Exhibit 10.1

 

2000 LONG-TERM INCENTIVE PLAN

 

1.         Purpose. The purpose of this 2000 Long-Term Incentive Plan (the
“Plan”) of Lifetime Brands, Inc., a Delaware corporation (the “Company”), is to
advance the interests of the Company and its stockholders by providing a means
to attract, retain, motivate and reward directors, officers, employees and
consultants of and service providers to the Company and its affiliates and to
enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company’s stockholders.

2.         Definitions. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards as are set forth in Section 6 of the Plan. Such awards,
together with any other right or interest granted to a Participant under the
Plan, are termed “Awards.” For purposes of the Plan, the following additional
terms shall be defined as set forth below:

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

(b)        “Beneficiary” shall mean the person, persons, trust or trusts which
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, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

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

(d)        “Code” means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.

(e)        “Committee” means the committee appointed by the Board to administer
the Plan, or if no committee is appointed, the Board.

(f)        “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules thereto.

(g)        “Full-Value Award” means any Award granted under the Plan other than
(i) an Option that requires the Participant to pay (in cash, foregone cash
compensation, or other consideration, other than the performance of services,
designated as acceptable by the Committee) at least the Fair Market Value of the
Stock subject thereto as determined on the date of grant of the Award or (ii) an
SAR that is based solely on the appreciation of the Stock underlying the Award
from the Fair Market Value of the Stock as determined on the date of grant of
the Award.

 

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(h)        “Fair Market Value” means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, provided, however, that if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price at the end of regular trading or, if unavailable, the average of the
closing bid and asked prices per share of the Stock at the end of regular
trading on such date (or, if there was no trading or quotation in the Stock on
such date, on the next preceding date on which there was trading or quotation)
as provided by one of such organizations.

(i)        “ISO” means any Option that is designated as an incentive stock
option within the meaning of Section 422 of the Code, and qualifies as such.

(j)         “Parent” means any “person” (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) that controls the Company, either directly or
indirectly through one or more intermediaries.

(k)        “Participant” means a person who, at a time when eligible under
Section 5 hereof, has been granted an Award under the Plan.

(l)        “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.

(m)       “Stock” means the Company’s common stock, and such other securities as
may be substituted for Stock pursuant to Section 4.

(n)        “Subsidiary” means each entity that is controlled by the Company or a
Parent, either directly or indirectly through one or more intermediaries.

3.         Administration.

(a)        Authority of the Committee. Except as otherwise provided below, the
Plan shall be administered by the Committee. The Committee shall have full and
final authority to take the following actions, in each case subject to and
consistent with the provisions of the Plan:

(i)         to select persons to whom Awards may be granted;

(ii)        to determine the type or types of Awards to be granted to each such
person;

(iii)      to determine the number of Awards to be granted, the number of shares
of Stock to which an Award will relate, the terms and conditions of any Award
granted under the Plan (including, but not limited to, any exercise price, grant
price or purchase price, any restriction or condition, any schedule for lapse of
restrictions or conditions relating to transferability or forfeiture,
exercisability or settlement of an Award, and waivers or accelerations thereof,
performance conditions relating to an Award (including performance conditions
relating to Awards not intended to be governed by Section 7(f) and waivers and
modifications thereof), based in each case on such considerations as the
Committee shall determine), and all other matters to be determined in connection
with an Award;

(iv)       to determine whether, to what extent and under what circumstances an
Award may be settled, or the exercise price of an Award may be paid, in cash,
Stock, other Awards, or other property, or an Award may be canceled, forfeited,
or surrendered;

 

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(v)        to determine whether, to what extent and under what circumstances
cash, Stock, other Awards or other property payable with respect to an Award
will be deferred either automatically, at the election of the Committee or at
the election of the Participant;

(vi)       to determine the restrictions, if any, to which Stock received upon
exercise or settlement of an Award shall be subject (including lock-ups and
other transfer restrictions), may condition the delivery of such Stock upon the
execution by the Participant of any agreement providing for such restrictions;

(vii)      to prescribe the form of each Award Agreement, which need not be
identical for each Participant;

(viii)     to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;

(ix)       to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any Award,
rules and regulations, Award Agreement or other instrument hereunder; and

(x)        to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or advisable
for the administration of the Plan.

