Document:

Unassociated Document

EXHIBIT 10.4

 

INDEPENDENT CONTRACTOR AGREEMENT

 

This Independent Contractor Agreement (the “Agreement”) is entered into by and between Great American Energy, Inc., a Delaware corporation (the “Company”), and Geoff Evett, an individual (the “Contractor”), effective as of May 1, 2012, (the “Effective Date”). The Company and the Contractor are each individually a “party,” and collectively, the “parties.”

 

RECITALS

 

WHEREAS, the Company is in the mineral exploration and development industry and desires to engage Contractor to provide certain services to support the Company’s growth and development; and

 

WHEREAS, the Company desires to retain Contractor as an independent contractor to perform services for the Company, and Contractor is willing to perform such services, on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and representations, and subject to the conditions contained herein, the parties hereto agree as follows:

 

1.     NATURE OF SERVICES.

 

(a)   Services. Contractor agrees to use its best efforts to diligently and faithfully explore and develop business opportunities and related services in support of the Company’s mineral exploration and development projects outside of the United States (the “Services”). The Services are to be performed outside of the United States.

 

(b)   Duties & Responsibilities. Contractor shall be entitled to determine the method and means of performing under and providing the Services contemplated in this Agreement, and shall also determine when and where the Services are provided, subject to the condition that the Services are to be performed outside of the United States. Further, to the extent that Contractor needs to retain assistance to perform the Services, Contractor shall select individuals he requires assistance from, and shall be solely responsible for compensating those individuals; Contractor will not be reimbursed for these expenses.

 

2.     FEE; GRANT OF SHARES; TAXES; EXPENSES.

 

(a)   Fee. The Company agrees to compensate Contractor at a flat rate of USD $2,500 per month (the “Fee”) commencing May 1, 2012.

 

(b)   Taxes. As an independent contractor, Contractor agrees that it will be responsible for the reporting and payment of any state and/or federal income tax or other withholdings on the Fee provided for his/her services under this Agreement. All amounts to be paid by the Company to Contractor herein are exclusive of any federal, state, local, municipal or other governmental taxes, now or hereafter imposed on Contractor under applicable law. The Company is not liable to Contractor for any taxes incurred in connection with this Agreement unless they are (i) owed by the Company under applicable law solely as a result of entering into this Agreement, (ii) are based solely upon the amounts payable under this Agreement, and (iii) are required to be collected from the Company by Contractor under applicable law.

 

  

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(d)   Reasonable Expenses. Contractor shall be promptly reimbursed for all reasonable expenses incurred while providing services to the Company under the Agreement, including but not limited to travel and cell phone costs, which are evidenced by receipts presented to the Company.

 

3.     CONFIDENTIAL INFORMATION & INVENTIONS. Contractor agrees to execute the form of Confidential Information and Ownership Agreement for Independent Contractors attached hereto as Exhibit A. If Contractor retains the services of any other individual in order to perform the Services, Contractor shall have the individual(s) execute the Confidential Information and Ownership Agreement for Independent Contractors.

 

4.     INDEPENDENT CONTRACTOR. Contractor understands and acknowledges that it enters into this Agreement as an independent contractor engaged in providing the Services. Nothing in this Agreement or in the activities contemplated by the parties hereunder shall be deemed to create an agency, partnership, employment or joint venture relationship between the parties or any of its employees, subcontractors or representatives. Further, Contractor acknowledges and agrees, and it is the intent of the parties, that Contractor shall receive no benefits, including disability or unemployment insurance, worker’s compensation, medical insurance, or sick leave, from the Company, either as an independent contractor or employee. If Contractor is reclassified by a state or federal agency or court as an employee for tax or other purposes, Contractor will become a non-benefit employee and will receive no benefits from the Company, except those mandated by state or federal law, even if by the terms of the benefit plans or programs of the Company in effect at the time of such reclassification Contractor would otherwise be eligible for such benefits. Contractor further agrees to indemnify the Company and hold it harmless to the extent of any obligation imposed on the Company (a) to pay withholding taxes or similar items, or (b) resulting from the determination that Contractor is not an independent contractor.

 

5.     LIMITATION ON LIABILITY. IN NO EVENT SHALL THE COMPANY BE LIABLE TO CONTRACTOR FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY, PUNITIVE OR INCIDENTAL DAMAGES INCLUDING, BUT NOT LIMITED TO, LOST PROFITS OR OTHER ECONOMIC LOSS, LOSS OF DATA (WHETHER ARISING FROM BREACH OF CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE) EVEN IF THE COMPANY HAS BEEN APPRAISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING. THE COMPANY’S LIABILITY TO CONTRACTOR, OR ITS EMPLOYEES, SUBCONTRACTORS OR REPRESENTATIVES, FOR DAMAGES ARISING OUT OF THIS AGREEMENT SHALL BE LIMITED TO DIRECT DAMAGES, AND SHALL NOT EXCEED THE AMOUNT OF THE FEE PAID.

 

6.     INDEMNIFICATION. Contractor agrees to defend, indemnify, and hold harmless the Company, from and against any claims, losses, actions, demands or damages, including reasonable attorney’s fees, resulting from any act, omission, negligence or performance under this Agreement by Contractor. Contractor further agrees to defend, indemnify, and hold harmless the Company, from and against any claims, losses, actions, demands or damages, including reasonable attorney’s fees, resulting from any injury or loss of life, sustained in the course of providing the Services to the Company under this Agreement. This indemnity shall not apply to the extent the portion of such claim, liability, loss, cost, damage or expense is the result of the gross negligence or willful misconduct of the Company, its users, or Contractor, as determined by a court of law, or to the extent liability is disclaimed or limited by either party under this section.

 

7.     TERM; TERMINATION; SURVIVAL.

 

(a)    Term. This Agreement shall commence on the Effective Date and shall continue for a period of one (1) year from the date of execution, or until terminated by either party in accordance with Section 7(b) below. The Agreement will automatically renew each year thereafter for a period of one year, unless either party notifies the other party in writing at least thirty (30) days prior to the renewal date that it does not want to renew the Agreement.

 

(b)   Termination. Either party may terminate this Agreement for any reason at any time by giving thirty (30) days’ written notice to the other party. Should either party default in the performance of this Agreement or materially breach any of its provisions, the nonbreaching party may terminate this Agreement upon giving notice to the breaching party.

 

  

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(c)   Survival. The parties’ obligations with respect to Sections 2(b), 3, 4, 5, 6, 8(b), 9(d) and 9(e) shall survive the termination of this Agreement. In addition, the obligations of Contractor and its employees, subcontractors and representatives under each Confidential Information and Ownership Agreement for Independent Contractors executed in connection with this Agreement shall survive any termination of this Agreement

 

(d)   No Waiver. No delay or failure by either party to act in the event of a breach or default hereunder shall be construed as a waiver of that or any succeeding breach or a waiver of the provision itself.

 

8.     NON-COMPETE; NON-INTEFERENCE; NON-DISPARAGEMENT.

 

(a)   Non Competition During The Term of Engagement. During the term of this Agreement, Contractor will not directly or indirectly, either as an employer, employee, consultant, Contractor, principal, partner, stockholder, corporate officer, director, or in any other individual or representative capacity, engage or participate in any business that is in competition in any manner whatsoever with the business of the Company and that creates a conflict of interest with the Company or results in a breach of the terms of this Agreement or the Confidential Information and Ownership Agreement for Independent Contractors, without first receiving the prior written consent of the Company’s board of directors.

