Exhibit 10.6

 

POORE BROTHERS, INC.

RESTRICTED STOCK AGREEMENT

 

Poore Brothers, Inc. (the “Company”) hereby grants you, STEVEN SKLAR
(“Employee”), a grant of restricted stock. The date of this Agreement is August
1, 2005. Subject to the provisions set forth in this Agreement and the
provisions of the Company’s 2005 Equity Incentive Plan, a copy of which is
attached hereto as Exhibit A (the “Plan”), the principal features of this grant
are as follows:

 

NUMBER OF SHARES OF RESTRICTED STOCK:

 

35,353

 

 

 

 

 

PURCHASE PRICE PER SHARE:

 

$

0.01

 

 

SCHEDULED VESTING DATES

 

NUMBER OF SHARES

 

 

 

 

 

August 1, 2006

 

11,784

 

August 1, 2007

 

11,784

 

August 1, 2008

 

11,785

 

 

Employee understands that under Section 83 of the Internal Revenue Code of 1986,
as amended (the “Code”), as the Shares vest, the fair value of such Shares will
be reportable as ordinary income at that time.  Employee further understands
that instead of being taxed when and as the Shares vest, Employee may elect to
be taxed as of the purchase date of the Shares with respect to the fair value of
all Shares on such date less the purchase price paid for the Shares.  Such
election may only be made under Section 83(b) of the Code with the I.R.S. within
thirty (30) days after the Grant Date.  The form for making this election may be
provided by the Company for Employee’s convenience only.  Employee understands
that failure to make this filing within the thirty (30) day period will result
in the recognition of ordinary income as the Shares vest.  EMPLOYEE ACKNOWLEDGES
THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A
TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE REQUESTS THE COMPANY OR
ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE’S BEHALF.  EMPLOYEE IS
RELYING SOLELY ON EMPLOYEE’S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER
OR NOT TO FILE AN 83(b) ELECTION.

 

Your signature below indicates your agreement and understanding that this grant
is subject to all of the terms and conditions contained in this Agreement and
the Plan attached hereto as Exhibit A, including without limitation provisions
relating to vesting and forfeiture of shares covered by this grant.  PLEASE BE
SURE TO READ THIS AGREEMENT AND THE PLAN IN THEIR ENTIRETY.

 

POORE BROTHERS, INC.

EMPLOYEE

 

 

By:

/s/ Rick Finkbeiner

 

/s/ Steven Sklar

 

Print Name:

Rick Finkbeiner

 

Print Name:

Steven Sklar

 

Print Title:

SVP and CFO

 

Date:

8/30/05

 

Date:

8/30/05

 

 

 

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TERMS AND CONDITIONS

 

1.             Incorporation of the Plan.  The Plan attached hereto is
incorporated by reference into this Agreement, and any capitalized term not
defined in this Agreement shall have the meaning ascribed to such term under the
Plan.  To the extent that any provisions of this Agreement violates or is
inconsistent with the Plan, the Plan shall govern and any inconsistent provision
in this Agreement shall be of no force or effect.

 

2.             Grant.  The Company hereby grants to the Employee the right to
purchase 35,353 shares (the “Shares”) of the Company’s Common Stock, $0.01 par
value per share (the “Common Stock”) at a purchase price of $0.01 per Share,
subject to all of the terms and conditions in this Agreement. The Employee has
until August 31, 2005 to make such purchase after which date he will have no
further right to purchase the Shares under this Agreement.

 

3.             Shares Held in Escrow. Unless and until the Shares have vested in
the manner set forth in paragraphs 4 or 5, such Shares will be issued in the
name of the Employee and held by the Secretary of the Company as escrow agent
(the “Escrow Agent”), and cannot be sold, transferred or otherwise disposed of,
nor pledged or otherwise hypothecated. The Company may instruct the transfer
agent for its Common Stock to place a legend on the certificates representing
the Shares or otherwise note its records as to the restrictions on transfer set
forth in this Agreement. The certificate or certificates representing such
Shares will not be delivered by the Escrow Agent to the Employee unless and
until the Shares have vested and all other terms and conditions in this
Agreement have been satisfied.

 

4.             Vesting Schedule. Except as provided in Section 5, and subject to
Section 6, 11,784 Shares subject to this grant will vest on August 1, 2006,
11,784 Shares subject to this grant will vest on August 1, 2007 and 11,785
Shares subject to this grant will vest on August 1, 2008; provided, however,
that vesting will occur only if the Company employs the Employee through the
applicable vesting date.

 

5.             Board Discretion. The Board, in its discretion, may accelerate
the vesting of the balance, or some lesser portion of the balance, of the
unvested Shares at any time. If so accelerated, such Shares will be considered
as having vested as of the date specified by the Board.

 

6.             Forfeiture.  Notwithstanding any contrary provision of this
Agreement, the balance of the Shares that have not vested pursuant to paragraphs
4 or 5 will thereupon be forfeited and automatically transferred to and
reacquired by the Company at no cost to the Company upon the date the Employee’s
employment with the Company terminates for any reason. The Employee will not be
entitled to a refund of the price paid for any Shares returned to the Company
pursuant to this paragraph 6. The Employee hereby appoints the Escrow Agent with
full power of substitution, as the Employee’s true and lawful attorney-in-fact
with irrevocable power and authority in the name and on behalf of the Employee
to take any action and execute all documents and instruments, including, without
limitation, stock powers which may be necessary to transfer the certificate or
certificates evidencing such unvested Shares to the Company upon such
termination.

 

7.             Death of Employee. Any distribution or delivery to be made to the
Employee under this Agreement will, if the Employee is then deceased, be made to
the Employee’s designated beneficiary, or if no beneficiary survives the
Employee, to the administrator or executor of the Employee’s estate. Any such
transferee must furnish the Company with (a) written notice of his or her status
as transferee, and (b) evidence satisfactory to the Company to establish the
validity of the transfer and compliance with any laws or regulations pertaining
to said transfer.

 

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8.             Withholding.  Notwithstanding any contrary provision of this
Agreement, no certificate representing the Shares may be released from the
escrow established pursuant to paragraph 3 unless and until satisfactory
arrangements (as determined by the Board) will have been made by the Employee
with respect to the payment of income and employment taxes which the Company
determines must be withheld with respect to such Shares.

