Exhibit 10.9
STARBOARD RESOURCES, INC.

 
2014 EQUITY INCENTIVE PLAN

Adopted as of August 14, 2014
 
1. PURPOSE.
 
The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to the success of the Starboard Resources, Inc. (the “Company”) and
its Subsidiaries, including employees, non-employee directors and consultants,
by offering them an opportunity to participate in the Company’s future
performance through awards of Options, the right to purchase Shares, through
awards or bonuses of Shares and awards of Stock Units, Stock Appreciation Rights
(“SARs”), and other Share-based awards. Capitalized terms not otherwise defined
in the Plan have the respective meanings set forth in Section 2 below.
 
2. DEFINITIONS.
 
As used in this Plan, the following terms will have the following respective
meanings:
 
“AWARD” means any award under this Plan, including any Option, Stock Award, SAR,
Stock Unit, Stock Bonus or other Share-based award under this Plan.
 
“AWARD AGREEMENT” means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.  In the event of a contradiction between the terms of
this Plan and an Award Agreement, the terms of the Award Agreement shall govern
the terms of the subject Award and the entitlements of the Participant in
respect of such Award.

 
“BOARD OF  DIRECTORS” or “BOARD”  means the Board of Directors of the Company.
 
“CAUSE” means, with respect to a Participant, (a) the meaning of such term (or
similar applicable term) provided for in such Participant’s Services Agreement
or (b) in the case of a Participant who is not party to a Services Agreement,
any cause, as defined by applicable law, for the termination of a Participant’s
employment (or other services relationship) with the Company or a Parent or
Subsidiary.

 
“CHANGE OF CONTROL” shall be deemed to have occurred if:

 
(i)  
any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange
Act) becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing more
than fifty percent (50%) of the voting power of the then outstanding securities
of the Company; provided that a Change of Control shall not be deemed to occur
as a result of a transaction in which the Company becomes a subsidiary of
another entity and in which the shareholders of the Company, immediately prior
to the transaction, will beneficially own, immediately after the transaction,
equity interest entitling such shareholders to more than fifty percent (50%) of
all votes to which all equity interest holders of the parent entity would be
entitled in the election of directors;

(ii)  
the consummation of (1) a merger or consolidation of the Company with another
entity where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, equity interests entitling such shareholders to more than 50% of
all votes to which all equity interest holders with the right to vote of the
surviving entity would be entitled in the election of directors, (2) a sale or
other disposition of all or substantially all of the assets of the Company, or
(3) a liquidation or dissolution of the Company; or

(iii)  
after the Effective Date, directors are elected such that a majority of the
members of the Board shall have been members of the Board for less than one
year, unless the election or nomination for election of each new director who
was not a director at the beginning of such one-year period was approved by a
vote of at least two-thirds (2/3) of the directors then still in office who were
directors at the beginning of such period.

 
 
 
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Notwithstanding the foregoing, for any Awards subject to the requirements of
section 409A of the Code that will become payable on a Change of Control, the
transaction constituting a “Change of Control” must also constitute a “change in
control event” for purposes of section 409A(a)(2)(A)(v) of the Code.
 
“CODE” means the Internal Revenue Code of 1986, as amended from time to time and
all regulations, interpretations, and administrative guidance issued thereunder.
 
“COMMITTEE” means (i) with respect to Awards to Employees and Consultants, the
Compensation Committee of the Board or another committee appointed by the Board
to administer the Plan, and (ii) with respect to Awards made to Non-Employee
Directors, the Board or its delegate. Notwithstanding the foregoing, with
respect to Awards to Employees that are intended to be “qualified
performance-based compensation” under section 162(m) of the Code, as well as to
Employees who are officers of the Company, the Committee shall consist of two or
more persons appointed by the Board, all of whom shall be “outside directors” as
defined under section 162(m) of the Code and related Treasury regulations and
“non-employee directors” as defined under Rule 16b-3 promulgated under the
Exchange Act.

 
“COMPANY” means Starboard Resources, Inc., a Delaware corporation, or any
successor business entity.

 
“CONSULTANT” means a professional who is engaged by the Company to provide
professional or expert advice to the Company but is not an Employee.
 
“DIRECTOR” means a member of the Board, including Employee-Directors and
Non-Employee Directors.

 
“DISABILITY” means, with respect to a Participant, (a) the meaning of such term
(or similar applicable term) provided for in such Participant’s Services
Agreement or (b) in the case of a Participant who is not party to a Services
Agreement, a disability, whether temporary or permanent, partial or total, as
determined by Committee.

 
“DIVIDEND EQUIVALENT” means an amount calculated with respect to a Stock Unit,
which is determined by multiplying the number of Shares subject to the Stock
Unit by the per-Share cash dividend, or the per-Share fair market value (as
determined by the Committee) of any dividend in consideration other than cash,
paid by the Company on its Shares. If interest is credited on accumulated
dividend equivalents, the term “Dividend Equivalent” shall include the accrued
interest.

“EMPLOYEE” means an employee of the Company.

 
“EMPLOYEE-DIRECTOR” means a member of the Board who is an Employee.

“EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended.

 
“EXERCISE PRICE” means the price per Share at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

“FAIR MARKET VALUE” means, as of any date, the value of a share of the Shares
determined as follows:
 
(a)   if Shares are publicly traded and are then listed on a national securities
exchange, their closing price on the date of determination if at least 100
Shares were traded on such date, otherwise the closing price on the last
preceding date on which at least 100 Shares were traded, on the principal
national securities exchange on which the Shares are listed or admitted to
trading;
 
(b)   if the foregoing is not applicable, by the Committee in good faith.

 
“NON-EMPLOYEE DIRECTOR” means a member of the Board who is not an Employee.

 
“OPTION” means an award of an option to purchase Shares pursuant to Section 6.

 
“PARENT” means any corporation or other entity (other than the Company) in an
unbroken chain of entities ending with the Company if each of such entities
other than the Company owns voting securities possessing 50% or more of the
total combined voting power of all classes of equity securities in one of the
other entities in such chain.

 
“PARTICIPANT” means a person who receives an Award under this Plan.
 
 
 
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“PERFORMANCE FACTORS” means the factors selected by the Committee, in its sole
and absolute discretion, to determine whether the performance goals applicable
to Awards have been satisfied, including, without limitation, the following
factors:
 
(a)   net revenue and/or net revenue growth;
 
(b)   earnings before income taxes and amortization and/or earnings before
income taxes and amortization growth;

(c)   operating income and/or operating income growth;
(d)   net income and/or net income growth;
(e)   earnings per share and/or earnings per share growth;
 
(f)   total Shareholder return and/or total Shareholder return growth;

(g)   return on equity;
(h)   operating cash flow return on income;
(i)    adjusted operating cash flow return on income;
(j)    economic value added;
(k)   periodic increases in proved or probable oil and gas reserves;
(l)    periodic increases in oil and gas production; and
(k)   individual business objectives.

 
“PERFORMANCE PERIOD” means the period of service determined by the Committee,
not to exceed five years, during which period of service or performance is to be
measured for Stock Awards or Stock Bonuses, if such Awards are restricted.

 
“PLAN” means this Starboard Resources, Inc. 2014 Equity Incentive Plan, as
amended from time to time in accordance with its terms.

 
“PURCHASE PRICE” means the price at which the Participant of a Stock Award may
purchase the Shares.

“SEC” means the Securities and Exchange Commission.

 
“SERVICES AGREEMENT” means an employment, consulting or services agreement
between a Participant and the Company (or Parent or Subsidiary thereof).

“SHARES” means shares of the Company’s common stock, $.001 par value per Share,
issuable under the Company’s Certificate of Incorporation and Bylaws, as
amended, as adjusted pursuant to Sections 3 and 23, and any successor security.

 
“STOCK APPRECIATION RIGHT” means an award of a stock appreciation right, as
described in Section 10.

“STOCK AWARD” means an award of Shares pursuant to Section 7. 

 
“STOCK BONUS” means an award of Shares, or cash in lieu of Shares, pursuant to
Section 8.
 
“STOCK UNIT” means an Award of a stock unit pursuant to Section 9.

 
“SUBSIDIARY” means any corporation or other entity (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last such entity in the unbroken chain owns equity
interests possessing fifty (50%) or more of the total combined voting power of
all classes of equity interests in one of the other entities in such chain.

 
“TERMINATION” or “TERMINATED” means, for purposes of this Plan with respect to a
Participant, that the Participant has for any reason ceased to provide services
as an employee, officer, director, consultant, independent contractor or advisor
to the Company or a Parent or Subsidiary. An employee will not be deemed to have
ceased to provide services in the case of (i) sick leave, (ii) military leave,
or (iii) any other leave of absence approved by the Company, provided that such
leave is for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute or unless provided
otherwise pursuant to a formal policy adopted from time to time by the Company
and issued and promulgated to employees in writing. In the case of any employee
on an approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the employ of
the Company or a Subsidiary as it may deem appropriate, except that in no event
may an Award be exercised after the expiration of the term set forth in the
applicable Award Agreement.  Subject to the terms of a Participant’s Services
Agreement, the Committee will have sole discretion to determine whether a
Participant has ceased to provide services and the effective date on which the
Participant ceased to provide services (the “Termination Date”).
 
 
 
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3. SHARES SUBJECT TO THE PLAN.

 
3.1   Amount of Shares Available. Subject to Sections 3.2 and 23, the total
aggregate number of Shares reserved and available for grant and issuance (or
otherwise covered by Awards) pursuant to this Plan shall be 2,243,266 Shares and
will include Shares that are subject to: (a) issuance upon exercise of an Option
but cease to be subject to such Option for any reason other than exercise of
such Option; (b) an Award granted hereunder but forfeited or repurchased by the
Company at the original issue price; (c) an Award that otherwise terminates
without Shares being issued; and (d) an Award that does not become exercisable
(or is forfeited) during such Award’s stated term or which expires in accordance
with its terms. 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 Options granted under this Plan and all other outstanding but
unvested Awards granted under this Plan.
 
3.2   Adjustment of Shares. If there shall occur any change with respect to the
outstanding Shares by reason of any recapitalization, reclassification, stock
dividend, extraordinary dividend, stock split, reverse stock split, or other
distribution with respect to the Shares, or any merger, reorganization,
consolidation, combination, spin-off or other similar corporate change, or any
other change affecting the Shares, the Committee shall, in the manner and to the
extent that it deems appropriate and equitable to the Participants and
consistent with the terms of the Plan (and then outstanding Awards), cause an
adjustment to be made in (i) the maximum numbers and kind of Shares provided in
Sections 3.1 and 3.3 hereof, (ii) the numbers and kind of Shares, units, or
other rights subject to then outstanding Awards, (iii) the exercise price of
outstanding Options and the base, strike or exercise price for each Share or
unit or other right subject to then outstanding Awards, (iv) the performance
measures or goals relating to the vesting of an Award and (v) any other terms of
an Award that are affected by the subject event to prevent dilution or
enlargement of a Participant’s rights under an Award. Notwithstanding the
foregoing, in the case of Incentive Stock Options (as defined in Section 6
below), any such adjustments shall, to the extent practicable, be made in a
manner consistent with the requirements of Section 424(a) of the Code.

 
3.3  Individual Limits. All Awards under the Plan (other than Dividend
Equivalents) shall be expressed in Shares. The maximum aggregate number of
Shares that may be subject to such Awards granted pursuant to this Plan that are
granted to any individual during any calendar year shall be 450,000 Shares,
subject to adjustment as described in this Section 3 and Section 3.2. The
individual share limit set forth above in this Section 3.3 shall apply without
regard to whether the Awards are to be paid in Shares or cash. All cash payments
(other than with respect to Dividend Equivalents) shall equal the Fair Market
Value of the Shares to which the cash payments relate. A Participant may not
accrue Dividend Equivalents or other cash payments with respect to Awards under
the Plan during any calendar year in excess of $2,000,000.00. Notwithstanding
the foregoing, there shall be no limits on cashless exercises of Shares, and any
spread on Awards as a result of increase in equity values shall be exempt from
the limits of this Subsection 3.3. The maximum number of Shares that may be
covered by NQSO (as defined in Section 6 below) or SARs granted to any
individual Non-Employee Director during any calendar year under the Plan is
30,000.
 
4. ELIGIBILITY.

 
ISOs (as defined in Section 6 below) may be granted only to employees (including
officers and directors who are deemed to be employees) of the Company or of a
Parent or Subsidiary of the Company. All other Awards may be granted to by the
Committee to Officers, Directors, Employees, agents and Consultants of the
Company or any Parent or Subsidiary of the Company. A person may be granted more
than one Award under this Plan.
 
5. ADMINISTRATION.
 
5.1   Committee. The Plan shall be administered and interpreted by the
Committee.
 
5.2   Committee’ Authority. The Committee will have the authority to:

 
(a)  
construe and interpret this Plan, any Award Agreement and any other agreement or
document executed pursuant to this Plan;

 
(b)  
prescribe, amend and rescind rules and regulations relating to this Plan or any
Award;

 
(c)  
select persons to receive Awards;

 
(d)  
determine the form, terms and conditions of Awards;

 
(e)  
determine the number of Shares or other consideration subject to Awards;

 
 
 
 
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(f)  
determine whether Awards will be granted singly, in combination with, in tandem
with, in replacement of, or as alternatives to, other Awards under this Plan or
any other incentive or compensation plan of the Company or any Parent or
Subsidiary;

 
(g)  
grant waivers of Plan or Award conditions;

 
(h)  
determine the vesting, exercisability and payment of Awards;

 
(i)  
correct any defect, supply any omission or reconcile any inconsistency in this
Plan, any Award or any Award Agreement;

 
(j)  
determine whether an Award has been earned in accordance with and subject to its
terms; and

 
(k)  
make all other determinations necessary or advisable for the administration of
this Plan.

 
The Board of Directors shall have the authority to amend or terminate the Plan,
provided, however, the Board of Directors will not amend the Plan in any manner
that requires Shareholder approval without such approval; provided that no such
amendment or termination shall adversely affect effect a Participant’s rights
under outstanding Awards.

 
5.3   Committee’ Discretion. Any determination made by the Committee with
respect to any Award will be made at the time of the grant of the Award or,
unless in contravention of any express term of this Plan or Award, at any later
time, and such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan.  No member of the
Committee or the Board of Directors shall be personally liable for any action
taken or decision made in good faith relating to this Plan, and all members of
the Committee and the Board of Directors shall be fully protected and
indemnified to the fullest extent permitted under applicable law by the Company
in respect to any such action, determination, or interpretation.

 
6. OPTIONS.

 
The Committee may grant Options to eligible persons and will determine whether
such Options will be “Incentive Stock Options” within the meaning of the Code
(“ISO”) or “Nonqualified Stock Options” within the meaning of the Code
(“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the
Option, the period during which the Option may be exercised, and all other terms
and conditions of the Option.  Unless specifically set forth to the contrary in
an Share Option Agreement (as defined below), the terms of such Option shall be
subject to the following terms and conditions: 

 
6.1   Form of Option Award. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO (hereinafter referred to as the “Share Option Agreement”), and
will be in such form and contain such provisions (which need not be the same for
each Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Plan.

 
6.2   Date of Grant. The date of grant of an Option will be the date on which
the Committee makes the determination to grant such Option, unless otherwise
specified by the Committee. The Share Option Agreement and a copy of this Plan
will be delivered to the Participant within a reasonable time after the granting
of the Option.

 
6.3   Exercise Period. Options may be exercisable within the times or upon the
events determined by the Committee as set forth in the Share Option Agreement
governing such Option; provided, however, that no Option will be exercisable
after the expiration of ten years from the date the Option is granted; and
provided further that no ISO granted to a person who directly or by attribution
owns more than 10% of the total combined voting power of all classes of stock of
the Company or of any Parent or Subsidiary of the Company (“Ten Percent Owner”)
will be exercisable after the expiration of five years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at one
time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines, provided, however, that in
all events a Participant will be entitled to exercise an Option at the rate of
at least 20% per year over five years from the date of grant, subject to
reasonable conditions such as continued employment; and further provided that an
Option granted to a Participant who is an officer or director may become fully
exercisable at any time or during any period established by the Company.

 
6.4   Exercise Price. The Exercise Price of an Option will be determined by the
Committee when the Option is granted and may not be less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that: (a) the Exercise
Price of an ISO will be not less than 100% of the Fair Market Value of the
Shares on the date of grant; and (b) the Exercise Price of any Option granted to
a Ten Percent Owner will not be less than 110% of the Fair Market Value of the
Shares on the date of grant. Payment for the Shares purchased must be made in
accordance with Section 15 of this Plan.
 

 
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6.5   Method of Exercise. Options may be exercised only by delivery to the
Company of a written Shares option exercise agreement (the “Exercise Agreement”)
in a form approved by the Committee, which need not be the same for each
Participant, stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding the Participant’s investment intent and
access to information and other matters, if any, as may be required or desirable
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased (where
the purchase price therefor shall be paid in accordance with Section 15 below).
 
6.6   Termination. Unless set forth in a Participant’s Services Agreement or
Share Option Agreement, exercise of an Option will always be subject to the
following:

 
(a)  
If the Participant’s service is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant’s Options only to
the extent that such Options would have been exercisable upon the Termination
Date, but must be exercised no later than three months after the Termination
Date (or such longer time period not exceeding five years as may be approved by
the Committee, with any exercise beyond three months after the Termination Date
deemed to be an NQSO).

(b)  
If the Participant’s service is Terminated because of the Participant’s death or
Disability (or the Participant dies within three months after a Termination
other than for Cause or because of Participant’s Disability), then the
Participant’s Options may be exercised only to the extent that such Options
would have been exercisable by the Participant on the Termination Date and must
be exercised by the Participant (or the Participant’s legal representative) no
later than twelve months after the Termination Date (or such longer time period
not exceeding five years as may be approved by the Committee, with any such
exercise beyond (i) three months after the Termination Date when the Termination
is for any reason other than the Participant’s death or Disability, or (ii)
twelve months after the Termination Date when the Termination is for
Participant’s death or Disability, deemed to be an NQSO).

(c)  
Notwithstanding the provisions in paragraph 6.6(a) above, if the Participant’s
service is Terminated for Cause, neither the Participant, the Participant’s
estate nor such other person who may then hold the Option shall be entitled to
exercise any Option with respect to any Shares whatsoever, after Termination,
whether or not after Termination the Participant may receive payment from the
Company or a Subsidiary for vacation pay, for services rendered prior to
Termination, for services rendered for the day on which Termination occurs, for
salary in lieu of notice, or for any other benefits. For the purpose of this
paragraph, Termination shall be deemed to occur on the date when the Company
dispatches notice or advice to the Participant that his or her service is
Terminated.

 
6.7   Limitations on Exercise. No less than 500 Shares that may be purchased on
any exercise of an Option, provided that such minimum number will not prevent
the Participant from exercising an Option for the full number of Shares for
which it is then exercisable.
 
6.8   Limitations on ISO. The aggregate Fair Market Value (determined as of the
date of grant) of Shares with respect to which ISO are exercisable for the first
time by a Participant during any calendar year (under this Plan or under any
other incentive stock option plan of the Company, Parent or Subsidiary of the
Company) will not exceed $100,000.00.  If the Fair Market Value of Shares on the
date of grant with respect to which ISO are exercisable for the first time by a
Participant during any calendar year exceeds $100,000.00, then the Options for
the first $100,000.00 worth of Shares to become exercisable in such calendar
year will be ISO and the Options for the amount in excess of $100,000 that
become exercisable in that calendar year will be NQSOs. In the event that the
Code or the regulations promulgated thereunder are amended after the Effective
Date of this Plan to provide for a different limit on the Fair Market Value of
Shares permitted to be subject to ISO, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
 
6.9   Modification, Extension or Renewal. The Committee may modify, extend or
renew outstanding Options and authorize the grant of new Options in substitution
therefore, provided that any such action may not, without the written consent of
a Participant, impair or diminish any of such Participant’s rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 6.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise
Price.  Notwithstanding anything to the contrary herein, the Committee may
reprice any Option (or other Award) without the approval of the Company
Shareholders. For this purpose, “reprice” means (i) any of the following or any
other action that has the same effect: (A) lowering the exercise price (or base
or strike price/value) of an Option (or other Award) after it is granted,
(B) any other action that is treated as a repricing under U.S. generally
accepted accounting principles (“GAAP”), or (C) cancelling an Award at a time
when its exercise/base/strike price exceeds the Fair Market Value of the
underlying Shares, in exchange for another Award, unless the cancellation and
exchange occurs in connection with a merger, acquisition, spin-off or other
similar corporate transaction; and (ii) any other action that is considered to
be a repricing under formal or informal guidance issued by the securities
exchange upon which the Company’s securities are listed.
 

 
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6.10   No Disqualification. Notwithstanding any other provision in this Plan, no
term of this Plan relating to ISO will be interpreted, amended or altered, nor
will any discretion or authority granted under this Plan be exercised, so as to
disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any ISO under Section 422 of the Code.

