Document:

WWW.EXFILE.COM, INC. -- 888-775-4789 -- NORTH AMERICAN GALVANIZING AND COATINGS, INC. -- EXHIBIT 10.1 TO FORM 8-K

    
       

      EXHIBIT
10.1

       

       

       

       

       

       

       

       

       

      NORTH
AMERICAN GALVANIZING & COATINGS, INC.

      2009
INCENTIVE STOCK PLAN

      (Amended
and Restated as of December 4, 2009)

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        TABLE
OF CONTENTS

        

           

      

      
        
          	
                   

                	
                   

                	
                  Page

                

        

         

      

      
        	
                § 1.

              	
                BACKGROUND
      AND PURPOSE 

              	
                1

              

      

       

      
        	
                §
      2.

              	
                DEFINITIONS 

              	
                1

              

      

       

      
        	
                 
      

              	
                2.1

              	
                Account 

              	
                1

              

      

       

      
        	
                 
      

              	
                2.2

              	
                Affiliate 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.3

              	
                Automatic
      Deferral Period 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.4

              	
                Beneficiary 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.5

              	
                Board 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.6

              	
                Certificate 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.7

              	
                Change
      Effective Date 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.8

              	
                Change
      in Control 

              	
                2

              

      

       

      
        	
                 
      

              	
                2.9

              	
                Code 

              	
                5

              

      

       

      
        	
                 
      

              	
                2.10

              	
                Committee 

              	
                5

              

      

       

      
        	
                 
      

              	
                2.11

              	
                Company 

              	
                5

              

      

       

      
        	
                 
      

              	
                2.12

              	
                Deferral
      Period 

              	
                5

              

      

       

      
        	
                 
      

              	
                2.13

              	
                Director 

              	
                5

              

      

       

      
        
          	
                   
      

                	
                  2.14

                	
                  Elective
      Deferral Period 

                	
                  5

                

        

      

       

      
        	
                 
      

              	
                2.15

              	
                Fair
      Market Value 

              	
                5

              

      

       

      
        	
                 
      

              	
                2.16

              	
                ISO 

              	
                6

              

      

       

      
        	
                 
      

              	
                2.17

              	
                Inside
      Director 

              	
                6

              

      

       

      
        	
                 
      

              	
                2.18

              	
                Key
      Employee 

              	
                7

              

      

       

      
        
          	
                   
      

                	
                  2.19

                	
                  NASDAQ
      Official Closing Price 

                	
                  7

                

        

      

       

      
        	
                 
      

              	
                2.20

              	
                1933
      Act 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.21

              	
                1934
      Act 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.22

              	
                Non-ISO 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.23

              	
                Option 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.24

              	
                Option
      Certificate 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.25

              	
                Option
      Price 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.26

              	
                Outside
      Director 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.27

              	
                Parent 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.28

              	
                Plan 

              	
                7

              

      

       

      
        	
                 
      

              	
                2.29

              	
                Preexisting
      Plan 

              	
                7

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                2.30

              	
                Rule
      16b-3 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.31

              	
                SAR
      Value 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.32

              	
                Stock 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.33

              	
                Stock
      Appreciation Right 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.34

              	
                Stock
      Appreciation Right Certificate 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.35

              	
                Stock
      Grant 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.36

              	
                Stock
      Grant Certificate 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.37

              	
                Stock
      Unit Grant 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.38

              	
                Subsidiary 

              	
                8

              

      

       

      
        	
                 
      

              	
                2.39

              	
                Ten
      Percent Shareholder 

              	
                8

              

      

       

      
        	
                §
      3.

              	
                SHARES
      AND GRANT LIMITS 

              	
                9

              

      

       

      
        	
                 
      

              	
                3.1

              	
                Shares
      Reserved 

              	
                9

              

      

       

      
        	
                 
      

              	
                3.2

              	
                Source
      of Shares 

              	
                9

              

      

       

      
        	
                 
      

              	
                3.3

              	
                Reduction
      and Restoration of Shares Reserved 

              	
                10

              

      

       

      
        	
                 
      

              	
                3.4

              	
                Use
      of Proceeds 

              	
                11

              

      

       

      
        	
                 
      

              	
                3.5

              	
                Grant
      Limits 

              	
                11

              

      

       

      
        	
                 
      

              	
                3.6

              	
                Preexisting
      Plan 

              	
                11

              

      

       

      
        	
                §
      4.

              	
                EFFECTIVE
      DATE 

              	
                11

              

      

       

      
        	
                §
      5.

              	
                COMMITTEE 

              	
                11

              

      

       

      
        	
                §
      6.

              	
                ELIGIBILITY 

              	
                12

              

      

       

      
        	
                §
      7.

              	
                OPTIONS 

              	
                12

              

      

       

      
        	
                 
      

              	
                7.1

              	
                Committee
      Action 

              	
                12

              

      

       

      
        	
                 
      

              	
                7.2

              	
                Option
      Certificate 

              	
                12

              

      

       

      
        	
                 
      

              	
                7.3

              	
                $100,000
      Limit 

              	
                13

              

      

       

      
        	
                 
      

              	
                7.4

              	
                Option
      Price 

              	
                13

              

      

       

      
        	
                 
      

              	
                7.5

              	
                Payment 

              	
                14

              

      

       

      
        	
                 
      

              	
                7.6

              	
                Exercise 

              	
                14

              

      

       

      
        	
                §
      8.

              	
                STOCK
      APPRECIATION RIGHTS 

              	
                15

              

      

       

      
        	
                 
      

              	
                8.1

              	
                Committee
      Action 

              	
                15

              

      

       

      
        	
                 
      

              	
                8.2

              	
                Terms
      and Conditions 

              	
                16

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                8.3

              	
                Exercise 

              	
                18

              

      

       

      
        	
                §
      9.

              	
                STOCK
      GRANTS 

              	
                18

              

      

       

      
        	
                 
      

              	
                9.1

              	
                Committee
      Action 

              	
                18

              

      

       

      
        	
                 
      

              	
                9.2

              	
                Conditions 

              	
                19

              

      

       

      
        	
                 
      

              	
                9.3

              	
                Dividends,
      Voting Rights and Creditor Status 

              	
                21

              

      

       

      
        	
                 
      

              	
                9.4

              	
                Satisfaction
      of Forfeiture Conditions 

              	
                22

              

      

       

      
        	
                 
      

              	
                9.5

              	
                Performance
      Goals for Income Tax Deduction 

              	
                22

              

      

       

      
        	
                §
      10.

              	
                NORTH
      AMERICAN GALVANIZING & COATINGS, INC. DIRECTOR STOCK UNIT
      PROGRAM 

              	
                24

              

      

       

      
        	
                 
      

              	
                10.1

              	
                Outside
      Directors 

              	
                24

              

      

       

      
        	
                 
      

              	
                10.2

              	
                Inside
      Directors 

              	
                25

              

      

       

      
        	
                 
      

              	
                10.3

              	
                Matching
      Grants 

              	
                25

              

      

       

      
        	
                 
      

              	
                10.4

              	
                Deferral
      Periods 

              	
                25

              

      

       

      
        	
                 
      

              	
                10.5

              	
                Payment 

              	
                28

              

      

       

      
        	
                 
      

              	
                10.6

              	
                Non-Forfeitable
      Account and Account Adjustments 

              	
                28

              

      

       

      
        	
                 
      

              	
                10.7

              	
                General
      Assets 

              	
                28

              

      

       

      
        	
                 
      

              	
                10.8

              	
                No
      Liability 

              	
                29

              

      

       

      
        	
                 
      

              	
                10.9

              	
                Rabbi
      Trust 

              	
                29

              

      

       

      
        	
                 
      

              	
                10.10

              	
                Amendment
      and Termination 

              	
                29

              

      

       

      
        	
                §
      11.

              	
                NON-TRANSFERABILITY 

              	
                31

              

      

       

      
        	
                §
      12.

              	
                SECURITIES
      REGISTRATION 

              	
                31

              

      

       

      
        	
                §
      13.

              	
                LIFE
      OF PLAN 

              	
                32

              

      

       

      
        	
                §
      14.

              	
                ADJUSTMENT 

              	
                33

              

      

       

      
        	
                 
      

              	
                14.1

              	
                Capital
      Structure 

              	
                33

              

      

       

      
        	
                 
      

              	
                14.2

              	
                Shares
      Reserved 

              	
                34

              

      

       

      
        	
                 
      

              	
                14.3

              	
                Transactions
      Described in § 424 of the Code 

              	
                34

              

      

       

      
        	
                 
      

              	
                14.4

              	
                Fractional
      Shares 

              	
                35

              

      

       

      
        	
                §
      15.

              	
                CHANGE
      IN CONTROL 

              	
                35

              

      

       

      
        	
                §
      16.

              	
                AMENDMENT
      OR TERMINATION 

              	
                36

              

      

       

      
        	
                §
      17.

              	
                MISCELLANEOUS 

              	
                37

              

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      
        	
                 
      

              	
                17.1

              	
                Shareholder
      Rights 

              	
                37

              

      

       

      
        	
                 
      

              	
                17.2

              	
                No
      Contract of Employment 

              	
                37

              

      

       

      
        	
                 
      

              	
                17.3

              	
                Tax
      Withholding 

              	
                37

              

      

       

      
        	
                 
      

              	
                17.4

              	
                Construction 

              	
                38

              

      

       

      
        	
                 
      

              	
                17.5

              	
                Other
      Conditions 

              	
                38

              

      

       

      
        	
                 
      

              	
                17.6

              	
                Rule
      16b-3 

              	
                38

              

      

       

      
        	
                 
      

              	
                17.7

              	
                Coordination
      with Employment Agreements and Other Agreements 

              	
                39

              

      

       

      

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

      §
1.

       

      BACKGROUND AND
PURPOSE

       

      The
purpose of this Plan is to promote the interests of North American Galvanizing
& Coatings, Inc., (the “Company”) by authorizing the Committee to grant
Options and Stock Appreciation Rights and to make Stock Grants to Key Employees
and Directors and to make Stock Unit Grants to Directors in order (1) to
attract and retain Key Employees and Directors, (2) to provide an
additional incentive to each Key Employee and Director to work to increase the
Stock value, (3) to provide each Key Employee and Director with a stake in
the future of the Company which corresponds to the stake of each of the
Company’s shareholders, and (4) to tie each Director’s compensation to the
long-term Stock value.  This Plan document contains various amendments
approved by the Board after the Plan was approved by the shareholders July 29,
2009.  The shareholder-approved Plan replaced and superseded the North
American Galvanizing & Coatings, Inc., 2004 Stock Incentive Plan, as
amended.  This amended and restated Plan document also incorporates
and supersedes the North American Galvanizing & Coatings, Inc., Director
Stock Unit Program that was adopted in connection with the adoption of the 2004
Incentive Stock Plan July 21, 2004.  This amended and restated Plan
document is effective as of October 1, 2009 and supersedes all previous versions
of the Plan and the Director Stock Unit Program.

