The
purpose of the GVI Security Solutions, Inc. 2008 Long-Term Incentive Plan (the
“Plan”) is to attract and retain and provide incentives to employees, officers,
directors and consultants of the Corporation and its Subsidiaries, and to
thereby increase overall stockholders’ value. The Plan generally provides for
the granting of stock, stock options, stock appreciation rights, restricted
shares or any combination of the foregoing to the eligible
participants.
II. Definitions
(a) “Award”
includes, without limitation, stock options (including incentive stock options
within the meaning of Section 422(b) of the Code), stock appreciation rights,
dividend equivalent rights, stock awards, restricted share awards, or other
awards that are valued in whole or in part by reference to, or are otherwise
based on, the Common Stock (“other Common Stock-based Awards”), all on a stand
alone, combination or tandem basis, as described in or granted under this
Plan.
(b) “Award
Agreement” means a written agreement setting forth the terms and conditions of
each Award made under this Plan.
(c) “Board”
means the Board of Directors of the Corporation.
(d) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
(e) “Committee”
means the Compensation Committee of the Board or such other committee of the
Board as may be designated by the Board from time to time to administer this
Plan or if no such committee is designated, the Board.
(f) “Common
Stock” means the common stock of the Corporation, par value $.001 per share, or
any other securities of the Corporation into which such common stock is
reclassified or reconstituted.
(g) “Corporation”
means GVI Security Solutions, Inc., a Delaware corporation.
(h) “Employee”
means an employee of the Corporation or a Subsidiary.
(i) “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
(j) “Fair
Market Value” means the closing price for the Common Stock as officially
reported on the relevant date (or if there were no sales on such date, on the
next preceding date on which such closing price was recorded) by the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
such national securities exchange, the closing price as furnished by the
National Association of Securities Dealers or a similar organization or
quotation system, or, if the Common Stock is not quoted by the National
Association of Securities Dealers or a similar organization or quotation system,
as determined in good faith by resolution of the Committee (whose determination
shall be conclusive), based on the best information available to
it.
(k) “Officer”
means a person who is an officer of the Corporation within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(l) “Participant”
means an Employee, officer, director or consultant who has been granted an Award
under the Plan.
(m) “Plan
Year” means a twelve-month period beginning with January 1 of each
year.
(n) “Subsidiary”
means any corporation or other entity, whether domestic or foreign, in which the
Corporation has or obtains, directly or indirectly, a proprietary interest of
more than 50% by reason of stock ownership or otherwise.
III. Eligibility
Any
Employee, officer, director or consultant of the Corporation or a Subsidiary
selected by the Committee is eligible to receive an Award.
IV. Plan
Administration
(a) Except
as otherwise determined by the Board, the Plan shall be administered by the
Committee. The Committee shall periodically make determinations with respect to
the participation of Employees, officers, directors and consultants in the Plan
and, except as otherwise required by law or this Plan, the grant terms of
Awards, including vesting schedules, price, restriction or option periods,
dividend rights, post-retirement and termination rights, payment alternatives
such as cash, stock, contingent awards or other means of payment consistent with
the purposes of this Plan, and such other terms and conditions as the Board or
the Committee deems appropriate which shall be contained in an Award Agreement
with respect to a Participant.
(b) The
Committee shall have authority to interpret and construe the provisions of the
Plan and any Award Agreement and make determinations pursuant to any Plan
provision or Award Agreement which shall be final and binding on all persons. No
member of the Committee shall be liable for any action or determination made in
good faith, and the members shall be entitled to indemnification and
reimbursement in the manner provided in the Corporation’s Certificate of
Incorporation, as it may be amended from time to time.
(c) The
Committee shall have the authority at any time to provide for the conditions and
circumstances under which Awards shall be forfeited. The Committee
shall have the authority to accelerate the vesting of any Award and the times at
which any Award becomes exercisable.
(d) The
Committee may delegate to one (1) or more Officers the authority to do one or
both of the following (i) designate Employees who are not Officers to be
recipients of stock options (and, to the extent permitted by applicable law,
other Awards) and the terms thereof, and (ii) determine the number of shares of
Common Stock to be subject to such Awards granted to such Employees; provided, however, that the Committee
resolutions regarding such delegation shall specify the total number of shares
of Common Stock that may be subject to the Awards granted by such Officer and
that such Officer may not grant an Award to himself or
herself. Notwithstanding the foregoing, the Committee may not
delegate authority to an Officer to determine the Fair Market
Value.
V. Capital
Stock Subject to the Provisions of this Plan
(a) The
capital stock subject to the provisions of this Plan shall be shares of
authorized but unissued Common Stock and shares of Common Stock held as treasury
stock. Subject to (i) adjustment in accordance with the provisions of
Section X, and (ii) Sections V(b) and (c) below, the total number of shares of
Common Stock available for grants of Awards shall not exceed
1,000,000.