 
7. STOCK AWARDS.
 
A Stock Award is an offer by the Company to sell to an eligible person Shares
that may or may not be subject to restrictions. The Committee will determine to
whom an offer will be made, the number of Shares the person may purchase, the
price to be paid (the “Purchase Price”), the restrictions to which the Shares
will be subject, if any, and all other terms and conditions of the Stock Award,
subject to the following:

 
7.1   Form of Stock Award. All purchases under a Stock Award made pursuant to
this Plan will be evidenced by an Award Agreement (the “Stock Purchase
Agreement”) that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. The offer of a
Stock Award will be accepted by the Participant’s execution and delivery of the
Stock Purchase Agreement and payment for the Shares to the Company in accordance
with the Stock Purchase Agreement.

 
7.2   Purchase Price. The Purchase Price of Shares sold pursuant to a Stock
Award will be determined by the Committee on the date the Stock Award is granted
and may not be less than 85% of the Fair Market Value of the Shares on the grant
date, except in the case of a sale to a Ten Percent Owner, in which case the
Purchase Price will be 100% the Fair Market Value. Payment of the Purchase Price
must be made in accordance with Section 15 of this Plan.
 
7.3   Terms of Stock Awards. Stock Awards may be subject to such restrictions as
the Committee may impose. These restrictions may be based upon completion of a
specified term of service with the Company or upon completion of the performance
goals as set out in advance in the Participant’s individual Stock Purchase
Agreement. Stock Awards may vary from Participant to Participant and between
groups of Participants. Prior to the grant of a Stock Award subject to
restrictions, the Committee shall: (a) determine the nature, length and starting
date of any Performance Period for the Stock Award; (b) select from among the
Performance Factors to be used to measure performance goals, if any; and (c)
determine the number of Shares that may be awarded to the Participant. Prior to
the transfer of any Stock Award, the Committee shall determine the extent to
which such Stock Award has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Awards that
are subject to different Performance Periods and have different performance
goals and other criteria.
 
7.4   Termination During Performance Period. If a Participant is Terminated
during a Performance Period for any reason, then such Participant will be
entitled to payment (whether in Shares, cash or otherwise) with respect to the
Stock Award only to the extent earned as of the date of Termination in
accordance with the Stock Purchase Agreement, unless the Committee determines
otherwise.
 
8. STOCK BONUSES.
 
8.1   Awards of Stock Bonuses. A Stock Bonus is an award of Shares for
extraordinary services rendered to the Company or any Parent or Subsidiary of
the Company. A Stock Bonus will be awarded pursuant to an Award Agreement (the
“Stock Bonus Agreement”) that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. A Stock
Bonus may be awarded upon satisfaction of such performance goals as are set out
in advance in the Participant’s individual Award Agreement (the “Performance
Stock Bonus Agreement”). Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company, Parent or Subsidiary and/or individual performance factors or upon such
other criteria as the Committee may determine.
 
8.2   Terms of Stock Bonuses. The Committee will determine the number of Shares
to be awarded to the Participant. If the Stock Bonus is being earned upon the
satisfaction of performance goals pursuant to a Performance Stock Bonus
Agreement, then the Committee will: (a) determine the nature, length and
starting date of any Performance Period for each Stock Bonus; (b) select from
among the Performance Factors to be used to measure the performance, if any; and
(c) determine the number of Shares that may be awarded to the Participant. Prior
to the payment of any Stock Bonus, the Committee shall determine the extent to
which such Stock Bonuses have been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Stock Bonuses that
are subject to different Performance Periods and different performance goals and
other criteria. The number of Shares may be fixed or may vary in accordance with
such performance goals and criteria as may be determined by the Committee. The
Committee may adjust the performance goals applicable to the Stock Bonuses to
take into account changes in law and accounting or tax rules and to make such
adjustments as the Committee deem necessary or appropriate to reflect the impact
of extraordinary or unusual items, events or circumstances to avoid windfalls or
hardships.
 

 
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8.3   Form of Payment. The earned portion of a Stock Bonus may be paid to the
Participant by the Company either currently or on a deferred basis, as agreed by
the Participant and the Company, with such interest or dividend equivalent, if
any, as the Committee may determine. Payment of an interest or dividend
equivalent (if any) may be made in the form of cash or whole Shares or a
combination thereof, either in a lump sum payment or in installments, as the
Committee will determine.
 
9. STOCK UNITS
 
9.1 General Requirements. The Committee may grant Stock Units to an Employee,
Non-Employee Director or Consultant, upon such terms and conditions as the
Committee deems appropriate under this Section 9. Each Stock Unit shall
represent the right of the Participant to receive a Share or an amount based on
the value of a Share. All Stock Units shall be credited to bookkeeping accounts
on the Company’s records for purposes of the Plan.

 
9.2  Terms of Stock Units. The Committee may grant Stock Units that are payable
on terms and conditions determined by the Committee, which may include payment
based on achievement of performance goals and/or satisfaction of certain
condition. Stock Units may be paid at the end of a specified vesting or
performance period, or payment may be deferred to a date authorized by the
Committee. The Committee shall determine the number of Stock Units to be granted
and the requirements applicable to such Stock Units; each of which shall be set
forth in the applicable Award Agreement.
 
9.3  Payment With Respect to Stock Units. Payment with respect to Stock Units
shall be made in cash, in Shares, or in a combination of the two, as determined
by the Committee. The Award Agreement shall specify the maximum number of Shares
that can be issued under the Stock Units.
 
9.4  Requirement of Employment or Service. The Committee shall determine in the
Award Agreement under what circumstances a Participant may retain Stock Units
after termination of the Participant’s employment or service, and the
circumstances under which Stock Units may be forfeited.