 

(b)   Non-Intereference, Non-Disparagement. Contractor agrees not to interfere with any of the Company’s contractual obligations. In addition, Contractor agrees to treat the Company respectfully and professionally and not disparage the Company (or the Company’s managers, officers or directors) in any manner likely to be harmful to the Company or its business, business reputation or personal reputation.

 

9.     MISCELLANEOUS.

 

(a)   Entire Agreement. This Agreement, together with the Exhibit attached hereto, constitutes the entire agreement of the parties with respect to the subject matter of this Agreement. This Agreement supersedes any and all agreements, whether oral or written, between the parties to this Agreement with respect to the subject of this Agreement. Except as otherwise expressly provided herein, this Agreement may be modified only by a writing signed by an authorized representative of each party.

 

(b)   Notices. Any and all notices, requests, demands and other communications required or otherwise contemplated to be made under this Agreement shall be in writing and shall be provided by one or more of the following means and shall be deemed to have been duly given (i) if delivered personally, when received; (ii) if transmitted by facsimile or email, on the date of transmission; or (iii) if by international courier service, on the fourth (4th) business day following the date of deposit with such courier service, or such earlier delivery date as may be confirmed in writing to the sender by such courier service. The addresses appearing on the signature page of this Agreement shall be the party’s address for delivery or mailing of notice purposes. Any party may, at any time, by giving notice to the other party in accordance with this section, designate any other address in substitution of the foregoing address to which such notice will be given.

 

(c)   Assignment. This Agreement shall be binding upon and inure to the benefit of the parties, their successors and permitted assigns. Contractor may not transfer, sublicense or otherwise assign this Agreement or any of its rights or obligations hereunder without the Company’s prior written consent, which consent may not be unreasonably withheld.

 

  

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(d)   Dispute Resolution. Any dispute, controversy or claim concerning, arising from, or relating to this Agreement shall be resolved in the following manner:

 

(i)     The parties agree to use all reasonable efforts to resolve the dispute through direct discussion. To that end, either party may give the other party written notice of any dispute not resolved in the normal course of business. Upon such notice, the parties shall attempt in good faith to resolve the disputes promptly by negotiation between executives who have authority to settle the controversy and who are at a higher level of management than the persons with direct responsibility for administration of this Agreement.

 

(ii)    If the parties are unable to resolve the dispute by such means within thirty (30) days of the notice date, or such other time period as mutually agreed, then either party may commence binding arbitration pursuant to the Rules of Commercial Arbitration of the American Arbitration Association, as modified or supplemented under this Section 9(d). The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. Sec. 1, et seq., and judgment upon the award rendered by the arbitrator(s) may be entered by any court with jurisdiction or application may be made to such a court for judicial recognition and acceptance of the award and any appropriate order including enforcement. The arbitration proceeding will be held in Las Vegas, Nevada.

 

(iii)   The arbitration proceedings contemplated by this section shall be as confidential and private as permitted by law. To that end, the parties shall not disclose the existence, contents or results of any proceedings conducted in accordance with this section, and materials submitted in connection with such proceedings shall not be admissible in any other proceeding, provided, however, that this confidentiality provision shall not prevent a petition to vacate or enforce an arbitral award and shall not bar disclosures required by law. The parties agree that any decision or award resulting from proceedings in accordance with this section shall have no preclusive effect in any other matter involving third parties.

 

(iv)   Notwithstanding any of the foregoing, either party may request injunctive and/or equitable relief either from the arbitrator or from a court in order to protect the rights or property of the party, pending the resolution of the dispute by arbitration as provided hereunder.

 

(e)   Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the State of Nevada. In addition, questions concerning arbitration under Section 9(d) shall be governed exclusively by the Federal Arbitration Act.

 

(f)   Severability. If any provision of this Agreement is held invalid, illegal or unenforceable, such provision shall be reformed only to the extent necessary to effect the original intentions of the parties, and all remaining provisions shall continue in full force and effect.

 

(g)   Counterparts. This Agreement may be executed in one or more counterparts, each of which, shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

 

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the Effective Date.

	
CONTRACTOR:

	 
	 	 
	
/s/ Geoff Evett 

	 
	
Geoff Evett

	 
	 	 
	Bell Puig 28	 
	07181 Ca’s Catala	 
	Mallorca, Balearic Island	 

 

COMPANY:

Great American Energy, Inc.

	 	 	 
	
By: 

	
/s/ Felipe Pimienta Barrios 

	 
	Name:	Felipe Pimienta Barrios	 
	Title:	Chief Executive Officer	 
	 	 
	
999 18th Street, Suite 3000

Denver, Colorado 80202

	 

 

  

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EXHIBIT A

 

Great American Energy, Inc. – Confidential Information and Ownership Agreement

 

	
As a condition of Geoff Evett (“Independent Contractor”) being retained as an independent contractor (or Independent Contractor’s relationship being continued) by Great American Energy, Inc., a Delaware corporation, or any of its current or future subsidiaries, affiliates, successors or assigns (collectively, the “Company”), and in consideration of Independent Contractor’s relationship with the Company and its receipt of the compensation now and hereafter paid to Independent Contractor by the Company, Independent Contractor agrees to the following:

 

1.    Definitions. As used in this Agreement, the following definitions will apply:

 

(a) “Confidential Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, mineral reports, mining methods, drilling plans, reserve reports, surveys, geological data, services, suppliers, customer lists and customers (including, but not limited to, customers of the Company on whom Independent Contractor called or with whom Independent Contractor became acquainted during Independent Contractor’s engagement with the Company), prices and costs, markets, inventions, laboratory notebooks, field notebooks, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, licenses, finances, budgets or other business information disclosed to Independent Contractor by the Company either directly or indirectly in writing, orally or by drawings or observation of parts or equipment or created by Independent Contractor during the period of Independent Contractor’s engagement with the Company, whether or not during working hours. Independent Contractor understands that “Confidential Information” includes, but is not limited to, information pertaining to any aspects of the Company’s business which is either information not known by actual or potential competitors of the Company or is proprietary information of the Company or its customers or suppliers, whether of a technical nature or otherwise. Independent Contractor further understands that Confidential Information does not include any of the foregoing items which has become publicly and widely known and made generally available through no wrongful act of Independent Contractor’s or of others who were under confidentiality obligations as to the item or items involved.

	 	
(b) “Develop” means to conceive, create, develop, assemble, reduce to practice, or, in the case of works of authorship, to fix in a tangible medium of expression.

 

(c) “Development” includes, but is not limited to, all inventions, discoveries, improvements, processes, developments, designs, know-how, data, computer programs, algorithms, formulae and works of authorship, whether or not patentable or registerable under patent, copyright or similar statutes, conceived or Developed in connection with the Company's business.

 

(d) “Intellectual Property” means and includes, with respect to any Development all relevant patents, patent applications, copyrights, trade secrets and other rights and protections arising under patent, copyright or similar statutes.

 

2.    Confidential Information of the Company. Except as required by Independent Contractor’s engagement with the Company, or as the Company may consent to in writing, at no time will Independent Contractor use for the benefit of any person or entity other than the Company, or disclose or reveal to any other person or entity, either during or subsequent to the term of Independent Contractor’s engagement with the Company, any Confidential Information belonging to the Company or its Contractors, suppliers, joint venturers, licensors, licensees, or distributors. This means, among other things (and by way of example only), that without the Company's written consent Independent Contractor cannot use any such Confidential Information in making investment decisions. Upon termination of Independent Contractor’s engagement with the Company for any reason, Independent Contractor will deliver to the Company all originals and all copies of any and all physical, written, graphical and/or machine readable materials and media (including, for example, notes, notebooks, memoranda, diskettes and photographic slides, prints and negatives) that are in Independent Contractor’s possession or under Independent Contractor’s control and contain, represent, disclose or embody Confidential Information of the Company or its Contractors, suppliers, joint venturers, licensors, licensees, or distributors. Both during and after Independent Contractor’s engagement with the Company, all such materials and media will belong to the Company.