      §
2.

       

      DEFINITIONS

       

      2.1 Account - means the
bookkeeping account maintained by the Committee to show for each Director as of
any date all Stock Unit Grant credits made for such 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Director
under this Plan, the adjustments to such credits and any distributions related
to such Account.

       

      2.2 Affiliate - means any
organization (other than a Subsidiary) that would be treated as under common
control with the Company under § 414(c) of the Code if “50 percent” were
substituted for “80 percent” in the income tax regulations under § 414(c)
of the Code.

       

      2.3 Automatic Deferral
Period - means the period described in § 10.4(b).

       

      2.4 Beneficiary - means
for each Director the person designated as such by the Director on the form
provided for this purpose or, if no such person is so designated or if no such
person survives the Director, the Director’s estate.

      2.5 Board - means the
Board of Directors of the Company.

       

      2.6 Certificate - means,
as applicable, an Option Certificate, a Stock Appreciation Right Certificate or
a Stock Grant Certificate.

       

      2.7 Change Effective Date
- means either the date which includes the “closing” of the transaction which
makes a Change in Control effective if the Change in Control is made effective
through a transaction which has a “closing” or the date a Change in Control is
reported in accordance with applicable law as effective to the Securities and
Exchange Commission if the Change in Control is made effective other than
through a transaction which has a “closing”.

       

      2.8 Change in Control -
means any one of the following events or transactions:

       

      
        	
                (a)  

              	
                any
      "person" (as that term is used in Sections 13(d) and 14(d)(2) of the 1934
      Act) after the date this Plan becomes effective under § 4
      

              

      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      
         

        
          	
                    

                	
                  becomes
      the beneficial owner (as defined in Rule 13d-3 under the 1934 Act)
      directly or indirectly, of securities representing 30% or more of the
      combined voting power for election of directors of the then outstanding
      securities of the Company or any successor to the Company; provided,
      however, the following transactions shall not constitute a Change of
      Control under this §2.8(a):  (A) any acquisition of such
      securities by the Company, (B) any acquisition of such securities by any
      employee benefit plan (or a related trust) sponsored or maintained by the
      Company or any corporation controlled by the Company, (C) any acquisition
      of such securities by any person who, immediately before such acquisition,
      had beneficial ownership (as defined in Rule 13d-3 under the 1933 Act) of
      50% or more of (i) the fair market value of the then outstanding
      securities of the Company or (ii) the combined voting power of the
      outstanding voting securities of the Company entitled to vote generally in
      the election of directors to the board of directors of the Company or (D)
      any acquisition by any corporation pursuant to a transaction which
      satisfies the requirements of  § 2.8(d)(A),
      § 2.8(d)(B) and
§ 2.8(d)(C);

                

        

         

      

      
        	
                (b)  

              	
                during
      any period of two consecutive years or less, individuals who at the
      beginning of such period constitute the Board cease for any reason
      (whether beginning on or after the date this Plan becomes effective under
      § 4) to constitute at least a majority of the Board,
  

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
         

        
          	
                    

                	
                  unless
      the election or nomination for election of each new director was approved
      by a vote of at least two-thirds of the directors then still in office who
      were directors at the beginning of the
period;

                

        

      

       

      
        	
                (c)  

              	
                the
      shareholders of the Company after the date this Plan becomes effective
      under § 4 approve any dissolution or liquidation of the Company or
      any sale or the disposition of 50% or more of the assets or business of
      the Company; or

              

      

       

      
        	
                (d)  

              	
                shareholders
      of the Company after the date this Plan becomes effective under § 4
      approve any reorganization, merger, consolidation or share exchange unless
      (A) the persons who were the beneficial owners of the outstanding shares
      of the common stock of the Company immediately before the consummation of
      such transaction beneficially own more than 60% of the outstanding shares
      of the common stock of the successor or survivor corporation in such
      transaction immediately following the consummation of such transaction and
      (B) the number of shares of the common stock of such successor or survivor
      corporation beneficially owned by the persons described in
      § 2.8(d)(A) immediately following the consummation of such
      transaction is beneficially owned by each such person in substantially the
      same proportion that each such person had beneficially owned shares of the
      Company common stock immediately before the consummation of such
      transaction, provided (C) the percentage described in
  

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
         

        
          	
                    

                	
                  § 2.8(d)(A)
      of the beneficially owned shares of the successor or survivor corporation
      and the number described in § 2.8(d)(B) of the beneficially owned
      shares of the successor or survivor corporation shall be determined
      exclusively by reference to the shares of the successor or survivor
      corporation which result from the beneficial ownership of shares of common
      stock of the Company by the persons described in § 2.8(d)(A)
      immediately before the consummation of such
  transaction.

                

        

         

      

       

      2.9 Code - means the
Internal Revenue Code of 1986, as amended.

       

      2.10 Committee - means a
committee of the Board which shall have at least 2 members, each of whom shall
be appointed by and shall serve at the pleasure of the Board and shall come
within the definition of a “non-employee director” under Rule 16b-3 and an
“outside director” under § 162(m) of the Code.

       

      2.11 Company - means North
American Galvanizing & Coatings, Inc. and any successor to North American
Galvanizing & Coatings, Inc.

       

      2.12 Deferral Period -
means the period described in § 10.4(b) and the period described in
§ 10.4(c).

       

      2.13 Director - means any
member of the Board.

       

      2.14 Elective Deferral
Period - means the period described in § 10.4(c).

       

      2.15 Fair Market Value -
means either (a) the NASDAQ Official Closing Price for the applicable date
or (b) if the NASDAQ Official Closing Price is not available for the applicable
date, the NASDAQ Official Closing Price for the immediately preceding business
day or (c) if no such NASDAQ Official Closing Price quotation is available,

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (c) the
current fair market value of a share of Stock that the Committee acting in good
faith determines through the reasonable application of a reasonable valuation
method which takes into consideration in applying its methodology all available
information material to the value of the Company, considering factors including
(as applicable) (1) the value of the Company’s tangible and intangible assets,
(2) the present value of the Company’s anticipated future cash-flows, (3) the
market value of equity interests in similar companies engaged in trades or
businesses substantially similar to those engaged in by the Company, the value
of which can be readily determined through nondiscretionary, objective means
(such as through trading prices on an established securities market or an amount
paid in an arms-length private transaction), (4) recent arm’s length
transactions involving the sale or transfer of shares of Stock, and (5) other
relevant factors such as control premiums or discounts for lack of marketability
and whether the valuation method is used for other purposes that have a material
economic effect on the Company, the holders of Stock or the Company’s
creditors.

       

      2.16 ISO - means an option
granted under this Plan to purchase Stock which is intended to satisfy the
requirements of § 422 of the Code.

       

      2.17 Inside Director -
means a member of the Board who is an employee of the Company or a Parent or
Subsidiary or Affiliate .

       

      2.18 Key Employee - means
an employee of the Company or any Subsidiary or Parent or Affiliate to whom the
Committee decides for reasons sufficient to the Committee to make a grant under
this Plan.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      2.19 NASDAQ Official Closing
Price - means the price of a share of Stock as determined using the
NASDAQ process for identifying the NASDAQ market-specific closing price for
NASDAQ-listed issues.

       

      2.20 1933 Act - means the
Securities Act of 1933, as amended.

       

      2.21 1934 Act - means the
Securities Exchange Act of 1934, as amended.

       

      2.22 Non-ISO - means an
option granted under this Plan to purchase Stock which is intended to fail to
satisfy the requirements of § 422 of the Code.

       

      2.23 Option - means an ISO
or a Non-ISO which is granted under § 7.

       

      2.24 Option Certificate -
means the certificate (whether in electronic or written form) which sets forth
the terms and conditions of an Option granted under this Plan.

       

      2.25 Option Price - means
the price which shall be paid to purchase one share of Stock upon the exercise
of an Option granted under this Plan.

       

      2.26 Outside Director -
means a member of the Board who is not an employee of the Company or a Parent or
Subsidiary or Affiliate.

       

      2.27 Parent - means any
corporation which is a parent corporation (within the meaning of § 424(e)
of the Code) of the Company.

       

      2.28 Plan - means this
North American Galvanizing & Coatings, Inc. 2009 Incentive Stock Plan as
effective as of the date approved by the shareholders of the Company and as
amended from time to time thereafter.

       

      2.29 Preexisting Plan -
means the North American Galvanizing & Coatings, Inc. 2004 Incentive Stock
Plan, as such plan has been amended from time to time up to the date this Plan
is effective.

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      2.30 Rule 16b-3 - means
the exemption under Rule 16b-3 to Section 16(b) of the 1934 Act or any
successor to such rule.

       

      2.31 SAR Value - means the
value assigned by the Committee to a share of Stock in connection with the grant
of a Stock Appreciation Right under § 8.

       

      2.32 Stock - means the
$0.10 par value common stock of the Company.

       

      2.33 Stock Appreciation
Right - means a right which is granted under § 8 to receive the
appreciation in a share of Stock.

       

      2.34 Stock Appreciation Right
Certificate - means the certificate (whether in electronic or written
form) which sets forth the terms and conditions of a Stock Appreciation Right
which is not granted as part of an Option.

       

      2.35 Stock Grant - means a
grant under § 9 which is designed to result in the issuance of the number
of shares of Stock described in such grant.

       

      2.36 Stock Grant
Certificate - means the certificate (whether in electronic or written
form) which sets forth the terms and conditions of a Stock Grant.

       

      2.37 Stock Unit Grant -
means a grant under § 10 which shall be designed to result in the issuance
of whole shares of Stock and cash in lieu of any fractional share (based on the
average Fair Market Value of a share of Stock over the 10 trading days
immediately before the date of the issuance of such Stock).

       

      2.38 Subsidiary - means a
corporation which is a subsidiary corporation (within the meaning of
§ 424(f) of the Code) of the Company.

       

      2.39 Ten Percent
Shareholder - means a person who owns (after taking into account the
attribution rules of § 424(d) of the Code) more than ten percent of the
total combined voting power of all classes of stock of either the Company, a
Subsidiary or Parent.

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      §
3.