 
9.5  Dividend Equivalents. The Committee may grant Dividend Equivalents in
connection with Stock Units, under such terms and conditions as the Committee
deems appropriate. Dividend Equivalents may be paid to Participants as and when
the underlying Stock Units are payable, or may be deferred. All Dividend
Equivalents shall be credited to bookkeeping accounts on the Company’s records
for purposes of the Plan. Dividend Equivalents may be accrued as a cash
obligation, or may be converted to additional Stock Units for the Participant,
and deferred Dividend Equivalents may accrue interest, all as determined by the
Committee. The Committee may provide that Dividend Equivalents shall be payable
based on the achievement of specific performance goals. Dividend Equivalents may
be payable in cash or shares of Company Stock or in a combination of the two, as
determined by the Committee.

 
10. STOCK APPRECIATION RIGHTS

 
10.1           General Requirements. The Committee may grant SARs to Employees,
Non-Employee Directors or Consultants separately or in tandem with an Option.
The Committee shall establish the number of Shares, the terms and the base
amount of the SAR at the time the SAR is granted. The base amount of each SAR
shall be not less than the Fair Market Value of a Share as of the date of grant
of the SAR.

 
10.2  Tandem SARs. The Committee may grant tandem SARs either at the time an
Option is granted or at any time thereafter while the Option remains
outstanding; provided, however, that, in the case of an Incentive Stock Option,
SARs may be granted only at the date of the grant of the Incentive Stock Option.
In the case of tandem SARs, the number of SARs granted to a Participant that
shall be exercisable during a specified period shall not exceed the number of
Shares that the Participant may purchase upon the exercise of the related Option
during such period. Upon the exercise of an Option, the SARs relating to the
Shares covered by such Option shall terminate. Upon the exercise of SARs, the
related Option shall terminate to the extent of an equal number of Shares.  Each
such termination shall allow the Participant the opportunity to exercise the
tandem SAR in connection with the related Option exercise.
 

 
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10.3  Exercisability; Term. A SAR shall become exercisable in accordance with
such terms and conditions as may be specified in the Award Agreement. The
Committee may grant SARs that are subject to achievement of performance goals or
other conditions each which hall be specified in the Award Agreement. The
Committee may accelerate the exercisability of any or all outstanding SARs at
any time for any reason. The Committee shall determine in the Award Agreement
under what circumstances and during what periods a Participant may exercise a
SAR after termination of employment or service. A tandem SAR shall be
exercisable only while the Option to which it is related is exercisable. The
Committee shall determine the term of each SAR, which shall not exceed ten years
from the date of grant.

 
10.4  Grants to Non-Exempt Employees. SARs granted to persons who are non-exempt
employees under the Fair Labor Standards Act of 1938, as amended, may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).

 
10.5  Exercise of SARs. When a Participant exercises SARs, the Participant shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised. The stock appreciation for a SAR
is the amount by which the Fair Market Value of the underlying Shares on the
date of exercise of the SAR exceeds the base amount of the SAR as specified in
the Award Agreement.

 
10.6  Form of Payment. The Committee shall determine whether the stock
appreciation for a SAR shall be paid in the form of Shares, cash or a
combination of the two. The Committee shall consider tax withholding
requirements in allocating payments in Shares. For purposes of calculating the
number of Shares to be received, Shares shall be valued at their Fair Market
Value on the date of exercise of the SAR. If shares of Company Stock are to be
received upon exercise of a SAR, cash shall be delivered in lieu of any
fractional share. All SARs are subject to the withholdings provided in Section
14 below.

 
11. OTHER SHARE-BASED AWARDS
 
The Committee may grant other Awards not specified in Sections 6, 7, 8, 9 and 10
above that are based on or measured by Shares to Employees, Non-Employee
Directors and Consultants, on such terms and conditions as the Committee deems
appropriate (“Other Share-Based Awards”). Other Share-based Awards may be
granted subject to achievement of performance goals or the satisfaction other
conditions and may be payable in Shares or cash, or in a combination of the two;
each as determined by the Committee in the Award Agreement.
 
12. QUALIFIED PERFORMANCE-BASED COMPENSATION
 
12.1  Designation as Qualified Performance-Based Compensation. The Committee may
determine that Stock Units, Stock Awards, Dividend Equivalents or Other
Shares-based Awards granted to an Employee shall be considered “qualified
performance-based compensation” under section 162(m) of the Code, in which case
the provisions of this Section 12 shall apply.
 
12.2  Performance Goals. When Awards are granted under this Section 12, the
Committee shall establish in writing (i) the objective performance goals that
must be met, (ii) the period during which performance will be measured, (iii)
the maximum amounts that may be paid if the performance goals are met, and (iv)
any other conditions that the Committee deems appropriate and consistent with
the requirements of section 162(m) of the Code for “qualified performance-based
compensation.” The performance goals shall satisfy the requirements for
“qualified performance-based compensation,” including the requirement that the
achievement of the goals be substantially uncertain at the time they are
established and that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met. The Committee shall not have
discretion to increase the amount of compensation that is payable, but may
reduce the amount of compensation that is payable, pursuant to Awards identified
by the Committee as “qualified performance-based compensation.”
 