Other provisions of the Plan notwithstanding, (i) the Board shall perform the
functions of the Committee for purposes of granting awards to directors who
serve on the Committee, (ii) a subcommittee of the Committee or the Board
composed solely of two or more directors who are (a) “non-employee directors” of
the Company as defined in Rule 16b-3(b)(3) under the Exchange Act and (b)
“outside directors” within the meaning of Treasury Regulation section 1.162-27
under Code section 162(m), shall perform the functions of the Committee for
purposes of granting awards to directors who are not employed by the Company,
Parent or any Subsidiary, and (iii) the Board may perform any function of the
Committee under the Plan for any other purpose, including without limitation for
the purpose of ensuring that transactions under the Plan by Participants who are
then subject to Section 16 of the Exchange Act in respect of the Company are
exempt under Rule 16b-3. In any case in which the Board is performing a function
of the Committee under the Plan, each reference to the Committee herein shall be
deemed to refer to the Board, except where the context otherwise requires.

(b)        Manner of Exercise of Committee Authority. Any action of the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, its Parent and Subsidiaries, Participants, any
person claiming any rights under the Plan from or through any Participant and
stockholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
be modified by the Committee (subject to Section 8(e)). 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.
Except as provided under Section 7(f), the Committee may delegate to officers or
managers of the Company, its Parent or Subsidiaries the authority, subject to
such terms as the Committee shall determine, to perform such functions as the
Committee may determine, to the extent permitted under applicable law.

 

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(c)        Limitation of Liability; Indemnification. Each member of the
Committee shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him by any officer or other employee of the
Company, its Parent or Subsidiaries, the Company’s independent certified public
accountants or any executive compensation consultant, legal counsel or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee, or any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on its behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination or interpretation.

4.          Stock Subject to Plan.

(a)        Amount of Stock Reserved. The aggregate number of shares of Stock for
which Awards may be granted under this Plan shall not exceed 3,500,000;
provided, however, that no more than 5% of such authorized shares may be issued
pursuant to Full-Value Awards that do not satisfy the vesting requirements set
forth in Section 7(g) of the Plan. Awards made under this Plan which are
forfeited (including a repurchase or cancellation of shares of Stock subject
thereto by the Company in exchange for the price, if any, paid to the Company
for such shares, or for their par value or other nominal value), cancelled or
have expired, shall be disregarded for purposes of the preceding sentence. Any
shares of Stock delivered pursuant to an Award may consist, in whole or in part,
of authorized and unissued shares, treasury shares or shares acquired in the
market on a Participant’s behalf.

(b)        Annual Per-Participant Limitations. During any calendar year, no
Participant may be granted Awards that may be settled by delivery of more than
500,000 shares of Stock, subject to adjustment as provided in Section 4(c). In
addition, with respect to Awards that may be settled in cash (in whole or in
part), no Participant may be paid during any calendar year cash amounts relating
to such Awards that exceed the greater of the Fair Market Value of the number of
shares of Stock set forth in the preceding sentence at the date of grant or the
date of settlement of the Award. This provision sets forth two separate
limitations, so that Awards that may be settled solely by delivery of Stock will
not operate to reduce the amount of cash-only Awards, and vice versa;
nevertheless, Awards that may be settled in Stock or cash must not exceed either
limitation.

(c)        Adjustments. In the event of any recapitalization, reclassification,
forward or reverse split, reorganization, merger, consolidation, spinoff,
combination, repurchase or exchange of Stock or other securities, Stock dividend
or other special, large and non-recurring dividend or distribution (whether in
the form of cash, securities or other property), liquidation, dissolution, or
any other extraordinary or unusual event affecting the outstanding Stock as a
class, then the Committee shall equitably adjust any or all of (i) the number
and kind of shares of Stock reserved and available for Awards under Section 4(a)
and 4(b), including shares reserved for ISOs, (ii) the number and kind of shares
of outstanding Restricted Stock or other outstanding Awards in connection with
which the shares have been issued, (iii) the number and kind of shares that may
be issued in respect of other outstanding Awards and (iv) the exercise price,
grant price or purchase price relating to any Award (or, if deemed appropriate,
the Committee may make provision for a cash payment with respect to any
outstanding Award), to preclude, to the extent practicable, the enlargement or
dilution of rights and benefits under the Plan and such outstanding Awards;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
(including, without limitation, cancellation of unexercised or outstanding
Awards, or substitution of Awards using stock of a successor or other entity) in
recognition of unusual or nonrecurring events (including, without limitation,
events described in the preceding sentence) affecting the Company, its Parent or
any Subsidiary or the financial statements of the Company, its Parent or any
Subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.

