Document:

Unassociated Document

Exhibit 10.5

 

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of September 24, 2013 (the “Effective Date”), by and between Universal Technology Systems Corp., a Florida Corporation (the "Company"), and Robert J. Fasnacht (the "Executive").

W  I  T  N  E  S  S  E  T  H:

The Executive is presently employed by the Company in the capacity of its President and Chief Operating Officer and possesses considerable experience and an intimate knowledge of the business and affairs of the Company, its policies, methods, personnel and operations.  The Company recognizes that the Executive's contributions to Global Photonic Energy Corporation (“GPEC”) have been substantial and meritorious and that the Executive has demonstrated unique qualifications to act in an executive capacity for the Company, not that the merger between it and GPEC is complete.  The Company is desirous of assuring the continued employment of the Executive and the Executive is desirous of having such assurance.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1.         Term of Employment.  The Company hereby agrees to employ the Executive and the Executive hereby agrees to continue to serve the Company, in accordance with the terms and conditions set forth herein, for an initial period of five (5) years commencing as of  October 1, 2013 (the "Effective Date"); subject, however, to earlier termination as expressly provided herein.  The initial five (5) year period of employment automatically shall be extended for one (1) additional year at the end of the initial five (5) year term and then again for each successive year thereafter.  However, either party may terminate this Agreement at the end of the initial five (5) year period, or at the end of any successive one (1) year term thereafter, by giving the other party written notice of intent not to renew, delivered at least sixty (60) days prior to the end of such initial period or successive term.  In the event such notice of intent not to renew is properly delivered, this Agreement, along with all corresponding rights, duties and covenants, automatically shall expire at the end of the initial period or successive term then in progress (except as otherwise provided herein).

Regardless of the above, if at any time during the initial period of employment, or any successive term, a Change in Control of the Company occurs (as defined in Section 7 hereof), then the term of this Agreement thereafter shall be the longer of: (a) one (1) year beyond the month in which the effective date of such Change in Control occurs; or (b) the term as otherwise provided by this Section 1.

  

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2.         Position and Responsibilities.  During the term of this Agreement, the Executive shall serve as the President and Chief Operating Officer of the Company.  The Executive shall have the duties and functions that are generally associated with the position of President and Chief Operating Officer and will be responsible for such other duties as may from time to time be reasonably assigned to him by the Company’s Board of Directors.  The Executive’s duties shall be as assigned from time-to-time by the Board, but shall include, but not be limited to, the following:  diligently perform to the best of the Executive’s ability all of the duties required in the day-to-day management of the Company as its President and Chief Operating Officer, all of which shall be under the direction and supervision of the Executive Chairman, the Chief Executive Officer and the Board, and to perform any other matter as enumerated in the Company’s By-laws.

3.         Performance of Duties.  During the term of this Agreement, the Executive shall devote substantially all of his working time to the performance of his responsibilities and duties hereunder and shall comply with the policies of the Company with respect to conflict of interest and business ethics from time to time in effect.  During the term of this Agreement, the Executive shall not, without the prior written consent of the Board, render services, whether or not compensated, to any other person or entity as an employee, independent contractor or otherwise; provided, however, that, except as provided in Section 8.1 below, nothing contained herein shall restrict the Executive from: (i) rendering services to charitable organizations and from managing his personal investments in such manner as shall not interfere with the performance by the Executive of his duties hereunder; or (ii) serving on the board of directors of any other entity so long as (iii) such entity is not in a business which is competitive with that of the Company, (iv) such service does not interfere with the performance by the Executive of his duties hereunder and (v) the Executive receives the prior approval of the Board with respect to such service.

4.         Compensation.  As remuneration for all services to be rendered by the Executive during the term of this Agreement, and as consideration for complying with the covenants herein, the Company shall pay and provide to the Executive the following:

 

4.1          Base Salary.  The Company shall pay the Executive a base salary (the “Base Salary”) in an amount which shall be established from time to time by the Board, provided that such base salary shall not be less than $360,000 per year (“Base Salary”).  The foregoing Base Salary shall be paid on the first of each month and shall have an automatic 3% cost of living increase applied to it on first anniversary date of the Agreement.  This new adjusted salary shall be considered the Base Salary for year two.  Thereafter at each anniversary, of this agreement, the then Base Salary shall have a 3% cost of living increase, which shall be the new Base Salary for that year, and so on.  This Base Salary shall be paid to the Executive in installments throughout the year consistent with the normal payroll practices of the Company.  The Board’s Compensation Committee will review the Executive’s Salary at least once per year and may, in its discretion, increase (but not decrease) the Base Salary in accordance with the Company’s compensation policies.

 

  

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4.2          Annual Bonus.  In addition to his Base Salary, the Executive shall be eligible to receive an annual cash bonus (the "Bonus") in respect of each fiscal year during the term of this Agreement on the basis of a formula or criteria to be developed by the Board.  The Bonus shall be payable to the Executive in cash as promptly as practical after the completion by the Company of an audit of its financial statements for the fiscal year to which such bonus relates.  The Bonus amount shall be recommended by the Company’s CEO (after considering the Executive’s performance, the performance of the Company and any other factors considered significant or relevant to the decision) and it shall be subject to approval by the Compensation Committee and then the full Board of Directors.

4.3          Compensation Plans.  The Executive shall be eligible to participate in such profit-sharing, 401K, stock option, bonus and performance award programs as are made available generally to executive officers of the Company, such participation to be on a basis which is commensurate with the Executive's position with the Company.

4.4          Health Care and Other Benefits.  The Executive shall receive full family plan coverage under any health and dental insurance plans established for the company and in addition to the foregoing the Executive will be entitled to participate at Company expense in the Mayo Clinic Executive Health Program, with full examinations no less frequent than annually, throughout the term of this Agreement and its extensions.  In addition to the foregoing, the Executive shall also be entitled to participate in all other benefit programs that the Company establishes and makes available to its employees to the extent the Executive’s position, tenure, salary, age, health and other qualifications make him eligible to participate, and shall be entitled to receive such perquisites as are made available generally to executive officers of the Company.  The Executive shall be entitled to five weeks paid vacation per year to be taken at such times as may be approved by the Board or its designee.  Executive is entitled to accrue their vacation time and shall be paid for any unused vacation upon death, disability or termination of employment or non-renewal of this Agreement.

4.5          [RESERVED]

 

4.6          Stock Options.  Without limiting the foregoing, on the Effective Date, the Executive shall be entitled to participate in the Company’s 2013 Equity Incentive Plan and any other applicable option plans (the “Plan”).  All issuances under that plan including stock options, shall be determine by the Compensation Committee of the Board and then approved by the full Board, and shall be in such type, amounts, timing and distribution terms as it determines to be appropriate.  In addition, the Executive shall be eligible to receive grants of additional equity and options on an annual basis at the sole discretion of the Board.

5.         Expenses/Stipend Allowance.  The Company shall reimburse the Executive for all reasonable, ordinary and necessary documented travel, entertainment and other out-of-pocket expenses that the Executive incurs on behalf of the Company in the course of his employment hereunder in accordance with the Corporation’s normal policies and provisions regarding such reimbursements.  This shall include a stipend allowance for the Executive a in an amount and for the purposes as determined by the Board.

 

  

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6.         Employment Terminations.

 

6.1          Termination Due to Death.  In the event the Executive's employment is terminated while this Agreement is in force by reason of death, the Executive's benefits shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable programs of the Company then in effect.  Upon the effective date of such termination, the Company's obligation under this Agreement to pay and provide to the Executive the elements of unvested pay described in Sections 4.1, 4.2, 4.3, and 4.4 shall immediately expire, except to the extent that the benefits described in Section 4.4 continue thereafter under the terms of the benefit plans and programs which apply generally to the Company's executives and except that the Executive shall receive all other rights and benefits that he is vested in pursuant to other plans and programs of the Company and the Board may award such Executive equity under its Equity Incentive Plan.  In addition, the Company shall pay to the Executive's beneficiaries, estate, or trust, as applicable, a pro rata share of any vested Salary or Bonus to which the Executive would have been entitled for the fiscal year in which employment termination occurs, based on the results of the Company for such fiscal year.  This pro rata Bonus amount shall be determined by multiplying the Bonus which otherwise would apply for such full fiscal year by a fraction, the numerator of which is the number of days in such fiscal year prior to the date of employment termination and the denominator of which is the total number of days in such fiscal year.

