Exhibit 10.1

 

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INNOSPEC INC.

2018 OMNIBUS LONG-TERM INCENTIVE PLAN

 

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TABLE OF CONTENTS

 

         Page   SECTION 1  

GENERAL

     4  

1.1.

 

Purpose

     4  

1.2.

 

Participation

     4  

1.3.

 

Operation and Administration

     4  

1.4.

 

History

     4   SECTION 2  

DEFINITIONS

     4   SECTION 3  

SHARES AND PLAN LIMITS

     8  

3.1.

 

Shares of Stock and Other Amounts Subject to Plan

     8  

3.2.

 

Adjustments

     9  

3.3.

 

Plan Limitations

     9   SECTION 4  

OPTIONS

     11  

4.1.

 

Grant of Options

     11  

4.2.

 

Option Agreement

     11  

4.3.

 

Term of Option

     11  

4.4.

 

Exercise Price

     11  

4.5.

 

Minimum Vesting

     11  

4.6.

 

Exercise Period

     11  

4.7.

 

Manner of Exercise

     12  

4.8.

 

Payment of Option Exercise Price

     12  

4.9.

 

No Repricing

     12   SECTION 5  

FULL VALUE AWARDS

     12  

5.1.

 

Grant of Full Value Award

     12  

5.2.

 

Full Value Award Agreement

     13  

5.3.

 

Conditions

     13  

5.4.

 

Minimum Vesting

     13   SECTION 6  

CASH INCENTIVE AWARDS

     13   SECTION 7  

PERFORMANCE BASED COMPENSATION

     14  

7.1.

 

Grants of Performance-Based Compensation

     14  

7.2.

 

Grants Not Intended as Performance-Based Compensation

     14   SECTION 8  

CHANGE IN CONTROL

     14  

8.1.

 

Award Agreement

     14  

8.2.

 

Accelerated Vesting

     15  

8.3.

 

Committee Actions On a Change in Control

     15  

 

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         Page   SECTION 9  

COMMITTEE

     15  

9.1.

 

Administration

     15  

9.2.

 

Selection of Committee

     15  

9.3.

 

Powers of Committee

     15  

9.4.

 

Delegation by Committee

     16  

9.5.

 

Information to be Furnished to Committee

     16  

9.6.

 

Liability and Indemnification of Committee

     16   SECTION 10  

AMENDMENT AND TERMINATION

     16   SECTION 11  

GENERAL PROVISIONS

     17  

11.1.

 

General Restrictions

     17  

11.2.

 

Tax Withholding

     17  

11.3.

 

Grant and Use of Awards

     17  

11.4.

 

Dividends and Dividend Equivalents

     18  

11.5.

 

Settlement of Awards

     18  

11.6.

 

Transferability

     18  

11.7.

 

Form and Time of Elections

     18  

11.8.

 

Agreement With Company

     18  

11.9.

 

Action by Company or Subsidiary

     18  

11.10.

 

Gender and Number

     19  

11.11.

 

Limitation of Implied Rights

     19  

11.12.

 

Evidence

     19  

11.13.

 

Limitations under Section 409A

     19   EXHIBIT A UK TAX-QUALIFIED OPTIONS      21  

 

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INNOSPEC INC.

2018 OMNIBUS LONG-TERM INCENTIVE PLAN

SECTION 1

GENERAL

1.1. Purpose. The Innospec Inc. 2018 Omnibus Long-Term Incentive Plan (the
“Plan”) has been established by Innospec Inc., a Delaware corporation, (the
“Company”) to (i) attract and retain persons eligible to participate in the
Plan; (ii) motivate Participants, by means of appropriate incentives, to achieve
long-range goals; (iii) provide incentive compensation opportunities that are
competitive with those of other similar companies; and (iv) further align the
interests of Participants with those of the Company’s other stockholders through
compensation that is based on the Company’s shares; and thereby promote the
long-term financial interest of the Company and the Related Companies including
the growth in value of the Company’s shares and enhancement of long-term
stockholder return. Capitalized terms in the Plan are defined in Section 2.

1.2. Participation. Subject to the terms and conditions of the Plan, the
Committee shall determine and designate, from time to time, from among the
Eligible Individuals, those persons who will be granted one or more Awards under
the Plan, and thereby become “Participants” in the Plan.

1.3. Operation and Administration. The operation and administration of the Plan,
including the Awards made under the Plan, shall be subject to the provisions of
Section 9 (relating to operation and administration).

1.4. History. The Plan was approved by the Board of Directors for submission to
the stockholders, for approval at the 2018 Annual Meeting of Stockholders. To
the extent not prohibited by Applicable Laws, Awards which are to use shares of
Stock reserved under the Plan that are contingent on the approval by the
Company’s stockholders may be granted prior to that meeting contingent on such
approval. The Plan shall be unlimited in duration and, in the event of Plan
termination, shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no Awards may be granted under the Plan
after the ten-year anniversary of the date on which the stockholders approved
the Plan. The Plan is intended to replace the Innospec Inc. Company Stock Option
Plan, the Innospec Inc. Non-Employee Directors’ Stock Option Plan, and the
Innospec Inc. Performance Related Stock Option Plan (the “Prior Plans”). The
Prior Plans were adopted and approved by stockholders in 2008 and approved by
stockholders, as each was amended, again in 2011. Following the approval of the
Plan by the stockholders, no additional grants will be made pursuant to the
Prior Plans.

SECTION 2

DEFINITIONS

2.1. “Administrator” means the Board or any of its Committees as will be
administering the Plan, in accordance with Section 9.

2.2. “Applicable Laws” means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Awards are, or will be, granted under the Plan.

2.3. “Award Agreement” means the written agreement, including an electronic
agreement, setting forth the terms and conditions applicable to each Award
granted under the Plan. The Award Agreement is subject to the terms and
conditions of the Plan.

2.4. “Award” means any award or benefit granted under the Plan, including,
without limitation, the grant of Options, Cash Incentive Awards and Full Value
Awards.

2.5. “Board” means the Board of Directors of the Company.

 

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2.6. “Cause” shall mean, in the reasonable judgment of the Committee, (i) the
willful and continued failure by the Participant to substantially perform his
duties with the Company or any Related Company (other than any such failure
resulting from the Participant’s Disability), (ii) the willful engaging by the
Participant in conduct which is demonstrably injurious to the Company or any
Related Company, monetarily or otherwise, (iii) the engaging by the Participant
in egregious misconduct involving moral turpitude to the extent that the
Participant’s credibility and reputation no longer conform to the standard for
employees, directors or service providers, as applicable, of the Company and
Related Companies, or (iv) the Participant is convicted of a felony. For
purposes hereof, no act, or failure to act, on the Participant’s part shall be
deemed “willful” unless done, or omitted to be done, by the Participant not in
good faith and without reasonable belief that such action was in the best
interest of the Company or Related Company.

2.7. “Change in Control” means the first to occur of any of the following:

 

(a) the consummation of a purchase or other acquisition by any person, entity or
group of persons (within the meaning of Section 13(d) or 14(d) of the Exchange
Act or any comparable successor provisions, other than an acquisition by a
trustee or other fiduciary holding securities under an employee benefit plan or
similar plan of the Company or a Related Company), of “beneficial ownership”
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either the outstanding shares of Stock or the combined voting power of
the Company’s then outstanding voting securities entitled to vote generally;

 

(b) the consummation of a reorganization, merger, consolidation, acquisition,
share exchange or other corporate transaction of the Company, in each case, with
respect to which persons who were stockholders of the Company immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter,
own more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company’s then
outstanding securities;

 

(c) the consummation of any plan of liquidation or dissolution of the Company
providing for the sale or distribution of substantially all of the assets of the
Company and its Subsidiaries or the consummation of a sale of substantially all
of the assets of the Company and its Subsidiaries; or

 

(d) at any time during any period of two consecutive years, individuals who at
the beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof (unless the election, or the nomination
for election by the Company’s stockholders, of each new director was approved by
a vote of at least two-thirds of the directors still in office at the time of
such election or nomination who were directors at the beginning of such period).

2.8. “Code” means the United States Internal Revenue Code of 1986, as amended. A
reference to any provision of the Code shall include reference to any successor
provision of the Code.

2.9. “Committee” has the meaning set forth in Section 9.1.

2.10. “Common Stock” or “Stock” means the common stock of the Company.

2.11. “Company” has the meaning set forth in Section 1.1.

2.12. “Consultant” means any natural person engaged as a consultant or advisor
by the Company or a Parent or Subsidiary or other Related Company (as determined
by the Committee) to render bona fide services to such entity and such services
are not in connection with the sale of shares of Stock in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the Company’s securities.

2.13. “Director” means a member of the Board.

 

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2.14. “Disability” means, except as otherwise provided by the Committee in an
Award Agreement, that the Participant has been determined to be eligible for
long-term disability benefits under the long-term disability plan in which the
Participant participates and which is sponsored by the Company or a Related
Company; or if the Participant does not participate in a long-term disability
plan sponsored by the Company or a Related Company, then the Participant shall
be considered to have a “Disability” if the Committee determines, under
standards comparable to those of the Company’s long-term disability plan, that
the Participant would be eligible for long-term disability benefits if he or she
participated in such plan or if the Committee determines, under standards for
disability that apply pursuant to applicable statute in the country in which
such Participant works, that such Participant would be considered disabled
pursuant to such statute.

2.15. “Eligible Individual” means any Employee, Consultant or Director;
provided, however, that to the extent required by the Code, an ISO may only be
granted to an Employee of the Company or a Parent or Subsidiary. An Award may be
granted to an Employee, Consultant or Director, in connection with hiring,
retention or otherwise, prior to the date the Employee, Consultant or Director
first performs services for the Company or the Subsidiaries, provided that such
Awards shall not become vested prior to the date the Employee, Consultant or
Director first performs such services.

2.16. “Employee” means any person, including officers and Directors, employed by
the Company or any Parent or Subsidiary of the Company or a Related Company (as
determined by the Committee). Neither service as a Director nor payment of a
director’s fee by the Company will be sufficient to constitute “employment” by
the Company.

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

2.18. “Exercise Price” of each Option granted under this Plan shall be
established by the Committee or shall be determined by a method established by
the Committee at the time the Option is granted.

2.19. “Expiration Date” has the meaning set forth in Section 4.6.

2.20. “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

 

(a) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq Global Select
Market, its Fair Market Value will be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system
on the last previous trading day prior to such date of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

 

(b) If the Common Stock is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a share of Stock
will be the mean between the high bid and low asked prices for the Common Stock
on the last previous trading day prior to such date of determination (or, if no
bids and asks were reported on that date, as applicable, on the last trading
date such bids and asks were reported), as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or

 

(c) In the absence of an established market for the Common Stock, the Fair
Market Value will be determined in good faith by the Administrator.

2.21. A “Full Value Award” is a grant of one or more shares of Stock or a right
to receive one or more shares of Stock in the future, with such grant subject to
one or more conditions, as determined by the Committee.

2.22. An “Incentive Stock Option” or an “ISO” is an Option that is intended to
satisfy the requirements applicable to an “incentive stock option” described in
Section 422(b) of the Code.

 

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2.23. A “Non-Qualified Option or an “NQO” is an Option that is not intended to
be an “incentive stock option” as that term is described in Section 422(b) of
the Code or a Tax-Qualified Option.

2.24. An “Option” entitles the Participant to purchase shares of Stock at an
Exercise Price established by the Committee. Any Option granted under this Plan
may be either an ISO, an NQO or a Tax-Qualified Option, as determined in the
discretion of the Committee.

2.25. “Outside Director” means a Director of the Company who is not an officer
or employee of the Company or the Related Companies.

2.26. “Parent” means a parent corporation within the meaning of Section 424(e)
of the Code.

2.27. “Participant” means the holder of an outstanding Award.

2.28. “Performance-Based Compensation” has the meaning ascribed to such term
under Section 162(m) of the Code and the regulations thereunder.

2.29. “Performance Measures” means performance goals based on any one or more of
the following Company, Subsidiary, operating unit or division performance
measures: (i) earnings, including, but not limited to, operating income,
earnings before or after taxes, earnings before or after interest, depreciation,
amortization, or extraordinary or special items or book value per share (which
may exclude nonrecurring items); (ii) pre-tax income or after-tax income;
(iii) earnings per share of Stock (basic or diluted); (iv) operating profit;
(v) revenue, revenue growth or rate of revenue growth; (vi) return on assets
(gross or net), return on investment, return on capital, or return on equity;
(vii) returns on sales or revenues; (viii) operating expenses; (ix) stock price
appreciation; (x) cash flow(s); (xi) implementation or completion of critical
projects or processes; (xii) economic value created; (xiii) cumulative earnings
per share growth; (xiv) operating margin or profit margin; (xv) common stock
price or total stockholder return; (xvi) cost targets, reductions and savings,
productivity and efficiencies; and (xvii) any combination of any of the
foregoing. Each goal may be expressed on an absolute and/or relative basis, may
be based on or otherwise employ comparisons based on internal targets, the past
performance of the Company and/or the past or current performance of other
companies or may be applied to the performance of the Company relative to a
market index, a group of other companies or a combination thereof, and in the
case of earnings-based measures, may use or employ comparisons relating to
capital, stockholders equity and/or shares outstanding, investments or to assets
or net assets, and may (but need not) provide for adjustments for
restructurings, extraordinary, and any other unusual, non-recurring, or similar
changes.

2.30. “Period of Restriction” means the period during which the transfer of
shares of Stock are subject to restrictions and therefore, the shares of Stock
are subject to a substantial risk of forfeiture. Such restrictions may be based
on the passage of time, the achievement of target levels of performance, or the
occurrence of other events as determined by the Administrator.

2.31. “Plan” has the meaning set forth in Section 1.1.

2.32. “Prior Plans” has the meaning set forth in Section 1.4.

2.33. “Related Company” means any corporation, partnership, joint venture,
limited liability company or other entity during any period in which a
controlling interest in such entity is owned, directly or indirectly, by the
Company (or by any entity that is a successor to the Company), and any other
business venture designated by the Committee in which the Company (or any entity
that is a successor to the Company) has, directly or indirectly, a significant
interest (whether through the ownership of securities or otherwise), as
determined in the discretion of the Committee.

 

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2.34. “Retirement” means the occurrence of a Participant’s Termination Date due
to the voluntary termination of employment with the consent of the Committee
prior to such Termination Date.

2.35. “Securities Act” means the Securities Act of 1933, as amended.

2.36. “Subsidiary” means a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

2.37. “Tax-Qualified Option” means an Option granted that satisfies the
requirements of Exhibit A to this Plan.

2.38. “Termination Date” means the date on which a Participant both ceases to be
an employee of the Company and the Related Companies and ceases to perform
material services for the Company and the Related Companies (whether as a
director or otherwise), regardless of the reason for the cessation; provided
that a “Termination Date” shall not be considered to have occurred during the
period in which the reason for the cessation of services is a leave of absence
approved by the Company or the Related Company which was the recipient of the
Participant’s services; and provided, further that, with respect to an Outside
Director, “Termination Date” means the date on which the Outside Director’s
service as an Outside Director terminates for any reason. If, as a result of a
sale or other transaction, the entity for which the Participant performs
services ceases to be a Related Company (and such entity is or becomes an entity
separate from the Company), the occurrence of such transaction shall be the
Participant’s Termination Date. With respect to Awards that constitute Deferred
Compensation, references to the Participant’s termination of employment
(including references to the Participant’s employment termination, and to the
Participant terminating employment, a Participant’s separation from service, and
other similar reference) and references to a Participant’s termination as a
Director (including separation from service and other similar references) shall
mean the date that the Participant incurs a “separation from service” within the
meaning of Section 409A of the Code.

SECTION 3

SHARES OF STOCK AND PLAN LIMITS

3.1. Shares of Stock and Other Amounts Subject to Plan. The shares of Stock for
which Awards may be granted under the Plan shall be subject to the following:

 

(a) Subject to the following provisions of this Section 3.1, the maximum number
of shares of Stock that may be delivered to Participants and their beneficiaries
under the Plan shall be (i) 900,000 shares of Stock (which number includes all
shares available for delivery under this Section 3.1(a) since the establishment
of the Plan, determined in accordance with the terms of the Plan); and (ii) any
shares of Stock that are represented by awards granted under the Prior Plans
that are forfeited, expire or are cancelled after the Effective Date without
delivery of shares of Stock or which result in the forfeiture of the shares of
Stock back to the Company to the extent that such shares would have been added
back to the reserve under the terms of the applicable Prior Plan. Shares of
Stock issued by the Company in connection with awards that are assumed or
substituted in connection with a reorganization, merger, consolidation,
acquisition, share exchange or other corporate transaction shall not be counted
against the number of shares of Stock that may be issued with respect to Awards
under the Plan.

 

(b) Only shares of Stock, if any, actually delivered to the Participant or
beneficiary on an unrestricted basis with respect to an Award shall be treated
as delivered for purposes of the determination under Section 3.1(a) above,
regardless of whether the Award is denominated in shares of Stock or cash.
Consistent with the foregoing:

 

  (i) To the extent any shares of Stock covered by an Award are not delivered to
a Participant or beneficiary because the Award is forfeited or cancelled, or the
shares of Stock are not delivered on an unrestricted basis (including, without
limitation, by reason of the Award being settled in cash), such shares of Stock
shall not be deemed to have been delivered for purposes of the determination
under Section 3.1(a) above.