 

  

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3.     Ownership of Developments.

 

(a) All Developments that Independent Contractor conceives or Develops (either alone or jointly with others) at any time during the term of Independent Contractor’s engagement with the Company, including all Intellectual Property rights and protections in connection therewith, shall be the sole property of the Company and/or its nominees or assigns. Independent Contractor hereby assigns to the Company any and all right, title and interest Independent Contractor has, may have or may acquire in all Developments.

 

(b) Independent Contractor will communicate to the Company as promptly as practicable all Developments that Independent Contractor conceives or Develops (either alone or jointly with others) at any time during Independent Contractor’s engagement with the Company and for the period ending one (1) year after such engagement terminates for any reason, for the purpose of determining the extent of the Company’s rights in such Developments. For Developments that are conceived or Developed during the term (and within the scope of Independent Contractor’s service to the Company) of Independent Contractor’s engagement with the Company, the communication will be as complete as practicable. For Developments that are neither conceived nor Developed during the term and within the scope of Independent Contractor’s engagement with the Company, the communication may be limited to a general description sufficient to disclose clearly the relationship between those Developments and the scope of the work Independent Contractor did for or on behalf of the Company, and Independent Contractor will not be obligated to disclose confidential information belonging to Independent Contractor or any third party except to the extent required to make that clear disclosure.

 

(c) Independent Contractor will assist the Company and/or its nominees or assigns (without charge but at no expense to Independent Contractor) in every lawful way to obtain, maintain and enforce any and all Intellectual Property rights and protections relating to all Developments, including by executing all relevant documents. Independent Contractor understands that these obligations will continue beyond the termination of Independent Contractor’s engagement with the Company. Independent Contractor hereby irrevocably designates and appoints the Company and its duly authorized officers and Contractors as Independent Contractor’s Contractor and attorney-in-fact to execute and file any and all applications and other necessary documents and to do all other lawfully permitted acts to further the prosecution, issuance, or enforcement of patents, copyrights, trade secrets and similar protections related to such Developments with the same legal force and effect as if Independent Contractor had executed them itself.

	 	
(d) Paragraph 3(a) generally will not apply to any Intellectual Property that Independent Contractor conceived or Developed prior to Independent Contractor’s engagement with the Company and that underlies, pertains to, is embodied or becomes embodied in any Development (“Background Intellectual Property”), except that with respect to any Development that incorporates both elements that are Background Intellectual Property and elements that are conceived or Developed during the term of Independent Contractor’s engagement with the Company, Paragraph 3(a) will apply (to the extent otherwise applicable) to those elements that are conceived or Developed during such engagement. Independent Contractor hereby grants to the Company an irrevocable, perpetual, non-exclusive, worldwide, royalty-free license (with the right to sublicense) in the Background Intellectual Property to the extent reasonably necessary to permit the Company and its customers, clients and licensees to use, practice, reproduce, manufacture, modify, publicly perform, display and exhibit, market, distribute and otherwise exploit all Developments. Independent Contractor has listed below the only Background Intellectual Property that is or might be incorporated into Developments (failure to list indicates there are none): 

	 	 
	 	 	
(if additional space is required, use the back of this Agreement)

	 	
 

4.     No Breach of Other Rights or Obligations. Independent Contractor’s performance of the terms of this Agreement and Independent Contractor’s engagement with the Company does not and will not breach any agreement to keep in confidence proprietary information acquired by Independent Contractor in confidence prior to the term of such engagement with the Company. Independent Contractor has not entered into, and Independent Contractor agrees Independent Contractor will not enter into, any agreement in conflict with this Agreement. Independent Contractor has the right, power and authority to grant the licenses with respect to the Background Intellectual Property set forth in Paragraph 3 above. Independent Contractor has not brought, and Independent Contractor agrees Independent Contractor will not knowingly bring, with Independent Contractor to the Company for use in Independent Contractor’s engagement with the Company any materials or documents of a former employer or any other person or entity for whom Independent Contractor has provided or is providing services (paid or unpaid) that are not generally available to the public unless Independent Contractor has obtained express written authorization from the former employer or other person or entity for whom Independent Contractor has provided or is providing such services for their possession and use. If there are any exceptions to the foregoing representations, Independent Contractor has attached hereto a copy of each agreement or other written documentation, if any, which presently affects Independent Contractor’s compliance with the terms of this Agreement. Independent Contractor will indemnify and hold harmless the Company, its affiliates and licensees, and its officers, directors, employees and Contractors, for any breach of the provisions of this Paragraph 4.

 

  

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5.     No Solicitation. During the term of Independent Contractor’s engagement with the Company, and for a period of one (1) year following its termination for any reason, Independent Contractor will not, without the Company’s express written consent, either on Independent Contractor’s own behalf or on behalf of another: (i) contact or solicit employees of the Company for the purpose of hiring them; (ii) hire Company employees; or (iii) solicit the business of any client, customer or licensee of the Company. Independent Contractor acknowledges that the provisions of this Paragraph 5 are reasonable and necessary measures designed to protect the Confidential Information of the Company.

 

6.     General.

 

(a) This Agreement constitutes the entire agreement between Independent Contractor and the Company with respect to the subject matter hereof, superseding any prior agreement or representation, oral or written. Independent Contractor’s obligations under this Agreement may not be modified, released or terminated, in whole or in part, except in a writing signed by Independent Contractor and an officer of the Company or his or her designee. Any waiver by the Company of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach thereof.

 

(b) Each provision of this Agreement will be treated as a separate and independent clause, and the unenforceability of any one clause in no way will impair the enforceability of any of the other clauses herein. If one or more of the provisions of this Agreement is held to be excessively broad, such provision or provisions will be construed by the appropriate judicial body by limiting or reducing it or them, so as to be legally enforceable.

	 	
(c) Independent Contractor’s obligations under this Agreement will survive the termination of Independent Contractor’s engagement with the Company. 

 

(d) This Agreement will inure to the benefit of and be binding upon the heirs, personal representatives, administrators, successors and assigns of the parties hereto. The Company may assign any of its rights under this Agreement. 

 

(e) Independent Contractor acknowledges that Independent Contractor’s services are, and that the Confidential Information is, special, unique and unusual. Independent Contractor recognizes that if Independent Contractor breaches this Agreement, money damages would not reasonably or adequately compensate the Company for its loss. Accordingly, if Independent Contractor breaches this Agreement, Independent Contractor recognizes and consents to the Company’s right to seek injunctive relief to force Independent Contractor to abide by the terms of this Agreement. The Company also will have the right to recover damages or pursue any other remedy permitted by law.

 

(f) This Agreement will be governed by and interpreted in accordance with the laws of the State of Nevada, as applied to agreements made and wholly performed within Nevada.

 

 

[INTENTIONALLY LEFT BLANK]

 

  

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This Agreement will be deemed effective as of the start of Independent Contractor’s engagement with the Company.

 

CAUTION: This Agreement creates important obligations of trust and affects Independent Contractor’s rights to inventions Independent Contractor may make during Independent Contractor’s engagement with the Company.

 

	
COMPANY:

	 	
INDEPENDENT CONTRACTOR:

	 
	
Great American Energy, Inc.