 

9.             Rights as Shareholder.  Employee shall have all rights of a
shareholder prior to the vesting of the Shares, including the right to vote the
Shares and receive all dividends and other distributions paid or made with
respect thereto.

 

10.           No Effect on Employment.  Only the terms of any written employment
agreement between the Company and Employee’s (and not this Agreement) shall
govern the terms of Employee’s employment, and nothing in this Agreement shall
constitute any assurance of employment of Employee by the Company for any
period, including any period necessary for the Shares to vest.  The Company or
the Affiliate will have the right, which is hereby expressly reserved, to
terminate or change the terms of the employment of the Employee at any time for
any reason whatsoever, with or without good cause, subject to the terms of any
such written employment agreement..

 

11.           Entire Agreement; Amendment.  This Agreement embodies the entire
understanding and agreement of the parties in relation to the subject matter
hereof, and no promise, condition, representation or warranty, expressed or
implied, not herein stated, shall bind either party hereto.  This Agreement may
be amended only by a writing executed by the Company and Employee that
specifically states that it is amending this Agreement.  Notwithstanding the
foregoing, this Agreement may be amended solely by the Board by a writing which
specifically states that it is amending this Agreement, so long as a copy of
such amendment is delivered to Employee, and provided that no such amendment
adversely affects the rights of Employee hereunder without Employee’s written
consent.  Without limiting the foregoing, the Board reserves the right to
change, by written notice to Employee, the provisions of the Shares or this
Agreement in any way it may deem necessary or advisable to carry out the purpose
of the grant as a result of any change in applicable laws or regulations or any
future law, regulation, ruling or judicial decisions, provided that any such
change shall be applicable only to the Shares which are than subject to
restrictions as provided herein.

 

12.           Severability.  If all or any part of this Agreement is declared by
any court or government authority to be unlawful or invalid, such unlawfulness
or invalidity shall not invalidate any portion of this Agreement not declared to
be unlawful or invalid.  Any Section of this Agreement so declared to be
unlawful or invalid shall, if possible, be construed in a manner that will give
effect to the terms of such Section to the fullest extent possible while
remaining lawful and valid.

 

13.           Binding Effect and Benefit.  This Agreement shall be binding upon
and, subject to the conditions hereof, inure to the benefit of the Company, its
successors and assigns, and Employee and Employee’s successors and assigns.

 

14.           Governing Law.  This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Arizona without regard to
principles of conflicts of law.

 

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Form of 83(b) Election

 

Election to Include Value of Restricted Property in Gross Income
in Year of Transfer under Code § 83(b)

 

The undersigned hereby makes an election pursuant to § 83(b) of the Internal
Revenue Code (the “Code”) with respect to the property described below and
supplies the following information in accordance with the regulations
promulgated thereunder:

 

1.             The name, address and taxpayer identification number of the
undersigned are:

Social Security No.                                   

 

2.             Description of property with respect to which the election is
being made:

 

                             (                ) restricted shares of
                           Stock (the “Property”), $           par value, of
Poore Brothers, Inc. (the “Company”).

 

3.             The date on which property was transferred is
                                    .

 

The taxable year to which this election relates is calendar year 20    .

 

4.             The nature of the restriction(s) to which the property is subject
is:

 

The Property is subject to certain restrictions set forth in that certain
Restricted Stock Award Agreement dated as of                     .

 

5.             Fair market value:

 

The fair market value at time of transfer (determined without regard to any
restrictions other than restrictions which by their terms will never lapse) of
the property with respect to which this election is being made is
$                 ($             per share).

 

6.             Amount paid for property:

 

Taxpayer paid a total of $                   ($0.01 per share) for the Property.

 

7.             Furnishing statement to employer:

 

A copy of this statement has been furnished to the Company.

 

DATED:

 

 

SIGNATURE:

 

 

 

 

 

Print Name:

 

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Exhibit A

 

POORE BROTHERS, INC.
2005 EQUITY INCENTIVE PLAN

 

ARTICLE 1:  PURPOSE

 

1.1           General.  The purpose of the Poore Brothers, Inc. 2005 Equity
Incentive Plan (the “Plan”) is to promote the interests of Poore Brothers, Inc.
(the “Company”), by enabling the Company to motivate, attract, and retain the
services of persons upon whose judgment, efforts, and contributions the success
of the Company’s business depends.  The plan is further intended to align the
personal interests of such persons with the interests of stockholders of the
Company through equity participation in the Company’s growth and success. 
Capitalized terms not otherwise defined in the text are defined in Article 16.

 

ARTICLE 2: EFFECTIVE DATE; TERM

 

2.1           Effective Date.  The effective date of the Plan is May 17, 2005
(the “Effective Date”), which is the date as of which the Plan was approved by
the stockholders of the Company.

 

2.2           Term.  This Plan shall continue in effect until terminated in
accordance with Article 14, except that no Awards shall be granted after the
tenth (10th) anniversary of the Effective Date.

 

ARTICLE 3: SHARES SUBJECT TO THE PLAN

 

3.1           Number of Shares.  The aggregate number of shares of Stock (the
“Shares”) reserved and available for Awards or which may be used to provide a
basis of measurement or valuation of an Award (such as an SAR, Restricted Stock
Award or Performance Unit Award) shall be (a) 410,518, which is the number of
shares of Stock reserved under the Company’s 1995 Stock Option Plan (the “Prior
Plan”) that were not subject to outstanding awards under the Prior Plan on the
Effective Date and (b) the number of shares of Stock that prior to issuance are
released from, or reacquired by the Company pursuant to, the terms of awards
outstanding under the Prior Plan.

 

3.2           Re-use of Shares.  Shares that: (a) are subject to issuance upon
exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option; (b) are subject to an Award granted
hereunder but prior to issuance are released from, or reacquired by the Company
pursuant to, the terms of such Award; or (c) are subject to an Award that
otherwise terminates without Shares being issued; will again be available for
grant and issuance in connection with future Awards under this Plan.  In
addition, Shares that are withheld by the Company and not issued in order to pay
for Shares purchased pursuant to an Award or any withholding taxes due upon
issuance of an Award or Shares thereunder shall not be deemed to have been
delivered for purposes of determining the maximum number of Shares available for

 

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delivery under the Plan and such shares shall again be available for the grant
of Awards under the Plan, other than an Award that includes Incentive Stock
Options.

