Document:

exv10w39

 

Exhibit 10.39

STOCK OPTION CONSIDERATION AGREEMENT

GRANT DATE: XXXXXX

The following Agreement is established to protect the trade secrets, intellectual property,
confidential information, customer relationships and goodwill of Motorola, Inc. and each of its
subsidiaries (the “Company”) both as defined in the Motorola Omnibus Incentive Plan of 2006 (the
“2006 Plan”).

As consideration for the stock option(s) granted to me on the date shown above under the terms of
the 2006 Plan (“the Covered Options”), and Motorola having provided me with Confidential
Information as a Motorola appointed vice president or elected officer, I agree to the following:

(1) I agree that during the course of my employment and thereafter, I will not use or disclose,
except on behalf of the Company and pursuant to its directions,
any Company Confidential Information. Confidential Information means information concerning the
Company and its business that is not generally known outside the Company. Confidential Information
includes: (i) trade secrets; (ii) intellectual property; (iii) the Company’s methods of operation
and Company processes; (iv) information regarding the Company’s present and/or future products,
developments, processes and systems, including invention disclosures and patent applications; (v)
information on customers or potential customers, including customer’s names, sales records, prices,
and other terms of sales and Company cost information; (vi) Company personnel data; (vii) Company
business plans, marketing plans, financial data and projections; and (viii) information received in
confidence by the Company from third parties. Information regarding products or technological
innovations in development, in test marketing or being marketed or promoted in a discrete
geographic region, which information the Company or one of its affiliates is considering for
broader use, shall not be deemed generally known until such broader use is actually commercially
implemented.

(2) I agree that during my employment and for a period of one year following my termination of
employment for any reason, I will not hire, recruit, solicit or induce, or cause, allow, permit or
aid others to hire, recruit, solicit or induce, or to communicate in support of those activities,
any employee of the Company who possesses Confidential Information of the Company to terminate
his/her employment with the Company and/or to seek employment with my new or prospective employer,
or any other company.

(3) I agree that during my employment and for a period of one year following the termination of my
employment for any reason, I will not, directly or indirectly, on behalf of myself or any other
person, company or entity, solicit or participate in soliciting, products or services competitive
with or similar to products or services offered by, manufactured by, designed by or distributed by
the Company to any person, company or entity which was a customer or potential customer for such
products or services and with which I had direct or indirect contact regarding those products or
services or about which I learned Confidential Information at any time during the two years prior
to my termination of employment with the Company.

(4) I agree that by accepting the Covered Options, if I violate the terms of paragraphs 1 through
and including 3 of this Agreement, then, in addition to any other remedies available in law and/or
equity, all of my vested and unvested Covered Options will terminate and no longer be exercisable,
and for all Covered Options exercised within one year prior to the termination of my employment for
any reason or anytime after termination of my employment for any reason, I will immediately pay to
the Company the difference between the exercise price on the date of grant as reflected in the
Award Document for the Covered Options and the market price of the Covered Options on the date of
exercise (the “spread”).

 

 

(5) The requirements of this agreement can be waived or modified only upon the prior written
consent of Motorola, Inc. I acknowledge that the promises in this Agreement, not any employment of
or services performed by me in the course and scope of that employment, are the sole consideration
for the Covered Options. I agree the
Company shall have the right to assign this Agreement which shall not affect the validity or
enforceability of this Agreement. This Agreement shall inure to the benefit of the Company assigns
and successors.

(6) I agree that during my employment and for a period of one year following the termination
of my employment for any reason, I will immediately inform the Company of (i) the identity of my
new employer (or the nature of any start-up business, consulting arrangements or self-employment),
(ii) my new title, and (iii) my job duties and responsibilities. I hereby authorize the Company to
provide a copy of this Agreement to my new employer. I further agree to provide information to the
Company as may from time to time be requested in order to determine my compliance with the terms of
this Agreement.

(7) I acknowledge that the harm caused to the Company by the breach or anticipated breach of
paragraphs 1, 2,and/or 3 of this Agreement will be irreparable and I agree the Company may obtain
injunctive relief against me in addition to and cumulative with any other legal or equitable rights
and remedies the Company may have pursuant to this Agreement, any other agreements between me and
the Company for the protection of the Company’s Confidential Information, or law, including the
recovery of liquidated damages. I agree that any interim or final equitable relief entered by a
court of competent jurisdiction, as specified in paragraph 10 below, will, at the request of the
Company, be entered on consent and enforced by any such court having jurisdiction over me. This
relief would occur without prejudice to any rights either party may have to appeal from the
proceedings that resulted in any grant of such relief.

