EMERALD OIL, INC.
SECOND AMENDED AND RESTATED 2011 EQUITY INCENTIVE PLAN

 

SECTION 1.
DEFINITIONS

 

As used herein, the following terms shall have the meanings indicated below:

 

(a) “Administrator” shall mean the Board of Directors of the Company, or one or
more Committees appointed by the Board, as the case may be.

 

(b) “Affiliate(s)” shall mean a Parent or Subsidiary of the Company.

 

(c) “Agreement” shall mean the written agreement entered into by the Participant
and the Company evidencing the grant of an Award. Each Agreement shall be in
such form as may be approved from time to time by the Administrator and may vary
from Participant to Participant.

 

(d) “Award” shall mean any grant pursuant to this Plan of an Incentive Stock
Option, Nonqualified Stock Option, Restricted Stock Award, Restricted Stock Unit
Award, Stock Appreciation Right, or Performance Award.

 

(e) “Change of Control” shall mean the occurrence, in a single transaction or in
a series of related transactions, of any one or more of the events in
subsections (i) through (iv) below. For purposes of this definition, a person,
entity or group shall be deemed to “Own,” to have “Owned,” to be the “Owner” of,
or to have acquired “Ownership” of securities if such person, entity or group
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power, which includes the power
to vote or to direct the voting, with respect to such securities.

 

(i) Any person, entity or group becomes the Owner, directly or indirectly, of
securities of the Company representing more than fifty percent (50%) of the
combined voting power of the Company’s then outstanding securities other than by
virtue of a merger, consolidation or similar transaction. Notwithstanding the
foregoing, a Change of Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company by an investor, any affiliate
thereof or any other person, entity or group from the Company in a transaction
or series of related transactions the primary purpose of which is to obtain
financing for the Company through the issuance of equity securities, or (B)
solely because the level of Ownership held by any person, entity or group (the
“Subject Person”) exceeds the designated percentage threshold of the outstanding
voting securities as a result of a repurchase or other acquisition of voting
securities by the Company reducing the number of shares outstanding, provided
that if a Change of Control would occur (but for the operation of this sentence)
as a result of the acquisition of voting securities by the Company, and after
such share acquisition, the Subject Person becomes the Owner of any additional
voting securities that, assuming the repurchase or other acquisition had not
occurred, increases the percentage of the then outstanding voting securities
Owned by the Subject Person over the designated percentage threshold, then a
Change of Control shall be deemed to occur;

 

 

 

 

(ii) There is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately after the
consummation of such merger, consolidation or similar transaction, the
shareholders of the Company immediately prior thereto do not Own, directly or
indirectly, either (A) outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the surviving
entity in such merger, consolidation or similar transaction or (B) more than
fifty percent (50%) of the combined outstanding voting power of the parent of
the surviving entity in such merger, consolidation or similar transaction, in
each case in substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to such
transaction;

 

(iii) There is consummated a sale, lease, exclusive license or other disposition
of all or substantially all of the total gross value of the consolidated assets
of the Company and its subsidiaries, other than a sale, lease, license or other
disposition of all or substantially all of the total gross value of the
consolidated assets of the Company and its subsidiaries to an entity, more than
fifty percent (50%) of the combined voting power of the voting securities of
which are Owned by shareholders of the Company in substantially the same
proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such sale, lease, license or other disposition (for
purposes of this Section 1(e)(iii), “gross value” means the value of the assets
of the Company or the value of the assets being disposed of, as the case may be,
determined without regard to any liabilities associated with such assets); or

 

(iv) Individuals who, at the beginning of any consecutive twelve-month period,
are members of the Board (the “Incumbent Board”), cease for any reason to
constitute at least a majority of the members of the Board at any time during
that consecutive twelve-month period; provided, however, that if the appointment
or election (or nomination for election) of any new Board member was approved or
recommended by a majority vote of the members of the Incumbent Board then still
in office, such new member shall, for purposes of this Plan, be considered as a
member of the Incumbent Board.

 

For the avoidance of doubt, the term “Change of Control” shall not include a
sale of assets, merger or other transaction effected exclusively for the purpose
of changing the domicile of the Company. To the extent required, the
determination of whether a Change of Control has occurred shall be made in
accordance with Code Section 409A and the regulations, notices and other
guidance of general applicability issued thereunder.

 

(f) “Close of Business” of a specified day shall mean 5:00 p.m., Mountain Time,
without regard to whether such day is a Saturday, Sunday, bank holiday, or other
day on which no business is conducted.

 

(g) “Committee” shall mean a Committee of two or more Directors who shall be
appointed by and serve at the pleasure of the Board. To the extent necessary for
compliance with Rule 16b-3, each of the members of the Committee shall be a
“non-employee director.” Solely for purposes of this Section 1(g), “non-employee
director” shall have the same meaning as set forth in Rule 16b-3. Any Award
granted under the Plan which is intended to constitute performance-based
compensation (including Incentive Stock Options and Nonqualified Stock Options)
within the meaning of Code Section 162(m) shall be granted by a Committee
consisting solely of two or more “outside directors” within the meaning of Code
Section 162(m).

 

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(h) “Common Stock” shall mean the common stock of the Company (subject to
adjustment as provided in Section 14 of this Plan).

 

(i) The “Company” shall mean Emerald Oil, Inc., a Montana corporation.

 

(j) “Consultant” shall mean any person, including an advisor, who is engaged by
the Company or any Affiliate to render consulting or advisory services and is
compensated for such services; provided, however, that no person shall be
considered a Consultant for purposes of the Plan unless such Consultant is a
natural person, renders bona fide services to the Company or any Affiliate, and
such services are not in connection with the offer or sale of securities in a
capital raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities. For purposes of this plan,
“Consultant” shall also include a director of an Affiliate who is compensated
for services as a director.

 

(k) “Director” shall mean a member of the Board of Directors of the Company.

 

(l) “Effective Date” shall mean the date the Board of Directors of the Company
adopts the Plan.

 

(m) “Employee” shall mean a common-law employee of the Company or any Affiliate,
including “officers” as defined by Section 16 of the Exchange Act; provided,
however, that service solely as a Director or Consultant, regardless of whether
a fee is paid for such service, shall not cause a person to be an Employee for
purposes of the Plan.

