law, including adoptive relationships (such persons, “Family Members”), (ii) a corporation, partnership, limited liability company, or other business entity whose only stockholders, partners, or members, as applicable are the Grantee and/or Family Members, or (iii) a trust in which the Grantee and/or Family Members have all of the beneficial interests, and subsequent to any such transfer any Award may be exercised by any such transferee, provided, however, no Award may be transferred for value (as defined in the General Instructions to Form S-8 Registration Statement).

 

   (c)         Notwithstanding Sections 7.2.4(a) and 7.2.4(b), an Award may be transferred pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award under this Plan, but only if the tax consequences flowing from the assignment or transfer are specified in said order, the order is accompanied by signed agreement by both or all parties to the domestic relations order, and, if requested by the Committee, an opinion is provided by qualified counsel for the Grantee that the order is enforceable by or against this Plan under applicable law, and said opinion further specifies the tax consequences flowing from the order and the appropriate tax reporting procedures for this Plan.

 

7.2.5           Notwithstanding any other provision of this Plan or agreements made pursuant thereto, the Company's obligation to issue or deliver any certificate or certificates for shares of Common Stock under a Stock Option or Stock Award, and the transferability of Common Stock acquired by exercise of a Stock Option or grant of a Stock Award, shall be subject to all of the following conditions:

 

   (a)         Any registration or other qualification of such shares under any state or federal law or regulation, or the maintaining in effect of any such registration or other qualification that the Board shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and

 

  

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   (b)        The obtaining of any other consent, approval, or permit from any state or federal governmental agency that the Board shall, in its absolute discretion upon the advice of counsel, determine to be necessary or advisable.

 

The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Common Stock or payment of other benefits under any Award until completion of such registration or qualification of such Common Stock (including, but not limited to, the conditions described in Sections 7.2.5(a) and 7.2.5(b) above) or other required action under any federal or state law, rule or regulation, listing, or other required action with respect to any stock exchange or automated quotation system upon which the Shares or other Company securities are listed or quoted, or compliance with any other obligation of the Company, as the Committee, may consider appropriate, and may require any Grantee to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Shares or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations.

 

7.2.6           All payments to Grantees or to their legal representatives shall be subject to any applicable tax, community property, or other statutes or regulations of the United States or of any state or country having jurisdiction over such payments.  The Grantee may be required to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to a Stock Option or its exercise or a Stock Award.  In the event that such payment is not made when due, the Company shall have the right to deduct, to the extent permitted by law, from any payment of any kind otherwise due to such person all or part of the amount required to be withheld.

 

7.2.7           In the case of a grant of a Stock Option or Stock Award to any Employee of a Subsidiary, the Company may, if the Committee so directs, issue or transfer the shares, if any, covered by the Stock Option or Stock Award to such Subsidiary, for such lawful consideration as the Committee may specify, upon the condition or understanding that such Subsidiary will transfer the shares to the Employee in accordance with the terms of the Stock Option or Stock Award specified by the Committee pursuant to the provisions of this Plan.

 

7.2.8           A Grantee entitled to Common Stock as a result of the exercise of a Stock Option or grant of a Stock Award shall not be deemed for any purpose to be, or have rights as, a shareholder of the Company by virtue of such exercise, except to the extent that a stock certificate is issued therefor and then only from the date such certificate is issued.  No adjustments shall be made for dividends or distributions or other rights for which the record date is prior to the date such stock certificate is issued.  The Company shall issue any stock certificates required to be issued in connection with the exercise of a Stock Option with reasonable promptness after such exercise.

 

7.2.9           The grant or exercise of Stock Options granted under this Plan or the grant of a Stock Award under this Plan shall be subject to, and shall in all respects comply with, applicable law relating to such grant or exercise, or to the number of shares of Common Stock that may be beneficially owned or held by any Grantee.

 

7.2.10          The Company intends that this Plan shall comply with the requirements of Rule 16b-3 (the “Rule”) under the Securities Exchange Act of 1934, as amended, during the term of this Plan. Should any additional provisions be necessary for this Plan to comply with the requirements of the Rule, the Board may amend this Plan to add to or modify the provisions of this Plan accordingly.

 

  

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7.2.11          Code Section 409A.

