HEI Exhibit 10.6

 

HAWAIIAN ELECTRIC INDUSTRIES, INC.

2010 EQUITY AND INCENTIVE PLAN

 

As Amended and Restated November 16, 2010

 

Section 1.  Purpose of Plan.

 

The name of this Plan is the Hawaiian Electric Industries, Inc. 2010 Equity and
Incentive Plan (the “Plan”). The purpose of the Plan is to provide an additional
incentive to selected employees of the Company or its Affiliates whose
contributions are essential to the growth and success of the Company’s business,
in order to strengthen the commitment of such persons to the Company and its
Affiliates, motivate such persons to faithfully and diligently perform their
responsibilities and attract and retain competent and dedicated persons whose
efforts will result in the long-term growth and profitability of the Company. To
accomplish such purposes, the Plan provides that the Company may grant Options,
Share Appreciation Rights, Restricted Shares, Restricted Stock Units,
Performance Shares, Other Share-Based Awards, Other Cash-Based Awards or any
combination of the foregoing.

 

As of the Effective Date, no new awards shall be made under the Company’s 1987
Stock Option and Incentive Plan, as amended from time to time.

 

Section 2.  Definitions.

 

For purposes of the Plan, the following terms shall be defined as set forth
below:

 

(a)           “Administrator” means the Board, or, if and to the extent the
Board does not administer the Plan, the Committee in accordance with Section 3
hereof.

 

(b)           “Affiliate” means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Person specified. An entity shall be deemed an Affiliate of
the Company for purposes of this definition only for such periods as the
requisite ownership or control relationship is maintained.

 

(c)           “Award” means any Option, Share Appreciation Right, Restricted
Share, Restricted Stock Unit, Performance Share, Other Share-Based Award or
Other Cash-Based Award granted under the Plan.

 

(d)           “Award Agreement” means any written agreement, contract or other
instrument or document evidencing an Award.

 

(e)           “Bylaws” mean the amended and restated bylaws of the Company, as
may be amended and/or restated from time to time.

 

(f)            “Beneficial Owner” (or any variant thereof) has the meaning
defined in Rule 13d-3 under the Exchange Act.

 

(g)           “Board” means the Board of Directors of the Company.

 

(h)           “Cause” shall have the meaning assigned to such term in any
individual employment or severance agreement or Award Agreement with the
Participant or, if no such agreement exists or the agreement does not define
“Cause,” Cause shall mean (i) the refusal or neglect of the Participant to
perform substantially his or her employment-related duties, (ii) the
Participant’s personal dishonesty, incompetence, willful misconduct or breach of
fiduciary duty, (iii) the Participant’s indictment for, conviction of or
entering a plea of guilty or nolo contendere to a crime constituting a felony or
his or her willful violation of any applicable law (other than a traffic
violation or other offense or violation outside of the course of employment
which in no way adversely affects the Company and its Subsidiaries or their
reputation or the ability of the Participant to perform his or her
employment-related duties or to represent the Company or any Subsidiary of the
Company that employs such Participant), (iv) the Participant’s failure to
reasonably cooperate, following a request to do so by the Company, in any
internal or governmental investigation of the Company or any of its Subsidiaries
or (v) the Participant’s material breach of any written covenant or agreement
with the Company or any of its Subsidiaries not to disclose any information
pertaining to the Company or such Subsidiary or not to compete or interfere with
the Company or such Subsidiary.

 

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(i)            “Certificate of Incorporation” means the amended and restated
certificate of incorporation of the Company, as may be further amended and/or
restated from time to time.

 

(j)            “Change in Capitalization” means any (i) merger, consolidation,
reclassification, recapitalization, spin-off, spin-out, repurchase or other
reorganization or corporate transaction or event, (ii) dividend (whether in the
form of cash, Common Stock or other property), stock split or reverse stock
split, (iii) combination or exchange of shares, (iv) other change in corporate
structure or (v) declaration of a special dividend (including a cash dividend)
or other distribution, which, in any such case, the Administrator determines, in
its sole discretion, affects the Shares such that an adjustment pursuant to
Section 6 hereof is appropriate.

 

(k)           “Change in Control” shall be deemed to have occurred if an event
set forth in any one of the following paragraphs shall have occurred:

 

(i)            any Person is or becomes (other than in connection with a
transaction described in Paragraph (iii) below) the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or any of its Affiliates) representing more than thirty percent (30%) of
the combined voting power of the Company’s then outstanding securities; or

 

(ii)           during any period of two (2) consecutive years, individuals who
at the beginning of such period constitute the Board and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including without limitation a consent
solicitation, relating to the election of directors of the Company) whose
election by the Board or nomination for election by the Company’s shareholders
was approved by a vote of at least two-thirds (2/3) 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 a majority thereof; or

 

(iii)          consummation of a merger or consolidation of the Company or any
Subsidiary 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), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its Affiliates, more than fifty percent (50%) 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 acquires more than fifty percent (50%)
of the combined voting power of the Company’s then outstanding securities; or

 

(iv)          the shareholders of the Company approve a plan of complete
liquidation of the Company; or

 

(v)           there is consummated an agreement for the sale, disposition or
long-term lease by the Company of all or substantially all of the Company’s
assets.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred (1) by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
Common Stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
one or more entities which, singly or together, immediately following such
transaction or series of transactions, own all or substantially all of the
assets of the Company as constituted immediately prior to such transaction or
series of transactions, or (2) with respect to any Award subject to Section 409A
of the Code, unless the applicable event also constitutes a change in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company under
Section 409A(a)(2)(A)(v) of the Code and regulations thereunder.

 

(l)            “Code” means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.

