COMPANY

ADDRESS
CITY, ST ZIP

DATE

Name
Address
CITY, ST ZIP

Re: Membership On Advisory Board

Dear First Name:

___________________, a __________ corporation (the “Corporation”) is very pleased to

offer you a position as a member of our Advisory Board. Advisory Board members have no
fiduciary obligations to the Shareholders, and they serve as advisors to the Board of Directors
and Management on certain matters from time to time. As an Advisory Board member, we wish
to bring the following to your attention:

1. Stock Option. Upon the approval of the Company’s Board of Directors, you will be
granted a supplemental (i.e., nonstatutory and non-qualified) stock option to purchase an
aggregate of ________ thousand (_______) shares of the Company’s Common Stock for an
exercise price equal to $_____ per share (the “Exercise Price”). Your stock options will vest in
twelve (12) monthly installments, the first installment of _________ (_____) shares vesting upon
the date of this Agreement and eleven (11) equal installments of ______________(_____) shares
vesting monthly thereafter, provided that your role as a member of the Advisory Board has not
been terminated. This option may be exercised at anytime following vesting until and including the
date five (5) years from the date grant at 5:00 p.m., _______, _____ time.

2. Incentive Fees. As a member of the Advisory Board, you will be eligible for
incentive fees based on the criteria and formulas specified below. All incentive fees shall be
paid promptly after the Company has received the consideration for the transaction which gives
rise to the incentive fees, and all determinations under paragraph 2(f) of this letter have been
made.
(a). The activities covered by this letter include your advising and assisting the
Company in its (i) sales or license of its products (“Sales”); (ii) a merger or sale of the Company
(which includes, but is not limited to, a sale of all or substantially all of the stock or assets of the
Company through a sale or merger)(collectively referred to herein as an “M&A Transaction”);
and (iii) strategic alliances with third parties (which include joint marketing and business

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development arrangements, technology transfers, joint engineering projects or direct funding of
designated projects) (collectively referred to herein as a “Strategic Alliance”).
(b). To be eligible for an incentive fee, you must communicate in writing to
the Company’s Chief Executive Officer the organization’s name that you wish to contact for
potential Sales, an M&A Transaction or a Strategic Alliance (each a “Prospect”). The Chief
Executive Officer will communicate in writing (generally within 72 hours following receipt of
such notice from you) and advise you if such Prospect is deemed a “Qualified Prospect” or if you
should proceed no further with the proposed Prospect as determined in the sole discretion of the
Company. Your eligibility for an incentive fee, the portion of the incentive fee that you have
earned, and any apportionment of the fee will be based solely on the criteria set forth in
paragraph 2(f) below.
(c). A product Sale made to a Qualified Prospect when, as and if successfully
consummated may result in you earning an incentive fee from the Company not to exceed a
maximum of seven (7%) percent of the Company’s actual net collected revenue (net of taxes and
charges) (the “Maximum Sales Fee”) attributable to such Sale.
(d). M&A Transactions generated from a Qualified Prospect, when, as and if
successfully consummated may result in you earning an incentive fee not to exceed a maximum
of three and one-half percent (3.5%) of the total valuation of the Company at the time of the
closing (the “Maximum M&A Transaction Fee”).
(e). A Strategic Alliance generated from a Qualified Prospect, when, as and if
successfully consummated may result in you earning an incentive fee not to exceed a maximum
of three and one-half percent (3.5%) of any cash, or cash equivalent (i.e., non-cash external
investment of resources, referred to herein as a “Cash Equivalent”)(the “Maximum Strategic
Alliance Fee”) received by the Company from such Strategic Alliance. Payment for a cash based
Strategic Alliance will be made at the time of receipt of such cash by the Company. Payment for
a Cash Equivalent based Strategic Alliance will be paid from the revenues generated from Sales
as a result of the Strategic Alliance at a rate of three percent (3.0%) of such revenues until the
entire Maximum Strategic Alliance Fee has been paid. In addition, you will be eligible to
receive an amount up to the Maximum Sales Fee set forth in Paragraph 2(c) above for any Sales
resulting from the Cash Equivalent Strategic Alliance.
(f). The actual earning of and apportionment of a fee earned pursuant to this
Paragraph 2 will be conclusively determined by a committee composed of three (3) advisors
and/or directors selected by the Company. The only limitation on the selection of committee
members will be that they may not have a direct personal financial interest in the fee on which
they are deciding. If there are not three such advisors or directors available to serve, the
Company may, in its discretion, select other persons to serve as the committee. The incentive
fees described in this letter are intended to be a maximum, and to be apportioned among all
Advisors who work on a particular Sale, M&A Transaction or Strategic Alliance (collectively,
“Transactions”); that is, if more than one Advisor works on any Transaction, then the incentive
fee for that Transaction will be apportioned among all Advisors who worked on the Transaction.
The committee will be guided in its deliberations by the following guidelines as to the earning or
apportionment, if any, of a fee: up to 25% of the fee will generally be apportioned for each of the
following functions, (i) origination (which generally means the identification of, and
introduction at an appropriate level to, a Qualified Prospect), (ii) development, (iii) closing, and

