Exhibit 10.1
 

AMENDED AND RESTATED

LUFKIN INDUSTRIES, INC.
INCENTIVE STOCK COMPENSATION PLAN 2000

SECTION 1. Purpose of the Plan.

The Lufkin Industries, Inc. Incentive Stock Compensation Plan 2000 (the “Plan”)
is intended to promote the interests of Lufkin Industries, Inc., a Delaware
corporation (the “Company”), by encouraging officers, employees, directors and
consultants of the Company and its Affiliates to acquire or increase their
equity interest in the Company and to provide a means whereby they may develop a
sense of proprietorship and personal involvement in the development and
financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company thereby advancing the
interests of the Company and its stockholders. The Plan is also contemplated to
enhance the ability of the Company and its Affiliates to attract and retain the
services of individuals who are essential for the growth and profitability of
the Company.

SECTION 2. Definitions.

As used in the Plan, the following terms shall have the meanings set forth
below:

“Affiliate” shall mean (i) any “parent corporation” of the Company (as defined
in Section 424(e) of the Code) and any “subsidiary corporation” of any such
corporation (as defined in Section 424(f) of the Code), (ii) any entity that,
directly or through one or more intermediaries, is controlled by the Company,
and (iii) any entity in which the Company has a significant equity interest, as
determined by the Committee.

“Award” shall mean any Option, Restricted Stock, Performance Award, Phantom
Shares, Bonus Shares, Other Stock-Based Award or Cash Award.

“Award Agreement” shall mean any agreement, contract, or other instrument or
document (written or electronic) evidencing any Award, which may, but need not,
be executed or acknowledged by a Participant.

“Board” shall mean the Board of Directors of the Company.

“Bonus Shares” shall mean an award of Shares granted pursuant to Section 6(d) of
the Plan.

“Cash Award” shall mean an award payable in cash granted pursuant to Section
6(f) of the Plan.

“Change in Control” shall mean the occurrence of any one of the following
events:

(a) any “person,” as such term is used in Section 13(d) and 14(d) of the
Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under an executive benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company) together with its
“Affiliates” and “Associates”, as such term is defined in Rule 12b-2 of the
Exchange Act, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the Company’s common stock or of the combined voting
power of the Company’s then outstanding securities entitled to vote generally in
the election of directors;

(b) during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this definition)
whose election by the Board or nomination for election by the Company’s
shareholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;

(c) the shareholders of the Company approve a merger or consolidation of the
Company with any other company other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 65% of
the combined voting power of the voting securities of the Company (or such
surviving entity) outstanding immediately after such merger or consolidation, or
(B) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no “person” (as hereinabove defined)
acquires more than 25% of the combined voting power of the Company’s then
outstanding securities; or

(d) the shareholders of the Company adopt a plan of complete liquidation of the
Company or approve an agreement for the sale, exchange or disposition by the
Company of “all or a significant portion of the Company’s assets,” which for
this purpose shall mean a sale or other disposition transaction or series of
related transactions involving assets of the Company or any subsidiary
(including the stock of any subsidiary) in which the value of the assets or
stock being sold or otherwise disposed of (as measured by the purchase price
being paid therefore or by such other method as the Board determines is
appropriate in a case where there is no readily ascertainable purchase price)
constitutes more than 35% of the fair market value of the Company (as
hereinafter defined). For purposes of the preceding sentence, the “fair market
value of the Company” shall be the aggregate market value of the outstanding
shares of common stock of the Company (on a fully diluted basis) plus the
aggregate market value of the Company’s other outstanding equity securities. The
aggregate market value of the shares of common stock of the Company shall be
determined by multiplying the number of shares of the Company’s common stock (on
a fully diluted basis) outstanding on the date of the execution and delivery of
a definitive agreement with respect to the transaction or series of related
transactions (the “Transaction Date”) by the market value per share immediately
preceding the Transaction Date or by such other method as the Board shall
reasonably determine is appropriate. The aggregate market value of any other
equity securities of the Company shall be determined in a manner similar to that
prescribed in the immediately preceding sentence for determining the aggregate
market value of the shares of common stock of the Company or by such other
method as the Board shall reasonably determine is appropriate.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations thereunder.

“Committee” shall mean the committee appointed by the Board to administer the
Plan or, if none, the Board.

“Consultant” shall mean any individual, other than a Director or an Employee,
who renders consulting services to the Company or an Affiliate for a fee.

“Director” shall mean a “non-employee director” of the Company, as defined in
Rule 16b-3.