(8) With respect to the subject matter hereof, this Agreement is my entire agreement with the
Company and supersedes any prior stock option agreement or stock option consideration agreement,
regarding the same subject matter. No waiver
of any breach of any provision of this Agreement by the Company shall be construed to be a waiver
of any succeeding breach or as a modification of such provision. The provisions of this Agreement
shall be severable and in the event that any provision of this Agreement shall be found by any
court as specified in paragraph 10 below to be unenforceable, in whole or in part, the remainder of
this Agreement shall nevertheless be enforceable and binding on the parties. I also agree that the
court may modify any invalid, overbroad or unenforceable term of this Agreement so that such term,
as modified, is valid and enforceable under applicable law. Further, I affirmatively state that I
have not, will not and cannot rely on any representations not expressly made herein.

(9) I accept the terms of this Agreement and the above option(s) to purchase shares of the Common
Stock of the Company, subject to the terms of this Agreement, the 2006 Plan, and any Award Document
issued pursuant thereto. I am familiar with the 2006 Plan and agree to be bound by it to the
extent applicable, as well as by the actions of the Company’s Board of Directors or any committee
thereof.

(10) I agree that this Agreement and the 2006 Plan, and any Award Document issued pursuant thereto,
together constitute an agreement between the Company and me. I further agree that this Agreement
is governed by the laws of Illinois, without giving effect to any state’s principles of Conflicts
of Laws, and any legal action related to this Agreement shall be brought only in a federal or state
court located in Illinois, USA.

					
	 
	 

	 	 
	 	 
	Date

	 	Signature
	 	Printed Name
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Commerce ID

IN ORDER FOR THE ABOVE-REFERENCED OPTION(S) TO BE AWARDED, THIS AGREEMENT, SIGNED AND DATED, MUST
BE RETURNED TO MOTOROLA c/o EXECUTIVE REWARDS NO LATER THAN
__________.

- 2 -exv4w7

 

XATA CORPORATION

2007 LONG-TERM INCENTIVE

AND

STOCK OPTION PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	1.	 	 	Purpose of Plan
	 	 	1	 
	 	2.	 	 	Stock Subject to Plan
	 	 	1	 
	 	3.	 	 	Administration of Plan
	 	 	1	 
	 	4.	 	 	Eligibility
	 	 	3	 
	 	5.	 	 	Price
	 	 	3	 
	 	6.	 	 	Term
	 	 	3	 
	 	7.	 	 	Exercise of Option or Award
	 	 	4	 
	 	8.	 	 	Additional Restrictions
	 	 	4	 
	 	9.	 	 	Alternative Stock Appreciation Rights
	 	 	4	 
	 	10.	 	 	Ten Percent Shareholder Rule
	 	 	5	 
	 	11.	 	 	Non-Transferability
	 	 	5	 
	 	12.	 	 	Restricted Stock Awards
	 	 	5	 
	 	13.	 	 	Performance Awards
	 	 	6	 
	 	14.	 	 	Dilution or Other Adjustments
	 	 	6	 
	 	15.	 	 	Amendment or Discontinuance of Plan
	 	 	7	 
	 	16.	 	 	Intentionally Omitted
	 	 	7	 
	 	17.	 	 	Income Tax Withholding and Tax Bonuses
	 	 	7	 
	 	18.	 	 	Effective Date and Termination of Plan
	 	 	7	 
	 	19.	 	 	Automatic Grant of Non-Employee Director Options
	 	 	8	 

 

 

2007 LONG-TERM INCENTIVE

AND

STOCK OPTION PLAN

1. Purpose of Plan.

This Plan shall be known as the “XATA 2007 LONG-TERM INCENTIVE AND STOCK OPTION PLAN” and is
hereinafter referred to as the “Plan”. The purpose of the Plan is to aid in maintaining and
developing personnel capable of assuring the future success of XATA Corporation, a Minnesota
corporation (the “Company”), to offer such personnel additional incentives to put forth maximum
efforts for the success of the business, and to afford them an opportunity to acquire a proprietary
interest in the Company through stock options and other long-term incentive awards as provided
herein. Options granted under this Plan may be either incentive stock options (“Incentive Stock
Options”) within the meaning of Section 422 of the Internal Revenue Code of 1986 (the “Code”), or
options which do not qualify as Incentive Stock Options. Awards granted under this Plan shall be
stock appreciation rights (“SARs”), restricted stock or performance awards as hereinafter
described.

