Exhibit 10.3

 

 

3PEA INTERNATIONAL, INC.

 

2018 INCENTIVE COMPENSATION PLAN

 

1.                   Purpose. The purpose of this 3PEA INTERNATIONAL, INC. 2018
INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist 3Pea International, Inc.,
a Nevada corporation (the “Company”) and its Related Entities (as hereinafter
defined) in attracting, motivating, retaining and rewarding high-quality
executives and other employees, officers, directors, consultants and other
persons who provide services to the Company or its Related Entities by enabling
such persons to acquire or increase a proprietary interest in the Company in
order to strengthen the mutuality of interests between such persons and the
Company’s shareholders, and providing such persons with annual and long term
performance incentives to expend their maximum efforts in the creation of
shareholder value.

 

2.                   Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below, in addition to such terms defined in
Section 1 hereof and elsewhere herein.

 

(a)                “Award” means any Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award, Share granted as a bonus or in
lieu of another Award, Dividend Equivalent, Other Stock-Based Award or
Performance Award, together with any other right or interest, granted to a
Participant under the Plan.

 

(b)                “Award Agreement” means any written agreement, contract or
other instrument or document evidencing any Award granted by the Committee
hereunder.

 

(c)                “Beneficiary” means the person, persons, trust or trusts that
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant’s death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant’s death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

 

(d)                “Beneficial Owner” and “Beneficial Ownership” shall have the
meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any
successor to such Rule.

 

(e)                “Board” means the Company’s Board of Directors.

 

(f)                 “Cause” shall, with respect to any Participant, have the
meaning specified in the Award Agreement. In the absence of any definition in
the Award Agreement, “Cause” shall have the equivalent meaning or the same
meaning as “cause” or “for cause” set forth in any employment, consulting, or
other agreement for the performance of services between the Participant and the
Company or a Related Entity or, in the absence of any such agreement or any such
definition in such agreement, such term shall mean (i) the failure by the
Participant to perform, in a reasonable manner, his or her duties as assigned by
the Company or a Related Entity, (ii) any violation or breach by the Participant
of his or her employment, consulting or other similar agreement with the Company
or a Related Entity, if any, (iii) any violation or breach by the Participant of
any non-competition, non-solicitation, non-disclosure and/or other similar
agreement with the Company or a Related Entity, (iv) any act by the Participant
of dishonesty or bad faith with respect to the Company or a Related Entity,
(v) use of alcohol, drugs or other similar substances in a manner that adversely
affects the Participant’s work performance, or (vi) the commission by the
Participant of any act, misdemeanor, or crime reflecting unfavorably upon the
Participant or the Company or any Related Entity. The good faith determination
by the Committee of whether the Participant’s Continuous Service was terminated
by the Company for “Cause” shall be final and binding for all purposes
hereunder.

 

 

 

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(g)                “Change in Control” means a Change in Control as defined in
Section 9(b) of the Plan.

 

(h)                “Code” means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.

 

(i)                 “Committee” means a committee designated by the Board to
administer the Plan; provided, however, that if the Board fails to designate a
committee or if there are no longer any members on the committee so designated
by the Board, or for any other reason determined by the Board, then the Board
shall serve as the Committee. While it is intended that the Committee shall
consist of at least two directors, each of whom shall be (i) a “non-employee
director” within the meaning of Rule 16b-3 (or any successor rule) under the
Exchange Act, unless administration of the Plan by “non-employee directors” is
not then required in order for exemptions under Rule 16b-3 to apply to
transactions under the Plan, (ii) an “outside director” within the meaning of
Section 162(m) of the Code, and (iii) “Independent”, the failure of the
Committee to be so comprised shall not invalidate any Award that otherwise
satisfies the terms of the Plan.

 

(j)                 “Consultant” means any Person (other than an Employee or a
Director, solely with respect to rendering services in such Person’s capacity as
a director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

 

(k)                “Continuous Service” means the uninterrupted provision of
services to the Company or any Related Entity in any capacity of Employee,
Director, Consultant or other service provider. Continuous Service shall not be
considered to be interrupted in the case of (i) any approved leave of absence,
(ii) transfers among the Company, any Related Entities, or any successor
entities, in any capacity of Employee, Director, Consultant or other service
provider, or (iii) any change in status as long as the individual remains in the
service of the Company or a Related Entity in any capacity of Employee,
Director, Consultant or other service provider (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave.

 

(l)                 “Covered Employee” means the Person who, as of the end of
the taxable year, either is the principal executive officer of the Company or is
serving as the acting principal executive officer of the Company, and each other
Person whose compensation is required to be disclosed in the Company’s filings
with the Securities and Exchange Commission by reason of that person being among
the three highest compensated officers of the Company as of the end of a taxable
year, or such other person as shall be considered a “covered employee” for
purposes of Section 162(m) of the Code.

 

(m)              “Deferred Stock” means a right to receive Shares, including
Restricted Stock, cash measured based upon the value of Shares or a combination
thereof, at the end of a specified deferral period.

 

(n)                “Deferred Stock Award” means an Award of Deferred Stock
granted to a Participant under Section 6(e) hereof.

 

(o)                “Director” means a member of the Board or the board of
directors of any Related Entity.

 

(p)                “Disability” means a permanent and total disability (within
the meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.

 

(q)                “Dividend Equivalent” means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Shares, other Awards or other
property equal in value to dividends paid with respect to a specified number of
Shares, or other periodic payments.

 

 

 

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(r)                 “Effective Date” means the effective date of the Plan, which
shall be July 18, 2018.

 

(s)                 “Eligible Person” means each officer, Director, Employee,
Consultant and other person who provides services to the Company or any Related
Entity. The foregoing notwithstanding, only Employees of the Company, or any
parent corporation or subsidiary corporation of the Company (as those terms are
defined in Sections 424(e) and (f) of the Code, respectively), shall be Eligible
Persons for purposes of receiving any Incentive Stock Options. An Employee on
leave of absence may, in the discretion of the Committee, be considered as still
in the employ of the Company or a Related Entity for purposes of eligibility for
participation in the Plan.