 

3.3           Maximum Number of Shares for Certain Awards.  No more than 100% of
the Shares shall be issued pursuant to Incentive Stock Options, and no more than
100% of the Shares shall be issued pursuant to Non-Qualified Stock Options,
Restricted Stock Awards, SARs, Performance Units and Stock Reference Awards.  A
person may be granted more than one Award under this Plan.

 

3.4           Stock Distributed.  Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock,
or Stock purchased on the open market.  At all times the Company shall reserve
and keep available a sufficient number of Shares as shall be required to satisfy
the requirements of all outstanding Awards granted under this Plan.

 

ARTICLE 4: ELIGIBILITY

 

4.1           General.  Awards may be granted only to an individual who is an
employee (including an employee who also is a director or officer), officer,
director, consultant, independent contractor, or adviser of the Company or a
Subsidiary, as determined by the Board; provided such consultants, contractors
and advisors render bona fide services not in connection with the offer and sale
of securities in a capital-raising transaction.

 

4.2           Individual Award Limits.  In no event shall any Participant
receive an Award or Awards during any calendar year covering an aggregate of
more than 250,000 Shares.

 

4.3           Description of Criteria for Performance-Based Awards to Named
Executive Officers.  In determining performance goals applicable to any Award
granted to a Named Executive Officer, one or more of the following business
criteria shall be used: (a) cash flow; (b) earnings per share, including
earnings per share as adjusted (i) to exclude the impact of any (1) significant
acquisitions or dispositions of businesses by the Company, (2) one-time,
non-operating charges and (3) accounting changes (including but not limited to
any accounting changes that require the expensing of stock options and any
accounting changes the Company adopts early); and (ii) for any stock split,
stock dividend or other recapitalization; (c) earnings before interest, taxes,
and amortization; (d) return on equity; (e) total shareholder return; (f) share
price performance; (g) return on capital; (h) return on assets or net assets;
(i) revenue; (j) income; (k) operating income; (l) operating profit; (m) profit
margin; (n) return on operating revenue; (o) return on invested capital; (p)
market price; (q) brand recognition/acceptance; (r) customer satisfaction; (s)
productivity; or (t) sales growth and volume.

 

ARTICLE 5: ADMINISTRATION

 

5.1           Board.  The Plan shall be administered by the Board or a Committee
appointed by the Board to administer the Plan at any time or from time to time. 
To the extent required for Awards to qualify for the exemptions available under
Rule 16b-3 under the Exchange Act, or successor legislation, members of the
Committee shall be “non-employee” directors within the meaning of Rule 16b-3. 
To the extent required for compensation realized from Awards to be deductible by
the Company pursuant to Section 162(m) of the Code, members of the Committee

 

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shall be “outside directors” within the meaning of such Section.  Once
appointed, the Committee shall continue to serve until otherwise directed by the
Board.  From time to time, the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause),
appoint new members in substitution therefor, and fill vacancies however caused.

 

5.2           Authority of Board.  The Board has the exclusive power, authority,
and discretion to:

 

(a)           Designate Participants;

 

(b)           Determine the type or types of Awards to be granted to each
Participant;

 

(c)           Determine the number of Awards to be granted and the number of
shares of Stock subject to an Award;

 

(d)           Prescribe the form of each Award Agreement, which need not be
identical for each Participant;

 

(e)           Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Award, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability of an Award and
accelerations or waivers thereof, any performance criteria, and any modification
or amendment of any Award previously granted, based in each case on such
considerations as the Board in its sole discretion determines;

 

(f)            Determine whether, to what extent, and under what circumstances
an Award may be settled in, 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;

 

(g)           Determine whether, to what extent, and under what circumstances
cash, Stock, other Awards, other property, and other amounts payable with
respect to an Award shall be deferred either automatically or at the election of
the holder thereof or of the Board;

 

(h)           Decide all other matters that must be determined in connection
with an Award;

 

(i)            Establish, adopt, or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;

 

(j)            Interpret the Plan, any Award, and any Award Agreement in its
discretion; and

 

(k)           Make all other decisions and determinations that may be required
under the Plan or as the Board deems necessary or advisable to administer the
Plan.

 

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5.3           Decisions Binding.  All decisions, interpretations, and
determinations by the Board with respect to the Plan, any Award, and any Award
Agreement are final, binding, and conclusive on all parties.

 

5.4           Repricing of Stock Options and SARs.  In no event shall any
outstanding Option or SAR be repriced to a lower exercise or grant price per
Share at any time during the term of such Option or SAR without the prior
affirmative vote of holders of a majority of the shares of Common Stock of the
Company present at a stockholders meeting in person or represented by proxy and
entitled to vote thereon.

 

ARTICLE 6: STOCK OPTIONS

 

6.1           General.  The Board is authorized to grant Options to Participants
on the following terms and conditions:

 

(a)           Exercise Price.  The exercise price per share of Stock under an
Option other than an Incentive Stock Option shall be determined by the Board,
provided that the exercise price for any such Option may not be less than 85% of
the Fair Market Value as of the date of the grant.

 

(b)           Payment.  Payment for Stock issued upon exercise of an Option
shall be made in accordance with Article 11 of the Plan.

 

(c)           Time and Conditions of Exercise. The Board shall determine the
time or times at which an Option may be exercised in whole or in part, provided
that no Option may be exercisable prior to six months following the date of the
grant of such Option if and to the extent such limitation is necessary or
required under Rule 16b-3 or successor legislation under the Exchange Act.

 

(d)           Evidence of Option.  All Options shall be evidenced by a written
Award Agreement between the Company and the Participant.  The Award Agreement
shall include such provisions as may be specified by the Board.

 

6.2           Incentive Stock Options.  The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules, and, to
the extent that an Incentive Stock Option fails to comply with such rules, it
will be treated as a Non Qualified Stock Option:

 

(a)           Employees Only.  Incentive Stock Options may only be granted to
employees (including officers and directors who are also employees) of the
Company or a Subsidiary.

 

(b)           Exercise Price.  The exercise price per share of Stock shall be
set by the Board, provided that the exercise price for any Incentive Stock
Option may not be less than the Fair Market Value as of the date of the grant.

 

(c)           Exercise.  In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.

 

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(d)           Individual Dollar Limitation.  The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with respect
to which Incentive Stock Options are first exercisable by a Participant in any
calendar year may not exceed $100,000.00.