2. Stock Subject to Plan.

     Subject to the provisions of Section 14 hereof, the stock to be subject to options or other
awards under the Plan shall be the Company’s authorized Common Stock, par value $0.01 per share
(the “Common Shares”). Such shares may be either authorized but unissued shares, or issued shares
which have been reacquired by the Company. Subject to adjustment as provided in this Section 2 and
Section 14 hereof, the aggregate number of Shares that may be issued under the Plan shall be
500,000. The maximum number of Shares that may be issued under the Plan shall be cumulatively
increased on January 1, 2008 and on each January 1 thereafter for nine years by the lesser of (i)
500,000 Common Shares, (ii) 3% of the Company’s outstanding Common Shares on an as-converted basis
as of the preceding December 31 and (iii) a number of Common Shares determined by the Board or
Committee. If an option or award under the Plan expires, or for any reason is terminated or
unexercised with respect to any shares, such shares shall again be available for options or awards
thereafter granted during the term of the Plan.

3. Administration of Plan.

     (a) Except as provided in Section 3(d) hereof, the Plan shall be administered by the Board of
Directors of the Company or a committee thereof. The members of any such committee shall be
appointed by and serve at the pleasure of the Board of Directors. If no committee is appointed by
the Board, the committee shall be comprised of all of the members of the Board of Directors. (The
group administering the Plan shall hereinafter be referred to as the “Committee”.)

     (b) The Committee shall have plenary authority in its discretion, but subject to the express
provisions of the Plan: (i) to determine the purchase price of the Common Stock covered by each
option or award, (ii) to determine the employees to whom and the time or times at which such
options and awards shall be granted and the number of shares to be subject to each, (iii) to
determine the form of payment to be made upon the exercise of a SAR or in connection with
performance awards, either cash, Common Shares of the Company or a combination thereof, (iv) to
determine the terms of exercise of each option and award, (v) to accelerate the time at which all
or any part of an option or award may be

 

 

exercised, (vi) to amend or modify the terms of any option
or award with the consent of the optionee, (vii) to interpret the Plan, (viii) to prescribe, amend and rescind rules and regulations relating
to the Plan, (ix) to determine the terms and provisions of each option and award agreement under
the Plan (which agreements need not be identical), including the designation of those options
intended to be Incentive Stock Options, and (x) to make all other determinations necessary or
advisable for the administration of the Plan, subject to the exclusive authority of the Board of
Directors under Section 15 herein to amend or terminate the Plan. The Committee’s determinations
on the foregoing matters, unless otherwise disapproved by the Board of Directors of the Company,
shall be final and conclusive.

     (c) The Committee may select one of its members as its Chairman and shall holds its meetings
at such times and places as it may determine. A majority of its members shall constitute a quorum.
All determinations of the Committee shall be made by not less than a majority of its members. Any
decision or determination reduces to writing and signed by all of the members of the Committee
shall be fully effective as if it had been made by a majority vote at a meeting duly called and
held. The grant of an option or award shall be effective only if a written agreement shall have
been duly executed and delivered by and on behalf of the Company following such grant. The
Committee may appoint a Secretary and may make such rules and regulations for the conduct of its
business as it shall deem advisable.

     (d) Section 19 of the Plan shall be administered by the Chairman/Chief Executive Officer and
the Chief Financial Officer, whose construction and interpretation of the terms and provisions of
such Sections shall be final and conclusive; provided that the numbers of Common Shares subject to
options granted to Non-Employee Directors (defined below) under Section 19, the timing of the
grants of such options (except as provided in Section 19), the eligibility for such options, and
the terms and conditions of such options, shall be automatic and non-discretionary in accordance
with the terms of such Section.