	 	 	 
	 	 	 	 
	By: 	/s/ Felipe Pimienta Barrios 	 	/s/ Geoff Evett 	 
	Name: 	Felipe Pimienta Barrios	 	Geoff Evett	 
	Title: 	Chief Executive Officer	 	 	 

 

 

4Unassociated Document

EXHIBIT 10a

 

KINGSTONE COMPANIES, INC.

2005 Equity Participation Plan

 

1. Purpose of the Plan. The Kingstone Companies, Inc. 2005 Equity Participation Plan (the “Plan”) is intended to advance the interests of Kingstone Companies, Inc. (the “Company”) by inducing individuals or entities of outstanding ability and potential to join and remain with, or provide consulting or advisory services to, the Company, by encouraging and enabling eligible employees, non-employee Directors, consultants and advisors to acquire proprietary interests in
the Company, and by providing the participating employees, non-employee Directors, consultants and advisors with an additional incentive to promote the success of the Company. This is accomplished by providing for the granting of “Options,” which term as used herein includes both “Incentive Stock Options” and “Nonstatutory Stock Options,” as later defined, and “Restricted Stock” to employees, non-employee Directors, consultants and advisors.

 

2. Administration. The Plan shall be administered by the Board of Directors of the Company (the “Board” or “Board of Directors”) or by a committee (the “Committee”) consisting of at least two (2) persons chosen by the Board of Directors. Except as herein specifically provided, the interpretation and construction by the Board of Directors or the Committee of any provision of the Plan or of any Option, or with respect to any Restricted Stock, granted under
it shall be final and conclusive. The receipt of Options or Restricted Stock by Directors, or any members of the Committee, shall not preclude their vote on any matters in connection with the administration or interpretation of the Plan.

 

  

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3. Shares Subject to the Plan. The shares subject to Options granted under the Plan, and shares granted as Restricted Stock under the Plan, shall be shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), whether authorized but unissued or held in the Company’s treasury, or shares purchased from stockholders expressly for use under the Plan. The maximum number of shares of Common Stock which may be issued pursuant to Options or as
Restricted Stock granted under the Plan shall not exceed in the aggregate five hundred fifty thousand (550,000) shares. The Company shall at all times while the Plan is in force reserve such number of shares of Common Stock as will be sufficient to satisfy the requirements of all outstanding Options granted under the Plan. In the event any Option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject thereto shall again be available for Options and grants of Restricted Stock under the Plan. In the event any shares of Restricted Stock are forfeited for any reason, the shares forfeited shall again be available for Options and grants of Restricted Stock under the Plan. In the event shares of Common Stock are delivered to, or withheld by, the
Company pursuant to Sections 13(b) or 27 hereof, only the net number of shares issued, i.e., net of the shares so delivered or withheld, shall be considered to have been issued pursuant to the Plan.

 

  

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4. Participation. The class of individuals that shall be eligible to receive Options (“Optionees”) and Restricted Stock (“Grantees”) under the Plan shall be (a) with respect to Incentive Stock Options described in Section 6 hereof, all employees of either the Company or any parent or subsidiary corporation of the Company, and (b) with respect to Nonstatutory Stock Options described in Section 7 hereof and Restricted Stock described in Section 17 hereof, all
employees, and non-employee Directors of, or consultants and advisors to, either the Company or any parent or subsidiary corporation of the Company; provided, however, neither Nonstatutory Stock Options nor Restricted Stock shall be granted to any such consultant or advisor unless (i) the consultant or advisor is a natural person (or an entity wholly-owned by the consultant or advisor), (ii) bona fide services have been or are to be rendered by such consultant or advisor and (iii) such services are not in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. The Board of Directors or the Committee, in its sole discretion, but subject
to the provisions of the Plan, shall determine the employees and non-employee Directors of, and the consultants and advisors to, the Company and its parent and subsidiary corporations to whom Options and Restricted Stock shall be granted, and the number of shares to be covered by each Option and each Restricted Stock grant, taking into account the nature of the employment or services rendered by the individuals or entities being considered, their annual compensation, their present and potential contributions to the success of the Company, and such other factors as the Board of Directors or the Committee may deem relevant. For purposes hereof, a non-employee to whom an offer of employment has been extended shall be considered an employee, provided that the Options granted to such individual shall not be exercisable, and the Restricted Stock granted shall not vest, in whole or in part,
for a period of at least one year from the date of grant and in the event the individual does not commence employment with the Company, the Options and/or Restricted Stock granted shall be considered null and void.

 

  

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5. Stock Option Agreement. Each Option granted under the Plan shall be authorized by the Board of Directors or the Committee, and shall be evidenced by a Stock Option Agreement which shall be executed by the Company and by the individual or entity to whom such Option is granted. The Stock Option Agreement shall specify the number of shares of Common Stock as to which any Option is granted, the period during which the Option is exercisable, the option price per share thereof, and such other
terms and provisions as the Board of Directors or the Committee may deem necessary or appropriate.

 

6. Incentive Stock Options. The Board of Directors or the Committee may grant Options under the Plan which are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), with respect to “incentive stock options,” and which are subject to the following terms and conditions and any other terms and conditions as may at any time be required by Section 422 of the Code (referred to herein as an “Incentive Stock
Option”):

 

(a) No Incentive Stock Option shall be granted to individuals other than employees of the Company or of a parent or subsidiary corporation of the Company.

 

(b) Each Incentive Stock Option under the Plan must be granted prior to October 11, 2015, which is within ten (10) years from the date the Plan was adopted by the Board of Directors.

 

(c) The option price of the shares subject to any Incentive Stock Option shall not be less than the fair market value (as defined in subsection (f) of this Section 6) of the Common Stock at the time such Incentive Stock Option is granted; provided, however, if an Incentive Stock Option is granted to an individual who owns, at the time the Incentive Stock Option is granted, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of a parent or subsidiary corporation of the Company (a “10% Stockholder”), the option price of the
shares subject to the Incentive Stock Option shall be at least one hundred ten percent (110%) of the fair market value of the Common Stock at the time such Incentive Stock Option is granted.

 

  

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(d) No Incentive Stock Option granted under the Plan shall be exercisable after the expiration of ten (10) years from the date of its grant. However, if an Incentive Stock Option is granted to a 10% Stockholder, such Incentive Stock Option shall not be exercisable after the expiration of five (5) years from the date of its grant. Every Incentive Stock Option granted under the Plan shall be subject to earlier termination as expressly provided in Section 12 hereof.

 

(e) For purposes of determining stock ownership under this Section 6, the attribution rules of Section 424(d) of the Code shall apply.

 

(f) For purposes of the Plan, fair market value shall be determined by the Board of Directors or the Committee. If the Common Stock is listed on a national securities exchange or The Nasdaq Stock Market (“Nasdaq”) or traded on the Over-the-Counter market, fair market value shall be the closing selling price or, if not available, the closing bid price or, if not available, the high bid price of the Common Stock quoted on such exchange or Nasdaq, or on the Over-the-Counter market, as reported by the exchange, Nasdaq or the OTC Electronic Bulletin Board, or if the Common Stock is
not so reported, then by the Pink Sheets, LLC, as the case may be, on the day immediately preceding the day on which the Option is granted (or, if granted after the close of business for trading, then on the day on which the Option is granted), or, if there is no selling or bid price on that day, the closing selling price, closing bid price or high bid price, as the case may be, on the most recent day which precedes that day and for which such prices are available. If there is no selling or bid price for the ninety (90) day period preceding the date of grant of an Option hereunder, fair market value shall be determined in good faith by the Board of Directors or the Committee.