 

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Any adjustments to outstanding Awards shall be consistent with Section 409A or
424 of the Code, to the extent applicable. Any adjustments determined by the
Committee shall be final, binding and conclusive.

5.         Eligibility. Directors, officers and employees of the Company or its
Parent or any Subsidiary, and persons who provide consulting or other services
to the Company, its Parent or any Subsidiary deemed by the Committee to be of
substantial value to the Company or its Parent and Subsidiaries, are eligible to
be granted Awards under the Plan. In addition, persons who have been offered
employment by, or agreed to become a director of, the Company, its Parent or any
Subsidiary, and persons employed by an entity that the Committee reasonably
expects to become a Subsidiary of the Company, are eligible to be granted an
Award under the Plan.

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 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 employment or
service of the Participant. Except as expressly provided by the Committee
(including for purposes of complying with the requirements of the Delaware
General Corporation Law relating to lawful consideration for the issuance of
shares), no consideration other than services will be required as consideration
for the grant (but not the exercise) of any Award.

(b)        Options. The Committee is authorized to grant options to purchase
Stock on the following terms and conditions (“Options”):

(i)        Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee; provided, however, such
exercise price may not be less than one hundred percent (100%) of the Fair
Market Value of such Stock on the date of grant of such Option.

(ii)       Time and Method of Exercise. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part, the methods by
which such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards or awards
granted under other Company plans or other property (including notes or other
contractual obligations of Participants to make payment on a deferred basis,
such as through “cashless exercise” arrangements, to the extent permitted by
applicable law), and the methods by which Stock will be delivered or deemed to
be delivered to Participants.

(iii)      Termination of Employment. The Committee shall determine the period,
if any, during which Options shall be exercisable following a Participant’s
termination of his employment relationship with the Company, its Parent or any
Subsidiary. For this purpose, unless otherwise determined by the Committee, any
sale of a Subsidiary of the Company pursuant to which it ceases to be a
Subsidiary of the Company shall be deemed to be a termination of employment by
any Participant employed by such Subsidiary. Unless otherwise determined by the
Committee, (x) during any period that an Option is exercisable following
termination of employment, it shall be exercisable only to the extent it was
exercisable upon such termination of employment, and (y) if such termination of
employment is for cause, as determined in the discretion of the Committee, all
Options held by the Participant shall immediately terminate.

 

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(iv)       Sale of the Company. Upon the consummation of any transaction whereby
the Company (or any successor to the Company or substantially all of its
business) becomes a wholly-owned Subsidiary of any corporation, all Options
outstanding under the Plan shall terminate, unless such other corporation shall
continue or assume the Plan as it relates to Options then outstanding (in which
case such other corporation shall be treated as the Company for all purposes
hereunder, and, pursuant to Section 4(c), the Committee of such other
corporation shall make appropriate adjustment in the number and kind of shares
of Stock subject thereto and the exercise price per share thereof to reflect
consummation of such transaction). If the Plan is not to be so assumed, the
Company shall notify the Participant of consummation of such transaction at
least ten days in advance thereof.

(v)        Options Providing Favorable Tax Treatment. The Committee may grant
Options that may afford a Participant with favorable treatment under the tax
laws applicable to such Participant, including, but not limited to ISOs. If
Stock acquired by exercise of an ISO is sold or otherwise disposed of within two
years after the date of grant of the ISO or within one year after the transfer
of such Stock to the Participant, the holder of the Stock immediately prior to
the disposition shall promptly notify the Company in writing of the date and
terms of the disposition and shall provide such other information regarding the
disposition as the Company may reasonably require in order to secure any
deduction then available against the Company’s or any other corporation’s
taxable income. The Company may impose such procedures as it determines may be
necessary to ensure that such notification is made. Each Option granted as an
ISO shall be designated as such in the Award Agreement relating to such Option.