       

      SHARES AND GRANT
LIMITS

       

      3.1 Shares
Reserved.  There shall (subject to § 14) be reserved for
issuance under this Plan (a) 2,500,000  shares of Stock plus (b) the
124,898 shares of Stock which would remain available for issuance under the
Preexisting Plan if shares were issued on August 1, 2009, the effective date of
this Plan, sufficient to satisfy grants then outstanding under such plan and the
North American Galvanizing & Coatings, Inc. Director Stock Unit Program plus
(c) the number of shares of Stock subject to grants under the Preexisting Plan
which are outstanding on the effective date of this Plan and which are forfeited
or expire on or after such effective date in accordance with the terms of such
grants or are cancelled; provided, however, (d) no more than the number of
shares of Stock described in § 3.1(a) and § 3.1(b) shall be issued in
connection with the exercise of ISOs and (e) nothing in this Plan shall affect
any grants under the Preexisting Plan which are outstanding on the effective
date of this Plan until such time, if any, that any shares of Stock subject to
such grants are forfeited or grants respecting any shares of Stock expire on or
after such effective date in accordance with the terms of such grants or such
grants are cancelled.

       

      3.2 Source of
Shares.  The shares of Stock described in § 3.1 shall be
reserved to the extent that the Company deems appropriate from authorized but
unissued shares of Stock and from shares of Stock which have been reacquired by
the Company.

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      3.3 Reduction and Restoration of
Shares Reserved.  All shares of Stock reserved for issuance
under § 3.1 shall remain available for issuance under this Plan until
issued pursuant to the exercise of an Option or a Stock Appreciation Right or
issued pursuant to a Stock Grant or Stock Unit Grant; provided,

       

      
        	
                (a)  

              	
                any
      such shares of stock which are issued pursuant to an Option shall reduce
      the number of shares reserved for issuance under § 3.1 on a one to
      one (1 to 1) basis, any shares issued pursuant to a Stock Grant or Stock
      Unit Grant shall reduce the number of shares reserved for issuance under
      § 3.1 on a one to one  (1 to 1) basis, and any shares which
      are forfeited after issuance pursuant to a Stock Grant or Stock Unit Grant
      shall be restored to the number of shares reserved for issuance under
      § 3.1 on a one to one (1 to 1)
basis;

              

      

       

      
        	
                (b)  

              	
                any
      shares of Stock issued or otherwise used to satisfy a tax withholding
      obligation under § 17.3 shall no longer be available for issuance
      under § 3.1;

              

      

       

      
        	
                (c)  

              	
                any
      shares of Stock which are tendered to the Company to pay the Option Price
      of an Option or which are tendered to the Company in satisfaction of any
      condition to a Stock Grant shall not be added to the shares of Stock
      reserved for issuance under § 3.1,
and

              

      

       

      
        	
                (d)  

              	
                the
      number of shares of Stock reserved for issuance under § 3.1 shall be
      reduced on a one to one (1 to 1) basis for each share of Stock with
      respect to which the appreciation in a Stock Appreciation Right is based
      if a share of Stock is issued in connection with the exercise of such
      Stock Appreciation Right.

              

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      3.4 Use of
Proceeds.  The proceeds which the Company receives from the
sale of any shares of Stock under this Plan shall be used for general corporate
purposes and shall be added to the general funds of the Company.

       

      3.5 Grant
Limits.  Subject to Section 14, no Key Employee or Director in
any calendar year shall be granted an Option to purchase more than 200,000
shares of Stock or a Stock Appreciation Right based on the appreciation with
respect to more than 200,000 shares of Stock.  If a Key Employee or
Director is granted both an Option and a Stock Appreciation Right in any
calendar year, however, the total of the number of Shares subject to the Option
and the number of shares with respect to which the Stock appreciation is based
shall not exceed 200,000.  Notwithstanding the above limits, the
Committee shall have the discretion to exceed any such limits if deemed
necessary or appropriate in connection with the hiring of any individual who,
when hired, would be a Key Employee.

       

      3.6 Preexisting
Plan.  No grants shall be made under the Preexisting Plan on or
after the date this Plan becomes effective.

       

      §
4.

       

      EFFECTIVE
DATE

       

      The
effective date of this amended and restated Plan shall be August 1,
2009.

      §
5.

      

       

      COMMITTEE

       

      This Plan
shall be administered by the Committee.  The Committee acting in its
absolute discretion shall exercise such powers and take such action as expressly
called 

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      for under
this Plan and, further, the Committee shall have the power to interpret this
Plan and (subject to § 15 and § 16 and Rule 16b-3) to take such other
action in the administration and operation of this Plan as the Committee deems
equitable under the circumstances, which action shall be binding on the Company,
on each affected Key Employee or Director and on each other person directly or
indirectly affected by such action.  Furthermore, the Committee as a
condition to making any grant under this Plan to any Key Employee or Director
shall have the right to require him or her to execute an agreement which makes
the Key Employee or Director subject to non-competition provisions and other
restrictive covenants which run in favor of the Company.

       

      §
6.

       

      ELIGIBILITY

       

      Only Key
Employees who are employed by the Company or a Subsidiary or Parent shall be
eligible for the grant of ISOs under this Plan.  All Key Employees and
all Directors shall be eligible for the grant of Non-ISOs and Stock Appreciation
Rights and for Stock Grants under this Plan.  Only Directors shall be
eligible for Stock Unit Grants under § 10 of this Plan.

       

      §
7.

       

      OPTIONS

       

      7.1 Committee
Action.  The Committee acting in its absolute discretion shall
have the right to grant Options to Key Employees and to Directors under this
Plan from time to time to purchase shares of Stock, and Options may be granted
for any reason the Committee deems appropriate, including as a substitute for
compensation otherwise payable in cash.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      7.2 Option
Certificate.  Each grant of an Option shall be evidenced by an
Option Certificate, and each Option Certificate shall set forth whether the
Option is an ISO or a Non-ISO and shall set forth such other terms and
conditions of such grant as the Committee acting in its absolute discretion
deems consistent with the terms of this Plan; however, (a) if the Committee
grants an ISO and a Non-ISO to a Key Employee on the same date, the right of the
Key Employee to exercise the ISO shall not be conditioned on his or her failure
to exercise the Non-ISO and (b) no Option Certificate shall provide for the
automatic grant of any new Option upon the exercise of an Option subject to such
Option Certificate.

       

      7.3 $100,000
Limit.  No Option shall be treated as an ISO to the extent that
the aggregate Fair Market Value of the Stock subject to the Option which would
first become exercisable in any calendar year exceeds $100,000.  Any
such excess shall instead automatically be treated as a Non-ISO.  The
Committee shall interpret and administer the ISO limitation set forth in this
§ 7.3 in accordance with § 422(d) of the Code, and the Committee shall
treat this § 7.3 as in effect only for those periods for which
§ 422(d) of the Code is in effect.

       

      7.4 Option
Price.  The Option Price for each share of Stock subject to an
Option shall be no less than the Fair Market Value of a share of Stock on the
date the Option is granted; provided, however, if the Option is an ISO granted
to a Key Employee who is a Ten Percent Shareholder, the Option Price for each
share of Stock subject to such ISO shall be no less than 110% of the Fair Market
Value of a share of Stock on the date such ISO is granted.  The
Committee shall not (except in accordance with § 14 and § 15) take any
action absent the approval of the Company’s shareholders

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

       (whether
through an amendment, a cancellation, making replacement grants or exchanges or
any other means) to directly or indirectly reduce the Option Price of any
outstanding Option or to make a tender offer for any Option if the Option Price
for such Option on the effective date of such tender offer exceeds the then Fair
Market Value of a share of Stock subject to such Option.

       

      7.5 Payment.  The
Option Price shall be payable in full upon the exercise of any Option and, at
the discretion of the Committee, an Option Certificate can provide for the
payment of the Option Price either in cash, by check, in Stock or through any
cashless exercise procedure which is acceptable to the Committee, or in any
combination of such forms of payment.  Any payment made in Stock shall
be treated as equal to the Fair Market Value of such Stock on the date action
acceptable to the Committee is taken to tender to the Committee or its
delegate.

       

      7.6 Exercise.

       

      
        	
                (a)  

              	
                Vesting.  The
      Committee may condition the right to exercise an Option on the
      satisfaction of a service requirement or a performance requirement or on
      the satisfaction of more than one such requirement or the satisfaction of
      any combination of such requirements or may grant an Option which is not
      subject to any such requirements, all as determined by the Committee in
      its discretion and as set forth in the related Option
      Certificate.

              

      

       

      
        	
                (b)  

              	
                Exercise
      Period.  Each Option granted under this Plan shall be
      exercisable in whole or in part to the extent vested at such time or times
      as set forth in the related Option Certificate, but no Option Certificate
      shall make an Option exercisable on or after the earlier
  of

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      
        	
                (1)  

              	
                the
      date which is the fifth anniversary of the date the Option is granted, if
      the Option is an ISO and  the Key Employee is a Ten Percent
      Shareholder on the date the Option is granted,
  or

              

      

       

      
        	
                (2)  

              	
                the
      date which is the tenth anniversary of the date the Option is granted, if
      the Option is (a) a Non-ISO or (b) an ISO which is granted to a Key
      Employee who is not a Ten Percent Shareholder on the date the Option is
      granted.

              

      

       

      
        	
                (c)  

              	
                Termination of Status
      as Key Employee or Director.  Subject to § 7.6(a),
      an Option Certificate may provide for the exercise of an Option after a
      Key Employee’s or a Director’s status as such has terminated for any
      reason whatsoever, including death or
  disability.

              

      

       

      §
8.

       

      STOCK APPRECIATION
RIGHTS

       

      8.1 Committee
Action.  The Committee acting in its absolute discretion shall
have the right to grant Stock Appreciation Rights to Key Employees and to
Directors under this Plan from time to time, and each Stock Appreciation Right
grant shall be evidenced by a Stock Appreciation Right Certificate or, if such
Stock Appreciation Right is granted as part of an Option, shall be evidenced by
the Option Certificate for the related Option.  Stock Appreciation
Rights may be granted for any reason the Committee deems appropriate, including
as a substitute for compensation otherwise payable in cash.  The
Committee shall not (except in accordance with § 14 and
§ 15)

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

       take
any action absent the approval of the Company’s shareholders (whether through an
amendment, a cancellation, making replacement grants or exchanges or any other
means) to directly or indirectly reduce the SAR Value of any outstanding Stock
Appreciation Right or to make a tender offer for any Stock Appreciation Right if
the SAR Value for such Stock Appreciation Right on the effective date of such
tender offer exceeds the then Fair Market Value of a share of Stock with respect
to which the appreciation in such Stock Appreciation Right is
based.

       

      8.2 Terms and
Conditions.

       

      
        	
                (a)  

              	
                Stock Appreciation
      Right Certificate.  If a Stock Appreciation Right is
      granted independent of an Option, such Stock Appreciation Right shall be
      evidenced by a Stock Appreciation Right Certificate, and such certificate
      shall set forth the number of shares of Stock on which the Key Employee’s
      or Director’s right to appreciation shall be based and the SAR Value of
      each share of Stock.  The SAR Value shall be no less than the
      Fair Market Value of a share of Stock on the date the Stock Appreciation
      Right is granted.  The Stock Appreciation Right Certificate
      shall set forth such other terms and conditions for the exercise of the
      Stock Appreciation Right as the Committee deems appropriate under the
      circumstances, but no Stock Appreciation Right Certificate shall make a
      Stock Appreciation Right exercisable on or after the date which is the
      tenth anniversary of the date such Stock Appreciation Right is
      granted.

              

      

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      
        	
                (b)  

              	
                Option
      Certificate.  If a Stock Appreciation Right is granted
      together with an Option, such Stock Appreciation Right shall be evidenced
      by the related Option Certificate, the number of shares of Stock on which
      the Key Employee’s or Director’s right to appreciation is based shall be
      no more than the number of shares of Stock subject to the related Option,
      and the SAR Value for each such share of Stock shall be no less than the
      Option Price under the related Option.  Each such Option
      Certificate shall provide that the exercise of the Stock Appreciation
      Right with respect to any share of Stock shall cancel the Key Employee’s
      or Director’s right to exercise his or her Option with respect to such
      share and, conversely, that the exercise of the Option with respect to any
      share of Stock shall cancel the Key Employee’s or Director’s right to
      exercise his or her Stock Appreciation Right with respect to such
      share.  A Stock Appreciation Right which is granted as part of
      an Option shall be exercisable only while the related Option is
      exercisable.  The Option Certificate shall set forth such other
      terms and conditions for the exercise of the Stock Appreciation Right as
      the Committee deems appropriate under the
  circumstances.

              

      

       

      
        	
                (c)  

              	
                Vesting.  The
      Committee may condition the right to exercise a Stock Appreciation Right
      on the satisfaction of a service requirement or a performance requirement
      or on the satisfaction of more than one such requirement or the
      satisfaction of any combination of such requirements or may grant a Stock
      Appreciation Right which is not subject to any such requirements, all as
      determined by the Committee in its discretion and as set forth in the
      related Stock Appreciation Right
Certificate.

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      8.3 Exercise.  A
Stock Appreciation Right shall be exercisable to the extent vested only when the
Fair Market Value of a share of Stock on which the right to appreciation is
based exceeds the SAR Value for such share, and the payment, if any, due on
exercise shall be based on such excess with respect to the number of shares of
Stock to which the exercise relates.  A Key Employee or Director upon
the exercise of his or her Stock Appreciation Right shall receive a payment from
the Company in cash or in Stock issued under this Plan, or in a combination of
cash and Stock, and the number of shares of Stock issued shall be based on the
Fair Market Value of a share of Stock on the date the Stock Appreciation Right
is exercised.  The Committee acting in its absolute discretion shall
have the right to determine the form and time of any payment under this
§ 8.3.

       

      §
9.

       

      STOCK
GRANTS

       

      9.1 Committee
Action.  The Committee acting in its absolute discretion shall
have the right to make Stock Grants to Key Employees and to Directors, and Stock
Grants may be made for any reason the Committee deems appropriate, including as
a substitute for compensation otherwise payable in cash.  Each Stock
Grant shall be evidenced by a Stock Grant Certificate, and each Stock Grant
Certificate shall set forth the conditions, if any, under which Stock will be
issued under the Stock Grant and the 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      conditions
under which the Key Employee’s or Director’s interest in any Stock which has
been issued will become vested and non-forfeitable.

       

      9.2 Conditions.

       

      
        	
                (a)  

              	
                Conditions to Issuance
      of Stock.  The Committee acting in its absolute
      discretion may make the issuance of Stock under a Stock Grant subject to
      the satisfaction of one, or more than one, condition which the Committee
      deems appropriate under the circumstances for Key Employees or Directors
      generally or for a Key Employee or a Director in particular, and the
      related Stock Grant Certificate shall set forth each such condition and
      the deadline for satisfying each such condition.  Stock subject
      to a Stock Grant shall be issued in the name of a Key Employee or Director
      only after each such condition, if any, has been timely satisfied, and any
      Stock which is so issued shall be held by the Company pending the
      satisfaction of the vesting conditions, if any, under § 9.2(b) for
      the related Stock Grant.

              

      

       

      
        	
                (b)  

              	
                Vesting
      Conditions.  The Committee acting in its absolute
      discretion may issue any Stock in the name of a Key Employee or Director
      under a Stock Grant subject to the satisfaction of one, or more than one,
      objective employment, performance or other vesting condition that the
      Committee acting in its absolute discretion deems appropriate under the
      circumstances for Key Employees or Directors generally or for a Key
      Employee or a Director in 

              

      

      
         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

        
          	
                    

                	
                  particular,
      and the related Stock Grant Certificate shall set forth each
      such  vesting condition, if any, and the deadline, if any, for
      satisfying each such vesting condition.  A Key Employee’s or a
      Director’s vested and non-forfeitable interest in the shares of Stock
      underlying a Stock Grant shall depend on the extent to which he or she
      timely satisfies each such vesting condition.  If a share of
      Stock is issued under this § 9.2(b) before a Key Employee’s or
      Director’s interest in such share of Stock is vested and is
      non-forfeitable, (1) such share of Stock shall not be available for
      re-issuance under § 3 until such time, if any, as such share of Stock
      thereafter is forfeited as a result of a failure to timely satisfy a
      vesting condition and (2) the Company shall have the right to condition
      any such issuance on the Key Employee or Director first signing an
      irrevocable stock power in favor of the Company with respect to the
      forfeitable shares of Stock issued to such Key Employee or Director in
      order for the Company to effect any forfeiture called for under the
      related Stock Grant Certificate.

                

        

         

      

      
        	
                (c)  

              	
                Minimum Service
      Requirement.  If the conditions to the vesting of a Stock
      Grant include the satisfaction of a service requirement and a performance
      requirement, the minimum service requirement for 100% vesting shall be at
      least one year.  If the only condition to the vesting of a Stock
      Grant is the satisfaction of a service requirement, the minimum service
      requirement for 100% vesting shall be at least three years.  The
      Committee in either case, however, may provide for a shorter period of
      service (or no period of service) if the Committee determines that the
      Company’s interests are better
served.

              

      

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      9.3 Dividends, Voting Rights and
Creditor Status.

       

      
        	
                (a)  

              	
                Cash
      Dividends.  Except as otherwise set forth in a Stock
      Grant Certificate, if a dividend is paid in cash on a share of Stock
      awarded under a Stock Grant before the first date that a Key Employee’s or
      a Director’s interest in such Stock (1) is forfeited completely or
      (2) becomes completely non-forfeitable, the Company shall pay such
      cash dividend directly to such Key Employee or
  Director.

              

      

       

      
        	
                (b)  

              	
                Stock
      Dividends.  If a Stock dividend is paid on a share of
      Stock awarded pursuant to a Stock Grant before the first date that a Key
      Employee’s or a Director’s interest in such award Stock (1) is
      forfeited completely or (2) becomes completely non-forfeitable, the
      Company shall hold such Stock dividend subject to the same conditions that
      apply to the award Stock under
§ 9.2(b).

              

      

       

      
        	
                (c)  

              	
                Other.  If
      a dividend (other than a dividend described in § 9.3(a) or
      § 9.3(b)) is paid with respect to a share of Stock after such Stock
      has been issued under a Stock Grant but before the first date that a Key
      Employee’s or a Director’s interest in such Stock (1) is forfeited
      completely or (2) becomes completely non-forfeitable, the Company
      shall distribute or hold such dividend in accordance with such rules as
      the Committee shall adopt with respect to each such
    dividend.

              

      

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      
        	
                (d)  

              	
                Voting.  Except
      as otherwise set forth in a Stock Grant Certificate, a Key Employee or a
      Director shall have the right to vote the Stock issued under his or her
      Stock Grant during the period which comes after such Stock has been issued
      under a Stock Grant but before the first date that a Key Employee’s or
      Director’s interest in such Stock (1) is forfeited completely or (2)
      becomes completely non-forfeitable.

              

      

       

      9.4 Satisfaction of Forfeiture
Conditions.  A share of Stock shall cease to be subject to a
Stock Grant at such time as a Key Employee’s or a Director’s interest in such
Stock becomes vested and non-forfeitable under this Plan, and the certificate or
other evidence of ownership representing such share shall be transferred to the
Key Employee or Director as soon as practicable thereafter.

       

      9.5 Performance Goals for Income
Tax Deduction.

       

      
        	
                (a)  

              	
                General.  The
      Committee shall (where the Committee under the circumstances deems it in
      the Company’s best interest) (1) make Stock Grants to Key Employees
      subject to at least one condition related to one, or more than one,
      performance goal based on the performance goals described in § 9.5(b)
      which the Committee deems likely to result in the Stock Grant qualifying
      as “performance-based compensation” under § 162(m) of the Code or
      

              

      

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      
        
          	
                   

                	
                  (2)
      make Stock Grants to Key Employees under such other circumstances as the
      Committee deems likely to result in an income tax deduction for the
      Company with respect to such Stock
Grant.

                

        

         

      

      
        	
                (b)  

              	
                Performance
      Goals.  A performance goal is described in this
      § 9.5(b) if such goal relates to (1) the Company’s return on capital
      employed or increases in return on capital employed, (2) the Company’s
      total earnings or the growth in such earnings, (3) the Company’s
      consolidated earnings or the growth in such earnings, (4) the Company’s
      earnings per share or the growth in such earnings, (5) the Company’s net
      earnings or the growth in such earnings, (6) the Company’s earnings before
      interest expense, taxes, depreciation, amortization and other non-cash
      items or the growth in such earnings, (7) the Company’s earnings
      before interest and taxes or the growth in such earnings, (8) the
      Company’s consolidated net income or the growth in such income, (9) the
      value of the Company’s stock or the growth in such value, (10) the
      Company’s stock price or the growth in such price, (11) the Company’s
      return on assets or the growth on such return, (12) the Company’s cash
      flow or the growth in such cash flow, (13) the Company’s total shareholder
      return or the growth in such return, (14) the Company’s expenses or the
      reduction of such expenses, (15) the Company’s sales growth, (16) the
      Company’s overhead ratios or changes in such ratios, (17) the Company’s
      expense-to-sales ratios or the changes in such ratios, or (18) the
      Company’s economic value added or changes in such value
    added.

