2006
STOCK OPTION PLAN OF
SECURED
DIVERSIFIED INVESTMENT, LTD.
A
Nevada Corporation
1.
Purpose of the Plan
The
purpose of this Plan is to strengthen Secured Diversified Investment, Ltd.
(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:
| (a) |
Board.
The Board of Directors of the Company.
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| (b) |
Code.
The Internal Revenue Code of 1986, as amended from time to
time.
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| (c) |
Common
Stock.
The shares of Common Stock of the
Company.
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| (d) |
Company.
Secured Diversified Investment, Ltd., a Nevada
corporation.
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| (e) |
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.
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| (f) |
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.
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| (g) |
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 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
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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. |
| (h) |
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.
|
| (i) |
Non-Qualified
Stock Option. Any
Stock Option that is not an Incentive Stock
Option.
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| (j) |
Optionee.
The recipient of a Stock Option.
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| (k) |
Plan
Administrator.
The board or a committee designated by the Board pursuant to Section
4 to
administer and interpret the terms of the
Plan.
|
| (l) |
Stock
Option.
Any option to purchase shares of Common Stock granted pursuant to Section
7.
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4.
Administration of the Plan
This
Plan
shall be administered by a “Compensation Committee” or “Plan Administrator”
composed of members selected by, and serving at the pleasure of, the Board
of
Directors. 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 determination
undertaken or made in good faith with respect to the Plan or any agreement
executed pursuant to the Plan.
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 l6b-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 Consultants who are selected by the Plan Administrator.
6.
Stock Subject to Plan
The
stock
available for grant of Options under this Plan shall be shares of the Company's
authorized but unissued, or reacquired, Common Stock. The aggregate sales price,
or amount of securities sold, during any 12 month period may not exceed the
greater of: (1) $1 million, (2) 15% of the total assets of the
Company, or (3) 15% of the issued and outstanding common stock of the company,
including shares previously issued under this Plan or other stock option plans
created by the Company, whichever is greater. The maximum number of shares
for
which an Option may be granted to any Optionee during any calendar year shall
not exceed 5% of the issued and outstanding shares. 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:
| (a) |
Number
of Shares.
Each Option agreement shall specify the number of shares subject to
the
Option.
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| (b) |
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
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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 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. |
| (c) |
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 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 "cash1ess 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 my 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 rnethods; 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 mange
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.
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| (d) |
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
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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 forth in (a)
above
shall not be more than five years after the date the Option is
granted. |
| (e) |
Exercise
of an Option.
No Option shall be exercisable during the lifetime of the 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 be exercisable and to accelerate the time or times
of
exercise; provided however, the 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 granted under the Plan shall become exercisable on a
cumulative basis as to one--third (1/3) of the total number of shares
covered thereby at any time after one year from the date the Option
is
granted and an additional one-third (1/3) of such total number of shares
at any time after the end of each consecutive one-year period thereafter
until the Option has become exercisable as to all of such total number
of
shares. 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.
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| (f) |
No
Transfer of Option.
No Option shall be transferable by an Optionee otherwise than by will
or
the laws of descent and distribution.
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| (g) |
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.
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| (h) |
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
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.
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| (i) |
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
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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. |
| (j) |
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
(m)
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.
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| (k) |
No
Fractional Shares.
In no event shall the Company be required to issue fractional shares
upon
the exercise of an Option.
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| (l) |
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
(d) above.
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| (m) |
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 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.
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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.
| (n) |
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.
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| (o) |
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.
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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 (m) 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 exercise price of Options granted under the Plan, and no
extension 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 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
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This
Plan
shall become effective (the "Effective Date") on the date of adoption by the
board of directors as evidenced by the date and signature below. Options granted
under the Plan prior to shareholder approval are subject to cancellation by
the
Plan Administrator if shareholder approval is not obtained within 12 months
of
the date of adoption. Unless sooner terminated by the Board in its sole
discretion, this Plan will expire on March 8, 2016.
IN
WITNESS WHEREOF, the Company by its duly authorized officer, has caused this
Plan to be executed this 8th day of March, 2006.
SECURED
DIVERSIFIED INVESTMENT, LTD.
_____________________________________
By:
Its: