Document:

exhibit_10-19.htm

Exhibit 10.19

 

PERSONAL EMPLOYMENT AGREEMENT

THIS PERSONAL EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into this 6 day of December, 2011 by and between A.D. Integrity Applications Ltd. (P.C 51-315187-8), of 102 Ha’Avoda St., P.O. Box 432, Ashkelon, 78100, Israel (the “Company”) and Jacob Bar-Shalom (I.D. No 022620645) of 11 Komemiyut St, Ramat Hasharon, Israel (the “CFO”).

	
WHEREAS,

	
the Company employs the CFO and the CFO is employed by the Company commencing September 1, 2011 (the "Commencement Date"); and

	
WHEREAS,

	
the parties desire to state the terms and conditions of the CFO's employment by the Company, as set forth below.

NOW, THEREFORE, in consideration of the mutual premises, covenants and other agreements contained herein, the parties hereby agree as follows:

General

1. Position. The CFO shall serve in the position described in Exhibit A attached hereto. In such position the CFO shall report regularly and shall be subject to the direction and control of the Company's CEO. The CFO shall have all of the powers, authorities, duties and responsibilities usually incident to the position of a CFO of a corporation. The CFO shall perform his duties diligently, conscientiously and in furtherance of the Company's best interests.

 

2. Scope of Employment. The Scope of employment of the CFO will be 55% of a full time employment, which is 186 hours per month. The CFO shall devote the required time and attention to the business of the Company. The CFO hereby acknowledges that the performance of his employment with the Company may require working overtime. However, CFO acknowledges that he holds a senior position in the Company requiring a special degree of trust and therefore is not entitled to receive, pursuant to the Hours of Work and Rest Law 5711-1951, separate and/or additional payments in respect of additional hours or for working on weekends or on holidays.

  

3. Location. The CFO shall perform his duties hereunder at the Company's office in Ashkelon, Israel or from his home, as shall be decided by the CEO, and he understands and agrees that his position may involve international travels.

4. CFO's Representations and Warranties. The CFO represents and warrants that the execution and delivery of this Agreement and the fulfillment of its terms: (i) will not constitute a default under or conflict with any agreement or other instrument to which he is a party or by which he is bound; and (ii) do not require the consent of any person or entity.

Term of Employment

5. Term. The CFO's employment with the Company had commenced on the date set forth in Exhibit A (the "Commencement Date"), and shall continue until it is terminated pursuant to the terms set forth herein.

 

  

  

  

6. Termination at Will. Either party may terminate the employment relationship hereunder at any time, by giving the other party a prior written notice as set forth in Exhibit A (the "Notice Period"). Notwithstanding the foregoing, the Company is entitled to terminate this Agreement with immediate effect upon a written notice to the CFO and to pay the CFO an amount equal to the Salary (as defined below) and the financial value of the other benefits the CFO is entitled to receive under the Agreement during the Notice Period, in lieu of such prior notice.

The Company and CFO agree and acknowledge that the Company’s Severance Contribution to the Pension Insurance Scheme in accordance with Section 10 below, shall, provided contribution is made in full, be instead of severance payment to which the CFO (or his beneficiaries) shall be entitled with respect to the Salary upon which such contributions were made and for the period in which they were made (the “Exempt Salary”), pursuant to Section 14 of the Severance Pay Law 5723 – 1963 (the “Severance Law”). The parties hereby adopt the General Approval of the Minister of Labor and Welfare, which is attached hereto as Exhibit B. The Company hereby forfeits any right it may have in the reimbursement of sums paid by Company into the Insurance Scheme, except: (i) in the event that CFO withdraws such sums from the Insurance Scheme, other than in the event of death, disability or retirement at the age of 60 or more; or (ii) upon the occurrence of any of the events provided for in Sections 16 and 17 of the Severance Law. Nothing in this Agreement shall derogate from the CFO’s rights to severance payment in accordance with the Severance Law or agreement or applicable ministerial order in connection with remuneration other than the Exempt Salary, to the extent such remuneration exists.

7. Termination for Cause. The Company may immediately terminate the employment relationship for Cause, and such termination shall be effective as of the time of notice of the same. "Cause" means (a) conviction of a felony involving moral turpitude; or (b) any cause justifying termination or dismissal in circumstances in which the Company can deny the CFO's severance payment under applicable law.

8. Notice Period; End of Relations. During the Notice Period and unless otherwise determined by the Company in a written notice to the severance, the employment relationship hereunder shall remain in full force and effect, the CFO shall be obligated to continue to discharge and perform all of his duties and obligations with Company, and the CFO shall cooperate with the Company and assist the Company with the integration into the Company of the person who will assume the CFO's responsibilities.

Salary and Additional Compensation; Pension/Insurance Scheme

9. Salary. The Company shall pay to the CFO as compensation for the employment services an aggregate salary in the amount set forth in Exhibit A (the "Salary"). Except as specifically set forth herein, the Salary includes any and all payments to which the CFO is entitled from the Company hereunder and under any applicable law, regulation or agreement. The Salary is to be paid to the CFO no later than by the 9th day of each calendar month after the month for which the Salary is paid, after deduction of applicable taxes and like payments.

10. Insurance and Social Benefits. The Company will insure the CFO under one of the following Pension or Insurance schemes as will be selected by the CFO:

 

Pension Fund (the "Pension Scheme") - (i) the Company will pay an amount equal to 6% of the Salary towards a fund for Tagmulim; and (ii) the Company will pay an amount equal to 8 1/3% of the Salary towards a fund for severance compensation (the “Company’s Severance Contribution”). Similarly, the Company shall deduct an amount equal to 5.5% of the Salary and shall pay such amount in respect of the Tagmulim component of the Pension Scheme; or

 

  

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"Manager's Insurance Scheme" (the "Insurance Scheme") - (i) the Company will pay an amount equal to 5% of the Salary towards a fund for Tagmulim; and (ii) the Company will pay an amount equal to 8 1/3% of the Salary towards a fund for severance compensation (the “Company’s Severance Contribution”). Similarly the Company shall deduct an amount equal to 5% of the Salary, and shall pay such amount in respect of the Tagmulim component of the Insurance Scheme. Additionally, the Company shall pay an amount equals to 2.5% of the Salary for a fund for the event of loss of working ability ("Ovdan Kosher Avoda").

 

The above contributions and deductions are subject to applicable law and therefore may be adjusted accordingly.

 

All of the CFO's aforementioned contributions shall be transferred to the plans and funds by the Company by deducting such amounts from each monthly salary payment. The contributions set out above shall be made with respect to the total amount of the Salary notwithstanding the maximum amounts exempt from tax payment under applicable laws, provided that the CFO shall bear all tax liability associated therewith.

Additional Benefits

11. Expenses. The Company will reimburse the CFO for overseas phone expenses borne by the CFO in connection with the execution of his duties hereunder, against receipts. In addition, the Company will reimburse the CFO for travel expenses borne by the CFO in connection with the execution of his duties hereunder in the amount of NIS 500 per month.

12.Vacation. The CFO shall be entitled to the number of vacation days per year as set forth in Exhibit A, to be taken at times subject to the reasonable approval of the Company.

 

13. Sick Leave; Convalescence Pay. The CFO shall be entitled to that number of paid sick leave per year as set forth in Exhibit A, and also to Convalescence Pay ("Dmei Havra'a") as set forth in Exhibit A.

 

14. Stock Options. On January 2012 or immediately thereafter, the Company will cause INTEGRITY APPLICATIONS, INC. ("Integrity"), a Delaware corporation and parent of the Company, to grant the CFO options to purchase common stock of Integrity at an exercise price per share equal to $6.25, on a fully diluted basis (the "Options"). The Options shall be subject to the terms and conditions set forth in the stock option agreement executed between Integrity and CFO and pursuant to Integrity's 2010 Incentive Compensation Plan. The number of Options will be determined by the board of Integrity.