 

   (a)         If any Award constitutes a “nonqualified deferred compensation plan” under Section 409A of the Code (a “Section 409A Plan”), then the Award shall be subject to the following additional requirements, if and to the extent required to comply with Section 409A of the Code:

(i)           Payments under the Section 409A Plan may not be made earlier than (u) the Grantee’s separation from service, (v) the date the Grantee becomes disabled, (w) the Grantee’s death, (x) a specified time (or pursuant to a fixed schedule) specified in the Award Agreement at the date of the deferral of such compensation, (y) a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation, or (z) the occurrence of an unforeseeable emergency;

(ii)           The time or schedule for any payment of the deferred compensation may not be accelerated, except to the extent provided in applicable Treasury Regulations or other applicable guidance issued by the Internal Revenue Service;

(iii)           Any elections with respect to the deferral of such compensation or the time and form of distribution of such deferred compensation shall comply with the requirements of Section 409A(a)(4) of the Code; and

(iv)           In the case of any Grantee who is specified employee, a distribution on account of a separation from service may not be made before the date that is six (6) months after the date of the Grantee’s separation from service (or, if earlier, the date of the Grantee’s death).

For purposes of the foregoing, the terms “separation from service”, “disabled,” and “specified employee”, all shall be defined in the same manner as those terms are defined for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.

   (b)         The Award Agreement for any Award that the Committee reasonably determines to constitute a Section 409A Plan, and the provisions of this Plan applicable to that Award, shall be construed in a manner consistent with the applicable requirements of Section 409A, and the Committee, in its sole discretion and without the consent of any Grantee, may amend any Award Agreement (and the provisions of this Plan applicable thereto) if and to the extent that the Committee determines that such amendment is necessary or appropriate to comply with the requirements of Section 409A of the Code. No Section 409A Plan shall be adjusted, modified, or substituted for, pursuant to any provision of this Plan, without the consent of the Grantee if any such adjustment, modification, or substitution would cause the Section 409A Plan to violate the requirements of Section 409A of the Code.

   (c)         The Company intends that this Plan shall comply with the requirements of Section 409A of the Code, to the extent applicable.  Should any changes to this Plan be necessary for this Plan to comply with the requirements of Section 409A, the Board may amend this Plan to add to or modify the provisions of this Plan accordingly.

7.2.12          The validity, construction, and effect of this Plan, any rules and regulations under this Plan, and any Award Agreement shall be determined in accordance with the laws of the State of California without giving effect to principles of conflict of laws, and applicable federal law.  Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts whose jurisdiction covers California to resolve any and all issues that may arise out of or relate to this Plan or any related Award Agreement.

 

  

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7.2.13          The Board shall have the authority to adopt such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Entities may operate to assure the viability of the benefits from Awards granted to Grantees performing services in such countries and to meet the objectives of this Plan.

7.2.14          The Company will seek stockholder approval in the manner and to the degree required under applicable laws.  If the Company fails to obtain any required stockholder approval of this Plan within twelve (12) months after the date this Plan is adopted by the Board, pursuant to Section 422 of the Code, any Option granted as an Incentive Stock Option at any time under this Plan will not qualify as an Incentive Stock Option within the meaning of the Code and will be deemed to be a Non-Statutory Stock Option.

[End of Document]

 

18ex10-1.htm

Exhibit 10.1

NON-EXCLUSIVE LICENSE AGREEMENT

 

 

This Non-Exclusive License Agreement (the “Agreement”) is made and entered into as of the __________ day of ________________, 2010 (the “Effective Date”), by and between Modavox, Inc., a Delaware corporation having a principal place of business at 43 West 24th Street, 11th Floor, New York, NY 10011 (“Modavox”) and Audio Eye, Inc., a Delaware corporation having a principal place of business at 9070 S. Rita Road, Suite 1550, Tuscon, AZ 85747 (“Licensee”).

 

WHEREAS, Modavox has developed and markets a variety of targeted communications products and related services, and owns certain intellectual property including certain patents related to delivering targeted communications.

 

WHEREAS, Licensee would like to license, and Modavox is willing to grant, a license to certain Licensed Patents (as defined below) in the Field of Use set forth below.