     (e) Compliance with Section 409A. Notwithstanding anything to the contrary contained
herein, to the extent that the Committee determines that any award granted under the Plan is
subject to Code Section 409A and unless otherwise specified in the applicable award agreement, the
award agreement evidencing such award shall incorporate the terms and conditions necessary for such
Award to avoid the consequences described in Code Section 409A(a)(1), and to the maximum extent
permitted under applicable law (and unless otherwise stated in the applicable award agreement), the
Plan and the award agreements shall be interpreted in a manner that results in their conforming to
the requirements of Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal
Revenue Service regulations or other interpretive guidance issued under Section 409A (whenever
issued, the “Guidance”). Notwithstanding anything to the contrary in this Plan (and unless
the award agreement provides otherwise, with specific reference to this sentence), to the extent
that a Participant holding an award that constitutes “deferred compensation” under Section 409A and
the Guidance is a “specified employee” (also as defined thereunder), no distribution or payment of
any amount shall be made before a date that is six months following the date of such participant’s
“separation from service” (as defined in Section 409A and the Guidance) or, if earlier, the date of
the participant’s death.

     (f) Solely for purposes of determining and administering options and awards to eligible
persons under this Plan who are not Insiders, the Committee may delegate all or any portion of its
authority under the Plan to one or more executive officers of the Company. For purposes of this
paragraph, the term “Insiders” means, as of a particular date, persons who, as of that date, are
officers of the Company as defined under Exchange Act Rule 16a-1(f) or its successor provision.

2

 

4. Eligibility.

     Incentive Stock options may only be granted under this Plan to any full or part-time employee
(which term as used herein includes, but is not limited to, officers and directors who are also
employees) of the Company and of its present and future subsidiary corporations (herein called
“subsidiaries”). Full or part-time employees, non-employee members of the Board of Directors, and
non-employee consultants, agents or independent contractors to the Company or one of its
subsidiaries shall be eligible to receive options which do not qualify as Incentive Stock Options
and awards. For purposes of this Plan, “Non-Employee Director,” means any member of the Board of
Directors who is not at the time of option grant an employee of the Company. Non-Employee
Directors shall be eligible for discretionary grants and awards under the Plan in addition to
automatic option grants under Section 19. In determining the persons to whom options and awards
shall be granted and the number of shares subject to each, the Committee may take into account the
nature of services rendered by the respective employees or consultants, their present and potential
contributions to the success of the Company and such other factors as the Committee in its
discretion shall deem relevant. A person who has been granted an option or award under this Plan
may be granted additional options or awards under the Plan if the Committee shall so determine;
provided, however, that for Incentive Stock Options, to the extent the aggregate fair market value
(determined at the time the Incentive Stock Option is granted) of the Common Shares with respect to
which all Incentive Stock Options are exercisable for the first time by an employee during any
calendar year (under all plans described in subsection (d) of Section 422 of the Code of his
employer corporation and its parent and subsidiary corporations) exceeds $100,000, such options
shall be treated as options which do not qualify as Incentive Stock Options. Nothing in the Plan
or in any agreement thereunder shall confer on any employee any right to continue in the employ of
the Company or any of its subsidiaries or affect, in any way, the right of the Company or any of
its subsidiaries to terminate his or her employment at the time.

5. Price.

     The option price for all Incentive Stock Options, for options which do not qualify as
Incentive Stock Options, and if applicable, the price for all awards granted under the Plan shall
be determined by the Committee, but shall not be less than 100% of the fair market value of the
Common Shares at the date of grant of such option or award. For purposes of the preceding sentence
and for all other valuation purposes under the Plan, the fair market value of the Common Shares
shall be as reasonably determined by the Committee. If on the date of grant of any option or award
hereunder the Common Shares are not traded on an established securities market, the Committee shall
make a good faith attempt to satisfy the requirements of this Section 5 and in connection therewith
shall take such action as it deems necessary or advisable.

6. Term.

     Each option and award and all rights and obligations thereunder shall expire on the date
determined by the Committee and specified in the option or award agreement. The Committee shall be
under no duty to provide terms of like duration for options or awards granted under the Plan, but
the term of an Incentive Stock Option may not extend more than ten (10) years from the date of
grant of such option and the term of options granted under the Plan which do not qualify as
Incentive Stock Options may not extend more than fifteen (15) years from the date of granting of
such option.

3

 

7. Exercise of Option or Award.

     (a) The Committee shall have full and complete authority to determine whether an option or
award will be exercisable in full at any time or from time to time during the term thereof, or to
provide for the exercise thereof in such installments, upon the occurrence of such events (such as
termination of employment for any reason) and at such times during the term of the option as the
Committee may determine and specify in the option or award agreement.

