Document:

Employment Agreement dated August 3, 2004 - Robert J. Millstone

 Exhibit 10.27 
  
  
 

 
  
 August 3, 2004 
  
 Robert J. Millstone 
 160 South River Landing 
 Edgewater, MD 21037 
  
  
 Dear Rob: 
  
 Quality Distribution, Inc. (the “Company”) and you (the
“Employee”) hereby enter into this Agreement (“Agreement”) under the following terms and conditions: 
  

	1.	 	Employee will hold the position of Senior Vice President, General Counsel, and Secretary with an annual salary of $210,000.00 including benefits and perquisites that are consistent
with the Company’s senior level management. Employee’s base salary in effect from time to time shall be reviewed at least annually and may be increased (but not decreased) in the Company’s sole discretion. In the Employee’s
capacity as General Counsel, he will report to the Chief Executive Officer and Board of Directors of the Company. Employee’s duties shall be as determined from time to time by the Board of Directors and Chief Executive Officer and shall be
commensurate with the executive duties and authority of general counsels of publicly traded companies. 

  

	2.	 	Employee will devote substantially all of his business time to the Company. Employee may participate in civic, charitable and professional organizations that do not materially
interfere with his duties. Executive may serve on the board of directors of one non-competing for-profit business provided such service does not materially interfere with his duties. 

  

	3.	 	Beginning with calendar year 2005 Employee will be eligible to receive a bonus equal to 30% of Employee’s annual base salary conditioned upon the Company achieving its
Board-approved business plan. Additionally Employee may receive such bonus (or higher) based upon Employee’s extraordinary individual performance as determined by the Compensation Committee. 

  

	4.	 	In addition, Employee shall be entitled to receive his prorated target bonus for 2004 (if a 2004 bonus is paid to the senior executives of the Company generally).

  

	5.	 	Employee shall promptly relocate to the Tampa Florida area. In connection with such relocation, the Company will reimburse Employee’s documented, reasonable relocation expenses
plus an amount equal to the taxes paid by Employee as a result of such reimbursement. Relocation expenses shall include: (i) brokerage fees, transfer taxes, reasonable legal fees, and other expenses relating to the sale of Employee’s current
residence, (ii) moving of household goods and automobiles; (iii) up to $5,000 to relocate Employee’s boat to Tampa; (iv) reasonable legal fees, title, and other incidental fees and expenses relating to Employee’s purchase of a residence in
Florida (excluding purchase price, improvements, or mortgage points). 

  
  

 
  
 3802 Corporex Park Drive     ·     Tampa, FL
33619     ·     Phone 813-630-5826
    ·     Fax 813-630-4296 

	6.	 	The Company will also reimburse Employee for: (i) the reasonable cost of two house hunting trips for Employee and spouse to Tampa; (ii) reasonable temporary living expenses
including transportation from time to time back to Employee’s current residence as approved by the Chief Executive Officer for a period not to exceed six months from the Effective Date of this Agreement. 

  

	7.	 	Employee shall be entitled to 25 days of paid time off per year and shall be entitled to carryover up to ten days. Paid time off shall be prorated for 2004. Employee shall be
entitled to immediate participation in all current and future executive benefits, plans, programs, policies and perquisites on a basis no less favorable than any other executives of the Company at the Senior Vice President level. Business and
business-travel expenses shall be reimbursed in accordance with Company policy as applied to senior executive generally. In addition, the Company shall reimburse as incurred Employee’s expenses for bar membership fees and dues, bar preparation
courses (if any), continuing legal education, and other reasonable expenses of maintaining Employee’s status as an attorney. 

  

	8.	 	This Agreement will commence as of September 7, 2004 (the “Effective Date”) and continue until the second anniversary of such date. At least 90 days prior to such
anniversary either party may provide written notice of termination effective as of such anniversary. If no such timely notice of termination is provided, the term of this Agreement will automatically extend for additional one-year periods unless and
until either party provides written notice of termination pursuant to this section at least 90 days prior to the end of the then applicable term. If, at any point, the Company provides such notice, Employee shall be entitled to receive
Employee’s then current base salary and target bonus for one year after the end of the term and Employee shall be entitled during such time to the continuation of health, medical and other benefits, and any benefit continuation or conversion
rights provided under Company benefit plans. In addition, the options granted under Section 10 shall be governed in accordance with the “Quality Distribution, Inc. 2003 Stock Option Plan” (the “Option Plan”).