“Employee” shall mean any employee of the Company or an Affiliate.

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

“Fair Market Value” shall mean, with respect to Shares, the closing sales price
of a Share on the applicable date (or if there is no trading in the Shares on
such date, on the next preceding date on which there was trading) as reported in
The Wall Street Journal (or other reporting service approved by the Committee).
In the event the Shares are not publicly traded at the time a determination of
its fair market value is required to be made hereunder, the determination of
fair market value shall be made in good faith by the Committee.

“Option” shall mean an option granted under Section 6(a) of the Plan. Options
granted under the Plan may constitute “incentive stock options” for purposes of
Section 422 of the Code or nonqualified stock options.

“Other Stock-Based Award” shall mean an award granted pursuant to Section 6(g)
of the Plan that is not otherwise specifically provided for, the value of which
is based in whole or in part upon the value of a Share.

“Participant” shall mean any Director, Employee or Consultant granted an Award
under the Plan.

“Performance Award” shall mean any right granted under Section 6(c) of the Plan.

“Performance Objectives” means the objectives, if any, established by the
Committee that are to be achieved with respect to an Award granted under this
Plan, which may be described in terms of Company-wide objectives, in terms of
objectives that are related to performance of a division, subsidiary, department
or function within the Company or an Affiliate in which the Participant
receiving the Award is employed or in individual or other terms, and which will
relate to the period of time determined by the Committee. The Performance
Objectives intended to qualify under Section 162(m) of the Code shall be with
respect to one or more of the following: earnings per share; earnings before
interest, taxes, depreciation and amortization expenses (“EBITDA”); earnings
before interest and taxes (“EBIT”); EBITDA, EBIT or earnings before taxes and
unusual or nonrecurring items as measured either against the annual budget or as
a ratio to revenue; market share; sales; costs; return on equity; operating cash
flow; discretionary cash flow; return on net capital employed; and stock price
performance. Which objectives to use with respect to an Award, the weighting of
the objectives if more than one is used, and whether the objective is to be
measured against a Company-established budget or target, an index or a peer
group of companies, shall be determined by the Committee in its discretion at
the time of grant of the Award. A Performance Objective need not be based on an
increase or a positive result and may include, for example, maintaining the
status quo or limiting economic losses.

“Person” shall mean individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.

“Phantom Shares” shall mean an Award of the right to receive Shares issued at
the end of a Restricted Period which is granted pursuant to Section 6(e) of the
Plan.

“Restricted Period” shall mean the period established by the Committee with
respect to an Award during which the Award either remains subject to forfeiture
or is not exercisable by the Participant.

“Restricted Stock” shall mean any Share, prior to the lapse of restrictions
thereon, granted under Sections 6(b) of the Plan.

“Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the Exchange
Act, or any successor rule or regulation thereto as in effect from time to time.

“SEC” shall mean the Securities and Exchange Commission, or any successor
thereto.

“Shares” or “Common Shares” or “Common Stock” shall mean the common stock of the
Company, $1.00 par value, and such other securities or property as may become
the subject of Awards under the Plan.

SECTION 3. Administration.

The Plan shall be administered by the Committee. A majority of the Committee
shall constitute a quorum, and the acts of the members of the Committee who are
present at any meeting thereof at which a quorum is present, or acts unanimously
approved by the members of the Committee in writing, shall be the acts of the
Committee. Subject to the following, the Committee, in its sole discretion, may
delegate any or all of its powers and duties under the Plan, including the power
to grant Awards under the Plan, to the Chief Executive Officer of the Company,
subject to such limitations on such delegated powers and duties as the Committee
may impose. Upon any such delegation all references in the Plan to the
“Committee”, other than in Section 7, shall be deemed to include the Chief
Executive Officer; provided, however, that such delegation shall not limit the
Chief Executive Officer’s right to receive Awards under the Plan.
Notwithstanding the foregoing, the Chief Executive Officer may not grant Awards
to, or take any action with respect to any Award previously granted to, a person
who is an officer or a member of the Board. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to a Participant; (iii) determine the number of Shares to
be covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or suspended
and the method or methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property, and
other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement relating
to an Award made under the Plan; (viii) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive, and binding
upon all Persons, including the Company, any Affiliate, any Participant, any
holder or beneficiary of any Award, any stockholder and any Employee.