 

  

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7. Nonstatutory Stock Options. The Board of Directors or the Committee may grant Options under the Plan which are not intended to meet the requirements of Section 422 of the Code, as well as Options which are intended to meet the requirements of Section 422 of the Code but the terms of which provide that they will not be treated as Incentive Stock Options (referred to herein as a “Nonstatutory Stock Option”). Nonstatutory Stock Options shall be subject to the following terms and
conditions:

 

(a) A Nonstatutory Stock Option may be granted to any individual or entity eligible to receive an Option under the Plan pursuant to clause (b) of Section 4 hereof.

 

(b) The option price of the shares subject to a Nonstatutory Stock Option shall not be less than the fair market value of the Common Stock at the time such Nonstatutory Stock Option is granted.

 

(c) A Nonstatutory Stock Option granted under the Plan may be of such duration as shall be determined by the Board of Directors or the Committee (subject to earlier termination as expressly provided in Section 12 hereof).

 

8. Reload Options. The Board of Directors or the Committee may grant Options with a reload feature. A reload feature shall only apply when the option price is paid by delivery of Common Stock (as set forth in Section 13(b)(ii)) or by having the Company reduce the number of shares otherwise issuable to an Optionee (as provided for in the last sentence of Section 13(b)) (a “Net Exercise”). The Stock Option Agreement for the Options containing the reload feature shall provide that
the Option holder shall receive, contemporaneously with the payment of the option price in shares of Common Stock or in the event of a Net Exercise, a reload stock option (the “Reload Option”) to purchase that number of shares of Common Stock equal to the sum of (i) the number of shares of Common Stock used to exercise the Option (or not issued in the case of a Net Exercise), and (ii) with respect to Nonstatutory Stock Options, the number of shares of Common Stock used to satisfy any tax withholding requirement incident to the exercise of such Nonstatutory Stock Option. The terms of the Plan applicable to the Option shall be equally applicable to the Reload Option with the following exceptions: (i) the option price per share of Common Stock deliverable upon the exercise of the Reload Option, (A) in the case of a Reload Option which is an Incentive Stock Option being granted
to a 10% Stockholder, shall be one hundred ten percent (110%) of the fair market value of a share of Common Stock on the date of grant of the Reload Option and (B) in the case of a Reload Option which is an Incentive Stock Option being granted to a person other than a 10% Stockholder or is a Nonstatutory Stock Option, shall be the fair market value of a share of Common Stock on the date of grant of the Reload Option; and (ii) the term of the Reload Option shall be equal to the remaining option term of the Option (including a Reload Option) which gave rise to the Reload Option. The Reload Option shall be evidenced by an appropriate amendment to the Stock Option Agreement for the Option which gave rise to the Reload Option. In the event the exercise price of an Option containing a reload feature is paid by check and not in shares of Common Stock, the reload feature shall have no
application with respect to such exercise.

 

  

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9. Rights of Option Holders. The holder of an Option granted under the Plan shall have none of the rights of a stockholder with respect to the stock covered by his Option until such stock shall be transferred to him upon the exercise of his Option.

 

10. Alternate Stock Appreciation Rights.

 

(a) Concurrently with, or subsequent to, the award of any Option to purchase one or more shares of Common Stock, the Board of Directors or the Committee may, in its sole discretion, subject to the provisions of the Plan and such other terms and conditions as the Board of Directors or the Committee may prescribe, award to the Optionee with respect to each share of Common Stock covered by an Option (“Related Option”), a related alternate stock appreciation right (“SAR”), permitting the Optionee to be paid the appreciation on the Related Option in lieu of exercising the
Related Option. An SAR granted with respect to an Incentive Stock Option must be granted together with the Related Option. An SAR granted with respect to a Nonstatutory Stock Option may be granted together with, or subsequent to, the grant of such Related Option.

 

  

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(b) Each SAR granted under the Plan shall be authorized by the Board of Directors or the Committee, and shall be evidenced by an SAR Agreement which shall be executed by the Company and by the individual or entity to whom such SAR is granted. The SAR Agreement shall specify the period during which the SAR is exercisable, and such other terms and provisions not inconsistent with the Plan.

 

(c) An SAR may be exercised only if and to the extent that its Related Option is eligible to be exercised on the date of exercise of the SAR. To the extent that a holder of an SAR has a current right to exercise, the SAR may be exercised from time to time by delivery by the holder thereof to the Company at its principal office (attention: Secretary) of a written notice of the number of shares with respect to which it is being exercised. Such notice shall be accompanied by the agreements evidencing the SAR and the Related Option. In the event the SAR shall not be exercised in full, the
Secretary of the Company shall endorse or cause to be endorsed on the SAR Agreement and the Related Option Agreement the number of shares which have been exercised thereunder and the number of shares that remain exercisable under the SAR and the Related Option and return such SAR and Related Option to the holder thereof.

 

  

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(d) The amount of payment to which an Optionee shall be entitled upon the exercise of each SAR shall be equal to one hundred percent (100%) of the amount, if any, by which the fair market value of a share of Common Stock on the exercise date exceeds the exercise price per share of the Related Option; provided, however, the Company may, in its sole discretion, withhold from any such cash payment any amount necessary to satisfy the Company’s obligation for withholding taxes with respect to such payment.

 

(e) The amount payable by the Company to an Optionee upon exercise of a SAR may, in the sole determination of the Company, be paid in shares of Common Stock, cash or a combination thereof, as set forth in the SAR Agreement. In the case of a payment in shares, the number of shares of Common Stock to be paid to an Optionee upon such Optionee’s exercise of an SAR shall be determined by dividing the amount of payment determined pursuant to Section 10(d) hereof by the fair market value of a share of Common Stock on the exercise date of such SAR. For purposes of the Plan, the exercise date
of an SAR shall be the date the Company receives written notification from the Optionee of the exercise of the SAR in accordance with the provisions of Section 10(c) hereof. As soon as practicable after exercise, the Company shall either deliver to the Optionee the amount of cash due such Optionee or a certificate or certificates for such shares of Common Stock. All such shares shall be issued with the rights and restrictions specified herein.

 

(f) SARs shall terminate or expire upon the same conditions and in the same manner as the Related Options, and as set forth in Section 12 hereof.

 

(g) The exercise of any SAR shall cancel and terminate the right to purchase an equal number of shares covered by the Related Option.

 

  

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(h) Upon the exercise or termination of any Related Option, the SAR with respect to such Related Option shall terminate to the extent of the number of shares of Common Stock as to which the Related Option was exercised or terminated.

 

(i) An SAR granted pursuant to the Plan shall be transferable to the same extent as the Related Option.

 

(j) All references in this Plan to “Options” shall be deemed to include “SARs” where applicable.

 

11. Transferability of Options.

 

(a) No Option granted under the Plan shall be transferable by the individual or entity to whom it was granted other than by will or the laws of descent and distribution, and, during the lifetime of an individual, shall not be exercisable by any other person, but only by him.

 

(b) Notwithstanding Section 11(a) above, a Nonstatutory Stock Option granted under the Plan may be transferred in whole or in part during an Optionee’s lifetime, upon the approval of the Board of Directors or the Committee, to an Optionee’s “family members” (as such term is defined in Rule 701(c)(3) of the Securities Act of 1933, as amended, and General Instruction A(1)(a)(5) to Form S-8) through a gift or domestic relations order. The transferred portion of a Nonstatutory Stock Option may only be exercised by the person or entity who acquires a proprietary interest
in such option pursuant to the transfer. The terms applicable to the transferred portion shall be the same as those in effect for the Option immediately prior to such transfer and shall be set forth in such documents issued to the transferee as the Board of Directors or the Committee may deem appropriate. As used in this Plan the terms “Optionee” and “holder of an Option” shall refer to the grantee of the Option and not any transferee thereof.

