Exhibit 10.9

 

UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.

 

STOCK INCENTIVE PLAN

 

1. Purpose

 

The purpose of this plan (the “Plan”) is to secure for Universal Stainless &
Alloy Products, Inc. (the “Company”), and its stockholders, the benefits arising
from the ownership of stock options by directors and employees (including,
without limitation, officers) of the Company or Subsidiaries (as defined in
Section 18 hereof) who are expected to contribute to the Company’s future growth
and success.

 

2. Types of Plan Benefits and Administration

 

(a) Types of Awards. Under the Plan, the Company may in its sole discretion
grant, with respect to the Company’s common stock, par value $.001 per share
(“Common Stock”), options (“Options”) to employees (the “Employees”), as
authorized by action of the Board of Directors of the Company (or a committee
designated by the Board of Directors), and the Company shall, subject to the
terms and conditions hereof, grant to each director of the Company who is not an
employee and does not own, individually or together with family members, in
excess of 5 % of outstanding Common Stock (an “Eligible Director”), Options in
accordance with the formula set forth in Section 7 hereof. As used in the Plan,
an “Award” shall mean an Option and an “Award Owner” shall mean the owner of an
Option. Options granted pursuant to the Plan to Employees may be either
incentive stock options (“Incentive Stock Options”) meeting the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or
non-statutory options (“Non-Statutory Stock Options”), which are not intended to
or do not meet the requirements of Code Section 422. Options granted to Eligible
Directors pursuant to the Plan shall be only Non-Statutory Stock Options.

 

(b) Administration. The Plan will be administered by the Board of Directors of
the Company, except to the extent the Board of Directors appoints from among its
members a committee to administer the Plan (in either case, the group
administering the Plan is hereinafter referred to as the “Committee”). The
Committee’s construction and interpretation of the terms and provisions of the
Plan shall be final and conclusive. The Committee may in its sole discretion
grant Options to purchase shares of the Company’s Common Stock to Employees, and
issue shares upon exercise of such Options, as provided in the Plan. The
Committee shall grant Options to purchase shares of the Company’s Common Stock
to the Eligible Directors, and issue shares upon exercise of such Options, as
provided in the Plan. The Committee shall have authority, subject to the express
provisions of the Plan, including, but not limited to Section 7 hereof, to
construe the respective Award agreements and the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the respective Award agreements, which need not be identical; to
advance the lapse of any waiting or installment periods and exercise dates; and
to make all other determinations in the sole judgment of the Committee necessary
or desirable for the administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the

 

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Plan or in any Award agreement in the manner and to the extent it shall deem
expedient to carry the Plan into effect, and such determination shall be in the
sole and final judgement of the Committee. No director shall be liable for any
action or determination taken or made under or with respect to the Plan or any
Award in good faith.

 

3. Eligibility

 

(a) Generally.

 

(i) Except as provided in paragraph (b) of this Section 3 and Section 7 hereof,
Awards shall be granted only to persons selected by the Committee who are, at
the time of grant, directors or employees (including, without limitation,
officers) of the Company or any Subsidiary of the Company.

 

(ii) An Employee may be granted Incentive Stock Options and/or Non-Statutory
Stock Options. An Employee who has been granted an Award may, if he or she is
otherwise eligible, be granted one or more additional Awards if the Committee
shall so determine.

 

(b) Incentive Stock Options. No person shall be granted any Incentive Stock
Option under the Plan unless, at the time such Option is granted, such person is
an employee of the Company or any Subsidiary of the Company, and does not own,
directly or indirectly, Common Stock of the Company possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of any
Subsidiary (unless the requirements of Section 6(f)(i) are satisfied).