 

6.2          Termination Due to Disability.  In the event that the Executive becomes Disabled (as defined below) during the term of this Agreement and is, therefore, unable to perform his duties herein for more than one hundred eighty (180) total calendar days during any period of twelve (12) consecutive months, or in the event of the Board's reasonable expectation that the Executive's Disability will exist for more than a period of one hundred eighty (180) calendar days, the Company shall have the right to terminate the Executive's active employment as provided in this Agreement.  However, the Board shall deliver written notice to the Executive of the Company's intent to terminate for Disability at least thirty (30) calendar days prior to the effective date of such termination.  A termination for Disability shall become effective upon the end of the thirty (30) day notice period. Upon such effective date, the Company's obligation to pay and provide to the Executive the elements of pay described in Sections 4.1, 4.2, 4.3, and 4.4 shall immediately expire, except to the extent that the benefits described in Section 4.4 continue after Disability under the terms of the benefit plans and programs which apply generally to the Company's executives and except that the Executive shall receive all rights and benefits that he is vested in pursuant to other plans and programs of the Company.  In addition, the Company shall pay to the Executive a pro rata share of his Bonus for the fiscal year in which employment termination occurs, based on the results for such fiscal year, determined as provided in Section 6.1, and may award him equity under the Company’s Equity Incentive Plan.

 

  

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The term "Disability" shall mean, for all purposes of this Agreement, the incapacity of the Executive, due to injury, illness, disease, or bodily or mental infirmity, to engage in the performance of substantially all of the usual duties of employment with the Company as contemplated by Section 2 herein, such Disability to be determined by the Board of Directors of the Company upon receipt and in reliance on competent medical advice from one (1) or more individuals, selected by the Board, who are qualified to give such professional medical advice.

It is expressly understood that the Disability of the Executive for a period of one hundred eighty (180) calendar days or less in the aggregate during any period of twelve (12) consecutive months, in the absence of any reasonable expectation that his Disability will exist for more than such a period of time, shall not constitute a failure by his to perform his duties hereunder and shall not be deemed a breach or default and the Executive shall receive full compensation for any such period of Disability or for any other temporary illness or incapacity during the term of this Agreement.

6.3          Voluntary Termination by the Executive.  The Executive may terminate this Agreement at any time by giving the Board written notice of intent to terminate, delivered at least ninety (90) days prior to the effective date of such termination.

Upon the expiration of the ninety (90) day notice period, the termination by the Executive shall become effective.  The Company shall pay the Executive his Base Salary, at the rate then in effect as provided in Section 4.1 herein, through the effective date of termination, plus all other benefits to which the Executive has a vested right to at that time (for this purpose, the Executive shall not be paid any Bonus with respect to the fiscal year in which voluntary termination under this Section 6.3 occurs).  The Company and the Executive shall have no further obligations under this Agreement after the effective date of such termination, except as set forth in Sections 8 or 9 hereof.

6.4          Involuntary Termination by the Company Without Cause.  The Board may terminate the Executive's employment, as provided under this Agreement, at any time, for reasons other than death, Disability or for Cause (as defined in Section 6.5 hereof), by notifying the Executive in writing of the Company's intent to terminate, at least thirty (30) calendar days prior to the effective date of such termination.  Upon the expiration of the thirty (30) day notice period the termination by the Company shall become effective, and the Company shall pay and provide to the Executive the benefits set forth in this Section 7.1.

 

  

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6.5          Termination For Cause.  Nothing in this Agreement shall be construed to prevent the Board from terminating the Executive's employment under this Agreement for "Cause."

"Cause" shall be determined by the Board in the exercise of good faith and reasonable judgment, and shall be defined as: (i) conviction of, or plea of nolo contendere to, a felony or serious crime involving moral turpitude; (ii) fraud on or misappropriation of any funds or property of the Company; (iii) personal dishonesty, willful misconduct, willful violation of any law, rule or regulation (other than minor traffic violations or similar offenses) or breach of fiduciary duty which involves personal profit; (iv) willful misconduct in connection with the Employee's duties; (v) chronic use of alcohol, drugs or other similar substances which affects the Employee’s work performance; (vi) breach of any provision of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement executed by the Employee for the benefit of the Company; (vii) Executive’s willful refusal to carry out written instructions of his direct supervisor, the CEO or the Board which are consistent with Executive's position with the Company; provided, however, that Executive may only be discharged under this clause (vii) after he shall first have been given thirty (30) days written notice setting forth the grounds for such discharge and, within, such 30-day period, shall not have ceased or otherwise cured (to the reasonable satisfaction of his supervisor, the CEO or the Board, as applicable) the activity or activities or omissions constituting the grounds for such discharge; or (viii) Executive’s willful disclosure of any trade secrets or confidential corporate information of the Corporation to persons not authorized to know same, unless such disclosure is, based upon advice of counsel, reasonably determined by Executive to be required by any law or court order.  In the event this Agreement is terminated by the Board for Cause, the Company shall pay the Executive his Base Salary through the effective date of the employment termination and the Executive shall immediately thereafter forfeit all rights and benefits (other than vested benefits) he would otherwise have been entitled to receive under this Agreement, including any right to a Bonus for the fiscal year in which the termination occurs.  The Company and the Executive thereafter shall have no further obligations under this Agreement, except as set forth in Sections 8 or 9 hereof.

 

6.6          Termination for Good Reason.  At any time during the term of this Agreement, the Executive may terminate this Agreement for Good Reason (as defined below) by giving the Board of Directors of the Company thirty (30) calendar days written notice of intent to terminate, which notice sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination.  Upon the expiration of the thirty (30) day notice period, the Good Reason termination shall become effective, and the Company shall pay and provide to the Executive the benefits set forth in this Section 6.6.

“Good Reason” shall mean, without the Executive's express written consent, the occurrence of any one or more of the following:

	 	
(a)

	
the assignment of the Executive to duties materially inconsistent with the Executive's authorities, duties, responsibilities and status (including offices, titles, and reporting requirements) as an executive of the Company, or a reduction or alteration in the nature or status of the Executive's authorities, duties, or responsibilities from those in effect during the immediately preceding fiscal year, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive;

	 	
(b)

	
a reduction by the Company in the Executive's Base Salary as in effect on the Effective Date, as provided in Section 4.1 herein; or

 

  

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(c)

	
the failure of the Company to obtain a satisfactory agreement from any successor to the Company to assume and agree to perform this Agreement, as contemplated in Section 10.1 herein.

Upon a termination of the Executive's employment for Good Reason at any time other than during a Change of Control Period, the Executive shall be entitled to receive the same payments and benefits, payable in the same manner, as he is entitled to receive in Section 7.1.

The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's incapacity due to physical or mental illness.  The Executive's continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason herein.

6.7          Non-Renewal by Company.  Upon any termination of this Agreement as a result of a notice of non-renewal by the Company pursuant to Section 1 hereof (a “Non-Renewal”), upon the effective date of such termination, the Company shall continue to pay to the Executive his Base Salary then in effect for a period of six (6) full months following the effective date of such termination and shall thereafter provide to the Executive a continuation of his health and welfare benefits, including those related to the Mayo Clinic Executive Health Program, during such six (6) month period.   If for any reason the Company is unable to continue the foregoing benefits as required by the preceding sentence, the Company shall either provide equivalent benefits to the Executive or pay to the Executive a lump sum cash payment equal to the value of the benefits which the Company is unable to provide.  Continuation of health benefits under this Section 6.7 will count against, and will not extend, the period during which benefits are required to be continued under COBRA.  In addition, the Company shall make a prorated payment of the Executive’s Bonus for the fiscal year in which such termination occurs.

 

6.8          [RESERVED]

 

6.9          Condition to Payment.  All amounts payable by the Company to the Employee upon or with respect to the termination of the Employee’s employment with the Company shall be contingent upon and in consideration for Employee's execution and delivery to the Company of a general release agreement, in form and substance reasonably acceptable to the Company, which releases all of the Employee's claims against the Company relating in any way to Employee's employment with the Company and the termination of the Employee's employment by the Company or for additional compensation under the terms of this Agreement.