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(iv) general assistance. To be eligible for earning an incentive fee, a Transaction must be
consummated no later than one year from the date that the Qualified Prospect is first identified to
the Company by the Advisor; provided, however, that if at the end of this one-year period active
discussions are ongoing with a Qualified Prospect as to a Transaction, then this one-year period
shall be extended for so long as the discussions continue actively ongoing, but in no event shall
the extension last for more than an additional one year.
(g). To the extent that an incentive fee under this Paragraph 2 is payable in
cash, you may elect to take any such compensation earned by you all or part in cash or in the
form of a grant of common stock, with the per share value of the common stock set at its fair
market value as determined by the Company as of the time of the consummation of the
applicable Transaction.
3. Cash Compensation; Reimbursement of Expenses. As additional consideration
for serving as a member of the Company’s Advisory Board, you shall be entitled to an annual
payment of one thousand ($1,000) dollars and shall be reimbursed for all reasonable business
expenses incurred on behalf of the Company, provided you have received the prior approval of the
Chief Executive Officer for such expenses and upon the submission to the Company of appropriate
documentation with respect thereto.

4. Confidential Information. As an Advisory Board Member to the Company,

you will have access to certain Company confidential and proprietary information. To protect the
interests of the Company, you agree that all such information, as well as that which you
previously became aware of through your discussions with the Company’s management,
directors, employees, agents or advisors, will remain the sole and exclusive property of the
Company and you will use or disclose such information only to the extent required to perform
services for the Company as an Advisory Board member.

Further, with respect to inventions and proprietary rights discussed or developed

by the Advisory Board, or you in your capacity as an Advisory Board member, you agree to
assign to the Company all right, title and interest in and to any and all such inventions or
proprietary rights. Upon your termination as an Advisory Board member, you agree to deliver to
the person designated by the Company all originals and copies of all documents and other
property of the Company in your possession, under your control or to which you may have
access. You also agree not to reproduce or appropriate for your own use, or for the use of others,
any Company property, proprietary rights or inventions.

5. Representations. By accepting this offer, you represent and warrant that your
relationship with the Company will not violate any agreements, obligations or understandings
that you may have with any current or prior employer or other third party (collectively, “Third
Parties”). You agree not to make any unauthorized disclosure to the Company or use on behalf
of the Company any confidential information belonging to any Third Party (except in accordance
with agreements between the Company and any such Third Party). You also warrant that you do
not possess any property containing a Third Party’s confidential and proprietary information. Of
course, during your relationship with the Company, you may make use of information generally
known and used by persons with training and experience comparable to your own, and

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information which is common knowledge in the industry or is otherwise legally available in the
public domain.

5. Complete Agreement. This letter agreement constitutes the complete, final and
exclusive embodiment of the entire agreement between you and the Company with respect to the
terms and conditions of your membership on the Advisory Board, and it supersedes any other
agreements or promises made to you by anyone, whether oral or written. This letter agreement
will be construed and interpreted in accordance with the laws of the State of ____________.
This letter agreement may be modified or amended only in a writing signed by the parties to this
agreement.

6. Dispute Resolution. In the event of any dispute or claim relating to or arising

out of the your relationship with the Company, this Agreement, or the termination with the
Company for any reason (including, but not limited to, any claims of breach of contract,
wrongful termination or age, disability or other discrimination), any dispute or claim shall be
fully, finally and exclusively resolved by binding arbitration conducted by an arbitration forum
selected by the parties, but if there is not agreement as to the forum, then by the American
Arbitration Association in _________ County, ____________. You and the Company hereby
knowingly and willingly waive their respective rights to have any such disputes or claims tried
by a judge or jury. Any party seeking to set aside this arbitration agreement by judicial action
shall be responsible for all of the fees and costs, without limitation, of the party defending
against such action, irrespective of the outcome of such judicial action.

7. At-Will Relationship/Independent Contractor. While we look forward to a

long and profitable relationship, should you decide to accept our offer, you will be an at-will
advisor/independent contractor to the Company and not an employee, which means the
relationship can be terminated by either of us for any reason and at any time. Accordingly, you
shall be responsible for payment of all taxes for remuneration received under this Agreement,
including Federal and State income tax, Social Security tax, Unemployment Insurance tax, and
any other taxes or business license fees as required. Any statements or representations to the
contrary (and, indeed, any statements contradicting any provision in this letter) should be
regarded by you as ineffective. Further, your participation in any stock option or compensatory
program is not to be regarded as assuring you a continuing relationship for any particular period
of time. If this Agreement is terminated by either of us for any reason (with or without cause or
the existence of a breach), then you shall continue to receive any incentive fee that you would
otherwise be entitled to under paragraph 2 of this Agreement, for a period of one year from the
date of the termination of this Agreement; provided, however that if this Agreement is
terminated by the Company because you have breached this Agreement, then the Company may
offset any damages it has incurred against any amounts owed to you under this Agreement.

8. Indemnification. The Company will indemnify you if you are a party or are
threatened to be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right of
the Company) by reason of the fact that you are or were a member of the Company’s Advisory
Board, against expenses, judgments, fines and amounts paid in settlement actually and

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reasonably incurred by you in connection with such action or proceeding if you acted in good
faith and in a manner you believed to be in the best interests of the Company, and with respect to
any criminal action or proceeding, had no reasonable cause to believe your conduct was
unlawful.

We hope you accept our offer, and we look forward to a productive and enjoyable
working relationship.

Sincerely,

The Company

By:
Its Named Officer

ACCEPTED AND AGREED:

By:

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