 

(t)                 “Employee” means any person, including an officer or
Director, who is an employee of the Company or any Related Entity. The payment
of a director’s fee by the Company or a Related Entity shall not be sufficient
to constitute “employment” by the Company.

 

(u)                “Exchange Act” means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.

 

(v)                “Fair Market Value” means the fair market value of Shares,
Awards or other property as determined by the Committee, or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of a Share as of any given date shall be (i) the last sale
price of a Share on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the average of the closing bid and asked prices for
the Common Stock quoted by an established quotation service for over-the-counter
securities, if the Common Stock is not then traded on a national securities
exchange.

 

(w)              “Good Reason” shall, with respect to any Participant, have the
meaning specified in the Award Agreement. In the absence of any definition in
the Award Agreement, “Good Reason” shall have the equivalent meaning or the same
meaning as “good reason” or “for good reason” set forth in any employment,
consulting or other agreement for the performance of services between the
Participant and the Company or a Related Entity or, in the absence of any such
agreement or any such definition in such agreement, such term shall mean (i) the
assignment to the Participant of any duties inconsistent in any material respect
with the Participant’s duties or responsibilities as assigned by the Company or
a Related Entity, or any other action by the Company or a Related Entity which
results in a material diminution in such duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company or a Related Entity promptly
after receipt of notice thereof given by the Participant; (ii) any material
failure by the Company or a Related Entity to comply with its obligations to the
Participant as agreed upon, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company or a Related Entity promptly after receipt of notice thereof given by
the Participant; or (iii) the Company’s or Related Entity’s requiring the
Participant to be based at any office or location outside of fifty miles from
the location of employment or service as of the date of Award, except for travel
reasonably required in the performance of the Participant’s responsibilities.

 

(x)                “Incentive Stock Option” means any Option intended to be
designated as an incentive stock option within the meaning of Section 422 of the
Code or any successor provision thereto.

 

(y)                “Independent”, when referring to either the Board or members
of the Committee, shall have the same meaning as used in the rules of the
Listing Market.

 

(z)                “Incumbent Board” means the Incumbent Board as defined in
Section 9(b)(ii) hereof.

 

(aa)             “Listing Market” means the OTC Bulletin Board or any other
national securities exchange on which any securities of the Company are listed
for trading, and if not listed for trading, by the rules of the Nasdaq Market.

 

 

 

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(bb)            “Option” means a right granted to a Participant under
Section 6(b) hereof, to purchase Shares or other Awards at a specified price
during specified time periods.

 

(cc)             “Optionee” means a person to whom an Option is granted under
this Plan or any person who succeeds to the rights of such person under this
Plan.

 

(dd)            “Other Stock-Based Awards” means Awards granted to a Participant
under Section 6(i) hereof.

 

(ee)             “Participant” means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.

 

(ff)               “Performance Award” means any Award of Performance Shares or
Performance Units granted pursuant to Section 6(h) hereof.

 

(gg)            “Performance Period” means that period established by the
Committee at the time any Performance Award is granted or at any time thereafter
during which any performance goals specified by the Committee with respect to
such Award are to be measured.

 

(hh)            “Performance Share” means any grant pursuant to Section 6(h)
hereof of a unit valued by reference to a designated number of Shares, which
value may be paid to the Participant by delivery of such property as the
Committee shall determine, including cash, Shares, other property, or any
combination thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time of such grant or
thereafter.

 

(ii)               “Performance Unit” means any grant pursuant to Section 6(h)
hereof of a unit valued by reference to a designated amount of property
(including cash) other than Shares, which value may be paid to the Participant
by delivery of such property as the Committee shall determine, including cash,
Shares, other property, or any combination thereof, upon achievement of such
performance goals during the Performance Period as the Committee shall establish
at the time of such grant or thereafter.

 

(jj)               “Person” shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a “group” as defined in Section 13(d) thereof.

 

(kk)            “Related Entity” means any Subsidiary, and any business,
corporation, partnership, limited liability company or other entity designated
by the Board, in which the Company or a Subsidiary holds a substantial ownership
interest, directly or indirectly.

 

(ll)               “Restriction Period” means the period of time specified by
the Committee that Restricted Stock Awards shall be subject to such restrictions
on transferability, risk of forfeiture and other restrictions, if any, as the
Committee may impose.

 

(mm)            “Restricted Stock” means any Share issued with the restriction
that the holder may not sell, transfer, pledge or assign such Share and with
such risks of forfeiture and other restrictions as the Committee, in its sole
discretion, may impose (including any restriction on the right to vote such
Share and the right to receive any dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.

 

(nn)            “Restricted Stock Award” means an Award granted to a Participant
under Section 6(d) hereof.

 

(oo)            “Rule 16b-3” means Rule 16b-3, as from time to time in effect
and applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.

 

 

 

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(pp)            “Shares” means the shares of common stock of the Company, par
value $0.001 per share, and such other securities as may be substituted (or
resubstituted) for Shares pursuant to Section 10(c) hereof.

 

(qq)            “Stock Appreciation Right” means a right granted to a
Participant under Section 6(c) hereof.

 

(rr)               “Subsidiary” means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

 

(ss)              “Substitute Awards” means Awards granted or Shares issued by
the Company in assumption of, or in substitution or exchange for, Awards
previously granted, or the right or obligation to make future Awards, by a
company (i) acquired by the Company or any Related Entity, (ii) which becomes a
Related Entity after the date hereof, or (iii) with which the Company or any
Related Entity combines.

 

3.                   Administration.

 

(a)                Authority of the Committee. The Plan shall be administered by
the Committee except to the extent (and subject to the limitations imposed by
Section 3(b) hereof) the Board elects to administer the Plan, in which case the
Plan shall be administered by only those members of the Board who are
Independent members of the Board, in which case references herein to the
“Committee” shall be deemed to include references to the Independent members of
the Board. The Committee shall have full and final authority, subject to and
consistent with the provisions of the Plan, to select Eligible Persons to become
Participants, grant Awards, determine the type, number and other terms and
conditions of, and all other matters relating to, Awards, prescribe Award
Agreements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the Plan
and Award Agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee may deem necessary or advisable for the administration of the
Plan. In exercising any discretion granted to the Committee under the Plan or
pursuant to any Award, the Committee shall not be required to follow past
practices, act in a manner consistent with past practices, or treat any Eligible
Person or Participant in a manner consistent with the treatment of any other
Eligible Persons or Participants.

