Document:

Exhibit 10.1

 

INDEMNIFICATION AGREEMENT

 

This
Indemnification Agreement, dated as of May 7, 2009, is made by and between NIC
Inc., a Delaware corporation (the “Corporation”), and
                    
(the “Indemnitee”).

 

RECITALS

 

A.                                   The
Corporation recognizes that competent and experienced persons are increasingly
reluctant to serve or to continue to serve as directors or officers of
corporations unless they are protected by comprehensive liability insurance or
indemnification, or both, due to increased exposure to litigation costs and
risks resulting from their service to such corporations, and due to the fact
that the exposure frequently bears no reasonable relationship to the
compensation of such directors and officers;

 

B.                                     The
statutes and judicial decisions regarding the duties of directors and officers
are often difficult to apply, ambiguous, or conflicting, and therefore fail to
provide such directors and officers with adequate, reliable knowledge of legal
risks to which they are exposed or information regarding the proper course of
action to take;

 

C.                                     The
Corporation and Indemnitee recognize that plaintiffs often seek damages in such
large amounts and the costs of litigation may be so enormous (whether or not
the case is meritorious), that the defense and/or settlement of such litigation
is often beyond the personal resources of directors and officers and the
exposure from such litigation frequently bears no reasonable relationship to
the compensation of such directors and officers;

 

D.                                    The
Corporation believes that it is unfair for its directors and officers to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director or officer received no personal profit and in cases where the
director or officer was not culpable;

 

E.                                      The
Corporation, after reasonable investigation, has determined that the liability
insurance coverage presently available to the Corporation may be inadequate in
certain circumstances to cover all possible exposure for which Indemnitee
should be protected.  The Corporation
believes that the interests of the Corporation and its stockholders would best
be served by a combination of such insurance and the indemnification by the
Corporation of the directors and officers of the Corporation;

 

F.                                      The
Corporation’s Bylaws require the Corporation to indemnify its directors and
officers to the fullest extent permitted by the Delaware General Corporation
Law (the “DGCL”). The Bylaws expressly provide that the indemnification
provisions set forth therein are not exclusive, and contemplate that contracts
may be entered into between the Corporation and its directors and officers with
respect to indemnification;

 

G.                                     Section 145
of the DGCL (“Section 145”), under which the Corporation is organized,
empowers the Corporation to indemnify its officers, directors, employees and
agents by agreement and to indemnify persons who serve, at the request of the
Corporation, as the 

 

 

directors, officers, employees or agents of other corporations or
enterprises, and expressly provides that the indemnification provided by Section 145
is not exclusive;

 

H.                                    Section 102(b)(7) of
the DGCL allows a corporation to include in its certificate of incorporation a
provision limiting or eliminating the personal liability of a director for monetary
damages in respect of claims by shareholders and corporations for breach of
certain fiduciary duties, and the Corporation has so provided in its
Certificate of Incorporation that each Director shall be exculpated from such
liability to the maximum extent permitted by law;

 

I.                                         The
Corporation desires to provide the Indemnitee with specific contractual
assurances of the Indemnitee’s rights to full indemnification against
litigation risks and reasonable expenses (regardless, among other things, of
any amendment to or revocation of the Certificate of Incorporation and Bylaws
or any change in the ownership of the Corporation or the composition of its
Board of Directors) and, to the extent insurance is available, the coverage of
the Indemnitee under the Corporation’s directors’ and officers’ liability
insurance policies;

 

J.                                        The
Board of Directors has determined that contractual indemnification as set forth
herein is not only reasonable and prudent but also promotes the best interests
of the Corporation and its stockholders;

 

K.                                    The
Corporation desires and has requested Indemnitee to serve or continue to serve
as a director or officer of the Corporation free from undue concern for
unwarranted claims for damages arising out of or related to such services to the
Corporation; and

 

L.                                      Indemnitee
is willing to serve, continue to serve or to provide additional service for or
on behalf of the Corporation on the condition that he is furnished the
indemnity provided for herein.

 

AGREEMENT

 

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

 

Section 1.                                            Certain
Definitions. For purposes of this Agreement, the following definitions
shall apply:

 

(a)                                  The
term “Proceeding” shall be broadly construed and shall include, without
limitation, the investigation, preparation, prosecution, defense, settlement,
arbitration and appeal of, and the giving of testimony in, any threatened,
pending or completed claim, action, suit, proceeding, or arbitration, whether
civil, criminal, administrative, investigative, appellate or arbitral, and
whether formal or informal.

 

(b)                                 The
phrase “by reason of the fact that Indemnitee is or was a director or officer
of the Corporation, or is or was serving at the Corporation’s request as a
director, officer, employee or agent of any Other Enterprise”, or any
substantially similar phrase, shall be broadly construed and shall include,
without limitation, any actual or alleged act or omission to act.

 

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(c)                                  The
term “Expenses” shall be broadly and reasonably construed and shall include,
without limitation, all direct and indirect expenses, costs or charges of any
type or nature whatsoever (including, without limitation, all attorneys’ fees
and related disbursements, appeal bonds, other out-of-pocket costs and
reasonable compensation for time spent by Indemnitee for which Indemnitee is
not otherwise compensated by the Corporation or any third party, provided that
the rate of compensation and estimated time involved is approved by the
Corporation’s Board of Directors, which approval shall not be unreasonably
withheld, conditioned or delayed), actually and reasonably incurred by
Indemnitee in connection with the investigation, preparation, prosecution,
defense, settlement, arbitration or appeal of, or the giving of testimony in, a
Proceeding or establishing or enforcing a right to indemnification under this
Agreement, the Corporation’s Certificate of Incorporation or Bylaws, Section 145
of the General Corporation Law of the State of Delaware or otherwise.

 

(d)                                 The
terms “judgments, fines and amounts paid in settlement” shall be broadly
construed and shall include, without limitation, all direct and indirect
payments of any type or nature whatsoever (including, without limitation, all
penalties and amounts required to be forfeited or reimbursed to the Corporation),
as well as any penalties or excise taxes assessed on a person with respect to
an employee benefit plan.

 

(e)                                  The
term “Corporation” shall include, without limitation and in addition to the
resulting corporation, any constituent corporation or any Other Enterprise
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director or officer of such constituent corporation
or Other Enterprise, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of any Other Enterprise,
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as he or she would have with
respect to such constituent corporation or Other Enterprise as if its separate
existence had continued.

 

(f)                                    The
term “Other Enterprise” shall include, without limitation, any other
corporation, partnership, joint venture, trust or employee benefit plan.

 

(g)                                 The
phrase “serving at the request of the Corporation”, or any substantially
similar phrase, shall include, without limitation, any service as a director or
officer of the Corporation which involves services as a director, officer,
employee or agent with respect to any Other Enterprise, including any employee
benefit plan.

 

(h)                                 A
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner “not opposed to the best
interests of the Corporation” as referred to in this Agreement.

 

(i)                                     The
term “defense” shall include investigations of any Proceeding, appeals of any
Proceeding and defensive assertion of any cross -claim or counterclaim.

 

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(j)                                     The
term “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the
past five years has been, retained to represent:  (i) the Corporation or Indemnitee in any
matter material to either such party (other than with respect to matters
concerning Indemnitee under this Agreement, or of other indemnitees under
similar indemnification agreements), or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.  Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Corporation or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement. 
The Corporation agrees to pay the reasonable fees of the Independent
Counsel arising out of or relating to this Agreement or its engagement pursuant
hereto.