     (b) The exercise of any option or award granted hereunder shall only be effective at such time
that the sale of Common Shares pursuant to such exercise will not violate any state or federal
securities or other laws.

     (c) An optionee or grantee electing to exercise an option or award shall give written notice
to the Company of such election and of the number of shares subject to such exercise. The full
purchase price of such shares shall be tendered with such notice of exercise. Payment shall be
made to the Company in cash (including bank check, certified check, personal check, or money
order), or, at the discretion of the Committee and as specified by the Committee, (i) by delivering
certificates for the Company’s Common Shares already owned by the optionee or grantee having a fair
market value as of the date of grant equal to the full purchase price of the shares, (ii) by
delivering a combination of cash and such shares, or (iii) by delivering (including by fax) to the
Company or its designated agent an executed irrevocable option exercise form together with
irrevocable instructions to a broker-dealer to sell or margin the Common Shares and deliver the
sale or margin loan proceeds directly to the Company to the extent required to pay the option
exercise price.

     (d) The fair market value of the Common Shares which are tendered in payment of the exercise
price shall be determined as provided in Section 5 herein.

     (e) Until such person has been issued the shares subject to such exercise, he or she shall
possess no rights as a shareholder with respect to such shares.

8. Additional Restrictions.

     The Committee shall have full and complete authority to determine whether all or any part of
the Common Shares of the Company acquired upon exercise of any of the options or awards granted
under the Plan shall be subject to restrictions on the transferability thereof or any other
restrictions affecting in any manner the optionee’s or grantee’s rights with respect thereto, but
any such restriction shall be contained in the agreement relating to such options or awards.

9. Alternative Stock Appreciation Rights.

     (a) Grant. At the time of grant of an option or award under the Plan (or at any other
time), the Committee, in its discretion, may grant a Stock Appreciation Right (“SAR”) evidenced by
an agreement in such form as the Committee shall from time to time approve. Any such SAR may be
subject to restrictions on the exercise thereof as may be set forth in the agreement representing
such SAR which agreement shall comply with and be subject to the following terms and conditions and
any additional terms and conditions established by the Committee that are consistent with the terms
of the Plan.

4

 

     (b) Exercise. An SAR shall be exercised by the delivery to the Company of a written
notice which shall state that the holder thereof elects to exercise his or her SAR as to the number
of shares specified in the notice and which shall further state what portion, if any, of the SAR exercise
amount (hereinafter defined) the holder thereof requests be paid to in cash and what portion, if
any, is to be paid in Common Shares of the Company. The Committee promptly shall cause to be paid
to such holder the SAR exercise amount either in cash, in Common Shares of the Company, or any
combination of cash and shares as the Committee may determine. Such determination may be either in
accordance with the request made by the holder of the SAR or in the sole and absolute discretion of
the Committee. The SAR exercise amount is the excess of the fair market value of one share of the
Company’s Common Shares on the date of exercise over the per share exercise price in respect of
which the SAR was granted, multiplied by the number of shares as to which the SAR is exercised.
For the purposes hereof, the fair market value of the Company’s shares shall be determined as
provided in Section 5 herein.

10. Ten Percent Shareholder Rule.

     Notwithstanding any other provision in the Plan, if at the time an option is granted pursuant
to the Plan the optionee owns directly or indirectly (within the meaning of Section 425(d) of the
Code) Common Shares of the Company possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or its parent or subsidiary corporations, if
any (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be
granted to such optionee pursuant to the Plan shall satisfy the requirements of Section 422(c)(6)
of the Code, and the option price shall be not less than 110% of the fair market value of the
Common Shares of the Company determined as described herein, and such option by its terms shall not
be exercisable after the expiration of five (5) years from the date such option is granted.

11. Non-Transferability.

     No Incentive Option granted under the Plan shall be transferable by an optionee, otherwise
than by will or the laws of descent or distribution. Except as otherwise provided in an option or
award agreement, during the lifetime of an optionee or grantee, the option shall be exercisable
only by such optionee or grantee.