 

WHEREAS, Modavox is willing to license the Licensed Patents to Licensee as set forth in this Agreement;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein the parties hereto agree as follows:

 

1.             Definitions. The following definitions shall apply to this Agreement:

 

1.1            “Licensed Patents”, as used herein, refers to U.S. Patent Nos. 6,594,691 (“Method  and System for Adding Function to a Web Page”) (the “691’ Patent”) and 7,269,636 (“Method and Code Module for Adding Function to a Web Page”) (the “636’ Patent”), and a release with respect to any other patents owned or controlled by Modavox or its affiliates that Licensee needs to use or practice the claims of the ‘691 Patent or ‘636 Patent.

 

1.2           “Field of Use” means the accessibility software industry, which industry focuses on providing software solutions to generate audio outputs from traditional Web content in order to make such content accessible to disabled/impaired users consistent with the purposes of the Americans with Disabilities Act.

 

1.4           “Licensee Products or Services” means products and services that are developed by or for Licensee or provided by Licensee and as to which right, title and interest are primarily owned by Licensee.  Licensee Products or Services which utilize the Licensed Patents, per the license grant under this Agreement, are called “Targeted Accessibility Products or Services,” as described in Section 2.2 below.

 

1.5           “Gross Revenue” means all revenue or other consideration recognized by Licensee in accordance with United States Generally Accepted Accounting Principles related to use of the Licensed Patents in the Field of Use, including through Targeted Accessibility Products or Services, including sales, licenses, leases, subscriptions and maintenance, services, development and consulting fees.

 

1.7           “Territory means the fifty stated of the United States and the District of Columbia.

  

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2.             Grant.

2.1           License Grant. Subject to the terms and conditions of this Agreement, Modavox grants to Licensee, solely within the Territory and within the Field of Use, a non-exclusive, non-sublicensable, non-transferable and non-assignable license under the Licensed Patents to utilize the systems, methods, code modules and apparatuses covered by one or more claims of the Licensed Patents through the incorporation into Licensee Products and Services as described in Section 2.2 below.  Modavox warrants that (i) it is the owner of the Licensed Patents, and (ii) it has the sole right to provide a license for the Licensed Patents.  If Modavox transfers any of its rights in the Licensed Patents or if Modavox’s ownership or right to enforce any of the Licensed Patents changes, Modavox will provide written notice to Licensee within thirty (30) days of when Modavox gains knowledge of such events, but any such action or change will not affect the license granted herein or Licensee’s right to utilize the Licensed Patents as described herein.

2.2           End User Use of Licensee Products or Services Using Licensed Patents. The Licensed Patents may be incorporated by Licensee into Licensee Products or Services within the Field of Use (“Targeted Accessibility Products or Services”) as an enhancement thereto solely in the Field of Use for use by end user customers of Licensee (“End User(s)”).  Licensee will not make available to any End User any Targeted Accessibility Products or Services unless the End User executes a written agreement, in a form acceptable to Modavox, specifying that (i) End User obtains no property rights to the Licensed Patents by virtue of such use of the Targeted Accessibility Products or Services; and (ii) End User’s use of the Licensed Patents is restricted to its use of the Targeted Accessibility Products or Services within the Territory and will not extend beyond the term of this Agreement. All End User agreements must include confidentiality terms concerning the Modavox Confidential Information at least as restrictive as the Confidentiality terms in Section 9.5 below and must not be inconsistent with the terms of this Agreement.

2.3           Proprietary Rights. Except for the rights and licenses expressly granted to Licensee in this Agreement, Modavox shall reserve and retain all right title and interest (including, without limitation, all intellectual property rights) in and to the Licensed Patents, and all revisions, modifications, updates and upgrades of the foregoing.

 

 

2.4           No Sublicense.  For the avoidance of doubt, this Agreement does not authorize Licensee to grant any license of Licensed Patents that is ‘naked’ or not in connection with the use of Targeted Accessibility Products or Services in accordance with Section 2.1.

2.5           No Additional Licenses/Rights Conveyed.  Nothing contained in this Agreement shall be construed as conferring by implication, estoppels or otherwise, any license or other right under any Modavox patent rights or other industrial or intellectual property rights except for the licenses and rights expressly granted hereunder.

3.             Payments and other Consideration

3.1           Royalties.

3.1.1           For each calendar quarter, Licensee shall owe Modavox royalties equal to fifteen percent (15%) of Gross Revenue.

  

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3.1.2           Licensee shall pay Modavox quarterly royalties as calculated in this Section 3.1.1 only for the amount of those royalties that exceed the Guaranteed Royalty Payment of Section 3.2 due in that calendar quarter. There will be no carryover from calendar quarter to calendar quarter.