 

(n) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

 

(o) (o) “Fair Market Value” of specified stock as of any date shall mean (i) if
such stock is listed on the NYSE MKT stock exchange or an established stock
exchange, the price of such stock at the close of the regular trading session of
such market or exchange on such date, as reported by The Wall Street Journal or
a comparable reporting service, or, if no sale of such stock shall have occurred
on such date, on the next preceding date on which there was a sale of stock;
(ii) if such stock is not so listed on the NYSE MKT stock exchange, or an
established stock exchange, the average of the closing “bid” and “asked” prices
quoted by the OTC Bulletin Board, the National Quotation Bureau, or any
comparable reporting service on such date or, if there are no quoted “bid” and
“asked” prices on such date, on the next preceding date for which there are such
quotes; or (iii) if such stock is not publicly traded as of such date, the per
share value as determined by the Board or the Committee in its sole discretion
by applying principles of valuation with respect to Common Stock.
Notwithstanding the foregoing, the Board or the Committee may determine Fair
Market Value in a manner other than as specified above provided that the method
used to determine Fair Market Value reasonable and in good faith and, in the
case of any Option or Stock Appreciation Right, shall be determined in
accordance with Code Section 409A.

 

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(p) “Incentive Stock Option” shall mean an option granted pursuant to Section 8
of this Plan that is intended to satisfy the provisions of Code Section 422, or
any successor provision.

 

(q) The “Internal Revenue Code” or “Code” shall mean the Internal Revenue Code
of 1986, as amended from time to time.

 

(r) “Option” shall mean an Incentive Stock Option or Nonqualified Stock Option
granted pursuant to the Plan.

 

(s) “Nonqualified Stock Option” shall mean an option granted pursuant to Section
9 of this Plan or an option (or portion thereof) that does not qualify as an
Incentive Stock Option.

 

(t) “Parent” shall mean any parent corporation of the Company within the meaning
of Code Section 424(e), or any successor provision.

 

(u) “Participant” shall mean an Employee to whom an Incentive Stock Option has
been granted or an Employee, a Director, or a Consultant to whom a Nonqualified
Stock Option, Restricted Stock Award, Restricted Stock Unit Award, Performance
Award or Stock Appreciation Right has been granted.

 

(v) “Performance Award” shall mean any Performance Shares or Performance Cash
Units granted pursuant to Section 12 of this Plan.

 

(w) “Performance Objective(s)” shall mean one or more performance objectives
established by the Administrator, in its sole discretion, for Awards granted
under this Plan. With respect to any Award (other than Options or Stock
Appreciation Rights) that is intended to constitute performance-based
compensation (within the meaning of Code Section 162(m)), “Performance
Objectives” shall mean any of the following: (i) net earnings; (ii) earnings per
share; (iii) net sales growth; (iv) net income (before or after taxes); (v) net
operating profit; (vi) return measures (including, but not limited to, return on
assets, capital, equity or sales); (vii) cash flow (including, but not limited
to, operating cash flow and free cash flow); (viii) cash flow return on
investments, which equals net cash flows divided by owner’s equity; (ix)
earnings before or after taxes, interest, depreciation and/or amortization; (x)
internal rate of return or increase in net present value; (xi) gross margins;
(xii) gross margins minus expenses; (xiii) operating margin; (xiv) share price
(including, but not limited to, growth measures and total stockholder return);
(xv) expense targets; (xvi) working capital targets relating to inventory and/or
accounts receivable; (xvii) planning accuracy (as measured by comparing planned
results to actual results); (xviii) comparisons to various stock market indices;
(xix) comparisons to the performance of other companies; or (xx) any combination
of the foregoing. Where applicable, the performance targets based on
satisfaction of Performance Objectives may be expressed in terms of attaining a
specified level of the particular measure or the attainment of a percentage
increase or decrease in the particular measure, and may be applied to one or
more of the Company, a Subsidiary, or a division or strategic business unit of
the Company or a Subsidiary, 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 targets based on the foregoing
Performance Objectives shall be determined in accordance with generally accepted
accounting principles, if applicable, and shall be subject to certification by
the Committee; provided that the Committee shall have the authority to include
or exclude any of the following events that occurs during a performance period:
(1) asset write-downs, (2) litigation or claim judgments or settlements, (3) the
effect of changes in tax laws, accounting principles, or other laws or
provisions affecting reported results, (4) accruals for reorganization and
restructuring programs, (5) extraordinary nonrecurring items as described in
SFAS No. 144 (or successor guidance) and/or in management’s discussion and
analysis of financial condition and results of operations appearing in the
Company’s annual report to shareholders for the applicable year, (6)
acquisitions or divestitures, and (7) foreign exchange gains and losses.

 

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(x) “Performance Period” shall mean the period, established at the time any
Performance Award is granted or at any time thereafter, during which any
Performance Objectives specified by the Administrator with respect to such
Performance Award are to be measured.

 

(y) “Performance Share” shall mean any grant of an Award pursuant to Section 12
of this Plan, the value of which, if any, shall be paid to a Participant by
delivery of shares of Common Stock upon achievement of such Performance
Objectives during the Performance Period as the Administrator shall establish at
the time of such grant or thereafter.

 

(z) “Performance Cash Unit” shall mean any grant of an Award pursuant to Section
12 of this Plan, the value of which, if any, shall be paid to a Participant by
delivery of cash upon achievement of such Performance Objectives during the
Performance Period as the Administrator shall establish at the time of such
grant or thereafter.

 

(aa) The “Plan” means the Emerald Oil, Inc. Second Amended and Restated 2011
Equity Incentive Plan, as amended hereafter from time to time, including the
form of Agreements as they may be modified by the Administrator from time to
time.

 

(bb) “Restricted Stock Award” shall mean any grant of restricted shares of
Common Stock pursuant to Section 10 of this Plan.

 

(cc) “Restricted Stock Unit Award” shall mean any grant of any restricted stock
units pursuant to Section 11 of this Plan.

 

(dd) “Rule 16b-3” shall mean Rule 16b-3, or any successor provision, as then in
effect, of the General Rules and Regulations under the Exchange Act.

 

(ee) “Stock Appreciation Right” shall mean a grant pursuant to Section 13 of
this Plan.

 

(ff) A “Subsidiary” shall mean any subsidiary corporation of the Company within
the meaning of Code Section 424(f), or any successor provision.

 

SECTION 2.
PURPOSE

 

The purpose of the Plan is to promote the success of the Company and its
Affiliates by facilitating the employment and retention of competent personnel
and by furnishing incentives to those Employees, Directors and Consultants upon
whose efforts the success of the Company and its Affiliates will depend to a
large degree. It is the intention of the Company to carry out the Plan through
the granting of Incentive Stock Options, Nonqualified Stock Options, Restricted
Stock Awards, Restricted Stock Unit Awards, Performance Awards and Stock
Appreciation Rights.