7.         Change In Control.

 

7.1          Employment Terminations in Connection with a Change in Control.  In the event of a Qualifying Termination (as defined below) during a Change of Control Period, the Company shall pay to the Executive and provide him with benefits in lieu of the benefits which otherwise would have been payable under this Agreement such that the total benefits payable to the Executive shall be as follows:

	 	
(a)

	
A lump sum amount equal to three (3) times the highest rate of the Executive's annualized Base Salary rate in effect at any time up to and including the effective date of termination;

 

  

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(b)

	
A lump sum amount equal to three (3) times the higher of the Executive's Bonus for the last fiscal year prior to the Change in Control or the average annual Bonus paid to the Executive for the last three (3) fiscal years prior to the Change in Control;

	 	
(c)

	
An amount equal to the Executive's unpaid Base Salary and pro rata Bonus through the effective date of termination, determined as provided in Section 6.4; and,

	 	
(d)

	
A continuation of health and welfare benefits, including enrollment in the Mayo Clinic Executive Health Program, for twelve (12) full months from the effective date of termination.  If for any reason the Company is unable to continue such benefits as required by the preceding sentence, the Company shall either provide equivalent benefits to the Executive or pay to the Executive a lump sum cash payment equal to the value of the benefits which the Company is unable to provide.  Continuation of  health benefits under this Section 7.1 will count against, and will not extend, the period during which benefits are required to be continued under COBRA.  The continuation of these welfare benefits may be discontinued by the Company prior to the end of the twelve (12) month period in the event the Executive has available substantially similar benefits from a subsequent employer, as determined by the Company's Board of Directors.

For purposes of this Section 7, a Qualifying Termination shall mean any termination of the Executive's employment other than: (1) by the Company for Cause; (2) by reason of death, Disability or Retirement; or (3) by the Executive without Good Reason.  Payment of any lump sum amounts pursuant to this Section 7.1 will be made within sixty (60) days after the effective date of the termination of the Executive's Employment.

7.2          Definition of "Change in Control".  A Change in Control of the Company shall be deemed to have occurred as of the first to occur of any one or more of the following:

(a)       the effective time of any merger, share exchange, consolidation or other reorganization or business combination of the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity are not persons who held a majority of the voting capital stock of the Company immediately prior to such transaction;

(b)       the closing of a sale or conveyance of all or substantially all of the assets of the Company;

 

  

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(c)       an acquisition (other than from the Company) in a transaction or a series of related transactions by any person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), (excluding for this purpose, (A) the Company or its subsidiaries, (B) any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the then outstanding voting securities of the Company entitled to vote generally in the election of directors) of beneficial ownership, within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors;

(d)       individuals who were the Board’s nominees for election as directors immediately prior to a meeting of the stockholders of the Company involving an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, cease to constitute a majority of the Board following the election; or

(e)       the dissolution or liquidation of the Company;

provided, however, that the term “Change in Control” does not include (1) a public offering of capital stock of the Company that is effected pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, or (2) any transaction pursuant to which shares of capital stock of the Company are transferred or issued to any trust, charitable organization, foundation, family partnership or other entity controlled directly or indirectly by, or established for the benefit of, the Executive or their immediate family members (including spouses, children, grandchildren, parents, and siblings, in each case to include in-laws and adoptive relations), or transferred to any such immediate family members.

In addition, in no event shall a Change in Control be deemed to have occurred, with respect to the Executive, if the Executive is part of a purchasing group which consummates the Change in Control transaction. The Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if the Executive is an equity participant in the purchasing company or group (except for: (i) passive ownership of less than two percent (2%) of the stock of the purchasing company; or (ii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change in Control by a majority of the non-Executive continuing Directors).

7.3          Change of Control Period.  "Change in Control Period" shall mean the period of time commencing with the date on which the Company becomes aware of the Change in Control or becomes aware of a proposed transaction which reasonably could be expected to result in a Change in Control and ending on the first to occur of two (2) years after the effective date of the Change in Control or the date on which the proposed transaction no longer is reasonably expected to occur.

 

  

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7.4          Limitation on Change in Control Benefits.  In the event that any of the amounts payable to the Executive by the Company pursuant to the provisions of Section 7.1 of this Agreement or otherwise would, if made, be nondeductible for Federal income tax purposes under Section 280G of the Internal Revenue Code of 1986, as amended (after application of Section 280G(b)(4)), the amount payable by the Company shall be reduced by the minimum amount necessary to cause the Executive to receive no payments which would be nondeductible by the Company for Federal income tax purposes under Section 280G of the Code.  For purposes of determining whether or not payments under Section 7.1 or otherwise would in fact be nondeductible to the Company under Code Section 280G, the following principles and guidelines are agreed to, and, absent contrary mutual agreement, shall be followed:  (i) all payments under or in respect of supplemental retirement plans, and stock option, bonus and other incentive compensation plans are intended to represent reasonable compensation for personal services performed by the Executive through the date of termination of the Executive's employment, (ii) if there is an issue as to whether any payments being made to the Executive constitute “parachute payments” under Section 280G of the Code, and the Company and the Executive cannot agree upon the amount thereof within thirty (30) days after the effective date of the termination of the Executive's employment, the Executive and the Company shall, within forty-five (45) days after the effective date of the termination of Executive's employment, mutually agree upon and appoint a third party arbitrator who shall analyze the issue giving recognition to the foregoing intentions and shall issue a report within thirty (30) days of the appointment stating the arbitrator's best estimate of the amount of “parachute payments” under Code Section 280G, if any, and the report of such arbitrator shall be conclusive and binding on the parties, (iii) the third party arbitrator selected shall be a nationally recognized accounting firm or a management consulting firm specializing in the area of executive compensation, who shall be entitled to engage independent legal counsel for advice with respect to legal matters in connection with the report, (iv) if the parties cannot agree upon a third party arbitrator within the specified forty-five (45) day time period, the selection of such arbitrator shall be submitted to arbitration in accordance with Section 12.1 hereof and (v) the costs and expenses of the third party arbitrator selected to issue the report under this Section 7.4, including counsel's fees, shall be borne by the Company.  The Executive and the Company agree that each will in all cases file tax returns on a basis consistent with any conclusions reached with respect to the deductibility of amounts under Code Section 280G, and will defend such position to the extent practicable in the event a contrary position is taken by the Internal Revenue Service.  The Executive shall be entitled to reimbursement of counsel fees in connection with any such defense as provided in Section 11.1 hereof.

In the event of any reduction of payments made or to be made to the Executive pursuant to Section 7.1 or otherwise as a result of this Section 7.4, the Executive shall be entitled to select the amount and form of compensation to be reduced or eliminated.

 

  

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7.5          Subsequent Imposition of Excise Tax.  If, notwithstanding compliance with the provisions of Section 7.4 herein, it is ultimately determined by a court or pursuant to a final determination by the Internal Revenue Service that any portion of the payments to the Executive under Section 7.1 is considered to be an “excess parachute payment,” subject to the excise tax under Section 4999 of the Code, which was not contemplated to be an “excess parachute payment” at the time of payment (so as to accurately determine whether a limitation should have been applied to the payments to maximize the net benefit to the Executive, as provided in Section 7.4 hereof), the Executive shall be entitled to receive a lump sum cash payment sufficient to place the Executive in the same net after-tax position, computed by using the "Special Tax Rate" as such term is defined below, that the Executive would have been in had such payment not been subject to such excise tax, and had the Executive not incurred any interest charges or penalties with respect to the imposition of such excise tax. For purposes of this Agreement, the "Special Tax Rate" shall be the highest effective Federal and state marginal tax rates applicable to the Executive in the year in which the payment contemplated under this Section 7.5 is made.

7.6          [RESERVED]

8.         Noncompetition/Nondisclosure.

8.1          Executive’s Acknowledgment.  The Executive agrees and acknowledges that in order to assure the Company that it will retain its value as a going concern, it is necessary that the Executive undertake not to utilize his special knowledge of the Company’s business of acquiring and operating hydroelectric facilities in the Peoples Republic of China (the “Business”) and his relationships with those in the Company’s industry, customers and suppliers to compete with the Company.  Executive further acknowledges that: (i) the Company is and will be engaged in the Business; (ii) Executive has occupied a position of trust and confidence with the Company prior to the date of this Agreement and, during such period the Executive has, and during the term of this Agreement the Executive will, become familiar with the Company’s trade secrets and with other proprietary and confidential information concerning the Company and the Business; (iii) the agreements and covenants contained in this Section 8 are essential to protect the Company and the goodwill of the Business; and (iv) the Executive’s employment with the Company has special, unique and extraordinary value to the Company and the Company would suffer irreparable harm, for which money damages would not constitute adequate compensation, if Executive were to provide services to any person or entity in violation of the provisions of this Agreement or otherwise violate any of the terms of this Section 8.

 

8.2          Competitive Activities.  The Executive hereby agrees that for a period (the “Restricted Period”) commencing on the date hereof and ending two years following the termination of Executive’s employment with the Company for whatever reason, Executive shall not, on behalf of himself or any other individual or group of individuals, firm, company, corporation, partnership, trust or other entity or enterprise or successor in interest to any of the foregoing, or any employee, partner, officer, director, partner, or stockholder of any of the foregoing (each individually, a Person and collectively, “Persons”), directly or indirectly, as an employee, proprietor, stockholder, partner, consultant, or otherwise, engage in any business or activity directly competitive with the Business or any of the business activities of the Company as they are now, currently proposed to be, or are, at the time in question, undertaken by the Company, anywhere in North America (the “Territory”), except as expressly approved by the Board in writing.  With respect to the Territory, Executive specifically acknowledges that the Company has conducted the Business throughout those areas comprising the Territory and the Company intends to continue to expand the Business throughout the Territory.

 

  

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8.3          Blue-Pencil.  If any court of competent jurisdiction shall at any time deem the term of this Agreement or any particular covenant contained in this Section 8, including, without limitation, the Restricted Period, to be too lengthy or the Territory to be too extensive, the other provisions of this Section 8 shall nevertheless stand, the Restricted Period shall be deemed to be the longest period permissible by law under the circumstances and the Territory shall be deemed to comprise the largest territory permissible by law under the circumstances.  The court in each case shall reduce the Restricted Period and/or the Territory to permissible duration or size.

 

8.4          Confidential Information.  During the term of this Agreement and for a period of three (3) years thereafter, the Executive shall keep secret and retain in strictest confidence, and shall not, without the prior written consent of the Board, furnish, make available or disclose to any third party or use for the benefit of herself or any third party, any Confidential Information.  As used in this Section 8.4, the term “Confidential Information” shall mean any information relating to the business or affairs of the Company or the Business, including, but not limited to, information relating to financial statements, customer identities, potential customers, employees, suppliers, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by the Company in connection with the Business; provided, however, that Confidential Information shall not include any information which is the public domain, becomes generally known in the industry through no wrongful act on the part of the Executive or as required to be disclosed by a court of competent jurisdiction.  The Executive acknowledges that the Confidential Information is vital, sensitive, confidential and proprietary to the Company.

9.        Inventions and Other Intellectual Property.  The Executive hereby agrees that all right, title and interest in and to all of Executive’s “Creations” and work product made during the term of the Executive’s employment with the Company, whether pursuant to this Agreement or otherwise, shall belong solely to the Company, whether or not they are protected or protectible under applicable patent, trademark, service mark, copyright or trade secret laws.  For purposes of this Section 9, the term “Creations” shall mean all inventions, designs, discoveries, books, newsletters, manuscripts, articles, research, compilations, improvements, and other works which are or may be copyrighted, trade-marked or patented or otherwise constitute works of intellectual property which may be protected (including, without limitation, any information relating to the Company’s software products, source code, know-how, processes, designs, algorithms, computer programs and routines, formulae, techniques, developments or experimental work, works-in-progress, or business trade secrets whether now existing, or hereafter developed during the Employment Period) made or conceived or reduced to practice by the Company.  Executive agrees that all work or other material containing or reflecting any such Creations shall be deemed work made for hire as defined in Section 101 of the Copyright Act, 15 U.S.C. Section 101.  If a court of competent jurisdiction determines that any such works are not works made for hire, Executive hereby assigns to the Company all of Executive’s right, title and interest, including all rights of copyright, patent, and other intellectual property rights, to or in such Creations.

 

  

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Executive covenants that he shall keep the Company informed of the development of all Creations made, conceived or reduced to practice by the Company, in whole or in part, by Executive or any other alone or with others, which either result from any work Executive may do for, or at the request of, the Company, or are related to the Company’s present or contemplated activities, investigations, or obligations.  Executive further agrees that (i) at the Company’s request and expense, he will execute any assignments or any other documents or instruments necessary to transfer all rights any such Creations to the Company and (ii) he will cooperate with the Company or its nominee in perfecting the Company’s title (or the title of the Company’s nominee) in any or all such materials.

 

10.       Interference with Relationships.

 

10.1        Suppliers, Customers, Service Providers . During the Restricted Period, Executive shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, partner or in any other individual or representative capacity intentionally solicit or encourage any present or future customer, employee, consultant, service provider, stockholder, officer, director or supplier of or service provider to the Company to terminate or otherwise alter his, their or its relationship with the Company in a manner having an adverse effect on the Company or the Business.

 

10.2        No Breach.  Executive represents and warrants that he is not under any contractual obligation to any party, which obligation would prevent him from accepting full-time employment with the Company or from otherwise fulfilling any of his obligations under this Agreement.  Executive hereby agrees to indemnify the Company and hold it and its officers and directors harmless from and against any and all claims against or any losses or liabilities, including reasonable attorney’s fees, incurred by, the Company or any of its officers or directors derived from any breach or failure of the representation and warranty contained in this Section10.2.

 

11.      Return of Company Materials Upon Termination.  Executive acknowledges that all price lists, sales manuals, catalogs, binders, customer lists and other customer information, supplier lists, financial information, business plans, corporate records, working notes, work product, sales manuals, catalogs, binders and other records or documents containing any Confidential Information prepared by Executive or coming into Executive’s possession by virtue of Executive’s employment by the Company, other than personal information belonging to the Executive, is and shall remain the property of the Company and that immediately upon termination of Executive’s employment hereunder, Executive shall return all such items in his possession, together with all copies thereof, to the Company.

 

  

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12.      Indemnification.  The Company hereby covenants and agrees to indemnify and hold harmless the Executive fully, completely, and absolutely against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including attorney's fees), losses, and damages resulting from the Executive's good faith performance of his duties and obligations under the terms of this Agreement and as it relates to any such duties preformed by the Executive at GPEC, subject to compliance with any applicable requirements and limitations improved by the Company's Certificate of Incorporation and By-Laws as in effect on the date hereof and applicable law.

13.      Assignment

13.1        Assignment by Company.  This Agreement may and shall be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and any such successor shall be deemed substituted for all purposes of the "Company" under the terms of this Agreement. As used in this Agreement, the term "successor" shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets or the business of the Company. Notwithstanding such assignment, the Company shall remain, with such successor, jointly and severally liable for all its obligations hereunder.

Except as herein provided, this Agreement may not otherwise be assigned by the Company.

13.2        Assignment by Executive.  The services to be provided by the Executive to the Company hereunder are personal to the Executive, and the Executive's duties may not be assigned by the Executive; provided, however that this Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, and administrators, successors, heirs, distributees, devisees, and legatees.  If the Executive dies while any amounts payable to the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, in the absence of such designee, to the Executive's estate or trust.

13.3        Name Change.  Upon any name change by Company, no assignment need occur as the same entity is bound by the terms of this Agreement.

14.       Dispute Resolution and Notice.

14.1        Dispute Resolution.  Either the Executive or the Company may elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by arbitration, by providing written notice of such election to the other party hereto, specifying the nature of the dispute to be arbitrated, provided that if the other party objects to the use of arbitration within thirty (30) days of the receipt of such notice, the dispute may only be settled by litigation unless otherwise agreed.

 

  

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If arbitration is selected, such proceeding shall be conducted before a panel of three (3) arbitrators sitting in a location agreed to by the Company and the Executive within fifty (50) miles from the location of the Executive's principal place of employment, in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrators in any court having competent jurisdiction.

To the extent that the Executive prevails in any litigation or arbitration seeking to enforce the provisions of this Agreement, the Executive shall be entitled to reimbursement by the Company of all expenses of such litigation or arbitration, including the reasonable fees and expenses of the legal representative for the Executive, and necessary costs and disbursements incurred as a result of such dispute or legal proceeding.

14.2        Notice.  Any notices, requests, demands, or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.

15.  No Mitigation.  The Executive shall have no duty to seek other employment and the amounts, benefits and entitlements payable to the Executive hereunder or otherwise shall not be subject to reduction, offset or repayment for any compensation received by the Executive from services provided by the Executive following the termination of the Executive’s employment with the Company.

 

16.  Section 409A.

 

16.1        The intent of the parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A.

 

16.2   A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  Notwithstanding anything to the contrary in this Agreement, if the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death, to the extent required under Code Section 409A.  Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Agreement (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

  

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16.3        To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by the Executive, (B) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

16.4        For purposes of Code Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

16.5        Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

17.  Adjustment. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that as a result of any payment or distribution by the Company to or for Executive’s benefit whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Payments”), Executive would be subject to the excise tax imposed by Sections 409A, 280G or Section 4999 of the Internal Revenue Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes and Excise Tax imposed upon the Gross-Up Payment, Executive is in the same after-tax position as if no Excise Tax had been imposed upon Executive with respect to the Payments, provided further that such Gross-Up Payment shall be made prior to April 15th of the calendar year following the year in which Executive receive any payment or distribution from the Company which gives rise to a Gross-Up Payment.