  

	9.	 	Notwithstanding anything else herein, the Company reserves the right to terminate Employee’s employment at any time with or without Cause (as defined below) and Employee
reserves the right to terminate Employee’s employment with or without Good Reason (as defined below), provided that if the Company terminates Employee’s employment without Cause or Employee terminates Employee’s employment with Good
Reason, Employee shall be entitled to receive Employee’s then current base salary and target bonus for one year, and a prorated portion of any bonus that has been earned by Employee as of the date of such termination, and Employee will be
entitled during such time to the continuation of health, medical, and other benefits, and any benefit continuation or conversion rights provided under Company benefit plans. If the Company terminates Employee’s employment for Cause or Employee
terminates Employee’s employment other than for Good Reason, Employee shall not be entitled to any further payments or benefits (except any accrued, but unpaid amounts due), effective immediately upon such termination. 

 

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	10.	 	The Company agrees to grant Employee options to acquire 100,000 shares of the Company’s common stock pursuant to the Option Plan, such grant to be effective as of the Effective
Date; provided that, in the event of a termination of this Agreement by the Company without Cause or by the Employee with Good Reason, which termination follows a change of control of the Company, the options shall continue to vest for 1 year
following such termination and be exercisable for 3 months thereafter. The exercise price of the option shares will be set at the closing price of the stock on the Effective Date. 

  

	11.	 	Employee agrees to be bound by the Restrictive Covenant Agreement set forth on Exhibit A, which is incorporated by reference herein. 

  

	12.	 	For purposes of this Agreement Cause means (i) a good faith finding by the Board of Directors of Employee’s failure to satisfactorily perform Employee’s assigned duties
for the Company as a result of Employee’s material dishonesty, gross negligence or intentional misconduct (including intentionally violating any law, rule, regulation, policy or guideline of the Company) or (ii) Employee’s conviction of,
or the entry of a pleading of guilty or nolo contendere by Employee to, any crime involving moral turpitude or any felony. For purposes of this Agreement “Good Reason” means a material diminution in Employee’s duties and
responsibilities caused by the Company, a change in Employee’s reporting assignment, a breach by the Company of its minimum compensation and benefit obligations under this Agreement (including the obligation to grant options under Section 10 of
this Agreement and the indemnity obligations under Section 17 of this Agreement), the failure of the Company to carry at least $10 million in officers’ and directors’ liability insurance or to make Employee an insured thereunder, or an
involuntary relocation by more than 50 miles of Employee’s principal place of business as it exists as of the Effective Date. 

  

	13.	 	This Agreement shall terminate automatically upon Employee’s death or long-term disability. Any termination hereof by reason of Employee’s death or disability shall
terminate Employee’s right to receive further payments hereunder, except for any accrued and unpaid amounts due, and a prorated bonus at target for the year of termination. Nothing in this Section shall, however, limit or eliminate any right
Employee may have under life insurance, disability or other benefits provided to Employee during his employment. 

  

	14.	 	In the event of a change of control of the Company, if a termination of the Employee’s employment by the Company without Cause or a resignation by Employee for Good Reason
occurs within one year of such change of control, Employee shall be entitled to the greater of the severance pay and benefits provided hereunder or the change of control benefits provided to any executive at the Senior Vice President Level.

  

	15.	 	Employee agrees to cooperate with the Company should the Company need information, testimony or other material relating to Employee’s employment with the Company. The Company
agrees to reimburse Employee for any expenses incurred or loss suffered by him as a result of providing such cooperation including with respect to matters involving 

  

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	 	 	or potentially involving the attorney/client or attorney work-product privilege or the nature of legal advice given the Company, the reasonable cost of retaining his own counsel.

  

	16.	 	The Company agrees to pay Employee’s reasonable documented attorney’s fees up to $5,000, in conjunction with the preparation and review of this Agreement.

  

	17.	 	Employee shall be indemnified and held harmless by the Company to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than were permitted prior thereto), against all expenses, judgments, fines, and amounts (including attorney’s fees. ERISA
excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by the Employee in connection therewith and such indemnification shall continue as to the Employee when the Employee has ceased to be an officer and shall
inure to the benefit of the Employee’s heirs, personal representatives and estate. Expenses incurred by Employee in defending any claim, including attorneys’ fees, judgments, fines, ERISA excise taxes, penalties, or amounts paid in
settlement, travel and business costs, and other costs, shall be paid by the Company in advance of the final disposition of the claim upon receipt of an undertaking by Employee or on Employee’s behalf to repay all amounts so advanced if it
shall ultimately be determined that Employee is not entitled to be indemnified by the Company under applicable law. 

  
 This Agreement (including Exhibits A) embodies the entire understanding between the parties and shall supersede all prior understandings and agreements with respect to
the subject matter hereof. The parties agree that this Agreement shall be governed in accordance with the laws of the State of Florida. In the event of any conflict between this agreement and any other Company document referred to herein, this
Agreement shall govern. 
  
 If you are in agreement with the foregoing, please
execute this Agreement below and cause it to be delivered to the Company at the address set forth above. 
  
  
 Very truly yours, 
  
 /S/    THOMAS L. FINKBINER 
  
 Thomas L. Finkbiner 
 Chief Executive Officer
and President 
  
  

	
	Acknowledged and agreed as of
	 The date first above written:

	
	 /S/    ROBERT J. MILLSTONE

	 Robert J. Millstone

  

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 Exhibit A 
  
  
 ARTICLE I 
 CONFIDENTIALITY 
  
 Confidentiality. As a material part of the consideration for the Company’s commitment to the terms of the agreement (the “Agreement”) to which this Exhibit is attached, the Employee hereby agrees that
the Employee will not at any time (whether during or after the Employee’s employment with the Company), other than in the course of the Employee’s duties under the agreement, or unless compelled by lawful process after written notice to
the Company of such notice along with sufficient time for the Company to try to overturn such lawful process, disclose or use for the Employee’s own benefit or purposes or the benefit or purposes of any other person, firm, partnership, joint
venture, association, company or other business organization, entity or enterprise, any trade secrets, or other confidential data or information relating to customers, Trucking Affiliates, development programs, costs, marketing, trading, investment,
sales activities, promotion, credit and financial data, financing methods, or plans of the Company or any of its affiliates; provided, however, that the foregoing shall not apply to information which is generally known to the industry or the public,
other than as a result of the Employee’s breach of this covenant. The Employee further agrees that the Employee will not retain or use for his account, at any time, any trade names, trademark or other proprietary business designation used or
owned in connection with the business of the Company or any of its affiliates. 
  
 The Employee agrees not to delete or destroy any files or customer information and will not create any disruption of the operation. 
  
 The Employee further agrees to return all hardware, software, office furniture and equipment immediately upon termination. 
  
  
 ARTICLE II 
 NON-SOLICITATION 
  

	2.1	 	The Employee agrees that he will not, during the term of this Agreement and for a period of one year thereafter (the “Non-Solicitation Expiration”), solicit or make
any other contact with, directly or indirectly, any Trucking Affiliate, any customer of the Company or any of its subsidiaries with respect to the provision of any service to any such customer that is the same or substantially similar to any service
provided to such customer by the Company or any of its subsidiaries or any Trucking Affiliate, provided, however, that the provision of legal services to any person by Employee in a manner that does not violate the attorney/client privilege with the
Company shall not be deemed to contravene this Section 2.1. 

  

	2.2	 	The Employee agrees that he will not, prior to the Non-Solicitation Expiration, solicit or make any other contact regarding the Company or any of its subsidiaries or any Trucking
Affiliate with any union or similar organization which has a collective bargaining agreement, union contract or similar agreement with the Company or any Subsidiary or affiliate or any Trucking Affiliate or which is seeking to organize employees of
the 

  

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	 	 	Company or any Subsidiary or any Trucking Affiliate, with respect to any employee of the Company or such union’s or similar organization’s relationship or arrangements
with the Company or any Subsidiary or any Trucking Affiliate. 

  

	2.3	 	The Employee agrees that he will not, for a period of one year from the date of termination of the Employee’s employment with the Company, hire, solicit or make any other
contact with, directly or indirectly, any employee or independent contractor (including, without limitation, any of the Company’s and its Trucking Affiliates’ truck drivers) of the Company or any of its subsidiaries or affiliates or
Trucking Affiliates (including all such persons who had such a relationship at any time starting with the three month period prior to the Effective Time) with respect to any employment services or other business relationship.

  
  
 ARTICLE III 
 NON-DISPARAGEMENT 
  

	 	 	The Employee agrees not to make or publish, or cause to be made or published, any statement or information that disparages, defames or in any way impugns the reputation of the
Company or any of its subsidiaries or affiliates or Trucking Affiliates, or any employees or representatives thereof, except to the extent necessary in connection with a termination without “good reason”. 

  

	 	 	The Company agrees not to make or publish, or cause to be made or published, any statement or information that disparages, defames or in any way impugns the reputation of the
Employee, except to the extent necessary in connection with a termination for “cause”. 