 

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SECTION 3.
EFFECTIVE DATE AND DURATION OF PLAN

 

The Plan shall be effective on the Effective Date; provided, however, that
adoption of this Plan shall be and is expressly subject to the condition of
approval by the shareholders of the Company within twelve (12) months before or
after the Effective Date.

 

If shareholder approval is not obtained within the twelve (12) month period
referenced in this Section 3, this Plan and all Awards granted after the
Effective Date shall be null and void.

 

The Administrator may grant Awards pursuant to the Plan from time to time until
the Administrator discontinues or terminates the Plan; provided, however, that
in no event may Incentive Stock Options be granted pursuant to the Plan after
the earlier of (i) the date the Administrator discontinues or terminates the
Plan or (ii) the Close of Business on the day immediately preceding the tenth
anniversary of the Effective Date.

 

SECTION 4.
ADMINISTRATION

 

The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the “Board”); provided, however, that the Board may
delegate some or all of the administration of the Plan to a Committee or
Committees. The Board and any Committee appointed by the Board to administer the
Plan are collectively referred to in this Plan as the “Administrator.”

 

Except as otherwise provided herein, the Administrator shall have all of the
powers vested in it under the provisions of the Plan, including but not limited
to exclusive authority to determine, in its sole discretion, whether an Award
shall be granted; the individuals to whom, and the time or times at which,
Awards shall be granted; the number of shares subject to each Award; the
exercise price of Options granted hereunder; and the performance criteria, if
any, and any other terms and conditions of each Award. The Administrator shall
have full power and authority to administer and interpret the Plan; to make and
amend rules, regulations and guidelines for administering the Plan; to prescribe
the form and conditions of the respective Agreements evidencing each Award
(which may vary from Participant to Participant); and to make all other
determinations necessary or advisable for the administration of the Plan,
including to correct any defect, omission or inconsistency in the Plan or any
Agreement, to the extent permitted by law and this Plan. The Administrator’s
interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the power vested in it hereunder, shall be conclusive
and binding on all parties concerned.

 

No member of the Board or Committee shall be liable for any action taken or
determination made in good faith in connection with the administration of the
Plan. In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.

 

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SECTION 5.
PARTICIPANTS

 

The Administrator may grant Awards under this Plan to any Employee, Director, or
Consultant; provided, however, that only Employees are eligible to receive
Incentive Stock Options. In designating Participants, the Administrator shall
also determine the number of shares or cash units to be optioned or awarded to
each such Participant and the performance criteria applicable to each
Performance Award. The Administrator may from time to time designate individuals
as being ineligible to participate in the Plan. The power of the Administrator
under this Section 5 shall be exercised from time to time in the sole discretion
of the Administrator and without approval by the shareholders.

 

SECTION 6.
STOCK AND LIMITATIONS

 

The stock to be awarded or optioned under this Plan shall consist of authorized
but unissued or reacquired shares of Common Stock. Subject to Section 14 of this
Plan, the maximum aggregate number of shares of Common Stock reserved and
available for Awards under the Plan is Nine Million Eight Hundred Thousand
(9,800,000). The maximum aggregate number of shares of Common Stock that may be
issued through Incentive Stock Options shall also be Nine Million Eight Hundred
Thousand (9,800,000).

 

The following shares of Common Stock shall continue to be reserved and available
for Awards granted pursuant to the Plan: (i) any outstanding Award that expires
or is forfeited for any reason, (ii) any portion of an outstanding Option or
Stock Appreciation Right that is terminated prior to exercise, (iii) any portion
of an Award that is terminated prior to the lapsing of the risks of forfeiture
on such Award, (iv) shares of Common Stock used to pay the exercise price under
any Award, (v) shares of Common Stock used to satisfy any tax withholding
obligation attributable to any Award, whether such shares are withheld by the
Company or tendered by the Participant, and (vi) shares of Common Stock covered
by an Award to the extent the Award is settled in cash.

 

(a) For Options and Stock Appreciation Rights that are intended to constitute
performance-based compensation (within the meaning of Code Section 162(m)), no
more than 500,000 shares of Common Stock may be subject to such Awards granted
to any one individual during any one calendar year.

 

(b) For Awards other than Options, Stock Appreciation Rights or Performance Cash
Units that are intended to be performance-based compensation (within the meaning
of Code Section 162(m)), no more than 500,000 shares of Common Stock may be
subject to such Awards granted to any one individual during any one calendar
year (regardless of whether settlement of the Award is to occur prior to, at the
time of or after the time of vesting). If the delivery of Common Stock is
deferred until after the Common Stock has been earned, any adjustment in the
amount delivered to reflect actual or deemed earnings or other investment
experience during the deferral period shall be disregarded.

 

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(c) For Performance Cash Units that are intended to be performance-based
compensation (within the meaning of Code Section 162(m)), the maximum amount
payable to any Participant with respect to any twelve month performance period
shall equal $2.5 million (pro rated for performance periods that are greater or
lesser than twelve months).

 

SECTION 7.
PAYMENT OF OPTION EXERCISE PRICE

 

Upon exercise of an option, Participants may pay the exercise price of an Option
(i) in cash, or with a personal check, certified check, or other cash
equivalent, (ii) by the surrender by the Participant to the Company of
previously acquired unencumbered shares of Common Stock (through physical
delivery or attestation), (iii) through the withholding of shares of Common
Stock from the number of shares otherwise issuable upon the exercise of the
Option (e.g., a net share settlement), (iv) through broker-assisted cashless
exercise if such exercise complies with applicable securities laws and any
insider trading policy of the Company, (v) such other form of payment as may be
authorized by the Administrator, or (vi) by a combination thereof. In the event
the Participant elects to pay the exercise price, in whole or in part, with
previously acquired shares of Common Stock or through a net share settlement,
the then-current Fair Market Value of the stock delivered or withheld shall
equal the total exercise price for the shares being purchased in such manner.

 

The Administrator may, in its sole discretion, limit the forms of payment
available to the Participant and may exercise such discretion any time prior to
the termination of the Option granted to the Participant or upon any exercise of
the Option by the Participant. “Previously acquired shares of Common Stock”
means shares of Common Stock which the Participant owns on the date of exercise
(or for such other period of time, if any, as may be required by generally
accepted accounting principles or any successor principles applicable to the
Company).

 

With respect to payment in the form of Common Stock, the Administrator may
require advance approval or adopt such rules as it deems necessary to assure
compliance with Rule 16b-3, if applicable.