 

(e)           Ten Percent Owners.  An Incentive Stock Option may be granted to a
Ten Percent Owner, provided that at the time such option is granted the exercise
price per share of Stock shall not be less than 110% of the Fair Market Value
and such option by its terms is not exercisable after the expiration of five (5)
years from the date of its grant.

 

(f)            Expiration of Incentive Stock Options.  No Award of an Incentive
Stock Option may be made pursuant to this Plan after the expiration of ten (10)
years from the Effective Date.

 

(g)           Right to Exercise.  During a Participant’s lifetime, an Incentive
Stock Option may be exercised only by the Participant.

 

(h)           Tax-Qualified ISOP Options.  All provisions of the Plan relating
to Incentive Stock Options shall be administered and interpreted in accordance,
and so as to comply, with the provisions of Section 422 of the Code.

 

6.3           Termination of Participant.  Notwithstanding the exercise periods
set forth in any Award Agreement, Options shall be subject to the following:

 

(a)           An Option shall lapse ten years after it is granted, unless an
earlier time is set in the Award Agreement.

 

(b)           If a Participant’s employment is terminated due to Retirement or
for any other reason other than for Cause, such Participant may exercise his or
her Incentive Stock Options only to the extent that such Incentive Stock Options
would have been exercisable on the Termination Date; provided, that such
exercise is made prior to the earlier of the date sixty (60) days after the
Termination Date and the expiration date of the Option set forth in the Award
Agreement.  If a Participant’s employment is terminated due to Cause, the
Participant’s Incentive Stock Options shall automatically lapse and not be
exercisable by the Participant, whether or not such Options were vested.

 

(c)           If a Participant’s employment, contractual or other relationship
with the Company is terminated due to Retirement or for any other reason other
than for Cause, such Participant may exercise his or her Non-Qualified Stock
Options, only to the extent that such Options would have been exercisable on the
Termination Date; provided, that such exercise is made prior to the earlier of
the date sixty (60) days after the Termination Date (or such other time period
as set forth in the Award Agreement) and the expiration date of the Option set
forth in the Award Agreement.  If a Participant’s employment, contractual or
other relationship is terminated due to Cause, the Participant’s Non-Qualified
Stock Options shall automatically lapse and not be exercisable by the
Participant, whether or not such Options were vested.

 

(d)           If a Participant dies or is terminated due to Disability, then the
Participant’s Options may be exercised, only to the extent that such Options
would have been

 

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exercisable on the date of the Participant’s death or termination due to
Disability; provided that such exercise is made prior to the earlier of (i) the
six-month anniversary of such Participant’s death or termination due to
Disability, as the case may be or (ii) the expiration date of the Option set
forth in the Award Agreement.  Upon the Participant’s death or termination due
to Disability, any exercisable Options may be exercised by the Participant’s
legal representative or representatives.

 

ARTICLE 7: STOCK APPRECIATION RIGHTS

 

7.1           Grant of SARs.  The Board is authorized to grant SARs to
Participants on the following terms and conditions:

 

(a)           Right to Payment.  Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:

 

(1)           The Fair Market Value of one share of Stock on the date of
exercise; over

 

(2)           The grant price of the SAR as determined by the Board, which shall
not be less than 85% of the Fair Market Value of one share of Stock on the date
of grant in the case of any SAR.

 

(b)           Other Terms.  All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement.  The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of any Stock Appreciation Right shall be determined by the Board at
the time of the grant of the Award and shall be reflected in the Award
Agreement.  A Stock Appreciation Right may be granted in combination with, in
addition to, or completely independent of an Option or any other Award under the
Plan.

 

ARTICLE 8: PERFORMANCE UNITS

 

8.1           Grant of Performance Units.  The Board is authorized to grant
Performance Units to Participants on such terms and conditions as may be
selected by the Board.  The Board shall have the complete discretion to
determine the number of Performance Units granted to each Participant.  All
Awards of Performance Units shall be evidenced by an Award Agreement.

 

8.2           Right Under Performance Units.  A grant of Performance Units gives
the Participant rights, valued as determined by the Board, and payable to, or
exercisable by, the Participant to whom the Performance Units are granted, in
whole or in part, as the Board shall establish at grant or thereafter.  The
Board shall set performance goals and other terms or conditions to payment of
the Performance Units in its discretion which, depending on the extent to which
they are met, will determine the amount and value of cash, Stock, Awards, and/or
other property that will be paid to the Participant.

 

8.3           Other Terms.  Performance Units may be payable in cash, Stock, or
other Awards or property, or any combination thereof, and have such other terms
and conditions as determined by the Board and reflected in the Award Agreement.

 

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ARTICLE 9: RESTRICTED STOCK AWARDS

 

9.1           Restricted Stock Awards.  The Board is authorized to make Awards
of Restricted Stock to Participants either in the form of a grant of Stock or an
offer to sell Stock to a Participant, in such amounts and subject to such terms,
conditions and restrictions as may be selected by the Board.  All Awards of
Restricted Stock shall be evidenced by an Award Agreement.

 

9.2           Issuance and Restrictions.  Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, including without
limitation “vesting” or forfeiture restrictions, as the Board may impose.  These
restrictions may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Board determines at
the time of the grant of the Award or thereafter.

 

9.3           Forfeiture.  Except as otherwise determined by the Board at the
time of the grant of the Award or thereafter, upon termination of employment
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 Board may provide in any Award Agreement that
restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in specified circumstances, and the Board may in
other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock.

 

9.4           Payment and Certificates for Restricted Stock.  If a Restricted
Stock Award provides for the purchase of Stock by a Participant, payment shall
be made pursuant to Article 11 of the Plan.  Restricted Stock granted under the
Plan may be evidenced in such manner as the Board shall determine.  To the
extent that an Award is granted in the form of newly issued Restricted Stock,
the Award recipient, as a condition to the grant of such an Award, shall be
required to pay to the Company in cash, cash equivalents or other legal
consideration an amount equal to the par value of such Restricted Stock.  To the
extent that an Award is granted in the form of Restricted Stock from the
Company’s treasury, no such cash consideration shall be required of the Award
recipients.  If certificates representing shares of Restricted Stock are
registered in the name of the Participant, certificates must bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company shall retain physical possession of the
certificate until such time as all applicable restrictions lapse.