12. Restricted Stock Awards.

Awards of Common Shares subject to forfeiture and transfer restrictions may be granted by the
Committee. Any restricted stock award shall be evidenced by an agreement in such form as the
Committee shall from time to time approve, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions established by the Committee
that are consistent with the terms of the Plan:

     (a) Grant of Restricted Stock Awards. Each restricted stock award made under the Plan
shall be for such number of Common Share as shall be determined by the Committee and set forth in
the agreement containing the terms of such restricted stock award. Such agreement shall set forth
a period of time during which the grantee must remain in the continuous employment of the Company
in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines,
the restrictions may lapse during such restricted period in installments with respect to specified
portions of the shares covered by the restricted stock award. The agreement may also, in the
discretion of the Committee, set forth performance or other conditions that will subject the Common
Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or
any part of the restrictions applicable to any or all outstanding restricted stock awards.

5

 

     (b) Delivery of Common Shares and Restrictions. At the time of a restricted stock
award, a certificate representing the number of Common Shares awarded thereunder shall be
registered in the name of the grantee. Such certificate shall be held by the Company or any
custodian appointed by the Company for the account of the grantee subject to the terms and
conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon
as the Committee, in its discretion, may determine. The grantee shall have all rights of a
shareholder with respect to the Common Shares, including the right to receive dividends and the
right to vote such shares, subject to the following restrictions: (i) the grantee shall not be
entitled to delivery of the stock certificate until the expiration of the restricted period and the
fulfillment of any other restrictive conditions set forth in the restricted stock agreement with
respect to such Common Shares; (ii) none of the Common Shares may be sold, assigned, transferred,
pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until
after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise
determined by the Committee, all of the Common Shares shall be forfeited and all rights of the
grantee to such Common Shares shall terminate, without further obligation on the part of the
Company, unless the grantee remains in the continuous employment of the Company for the entire
restricted period in relation to which such Common Shares were granted and unless any other
restrictive conditions relating to the restricted stock award are met. Any Common Shares, any
other securities of the Company and any other property (except for cash dividends) distributed with
respect to the Common Shares subject to restricted stock awards shall be subject to the same
restrictions, terms and conditions as such restricted Common Shares.

     (c) Termination of Restrictions. At the end of the restricted period and provided
that any other restrictive conditions of the restricted stock award are met, or at such earlier
time as otherwise determined by the Committee, all restrictions set forth in the agreement relating
to the restricted stock award or in the Plan shall lapse as to the restricted Common Shares subject
thereto, and a stock certificate for the appropriate number of Common Shares, free of the
restrictions and the restricted stock legend, shall be delivered to the grantee or his beneficiary
or estate, as the case may be.

13. Performance Awards.

     The Committee is further authorized to grant performance awards. Subject to the terms of this
Plan and any applicable award agreement, a performance award granted under the Plan (i) may be
denominated or payable in cash, Common Shares (including, without limitation, restricted stock),
other securities, other awards, or other property and (ii) shall confer on the holder thereof
rights valued as determined by the Committee, in its discretion, and payable to, or exercisable by,
the holder of the performance awards, in whole or in part, upon the achievement of such performance
goals during such performance periods as the Committee, in its discretion, shall establish.
Subject to the terms of this Plan and any applicable award agreement, the performance goals to be
achieved during any performance period, the length of any performance period, the amount of any
performance award granted, and the amount of any payment or transfer to be made by the granter and
by the Company under any performance award shall be determined by the Committee.

14. Dilution or Other Adjustments.

     If there shall be any change in the Common Shares through merger, consolidation,
reorganization, recapitalization, dividend in the form of stock (of whatever amount), stock split
or other change in the corporate structure, appropriate adjustments in the Plan and outstanding
options and awards shall be made by the Committee. In the event of any such changes, adjustments
shall include, where appropriate, changes in the aggregate number of shares subject to the Plan,
the number of shares
and the price per share subject to outstanding options and awards and the amount payable upon
exercise of outstanding awards, in order to prevent dilution or enlargement of option or award
rights.

6

 

15. Amendment or Discontinuance of Plan.

     The Board of Directors may amend or discontinue at any time. Subject to the provisions of
Section 14 no amendment of the Plan, however, shall without shareholder approval: (i) increase the
maximum number of shares under the Plan as provided in Section 2 herein, (ii) decrease the minimum
price provided in Section 5 herein, (iii) extend the maximum term under Section 6, or (iv) modify
the eligibility requirements for participation in the Plan. The Board of Directors shall not alter
or impair any option or award theretofore granted under the Plan without the consent of the holder
of the option or award.