3.2           Guaranteed Royalty Payment. Licensee shall pay Modavox a non-refundable guaranteed royalty payment on a quarterly basis, commencing the calendar quarter following Licensee’s incorporation of the Licensed Patents into Targeted Accessibility Products or Services and before Licensee uses/sells or promotes for use/sale the Targeted Accessibility Products or Services (“Guaranteed Royalty Payment”). The Guaranteed Royalty Payment obligation shall be determined by Modavox and Licensee based upon Licensee’s written financial/business revenue projections related to the Targeted Accessibility Products or Services, which financial/business revenue projections, including but not limited those which are provided to any investor(s) of Licensee, will be shared with Modavox.

3.3           Payment Timing.  Guaranteed Royalty Payments due under Section 3.2 will be due on or before the first day of the calendar quarter.  Payments due under Section 3.1.1 shall be due in full within thirty (30) days after the last day of the calendar quarter for which payment is due.

3.4           Assignment; Modavox Right to Adjust Guaranteed Royalty Payment.  If the Grants of either Sections 2.1 or 2.2 continue after Licensee assigns this Agreement under Section 9.9 to an entity which, at the time of assignment, (a) had at least $1 billion in annual revenues over the last four reported quarters; (b) has a corporate shareholder owning over twenty percent of the assignee entity and that corporate and that corporate shareholder had at least $1 billion in annual revenues over the last four reported quarters; or (c) has corporate shareholders that each has at least $1 billion in annual revenues over the last four reported quarters and these corporate shareholders collectively own over fifty percent of the assignee entity, then Modavox has the option to raise the Guaranteed Royalty Payment under Section 3.2 to up to three times the amount currently in these sections. Any increase in such Guaranteed Royalty Payment would be effective on a pro-rata basis, as of the date that notice by Modavox to the assignee of this Agreement of increased Guaranteed Royalty Payment is considered effective.

4.             Licensee Joint Marketing Activities.

In addition to the license arrangement described herein related to the Field of Use, Licensee and Modavox desire to work together under a separate referral arrangement to promote Modavox’s lines of business, which business focuses on providing technical platform-based services and solutions.  Such referral arrangement is described more fully in Exhibit A hereto.

5.             Indemnification.

5.1           Licensee Indemnification.  Licensee will at all times during the Term of this Agreement and thereafter, indemnify, defend and hold Modavox, its directors, officers and employees harmless against all claims, proceedings, demands and liabilities of any kind, including legal expenses and reasonable attorneys fees (“Losses”), arising out of any breach of any representation or warranty or covenant made by Licensee in this Agreement.

5.2            Modavox Indemnification.  Modavox will at all times during the Term of this Agreement and thereafter, indemnify, defend and hold Licensee, its directors, officers and employees harmless against all Losses arising out of any breach of any representation or warranty or covenant made by Modavox in this Agreement.

  

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6.             Trademark Usage.

6.1           Modavox Usage Guidelines.  Any use by Licensee of Modavox Marks shall be in conformance with any trademark usage guidelines communicated by Modavox to Licensee from time to time. Prior to publishing any Printed Material, other materials, web pages or the like bearing a Modavox Mark, Licensee shall provide Modavox with copies and samples of any such items bearing the Modavox Marks, and shall promptly remedy any failure of such items to conform to Modavox’s trademark usage guidelines that are communicated to Licensee by Modavox. Licensee will acquire no interest in the Modavox Marks or their translations into any other languages and all rights in the Modavox Marks shall belong to Modavox. Licensee shall not register any trademarks or service marks incorporating the word Modavox, the word Modavox, any Modavox logo or any other Modavox trademark and if Licensee acquires any rights in such marks, such rights shall automatically be assigned to Modavox.

 

6.2           Goodwill.  Any goodwill arising out of or relating to Licensee’ use of the Modavox Marks shall inure to the sole benefit of Modavox. Licensee shall execute any documents reasonably requested by Modavox to evidence Modavox’s ownership of such marks on Modavox’s request.