 

  

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15. Non-Competition. The Company acknowledges the CFO is working for another company. Notwithstanding the above and in order to enable the Company to effectively protect its Confidential Information, the CFO agrees and undertakes that he will not, so long as the Agreement is in effect and for a period of twelve (12) months following termination of the Agreement, for any reason whatsoever, directly or indirectly, in any capacity whatsoever, (i) engage in, become financially interested in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with the activities of the Company; (ii) employ or solicit employees or former employees of the Company for the purposes of such activities; (iii) engage in business activities with third parties, including clients, suppliers, service providers, consultants and contractors, which at the time of termination of the Agreement or six (6) months earlier, were engaged in any form of relations, business or otherwise, with the Company.

16. Secrecy and Nondisclosure. The CFO undertakes to maintain absolute confidentiality and not to disclose nor convey to any person and/or entity whatsoever and not to use for his own purposes and/or for the purposes of others any commercial, technological or industrial information, trademarks, copyrights and other intellectual property relating to any business, operations or affairs of the Company, including all information, whether written or oral, relating to the Company, its products, customers, clients and business, commercial and technological secrets, or any other information the disclosure whereof is likely to result in damage to the Company, or in an advantage to competitors, which reached or shall reach the CFO’s knowledge, whether directly or indirectly, whether in Israel or abroad, during the course and/or in consequence of, his engagement by the Company (together the “Confidential Information”). The CFO hereby undertakes to return, upon request, to the Company, all written materials, records, documents, computer software and/or hardware or any other material which belongs to the Company and that might be in his possession, and if requested by the Company to do so, will execute a written statement confirming compliance with the above. The CFO’s undertakings pursuant to this Section shall also remain in force after the termination of this agreement, without any limitation.

Miscellaneous

17. The laws of the State of Israel shall apply to this Agreement and the sole and exclusive place of jurisdiction in any matter arising out of or in connection with this Agreement shall be the Tel-Aviv-Yafo Regional Labor Court.

18. The provisions of this Agreement are in lieu of the provisions of any collective bargaining agreement, and therefore, no collective bargaining agreement shall apply with respect to the relationship between the parties hereto (subject to the applicable provisions of the law).

19. No failure, delay or forbearance of either party in exercising any power or right hereunder shall in any way restrict or diminish such party's rights and powers under this Agreement, or operate as a waiver of any breach or nonperformance by either party of any terms or conditions hereof.

20. In the event it shall be determined under any applicable law that a certain provision set forth in this Agreement is invalid or unenforceable, such determination shall not affect the remaining provisions of this Agreement unless the business purpose of this Agreement is substantially frustrated thereby.

 

  

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21. The preface and exhibits to this Agreement constitute an integral and indivisible part hereof.

22. This Agreement constitutes the entire understanding and agreement between the parties hereto, supersedes any and all prior discussions, agreements and correspondence with regard to the subject matter hereof, and may not be amended, modified or supplemented in any respect, except by a subsequent writing executed by both parties hereto.

23. The CFO acknowledges and confirms that all the terms of his employment are personal and confidential, and undertake to keep such terms in confidence and refrain from disclosing such terms to any third party.

24. All references to applicable laws are deemed to include all applicable and relevant laws and ordinances and all regulations and orders promulgated there under, unless the context otherwise requires. The parties agree that this Agreement constitutes, among others, notification in accordance with the Notice to Employees (Employment Terms) Law, 2002. Nothing in this agreement shall derogate from the CFO’s rights according to applicable laws.

25. The Company will be bound by this Agreement subject to its authorization by all necessary corporate actions.

IN WITNESS WHEREOF the parties have signed this Agreement as of the date first hereinabove set forth.

 

	/s/ Avner Gal	 	/s/ Jacob Bar-Shalom
	A.D. Integrity Applications Ltd	 	Jacob Bar-Shalom

 

  

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Exhibit A

To the Personal Employment Agreement by and between

The Company and the CFO

 

	
        Name & I.D. No: Name of Manager:

	
Jacob Bar-Shalom, I.D. No 022620645

 

	
1.   Position: Position in the Company:

	
Chief Financial Officer of the Company and of Integrity Applications, Inc. the parent of the Company

 

	
2.   Under Direction of:

	
Chief Executive Officer

 

	
3.   Commencement Date: 

	
September 1st, 2011

 

	
4.   Notice Period: Notice Period:

	
60 days

 

	
5.   Rest Days:

	
Saturday

 

	
6.   Salary: Salary:

	
NIS 20,000

 

	
7.   Annual Vacation: Vacation Days Per Year:

	
13 days per year

 

	
8.   Sick Days: Sick Leave Days Per Year:

	
Pursuant to applicable law, however paid in full from first day

 

	
9.   Convalescence Pay:

	
Pursuant to applicable law

 

  

  

  

 

Exhibit B

GENERAL APPROVAL REGARDING PAYMENTS BY EMPLOYERS

TO A PENSION FUND AND INSURANCE FUND IN LIEU OF SEVERANCE PAY

UNDER THE SEVERANCE PAY LAW, 5723-1963

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 (hereinafter: the “Law”), I certify that payments made by an employer commencing from the date of the publication of this approval for the sake of his employee to a comprehensive pension provident fund that is not an insurance fund within the meaning set forth in the Income Tax Regulations (Rules for the Approval and Conduct of Provident Funds), 5724-1964 (hereinafter: the “Pension Fund ”) or to managers’ insurance which includes the possibility to receive annuity payments under an insurance fund as aforesaid, (hereinafter: the “Insurance Fund ”), including payments made by the employer by a combination of payments to a Pension Fund and an Insurance Fund (hereinafter: “Employer’s Payments ”), shall be made in lieu of severance pay due to said employee with respect to the salary from which said payments were made and for the period they were paid (hereinafter: the “Exempt Salary ”), provided that all the following conditions are fulfilled:

 

	
(1)

	
The Employer’s Payments –

 

	  	
(a)

	
to the Pension Fund are not less than 14 1/3% of the Exempt Salary or 12% of the Exempt Salary if the employer pays, for the sake of his employee, in addition thereto, payments to supplement severance pay to a severance pay provident fund or to an Insurance Fund in the employee’s name, in the amount of 2 1/3 % of the Exempt Salary. In the event that the employer has not paid the above mentioned 2 1/3% in addition to said 12%, his payments shall come in lieu of only 72% of the employee’s severance pay;

 

	  	
(b)

	
to the Insurance Fund are not less than one of the following:

 

	  	
(i)

	
13 1/3% of the Exempt Salary, provided that, in addition thereto, the employer pays, for the sake of his employee, payments to secure monthly income in the event of disability, in a plan approved by the Commissioner of the Capital Market, Insurance and Savings Department of the Ministry of Finance, in an amount equivalent to the lower of either an amount required to secure at least 75% of the Exempt Salary or in an amount of 2 1/2% of the Exempt Salary (hereinafter: “ Disability Insurance Payment ”);

 

	  	
(ii)

	
11% of the Exempt Salary, if the employer paid, in addition, the Disability Insurance Parent; and in such case, the Employer’s Payments shall come in lieu of only 72% of the employee’s severance pay. In the event that the employer has made payments in the employee’s name, in addition to the foregoing payments, to a severance pay provident fund or to an Insurance Fund in the employee’s name, to supplement severance pay in an amount of 2 1/3% of the Exempt Salary, the Employer’s Payments shall come in lieu of 100% of the employee’s severance pay.

 

	
(2)

	
No later than three months from the commencement of the Employer’s Payment, a written agreement was executed between the employer and the employee, which includes:

 

	  	
(a)

	
the employee’s consent to an arrangement pursuant to this approval, in an agreement specifying the Employer’s Payments, the Pension Fund and the Insurance Fund, as the case may be; said agreement shall also incorporate the text of this approval;

 

  

  

  

 

	  	
(b)

	
an advance waiver by the employer of any right which he may have to a refund of monies from his payments, except in cases in which the employee’s right to severance pay was denied by a final judgment pursuant to Sections 16 or 17 of the Law, and in such a case or in cases in which the employee withdrew monies from the Pension Fund or Insurance Fund, other than by reason of an entitling event; for these purposes an “Entitling Event” means death, disability or retirement at or after the age of 60.

 

	
(3) 

	
This approval shall not derogate from the employee’s right to severance pay pursuant to any law, collective agreement, extension order or employment agreement with respect to compensation in excess of the Exempt Salary.

 

15th Sivan 5758 (June 9th, 1998).ex4-1.htm

Exhibit 4.1

_____________________________________________________________

MEDIZONE INTERNATIONAL, INC.

2012 EQUITY INCENTIVE AWARD PLAN

 

_____________________________________________________________

 

 

 

 

  

  

  

 

TABLE OF CONTENTS

 

Page

	
ARTICLE 1 PURPOSE

	
1

	 	 
	
ARTICLE 2 DEFINITIONS AND CONSTRUCTION

	
1

	 	 
	
ARTICLE 3 SHARES SUBJECT TO THE PLAN

	
5

	
3.1.

	
Number of Shares

	
5

	
3.2.

	
Stock Distributed

	
6

	
3.3.

	
Limitation on Number of Shares Subject to Awards

	
6

	 	 	 
	
ARTICLE 4 ELIGIBILITY AND PARTICIPATION

	
6

	
4.1.

	
Eligibility

	
6

	
4.2.

	
Participation

	
6

	
4.3.

	
Foreign Participants

	
6

	 	 	 
	
ARTICLE 5 STOCK OPTIONS

	
6

	
5.1.

	
General

	
6

	
5.2.

	
Incentive Stock Options

	
7

	
5.3.

	
Substitution of Stock Appreciation Rights

	
8

	
5.4.

	
Paperless Exercise

	
8

	
5.5.

	
Granting of Options to Independent Directors

	
8

	 	 	 
	
ARTICLE 6 RESTRICTED STOCK AWARDS

	
9

	
6.1.

	
Grant of Restricted Stock

	
9

	
6.2.

	
Issuance and Restrictions

	
9

	
6.3.

	
Forfeiture

	
9

	
6.4.

	
Certificates for Restricted Stock

	
9

	 	 	 
	
ARTICLE 7 STOCK APPRECIATION RIGHTS

	
9

	
7.1.

	
Grant of Stock Appreciation Rights

	
9

	
7.2.

	
Coupled Stock Appreciation Rights

	
9

	
7.3.

	
Independent Stock Appreciation Rights

	
10

	
7.4.

	
Payment and Limitations on Exercise

	
10

 

  

ii

  

 

	
ARTICLE 8 OTHER TYPES OF AWARDS

	
11

	
8.1.

	
Performance Share Awards

	
11

	
8.2.

	
Performance Units

	
11

	
8.3.

	
Dividend Equivalents

	
11

	
8.4.

	
Stock Payments

	
11

	
8.5.

	
Deferred Stock

	
12

	
8.6.

	
Restricted Stock Units

	
12

	
8.7.

	
Other Stock-Based Awards

	
12

	
8.8.

	
Term

	
12

	
8.9.

	
Exercise or Purchase Price

	
12

	
8.10.

	
Exercise Upon Termination of Employment or Service

	
13

	
8.11.

	
Form of Payment

	
13

	
8.12.

	
Award Agreement

	
13

	 	 	 
	
ARTICLE 9 PERFORMANCE-BASED AWARDS

	
13

	
9.1.

	
Purpose

	
13

	
9.2.

	
Applicability

	
13

	
9.3.

	
Procedures with Respect to Performance-Based Awards

	
13

	
9.4.

	
Payment of Performance-Based Awards

	
14

	
9.5.

	
Additional Limitations

	
14

	 	 	 
	
ARTICLE 10 PROVISIONS APPLICABLE TO AWARDS

	
14

	
10.1.

	
Stand-Alone and Tandem Awards

	
14

	
10.2.

	
Award Agreement

	
14

	
10.3.

	
Limits on Transfer

	
14

	
10.4.

	
Death of Optionee

	
15

	
10.5.

	
Retirement or Disability

	
15

	
10.6.

	
Termination for Other Reasons

	
15

	
10.7.

	
Leaves of Absence and Performance Targets

	
16

	
10.8.

	
Newly Eligible Employees

	
16

	
10.9.

	
Stock Certificates; Book Entry Procedures

	
16

 

  

iii

  

 

	
ARTICLE 11 CHANGES IN CAPITAL STRUCTURE

	
16

	
11.1.

	
Adjustments

	
16

	
11.2.

	
Outstanding Awards—Other Changes

	
17

	
11.3.

	
No Other Rights

	
18

	 	 	 
	
ARTICLE 12 ADMINISTRATION

	
18

	
12.1.

	
Committee

	
18

	
12.2.

	
Committee Appointee Duration

	
18

	
12.3.

	
Action by the Board

	
18

	
12.4.

	
Action by the Committee

	
19

	
12.5.

	
Authority of Committee

	
19

	
12.6.

	
Decisions Binding

	
20

	
12.7.

	
Delegation of Authority

	
20

	
12.8.

	
Committee Administration

	
20

	
12.9.

	
Liability

	
20

	 	 	 
	
ARTICLE 13 EFFECTIVE AND EXPIRATION DATE

	
20

	
13.1.

	
Effective Date

	
20

	
13.2.

	
Expiration Date

	
20

	 	 	 
	
ARTICLE 14 AMENDMENT, MODIFICATION, AND TERMINATION

	
20

	
14.1.

	
Amendment, Modification, And Termination

	
20

	
14.2.

	
Awards Previously Granted

	
21

	 	 	 
	
ARTICLE 15 COMPLIANCE WITH SECTION 409A OF THE CODE

	
21

	
15.1.

	
Awards subject to Code Section 409A

	
21

	
15.2.

	
Distributions under a Section 409A Award

	
21

	
15.3.

	
Prohibition on Acceleration of Benefits

	
22

	
15.4.

	
Elections under Section 409A Awards

	
22

	 	 	 
	
ARTICLE 16 GENERAL PROVISIONS

	
23

	
16.1.

	
No Rights to Awards

	
23

	
16.2.

	
No Stockholder Rights

	
23

	
16.3.

	
Withholding

	
23

	
16.4.

	
No Right to Employment or Services

	
24

	
16.5.

	
Unfunded Status of Awards

	
24

	
16.6.

	
Indemnification

	
24

	
16.7.

	
Relationship to other Benefits

	
24

	
16.8.

	
Expenses

	
24

	
16.9.

	
Titles and Headings

	
24

	
16.10.

	
Fractional Shares

	
24

	
16.11.

	
Limitations Applicable to Section 16 Persons

	
24

	
16.12.

	
Government and Other Regulations

	
25

	
16.13.

	
Governing Law

	
25

 

  

iv

  

 

MEDIZONE INTERNATIONAL, INC.

2012 EQUITY INCENTIVE AWARD PLAN

ARTICLE 1

PURPOSE

 

The purposes of the Medizone International, Inc. 2012 Equity Incentive Award Plan (the “Plan”) are to:

 

(1)           Closely associate the interests of management, Employees, directors and Consultants of Medizone International, Inc., a Nevada corporation (the “Company”), with the stockholders of the Company by reinforcing the relationship between participants’ rewards and stockholder gains;

 

(2)           Provide management and employees with an equity ownership in the Company commensurate with Company performance, as reflected in increased stockholder value;

 

(3)           Maintain competitive compensation levels; and

 

(4)           Provide an incentive to management and employees to remain in continuing employment with the Company and to put forth maximum efforts for the success of its business.