 

(k)                                  The
term “Change of Control” means (i) an acquisition by any person (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) of beneficial ownership
of twenty percent (20%) or more of the combined voting power of the Corporation’s
then outstanding voting securities; (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Corporation and any new director whose election
by the Board of Directors or nomination for election by the Corporation’s
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or (iii) the
consummation of a merger or consolidation involving the Corporation if the
stockholders of the Corporation, immediately before such merger or
consolidation, do not own, immediately following such merger or consolidation,
more than eighty percent (80%) of the combined voting power of the outstanding
voting securities of the resulting entity in substantially the same proportion
as their ownership of voting securities immediately before such merger or
consolidation, (iv) the consummation of the sale or other disposition of
all or substantially all of the assets of the Corporation, (v) approval by
the stockholders of the Corporation of a complete liquidation or dissolution of
the Corporation or (vi) the occurrence of any other event of a nature that
would be required to be reported in response to either Item 5.01 of Form 8-K
or Item 6(e) of Schedule 14A of Regulation 14A (or a response to any
similar item on any similar schedule or form promulgated under the Exchange
Act), whether or not the Corporation is then subject to such reporting
requirement.  Notwithstanding the
foregoing, a Change of Control shall not be deemed to occur solely because
twenty percent (20%) or more of the then outstanding voting securities is
acquired by (i) a trustee or other fiduciary holding securities under one
or more employee benefit plans maintained by the Corporation or any of its
subsidiaries or (ii) any entity that, immediately prior to such acquisition,
is owned directly or indirectly by the stockholders of the Corporation in the
same proportion as their ownership of shares in the Corporation immediately
prior to such acquisition.

 

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Section 2.                                            Indemnification.

 

(a)                                  Subject
to Sections 4, 6 and 8 of this Agreement, to the fullest extent not prohibited
by the laws of the State of Delaware, as the same now exists or may hereafter
be amended (but only to the extent any such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), the Corporation shall
indemnify, defend and hold harmless, Indemnitee if Indemnitee was or is a party
or is threatened to be made a party to, or a witness of, or is otherwise
involved in, any Proceeding by reason of the fact that Indemnitee is or was or
has agreed to serve as a director or officer of the Corporation, or is or was
serving at the Corporation’s request as a director, officer, employee or agent
of any Other Enterprise, or by reason of any action taken or alleged to have
been taken, or omitted to be taken or alleged to be omitted to be taken, in
such capacity.

 

(b)                                 The
indemnification provided by this Section 2 shall be from and against
Expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with
such Proceeding, but shall only be provided if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal
Proceeding, had no reasonable cause to believe Indemnitee’s conduct was
unlawful.

 

(c)                                  Notwithstanding
the foregoing provisions of this Section 2, in the case of any Proceeding
by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that Indemnitee is or was a director or officer of the
Corporation, or is or was serving at the Corporation’s request as a director,
officer, employee or agent of any Other Enterprise, no indemnification shall be
made in respect of any claim, issue or matter as to which Indemnitee shall have
been adjudged to be liable to the Corporation unless, and only to the extent
that, the Delaware Court of Chancery or the court in which such Proceeding was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such Expenses which the
Delaware Court of Chancery or such other court shall deem proper.

 

(d)                                 The
termination of any Proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal Proceeding, had reasonable
cause to believe that Indemnitee’s conduct was unlawful.

 

Section 3.                                            Successful
Defense; Partial Indemnification. To the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding referred to
in Section 2 hereof or in defense of any claim, issue or matter therein,
Indemnitee shall be indemnified against Expenses actually and reasonably
incurred in connection therewith.  For
purposes of this Agreement and without limiting the foregoing, if any
Proceeding is disposed of, on the merits or otherwise (including a disposition
without prejudice), without (i) the disposition being adverse to
Indemnitee, (ii) an adjudication that Indemnitee was liable to the
Corporation, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an
adjudication that Indemnitee did not act in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Corporation, and (v) with respect to any criminal Proceeding, an 

 

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adjudication that Indemnitee had reasonable cause to believe Indemnitee’s
conduct was unlawful, Indemnitee shall be considered for the purposes hereof to
have been wholly successful with respect thereto.  

 

If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Corporation for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement actually and reasonably incurred
by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding, or
in defense of any claim, issue or matter therein, and any appeal therefrom but
not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, judgments, fines or
amounts paid in settlement to which Indemnitee is entitled.  Any necessary determination regarding
allocation or apportionment of Expenses between successful and unsuccessful
claims, issues or matters shall be made by the person, persons or entity empowered
or selected under Section 4(a) to determine whether Indemnitee is
entitled to indemnification.

 

Section 4.                                            Determination
That Indemnification Is Proper.

 

(a)                                  Any
indemnification hereunder shall (unless otherwise ordered by a court) be made
by the Corporation unless a determination is made that indemnification of such
person is not proper in the circumstances because he or she has not met the
applicable standard of conduct set forth in Section 2(b) hereof. Any
such determination shall be made (i) by a majority vote of the directors
who are not parties to the Proceeding in question (“disinterested directors”),
even if less than a quorum, (ii) by a majority vote of a committee of
disinterested directors designated by majority vote of disinterested directors,
even if less than a quorum, (iii) by a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote on the matter,
voting as a single class, which quorum shall consist of stockholders who are
not at that time parties to the Proceeding in question, (iv) by
Independent Counsel, or (v) by a court of competent jurisdiction; provided, however, that
following a Change of Control of the Corporation, any determinations, whether
arising out of acts, omissions or events occurring prior to or after the Change
of Control of the Corporation, shall be made by Independent Counsel selected in
the manner described in Section 4(b). 
Such Independent Counsel shall determine as promptly as practicable
whether and to what extent Indemnitee would be permitted to be indemnified
under applicable law and shall render a written opinion to the Corporation and
to Indemnitee to such effect.

 

(b)                                 If
the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 4(a) hereof, the Independent
Counsel shall be selected as provided in this Section 4(b).  The Independent Counsel shall be selected by
the Board of Directors.  Indemnitee may,
within ten (10) days after such written notice of selection shall have
been given, deliver to the Corporation, as the case may be, a written objection
to such selection; provided, however, that such objection may be asserted only
on the ground that the Independent Counsel so selected does not meet the
requirements of “Independent Counsel” as defined in Section 1 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion.  Absent a proper
and timely objection, the person so selected shall act as Independent Counsel.  If a written objection is made in proper
form, the Independent Counsel selected may not serve as Independent Counsel
unless and until such objection is withdrawn or a court has determined that
such objection is without merit.  If,
within twenty (20) days after

 

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submission by Indemnitee of a written request for indemnification
pursuant to Section 6(a) hereof, no Independent Counsel shall have
been selected and not objected to, either the Corporation or Indemnitee may
petition the Court of Chancery of the State of Delaware or other court of
competent jurisdiction for resolution of any objection which shall have been
made by the Indemnitee to the Corporation’s selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person selected by the
court or by such other person as the court shall designate, and the person with
respect to whom all objections are so resolved or the person so appointed shall
act as Independent Counsel under Section 4(a) hereof.  The Corporation shall pay any and all
reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with acting pursuant to Section 4(a) hereof,
and the Corporation shall pay all reasonable fees and expenses incident to the
procedures of this Section 4(b) regardless of the manner in which
such Independent Counsel was selected or appointed.

 

Section 5.                                            Advance
Payment of Expenses; Notification and Defense of Claim.