 

9.5           Restricted Stock Units.  Restricted Stock Awards may be granted as
Awards of Restricted Stock Units.

 

(a)           A Restricted Stock Unit means a contractual right granted to a
Participant under this Plan to receive a Share (or cash equivalent) which is
subject to restrictions of this Plan and the applicable Award Agreement.  A
Restricted Stock Unit shall entitle the Participant to receive one Share at such
future time and upon such terms as specified by the Board in the Award Agreement
evidencing such Award. Restricted Stock Units issued under the Plan may have
restrictions which lapse based upon the service of a Participant, or based upon
other criteria that the Board may determine appropriate. The Board may require a
cash payment from the Participant in exchange for the grant of Restricted Stock
Units or may grant Restricted Stock Units without the requirement of a cash
payment. The Board may grant Restricted Stock Units

 

11

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that vest on the attainment of performance goals determined by the Board based
upon one or more of the performance criteria listed in Section 4.3, and must
have the attainment of such performance goals certified in writing by the Board.

 

(b)           The Board shall establish the vesting schedule applicable to
Restricted Stock Units and shall specify the times, vesting and performance goal
requirements. Until the end of the period(s) of time specified in the vesting
schedule and/or the satisfaction of any performance criteria set forth in the
Award Agreement, the Restricted Stock Units subject to such Award Agreement
shall remain subject to forfeiture.

 

(c)           If the Participant’s employment (or in the case of a non-employee,
such Participant’s service) with the Company terminates before the Restricted
Stock Awards vest, the Participant shall forfeit all unvested Restricted Stock
Awards, unless the termination is a result of such Participant’s death,
Disability or Retirement (a “Qualifying Event”) or the Board determines that the
Participant’s unvested Restricted Stock Awards shall vest as of the Termination
Date; provided, however, the Board may grant Restricted Stock Awards precluding
such accelerated vesting in order to qualify the Restricted Stock Awards for the
performance-based exception from the tax deductibility limitations of Code
Section162(m).

 

(d)           In the event a Qualifying Event occurs before the date or dates on
which Restricted Stock Units vest, the expiration of the applicable restrictions
(other than restrictions based on performance criteria listed in Section 4.3)
shall be accelerated and the Participant shall be entitled to receive the Shares
free of all such restrictions.  In the case of Restricted Stock Units which are
based on performance criteria set forth in Section 4.3, then as of the date on
which such Qualifying Event occurs, the Participant shall be entitled to receive
a number of Shares that is determined by measuring the selected performance
criteria from the Company’s most recent publicly available quarterly results
that are available as of the date the Qualifying Event occurs; provided,
however, the Board may grant Restricted Stock Units precluding such partial
awards when a Qualifying Event occurs in order to qualify the Restricted Stock
Units for the performance-based exception from the tax deductibility limitations
of Code Section162(m). All other Shares subject to such Restricted Stock Units
shall be forfeited and returned to the Company as of the date on which such
Qualifying Event occurs.

 

(e)           Notwithstanding anything to the contrary in this Plan, the Board
shall have the power to permit, in its sole discretion, an acceleration of the
applicable restrictions or the applicable period of such restrictions with
respect to any part or all of the Restricted Stock Units awarded to a
Participant; provided, however, the Board may grant Restricted Stock Units
precluding such accelerated vesting on order to qualify the Restricted Stock
Units for the performance-based exception from the tax deductibility limitations
of Code Section162(m).

 

(f)            Each grant of Restricted Stock Unit(s) shall be evidenced by an
Award Agreement that shall specify the terms, conditions and restrictions
regarding the Participant’s right to receive Share(s) in the future, and shall
incorporate such other terms and conditions as the Board, acting in its sole
discretion, deems consistent with the terms of this Plan. The Board shall have
sole discretion to modify the terms and provisions of Restricted Stock Unit(s)
in accordance with Article 14 of this Plan.

 

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(g)           Except as otherwise provided in a Participant’s Award Agreement,
no Restricted Stock Unit granted under the Plan may be sold, transferred,
pledged, assigned or otherwise alienated or hypothecated by the Participant,
except upon the death of the Participant by will or by the laws of descent and
distribution.

 

(h)           Except as otherwise provided in a Participant’s Award Agreement,
holders of Restricted Stock Units shall not be entitled to vote or to receive
dividends until they become owners of the Shares pursuant to their Restricted
Stock Units.

 

ARTICLE 10: STOCK-REFERENCE AWARDS

 

10.1         Grant of Stock-Reference Awards.  The Board is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that are payable in, valued in whole or in part by reference to, or otherwise
based on or related to shares of Stock, as deemed by the Board to be consistent
with the purposes of the Plan, including without limitation shares of Stock
awarded purely as a “bonus” and not subject to any restrictions or conditions,
other rights convertible or exchangeable into shares of Stock, and awards valued
by reference to book value of shares of Stock or the value of securities of or
the performance of specified divisions or Subsidiaries of the Company.  The
Board shall determine the terms and conditions of such Awards.

 

ARTICLE 11: PAYMENT FOR STOCK PURCHASES;
WITHHOLDING TAXES; RELOAD OPTIONS

 

11.1         Payment.  Payment for Stock purchased pursuant to the Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Board in an Award Agreement or otherwise in writing and where permitted by law:

 

(a)           by cancellation of indebtedness of the Company to the Participant;

 

(b)           by surrender of (or attestation to the ownership of) Stock valued
at Fair Market Value on the date new Stock is purchased under the Plan;
provided, however, that such surrender or attestation shall not be permitted if
such action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to the Award for financial
reporting purposes;

 

(c)           by waiver of compensation due or accrued to Participant for
services rendered;

 

(d)           by tender of property acceptable to the Board;

 

(e)           with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company’s stock then exists:

 

(1)           through a “same day sale” commitment from Participant and a
broker-dealer that is a member of the National Association of Securities Dealers
(a “NASD Dealer”) whereby Participant irrevocably elects to exercise the Option
and to sell a portion of the Stock so purchased to pay for the exercise price,
and

 

13

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whereby the NASD Dealer irrevocably commits upon receipt of such Stock to
forward the exercise price directly to the Company;

 

(2)           through a “margin” commitment from Participant and a NASD Dealer
whereby Participant irrevocably elects to exercise the Option and to pledge the
Stock so purchased to the NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the exercise price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Stock to forward the exercise
price directly to the Company; or

 

(3)           through any other “cashless exercise” procedure approved by the
Board; or

 

(f)            by any combination of the foregoing, or any other method of
payment acceptable to the Board in its sole discretion.

