Document:

EXHIBIT 4.2

 

PROUROCARE MEDICAL INC.

 

AMENDED AND RESTATED 2004 STOCK
OPTION PLAN

Amended  and restated as of March 27, 2008

 

1.     Purpose.

 

The purpose of the Amended and Restated 2004 Stock
Option Plan (the “Plan”) of ProUroCare Medical Inc. (the “Company”), a Nevada
corporation, is to increase shareholder value and to advance the interests of
the Company by furnishing a variety of economic incentives (variously referred
to hereinafter as the “Incentives”) designed to attract, retain and motivate
employees, directors and consultants. 
Incentives may consist of opportunities to purchase or receive shares of
the Company’s common stock, $0.00001 par value (the “Common Stock”), monetary
payments, or both, on terms and conditions determined under this Plan.

 

2.     Administration.

 

2.1   The Plan
shall be administered by a committee of the Company’s board of directors (the “Committee”).  The Committee shall consist of not less than
two directors of the Company who shall be appointed from time to time by the
Company’s board of directors.  Each
member of the Committee shall qualify both as a “non-employee director” within
the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (together with the rules and regulations promulgated thereunder,
the “Exchange Act”), and as an “outside director” as defined in Section 162(m) of
the Internal Revenue Code of 1986, as amended (the “Code”).  The Committee shall have complete discretion
and authority to determine all provisions of all Incentives awarded under the Plan
(consistent with the terms of the Plan), interpret the Plan, and make any other
determination which it believes necessary and advisable for the proper
administration of the Plan.  The
Committee’s decisions and matters relating to the Plan shall be final and
conclusive for the Company and its participants.  No member of the Committee will be liable for
any action or determination made in good faith with respect to the Plan or any
Incentives granted under the Plan.  The
Committee will also have the authority under the Plan to amend or modify the
terms of any outstanding Incentives in any manner; provided,
however, that any such amended or modified terms are permitted by
the Plan as then in effect, and any recipient of an Incentive adversely
affected by such amended or modified terms has consented to such amendment or
modification.  No amendment or
modification to an Incentive, however, whether pursuant to this Section 2
or any other provisions of the Plan, will be deemed to be a re-grant of such
Incentive for purposes of this Plan.  If
at any time there is no Committee, then for purposes of the Plan the term “Committee”
shall mean the Company’s board of directors.

 

2.2   In the
event of (i) any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, extraordinary dividend or divestiture, including a
spinoff, or any other similar change in corporate structure or shares, (ii) any
purchase, acquisition, sale or disposition of a significant amount of assets or
a significant business, (iii) any change in accounting principles or
practices, or (iv) any other similar change, in each case with respect to
the Company or any other entity whose performance is relevant to the grant or
vesting of an Incentive, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation) may, without the consent of any affected recipient of an
Incentive, amend or modify the vesting criteria of any outstanding Incentive
based, in whole or in part, on the financial performance of the Company (or any
subsidiary or division thereof) or such other entity so as 

 

 

equitably to reflect such event, with the desired result that the
criteria for evaluating such financial performance of the Company or such other
entity will be substantially the same (in the sole discretion of the Committee
or the board of directors of the surviving corporation) following such event as
prior to such event; provided, however,
that the amended or modified terms are permitted by the Plan as then in effect.

 

3.     Eligible Participants.

 

Employees of the Company or its subsidiaries,
including officers and employees of the Company or its subsidiaries), directors
and consultants, advisors or other independent contractors who provide services
to the Company or its subsidiaries, including members of any advisory board,
shall become eligible to receive Incentives under the Plan when designated by
the Committee.  Participants may be
designated individually or by groups or categories (for example, by pay grade)
as the Committee deems appropriate. 
Participation by Company officers or its subsidiaries and any
performance objectives relating to such officers must be approved by the
Committee.  Participation by others and
any performance objectives relating to others may be approved by groups or
categories (for example, by pay grade) and authority to designate participants
who are not officers and to set or modify such performance objectives may be
delegated.

 

4.     Types of Incentives.

 

Incentives under the Plan may be granted in any
combination of the following forms:  (a) incentive
stock options and non-statutory stock options under Section 6; (b) stock-appreciation
rights (“SARs”) under Section 7; (c) stock awards under Section 8;
(d) restricted stock under Section 8; and (e) performance shares
under Section 9.

 

5.     Shares Subject to the
Plan.

 

5.1   Number
of Shares.  Subject to adjustment as
provided in Section 11.5, the number of shares of Common Stock which may
be issued under the Plan shall not exceed 150,000 shares of Common Stock.  Shares of Common Stock issued under the Plan
or that are currently subject to outstanding Incentives will be applied to
reduce the maximum number of shares of Common Stock remaining available for
issuance under the Plan.

 

5.2   Cancellation.  To the extent that cash in lieu of shares of
Common Stock is delivered upon the exercise of an SAR pursuant to Section 7.4,
the Company shall be deemed, for purposes of applying the limitation on the
number of shares, to have issued the greater of the number of shares of Common
Stock which it was entitled to issue upon such exercise or upon the exercise of
any related option.  In the event that a
stock option or SAR granted hereunder expires or is terminated or canceled
unexercised or unvested as to any shares of Common Stock, such shares may again
be issued under the Plan either pursuant to stock options, SARs or otherwise.  In the event that shares of Common Stock are
issued hereunder as restricted stock or pursuant to a stock award and
thereafter are forfeited or reacquired by the Company pursuant to rights
reserved upon issuance thereof, such forfeited and reacquired shares may again
be issued under the Plan, either as restricted stock, pursuant to stock awards
or otherwise.  The Committee may also
determine to cancel, and agree to the cancellation of, stock options in order
to make a participant eligible for the grant of a stock option at a lower price
than the option to be canceled.