 

(a)                                  In
the event that the Corporation does not assume the defense pursuant to Section 5(c) of
any Proceeding of which the Corporation receives notice under this Agreement,
any Expenses incurred by Indemnitee in defending a Proceeding, or in connection
with an enforcement action pursuant to Section 6(b), shall be paid by the
Corporation to Indemnitee in advance of the final disposition of such
Proceeding as soon as practicable but in any event no later than twenty (20)
days after receipt by the Corporation of (i) a statement or statements
from Indemnitee requesting such advance or advances from time to time, and (ii) an
undertaking by or on behalf of Indemnitee to repay such amount or amounts, only
if, and to the extent that, there is a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee is not entitled to be indemnified by the Corporation as authorized
by this Agreement or otherwise.  Such
undertaking shall be accepted without reference to the financial ability of
Indemnitee to make such repayment. Advances shall be unsecured and
interest-free.  Notwithstanding the
foregoing, the obligation of the Corporation to advance Expenses pursuant to
this Section 5, its Certificate of Incorporation, its Bylaws or otherwise,
shall be subject to the condition that, if, when and to the extent that the
Corporation determines that Indemnitee would not be permitted to be indemnified
under applicable law, the Corporation shall be reimbursed within sixty (60)
days of such determination, by Indemnitee (who hereby agrees to reimburse the
Corporation) for such amounts previously paid by the Corporation pursuant to
this Section 5; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee should be indemnified under applicable
law, any determination made by the Corporation that Indemnitee would not be
permitted to be indemnified under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Corporation for any advance
of Expenses until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted or lapsed).

 

(b)                                 Promptly
after receipt by Indemnitee of notice of the commencement of any Proceeding,
Indemnitee shall, if a claim thereof is to be made against the Corporation
hereunder, notify the Corporation of the commencement thereof.  The failure to promptly notify the Corporation
of the commencement of the Proceeding, or Indemnitee’s request for
indemnification, will not relieve the Corporation from any liability that it
may have to

 

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Indemnitee hereunder, except to the extent the Corporation is
prejudiced in its defense of such Proceeding as a result of such failure.

 

(c)                                  In
the event the Corporation shall be obligated to pay the Expenses of Indemnitee
with respect to a Proceeding as provided in this Agreement, its Certificate of
Incorporation, its Bylaws or otherwise, the Corporation, if appropriate, shall
be entitled to assume the defense of such Proceeding, with counsel reasonably
acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of
its election to do so.  After delivery of
such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Corporation, the Corporation will not be liable to Indemnitee
under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same Proceeding, provided that (i) Indemnitee
shall have the right to employ Indemnitee’s own counsel in such Proceeding at
Indemnitee’s expense and (ii) if (1) the employment of counsel by
Indemnitee has been previously authorized in writing by the Corporation, (2) counsel
to the Corporation or Indemnitee shall have reasonably concluded that there may
be a conflict of interest or position, or reasonably believes that a conflict
is likely to arise, on any significant issue between the Corporation and
Indemnitee in the conduct of any such defense, (3) after a Change of
Control, the employment of counsel by Indemnitee has been approved by the
Independent Counsel or (4) the Corporation shall not, in fact, have
employed counsel to assume the defense of such Proceeding, then the fees and
expenses of Indemnitee’s counsel shall be at the expense of the Corporation,
except as otherwise provided by this Agreement. 
The Corporation shall not be entitled, without the consent of
Indemnitee, to assume the defense of any claim brought by or in the right of
the Corporation or as to which counsel for the Corporation or Indemnitee shall
have reasonably made the conclusion provided for in clause (2) of the
proviso in the immediately preceding sentence.

 

(d)                                 Notwithstanding
any other provision of this Agreement to the contrary, to the extent that
Indemnitee is, by reason of Indemnitee’s corporate status with respect to the
Corporation or any Other Enterprise which Indemnitee is or was serving or has
agreed to serve at the request of the Corporation, a witness or otherwise
participates in any Proceeding at a time when Indemnitee is not a party in the
Proceeding, the Corporation shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in
connection therewith.

 

Section 6.                                            Procedure
for Indemnification.

 

(a)                                  To
obtain indemnification (other than as provided otherwise herein) under this
Agreement, Indemnitee shall promptly submit to the Corporation a written
request, including therein or therewith such documentation and information as
is reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification.  The Corporation shall, promptly upon receipt
of such a request for indemnification, advise the Board of Directors in writing
that Indemnitee has requested indemnification.

 

(b)                                 The
determination whether to grant Indemnitee’s indemnification request (whether
made by the Board of Directors or one of its committees, Independent Counsel,
or the Corporation’s stockholders) shall be made promptly, and in any event
within sixty (60) days

 

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following
receipt of a request for indemnification pursuant to Section 6(a). The
right to indemnification as granted by Section 2 of this Agreement shall
be enforceable by Indemnitee in any court of competent jurisdiction if the
Corporation denies such request, in whole or in part, or fails to respond
within such sixty-day (60) period.  It
shall be a defense to any such action (other than an action brought to enforce
a claim for the advance of Expenses under Section 5 hereof where the
required undertaking, if any, has been received by the Corporation) that
Indemnitee has not met the standard of conduct set forth in Section 2
hereof, but the burden of proving such defense by clear and convincing evidence
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors or one of its committees, its Independent Counsel, and
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct set forth in Section 2
hereof, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors or one of its committees, its
Independent Counsel, and its stockholders) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.  The Indemnitee’s Expenses
incurred in connection with successfully establishing Indemnitee’s right to
indemnification, in whole or in part, in any such Proceeding or otherwise shall
also be indemnified by the Corporation.

 

(c)                                  The Indemnitee
shall be presumed to be entitled to indemnification under this Agreement upon
submission of a request for indemnification pursuant to this Section 6,
and the Corporation shall have the burden of proof in overcoming that
presumption in reaching a determination contrary to that presumption.  Such presumption shall be used as a basis for
a determination of entitlement to indemnification unless the Corporation
overcomes such presumption by clear and convincing evidence.

 

(d)                                 The knowledge
and/or actions, or failure to act, of any director, officer, agent or employee
of the Corporation shall not be imputed to Indemnitee for purposes of
determining the right to indemnification under this Agreement.

 

Section 7.                                            Insurance and
Subrogation.

 

(a)                                  The Corporation
represents that it currently has in effect the following policy or policies of
director and officer liability insurance (the “Insurance Policies”) which names
or covers Indemnitee as an insured:

 

	
  Insurer

  	
   

  	
  Policy No.

  	
   

  	
  Amount

  	
   

  	
  Deductible

  	
   

  
	
  [Polices listed]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(b)                                 So long as
Indemnitee shall continue to serve as a director or officer of the Corporation,
or shall continue at the request of the Corporation to serve as a director or
officer, employee or agent of any Other Enterprise, and thereafter so long as
Indemnitee shall be subject to any possible claim or is a party or is
threatened to be made a party to any Proceeding, by reason of the fact that
Indemnitee is or was a director or officer of the Corporation, or is or was 

 

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serving
in any of said other capacities at the request of the Corporation, the
Corporation shall be required to maintain the Insurance Policies in effect or
to obtain policies of directors’ and officers’ liability insurance from
established and reputable insurers with coverage in at least the amount or
amounts as prescribed by the Insurance Policies and which provides the
Indemnitee with substantially the same rights and benefits as the Insurance
Policies, and which coverage, rights and benefits shall, in any event, be as favorable
to Indemnitee as are accorded to the most favorably insured of the Corporation’s
directors or officers, as the case may be (“Comparable D&O Insurance”)
unless, in the reasonable business judgment of the Board of Directors of the
Corporation as it may exist from time to time, either (i) the premium cost
for such Insurance Policies or Comparable D&O Insurance is disproportionate
to the amount of coverage provided, or (ii) the coverage provided by such
Insurance Policies or Comparable D&O Insurance is so limited by exclusions
that there is insufficient benefit provided by such director and officer
liability insurance; provided, however, that in the event that the Board of
Directors makes such a determination, the Corporation shall provide notice to
Indemnitee no less than ninety (90) days prior to the lapse or termination of
coverage under the Insurance Policies or Comparable D&O Insurance.