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided in Section 4(c), the
number of Shares with respect to which Awards may be granted under the Plan
shall be 1,800,000, plus an additional number of 1,000,000 “new” Shares
available with respect to which Options may be granted under the Plan. If any
Award is exercised, paid, forfeited, terminated or canceled without the delivery
of Shares, then the Shares covered by such Award, to the extent of such payment,
exercise, forfeiture, termination or cancellation, shall again be Shares with
respect to which Awards may be granted.

(b) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to
an Award may consist, in whole or in part, of authorized and unissued Shares or
of treasury Shares.

(c) Adjustments. In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that an adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(ii) the number and type of Shares (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the holder
of an outstanding Award; provided, that the Committee shall not take any action
otherwise authorized under this subparagraph (c ) to the extent that such action
would cause (A) the application of Section 409A or 162(m) of the Code to the
Award or (B) create adverse tax consequences under Section 409A or 162(m) of the
Code should either or both of those Code sections apply to the Award.

SECTION 5. Eligibility.

Any Employee, Director or Consultant shall be eligible to be designated a
Participant and receive an Award under the Plan.

SECTION 6. Awards.

(a) Options. Subject to the provisions of the Plan, the Committee shall have the
authority to determine the Participants to whom Options shall be granted, the
number of Shares to be covered by each Option, the purchase price therefor and
the conditions and limitations applicable to the exercise of the Option,
including the following terms and conditions and such additional terms and
conditions, as the Committee shall determine, that are not inconsistent with the
provisions of the Plan.

(i) Exercise Price. The purchase price per Share purchasable under an Option
shall be determined by the Committee at the time the Option is granted, but
shall not be less than the Fair Market Value per Share on such grant date.

(ii) Time and Method of Exercise. The Committee shall determine the time or
times at which an Option may be exercised in whole or in part (which may include
the achievement of one or more Performance Objectives), and the method or
methods by which, and the form or forms (which may include, without limitation,
cash, check acceptable to the Company, Shares already-owned for more than six
months, outstanding Awards, Shares that would otherwise be acquired upon
exercise of the Option, a “cashless-broker” exercise through procedures approved
by the Company, other securities or other property, loans, notes approved by the
Committee, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which payment of the
exercise price with respect thereto may be made or deemed to have been made.

(iii) Incentive Stock Options. The terms of any Option granted under the Plan
intended to be an incentive stock option shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision, and any
regulations promulgated thereunder. Incentive stock options may be granted only
to employees of the Company and its parent corporation and subsidiary
corporations, within the meaning of Section 424 of the Code. To the extent the
aggregate Fair Market Value of the Shares (determined as of the date of grant)
of an Option to the extent exercisable for the first time during any calendar
year (under all plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such Option Shares in excess of $100,000 shall be nonqualified
stock options. The maximum number of Shares with respect to which incentive
stock options may be granted under the Plan shall not exceed 300,000 Shares. No
Option may be granted as an incentive stock option after the 10th anniversary of
the date the Plan was adopted by the Board. The Plan was adopted by the Board on
May 4, 2000.

(iv) Limits. The maximum number of Options that may be granted to any
Participant during any calendar year shall not exceed 300,000 Shares.

(b) Restricted Stock. Subject to the provisions of the Plan, the Committee shall
have the authority to determine the Participants to whom Restricted Stock shall
be granted, the number of Shares of Restricted Stock to be granted to each such
Participant, the duration of the Restricted Period during which, and the
conditions, including Performance Objectives, if any, under which if not
achieved, the Restricted Stock may be forfeited to the Company, and the other
terms and conditions of such Awards. Unless subject to the achievement of
Performance Objectives or a special determination is made by the Committee as to
a shorter Restricted Period, the Restricted Period shall not be less than three
years.

(i) Dividends. Dividends paid on Restricted Stock may be paid directly to the
Participant, may be subject to risk of forfeiture and/or transfer restrictions
during any period established by the Committee or sequestered and held in a
bookkeeping cash account (with or without interest) or reinvested on an
immediate or deferred basis in additional shares of Common Stock, which credit
or shares may be subject to the same restrictions as the underlying Award or
such other restrictions, all as determined by the Committee in its discretion.

(ii) Registration. Any Restricted Stock may be evidenced in such manner as the
Committee shall deem appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates. In the event
any stock certificate is issued in respect of Restricted Stock granted under the
Plan, such certificate shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock.