 

  

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18.       Miscellaneous

18.1        Entire Agreement.  This Agreement supersedes any prior agreements or understandings, oral or written, between the parties hereto, or between the Executive and the Company, with respect to the subject matter hereof and constitutes the entire agreement of the parties with respect thereto.

18.2        Modification.  This Agreement shall not be varied, altered, modified, canceled, changed, or in any way amended except by mutual agreement of the parties in a written instrument executed by the parties hereto or their legal representatives.

18.3        Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.

18.4        Tax Withholding.  The Company may withhold from any benefits payable under this Agreement all Federal, state, city, or other taxes as may be required pursuant to any law or governmental regulation or ruling.

18.5        Beneficiaries.  The Executive may designate one or more persons or entities as the primary and/or contingent beneficiaries of any amounts to be received under this Agreement.  Such designation must be in the form of a signed writing acceptable to the Board or the Board's designee. The Executive may make or change such designation at any time.

18.6        Board Committee.  Any action to be taken, or determination to be made, by the Board of Directors under this Agreement may be taken or made by the Compensation Committee or any other Committee authorized by the Board of Directors to act on its behalf.

18.7        Governing Law.  To the extent not preempted by Federal law, the provisions of this Agreement shall be construed and enforced in accordance with the internal, substantive laws of the State of New York, without regards to the principles of conflicts of laws thereof.

18.8        Inurement.  This Agreement is binding on the parties and on their heirs, personal representatives, administrators, successors and assigns.

 

* * * * *

 

  

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IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the date first above written.

	  	
Universal Technology Systems Corp.

	  	
Executive:

	  	  	  	  
	
By:

	
 

	  	
 

	  	
John D. Kuhns, Executive Chair

	  	
Robert J. Fasnacht

 

 

Page: 18f8k092513ex10i_soligenixinc.htm

Exhibit 10.1

SOLIGENIX, INC.

2005 EQUITY INCENTIVE PLAN

(as amended through September 25, 2013)

The purpose of this 2005 Equity Incentive Plan (the “Plan”) is to advance the interests of Soligenix, Inc. by enhancing its ability to attract and retain employees and other persons who can make significant contributions to the success of the Company through ownership of shares of the Company’s common stock.

The Plan is intended to accomplish this goal by enabling the Company to grant Awards in the form of options, restricted stock awards, deferred stock awards, unrestricted stock, performance awards, or combinations thereof, as described in greater detail below.

ARTICLE I

DEFINITIONS

1.1           General.  Wherever the following terms are used in this Plan they shall have the meaning specified below, unless the context clearly indicates otherwise.

1.2           Award.  “Award” shall mean the grant of an option, deferred stock, restricted stock, unrestricted stock, performance award, stock appreciation right or any combination thereof pursuant to this Plan.

1.3           Award Limit.  “Award Limit” shall mean two hundred thousand (200,000) shares of common stock.

1.4           Board.  “Board” shall mean the Board of Directors of the Company.

1.5           Code.  “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

1.6           Committee.  “Committee” shall mean the Committee to which the Board delegates the power to act under or pursuant to the provisions of the Plan, or the Board if no Committee is selected. If the Board delegates powers to a Committee, and if the Company is or becomes subject to Section 16 of the Exchange Act, then, if necessary for compliance therewith, such Committee shall consist initially of not less than two (2) members of the Board, each member of which must be a “Non-Employee Board Member” within the meaning of the applicable rules promulgated pursuant to the Exchange Act. The failure of any Committee members to qualify as a “Non-Employee Board Member” shall not otherwise affect the validity of an Award. If the Company is or becomes subject to Section 16 of the Exchange Act, no member of the Committee shall receive any Award pursuant to the Plan or any similar plan of the Company or any affiliate while serving on the Committee unless the Board determines that the grant of such Award satisfies the then current Rule 16b-3 requirements under the Exchange Act.

  

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Notwithstanding anything herein to the contrary, and insofar as the Board determines that it is necessary in order for compensation recognized by Participants pursuant to the Plan to be fully deductible to the Company for federal income tax purposes, each member of the Committee also shall be an “outside director” (as defined in regulations or other guidance issued by the Internal Revenue Service under Code Section 162(m)).

1.7           Company.  “Company” shall mean Soligenix, Inc., a Delaware corporation, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed, or consolidated; any corporation for whose securities the securities of the Company shall be exchanged; and any assignee of or successor to substantially all of the assets of the Company.

  

1.8           Disability or Disabled.  “Disability or Disabled” shall mean permanent and total disability as defined in Section 22(e)(3) of the Code, except as otherwise may be required by section 409A, in which case “disability” shall be defined as set forth in section 409A.

1.9           Exchange Act.  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.10         Fair Market Value.  “Fair Market Value” of a share of common stock as of a given date shall be (i) the mean between the highest and lowest selling price of a share of common stock on such date on the principal exchange on which shares of common stock are then trading, if any, or if shares were not traded on such date, then on the closest preceding date on which a trade occurred, or (ii) if the common stock is not traded on an exchange, the mean between the closing representative bid and asked prices for the common stock on such date as reported by AMEX or, if AMEX is not then in existence, by its successor quotation system; or (iii) if the common stock is not publicly traded, the Fair Market Value of a share of common stock as established by the Committee acting in good faith.

1.11         Key Employee.  “Key Employee” shall mean an employee of the Company or of an affiliate (including, without limitation, an employee who also is serving as an officer or director of the Company or of an affiliate), designated by the Board or the Committee as being eligible to be granted one or more options under the Plan.

1.12         Key Non-Employee.  “Key Non-Employee” shall mean a Non-Employee Board Member, consultant, or independent contractor of the Company or of an affiliate who is designated by the Board or the Committee as being eligible to be granted one or more options under the Plan.

1.13         Non-Employee Board Member.  “Non-Employee Board Member” shall mean a director of the Company who is not an employee of the Company or any of its affiliates. For purposes of this Plan, a Non-Employee Board Member shall be deemed to include the employer of such Non-Employee Board Member, if the Non-Employee Board Member is so required, as a condition of his employment, to provide that any option granted hereunder be made to the employer.

  

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1.14         Participant.  “Participant” shall mean a Key Employee or a Key Non-Employee to whom an award is granted under the Plan.

1.15         Plan.  “Plan” shall mean this Equity Compensation Plan, as amended from time to time.

1.16         Shares.  “Shares” shall mean the following shares of the capital stock of the Company as to which Awards have been or may be granted under the Plan; treasury shares or authorized but unissued common stock $.001 par value, or any share of capital stock into which the shares are changed or for which they are exchanged within the provision of the Plan.

1.17         Rule 16b-3.  “Rule 16b-3” shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time.

1.18         Termination of Directorship.  “Termination of Directorship” shall mean the time when an optionee who is an independent director ceases to be a director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship.

1.19         Termination of Employment.  “Termination of Employment” shall mean the time when the employee-employer relationship between the optionee, grantee or restricted stockholder and the Company is terminated for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where there is a simultaneous reemployment, continuing employment or retention as a consultant or advisor of an optionee, grantee or restricted stockholder by the Company, (ii) at the discretion of the Committee, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company with the former employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to “incentive stock options”, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purpose of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company has an absolute and unrestricted right to terminate an employee’s employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

  

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ARTICLE II

SHARES SUBJECT TO PLAN

2.1           Shares Subject to Plan.

(a)           The shares of stock subject to options, awards of restricted stock, performance awards, awards of deferred stock or unrestricted stock shall be the Company’s common stock, $.001 par value. The aggregate number of such shares that may be issued upon exercise of such options or rights or upon any such awards under the Plan shall not exceed 3,000,000, subject to adjustment as provided in Section 9.3. The shares of common stock issuable upon exercise of such options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares.

(b)           The maximum number of shares which may be subject to options or stock appreciation rights granted under the Plan to any individual in any calendar year shall not exceed the limitations set forth in this subsection 2.1(b) as follows:

(i)           Subject to adjustment as provided in Section 9.3, the maximum number of shares of stock as to which options may be granted to any Participant in any one calendar year shall be 200,000. These limits shall be construed and applied in a manner that is consistent with the rules under Section 162(m) of the Code.