 

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  (ii) Subject to the provisions of paragraph (i) above, the total number of
shares of Stock covered by an Award will be treated as delivered for purposes of
this paragraph (b) to the extent payments or benefits are delivered to the
Participant with respect to such shares. Accordingly (A) if shares covered by an
Award are used to satisfy the applicable tax withholding obligation or Exercise
Price, the number of shares held back by the Company to satisfy such withholding
obligation or Exercise Price shall be considered to have been delivered; (B) if
the Exercise Price of any Option granted under the Plan is satisfied by
tendering shares of Stock to the Company (by either actual delivery or by
attestation, including shares of Stock that would otherwise be distributable
upon the exercise of the Option), the number of shares tendered to satisfy such
Exercise Price shall be considered to have been delivered; and (C) if shares of
Stock are repurchased by the Company with proceeds received from the exercise of
an option issued under this Plan, the total number of such shares repurchased
shall be deemed delivered.

 

(c) The shares of Stock with respect to which Awards may be made under the Plan
shall be: (i) shares currently authorized but unissued; (ii) to the extent
permitted by Applicable Law, shares currently held or acquired by the Company as
treasury shares, including shares purchased in the open market or in private
transactions; or (iii) shares purchased in the open market by a direct or
indirect wholly-owned subsidiary of the Company (as determined by the Chief
Executive Officer or the Chief Financial Officer of the Company). The Company
may contribute to the subsidiary or trust an amount sufficient to accomplish the
purchase in the open market of the shares of Stock to be so acquired (as
determined by the Chief Executive Officer or the Chief Financial Officer of the
Company).

3.2. Adjustments. In the event of a corporate transaction involving the Company
(including, without limitation, any share dividend, share split, extraordinary
cash dividend, recapitalization, reorganization, merger, amalgamation,
consolidation, share exchange split-up, spin-off, sale of assets or
subsidiaries, combination or exchange of shares), the Committee shall, in the
manner it determines equitable in its sole discretion, adjust Awards to reflect
the transactions. Action by the Committee may include: (i) adjustment of the
number and kind of shares which may be delivered under the Plan; (ii) adjustment
of the number and kind of shares subject to outstanding Awards; (iii) adjustment
of the Exercise Price of outstanding Options; and (iv) any other adjustments
that the Committee determines to be equitable (which may include, without
limitation, (A) replacement of Awards with other Awards which the Committee
determines have comparable value and which are based on shares of a company
resulting from the transaction, and (B) cancellation of the Award in return for
cash payment of the current value of the Award, determined as though the Award
is fully vested at the time of payment, provided that in the case of an Option,
the amount of such payment will be the excess of value of the shares of Stock
subject to the Option at the time of the transaction over the Exercise Price).
However, in no event shall this Section 3.2 be construed to permit a
modification (including a replacement) of an Option if such modification either:
(i) would result in accelerated recognition of income or imposition of
additional tax under Section 409A of the Code; or (ii) would cause the Option
subject to the modification (or cause a replacement Option) to be subject to
Section 409A of the Code, provided that the restriction of this clause
(ii) shall not apply to any Option that, at the time it is granted or otherwise,
is designated as being deferred compensation subject to Section 409A of the
Code.

3.3. Plan Limitations. Subject to Section 3.2, the following additional maximums
are imposed under the Plan:

 

(a) The maximum number of shares of Stock that may be delivered to Participants
and their beneficiaries with respect to ISOs granted under the Plan shall be
900,000 shares of Stock (which number includes all shares of Stock available for
delivery under this Section 3.3(a) since the establishment of the Plan,
determined in accordance with the terms of the Plan); provided, however, that to
the extent that shares of Stock not delivered must be counted against this limit
as a condition of satisfying the rules applicable to ISOs, such rules shall
apply to the limit on ISOs granted under the Plan.

 

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(b) The maximum number of shares of Stock that may be covered by Awards granted
to any one Participant during any one-calendar-year period pursuant to Section 4
(relating to Options) shall be 600,000 shares of Stock.

 

(c) For Full Value Awards that are intended to be Performance-Based
Compensation, no more than 250,000 shares of Stock may be delivered pursuant to
such Awards granted to any one Participant during any one-calendar-year period
(regardless of whether settlement of the Award is to occur prior to, at the time
of, or after the time of vesting); provided that Awards described in this
Section 3.3(c) that are intended to be Performance-Based Compensation shall be
subject to the following:

 

  (i) If the Awards are denominated in shares of Stock but an equivalent amount
of cash is delivered in lieu of delivery of shares of Stock, the foregoing limit
shall be applied based on the methodology used by the Committee to convert the
number of shares of Stock into cash.

 

  (ii) If delivery of shares of Stock or cash is deferred until after shares of
Stock have been earned, any adjustment in the amount delivered to reflect actual
or deemed investment experience after the date the shares of Stock are earned
shall be disregarded.

For the avoidance of doubt, the limitations of this Section 3.3(c) do not apply
to any Award that is not intended to constitute Performance-Based Compensation.

 

(d) The maximum number of shares of Stock that may be issued in conjunction with
Awards granted pursuant to Section 5 (relating to Full Value Awards) shall be
860,000 shares.

 

(e) For Cash Incentive Value Awards that are intended to be Performance-Based
Compensation, the maximum amount payable to any Participant with respect to any
performance period shall equal $600,000 multiplied by the number of calendar
months included in that performance period; provided that Awards described in
this Section 3.3(e), that are intended to be Performance-Based Compensation,
shall be subject to the following:

 

  (i) If the Awards are denominated in cash but an equivalent amount of shares
of Stock is delivered in lieu of delivery of cash, the foregoing limit shall be
applied to the cash based on the methodology used by the Committee to convert
the cash into shares of Stock.

 

  (ii) If delivery of shares of Stock or cash is deferred until after cash has
been earned, any adjustment in the amount delivered to reflect actual or deemed
investment experience after the date the cash is earned shall be disregarded.

For the avoidance of doubt, the limitations of this Section 3.3(d) do not apply
to any Award that is not intended to constitute Performance-Based Compensation.

 

(f) The maximum number of shares of Stock that may be covered by Awards granted
to any one Participant who is a member of the Board but who is not an employee
of the Company or a Related Company during any one calendar-year period pursuant
to Sections 4 (relating to Options) shall be 50,000 shares. The maximum number
of shares of Stock that may be covered by Full Value Awards granted to any one
Participant who is a member of the Board but who is not an employee of the
Company or a Related Company during any one calendar-year period shall be 50,000
shares.

 

(g) Notwithstanding the provisions of Sections 4.5 and 5.4 of the Plan, the
Committee may grant Awards that are not subject to the minimum vesting
limitations of Sections 4.5 (with respect to Options) and of Section 5.4 (with
respect to Full Value Awards); provided, however, that the aggregate number of
shares of Stock subject to Options and Full Value Awards granted pursuant to the
Plan that are not subject to the minimum vesting limitations of Sections 4.5 and
5.4) (excluding any such Awards to the extent that they have been forfeited or
cancelled) may not exceed 5% of the limit imposed by Section 3.1(a) (relating to
the limit on shares of Stock granted under the Plan).

 

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SECTION 4

OPTIONS

4.1. Grant of Options. Subject to the terms and conditions of the Plan, the
Administrator, at any time and from time to time, may grant Options to an
Eligible Individual in such amounts as the Administrator, in its sole
discretion, will determine. Each Option will be designated in the Award
Agreement as either an ISO, an NQO or a Tax-Qualified Option (subject to the
terms of Exhibit A to the Plan). Notwithstanding a designation for a grant of
Options as ISOs, however, to the extent that the aggregate Fair Market Value of
the shares of Stock with respect to which ISOs are exercisable for the first
time by the Participant during any calendar year (under all plans of the Company
and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as
NQOs. For purposes of this Section 4.1, ISOs will be taken into account in the
order in which they were granted, the Fair Market Value of the shares of Stock
will be determined as of the time the Option with respect to such shares of
Stock is granted, and calculation will be performed in accordance with
Section 422 of the Code and Treasury Regulations promulgated thereunder. Each
Eligible Individual to whom an Option is granted may, by notice in writing
within 30 days of the date of grant, disclaim in whole or in part his rights
under the Option, in which case the Option shall for all purposes be deemed
never to have been granted.

4.2. Option Agreement. Each Award of an Option will be evidenced by an Award
Agreement that will specify the date of grant of the Option, the Exercise Price,
the term of the Option, the number of shares of Stock subject to the Option, the
exercise restrictions, if any, applicable to the Option, including the dates
upon which the Option is first exercisable in whole and/or part, and such other
terms and conditions as the Administrator, in its sole discretion, may
determine.