 

SECTION 8.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

 

Each Incentive Stock Option shall be evidenced by an Incentive Stock Option
Agreement, which shall comply with and be subject to the following terms and
conditions:

 

(a) Number of Shares and Exercise Price. The Incentive Stock Option Agreement
shall state the total number of shares covered by the Incentive Stock Option.
Except as permitted by Code Section 424(a), or any successor provision, the
exercise price per share shall not be less than one hundred percent (100%) of
the per share Fair Market Value of the Common Stock on the date the
Administrator grants the Incentive Stock Option; provided, however, that if a
Participant owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its Parent or
any Subsidiary, the exercise price per share of an Incentive Stock Option
granted to such Participant shall not be less than one hundred ten percent
(110%) of the per share Fair Market Value of Common Stock on the date of the
grant of the Incentive Stock Option. The Administrator shall have full authority
and discretion in establishing the exercise price and shall be fully protected
in so doing.

 

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(b) Exercisability and Term of Incentive Stock Options. The Incentive Stock
Option Agreement shall state when the Incentive Stock Option becomes exercisable
(i.e., “vests”). The Participant may exercise the Incentive Stock Option, in
full or in part, upon or after the vesting date of such Option (or portion
thereof). Notwithstanding anything in this Plan or the Agreement to the
contrary, the Participant may not exercise an Incentive Stock Option after the
maximum term of such Option, as such term is specified in the Incentive Stock
Option Agreement. Except as permitted by Code Section 424(a), in no event shall
any Incentive Stock Option be exercisable during a term of more than ten (10)
years after the date on which it is granted; provided, however, that if a
Participant owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its Parent or
any Subsidiary, the Incentive Stock Option granted to such Participant shall be
exercisable during a term of not more than five (5) years after the date on
which it is granted.

 

The Administrator may accelerate the exercisability of any Incentive Stock
Option granted hereunder which is not immediately exercisable as of the date of
grant.

 

(c) No Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by a
Incentive Stock Option until the date of the issuance of the Common Stock
subject to such Award upon exercise, as evidenced by a stock certificate or as
reflected in the books and records of the Company or its designated agent (i.e.,
a “book entry”). Except as provided in Section 14 of the Plan, no adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such shares are actually issued (as evidenced
in either certificated or book entry form).

 

(d) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from any future payments to the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of an Incentive Stock Option or a
“disqualifying disposition” of shares acquired through the exercise of an
Incentive Stock Option as defined in Code Section 421(b) or require the
Participant to remit an amount sufficient to satisfy such withholding
requirements, or any combination thereof. In the event the Participant is
required under the Incentive Stock Option Agreement to pay the Company, or make
arrangements satisfactory to the Company respecting payment of, such withholding
and employment-related taxes, the Administrator may, in its sole discretion,
require the Participant to satisfy such obligation, in whole or in part, by
delivering shares of Common Stock or by electing to have the Company withhold
shares of Common Stock otherwise issuable to the Participant as a result of the
exercise of the Incentive Stock Option. Such shares shall have a Fair Market
Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from
such exercise or disqualifying disposition. In no event may the Participant
deliver shares, nor may the Company or any Affiliate withhold shares, having a
Fair Market Value in excess of such statutory minimum required tax withholding.
The Participant’s delivery of shares or the withholding of shares for this
purpose shall occur on or before the later of (i) the date the Incentive Stock
Option is exercised or the date of the disqualifying disposition, as the case
may be, or (ii) the date that the amount of tax to be withheld is determined
under applicable tax law.

 

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(e) Vesting Limitation. Notwithstanding any other provision of the Plan, the
aggregate Fair Market Value (determined as of the date an Incentive Stock Option
is granted) of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Participant during any calendar
year under the Plan and any other “incentive stock option” plans of the Company
or any Affiliate shall not exceed $100,000 (or such other amount as may be
prescribed by the Code from time to time); provided, however, that if the
exercisability or vesting of an Incentive Stock Option is accelerated as
permitted under the provisions of the Plan and such acceleration would result in
a violation of the limit imposed by this Section 8(e), such acceleration shall
be of full force and effect but the number of shares of Common Stock that exceed
such limit shall be treated as having been granted pursuant to a Nonqualified
Stock Option; and provided, further, that the limits imposed by this Section
8(e) shall be applied to all outstanding Incentive Stock Options under the Plan
and any other “incentive stock option” plans of the Company or any Affiliate in
chronological order according to the dates of grant.

 

(f) Other Provisions. The Incentive Stock Option Agreement authorized under this
Section 8 shall contain such other provisions as the Administrator shall deem
advisable. Any such Incentive Stock Option Agreement shall contain such
limitations and restrictions upon the exercise of the Incentive Stock Option as
shall be necessary to ensure that such Incentive Stock Option will be considered
an “incentive stock option” as defined in Code Section 422 or to conform to any
change therein.

 

SECTION 9.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

 

Each Nonqualified Stock Option shall be evidenced by a Nonqualified Stock Option
Agreement, which shall comply with and be subject to the following terms and
conditions:

 

(a) Number of Shares and Exercise Price. The Nonqualified Stock Option Agreement
shall state the total number of shares covered by the Nonqualified Stock Option.
Unless otherwise determined by the Administrator, the exercise price per share
shall be one hundred percent (100%) of the per share Fair Market Value of the
Common Stock on the date the Administrator grants the Nonqualified Stock Option.

 

(b) Term and Exercisability of Nonqualified Stock Options. The Nonqualified
Stock Option Agreement shall state when the Nonqualified Stock Option becomes
exercisable (i.e., “vests”). The Participant may exercise the Nonqualified Stock
Option, in full or in part, upon or after the vesting date of such Option (or
portion thereof); provided, however, that the Participant may not exercise a
Nonqualified Stock Option after the maximum term of such Option, as such term is
specified in the Nonqualified Stock Option Agreement.

 

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The Administrator may accelerate the exercisability of any Nonqualified Stock
Option granted hereunder which is not immediately exercisable as of the date of
grant.

 

(c) No Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by a
Nonqualified Stock Option until the date of the issuance of the Common Stock
subject to such Award upon exercise, as evidenced by a stock certificate or as
reflected in the books and records of the Company or its designated agent (i.e.,
a “book entry”). Except as provided in Section 14 of the Plan, no adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property), distributions or other rights for which the
record date is prior to the date such shares are actually issued (as evidenced
in either certificated or book entry form).