              

      

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      
        	
                (c)  

              	
                Alternative
      Goals.  A performance goal may be set in any manner
      determined by the Committee, including looking to achievement on an
      absolute or relative basis in relation to peer groups or indexes, and the
      Committee may set more than one goal.  No change may be made to
      a performance goal after the goal has been set.  However, the
      Committee may express any goal in terms of alternatives, or a range of
      alternatives, as the Committee deems appropriate under the circumstances,
      such as including or excluding (1) any acquisitions or dispositions,
      restructuring, discontinued operations, extraordinary items and other
      unusual or non-recurring charges, (2) any event either not directly
      related to the operations of the Company or not within the reasonable
      control of the Company’s management or (3) the effects of tax or
      accounting changes.

              

      

       

      §
10.

       

      NORTH AMERICAN GALVANIZING
& COATINGS, INC.

       

      DIRECTOR STOCK UNIT
PROGRAM

       

      10.1 Outside
Directors.  In order to tie each Outside Director’s
compensation to the long-term value of the Stock, the Company shall defer 100%
of each Outside Director’s fees each calendar year.  The deferred
amounts shall be converted into a Stock Unit Grant at the average of the Fair
Market Value for a share of Stock for the 10 

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      trading
days before the date the director fees for Outside Directors otherwise would
have been payable in cash.

       

      10.2 Inside
Directors.  In order to tie a portion of each Inside Director’s
compensation to the long-term value of the Stock, the Company shall defer for
each Inside Director each calendar year a dollar amount equal to 100% of the
deferred director fees for Outside Directors.  Any deferrals for
Inside Directors shall be matched by the Company at the same rate that applies
to the required deferrals for Outside Directors under
§ 10.3.  The deferrals for each Inside Director shall be effected
from their base salary or other cash compensation to coincide with the deferrals
for Outside Directors, and the deferrals for Inside Directors shall be converted
into a Stock Unit Grant at the same time and in accordance with the same
procedure followed for Outside Directors.

       

      10.3 Matching
Grants.  The Company shall match 100% of each Director’s
deferred fees.  A Director’s matching grant under this § 10.3
will be deferred and converted into a Stock Unit Grant at the same time and
under the same procedure as his or her deferrals are converted into a Stock Unit
Grant.

       

      10.4 Deferral
Periods.

       

      
        	
                (a)  

              	
                General.  All
      deferrals under this § 10 shall be paid in the calendar year immediately
      following, and within 30 days after the end of, an Automatic Deferral
      Period or, if a Director so elects in accordance with this § 10.4,
      the end of an additional Elective Deferral
  Period.

              

      

       

      
        	
                (b)  

              	
                Automatic Deferral
      Period.  The Automatic Deferral Period for a Director for
      deferrals effected in any calendar year shall be the five calendar year
      period starting on the immediately following
      January 1.  There will be separate Automatic Deferral
      Period for deferrals effected in each calendar
  year.

              

      

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      
        	
                (c)  

              	
                Elective Deferral
      Period.  If a Director delivers an election on the form
      provided for this purpose to the Company at least one full year before the
      end of any Automatic Deferral Period, the payment of the deferrals subject
      to such Automatic Deferral Period shall be deferred for an additional five
      calendar years.  Any such election shall be irrevocable when
      delivered to the Company.  Any such payment shall be made in the
      calendar year immediately following, and within 30 days after the end of,
      any Elective Deferral Period.

              

      

       

      
        	
                (d)  

              	
                Special
      Rules.

              

      

       

      
        	
                (1)  

              	
                Termination.  All
      deferrals (whether subject to an Automatic Deferral Period or an Elective
      Deferral Period) shall be payable as of the date a Director has “separated
      from service”, by death or otherwise, as that term is defined for purposes
      of § 409A of the Code.  If the Director is also a
      “specified employee”, as defined for purposes of § 409A of the Code,
      the distribution on account of the Director’s separation from service
      shall be made six months and one day after the date of the Director’s
      separation from service unless the separation from service occurs as a
      result of the Director’s death, in which event the distribution shall be
      made as soon as is practical after the Director’s
  death.

              

      

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      
        	
                (2)  

              	
                Unforseeable
      Emergency.  If a Director can demonstrate to a majority
      of the other members of the Board that he or she has an extreme financial
      hardship as a result of an unforeseeable emergency (within the meaning of
      § 409A of the Code) and that access to his or her deferrals under
      this Plan is more appropriate under the circumstances than using any of
      his or her other assets to meet the emergency, the Board (acting by a
      majority vote with the affected Director not voting) may authorize the
      payment of all or a portion of his or her deferrals to meet the
      emergency.  The amounts distributed under this § 10.4(d)(2)
      may not exceed the amount necessary to meet the emergency plus the amount
      necessary to pay taxes reasonably anticipated to result from the
      distribution and, in any event, may not exceed the amount allowable under
      § 409A of the Code.

              

      

       

      
        	
                (e)  

              	
                Accelerated
      Payments.  The timing of any payment under this § 10
      shall not be accelerated unless the Committee (1) in its absolute
      discretion consents to such acceleration and (2) determines (acting
      in good faith) such acceleration is permissible under § 409A of the
      Code.

              

      

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      
        	
                (f)  

              	
                Delayed
      Payments.  The timing of any payment under this § 10
      shall not be delayed unless the Committee (1) in its absolute
      discretion consents to such a delay and (2) determines (acting in
      good faith) such delay is permissible under § 409A of the
      Code.

              

      

       

      10.5 Payment.  When
any deferrals become payable at the end of a Deferral Period or become payable
under § 10.4(d), payment shall be made (subject to applicable withholdings)
in whole shares of Stock and cash in lieu of a fractional share (based on the
average of the Fair Market Value for a share of Stock for the 10 trading days
before the date as of which payment is made).  The Company shall make
a payment as soon as practicable after a deferral becomes
payable.   A payment due a Director shall be made to his or her
Beneficiary if the Director dies before the payment is made.

       

      10.6 Non-Forfeitable Account and
Account Adjustments.  A Director’s interest in his or her
Account shall be non-forfeitable.  The number of shares described in a
Stock Unit Grant credited to a Director’s Account shall be adjusted at the same
time and in the same manner as Stock Grants made under this Plan.

       

      10.7 General
Assets.  All cash distributions to, or on behalf of, a Director
under this § 10 shall be made from the Company’s general assets, and any
claim by a Director or by his or her Beneficiary against the Company for any
cash distribution under this Plan shall be treated the same as a claim of any
general and unsecured creditor of the Company.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      10.8 No
Liability.  No Director and no Beneficiary shall have the right
to look to, or have any claim whatsoever against, any officer, director,
employee or agent of the Company in his or her individual capacity for the
distribution of any Account.

       

      10.9 Rabbi
Trust.  The Company, at the discretion of the Committee, may
establish a revocable “rabbi trust” which is a part of this Plan and transfer a
number of shares of Stock to the trustee of such trust which matches the number
of Stock Unit Grants made pursuant to this § 10.

       

      10.10 Amendment and
Termination.

       

      
        	
                (a)  

              	
                In
      General.  The Company reserves the right to amend or
      terminate this Director Stock Unit Program at any time by action of the
      Board.  No amendment or termination shall directly or indirectly
      reduce the balance of any Account as of the effective date of such
      amendment or termination.  Except as otherwise permitted in this
      Section 10 or as permitted by Section 409A of the Code and the regulations
      thereunder or other IRS guidance, no amendment or termination of the
      Program shall cause the payment of a deferred amount to be accelerated or
      further deferred.

              

      

       

      
        	
                (b)  

              	
                Termination After
      Change in Control.   As permitted by Section 409A of
      the Code, the Committee may terminate the Program within 30 days preceding
      or 12 months following a Change of Control as defined under any of the
      definitions of a Change of Control in Section 409A or the regulations or
      other IRS guidance issued pursuant to Section 409A.  In the
      event of a termination associated with a Change of Control, Participant
      accounts in this Program and all similar Company deferred compensation
      programs shall be distributed in a lump sum within 12 months following the
      termination.

              

      

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      
        	
                (c)  

              	
                Termination After
      Corporate Dissolution.   As permitted by Section
      409A of the Code, the Committee may terminate the Program within 12 months
      of a corporate dissolution taxed under Section 331 of the Code, or with
      the approval of a bankruptcy court pursuant to 11 U.S.C. Section
      503(b)(1)(A), provided that the amounts deferred under the Program are
      distributed to the Program Participants and included in their taxable
      income within the time limits specified for such terminations in the
      regulations under Section 409A of the
Code.

              

      

       

      
        	
                (d)  

              	
                Termination of All
      Deferral Arrangements.  As permitted by Section 409A of
      the Code, the Company may terminate the Program  provided that
      all the following conditions are met:  (1) The Company
      terminates all of its deferral arrangements that would be aggregated with
      this Program pursuant to Section 409A of the Code. (2) No payments of
      deferred amounts are made within 12 months of the termination other than
      payments that would otherwise be payable under the Program if the Program
      had not been terminated. (3)  Payments of all remaining Deferred
      Amounts are made within 24 months of the termination. (4) The Company does
      not adopt any new deferral arrangement that would be aggregated with any
      terminated arrangement at any time within five years following the date of
      termination. (5) The termination and liquidation does not occur proximate
      to a downturn in the financial health of the
  Company.

              

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      §
11.

       

      NON-TRANSFERABILITY

       

      No
Option, Stock Grant, Stock Unit Grant  or Stock Appreciation Right
shall (absent the Committee’s express, written consent) be transferable by a Key
Employee or a Director other than by will or by the laws of descent and
distribution, and any Option or Stock Appreciation Right shall (absent the
Committee’s express, written consent) be exercisable during a Key Employee’s or
Director’s lifetime only by the Key Employee or Director.  The person
or persons to whom an Option or Stock Grant or Stock Unit Grant or Stock
Appreciation Right is transferred by will or by the laws of descent and
distribution (or with the Committee’s express, written consent) thereafter shall
be treated as the Key Employee or Director.

      §
12.

       

      SECURITIES
REGISTRATION

       

      As a
condition to the receipt of shares of Stock under this Plan, the Key Employee or
Director shall, if so requested by the Company, agree to hold such shares of
Stock for investment and not with a view of resale or distribution to the public
and, if so requested by the Company, shall deliver to the Company a written
statement satisfactory to the Company to that effect.  Furthermore, if
so requested by the Company, the Key Employee or Director shall make a written
representation to the 

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      Company
that he or she will not sell or offer for sale any of such Stock unless a
registration statement shall be in effect with respect to such Stock under the
1933 Act and any applicable state securities law or he or she shall have
furnished to the Company an opinion in form and substance satisfactory to the
Company of legal counsel satisfactory to the Company that such registration is
not required.  Certificates or other evidence of ownership
representing the Stock transferred upon the exercise of an Option or Stock
Appreciation Right or upon the lapse of the forfeiture conditions, if any, on
any Stock Grant or issued pursuant to a Stock Unit Grant may at the discretion
of the Company bear a legend to the effect  that such Stock has not
been registered under the 1933 Act or any applicable state securities law and
that such Stock cannot be sold or offered for sale in the absence of an
effective registration statement as to such Stock under the 1933 Act and any
applicable state securities law or an opinion in form and substance satisfactory
to the Company of legal counsel satisfactory to the Company that such
registration is not required.