4.3. Term of Option. The term of each Option will be stated in the Award
Agreement; provided, however, that the term will be no more than 10 years from
the date of grant thereof. In the case of an ISO granted to a Participant who,
at the time the ISO is granted, owns capital stock representing more than 10% of
the total combined voting power of all classes of capital stock of the Company
or any Parent or Subsidiary, the term of the ISO will be five years from the
date of grant or such shorter term as may be provided in the Award Agreement.

4.4. Exercise Price. The Exercise Price shall not be less than 100% of the Fair
Market Value of a share of Stock on the date of grant (or, if greater, the par
value, if any, of a share of Stock). In addition, in the case of an ISO granted
to an Employee who owns capital stock representing more than 10% of the voting
power of all classes of capital stock of the Company or any Parent or
Subsidiary, the per share Exercise Price will be no less than 110% of the Fair
Market Value per share of Stock on the date of grant. Notwithstanding the
foregoing provisions of this Section 4.4, Options may be granted with a per
share Exercise Price of less than 100% of the Fair Market Value per share of
Stock on the date of grant pursuant to a transaction described in, and in a
manner consistent with, Section 424(a) of the Code.

4.5. Minimum Vesting. Notwithstanding the foregoing, and subject to Sections
3.3(g), 8 and 9, in no event shall an Option granted to any Participant become
exercisable or vested prior to the earlier to occur of (i) the first anniversary
of the date on which it is granted and (ii) the Participant’s Termination Date
occurs by reason of death or Disability. In the event the Participant’s
Termination Date occurs for any reason other than death, Disability, Retirement
or an involuntary termination without Cause, any unvested Options shall be
forfeited, and in the event the Participant’s Termination Date occurs by reason
of death, Disability, Retirement or an involuntary termination without Cause,
unvested Options shall be exercisable only as determined by the Committee in its
sole discretion pursuant to its authority in Section 9.

4.6. Exercise Period. The Option shall not be exercisable prior to the date that
the vesting conditions have been satisfied as provided in Section 4.5 of the
Plan, and the Option shall not be exercisable after the Company’s close of
business on the last business day that occurs prior to the Expiration Date. The
“Expiration Date” shall be the earliest to occur of:

 

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(a) the last day of the term of the Option;

 

(b) if the Participant’s Termination Date occurs by reason of death, Disability,
Retirement or an involuntary termination without Cause, the one-year anniversary
of such Termination Date;

 

(c) if the Participant’s Termination Date occurs for any reason other than those
listed in Section 4.6(b), the Termination Date.

4.7. Manner of Exercise. An Option may be exercised, in whole or in part, by the
delivery to the secretary of the Company, or his duly appointed agent, of an
Option exercise agreement covering not less than all the shares of Stock over
which the Option is then to be exercised, with the notice of exercise in the
prescribed form duly completed and signed by the Participant together with a
remittance of the Exercise Price payable in respect of the shares of Stock over
which the Option is to be exercised.

4.8. Payment of Option Exercise Price. The payment of the Exercise Price of an
Option granted under this Section 4 shall be subject to the following:

 

(a) Subject to the following provisions of this Section 4.8, the full Exercise
Price for shares of Stock purchased upon the exercise of any Option shall be
paid at the time of such exercise (except that, in the case of an exercise
arrangement approved by the Committee and described in Section 4.8(c), payment
may be made as soon as practicable after the exercise).

 

(b) Subject to Applicable Law, the full Exercise Price shall be payable in cash,
by promissory note, or by tendering, by either actual delivery of shares or by
attestation, shares of Stock acceptable to the Committee (including shares
otherwise distributable pursuant to the exercise of the Option), and valued at
Fair Market Value as of the day of exercise, or in any combination thereof, as
determined by the Committee.

 

(c) Subject to Applicable Law, if shares are publicly traded, the Committee may
permit a Participant to elect to pay the Exercise Price upon the exercise of an
Option by irrevocably authorizing a third party to sell shares of Stock (or a
sufficient portion of the shares of Stock) acquired upon exercise of the Option
and remit to the Company a sufficient portion of the sale proceeds to pay the
entire Exercise Price and any tax withholding resulting from such exercise.

4.9. No Repricing. Except for either adjustments pursuant to Section 3.2
(relating to the adjustment of shares of Stock), or reductions of the Exercise
Price approved by the Company’s stockholders, the Exercise Price for any
outstanding Option may not be decreased after the date of grant nor may an
outstanding Option granted under the Plan be surrendered to the Company as
consideration for the grant of a replacement Option with a lower Exercise Price.
Except as approved by Company’s stockholders, in no event shall any Option
granted under the Plan be surrendered to Company in consideration for a cash
payment or the grant of any other Award if, at the time of such surrender, the
Exercise Price of the Option is greater than the then current Fair Market Value
of a share of Stock. In addition, no repricing of an Option shall be permitted
without the approval of Company’s stockholders if such approval is required
under the rules of any stock exchange on which Stock is listed.

SECTION 5

FULL VALUE AWARDS

5.1. Grant of Full Value Award. Subject to the terms and conditions of the Plan,
the Administrator, at any time and from time to time, may grant Full Value
Awards to Eligible Individuals in such amounts as the Administrator, in its sole
discretion, will determine.

 

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5.2. Full Value Award Agreement. Each Full Value Award will be evidenced by an
Award Agreement that will specify the Period of Restriction, the number of
shares of Stock granted, and such other terms and conditions as the
Administrator, in its sole discretion, may determine.

5.3. Conditions. A Full Value Award may be subject to one or more of the
following, as determined by the Committee:

 

(a) The grant shall be in consideration of a Participant’s previously performed
services, or surrender of other compensation that may be due.

 

(b) The grant shall be contingent on the achievement of performance or other
objectives during a specified period.

 

(c) The grant shall be subject to a risk of forfeiture or other restrictions
that will lapse upon the achievement of one or more goals relating to completion
of service by the Participant, or achievement of performance or other
objectives.

The grant of Full Value Awards may also be subject to such other conditions,
restrictions and contingencies, as determined by the Committee.

5.4. Minimum Vesting.

 

(a) Notwithstanding the foregoing, and subject to Sections 3.3(g), 8 and 9, if a
Participant’s right to become vested in a Full Value Award is conditioned on the
completion of a specified period of service with the Company or the Related
Companies, without achievement of performance targets or other performance
objectives (whether or not related to Performance Measures) being required as a
condition of vesting, and without it being granted in lieu of other
compensation, then the required period of service for vesting shall not end
prior to the earlier to occur of (i) the first anniversary of the date on which
it is granted and (ii) the Participant’s Termination Date occurs by reason of
death or Disability. In the event the Participant’s Termination Date occurs for
any reason other than death, Disability, Retirement or an involuntary
termination without Cause, any unvested Full Value Awards shall be forfeited,
and in the event the Participant’s Termination Date occurs by reason of death,
Disability, Retirement or an involuntary termination without Cause, any unvested
Full Value Awards shall become vested only as determined by the Committee in its
sole discretion pursuant to its authority in Section 9. The foregoing
requirements shall not apply to grants that are a form of payment of earned
performance awards or other incentive compensation.

 

(b) Notwithstanding the foregoing, and subject to Sections 3.3(g), 8 and 9, if a
Participant’s right to become vested in a Full Value Award is conditioned on the
achievement of performance targets or other performance objectives (whether or
not related to Performance Measures and whether or not such Full Value Award is
designated as “Performance-Based Compensation”), then the required performance
period for determining the achievement of such performance targets or other
performance objectives for vesting shall be not end prior to the earlier occur
of (i) the first anniversary of the date on which it is granted and (ii) the
Participant’s Termination Date occurs by reason of death or Disability. In the
event the Participant’s Termination Date occurs for any reason other than death,
Disability, Retirement or an involuntary termination without Cause, any unvested
Full Value Awards shall be forfeited, and in the event the Participant’s
Termination Date occurs by reason of death, Disability, Retirement or an
involuntary termination without Cause, any unvested Full Value Awards shall
become vested only as determined by the Committee in its sole discretion
pursuant to its authority in Section 9.

SECTION 6

CASH INCENTIVE AWARDS

Subject to the terms and conditions of the Plan, the Administrator, at any time
and from time to time, may grant Cash Incentive Awards to Eligible Individuals
in such amounts as the Administrator, in its sole

 

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discretion, may determine. A Cash Incentive Award is the grant of a right to
receive a payment of cash that is contingent on service conditions or on
achievement of performance objectives or any other applicable conditions over a
specified period as established and determined by the Committee. The grant of
Cash Incentive Awards may also be subject to such other conditions, restrictions
and contingencies, as determined by the Committee, including provisions relating
to deferred payment.