(c)        Stock Appreciation Rights. The Committee is authorized to grant stock
appreciation rights on the following terms and conditions (“SARs”):

(i)        Right to Payment. An SAR 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 of Stock on the date of exercise (or, if the Committee
shall so determine in the case of any such right other than one related to an
ISO, the Fair Market Value of one share at any time during a specified period
before or after the date of exercise), over (B) the grant price of the SAR as
determined by the Committee as of the date of grant of the SAR, which, except as
provided in Section 7(a), shall be not less than the Fair Market Value of one
share of Stock on the date of grant.

(ii)       Other Terms. The Committee shall determine the time or times at which
a SAR may be exercised in whole or in part, the method of exercise, method of
settlement, form of consideration payable in settlement, method by which Stock
will be delivered or deemed to be delivered to Participants, whether or not a
SAR shall be in tandem with any other Award, and any other terms and conditions
of any SAR. Limited SARs that may only be exercised upon the occurrence of a
change in control of the Company may be granted on such terms, not inconsistent
with this Section 6(c), as the Committee may determine. Limited SARs may be
either freestanding or in tandem with other Awards.

(d)        Restricted Stock. The Committee is authorized to grant Stock that is
subject to restrictions based on continued employment on the following terms and
conditions (“Restricted Stock”):

 

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(i)        Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions, if any, as the Committee
may impose, which restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments, or otherwise, as the
Committee may determine. Except to the extent restricted under the terms of the
Plan and any Award Agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock or the right
to receive dividends thereon.

(ii)       Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service (as determined under criteria established
by the Committee) during the applicable restriction period, Restricted Stock
that is at that time subject to restrictions shall be forfeited and reacquired
by the Company; provided, however, that the Committee may provide, by rule or
regulation or in any Award Agreement, or may determine in any individual case,
that restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of termination resulting from specified
causes.

(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,
such certificates may bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, the Company
may retain physical possession of the certificate, in which case the Participant
shall be required to have delivered a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.

(iv)       Dividends. Dividends paid on Restricted Stock shall be either paid 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 the payment of such
dividends shall be deferred and/or the amount or value thereof automatically
reinvested in additional Restricted Stock, other Awards, or other investment
vehicles, as the Committee shall determine or permit the Participant to elect.
Stock 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 Stock or other property has been distributed, unless otherwise determined
by the Committee.

(e)        Deferred Stock. The Committee is authorized to grant units
representing the right to receive Stock at a future date subject to the
following terms and conditions (“Deferred Stock”):

(i)        Award and Restrictions. Delivery of Stock will occur upon expiration
of the deferral period specified for an Award of Deferred Stock by the Committee
(or, if permitted by the Committee, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions as the Committee may
impose, if any, which restrictions may lapse at the expiration of the deferral
period or at earlier specified times, separately or in combination, in
installments or otherwise, as the Committee may determine.

 

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(ii)       Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment or service (as determined under criteria established
by the Committee) during the applicable deferral period or portion thereof to
which forfeiture conditions apply (as provided in the Award Agreement evidencing
the Deferred Stock), all Deferred Stock that is at that time subject to such
forfeiture conditions shall be forfeited; provided, however, that the Committee
may provide, by rule or regulation or in any Award Agreement, or may determine
in any individual case, that restrictions or forfeiture conditions relating to
Deferred Stock will be waived in whole or in part in the event of termination
resulting from specified causes.

(f)        Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash under other plans or compensatory
arrangements.

(g)        Dividend Equivalents. The Committee is authorized to grant awards
entitling the Participant to receive cash, Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares of
Stock (“Dividend Equivalents”). 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 Stock, Awards or other
investment vehicles, and subject to such restrictions on transferability and
risks of forfeiture, as the Committee may specify.

(h)        Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant 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, Stock and factors that may influence the
value of Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified Subsidiaries (“Other Stock-Based Awards”). The
Committee shall determine the terms and conditions of such Awards. Stock issued
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).

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 for any other
Award granted under the Plan or any award granted under any other plan of the
Company, its Parent or Subsidiaries or any business entity to be acquired by the
Company or a Subsidiary, or any other right of a Participant to receive payment
from the Company its Parent or Subsidiaries. Awards granted in addition to or in
tandem with other Awards or awards may be granted either as of the same time as
or a different time from the grant of such other Awards or awards.

(b)        Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).