  
  
 ARTICLE IV 
 MISCELLANEOUS 
  

	4.1	 	Remedies 

  

	 	 	The parties acknowledge that irreparable damage would occur in the event of a breach of any of the provisions of this Exhibit. It is accordingly agreed that, in addition to any
other remedy to which they are entitled at law or in equity, the parties shall be entitled to an injunction or injunctions to prevent breaches of such sections of this Exhibit and to enforce specifically the terms and provisions of such sections.

  

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	4.2	 	Jurisdiction and Governing Law 

  
 The parties agree that the Agreement and its Exhibits shall be governed in accordance with the laws of the State of Florida and the exclusive jurisdiction
for enforcement thereof shall be the courts located in Tampa, Florida. 
  

	4.3	 	Severability 

  
 If any provision of the Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment
shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent,
then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Employee consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such
restriction or requirement. 
  

	4.4	 	Amendments 

  
 No change, alteration or modification hereof may be made except in writing, signed by each of the parties hereto. 
  

	4.5	 	Interpretation 

  
 The heading in this Agreement are for convenience and reference only and shall not be construed as part of this Agreement or to limit or otherwise affect
the meaning hereof. This Agreement contains all of the terms and conditions agreed upon by the parties and no other agreements, oral or otherwise, exist or shall be binding upon the parties as to the subject matter hereof. 
  

	4.6	 	Affiliates 

  
 In this Exhibit Trucking Affiliate is defined to mean “affiliates” of the Company as that term is used in the Company’s business, and
“affiliate” is defined as a person controlled by, controlling or under common control with the applicable entity. 
  

 -4-stckoptnpln Ex 4-1

2003 STOCK OPTION PLAN OF

eRXSYS, INC.

July 28, 2003

 

A Nevada Corporation

	 	 	 
	

2003 STOCK OPTION PLAN OF

eRXSYS, INC.

TABLE OF CONTENTS

 

                                                Page No.

PURPOSE OF THE PLAN                                                                                                                                                              1

TYPES OF STOCK OPTIONS                                                                                                                                                       1

DEFINITIONS                                                                                                                                                                                 1

ADMINISTRATION OF THE PLAN                                                                                                                                              2

GRANT OF OPTIONS                                                                                                                                                                    3

STOCK SUBJECT TO PLAN                                                                                                                                                          4

TERMS AND CONDITIONS OF OPTIONS                                                                                                                                  4

TERMINATION OR AMENDMENT OF THE PLAN                                                                                                                    9

INDEMNIFICATION                                                                                                                                                                      9

EFFECTIVE DATE AND TERM OF THE PLAN                                                                                                                          10

	 	 	 
	

2003 STOCK OPTION PLAN OF

eRXSYS, INC.

A Nevada Corporation

1.     PURPOSE OF THE PLAN

The purpose of this Plan is to strengthen eRXSYS, Inc. (hereinafter the "Company") by providing incentive stock options as a means to attract, retain and motivate key corporate personnel, through ownership of stock of the Company, and to attract individuals of outstanding ability to render services to and enter the employment of the Company or its subsidiaries.

 

2.     TYPES OF STOCK OPTIONS

There shall be two types of Stock Options (referred to herein as "Options" without distinction between such different types) that may be granted under this Plan: (1) Options intended to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code ("Qualified Stock Options"), and (2) Options not specifically authorized or qualified for favorable income tax treatment under the Internal Revenue Code ("Non-Qualified Stock Options").

 

3.     DEFINITIONS

 

The following definitions are applicable to the Plan:

 

          (1)     Board. The Board of Directors of the Company. 

 

          (2)     Code. The Internal Revenue Code of 1986, as amended from time to time.
 

          (3)     Common Stock. The shares of Common Stock of the Company.  

          (4)     Company. eRXSYS, Inc., a Nevada corporation. 

          (5)     Consultant. An individual or entity that renders professional services to the Company as an independent contractor and is not an employee or under 

                    the direct supervision and control of the Company.

          

          (6)     Disabled or Disability. For the purposes of Section 7, a disability of the type defined in Section 22(e)(3) of the Code. The determination of whether 

                    an individual is Disabled or has a Disability is determined under procedures established by the Plan Administrator for purposes of the Plan.