 

(m)          “Committee” means any committee the Board may appoint to administer
the Plan or a subcommittee thereof. Subject to the discretion of the Board, the
Committee shall be composed entirely of individuals who meet the qualifications
of an “outside director” within the meaning of Section 162(m) of the Code, a
“non-employee director” within the meaning of Rule 16b-3 and any other
qualifications required by the applicable stock exchange on which the Common
Stock is traded. If at any time or to any extent the Board shall not administer
the Plan, then the functions of the Administrator specified in the Plan shall be
exercised by the Committee. Except as otherwise provided in the Certificate of
Incorporation or

 

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Bylaws, any action of the Committee with respect to the administration of the
Plan shall be taken by a majority vote at a meeting at which a quorum is duly
constituted or unanimous written consent of the Committee’s members.

 

(n)           “Common Stock” means the common stock, no par value per share, of
the Company.

 

(o)           “Company” means Hawaiian Electric Industries, Inc. (or any
successor corporation, except as the term “Company” is used in the definition of
“Change in Control” above).

 

(p)           “Covered Employee” shall have the meaning set forth in
Section 162(m) of the Code.

 

(q)           “Disability” means, with respect to any Participant, that such
Participant (i) as determined by the Administrator in its sole discretion, is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months, or (ii) is, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Company or an Affiliate
thereof.

 

(r)            “Effective Date” means the date as of which this Plan is approved
by the shareholders of the Company.

 

(s)           “Eligible Recipient” means any regular full-time employee of the
Company or any Affiliate of the Company who has been selected as an eligible
participant by the Administrator.

 

(t)            “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

 

u)            “Exercise Price” means, with respect to any Award under which the
holder may purchase Shares, the per share price at which a holder of such Award
granted hereunder may purchase Shares issuable upon exercise of such Award.

 

(v)           “Fair Market Value” means, as of any given date, with respect to
any Awards granted hereunder: (i) the closing sale price of a share of Common
Stock on such date on the national securities exchange on which the Company’s
equity securities are principally listed or traded, or, if on such date no trade
was conducted, the most recent preceding date on which there was such a trade;
(ii) if the shares of Common Stock are then traded in an over-the-counter
market, the average of the closing bid and asked prices for the shares of Common
Stock in such over-the-counter market for the last preceding date on which there
was a sale of such Common Stock in such market; (iii) the fair market value of a
share of Common Stock as determined in accordance with a method prescribed in
the applicable Award Agreement; or (iv) the fair market value of a share of
Common Stock as otherwise determined by the Administrator in the good faith
exercise of its discretion and, as required, in compliance with Section 409A of
the Code.

 

(w)          “Free Standing Rights” shall have the meaning as set forth in
Section 9 hereof.

 

(x)            “Good Reason” means any material reduction in the Participant’s
annual base compensation (except a reduction pursuant to across-the-board
reductions that similarly affect all similarly situated employees of the Company
or any Affiliate, as applicable).

 

(y)           “Incentive Stock Option” or “ISO” means any Option intended to be
an “incentive stock option” within the meaning of Section 422 of the Code.

 

(z)            “Non-Qualified Stock Option” or “NQSO” means any Option that is
not an Incentive Stock Option, including any Option that provides (as of the
time such Option is granted) that it will not be treated as an Incentive Stock
Option.

 

(aa)         “Option” means an option to purchase shares of Common Stock granted
pursuant to Section 8 hereof. An Option may be either an ISO or an NQSO.

 

(bb)         “Other Cash-Based Award” means a cash Award granted to a
Participant under Section 11 hereof, including cash awarded as a bonus or upon
the attainment of Performance Goals or otherwise as permitted under the Plan.

 

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(cc)         “Other Share-Based Award” means a right or other interest granted
to a Participant under the Plan that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related to, Common
Stock, including, but not limited to, unrestricted Shares, restricted stock
units, dividend equivalents or performance units, each of which may be subject
to the attainment of Performance Goals or a period of continued employment or
other terms or conditions as permitted under the Plan.

 

(dd)         “Participant” means any Eligible Recipient selected by the
Administrator, pursuant to the Administrator’s authority provided for in
Section 3 hereof, to receive grants of Options, Share Appreciation Rights,
Restricted Shares, Restricted Stock Units, Performance Shares, Other Share-Based
Awards, Other Cash-Based Awards or any combination of the foregoing, and, upon
his or her death, his or her successors, heirs, executors and administrators, as
the case may be.

 

(ee)         “Performance Goals” means performance goals based on one or more of
the following criteria: (i) total return to shareholders; (ii) earnings per
share of Common Stock; (iii) net income (before or after taxes); (iv) earnings
before all or any interest, taxes, depreciation and/or amortization (“EBIT”,
“EBITA”, or “EBITDA”); (v) gross revenue; (vi) return on assets; (vii) market
share; (viii) cost reduction goals; (ix) earnings from continuing operations,
levels of expense, cost or liability; (x) performance against operational
budgets; (xi) a Participant’s individual operational project goals; (xii) return
on average common equity; (xiii) individual performance goals; (xiv) free cash
flow; (xv) modified free cash flow (net income plus depreciation and
amortization less net capital expenditures); (xvi) shareholder value added;
(xvii) pre-tax, pre-provision income; (xviii) efficiency ratio; (xix) net charge
offs; and (xx) any combination of, or a specified increase or decrease of one or
more of the foregoing over a specified period. Where applicable, the Performance
Goals may be expressed in terms of attaining a specified level of the particular
criteria or the attainment of a percentage increase or decrease in the
particular criteria, and may be applied to one or more of the Company or
Affiliate thereof, or a division or strategic business unit of the Company, or
may be applied to the performance of the Company relative to a market index, a
group of other companies or a combination thereof, all as determined by the
Committee. The Performance Goals may include a threshold level of performance
below which no payment shall be made (or no vesting shall occur), levels of
performance at which specified payments shall be made (or specified vesting
shall occur), and a maximum level of performance above which no additional
payment shall be made (or at which full vesting shall occur). Each of the
foregoing Performance Goals shall be determined in accordance with generally
accepted accounting principles and shall be subject to certification by the
Committee; provided, that the Committee shall have the authority to make
equitable adjustments to the Performance Goals in recognition of unusual or
non-recurring events affecting the Company or any Affiliate thereof or the
financial statements of the Company or any Affiliate thereof, in response to
changes in applicable laws or regulations, or to account for items of gain, loss
or expense determined to be extraordinary or unusual in nature or infrequent in
occurrence or related to the disposal of a segment of a business or related to a
change in accounting principles, in any case to the extent such adjustment does
not cause a loss of deduction under Section 162(m) of the Code.