(iii) Forfeiture and Restrictions Lapse. Except as otherwise determined by the
Committee or the terms of the Award that granted the Restricted Stock, upon
termination of a Participant’s employment (as determined under criteria
established by the Committee) for any reason during the applicable Restricted
Period, all Restricted Stock shall be forfeited by the Participant and
reacquired by the Company. Unrestricted Shares, evidenced in such manner as the
Committee shall deem appropriate, shall be issued to the holder of Restricted
Stock promptly after the applicable restrictions have lapsed or otherwise been
satisfied.

(iv) Transfer Restrictions. During the Restricted Period, Restricted Stock will
be subject to the limitations on transfer as provided in Section 6(h)(iii).

(v) Limits. The maximum number of Shares of Restricted Stock that may be granted
to any Participant during any calendar year shall not exceed 150,000 Shares.

(c) Performance Awards. The Committee shall have the authority to determine the
Participants who shall receive a Performance Award, which shall be denominated
as a cash amount (e.g., $100 per award unit) at the time of grant and confer on
the Participant the right to receive payment of such Award, in whole or in part,
upon the achievement of such Performance Objectives during such performance
periods as the Committee shall establish with respect to the Award.

(i) Terms and Conditions. Subject to the terms of the Plan and any applicable
Award Agreement, the Committee shall determine the Performance Objectives to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award and the amount of any payment or transfer to
be made pursuant to any Performance Award.

(ii) Payment of Performance Awards. Performance Awards, to the extent earned,
shall be paid (in cash and/or in Shares, in the sole discretion of the
Committee) in a lump sum following the close of the performance period.

(iii) Limits. The maximum value of Performance Awards that may be granted to any
Participant during any calendar year shall not exceed $1,000,000.

(d) Bonus Shares. The Committee shall have the authority, in its discretion, to
grant Bonus Shares to Participants. Each Bonus Share shall constitute a transfer
of an unrestricted Share to the Participant, without other payment therefor, as
additional compensation for the Participant’s services to the Company. Bonus
Shares shall be in lieu of a cash bonus that otherwise would be granted to the
Participant.

(e) Phantom Shares. The Committee shall have the authority to grant Awards of
Phantom Shares to Participants upon such terms and conditions as the Committee
may determine.

(i) Terms and Conditions. Each Phantom Share Award shall constitute an agreement
by the Company to issue or transfer a specified number of Shares or pay an
amount of cash equal to a specified number of Shares, or a combination thereof
to the Participant in the future, subject to the fulfillment during the
Restricted Period of such conditions, including Performance Objectives, if any,
as the Committee may specify at the date of grant. During the Restricted Period,
the Participant shall not have any right to transfer any rights under the
subject Award, shall not have any rights of ownership in the Phantom Shares and
shall not have any right to vote such shares.

(ii) Dividends. Any Phantom Share award may provide that amount equal to any or
all dividends or other distributions paid on Shares during the Restricted Period
be credited in a cash bookkeeping account (without interest) or that equivalent
additional Phantom Shares be awarded, which account or shares may be subject to
the same restrictions as the underlying Award or such other restrictions as the
Committee may determine.

(iii) Limits. The maximum number of Phantom Shares that may be granted to any
Participant during any calendar year shall not exceed 150,000.

(f) Cash Awards. The Committee shall have the authority to determine the
Participants to whom Cash Awards shall be granted, the amount, and the terms or
conditions, if any, as additional compensation for the Participant’s services to
the Company or its Affiliates. A Cash Award may be granted (simultaneously or
subsequently) separately or in tandem with another Award and may entitle a
Participant to receive a specified amount of cash from the Company upon such
other Award becoming taxable to the Participant, which cash amount may be based
on a formula relating to the anticipated taxable income associated with such
other Award and the payment of the Cash Award.

(g) Other Stock-Based Awards. The Committee may grant to Participants an Other
Stock-Based Award, which shall consist of a right which is an Award denominated
or payable in, valued in whole or in part by reference to, or otherwise based on
or related to, Shares as is deemed by the Committee to be consistent with the
purposes of the Plan. Subject to the terms of the Plan, including the
Performance Objectives, if any, applicable to such Award, the Committee shall
determine the terms and conditions of any such Other Stock-Based Award. The
maximum number of Shares or the value for which Other Stock-Based Awards may be
granted to any Participant during any calendar year shall not exceed 300,000
Shares, if the Award is in Shares, or $1,000,000, if the Award is denominated in
dollars.

(h) General.

(i) Awards May Be Granted Separately or Together. Awards may, in the discretion
of the Committee, be granted either alone or in addition to, in tandem with, or
in substitution for any other Award granted under the Plan or any award granted
under any other plan of the Company or any Affiliate. Awards granted in addition
to or in tandem with other Awards or awards granted under any other plan of the
Company or any Affiliate may be granted either at the same time as or at a
different time from the grant of such other Awards or awards.