 

  

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12. Effect of Termination of Employment or Death on Options.

 

(a) Unless otherwise provided in the Stock Option Agreement, if the employment of an employee by, or the services of a non-employee Director for, or consultant or advisor to, the Company or a parent or subsidiary corporation of the Company shall be terminated for Cause (as hereinafter defined) or voluntarily by the employee, non-employee Director, consultant or advisor, then his Option shall expire forthwith. Unless otherwise provided in the Stock Option Agreement, and except as provided in subsections (b) and (c) of this Section 12, if such employment or services shall terminate for any
other reason, then such Option may be exercised at any time within three (3) months after such termination, subject to the provisions of subsection (d) of this Section 12. For purposes hereof, “Cause” shall include, without limitation, (i) conviction of, or a plea of nolo contendere to, a felony or other serious crime; (ii) commission of any act involving moral turpitude; (iii) commission of any act of dishonesty involving the Company or the performance of the Optionee’s duties; (iv) breach of any fiduciary duty to the Company; (v) any alcohol or substance abuse on the part of the Optionee; (vi) the Optionee’s commission of any illegal business practices in connection with the Company’s business; (vii) any embezzlement or misappropriation of assets; (viii) any excessive unexcused absences from
employment or service; (ix) continued and habitual neglect to perform material stated duties; (x) material breach of any provision of any employment, consulting or advisory agreement between the Optionee and the Company; or (xi) engagement in any other misconduct that is materially injurious to the Company. All references in the above definition of “Cause” to the Company shall be deemed to include any parent or subsidiary thereof. For purposes of the Plan, the retirement of an individual either pursuant to a pension or retirement plan adopted by the Company or at the normal retirement date prescribed from time to time by the Company shall be deemed to be termination of such individual’s employment other than voluntarily or for cause. For purposes of this subsection (a), an employee, non-employee Director, consultant or advisor who leaves the employ or services of the
Company to become an employee or non-employee Director of, or a consultant or advisor to, a parent or subsidiary corporation of the Company or a corporation (or subsidiary or parent corporation of the corporation) which has assumed the Option of the Company as a result of a corporate reorganization or like event shall not be considered to have terminated his employment or services.

 

  

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(b) Unless otherwise provided in the Stock Option Agreement, if the holder of an Option under the Plan dies (i) while employed by, or while serving as a non-employee Director for or a consultant or advisor to, the Company or a parent or subsidiary corporation of the Company, or (ii) within three (3) months after the termination of his employment or services other than voluntarily or for Cause, then such Option may, subject to the provisions of subsection (d) of this Section 12, be exercised by the estate of the employee or non-employee Director, consultant or advisor, or by a person who
acquired the right to exercise such Option by bequest or inheritance or by reason of the death of such employee or non-employee Director, consultant or advisor, at any time within one (1) year after such death.

 

(c) Unless otherwise provided in the Stock Option Agreement, if the holder of an Option under the Plan ceases employment or services because of permanent and total disability (within the meaning of Section 22(e)(3) of the Code) (“Permanent Disability”) while employed by, or while serving as a non-employee Director for or consultant or advisor to, the Company or a parent or subsidiary corporation of the Company, then such Option may, subject to the provisions of subsection (d) of this Section 12, be exercised at any time within one (1) year after his termination of employment,
termination of Directorship or termination of consulting or advisory services, as the case may be, due to the disability.

 

  

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(d) An Option may not be exercised pursuant to this Section 12 except to the extent that the holder was entitled to exercise the Option at the time of termination of employment, termination of Directorship, termination of consulting or advisory services, or death, and in any event may not be exercised after the expiration of the Option.

 

(e) For purposes of this Section 12, the employment relationship of an employee of the Company or of a parent or subsidiary corporation of the Company will be treated as continuing intact while he is on military or sick leave or other bona fide leave of absence (such as temporary employment by the Government) if such leave does not exceed ninety (90) days, or, if longer, so long as his right to reemployment is guaranteed either by statute or by contract.

 

13. Exercise of Options.

 

(a) Unless otherwise provided in the Stock Option Agreement, any Option granted under the Plan shall be exercisable in whole at any time, or in part from time to time, prior to expiration. The Board of Directors or the Committee, in its absolute discretion, may provide in any Stock Option Agreement that the exercise of any Options granted under the Plan shall be subject (i) to such condition or conditions as it may impose, including, but not limited to, a condition that the holder thereof remain in the employ or service of, or continue to provide consulting or advisory services to, the
Company or a parent or subsidiary corporation of the Company for such period or periods from the date of grant of the Option as the Board of Directors or the Committee, in its absolute discretion, shall determine; and (ii) to such limitations as it may impose, including, but not limited to, a limitation that the aggregate fair market value (determined at the time the Option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any employee during any calendar year (under all plans of the Company and its parent and subsidiary corporations) shall not exceed one hundred thousand dollars ($100,000). In addition, in the event that under any Stock Option Agreement the aggregate fair market value (determined at the time the Option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the
first time by any employee during any calendar year (under all plans of the Company and its parent and subsidiary corporations) exceeds one hundred thousand dollars ($100,000), the Board of Directors or the Committee may, when shares are transferred upon exercise of such Options, designate those shares which shall be treated as transferred upon exercise of an Incentive Stock Option and those shares which shall be treated as transferred upon exercise of a Nonstatutory Stock Option.

 

  

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(b) An Option granted under the Plan shall be exercised by the delivery by the holder thereof to the Company at its principal office (attention of the Secretary) of written notice of the number of shares with respect to which the Option is being exercised. Such notice shall be accompanied, or followed within ten (10) days of delivery thereof, by payment of the full option price of such shares, and payment of such option price shall be made by the holder’s delivery of (i) his check payable to the order of the Company, or (ii) previously acquired Common Stock, the fair market value of
which shall be determined as of the date of exercise (provided that the shares delivered pursuant hereto are acceptable to the Board of Directors or the Committee in its sole discretion) or (iii) if provided for in the Stock Option Agreement, his check payable to the order of the Company in an amount at least equal to the par value of the Common Stock being acquired, together with a promissory note, in form and upon such terms as are acceptable to the Board or the Committee, made payable to the order of the Company in an amount equal to the balance of the exercise price, or (iv) by the holder’s delivery of any combination of the foregoing (i), (ii) and (iii). Alternatively, if provided for in the Stock Option Agreement, the holder may elect to have the Company reduce the number of shares otherwise issuable by a number of shares having a fair market value equal to the exercise
price of the Option being exercised.

 

  

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14. Adjustment Upon Change in Capitalization.

 

(a) In the event that the outstanding Common Stock is hereafter changed by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, reverse split, stock dividend or the like, an appropriate adjustment shall be made by the Board of Directors or the Committee in the aggregate number of shares available under the Plan, in the number of shares and option price per share subject to outstanding Options, and in any limitation on exerciseability referred to in Section 13(a)(ii) hereof which is set forth in outstanding Incentive
Stock Options. If the Company shall be reorganized, consolidated, or merged with another corporation, subject to the provisions of Section 19 hereof, the holder of an Option shall be entitled to receive upon the exercise of his Option the same number and kind of shares of stock or the same amount of property, cash or securities as he would have been entitled to receive upon the happening of any such corporate event as if he had been, immediately prior to such event, the holder of the number of shares covered by his Option; provided, however, that in such event the Board of Directors or the Committee shall have the discretionary power to take any action necessary or appropriate to prevent any Incentive Stock Option granted hereunder which is intended to be an “incentive stock option” from being disqualified as such under the then existing provisions of the Code or any law
amendatory thereof or supplemental thereto; and provided, further, however, that in such event the Board of Directors or the Committee shall have the discretionary power to take any action necessary or appropriate to prevent such adjustment from being deemed or considered as the adoption of a new plan requiring shareholder approval under Section 422 of the Code and the regulations promulgated thereunder.