 

(d) Withholding. The Company or its Affiliate shall be entitled to withhold and
deduct from any future payments to the Participant all legally required amounts
necessary to satisfy any and all withholding and employment-related taxes
attributable to the Participant’s exercise of a Nonqualified Stock Option, or
require the Participant to remit an amount sufficient to satisfy such
withholding requirements. In the event the Participant is required under the
Nonqualified Stock Option Agreement to pay the Company, or make arrangements
satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its sole discretion, require
the Participant to satisfy such obligation, in whole or in part, by delivering
shares of Common Stock or by electing to have the Company withhold shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
of the Nonqualified Stock Option. Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from such exercise. In
no event may the Participant deliver shares, nor may the Company or any
Affiliate withhold shares, having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s delivery of shares
or the withholding of shares for this purpose shall occur on or before the later
of (i) the date the Nonqualified Stock Option is exercised, or (ii) the date
that the amount of tax to be withheld is determined under applicable tax law.

 

(e) Other Provisions. The Nonqualified Stock Option Agreement authorized under
this Section 9 shall contain such other provisions as the Administrator shall
deem advisable.

 

SECTION 10.
RESTRICTED STOCK AWARDS

 

Each Restricted Stock Award shall be evidenced by a Restricted Stock Award
Agreement, which shall comply with and be subject to the following terms and
conditions:

 

(a) Number of Shares. The Restricted Stock Award Agreement shall state the total
number of shares of Common Stock covered by the Restricted Stock Award.

 

(b) Risks of Forfeiture. The Restricted Stock Award Agreement shall set forth
the risks of forfeiture, if any, including risks of forfeiture based on
Performance Objectives, which shall apply to the shares of Common Stock covered
by the Restricted Stock Award, and shall specify the manner in which such risks
of forfeiture shall lapse. The Administrator may, in its sole discretion, modify
the manner in which such risks of forfeiture shall lapse but only with respect
to those shares of Common Stock which are restricted as of the effective date of
the modification.

 

11

 

 

(c) Issuance of Shares; Rights as Shareholder. Except as provided below, the
Company shall cause a stock certificate to be issued and shall deliver such
certificate to the Participant or hold such certificate in a manner determined
by the Administrator in its sole discretion; provided, however, that in lieu of
a stock certificate, the Company may evidence the issuance of shares by a book
entry in the records of the Company or its designated agent (if permitted by the
Company’s designated agent and applicable law, as determined by the
Administrator in its sole discretion). The Company shall cause a legend or
notation to be placed on such certificate or book entry describing the risks of
forfeiture and other transfer restrictions set forth in the Participant’s
Restricted Stock Award Agreement and providing for the cancellation and, if
applicable, return of such certificate or book entry if the shares of Common
Stock subject to the Restricted Stock Award are forfeited.

 

Until the risks of forfeiture have lapsed or the shares subject to such
Restricted Stock Award have been forfeited, the Participant shall be entitled to
vote the shares of Common Stock represented by such stock certificates and shall
receive all dividends attributable to such shares, but the Participant shall not
have any other rights as a shareholder with respect to such shares.

 

(d) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from any future payments to the Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Restricted Stock
Award, or require the Participant to remit an amount sufficient to satisfy such
withholding requirements. In the event the Participant is required under the
Restricted Stock Award Agreement to pay the Company, or make arrangements
satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its sole discretion, require
the Participant to satisfy such obligations, in whole or in part, by delivering
shares of Common Stock, including shares of Common Stock received pursuant to
the Restricted Stock Award on which the risks of forfeiture have lapsed. Such
shares shall have a Fair Market Value equal to the minimum required tax
withholding, based on the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes, that are applicable to the
supplemental income resulting from the lapsing of the risks of forfeiture on
such Restricted Stock Award. In no event may the Participant deliver shares
having a Fair Market Value in excess of such statutory minimum required tax
withholding. The Participant’s delivery of shares shall occur on or before the
date that the amount of tax to be withheld is determined under applicable tax
law.

 

(e) Other Provisions. The Restricted Stock Award Agreement authorized under this
Section 10 shall contain such other provisions as the Administrator shall deem
advisable.

 

12

 

 

SECTION 11.
RESTRICTED STOCK UNIT AWARDS

 

Each Restricted Stock Unit Award shall be evidenced by a Restricted Stock Unit
Award Agreement, which shall comply with and be subject to the following terms
and conditions:

 

(a) Number of Shares. The Restricted Stock Unit Award Agreement shall state the
total number of shares of Common Stock covered by the Restricted Stock Unit
Award.

 

(b) Vesting. The Restricted Stock Unit Award Agreement shall set forth the
period over which the Restricted Stock Unit Award may become vested and/or the
conditions, including conditions based on Performance Objectives, to which such
vesting is subject. The Administrator may, in its sole discretion, accelerate
the vesting of any Restricted Stock Unit Award.

 

(c) Issuance of Shares; Rights as Shareholder. The Participant shall be entitled
to payment of the Restricted Stock Unit Award as the units subject to such Award
vest. The Administrator may, in its sole discretion, pay Restricted Stock Units
in cash, shares of Common Stock or any combination thereof. If payment is made
in shares of Common Stock, the Administrator shall cause to be issued one or
more stock certificates in the Participant’s name and shall deliver such
certificates to the Participant in satisfaction of such units; provided,
however, that in lieu of stock certificates, the Company may evidence such
shares by a book entry in the records of the Company or its designated agent (if
permitted by the Company’s designated agent and applicable law, as determined by
the Administrator in its sole discretion). Until the units subject to the
Restricted Stock Unit Award have vested, the Participant shall not be entitled
to vote any shares of stock which may be acquired through the Award, shall not
receive any dividends attributable to such shares, and shall not have any other
rights as a shareholder with respect to such shares.

 

(d) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from any future payments to the Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Restricted Stock Unit
Award, or require the Participant to remit an amount sufficient to satisfy such
withholding requirements. In the event the Participant is required under the
Restricted Stock Unit Award Agreement to pay the Company, or make arrangements
satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its sole discretion, require
the Participant to satisfy such obligations, in whole or in part, by delivering
shares of Common Stock, including shares of Common Stock received pursuant to
the Restricted Stock Unit Award. Such shares shall have a Fair Market Value
equal to the minimum required tax withholding, based on the minimum statutory
withholding rates for federal and state tax purposes, including payroll taxes,
that are applicable to the supplemental income resulting from the lapsing of the
risks of forfeiture on such Restricted Stock Unit Award. In no event may the
Participant deliver shares having a Fair Market Value in excess of such
statutory minimum required tax withholding. The Participant’s delivery of shares
for this purpose shall occur on or before the date that the amount of tax to be
withheld is determined under applicable tax law.

 

13

 

 

(e) Other Provisions. The Restricted Stock Unit Award Agreement authorized under
this Section 11 shall contain such other provisions as the Administrator shall
deem advisable.