 

11.2         Loans.  To the extent permitted under applicable law and the rules
and regulations of any listing organization for the Stock, the Board may, in its
discretion, help the Participant pay for Shares purchased under the Plan by
authorizing (a) a guarantee by the Company of a third-party loan to the
Participant, or (b) payment of the purchase price of part or all of the Shares
by tender of a full recourse promissory note having such terms as may be
approved by the Board and bearing interest at a rate at least sufficient to
avoid imputation of income under Section 183 and 1274 of the Code; provided,
however, that Participants who are not employees or directors of the Company
will not be entitled to purchase Shares with a promissory note unless the note
is adequately secured by collateral other than the Shares; provided, further,
that the portion of the purchase price equal to the par value of the Shares, if
any, must be paid in cash.

 

11.3         Tax Withholding.  The Company or any Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant’s FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan.  Whenever,
under the Plan, payments in satisfaction of Awards are to be made in cash, such
payment shall be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.  With respect to withholding required upon
any taxable event relating to the issuance of Stock under the Plan, Participants
may elect (the “Election”), on or prior to the date of such taxable event, to
satisfy the withholding requirement, in whole or in part, by having the Company
or any Subsidiary withhold shares of Stock having a Fair Market Value on the
date of withholding equal to the amount to be withheld for tax purposes.  The
Board may disapprove any Election or may suspend or terminate the right to make
Elections.  An Election is irrevocable.  The Board may, at the time any Award is
granted, require that any and all applicable tax withholding requirements be
satisfied by the withholding of shares of Stock as set forth above.

 

11.4         Reload Options.  Award Agreements may contain a provision pursuant
to which a Participant who pays all or a portion of the exercise price of an
Option or the tax required to be withheld pursuant to an exercise of an Option
by surrendering shares of Stock pursuant to Sections 11.1 or 11.3, respectively,
shall be automatically granted an Option for the purchase of Stock equal to the
number of shares surrendered (a “Reload Option”).  The grant of the Reload

 

14

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Option shall be effective on the date the Participant surrenders the shares of
Stock in respect of which the Reload Option is granted (the “Reload Date”).  The
Reload Option shall have an exercise price equal to the Fair Market Value of the
Stock on the Reload Date, and shall have a term which is no longer, and which
shall lapse no later, than the original term of the underlying option.  If stock
otherwise available under an Incentive Stock Option is withheld pursuant to
Section 11.3, any Reload Option granted in connection with the withholding shall
be treated as a new Incentive Stock Option, subject to the rules set forth in
Section 6.2.

 

ARTICLE 12: PROVISIONS APPLICABLE TO AWARDS

 

12.1         Stand-Alone, Tandem, and Substitute Awards.  Awards granted under
the Plan may, in the discretion of the Board, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan.  Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant
of such other Awards.

 

12.2         Modification or Assumption of Awards.  Within the limitations of
the Plan, the Board may modify, extend or assume outstanding Awards or may
accept the cancellation of outstanding Awards (whether granted by the Company or
by another issuer) in return for the grant of new Awards for the same or a
different number of shares and at the same or a different exercise price.  The
foregoing notwithstanding, no modification of an Award shall, without the
consent of the Participant, alter or impair his or her rights or obligations
under such Award.

 

12.3         Exchange Provisions.  The Board may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award, based on the terms and conditions the Board determines and communicates
to the Participant at the time the offer is made.

 

12.4         Escrow; Pledge of Shares.  To enforce any restrictions on a
Participant’s Shares, the Board may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Board, appropriately endorsed in blank,
with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Board may cause a legend or
legends referencing such restrictions to be placed on the certificates.  Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of Participant’s obligation to the Company
under the promissory note; provided, however, that the Board may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant’s Shares or other collateral.  In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Board will from time to time approve.  The Shares
purchased with the promissory note may be released from the pledge on a pro rata
basis as the promissory note is paid.

 

12.5         Form of Payment for Awards.  Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Subsidiary on

 

15

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the grant or exercise of an Award may be made in such forms as the Board
determines at or after the time of grant, including without limitation, cash,
Stock, other Awards, or other property, or any combination, and may be made in a
single payment or transfer, in installments, or on a deferred basis, in each
case determined in accordance with rules adopted by, and at the discretion of,
the Board.

 

12.6         Limits on Transfer.  No right or interest of a Participant in any
Award may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the
Company or a Subsidiary.  Except as otherwise provided below, no Award shall be
assignable or transferable by a Participant other than by will or the laws of
descent and distribution or, except in the case of an Incentive Stock Option,
pursuant to a “domestic relations order” as defined in the Code or Title I of
the Employee Retirement Income Security Act, or the rules thereunder.  In the
Award Agreement for any Award other than an Award that includes an Incentive
Stock Option, the Board may allow a Participant to assign or otherwise transfer
all or a portion of the rights represented by the Award to specified individuals
or classes of individuals, or to a trust or other entity benefiting such
individuals or classes of individuals, subject to such restrictions,
limitations, or conditions as the Board deems appropriate.  At the discretion of
the Board, the Company may reserve to itself or its assignees in any Award (a) a
right of first refusal to purchase any Stock which a Participant may propose to
transfer to a third party and/or (b) a right to repurchase any and all Stock
held by a Participant upon the Participant’s termination of employment or other
relationship with the Company or its Parent or Subsidiary for any reason,
including Death or Disability, at a price for such Stock as determined by the
Board.

 

12.7         Market Standoff.  In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, a Participant shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer for value or otherwise agree
to engage in any of the foregoing transactions with respect to, any Stock issued
pursuant to an Award granted under the Plan without the prior written consent of
the Company or its underwriters.  Such limitations shall be in effect for a
period of 180 days, or such period of time as may be requested in writing by the
Company and such underwriters.  The limitations of this subsection shall apply
only to the Company’s initial underwritten public offering registered under the
Securities Act that results in the Stock being traded, or quoted, as applicable,
on a national securities exchange, over the counter on NASDAQ, or through the
NASD’s National Market System.