 

(c)                                  If, at the time
of the receipt of a notice of a claim pursuant to the terms hereof, the
Corporation has director and officer liability insurance in effect, the
Corporation shall give prompt notice of the commencement of such claim, and any
Proceeding in which such claim is asserted, to the insurers in accordance with
the procedures set forth in the respective policies.  The Corporation shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such claim or Proceeding in
accordance with the terms of such policies. 
The failure or refusal of any such insurer to pay any such amount shall
not affect or impair the obligations of the Corporation under this Agreement.

 

(d)                                 In the event of
any payment by the Corporation under this Agreement, the Corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee with respect to any insurance policy, who shall execute all papers
required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Corporation to bring
suit to enforce such rights in accordance with the terms of such insurance
policy.  The Corporation shall pay or
reimburse all Expenses actually and reasonably incurred by Indemnitee in
connection with such subrogation.

 

(e)                                  The Corporation
shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable hereunder (including, but not limited to, Expenses,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) if and to the extent that Indemnitee has otherwise actually
received such payment under the Corporation’s Certificate of Incorporation or
Bylaws, or any insurance policy, contract, agreement or otherwise.

 

(f)                                    The Corporation’s
obligation to indemnify or advance Expenses hereunder to Indemnitee who is or
was serving at the request of the Corporation as a director, officer, employee
or agent of any Other Enterprise shall be reduced by any amount Indemnitee has
actually received as indemnification or advancement of Expenses from such Other
Enterprise.

 

10

 

Section 8.                                            Limitation on
Indemnification. 
Notwithstanding any other provision herein to the contrary, the
Corporation shall not be obligated pursuant to this Agreement:

 

(a)                                  Claims
Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to a Proceeding (or part thereof) initiated by
Indemnitee, except with respect to a Proceeding brought to establish or enforce
a right to indemnification (which shall be governed by the provisions of
Sections 6(b) and 8(b) of this Agreement), unless such Proceeding (or
part thereof) was authorized or consented to by the Board of Directors of the
Corporation or the Proceeding was commenced following a Change of Control.

 

(b)                                 Action for
Indemnification. To indemnify Indemnitee for any Expenses incurred
by Indemnitee with respect to any Proceeding instituted by Indemnitee to
enforce or interpret this Agreement, unless Indemnitee is successful in
establishing Indemnitee’s right to indemnification in such Proceeding, in whole
or in part, or unless and to the extent that the court in such Proceeding shall
determine that, despite Indemnitee’s failure to establish his or her right to
indemnification, Indemnitee is entitled to indemnity for such Expenses;
provided, however, that nothing in this Section 8(b) is intended to
limit the Corporation’s obligation with respect to the advancement of Expenses
to Indemnitee in connection with any such Proceeding instituted by Indemnitee
to enforce or interpret this Agreement, as provided in Section 5 hereof.

 

(c)                                  Certain
Statutory Violations. To indemnify Indemnitee on account of any
Proceeding with respect to which final judgment is rendered against Indemnitee
for (i) payment or an accounting of profits arising from the purchase or
sale by Indemnitee of securities in violation of Section 16(b) of the
Exchange Act or any similar successor statute, or (ii) any reimbursement
of the Corporation by the Indemnitee of any bonus or other incentive-based or
equity-based compensation or of any profits realized by the Indemnitee from the
sale of securities of the Corporation, as required in each case under the
Exchange Act (including any such reimbursements that arise from an accounting
restatement of the Corporation pursuant to Section 304 of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the
Corporation of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 306 of the Sarbanes-Oxley Act).

 

(d)                                 Non-compete and
Non-disclosure.  To
indemnify Indemnitee in connection with Proceedings or claims involving the
enforcement of non-compete and/or non-disclosure agreements or the non-compete
and/or non-disclosure provisions of employment, consulting or similar
agreements the Indemnitee may be a party to with the Corporation, or any
subsidiary of the Corporation or any Other Enterprise.

 

Section 9.                                            Mutual
Acknowledgement.  Both the
Corporation and the Indemnitee acknowledge that in certain instances, federal
law or applicable public policy may prohibit the Corporation from indemnifying
its directors, officers, employees, agents or fiduciaries under this Agreement
or otherwise.  The Indemnitee understands
and acknowledges that the Corporation has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Corporation’s right under public policy to indemnify the
Indemnitee.

 

11

 

Section 10.                                      Certain
Settlement Provisions.  The
Corporation shall have no obligation to indemnify Indemnitee under this
Agreement for amounts paid in settlement of any Proceeding without the
Corporation’s prior written consent, which shall not be unreasonably withheld,
conditioned or delayed; provided, however, that if a Change of Control has occurred, the
Corporation shall be liable for indemnification of Indemnitee for amounts paid
in settlement if the Independent Counsel has approved the settlement.  The Corporation shall not settle any
Proceeding in any manner that would impose any fine or other obligation on
Indemnitee without Indemnitee’s prior written consent, which shall not be
unreasonably withheld, conditioned or delayed.

 

Section 11.                                      Savings Clause. If any
provision or provisions of this Agreement shall be invalidated on any ground by
any court of competent jurisdiction, then the Corporation shall nevertheless
indemnify Indemnitee as to Expenses, judgments, fines and amounts paid in
settlement with respect to any Proceeding, including an action by or in the
right of the Corporation, to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated and to the full
extent permitted by applicable law.

 

Section 12.                                      Contribution.  In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for herein
is held by a court of competent jurisdiction to be unavailable to Indemnitee in
whole or in part, it is agreed that, in such event, the Corporation shall, to
the fullest extent permitted by law, contribute to the payment of Indemnitee’s
Expenses, judgments, fines and amounts paid in settlement with respect to any
Proceeding, or any claims, issues or matters in such Proceeding, in an amount
that is just and equitable in the circumstances, taking into account, among
other things, contributions by other directors and officers of the Corporation
or others pursuant to indemnification agreements or otherwise; provided, that,
without limiting the generality of the foregoing, such contribution shall not
be required where such holding by the court is due to (i) the failure of
Indemnitee to meet the standard of conduct set forth in Section 2 hereof,
or (ii) any limitation on indemnification set forth in Section 7(e),
8, 9 or 10 hereof.

 

Section 13.                                      Form and
Delivery of Communications.  All notices and other communications given or
made pursuant to this Agreement shall be in writing and shall be deemed
effectively given:  (i) upon
personal delivery to the party to be notified, (ii) if sent via facsimile,
upon confirmation of facsimile transfer or, if sent via electronic mail, upon
confirmation of delivery when directed to the relevant electronic mail address,
if sent during normal business hours of the recipient, or if not sent during
normal business hours of the recipient, then on the recipient’s next business
day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt.  All communications shall be sent to the
address, facsimile number or electronic mail address set forth below, or to
such other address, facsimile number or electronic mail address as may have
been furnished hereafter to Indemnitee by the Corporation or to the Corporation
by Indemnitee, as the case may be.

 

12

 

If to the Corporation:

 

Attn:  General
Counsel (legal notice)

Facsimile:  (913)
498-3472

Electronic
Mail Address:

 

If
to Indemnitee:

 

 

Section 14.                                      Nonexclusivity.  The provisions for indemnification,
advancement of Expenses and contribution set forth in this Agreement shall not
be deemed exclusive of any other rights which Indemnitee may have under any
provision of law, the Corporation’s Certificate of Incorporation or Bylaws, in
any court in which a Proceeding is brought, the vote of the Corporation’s
stockholders or disinterested directors, other agreements or otherwise, and
Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting
as a director or officer of the Corporation, or ceased serving at the
Corporation’s request as a director, officer, employee or agent of any Other
Enterprise, and shall inure to the benefit of the heirs, executors,
administrators and legal representatives of Indemnitee.  However, no amendment or alteration of the
Corporation’s Certificate of Incorporation or Bylaws or any other agreement
shall adversely affect the rights provided to Indemnitee under this Agreement.