(ii)           Subject to adjustment as provided in Section 9.3, the maximum number of shares of stock subject to performance awards granted to any Participant in any one calendar year shall be 100,000. This limit shall be construed and applied in a manner that is consistent with the rules under Section 162(m) of the Code.

(c)           To the extent required by Section 162(m) of the Code, shares subject to options which are canceled shall continue to be counted against the Award Limit and if, after grant of an option, the price of shares subject to such option is reduced, the transaction shall be treated as a cancellation of the option and a grant of a new option and both the option deemed to be canceled and the option deemed to be granted shall be counted against the Award Limit.  This subparagraph (c) shall be construed in a manner consistent with the requirements of section 409A of the Code and any such cancellation and subsequent grant or Award shall fully comply with the requirements of said section 409A.

2.2           Unexercised options and Other Rights.  Consistent with the provisions of Section 162(m) of the Code, as from time to time applicable, to the extent that (i) an option expires or is otherwise terminated without being exercised, or (ii) any shares of stock subject to any restricted stock, deferred stock or performance award granted hereunder are forfeited, such shares shall again be available for issuance in connection with future awards under the Plan. If any shares of stock have been pledged as collateral for indebtedness incurred by a Participant in connection with the exercise of an option and such shares are returned to the Company in satisfaction of such indebtedness, such shares shall again be available for issuance in connection with future awards under the Plan.

 

  

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ARTICLE III

GRANTING OF OPTIONS

3.1           Eligibility.  Any officer, employee, consultant, advisor or director shall be eligible to be granted an option.

3.2           Granting of options.

(a)           The Committee shall from time to time, in its absolute discretion:

(i)           Select which Participants shall be granted options;

(ii)          Subject to the Award Limit, determine the number of shares subject to such options;

(iii)         Determine whether such options are to be incentive stock options or non-qualified stock options and whether such options are to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code; and

(iv)         Determine the terms and conditions of such options, consistent with this Plan; provided, however, that the terms and conditions of options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.

(b)           The Committee shall instruct the secretary of the Company to issue such options and may impose such conditions on the grant of such options as it deems appropriate, including substitution or replacement of awards, cancellation and replacement or other adjustments to the Award, including but not limited to the strike price. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an option that the optionee surrender for cancellation some or all of the unexercised options, awards of restricted stock, deferred stock, performance awards or unrestricted stock or other rights which have been previously granted to him under this Plan or otherwise.  Any such surrender and subsequent grant or Award shall fully comply with the requirements of section 409A of the Code and within the statutory guidelines.  Such grant or other Award may contain such terms and conditions as the Committee deems appropriate and shall be exercisable in accordance with its terms, subject to statutory and regulatory compliance.

3.3           Special Rules Applicable to incentive stock options.

(a)           No person may be granted an incentive stock option under this Plan if such person, at the time the incentive stock option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company unless such incentive stock option conforms to the applicable provisions of Section 422 of the Code.

 

  

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(b)           No incentive stock option shall be granted unless such option, when granted, qualifies as an “incentive stock option” under Section 422 of the Code. No incentive stock option shall be granted to any person who is not an employee.

(c)           Any incentive stock option granted under this Plan may be modified by the Committee to disqualify such option from treatment as an “incentive stock option” under Section 422 of the Code.

(d)           To the extent that the aggregate Fair Market Value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company) exceeds $100,000, such options shall be treated as non-qualified options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For purposes of this Section 3.3(d), the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. 

 

3.4           Certain Additional provisions for Non-Qualified Stock Options.

(a)           NQOs With Fair Market Value Exercise Price.  Unless otherwise determined by the Board pursuant to paragraph (b) below, to avoid a deferral of compensation falling within the requirements of section 409A of the Code, any option to purchase stock (“NQO”), other than an Incentive Stock Option described in section 422 of the Code, will have the following characteristics: (i) the exercise price will never be less than the fair market value of the underlying stock on the date the option is granted, (ii) the receipt, transfer or exercise of the option will be subject to taxation under section 83 of the Code, and (iii) the option will not include any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of the option.

(b)           NQOs With an Exercise Price Less than Fair Market Value.  Notwithstanding paragraph (a) above, to the extent that any NQO may constitute a deferral of compensation, such option shall comply with the requirements of section 409A of the Code as set forth in the corresponding stock option agreement.

3.5           Substitute Options.  In the event that the Company or any Subsidiary consummates a transaction described in section 424(a) of the Code (relating to the acquisition of property or stock from an unrelated corporation), individuals who become employees or consultants of the Company or any Subsidiary on account of such transaction may be granted ISOs in substitution for options granted by their former employer, subject to the requirements of section 409A of the Code.  The Board, in its sole discretion and consistent with sections 409A and 424(a) of the Code, shall determine the exercise price of such substitute Options.

 

  

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ARTICLE IV

TERMS OF OPTIONS

4.1           Option Agreement.  Each option shall be evidenced by a written stock option agreement, which shall be executed by the optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. Stock option agreements evidencing options intended to qualify as performance-based compensation as described in Section l62(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Stock option agreements evidencing incentive stock options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.  In this regard, any awards which are NQOs under Section 3.4 of this Plan will include within the written award agreement such terms and conditions as are necessary to comply with the requirements of section 409A of the Code.  Any award agreement may require that the Participant agree to be bound by any stockholders’ agreement among all or certain stockholders of the Company that may be in effect at the time of the grant of the award, or the exercise of an Option, if applicable, or certain provisions of any such agreement that may be specified by the Company.

4.2           Option Price.  The price per share of the shares subject to each option shall be set by the Committee; provided, however, that (i) such price shall be no less than the par value of a share of common stock, and (ii) in the case of options intended to qualify as incentive stock options or as performance-based compensation as described in Section 162(m)(4)(C) of the Code such price shall be no less than 100% of the Fair Market Value of a share of common stock on the date the option is granted (110% of the Fair Market Value of a share of common stock on the date such option is granted in the case of an individual then owning (within the meaning of Section 424( d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company).

4.3           Option Term.  The term of an option shall be set by the Committee in its discretion; provided, however, that, in the case of incentive stock options, the term shall not be more than ten (10) years from the date the incentive stock option is granted, or five (5) years from such date if the incentive stock option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company.

 

4.4           Option Vesting and Exercisability.  Stock options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant. The Committee may provide, in its discretion, that any stock option shall be exercisable only in installments, and the Committee may waive such installment exercise provisions at any time in whole or in part based on such factors as the Committee may determine, in its sole discretion, including but not limited to in connection with any “change in control” of the Company, as defined in any stock option agreement.  Notwithstanding the foregoing, the Board may accelerate (i) the vesting or payment of any award (including an ISO), (ii) the lapse of restrictions on any award (including an award of Restricted Stock) and (iii) the date on which any Option first becomes exercisable as long as such acceleration will not subject the specific award or this Plan, in general, to the requirements of section 409A of the Code.

 

  

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ARTICLE V

EXERCISE OF OPTIONS

5.1           Partial Exercise.  An exercisable option may be exercised in whole or in part. However, an option shall not be exercisable with respect to fractional shares and the Committee may require that, by the terms of the option, a partial exercise be with respect to a minimum number of shares.

5.2           Manner of Exercise.  All or a portion of an exercisable option shall be deemed exercised upon delivery of all of the following to the secretary of the Company or the secretary’s office:

(a)           A written notice complying with the applicable rules established by the Committee stating that the option, or a portion thereof, is to be exercised. The notice shall be signed by the optionee or other person then entitled to exercise the option or such portion;

(b)           Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;

(c)           In the event that the option shall be exercised pursuant to Section 10.1 by any person or persons other than the optionee, appropriate proof of the right of such person or persons to exercise the option; and

(d)           Full cash payment to the secretary of the Company for the shares with respect to which the option, or portion thereof, is exercised. However, at the discretion of the Committee, the terms of the option may (i) allow a delay in payment up to thirty (30) days from the date the option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of common stock owned by the optionee for at least six months prior to the date of delivery, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of common stock then issuable upon exercise of the option having a Fair Market Value on the date of option exercise equal to the aggregate exercise price of the option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee, or (vi) allow payment through any combination of the foregoing. In the case of a promissory note, the Committee may also prescribe the form of such note, the security to be given for such note and the rate of interest, if any, that the note shall bear. The option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law, and any such note or loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction.