 

SECTION 12.
PERFORMANCE AWARDS

 

Each Performance Award shall be evidenced by a Performance Award Agreement,
which shall comply with and be subject to the following terms and conditions:

 

(a) Awards. Performance Awards may be in the form of Performance Cash Units or
Performance Shares. Performance Cash Units shall consist of monetary awards
which may be earned or become vested in whole or in part if the Company or the
Participant achieves certain Performance Objectives established by the
Administrator over a specified Performance Period. Performance Shares shall
consist of shares of Common Stock or other Awards denominated in shares of
Common Stock that may be earned or become vested in whole or in part if the
Company or the Participant achieves certain Performance Objectives established
by the Administrator over a specified Performance Period.

 

(b) Performance Objectives, Performance Period and Payment by the Company. The
Performance Award Agreement shall set forth:

 

(i) the number of Performance Cash Units or Performance Shares subject to the
Performance Award, and the dollar value of each Performance Cash Unit;

 

(ii) one or more Performance Objectives established by the Administrator and the
method for measuring performance;

 

(iii) the Performance Period over which Performance Cash Units or Performance
Shares may be earned or may become vested;

 

(iv) the extent to which partial achievement of the Performance Objectives may
result in a payment or vesting of the Performance Award, as determined by the
Administrator; and

 

(v) the date upon which payment of Performance Cash Units will be made or
Performance Shares will be issued, as the case may be, and the extent to which
such payment or the receipt of such Performance Shares may be deferred.

 

(c) Withholding Taxes. The Company or its Affiliates shall be entitled to
withhold and deduct from any future payments to the Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Performance Award, or
require the Participant to remit an amount sufficient to satisfy such
withholding requirements. In the event the Participant is required under the
Performance Award Agreement to pay the Company or its Affiliates, or make
arrangements satisfactory to the Company or its Affiliates respecting payment
of, such withholding and employment-related taxes, the Administrator may, in its
sole discretion, require the Participant to satisfy such obligations, in whole
or in part, by delivering shares of Common Stock, including shares of Common
Stock received pursuant to the Performance Award. Such shares shall have a Fair
Market Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes. In no event may the Participant deliver shares having a Fair
Market Value in excess of such statutory minimum required tax withholding. The
Participant’s delivery of shares for this purpose shall occur on or before the
date that the amount of tax to be withheld is determined under applicable tax
law.

 

14

 

 

(d) No Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by a
Performance Shares Award until the date of the issuance of a stock certificate
evidencing such shares (after such Award has vested); provided, however, that in
lieu of a stock certificate, the Company may evidence such shares by a book
entry in the records of the Company or its designated agent (if permitted by the
Company’s designated agent and applicable law, as determined by the
Administrator in its sole discretion). No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is actually issued or such book entry is made, except as
otherwise provided in Section 14 of the Plan.

 

(e) Other Provisions. The Performance Award Agreement authorized under this
Section 12 shall contain such other provisions as the Administrator shall deem
advisable.

 

SECTION 12A.
CODE SECTION 162(m) PERFORMANCE-BASED COMPENSATION

 

The provisions of this Section 12A shall apply to any Award under the Plan that
is intended to constitute performance-based compensation within the meaning of
Code Section 162(m).

 

(a) Any Award under the Plan may be designated as performance-based
compensation. To the extent required by Code Section 162(m), any Award (other
than an Option or Stock Appreciation Right) so designated shall be conditioned
on the achievement of one or more performance targets as determined by the
Committee and the additional requirements set forth in this Section 12A shall
apply.

 

(b) The performance targets established for the performance period established
by the Committee shall be objective (as that term is described in regulations
under Code Section 162(m)), and shall be established in writing by the Committee
not later than 90 days after the beginning of the performance period (but in no
event after 25% of the performance period has elapsed), and while the outcome as
to the performance targets is substantially uncertain. The performance targets
established by the Committee may be with respect to corporate performance,
operating group or sub-group performance, individual company performance, other
group or individual performance, or division performance, and shall be based on
one or more of the Performance Objectives.

 

(c) A Participant otherwise entitled to receive an Award for any performance
period shall not receive a settlement or payment of the Award until the
Committee has determined that the applicable performance target(s) have been
attained. To the extent that the Committee exercises discretion in making the
determination required by this Section 12A(c), such exercise of discretion may
not result in an increase in the amount of the payment.

 

15

 

 

(d) If a Participant's employment terminates because of death or disability, or
if a change in control occurs prior to the Participant's termination of
employment, the Award may, to the extent provided by the Committee, become
vested without regard to whether the Award would be performance-based
compensation.

 

(e) An Award designated as performance-based compensation shall not vest prior
to the first anniversary of the date on which it is granted (subject to
acceleration of vesting, to the extent provided by the Committee, in the event
of the Participant’s death, disability or change in control).

 

Nothing in this Section 12A shall preclude the Committee from granting Awards
under the Plan or the Committee, the Company or any Subsidiary from granting any
Awards outside of the Plan that are not intended to be performance-based
compensation; provided, however, that, at the time of grant of the Award by the
Committee, the Committee shall designate whether such Awards are intended to
constitute performance-based compensation. To the extent that the provisions of
this Section 12A reflect the requirements applicable to performance-based
compensation, such provisions shall not apply to the portion of the Award, if
any, that is not intended to constitute performance-based compensation. Unless
otherwise indicated by the Committee at the time of grant, all Options and Stock
Appreciation Rights granted pursuant to the Plan shall be deemed to be intended
to be performance-based compensation for the purposes of Code Section 162(m).

 

SECTION 13.
STOCK APPRECIATION RIGHTS

 

Each Stock Appreciation Right shall be evidenced by a Stock Appreciation Right
Agreement, which shall comply with and be subject to the following terms and
conditions:

 

(a) Awards. A Stock Appreciation Right shall entitle the Participant to receive,
upon exercise, cash, shares of Common Stock, or any combination thereof, having
a value equal to the excess of (i) the Fair Market Value of a specified number
of shares of Common Stock on the date of such exercise, over (ii) a specified
exercise price. The number of shares and the exercise price of the Stock
Appreciation Right shall be determined by the Administrator on the date of
grant. Unless otherwise determined by the Administrator, the specified exercise
price shall not be less than 100% of the Fair Market Value of such shares of
Common Stock on the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted independent of or in tandem with a previously
or contemporaneously granted Option.