 

Section 15.                                      Enforcement.  The Corporation shall be precluded from
asserting in any judicial Proceeding that the procedures and presumptions of
this Agreement are not valid, binding and enforceable.  The Corporation agrees that its obligations
set forth in this Agreement are unique and special, and that failure of the
Corporation to comply with the provisions of this Agreement will cause
irreparable and irremediable injury to Indemnitee, for which a remedy at law
will be inadequate.  As a result, in
addition to any other right or remedy Indemnitee may have at law or in equity
with respect to breach of this Agreement, Indemnitee shall be entitled to
injunctive or mandatory relief directing specific performance by the
Corporation of its obligations under this Agreement.

 

Section 16.                                      Interpretation
of Agreement.  It is understood
that the parties hereto intend this Agreement to be interpreted and enforced so
as to provide indemnification of, and advancement of Expenses and contribution
to, Indemnitee to the fullest extent now or hereafter permitted by law.

 

Section 17.                                      Entire
Agreement.  This
Agreement and the documents expressly referred to herein constitute the entire
agreement between the parties hereto with respect to the matters covered
hereby, and any other prior or contemporaneous oral or written understandings
or agreements with respect to the matters covered hereby are expressly
superseded by this Agreement.

 

13

 

Section 18.                                      Modification
and Waiver.  No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties hereto.  No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.

 

Section 19.                                      Successor and
Assigns.  All of the terms and
provisions of this Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors, administrators and legal
representatives.  The Corporation shall
require and cause any direct or indirect successor (whether by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Corporation, by written agreement in form and substance
reasonably satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform if no such succession had taken place.  This Agreement shall continue in effect
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent of fiduciary (as applicable) of the Corporation or of any Other
Enterprise.

 

Section 20.                                      Service of
Process and Venue.  For
purposes of any Proceedings to enforce this Agreement, the Corporation and
Indemnitee hereby irrevocably and unconditionally (i) agree that any
Proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the “Delaware Court”), and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive
jurisdiction of the Delaware Court for purposes of any Proceeding arising out
of or in connection with this Agreement, (iii) irrevocably appoint, to the
extent such party is not otherwise subject to service of process in the State
of Delaware, CT Corporation as its agent in the State of Delaware as such party’s
agent for acceptance of legal process in connection with any such Proceeding
against such party with the same legal force and validity as if served upon
such party personally within the State of Delaware, (iv) waive any
objection to the laying of venue of any such Proceeding in the Delaware Court,
and (v) waive, and agree not to plead or to make, any claim that any such
Proceeding brought in the Delaware Court has been brought in an improper or
inconvenient forum.

 

Section 21.                                      Governing Law.  This Agreement shall be governed exclusively
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.  If a court of competent
jurisdiction shall make a final determination that the provisions of the law of
any state other than Delaware govern indemnification of, or advancement of
Expenses or contribution to, its officers and directors by the Corporation,
then the indemnification, advancement of Expenses and contribution provided
under this Agreement shall in all instances be enforceable to the fullest
extent permitted under such law, notwithstanding any provision of this
Agreement to the contrary.

 

Section 22.                                      Employment
Rights. Nothing in this Agreement is intended to create in Indemnitee any
right to employment or continued employment.

 

14

 

Section 23.                                      Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one
and the same instrument, notwithstanding that both parties are not signatories
to the original or same counterpart.

 

Section 24.                                      Headings. The section
and subsection headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

Section 25.                                      Section 409A. It is
intended that any indemnification payment or advancement of Expenses made
hereunder shall be exempt from Section 409A of the Internal Revenue Code
of 1986, as amended, and the guidance issued thereunder (“Section 409A”)
pursuant to Treasury Regulation Section 1.409A-1(b)(10).  Notwithstanding the foregoing, if any
indemnification payment or advancement of Expenses made hereunder shall be
determined to be “nonqualified deferred compensation” within the meaning of Section 409A,
then (i) the amount of the indemnification payment or advancement of
Expenses during one taxable year shall not affect the amount of the
indemnification payments or advancement of Expenses during any other taxable
year, (ii) the indemnification payments or advancement of Expenses must be
made on or before the last day of the Indemnitee’s taxable year following the
year in which the expense was incurred, and (iii) the right to
indemnification payments or advancement of Expenses hereunder is not subject to
liquidation or exchange for another benefit.

 

IN WITNESS WHEREOF, this
Agreement has been duly executed and delivered by the parties hereto to be
effective as of the date first above written.

 

 

	
   

  	
  NIC
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  

 

15Exhibit 10.2

 

NIC INC.
2006 AMENDED AND RESTATED

STOCK
OPTION AND INCENTIVE PLAN

 

As
Amended May 5, 2009

 

ARTICLE I. PURPOSE.

 

A.            The purpose of the Plan is to provide a means by which
selected Employees, Directors and Consultants of the Company, and its Affiliates,
if any, may be given an opportunity to benefit from increases in value of the
Common Stock of the Company through the grant of Options, Restricted Stock
Awards or both.

 

B.            The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or Consultants to the
Company or its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.

 

C.            All Options granted under the Plan shall be separately
designated as Incentive Stock Options or Non-Qualified Stock Options at the
time of grant, and in such form as issued pursuant to Article VI, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option or granted pursuant to a Restricted Stock
Award, which shall also be in such form as issued pursuant to Article VIII.

 

D.            The Plan is a 2006 amendment and restatement of the
National Information Consortium, Inc. 1998 Stock Option Plan, as adopted
effective May 5, 1998 and amended November 3, 1998 and May 4,
1999, revised as of August 31, 1999 and amended and restated as of May 4,
2004. Any option granted under the National Information Consortium, Inc.
1998 Stock Option Plan prior to the Plan’s effective date, as provided in Article XV,
shall be subject to the terms of the National Information Consortium, Inc.
1998 Stock Option Plan as they existed immediately prior to that effective
date.

 

ARTICLE II. DEFINITIONS.

 

“Act” means the
Securities Act of 1933, as amended.

 

“Affiliate” means any
parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively,
of the Code.

 

“Award” means either an
Option or a Restricted Stock Award.

 

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

 

“Code” means the Internal
Revenue Code of 1986, as amended, and any Internal Revenue Code adopted in the
future to replace the Internal Revenue Code of 1986.

 

“Committee” means the
Committee of Outside Directors appointed by the Board in accordance with
subsection C of Article III to administer the Plan. For any purposes under
this Plan, the Committee may be the Compensation Committee of the Company’s
Board.

 

“Common Stock” means
shares of the Company’s common stock, no par value.

 

 

“Company” means NIC Inc.,
a Colorado corporation.

 

“Consultant” means any
person, including an advisor, engaged by the Company or an Affiliate to render
consulting services as an independent contractor and who is compensated for
such services, provided that the term “Consultant” shall not include Directors
who are paid only a director’s fee by the Company or who are not compensated by
the Company for their services as Directors.

 

“Continuous Status as an
Employee, Director or Consultant” means that the provision of services to the
Company or an Affiliate in any capacity of Employee, Director or Consultant, is
not interrupted or terminated. Continuous Status as an Employee, Director or
Consultant shall not be considered interrupted in the case of (i) any
approved leave of absence, (ii) transfers between locations of the Company
or among the Company, any Affiliate, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as
the person remains in the service of the Company, Affiliate or successor in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Option Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave approved by the Company;
provided, however, that any such authorized leave of absence shall be treated
as Continuous Status as an Employee, Director or Consultant for the purposes of
vesting only to the extent as may be provided in the Company’s leave policy.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. The Board, in its sole discretion, shall in all cases
determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted or terminated.