(ii) Forms of Payment by Company Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may be
made in such form or forms as the Committee shall determine, including, without
limitation, cash, Shares, other securities, other Awards or other property, or
any combination thereof, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments.

(iii) Limits on Transfer of Awards.

(A) Except as provided in (C) below, each Award, and each right under any Award,
shall be exercisable only by the Participant during the Participant’s lifetime,
or by the person to whom the Participant’s rights shall pass by will or the laws
of descent and distribution.

(B) Except as provided in (C) below, no Award and no right under any such Award
may be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of descent and
distribution (or, in the case of Restricted Stock, to the Company) and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or any
Affiliate.

(C) Notwithstanding anything in the Plan to the contrary, to the extent
specifically provided by the Committee with respect to a grant, a nonqualified
stock option may be transferred to immediate family members or related family
trusts, or similar entities on such terms and conditions as the Committee may
establish.

(iv) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee; provided, that in no event shall the term of any
Award exceed a period of 10 years from the date of its grant.

(v) Share Certificates. All certificates for Shares or other securities of the
Company or any Affiliate delivered under the Plan pursuant to any Award or the
exercise thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the SEC, any stock exchange upon which
such Shares or other securities are then listed, and any applicable federal or
state laws, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

(vi) Consideration for Grants. Awards may be granted for no cash consideration
or for such consideration as the Committee determines including, without
limitation, such minimal cash consideration as may be required by applicable
law.

(vii) Delivery of Shares or other Securities and Payment by Participant of
Consideration. No Shares or other securities shall be delivered pursuant to any
Award until payment in full of any amount required to be paid pursuant to the
Plan or the applicable Award Agreement (including, without limitation, any
exercise price, tax payment or tax withholding) is received by the Company. Such
payment may be made by such method or methods and in such form or forms as the
Committee shall determine, including, without limitation, cash, Shares, other
securities, other Awards or other property, withholding of Shares, cashless
exercise with simultaneous sale, or any combination thereof; provided that the
combined value, as determined by the Committee, of all cash and cash equivalents
and the Fair Market Value of any such Shares or other property so tendered to
the Company, as of the date of such tender, is at least equal to the full amount
required to be paid pursuant to the Plan or the applicable Award Agreement to
the Company.

SECTION 7. Amendment and Termination.

Except to the extent prohibited by applicable law and unless otherwise expressly
provided in an Award Agreement or in the Plan:

(a) Amendments to the Plan. Except as required by applicable law or the rules of
the principal securities market on which the shares are traded and subject to
paragraph (b) below, the Board or the Committee may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of any stockholder,
Participant, other holder or beneficiary of an Award, or other Person; provided,
however, no such amendment may be made without stockholder approval, if such
amendment would (i) materially increase the number of Shares authorized under
the Plan or (ii) materially increase the Persons eligible to receive Awards
under the Plan.

(b) Amendments to Awards. Subject to paragraph (d) below, the Committee may
waive any conditions or rights under, amend any terms of, or alter any Award
theretofore granted, provided no change, other than pursuant to paragraph (c),
in any Award shall reduce the benefit to Participant without the consent of such
Participant.

(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. Subject to paragraph (d) below, the Committee is hereby authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) of the Plan) affecting the
Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.

(d) Section 162(m). The Committee, in its sole discretion and without the
consent of the Participant, may amend (i) any stock-based Award to reflect (1) a
change in corporate capitalization, such as a stock split or dividend, (2) a
corporate transaction, such as a corporate merger, a corporate consolidation,
any corporate separation (including a spinoff or other distribution of stock or
property by a corporation), any corporate reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code), (3) any partial or complete corporate liquidation, or (4) a change in
accounting rules required by the Financial Accounting Standards Board and (ii)
any Award that is not intended to meet the requirements of Section 162(m) of the
Code, to reflect significant event that the Committee, in its sole discretion,
believes to be appropriate to reflect the original intent in the grant of the
Award. With respect to an Award that is subject to Section 162(m) of the Code,
the Committee (i) shall not take any action that would disqualify such Award and
(ii) must first certify that the Performance Objectives, if applicable, have
been achieved before the Award may be paid.

SECTION 8. Change in Control.