      §
13.

       

      LIFE OF
PLAN

       

      No Option
or Stock Appreciation Right shall be granted or Stock Grant or Stock Unit Grant
made under this Plan on or after the earlier of:

       

      
        	
                (1)  

              	
                the
      tenth anniversary of the effective date of this Plan (as determined under
      § 4), in which event this Plan otherwise thereafter shall continue in
      effect until all outstanding Options and Stock Appreciation Rights have
      been exercised in full or no longer are exercisable, all Stock issued
      under any Stock Grants under this Plan have been forfeited or have become
      non-forfeitable, and payment has been made in full with respect to all
      Stock Unit Grants, or

              

      

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      
        	
                (2)  

              	
                the
      date on which all of the Stock reserved under § 3 has (as a result of
      the exercise of Options or Stock Appreciation Rights granted under this
      Plan or the satisfaction of the forfeiture conditions, if any, on Stock
      Grants or the payments with respect to Stock Unit Grants) been issued or
      no longer is available for use under this Plan, in which event this Plan
      also shall terminate on such date.

              

      

       

      §
14.

       

      ADJUSTMENT

       

      14.1 Capital
Structure.  The grant limits described in § 3.5, the
number, kind or class (or any combination thereof) of shares of Stock subject to
outstanding Options and Stock Appreciation Rights granted under this Plan and
the Option Price of such Options and the SAR Value of such Stock Appreciation
Rights as well as the number, kind or class (or any combination thereof) of
shares of Stock subject to outstanding Stock Grants or Stock Unit Grants made
under this Plan shall be adjusted by the Committee in a reasonable and equitable
manner to preserve immediately after

       

      
        	
                (a)  

              	
                any
      equity restructuring or change in the capitalization of the Company,
      including, but not limited to, spin offs, stock dividends, large
      non-reoccurring cash or stock dividends, rights offerings or stock splits,
      or

              

      

       

      
        	
                (b)  

              	
                any
      other transaction described in § 424(a) of the Code which does not
      constitute a Change in Control of the Company the aggregate intrinsic
      value of each such outstanding Option, Stock Appreciation Right, Stock
      Grant and Stock Unit Grant immediately before such restructuring or
      recapitalization or other
transaction.

              

      

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      14.2 Shares
Reserved.  If any adjustment is made with respect to any
outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant
under § 14.1, then the Committee shall adjust the number, kind or class (or
any combination thereof) of shares of Stock reserved under
§ 3.1.  The Committee shall have the discretion to limit such
adjustment to account only for the number, kind and class of shares of Stock
subject to each such Option, Stock Appreciation Right, Stock Grant and Stock
Unit Grant as adjusted under § 14.1 or to further adjust such number, kind
or class (or any combination thereof) of shares of Stock reserved under
§ 3.1 to account for any reduction in the total number of shares of Stock
then reserved under § 3.1 which would result from the events described in
§ 14.1(a) and § 14.1(b) if no action was taken by the Committee under
this § 14.2.  The Committee may make any adjustment provided for
in this § 14.2 without seeking the approval of the Company’s shareholders
for such adjustment unless the Committee acting on the advice of counsel
determines that such approval is required under applicable law or the rules of
the stock exchange on which shares of Stock are traded.

       

      14.3 Transactions Described in
§ 424 of the Code.  If there is a  corporate
transaction described in § 424(a) of the Code which does not constitute a
Change in Control of the Company, the Committee as part of any such transaction
shall have the right to make Stock Grants and Option and Stock Appreciation
Right grants (without regard to any limitations set forth under § 3.5 of
this Plan) to effect the assumption of, or 

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      the
substitution for, outstanding stock grants and option and stock appreciation
right grants previously made by any other corporation to the extent that such
corporate transaction calls for such substitution or assumption of such
outstanding stock grants and stock option and stock appreciation right
grants.  Furthermore, if the Committee makes any such grants as part
of any such transaction, the Committee shall have the right to increase the
number of shares of Stock available for issuance under § 3.1 by the number
of shares of Stock subject to such grants without seeking the approval of the
Company’s shareholders for such adjustment unless such approval is required
under applicable law or the rules of the stock exchange on which shares of Stock
are traded.

       

      14.4 Fractional
Shares.  If any adjustment under this § 14 would create a
fractional share of Stock or a right to acquire a fractional share of Stock
under any Option, Stock Appreciation Right or Stock Grant, such fractional share
shall be disregarded and the number of shares of Stock reserved under this Plan
and the number subject to any Options, Stock Appreciation Right grants and Stock
Grants shall be the next lower number of shares of Stock, rounding all fractions
downward.  An adjustment made under this § 14 by the Committee
shall be conclusive and binding on all affected persons.

       

      §
15.

       

      CHANGE IN
CONTROL

       

      If there
is a Change in Control of the Company, then as of the Change Effective Date for
such Change in Control any and all conditions to the exercise of all outstanding
Options and Stock Appreciation Rights on such date and any and all outstanding
issuance and forfeiture conditions on any Stock Grants on such date
automatically shall be deemed 100% satisfied as of such Change Effective Date,
and the Board shall have 

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      the right
(to the extent expressly required as part of such transaction) to cancel such
Options, Stock Appreciation Rights and Stock Grants after providing each Key
Employee and Director a reasonable period to exercise his or her Options and
Stock Appreciation Rights and to take such other action as necessary or
appropriate to receive the Stock subject to any Stock Grants; provided, if any
issuance or forfeiture condition described in this § 15 relates to
satisfying any performance goal and there is a target for such goal, such
issuance or forfeiture condition shall be deemed satisfied under this § 15
only to the extent of such target unless such target has been exceeded before
the Change Effective Date, in which event such issuance or forfeiture condition
shall be deemed satisfied to the extent such target had been so
exceeded.

       

      §
16.

       

      AMENDMENT OR
TERMINATION

       

      This Plan
may be amended by the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, (a) no amendment shall be made
absent the approval of the shareholders of the Company to the extent such
approval is required under applicable law or the rules of the stock exchange on
which shares of Stock are listed and (b) no amendment shall be made to § 15
on or after the date of any Change in Control which might adversely affect any
rights which otherwise would vest on the related Change Effective
Date.  The Board also may suspend granting Options or Stock
Appreciation Rights or making Stock Grants or Stock Unit Grants under this Plan
at any time and may terminate this Plan at any time; provided, however, the
Board shall not have the right in connection with any such suspension or
termination to unilaterally modify, amend or cancel any Option or Stock
Appreciation Right granted, or Stock Grant or Stock Unit Grant unless
(1) the Key Employee or Director consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or liquidation of
the Company or a transaction described in § 15.

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      §
17.

       

      MISCELLANEOUS

       

      17.1 Shareholder
Rights.  No Key Employee or Director shall have any rights as a
shareholder of the Company as a result of the grant of an Option or a Stock
Appreciation Right or a Stock Unit Grant pending the actual delivery of the
Stock subject to such Option or Stock Appreciation Right or Stock Unit Grant to
such Key Employee or Director.  A Key Employee’s or a Director’s
rights as a shareholder in the shares of Stock which remain subject to
forfeiture under § 9.2(b) shall be set forth in the related Stock Grant
Certificate.

       

      17.2 No Contract of
Employment.  The grant of an Option or a Stock Appreciation
Right or a Stock Grant or Stock Unit Grant to a Key Employee or Director under
this Plan shall not constitute a contract of employment or a right to continue
to serve on the Board and shall not confer on a Key Employee or Director any
rights upon his or her termination of employment or service in addition to those
rights, if any, expressly set forth in this Plan or the related Option
Certificate, Stock Appreciation Right Certificate, or Stock Grant
Certificate.

       

      17.3 Tax
Withholding.  Each Option, Stock Appreciation Right, Stock
Grant and Stock Unit Grant shall be made subject to the condition that the Key
Employee or Director consents to whatever action the Committee directs to at
least satisfy the statutory federal and state tax withholding requirements, if
any, which the Company determines are applicable to the exercise of such Option
or Stock Appreciation Right or to the satisfaction of any forfeiture condition
with respect to Stock subject to a Stock 

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      Grant
issued in the name of the Key Employee or Director or any payment made pursuant
to a Stock Unit Grant.  No withholding shall be effected under this
Plan which exceeds the federal and state tax withholding
requirements.

       

      17.4 Construction.  All
references to sections (§) are to sections (§) of this Plan unless otherwise
indicated.  This Plan shall be construed under the laws of the State
of Delaware.  Each term set forth in § 2 shall, unless otherwise
stated, have the meaning set forth opposite such term for purposes of this Plan
and, for purposes of such definitions, the singular shall include the plural and
the plural shall include the singular.  Finally, if there is any
conflict between the terms of this Plan and the terms of any Option Certificate,
Stock Appreciation Right Certificate or Stock Grant Certificate, the terms of
this Plan shall control.

       

      17.5 Other
Conditions.  Each Option Certificate, Stock Appreciation
Right  Certificate or Stock Grant Certificate may require that a Key
Employee or a Director (as a condition to the exercise of an Option or a Stock
Appreciation Right or the issuance of Stock subject to a Stock Grant) enter into
any agreement or make such representations prepared by the Company, including
(without limitation) any agreement which restricts the transfer of Stock
acquired pursuant to the exercise of an Option or a Stock Appreciation Right or
a Stock Grant or provides for the repurchase of such Stock by the
Company.  The Company also may condition any payment under § 10 on a
Director signing such an agreement or making such representations.

       

      17.6 Rule
16b-3.  The Committee shall have the right to amend any Option,
Stock Appreciation Right, Stock Grant or Stock Unit Grant to withhold or
otherwise restrict the transfer of any Stock or cash under this Plan to a Key
Employee or Director as the Committee deems appropriate in order to satisfy any
condition or requirement under Rule 16b-3 to the extent Rule 16 of the 1934 Act
might be applicable to such grant or transfer.

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      17.7 Coordination with Employment
Agreements and Other Agreements.  If the Company enters into an
employment agreement or other agreement with a Key Employee or Director which
expressly provides for the acceleration in vesting of an outstanding Option,
Stock Appreciation Right or Stock Grant or for the extension of the deadline to
exercise any rights under an outstanding Option, Stock Appreciation Right or
Stock Grant, any such acceleration or extension shall be deemed effected
pursuant to, and in accordance with, the terms of such outstanding Option, Stock
Appreciation Right or Stock Grant and this Plan even if such employment
agreement or other agreement is first effective after the date the outstanding
Option or Stock Appreciation Right was granted or the Stock Grant was
made.