 

(ff)           “Performance Shares” means Shares that are subject to
restrictions that lapse upon the attainment of specified performance objectives
and that are granted pursuant to Section 10 hereof.

 

(gg)         “Person” shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any Subsidiary thereof,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any Subsidiary thereof, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

 

(hh)         “Plan” shall have the meaning as set forth in Section 1 hereof.

 

(ii)           “Related Rights” shall have the meaning as set forth in Section 9
hereof.

 

(jj)           “Restricted Period” means any such period as may be set by the
Administrator commencing on the date of grant of an Award, subject to the
provisions of the Plan and the applicable Award Agreement, during which the
Participant shall not be permitted to sell, transfer, pledge or assign shares
subject to such Award granted under the Plan; provided, however, that the
Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant’s
termination of employment with the Company or any of its Affiliates, the
Participant’s death or Disability, or the occurrence of a Change in Control.

 

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(kk)         “Restricted Shares” means Shares granted pursuant to Section 10
hereof subject to certain restrictions that lapse at the end of a specified
period or periods.

 

(ll)           “Restricted Stock Units” means the right granted pursuant to
Section 10 hereof to receive Shares at the end of a specified deferral period or
periods and/or upon attainment of specified performance objectives.

 

(mm)       “Retirement” means a termination of a Participant’s employment, other
than for Cause, on or after the attainment of age fifty-five (55) with at least
five (5) years of continuous employment.

 

(nn)         “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act,
as amended from time to time.

 

(oo)         “Shares” means shares of Common Stock reserved for issuance under
the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a
merger, consolidation or other reorganization) security.

 

(pp)         “Share Appreciation Right” means the right pursuant to an Award
granted under Section 9 hereof to receive an amount equal to the excess, if any,
of (i) the aggregate Fair Market Value, as of the date such Award or portion
thereof is surrendered, of the Shares covered by such Award or such portion
thereof, over (ii) the aggregate Exercise Price of such Award or such portion
thereof.

 

(qq)         “Subsidiary” means, with respect to any Person, as of any date of
determination, any other Person as to which such first Person owns or otherwise
controls, directly or indirectly, more than fifty percent (50%) of the voting
shares or other similar interests or a sole general partner interest or managing
member or similar interest of such other Person. An entity shall be deemed a
Subsidiary of the Company for purposes of this definition only for such periods
as the requisite ownership or control relationship is maintained.

 

Section 3.  Administration.

 

(a)           The Plan shall be administered by the Administrator and shall be
administered in accordance with the requirements of Section 162(m) of the Code
(but only to the extent necessary and desirable to maintain qualification of
awards under the Plan under Section 162(m) of the Code) and, to the extent
applicable, Rule 16b-3. The Plan is intended to comply, and shall be
administered in a manner that is intended to comply, with Section 409A of the
Code and shall be construed and interpreted in accordance with such intent. To
the extent that an Award, issuance and/or payment is subject to Section 409A of
the Code, it shall be awarded and/or issued or paid in a manner that will comply
with Section 409A of the Code, including any applicable regulations or guidance
issued by the Secretary of the Treasury and the Internal Revenue Service with
respect thereto.

 

(b)           Pursuant to the terms of the Plan, the Administrator, subject, in
the case of any Committee, to any restrictions on the authority delegated to it
by the Board, shall have the power and authority, without limitation:

 

(1)           to select those Eligible Recipients who shall be Participants;

 

(2)           to determine whether and to what extent Options, Share
Appreciation Rights, Restricted Shares, Restricted Stock Units, Performance
Shares, Other Share-Based Awards, Other Cash-Based Awards or a combination of
any of the foregoing, are to be granted hereunder to Participants;

 

(3)           to determine the number of Shares to be covered by each Award
granted hereunder;

 

(4)           to determine the terms and conditions, not inconsistent with the
terms of the Plan, of each Award granted hereunder (including, but not limited
to, (i) the restrictions applicable to Restricted Shares or Restricted Stock
Units and the conditions under which restrictions applicable to such Restricted
Shares or Restricted Stock Units shall lapse, (ii) the Performance Goals or
other performance related objectives and periods applicable to Performance
Shares, (iii) the Exercise Price of each Award, (iv) the vesting schedule
applicable to each Award, (v) the number of Shares subject to each Award and
(vi) subject to the requirements of Section 409A of the Code (to the extent
applicable), any amendments to the terms and conditions of outstanding Awards,
including, but not limited to, extending the exercise period of such Awards and
accelerating the vesting schedule of such Awards);

 

(5)           to permit a Participant to elect to defer receipt of all or any
portion of the cash or shares of Common Stock that are payable under an Award
and provide that such deferred amount shall be credited with an

 

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interest rate or such other rate of return as shall be specified by the
Administrator, all on such terms and conditions as may be established by the
Administrator; provided, however, that any such election and deferral shall
comply with the requirements of Section 409A of the Code;

 

(6)           to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instruments evidencing
Options, Share Appreciation Rights, Restricted Shares, Restricted Stock Units,
Performance Shares or Other Share-Based Awards, Other Cash-Based Awards or any
combination of the foregoing granted hereunder;

 

(7)           to determine the Fair Market Value;

 

(8)           to determine the duration and purpose of leaves of absence which
may be granted to a Participant without constituting termination of the
Participant’s employment for purposes of Awards granted under the Plan;

 

(9)           to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall from time to time deem advisable;
and

 

(10)         to construe and interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any Award Agreement relating thereto), and
to otherwise supervise the administration of the Plan and to exercise all powers
and authorities either specifically granted under the Plan or necessary and
advisable in the administration of the Plan.