SECTION 7

PERFORMANCE-BASED COMPENSATION

7.1. Grants of Performance-Based Compensation. The Committee may designate a
Full Value Award or Cash Incentive Award granted to any Participant as
Performance-Based Compensation within the meaning of Section 162(m) of the Code
and regulations thereunder. To the extent required by Section 162(m) of the
Code, any Full Value Award or Cash Incentive Award so designated shall be
conditioned on the achievement of one or more Performance Measures as determined
by the Committee and the following additional requirements shall apply:

 

(a) The Performance Measures established for the performance period established
by the Committee shall be objective (as that term is described in regulations
under Section 162(m) of the Code), and shall be established in writing by the
Committee not later than 90 days after the beginning of the performance period
(but in no event after 25% of the performance period has elapsed), and while the
outcome as to the Performance Measure is substantially uncertain.

 

(b) A Participant otherwise entitled to receive a Full Value Award or Cash
Incentive Award for any performance period shall not receive a settlement or
payment of the Award until the Committee has determined that the applicable
Performance Measure(s) have been attained. To the extent that the Committee
exercises discretion in making the determination required by this
Section 7.1(b), such exercise of discretion may not result in an increase in the
amount of the payment.

 

(c) If a Participant’s employment terminates because of death or Disability, or
if a Change in Control occurs prior to the Participant’s Termination Date, the
Committee may provide that the Participant’s Full Value Award or Cash Incentive
Award shall become vested without regard to whether the Full Value Award or Cash
Incentive Award would be Performance-Based Compensation; provided, however, that
where the extent to which any such Full Value Award or Cash Incentive Award
becomes vested is based on the satisfaction of the applicable Performance
Measures on or after such Change in Control, the Committee may make such
determination either based on the determination of the satisfaction of the
applicable Performance Measure based on actual performance through the date of
such Change in Control or based on assumed performance at the target level
through the date of such Change in Control.

7.2. Grants Not Intended as Performance-Based Compensation. Nothing in this
Section 7 shall preclude the Committee from granting Full Value Awards or Cash
Incentive Awards under the Plan or the Committee, the Company or any Related
Company from granting any Cash Incentive Awards outside of the Plan that are not
intended to be Performance-Based Compensation; provided, however, that, at the
time of grant of Full Value Awards or Cash Incentive Awards by the Committee,
the Committee shall designate whether such Awards are intended to constitute
Performance-Based Compensation. To the extent that the provisions of this
Section 7 reflect the requirements applicable to Performance-Based Compensation,
such provisions shall not apply to the portion of the Award, if any, that is not
intended to constitute Performance-Based Compensation.

SECTION 8

CHANGE IN CONTROL

8.1. Award Agreement. Subject to the provisions of Section 3.2 (relating to the
adjustment of shares), the occurrence of a Change in Control shall have the
effect, if any, with respect to any Award as set forth in the Award Agreement
or, to the extent not prohibited by the Plan or the Award Agreement, as provided
by the Committee.

 

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8.2. Accelerated Vesting. Except as otherwise provided in an Award Agreement, on
the consummation of a Change in Control, all Options which have not otherwise
expired or been forfeited or cancelled shall become immediately exercisable and
vested, and all other Awards which have not otherwise expired or been forfeited
or cancelled shall become fully vested.

8.3. Committee Actions On A Change in Control. On a Change in Control, the
Committee may cancel any outstanding Awards in return for cash payment of the
current value of the Award, determined with the Award fully vested at the time
of payment pursuant to Section 8.2, provided that in the case of an Option, the
amount of such payment will be the excess of value of the shares of Stock
subject to the Option at the time of the transaction over the Exercise Price;
provided, further, that in the case of an Option, such Option will be cancelled
with no payment if, as of the Change in Control, the value of the shares of
Stock subject to the Option at the time of the transaction are equal to or less
than the Exercise Price. However, in no event shall this Section 8.3 be
construed to permit a payment if such payment would result in accelerated
recognition of income or imposition of additional tax under Section 409A of the
Code.

SECTION 9

COMMITTEE

9.1. Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the “Committee”) in
accordance with this Section 9. The Committee shall be selected by the Board,
and shall consist of two or more members of the Board. Unless otherwise provided
by the Board, the Compensation Committee of the Board shall serve as the
Committee. As a committee of the Board, the Committee is subject to the overview
of the Board. If the Committee does not exist, or for any other reason
determined by the Board, and to the extent not prohibited by Applicable Law, the
Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.

9.2. Selection of Committee. So long as the Company is subject to Section 16 of
the Exchange Act, the Committee shall be selected by the Board and shall consist
of not fewer than two members of the Board or such greater number as may be
required for compliance with Rule 16b-3 issued under the Exchange Act and shall
be comprised of persons who are independent for purposes of applicable stock
exchange listing requirements and who would meet the requirements of a
“non-employee director” within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934. Any Award granted under the Plan which is intended to
constitute Performance-Based Compensation (including Options) shall be granted
by a Committee consisting solely of two or more “outside directors“ within the
meaning of Section 162(m) of the Code and applicable regulations.

9.3. Powers of Committee. The Committee’s administration of the Plan shall be
subject to the following:

 

(a) Subject to the provisions of the Plan, the Committee will have the authority
and discretion to select individuals who shall be Eligible Individuals and who,
therefore, are eligible to receive Awards under the Plan. The Committee shall
have the authority to determine the time or times of receipt of Awards, to
determine the types of Awards and the number of shares of Stock covered by the
Awards, to establish the terms, conditions, performance targets, restrictions,
and other provisions of such Awards, to cancel or suspend Awards, and to
accelerate the exercisability or vesting of any Award under circumstances
designated by it. In making such Award determinations, the Committee may take
into account the nature of services rendered by the respective employee, the
individual’s present and potential contribution to the Company’s or a Related
Company’s success and such other factors as the Committee deems relevant.

 

(b) To the extent that the Committee determines that the restrictions imposed by
the Plan preclude the achievement of the material purposes of the Awards in
jurisdictions outside the United States, the Committee will have the authority
and discretion to modify those restrictions as the Committee determines to be
necessary or appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States.

 

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(c) The Committee will have the authority and discretion to interpret the Plan,
to establish, amend, and rescind any rules and regulations relating to the Plan,
to determine the terms and conditions of any Award Agreement made pursuant to
the Plan, and to make all other determinations that may be necessary or
advisable for the administration of the Plan.

 

(d) Subject to the provisions of the Plan, the Committee will have the authority
and discretion to determine the extent to which Awards under the Plan will be
structured to conform to the requirements applicable to Performance-Based
Compensation, and to take such action, establish such procedures, and impose
such restrictions at the time such Awards are granted as the Committee
determines to be necessary or appropriate to conform to such requirements.

 

(e) Any interpretation of the Plan by the Committee and any decision made by it
under the Plan is final and binding on all persons.

 

(f) In controlling and managing the operation and administration of the Plan,
the Committee shall take action in a manner that conforms to applicable
corporate law.

 

(g) Notwithstanding any other provision of the Plan, no benefit shall be
distributed under the Plan to any person unless the Committee, in its sole
discretion, determines that such person is entitled to benefits under the Plan.

9.4. Delegation by Committee. Except to the extent prohibited by Applicable Law,
the Committee may allocate all or any portion of its responsibilities and powers
to any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any time.

9.5. Information to be Furnished to Committee. The Company, Subsidiaries and any
applicable Related Company shall furnish the Committee with such data and
information as it determines may be required for it to discharge its duties. The
records of the Company, Subsidiaries and any applicable Related Company as to an
employee’s or Participant’s employment (or other provision of services),
termination of employment (or cessation of the provision of services), leave of
absence, reemployment and compensation shall be conclusive on all persons unless
determined to be incorrect. Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or information as
the Committee considers desirable to carry out the terms of the Plan.

9.6. Liability and Indemnification of Committee. No member or authorized
delegate of the Committee shall be liable to any person for any action taken or
omitted in connection with the administration of the Plan unless attributable to
his own fraud or willful misconduct; nor shall the Company or any Related
Company be liable to any person for any such action unless attributable to fraud
or willful misconduct on the part of a director or employee of the Company or
Related Company. The Committee, the individual members thereof, and persons
acting as the authorized delegates of the Committee under the Plan, shall be
indemnified by the Company against any and all liabilities, losses, costs and
expenses (including legal fees and expenses) of whatsoever kind and nature which
may be imposed on, incurred by or asserted against the Committee or its members
or authorized delegates by reason of the performance of a Committee function if
the Committee or its members or authorized delegates did not act dishonestly or
in willful violation of the law or regulation under which such liability, loss,
cost or expense arises. This indemnification shall not duplicate but may
supplement any coverage available under any applicable insurance.