       

      IN
WITNESS WHEREOF, the Company has caused its duly authorized officer to execute
this Plan to evidence its adoption of this Plan.

       

       

       

      NORTH
AMERICAN GALVANIZING & COATINGS, INC.

      

      

      

      By: _____________________________________                                                                                               

      

      Date:  __________________________________

       

       

       

      
        
          
          

        

        
          39pbal_ex10x1.htm

     

     

    EXHIBIT
10.1

     

    LOAN
AGREEMENT

     

    Dated as
of January 15, 2010

     

    by and
between

     

    J.A.&
G.L. SIMPSON TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST

    

    as
Lender

     

    and

     

    PEPPERBALL
TECHNOLOGIES, INC.

    as
Borrower

     

    TOTAL
CREDIT AMOUNT:  $300,000

     

    
      	
              Maturity
      Date:

            	
              December
      10, 2010

            
	
              Formula:

            	
              As
      set forth in Agreement

            
	
              Interest:

            	
              15%
      per annum, fixed

            
	
              Warrants:

            	
              $150,000/Warrant
      Paid

            
	
              Class
      of stock:

            	
              Common

            
	
              Exercise
      price:

            	
              $0.10
      per share

            

    

    

    The
information set forth above is subject to the terms and conditions set forth in
the balance of this Agreement.  The parties agree as
follows:

     

    
 

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
        	
                1.    
      

              	
                Closing;
      Payments.

              

      

    

     

    (a)  Closing.  Upon the
execution of this Loan Agreement Lender shall deliver to Borrower $300,000
(sometimes referred to as “Credit Facility”)

     

    (b)  Interest.  The Credit Facility shall
be interest-only through February 28, 2010, amortizing thereafter at $12,000 per
month (in addition to the monthly interest payments) for the first month, then
$24,000 per month thereafter through Maturity (See Amortization and Fee Payment
Schedule below).

     

    (c)  Warrant.  Borrower
is concurrently issuing to Lender a Warrant to Purchase Stock on the terms and
conditions set forth therein (the “Warrant”).

     

    (d)  Maturity
Date.   All amounts outstanding hereunder are due and
payable on December 10, 2010.

     

    (e)  Amortization of
Principal.  The amortization of principal associated with this
Credit Facility shall be made as follows:

     

    
      	Month	 	Amortization of
      Principal	 
	 	 	 	 
	March 31	 	$12,000 
    	 
	April 30	 	24,000	 
	May 31	 	24,000	 
	June 30	 	24,000	 
	July 31	 	24,000	 
	August 31	 	24,000	 
	September
    30	 	24,000	 
	October 31	 	24,000	 
	November
30	 	24,000	 

    

     

    (f)  Late Payment.  If
any payment of interest or any other amount owing to Lender is not made within
ten (10) days after the due date, Borrower shall pay Lender a late payment fee
equal to the greater of $500 or 10% of the amount of such late
payment.  After the occurrence and during the continuance of an Event
of Default (after giving effect to the right to cure, if any, provided in
Section 5), the Exercise Price under the Warrant shall be $0.05.  The
terms of this paragraph shall not be construed as Lender’s consent to Borrower’s
failure to pay any amounts in strict accordance with this Agreement, and
Lender’s charging any such fees and/or acceptance of any such payments shall not
restrict Lender’s exercise of any remedies arising out of any such
failure.

     

    2.  Security
Interest.  As security for all present and future indebtedness,
guarantees, liabilities, and other obligations of Borrower to Lender under this
Agreement, including all fees specified in Section 1 (collectively, the
“Obligations”), Borrower grants Lender a security interest in all of Borrower’s
personal property, whether now owned or hereafter acquired, including without
limitation all of the following:  all accounts, cash, patents,
copyrights, trademarks, goodwill, general intangibles, chattel paper, documents,
letters of credit, instruments, deposit accounts, investment property,
inventory, fixtures and equipment, as such terms are defined in Division 9
of the Uniform Commercial Code in effect on the date hereof, and all products,
proceeds and insurance proceeds of the foregoing, but excluding any equipment
subject to existing equipment leases or motor vehicle leases or equipment lines
of credit in place prior to the date hereof and such other equipment or motor
vehicles acquired hereafter under such facilities (collectively, the
“Collateral”).  Borrower authorizes Lender to execute such documents
and take such actions as Lender reasonably deems appropriate from time to time
to perfect or continue the security interest granted
hereunder.  Borrower shall enter into such deposit account control
agreements, and shall take such other steps as Lender may reasonably request, to
perfect or assure the first priority of the security interest granted
hereunder.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  Representations and
Warranties.  Borrower represents to Lender as follows (which
shall be deemed continuing throughout the term of this Agreement):

     

    (a)  Authorization.  Borrower
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and Borrower
is and will continue to be qualified and licensed to do business in all
jurisdictions in which it is required to do so; the execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby have been duly and validly authorized by all necessary corporate action,
and do not violate Borrower’s Certificate of Incorporation or by-laws, or any
law or any material agreement or instrument which is binding upon Borrower or
its property.  Except as disclosed on Exhibit A, Borrower has no
wholly owned or partially owned subsidiaries and is not a partner or joint
venturer in any partnership or joint venture.

     

    (b)  State of Incorporation; Places of
Business; Locations of Collateral.  Borrower is a corporation
incorporated and in good standing under the laws of the State of
Colorado.  The address set forth in this Agreement under Borrower’s
signature is Borrower’s chief executive office.

     

    (c)  Title to Collateral; Permitted
Liens.  Borrower is now, and will at all times in the future
be, the sole owner of all the Collateral, except for items of Equipment that are
leased by Borrower.  The Collateral now is and will remain free and
clear of any and all liens, security interests, encumbrances and adverse claims,
except for (i) purchase money security interests in specific items of
Equipment; (ii) leases of specific items of Equipment; (iii) liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings, provided
the same have no priority over any of Lender’s security interests; and
(iv) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations that are not delinquent.

     

    (d)  Tax Returns and
Payments.  Borrower has timely filed, and will timely file, all
tax returns and reports required by applicable law, and Borrower has timely
paid, and will timely pay, all applicable taxes, assessments, deposits and
contributions now or in the future owed by Borrower.

     

    (e)  Compliance with
Law.  Borrower has complied, and will comply, in all material
respects, with all provisions of all applicable laws and
regulations.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f)  Information.  All
information provided to Lender by or on behalf of Borrower on or prior to the
date of this Agreement is true and correct in all material respects, and no
representation or other statement made by Borrower to Lender contains any untrue
statement of a material fact or omits to state a material fact necessary to make
any statements made to Lender not misleading at the time made.

     

    (g)  Litigation.  Except
as disclosed on Exhibit
A, there is no claim or litigation pending or (to best of Borrower’s
knowledge) threatened against Borrower.  Borrower will promptly inform
Lender in writing of any claim or litigation in the future which, either
separately or in the aggregate, involve a claim in excess of
$200,000.

     

    (h)  Subsidiaries.  Except
as disclosed on Exhibit
A, Borrower has no wholly-owned or partially owned subsidiaries and Exhibit A sets forth all
Advances by Borrower to, and all investments by Borrower in, any person, entity,
corporation partnership or joint venture.

     

    (i)  Deposit and Investment
Accounts.  Borrower maintains only the operating, savings,
deposit, securities and investment accounts listed on Exhibit A.

     

    4.  Covenants.

     

    (a)  Insurance.  Borrower
will maintain insurance on the Collateral and Borrower’s business, in amounts
and of a type that are customary to businesses similar to Borrower’s, and Lender
will be named in a loss payable endorsement in favor of Lender, in form
reasonably acceptable to Lender.

     

    (b)      Negative
Covenants.  Without Lender’s prior written consent, Borrower
shall not do any of the following:  (i) permit or suffer an
acquisition of all or substantially all of Borrower’s assets other than an
acquisition, the terms of which provide for immediate payment of all amounts
outstanding under this Agreement; (ii) acquire any assets outside the
ordinary course of business; (iii)  sell, lease, encumber, license or
transfer any Collateral except for sales in the ordinary course of business (in
which case Lender retains its security interest in the proceeds of such
disposition); (iv) pay or declare any dividends on Borrower’s stock;
(v) redeem, purchase or otherwise acquire, any of Borrower’s stock;
(vi) make any investments in, or Advances or advances to, any person,
including without limitation any investments in, or downstreaming of funds to,
any subsidiary or affiliate of Borrower, except in the ordinary course of
business as conducted on the date hereof; or (vii)  incur any indebtedness
outside the ordinary course of business, other than debt of up to $1,000,000
subordinated on terms reasonably acceptable to Lender, or make any payment on
any of Borrower’s indebtedness that is subordinate to the Obligations, other
than regularly scheduled interest payments for so long as an Event of Default is
not continuing.

     

    (c)           Board
Materials.  Borrower shall give Lender copies of all notices,
minutes, consents and other materials that Borrower provides to its directors in
connection with such meetings at the same time and in the same manner as it
gives to its directors.

     

    5.           Events of
Default.  Prior to Full Repayment, any one or more of the
following shall constitute an Event of Default under this
Agreement:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)           Borrower
shall fail to pay any principal of or interest on any Advances or any other
monetary Obligations within ten (10) days of when due; or

     

    (b)   Borrower
shall fail to comply with any other provision of this Agreement, which failure
is not cured within ten (10) days after the sooner of (i) the date that Borrower
has knowledge of
that failure or (ii) Borrower’s receipt of notice from Lender; or

     

    (c)   Any
warranty, representation, statement, report or certificate made or delivered to
Lender by Borrower or on Borrower’s behalf shall be untrue or misleading in a
material respect as of the date given or made, or shall become untrue or
misleading in a material respect after the date hereof which cannot be corrected
after notice to the satisfaction of Lender, acting reasonably; or

     

    (d)   A default
or event of default shall occur under any agreement to which Borrower is a party
or by which it is bound (i) resulting in a right by the other party or parties,
whether or not exercised, to accelerate the maturity of any indebtedness or (ii)
that could have a Material Adverse Effect, as defined below; or

     

    (e)   Dissolution,
termination of existence of Borrower; the occurrence of a Dissolution Event; or
appointment of a receiver, trustee or custodian, for all or any material part of
the property of, assignment for the benefit of creditors by, or the commencement
of any proceeding by or against Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect (except that, in the
case of a proceeding commenced against Borrower, Borrower shall have sixty
(60) days after the date such proceeding was commenced to have it
dismissed, provided Lender shall have no obligation to make any Advances during
such period); or

     

    (f)   The
occurrence of a “Material Adverse Effect”, which shall mean (i) a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities or financial or other condition of Borrower, (ii) the
impairment of Borrower’s ability to perform its Obligations or of Lender’s
ability to enforce the Obligations or realize upon the Collateral, or
(iii) a material adverse change in the value of the
Collateral.