 

In the event of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the Company’s
outstanding Stock effected as a class without the Company’s receipt of
consideration, then any new, substituted or additional securities distributed
with respect to the purchased Stock shall be immediately subject to the
provisions of this subsection, to the same extent the purchased Stock is at such
time covered by such provisions.

 

In order to enforce the limitations of this subsection, the Company may impose
stop-transfer instructions with respect to the purchased Stock until the end of
the applicable standoff period.

 

16

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12.8         Stock Certificates.  All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the Board
deems necessary or advisable to comply with federal or state securities laws,
rules, and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded.  The
Board may place legends on any Stock certificate to reference restrictions
applicable to the Stock.

 

ARTICLE 13: CHANGES IN CAPITAL STRUCTURE

 

13.1         General; Adjustments.  In the event of a subdivision of the
outstanding Stock, a declaration of a dividend payable in Stock, a declaration
of a dividend payable in a form other than Stock in an amount that has a
material effect on the price of the Stock, a combination or consolidation of the
outstanding Stock (by classification or otherwise) into a lesser number of
shares of Stock, a recapitalization, a spin-off or a similar occurrence, or the
assumption and conversion of outstanding grants of a company acquired by the
Company or its Subsidiary, the Board shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of (a) the number of shares of
Stock available for future Awards under Article 3, (b) the limitations set forth
in Article 3, (c) the number and kind of shares of Stock covered by each
outstanding Award or (d) the exercise price under each outstanding Option and
other Award in the nature of rights that may be exercised.  Except as provided
in this Article 13, a Participant shall have no rights by reason of any issue by
the Company of stock of any class or securities convertible into stock of any
class, any subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class.

 

13.2         Dissolution or Liquidation.  To the extent not previously
exercised, Awards shall terminate immediately prior to the dissolution or
liquidation of the Company.

 

13.3         Reorganizations.  In the event that the Company is a party to a
merger, consolidation or other reorganization, outstanding Awards shall be
subject to the agreement of merger, consolidation or reorganization
(“Reorganization Agreement”), which shall be binding on all Participants.  The
Board may cause such Reorganization Agreement to provide, without limitation and
without any Participant’s consent, for any one or combination of the following:

 

(a)           for the continuation of outstanding Awards by the Company (if the
Company is a surviving corporation);

 

(b)           for assumption of outstanding Awards by the surviving corporation
or its parent or subsidiary;

 

(c)           for the substitution by the surviving corporation or its parent or
subsidiary of its own awards for outstanding Awards;

 

(d)           for accelerated vesting and/or lapse of restrictions on
outstanding Awards;

 

(e)           for termination in its entirety, without payment of any
consideration, of any Award that is not exercised in accordance with its terms
upon or prior to consummation of

 

17

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the transactions contemplated by the Reorganization Agreement within a time
specified by the Board for such exercise, whether or not such Award is then
fully exercisable;

 

(f)            for termination of any Award consisting of an Option or any other
exercisable right after payment to the Participant of an amount in cash or cash
equivalents equal to (1) the per share Fair Market Value immediately prior to
consummation of the transactions contemplated by the Reorganization Agreement of
the Stock subject to such Award (to the extent then vested), minus (2) the
exercise price per share pursuant to such Award; or

 

(g)           for termination, without payment of any consideration, of any
Award consisting of an Option or other exercisable right, if the exercise price
per share pursuant to such Award exceeds the Fair Market Value of the Stock
immediately prior to consummation of the transactions contemplated by the
Reorganization Agreement, as determined by the Board in good faith.

 

The Board shall have the discretion to cause any such Reorganization Agreement
to provide for different terms and conditions for different Awards and shall
have no obligation to treat Awards or classes of Awards in an identical fashion
under any such Reorganization Agreement.

 

13.4         Effect of Change of Control.  The Board may determine and specify
in any Award Agreement, at the time of granting an Award or thereafter, that any
or all outstanding rights that may be exercised under Awards shall become fully
exercisable and/or that any or all restrictions on Awards shall lapse, upon the
effectiveness of a change of control of the Company as defined in such Award
Agreement, or upon termination of a Participant’s employment, contractual or
other relationship with the Company or its successor following a specified
period after such change of control; provided that, in the case of an Incentive
Stock Option, the acceleration of exercisability shall not occur without the
Participant’s written consent.

 

ARTICLE 14: AMENDMENT, MODIFICATION, AND TERMINATION

 

14.1         Amendment, Modification, and Termination.  With the approval of the
Board, at any time and from time to time, the Board may terminate, amend, or
modify the Plan.  An amendment or modification of the Plan shall be subject to
the approval of the stockholders of the Company only to the extent required by
applicable laws, regulations and rules.

 

14.2         Awards Previously Granted.  No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant.

 

ARTICLE 15: GENERAL PROVISIONS

 

15.1         No Rights to Awards.  No Participant or employee shall have any
claim to be granted any Award under the Plan, and neither the Company nor the
Board is obligated to treat Participants and employees uniformly.

 

15.2         No Stockholders Rights.  No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.

 

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15.3         No Right to Employment.  Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the “at-will” nature of any
Participant’s employment or other relationship with the Company or any
Subsidiary, nor confer upon any Participant any right to continue in the
employment or any other relationship of the Company or any Subsidiary, and the
Company and each Subsidiary reserve the right to terminate any Participant’s
employment or other relationship with the Company or any Subsidiary at any time
and for any reason or no reason, with or without Cause.

 

15.4         Unfunded Status of Awards.  The Plan is intended to be 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 Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Subsidiary.

 

15.5         Relationship to Other Benefits.  No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.

 

15.6         Expenses.  The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries.

 

15.7         Titles and Headings.  The titles and headings of the Articles and
Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall
control.

 

15.8         Fractional Shares.  No fractional shares of stock shall be issued
and the Board shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up.

 

15.9         Securities Law Compliance.  With respect to any person who is, on
the relevant date, obligated to file reports under Section 16 of the Exchange
Act, transactions under this Plan are intended to comply with all applicable
conditions of Section 16 or its successors under the Exchange Act.  To the
extent any provision of the Plan or any Award Agreement or any action by the
Board fails to so comply, it shall be void to the extent permitted by law and
voidable as deemed advisable by the Board.