SECTION 10

AMENDMENT AND TERMINATION

The Board may, at any time, amend or terminate the Plan, and the Board or the
Committee may amend any Award Agreement, provided that no amendment or
termination may, in the absence of written consent to the

 

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change by the affected Participant (or, if the Participant is not then living,
the affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board (or the Committee if applicable); and further
provided that adjustments pursuant to Section 3.2 shall not be subject to the
foregoing limitations of this Section 10; and further provided that the
provisions of Section 4.9 (relating to Option repricing) cannot be amended
unless the amendment is approved by the Company’s stockholders. Approval by the
Company’s stockholders will be required for any material revision to the terms
of the Plan, with the Committee’s determination of “material revision” to take
into account the exemptions under NASDAQ’s rules. No amendment or termination
shall be adopted or effective if it would result in accelerated recognition of
income or imposition of additional tax under Section 409A of the Code or, except
as otherwise provided in the amendment, would cause amounts that were not
otherwise subject to Section 409A of the Code to become subject to Section 409A
of the Code.

SECTION 11

GENERAL PROVISIONS

11.1. General Restrictions. Delivery of shares of Stock or other amounts under
the Plan shall be subject to the following:

 

(a) Notwithstanding any other provision of the Plan, the Company shall have no
obligation to recognize an exercise of an Option or deliver any shares of Stock
or make any other distribution of benefits under the Plan unless such exercise,
delivery or distribution complies with all Applicable Laws (including, without
limitation, the requirements of the United States Securities Act of 1933 and the
securities laws of any other applicable jurisdiction), and the applicable
requirements of any securities exchange or similar entity or other regulatory
authority with respect to the issue of shares and securities by the Company.

 

(b) To the extent that the Plan provides for issuance of share certificates to
reflect the issuance of shares of Stock, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by Applicable Law, the
By-laws of the Company.

 

(c) To the extent provided by the Committee, any Award may be settled in cash
rather than shares of Stock.

11.2. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares of Stock or other benefits under the Plan on satisfaction
of the applicable withholding obligations. Except as otherwise provided by the
Committee and subject to Applicable Law, such withholding obligations may be
satisfied (i) through cash payment by the Participant; (ii) through the
surrender of shares of Stock which the Participant already owns; or
(iii) through the surrender of shares of Stock to which the Participant is
otherwise entitled under the Plan (including shares otherwise distributable
pursuant to the Award); provided, however, that such shares of Stock under this
clause (iii) may be used to satisfy not more than the maximum individual tax
rate for the Participant in applicable jurisdiction for such Participant (based
on the applicable rates of the relevant tax authorities (for example, federal,
state, and local), including the Participant’s share of payroll or similar
taxes, as provided in tax law, regulations, or the authority’s administrative
practices, not to exceed the highest statutory rate in that jurisdiction, even
if that rate exceeds the highest rate that may be applicable to the specific
Participant).

11.3. Grant and Use of Awards. In the discretion of the Committee, an Eligible
Individual may be granted any Award permitted under the provisions of the Plan,
and more than one Award may be granted to an Eligible Individual. Subject to
Section 4.9 (relating to repricing), Awards may be granted as alternatives to or
replacement of awards granted or outstanding under the Plan, or any other plan
or arrangement of the Company or a Subsidiary or a Related Company (including a
plan or arrangement of a business or entity, all or a portion of which is
acquired by the Company or a Subsidiary or a Related Company). Subject to the
overall limitation on the number of shares of Stock that may be delivered under
the Plan, the Committee may use available shares of Stock as the form of payment
for compensation, grants or rights earned or due under any other compensation
plans or arrangements of the Company or a Subsidiary or a Related Company,

 

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including the plans and arrangements of the Company or a Subsidiary or a Related
Company assumed in business combinations. Notwithstanding the provisions of
Section 4.4, Options granted under the Plan in replacement for awards under
plans and arrangements of the Company or a Subsidiary or a Related Company
assumed in business combinations may provide for Exercise Prices that are less
than the Fair Market Value of the shares of Stock at the time of the replacement
grants, if the Committee determines that such Exercise Price is appropriate to
preserve the economic benefit of the award. The provisions of this Section shall
be subject to the provisions of Section 11.13.

11.4. Dividends and Dividend Equivalents. An Award (other than an Option) may
provide the Participant with the right to receive dividend or dividend
equivalent payments with respect to shares of Stock subject to the Award;
provided, however, that no dividend or dividend equivalents granted in relation
to Full Value Awards that are subject to vesting shall be settled prior to the
date that such Full Value Award (or applicable portion thereof) becomes vested
and is settled. Any such settlements, and any such crediting of dividends or
dividend equivalents or reinvestment in shares of Stock, will be subject to the
Company’s By-laws as well as Applicable Law and further may be subject to such
conditions, restrictions and contingencies as the Committee shall establish,
including the reinvestment of such credited amounts in share of Stock
equivalents. The provisions of this Section shall be subject to the provisions
of Section  11.13.

11.5. Settlement of Awards. The obligation to make payments and distributions
with respect to Awards may be satisfied through cash payments, the delivery of
shares of Stock, the granting of replacement Awards, or combination thereof as
the Committee shall determine; provided, however, that if a Cash Incentive Award
is settled in shares of Stock, it must satisfy the minimum vesting requirements
related to Full Value Awards (as described in Section 5.4, including the limited
exception described in Section 3.3(g)). Satisfaction of any such obligations
under an Award, which is sometimes referred to as “settlement” of the Award, may
be subject to such conditions, restrictions and contingencies as the Committee
shall determine. The Committee may permit or require the deferral of any Award
payment or distribution, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of interest
or dividend equivalents, and may include converting such credits into deferred
share of Stock equivalents. Except for Options designated at the time of grant
or otherwise as intended to be subject to Section 409A of the Code, this
Section 11.5 shall not be construed to permit the deferred settlement of
Options, if such settlement would result in deferral of compensation under
Treas. Reg. §1.409A-1(b)(5)(i)(A)(3) (except as permitted in Sections (i) and
(ii) of that section). Each Subsidiary shall be liable for payment of cash due
under the Plan with respect to any Participant to the extent that such benefits
are attributable to the services rendered for that Subsidiary by the
Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee. The provisions of this Section
shall be subject to the provisions of Section 11.13.

11.6. Transferability. Except as otherwise provided by the Committee, Awards
under the Plan are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.

11.7. Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the Committee at such times,
in such form, and subject to such restrictions and limitations, not inconsistent
with the terms of the Plan, as the Committee shall require.

11.8. Agreement With Company. An Award under the Plan shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Committee shall, in
its sole discretion, prescribe. The terms and conditions of any Award to any
Participant shall be reflected in such form of written (including electronic)
document as is determined by the Committee. A copy of such document shall be
provided to the Participant, and the Committee may, but need not require that
the Participant sign a copy of such document. Such document is referred to in
the Plan as an “Award Agreement” regardless of whether any Participant signature
is required.

11.9. Action by Company or Subsidiary. Any action required or permitted to be
taken by the Company or any Subsidiary or Related Company shall be by resolution
of its board of directors, or by action of one or more members of the board
(including a committee of the board) who are duly authorized to act for the
board, or (except to the extent prohibited by Applicable Law or applicable rules
of any stock exchange) by a duly authorized officer of such company.

 

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11.10. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.

11.11. Limitation of Implied Rights.

 

(a) Neither a Participant nor any other person shall, by reason of participation
in the Plan, acquire any right in or title to any assets, funds or property of
the Company or any Subsidiary or Related Company whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company or
any Subsidiary or Related Company, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only a
contractual right to the shares of Stock or amounts, if any, payable under the
Plan, unsecured by any assets of the Company or any Subsidiary or Related
Company, and nothing contained in the Plan shall constitute a guarantee that the
assets of the Company or any Subsidiary or Related Company shall be sufficient
to pay any benefits to any person.

 

(b) The Plan does not constitute a contract of employment, and selection as a
Participant will not give any participating employee or other individual the
right to be retained in the employ of the Company or any Subsidiary or Related
Company or the right to continue to provide services to the Company or any
Subsidiary or Related Company, nor any right or claim to any benefit under the
Plan, unless such right or claim has specifically accrued under the terms of the
Plan. Except as otherwise provided in the Plan, no Award under the Plan shall
confer upon the holder thereof any rights as a stockholder of the Company prior
to the date on which the individual fulfills all conditions for receipt of such
rights and is registered in the Company’s Register of share of stockholders.

 

(c) All Stock and shares issued under any Award or otherwise are to be held
subject to the provisions of the Company’s By-laws and each Participant is
deemed to agree to be bound by the terms of the Company’s By-laws as they stand
at the time of issue of any shares of Stock under the Plan.

11.12. Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.

11.13. Limitations under Section 409A. The provisions of the Plan shall be
subject to the following:

 

(a) Awards will be designed and operated in such a manner that they are either
exempt from the application of, or comply with, the requirements of Section 409A
of the Code, except as otherwise determined in the sole discretion of the
Administrator. The Plan and each Award Agreement under the Plan is intended to
meet the requirements of Section 409A of the Code and will be construed and
interpreted in accordance with such intent, except as otherwise determined in
the sole discretion of the Administrator. To the extent that an Award or
payment, or the settlement or deferral thereof, is subject to Section 409A of
the Code the Award will be granted, paid, settled or deferred in a manner that
will meet the requirements of Section 409A of the Code, such that the grant,
payment, settlement or deferral will not be subject to the additional tax or
interest applicable under Section 409A of the Code.