 

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6.     Stock Options.

 

A stock option is a right to purchase shares of Common
Stock from the Company.  The Committee
may designate whether an option is to be considered an incentive stock option
or a non-statutory stock option.  To the
extent that any incentive stock option granted under the Plan ceases for any
reason to qualify as an “incentive stock option” for purposes of Section 422
of the Code, such incentive stock option will continue to be outstanding for
purposes of the Plan but will thereafter be deemed to be a non-statutory stock
option.  Each stock option granted by the
Committee under this Plan shall be subject to the following terms and
conditions:

 

6.1   Price.  The option price per share shall be
determined by the Committee, subject to adjustment under Section 11.5.

 

6.2   Number.  The number of shares of Common Stock subject
to the option shall be determined by the Committee, subject to adjustment as
provided in Section 11.5.  The
number of shares of Common Stock subject to a stock option shall be reduced in
the same proportion that the holder thereof exercises a SAR if any SAR is
granted in conjunction with or related to the stock option.  No individual may receive options to purchase
more than 1,000,000 shares in any year.

 

6.3   Term and
Time for Exercise.  Subject to
earlier termination as provided in Section 11.4, the term of each stock
option shall be determined by the Committee but shall not exceed ten (10) years
and one day from the date of grant.  Each
stock option shall become exercisable at such time or times during its term as
shall be determined by the Committee at the time of grant.  The Committee may in its discretion
accelerate the exercisability of any stock option.  Subject to the foregoing and with the
approval of the Committee, all or any part of the shares of Common Stock with
respect to which the right to purchase has accrued may be purchased by the Company
at the time of such accrual or at any time or times thereafter during the term
of the option.

 

6.4   Manner
of Exercise.  Subject to the
conditions contained in this Plan and in the agreement with the recipient
evidencing such option, a stock option may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of shares of
Common Stock to be purchased and accompanied by the full purchase price for
such shares.  The exercise price shall be
payable (a) in United States dollars upon exercise of the option and may
be paid by cash; uncertified or certified check; or bank draft; (b) at the
discretion of the Committee, by delivery of shares of Common Stock already
owned by the participant in payment of all or any part of the exercise price,
which shares shall be valued for this purpose at the Fair Market Value (as
defined in Section 11.12 below) on the date such option is exercised; or (c) at
the discretion of the Committee, by instructing the Company to withhold from
the shares of Common Stock issuable upon exercise of the stock option shares of
Common Stock in payment of all or any part of the exercise price and/or any
related withholding-tax obligations, which shares shall be valued for this
purpose at the Fair Market Value or in such other manner as may be authorized
from time to time by the Committee.  Any
shares of Common Stock delivered by a participant pursuant to clause (b) above
must have been held by the participant for a period of not less than six (6) months
prior to the exercise of the option, unless otherwise determined by the
Committee.  Prior to the issuance of
shares of Common Stock upon the exercise of a stock option, a participant shall
have no rights as a shareholder with respect to shares of Common Stock issuable
under such stock option.  Except as
otherwise provided in the Plan, no adjustment will be made for dividends or
distributions declared as of a record date preceding the date on which a
participant becomes the holder of record of shares of Common Stock acquired
upon exercise of a stock option, except as the Committee may determine in its
sole discretion.

 

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6.5   Incentive
Stock Options.  Notwithstanding
anything in the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options which are intended to qualify as incentive
stock options (as such term is defined in Section 422 of the Code):

 

(a)   The
aggregate Fair Market Value (determined as of the time the option is granted)
of the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by any participant during any calendar year
(under the Plan and any other incentive stock-option plans of the Company or
any subsidiary or parent corporation of the Company) shall not exceed
$100,000.  The determination will be made
by taking incentive stock options into account in the order in which they were
granted.

 

(b)   Any
certificate for an incentive stock option authorized under the Plan shall
contain such other provisions as the Committee shall deem advisable, but shall
in all events be consistent with and contain all provisions required in order
to qualify the options as incentive stock options.

 

(c)   All
incentive stock options must be granted within ten (10) years from the
earlier of the date on which this Plan was adopted by board of directors or the
date this Plan was approved by the Company’s shareholders.

 

(d)   Unless
sooner exercised, all incentive stock options shall expire no later than ten (10) years
after the date of grant.  No incentive
stock option may be exercisable after ten (10) years from its date of
grant (or five (5) years from its date of grant if, at the time of grant,
the participant owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company).

 

(e)   The
exercise price for a share of Common Stock under an incentive stock options
shall be not less than one hundred percent (100%) of the Fair Market Value of
one share of Common Stock on the date of grant; provided,
however, that the exercise price shall be one hundred ten percent
(110%) of the Fair Market Value if, at the time the incentive stock option is
granted, the participant owns, directly or indirectly, more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any parent or subsidiary corporation of the Company.