        

          (7)     Fair Market Value. For purposes of the Plan, the "fair market value" per share of Common Stock of the Company at any date shall be: (a) if the 

                   Common Stock is listed on an established stock exchange or exchanges or 

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                    the NASDAQ National Market, the closing price per share on the last trading day immediately preceding such date on the principal exchange on 

                    which it is traded or as reported by NASDAQ; or (b) if the Common Stock is not then listed on an exchange or the NASDAQ National Market, 

                    but is quoted on the NASDAQ Small Cap Market, the NASDAQ electronic bulletin board or the National Quotation Bureau pink sheets, the 

                    average of the closing bid and asked prices per share for the Common Stock as quoted by NASDAQ or the National Quotation Bureau, as the 

                    case may be, on the last trading day immediately preceding such date; or (c) if the Common Stock is not then listed on an exchange or the 

                    NASDAQ National Market, or quoted by NASDAQ or the National Quotation Bureau, an amount determined in good faith by the Plan 

                    Administrator.

          (8)      Incentive Stock Option. Any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the 

                     Code.

        

          (9)       Non-Qualified Stock Option. Any Stock Option that is not an Incentive Stock Option.

          

         (10)     Optionee. The recipient of a Stock Option.

          (11)     Plan Administrator. The board or the Committee designated by the Board pursuant to Section 4 to administer and interpret the terms of the Plan.

          (12)     Stock Option. Any option to purchase shares of Common Stock granted pursuant to Section 7.

 

4.     ADMINISTRATION OF THE PLAN 

 

This Plan shall be administered by the Board of Directors or by a Compensation Committee (hereinafter the "Committee") composed of members selected by, and serving at the pleasure of, the Board of Directors (the "Plan Administrator"). Subject to the provisions of the Plan, the Plan Administrator shall have authority to construe and interpret the Plan, to promulgate, amend, and rescind rules and regulations relating to its administration, to select, from time to time, among the eligible employees and non-employee consultants (as determined pursuant to Section 5) of the Company and its subsidiaries those employees and consultants to whom Stock Options will be granted, to determine the duration and manner of the grant of the Options, to determine the exercise price, the number of shares and other terms covered by the Stock Options, to determine the duration and purpose of leaves of absence which may be granted to Stock Option holders without constituting termination of their employment for purposes of the Plan, and to make all of the determinations necessary or advisable for administration of the Plan. The interpretation and construction by the Plan Administrator of any provision of the Plan, or of any agreement issued and executed under the Plan, shall be final and binding upon all parties. No member of the Committee or Board shall be liable for any action or 

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determination undertaken or made in good faith with respect to the Plan or any agreement executed pursuant to the Plan.

If a Committee is established, all of the members of the Committee shall be persons who, in the opinion of counsel to the Company, are outside directors and "non-employee directors" within the meaning of Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission. -From time to time, the Board may increase or decrease the size of the Committee, and add additional members to, or remove members from, the Committee. The Committee shall act pursuant to a majority vote, or the written consent of a majority of its members, and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the provisions of the Plan and the directions of the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may deem advisable. 

At the option of the Board, the entire Board of Directors of the Company may act as the Plan Administrator during such periods of time as all members of the Board are "outside directors" as defined in Prop. Treas. Regs. '1.162-27(e)(3), except that this requirement shall not apply during any period of time prior to the date the Company's Common Stock becomes registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.

 

5.     GRANT OF OPTIONS

 

The Company is hereby authorized to grant Incentive Stock Options as defined in section 422 of the Code to any employee or director (including any officer or director who is an employee) of the Company, or of any of its subsidiaries; provided, however, that no person who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any of its parent or subsidiary corporations, shall be eligible to receive an Incentive Stock Option under the Plan unless at the time such Incentive Stock Option is granted the Option price is at least 110% of the fair market value of the shares subject to the Option, and such Option by its terms is not exercisable after the expiration of five years from the date such Option is granted.

An employee may receive more than one Option under the Plan. Non-Employee Directors shall be eligible to receive Non--Qualified Stock Options in the discretion of the Plan Administrator. In addition, Non--Qualified Stock Options may be granted to employees, officers, directors and consultants who are selected by the Plan Administrator.

	 	3 	 
	

6.      STOCK SUBJECT TO PLAN

 

The stock available for grant of Options under the Plan shall be shares of the Company's authorized but unissued, or reacquired, Common Stock. Subject to adjustment as provided herein, the maximum aggregate number of shares of the Company’s common stock that may be optioned and sold under the Plan is 15% of the issued and outstanding common stock of the Company, including shares previously issued under the Plan or other stock option plans created by the Company. 

The maximum number of shares for which an Option may be granted to any Optionee during any calendar year shall not exceed three percent (3%) of the issued and outstanding common shares of the Company. In the event that any outstanding Option under the Plan for any reason expires or is terminated, the shares of Common Stock allocable to the unexercised portion of the Option shall again be available for Options under the Plan as if no Option had been granted with regard to such shares.