 

(b) Neither Section 11.3 nor any other provision of the Plan shall be construed
to permit the grant of an Option if such action would cause the Option being
granted or the option or stock appreciation right being replaced to be subject
to Section 409A of the Code, provided that this Section (a) shall not apply to
any Option (or option or stock appreciation right granted under another plan)
being replaced that, at the time it is granted or otherwise, is designated as
being deferred compensation subject to Section 409A of the Code.

 

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(c) Except with respect to an Option that, at the time it is granted or
otherwise, is designated as being deferred compensation subject to Section 409A
of the Code, no Option shall condition the receipt of dividends with respect to
an Option on the exercise of such Award, or otherwise provide for payment of
such dividends in a manner that would cause the payment to be treated as an
offset to or reduction of the Exercise Price of the Option pursuant Treas. Reg.
§1.409A-1(b)(5)(i)(E).

 

(d) The Plan shall not be construed to permit a modification of an Award, or to
permit the payment of a dividend or dividend equivalent, if such actions would
result in accelerated recognition of taxable income or imposition of additional
tax under Section 409A of the Code.

 

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EXHIBIT A

UK TAX-QUALIFIED OPTIONS

The purpose of this Exhibit A is to provide, in accordance with Schedule 4 to
the Income Tax (Earnings and Pensions) Act 2003 of the United Kingdom (“Schedule
4”), benefits for employees in the form of Tax-Qualified Options. The Committee
may, when granting an Option to an Employee, designate it as a Tax-Qualified
Option. If they do so, the provisions of the Innospec Inc. 2018 Omnibus
Long-Term Incentive Plan (the “Plan”) will apply to it, as amended by this
Exhibit A.

SECTION 1 OF EXHIBIT A

DEFINITIONS

Words used in this Exhibit A have the same meaning as in the Plan unless amended
as stated below:

1.1. “Control” has the meaning given in s995 Income Tax Act 2007 of the United
Kingdom.

1.2. “Employee” means an employee or director of a Participating Company but
does not include anyone who is:

 

(a) excluded from participation because of paragraph 9 of Schedule 4 (material
interests provisions); or

 

(b) a director who is required to work less than 25 hours a week (excluding meal
breaks).

1.3. “HMRC” means Her Majesty’s Revenue and Customs of the United Kingdom.

1.4. “Market Value” in relation to a Share on a particular day means:

 

(a) if the Shares are listed on a Recognised Stock Exchange, the closing price
of the shares on the immediately preceding day (or if more than one price is
shown, the lower price plus one half the difference between the two figures) if
the exchange is open on that day, and if the exchange is not open on that day
the relevant price for the latest previous day it was open; and

 

(b) if the Shares are not listed on a Recognised Stock Exchange, the market
value determined in accordance with the applicable provisions of Part VIII of
the Taxation of Chargeable Gains Act 1992 of the United Kingdom, and any
relevant published HMRC guidance, on the relevant day,

and any restriction referred to in Section 4 of this Exhibit A will be ignored
when determining Market Value.

1.5. “Ordinary Share Capital” has the meaning given in s989 Income Tax Act 2007
of the United Kingdom.

1.6. “Participating Company” means:

 

(a) the Company and any Subsidiary;

 

(b) any jointly-owned company (within the meaning of paragraph 34 of Schedule 4)
designated by the Committee; and

 

(c) any other entity designated by the Committee so long its participation would
not prevent the Plan as amended by this Exhibit A from being a Schedule 4 Plan.

 

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1.7. “Recognised Stock Exchange” has the meaning given in s1005 of the Income
Tax Act 2007 of the United Kingdom.

1.8. “Retirement” shall be interpreted consistently with the interpretation of
that term in s524 Income Tax (Earnings and Pensions) Act 2003 of the United
Kingdom and applicable guidance from HMRC.

1.9. “Schedule 4” means Schedule 4 to the Income Tax (Earnings and Pensions) Act
2003 of the United Kingdom.

1.10. “Schedule 4 Plan” means a plan in relation to which the requirements of
Parts 2 to 6 of Schedule 4 are (and are being) met.

1.11. “Shares” means, subject to Section 2 of this Exhibit A, shares of Common
Stock which satisfy paragraphs 16 to 20 of Schedule 4.

1.12. “Subsidiary” means a company which is a subsidiary of the Company within
the meaning of s1159 Companies Act 2006 of the United Kingdom which is under the
Control of the Company.

1.13. “Takeover Offer” means either:

 

(a) a general offer to acquire the whole of the issued ordinary share capital of
the Company which is either unconditional or which is made on a condition such
that if it is satisfied the person making the offer will have Control of the
Company; or

 

(b) a general offer to acquire all the Shares,

and for these purposes the reference to the “whole of the issued ordinary share
capital” and “all the Shares” shall not be taken to include any capital or
Shares held by the person making the offer or a person connected with that
person (within the meaning of s718 Income Tax (Earnings and Pensions) Act 2003
of the United Kingdom), and it does not matter whether the offer is made to
different shareholders by different means.

1.14. “Tax-Qualified Option” means an Option to which this Exhibit A applies.

1.15. “Tax-Qualified Option Expiration Date” has the meaning set forth in
Section 9.4 of this Exhibit A.

SECTION 2 OF EXHIBIT A

SHARES

If any Shares which are subject to a Tax-Qualified Option cease to satisfy
paragraphs 16 to 20 of Schedule 4 and this Exhibit A ceases to be a Schedule 4
Plan, or the Tax-Qualified Options become exercisable pursuant to Section 10.4
of this Exhibit A, the definition of “Shares” above is changed automatically to
“shares of Common Stock”.

SECTION 3 OF EXHIBIT A

RESTRICTIONS ON TERMS OF TAX-QUALIFIED OPTIONS

3.1. A Tax-Qualified Option can only be satisfied by the delivery of Shares. The
Committee may not permit or require the deferral of any settlement of a
Tax-Qualified Option, and the relevant Shares shall be delivered no later than
30 days from the date of exercise.

3.2. The Exercise Price of a Tax-Qualified Option may not be paid by the
tendering of shares of Stock.

 

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3.3. If the Exercise Price of a Tax-Qualified Option (or any tax or social
security withholding obligation arising in connection with its exercise) is
funded by the sale of Shares acquired on exercise, the Shares must first be
acquired by the Participant, and cannot be sold before the exercise of the
Option.

3.4. A Tax-Qualified Option cannot be transferred during the Participant’s life,
although it may be transmitted to the Participant’s personal representatives on
the Participant’s death.

3.5. Any provisions in the Award Agreement for a Tax-Qualified Option shall
comply with the requirements of Schedule 4.

3.6. The Company shall ensure that the Participant has an enforceable right to a
Tax-Qualified Option (in accordance with its terms) from its date of grant.

SECTION 4 OF EXHIBIT A

NOTIFICATION OF TERMS OF TAX-QUALIFIED OPTION

4.1. The Company will ensure that the Participant is notified of the following
(which must be determined on the date of grant of the Option) as soon as
practicable after grant of a Tax-Qualified Option:

 

(a) the number and description of the Shares subject to the Option;

 

(b) the Exercise Price;

 

(c) whether or not the Shares subject to the Option are subject to any
restriction (as defined in paragraph 36(3) of Schedule 4) and, if so, the
details of any such restrictions;

 

(d) the times at which the Option may be exercised (in whole or in part);

 

(e) the circumstances under which the Option will lapse or be cancelled (in
whole or in part), including any conditions to which the exercise of the Option
(in whole or in part) is subject; and

 

(f) any mechanism by way of which any terms referred to in sub-paragraphs
(a) and (c) to (e) above can be changed.

4.2. The notification may be given wholly or partly through the Award Agreement
relating to the Tax-Qualified Option.

SECTION 5 OF EXHIBIT A

EXERCISE PRICE

The Exercise Price of a Tax-Qualified Option will not be less than Market Value
of a Share on the date of grant.

SECTION 6 OF EXHIBIT A

HMRC LIMIT

The aggregate Market Value of:

 

(a) the Shares subject to a Tax-Qualified Option held by a Participant; and

 

(b) the Shares which the Participant may acquire on exercising other
Tax-Qualified Options; and

 

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(c) the shares which the Participant may acquire on exercising his options under
any other Schedule 4 Plan established by the Company or by any of its associated
companies (as defined in paragraph 35 of Schedule 4),

must not be more than the amount permitted under paragraph 6(1) of Schedule 4
(currently £30,000). To the extent that a Tax-Qualified Option is purportedly
granted over a number of Shares which would result in this limit being exceeded
the Option shall be automatically limited and take effect so that this limit is
not exceeded, and the Tax-Qualified Option shall be deemed not to have been
granted to the extent that it exceeds this limit. For the purposes of this
Section, Market Value is calculated as at the date of grant of the relevant
option.