 

(b) Term and Exercisability. The Stock Appreciation Right Agreement shall state
when the Stock Appreciation Right becomes exercisable (i.e., “vests”). The
Participant may exercise the Stock Appreciation Right, in full or in part, upon
or after the vesting date of such Stock Appreciation Right (or portion thereof);
provided, however, that the Participant may not exercise a Stock Appreciation
Right after the maximum term of such Stock Appreciation Right, as such term is
specified in the Stock Appreciation Right Agreement.

 

16

 

 

The Administrator may accelerate the exercisability of any Stock Appreciation
Right granted hereunder which is not immediately exercisable as of the date of
grant. If a Stock Appreciation Right is granted in tandem with an Option, the
Stock Appreciation Right Agreement shall set forth the extent to which the
exercise of all or a portion of the Stock Appreciation Right shall cancel a
corresponding portion of the Option, and the extent to which the exercise of all
or a portion of the Option shall cancel a corresponding portion of the Stock
Appreciation Right.

 

(c) Withholding Taxes. The Company or its Affiliate shall be entitled to
withhold and deduct from any future payments to the Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Participant’s Stock Appreciation
Right, or require the Participant to remit an amount sufficient to satisfy such
withholding requirements. In the event the Participant is required under the
Stock Appreciation Right to pay the Company or its Affiliate, or make
arrangements satisfactory to the Company or its Affiliate respecting payment of,
such withholding and employment-related taxes, the Administrator may, in its
sole discretion, require the Participant to satisfy such obligation, in whole or
in part, by delivering shares of Common Stock or by electing to have the Company
withhold shares of Common Stock otherwise issuable to the Participant as a
result of the exercise of the Stock Appreciation Right. Such shares shall have a
Fair Market Value equal to the minimum required tax withholding, based on the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, that are applicable to the supplemental income
resulting from such exercise. In no event may the Participant deliver shares,
nor may the Company or any Affiliate withhold shares, having a Fair Market Value
in excess of such statutory minimum required tax withholding. The Participant’s
delivery of shares or the withholding of shares for this purpose shall occur on
or before the later of (i) the date the Stock Appreciation Right is exercised,
or (ii) the date that the amount of tax to be withheld is determined under
applicable tax law.

 

(d) No Rights as Shareholder. A Participant (or the Participant’s successors)
shall have no rights as a shareholder with respect to any shares covered by a
Stock Appreciation Right until the date of the issuance of a stock certificate
evidencing such shares; provided, however, that in lieu of stock certificates,
the Company may evidence such shares by a book entry in the records of the
Company or its designated agent (if permitted by the Company’s designated agent
and applicable law, as determined by the Administrator in its sole discretion).
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued or
such book entry is made (except as otherwise provided in Section 14 of the
Plan).

 

(e) Other Provisions. The Stock Appreciation Right Agreement authorized under
this Section 13 shall contain such other provisions as the Administrator shall
deem advisable, including but not limited to any restrictions on the exercise of
the Stock Appreciation Right which may be necessary to comply with Rule 16b-3.

 

17

 

 

SECTION 14.
RECAPITALIZATION, EXCHANGE,
LIQUIDATION, OR CHANGE OF CONTROL

 

(a) In General. In the event of an increase or decrease in the number of shares
of Common Stock resulting from a stock dividend, stock split, reverse split,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company, other than due to conversion of the convertible
securities of the Company, the Administrator may, in its sole discretion, adjust
the class and number of shares of stock reserved under Section 6 of this Plan,
the class and number of shares of stock covered by each outstanding Award, and,
if and as applicable, the exercise price per share of each outstanding Award to
reflect such change. Additional shares which may become covered by the Award
pursuant to such adjustment shall be subject to the same restrictions as are
applicable to the shares with respect to which the adjustment relates.

 

(b) Liquidation. Unless otherwise provided in the Agreement evidencing an Award,
in the event of a dissolution or liquidation of the Company, the Administrator
may provide for one or both of the following:

 

(i) the acceleration of the exercisability of any or all outstanding Options or
Stock Appreciation Rights, the vesting and payment of any or all Performance
Awards or Restricted Stock Unit Awards, or the lapsing of the risks of
forfeiture on any or all Restricted Stock Awards; provided, however, that no
such acceleration, vesting or payment shall occur if the acceleration, vesting
or payment would violate the requirements of Code Section 409A; or

 

(ii) the complete termination of this Plan and the cancellation of any or all
Awards (or portions thereof) which have not been exercised, have not vested, or
remain subject to risks of forfeiture, as applicable, in each case immediately
prior to the completion of such a dissolution or liquidation.

 

(c) Change of Control. Unless otherwise provided in the Agreement evidencing an
Award, in the event of a Change of Control, the Administrator may provide for
one or more of the following:

 

(i) the acceleration of the exercisability, vesting, or lapse of the risks of
forfeiture of any or all Awards (or portions thereof);

 

(ii) the complete termination of this Plan and the cancellation of any or all
Awards (or portions thereof) which have not been exercised, have not vested, or
remain subject to risks of forfeiture, as applicable, in each case as of the
effective date of the Change of Control;

 

(iii) that the entity succeeding the Company by reason of such Change of
Control, or the parent of such entity, shall assume or continue any or all
Awards (or portions thereof) outstanding immediately prior to the Change of
Control or substitute for any or all such Awards (or portions thereof) a
substantially equivalent award with respect to the securities of such successor
entity, as determined in accordance with applicable laws and regulations;

 

18

 

 

(iv) that Participants holding outstanding Awards shall become entitled to
receive, with respect to each share of Common Stock subject to such Award
(whether vested or unvested, as determined by the Administrator pursuant to
subsection (c)(i) hereof) as of the effective date of any such Change of
Control, cash in an amount equal to (1) for Participants holding Options or
Stock Appreciation Rights, the excess of the Fair Market Value of such Common
Stock on the date immediately preceding the effective date of such Change of
Control over the exercise price per share of Options or Stock Appreciation
Rights; or (2) for Participants holding Awards other than Options or Stock
Appreciation Rights, the Fair Market Value of such Common Stock on the date
immediately preceding the effective date of such Change of Control.

 

The Administrator need not take the same action with respect to all Awards (or
portions thereof) or with respect to all Participants. In addition, the
Administrator may restrict the rights of or the applicability of this Section 14
to the extent necessary to comply with Section 16(b) of the Exchange Act, the
Internal Revenue Code or any other applicable law or regulation. The grant of an
Award pursuant to the Plan shall not limit in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.

 

SECTION 15.
NON-TRANSFERABILITY

 

Except as expressly provided in this Plan or an Agreement, no Award shall be
transferable by the Participant, in whole or in part, other than by will or by
the laws of descent and distribution. If the Participant shall attempt any
transfer of any Award, such transfer shall be void and the Award shall
terminate.