 

The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

 

ARTICLE 2

DEFINITIONS AND CONSTRUCTION

 

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

 

2.1. “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance Share award, a Performance Unit award, a Dividend Equivalents award, a Stock Payment award, a Deferred Stock award, a Restricted Stock Unit award, an Other Stock-Based Award, or a Performance-Based Award granted to a Participant pursuant to the Plan.

 

2.2. “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.

 

2.3. “Board” means the Board of Directors of the Company.

 

  

1

  

 

2.4. “Change in Control” means the occurrence of any of the following in one or a series of related transactions: (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act) of more than thirty percent (30%) of the voting rights or equity interests in the Company; (ii) a replacement, during a 24-month period, of more than one-half of the members of the Board that is not approved by those individuals who are members of the Board on the date hereof (or other directors previously approved by such individuals); (iii) consummation of a merger or consolidation of the Company or any Subsidiary or a sale of more than one-half of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company’s securities prior to the first such transaction continue to hold at least one-half of the voting rights and equity interests of the surviving entity or acquirer of such assets; (iv) a recapitalization, reorganization or other transaction involving the Company or any Subsidiary that constitutes or results in a transfer of more than one-half of the voting rights or equity interests in the Company; or (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the Company.

 

2.5. “Code” means the Internal Revenue Code of 1986, as amended.

 

2.6. “Committee” means the committee of the Board described in Article 12.

 

2.7. “Consultant” means any consultant or adviser if:

 

(a) The consultant or adviser renders bona fide services to the Company;

 

(b) The services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and

 

(c) The consultant or adviser is a natural person who has contracted directly with the Company to render such services.

 

2.8. “Covered Employee” means an Employee who is, or may be, as determined by the Committee, a “covered employee” within the meaning of Section 162(m) of the Code.

 

2.9. “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time periods pursuant to Article 8.

 

2.10. “Disability” means that the Participant qualifies to receive long-term disability payments under the Company’s long-term disability insurance program, if any, as it may be amended from time to time.

 

2.11. “Dividend Equivalents” means a right granted to a Participant pursuant to Article 8 to receive the equivalent value (in cash or Stock) of dividends paid on Stock.

 

2.12. “Effective Date” shall have the meaning set forth in Section 13.1.

 

2.13. “Eligible Individual” means any person who is an Employee, a Consultant or a member of the Board, as determined by the Committee.

 

  

2

  

 

2.14. “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Subsidiary.

 

2.15. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.16. “Fair Market Value” means, as of any given date, the fair market value of a share of Stock on the date determined by such methods or procedures as may be established from time to time by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of a share of Stock as of any date shall be (i) the mean between the highest and lowest selling price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any, on such date, or if shares were not traded on such date, then on the closest preceding date on which a trade occurred; or (ii) if Common Stock is not traded on an exchange, the mean between the closing representative bid and asked prices for the Common Stock on such date as reported by the OTC Bulletin Board or the OTC Markets Group, Inc, or if not then in existence, by their successor quotation system; or (iii) if Common Stock is not publicly traded, the Fair Market Value of a share of Common Stock as established by the Committee acting in good faith.

 

2.17. “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

 

2.18. “Independent Director” means a member of the Board who is not an Employee of the Company.

 

2.19. “Non-Employee Director” means a member of the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) of the Exchange Act, or any successor definition adopted by the Board.

 

2.20. “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

 

2.21. “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option.

 

2.22. “Other Stock-Based Award” means an Award granted or denominated in Stock or units of Stock pursuant to Section 8.7 of the Plan.

 

2.23. “Participant” means any Eligible Individual who, as a member of the Board or Employee or Consultant, has been granted an Award pursuant to the Plan.

 

2.24. “Performance-Based Award” means an Award granted to selected Covered Employees pursuant to Articles 6 and 8, but which is subject to the terms and conditions set forth in Article 9. All Performance-Based Awards are intended to qualify as Qualified Performance-Based Compensation.

 

2.25. “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria that will be used to establish Performance Goals are limited to the following: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added (as determined by the Committee), sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per share, price per share of Stock, and market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Participant.

 

  

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2.26. “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. The Committee, in its discretion, may adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions.

 

2.27. “Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance-Based Award.

 

2.28. “Performance Share” means a right granted to a Participant pursuant to Article 8, to receive Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.

 

2.29. “Performance Unit” means a right granted to a Participant pursuant to Article 8, to receive units of value, including dollar value of shares of Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based targets established by the Committee.

 

2.30. “Plan” means this Medizone International, Inc. 2012 Equity Incentive Award Plan, as it may be amended from time to time.

 

2.31. “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as “qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

 

2.32. “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain restrictions and may be subject to risk of forfeiture.

 

2.33. “Restricted Stock Unit” means an Award granted pursuant to Section 8.6.

 

2.34. “Section 409A Award” shall have the meaning set forth in Section 15.1.

 

2.35. “Securities Act” shall mean the Securities Act of 1933, as amended.

 

  

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2.36. “Stock” or “Common Stock” means the common stock of the Company, par value $0.001 per share, and such other securities of the Company that may be substituted for Stock pursuant to Article 11.

 

2.37. “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award Agreement.

 

2.38. “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Article 8.

 

2.39. “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company.

 

ARTICLE 3

SHARES SUBJECT TO THE PLAN

 

3.1. Number of Shares.

 

(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which may be issued, transferred or reserved for issuance pursuant to Awards under the Plan shall be ten million (10,000,000) shares.  In order that the applicable regulations under the Code relating to Incentive Stock Options be satisfied, the maximum number of shares of Stock that may be delivered upon exercise of Incentive Stock Options shall be the number specified in this Section 3.1(a). In the absence of an effective registration statement under the Securities Act, all Options granted and shares of Common Stock subject to their exercise will be restricted as to subsequent resale or transfer, pursuant to the provisions of Rule 144 promulgated under the Securities Act.

 

(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend Equivalents in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan.

 

  

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3.2. Stock Distributed.   Any Stock distributed pursuant to an Award will consist of authorized and unissued Stock of the Company.

 

3.3. Limitation on Number of Shares Subject to Awards.   Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, (a) the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during a one-year period (measured from the date of any grant) shall be 1,000,000 shares, and (b) the maximum dollar value payable to any one Participant during a one-year period with respect to awards of Performance Units shall be $500,000.

 

ARTICLE 4

ELIGIBILITY AND PARTICIPATION

 

4.1. Eligibility.   Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the Plan.

 

4.2. Participation.   Subject to the provisions of the Plan, the Committee may, from time to time, select from among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.

 

4.3. Foreign Participants.   In order to assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy, or custom.  Moreover, the Committee may approve such supplements to, or amendments, restatements, or alternative versions of, the Plan as it may consider necessary or appropriate for such purposes without thereby affecting the terms of the Plan as in effect for any other purpose; provided, however, that no such supplements, amendments, restatements, or alternative versions shall increase the share limitations contained in Sections 3.1 and 3.3 of the Plan.

 

ARTICLE 5

STOCK OPTIONS

 

5.1. General.   The Committee is authorized to grant Options to Participants on the following terms and conditions:

 

(a) Exercise Price.   The exercise price per share of Stock subject to an Option shall be not less than 100% of the Fair Market Value of a share of Stock on the date of the grant.

 

(b) Time and Conditions of Exercise.   Each Option shall be fully exercisable at any time within the period beginning not earlier than six months after the date of the option grant and ending not later than ten (10) years after the date of such grant (the “Option Term”), unless the Committee specifies otherwise.  In no event, however, shall the Option Term extend beyond ten (10) years after the date of the grant. No Option shall be exercisable after the expiration of the Option Term.  The Committee shall also determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.