 

7.     Stock-Appreciation
Rights.

 

An SAR is a right to receive, without payment to the
Company, a number of shares of Common Stock, cash, or any combination thereof,
the amount of which is determined pursuant to the formula set forth in Section 7.4.  An SAR may be granted (a) with respect
to any stock option granted under this Plan, either concurrently with the grant
of such stock option or at such later time as determined by the Committee (as
to all or any portion of the shares of Common Stock subject to the stock
option), or (b) alone, without reference to any related stock option.  Each SAR granted by the Committee under this
Plan shall be subject to the following terms and conditions:

 

7.1   Number;
Exercise Price.  Each SAR granted to
any participant shall relate to such number of shares of Common Stock as shall
be determined by the Committee, subject to adjustment as provided in Section 11.5.  In the case of an SAR granted with respect to
a stock option, the number of shares of Common Stock to which the SAR pertains
shall be reduced in the same proportion that the holder of the option exercises
the related stock option.  The exercise
price of an SAR will be determined by the Committee, in its discretion, at the
date of grant but 

 

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may not be less than one hundred percent (100%) of the Fair Market
Value of one share of Common Stock on the date of grant.

 

7.2   Duration.  Subject to earlier termination as provided in
Section 11.4, the term of each SAR shall be determined by the Committee
but shall not exceed ten (10) years and one day from the date of
grant.  Unless otherwise provided by the
Committee, each SAR shall become exercisable at such time or times, to such
extent and upon such conditions as the stock option, if any, to which it relates
is exercisable.  The Committee may in its
discretion accelerate the exercisability of any SAR.

 

7.3   Exercise.  An SAR may be exercised, in whole or in part,
by giving written notice to the Company, specifying the number of SARs which
the holder wishes to exercise.  Upon
receipt of such written notice, the Company shall, within ninety (90) days
thereafter, deliver to the exercising holder certificates for the shares of
Common Stock or cash, or both, as determined by the Committee, to which the
holder is entitled pursuant to Section 7.4.

 

7.4   Payment.  Subject to the right of the Committee to
deliver cash in lieu of shares of Common Stock (which, as it pertains to
Company officers and directors, shall comply with all requirements of the
Exchange Act), the number of shares of Common Stock which shall be issuable
upon the exercise of an SAR shall be determined by dividing:

 

(a)   the number
of shares of Common Stock as to which the SAR is exercised multiplied by the
amount of the appreciation in such shares (i.e., the amount by which the Fair
Market Value of the shares of Common Stock subject to the SAR on the exercise
date exceeds (1) in the case of an SAR related to a stock option, the
exercise price of the shares of Common Stock under the stock option or (2) in
the case of an SAR granted alone and without reference to a related stock
option, an amount which shall be determined by the Committee at the time of
grant, subject to adjustment under Section 11.5); by

 

(b)   the Fair
Market Value of a share of Common Stock on the exercise date.

 

In lieu of issuing shares
of Common Stock upon the exercise of a SAR, the Committee may elect to pay the
holder of the SAR cash equal to the Fair Market Value on the exercise date of
any or all of the shares which would otherwise be issuable.  No fractional shares of Common Stock shall be
issued upon the exercise of an SAR; instead, the holder of the SAR shall be
entitled to receive a cash adjustment equal to the same fraction of the Fair
Market Value of a share of Common Stock on the exercise date or to purchase the
portion necessary to make a whole share at its Fair Market Value on the date of
exercise.

 

8.     Stock Awards and
Restricted Stock.

 

A stock award consists of the transfer by the Company
to a participant of shares of Common Stock, without other payment therefor, as
additional compensation for services rendered to the Company.  The participant receiving a stock award will
have all voting, dividend, liquidation and other rights with respect to the
shares of Common Stock issued to a participant as a stock award under this Section 8
upon the participant becoming the holder of record of such shares.  A share of restricted stock consists of
shares of Common Stock which are sold or transferred by the Company to a
participant at a price determined by the Committee (which price shall be at
least equal to the minimum price required by applicable law for the issuance of
a share of Common Stock) and subject to restrictions on their sale or other
transfer by the participant, which restrictions and conditions may be
determined by the Committee as long as such 

 

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restrictions and conditions are not inconsistent with
the terms of the Plan.  The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:

 

8.1   Number
of Shares.  The number of shares to
be transferred or sold by the Company to a participant pursuant to a stock
award or as restricted stock shall be determined by the Committee.

 

8.2   Sale
Price.  The Committee shall determine
the price, if any, at which shares of restricted stock shall be sold or granted
to a participant, which may vary from time to time and among participants and
which may be below the Fair Market Value of such shares of Common Stock at the
date of sale.

 

8.3   Restrictions.  All shares of restricted stock transferred or
sold hereunder shall be subject to such restrictions as the Committee may
determine, including without limitation any or all of the following:

 

(a)   a prohibition
against the sale, transfer, pledge or other encumbrance of the shares of
restricted stock, such prohibition to lapse at such time or times as the
Committee shall determine (whether in annual or more frequent installments, at
the time of the death, disability or retirement of the holder of such shares,
or otherwise);

 

(b)   a
requirement that the holder of shares of restricted stock forfeit, or (in the
case of shares sold to a participant) resell back to the Company at his or her
cost, all or a part of such shares in the event of termination of his or her
employment or consulting engagement during any period in which such shares are
subject to restrictions; or

 

(c)   such other
conditions or restrictions as the Committee may deem advisable.