 

7.             Reports, Books and Records; Audit; Late Payments and Taxes.

 

7.1           Reports. Within thirty (30) days after the last day of each quarter during the Term, Licensee shall submit to Modavox written statement (the “Quarterly License Reporting Statement”) detailing with respect to the preceding quarterly period: (a) all Gross Revenue; and (b) the Royalties to be paid to Modavox under this Agreement based on such Gross Revenue.

 

7.2           Adjustments.  If Licensee has to reverse previously recognized Gross Revenue reported under a previous Quarterly License Reporting Statement, Licensee can claim credit on a subsequent Quarterly License Reporting Statement for the same quarter it reverses the previously recognized Gross Revenue in Licensee’ income statement.  Such credit will not exceed the amount of Royalties to be paid in the then-current quarter, but the unused credit may be carried over to succeeding quarters within the same contract year.

 

7.3           Payment Timing.  Licensee shall pay Modavox, on a quarterly basis, the Royalty amounts reported in the Quarterly License Reporting Statement for such quarter not later than thirty (30) days after the end of such quarter.

 

7.4           Books and Records. Licensee shall maintain appropriate books of account and records with respect to Gross Revenue and Targeted Accessibility Products and Services in accordance with generally accepted accounting principles and shall make complete and accurate entries concerning all transactions relevant to the Agreement. All such books of account and records shall be kept available by Licensee for no less than three (3) years after the end of each calendar year, or, in the event of a dispute between the parties involving in any way those books of accounts and records, until such time as the dispute will have been resolve, whichever is later.

 

7.5           Audit. Modavox shall have the right during the Term and for a period of three (3) years after the end of the calendar year, or, in the event of a dispute concerning the accuracy and/or correctness of a Quarterly License Reporting Statement or any other payment made under this Agreement, until the dispute is resolved, whichever is later, through an independent public accountant or other qualified expert selected by Modavox and reasonably acceptable to Licensee, in inspect and examine Licensee’ relevant books of accounts and records, server log files and other documents (including, without limitation, vouchers, records, purchase orders, sales orders, re-orders, agreements and technical information) relating to the subject matter of this Agreement. Such inspection and examination shall be done to confirm that appropriate payments have been made or that the Modavox Patents are being used only within the license granted under this Agreement. Any such audit shall take place upon reasonable prior written notice to Licensee and during Licensee’ regular business hours. Except as set forth in Section 7.6, the cost of such audit shall be borne by Modavox.

  

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7.6           Late Payments. Modavox shall be entitled to charge, and Licensee shall pay, interest on any overdue amounts under this Agreement at the rate of one percent (1%) per month (or part thereof), or at such lower rate as may be the maximum rate allowed under applicable law. In the event that an audit reveals any undisputed underpayment, Licensee shall, within thirty (30) days after written notice from Modavox, make up for such underpayment by paying the difference between amounts the audits reveals and the amounts Licensee actually paid, together with such interest on such difference. If the underpayment is more than five percent (5%), Licensee shall pay the reasonable cost of the audit.  If any amount is overdue by more than ninety (90) days, in addition to any other remedies Modavox may have under this Agreement, Modavox can turn over the right to collect such overdue amounts to a collection agency. Licensee shall be responsible for any reasonable costs incurred by Modavox or such collection agency in collecting any amount that is overdue by more than ninety (90) days including, but not limited to, reasonable attorney’s fees.

 

7.7           Taxes. In addition to the fees, royalties and other charges set forth in this Agreement, Licensee shall pay all taxes, duties and levies imposed by all national, state, province and local authorities (including, without limitation, export, sales, use and excise) based on the transactions or payments under this Agreement. Amounts payable by Licensee hereunder shall be paid without deduction or withholding for or on account of any present or future tax, levy, impost, fee, assessment, deduction or charge by any taxing authority except the withholding tax deductible on any tax based Modavox income.

 

8.             Term and Termination.

 

8.1           Term.  This Agreement and all licenses hereunder shall take effect upon the Effective Date and shall continue until the last of the Licensed Patents expires, unless terminated sooner in accordance with Section 8.2 below.

 

8.2           Termination for Cause. Modavox and Licensee may terminate this Agreement if:

 

8.2.1           the other party breaches any material provision of this Agreement and fails to remedy such breach within thirty (30) days of the non-breaching party’s written notice of such breach (or, if such breach cannot be remedied in that time, fails to commence remedial procedures within said thirty (30) day period and diligently prosecutes the cure to completion);

 

8.2.2           the other party dissolves, becomes insolvent or makes a general assignment for the benefit of its creditors; or

 

8.2.3           a voluntary or involuntary petition or proceeding is commenced by or against the other party under the applicable bankruptcy laws or any other statue of any state or country relating to insolvency or the protection of the rights of creditors, or any other insolvency or bankruptcy proceeding or other similar proceedings for the settlement of the other party’s debt is instituted.