 

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(c)        Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company, its Parent
or Subsidiaries upon the grant, exercise or settlement of an Award may be made
in such forms as the Committee shall determine, including, without limitation,
cash, Stock, other Awards or other property, and may be made in a single payment
or transfer, in installments or on a deferred basis. Such payments may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments denominated
in Stock.

(d)        Rule 16b-3 Compliance.

(i)        Six-Month Holding Period. Unless a Participant could otherwise
dispose of equity securities, including derivative securities, acquired under
the Plan without incurring liability under Section 16(b) of the Exchange Act,
equity securities acquired under the Plan must be held for a period of six
months following the date of such acquisition, provided that this condition
shall be satisfied with respect to a derivative security if at least six months
elapse from the date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise or conversion)
or its underlying equity security.

(ii)       Other Compliance Provisions. With respect to a Participant who is
then subject to Section 16 of the Exchange Act in respect of the Company, the
Committee shall implement transactions under the Plan and administer the Plan in
a manner that will ensure that each transaction by such a Participant is exempt
from liability under Rule 16b-3, except that such a Participant may be permitted
to engage in a non-exempt transaction under the Plan if written notice has been
given to the Participant regarding the non-exempt nature of such transaction.
The Committee may authorize the Company to repurchase any Award or shares of
Stock resulting from any Award in order to prevent a Participant who is subject
to Section 16 of the Exchange Act from incurring liability under Section 16(b).
Unless otherwise specified by the Participant, equity securities, including
derivative securities, acquired under the Plan which are disposed of by a
Participant shall be deemed to be disposed of in the order acquired by the
Participant.

(e)        Loan Provisions. With the consent of the Committee, and subject at
all times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a loan
or loans to a Participant with respect to the exercise of any Option or other
payment in connection with any Award, including the payment by a Participant of
any or all federal, state or local income or other taxes due in connection with
any Award. Subject to such limitations, the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
terms and provisions of any such loan or loans, including the interest rate to
be charged in respect of any such loan or loans, whether the loan or loans are
to be with or without recourse against the borrower, the terms on which the loan
is to be repaid and conditions, if any, under which the loan or loans may be
forgiven.

 

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(f)        Performance-Based Awards. The Committee may, in its discretion,
designate any Award the exercisability or settlement of which is subject to the
achievement of performance conditions as a performance-based Award subject to
this Section 7(f), in order to qualify such Award as “qualified
performance-based compensation” within the meaning of Code Section 162(m) and
regulations thereunder. The performance objectives for an Award subject to this
Section 7(f) shall consist of one or more business criteria and a targeted level
or levels of performance with respect to such criteria, as specified by the
Committee but subject to this Section 7(f). Performance objectives shall be
objective and shall otherwise meet the requirements of Section 162(m)(4)(C) of
the Code. Business criteria used by the Committee in establishing performance
objectives for Awards subject to this Section 7(f) shall be selected from among
the following:

 

(1)

Annual return on capital;

 

(2)

Annual earnings or earnings per share;

 

(3)

Annual cash flow provided by operations;

 

(4)

Increase in stock price;

 

(5)

Changes in annual revenues; and/or

 

(6)

Strategic business criteria, consisting of one or more objectives based on
meeting specified revenue, market penetration, geographic business expansion
goals, cost targets, and goals relating to acquisitions or divestitures.

The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Performance objectives may differ for
such Awards to different Participants. The Committee shall specify the weighting
to be given to each performance objective for purposes of determining the final
amount payable with respect to any such Award. The Committee may, in its
discretion, reduce the amount of a payout otherwise to be made in connection
with an Award subject to this Section 7(f), but may not exercise discretion to
increase such amount, and the Committee may consider other performance criteria
in exercising such discretion. All determinations by the Committee as to the
achievement of performance objectives shall be in writing. The Committee may not
delegate any responsibility with respect to an Award subject to this Section
7(f).

(g)        Vesting for Full-Value Awards. Other provisions of the Plan
notwithstanding, (i) no Full-Value Award issued under the Plan that is
performance-based shall fully vest within one (1) year from the date of grant of
such Full-Value Award, (ii) no Full-Value Award issued under the Plan that is
service-based shall fully vest within three (3) years from the date of grant of
such Full-Value Award, and (iii) the Committee may not waive such vesting
periods except in the case of death, disability, retirement, change in control
or termination without cause (the occurrence of any such event shall be
determined by the Committee or the Board, as applicable); provided, however, the
Committee or the Board may issue Full-Value Awards that are not subject to the
restrictions set forth in this Section 7(g)(i) – (iii) so long as the aggregate
number of such Full-Value Awards does not exceed the limit for such Awards as
set forth in Section 4(a) of the Plan.