 

In order to enforce the
restrictions imposed by the Committee pursuant to Section 8.3, the
participant receiving restricted stock shall enter into an agreement with the
Company setting forth the conditions of the grant.  Shares of restricted stock shall be registered
in the name of the participant and deposited, together with a stock power
endorsed in blank, with the Company unless otherwise determined by the
Committee.  Each such certificate shall
bear a legend in substantially the following form:

 

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK REPRESENTED BY IT ARE SUBJECT TO THE TERMS AND CONDITIONS
(INCLUDING CONDITIONS OF FORFEITURE) CONTAINED IN THE 2004 STOCK OPTION  PLAN OF PROUROCARE MEDICAL INC., (THE “COMPANY”),
AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE
COMPANY.  A COPY OF THE 2004 STOCK OPTION
PLAN AND THE AGREEMENT IS AVAILABLE FROM THE COMPANY UPON REQUEST.

 

8.4   End of
Restrictions.  Subject to Section 11.3,
at the end of any time period during which the shares of restricted stock are
subject to forfeiture and restrictions on transfer, such shares will be
delivered free of all restrictions to the participant or to the participant’s
legal representative, beneficiary or heir.

 

6

 

8.5   Shareholder.  Subject to the terms and conditions of the
Plan, each participant receiving restricted stock shall have all the rights of
a shareholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation the right to vote such shares.  Dividends paid in cash or property other than
Common Stock with respect to shares of restricted stock shall be paid to the
participant currently.  Unless the
Committee determines otherwise in its sole discretion, any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the restrictions set forth above will be
subject to the same restrictions as the shares to which such dividends or
distributions relate.  In the event the
Committee determines not to pay dividends or distributions currently, the
Committee will determine in its sole discretion whether any interest will be
paid on such dividends or distributions. 
In addition, the Committee in its sole discretion may require such
dividends and distributions to be reinvested (and in such case the participant
consents to such reinvestment) in shares of Common Stock that will be subject
to the same restrictions as the shares to which such dividends or distributions
relate.

 

9.     Performance Shares.

 

A performance share consists of an award which shall be paid in shares
of Common Stock, as described below.  The
grant of a performance share shall be subject to such terms and conditions as
the Committee deems appropriate, including the following:

 

9.1   Performance
Objectives.  Each performance share
will be subject to performance objectives respecting the Company or one of its
operating units to be achieved by the participant before the end of a specified
period.  The Committee shall determine
the terms and conditions of each grant and the number of performance shares
granted.  If the performance objectives
are achieved, the participant will be paid in shares of Common Stock as
determined by the Committee.  If such
objectives are not met, each grant of performance shares may provide for lesser
payments in accordance with formulae established in the award.

 

9.2   Not
Shareholder.  The grant of performance
shares to a participant shall not create any rights in such participant as a
shareholder of the Company, until the payment of shares of Common Stock with
respect to an award.

 

9.3   No
Adjustments.  No adjustment shall be
made in performance shares granted on account of cash dividends which may be
paid or other rights which may be issued to the holders of Common Stock prior
to the end of any period for which performance objectives were established.

 

9.4   Expiration
of Performance Shares.  If any
participant’s employment or consulting engagement with the Company is
terminated for any reason other than normal retirement, death or disability
prior to the achievement of the participant’s stated performance objectives,
all the participant’s rights on the performance shares shall expire and
terminate unless otherwise determined by the Committee.  In the event of termination of employment or
consulting by reason of death, disability, or normal retirement, the Committee,
in its own discretion may determine what portions, if any, of the performance
shares should be paid to the participant.

 

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10.   Change of Control.

 

10.1        Change in Control.  For purposes of this Section 10, a “Change
in Control” of the Company will mean the following:

 

(a)                                  The purchase or other acquisition by any
one person, or more than one person acting as a group, of stock of the Company
that, together with stock held by such person or group, constitutes more than
fifty percent (50%) of the total combined value or total combined voting power
of all classes of stock issued by the Company; provided, however, that if any
one person or more than one person acting as a group is considered to own more
than fifty percent (50%) of the total combined value or total combined voting
power of such stock, the acquisition of additional stock by the same person or
persons shall not be considered a Change of Control;

 

(b)                                 A merger or consolidation to which the
Company is a party if the individuals and entities who were shareholders of the
Company immediately prior to the effective date of such merger or consolidation
have, immediately following the effective date of such merger or consolidation,
beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of less than fifty percent (50%) of the total combined
voting power of all classes of securities issued by the surviving entity for
the election of directors of the surviving corporation;

 

(c)                                  Any one person, or more than one person
acting as a group, acquires or has acquired during the twelve (12) month period
ending on the date of the most recent acquisition by such person or persons,
direct or indirect beneficial ownership (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of stock of the Company constituting more
than thirty (30%) of the total combined voting power of all classes of stock
issued by the Company;

 

(d)                                 The purchase or other acquisition by any
one person, or more than one person acting as a group, of substantially all of
the total gross value of the assets of the Company during the twelve-month
period ending on the date of the most recent purchase or other acquisition by
such person or persons.  For purposes of
this Section 2(d), “gross value” means the value of the assets of the
Company or the value of the assets being disposed of, as the case may be,
determined without regard to any liabilities associated with such assets;

 

(e)                                  A change in the composition of the Board
of the Company at any time during any consecutive twelve (12) month period such
that the “Continuity Directors” cease for any reason to constitute at least a
majority of the Board. For purposes of this event, “Continuity Directors” means
those members of the Board who either:

 

(1)                                  were directors at the beginning of such
consecutive twelve (12) month period; or

 

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(2)                                  were elected by, or on the nomination or
recommendation of, at least a majority of the then-existing Board of Directors.