 

4. Stock Subject to Plan

 

Subject to adjustment as provided in Sections 13 and 14 below, the maximum
number of shares of Common Stock of the Company that may be issued and sold
pursuant to Options granted under the Plan is 900,000 shares in the aggregate
(one share per Option). No individual employee shall be granted Options to
purchase more than 100,000 shares in any calendar year. The Company shall
reserve for the purposes of the Plan, out of its authorized but unissued shares
of Common Stock or out of shares held in the Company’s treasury, or partly out
of each, such number of shares of Common Stock as shall be determined by the
Committee. If Options granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the shares subject to the
unexercised portions of such Options shall again be available for subsequent
Award grants under the Plan. Common Stock issuable upon exercise of Options may
be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee.

 

5. Form of Option Agreements

 

As a condition to the grant of an Option under the Plan, each Employee recipient
of an Option shall execute an Option Agreement, substantially in the form of not
inconsistent with the Plan as shall be specified by the Committee at the time
such Option is granted. Each Eligible

 

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Director, as a condition to the grant of Options to him or her pursuant to
Section 7(a) hereof, shall execute an Option Agreement, substantially in the
form not inconsistent with the Plan as shall be specified by the Committee at
the time such option is granted.

 

6. Grants of Awards to Employees

 

(a) Disinterested Committee. Any Employee who is a director or officer of the
Company shall be granted Awards only if such person has been selected for
participation and the terms and provisions of such Awards have been determined,
solely by, and in the sole discretion of, a Committee of two or more directors,
each of whom is a “disinterested person. For purposes of the Plan, a person
shall be deemed to be “disinterested” only if such person qualifies as a
“disinterested person” within the meaning of paragraph (c)(2) of Rule 16b-3 of
the Securities and Exchange Commission (the “SEC”). The term “officer” shall
have the same meaning as in paragraph (f) of Rule 16a-1. To the extent required
to comply with the rules under Rule 16b-3, all references to the Committee in
the Plan shall mean and relate to the Committee of two or more “disinterested
persons” described in this Section 6(a).

 

(b) Purchase Price. The purchase price per share of stock issuable upon the
exercise of an Option granted pursuant to this Section 6 shall be, the Fair
Value on the date that such Option is granted. Notwithstanding anything to the
contrary contained herein, in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the Fair Value of such stock at
the date of grant of such Option, or less than 110% of such Fair Value in the
case of Options described in Section 6(f)(i).

 

(c) Exercise Period. Each Award to an Employee shall expire on such date as the
Committee shall determine on the date such Award is granted, but in no event
after the expiration of ten years from the date on which such Award is granted,
and in all cases each Award shall be subject to earlier termination as provided
in the Plan.

 

(d) Vesting of Awards. An Award granted to an Employee may be exercised, and
payment shall be made upon exercise of such Award, only to the extent that such
Award has vested. Awards shall vest based on the collective number of years of
service with or for the Company or a Subsidiary, in accordance with the schedule
or terms set forth in the Award agreement executed by the Award Owner and a duly
authorized officer of the Company. Notwithstanding the foregoing, unless the
Committee specifically authorizes a different vesting schedule with respect to
an Award, an Award to an Employee shall become exercisable based on the number
of full years of service that such Award Owner has completed with the Company or
a Subsidiary since the date of the grant of such Award, in accordance with the
following schedule:

 

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Number of Years of Service

Since First Date of Grant

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Percentage of Award Available

for Exercise (Cumulative)

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1

  

  25%

2

  

  50%

3

  

  75%

4

  

100%

 

(e) Effect of Termination of Employment. No Award to an Employee may be
exercised unless, at the time of such exercise the Employee is, and continuously
since the date of grant of his or her Award has been, an employee of the Company
or a Subsidiary, except that subject to Section 6(d) and if and to the extent
the Award agreement or instrument so provides:

 

(i) if the Employee ceases to be an employee of the Company or a Subsidiary for
any reason other than death or disability or a discharge for “cause” (as defined
in (iv) below), the right to exercise the Award shall terminate three months
after such cessation (or within such lesser period as may be specified in the
Award agreement or instrument);

 