 

  

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5.3           Conditions to Issuance of Stock Certificate.  The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any option or portion thereof prior to fulfillment of all of the following conditions:

(a)           The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;

(b)           The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee shall, in its absolute discretion, deem necessary or advisable;

(c)           The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable;

(d)           The lapse of such reasonable period of time following the exercise of the option as the Committee may establish from time to time for reasons of administrative convenience; and

(e)           The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax.

5.4           Rights as Stockholders.  The holders of options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of an option unless and until certificates representing such shares have been issued by the Company to such holders.

5.5           Ownership and Transfer Restrictions.  The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an option as it deems appropriate. Any such restriction shall be set forth in the respective stock option agreement and may be referred to on the certificates evidencing such shares. The Committee may require the optionee to give the Company prompt notice of any disposition of shares of common stock acquired by exercise of an incentive stock option within (i) two years from the date the option was granted or (ii) one year after the transfer of such shares to the optionee. The Committee may direct that the certificates evidencing shares acquired by exercise of an option refer to such requirement to be given prompt notice of disposition.

 

  

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ARTICLE VI

AWARD OF RESTRICTED STOCK

6.1           Award of Restricted Stock.

(a)           The Committee shall from time to time, in its absolute discretion, select which Participants shall be awarded restricted stock, and determine the purchase price, if any, and other terms and conditions applicable to such restricted stock, consistent with this Plan.

(b)           The Committee shall establish the purchase price, if any, and form of payment for restricted stock, including any consideration required by applicable law. The Committee shall instruct the secretary of the Company to issue such restricted stock and may impose such conditions on the issuance of such restricted stock as it deems appropriate.

6.2           Restricted Stock Agreement.  Restricted stock shall be issued only pursuant to a written restricted stock agreement, which shall be executed by the selected Key Employee or consultant and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan.

6.3           Rights as Stockholders.  Upon delivery of the shares of restricted stock to the escrow holder pursuant to Section 6.5, the restricted stockholder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in the restricted stockholder’s restricted stock agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the common stock shall be subject to the restrictions set forth in Section 6.4.

 

6.4           Restriction.  All shares of restricted stock issued under this Plan (including any shares received by holders thereof with respect to shares of restricted stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual restricted stock agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that by a resolution adopted after the restricted stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the restricted stock agreement. Restricted stock may not be sold or encumbered until all restrictions are terminated or expire.

6.5           Escrow.  The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing restricted stock until all of the restrictions imposed under the restricted stock agreement with respect to the shares evidenced by such certificate expire or shall have been removed.

6.6           Legend.  In order to enforce the restrictions imposed upon shares of restricted stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of restricted stock that are still subject to restrictions under restricted stock agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby.

 

  

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6.7           Deferred Compensation.  To the extent that any award of shares of Restricted Stock may constitute a deferral of compensation, the award shall comply with the requirements of section 409A of the Code as set forth in the corresponding restricted stock agreement.

ARTICLE VII

PERFORMANCE AWARDS, DEFERRED STOCK, UNRESTRICTED STOCK

7.1           Performance Awards.

(a)           Any Participant selected by the Committee may be granted one or more performance awards. The value of such performance awards may be linked to the market value, book value, net profits or other measure of the value of common stock or other specific Performance Criteria (as defined in Section 7.1(c) below) determined appropriate by the Committee, or may be based upon the appreciation in the market value, book value, net profits or other measure of the value of a specified number of shares of common stock over a fixed period or periods determined by the Committee. Performance conditioned awards are subject to the following:

(b)           Any performance award intended to qualify as performance-based for purposes of Section 162(m) of the Code. In the case of any performance award to which this Section 7.1(b) applies, the Plan and such Award will be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for such exception. With respect to such performance awards, the Committee will establish, in writing, one or more specific Performance Criteria (as defined below) no later than ninety (90) days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance-based under Section 162(m)). The Performance Criteria so established shall serve as a condition to the grant, vesting or payment of the performance award, as determined by the Committee. Prior to grant, vesting or payment of the performance award, as the case may be, the Committee will certify whether the Performance Criteria have been attained and such determination will be final and conclusive. If the Performance Criteria with respect to the Award are not attained, no other Award will be provided in substitution of the performance award. No performance award to which this Section 7.1(b) applies may be granted after the first meeting of the stockholders of the Company held in 2009 until the performance measures described in Section 7.1(c) below (as the same may be amended) have been resubmitted to and re-approved by the stockholders of the Company in accordance with the requirements of Section 162(m) of the Code, unless such grant is made contingent upon such approval.

 

  

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 (c)           For purposes of this Section 7.1, “Performance Criteria” are specified criteria, other than the mere performance of services or the mere passage of time the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance-based compensation exception under Section 162(m) of the Code, a Performance Criterion means an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof); sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating rations; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. A Performance Criterion measure and any targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss. Any Performance Criterion based on performance over a period of time shall be determined by reference to a period of not less than one year. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Code, the Committee may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.

7.2           Unrestricted Stock.  Subject to the terms and provisions of the Plan, the Committee may grant or sell shares of fully vested and unrestricted stock in such amounts and for such consideration, if any, as the Committee shall determine; provided, that the aggregate number of shares of unrestricted stock that may be granted or sold for a purchase price that is less than their fair market value, unless granted in lieu of cash compensation equal to such fair market value, shall not exceed 75,000 shares.

7.3           Deferred Stock.  Any Participant selected by the Committee may be granted an award of deferred stock in the manner determined from time to time by the Committee. The number of shares of deferred stock shall be determined by the Committee and may be linked to the market value, book value, net profits or other measure of the value of common stock or other specific Performance Criteria determined appropriate by the Committee. Common stock underlying a deferred stock award will not be issued until the deferred stock award has vested, pursuant to a vesting schedule or Performance Criteria set by the Committee. Unless otherwise provided by the Committee, a grantee of deferred stock shall have no rights as a Company stockholder with respect to such deferred stock until such time as the award has vested and the common stock underlying the award has been issued.

7.4           Performance Award Agreement, Deferred Stock Agreement, Unrestricted Stock Agreement.  Each performance award, award of deferred stock and/or unrestricted Stock shall be evidenced by a written agreement, which shall be executed by the grantee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan.

 

  

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7.5           Term.  The term of a performance award, award of deferred stock and/or unrestricted stock shall be set by the Committee in its discretion.

7.6           Payment on Exercise.  Payment of the amount determined under Section 7.1, 7.2 or 7.3 above shall be in cash, in common stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VII is effected in common stock, it shall be made subject to satisfaction of all provisions of Section 5.3.

7.7           Deferred Compensation.  It is not intended that awards under this Article VII, in form and/or operation, will constitute “deferred compensation” under section 409A of the Code.  If it is subsequently determined that such awards in form and/or operation, constitute “deferred compensation” under section 409A of the Code, the award shall be amended as provided by in Section 9.6 to comply with the requirements of section 409A of the Code as set forth in the corresponding award agreement.

  

7.8           Form of Agreement.  Each award granted pursuant to this Article VII shall be evidenced by a written agreement, which shall be executed by the Grantee and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine, consistent with this Plan, including the term of the award and payment on exercise.

ARTICLE VIII

ADMINISTRATION

8.1           Committee.  The Committee shall consist of two or more directors appointed by and holding office at the pleasure of the Board. To the extent applicable, the members of the Committee shall each be an “outside director” as defined under Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board.

8.2           Duties and Powers of Committee.  It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which options, awards of restricted stock, deferred stock, unrestricted stock or performance awards are granted or awarded, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such grant or award under this Plan need not be the same with respect to each optionee, grantee or restricted stockholder. Any such interpretations and rules with respect to incentive stock options shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.

 

  

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8.3           Majority Rule.  The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee.

8.4           Compensation; Professional Assistance; Good Faith Actions.  Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company’s officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all optionees, grantees, restricted stockholders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan, options, awards of restricted stock or unrestricted stock, deferred stock or performance awards, and all members of the Committee shall be fully protected and indemnified by the Company in respect of any such action, determination or interpretation.

ARTICLE IX

MISCELLANEOUS PROVISIONS

9.1           Not Transferable.  Except as may otherwise be authorized in writing by the Committee in accordance with applicable law, options, restricted stock awards, unrestricted or deferred stock awards or performance awards under this Plan may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution, unless and until such rights or awards have been exercised, or the shares underlying such rights or awards have been issued, and all restrictions applicable to such shares have lapsed. No Award or interest or right therein shall be liable for the debts, contracts or engagements of the optionee, grantee or restricted stockholder or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided however, that this Section 9.1 shall not prevent (i) transfers by will or by the applicable laws of descent and distribution, or (ii) the designation of a beneficiary to exercise any option or other right or award (or any portion thereof) granted under the Plan after the optionee’s or grantee’s death.