 

In all cases, the determination of whether a Change of Control Event
has occurred shall be made in accordance with Code Section 409A and the
regulations, notices and other guidance of general applicability issued
thereunder.

 

10.2.       Acceleration of
Incentives.  Without limiting the
authority of the Committee under the Plan, if a Change in Control of the
Company occurs whereby the acquiring entity or successor to the Company does
not assume the Incentives or replace them with substantially equivalent
incentive awards, then, unless otherwise provided by the Committee in its sole
discretion in the agreement evidencing an Incentive at the time of grant, as of
the date of the Change of Control:  (a) all
outstanding options and SARs will vest and will become immediately exercisable
in full and will remain exercisable for the remainder of their respective
terms, regardless of whether the participant to whom such options or SARs have
been granted remains in the employ or service of the Company or any subsidiary
of the Company or any acquiring entity or successor to the Company; (b) the
restrictions on all shares of restricted stock awards shall lapse immediately;
and (c) all performance shares shall be deemed to be met and payment made
immediately.

 

10.3.       Cash Payment for
Options.  If a Change in Control of
the Company occurs, then the Committee, if approved by the Committee in its
sole discretion either in an agreement evidencing an option at the time of
grant or at any time after the grant of an option, and without the consent of any
participant affected thereby, may determine that:

 

(a)                                    some or all participants holding
outstanding stock options will receive, with respect to some or all of the
shares of Common Stock subject to such options, as of the effective date of any
such Change in Control of the Company, cash in an amount equal to the excess of
the Fair Market Value of such shares immediately prior to the effective date of
such Change in Control of the Company over the exercise price per share of such
options; and

 

(b)                                   any options as to which, as of the
effective date of any such Change in Control, the Fair Market Value of the
shares of Common Stock subject to such options is less than or equal to the
exercise price per share of such options, shall terminate as of the effective date
of any such Change in Control.

 

If the Committee makes a
determination as set forth in subparagraph (a) of this Section 10.3,
then, as of the effective date of any such Change in Control of the Company,
such options will terminate as to such shares and the participants formerly
holding such options will only have the right to receive such cash
payment(s).  If the Committee makes a
determination as set forth in subparagraph (b) of this Section 10.3,
then, as of the effective date of any such Change in Control of the Company,
such options will terminate, become void and expire as to all unexercised
shares of Common Stock subject to such options on such date, and the
participants formerly holding such options will have no further rights with
respect to such options.

 

11.   General.

 

11.1        Effective Date.  The Plan will become effective upon approval
by the Company’s board of directors.

 

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11.2        Duration.  The Plan shall remain in effect until all
Incentives granted under the Plan have either been satisfied by the issuance of
shares of Common Stock or the payment of cash or have been terminated under the
terms of the Plan and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed.  No Incentives may be granted under the Plan
after the tenth anniversary of the date the Plan is approved by the
shareholders of the Company.

 

11.3        Non-Transferability
of Incentives.  No Incentive Stock
Option, SAR, restricted stock or performance award may be transferred, pledged
or assigned by the holder thereof (except, in the event of the holder’s death,
by will or the laws of descent and distribution to the limited extent provided
in the Plan or the Incentive, or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder), and the Company shall not be
required to recognize any attempted assignment of such rights by any
participant.  Incentive Stock Options
transferred (except as permitted in the preceding sentence) will continue to be
outstanding for purposes of the Plan but will thereafter be deemed to be a
non-qualified stock option.  Non-qualified
stock options may be transferred by the holder thereof only to such holder’s
spouse, children, grandchildren or parents (collectively, the “Family Members”),
to trusts for the benefit of Family Members, to partnerships or limited
liability companies in which Family Members are the only partners or
shareholders, or to entities exempt from federal income taxation pursuant to Section 501(c)(3) of
the Code.  During a participant’s
lifetime, a stock option may be exercised only by him or her, by his or her
guardian or legal representative or by the transferees permitted by this Section 11.3.

 

11.4        Effect of
Termination or Death.  In the event
that a participant ceases to be an employee of or consultant to the Company, or
the participant’s other service with the Company is terminated, for any reason,
including death, any Incentives may be exercised or shall expire at such times
as may be determined by the Committee in its sole discretion in the agreement
evidencing an Incentive.  Notwithstanding
the other provisions of this Section 11.4, upon a participant’s
termination of employment or other service with the Company and all
subsidiaries, the Committee may, in its sole discretion (which may be exercised
at any time on or after the date of grant, including following such
termination), cause options and SARs (or any part thereof) then held by such
participant to become or continue to become exercisable and/or remain
exercisable following such termination of employment or service and restricted
stock awards, performance shares and stock awards then held by such participant
to vest and/or continue to vest or become free of transfer restrictions, as the
case may be, following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however, that no option or
SAR may remain exercisable or continue to vest beyond the earlier of (i) the
latest date upon which the Incentive could have expired by its original terms,
and (ii) the tenth (10th) anniversary of the original date of grant.  Any incentive stock option that remains
unexercised more than one (1) year following termination of employment by
reason of death or disability or more than three (3) months following
termination for any reason other than death or disability will thereafter be
deemed to be a non-statutory stock option. 
Further, this Section 11.4 shall be administered in compliance with
Code Section 409A and the notices, regulations and other guidance of
general applicability issued thereunder.