 

Notwithstanding anything in this Section 15 to the contrary, Non-Qualified Stock
Options shall be transferable, in whole or in part, by the Participant by will
or by the laws of descent and distribution. In addition, the Administrator may,
in its sole discretion, permit the Participant to transfer any or all
Nonqualified Stock Option to any member of the Participant’s “immediate family”
as such term is defined in Rule 16a-1(e) of the Exchange Act, or any successor
provision, or to one or more trusts whose beneficiaries are members of such
Participant’s “immediate family” or partnerships in which such family members
are the only partners; provided, however, that the Participant cannot receive
any consideration for the transfer and such transferred Nonqualified Stock
Option shall continue to be subject to the same terms and conditions as were
applicable to such Nonqualified Stock Option immediately prior to its transfer.

 

SECTION 16.
INVESTMENT PURPOSE AND SECURITIES COMPLIANCE

 

No shares of Common Stock shall be issued pursuant to the Plan unless and until
there has been compliance, in the opinion of Company’s counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements. As a condition to the
issuance of Common Stock to Participant, the Administrator may require
Participant to (a) represent that the shares of Common Stock are being acquired
for investment and not resale and to make such other representations as the
Administrator shall deem necessary or appropriate to qualify the issuance of the
shares as exempt from the Securities Act of 1933 and any other applicable
securities laws, and (b) represent that Participant shall not dispose of the
shares of Common Stock in violation of the Securities Act of 1933 or any other
applicable securities laws.

 

19

 

 

As a further condition to the grant of any Option or the issuance of Common
Stock to a Participant, the Participant agrees to the following:

 

(a) In the event the Company advises the Participant that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, the Participant will execute any lock-up
agreement the Company and the underwriter(s) deem necessary or appropriate, in
their sole discretion, in connection with such public offering.

 

(b) In the event the Company makes any public offering of its securities and
determines in its sole discretion that it is necessary to reduce the number of
outstanding Awards so as to comply with any state’s securities or Blue Sky law
limitations with respect thereto, the Board of Directors of the Company shall
have the right (i) to accelerate the exercisability of any Award and the date on
which such Award must be exercised or remove the risks of forfeiture to which
the Award is subject, provided that the Company gives Participant prior written
notice of such acceleration or removal, and (ii) to cancel any outstanding
Awards (or portions thereof) which Participant does not exercise prior to or
contemporaneously with such public offering.

 

(c) In the event of a Change of Control, Participant will comply with Rule 145
of the Securities Act of 1933 and any other restrictions imposed under other
applicable legal or accounting principles if Participant is an “affiliate” (as
defined in such applicable legal and accounting principles) at the time of the
Change of Control, and Participant will execute any documents necessary to
ensure compliance with such rules.

 

The Company reserves the right to place a legend on any stock certificate (or a
notation on any book entry shares permitted by the Administrator) issued in
connection with an Award pursuant to the Plan to assure compliance with this
Section 16.

 

The Company shall not be required to register or maintain the registration of
the Plan, any Award, or any Common Stock issued or issuable pursuant to the Plan
under the Securities Act of 1933 or any other applicable securities laws. If the
Company is unable to obtain the authority that the Company or its counsel deems
necessary for the lawful issuance and sale of Common Stock under the Plan, the
Company shall not be liable for the failure to issue and sell Common Stock upon
the exercise, vesting, or lapse of restrictions of forfeiture of an Award unless
and until such authority is obtained. A Participant shall not be eligible for
the grant of an Award or the issuance of Common Stock pursuant to an Award if
such grant or issuance would violate any applicable securities law.

 

20

 

 

SECTION 17.
AMENDMENT OF THE PLAN

 

The Board may from time to time, insofar as permitted by law, suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such suspension, termination, revision, or amendment, except as is
authorized in Section 14, shall impair the terms and conditions of any Award
which is outstanding on the date of such suspension, termination, revision, or
amendment to the material detriment of the Participant without the consent of
the Participant. Notwithstanding the foregoing, except as provided in Section 14
of this Plan, to the extent required by applicable law or regulation, the Board
may not, without shareholder approval, revise or amend the Plan (i) to
materially increase the number of shares subject to the Plan, (ii) to change the
designation of Participants, including the class of Employees, eligible to
receive Awards, (iii) to decrease the price at which Options or Stock
Appreciation Rights may be granted, (iv) to cancel Options or Stock Appreciation
Rights that have an exercise price in excess of the Fair Market Value of the
Common Stock, (v) to materially increase the benefits accruing to Participants
under the Plan, or (vi) in any manner that will cause Incentive Stock Options to
fail to meet the requirements of Code Section 422.

 

To the extent applicable, this Plan and all Agreements shall be interpreted in
accordance with the requirements of Code Sections 409A and 422 and the
regulations, notices, and other guidance of general applicability issued
thereunder. Furthermore, notwithstanding anything in the Plan or any Agreement
to the contrary, the Board may amend the Plan or Agreement to the extent
necessary or desirable to comply with such requirements without the consent of
the Participant.

 

SECTION 18.
NO OBLIGATION TO EXERCISE OPTION;
NO EMPLOYMENT OR OTHER SERVICE RIGHTS

 

The granting of an Option or Stock Appreciation Right shall impose no obligation
upon the Participant to exercise such Option or Stock Appreciation Right.
Further, the granting of an Award hereunder shall not impose upon the Company or
any Affiliate any obligation to retain the Participant in its employ or service
for any period.

 

SECTION 19.
MISCELLANEOUS

 

(a) Issuance of Shares. The Company is not required to issue or remove
restrictions on shares of Common Stock granted pursuant to the Plan until the
Administrator determines that: (i) all conditions of the Award have been
satisfied, (ii) all legal matters in connection with the issuance have been
satisfied, and (iii) the Participant has executed and delivered to the Company
such representations or agreements as the Administrator may consider
appropriate, in its sole discretion, to satisfy the requirements of any
applicable law or regulation.

 

(b) Choice of Law. The law of the state of Montana shall govern all questions
concerning the construction, validity, and interpretation of this Plan, without
regard to that state’s conflict of laws rules.

 

(c) Severability. In the event that any provision of this Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of this Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.

 

21

 

 

(d) No Duty to Notify. The Company shall have no duty or obligation to any
Participant to advise such Participant as to the time and manner of exercising
an Award or as to the pending termination or expiration of such Award. In
addition, the Company has no duty or obligation to minimize the tax consequences
of an Award to the Participant.

 

 

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