 

  

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(b) Any adjustment in the number of shares shall apply proportionately to only the unexercised portion of the Option granted hereunder. If fractions of a share would result from any such adjustment, the adjustment shall be revised to the next lower whole number of shares.

 

15. Further Conditions of Exercise of Options.

 

(a) Unless prior to the exercise of the Option the shares issuable upon such exercise have been registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, the notice of exercise shall be accompanied by a representation or agreement of the person or estate exercising the Option to the Company to the effect that such shares are being acquired for investment purposes and not with a view to the distribution thereof, and such other documentation as may be required by the Company, unless in the opinion of counsel to the Company such representation,
agreement or documentation is not necessary to comply with such Act.

 

(b) If the Common Stock is listed on any securities exchange, including, without limitation, Nasdaq, the Company shall not be obligated to deliver any Common Stock pursuant to this Plan until it has been listed on each such exchange. In addition, the Company shall not be obligated to deliver any Common Stock pursuant to this Plan until there has been qualification under or compliance with such federal or state laws, rules or regulations as the Company may deem applicable. The Company shall use reasonable efforts to obtain such listing, qualification and compliance.

 

  

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16. Restricted Stock Grant Agreement. Each Restricted Stock grant under the Plan shall be authorized by the Board of Directors or the Committee, and shall be evidenced by a Restricted Stock Grant Agreement which shall be executed by the Company and by the individual or entity to whom such Restricted Stock is granted. The Restricted Stock Grant Agreement shall specify the number of shares of Restricted Stock granted, the vesting periods and such other terms and provisions as the Board of
Directors or the Committee may deem necessary or appropriate.

 

17. Restricted Stock Grants.

 

(a) The Board of Directors or the Committee may grant Restricted Stock under the Plan to any individual or entity eligible to receive Restricted Stock pursuant to clause (b) of Section 4 hereof.

 

(b) In addition to any other applicable provisions hereof and except as may otherwise be specifically provided in a Restricted Stock Grant Agreement, the following restrictions in this Section 17(b) shall apply to grants of Restricted Stock made by the Board or the Committee:

 

(i) No shares granted pursuant to a grant of Restricted Stock may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until, and to the extent that, such shares are vested.

 

(ii) Shares granted pursuant to a grant of Restricted Stock shall vest as determined by the Board or the Committee, as provided for in the Restricted Stock Grant Agreement. The foregoing notwithstanding (but subject to the provisions of (iii) hereof and subject to the discretion of the Board or the Committee), a Grantee shall forfeit all shares not previously vested, if any, at such time as the Grantee is no longer employed by, or serving as a Director of, or rendering consulting or advisory services to, the Company or a parent or subsidiary corporation of the Company. All forfeited shares
shall be returned to the Company.

 

(iii) Notwithstanding the provisions of (ii) hereof, non-vested Restricted Stock shall automatically vest as provided for in Section 19 hereof.

 

  

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(c) In determining the vesting requirements with respect to a grant of Restricted Stock, the Board or the Committee may impose such restrictions on any shares granted as it may deem advisable including, without limitation, restrictions relating to length of service, corporate performance, attainment of individual or group performance objectives, and federal or state securities laws, and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. Any such restrictions shall be specifically set forth in the Restricted Stock Grant
Agreement.

 

(d) Certificates representing shares granted that are subject to restrictions shall be held by the Company or, if the Board or the Committee so specifies, deposited with a third-party custodian or trustee until lapse of all restrictions on the shares. After such lapse, certificates for such shares (or the vested percentage of such shares) shall be delivered by the Company to the Grantee; provided, however, that the Company need not issue fractional shares.

 

(e) During any applicable period of restriction, the Grantee shall be the record owner of the Restricted Stock and shall be entitled to vote such shares and receive all dividends and other distributions paid with respect to such shares while they are so restricted. However, if any such dividends or distributions are paid in shares of Company stock or cash or other property during an applicable period of restriction, the shares, cash and/or other property deliverable shall be held by the Company or third party custodian or trustee and be subject to the same restrictions as the shares with
respect to which they were issued. Moreover, the Board or the Committee may provide in each grant such other restrictions, terms and conditions as it may deem advisable with respect to the treatment and holding of any stock, cash or property that is received in exchange for Restricted Stock granted pursuant to the Plan.

 

  

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(f) Each Grantee making an election pursuant to Section 83(b) of the Code shall, upon making such election, promptly provide a copy thereof to the Company.

 

18. Restrictions Upon Shares; Right of First Refusal.

 

(a) No Optionee or Grantee (collectively, “Participant”) shall, for value or otherwise, sell, assign, transfer or otherwise dispose of all or any part of the shares issued pursuant to the exercise of an Option or received as Restricted Stock (collectively, the “Shares”), or of any beneficial interest therein (collectively a “Disposition”), except as permitted by and in accordance with the provisions of the Plan. The Company shall not recognize as valid or give effect to any Disposition of any Shares or interest therein upon the books of the Company unless
and until the Participant desiring to make such Disposition shall have complied with the provisions of the Plan.

 

(b) No Participant shall, without the written consent of the Company, pledge, encumber, create a security interest in or lien on, or in any way attempt to otherwise impose or suffer to exist any lien, attachment, levy, execution or encumbrance on the Shares.

 

(c) If, at any time, a Participant desires to make a Disposition of any of the Shares (the “Offered Shares”) to any third-party individual or entity pursuant to a bona fide offer (the “Offer”), he shall give written notice of his intention to do so (“Notice of Intent to Sell”) to the Company, which notice shall specify the name(s) of the offeror(s) (the “Proposed Offeror(s)”), the price per share offered for the Offered Shares and all other terms and conditions of the proposed transaction. Thereupon, the Company shall have the option to
purchase from the Participant all, but not less than all, the Offered Shares upon the same terms and conditions as set forth in the Offer.

 

  

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(d) If the Company desires to purchase all of the Offered Shares, it must send a written notice to such effect to the Participant within thirty (30) days following receipt of the Notice of Intent to Sell.

 

(e) The closing of any purchase and sale of the Offered Shares shall take place sixty (60) days following receipt by the Company of the Notice of Intent to Sell.

 

(f) If the Company does not elect to purchase all of the Offered Shares within the period set forth in paragraph (d) hereof, no Shares may be purchased by the Company, and the Participant shall thereupon be free to dispose of such Shares to the Proposed Offeror(s) strictly in accordance with the terms of the Offer. If the Offered Shares are not disposed of strictly in accordance with the terms of the Offer within a period of one hundred twenty (120) days after the Participant gives a Notice of Intent to Sell, such Shares may not thereafter be sold without compliance with the provisions
hereof.

 

(g) All certificates representing the Shares shall bear on the face or reverse side thereof the following legend:

“The shares represented by this certificate are subject to the provisions of the Kingstone Companies, Inc. 2005 Equity Participation Plan, a copy of which is on file at the offices of the Company.”

(h) The provisions of this Section 18 shall be of no force or effect during such time that the Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), pursuant to Section 13 or 15(d) thereof.

 

  

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19. Liquidation, Merger or Consolidation. Notwithstanding Section 14(a) hereof, if the Board of Directors approves a plan of complete liquidation or a merger or consolidation (other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), at least fifty percent (50%) of the combined voting power
of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation), the Board of Directors or the Committee may, in its sole discretion, upon written notice to the holder of an Option, provide that the Option must be exercised within twenty (20) days following the date of such notice or it will be terminated. In the event such notice is given, the Option shall become immediately exercisable in full.