 

11.5        Additional
Conditions.  Notwithstanding anything
in this Plan to the contrary:  (a) the
Company may, if it shall determine it necessary or desirable for any reason, at
the time of award of any Incentive or the issuance of any shares of Common
Stock pursuant to any Incentive, require the recipient of the Incentive, as a
condition to the receipt thereof or to the receipt of shares of Common Stock
issued pursuant thereto, to deliver to the Company a written representation of
present intention to acquire the Incentive or the shares of Common Stock issued

 

10

 

pursuant thereto
for his or her own account for investment and not for distribution; and (b) if
at any time the Company further determines, in its sole discretion, that the
listing, registration or qualification (or any updating of any such document)
of any Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state securities
law, or that the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with the award of
any Incentive, the issuance of shares of Common Stock pursuant thereto, or the
removal of any restrictions imposed on such shares, such Incentive shall not be
awarded or such shares of Common Stock shall not be issued or such restrictions
shall not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions unacceptable to the Company.  Notwithstanding any other provision of the
Plan or any agreements entered into pursuant to the Plan, the Company will not
be required to issue any shares of Common Stock under this Plan, and a
participant may not sell, assign, transfer or otherwise dispose of shares of
Common Stock issued pursuant to any Incentives granted under the Plan, unless (a) there
is in effect with respect to such shares a registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), and any applicable
state or foreign securities laws or an exemption from such registration under
the Securities Act and applicable state or foreign securities laws, and (b) there
has been obtained any other consent, approval or permit from any other
regulatory body which the Committee, in its sole discretion, deems necessary or
advisable.  The Company may condition
such issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary or
advisable by the Company in order to comply with such securities law or other
restrictions.

 

11.6        Adjustment.  In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted for each of the shares of Common Stock then subject to the
Plan, including shares subject to restrictions, options or
achievement-of-performance share objectives, the number and kind of shares of
stock or other securities to which the holders of the shares of Common Stock
will be entitled pursuant to the transaction. 
In the event of any recapitalization, reclassification, stock dividend,
stock split, combination of shares or other similar change in the corporate
structure of the Company or shares of the Company, the exercise price of an
outstanding Incentive and the number of shares of Common Stock then subject to
the Plan, including shares subject to restrictions, options or achievements of
performance shares, shall be adjusted in proportion to the change in
outstanding shares of Common Stock in order to prevent dilution or enlargement
of the rights of the participants.  In
the event of any such adjustments, the purchase price of any option, the
performance objectives of any Incentive, and the shares of Common Stock
issuable pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the discretion of the Committee, to provide participants with
the same relative rights before and after such adjustment.

 

11.7        Incentive Plans and
Agreements.  Except in the case of
stock awards, the terms of each Incentive shall be stated in a plan or
agreement approved by the Committee.  The
Committee may also determine to enter into agreements with holders of options
to reclassify or convert certain outstanding options, within the terms of the
Plan, as Incentive Stock Options or as non-statutory stock options and in order
to eliminate SARs with respect to all or part of such options and any other
previously issued options.

 

11.8        Withholding.

 

(a)   The Company
shall have the right to (i) withhold and deduct from any payments made
under the Plan or from future wages of the participant (or from other 

 

11

 

amounts that may be due and owing to the participant from the Company
or a subsidiary of the Company), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any and all foreign,
federal, state and local withholding and employment-related tax requirements
attributable to an Incentive, or (ii) require the participant promptly to
remit the amount of such withholding to the Company before taking any action,
including issuing any shares of Common Stock, with respect to an
Incentive.  At any time when a
participant is required to pay to the Company an amount required to be withheld
under applicable income tax laws in connection with a distribution of Common
Stock or upon exercise of an option or SAR, the participant may satisfy this
obligation in whole or in part by electing (the “Election”) to have the Company
withhold from the distribution shares of Common Stock having a value up to the
amount required to be withheld.  The
value of the shares to be withheld shall be based on the Fair Market Value of
the Common Stock on the date that the amount of tax to be withheld shall be
determined (the “Tax Date”).

 

(b)   The
Committee may disapprove of any Election, may suspend or terminate the right to
make Elections, or may provide with respect to any Incentive that the right to
make Elections shall not apply to such Incentive.  An Election is irrevocable.

 

(c)   If a
participant is a Company officer or director within the meaning of Section 16
of the Exchange Act, then an Election is subject to the following additional
restrictions:  (a) no Election shall
be effective for a Tax Date which occurs within six (6) months of the
grant or exercise of the award, except that this limitation shall not apply in
the event death or disability of the participant occurs prior to the expiration
of the six-month period; and (b) the Election must be made either six
months prior to the Tax Date or must be made during a period beginning on the
third business day following the date of release for publication of the Company’s
quarterly or annual summary statements of sales and earnings and ending on the
twelfth business day following such date.

 

11.9        No Continued
Employment, Engagement or Right to Corporate Assets.  No participant under the Plan shall have any
right, because of his or her participation, to continue in the employ of the
Company for any period of time or to any right to continue his or her present
or any other rate of compensation. 
Nothing contained in the Plan shall be construed as giving an employee,
a consultant, such persons’ beneficiaries or any other person any equity or
interests of any kind in the assets of the Company or creating a trust of any
kind or a fiduciary relationship of any kind between the Company and any such
person.