(a) Subject to paragraph (b) below, in the event of a Change in Control of the
Company all outstanding Awards automatically shall become fully vested
immediately prior to such Change in Control (or such earlier time as set by the
Committee), all restrictions, if any, with respect to such Awards shall lapse,
all performance criteria, if any, with respect to such Awards shall be deemed to
have been met in full (at the highest level), and unless the Company survives as
an independent publicly traded company, all Options outstanding at the time of
the event or transaction shall terminate, except to the extent provision is made
in writing in connection with such event or transaction for the continuation of
the Plan and/or the assumption of the Options theretofore granted, or for the
substitution for such Options of new options covering the stock of a successor
entity, or the parent or subsidiary thereof, with appropriate adjustments as to
the number and kinds of shares and exercise prices, in which event the Plan and
Options theretofore granted shall continue in the manner and under the terms so
provided.

(b) Notwithstanding anything to the contrary in this Plan, if a Participant is a
“disqualified individual” (as defined in Section 280G(c) of the Code) and the
accelerated vesting of an Award and/or the termination of the Restricted Period
occurs with respect to a Change in Control, together with any other payments
which the Participant has the right to receive from any Person, whether or not
under this Plan, would constitute a “parachute payment” (as defined in Section
280G(b)(2) of the Code), such accelerated vesting and/or termination of the
Restricted Period provided under the paragraph above shall be reduced to the
extent necessary (beginning with Options) so that the present value thereof (as
determined for parachute purposes) to the Participant will be $1.00 less than
three times the Participant’s “base amount” (as defined in Section 280G of the
Code) but only if such reduction produces a better net after-tax position to the
Participant. Such determination shall be made by the Company in good faith.

SECTION 9. General Provisions.

(a) No Rights to Awards. No Director, Employee, Consultant or other Person shall
have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Consultants, or holders or beneficiaries
of Awards. The terms and conditions of Awards need not be the same with respect
to each recipient.

(b) Withholding. The Company or any Affiliate is authorized to withhold from any
Award, from any payment due or transfer made under any Award or under the Plan
or from any compensation or other amount owing to a Participant the amount (in
cash, Shares, other securities, Shares that would otherwise be issued pursuant
to such Award, other Awards or other property) of any applicable taxes payable
in respect of an Award, its exercise, the lapse of restrictions thereon, or any
payment or transfer under an Award or under the Plan and to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. Notwithstanding the above, a
Participant who is subject to Rule 16b-3 may direct the Company to satisfy such
Participant’s tax withholding obligation through the “constructive” tender of
already-owned Shares or the withholding of Shares otherwise to be acquired upon
the exercise or payment of such Award.

(c) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

(d) Governing Law. The validity, construction, and effect of the Plan and any
rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware, without regard to conflicts of laws
principles, and applicable federal law.

(e) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to the applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, Person or Award and the remainder of the Plan and any such Award
shall remain in full force and effect.

(f) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance of transfer or such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary in
connection with the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.

(g) No Trust or Fund Created. Neither the Plan nor the Award shall create or be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any general unsecured creditor of the Company or any
Affiliate.

(h) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares or whether such fractional Shares or any rights thereto
shall be canceled, terminated, or otherwise eliminated.

(i) Headings. Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.

SECTION 10. Designation of Beneficiary.

Each Participant to whom an Award has been made under this Plan may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to exercise any rights or receive any payment that under the
terms of such Award may become exercisable or payable on or after the
Participant’s death. At any time, and from time to time, any such designation
may be changed or cancelled by the Participant without the consent of any such
beneficiary. Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the Committee. If no beneficiary has been named by a deceased
Participant, or the designated beneficiaries have predeceased the Participant,
the beneficiary shall be the Participant’s estate. If a Participant designates
more than one beneficiary, any such exercise or payment under this Plan shall be
made in equal shares unless the Participant has designated otherwise, in which
case the exercise or payment shall be made in the shares designated by the
Participant.

SECTION 11. Effective Date of the Plan.

The Plan shall become effective upon its adoption by the Board; however, no
Award may become exercisable or payable unless, and until the Plan is approved
by the stockholders of the Company within 12 months of the date it is adopted by
the Board. In the event such stockholder approval is not obtained, all Awards
then outstanding on the first anniversary of the date adopted by the Board shall
be automatically cancelled without payment.

SECTION 12. Term of the Plan.

The Plan shall be effective from the time of its adoption by the Board and shall
continue until May 31, 2017. However, unless otherwise expressly provided in the
Plan or in an applicable Award Agreement, any Award granted prior to such
termination, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under such Award, shall extend beyond such termination
date.