(ii) if the Employee dies while an employee of the Company or a Subsidiary, or
within three months after the Employee ceases to be such an employee, the Awards
may be exercised by the administrator of the Employee’s estate, or by the person
to whom the Options are transferred by will or the laws of descent and
distribution, within the period of one year after the date of death (or within
such lesser period as may be specified in the Award agreement or instrument);

 

(iii) if the Employee become disabled (within the meaning of Section 22(e)(3) of
the Code) while an employee of the Company or a Subsidiary, the Awards may be
exercised within the period of one year after the date the Employee ceases to be
an employee of the Company or Subsidiary because of such disability (or within
such lesser period as may be specified in the Award agreement or instrument);
and

 

(iv) if the Employee, prior to the expiration date of an Award ceases his or her
services as an employee of the Company or Subsidiary, because he or she is
discharged for “cause” (as defined below), the right to exercise an Option shall
terminate immediately upon such cessation of such services. “Cause” shall mean:
willful misconduct in connection with the Employee’s performance of services for
the Company or willful failure to perform his or her services in the best
interest of the Company, determined by the Committee, which determination shall
be conclusive;

 

provided, however, that in no event may any Award be exercised after the
expiration date of the Award. Any Award or portion thereof that is not exercised
during the applicable time period specified above (or any shorter period
specified in the Award agreement or instrument) shall be deemed terminated at
the end of the applicable time period for purposes of Section 4 hereof.

 

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(f) Incentive Stock Options. Options granted under the Plan that are intended to
be Incentive Stock Options shall be specifically designated as intending to be
Incentive Stock Options and shall be subject to the following additional terms
and conditions:

 

(i) 10% Stockholder. If an Employee to whom an Incentive Stock Option is to be
granted under the Plan is at the time of the grant of such Option the owner of
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary, then the following special provisions
shall be applicable to the Incentive Stock Option granted to such individual:
(x) the exercise price per share of the Common Stock subject to such Incentive
Stock Option shall not be less than 110% of the Fair Value (as defined in
Section 18) of one share of Common Stock at the time of grant; and (y) the
option exercise period shall not exceed five years from the date of grant.

 

(ii) Dollar Limitation. Common Stock of the Company that is acquired pursuant to
the exercise of an Incentive Stock Option granted to an Employee under the Plan
shall be deemed to be acquired pursuant to the exercise of an Incentive Stock
Option under Code Section 422, only to the extent that the aggregate Fair Value
(determined as of the respective date or dates of grant) of the Common Stock
with respect to which such Incentive Stock Option, and all other Incentive Stock
Options that are granted to such Employee under the Plan (and under any other
incentive stock option plans of the Company or any Subsidiary), are exercisable
for the first time by such Employee in any one calendar year, does not exceed
$100,000. To effectuate the provisions of Section 6(f), the Committee may
designate the shares of Common Stock that are treated as acquired pursuant to
the exercise of an Incentive Stock Option by issuing a separate certificate for
such shares and identifying such certificates as Incentive Stock Option stock in
its stock transfer records.

 

(iii) If an Employee makes a disposition, within the meaning of Section 424(c)
of the Code and regulations promulgated thereunder, of any share or shares of
Common Stock issued to such Employee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such share or shares to the Employee pursuant to such exercise, the
Employee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.

 

Except as modified by the preceding provisions of this Section 6(f), all the
provisions of the Plan applicable to Options shall be applicable to Incentive
Stock Options granted hereunder.

 

7. Non-discretionary Formula Grants of Awards to Eligible Directors

 

(a) Non-discretionary Grants. Notwithstanding anything to the contrary contained
in this Plan, Eligible Directors shall be granted Options (“Director Options”)
as follows: following each successive annual meeting of shareholders so long as
Director Options remain available for grant, each person who is elected as a
Director at that meeting and is an Eligible Director, and each person who
continues to serve as a director after that meeting, and is an Eligible
director, shall be granted 2,500 Director Options to purchase 2,500 shares of
Common Stock in the aggregate on each of the following dates during the twelve
(12) month period

 

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following the annual meeting of shareholders: May 31, August 31, November 30 and
February 28, in recognition of service, subject to vesting as provided in
Section 7(d) below, for the following year ending on the day prior to the next
succeeding annual meeting of shareholders of the Company to elect directors.