 

(c)           All decisions made by the Administrator pursuant to the provisions
of the Plan shall be final, conclusive and binding on all persons, including the
Company and the Participants. No member of the Board or the Committee, nor any
officer or employee of the Company or any Subsidiary thereof acting on behalf of
the Board or the Committee, shall be personally liable for any action, omission,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company and of any Subsidiary thereof acting on their behalf
shall, to the maximum extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, omission, determination
or interpretation.

 

Section 4.  Shares Reserved for Issuance Under the Plan.

 

(a)           Subject to subsection (b) below and Section 6 hereof, the number
of shares of Common Stock that are reserved and available for issuance pursuant
to Awards granted under the Plan is 4,000,000 shares. Shares of Common Stock
that are issued in connection with all Awards other than Options and Share
Appreciation Rights or Awards whose vesting, exercisability or payment is
subject to the attainment of Performance Goals shall be counted against the
4,000,000 limit described above as four shares of Common Stock for every share
of Common Stock that is issued in connection with such Award. Shares issued
under the Plan may, in whole or in part, be authorized but unissued Shares or
Shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise.

 

(b)           If any Shares subject to an Award are forfeited, cancelled,
exchanged or surrendered or if an Award otherwise terminates or expires without
a distribution of shares to the Participant, the Shares with respect to such
Award shall, to the extent of any such forfeiture, cancellation, exchange,
surrender, termination or expiration, again be available for Awards under the
Plan. If any Award (other than a Share Appreciation Right) is settled in part or
in full in cash, the Shares settled in cash shall again be available for
issuance in connection with future Awards granted under the Plan.
Notwithstanding the foregoing, Shares surrendered or withheld as payment of
either the exercise price of an Award granted hereunder (including Shares
otherwise underlying an Award of a Share Appreciation Right that are retained by
the Company to account for the grant price of such Share Appreciation Right)
and/or withholding taxes in respect of such an Award shall no longer be
available for grant under the Plan.

 

(c)           All Shares may be made subject to Awards of ISOs.

 

Section 5.  Overall Award Limitations; Section 162(m) of the Code

 

(a)           To the extent required to comply with the requirements of
Section 162(m) of the Code, the aggregate number of Shares subject to Awards
(other than Other Cash-Based Awards) awarded to any one Participant during any
calendar year may not, subject to adjustment as provided in Section 6 hereof,
exceed 100,000 Shares.

 

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(b)           To the extent required to comply with the requirements of
Section 162(m) of the Code, the maximum value of the aggregate payment that any
Participant may receive with respect to Other Cash-Based Awards pursuant to
Section 11 hereof in any calendar year is $2,000,000.

 

(c)           To the extent that the Plan is subject to Section 162(m) of the
Code, no payment shall be made to a Participant who is likely to be a Covered
Employee prior to the certification by the Committee that the Performance Goals
(if any) have been attained.

 

Section 6.  Equitable Adjustments.

 

In the event of any Change in Capitalization, an equitable substitution or
proportionate adjustment shall be made, in each case, as may be determined by
the Administrator, in its sole discretion, in (i) the aggregate number of shares
of Common Stock reserved for issuance under the Plan and the maximum number of
Shares that may be subject to Awards granted to any Participant in any calendar
or fiscal year, (ii) the kind, number and Exercise Price subject to outstanding
Options and Share Appreciation Rights granted under the Plan, and (iii) the
kind, number and purchase price of Shares subject to outstanding Restricted
Shares, Restricted Stock Units, Performance Shares or Other Share-Based Awards
granted under the Plan, in each case as may be determined by the Administrator,
in its sole discretion, provided, however, that any fractional shares resulting
from the adjustment shall be eliminated. Such other equitable substitutions or
adjustments shall be made as may be determined by the Administrator, in its sole
discretion. No such adjustment shall be made that would cause any Award that is
or could be subject to Section 409A of the Code to fail to comply with the
requirements of such section, and with respect to ISOs, any adjustment shall be
made in accordance with the provisions of Section 424(h) of the Code and any
regulations or guidance promulgated thereunder. Without limiting the generality
of the foregoing, in connection with a Change in Capitalization, the
Administrator may provide, in its sole discretion, for the cancellation of any
outstanding Award granted hereunder in exchange for payment in cash or other
property having an aggregate Fair Market Value of the Shares covered by such
Award, reduced by the aggregate Exercise Price or purchase price thereof, if
any. Any Awards with an aggregate exercise price (or aggregate base in the case
of a Share Appreciation Right) or part thereof canceled that is greater than the
aggregate Fair Market Value of the shares of Common Stock subject to the Award
or part thereof canceled, may be cancelled for no consideration. The
Administrator’s determinations pursuant to this Section 6 shall be final,
binding and conclusive.

 

Section 7.  Eligibility.

 

The Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among Eligible Recipients. Awards
may be granted to Eligible Recipients; provided, however, that ISOs shall be
granted only to employees (including officers and directors who are also
employees) of the Company or any of its Subsidiaries.

 

Section 8.  Options.

 

(a)  General.  The grant of each Option shall be memorialized in an Award
Agreement, containing such terms and conditions as the Administrator shall
determine, in its sole discretion, including among other things the Exercise
Price of the Option, the term of the Option, provisions regarding exercisability
of the Option, and whether the Option granted thereunder is an ISO or an NQSO.
The provisions of each Option need not be the same with respect to each
Participant. More than one Option may be granted to the same Participant and be
outstanding concurrently hereunder. Options granted under the Plan shall be
subject to the terms and conditions set forth in this Section 8 and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Administrator shall deem desirable and set forth in the
applicable Award Agreement.

 

(b)  Exercise Price.  The Exercise Price of Shares purchasable under an Option
shall be determined by the Administrator in its sole discretion at the time of
grant, but in no event shall the exercise price of an Option be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock on the date
of grant. If a Participant owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company or of any of its Subsidiaries and an Incentive Stock Option is granted
to such Participant, the Exercise Price of such Incentive Stock Option (to the
extent required at the time of grant by the Code) shall be no less than one
hundred ten percent (110%) of the Fair Market Value of the Common Stock on the
date such Incentive Stock Option is granted.