 

(b)                Manner of Exercise of Committee Authority. The Committee, and
not the Board, shall exercise sole and exclusive discretion (i) on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act,
(ii) with respect to any Award that is intended to qualify as “performance-based
compensation” under Section 162(m), to the extent necessary in order for such
Award to so qualify; and (iii) with respect to any Award to an Independent
Director. Any action of the Committee shall be final, conclusive and binding on
all persons, including the Company, its Related Entities, Eligible Persons,
Participants, Beneficiaries, transferees under Section 10(b) hereof or other
persons claiming rights from or through a Participant, and shareholders. The
express grant of any specific power to the Committee, and the taking of any
action by the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to officers or managers
of the Company or any Related Entity, or committees thereof, the authority,
subject to such terms and limitations as the Committee shall determine, to
perform such functions, including administrative functions as the Committee may
determine to the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to
Section 16 of the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as “performance-based compensation” under Code
Section 162(m) to fail to so qualify. The Committee may appoint agents to assist
it in administering the Plan.

 

 

 

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(c)                Limitation of Liability. The Committee and the Board, and
each member thereof, shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him or her by any officer or Employee,
the Company’s independent auditors, Consultants or any other agents assisting in
the administration of the Plan. Members of the Committee and the Board, and any
officer or Employee acting at the direction or on behalf of the Committee or the
Board, shall not be personally liable for any action or determination taken or
made in good faith with respect to the Plan, and shall, to the extent permitted
by law, be fully indemnified and protected by the Company with respect to any
such action or determination.

 

4.                   Shares Subject to Plan.

 

(a)                Limitation on Overall Number of Shares Available for Delivery
Under Plan. Subject to adjustment as provided in Section 10(c) hereof, the total
number of Shares reserved and available for delivery under the Plan shall be
five million (5,000,000). Any Shares delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares.

 

(b)                Application of Limitation to Grants of Awards. No Award may
be granted if the number of Shares to be delivered in connection with such an
Award exceeds the number of Shares remaining available for delivery under the
Plan, minus the number of Shares deliverable in settlement of or relating to
then outstanding Awards. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
Shares actually delivered differs from the number of Shares previously counted
in connection with an Award.

 

(c)                Availability of Shares Not Delivered under Awards and
Adjustments to Limits.

 

i.                        If any Awards are forfeited, expire or otherwise
terminate without issuance of such Shares, or any Award is settled for cash or
otherwise does not result in the issuance of all or a portion of the Shares
subject to such Award, the Shares to which those Awards were subject, shall, to
the extent of such forfeiture, expiration, termination, cash settlement or
non-issuance, again be available for delivery with respect to Awards under the
Plan, subject to Section 4(c)(iv) below.

 

ii.                        In the event that any Option or other Award granted
hereunder is exercised through the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, or withholding tax
liabilities arising from such option or other award are satisfied by the
tendering of Shares (either actually or by attestation) or by the withholding of
Shares by the Company, then only the number of Shares issued net of the Shares
tendered or withheld shall be counted for purposes of determining the maximum
number of Shares available for grant under the Plan.

 

iii.                       Substitute Awards shall not reduce the Shares
authorized for delivery under the Plan or authorized for delivery to a
Participant in any period. Additionally, in the event that a company acquired by
the Company or any Related Entity or with which the Company or any Related
Entity combines has shares available under a pre-existing plan approved by its
shareholders, the shares available for delivery pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in such acquisition
or combination to determine the consideration payable to the holders of common
stock of the entities party to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the Shares authorized for delivery
under the Plan; if and to the extent that the use of such Shares would not
require approval of the Company’s shareholders under the rules of the Listing
Market.

 

iv.                      Any Share that again becomes available for delivery
pursuant to this Section 4(c) shall be added back as one (1) Share.

 

 

 

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v.                       Notwithstanding anything in this Section 4(c) to the
contrary but subject to adjustment as provided in Section 10(c) hereof, the
maximum aggregate number of Shares that may be delivered under the Plan as a
result of the exercise of the Incentive Stock Options shall be 5,000,000 Shares.

 

5.                   Eligibility. Awards may be granted under the Plan only to
Eligible Persons.

 

6.                   Specific Terms of Awards.

 

(a)                General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of the Participant’s
Continuous Service and terms permitting a Participant to make elections relating
to his or her Award. Except as otherwise expressly provided herein, the
Committee shall retain full power and discretion to accelerate, waive or modify,
at any time, any term or condition of an Award that is not mandatory under the
Plan. Except in cases in which the Committee is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Nevada law, no
consideration other than services may be required for the grant (as opposed to
the exercise) of any Award.

 

(b)                Options. The Committee is authorized to grant Options to any
Eligible Person on the following terms and conditions:

 

i.                        Exercise Price. Other than in connection with
Substitute Awards, the exercise price per Share purchasable under an Option
shall be determined by the Committee, provided that such exercise price shall
not be less than 100% of the Fair Market Value of a Share on the date of grant
of the Option and shall not, in any event, be less than the par value of a Share
on the date of grant of the Option. If an Employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 424(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company (or any parent corporation or subsidiary corporation of the Company, as
those terms are defined in Sections 424(e) and (f) of the Code, respectively)
and an Incentive Stock Option is granted to such Employee, the exercise price of
such Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no less than 110% of the Fair Market Value of a Share on the
date such Incentive Stock Option is granted.

 

ii.                       Time and Method of Exercise. The Committee shall
determine the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or times at
which Options shall cease to be or become exercisable following termination of
Continuous Service or upon other conditions, the methods by which the exercise
price may be paid or deemed to be paid (including in the discretion of the
Committee a cashless exercise procedure), the form of such payment, including,
without limitation, cash, Shares (including without limitation the withholding
of Shares otherwise deliverable pursuant to the Award), other Awards or awards
granted under other plans of the Company or a Related Entity, or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis provided that such deferred payments are not in
violation of Section 13(k) of the Exchange Act, or any rule or regulation
adopted thereunder or any other applicable law), and the methods by or forms in
which Shares will be delivered or deemed to be delivered to Participants.

 

iii.                       Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options
(including any Stock Appreciation Right issued in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be exercised, so as to disqualify either the Plan or any
Incentive Stock Option under Section 422 of the Code, unless the Participant has
first requested, or consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section 422
of the Code, Options granted as Incentive Stock Options shall be subject to the
following special terms and conditions:

 

 

 

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(A)the Option shall not be exercisable for more than ten years after the date
such Incentive Stock Option is granted; provided, however, that if a Participant
owns or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than 10% of the combined voting power of all classes of stock
of the Company (or any parent corporation or subsidiary corporation of the
Company, as those terms are defined in Sections 424(e) and (f) of the Code,
respectively) and the Incentive Stock Option is granted to such Participant, the
term of the Incentive Stock Option shall be (to the extent required by the Code
at the time of the grant) for no more than five years from the date of grant;
and

 

(B)The aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of the Shares with respect to which Incentive Stock
Options granted under the Plan and all other option plans of the Company (and
any parent corporation or subsidiary corporation of the Company, as those terms
are defined in Sections 424(e) and (f) of the Code, respectively) that become
exercisable for the first time by the Participant during any calendar year shall
not (to the extent required by the Code at the time of the grant) exceed
$100,000.

 

(c)                Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to any Eligible Person in conjunction with all or part of
any Option granted under the Plan or at any subsequent time during the term of
such Option (a “Tandem Stock Appreciation Right”), or without regard to any
Option (a “Freestanding Stock Appreciation Right”), in each case upon such terms
and conditions as the Committee may establish in its sole discretion, not
inconsistent with the provisions of the Plan, including the following:

 

i.                        Right to Payment. A Stock Appreciation Right shall
confer on the Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of one Share on the
date of exercise over (B) the grant price of the Stock Appreciation Right as
determined by the Committee. The grant price of a Stock Appreciation Right shall
not be less than 100% of the Fair Market Value of a Share on the date of grant,
in the case of a Freestanding Stock Appreciation Right, or less than the
associated Option exercise price, in the case of a Tandem Stock Appreciation
Right.

 

ii.                        Other Terms. The Committee shall determine at the
date of grant or thereafter, the time or times at which and the circumstances
under which a Stock Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the time or times at which Stock Appreciation Rights shall cease
to be or become exercisable following termination of Continuous Service or upon
other conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Shares will be
delivered or deemed to be delivered to Participants, whether or not a Stock
Appreciation Right shall be in tandem or in combination with any other Award,
and any other terms and conditions of any Stock Appreciation Right.

 

iii.                       Tandem Stock Appreciation Rights. Any Tandem Stock
Appreciation Right may be granted at the same time as the related Option is
granted or, for Options that are not Incentive Stock Options, at any time
thereafter before exercise or expiration of such Option. Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related
Option would be exercisable and the Fair Market Value of the Shares subject to
the related Option exceeds the exercise price at which Shares can be acquired
pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists
with respect to less than the full number of Shares covered by a related Option,
then an exercise or termination of such Option shall not reduce the number of
Shares to which the Tandem Stock Appreciation Right applies until the number of
Shares then exercisable under such Option equals the number of Shares to which
the Tandem Stock Appreciation Right applies. Any Option related to a Tandem
Stock Appreciation Right shall no longer be exercisable to the extent the Tandem
Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the related Option has been
exercised.

 

 

 

 8 

 

 

(d)                Restricted Stock Awards. The Committee is authorized to grant
Restricted Stock Awards to any Eligible Person on the following terms and
conditions:

 

i.                        Grant and Restrictions. Restricted Stock Awards shall
be subject to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, or as otherwise provided in
this Plan during the Restriction Period. The terms of any Restricted Stock Award
granted under the Plan shall be set forth in a written Award Agreement which
shall contain provisions determined by the Committee and not inconsistent with
the Plan. The restrictions may lapse separately or in combination at such times,
under such circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise, as the
Committee may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award Agreement relating to a
Restricted Stock Award, a Participant granted Restricted Stock shall have all of
the rights of a shareholder, including the right to vote the Restricted Stock
and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During the period
that the Restriction Stock Award is subject to a risk of forfeiture, subject to
Section 10(b) below and except as otherwise provided in the Award Agreement, the
Restricted Stock may not be sold, transferred, pledged, hypothecated, margined
or otherwise encumbered by the Participant.

 

ii.                        Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant’s Continuous Service during the
applicable Restriction Period, the Participant’s Restricted Stock that is at
that time subject to a risk of forfeiture that has not lapsed or otherwise been
satisfied shall be forfeited and reacquired by the Company; provided that,
subject to the limitations set forth in Section 6(j)(ii) hereof, the Committee
may provide, by rule or regulation or in any Award Agreement, or may determine
in any individual case, that forfeiture conditions relating to Restricted Stock
Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Stock.

 

iii.                       Certificates for Stock. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the name of the
Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.

 

iv.                        Dividends and Splits. As a condition to the grant of
a Restricted Stock Award, the Committee may require or permit a Participant to
elect that any cash dividends paid on a Share of Restricted Stock be
automatically reinvested in additional Shares of Restricted Stock or applied to
the purchase of additional Awards under the Plan. Unless otherwise determined by
the Committee, Shares distributed in connection with a stock split or stock
dividend, and other property distributed as a dividend, shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted Stock
with respect to which such Shares or other property have been distributed.

 

(e)                Deferred Stock Award. The Committee is authorized to grant
Deferred Stock Awards to any Eligible Person on the following terms and
conditions:

 

i.                        Award and Restrictions. Satisfaction of a Deferred
Stock Award shall occur upon expiration of the deferral period specified for
such Deferred Stock Award by the Committee (or, if permitted by the Committee,
as elected by the Participant). In addition, a Deferred Stock Award shall be
subject to such restrictions (which may include a risk of forfeiture) as the
Committee may impose, if any, which restrictions may lapse at the expiration of
the deferral period or at earlier specified times (including based on
achievement of performance goals and/or future service requirements), separately
or in combination, in installments or otherwise, as the Committee may determine.
A Deferred Stock Award may be satisfied by delivery of Shares, cash equal to the
Fair Market Value of the specified number of Shares covered by the Deferred
Stock, or a combination thereof, as determined by the Committee at the date of
grant or thereafter. Prior to satisfaction of a Deferred Stock Award, a Deferred
Stock Award carries no voting or dividend or other rights associated with Share
ownership.

 

 

 

 9 

 

 

ii.                        Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant’s Continuous Service during the
applicable deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Deferred Stock Award),
the Participant’s Deferred Stock Award that is at that time subject to a risk of
forfeiture that has not lapsed or otherwise been satisfied shall be forfeited;
provided that, subject to the limitations set forth in Section 6(j)(ii) hereof,
the Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that forfeiture conditions relating to a
Deferred Stock Award shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part the forfeiture of any Deferred Stock Award.

 

iii.                        Dividend Equivalents. Unless otherwise determined by
the Committee at the date of grant, any Dividend Equivalents that are granted
with respect to any Deferred Stock Award shall be either (A) paid with respect
to such Deferred Stock Award at the dividend payment date in cash or in Shares
of unrestricted stock having a Fair Market Value equal to the amount of such
dividends, or (B) deferred with respect to such Deferred Stock Award and the
amount or value thereof automatically deemed reinvested in additional Deferred
Stock, other Awards or other investment vehicles, as the Committee shall
determine or permit the Participant to elect. The applicable Award Agreement
shall specify whether any Dividend Equivalents shall be paid at the dividend
payment date, deferred or deferred at the election of the Participant. If the
Participant may elect to defer the Dividend Equivalents, such election shall be
made within 30 days after the grant date of the Deferred Stock Award, but in no
event later than 12 months before the first date on which any portion of such
Deferred Stock Award vests.

 

(f)                 Bonus Stock and Awards in Lieu of Obligations. The Committee
is authorized to grant Shares to any Eligible Persons as a bonus, or to grant
Shares or other Awards in lieu of obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Eligible Persons subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the
Committee to the extent necessary to ensure that acquisitions of Shares or other
Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares
or Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.

 

(g)                Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to any Eligible Person entitling the Eligible Person to
receive cash, Shares, other Awards, or other property equal in value to the
dividends paid with respect to a specified number of Shares, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Shares, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify. Any such determination by the Committee shall be made at
the grant date of the applicable Award.

 

(h)                Performance Awards. The Committee is authorized to grant
Performance Awards to any Eligible Person payable in cash, Shares, or other
Awards, on terms and conditions established by the Committee, subject to the
provisions of Section 8 if and to the extent that the Committee shall, in its
sole discretion, determine that an Award shall be subject to those provisions.
The performance criteria to be achieved during any Performance Period and the
length of the Performance Period shall be determined by the Committee upon the
grant of each Performance Award; provided, however, that a Performance Period
shall not be shorter than 12 months nor longer than 5 years. Except as provided
in Section 9 or as may be provided in an Award Agreement, Performance Awards
will be distributed only after the end of the relevant Performance Period. The
performance goals to be achieved for each Performance Period shall be
conclusively determined by the Committee and may be based upon the criteria set
forth in Section 8(b), or in the case of an Award that the Committee determines
shall not be subject to Section 8 hereof, any other criteria that the Committee,
in its sole discretion, shall determine should be used for that purpose. The
amount of the Award to be distributed shall be conclusively determined by the
Committee. Performance Awards may be paid in a lump sum or in installments
following the close of the Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.

 

 

 

 10 

 

 

(i)                 Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to any Eligible Person
such other Awards that may be denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Shares, as deemed by
the Committee to be consistent with the purposes of the Plan. Other Stock-Based
Awards may be granted to Participants either alone or in addition to other
Awards granted under the Plan, and such Other Stock-Based Awards shall also be
available as a form of payment in the settlement of other Awards granted under
the Plan. The Committee shall determine the terms and conditions of such Awards.
Shares delivered pursuant to an Award in the nature of a purchase right granted
under this Section 6(i) shall be purchased for such consideration, (including
without limitation loans from the Company or a Related Entity provided that such
loans are not in violation of Section 13(k) of the Exchange Act, or any rule or
regulation adopted thereunder or any other applicable law) paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Shares, other Awards or other property, as the Committee shall determine.

 

7.                   Certain Provisions Applicable to Awards.

 

(a)                Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Related Entity, or any business entity to be acquired by the
Company or a Related Entity, or any other right of a Participant to receive
payment from the Company or any Related Entity. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee shall
require the surrender of such other Award or award in consideration for the
grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company or any Related Entity, in which the value of Shares subject to the Award
is equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase price
of the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Shares minus the value of the cash compensation
surrendered (for example, Options or Stock Appreciation Right granted with an
exercise price or grant price “discounted” by the amount of the cash
compensation surrendered), provided that any such determination to grant an
Award in lieu of cash compensation must be made in compliance with Section 409A
of the Code.

 

(b)                Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee; provided that in no event shall
the term of any Option or Stock Appreciation Right exceed a period of ten years
(or in the case of an Incentive Stock Option such shorter term as may be
required under Section 422 of the Code).