 

7.     TERMS AND CONDITIONS OF OPTIONS 

 

Options granted under the Plan shall be evidenced by agreements (which need not be identical) in such form and containing such provisions that are consistent with the Plan as the Plan Administrator shall from time to time approve. Such agreements may incorporate all or any of the terms hereof by reference and shall comply with and be subject to the following terms and conditions:

 

         (1)     Number of Shares. Each Option agreement shall specify the number of shares subject to the Option. 

 

         (2)     Option Price. The purchase price for the shares subject to any Option shall be determined by the Plan Administrator at the time of the grant, but shall 

                   not be less than 85% of Fair Market Value per share. Anything to the contrary notwithstanding, the purchase price for the shares subject to any 

                   Incentive Stock Option shall not be less than 100% of the Fair Market Value of the shares of Common Stock of the Company on the date the Stock 

                   Option is granted. In the case of any Incentive Stock Option granted to an employee who owns stock possessing more than 10% of the total 

                  combined voting power of all classes of stock of the Company, or any of its parent or subsidiary corporations, the Option price shall not be less than 

                  110% of the Fair Market Value per share of the Common Stock of the Company on the date the Option is granted. For purposes of determining the 

                   stock ownership of an employee, the attribution rules of Section 424(d) of the Code shall apply. 

          

          (3)     Notice and Payment. Any exercisable portion of a Stock Option may be exercised only by: (a) delivery of a written notice to the Company prior to 

                    the time when such Stock Option becomes unexercisable herein, stating the number of shares bring purchased and complying with all applicable 

                    rules  

	 	4 	 
	

                    established by the Plan Administrator; (b) payment in full of the exercise price of such Option by, as applicable, delivery of: (i) cash or check for an 

                    amount equal to the aggregate Stock Option exercise price for the number of shares being purchased, (ii) in the discretion of the Plan Administrator, 

                    upon such terms as the Plan Administrator shall approve, a copy of instructions to a broker directing such broker to sell the Common Stock for 

                    which such Option is exercised, and to remit to the Company the aggregate exercise price of such Stock Option (a "cashless exercise"), or (iii) in the 

                    discretion of the Plan Administrator, upon such terms as the Plan Administrator shall approve, shares of the Company's Common Stock owned by 

                    the Optionee, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the aggregate purchase price of 

                    the shares with respect to which such Stock Option or portion is thereby exercised (a "stock-for-stock exercise"); (c) payment of the amount of tax 

                    required to be withheld (if any) by the Company, or any parent or subsidiary corporation as a result of the exercise of a Stock Option. At the 

                    discretion of the Plan Administrator, upon such terms as the Plan Administrator shall approve, the Optionee may pay all or a portion of the tax 

                    withholding by: (i) cash or check payable to the Company, (ii) a cashless exercise, (iii) a stock-for-stock exercise, or (iv) a combination of one or 

                    more of the foregoing payment methods; and (d) delivery of a written notice to the Company requesting that the Company direct the transfer agent 

                    to issue to the Optionee (or his designee) a certificate for the number of shares of Common Stock for which the Option was exercised or, in the case 

                    of a cashless exercise, for any shares that were not sold in the cashless exercise. Notwithstanding the foregoing, the Company, in its sole discretion, 

                    may extend and maintain, or arrange for the extension and maintenance of credit to any Optionee to finance the Optionee's purchase of shares 

                    pursuant to the exercise of any Stock Option, on such terms as may be approved by the Plan Administrator, subject to applicable regulations of the 

                    Federal Reserve Board and any other laws or regulations in effect at the time such credit is extended.

 

          (4)     Terms of Option. No Option shall be exercisable after the expiration of the earliest of: (a) ten years after the date the Option is granted, (b) three 

                    months after the date the Optionee's employment with the Company and its subsidiaries terminates, or a Non-Employee Director or Consultant 

                    ceases to provide services to the Company, if such termination or cessation is for any reason other than Disability or death, (c) one year after the 

                    date the Optionee's employment with the Company, and its subsidiaries, terminates, or a Non--Employee Director or Consultant ceases to provide 

                    services to the Company, if such termination or cessation is a result of death or Disability; provided, however, that the Option agreement for any 

                    Option may provide for shorter periods in each of the foregoing instances. In the case of an Incentive Stock Option granted to an employee who 

                    owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any of its parent or subsidiary 

                    corporations, the term set 

	 	5 	 
	

                    forth in (a) above shall not be more than five years after the date the Option is granted. 