 

  

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(c) Payment.   The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, including, without limitation: (i) cash, (ii) promissory note bearing interest at no less than such rate as shall preclude the imputation of interest under the Code, (iii) shares of Stock having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof, or (iv) other property acceptable to the Committee (including through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price;  provided  that payment of such proceeds is then made to the Company upon settlement of such sale), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a member of the Board or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option by means of a personal loan or other credit extended by the Company or in any other method which would violate Section 13(k) of the Exchange Act.

 

(d) Evidence of Grant.   All Options shall be evidenced by a written Award Agreement between the Company and the Participant.  The Award Agreement shall include the number of shares of Common Stock subject to the Option, the exercise date, the Option Term, and such additional provisions as may be specified by the Committee.

 

5.2. Incentive Stock Options.   The terms of any Incentive Stock Options granted pursuant to the Plan must comply with the conditions and limitations contained Section 13.2 and this Section 5.2.

 

(a) Eligibility.   The Committee may grant one or more Incentive Stock Options to employees of the Company or any “subsidiary corporation” thereof (within the meaning of Section 424(f) of the Code and the applicable regulations promulgated thereunder). The date an Incentive Stock Option is granted shall mean the date selected by the Committee as of which the Committee shall allot a specific number of shares to a participant pursuant to the Plan.

 

(b) Individual Dollar Limitation.   The aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code, or any successor provision.  Multiple Incentive Stock Options may be granted to an Optionee in any calendar year.

 

(c) Ten Percent Owners.   The Committee may determine to grant an Incentive Stock Option to an Employee who is also an individual who owns, at the date of grant, directly or indirectly according to the stock ownership attribution rules of Section 424(d) of the Code, Stock possessing more than ten percent (10%) of the total combined voting power of all classes of Stock of the Company.  However, the exercise price of such Option granted shall not be less than 110% of Fair Market Value on the date of grant.  Furthermore, the Option may be exercisable for no more than five (5) years from the date of grant.

 

  

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(d) Notice of Disposition.   The Participant shall give the Company prompt notice of any disposition of shares of Stock acquired by exercise of an Incentive Stock Option within (i) two (2) years from the date of grant of such Incentive Stock Option or (ii) one (1) year after the transfer of such shares of Stock to the Participant.  In order to obtain the favorable tax treatment available for Incentive Stock Options under Section 422 of the Code, the Optionee is prohibited from the sale, exchange, transfer, pledge, hypothecation, gift or other disposition of the shares of Common Stock underlying the Incentive Stock Options until the later of either two (2) years after the date of grant of the Incentive Stock Option, or one (1) year after the transfer to the Optionee of such underlying Common Stock after the Optionee’s exercise of such Incentive Stock Option. Should Optionee choose to make a premature disposition of such underlying Common Stock contrary to such restrictions, the Options related to such Common Stock shall be treated as Non-qualified Stock Options pursuant to the terms of the Plan.

 

(e) Right to Exercise.   During a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.

 

5.3. Substitution of Stock Appreciation Rights.   The Committee may provide in the Award Agreement evidencing the grant of an Option that the Committee, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option, subject to the provisions of Section 7.2 hereof; provided that such Stock Appreciation Right shall be exercisable with respect to the same number of shares of Stock for which such substituted Option would have been exercisable.

 

5.4. Paperless Exercise.   In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Options by a Participant may be permitted through the use of such an automated system.

 

5.5. Granting of Options to Independent Directors.   The Board may from time to time, in its sole discretion, and subject to the limitations of the Plan:

 

(a) Select from among the Independent Directors (including Independent Directors who have previously been granted Options under the Plan) such of them as in its opinion should be granted Options;

 

(b) Subject to Section 3.3, determine the number of shares of Stock that may be purchased upon exercise of the Options granted to such selected Independent Directors; and

 

(c) Subject to the provisions of this Article 5, determine the terms and conditions of such Options, consistent with the Plan.

 

Options granted to Independent Directors shall be Non-Qualified Stock Options.

  

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ARTICLE 6

RESTRICTED STOCK AWARDS

 

6.1. Grant of Restricted Stock.   The Committee is authorized to make Awards of Restricted Stock to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a written Restricted Stock Award Agreement.

 

6.2. Issuance and Restrictions.   Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

 

6.3. Forfeiture.   Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited;  provided, however, that the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

 

6.4. Certificates for Restricted Stock.   Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

 

ARTICLE 7

STOCK APPRECIATION RIGHTS

 

7.1. Grant of Stock Appreciation Rights.   A Stock Appreciation Right may be granted to any Participant selected by the Committee. A Stock Appreciation Right may be granted (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose and shall be evidenced by an Award Agreement.

 

7.2. Coupled Stock Appreciation Rights.

 

(a) A Coupled Stock Appreciation Right (“CSAR”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable, provided, however, that the exercise price for any CSAR shall not be less than 100% of the Fair Market Value on the date of grant; and provided, further, that, the Committee in its sole and absolute discretion may provide that the CSAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise.

 

  

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(b) A CSAR may be granted to a Participant for no more than the number of shares subject to the simultaneously or previously granted Option to which it is coupled.

 

(c) A CSAR shall entitle the Participant (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company the unexercised portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Stock on the date of exercise of the CSAR by the number of shares of Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Committee may impose.

 

7.3. Independent Stock Appreciation Rights.

 

(a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and shall have a term set by the Committee. An ISAR shall be exercisable in such installments as the Committee may determine. An ISAR shall cover such number of shares of Stock as the Committee may determine. The exercise price per share of Stock subject to each ISAR shall be set by the Committee; provided, however, that the exercise price for any ISAR shall not be less than 100% of the Fair Market Value on the date of grant; and provided, further, that, the Committee in its sole and absolute discretion may provide that the ISAR may be exercised subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise.

 

(b) An ISAR shall entitle the Participant (or other person entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Stock on the date of exercise of the ISAR by the number of shares of Stock with respect to which the ISAR shall have been exercised, subject to any limitations the Committee may impose.

 

7.4. Payment and Limitations on Exercise.

 

(a) Subject to Section 7.4(b) and (c), payment of the amounts determined under Sections 7.2(c) and 7.3(b) above shall be in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Committee.

 

(b) To the extent payment for a Stock Appreciation Right is to be made in cash, the Award Agreement shall, to the extent necessary to comply with the requirements of Section 409A of the Code, specify the date of payment, which may be different than the date of exercise of the Stock Appreciation Right. If the date of payment for a Stock Appreciation Right is later than the date of exercise, the Award Agreement may specify that the Participant be entitled to earnings on such amount until paid.

 

  

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(c) To the extent any payment under Section 7.2(c) or 7.3(b) is effected in Stock it shall be made subject to satisfaction of any applicable provisions of Article 5 above pertaining to Options.

 

ARTICLE 8

OTHER TYPES OF AWARDS

 

8.1. Performance Share Awards.   Any Participant selected by the Committee may be granted one or more Performance Share awards which shall be denominated in a number of shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

 

8.2. Performance Units.   Any Participant selected by the Committee may be granted one or more Performance Unit awards which shall be denominated in units of value, including dollar value of shares of Stock, and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

 

8.3. Dividend Equivalents.

 

(a) Any Participant selected by the Committee may be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by such formula and at such time and subject to such limitations as may be determined by the Committee.

 

(b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether such Option or SAR is subsequently exercised.

 

8.4. Stock Payments.   Any Participant selected by the Committee may receive Stock Payments in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

 

  

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8.5. Deferred Stock.   Any Participant selected by the Committee may be granted an award of Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. Stock underlying a Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been issued.