 

(c)                Form and Timing of Payment Under Awards; Deferrals. Subject
to the terms of the Plan and any applicable Award Agreement, payments to be made
by the Company or a Related Entity upon the exercise of an Option or other Award
or settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis, provided that any determination to pay in installments or
on a deferred basis shall be made by the Committee at the date of grant. Any
installment or deferral provided for in the preceding sentence shall, however,
be subject to the Company’s compliance with applicable law and all applicable
rules of the Listing Market, and in a manner intended to be exempt from or
otherwise satisfy the requirements of Section 409A of the Code. Subject to
Section 7(e) hereof, the settlement of any Award may be accelerated, and cash
paid in lieu of Shares in connection with such settlement, in the sole
discretion of the Committee or upon occurrence of one or more specified events
(in addition to a Change in Control). Any such settlement shall be at a value
determined by the Committee in its sole discretion, which, without limitation,
may in the case of an Option or Stock Appreciation Right be limited to the
amount if any by which the Fair Market Value of a Share on the settlement date
exceeds the exercise or grant price. Installment or deferred payments may be
required by the Committee (subject to Section 7(e) of the Plan, including the
consent provisions thereof in the case of any deferral of an outstanding Award
not provided for in the original Award Agreement) or permitted at the election
of the Participant on terms and conditions established by the Committee. The
Committee may, without limitation, make provision for the payment or crediting
of a reasonable interest rate on installment or deferred payments or the grant
or crediting of Dividend Equivalents or other amounts in respect of installment
or deferred payments denominated in Shares.

 

 

 

 11 

 

 

(d)                Exemptions from Section 16(b) Liability. : If the It is the
intent of the Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
from Section 16 pursuant to an applicable exemption (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award Agreement does not comply with the
requirements of Rule 16b-3 then applicable to any such transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to the applicable requirements of Rule 16b-3 so that such Participant
shall avoid liability under Section 16(b).

 

(e)                Code Section 409A.

 

i.                        The Award Agreement for any Award that the Committee
reasonably determines to constitute a Section 409A Plan, and the provisions of
the Plan applicable to that Award, shall be construed in a manner consistent
with the applicable requirements of Section 409A, and the Committee, in its sole
discretion and without the consent of any Participant, may amend any Award
Agreement (and the provisions of the Plan applicable thereto) if and to the
extent that the Committee determines that such amendment is necessary or
appropriate to comply with the requirements of Section 409A of the Code.

 

ii.                        If any Award constitutes a “nonqualified deferred
compensation plan” under Section 409A of the Code (a “Section 409A Plan”), then
the Award shall be subject to the following additional requirements, if and to
the extent required to comply with Section 409A of the Code:

 

(A)Payments under the Section 409A Plan may not be made earlier than the first
to occur of (u) the Participant’s “separation from service”, (v) the date the
Participant becomes “disabled”, (w) the Participant’s death, (x) a “specified
time (or pursuant to a fixed schedule)” specified in the Award Agreement at the
date of the deferral of such compensation, (y) a “change in the ownership or
effective control of the corporation, or in the ownership of a substantial
portion of the assets” of the Company, or (z) the occurrence of an “unforeseeble
emergency”;

 

(B)The time or schedule for any payment of the deferred compensation may not be
accelerated, except to the extent provided in applicable Treasury Regulations or
other applicable guidance issued by the Internal Revenue Service;

 

(C)Any elections with respect to the deferral of such compensation or the time
and form of distribution of such deferred compensation shall comply with the
requirements of Section 409A(a)(4) of the Code; and

 

(D)In the case of any Participant who is “specified employee”, a distribution on
account of a “separation from service” may not be made before the date which is
six months after the date of the Participant’s “separation from service” (or, if
earlier, the date of the Participant’s death).

 

For purposes of the foregoing, the terms in quotations shall have the same
meanings as those terms have for purposes of Section 409A of the Code, and the
limitations set forth herein shall be applied in such manner (and only to the
extent) as shall be necessary to comply with any requirements of Section 409A of
the Code that are applicable to the Award. The Company does not make any
representation to the Participant that any Awards awarded under this Plan will
be exempt from, or satisfy, the requirements of Section 409A, and the Company
shall have no liability or other obligation to indemnify or hold harmless any
Participant or Beneficiary for any tax, additional tax, interest or penalties
that any Participant or Beneficiary may incur in the event that any provision of
this Plan, any Award Agreement, or any amendment or modification thereof, or any
other action taken with respect thereto, is deemed to violate any of the
requirements of Section 409A.

 

 

 

 12 

 

 

iii.                      Notwithstanding the foregoing, the Company does not
make any representation to any Participant or Beneficiary that any Awards made
pursuant to this Plan are exempt from, or satisfy, the requirements of
Section 409A, and the Company shall have no liability or other obligation to
indemnify or hold harmless the Participant or any Beneficiary for any tax,
additional tax, interest or penalties that the Participant or any Beneficiary
may incur in the event that any provision of this Plan, or any Award Agreement,
or any amendment or modification thereof, or any other action taken with respect
thereto, is deemed to violate any of the requirements of Section 409A.

 

8.                   Code Section 162(m) Provisions.

 

(a)                Covered Employees. Unless otherwise specified by the
Committee, the provisions of this Section 8 shall be applicable to any
Performance Award granted to an Eligible Person who is, or is likely to be, as
of the end of the tax year in which the Company would claim a tax deduction in
connection with such Award, a Covered Employee.

 

(b)                Performance Criteria. If a Performance Award is subject to
this Section 8, then the payment or distribution thereof or the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be contingent upon achievement of one or
more objective performance goals. Performance goals shall be objective and shall
otherwise meet the requirements of Section 162(m) of the Code and regulations
thereunder including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” One or more of the following business criteria for
the Company, on a consolidated basis, and/or for Related Entities, or for
business or geographical units of the Company and/or a Related Entity (except
with respect to the total shareholder return and earnings per share criteria),
shall be used by the Committee in establishing performance goals for such
Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow;
(4) operating margin; (5) return on net assets, investment, capital, or equity;
(6) economic value added; (7) direct contribution; (8) net income; pretax
earnings; earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings after interest expense and before
extraordinary or special items; operating income or income from operations;
income before interest income or expense, unusual items and income taxes, local,
state or federal and excluding budgeted and actual bonuses which might be paid
under any ongoing bonus plans of the Company; (9) working capital;
(10) management of fixed costs or variable costs; (11) identification or
consummation of investment opportunities or completion of specified projects in
accordance with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total shareholder return; (13) debt
reduction; (14) market share; (15) entry into new markets, either geographically
or by business unit; (16) customer retention and satisfaction; (17) strategic
plan development and implementation, including turnaround plans; and/or (18) the
Fair Market Value of a Share. Any of the above goals may be determined on an
absolute or relative basis or as compared to the performance of a published or
special index deemed applicable by the Committee including, but not limited to,
the Standard & Poor’s 500 Stock Index or a group of companies that are
comparable to the Company. In determining the achievement of the performance
goals, the Committee shall exclude the impact of any (i) restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring
charges, (ii) event either not directly related to the operations of the Company
or not within the reasonable control of the Company’s management, or
(iii) change in accounting standards required by generally accepted accounting
principles.