16.[Intentionally Omitted]

17. Income Tax Withholding and Tax Bonuses.

     (a) In order to comply with all applicable federal or state income tax laws or regulations,
the Company may take such action as it deems appropriate to ensure that all applicable federal or
state payroll, withholding, income or other taxes, which are the sole and absolute responsibility
of an optionee or grantee under the Plan, are withheld or collected from such optionee or grantee.
In order to assist an optionee or grantee in paying all federal and state taxes to be withheld or
collected upon exercise of an option or award which does not qualify as an Incentive Stock Option
hereunder, the Committee, in its absolute discretion and subject to such additional terms and
conditions as it may adopt, shall permit the optionee or grantee to satisfy such tax obligation by
(i) electing to have the Company withhold a portion of the shares otherwise to be delivered upon
exercise of such option or award with a fair market value, determined in accordance with Section 5
herein, equal to such taxes or (ii) delivering to the Company Common Shares other than the shares
issuable upon exercise of such option or award with a fair market value, determined in accordance
with Section 5, equal to such taxes.

     (b) The Committee shall have the authority, at the time of grant of an option under the Plan
or at any time thereafter, to approve tax bonuses to designated optionee or grantees to be paid
upon their exercise of options or awards granted hereunder. The amount of any such payment shall
be determined by the Committee. The Committee shall have full authority in its absolute discretion
to determine the amount of any such tax bonus and the terms and conditions affecting the vesting
and payment thereafter.

18. Effective Date and Termination of Plan.

     No Award shall be granted under the Plan after ten years from the latest to occur of the date
of adoption of the Plan by Board or date of shareholder approval, or the date any amendment to add
shares to the Plan is approved by shareholders of the Company. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and the authority of the Committee provided for hereunder with respect to the
Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the
termination of the Plan.

7

 

19. Automatic Grant of Non-Employee Director Options.

     Pursuant to this Section 19, each Non-Employee Director elected or re-elected to the Board on
or after the date of the annual meeting of shareholders held in 2007 shall be granted automatically
an option to purchase Common Shares, in the amount consistent with the Non-Employee Director
compensation package in effect at the time (currently this is 5,000 shares) as approved by the
Committee, on the next business day following the annual shareholder meeting (as to each, a
“Director Grant Date”) at which such director is elected or re-elected. Notwithstanding the
foregoing, if on the scheduled Director Grant Date, the Chairman/Chief Executive Officer or the
Chief Financial Officer determines, in his discretion, that the Company is in possession of
material, undisclosed information, then the grant of options will be suspended until the third day
after public dissemination of such information. The Chairman/Chief Executive Officer or the Chief
Financial Officer may only suspend the grant; the amount and other terms of the grant will remain
as set forth in the Plan, with the exercise price of the option to be determined in accordance with
the Plan on the date the option is finally granted.

     Each option granted under this Section to a Non-Employee Director shall be evidenced by an
agreement, in a form approved by the Chairman/Chief Executive Officer or the Chief Financial
Officer. Such agreement shall contain the following terms and conditions:

	 	a.	 	Term. Each option granted under Section 19 to a Non-Employee Director
shall have a term of ten years and shall be immediately exercisable as to all Common
Shares; provided, however that no shares of Common stock issued upon the
exercise of an option may be sold or otherwise disposed of until six months after the
Director Grant Date of the option.

	 	b.	 	Exercise Price. The exercise price per share of options granted under
Section 19 shall be 100% of the fair market value of one Common Share on the Director
Grant Date. For these purposes, “fair market value” shall mean the reported closing
sale price of the Common Shares, as reported on the Nasdaq National Market or Nasdaq
Capital Market on the Director Grant Date.

	 	c.	 	Compliance with SEC Regulations. It is the Company’s intent that the
provisions of Sections 19 comply in all respects with Section 16 of the Securities
Exchange Act of 1934 (the “1934 Act”) and any regulations promulgated thereunder,
including Rule 16b-3. If any provision of Section 19 is found not to be in compliance
with the Rule, the provision shall be deemed null and void. All grants and exercises
of options granted under Section 19 shall be executed in accordance with the
requirements of Section 16 of the 1934 Act, as amended, and any regulations promulgated
thereunder.

	 	d.	 	Tax Status. All options granted pursuant to Section 19 shall be
nonqualified options which are not intended to be, and do not qualify as, incentive
stock options described in Section 422 of the Internal Revenue Code of 1986, as
amended.

8

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