     

    6.  Remedies.

     

    (a)   Remedies.  Upon the
occurrence and during the continuance of any Event of Default (after giving
effect to the right to cure, if any, provided in Section 5), Lender, at its
option, may do any one or more of the following:  (a) Accelerate
and declare the Obligations to be immediately due, payable, and performable;
(b) Take possession of any or all of the Collateral wherever it may be
found, and for that purpose Borrower hereby authorizes Lender to enter
Borrower’s premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge by Borrower for so long as Lender reasonably deems it necessary
in order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Lender seek to take possession
of any of the Collateral by Court process, Borrower hereby
waives:  (i) any bond and any surety or security relating
thereto; (ii) any demand for possession prior to the commencement of any
suit or action to recover possession thereof; and (iii) any requirement
that Lender retain possession of, and not dispose of, any such Collateral until
after trial or final judgment; (c) Require Borrower to assemble any or all
of the Collateral and make it available to Lender at places designated by
Lender; (d) Complete the processing of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal, Lender
shall have the right to use Borrower’s premises, equipment and all other
property without charge by Borrower; (e) Collect and dispose of and realize
upon any investment property, including withdrawal of any and all funds from any
deposit or securities accounts; (f) Dispose of any of the Collateral, at
one or more public or private sales, in lots or in bulk, for cash, exchange or
other property, or on credit, and to adjourn any such sale from time to time
without notice other than oral announcement at the time scheduled for sale; and
(g) Demand payment of, and collect any accounts, general intangibles or
other Collateral and, in connection therewith, Borrower irrevocably authorizes
Lender to endorse or sign Borrower’s name on all collections, receipts,
instruments and other documents, and, in Lender’s good faith business judgment,
to grant extensions of time to pay, compromise claims and settle accounts,
general intangibles and the like for less than face value; Borrower grants
Lender a license, exercisable from and after an Event of Default has occurred,
to use and copy any trademarks, service marks and other intellectual property in
which Borrower has an interest to effect any of the foregoing
remedies.  All reasonable attorneys’ fees, expenses, costs,
liabilities and obligations incurred by Lender with respect to the foregoing
shall be added to and become part of the Obligations, and shall be due on
demand.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)   Application of
Proceeds.  All proceeds realized as the result of any sale or
other disposition of the Collateral shall be applied by Lender first to the
reasonable costs, expenses, liabilities, obligations and attorneys’ fees
incurred by Lender in the exercise of its rights under this Agreement, second to
any fees and Obligations other than interest and principal, third to the
interest due upon any of the Obligations, and fourth to the principal of the
Obligations, in such order as Lender shall determine in its sole
discretion.  Any surplus shall be paid to Borrower or other persons
legally entitled thereto; Borrower shall remain liable to Lender for any
deficiency.

     

    (c)   Remedies
Cumulative.  In addition to the rights and remedies set forth
in this Agreement, Lender shall have all the other rights and remedies accorded
a secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Lender and Borrower, and all of such rights and
remedies are cumulative and none is exclusive.  Exercise or partial
exercise by Lender of one or more of its rights or remedies shall not be deemed
an election, nor bar Lender from subsequent exercise or partial exercise of any
other rights or remedies.  The failure or delay of Lender to exercise
any rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been fully paid and performed.

     

    (d)   Power of
Attorney.  After the occurrence and during the continuance of
an Event of Default (after giving effect to the right to cure, if any, provided
in Section 5), Borrower irrevocably appoints Lender (and any of Lender’s
designated employees or agents) as Borrower’s true and lawful attorney in fact
to:  endorse Borrower’s name on any checks or other forms of payment;
make, settle and adjust all claims under and decisions with respect to
Borrower’s policies of insurance; settle and adjust disputes and claims
respecting accounts, general intangibles and other Collateral; execute and
deliver all notices, instruments and agreements in connection with the
perfection of the security interest granted in this Agreement; sell, lease or
otherwise dispose of all or any part of the Collateral; and take any other
action or sign any other documents required to be taken or signed by Borrower,
or reasonably necessary to enforce Lender’s rights or remedies or otherwise
carry out the purposes of this Agreement.  The appointment of Lender
as Borrower’s attorney in fact, and each of Lender’s rights and powers, being
coupled with an interest, are irrevocable until all Obligations owing to Lender
have been paid and performed in full.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (e)           Loan Default.  Upon
the occurrence of an Event of Default under the loan agreement, Lender may
acquire an additional 50,000 warrant shares of Borrower at $0.05 per share for
the first 30 day period the Default remains uncured and an additional 75,000
warrant shares of Borrower at $0.05 per share for each subsequent 30 day period
the Default remains uncured.  Additionally, in the event of a default,
the interest rate will increase to 18% until the default is cured, and a default
fee of $6,000 will be charged per month up to a cumulative total of 25% of any
amounts due.

     

    7.  Triggering
Event.  Prior to Full Repayment (defined below), the occurrence
of any one or more of the following shall constitute a “Triggering
Event”:  (i) the sale, lease, license, exchange or similar
transaction involving all or substantially all of the assets of Borrower in one
or more transactions, (ii) the closing of a recapitalization,
reorganization, merger, consolidation or other transaction or transactions of
Borrower, (iii) any action (voluntary or involuntary) to liquidate,
dissolve and/or wind down the business of Borrower, (iv) the sale of any
division or business unit of Borrower in one or more transactions in which the
gross proceeds are at least $500,000 (or to the extent Borrower receives
consideration other than cash, any such transaction in which Borrower is deemed
to have received value in the form of cash, marketable securities, assets or
other consideration or any combination thereof of at least $500,000) and (v) the
incurrence of any debt other than debt of up to $1,000,000 subordinated on terms
reasonably acceptable to Lender.

     

    If a
Triggering Event (or any part or element thereof) shall occur before all amounts
owing Lender under this Agreement have been indefeasibly paid in full (“Full
Repayment”), upon the occurrence, and as part of the consummation, of such
Triggering Event, Lender shall be entitled to one hundred percent (100%) of the
proceeds of the sale of assets in an orderly liquidation of Borrower’s
assets  until such time as all amounts owing to Lender have been
repaid in full (including, without limitation, all accrued interest due thereon,
fees and other costs payable to Lender).  If the consideration payable
to Borrower in connection with such transaction(s) is other than cash in an
amount sufficient to satisfy the Full Repayment, Lender shall be entitled to
receive, in addition to such cash (or, upon mutual agreement, unrestricted,
publicly tradable marketable securities, provided such securities are traded on
a major public exchange and in regular daily volume sufficient to allow the
immediate liquidated thereof without negatively impacting the value of such
securities), the cash proceeds received by Borrower upon the sale of such
non-cash consideration until Full Repayment.  If Lender elects to
receive such unrestricted, publicly tradable marketable securities, Lender shall
credit the then outstanding balance hereunder with the fair market value of such
securities (based upon the average closing price per share for the five (5)
trading day period immediately preceding the date Lender receives such
unrestricted marketable securities).  If Borrower receives non-cash
consideration in connection with such transaction, Borrower shall sell, as soon
as reasonably practical, such non-cash consideration in a commercially
reasonable manner in order to maximize the proceeds of such sale.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    8.   Waivers.  The
failure of Lender at any time or times to require Borrower to strictly comply
with any of the provisions of this Agreement or any other present or future
agreement between Borrower and Lender shall not waive or diminish any right of
Lender later to demand and receive strict compliance therewith.  Any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent, and whether or not similar.  None of the provisions of
this Agreement or any other agreement shall be deemed to have been waived except
by a specific written waiver signed by an authorized officer of
Lender.  Borrower waives demand, protest, notice of protest and notice
of default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
general intangible, document or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement.

     

    9.   Governing Law; Jurisdiction;
Venue.  This Agreement and all acts and transactions hereunder
and all rights and obligations of Lender and Borrower shall be governed by the
internal laws (and not the conflict of laws rules) of the State of
California.  As a material part of the consideration to Lender to
enter into this Agreement, Borrower agrees that all actions and proceedings
relating directly or indirectly to this Agreement shall be litigated in courts
located within California, and that the exclusive venue therefor shall be San
Diego County.

     

    10.   MUTUAL
WAIVER OF JURY TRIAL.  BORROWER AND LENDER EACH WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN LENDER AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF
LENDER OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, IN ALL OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. IF THIS JURY
WAIVER IS FOR ANY REASON UNENFORCEABLE, THE PARTIES AGREE TO RESOLVE ALL CLAIMS,
CAUSES AND DISPUTES THROUGH FINAL AND BINDING ARBITRATION TO BE HELD IN SAN
DIEGO COUNTY IN ACCORDANCE WITH THEN-CURRENT COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION.  JUDGMENT UPON ANY AWARD RESULTING
FROM ARBITRATION MAY BE ENTERED INTO AND ENFORCED BY ANY STATE OR FEDERAL COURT
HAVING JURISDICTION THEREOF.

     

    11.   General.  This
Agreement and such other written agreements, documents and instruments as may be
executed in connection herewith are the final, entire and complete agreement
between Borrower and Lender and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement.  There are no oral understandings,
representations or agreements between the parties which are not set forth in
this Agreement or in other written agreements signed by the parties in
connection herewith.  The terms and provisions of this Agreement may
not be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Lender.  Lender may assign all or any part of
its interest in this Agreement and the Obligations to any person or entity, or
grant a participation in, or security interest in, any interest in this
Agreement, with notice to, but without consent of, Borrower.  Borrower
may not assign any rights under or interest in this Agreement without Lender’s
prior written consent.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one agreement.

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              J.A.&
      G.L. SIMPSON TRUST, DTD MAY 18, 1988, A CALIFORNIA TRUST

            	
              PEPPERBALL
      TECHNOLOGIES, INC. 

               

               

            
	
              By:  /s/ James A.
      Simpson

            	
              By:  /s/ Christin Lewis

            
	
              Title:  Trustee

            	
              Title:  Asst.
      Secretary

            
	 
      	 
      
	
              Address
      for notices:

            	
              Address
      for notices:

            
	
              J.A.&
      G.L. Simpson Trust, dtd May 18, 1988, a California Trust

              P.O.
      Box 2227

              Rancho
      Santa Fe, CA   92067

            	
              PepperBall
      Technologies, Inc.

              6142
      Nancy Ridge Dr., Suite 101

              San
      Diego, CA  92121

              Attn:  John
      C. Stiska, Chief Executive Officer

              Fax:  858-638-0781

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