 

8.3           Injunctive Relief.  If Modavox terminates this Agreement in accordance with Section 8.2 and Licensee thereafter makes, uses or sells systems, methods, apparatuses or code modules covered by one or more of the claims of the Licensed Patents, then Modavox shall, at its option, be entitled to seek an injunction to prohibit such activity and, in any event, shall be entitled to money damages, together with attorneys fees for enforcement of this Agreement.

 

  

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8.4           Effect of Termination. Upon the expiration or sooner termination of this Agreement:

 

8.4.1           all rights and licenses granted to Licensee hereunder will terminate, and Licensee shall cease use of the Modavox Patents, the Modavox Marks and cease all direct or indirect distribution of Targeted Accessibility Products or Services;

 

8.4.2           Licensee will destroy or return to Modavox all Confidential Information of Modavox and all copies of any of the foregoing;

 

8.4.3           Any goodwill associated with the Modavox Marks that is built up by Licensee during the Term shall be owned by Modavox; and

 

8.4.4           Modavox, at its option, will destroy or return to Licensee all Confidential Information of Licensee and all copies of the foregoing.

 

9.             Miscellaneous

 

9.1           Jurisdiction. The parties agree that exclusive jurisdiction for any dispute related to this Agreement lies in the courts of the State of New York, U.S.A, and according to New York law. For the avoidance of doubt, the parties understand that upon termination or expiration of this Agreement, Modavox may seek judgments and remedies for unauthorized infringement of Modavox intellectual property in any forum including the United States International Trade Commission or a Government Customs agency.

 

9.2           Licensee Representations & Warranties.  Licensee represents and warrants that:

 

9.2.1           it is a corporation duly organized and validly existing under the laws of the jurisdiction in which it is incorporated, and has the corporate power and authority to enter into and perform this Agreement;

 

9.2.2           all corporate action on the part of Licensee necessary for the authorization, execution and delivery of this Agreement and for the performance of all its obligations hereunder has been taken, and this Agreement, when fully executed and delivered, shall each constitute a valid, legally binding and enforceable obligation of Licensee;

 

9.3           WARRANTY DISCLAIMERS. EXCEPT EXPRESSLY STATED HEREIN, EACH PARTY EXPRESSLY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANT ABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WHETHER ARISING IN LAW, CUSTOM, CONDUCT OR OTHERWISE.

 

9.4           LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO LICENSEE’S USE OF THE LICENSED PATENTS IN A MANNER NOT PERMITTED BY SECTION 2 ABOVE, IN NO EVENT WILL ANY PARTY BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES, OR ANY DAMAGES FOR LOSS OF DATA, PROFITS, REVENUE, BUSINESS OR GOODWILL, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

  

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9.5              Mutual Confidentiality.

 

9.5.1           Parties’ Obligations.  Each of the parties will: (i) keep and maintain all Confidential Information of the other Party in confidence, using such degree of care as is appropriate to avoid unauthorized use or disclosure; (ii) not, directly or indirectly, disclose Confidential Information of the other Party, except with the prior written consent of the other Party; (iii) upon the expiration or termination of this Agreement and upon the request of the other Party, promptly deliver to the requesting Party or, at the requesting Party's option or in the absence of direction from the other Party, destroy, all information, data, memoranda, notes, records, reports, media and other documents and materials (and all copies thereof) regarding or including any Confidential Information of the requesting Party which the other Party may then possess or have under its control; and (iv) not take any action with respect to the Confidential Information of the other Party that is inconsistent with its confidential and proprietary nature.

 

9.5.2           Confidential Information Defined.  For purposes of this Agreement, "Confidential Information" will mean (i) information with respect to each Party’s technology, employees, customers, products and business strategies, and (ii) any information marked confidential, restricted or proprietary.