 

20. Effectiveness of the Plan. The Plan was adopted by the Board of Directors on October 11, 2005.  The Plan shall be subject to approval on or before October 10, 2006, which is within one (1) year of adoption of the Plan by the Board of Directors, by the affirmative vote of the holders of a majority of the votes of the outstanding shares of capital stock of the Company present in person or represented by proxy at a meeting of stockholders and entitled to vote thereon (or in the
case of action by written consent in lieu of a meeting of stockholders, the number of votes required by applicable law to act in lieu of a meeting) (“Stockholder Approval”). In the event such Stockholder Approval is withheld or otherwise not received on or before the latter date, the Plan and, unless otherwise provided in the Stock Option Agreement and/or the Restricted Stock Grant Agreement, all Options and Restricted Stock that may have been granted hereunder shall become null and void.

 

  

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21. Termination, Modification and Amendment.

 

(a) The Plan (but not Options previously granted under the Plan) shall terminate on October 10, 2015, which is within ten (10) years from the date of its adoption by the Board of Directors, or sooner as hereinafter provided, and no Option or Restricted Stock shall be granted after termination of the Plan. The foregoing shall not be deemed to limit the vesting period for Options or Restricted Stock granted pursuant to the Plan.

 

(b) The Plan may from time to time be terminated, modified, or amended if Stockholder Approval of the termination, modification or amendment is obtained.

 

(c) The Board of Directors may at any time, on or before the termination date referred to in Section 21(a) hereof, without Stockholder Approval, terminate the Plan, or from time to time make such modifications or amendments to the Plan as it may deem advisable; provided, however, that the Board of Directors shall not, without Stockholder Approval, (i) increase (except as otherwise provided by Section 14 hereof) the maximum number of shares as to which Incentive Stock Options may be granted hereunder, change the designation of the employees or class of employees eligible to receive Incentive
Stock Options, or make any other change which would prevent any Incentive Stock Option granted hereunder which is intended to be an “incentive stock option” from qualifying as such under the then existing provisions of the Code or any law amendatory thereof or supplemental thereto or (ii) make any other modifications or amendments that require Stockholder Approval pursuant to applicable law, regulation or exchange requirements. In the event Stockholder Approval is not received within one (1) year of adoption by the Board of Directors of the change provided for in (i) or (ii) above, then, unless otherwise provided in the Stock Option Agreement and/or Restricted Stock Grant Agreement (but subject to applicable law), the change and all Options, SARs and Restricted Stock that may have been granted pursuant thereto shall be null and void.

 

  

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(d) No termination, modification, or amendment of the Plan may, without the consent of the individual or entity to whom any Option or Restricted Stock shall have been granted, adversely affect the rights conferred by such Option or Restricted Stock grant.

 

22. Not a Contract of Employment. Nothing contained in the Plan or in any Stock Option Agreement or Restricted Stock Grant Agreement executed pursuant hereto shall be deemed to confer upon any individual or entity to whom an Option or Restricted Stock is or may be granted hereunder any right to remain in the employ or service of the Company or a parent or subsidiary corporation of the Company or any entitlement to any remuneration or other benefit pursuant to any consulting or advisory
arrangement.

 

23. Use of Proceeds. The proceeds from the sale of shares pursuant to Options or Restricted Stock granted under the Plan shall constitute general funds of the Company.

 

24. Indemnification of Board of Directors or Committee. In addition to such other rights of indemnification as they may have, the members of the Board of Directors or the Committee, as the case may be, shall be indemnified by the Company to the extent permitted under applicable law against all costs and expenses reasonably incurred by them in connection with any action, suit, or proceeding to which they or any of them may be a party by reason of any action taken or failure to act under or
in connection with the Plan or any rights granted thereunder and against all amounts paid by them in settlement thereof or paid by them in satisfaction of a judgment of any such action, suit or proceeding, except a judgment based upon a finding of bad faith. Upon the institution of any such action, suit, or proceeding, the member or members of the Board of Directors or the Committee, as the case may be, shall notify the Company in writing, giving the Company an opportunity at its own cost to defend the same before such member or members undertake to defend the same on his or their own behalf.

 

  

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25. Captions. The use of captions in the Plan is for convenience. The captions are not intended to provide substantive rights.

 

26. Disqualifying Dispositions. If Common Stock acquired upon exercise of an Incentive Stock Option granted under the Plan is disposed of within two years following the date of grant of the Incentive Stock Option or one year following the issuance of the Common Stock to the Optionee, or is otherwise disposed of in a manner that results in the Optionee being required to recognize ordinary income, rather than capital gain, from the disposition (a “Disqualifying Disposition”), the
holder of the Common Stock shall, immediately prior to such Disqualifying Disposition, notify the Company in writing of the date and terms of such Disqualifying Disposition and provide such other information regarding the Disqualifying Disposition as the Company may reasonably require.

 

27. Withholding Taxes.

 

(a) Whenever under the Plan shares of Common Stock are to be delivered to an Optionee upon exercise of a Nonstatutory Stock Option or to a Grantee of Restricted Stock, the Company shall be entitled to require as a condition of delivery that the Optionee or Grantee remit or, at the discretion of the Board or the Committee, agree to remit when due, an amount sufficient to satisfy all current or estimated future Federal, state and local income tax withholding requirements, including, without limitation, the employee’s portion of any employment tax requirements relating thereto. At the
time of a Disqualifying Disposition, the Optionee shall remit to the Company in cash the amount of any applicable Federal, state and local income tax withholding and the employee’s portion of any employment taxes.

 

  

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(b) The Board of Directors or the Committee may, in its discretion, provide any or all holders of Nonstatutory Stock Options or Grantees of Restricted Stock with the right to use shares of Common Stock in satisfaction of all or part of the withholding taxes to which such holders may become subject in connection with the exercise of their Options or their receipt of Restricted Stock. Such right may be provided to any such holder in either or both of the following formats:

 

(i) The election to have the Company withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Nonstatutory Stock Option or otherwise deliverable as a result of the vesting of Restricted Stock, a portion of those shares with an aggregate fair market value equal to the percentage of the withholding taxes (not to exceed one hundred percent (100%)) designated by the holder.

 

(ii) The election to deliver to the Company, at the time the Nonstatutory Stock Option is exercised or Restricted Stock is granted or vested, one or more shares of Common Stock previously acquired by such holder (other than in connection with the Option exercise or Restricted Stock grant triggering the withholding taxes) with an aggregate fair market value equal to the percentage of the withholding taxes (not to exceed one hundred percent (100%)) designated by the holder.

 

28. Other Provisions. Each Option granted, and each Restricted Stock grant, under the Plan may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board or the Committee, in its sole discretion. Notwithstanding the foregoing, each Incentive Stock Option granted under the Plan shall include those terms and conditions which are necessary to qualify the Incentive Stock Option as an “incentive stock option” within the meaning of Section
422 of the Code and the regulations thereunder and shall not include any terms and conditions which are inconsistent therewith.

 

  

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29. Definitions. For purposes of the Plan, the terms “parent corporation” and “subsidiary corporation” shall have the meanings set forth in Sections 424(e) and 424(f) of the Code, respectively, and the masculine shall include the feminine and the neuter as the context requires.

 

30. Governing Law. The Plan shall be governed by, and all questions arising hereunder shall be determined in accordance with, the laws of the State of New York, excluding choice of law principles thereof.

 

 

 

 

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