 

(b) Purchase Price. The purchase price per share of stock issuable upon the
exercise of an Option granted pursuant to this Section 7 shall be the Fair Value
on the date that such Option is granted.

 

(c) Exercise Period. The term of each Option granted pursuant to this Section 7
shall be ten years from the date of the grant thereof, subject to earlier
termination as herein provided. Any Option that is not exercised during the
applicable time period specified in this Section 7 shall be deemed terminated at
the end of the applicable time period for purposes of Section 4 hereof. In no
event may any Option granted pursuant to this Section 7 be exercised after the
expiration date thereof.

 

(d) Vesting of Awards. Director Options shall be exercisable by an Eligible
Director only to the extent that they have vested.

 

(i) Director Options shall vest based on years of service as follows:

 

Number of Years of Service

Since First Date of Grant

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Percentage of Award Available

for Exercise (Cumulative)

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1

  

33%

2

  

66%

3

  

100%

 

(e) Effect of Termination of Service or Death. If an Eligible Director ceases to
serve as a director of the Company or a Subsidiary, the Options that have been
previously granted to that Eligible Director and that are vested as of the date
of such cessation may be exercised by the Eligible Director after the date such
Eligible Director ceases to be a director of the Company or Subsidiary. If an
Eligible Director dies while a director of the Company or a Subsidiary, the
Options that have been previously granted to that Eligible Director and that are
vested as of the date of such death may be exercised by the administrator of the
Eligible Director’s estate, or by the person to whom such Options are
transferred by will or the laws of descent and distribution. In no event,
however, may any Option be exercised after the expiration date of such Option.
Any Option or portion thereof that is not exercised during the applicable time
period specified above shall be deemed terminated at the end of the applicable
time period for purposes of Section 4 hereof.

 

(f) Limitation on Amendments to Terms of Non-discretionary Grants.
Notwithstanding anything to the contrary contained in this Plan, the provisions
of this Section 7 shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules

 

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thereunder. Any reference to Option or Options in this Section 7 shall refer to
Options granted to Eligible Directors pursuant to this Section 7

 

8. Method of Exercise

 

An Award Owner may exercise an Option granted hereunder by delivering to the
Company at its main office (to the attention of the Secretary) written notice of
exercise, which notice shall specify the number of shares with respect to which
the Option is being exercised, together with payment of the purchase price in
exchange for the Company’s issuance and delivery of certificates therefor. The
purchase price for any shares of Common Stock purchased pursuant to the exercise
of an Option shall be paid in full upon such exercise by any one or a
combination of the following: (i) cash (by check), (ii) transferring shares of
fully paid Common Stock to the Company with a Fair Value equal to the aggregate
purchase price, or (iii) solely with respect to Options that are not Director
Options, by cash payments in installments or pursuant to a full recourse
promissory note, in either case, upon such terms as the Committee deems
appropriate. Notwithstanding the foregoing, the Committee shall have discretion
to determine at the time of grant of each Option (other than a Director Option)
or at any later date (up to and including the date of exercise) the form of
payment acceptable in respect of the exercise of such Option. The written notice
pursuant to this Section 8 may also provide instructions to the Company that
upon receipt of the purchase price in cash from the Award Owner’s broker or
dealer, designated as such on the written notice, in payment for any shares
purchased pursuant to the exercise of an Option, the Company shall issue such
shares directly to the designated broker or dealer. Any shares transferred to
the Company as payment of the purchase price under an Option shall be valued at
their Fair Value on the day preceding the date of exercise of such Option. If
requested by the Committee, the Award Owner shall deliver the related Award
agreement to the Secretary of the Company who shall endorse thereon a notation
of such exercise and return such agreement to the Award Owner. No fractional
shares (or cash in lieu thereof) shall be issued upon exercise of an Option and
the number of shares that may be purchased upon exercise shall be rounded to the
nearest number of whole shares.