 

11.10      {this item
DELETED}

 

11.11      Amendment of the
Plan.  The Board may amend, suspend
or discontinue the Plan at any time; provided, however, that no amendments to
the Plan will be effective without approval of the shareholders of the Company
if shareholder approval of the amendment is then required pursuant to Section 422
of the Code or the rules of any stock exchange or Nasdaq or similar
regulatory body.  No termination,
suspension or amendment of the Plan may adversely affect any outstanding
Incentive without the consent of the affected participant; provided,
however, that this sentence will not impair the right of the
Committee to take whatever action it deems appropriate under Section 11.5
of the Plan.

 

11.12      Definition of Fair
Market Value.  For purposes of this
Plan, the “Fair Market Value” of a share of Common Stock at a specified date
shall, unless otherwise expressly provided in this Plan, be the amount which
the Committee or the Company’s board of directors determines 

 

12

 

in good faith in
the exercise of its reasonable discretion to be one hundred percent (100%) of
the fair market value of such a share as of the date in question; provided, however, that notwithstanding the foregoing, if
such shares are listed on a U.S. securities exchange or are quoted on the
Nasdaq National Market System, Nasdaq SmallCap Stock Market (“Nasdaq”), or the
Over-The-Counter Bulletin Board (“OTCBB”), then Fair Market Value shall be
determined by reference to the last sale price of a share of Common Stock on
such U.S. securities exchange or Nasdaq, or the average of the bid and ask
price on the OTCBB, on the applicable date. 
If such U.S. securities exchange or Nasdaq is closed for trading on such
date, or if the Common Stock does not trade on such date, then the last sale
price used shall be the one on the date the Common Stock last traded on such
U.S. securities exchange or Nasdaq.

 

11.13      Breach of
Confidentiality, Assignment of Inventions, or Non-Compete Agreements.  Notwithstanding anything in the Plan to the
contrary, in the event that a participant materially breaches the terms of any
confidentiality, assignment-of-inventions, or noncompete agreement entered into
with the Company or any parent or subsidiary of the Company, whether such
breach occurs before or after termination of such participant’s employment or
other service with the Company or any subsidiary, the Committee in its sole
discretion may immediately terminate all rights of the participant under the
Plan and any agreements evidencing an Incentive then held by the participant
without notice of any kind.

 

11.14      Governing Law.  The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in
accordance with the laws of the State of [Minnesota], notwithstanding the
conflicts-of-law principles of Minnesota or any other jurisdiction.

 

11.15      Successors and
Assigns.  The Plan will be binding
upon and inure to the benefit of the successors and permitted assigns of the
Company and the participants in the Plan.

 

13EXHIBIT 10.9

 

GLENROSE INSTRUMENTS INC.

DEMAND PROMISSORY NOTE

 

	
  U.S. $500,000.00

  	
   

  	
  December 17, 2007

  

 

FOR VALUE RECEIVED, GlenRose Instruments Inc., a corporation organized
under the laws of Delaware (“Borrower”), 45 First Avenue, Waltham,
Massachusetts 02451, agrees to pay to Arvin & Wynona
Smith (“Lenders”), 1113 Sabine Court, Colleyville, TX 76034, or
order, the principal sum of Five Hundred Thousand U.S. Dollars ($500,000.00), on demand, together with interest from the
date hereof on the unpaid principal balance at the rate specified below, until
repaid in full. Prepayment of principal, together with accrued interest, may be
made at any time without penalty. Interest hereon shall accrue from the date
hereof at the rate of seven and one quarter (7.25%)
percent per annum.

 

In the
event that any amount of principal hereof, or (to the extent permitted by
applicable law) any interest hereon or any other amount payable hereunder is
not paid in full when due (whether as scheduled, on demand, by acceleration or
otherwise), Borrower shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on such unpaid amount to
Lenders, from the date such amount becomes due until the date such amount is
paid in full, payable on demand of Lenders at a rate per annum equal at all
times to 12% per annum (the “Default Rate”). Additionally, and without limiting
the foregoing, following the occurrence and during the continuance of any Event
of Default (as defined below), at the option of Lenders, the interest rate
shall be the Default Rate. Such interest on overdue amounts shall be payable on
demand. All computations of interest shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest is payable. Each
determination by Lenders of any applicable rate of interest, and of any change
therein, in the absence of manifest error shall be conclusive and binding on
the parties hereto.

 

Payment
shall be made in lawful tender of the United States unconditionally in full
without set-off, counterclaim or, to the extent permitted by applicable law,
other defense, all of which rights of Borrower are hereby expressly waived by
Borrower. All payments hereunder shall be made to Lenders at his address set
forth above (or to such other place as Lenders shall designate in a written
notice to Borrower), and, unless Borrower has obtained Lenders’ written consent
to another form of payment, such payment shall be made by wire transfer of
immediately available funds by no later than 12:00 noon (Boston time) on the
due date of the payment, in accordance with Lenders’ payment instructions.

 

Whenever
any payment hereunder shall be stated to be due, or whenever any interest
payment date or any other date specified hereunder would otherwise occur, on a
day other than a Business Day (as defined below), then such payment shall be
made, and such interest payment date or other date shall occur, on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest hereunder. As used herein, “Business
Day” means a day (i) other than Saturday or Sunday, and (ii) on which
commercial banks are open for business in Boston, Massachusetts.