 

“Covered Employee” means
any person who, on the last day of the taxable year, is the chief executive
officer (or is acting in such capacity) or is among the four most highly
compensated officers (other than the chief executive officer) of the Company
for whom total compensation is required to be reported to stockholders under
the Exchange Act, as determined for purposes of Section 162(m) of the
Code.

 

“Director” means a member
of the Board or of the board of directors of an Affiliate.

 

“Employee” means any
person, including Officers and Directors, employed by the Company or any
Affiliate of the Company as determined under the rules contained in Code Section 3401.
Neither service as a Director nor payment of a director’s fee by the Company
shall be sufficient by itself to constitute “employment” by the Company.

 

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

 

“Fair Market Value”
means, as of any date, the value of the Common Stock of the Company determined
as follows:

 

(i)            If the Common Stock is readily tradable
on an established securities market, the fair market value of the Common Stock
on the date of grant means the value determined based upon the last sale before
or the first sale after the grant, the closing price on the trading day before
or the trading day of the grant of the Award, or any other reasonable basis
using actual transactions in the Common Stock as reported by such market and
consistently applied.

 

(ii)           If the Common Stock is not readily
tradable on an established securities market, the fair market value of the
Common Stock on the date of grant means the value determined by a valuation of
the Common Stock determined by an independent appraisal that meets the
requirements of Section 

 

 

401(a)(28)(C) of the
Code and the regulations thereunder as of a date that is no more than 12 months
before the relevant Option grant date.

 

“Incentive Stock Option”
means an Option intended to qualify as an incentive stock option (as set forth
in the Option Agreement) and that qualifies as an Incentive Stock Option within
the meaning of Section 422 of the Code and the regulations promulgated
thereunder.

 

“Non-Qualified Stock
Option” means an Option not intended to qualify as an Incentive Stock Option
(as set forth in the Option Agreement) or that does not qualify as an Incentive
Stock Option.

 

“Officer” means a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

 

“Option” means a stock
option granted pursuant to the Plan.

 

“Option Agreement” means
a written agreement between the Company and a Recipient evidencing the terms
and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan.

 

“Outside Director” means
a Director who (i) is not a current employee of the Company or an “affiliated
corporation” (within the meaning of Treasury regulations promulgated under Section 162(m) of
the Code), (ii) is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits
under a tax qualified pension plan) during the taxable year, (iii) has not
been an officer of the Company or an “affiliated corporation” at any time, (iv) is
not currently receiving direct or indirect remuneration (including any payment
in exchange for goods or services) from the Company or an “affiliated
corporation” in any capacity other than as a Director, (v) is otherwise
considered an “outside director” for purposes of Section 162(m) of
the Code, a “non-employee director” for purposes of Rule 16b-3 under the
Exchange Act and an “independent director” for purposes of Rule 4350 of
the National Association of Securities Dealers, Inc.

 

“Plan” means this NIC
Inc. 2006 Amended and Restated Stock Option and Incentive Plan.

 

“Purchase Price” is
defined in Subsection C of Article VI.

 

“Recipient” means an
Employee, Director or Consultant, or their transferees, who holds an
outstanding Option or Restricted Stock Award.

 

“Restricted Stock” means
Common Stock awarded to an Employee pursuant to Article VIII that is
subject to certain restrictions and a substantial risk of forfeiture.

 

“Restricted Stock
Agreement” means a written agreement between the Company and a Recipient
evidencing the terms, conditions and restrictions of an individual Restricted
Stock Award. Each Restricted Stock Agreement shall be subject to the terms and
conditions of the Plan.

 

“Rule 16b-3” means Rule 16b-3
of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion
is being exercised with respect to the Plan.

 

ARTICLE III.
ADMINISTRATION.

 

A.            The Plan shall be administered by the Board unless and
until the Board delegates administration to the Committee, as provided in
subsection C of this Article III.

 

 

B.            The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

 

(i)            To determine, in its sole
discretion, from time to time which of the persons eligible under the Plan
shall be granted an Award; when and how each Award shall be granted; whether an
Option granted will be an Incentive Stock Option or a Non-Qualified Stock
Option, or a combination of the foregoing; the provisions of each Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to an Award; the number of shares with
respect to which an Award shall be granted to each such person; and all other
terms, conditions and restrictions applicable to each such Award or shares acquired
upon exercise of an Option not inconsistent with the terms of the Plan.

 

(ii)           To approve one or more forms of
Option Agreement and Restricted Stock Agreement.

 

(iii)          To construe and interpret, in its sole
discretion, the Plan and Awards granted under it, and to establish, amend and
revoke rules and regulations for its administration. The Board, in the
exercise of this power, may correct any defect, omission or inconsistency in
the Plan or in any Option Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

 

(iv)          To amend, modify or otherwise change
in any manner the Plan or an Award as provided in Article XIII and to
suspend or terminate the Plan as provided in Article XIV.

 

(v)           Generally, to exercise such powers
and to perform such acts as the Board deems necessary or expedient to promote
the best interests of the Company that are not in conflict with the provisions
of the Plan.

 

All decisions,
determinations and interpretations of the Board shall be final, binding and
conclusive on any Recipient and any other person with an interest in the Plan
or in an Award and on any Affiliate.

 

C.            The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) of its members, all of the
members of which Committee shall be Outside Directors. The Committee may be the
Board’s Compensation Committee. Furthermore, notwithstanding anything in this Article III
to the contrary, the Board shall delegate administration of the Plan to the
Committee for any grant of an Award to an eligible person who is a Covered
Employee or who is expected to be a Covered Employee at the time of recognition
of income resulting from such Award with respect to either of whom the Company
wishes to avoid the application of Section 162(m) of the Code.

 

Notwithstanding anything
in this Article III to the contrary, at any time the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Awards to eligible persons who (i) are not then subject
to Section 16 of the Exchange Act and (ii) are either (A) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Award, or (B) not persons
with respect to whom the Company wishes to avoid the application of Section 162(m) of
the Code.

 

In the event that any
administration of the Plan is delegated to the Committee under this Article III,
the Committee shall have, during such delegation and in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
references in this Plan to the Board shall thereafter be to the committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at 

 

 

any time and, upon
abolition administration of the Plan shall revert automatically, without any
further action on the Board’s part, to the Board.

 

D.            Notwithstanding anything in this Article III to the
contrary, at any time the Board may also delegate to any proper Officer the
authority to grant Awards, without further approval of the Board, to eligible
persons who (i) are not then subject to Section 16 of the Exchange
Act and (ii) are either (A) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Award, or (B) not persons with respect to whom the Company
wishes to avoid the application of Section 162(m) of the Code;
provided, however, that (i) the exercise price per share of each Option
Award shall be equal to the Fair Market Value of such stock at the date of
grant, and (ii) each Option Award shall be subject to the terms and
conditions of the standard form of Option Agreement approved by the Board and
shall conform to the provisions of the Plan and such other guidelines as shall
be established from time to time by the Board.

 

E.             No member of the Board or of any committee constituted
under this Article III or any Officer acting pursuant to this Article shall
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or any Award.

 

ARTICLE IV. SHARES
SUBJECT TO THE PLAN.

 

A.            Subject to the provisions of Article XII relating to
adjustments upon changes in stock, the amount of stock that may be issued
pursuant to Awards shall not exceed in the aggregate fourteen million two
hundred eighty-six thousand seven hundred fifty-four (14,286,754) shares of the
Common Stock. If any Award shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the shares not
acquired underlying such Award shall revert to and again become available for
issuance under the Plan.

 

B.            The Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.

 

ARTICLE V. ELIGIBILITY.

 

A.            Incentive Stock Options may be granted only to Employees.
Non-Qualified Stock Options and Restricted Stock may be granted only to
Employees, Directors or Consultants.