The Committee shall use objectively determinable performance goals based on the
Performance Factors
 
12.3  Timing of Establishment of Goals. Performance goals must be
pre-established by the Committee. A performance goal is considered
pre-established if it is established in writing not later than 90 days after the
commencement of the period of service to which the performance goal relates,
provided that the outcome is substantially uncertain at the time the Committee
actually established the goal. However, in no event will a performance goal be
considered pre-established if it is established after 25% of the period of
service (as scheduled in good faith at the time the goal is established) has
elapsed.
 
12.4  Certification of Results. The Committee shall certify the performance
results for the performance period specified in the Award Agreement after the
performance period ends. The Committee shall determine the amount, if any, to be
paid pursuant to each Award based on the achievement of the performance goals
and the satisfaction of all other terms of the Award Agreement.
 
 
 
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12.5  Death, Disability or Other Circumstances. The Committee may provide in the
Award Agreement that Awards under this Section 12 shall be payable, in whole or
in part, in the event of the Participant’s death or Disability, a Change of
Control or under other circumstances consistent with the Treasury regulations
and rulings under section 162(m) of the Code.
 
13. DEFERRALS
 
Subject to the terms of an applicable Award Agreement, the Committee may permit
or require a Participant to defer receipt of the payment of cash or the delivery
of Shares that would otherwise be due to the Participant in connection with any
Award. The Committee shall establish rules and procedures for any such
deferrals, consistent with applicable requirements of section 409A of the Code.
 
14. WITHHOLDING TAXES.

 
14.1   Withholding Generally. All Awards under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. Subject to the terms of the applicable Award Agreement, the
Company may require that the Participant or other person receiving or exercising
Awards pay to the Company the amount of any federal, state or local taxes that
the Company is required to withhold with respect to such Awards, or the Company
may deduct from other wages paid by the Company the amount of any withholding
taxes due with respect to such Awards.
 
14.2   Shares Withholding. When, under applicable tax laws, a participant incurs
tax liability in connection with the exercise or vesting of any Award that is
subject to tax withholding and the Participant is obligated to pay the Company
the amount required to be withheld, the Participant may satisfy the minimum
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued that number of Shares having a Fair Market Value equal to
the minimum amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined. All elections by a Participant
to have Shares withheld for this purpose will be made in accordance with the
requirements established by the Committee and will be in writing in a form
acceptable to the Committee.
 
15. PAYMENT FOR SHARE PURCHASES.

 
Payment for Shares purchased pursuant to this Plan must be made in cash (by
check) or, where expressly approved for the Participant by the Committee and
where permitted by law:

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

(b)  
by surrender of Shares that either: (1) have been owned by the Participant for
more than six months and have been paid for within the meaning of SEC Rule 144;
or (2) were obtained by the Participant in the public market;

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

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

(1)  
through a “same day sale” commitment from the Participant and a broker-dealer
that is a member of the Financial Industry Regulatory Authority (a “FINRA
Dealer”) whereby the Participant irrevocably elects to exercise the Option and
to sell a portion of the Shares so purchased to pay for the Exercise Price, and
whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or

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

 
(e)   by any combination of the foregoing.

 
16. PRIVILEGES OF SHAREHOLDER STATUS.

 
16.1   Voting and Dividends. No Participant will have any of the rights of a
Shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a Shareholder and will have all the rights of a Shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are issued pursuant to a Stock Award with restrictions, then any new,
additional or different securities the Participant may become entitled to
receive with respect to such Shares by virtue of a stock dividend, stock split
or any other change in the corporate or capital structure of the Company will be
subject to the same restrictions as the Stock Award.
 

 
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17. NON-TRANSFERABILITY.
 
Awards of Shares granted under this Plan, and any interest in or derived from
the Shares, will not be transferable or assignable by the Participant, and may
not be made subject to execution, attachment or similar process, other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
Shares that have been vested to Participants, or acquired by Participants
through the exercise of Awards, will be transferable by such Participant,
subject to restrictions on transfers under the Securities Exchange Act of 1934
and applicable state securities laws. Awards of Options granted under this Plan,
and any interest therein, will not be transferable or assignable by the
Participant, and may not be made subject to execution, attachment or similar
process, other than by will or by the laws of descent and distribution, by
instrument to an inter vivos or testamentary trust in which the options are to
be passed to beneficiaries upon the death of the trustor, or by gift to
“immediate family” as that term is defined in 17 C.F.R. 240.16a-1(e). During the
lifetime of the Participant an Award will be exercisable only by the
Participant. During the lifetime of the Participant, any elections with respect
to an Award may be made only by the Participant unless otherwise determined by
the Committee and set forth in the Award Agreement with respect to Awards that
are not ISOs.
 
18. CERTIFICATES.
 
All certificates for Shares or other securities delivered under this Plan will
be subject to such stop transfer orders, legends and other restrictions as the
Committee may deem necessary or advisable, including restrictions under any
applicable federal, state or foreign securities law, or any rules, regulations
and other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed or quoted.

 
19. ESCROW.
 
To enforce any restrictions on a Participant’s Shares, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee
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 Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates.
 
20. EXCHANGE AND BUYOUT OF AWARDS.

 
The Committee may, at any time or from time to time, authorize the Company, with
the consent of the respective Participants, to issue new Awards in exchange for
the surrender and cancellation of any or all outstanding Awards. The Committee
may at any time buy from a Participant an Award previously granted with payment
in cash, Shares or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.

 
21. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.
 