          

          (5)     Exercise of an Option. No Option shall be exercisable during the lifetime of an Optionee by any person other than the Optionee. Subject to the 

                    foregoing, the Plan Administrator shall have the power to set the time or times within which each Option shall vest or be exercisable and to 

                    accelerate the time or times of vesting and exercise; provided, however each Option shall provide the right to exercise at the rate of at least 20% per 

                    year over five years from the date the Option is granted. Unless otherwise provided by the Plan Administrator, each Option will not be subject to 

                    any vesting requirements. To the extent that an Optionee has the right to exercise an Option and purchase shares pursuant hereto, the Option may be 

                    exercised from time to time by written notice to the Company, stating the number of shares being purchased and accompanied by payment in full of 

                    the exercise price for such shares.

          (6)     No Transfer of Option. No Option shall be transferable by an Optionee otherwise than by will or the laws of descent and distribution.

          (7)     Limit on Incentive Stock Option. The aggregate Fair Market Value (determined at the time the Option is granted) of the stock with respect to which 

                   an Incentive Stock Option is granted and exercisable for the first time by an Optionee during any calendar year (under all Incentive Stock Option 

                   plans of the Company and its subsidiaries) shall not exceed $100,000. To the extent the aggregate Fair Market Value (determined at the time the 

                   Stock Option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Optionee 

                  during any calendar year (under all Incentive Stock Option plans of the Company and any parent or subsidiary corporations) exceeds $100,000, such 

                   Stock Options shall be treated as Non--Qualified Stock Options. The determination of which Stock Options shall be treated as Non--Qualified 

                   Stock Options shall be made by taking Stock Options into account in the Order in which they were granted.

          (8)     Restriction on Issuance of Shares. The issuance of Options and shares shall be subject to compliance with all of the applicable requirements of law 

                    with respect to the issuance and sale of securities, including, without limitation, any required qualification under state securities laws. If an Optionee 

                    acquires shares of Common Stock pursuant to the exercise of an Option, the Plan Administrator, in its sole discretion, may require as a condition of 

                    issuance of shares covered by the Option that the shares of Common Stock be subject to restrictions on transfer. The Company may place a legend 

                    on the share certificates reflecting the fact that they are subject to restrictions on transfer pursuant to the terms of this Section. In 

	 	6 	 
	

                    addition, the Optionee may be required to execute a buy-sell agreement in favor of the Company or its designee with respect to all or any of the 

                    shares so acquired. In such event, the terms of any such agreement shall apply to the optioned shares.

          (9)     Investment Representation. Any Optionee may be required, as a condition of issuance of shares covered by his or her Option, to represent that the 

        shares to be acquired pursuant to exercise will be acquired for investment and without a view toward distribution thereof, and in such case, the 

        Company may place a legend on the share certificate(s) evidencing the fact that they were acquired for investment and cannot be sold or transferred 

        unless registered under the Securities Act of 1933, as amended, or unless counsel for the Company is satisfied that the circumstances of the 

        proposed transfer do not require such registration.

 

        (10)      Rights as a Shareholder or Employee. An Optionee or transferee of an Option shall have no right as a stockholder of the Company with respect to 

        any shares covered by any Option until the date of the issuance of a share certificate for such shares. No adjustment shall be made for dividends 

        (Ordinary or extraordinary, whether cash, securities, or other property), or distributions or other rights for which the record date is prior to the date 

        such share certificate is issued, except as provided in paragraph (13) below. Nothing in the Plan or in any Option agreement shall confer upon any 

        employee any right to continue in the employ of the Company or any of its subsidiaries or interfere in any way with any right of the Company or any 

        subsidiary to terminate the Optionee's employment at any time.

        

         (11)     No Fractional Shares. In no event shall the Company be required to issue fractional shares upon the exercise of an Option.

         (12)     Exercise in the Event of Death. In the event of the death of the Optionee, any Option or unexercised portion thereof granted to the Optionee, to the 

        extent exercisable by him or her on the date of death, may be exercised by the Optionee's personal representatives, heirs, or legatees subject to the 

        provisions of paragraph (4) above. 

          

         (13)    Recapitalization or Reorganization of the Company. Except as otherwise provided herein, appropriate and proportionate adjustments shall be made 

        (1) in the number and class of shares subject to the Plan, (2) to the Option rights granted under the Plan, and (3) in the exercise price of such Option 

        rights, in the event that the number of shares of Common Stock of the Company are increased or decreased as a result of a stock dividend (but only 

        on Common Stock), stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, separation, or like change in the 

        corporate or capital structure of the Company. In the event there shall be any other change in the number or kind of the outstanding shares of 

        Common 

	 	7 	 
	

 

        Stock of the Company, or any stock or other securities into which such common stock shall have been changed, or for which it shall have been 

        exchanged, whether by reason of a complete liquidation of the Company or a merger, reorganization, or consolidation with any other corporation in 

        which the Company is not the surviving corporation, or the Company becomes a wholly-owned subsidiary of another corporation, then if the Plan 

        Administrator shall, in its sole discretion, determine that such change equitably requires an adjustment to shares of Common Stock currently subject 

        to Options under the Plan, or to prices or terms of outstanding Options, such adjustment shall be made in accordance with such determination.