 

Borrower
represents and warrants to Lenders that:

 

(i)            Organization and Powers.
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite power and
authority to own its assets and carry on its business and to execute, deliver
and perform its obligations under this Note.

 

(ii)           Authorization; No Conflict.
The execution, delivery and performance by Borrower of this Note have been duly
authorized by all necessary corporate action of Borrower and do not and will
not (A) contravene the terms of the constitutional documents of Borrower;
or (B) result in a breach of or constitute a default under any material
lease, instrument, contract or other agreement to which Borrower is a party or
by which it or its properties may be bound or affected; or (C) violate any
provision of any law, rule, regulation, order, judgment, decree or the like
binding on or affecting Borrower.

 

(iii)          Binding Obligations. This Note
constitutes the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms.

 

1

 

(iv)          Consents.
No authorization, consent, approval, license, exemption of, or filing or
registration with, any governmental authority or agency, or approval or consent
of any other person or entity is required for the due execution, delivery or
performance by Borrower of this Note.

 

Any of
the following events which shall occur shall constitute an “Event of Default”:

 

(a)           Payments. Borrower shall fail
to pay when due any amount of principal hereof, or interest hereon or other
amount payable hereunder, and such failure shall continue unremedied for five (5) days.

 

(b)           Representations and Warranties.
Any representation or warranty by Borrower under or in connection with this
Note shall prove to have been incorrect in any material respect when made or
deemed made.

 

(c)           Insolvency. (i) Borrower
shall (A) admit in writing its inability to, or shall fail generally or be
generally unable to, pay its debts (including its payrolls) as such debts
become due, (B) make a general assignment for the benefit of creditors, (C) be
dissolved, liquidated, wound up or cease its corporate existence, or (D) commence
any voluntary proceeding or case seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, intervention,
suspension of payments, or composition of it or its debt under any law relating
to bankruptcy, insolvency, suspension of payments or reorganization or relief
of debtors, or seeking appointment of a receiver, trustee, intervenor or
liquidator, or other similar official for it or for any substantial part of its
property, (ii) an involuntary proceeding or case shall be commenced
against Borrower seeking any of the foregoing relief and remain undismissed for
a period of 30 days; (iii) an order for relief or other order or
adjudication shall be entered against Borrower under any such bankruptcy,
insolvency or similar law; (iv) any receiver, trustee, or other official
or Person shall be appointed to take possession of any property of Borrower; or
(v) Borrower shall take any corporate action to authorize, or shall
consent to, any of the actions or events set forth above in this paragraph.

 

If any Event of Default
shall occur and be continuing, Lenders may, by notice to Borrower, declare the
entire unpaid principal amount of this Note, all interest accrued and unpaid
hereon and all other amounts due hereunder to be forthwith due and payable,
whereupon the principal hereof, all such accrued interest and all such other
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived by Borrower, provided that if an event described in paragraph (c) above
shall occur, the result which would otherwise occur only upon giving of notice
by Lenders to Borrower as specified above shall occur automatically, without
the giving of any such notice.

 

Borrower
agrees to pay on demand the costs and expenses of Lenders, and fees and
disbursements of Lenders’ counsel, in connection with any Event of Default, the
enforcement or attempted enforcement of, and preservation of any rights or
interests under, this Note, and any out-of-court workout or other refinancing
or restructuring or any bankruptcy or insolvency case or proceeding.

 

No
single or partial exercise of any power under this Note shall preclude any
other or further exercise of such power or exercise of any other power. No
delay or omission on the part of Lenders in exercising any right under this
Note shall operate as a waiver of such right or any other right thereunder.

 

All
notices and other communications provided for hereunder shall, unless otherwise
stated herein, be in writing and mailed, sent or delivered to the respective
parties hereto at or to their respective addresses set forth herein, or at or
to such other address as shall be designated by any party in a written notice
to the other party hereto. All such notices and communications shall be
effective (i) if delivered by hand, when delivered; (ii) if sent by
overnight courier service, when delivered; and (iii) if sent by mail, upon
the earlier of the date of receipt or five Business Days after deposit in the
mail, first class (or air mail, with respect to communications to be sent to or
from the United States), postage prepaid.

 

This
Note shall be binding on Borrower and its successors and assigns, and shall be
binding upon and inure to the benefit of Lenders, any future holder of this
Note and their respective successors and assigns. Borrower may not assign or
transfer this Note or any of its obligations hereunder without Lenders’ prior
written consent.

 

This Note shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.

 

Borrower hereby (a) submits
to the non-exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts and the Federal courts of the United States sitting in the
District of Massachusetts (collectively, the “Massachusetts Courts”), for the
purpose of any action or proceeding arising out of or relating to this Note, (b) irrevocably
waives (to the extent 

 

2

 

permitted by applicable
law) any objection which it now or hereafter may have to the laying of venue of
any such action or proceeding brought in any of the Massachusetts Courts, and
any objection on the ground that any such action or proceeding in any
Massachusetts Court has been brought in an inconvenient forum, and (c) agrees
that (to the extent permitted by applicable law) a final judgment in any such
action or proceeding brought in a Massachusetts Court shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner permitted by law.

 

IN
WITNESS WHEREOF, Borrower signing below by its duly authorized legal
representative(s) has executed this Note as of the date first above
mentioned.

 

 

	
   

  	
  GLENROSE INSTRUMENTS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Anthony S.
  Loumidis

  
	
   

  	
  Chief Financial Officer

  

 

3

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