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(b) The
grant of a restricted share Award shall be deemed to be equal to the maximum
number of shares which may be issued under the Award. Awards payable only in
cash will not reduce the number of shares available for Awards granted under the
Plan.
(c) There
shall be carried forward and be available for Awards under the Plan, in addition
to shares available for grant under paragraph (a) of this Section V, all of the
following: (i) any unused portion of the limit set forth in paragraph (a) of
this Section V; (ii) shares represented by the portion of any Awards which are
cancelled, forfeited, surrendered, terminated, paid in cash (including shares
used to satisfy the exercise price of an option or which are reacquired by the
Corporation to satisfy any tax withholding obligations under Section VIII(f)
below) or expire unexercised; and (iii) the excess amount of variable Awards
which become fixed at less than their maximum limitations.
VI. Awards
Under This Plan
A. Discretionary
Awards. As the Board or Committee may determine, the
following types of Awards and other Common Stock-based Awards may be granted
under this Plan on a stand alone, combination or tandem basis:
(a) Stock Option. A right to buy
a specified number of shares of Common Stock at a fixed exercise price during a
specified time, all as the Committee may determine.
(b) Incentive Stock Option. An
Award in the form of a stock option which shall comply with the requirements of
Section 422 of the Code or any successor section as it may be amended from time
to time. Subject to adjustment in accordance with the provisions of Section X,
the aggregate number of shares which may be subject to incentive stock option
Awards under this Plan shall not exceed 1,000,000, subject to Section V above.
To the extent that Section 422 of the Code requires certain provisions to be set
forth in a written plan, said provisions are incorporated herein by this
reference.
(c) Stock Appreciation Right. A
right, which may or may not be contained in the grant of a stock option or
incentive stock option, to receive in cash (or its equivalent value in Common
Stock) the excess of the Fair Market Value of a share of Common Stock on the
date the right is surrendered over the option exercise price or other price
specified in the Award Agreement.
(d) Restricted
Shares. The issuance of Common Stock to a Participant subject
to forfeiture until such restrictions, terms and conditions as the Committee may
determine are fulfilled.
(e) Dividend or Equivalent. A
right to receive dividends or their equivalent in value in Common Stock, cash or
in a combination of both with respect to any new or previously existing
Award.
(f) Stock Award. The issuance of
Common Stock, which may be on a contingent basis, to a Participant.
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(g) Other Stock-Based Awards.
Other Common Stock-based Awards which are related to or serve a similar function
to those Awards set forth in this Section VI.
B. Formula
Awards.
(a) Annual Option
Award. Each member of the Board who is not then an Employee
(an “Independent Director”), shall be granted on July 1 of each year, a stock
option (which shall not comply with the requirements of Section 422 of the Code)
to purchase 30,000 shares of Common Stock at an exercise price equal to the Fair
Market Value of the Common Stock on such date. Such stock option
shall be immediately exercisable as to 7,500 shares of Common Stock and
exercisable with respect to an additional 1,875 shares of Common Stock on the
first day of each of the next 12 fiscal quarters of the Corporation commencing
with October 1 of the year of such grant.
(b) Initial Option
Award. Unless otherwise specified by the Committee or the
Board, upon the initial appointment to the Board of an Independent Director,
such Director shall be granted on the effective date of such appointment, a
stock option (which shall not comply with the requirements of Section 422 of the
Code) to purchase 100,000 shares of Common Stock at an exercise price equal to
the Fair Market Value of the Common Stock on such date. Such stock
option shall be immediately exercisable as to 25,000 shares of Common Stock and
exercisable with respect to an additional 25,000 shares of Common Stock on each
of the first, second and third anniversaries of the date of grant.
(c) Termination.Options granted
pursuant to this Section VI.B shall expire and cease to be of any force or
effect on the earlier of the tenth anniversary of the date any such option was
granted or the first anniversary of the date on which an optionee ceases to be a
member of the Board.
VII. Award
Agreements
Each
Award under the Plan shall be evidenced by an Award Agreement that (i) shall set
forth the terms and conditions of the Award, (ii) shall be executed by the
Corporation and the Participant, and (iii) to the extent the Award includes
stock options granted to a resident of the State of California, shall include
the following terms, in addition to any other applicable terms required by this
Plan or the Committee:
(b) An exercise
period of not more than 120 months from the date the stock option is
granted;
(c) The
non-transferability of the stock options, provided that the Award Agreement may
permit transferability by will, by the laws of descent and distribution, or as
permitted by applicable securities laws;
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(d) The right to
exercise at the rate of at least 20% per year over 5 years from the date the
stock option is granted, subject to reasonable conditions such as continued
employment;
(e) Unless
employment is terminated for cause as defined by applicable law, the terms of
the Award Agreement or a contract of employment, the right to exercise in the
event of termination of employment, to the extent that the Optionee is entitled
to exercise on the date employment terminates, as follows: (1) at least 6 months
from the date of termination if termination was caused by death or disability,
and (2) at least 30 days from the date of termination if termination was caused
by other than death or disability; and
(f) A termination
date of not more than 10 years from the date the Award Agreement is entered into
or the date the Award Agreement is approved by the security holders, whichever
is earlier.