 

(c)  Option Term.  The maximum term of each Option shall be fixed by the
Administrator, but no Option shall be exercisable more than ten (10) years after
the date such Option is granted; provided, however, that if an employee owns or
is deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than ten percent (10%) of the

 

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combined voting power of all classes of stock of the Company or of any of its
Subsidiaries and an Incentive Stock Option is granted to such employee, the term
of such Incentive Stock Option (to the extent required by the Code at the time
of grant) shall be no more than five (5) years from the date of grant. Each
Option’s term is subject to earlier expiration pursuant to the applicable
provisions in the Plan and the Award Agreement. Notwithstanding the foregoing,
the Administrator shall have the authority to accelerate the exercisability of
any outstanding Option at such time and under such circumstances as the
Administrator, in its sole discretion, deems appropriate.

 

(d)  Exercisability.  Each Option shall be exercisable at such time or times and
subject to such terms and conditions, including the attainment of preestablished
corporate performance goals, as shall be determined by the Administrator in the
applicable Award Agreement. The Administrator may also provide that any Option
shall be exercisable only in installments, and the Administrator may waive such
installment exercise provisions at any time, in whole or in part, based on such
factors as the Administrator may determine in its sole discretion.
Notwithstanding anything to the contrary contained herein, an Option may not be
exercised for a fraction of a share.

 

(e)  Method of Exercise.  Options may be exercised in whole or in part by giving
written notice of exercise to the Company specifying the number of Shares to be
purchased, accompanied by payment in full of the aggregate Exercise Price of the
Shares so purchased in cash or its equivalent, as determined by the
Administrator. As determined by the Administrator, in its sole discretion, with
respect to any Option or category of Options, payment in whole or in part may
also be made (i) by means of consideration received under any cashless exercise
procedure approved by the Administrator (including the withholding of Shares
otherwise issuable upon exercise), (ii) in the form of unrestricted Shares
already owned by the Participant which, in the case of unrestricted Shares
acquired upon exercise of an Option, (x) have been owned by the Participant for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (iii) any other form of
consideration approved by the Administrator and permitted by applicable law or
(iv) any combination of the foregoing.

 

(f)  Rights as Shareholder.  A Participant shall have no rights to dividends or
any other rights of a shareholder with respect to the Shares subject to an
Option until the Participant has given written notice of the exercise thereof,
has paid in full for such Shares and has satisfied the requirements of
Section 15 hereof, and the Shares are delivered to the Participant.

 

(g)  Termination of Employment.

 

(1)           Unless the applicable Award Agreement provides otherwise, in the
event that the employment of a Participant with the Company and all Affiliates
thereof shall terminate for any reason other than Cause, Retirement, Disability,
or death, (A) Options granted to such Participant, to the extent that they are
exercisable at the time of such termination, shall remain exercisable until the
date that is one year after such termination, on which date they shall expire,
and (B) Options granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the close of
business on the date of such termination. The one year period described in this
Section 8(g)(1) shall be extended to three (3) years after the date of such
termination in the event of the Participant’s death during such one year period.
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term.

 

(2)           Unless the applicable Award Agreement provides otherwise, in the
event that the employment of a Participant with the Company and all Affiliates
thereof shall terminate on account of the Retirement, Disability, or death of
the Participant, Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall become fully vested as
to all Shares covered thereby and shall remain exercisable until the date that
is three (3) years after such termination, on which date they shall expire.
Notwithstanding the foregoing, no Option shall be exercisable after the
expiration of its term.

 

(3)           In the event of the termination of a Participant’s employment for
Cause, all outstanding Options granted to such Participant shall expire at the
commencement of business on the date of such termination.

 

(h)  Other Change in Employment Status.  An Option shall be affected, both with
regard to vesting schedule and termination, by leaves of absence, changes from
full-time to part-time employment, partial disability or other changes in the
employment status of an Participant, in the discretion of the Administrator.

 

(i)  Annual Limit on Incentive Stock Options.  To the extent that the aggregate
Fair Market Value (determined as of the date the Incentive Stock Option is
granted) of shares of Common Stock with respect to which Incentive Stock Options
granted to a Participant under this Plan and all other option plans of the
Company or of any Subsidiary of the Company become exercisable for the first
time by the Participant during any calendar year exceeds $100,000 (as determined
in accordance with Section 422(d) of the Code), the portion of such Incentive
Stock Options in excess of $100,000 shall be treated as Non-Qualified Stock
Options.

 

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Section 9.  Share Appreciation Rights.

 

(a)  General.  Share Appreciation Rights may be granted either alone (“Free
Standing Rights”) or in conjunction with all or part of any Option granted under
the Plan (“Related Rights”). Subject to Section 409A of the Code, in the case of
a Non-Qualified Stock Option, Related Rights may be granted either at or after
the time of the grant of such Option. In the case of an Incentive Stock Option,
Related Rights may be granted only at the time of the grant of the Incentive
Stock Option. The Administrator shall determine the Eligible Recipients to whom,
and the time or times at which, grants of Share Appreciation Rights shall be
made, the number of Shares to be awarded, the price per Share, and all other
conditions of Share Appreciation Rights. Notwithstanding the foregoing, no
Related Right may be granted for more Shares than are subject to the Option to
which it relates and any Share Appreciation Right must be granted with an
Exercise Price not less than the Fair Market Value of Common Stock on the date
of grant. The provisions of Share Appreciation Rights need not be the same with
respect to each Participant. Share Appreciation Rights granted under the Plan
shall be subject to the following terms and conditions set forth in this
Section 9 and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable, as set forth in the applicable Award Agreement.