 

9.5.3           Permitted Disclosure.  Each of the Parties will be permitted to disclose Confidential Information of the other Party: (i) to its employees, agents and subcontractors having a need to know such information in connection with the performance or receipt of the Services or its obligations pursuant to this Agreement; and (ii) if disclosure is required by law or requested by an authorized government agency; provided, however, that the disclosing Party will notify the other Party in advance of such disclosure, and provide the Party with copies of any related information so that the Party may take appropriate action to protect its Confidential Information.  With respect to clause (i) of this Subsection 9.5.3, each of the parties will instruct all such employees, agents and subcontractors of their obligations under this Agreement.

 

9.5.4           Limitations.  The obligations set forth in this Section 9.5 will not apply to information that (i) is or becomes generally known to the public, other than as a result of a disclosure of a Party's Confidential Information by the other Party, (ii) is rightfully in the possession of the other Party prior to disclosure, free of any obligation of confidentiality, (iii) is received by a Party in good faith and without restriction from a third party not under a confidentiality obligation to the other party and having the right to make such disclosure, or (iv) is independently developed without reference to the other party's Confidential Information.  Each of the parties acknowledges that the disclosure of Confidential Information may cause irreparable injury to the other party and damages which may be difficult to ascertain.  Each party will, therefore, be entitled to seek injunctive relief upon a disclosure or threatened disclosure of its Confidential Information, in addition to such other remedies as may be available at law or in equity.  Without limitation of the foregoing, each party will advise the other immediately in the event that it learns or has reason to believe that any person or entity that has had access to Confidential Information has violated or intends to violate the terms of this Section 9.5.

9.6              Costs. Each party will bear its own costs except as provided for in this Agreement.

 

9.7              Non-Monetary Consideration. If Licensee proposes to receive any consideration beyond direct exchange of money for Targeted Accessibility Products or Services or other use of the Licensed Patents provided under the license agreement (e.g. equity, marketing commitments or any offsets), Licensee and Modavox will negotiate a customer-specific amendment to the agreement that provides fair and reasonable compensation to Modavox prior to Licensee selling or licensing any such Targeted Accessibility Products or Services. If the parties are unable to reach agreement on this amendment, Licensee shall not have the right to sell or license such Licensee Products or Services.

 

  

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9.8              Currency. All payments made hereunder shall be made in U.S. Dollars.

 

9.9              Assignability. Licensee will not be able to assign the Agreement without prior written consent from Modavox. Modavox can assign this Agreement to a party who agrees to be bound by Modavox’s obligations under this Agreement, including any successor to Modavox or any party who acquires assets of Modavox.

 

9.10           Nonwaiver. The failure of a party to enforce at any time any of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce any such provisions.

 

9.11           Agency or Obligation. This Agreement is limited to the rights and obligations set forth herein; no agency, partnership, joint venture, fiduciary or similar relationship is created hereby, and no party has any authority of any kind to bind another party in any respect whatsoever, nor any obligation of any kind to another party except as provided herein.

 

9.12           Force Majeure. No party shall be responsible for its failure to perform to the extent due to unforeseen circumstances or causes beyond its control, such as acts of God, wars, riots, embargoes, strikes, acts of civil or military authorities, fires, or floods, provided that such party gives another party prompt written notice of the failure to perform and the reason therefore and uses its reasonable efforts to limit the resulting delay in its performance.

 

9.13           Notices. Notices under this Agreement shall be sufficient only if given by certified or registered mail, return receipt requested, personally delivered or sent by commercial overnight courier or if sent by facsimile with a written confirmation or acknowledgment of receipt or sent by e-mail with confirmation of receipt. Notice by mail shall be deemed received five days after mailing. Notices shall be sent to:

 

	
Audio Eye, Inc.

	
Modavox, Inc.

	
c/o Nathaniel Bradley

	
Legal Department

	
7450 Sandbar Willow Place

	
43 West 24th Street, 11th Floor

	
Tuscon, AZ 85747

	
New York, NY 10011

	
E-mail: nbradley@audioeye.com

	
E-mail: jim.lawson@modavox.com

	
Attn: Nathaniel Bradley

	
Attn: James Lawson

 

9.14           Execution in Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original instrument, but all of which shall constitute one and the same agreement.

9.15           Severability; Headings. In the event that any one or more of the provisions of this Agreement shall for any reason be held to be unenforceable in any respect under any federal or state law, such unenforceability shall not affect any other provision, but this Agreement shall then be construed as if such unenforceable provision or provisions had never been contained herein. The parties agree that the section or paragraph headings used in this Agreement are for references purposes only and shall not be used in the interpretation of this Agreement.