  

  

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9.2           Amendment Suspension or Termination of this Plan.  This Plan shall terminate on the date of the annual meeting of the Board immediately following the tenth (10th) anniversary of the Board’s adoption of this Plan. This Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Committee, no action of the Committee may, except as provided in Section 9.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under this Plan or modify the Award Limit, and no action of the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule. No amendment, suspension or termination of this Plan shall, without the consent of the holder of, alter or impair any rights or obligations under any Award theretofore granted, unless the award itself otherwise expressly so provides. No Award may be granted or awarded during any period of suspension or after termination of this Plan, and in no event may any incentive stock option be granted under this Plan after the first to occur of the following events:

 

(a)           The expiration of ten (10) years from the date the Plan is adopted by the Board; or

(b)           The expiration of ten (10) years from the date the Plan is approved by the Company’s stockholders under Section 9.5.

Specifically, and in addition to the foregoing, this Plan may be amended, to the extent necessary, to comply with regulatory and legislative requirements, including section 409A of the Code.

9.3           Adjustments.  Upon the happening of any of the following described events, a Participant’s rights with respect to awards granted hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the award agreement.

(a)           Stock Splits and Recapitalizations.  In the event the Company issues any of its shares as a stock dividend upon or with respect to the shares, or in the event shares shall be subdivided or combined into a greater or smaller number of shares, or if, upon a merger or consolidation, reorganization, split-up, liquidation, combination, recapitalization or the like of the Company, shares shall be exchanged for other securities of the Company, securities of another entity, cash or other property, each Participant upon exercising an Option (for the purchase price to be paid under the Option) shall be entitled to purchase such number of shares, other securities of the Company, securities of such other entity, cash or other property as the Participant would have received if the Participant had been the holder of the shares with respect to which the award is exercised at all times between the Grant Date of the award and the date of its exercise, and appropriate adjustments shall be made in the purchase price per share.  In determining whether any award granted hereunder has vested, appropriate adjustments will be made for distributions and transactions described in this Section 9.3(a).  The Board may adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property, or any other event if it is determined by the Board that such adjustment is appropriate to avoid distortion in the operation of the Plan, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued.  Notwithstanding the foregoing, any adjustment under this Section 9.3(a) shall not be permitted to the extent that the individual award or this Plan, in general, would constitute deferred compensation subject to section 409A of the Code unless the award agreement sets forth the terms and conditions necessary to comply with the requirements of section 409A of the Code.  Where an adjustment of the type described above is made to an Incentive Stock Option under this Section, the adjustment will be made in a manner which will not be considered a “modification” under the provisions of subsection 424(h)(3) of the Code.

  

  

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(b)           Restricted Stock.  If any person owning Restricted Stock receives new or additional or different shares or securities (“New Securities”) in connection with a corporate transaction or stock dividend described in Section 9.3(a) as a result of owning such Restricted Stock, the New Securities shall be subject to all of the conditions and restrictions applicable to the Restricted Stock with respect to which such New Securities were issued.  Notwithstanding the foregoing, any adjustment under this Section 9.3(b) shall not be permitted to the extent that the individual award or this Plan, in general, would constitute deferred compensation subject to section 409A of the Code unless the award agreement sets forth the terms and conditions necessary to comply with the requirements of section 409A of the Code.

(c)           Fractional Shares.  No fractional shares shall be issued under the Plan. Any fractional shares which, but for this Section, would have been issued shall be deemed to have been issued and immediately sold to the Company for their Fair Market Value, and the Participant shall receive from the Company cash in lieu of such fractional shares.

(d)           Further Adjustment.  Upon the happening of any of the events described in Sections 9.3(a) or 9.3(c), the class and aggregate number of shares set forth in Section 2.1 hereof that are subject to awards which previously have been or subsequently may be granted under the Plan, and the number of shares set forth in Section 5.3 hereof that may be granted to a Participant in any year shall be appropriately adjusted to reflect the events described in such Sections.  The Board shall determine the specific adjustments to be made under this Section 9.3(d).

(e)           Assumption of Options Upon Certain Events.  In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant awards under the Plan in substitution for stock and stock based awards issued by such entity or a Subsidiary thereof, as long as such substitute awards will not constitute a deferral of compensation under section 409A of the Code.  Notwithstanding the foregoing, to the extent that the Board determines that any such substitute award shall constitute a deferral of compensation under section 409A of the Code, such award shall be accompanied with a written award agreement which shall set forth the terms and conditions required to comply with the requirements of section 409A of the Code.  The substitute awards shall be granted on such terms and conditions as the Board considers appropriate in the circumstances.  The awards so granted shall not reduce the number of shares that would otherwise be available for awards under the Plan.  Notwithstanding the foregoing, in the event of such a reorganization, merger, consolidation, recapitalization, reclassification, stock splitup, stock dividend or combination, or other adjustment or event which results in shares of Common Stock being exchanged for or converted into cash, securities or other property, the Company will have the right, subject to applicable statutory and regulatory guidance, including but not limited to section 409A of the Code,  to terminate this Plan as of the date of the exchange or conversion, in which case all options, rights and other awards under this Plan shall become the right to receive such cash, securities or other property, net of any applicable exercise price.

  

  

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9.4           Approval of Plan by Stockholders.  This Plan will be submitted for the approval of the Company’s stockholders within (12) twelve months after the date of the Board’s initial adoption of this Plan. Awards may be granted prior to such stockholder approval, provided that such Awards shall not be exercisable nor shall vest prior to the time when this Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve (12) month period, all Awards previously granted under this Plan shall thereupon be canceled and become null and void.

9.5           Tax Withholding.  The Company shall be entitled to require payment in cash or deduction from other compensation payable to each optionee, grantee or restricted stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or exercise of any option, restricted stock, deferred stock, performance award or unrestricted stock. The Committee may in its discretion and in satisfaction of the foregoing requirement allow such optionee, grantee or restricted stockholder to elect to have the Company withhold shares of common stock (or allow the return of shares of common stock) having a Fair Market Value equal to the sums required to be withheld.

9.6           Loan.  To the extent permitted by applicable law, the Committee may, in its discretion, extend one or more loans in connection with the exercise or receipt of an option or performance award, granted under this Plan, or the issuance of restricted stock, unrestricted stock or deferred stock awarded under this Plan. The terms and conditions of any such loan shall be set by the Committee.

  

9.7           Limitations Applicable to Section 16 Persons and Performance-Based Compensation.  Notwithstanding any other provision of this Plan, any option, performance award, stock appreciation right granted, or restricted stock, unrestricted stock or deferred stock awarded, to a Key Employee or director who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule, and this Plan shall be deemed amended to the extent necessary to conform to such limitations. Furthermore, notwithstanding any other provision of this Plan, any option or stock appreciation right intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements.

9.8           Other Transfer Restrictions.  Notwithstanding any other provision of the Plan, in order to qualify for the exemption provided by Rule 16b-3 under the Exchange Act, and any successor provision, (i) any Restricted Stock offered under the Plan to a Participant subject to Section 16 of the Exchange Act (a “Section 16 Participant”) may not be sold for six (6) months after acquisition; (ii) any shares or other equity security acquired by a Section 16 Participant upon exercise of an Option may not be sold for six (6) months after the date of grant of the Option; and (iii) any Option or other similar right related to an equity security issued under the Plan shall not be transferable except in accordance with the rules under Section 16 of the Exchange Act, subject to any other applicable transfer restrictions under the Plan or the award agreement.  The Board shall have no authority to take any action if the authority to take such action, or the taking of such action, would disqualify a transaction under the Plan from the exemption provided by Rule 16b-3 under the Act, or any successor provision.

  

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9.9           Effect of Plan Upon Options and Compensation Plans.  The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for employees of the Company or (ii) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, firm or association.

9.10           Compliance with Laws.  This Plan, the granting and vesting of options, restricted stock awards, unrestricted stock awards, deferred stock awards, performance awards or stock appreciation rights under this Plan and the issuance and delivery of shares of common stock and the payment of money under this Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements and the requirements of section 409A of the Code) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, options, restricted stock awards, unrestricted stock awards, deferred stock awards, performance awards, or stock appreciation rights granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

9.11           Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.

 

9.12           Governing Law.  This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.

 

 

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