 

(b)  Awards; Rights as Shareholder.  The grant of each Share Appreciation Right
shall be memorialized in an Award Agreement, containing such terms and
conditions as the Administrator shall determine, in its sole discretion. A
Participant shall have no rights to dividends or any other rights of a
shareholder with respect to the Shares subject to a Share Appreciation Right
until the Participant has given written notice of the exercise thereof, has paid
in full for such Shares and has satisfied the requirements of Section 15 hereof,
and the Shares are delivered to the Participant.

 

(c)  Exercisability.

 

(1)           Share Appreciation Rights that are Free Standing Rights shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Administrator in the applicable Award Agreement.

 

(2)           Share Appreciation Rights that are Related Rights shall be
exercisable only at such time or times and to the extent that the Options to
which they relate shall be exercisable in accordance with the provisions of
Section 8 hereof and this Section 9; provided, however, that a Related Right
granted in connection with an Incentive Stock Option shall be exercisable only
if and when the Fair Market Value of the Common Stock subject to the Incentive
Stock Option exceeds the Exercise Price of such Option.

 

(d)  Payment Upon Exercise.

 

(1)           Upon the exercise of a Free Standing Right, the Participant shall
be entitled to receive up to, but not more than, that number of Shares equal in
value to the excess of the Fair Market Value as of the date of exercise over the
price per share specified in the Free Standing Right multiplied by the number of
Shares in respect of which the Free Standing Right is being exercised, with the
Administrator having the right to determine the form of payment.

 

(2)           A Related Right may be exercised by a Participant by surrendering
the applicable portion of the related Option. Upon such exercise and surrender,
the Participant shall be entitled to receive up to, but not more than, that
number of Shares equal in value to the excess of the Fair Market Value as of the
date of exercise over the Exercise Price specified in the related Option
multiplied by the number of Shares in respect of which the Related Right is
being exercised, with the Administrator having the right to determine the form
of payment. Options which have been so surrendered, in whole or in part, shall
no longer be exercisable to the extent the Related Rights have been so
exercised.

 

(3)           Notwithstanding the foregoing, the Administrator may determine to
settle the exercise of a Share Appreciation Right in cash (or in any combination
of Shares and cash).

 

(e)  Termination of Employment.

 

(1)           Unless the applicable Award Agreement provides otherwise, in the
event that the employment of a Participant with the Company and all Affiliates
thereof (who has been granted one or more Free Standing Rights) shall terminate
for any reason other than Cause, Retirement, Disability, or death, (A) Free
Standing Rights granted to such Participant, to the extent that they are
exercisable at the time of such termination, shall remain exercisable until the
date that is one year after such termination, on which date they shall expire,
and (B) Free Standing Rights

 

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granted to such Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business on the date of
such termination. The one year period described in this Section 9(e)(1) shall be
extended to three (3) years after the date of such termination in the event of
the Participant’s death during such one year period. Notwithstanding the
foregoing, no Free Standing Right shall be exercisable after the expiration of
its term.

 

(2)           Unless the applicable Award Agreement provides otherwise, in the
event that the employment of a Participant with the Company and all Affiliates
thereof (who has been granted one or more Free Standing Rights) shall terminate
on account of the Retirement, Disability, or death of the Participant, Free
Standing Rights granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall become fully vested as to all
Shares covered thereby and shall remain exercisable until the date that is three
(3) years after such termination, on which date they shall expire.
Notwithstanding the foregoing, no Free Standing Right shall be exercisable after
the expiration of its term.

 

(3)           In the event of the termination of a Participant’s employment for
Cause, all outstanding Free Standing Rights granted to such Participant shall
expire at the commencement of business on the date of such termination.

 

(4)           In the event of the termination of employment with the Company and
all Affiliates thereof of a Participant who has been granted one or more Related
Rights, such rights shall be exercisable at such time or times and subject to
such terms and conditions as set forth in the related Options.

 

(f)  Term.

 

(1)           The term of each Free Standing Right shall be fixed by the
Administrator, but no Free Standing Right shall be exercisable more than ten
(10) years after the date such right is granted.

 

(2)           The term of each Related Right shall be the term of the Option to
which it relates, but no Related Right shall be exercisable more than ten
(10) years after the date such right is granted.

 

Section 10.  Restricted Shares, Restricted Stock Units and Performance Shares.

 

(a)  General.  Restricted Shares, Restricted Stock Units or Performance Shares
may be issued either alone or in addition to other awards granted under the
Plan. The Administrator shall determine the Eligible Recipients to whom, and the
time or times at which, Awards of Restricted Shares, Restricted Stock Units or
Performance Shares shall be made; the number of Restricted Shares, Restricted
Stock Units or Performance Shares to be awarded; the price, if any, to be paid
by the Participant for the acquisition of Restricted Shares, Restricted Stock
Units or Performance Shares; the Restricted Period, if any, applicable to
Restricted Shares, Restricted Stock Units or Performance Shares; the Performance
Goals and/or other performance related objectives (if any) applicable to
Restricted Shares, Restricted Stock Units or Performance Shares; and all other
conditions of the Restricted Shares, Restricted Stock Units and Performance
Shares. If the restrictions, performance objectives and/or conditions
established by the Administrator are not attained, a Participant shall forfeit
his or her Restricted Shares, Restricted Stock Units or Performance Shares in
accordance with the terms of the grant. The provisions of the Restricted Shares,
Restricted Stock Units or Performance Shares need not be the same with respect
to each Participant.

 

(b)  Awards and Certificates.  The grant of each Award of Restricted Shares,
Restricted Stock Units or Performance Shares shall be memorialized in an Award
Agreement, containing such terms and conditions as the Administrator shall
determine, in its sole discretion. Except as otherwise provided below in
Section 10(c), (i) each Participant who is granted an Award of Restricted Shares
or Performance Shares may, in the Company’s sole discretion, be issued a stock
certificate in respect of such Restricted Shares or Performance Shares; and
(ii) any such certificate so issued shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to any such Award.

 

The Company may require that the stock certificates, if any, evidencing
Restricted Shares or Performance Shares granted hereunder be held in the custody
of the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any award of Restricted Shares or Performance Shares, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Shares covered by such Award.