9.16           Modification; Entire Agreement. This Agreement may be modified only by a writing signed by an authorized representative of each party. This Agreement supersedes all proposals oral and written, all negotiations, conversations or discussions between the parties relating to the subject matter hereof and thereof.

9.17           Survival. The parties’ rights and obligations under Sections 3, 5, 6, 7, 8 and 9 and any outstanding obligations incurred prior to termination (including earned but not yet due to royalties, fees and charges) will survive any expiration or sooner termination of this Agreement.

  

-8-

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement:

 

* * * * *

 

ACKNOWLEDGED AND AGREED:

 

	
AUDIO EYE, INC.

	
MODAVOX, INC.

	  	  
	
By:

	
By:

	  	  
	
Name:

	
Name: Mark Severini

	  	  
	
Title:

	
Title: CEO

	  	  
	
Date:

	
Date:

 

  

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EXHIBIT A

 

Joint Marketing/Referral Arrangement

 

Licensee and Modavox desire to work together to promote Modavox’s platform-based technology solutions and services (“Modavox Services”) to Designated Customers, as defined below, through the specific work and involvement of the Licensee Designated Contact, as defined below.  This arrangement will be handled as follows:

 

	
A.

	
Modavox Referrals.  Licensee will work with Modavox, through the Licensee Designated Contact(s), to introduce and sell the Modavox Services to client targets which are specifically pre-approved in writing by Modavox (“Designated Customers”).  Schedule A-1 hereto identifies the Licensee Designated Contact(s) and contains a list of Designated Customers and the effective date of each such designation.  Schedule A-1 may be amended from time to time to add new Designated Customers or to modify the Licensee Designated Contact, upon the written consent of both parties (which consent may be provided by email from each consenting party).  Only the Designated Customer(s) and Licensee Designated Contact(s) listed in Schedule A-1 hereto, as amended in writing from time to time, will be covered by the terms of this Agreement.

Modavox and Licensee, through the active involvement of the Licensee Designated Contact(s), will participate jointly and collaboratively in arranging and participating in meetings with Designated Customers to promote the Modavox Services.  If a Designated Customer agrees to implement the Modavox Services, Modavox will contract independently with the Designated Customer and Modavox will have complete discretion in setting the terms and conditions of service.

 

After designation of a client target as a “Designated Customer,” Modavox will not pursue the Designated Customer to sell the Modavox Services outside the scope of this Agreement for a period of six (6) months after the client target’s designation as a “Designated Customer” (or, if the Designated Customer enters into a production services agreement with Modavox, at any time before Modavox payment obligations to Licensee are complete as described in (B) below).  If the Designated Customer does not enter into a production services agreement to purchase the Modavox Service within six (6) months, or a greater period if extended by the parties in writing, or if the Licensee Designated Contact ceases to actively market and sell the Modavox Service as contemplated herein, then the Designated Customer and will no longer be covered by the terms of this Agreement and the parties will have no future rights or responsibilities with respect to marketing or selling the Modavox Services to that Designated Customer.

 

	
B.

	
Licensee Referral Fee.  As compensation for the efforts of the Licensee Designated Contact(s) in helping Modavox enter into production level service agreements with Designated Customers, Licensee will receive a commission (the “Licensee Fee”) based on the Gross Revenue received by Modavox for any production services agreement entered into within the six-month period described above (including any written extension thereto) between Modavox and the Designated Customer (the “Designated Customer Agreement”).  The Licensee Fee will equal: (i) twenty percent (20%) of the Gross Revenue received by Modavox under a Designated Customer Agreement with respect to the first two (2) years of the Designated Customer Agreement; and (ii) ten percent (10%) of the Gross Revenue received by Modavox under a Designated Customer Agreement with respect to the third through fifth years of the Designated Customer Agreement.  Modavox will pay the Licensee Fee on a quarterly basis in arrears based upon the Gross Revenue received by Modavox during that quarter.

 

  

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Schedule A-1

 

List of Designated Customer(s), Effective Dates & Licensee Designated Contact(s)

 

 

	
Designated Customer(s)

	
Effective Date(s)

	
Licensee Designated Contact(s)

	
Name

	
Date

	
Contact

 

  

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