 

(c)                Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of Performance Awards shall
be measured over a Performance Period no shorter than 12 months and no longer
than 5 years, as specified by the Committee. Performance goals shall be
established not later than 90 days after the beginning of any Performance Period
applicable to such Performance Awards, or at such other date as may be required
or permitted for “performance-based compensation” under Section 162(m) of the
Code.

 

(d)                Adjustments. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with Awards subject to
this Section 8, but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of an Award subject to this Section 8.
The Committee shall specify the circumstances in which such Awards shall be paid
or forfeited in the event of termination of Continuous Service by the
Participant prior to the end of a Performance Period or settlement of Awards.

 

 

 

 13 

 

 

(e)                Committee Certification. No Participant shall receive any
payment under the Plan that is subject to this Section 8 unless the Committee
has certified, by resolution or other appropriate action in writing, that the
performance criteria and any other material terms previously established by the
Committee or set forth in the Plan, have been satisfied to the extent necessary
to qualify as “performance based compensation” under Section 162(m) of the Code.

 

9.                   Change in Control.

 

(a)                Effect of “Change in Control.” If and only to the extent
provided in any employment or other agreement between the Participant and the
Company or any Related Entity, or in any Award Agreement, or to the extent
otherwise determined by the Committee in its sole discretion and without any
requirement that each Participant be treated consistently, upon the occurrence
of a “Change in Control,” as defined in Section 9(b):

 

i.                        Any Option or Stock Appreciation Right that was not
previously vested and exercisable as of the time of the Change in Control, shall
become immediately vested and exercisable, subject to applicable restrictions
set forth in Section 10(a) hereof.

 

ii.                        Any restrictions, deferral of settlement, and
forfeiture conditions applicable to a Restricted Stock Award, Deferred Stock
Award or an Other Stock-Based Award subject only to future service requirements
granted under the Plan shall lapse and such Awards shall be deemed fully vested
as of the time of the Change in Control, except to the extent of any waiver by
the Participant and subject to applicable restrictions set forth in
Section 10(a) hereof.

 

iii.                        With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, the Committee
may, in its discretion, deem such performance goals and conditions as having
been met as of the date of the Change in Control.

 

(b)                Definition of “Change in Control” . Unless otherwise
specified in any employment agreement between the Participant and the Company or
any Related Entity, or in an Award Agreement, a “Change in Control” shall mean
the occurrence of any of the following:

 

i.                        The acquisition by any Person of Beneficial Ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of either (A) the value of then outstanding equity
securities of the Company (the “Outstanding Company Stock”) or (B) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities) (the foregoing Beneficial Ownership hereinafter being referred to as
a “Controlling Interest”); provided, however, that for purposes of this
Section 9(b), the following acquisitions shall not constitute or result in a
Change in Control: (v) any acquisition directly from the Company; (w) any
acquisition by the Company; (x) any acquisition by any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest; (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Related Entity; or (z) any acquisition by any
entity pursuant to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) below; or

 

ii.                        During any period of three (3) consecutive years (not
including any period prior to the Effective Date) individuals who constitute the
Board on the Effective Date (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company’s shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or

 

 

 

 14 

 

 

iii.                      Consummation of a reorganization, merger, statutory
share exchange or consolidation or similar transaction involving the Company or
any of its Related Entities, a sale or other disposition of all or substantially
all of the assets of the Company, or the acquisition of assets or equity of
another entity by the Company or any of its Related Entities (each a “Business
Combination”), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
Beneficial Owners, respectively, of the Outstanding Company Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than fifty percent
(50%) of the value of the then outstanding equity securities and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of members of the board of directors (or comparable
governing body of an entity that does not have such a board), as the case may
be, of the entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Stock
and Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
entity resulting from such Business Combination or any Person that as of the
Effective Date owns Beneficial Ownership of a Controlling Interest) beneficially
owns, directly or indirectly, fifty percent (50%) or more of the value of the
then outstanding equity securities of the entity resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such entity except to the extent that such ownership existed prior
to the Business Combination and (C) at least a majority of the members of the
Board of Directors or other governing body of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

 

iv.                      Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.

 

10.               General Provisions.

 

(a)                Compliance With Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Shares or payment of other benefits under any Award
until completion of such registration or qualification of such Shares or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to the Listing Market, or compliance with any
other obligation of the Company, as the Committee, may consider appropriate, and
may require any Participant to make such representations, furnish such
information and comply with or be subject to such other conditions as it may
consider appropriate in connection with the issuance or delivery of Shares or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.

 

(b)                Limits on Transferability; Beneficiaries. No Award or other
right or interest granted under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party, or assigned or transferred by such Participant
otherwise than by will or the laws of descent and distribution or to a
Beneficiary upon the death of a Participant, and such Awards or rights that may
be exercisable shall be exercised during the lifetime of the Participant only by
the Participant or his or her guardian or legal representative, except that
Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the Committee
pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon). A Beneficiary, transferee,
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.

 

 

 

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(c)                Adjustments.

 

i.                        Adjustments to Awards. In the event that any
extraordinary dividend or other distribution (whether in the form of cash,
Shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Shares and/or such other securities of the Company or any
other issuer such that a substitution, exchange, or adjustment is determined by
the Committee to be appropriate, then the Committee shall, in such manner as it
may deem equitable, substitute, exchange or adjust any or all of (A) the number
and kind of Shares which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of Shares by which annual per-person Award
limitations are measured under Section 4 hereof, (C) the number and kind of
Shares subject to or deliverable in respect of outstanding Awards, (D) the
exercise price, grant price or purchase price relating to any Award and/or make
provision for payment of cash or other property in respect of any outstanding
Award, and (E) any other aspect of any Award that the Committee determines to be
appropriate.