 

9. Reload Options

 

Options (other than Director Options) granted under the Plan may, in the
discretion of the Committee, include the right to acquire a reload option
(“Reload Option”). The term “Reload Option” shall mean the right to purchase a
number of shares of Common Stock equal to the number of shares tendered by an
Employee in exercising an Option, and the number of whole shares, if any,
withheld by the Company in satisfaction of Withholding Taxes (as defined in
Section 20). A Reload Option shall have a purchase price equal to the Fair Value
of Common Stock on the date the Employee receives the Reload Option and a term
extending to the expiration date of the Option with respect to which the Reload
Option was granted.

 

10. Nontransferability of Awards

 

No Award granted under the Plan shall be assignable or transferable by the
person to whom it is granted, either voluntarily or by operation of law, except
by will or the laws of

 

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descent and distribution. During the life of the recipient, the Award shall be
exercisable only by or on behalf of such person.

 

11. General Restrictions

 

(a) Award Owner Representations. The Company may require a person to whom an
Award is granted, as a condition of exercising such Award, to:

 

(i) give such written assurances, in substance and form satisfactory to the
Company, as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws, including, without limitation,
that such person is acquiring the Common Stock subject to the Award for his or
her own account for investment and not with any present intention of selling or
otherwise distributing the same;

 

(ii) with respect to Employees only, grant to the Company the right, which may
be upon such terms as the Committee, in its sole discretion, prescribes, to
repurchase from the Award Owner any or all shares acquired by such Award Owner
through the exercise of an Award which such Award owner may at any time desire
to sell, transfer or otherwise dispose of; and

 

(iii) if the Award Owner is a director or officer, give written assurances, in
substance and form satisfactory to the Company, that such person has consulted
with competent counsel as to the application of Section 16(b) of the Securities
Exchange Act of 1934 (the Exchange Act”) to such exercise.

 

Certificates representing shares issued upon exercise of the Award shall bear
such legends as are deemed appropriate by legal counsel to the Company, unless
the Award Owner provides a written opinion of legal counsel, satisfactory to the
Company, that any such legend is not required.

 

(b) Compliance With Securities Laws.

 

(i) Each Award shall be subject to the requirement that, if at any time counsel
to the Company shall determine that the listing, registration or qualification
of such Award or the shares subject to such Award upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with the grant or exercise of such Award or the issuance or purchase
of shares thereunder, such Award shall not be effective or may not be accepted
or exercised in whole or in part (as applicable) unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration, qualification, consent or approval.

 

(ii) The Company shall provide each Award Owner with such information,
statements, discussions and analyses with respect to the Company in such manner
and at such times as may be required under state or federal securities laws.

 

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12. Rights as a Stockholder

 

The Award Owner shall have no rights as a stockholder with respect to any shares
covered by the Award until the date upon which the stock certificates are issued
to him or her for such shares. Except as otherwise expressly provided in the
Plan, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date on which such stock certificate is issued.

 

13. Recapitalization

 

In the event that the outstanding shares of Common Stock of the Company are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, stock dividend, combination or subdivision, an appropriate and
proportionate adjustment shall be made in the number and kind of shares subject
to the Plan and in the number, kind, and per share exercise price, of shares
subject to unexercised Options or portions thereof granted prior to such
adjustment. Any such adjustment to an outstanding Option shall be made without
change in the total price applicable to the unexercised portion of such Option
as of the date of the adjustment. No such adjustment shall be made with respect
to an Incentive Stock Option that would, within the meaning of any applicable
provisions of the Code, constitute a modification, extension or renewal of any
Option or a grant of additional benefits to the holder of an Option.