        To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustment shall be made by the Plan Administrator, 

        the determination of which in that respect shall be final, binding, and conclusive. No right to purchase fractional shares shall result from any 

        adjustment of Options pursuant to this Section. In case of any such adjustment, the shares subject to the Option shall he rounded down to the 

        nearest whole share. Notice of any adjustment shall be given by the Company to each Optionee whose Options shall have been so adjusted and 

        such adjustment (whether or not notice is given) shall be effective and binding for all purposes of the Plan.

 

        In the event of a complete liquidation of the Company or a merger, reorganization, or consolidation of the Company with any other corporation in 

        which the Company is not the surviving corporation, or the Company becomes a wholly-owned subsidiary of another corporation, any unexercised 

        Options granted under the Plan shall be deemed cancelled unless the surviving corporation in any such merger, reorganization, or consolidation elects 

        to assume the Options under the Plan or to issue substitute Options in place thereof; provided, however, that notwithstanding the foregoing, if such 

        Options would be cancelled in accordance with the foregoing, the Optionee shall have the right exercisable during a ten-day period ending on the 

        fifth day prior to such liquidation, merger, or consolidation to exercise such Option in whole or in part without regard to any installment exercise 

        provisions in the Option agreement.

 

         (14)    Modification, Extension and Renewal of Options. Subject to the terms and conditions and within the limitations of the Plan, the Plan Administrator 

        may modify, extend or renew outstanding options granted under the Plan and accept the surrender of outstanding Options (to the extent not 

        theretofore exercised). The Plan Administrator shall not, however, without the approval of the Board, modify any outstanding Incentive Stock 

        Option in any manner that would cause the Option not to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code. 

        Notwithstanding the foregoing, no modification of an Option shall, without the consent of the Optionee, alter or impair any rights of the Optionee 

        under the Option. 

	 	8 	 
	

         (15)   Other Provisions. Each Option may contain such other terms, provisions, and conditions not inconsistent with the Plan as may be determined by the 

       Plan Administrator.

 

8.      TERMINATION OR AMENDMENT OF THE PLAN

 

The Board may at any time terminate or amend the Plan; provided that, without approval of the holders of a majority of the shares of Common Stock of the Company represented and voting at a duly held meeting at which a quorum is present or the written consent of a majority of the outstanding shares of Common Stock, there shall be (except by operation of the provisions of paragraph (13) above) no increase in the total number of shares covered by the Plan, no change in the class of persons eligible to receive options granted under the Plan, no reduction in the limits for determination of the minimum exercise price of Options granted under the Plan, and no extension of the limits for determination of the latest date upon which Options may be exercised; and provided further that, without the consent of the Optionee, no amendment may adversely affect any then outstanding Option or any unexercised portion thereof.

 

9.     INDEMNIFICATION 

 

In addition to such other rights of indemnification as they may have as members of the Board Committee that administers the Plan, the members of the Plan Administrator shall be indemnified by the Company against reasonable expense, including attorney's fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein to which they, or any of them, may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Option granted thereunder, and against any and all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company). In addition, such members shall be indemnified by the Company for any amount paid by them in satisfaction of a judgment in any action, suit, or proceeding, except in relation to matters as to which it shall have been adjudged that such member is liable for negligence or misconduct in the performance of his or her duties, provided however that within sixty (60) days after institution of any such action, suit, or proceeding, the member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

 

10.     EFFECTIVE DATE AND TERM OF THE PLAN

 

This Plan shall become effective (the "Effective Date") on the date of adoption by the board of directors. Unless sooner terminated by the Board in its sole discretion, this Plan will expire on July 28, 2013.

	 	9 	 
	

 

IN WITNESS WHEREOF, the Company by its duly authorized officer, has caused this Plan to be executed as of the 28th day of July, 2003, as amended by resolution of the board of directors dated April 19, 2004.

eRXSYS, INC.

/s/ David Parker       

By:     David Parker

Its:     Chief Executive Officer and Director

 

 

 

/s/ A.J. LaSota

By:    A.J. LaSota 

Its:     President and Director

 

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