 

8.6. Restricted Stock Units.   The Committee is authorized to make Awards of Restricted Stock Units to any Participant selected by the Committee in such amounts and subject to such terms and conditions as determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the Committee shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of the Award and may be determined at the election of the grantee. On the maturity date, the Company shall, subject to Section 10.5(b), transfer to the Participant one unrestricted, fully transferable share of Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited. The Committee shall specify the purchase price, if any, to be paid by the grantee to the Company for such shares of Stock.

 

8.7. Other Stock-Based Awards.   Any Participant selected by the Committee may be granted one or more Awards that provide Participants with shares of Stock or the right to purchase shares of Stock or that have a value derived from the value of, or an exercise or conversion privilege at a price related to, or that are otherwise payable in shares of Stock and which may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of Award) the contributions, responsibilities and other compensation of the particular Participant.

 

8.8. Term.   Except as otherwise provided herein, the term of any Award of Performance Shares, Performance Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units or Other Stock-Based Award shall be set by the Committee in its discretion.

 

8.9. Exercise or Purchase Price.   The Committee may establish the exercise or purchase price, if any, of any Award of Performance Shares, Performance Units, Deferred Stock, Stock Payments, Restricted Stock Units or Other Stock-Based Award; provided, however , that such price shall not be less than the par value of a single share of Stock on the date of grant, unless otherwise permitted by applicable state law.

 

  

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8.10. Exercise Upon Termination of Employment or Service.   An Award of Performance Shares, Performance Units, Dividend Equivalents, Deferred Stock, Stock Payments, Restricted Stock Units and Other Stock-Based Award shall only be exercisable or payable while the Participant is an Employee, a Consultant, or a member of the Board, as applicable;  provided, however , that the Committee in its sole and absolute discretion may provide that an Award of Performance Shares, Performance Units, Dividend Equivalents, Stock Payments, Deferred Stock, Restricted Stock Units or Other Stock-Based Award may be exercised or paid subsequent to a termination of employment or service, as applicable, or following a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise;  provided, however , that any such provision with respect to Performance Shares or Performance Units shall be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based Compensation.

 

8.11. Form of Payment.   Payments with respect to any Awards granted under this Article 8 shall be made in cash, in Stock or a combination of both, as determined by the Committee.

 

8.12. Award Agreement.   All Awards under this Article 8 shall be subject to such additional terms and conditions as determined by the Committee and shall be evidenced by a written Award Agreement.

 

ARTICLE 9

PERFORMANCE-BASED AWARDS

 

9.1. Purpose.   The purpose of this Article 9 is to provide the Committee the ability to qualify Awards other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8;  provided, however , that the Committee may in its discretion grant Awards to Covered Employees that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.

 

9.2. Applicability.   This Article 9 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.

 

9.3. Procedures with Respect to Performance-Based Awards.   To the extent necessary to comply with the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 6 and 8 which may be granted to one or more Covered Employees, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the Performance Period.

 

  

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9.4. Payment of Performance-Based Awards.   Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by the Company or a Subsidiary on the day a Performance-Based Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved.

 

9.5. Additional Limitations.   Notwithstanding any other provision of the Plan, any Award which is granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements.

 

ARTICLE 10

PROVISIONS APPLICABLE TO AWARDS

 

10.1. Stand-Alone and Tandem Awards.   Awards granted pursuant to the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

 

10.2. Award Agreement.   Awards under the Plan shall be evidenced by written Award Agreements that shall set forth the terms, conditions, limitations and award type for each Award which may include the term of an Award, the provisions applicable in the event the Participant’s employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

 

10.3. Limits on Transfer.   Except as otherwise provided by the Committee, no right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, during the life of the recipient, such award shall be exercisable only by such person or by such person’s guardian or legal representative.

 

  

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10.4. Death of Optionee.

 

(a) Options.   Notwithstanding Section 10.3, upon the death of the Optionee while either in the Company’s employ or within six (6) months after termination of Optionee’s employment, any rights to the extent exercisable on the date of death may be exercised by the Optionee’s estate, or by a person who acquires the right to exercise such Option by bequest or inheritance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining effective term of the Option and one (1) year after the Optionee’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is filed with the Committee.

 

(b) Incentive Stock Options.   Upon the death of the Optionee while in the Company’s employ or within not more than ninety (90) days after termination of Optionee’s employment, any Incentive Stock Option exercisable on the date of death may be exercised by the Optionee’s estate or by a person who acquires the right to exercise such Incentive Stock Option by bequest or inheritance or by reason of the death of the Optionee, provided that such exercise occurs within both the remaining Option Term of the Incentive Stock Option and one (1) year after the Optionee’s death.

 

10.5. Retirement or Disability.

 

(a) Options.   Upon termination of the Optionee’s employment by reason of retirement or permanent disability, the Optionee may, within thirty-six (36) months from the date of termination, exercise any Options to the extent such Options are exercisable during such 36-month period.

 

(b) Incentive Stock Options.   Upon termination of the Optionee’s employment by reason of retirement or permanent disability, the Optionee may, within thirty-six (36) months from the date of termination, exercise any Incentive Stock Options to the extent such Incentive Stock Options are exercisable during such 36-month period. However, the tax treatment available pursuant to Section 422 of the Code will not be available to an Optionee who exercises any Incentive Stock Option more than (i) twelve (12) months after the date of termination of employment due to permanent disability, or (ii) three (3) months after the date of termination of employment due to retirement.

 

10.6. Termination for Other Reasons.   Except as provided herein or except as otherwise determined by the Committee, all Options shall terminate ninety (90) days after the termination of the Optionee’s employment with the Company.

 

  

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10.7. Leaves of Absence and Performance Targets.   The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by the recipient of any award. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of employment within the meaning of the Plan and (ii) the impact, if any, of such leave of absence on awards under the Plan theretofore made to any recipient who takes such leave of absence. The Committee shall also be entitled to make such determination of performance targets, if any, as it deems appropriate.

 

10.8. Newly Eligible Employees.   The Committee shall be entitled to make such rules, regulations, determinations and awards as it deems appropriate in respect of any employee who becomes eligible to participate in the Plan or any portion thereof, after the commencement of an award or incentive period.

 

10.9. Stock Certificates; Book Entry Procedures.   As soon as practicable after receipt of payment, the Company shall deliver to the Optionee a certificate(s) for such shares of Common Stock. Upon receipt of such certificate(s), the Optionee shall become a stockholder of the Company with respect to Common Stock represented by share certificates so issued and as such shall be fully entitled to receive dividends, to vote and to exercise all other rights of a stockholder. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements. The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

 

ARTICLE 11

CHANGES IN CAPITAL STRUCTURE

 

11.1. Adjustments.

 

(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of Company assets to stockholders (other than normal cash dividends), or any other corporate event affecting the Stock or the share price of the Stock, the Committee may make such proportionate adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such changes with respect to (i) the aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Sections 3.1 and 3.3); (ii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iii) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code.

 

  

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(b) In the event of any transaction or event described in Section 11.1(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate (including without limitation any Change in Control), or of changes in applicable laws, regulations or accounting principles, and whenever the Committee determines that action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Committee, in its sole discretion and on such terms and conditions as it deems appropriate, either by amendment of the terms of any outstanding Awards or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions:

 

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 11.1(b) the Committee determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Committee in its sole discretion;

 

(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and

 

(iii) To make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future;

 

(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement; and

 

(v) To provide that the Award cannot vest, be exercised or become payable after such event.

 

11.2. Outstanding Awards—Other Changes.   In the event of any other change in the capitalization of the Company or corporate change other than those specifically referred to in this Article 11, the Committee may, in its absolute discretion, make such adjustments in the number and kind of shares or other securities subject to Awards outstanding on the date on which such change occurs and in the per share grant or exercise price of each Award as the Committee may consider appropriate to prevent dilution or enlargement of rights.

 

  

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11.3. No Other Rights.   Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.