 

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With respect to Restricted Stock Units, at the expiration of the Restricted
Period, stock certificates in respect of such Restricted Stock Units may, in the
Company’s sole discretion, be delivered to the Participant, or his legal
representative, in a number equal to the number of Shares covered by the
Restricted Stock Unit Award.

 

Notwithstanding anything in the Plan to the contrary, any Restricted Shares,
Restricted Stock Units (at the expiration of the Restricted Period) or
Performance Shares (whether before or after any vesting conditions have been
satisfied) may, in the Company’s sole discretion, be issued in uncertificated
form pursuant to the customary arrangements for issuing shares in such form.

 

Further, notwithstanding anything in the Plan to the contrary, with respect to
Restricted Stock Units, at the expiration of the Restricted Period, Shares shall
promptly be issued (either in certificated or uncertificated form) to the
Participant, unless otherwise deferred in accordance with procedures established
by the Company in accordance with Section 409A of the Code, and such issuance
shall in any event be made within such period as is required to avoid the
imposition of a tax under Section 409A of the Code.

 

(c)  Restrictions and Conditions.  The Restricted Shares, Restricted Stock Units
and Performance Shares granted pursuant to this Section 10 shall be subject to
the following restrictions and conditions and any additional restrictions or
conditions as determined by the Administrator at the time of grant or, subject
to Section 409A of the Code, thereafter:

 

(1)           The Administrator may, in its sole discretion, provide for the
lapse of restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such circumstances as
the Administrator may determine, in its sole discretion, including, but not
limited to, the attainment of certain performance related goals, the
Participant’s termination of employment with the Company or any Affiliate
thereof, or the Participant’s death or Disability; provided, however, that this
sentence shall not apply to any Award which is intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.
Notwithstanding the foregoing, upon a Change in Control, the outstanding Awards
shall be subject to Section 12 hereof.

 

(2)           Except as provided in Section 16 hereof or in the Award Agreement,
the Participant shall generally have the rights of a shareholder of the Company
with respect to Restricted Shares or Performance Shares during the Restricted
Period. The Participant shall generally not have the rights of a shareholder
with respect to Shares subject to Restricted Stock Units during the Restricted
Period; provided, however, that, subject to Section 409A of the Code, an amount
equal to dividends declared during the Restricted Period with respect to the
number of Shares covered by Restricted Stock Units shall, unless otherwise set
forth in an Award Agreement, be paid to the Participant at the same time as
dividends are paid to the Company’s shareholders generally, provided that the
Participant is then providing services to the Company or any Affiliate of the
Company. Certificates for Shares of unrestricted Common Stock may, in the
Company’s sole discretion, be delivered to the Participant only after the
Restricted Period has expired without forfeiture in respect of such Restricted
Shares, Restricted Stock Units or Performance Shares, except as the
Administrator, in its sole discretion, shall otherwise determine.

 

(3)           The rights of Participants granted Restricted Shares, Restricted
Stock Units or Performance Shares upon termination of employment with the
Company or any Affiliate thereof during the Restricted Period shall be set forth
in the Award Agreement.

 

Section 11.  Other Share-Based or Cash-Based Awards.

 

(a)           The Administrator is authorized to grant Awards to Participants in
the form of Other Share-Based Awards or Other Cash-Based Awards, as deemed by
the Administrator to be consistent with the purposes of the Plan and as
evidenced by an Award Agreement. The Administrator shall determine the terms and
conditions of such Awards, consistent with the terms of the Plan, at the date of
grant or thereafter, including any Performance Goals and performance periods.
Common Stock or other securities or property delivered pursuant to an Award in
the nature of a purchase right granted under this Section 11 shall be purchased
for such consideration, paid for at such times, by such methods, and in such
forms, including, without limitation, Shares, other Awards, notes or other
property, as the Administrator shall determine, subject to any required
corporate action.

 

(b)           The Committee may establish other rules applicable to the Other
Share-Based Awards and the Other Cash-Based Awards as it may determine in its
discretion.

 

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Section 12.  Change in Control; Termination in Connection with a Change in
Control.

 

(a)           Except as otherwise provided in an Award Agreement or in an
individual agreement between a Participant and the Company, in the event of a
Change in Control, the surviving entity or acquiring entity (or the surviving or
acquiring entity’s parent company) shall assume all Awards outstanding under the
Plan or shall substitute similar awards for Awards outstanding under the Plan.
Notwithstanding the foregoing, to the extent the surviving entity (or acquiring
entity or parent company, as the case may be) refuses to assume outstanding
Awards or to substitute an equivalent award or right therefor (as determined by
the Administrator in its sole discretion), all such outstanding Awards shall
become fully vested and exercisable and all restrictions on such Awards shall
immediately lapse (with all performance goals or other vesting criteria deemed
achieved at one hundred percent (100%) of target levels) and, with respect to
Options and Share Appreciation Rights, the Participant in the discretion of the
Administrator (i) shall have the right to exercise such Awards for a period of
time determined by the Administrator or (ii) shall be entitled to receive an
amount in cash equal to the excess (if any) of (A) the product of (x) the number
of Shares subject to such Awards and (y) the per Share consideration paid as of
the date of the occurrence of the Change in Control for the Shares pursuant to
the Change in Control, less (B) the aggregate exercise price of such Awards, and
all Awards not assumed or continued, or for which an equivalent award or right
is not substituted therefor, shall terminate upon the Change in Control.

 

(b)           Except as otherwise provided in an Award Agreement or in an
individual agreement between a Participant and the Company, any Award that is
assumed or for which a substitution is made in accordance with
subsection (a) above shall provide that, if the Participant’s employment with
the Company or an Affiliate thereof (or any successor) is terminated within
twenty-four (24) months following the Change in Control by the Company or
Affiliate without Cause or by the Participant with Good Reason, the Award shall
become fully vested and exercisable and all restrictions on such Awards shall
immediately lapse (with all performance goals or other vesting criteria deemed
achieved at one hundred percent (100%) of target levels), and each such Award
that is an Option or Share Appreciation Right shall remain exercisable for not
less than one (1) year following such termination of employment.