An Award will not be effective unless such Award is in compliance with all
applicable federal and state securities laws, rules and regulations of any
governmental body, and the requirements of any stock exchange or automated
quotation system upon which the Shares may then be listed or quoted, as they are
in effect on the date of grant of the Award and also on the date of exercise or
other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this
Plan prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.
 

 
 
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22. NO OBLIGATION TO EMPLOY.

 
Nothing in this Plan or any Award granted under this Plan will confer or be
deemed to confer on any Participant any right to continue in the employ of, or
to continue any other relationship with, the Company or any Parent or Subsidiary
of the Company or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Participant’s employment or other
relationship at any time, with or without cause.

 
23. CORPORATE TRANSACTIONS.
 
23.1   Assumption or Replacement of Awards by Successor. In the event of (a) a
dissolution or liquidation of the Company, (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the Shareholders of the Company or their relative Share
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the Shareholders of the Company immediately prior to such merger
(other than any Shareholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
Shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding Shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor entity to the Company (if any), which assumption,
conversion or replacement will be binding on all Participants. In the
alternative, the successor entity may substitute equivalent Awards or provide
substantially similar consideration to Participants as was provided to
Shareholders (after taking into account the existing provisions of the Awards).
The successor entity may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar equity interests or other
property subject to repurchase restrictions no less favorable to the Participant
than the Awards (or Shares, as the case may be) being replaced.  In the event
such successor entity (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 23.1, (i)
the vesting of any or all Awards granted pursuant to this Plan will accelerate
upon a transaction described in this Section 23 and (ii) any or all Options
granted pursuant to this Plan will become exercisable in full prior to the
consummation of such event . If such Options are not exercised prior to the
consummation of the subject transaction, they shall terminate at such time as
determined by the Committee.

 
23.2   Other Treatment of Awards. Subject to any greater rights granted to
Participants under the foregoing provisions of this Section 23, in the event of
the occurrence of any transaction described in Section 23.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, or sale of assets.

 
23.3   Assumption of Awards by the Company. The Company, from time to time, also
may substitute or assume outstanding awards granted by another company, whether
in connection with an acquisition of such other company or otherwise, by either;
(a) granting an Award under this Plan in substitution of such other company’s
award; or (b) assuming such award as if it had been granted under this Plan if
the terms of such assumed award could be applied to an Award granted under this
Plan. Such substitution or assumption will be permissible if the holder of the
substituted or assumed award would have been eligible to be granted an Award
under this Plan if the other company had applied the rules of this Plan to such
grant. In the event the Company assumes an award granted by another company, the
terms and conditions of such award will remain unchanged (except that the
exercise price and the number and nature of Shares issuable upon exercise of any
such option will be adjusted appropriately pursuant to Section 424(a) of the
Code). In the event the Company elects to grant a new Option rather than
assuming an existing option, such new Option may be granted with a similarly
adjusted Exercise Price.
 
24. ADOPTION.
 
This Plan will become effective on the effective date of the adoption by the
Board (the “Effective Date”).  Upon the Effective Date, the Committee may grant
Awards pursuant to this Plan.
 
25. TERM OF PLAN/GOVERNING LAW.
 
Unless earlier terminated as provided herein, no grants of Awards under the Plan
may be made after ten (10) years from the date this Plan is adopted by the
Committee or, if earlier, the date of Shareholder approval. This Plan and all
agreements thereunder shall be governed by and construed in accordance with the
laws of the State of Delaware.
 
 
 
 
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26. AMENDMENT OR TERMINATION OF PLAN.
 
The Board of Directors may at any time terminate or amend this Plan in any
respect, including without limitation amendment of any form of Award Agreement
or instrument to be executed pursuant to this Plan; provided, however, that
neither the Board of Directors nor the Committee will, (a) without the approval
of the Shareholders of the Company, amend this Plan in any manner that requires
such Shareholder approval or (b) without the approval of a Participant, amend
such Participant’s Award(s) in a manner adverse to such Participant.
 
27. NONEXCLUSIVITY OF THE PLAN.

Neither the adoption of this Plan by the Board of Directors, the submission of
this Plan to the Shareholders of the Company for approval, nor any provision of
this Plan will be construed as creating any limitations on the power of the
Board of Directors to adopt such additional compensation arrangements as it may
deem desirable, including, without limitation, the granting of Shares options
and bonuses otherwise than under this Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.

 
28.  ACTION BY COMMITTEE.
 
Any action permitted or required to be taken by the Committee or Board of
Directors or any decision or determination permitted or required to be made by
the Committee or Board of Directors pursuant to this Plan shall be taken or made
in the Committee’ sole and absolute discretion.

 
29. NO OBLIGATION TO EXERCISE.
 
The grant to Participant of an Award shall impose no obligation upon such
Participant to exercise such Award.

 
30. TRANSFERS UPON DEATH
 
Upon the death of a Participant, outstanding Awards granted to such Participant
may be exercised by the Participant’s designated beneficiary, provided that such
beneficiary has been designated prior to the Participant’s death.  Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee.  In
the absence of any such effective designation, such Awards may be exercised only
by the executors and administrators of the Participant’s estate or by the laws
of descent and distribution.  No transfer by will or the laws of descent and
distribution of any Award, or the right to exercise any Award, shall be
effective to bind the Company unless the Committee shall have been furnished
with (a) written notice thereof and with a copy of the will and/or such evidence
as the Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms and
conditions of the Award that are or would have been applicable to the
Participant and to be bound by the acknowledgements made by the Participant in
connection with the grant of the Award.
 
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