 

ARTICLE 12

ADMINISTRATION

 

12.1. Committee.   Pursuant to Nevada Revised Statutes, and consistent with the provisions of Section 12.3 below, the Board may appoint a Committee consisting of two (2) or more Non-Employee Directors to administer the Plan, as constituted from time to time.

 

12.2. Committee Appointee Duration.   Once appointed, the Committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may increase or change the size of the Committee, and appoint new members thereof, remove members (with or without cause) and appoint new members in substitution, fill vacancies, however caused, or remove all members of the Committee; provided, however, that subject to Section 12.3, below, at no time shall any person administer the Plan who is not otherwise a Non-Employee Director.

 

12.3. Action by the Board.   Unless and until the Board delegates administration of the Plan to a Committee as set forth below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the extent required by any other applicable rule or regulation, shall delegate administration of the Plan to a Committee. The Committee shall consist solely of two or more members of the Board each of whom is both an “outside director,” within the meaning of Section 162(m) of the Code and any other applicable rules and regulations, and a Non-Employee Director. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to all Awards granted to Independent Directors and, for purposes of such Awards, the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the Committee may delegate its authority hereunder to the extent permitted by Section 12.5. Appointment of Committee members shall be effective upon acceptance of appointment. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board.

 

  

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12.4. Action by the Committee.   A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

 

12.5. Authority of Committee.   Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

 

(a) Designate Participants to receive Awards;

 

(b) Determine the type or types of Awards to be granted to each Participant;

 

(c) Determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate;

 

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Committee in its sole discretion determines;

 

(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;

 

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

 

(g) Decide all other matters that must be determined in connection with an Award;

 

(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;

 

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

 

(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Committee deems necessary or advisable to administer the Plan.

 

The Committee may delegate to one or more of its members or to one or more agents such administrative duties as it may deem advisable.

 

  

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12.6. Decisions Binding.   The Committee’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

 

12.7. Delegation of Authority.   To the extent permitted by applicable law, the Committee may from time to time delegate to a committee of one or more members of the Committee or the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than (a) senior executives of the Company who are subject to Section 16 of the Exchange Act, (b) Covered Employees, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Committee.

 

12.8. Committee Administration.   One member of the Committee shall be elected by the Board as chairman. The Committee shall hold its meetings at such times and places as it shall deem advisable. The Committee may appoint a secretary and make such rules and regulations for the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings.

 

12.9. Liability.   No member of the Board or Committee shall be liable for any action taken or decision or determination made in good faith with respect to any Option, the Plan, or any award thereunder.

 

ARTICLE 13

EFFECTIVE AND EXPIRATION DATE

 

13.1. Effective Date.   The Plan is effective as of the date the Plan is approved by a majority of the Board (the “Effective Date”). The Plan, however, shall be subject to approval by the stockholders. The Plan will be deemed to be approved by the stockholders if it receives the affirmative vote of the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Bylaws, but, in any event, held no later than twelve (12) months after adoption on the Effective Date.

 

13.2. Expiration Date.   The Plan will expire on, and no Incentive Stock Option or other Award may be granted pursuant to the Plan after, the tenth anniversary of the Effective Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement.

 

ARTICLE 14

AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1. Amendment, Modification, And Termination.   The Committee may at any time and from time to time terminate or modify or amend the Plan in any respect, except that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment or any modification of any Options that would be deemed a re-pricing under applicable rules, in such a manner and to such a degree as required, and (b) without stockholder approval the Committee may not (i) increase the maximum number of shares of Common Stock which may be issued under the Plan (other than increases pursuant to Section 4.10), (ii) extend the period during which any Award may be granted or exercised, (iii) amend to the Plan to permit the Committee to grant Options with an exercise price that is below Fair Market Value on the date of grant, or (iv) extend the term of the Plan. The termination or any modification or amendment of the Plan, except as provided in subsection (a), shall not without the consent of a participant, affect his or her other rights under an award previously granted to him or her.

 

  

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14.2. Awards Previously Granted.   No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant.

 

ARTICLE 15

COMPLIANCE WITH SECTION 409A OF THE CODE

 

15.1. Awards subject to Code Section 409A.   Any Award that constitutes, or provides for, a deferral of compensation subject to Section 409A of the Code (a “ Section 409A Award”) shall satisfy the requirements of Section 409A of the Code and this Article 15, to the extent applicable. The Award Agreement with respect to a Section 409A Award shall incorporate the terms and conditions required by Section 409A of the Code and this Article 15.

 

15.2. Distributions under a Section 409A Award.

 

(a) (a)  Subject to subsection (b), any shares of Stock or other property or amounts to be paid or distributed upon the grant, issuance, vesting, exercise or payment of a Section 409A Award shall be distributed in accordance with the requirements of Section 409A(a)(2) of the Code, and shall not be distributed earlier than:

 

(i) the Participant’s separation from service, as determined by the Secretary of the Treasury;

 

(ii) the date the Participant becomes disabled;

 

(iii) the Participant’s death;

 

(iv) a specified time (or pursuant to a fixed schedule) specified under the Award Agreement at the date of the deferral compensation;

 

(v) to the extent provided by the Secretary of the Treasury, a change in the ownership or effective control of the Company or a Parent or Subsidiary, or in the ownership of a substantial portion of the assets of the Company or a Parent or Subsidiary; or

 

(vi) the occurrence of an unforeseeable emergency with respect to the Participant.

 

(b) In the case of a Participant who is a “specified employee,” the requirement of paragraph (a)(i) shall be met only if the distributions with respect to the Section 409A Award may not be made before the date which is six (6) months after the Participant’s separation from service (or, if earlier, the date of the Participant’s death). For purposes of this subsection (b), a Participant shall be a “specified employee” if such Participant is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of a corporation any stock of which is publicly traded on an established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations thereunder.

 

  

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(c) The requirement of paragraph (a)(vi) shall be met only if, as determined under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the Code, the amounts distributed with respect to the unforeseeable emergency do not exceed the amounts necessary to satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such unforeseeable emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

 

(d) For purposes of this Section, the terms specified therein shall have the respective meanings ascribed thereto under Section 409A of the Code and the Treasury Regulations thereunder.

 

15.3. Prohibition on Acceleration of Benefits.   The time or schedule of any distribution or payment of any shares of Stock or other property or amounts under a Section 409A Award shall not be accelerated, except as otherwise permitted under Section 409A(a)(3) of the Code and the Treasury Regulations thereunder.

 

15.4. Elections under Section 409A Awards.

 

(a) Any deferral election provided under or with respect to an Award to any Eligible Individual, or to the Participant holding a Section 409A Award, shall satisfy the requirements of Section 409A(a)(4)(B) of the Code, to the extent applicable, and, except as otherwise permitted under paragraph (i) or (ii) below, any such deferral election with respect to compensation for services performed during a taxable year shall be made not later than the close of the preceding taxable year, or at such other time as provided in Treasury Regulations.

 

(i) In the case of the first year in which an Eligible Individual or a Participant holding a Section 409A Award, becomes eligible to participate in the Plan, any such deferral election may be made with respect to services to be performed subsequent to the election with thirty days after the date the Eligible Individual, or the Participant holding a Section 409A Award, becomes eligible to participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the Code.

 

(ii) In the case of any performance-based compensation based on services performed by an Eligible Individual, or the Participant holding a Section 409A Award, over a period of at least twelve (12) months, any such deferral election may be made no later than six (6) months before the end of the period, as provided under Section 409A(a)(4)(B)(iii) of the Code.