 

ii.                        Adjustments in Case of Certain Transactions. In the
event of any merger, consolidation or other reorganization in which the Company
does not survive, or in the event of any Change in Control, any outstanding
Awards may be dealt with in accordance with any of the following approaches,
without the requirement of obtaining any consent or agreement of a Participant
as such, as determined by the agreement effectuating the transaction or, if and
to the extent not so determined, as determined by the Committee: (a) the
continuation of the outstanding Awards by the Company, if the Company is a
surviving entity, (b) the assumption or substitution for, as those terms are
defined in Section 9(a)(iv) hereof, the outstanding Awards by the surviving
entity or its parent or subsidiary, (c) full exercisability or vesting and
accelerated expiration of the outstanding Awards, or (d) settlement of the value
of the outstanding Awards in cash or cash equivalents or other property followed
by cancellation of such Awards (which value, in the case of Options or Stock
Appreciation Rights, shall be measured by the amount, if any, by which the Fair
Market Value of a Share exceeds the exercise or grant price of the Option or
Stock Appreciation Right as of the effective date of the transaction). The
Committee shall give written notice of any proposed transaction referred to in
this Section 10(c)(ii) at a reasonable period of time prior to the closing date
for such transaction (which notice may be given either before or after the
approval of such transaction), in order that Participants may have a reasonable
period of time prior to the closing date of such transaction within which to
exercise any Awards that are then exercisable (including any Awards that may
become exercisable upon the closing date of such transaction). A Participant may
condition his exercise of any Awards upon the consummation of the transaction.

 

iii.                      Other Adjustments. The Committee (and the Board if and
only to the extent such authority is not required to be exercised by the
Committee to comply with Section 162(m) of the Code) is authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
(including Performance Awards, or performance goals and conditions relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, acquisitions and dispositions of businesses and assets) affecting
the Company, any Related Entity or any business unit, or the financial
statements of the Company or any Related Entity, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee’s assessment of the business
strategy of the Company, any Related Entity or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and to
the extent that such authority or the making of such adjustment would cause
Options, Stock Appreciation Rights, Performance Awards granted pursuant to
Section 8(b) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as “performance-based compensation” under Code
Section 162(m) and the regulations thereunder to otherwise fail to qualify as
“performance-based compensation” under Code Section 162(m) and regulations
thereunder. Adjustments permitted hereby may include, without limitation,
increasing the exercise price of Options and Stock Appreciation Rights,
increasing performance goals, or other adjustments that may be adverse to the
Participant.

 

 

 

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(d)                Taxes. The Company and any Related Entity are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other payment
to a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company or any
Related Entity and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award. This
authority shall include authority to withhold or receive Shares or other
property and to make cash payments in respect thereof in satisfaction of a
Participant’s tax obligations, either on a mandatory or elective basis in the
discretion of the Committee.

 

(e)                Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan, or the Committee’s authority to
grant Awards under the Plan, without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company’s shareholders not later than the annual
meeting next following such Board action if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of the Listing
Market, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to shareholders for approval; provided that,
except as otherwise permitted by the Plan or Award Agreement, without the
consent of an affected Participant, no such Board action may materially and
adversely affect the rights of such Participant under the terms of any
previously granted and outstanding Award. The Committee may waive any conditions
or rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award Agreement relating thereto, except as
otherwise provided in the Plan; provided that, except as otherwise permitted by
the Plan or Award Agreement, without the consent of an affected Participant, no
such Committee or the Board action may materially and adversely affect the
rights of such Participant under terms of such Award.

 

(f)                 Limitation on Rights Conferred Under Plan. Neither the Plan
nor any action taken hereunder or under any Award shall be construed as
(i) giving any Eligible Person or Participant the right to continue as an
Eligible Person or Participant or in the employ or service of the Company or a
Related Entity; (ii) interfering in any way with the right of the Company or a
Related Entity to terminate any Eligible Person’s or Participant’s Continuous
Service at any time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly with other
Participants and Employees, or (iv) conferring on a Participant any of the
rights of a shareholder of the Company including, without limitation, any right
to receive dividends or distributions, any right to vote or act by written
consent, any right to attend meetings of shareholders or any right to receive
any information concerning the Company’s business, financial condition, results
of operation or prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company in accordance with the terms of
an Award. None of the Company, its officers or its directors shall have any
fiduciary obligation to the Participant with respect to any Awards unless and
until the Participant is duly issued Shares pursuant to the Award on the stock
books of the Company in accordance with the terms of an Award. Neither the
Company nor any of the Company’s officers, directors, representatives or agents
is granting any rights under the Plan to the Participant whatsoever, oral or
written, express or implied, other than those rights expressly set forth in this
Plan or the Award Agreement.

 

(g)                Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Shares pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Shares, other Awards
or other property, or make other arrangements to meet the Company’s obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
“unfunded” status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.

 

(h)                Nonexclusivity of the Plan. Neither the adoption of the Plan
by the Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Section 162(m) of the Code.

 

 

 

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(i)                 Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.

 

(j)                 Governing Law. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award Agreement shall be
determined in accordance with the laws of the State of Nevada without giving
effect to principles of conflict of laws, and applicable federal law.

 

(k)                Non-U.S. Laws. The Committee shall have the authority to
adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Related Entities may operate to assure the viability of the
benefits from Awards granted to Participants performing services in such
countries and to meet the objectives of the Plan.

 

(l)                 Plan Effective Date and Shareholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval, within 12 months of its adoption by the Board, by
shareholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable
requirements under the rules of any stock exchange or automated quotation system
on which the Shares may be listed or quoted, and other laws, regulations, and
obligations of the Company applicable to the Plan. Awards may be granted subject
to shareholder approval, but may not be exercised or otherwise settled in the
event the shareholder approval is not obtained. The Plan shall terminate at the
earliest of (a) such time as no Shares remain available for issuance under the
Plan, (b) termination of this Plan by the Board, or (c) the tenth anniversary of
the Effective Date. Awards outstanding upon expiration of the Plan shall remain
in effect until they have been exercised or terminated, or have expired.

 

 

 

 

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