 

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8.      General Provisions.

(a)        Compliance With Laws and Obligations. The Company shall not be
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated quotation system
or any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon. In addition, the Company may adopt policies that impose
restrictions on the timing of exercise of Options, SARs or other Awards (e.g.,
to enforce compliance with Company-imposed black-out periods).

(b)        Limitations on Transferability. Awards and other rights under the
Plan will not be transferable by a Participant except by will or the laws of
descent and distribution or to a Beneficiary in the event of the Participant’s
death, shall not be pledged, mortgaged, hypothecated or otherwise encumbered, or
otherwise subject to the claims of creditors, and, in the case of ISOs and SARs
in tandem therewith, shall be exercisable during the lifetime of a Participant
only by such Participant or his guardian or legal representative; provided,
however, that such Awards and other rights (other than ISOs and SARs in tandem
therewith) may be transferred to one or more transferees during the lifetime of
the Participant to the extent and on such terms as then may be permitted by the
Committee.

(c)        No Right to Continued Employment or Service. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee, director or
other person the right to be retained in the employ or service of the Company,
its Parent or any Subsidiary, nor shall it interfere in any way with the right
of the Company, its Parent or any Subsidiary to terminate any employee’s
employment or other person’s service at any time or with the right of the Board
or stockholders to remove any director.

(d)        Taxes. The Company, its Parent and Subsidiaries are authorized to
withhold from any Award granted or to be settled, any delivery of Stock in
connection with an Award, any other payment relating to an Award 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, its Parent and Subsidiaries 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 Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Participant’s tax obligations.

 

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(e)           Changes to the Plan and Awards.

(i)        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 stockholders or Participants, except that any such action shall be
subject to the approval of the Company’s stockholders at or before the next
annual meeting of stockholders for which the record date is after such Board
action if such stockholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the Stock may then be listed or quoted, and the Board may otherwise, in
its discretion, determine to submit other such changes to the Plan to
stockholders for approval; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under any Award theretofore granted to him (as such rights are set
forth in the Plan and the Award Agreement). 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;
provided, however, that, (subject to Section 4(c)) without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award (as such rights are set forth in the Plan and the
Award Agreement). Notwithstanding the foregoing, the Board or the Committee may
take any action (including actions affecting or terminating outstanding Awards)
to the extent necessary for a business combination in which the Company is a
party to be accounted for under the pooling-of-interests method of accounting
under Accounting Principles Board Opinion No. 16 (or any successor thereto). The
Board or the Committee shall also have the authority to establish separate
sub-plans under the Plan with respect to Participants resident in a particular
jurisdiction (the terms of which shall not be inconsistent with those of the
Plan) if necessary or desirable to comply with the applicable laws of such
jurisdiction.

(ii)       Other provisions of the Plan notwithstanding, as to any Award granted
as an Option to purchase shares of Stock or an appreciation right payable in
Shares, the Committee is not authorized to subsequently reduce the applicable
exercise price relating to such Award, or take such other action as may be
considered a repricing of such Award under generally accepted accounting
principles, without the prior approval of the Company’s stockholders.

(f)        No Rights to Awards; No Stockholder Rights. No person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants and employees. No Award shall confer on
any Participant any of the rights of a stockholder of the Company unless and
until Stock is duly issued or transferred and delivered to the Participant in
accordance with the terms of the Award or, in the case of an Option, the Option
is duly exercised.

(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 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, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company’s obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which 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.

 

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(h)        Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor any submission of the Plan or amendments thereto to the stockholders
of the Company for approval shall be construed as creating any limitations on
the power of the Board to adopt such other compensatory arrangements as it may
deem desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.

(i)        No Fractional Shares. No fractional shares of Stock 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 relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.

(k)        Effective Date; Plan Termination. The Plan shall become effective as
of the date of its adoption by the Board, and shall continue in effect until
terminated by the Board; provided, however, that if approval of such adoption by
the Company’s shareholders is not obtained within 12 months of the date of such
adoption, the Plan shall terminate ab initio, and any Awards then outstanding
shall be canceled.