 

Section 13. Amendment and Termination.

 

The Board may amend, alter or terminate the Plan, but no amendment, alteration,
or termination shall be made that would impair the rights of a Participant under
any Award theretofore granted without such Participant’s consent, or that
without the approval of the Company’s shareholders would, (i) except as provided
in Section 6 hereof, increase the total number of Shares, (ii) materially
increase benefits provided under the Plan, (iii) materially alter the
eligibility provisions of the Plan, or (iv) extend the maximum option term under
Section 8(c) hereof. Unless the Board determines otherwise, the Board shall
obtain approval of the Company’s shareholders for any amendment that would
require such approval in order to satisfy the requirements of Sections 162(m) or
422 of the Code or Rule 16b-3, any rules of the stock exchange on which the
Common Stock is traded or other applicable law. The Administrator may amend the
terms of any Award theretofore granted, prospectively or retroactively, but,
subject to Section 6 hereof and the immediately preceding sentence, no such
amendment shall impair the rights of any Participant without his or her consent;
provided, however, that the Administrator may not reduce the Exercise Price of
an outstanding Option or Share Appreciation Right by amending the terms of such
Option or Share Appreciation Right or by canceling such Option or Share
Appreciation Right in exchange for cash or the grant of a new Award without
first obtaining approval from the shareholders of the Company.

 

Section 14. Unfunded Status of Plan.

 

The Plan is intended to constitute an “unfunded” plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.

 

Section 15. Withholding Taxes.

 

Each Participant shall, no later than the date as of which the value of an Award
first becomes includible in the gross income of such Participant for federal
and/or state income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any federal, state, or
local taxes of any kind required by law to be withheld with respect to the
Award. The obligations of the Company under the Plan shall be conditional on the
making of such payments or arrangements, and the Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to such Participant. Whenever cash is to be paid pursuant
to an award granted hereunder, the Company shall have the right to deduct
therefrom an amount sufficient to satisfy any federal, state and local
withholding tax requirements related thereto. Whenever Shares are to be
delivered pursuant to an Award, the Company shall have the right to require the
Participant to remit to the Company in cash an amount sufficient to satisfy any
related federal, state and local taxes to be withheld and applied to the tax
obligations. With the approval of the Administrator, a Participant may satisfy
the foregoing requirement by electing to have the Company withhold from delivery
of Shares or by

 

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delivering already owned unrestricted shares of Common Stock, in each case,
having a value not exceeding the federal, state and local taxes to be withheld
and applied to the tax obligations. Such shares shall be valued at their Fair
Market Value on the date of which the amount of tax to be withheld is
determined. Fractional share amounts shall be settled in cash. Such an election
may be made with respect to all or any portion of the Shares to be delivered
pursuant to an Award. The Company may also use any other method of obtaining the
necessary payment or proceeds, as permitted by law, to satisfy its withholding
obligation with respect to any Option or other Award.

 

Section 16. Transfer of Awards.

 

Unless otherwise determined by the Administrator or provided in an Award
Agreement, Awards shall not be transferable by a Participant except by will or
the laws of descent and distribution and shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative. Any purported transfer of an Award or any economic benefit or
interest therein in violation of the Plan or an Award Agreement shall be null
and void ab initio, and shall not create any obligation or liability of the
Company, and any person purportedly acquiring any Award or any economic benefit
or interest therein transferred in violation of the Plan or an Award Agreement
shall not be entitled to be recognized as a holder of such Shares.

 

Section 17. Continued Employment.

 

The adoption of the Plan shall not confer upon any Eligible Recipient any right
to continued employment with the Company or any Affiliate thereof, as the case
may be, nor shall it interfere in any way with the right of the Company or any
Affiliate thereof to terminate the employment of any of its Eligible Recipients
at any time.

 

Section 18. Effective Date; Shareholder Approval.

 

The Plan was adopted by the Board on February 11, 2010, and shall become
effective without further action on the date as of which this Plan is approved
by the shareholders of the Company. The grant of any Award hereunder shall be
contingent upon shareholder approval of the Plan being obtained within twelve
(12) months before or after the date the Board adopts the Plan.

 

Section 19. Term of Plan.

 

No Award shall be granted pursuant to the Plan on or after the tenth (10th)
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.

 

Section 20. Section 409A of the Code.

 

The intent of the parties is that payments and benefits under the Plan comply
with Section 409A of the Code to the extent subject thereto, and, accordingly,
to the maximum extent permitted, the Plan shall be interpreted and be
administered to be in compliance therewith. Any payments described in the Plan
that are due within the “short-term deferral period” as defined in Section 409A
of the Code shall not be treated as deferred compensation unless applicable law
requires otherwise. Notwithstanding anything to the contrary in the Plan, to the
extent required in order to avoid accelerated taxation and/or tax penalties
under Section 409A of the Code, amounts that would otherwise be payable and
benefits that would otherwise be provided pursuant to the Plan during the six
(6) month period immediately following the Participant’s termination of
employment shall instead be paid on the first business day after the date that
is six (6) months following the Participant’s separation from service (or upon
the Participant’s death, if earlier). Notwithstanding any provision to the
contrary in this Plan, no payment or distribution under this Plan that
constitutes an item of deferred compensation under Section 409A of the Code and
becomes payable by reason of a Participant’s termination of employment will be
made to such Participant unless such Participant’s termination of employment
constitutes a “separation from service” (as such term is defined in Section 409A
of the Code). In addition, for purposes of the Plan, each amount to be paid or
benefit to be provided to the Participant pursuant to the Plan, which
constitutes deferred compensation subject to Section 409A of the Code, shall be
construed as a separate identified payment for purposes of Section 409A of the
Code.

 

Section 21. Governing Law.

 

The Plan shall be governed by and construed in accordance with the laws of the
State of Hawaii, without giving effect to principles of conflicts of law of such
state.

 

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