 

15.10       Government and Other Regulations.  The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required.  The Company shall be under no obligation to register under the
Securities Act, any of the shares of Stock paid under the Plan.  If the shares
of Stock paid under the Plan may in certain circumstances be exempt from
registration under the Securities Act, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.  As a condition to the exercise of an Option or any other
receipt of Stock pursuant to an Award under the Plan, the Company may require
the Participant to represent and warrant at the time of any such exercise or
receipt that such Stock is being purchased or received only for the
Participant’s own account and without any present intention to sell or
distribute such Stock if, in the opinion

 

19

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of counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws.  At the option of the company, a
stop-transfer order against any such Stock may be placed on the official stock
books and records of the Company, and a legend indicating that such Stock may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration.  The Board may also require
such other action or agreement by the Participant as may from time to time be
necessary to comply with federal and state securities laws.

 

15.11       Governing Law.  The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Arizona without
regard to its conflicts of laws provisions.

 

15.12       Nonexclusivity of the Plan.  Neither the adoption of the Plan nor
the submission of the Plan to the stockholders of the Company for approval shall
be construed as creating any limitations upon the right and authority of the
Board to adopt such other incentive compensation arrangements (which
arrangements may be applicable either generally to a class or classes of
individuals or specifically to a particular individual or individuals) as the
Board in its discretion determines desirable, including, without limitation, the
granting of stock options or other rights otherwise than under the Plan.

 

ARTICLE 16: DEFINITIONS

 

16.1         Definitions.  The following words and phrases shall have the
following meanings for purposes of this Plan:

 

(a)           “Award” means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Unit, Stock-Reference Award or any other right or
interest relating to Stock, cash or property, granted to a Participant under the
Plan.

 

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

 

(c)           “Board” means the Board of Directors of the Company or, if the
context so requires, a Committee thereof appointed pursuant to Article 5.

 

(d)           Unless otherwise defined in the applicable Award Agreement,
“Cause” means (i) an act of fraud, intentional dishonesty or theft adversely
affecting the Company by a Participant, (ii) noncompliance by a Participant with
the reasonable directives of the Board or its designees (except by reason of
death or Disability), (iii) an allegation against a Participant of
discrimination by such Participant based on race, sex, national origin,
religion, handicap or age which is prohibited by applicable law if the Company
has reason to believe any material portion of the allegations after an
investigation conducted in accordance with any applicable Company policy, (iv)
material violation by a Participant of previously published Company policies and
procedures or the Plan or any applicable Award Agreement, or (v) a Participant’s
conviction of a felony; provided, however, in the case of (ii) or (iv) above,
the Participant shall be provided with thirty (30) days written notice of such
event, and the Participant shall have ten (10) days to respond and/or propose a
cure in writing.  If such noncompliance or material violations are not

 

20

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capable of cure, or if such noncompliance or material violations have not been
cured within fifteen (15) days after the date of such written proposal by
Participant, Cause shall be deemed to exist.

 

(e)           “Code” means the Internal Revenue Code of 1986, as amended from
time to time.

 

(f)            “Committee” means the committee of the Board described in
Article 5.

 

(g)           “Disability” means the following:  A Participant shall be disabled
if he or she is unable to perform the duties of his customary position of
employment by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which can be expected to last for a
continuous period of not less than 12 months.  The Board may require such
medical or other evidence as it deems necessary to judge the nature and
permanency of the Participant’s condition.

 

(h)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

(i)            “Fair Market Value” means with respect to Stock or any other
property, the fair market value of such Stock or other property determined by
the Board in good faith using such methods or procedures as may be established
from time to time by the Board.  Unless otherwise determined by the Board, the
Fair Market Value of Stock as of any date shall be the mean between the bid and
asked quotations for the Stock on that date as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or, if
there are no bid or asked quotations on such date, the mean between the bid and
asked quotations on the next preceding date for which quotations are available. 
If the Stock is subsequently listed and traded upon a recognized securities
exchange or shall be quoted on a recognized national market system, the Fair
Market Value shall be the closing price on such date or, if no closing price is
so reported for that date, the closing price on the next preceding date for
which a closing price was reported.

 

(j)            “Incentive Stock Option” means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision thereto.

 

(k)           “Non-Qualified Stock Option” means an Option that is not intended
to be an Incentive Stock Option.

 

(l)            “Option” means a right granted to a Participant under Article 6
of the Plan to purchase Stock at a specified price during specified time
periods.  An Option may be either an Incentive Stock Option or a Non-Qualified
Stock Option.

 

(m)          “Participant” means a person who, as an officer, employee,
consultant, independent contractor, or adviser of the Company or any Subsidiary,
has been granted an Award under the Plan.

 

(n)           “Performance Unit” means a right granted to a Participant under
Article 8 to receive cash, Stock, or other Awards.

 

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(o)           “Plan” means the Poore Brothers, Inc. 2005 Equity Incentive Plan,
as amended from time to time.

 

(p)           “Restricted Stock Award” means Stock granted to a Participant or
offered for sale to a Participant under Article 9.

 

(q)           “Retirement” means a Participant’s termination of employment with
the Company after attaining any normal or early retirement age specified in any
pension, profit sharing, or other retirement program sponsored by the Company,
if any.

 

(r)            “Securities Act” means the Securities Act of 1933, as amended.

 

(s)           “Stock” means Common Stock ($.01 par value) of the Company and
such other securities of the Company that may be substituted for Stock pursuant
to Article 13.

 

(t)            “Stock Appreciation Right” or “SAR” means a right granted to a
Participant under Article 7 to receive a payment equal to the difference between
the Fair Market Value of a share of Stock as of the date of exercise of the SAR
over the grant price of the SAR, all as determined pursuant to Article 7.

 

(u)           “Stock-Reference Award” means a right, granted to a Participant
under Article 10.

 

(v)           “Subsidiary” means any entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Company.

 

(w)          “Ten Percent Owner” means any individual who, at the date of grant
of an Incentive Stock Option, owns stock possessing more than ten percent of the
total combined voting power of all classes of Stock of the Company or a
Subsidiary.  For purposes of determining such percentage, the following rules
shall apply:

 

(1)           The individual with respect to whom such percentage is being
determined shall be considered as owning the Stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and

 

(2)           Stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust, shall be considered as being owned
proportionately by or for its stockholders, partners, or beneficiaries.

 

(x)            “Termination Date” means the date on which the employment (or
other service or relationship in the case of a Participant who is not an
employee of the Company) of a Participant terminates for any reason or no
reason.

 

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