 

14. Reorganization

 

In the event the Company is merged or consolidated with another entity or person
other than an Affiliate, and the Company is not a surviving entity, or in the
event all or substantially all of the assets or more than 20% of the outstanding
stock of the Company entitled to vote for directors is acquired by any other
entity or person other than an Affiliate, or in the event of a reorganization or
liquidation of the Company the Committee, or the board of directors of any
corporation assuming the obligations of the Company, shall, as to outstanding
Awards, either (i) in the case of a merger, consolidation or reorganization of
the Company, make appropriate provision for the protection of any such
outstanding Awards by the substitution on an equivalent basis of appropriate
stock of the Company, or of the merged, consolidated or otherwise reorganized
corporation that will be issuable in respect of the shares of Common Stock of
the Company (provided that no additional benefit shall be conferred upon Award
Owners as a result of such substitution), or (ii) upon written notice to the
Award Owners, provide that all unexercised Awards must be exercised within a
specified number of days of the date of such notice or they will be terminated,
or (iii) upon written notice to the Award Owners, provide that all unexercised
Awards shall be purchased by the Company or its successor within a specified
number of days of the date of such notice at a price equal to the value the
Award Owners would have received if they then exercised all their Awards and
immediately received full payment in respect of such exercise, as determined in
good faith by the Committee.

 

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15. No Special Employment Rights

 

Nothing contained in the Plan or in any Award granted under the Plan shall
confer upon any Award Owner any right with respect to the continuation of his or
her employment by the Company (or any Subsidiary) or interfere in any way with
the right of the Company (or any Subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Award Owner from
the rate in existence at the time of the grant of an Award. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination or cessation of services for purposes of this Plan shall
be determined by the Committee.

 

16. No Special Directorship Rights

 

Nothing contained in the Plan or in any Award granted under the Plan shall
constitute evidence of any agreement or understanding, express or implied, that
an Eligible Director has a right to continue as a director for any period of
time.

 

17. Other Employee Benefits

 

The amount of any income deemed to be received by an Award Owner as a result of
the exercise of an Award or the sale of shares received upon such exercise will
not constitute “compensation” or “earnings” with respect to which any other
benefits of such person are determined by the Company, including without
limitation benefits under any pension, profit sharing, life insurance or salary
continuation plan.

 

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18. Definitions

 

(a) Affiliate. The term “Affiliate” shall mean a corporation or other entity or
person which, at the time of reference, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Company.

 

(b) Fair Value. The term “Fair Value” of a share of Common Stock shall mean (i)
if the Common Stock is traded on a national securities exchange, the closing
price for such stock on the day immediately preceding the date of determination
or if there is no closing price on such date, the last preceding closing price,
(ii) if the Common Stock is not traded on a national securities exchange, the
mean of the high bid and ask quotes of such stock as reported in the NASDAQ/NMS
reports or the National Quotation Bureau Inc.’s pink sheets or in the NASD
Bulletin Board on the day immediately preceding the date of determination or if
there were no high bid and ask quotes on such date, the last preceding day that
there were, and (iii) if neither (i) or (ii) are applicable, as determined in
good faith by the Committee, provided, however, that if the recipient is a
director or holds 10% or more of the Common Stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company (directly
or beneficially), Fair Value shall be determined by an independent securities
valuation firm selected by a committee of “disinterested” persons (as defined in
Section 6(a) hereof) appointed by the Committee.

 

(c) Rule 16b-3. The term “Rule 16b-3” shall mean Rule 16b-3 of the SEC (or any
successor rule).