SECTION 7 OF EXHIBIT A

ADJUSTMENT OF OPTIONS

7.1. Adjustments may be made to Tax-Qualified Options under Section 3.2 of the
Plan only where there is a variation of the share capital of which Shares form
part and:

 

(a) the total Exercise Price after adjustment must be substantially the same as
before adjustment; and

 

(b) the total Market Value of the Shares subject to the Option must remain
substantially the same; and

 

(c) the Plan (as amended by this Exhibit A) must continue to be a Schedule 4
Plan.

7.2. An annual return relating to the Plan (as amended by this Exhibit A)
submitted to HMRC following any such adjustment must include a declaration that
the Plan (as amended by this Exhibit A) continues to comply with Schedule 4.

SECTION 8 OF EXHIBIT A

MATERIAL INTEREST

A Participant may not exercise a Tax-Qualified Option while he is excluded from
participation in a Schedule 4 Plan under paragraph 9 of Schedule 4 (material
interest provisions).

SECTION 9 OF EXHIBIT A

EXERCISE – ADDITIONAL PROVISIONS

9.1. A Tax-Qualified Option shall vest and become exercisable on the third
anniversary of the date of grant of the Option (or such later date as may be
provided in the Award Agreement) save where it may be exercised earlier in
accordance with the other provisions of this Section 9, Section 10 of this
Exhibit A or Section 8 of the Plan. A Tax-Qualified Option shall not be
exercisable before any such date or time.

9.2. Notwithstanding the provisions of Sections 4.5 and 4.6 of the Plan, but
save to the extent otherwise prohibited by any other provision of the Plan (as
amended by this Exhibit A), a Participant may exercise a Tax-Qualified Option
for the period of six months after ceasing to be an Employee for any of the
following reasons:

 

(a) injury;

 

(b) ill health;

 

(c) Disability;

 

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(d) Retirement;

 

(e) redundancy (within the meaning of the Employment Rights Act 1996 of the
United Kingdom);

 

(f) the Participant’s employer ceasing to be a Participating Company;

 

(g) the transfer of the business that employs the Participant to a person that
is not a Participating Company; or

 

(h) any other reason with the consent of the Committee.

9.3. If a Participant dies before the lapse of a Tax-Qualified Option, his
Tax-Qualified Option may be exercised by his personal representatives at any
time within 12 months after his death, notwithstanding any earlier lapse in
accordance with the rules of the Plan.

9.4. A Tax-Qualified Option shall not be exercisable after the Company’s close
of business on the last business day that occurs prior to the Tax-Qualified
Option Expiration Date. The Tax-Qualified Option Expiration Date shall be the
earliest to occur of the following:

 

(a) the date on which any applicable period provided in Section 9.2 of this
Exhibit A expires;

 

(b) the date on which the Participant ceases to be an Employee for any reason
other than those set out in Section 9.2 of this Exhibit A;

 

(c) the date on which the Option lapses in accordance with Section 10.4(c) of
this Exhibit A, if applicable;

 

(d) the last day of the period specified in Section 10.5 of this Exhibit A, if
applicable;

 

(e) any date on which the Option lapses in accordance with Section 10.6 of this
Exhibit A;

 

(f) any other date on which the Option lapses in accordance with the Plan (other
than Section 4 of the Plan) or the Award Agreement; or

 

(g) the last day of the term of the Option,

in each case save where Section 9.3 of this Exhibit A applies in which case the
Tax-Qualified Option Expiration Date shall be the last day of the period
referred to in that Section 9.3. Section 4.6 of the Plan shall not apply to a
Tax-Qualified Option.

9.5. Except for rights determined by reference to a date before the date of
issue, or any restriction notified in accordance with Section 4.1(c) of this
Exhibit A, Shares issued in satisfaction of the exercise of an Option shall rank
equally in all respects with Shares of the same class in issue at the date of
issue.

SECTION 10 OF EXHIBIT A

CORPORATE EVENTS

10.1. Change in Control. The provisions of this Section 10 of Exhibit A have
effect in addition to any provisions provided in the Award Agreement or by the
Committee pursuant to Section 8 of the Plan. Notwithstanding the foregoing, no
such provision provided in the Award Agreement shall have effect if it would
affect the status of the Plan as amended by this Exhibit A as a Schedule 4 Plan,
and no such provision provided by the Committee shall have effect if it would
affect such status as a Schedule 4 Plan unless it is determined that the Plan as
amended by this Exhibit A should cease to be a Schedule 4 Plan.

 

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10.2. Takeover Offer. If any person obtains Control of the Company as a result
of making a Takeover Offer (other than pursuant to a Reorganisation), any
Tax-Qualified Options that are not exchanged pursuant to Section 10.4 of this
Exhibit A may, subject to Section 10.4, be exercised within [40] days after the
time when the person making the offer has obtained Control of the Company and
any conditions subject to which the Takeover Offer is made have been satisfied.

10.3. Non-UK Company Reorganisation Arrangement. If a non-UK company
reorganisation arrangement (as defined in Schedule 4) applicable to or
affecting:

 

(a) all the ordinary share capital of the Company, or all the Shares; or

 

(b) all the ordinary share capital of the Company, or all the Shares, which are
held by a class of shareholders identified otherwise than by reference to their
employment or directorships or their participation in a Schedule 4 Plan,

becomes binding on the shareholders covered by it, then any Options that are not
exchanged pursuant to Section 10.4 of this Exhibit A may be exercised within 40
days of the arrangement becoming binding.

10.4. Option exchange.

 

(a) If, as a result of the events specified in Section 10.2 or 10.3 of this
Exhibit A, a company has obtained Control of the Company, the Participant may,
by agreement with that other company (the “Acquiring Company”), within the
applicable period provided in paragraph 26(3) of Schedule 4, release each Option
(the “Old Option”) in consideration of the grant of an Option (the “New Option”)
which satisfies the conditions set out in paragraph 27 of Schedule 4.

 

(b) Where, in accordance with this Section 10.4, Options are released and New
Options granted, the New Options shall not be exercisable in accordance with
Sections 10.2 or 10.3 above by virtue of the event by reason of which the New
Options were granted.

 

(c) Where New Options are, or are to be, offered in exchange for the release of
Old Options in accordance with the above provisions of this Section 10.4, the
Committee may determine that the Old Options will not become exercisable or
lapse as a result of the relevant event under Section 10.2 or 10.3. In such
cases the Old Options will, if the Committee so specifies, lapse at the end of
the period for acceptance of the offer, provided that Option Holders have a
period of at least 14 days in which to accept the offer.

10.5. Shares Ceasing to be Subject to Schedule 4. If Section 10.2 or 10.3 of
this Exhibit A applies and, as a result of the event by virtue of which that
paragraph applies, Shares in the Company would no longer meet the requirements
of Part 4 of Schedule 4, the Committee, acting fairly and reasonably, may decide
that the Tax-Qualified Options may be exercised under that Section only within a
20 day period after the relevant event.

10.6. Lapse Following Corporate Event. Where a Tax-Qualified Option becomes
exercisable pursuant to this Section 10 of Exhibit A, if it is not exercised by
the end of the period specified for exercise it shall then lapse (save where
Section 9.3 of this Exhibit A applies).

10.7. Extent of Exercise Following Corporate Event. Where a Tax-Qualified Option
becomes exercisable pursuant to this Section 10, it shall be exercisable in
full, subject to any contrary provision in the Award Agreement.

 

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SECTION 11 OF EXHIBIT A

COMMITTEE’S POWERS

11.1. The Committee’s powers under the Plan are further restricted in relation
to Tax-Qualified Options as described in this Section.

11.2. No amendment to the Plan or this Exhibit A shall apply in relation to
Tax-Qualified Options if it would result in the Plan as amended by this Exhibit
A ceasing to be a Schedule 4 Plan, unless it is determined that it should so
cease.

11.3. This Exhibit A, and the Plan as amended by this Exhibit A, shall at all
times be interpreted in a manner consistent with Schedule 4 and any other
legislative provisions applying to Schedule 4 Plans, save where it is determined
that the Plan as amended by this Exhibit A should cease to be a Schedule 4 Plan.

11.4. Any exercise of discretion in relation to an outstanding Tax-Qualified
Option must be done in a fair and reasonable manner.

11.5. An annual return submitted to HMRC following any change to a term of a
Tax-Qualified Option which is necessary to comply with Parts 2 to 6 of Schedule
4 must include a declaration that the Plan continues to comply with Schedule 4
from the date of the change.

 

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