 

(b) In the event that a Section 409A Award permits, under a subsequent election by the Participant holding such Section 409A Award, a delay in a distribution or payment of any shares of Stock or other property or amounts under such Section 409A Award, or a change in the form of distribution or payment, such subsequent election shall satisfy the requirements of Section 409A(a)(4)(C) of the Code, and:

 

(i) such subsequent election may not take effect until at least twelve (12) months after the date on which the election is made,

 

(ii) in the case such subsequent election relates to a distribution or payment not described in Section 10.2(a)(ii), (iii) or (vi), the first payment with respect to such election may be deferred for a period of not less than five years from the date such distribution or payment otherwise would have been made, and

 

  

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(iii) in the case such subsequent election relates to a distribution or payment described in Section 10.2(a)(iv), such election may not be made less than twelve months prior to the date of the first scheduled distribution or payment under Section 10.2(a)(iv).

 

15.5   Compliance in Form and Operation.   A Section 409A Award, and any election under or with respect to such Section 409A Award, shall comply in form and operation with the requirements of Section 409A of the Code and the Treasury Regulations thereunder.

 

ARTICLE 16

GENERAL PROVISIONS

 

16.1. No Rights to Awards.   No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible Individuals, Participants or any other persons uniformly.

 

16.2. No Stockholder Rights.   The recipient of any award under the Plan shall have no rights as a stockholder with respect thereto unless and until certificates for shares of Common Stock are issued to him or her.

 

16.3. Withholding.   The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six (6) months (or such other period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

 

  

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16.4. No Right to Employment or Services.   Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary.

 

16.5. Unfunded Status of Awards.   The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

 

16.6. Indemnification.   To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her;  provided  he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

 

16.7. Relationship to other Benefits.   No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.

 

16.8. Expenses.   The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

 

16.9. Titles and Headings.   The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.

 

16.10. Fractional Shares.   No fractional shares of Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

 

16.11. Limitations Applicable to Section 16 Persons.   Notwithstanding any other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

  

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16.12. Government and Other Regulations.   The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption.

 

16.13. Governing Law.   The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the State of Nevada.

 

*   *   *   *   *

 

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Medizone International, Inc. on February 21, 2012.

 

*   *   *   *   *

 

I hereby certify that the foregoing Plan was approved by the stockholders of Medizone International, Inc. on                       , 20__.

 

Executed on this      day of                       , 2012.

 

 

	  	  	  
	  	  	
Corporate Secretary

 

 

  

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MEDIZONE INTERNATIONAL, INC.

 

2012 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION AGREEMENT

 

This is a Non-Statutory Stock Option Agreement (“Agreement”) between Medizone International, Inc., a Nevada corporation (the “Company”), and [XXXXXXX] (the “Optionee”) effective as of XXXXX XX, 20XX (“Date of Grant”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Company’s 2012 Equity Incentive Award Plan (the “Plan”).

 

Recitals

 

WHEREAS, the Company maintains the Plan; and

 

WHEREAS, pursuant to the Plan, the Board of Directors of the Company (the “Board”) or a committee of two or more directors of the Company (the “Committee”) designated by the Board administers the Plan and has the authority to determine the awards to be granted under the Plan (if the Board has not appointed a committee to administer the Plan, then the Board shall constitute the Committee); and

 

WHEREAS, the Committee has determined that the Optionee is eligible to receive an award under the Plan in the form of a non-statutory stock option (the “Option”);

 

NOW, THEREFORE, the Company hereby grants this Option to the Optionee under the terms and conditions as follows.

 

Terms and Conditions

 

1.           Grant. The Optionee is granted this Option to purchase XXXXX shares of Common Stock of the Company (the “Shares”).

 

2.           Exercise Price. The price to the Optionee of each Share subject to this Option shall be $XXX per Share (the “Exercise Price”).

 

3.           Non-Statutory Stock Option. This Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

4.           Vesting. Notwithstanding the provisions of the Plan, this Option shall vest fully and become exercisable as to all of the Shares as of the Date of Grant; provided that Shares issued hereunder prior to the effective date of any registration statement filed to register the Plan shall be restricted shares and shall bear an appropriate legend restricting the transfer or sale of such Shares under the rules and regulations of the Securities Act of 1933, as amended.

 

  

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5.           Expiration. This Option shall expire at 5:00 p.m. Pacific Time on the earliest of:

 

(a)           February 21, 2017 (the “Expiration Date”);

 

(b)           The last day of the period following the termination of employment of the Optionee during which this Option can be exercised as specified in Section 10.4 (Death of Optionee), or 10.5 (Retirement or Disability) of the Plan; or

 

(c)           The date (if any) fixed for cancellation pursuant to the Plan.

 

Under Section 10.6 of the Plan, the Committee has determined that this Option will survive the termination of the Optionee’s employment by the Company (whether as a consultant, director or employee) until the Expiration Date; provided, however, that if termination of the Optionee’s employment by the Company shall have been for Cause, this Option shall expire immediately upon such termination.  In no event may anyone exercise this Option, in whole or in part, after it has expired, notwithstanding any other provision of this Agreement.

 

6.           Procedure to Exercise Option.

 

(a)           Notice of Exercise. This Option may be exercised by delivering written notice of exercise to the Company at the principal executive office of the Company, to the attention of the Company’s Secretary.  The notice shall state the number of Shares to be purchased, and shall be signed by the person exercising this Option. If the person exercising this Option is not the Optionee, he/she also must submit appropriate proof of his/her right to exercise this Option.

 

(b)           Tender of Payment. Upon giving notice of any exercise hereunder, the Optionee shall provide for payment of the purchase price of the Shares being purchased through one or a combination of the following methods:

 

(i)           Cash;

 

(ii)           By delivery to the Company of unencumbered Shares having an aggregate Fair Market Value on the date of exercise equal to the purchase price of the Shares as to which this Option is exercised; or

 

(iii)           To the extent permitted by law, a broker-assisted cashless exercise in which the Optionee irrevocably instructs a broker to deliver proceeds of a sale of all or a portion of the Shares to be issued pursuant to the exercise (or a loan secured by such Shares) to the Company in payment of the purchase price of the Shares as to which this Option is exercised.

 

Notwithstanding the foregoing, the Optionee shall not be permitted to pay any portion of the purchase price with Shares if the Committee, in its sole discretion, determines that payment in such manner could have adverse financial accounting consequences for the Company.

 

7.           Tax Withholding. Delivery of Shares upon exercise of this Option shall be subject to any required withholding taxes. As a condition precedent to receiving Shares upon exercise of this Option, the Optionee may be required to pay to the Company, in accordance with the provisions of the Plan, an amount equal to the amount of any required withholdings.

 

  

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8.           Interpretation of This Agreement. All decisions and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive upon the Company and the Optionee. If there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.

 

9.           Discontinuance of Employment. This Agreement shall not give the Optionee a right to continued employment with the Company or any parent or subsidiary of the Company, and the Company or any such parent or subsidiary employing the Optionee may terminate his/her employment at any time and otherwise deal with the Optionee without regard to the effect it may have upon him/her under this Agreement.

 

10.           Option Subject to Plan. The Optionee acknowledges that this Option and the exercise thereof is subject to the Plan, as amended from time to time, of the Company, and any applicable federal or state laws, rules or regulations.

 

11.           Obligation to Reserve Sufficient Shares. The Company shall at all times during the term of this Option reserve and keep available a sufficient number of Shares to satisfy this Agreement.

 

12.           Transfer Restrictions.  This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Corporation and upon the Optionee and the Optionee’s personal representatives and permitted assigns.  Neither this Agreement nor the Option is assignable by the Optionee except as provided in Section 10.3 of the Plan.

 

13.           Binding Effect. This Agreement shall be binding in all respects on the heirs, representatives, successors and assigns of the Optionee.

 

14.           Choice of Law. This Agreement is entered into under the laws of the State of Nevada and shall be construed and interpreted thereunder (without regard to its conflict of law principles).

 

IN WITNESS WHEREOF the parties hereto have executed this agreement as of the date first above written.

 

MEDIZONE INTERNATIONAL, INC.

 

 

By:                                                               

 

 

                                             

                                                               

Optionee

 

  

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