VIII. Other
Terms and Conditions
(a) Assignability. Unless
provided to the contrary in any Award, no Award shall be assignable or
transferable except by will or by the laws of descent and distribution and
during the lifetime of a Participant, the Award shall be exercisable only by
such Participant during the Participant’s lifetime.
(b) Termination of Employment or Other
Relationship. The Committee shall determine the disposition of the grant
of each Award in the event of the retirement, disability, death or other
termination of a Participant’s employment or other relationship with the
Corporation or a Subsidiary.
(c) Rights as a Stockholder. A
Participant shall have no rights as a stockholder with respect to shares covered
by an Award until the date the Participant is the holder of record. Except as
provided in Section X, no adjustment will be made for dividends or other rights
for which the record date is prior to such date.
(d) No Obligation to Exercise.
The grant of an Award shall impose no obligation upon the Participant to
exercise the Award.
(e) Payments by Participants. The
Committee may determine that Awards for which a payment is due from a
Participant may be payable: (i) in U.S. dollars by personal check, bank draft or
money order payable to the order of the Corporation, by money transfers or
direct account debits; (ii) through the delivery or deemed delivery based on
attestation to the ownership of shares of Common Stock with a Fair Market Value
equal to the total payment due from the Participant; (iii) pursuant to a
broker-assisted “cashless exercise” program if established by the Corporation;
(iv) by a combination of the methods described in (i) through (iii) above; or
(v) by such other methods as the Committee may deem appropriate.
(f) Withholding. Except as
otherwise provided by the Committee, (i) the deduction of withholding and any
other taxes required by law will be made from all amounts paid in cash and (ii)
in the case of payments of Awards in shares of Common Stock, the Participant
shall be required to pay the amount of any taxes required to be withheld prior
to receipt of such stock, or alternatively, a number of shares the Fair Market
Value of which equals the amount required to be withheld may be deducted from
the payment.
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(g) Maximum Awards. The maximum
number of shares of Common Stock that may be issued to any single Participant
pursuant to Awards under this Plan in any single Plan Year is
1,000,000.
(h) Compliance with Section
409A. To the
extent that the Committee determines that any Award granted hereunder is subject
to Section 409A of the Code, the Award Agreement evidencing such Award shall
incorporate the terms and conditions necessary to avoid the consequences
specified in Section 409A(a)(1) of the Code. To the extent
applicable, the Plan and Award Agreements shall be interpreted in accordance
with Section 409A of the Code, including without limitation any applicable
guidance that may be issued or amended after the effective date of this
Plan.
IX. Termination,
Modification and Amendments
The Plan
may from time to time be terminated, modified or amended by the Board. No
termination, modification or amendment of the Plan may adversely affect the
rights conferred by an Award without the consent of the recipient
thereof.
X. Recapitalization
The
aggregate number of shares of Common Stock as to which Awards may be granted to
Participants, the number of shares thereof covered by each outstanding Award and
the price per share thereof in each such Award, shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend or other increase or decrease in
such shares, effected without receipt of consideration by the Corporation, or
other change in corporate or capital structure; provided, however, that any
fractional shares resulting from any such adjustment shall be
eliminated. The Committee may also make the foregoing changes and any
other changes, including changes in the classes of securities available, to the
extent it is deemed necessary or desirable to preserve the intended benefits of
the Plan for the Corporation and the Participants in the event of any other
reorganization, recapitalization, merger, consolidation, spin-off, extraordinary
dividend or other distribution or similar transaction.
XI. No
Right to Employment
No person
shall have any claim or right to be granted an Award, and the grant of an Award
shall not be construed as giving a Participant the right to be retained in the
employ of, or in any other relationship with, the Corporation or a Subsidiary.
Further, the Corporation and each Subsidiary expressly reserve the right at any
time to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any Award Agreement issued
hereunder.
XII. Governing
Law
To the
extent that federal laws do not otherwise control, the Plan shall be construed
in accordance with and governed by the laws of the State of
Delaware.
XIII. Savings
Clause
This Plan
is intended to comply in all aspects with applicable laws and
regulations. In case any one or more of the provisions of this Plan
shall be held invalid, illegal or unenforceable in any respect under applicable
law and regulation, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and the invalid,
illegal or unenforceable provision shall be deemed null and void; however, to
the extent permissible by law, any provision which could be deemed null and void
shall first be construed, interpreted or revised retroactively to permit this
Plan to be construed in compliance with all applicable laws so as to foster the
intent of this Plan.
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XIV. Effective
Date and Term
The
effective date of this Plan is July 3, 2008. The Plan shall terminate
on June 30, 2018. No awards shall be granted after the termination of
the Plan.
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Dates Referenced Herein and Documents Incorporated by Reference