 

B.            No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock representing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, or of any of its Affiliates (a “Ten Percent Stockholder”), unless
the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of such stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant.

 

C.            To the extent that the aggregate Fair Market Value
(determined at the time of grant) of stock with respect to which Incentive
Stock Options are exercisable for the first time by any Recipient during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Non-Qualified Stock Options.

 

D.            Subject to the provisions of Article XII relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Awards covering more than two hundred thousand (200,000) shares of the Common
Stock in any calendar year.

 

 

ARTICLE VI. TERMS OF
OPTIONS.

 

Each Option shall be
evidenced by an Option Agreement in such form and shall contain such terms and
conditions as the Board shall deem appropriate. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Option Agreement or by communicating with the Company in such
manner as the Company may authorize. The provisions of separate Options need
not be identical, but each Option shall include (through incorporation of
provisions hereof or as specifically set forth in the Option Agreement or
otherwise) the substance of each of the following provisions:

 

A.            Term. No Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date it was granted.
However, in the case of an Incentive Stock Option granted to a Recipient who,
at the time the Option is granted, is a Ten Percent Stockholder (as described
in subsection B of Article V), the term of the Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement.

 

B.            Price. The exercise price of each Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Non-Qualified
Stock Option) may be granted with an exercise price lower than that set forth
in the preceding sentence if such Option is granted pursuant to an assumption
or substitution for another option in a manner satisfying the provisions of Section 424(a) of
the Code.

 

C.            Consideration. The purchase price of stock acquired
pursuant to an Option (the “Purchase Price”) shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in cash or
check at the time the Option is exercised, or (ii) as set forth in the
Option Agreement (or in the case of a Non-Qualified Stock Option, as
subsequently determined in the discretion of the Board or the Committee) (A) in
shares of Common Stock duly endorsed over to the Company (which shares shall
have been owned by the Option holder for at least six (6) months prior to
such exercise and, for purposes of this paragraph, be valued at their Fair Market
Value as of the business day immediately preceding the date of such exercise), (B) by
written direction to an authorized broker to sell the shares of Common Stock
purchased pursuant to such exercise immediately for the account of the Option
holder and pay an appropriate portion of the proceeds thereof to the Company, (C) according
to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other Common Stock of the Company)
with the Recipient in any other form of legal consideration that may be
acceptable to the Board, or (D) any combination of such methods of payment
which together amount to the full exercise price of the shares purchased
pursuant to the exercise of the Option. For purposes of this subsection C, the
Purchase Price shall include the amount of the full exercise price of the
Common Stock shares purchased pursuant to the exercise of the Option plus the
minimum amount, if any, of any applicable taxes which the Company is required to
withhold.

 

In the case of any
deferred payment arrangement, interest shall be payable at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement. No deferred payment arrangement shall be permitted if the exercise
of an Option for such a deferred payment would be a violation of any law or
cause the Plan to be deemed a “nonqualified deferred compensation plan”, as
defined in Section 409A of the Code.

 

D.            Transferability. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the Recipient only by 

 

 

such Recipient or by his
attorney-in-fact or conservator, unless such exercise by the attorney-in-fact
or the conservator of the Recipient would disqualify the Incentive Stock Option
as such. Unless the Board otherwise specifies, a Non-Qualified Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Recipient only
by such person or by his attorney-in-fact or conservator.

 

Notwithstanding the
foregoing, the Recipient may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Recipient, shall thereafter be entitled to exercise the Option.

 

E.             Vesting. The total number of shares of stock subject to
an Option may, but need not, be allotted in periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from time to
time during each of such installment periods, the Option may become exercisable
(“vest”) with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on
performance or other criteria) as the Board may deem appropriate. Unless
otherwise specified in an Option Agreement, the shares of stock underlying an
Option grant shall vest in four equal amounts: the first installment will be
first exercisable on the six (6)-month anniversary of the option grant date and
each succeeding installment will be first exercisable one (1) year from
the date that the immediately preceding installment became exercisable. Any
vesting schedule can be accelerated in the discretion of the Board, unless
otherwise specified in the Option Agreement.

 

F.             Termination of Employment or Relationship as a Director
or Consultant. In the event a Recipient’s Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Recipient’s death or
disability), the Recipient may exercise his or her Option (to the extent that
the Recipient was entitled to exercise it at the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3) months
after the termination of the Recipient’s Continuous Status as an Employee,
Director or Consultant (or, such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Recipient is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Recipient does not
exercise his or her Option within the time specified in the Option Agreement or
in this Plan, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan. The
above terms shall apply only if the specific Option grant is silent on the above
issues; however, a specific Option grant may provide for different terms in the
event a Recipient’s Continuous Status as an Employee, Director or Consultant
terminates (other than upon the Recipient’s death or disability).

 

G.            Disability of Recipient. In the event a Recipient’s
Continuous Status as an Employee, Director or Consultant terminates as a result
of the Recipient’s disability, as defined in Section 22(e)(3) of the
Code, the Recipient may exercise his or her Option (to the extent that the
Recipient was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve
(12) months following such termination (or, such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, at the date of termination
of Continuous Status, the Recipient is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Recipient does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan. The above terms shall apply only 

 

 

if the specific Option
grant is silent on the above issues; however, a specific Option grant may
provide for different terms in the event a Recipient’s Continuous Status as an
Employee, Director or Consultant terminates as a result of the Recipient’s
disability.

 

H.            Death of Recipient. In the event of the death of a
Recipient during, or within a period specified in the Option after the
termination of, the Recipient’s Continuous Status as an Employee, Director or
Consultant, the Option may be exercised (to the extent the Recipient was
entitled to exercise the Option at the date of death) by the Recipient’s
estate, by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the Recipient’s
death pursuant to subsection D of Article VI, but only within the period
ending on the earlier of (i) the date twelve (12) months following the
date of death (or, such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, at the time of death, the Recipient was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan. The above terms shall apply only if the specific Option grant
is silent on the above issues; however, a specific Option grant may provide for
different terms in the event a Recipient’s Continuous Status as an Employee,
Director or Consultant terminates as a result of the Recipient’s death.

 

I.              Responsibility for Option Exercise. A Recipient is
responsible for taking any and all actions as may be required to exercise any
Option in a timely manner, and for properly executing any documents as may be
required for the exercise of an Option in accordance with such rules and
procedures as may be established from time to time under the Plan. By signing
or accepting an Option Agreement a Recipient (and any person to whom the Option
under that Option Agreement is transferred) acknowledges that information
regarding the procedures and requirements for the exercise of that Option is
available upon such Recipient’s or person’s request to the Board. The Company
shall have no duty or obligation to notify any Recipient of the expiration of
any Option.

 

ARTICLE VII. REPRICING,
CANCELLATION AND RE-GRANT OF OPTIONS.

 

The Board or the
Committee shall not effect at any time directly or indirectly the repricing of
any outstanding Options, including without limitation a repricing by the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different amount of shares of stock. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Non-Qualified Stock Option) may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of
the Code.

 

ARTICLE VIII. RESTRICTED
STOCK AWARDS

 

A.            The Board is authorized to make Awards of Restricted
Stock to any Recipient selected by the Board in such amounts and subject to
such terms and conditions as determined by the Board. All Awards of Restricted
Stock shall be evidenced by a Restricted Stock Agreement.

 

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

 

 

C.            All Awards of Restricted Stock shall be subject to a “substantial
risk of forfeiture” as defined by Section 409A-1(d) of the Code.
Except as otherwise determined by the Board at the time of the grant of the
Award or thereafter, upon termination of employment or service during the
applicable restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited; provided, however, that, the Board may (a) provide
in any Restricted Stock Award Agreement that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part in
the event of terminations resulting from specified causes, and (b) in
other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock.