 

(d) Subsidiary. The term “Subsidiary” shall mean any corporation in an unbroken
chain of corporations beginning with the Company if, at the time of the grant of
the Award, each of the corporations other than the last Corporation in the
unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

 

19. Amendment of the Plan

 

(a) Except as provided in Section 7 hereof, the Board may at any time and from
time to time modify or amend the Plan in any respect, provided that, unless the
Board shall have received the consent of the stockholders, the board may not
make any amendments that require approval of the stockholders under Rule 16b-3.
As of September 23, 1994, Rule 16b-3 required stockholder approval of amendments
that (i) materially increase the benefits accruing to individuals who
participate in the Plan, (ii) materially increase the maximum number of shares
that may be issued under the Plan (except for permissible adjustments provided
in the Plan), or (iii) materially modify the requirements as to eligibility for
participation in the Plan. In addition, the Board shall not modify or amend the
Plan in a manner that would require stockholder approval under Section 422 of
the Code, without obtaining such stockholder approval, if such amendment would
affect the status of any outstanding Incentive Stock Option as an incentive
stock option under Section 422 of the Code. As of September 23, 1994, Section
422 of the Code required stockholder approval of amendments that (A) increase
the aggregate number of shares that may be issued pursuant to Incentive Stock
Options (except for permissible adjustments

 

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provided in the Plan), or (B) change the designation of employees or the class
of employees eligible to receive Incentive Stock Options. The termination or any
modification or amendment of the Plan shall not, without the consent of an Award
Owner, affect his or her rights under an Award previously granted to him or her.
With the consent of the Award Owners affected, the Committee may amend
outstanding Award agreements in a manner not inconsistent with the Plan.

 

(b) Notwithstanding the provisions of Sections 19(a)(i) and (iii), the Board
shall have the right, but not the obligation, without the consent of the
Company’s stockholders, to (i) amend or modify the terms and provisions of the
Plan and of any outstanding Incentive Stock Options granted under the Plan to
the extent necessary to qualify any or all such options for such favorable
federal income tax treatment (including deferral of taxation upon exercise), as
may be afforded incentive stock options under Section 422 of the Code; and (ii)
amend or modify the terms and provisions of the Plan and of any outstanding
Award granted under the Plan to the extent necessary to comply with any
securities law to which, in the opinion of counsel to the Company, the Plan or
Award is subject.

 

20. Withholding

 

At such times as an Award Owner recognizes taxable income in connection with the
receipt of shares of Common Stock hereunder (a “Taxable Event”), the Award Owner
shall pay to the Company an amount equal to the federal, state and local income
taxes and other amounts as may be required by law to be withheld by the Company
in connection with the Taxable Event (the “Withholding Taxes”) prior to the
issuance, or release from escrow, of such shares. In satisfaction of the
obligation to pay Withholding Taxes to the Company, the Committee may, in its
discretion and subject to compliance with applicable securities laws and
regulations, withhold Common Stock having an aggregate Fair Value on the date
preceding the date of such issuance equal to the Withholding Taxes.

 

21. Effective Date and Duration of the Plan

 

(a) Effective Date. The Plan shall become effective when adopted by the Board,
but no award granted under the Plan (other than Director Options granted
pursuant to Section 7 hereof) shall become exercisable unless and until the Plan
shall have been approved by the Company’s stockholders within twelve months
before or after the date of such adoption. If such stockholder approval is not
obtained within such period, any Award previously granted under the Plan (other
than Director Options, which shall remain in effect but which shall not qualify
for the exemption from Section 16(b) of the Exchange Act under Rule 16b-3) shall
terminate and no further Awards shall be granted. Subject to this limitation,
Awards may be granted under the Plan at any time after the effective date and
before the date fixed for termination of the Plan.

 

(b) Termination. The Plan shall terminate upon the earlier of (i) the close of
business on the day next preceding the tenth anniversary of the date of its
adoption by the Board or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise of
Awards granted under the Plan. If the date of termination is determined under
(i)

 

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above, then Awards outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
Awards.

 

22. Governing Law

 

The Plan and all Award agreements issued hereunder shall be governed by the laws
of the State of Delaware.

 

23. Expenses of Administration

 

All costs and expenses incurred in the operation and administration of this Plan
shall be borne by the Company.

 

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