 

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

 

ARTICLE IX. COVENANTS OF
THE COMPANY.

 

During the terms of the
Awards, the Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Awards.

 

ARTICLE X. USE OF
PROCEEDS FROM EXERCISE OF OPTIONS.

 

Proceeds from the
exercise of Options shall constitute general funds of the Company.

 

ARTICLE XI.
MISCELLANEOUS.

 

A.            Neither an Employee, Director or Consultant nor any
person to whom an Option may be transferred shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares
subject to such Award unless and until such person has satisfied all
requirements for exercise, which can include an early exercise, of the Option
pursuant to its terms, or until all restrictions on a Restricted Stock Award
have lapsed, and the Company has issued such shares.

 

B.            Nothing in the Plan or any instrument executed or Award
granted pursuant thereto shall confer upon any Employee, Director or Consultant
or other holder of Awards or Common Stock issued upon exercise of Options any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Director or Consultant) or shall affect the right of the Company or
any Affiliate to terminate the employment of any Employee with or without
cause, the right of the Company’s Board of Directors and/or the Company’s
stockholders to remove any Director pursuant to the terms of the Company’s
Articles of Incorporation and By- Laws and the provisions of Colorado Law, or
the right to terminate the relationship of any Consultant with the Company or
its Affiliates.

 

C.            If the Company or its Affiliates is required to withhold
any amounts by reason of federal, state or local tax laws, rules or
regulations, in respect of the issuance of Awards or shares of stock pursuant
to the Plan, the Company or such Affiliates shall be entitled to deduct and withhold
such amounts from any cash payments to be made to the Recipient. In any event,
such person shall promptly make available to the Company or such Affiliate,
when requested by the Company or such Affiliate, sufficient funds to meet the
requirements of such withholding, and the Company or such Affiliate may take
and authorize such steps as it may deem advisable in order to have such funds
made available to the Company or such Affiliate from any funds or property due
or to become due to such person.

 

 

D.            To the extent provided by the terms of an Option
Agreement, the person to whom an Option is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing
the Company to withhold shares from the shares of the stock otherwise issuable
to the Recipient as a result of the exercise or acquisition of stock underlying
the Option; or (iii) delivering to the Company unencumbered shares of the
Company’s stock owned by the person acquiring the stock. The Fair Market Value
of any shares of Common Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rules.

 

E.             The Company shall not be required to issue fractional
shares pursuant to this Plan and, accordingly, a Recipient may be awarded or
required to purchase only whole shares.

 

F.             The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Code or laws of the
United States, shall be governed by the laws of the State of Colorado and
construed accordingly, without reference to the conflict of laws principles.

 

G.            The receipt, transfer and exercise of any Award is
subject to taxation under Section 83 of the Code.

 

ARTICLE XII. ADJUSTMENTS
UPON CHANGES IN STOCK.

 

If any change is made in
the stock subject to the Plan, or subject to any Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan, and
the outstanding Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
transaction not involving the receipt of consideration by the Company.)

 

ARTICLE XIII. AMENDMENT
OF THE PLAN AND AWARDS.

 

A.            The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Article XII relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment, where the amendment will:

 

(i)            Increase the number of shares
reserved for Awards under the Plan;

 

(ii)           Modify the requirements as to
eligibility for participation in the Plan (to the extent such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code); or

 

(iii)          Modify the Plan in any other way if
such modification requires stockholder approval in order for the Plan to
satisfy the requirements of Section 422 of the Code.

 

B.            The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the 

 

 

requirements of Section 162(m) of
the Code and the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

 

C.            It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

 

D.            Rights and obligations of the Recipient under any Award
granted before amendment of the Plan shall not be materially impaired by any
amendment of the Plan except with the written consent of the Recipient, unless
such amendment is necessary to comply with any applicable law, regulation or rule as
determined in the sole discretion of the Board.

 

E.             The Board at any time, and from time to time, may amend,
modify, extend, cancel or renew any Award or waive any restrictions or
conditions applicable to any Award or any shares acquired upon the exercise
thereof and accelerate, continue, extend or defer the exercise time for any
Award or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following a Recipient’s termination of
Continuous Status as an Employee, Director or Consultant; provided, however,
that the rights and obligations under any Award shall not be materially
impaired by any such amendment except with the written consent of the
Recipient, unless such amendment is necessary to comply with any applicable
law, regulation or rule as determined in the sole discretion of the Board.

 

The Board may accelerate
the time at which an Option may first be exercised or the time during which an
Option or any part thereof will vest notwithstanding the provisions in the
Option Agreement stating the time at which it may first be exercised or the
time during which it will vest.

 

F.             The Board may amend the Plan to take into account
changes in law and tax and accounting rules, as well as other developments, and
to grant Awards that qualify for beneficial treatment under such rules without
stockholder approval.

 

ARTICLE XIV. TERMINATION
OR SUSPENSION OF THE PLAN.

 

A.            The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on December 31, 2015,
which shall be within ten (10) years from the date the Plan is adopted by
the Board or approved by the stockholders of the Company, whichever is earlier.
No Awards may be granted under the Plan while the Plan is suspended or after it
is terminated.

 

B.            Rights and obligations under any Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the written consent of the Recipient, unless such impairment
is necessary to qualify the Award as an Incentive Stock Option or to comply
with any applicable law, regulation or rule all as determined in the sole
discretion of the Board.

 

ARTICLE XV. EFFECTIVE
DATE OF PLAN.

 

The Plan shall become
effective as determined by the Board, but no Awards granted under the Plan
shall be exercised unless and until the Plan has been approved by the stockholders
of the Company, which approval shall be obtained within twelve (12) months
before or after the date when the Plan is adopted by the Board.

 

 

ARTICLE XVI. COMPLIANCE
WITH SECURITIES LAWS.

 

The grant of Awards and
the issuance of shares of Common Stock upon the exercise of Options shall be
subject to compliance with all applicable requirements of federal and state law
with respect to such securities. Options may not be exercised if the issuance
of shares of Common Stock upon exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations or the
requirements of any stock exchange or market system upon which the Common Stock
may then be listed. In addition, no Option may be exercised unless (A) a
registration statement under the Act shall at the time of exercise of the
Option be in effect with respect to the Common Stock shares to be issued upon
the exercise of that Option or (B) in the opinion of counsel to the
Company, the Common Stock shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Act. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
the Company’s counsel to be necessary to the lawful issuance and sale of any
Common Stock shares under the Plan shall relieve the Company of any liability
in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. As a condition of the
exercise of any Option, the Company may require the Recipient to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company. The Company
may, upon the advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

 

ARTICLE XVII. COMPLIANCE
WITH SECTION 409A.

 

To the extent that the
Board determines that any Award granted under the Plan is subject to Section 409A
of the Code, the Option Agreement or other agreement evidencing the Award will
incorporate the terms and conditions required by Section 409A of the Code.
To the extent applicable, the Plan and Award agreements will be interpreted in
accordance with Section 409A of the Code and Department of Treasury
regulations and other interpretive guidance issued thereunder, including
without limitation any such regulations or other guidance that may be issued
after the Plan’s effective date. Notwithstanding any provision of the Plan to
the contrary, in the event that following the Plan’s effective date the Board
determines that any Award may be subject to Section 409A of the Code and
related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Plan’s effective date), the Board may adopt
such amendment to the Plan and applicable Award agreements or adopt other
policies and procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Board determines are necessary or
appropriate to (a) exempt the Award from Section 409A of the Code
and/or preserve the intended tax treatment of the benefits provided with
respect to the Award, or (b) comply with the requirements of Section 409A
of the Code and related Department of Treasury guidance.

 

* * * * *

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