Exhibit 10.1
JMAR TECHNOLOGIES, INC. 2006 EQUITY INCENTIVE PLAN
SECTION I.
PURPOSE
     The purpose of the JMAR Technologies, Inc. 2006 Equity Incentive Plan (the
“Plan”) is to promote the long-term growth and financial success of JMAR
Technologies, Inc. (the “Company”) and its subsidiaries by enabling the Company
to compete successfully in attracting and retaining employees and directors (and
consultants and advisors) of outstanding ability, stimulating the efforts of
such persons to achieve the Company’s long-range performance goals and
objectives, and encouraging the identification of their interests with those of
the Company’s shareholders.
SECTION II.
DEFINITIONS
     For purposes of this Plan, the following terms shall have the following
meanings:
     2.1 “Advisor” means a person who provides bona fide advisory or consulting
services to the Company or a Subsidiary and whose Shares subject to an Award are
eligible for registration on Form S-8 under the Securities Act of 1933.
     2.2 “Award” means any form of Stock Option, Restricted Stock Award,
Unrestricted Stock Award, or Stock Appreciation Right granted under this Plan.
     2.3 “Award Agreement” means a written agreement setting forth the terms of
an Award.
     2.4 “Award Date” or “Grant Date” means the date designated by the Committee
as the date upon which an Award is granted.
     2.5 “Award Period” or “Term” means the period beginning on an Award Date
and ending on the expiration date of such Award.
     2.6 “Board” means the Board of Directors of the Company.
     2.7 “Cause” means, unless otherwise defined in an Award Agreement, a
Participant’s engaging in any of the following acts:
     (i) any type of disloyalty to the Company or a Subsidiary, including,
without limitation, fraud, embezzlement, theft, or dishonesty in the course of a
Participant’s employment or business relationship with the Company or
Subsidiary; or
     (ii) conviction of a felony or other crime involving a breach of trust or
fiduciary duty owed to the Company or a Subsidiary; or
     (iii) unauthorized disclosure of trade secrets or confidential information
of the Company or a Subsidiary; or
     (iv) a material breach of any agreement with the Company or a Subsidiary in
respect of confidentiality, non-disclosure, non-competition or otherwise; or
     (v) any serious violation of a policy of the Company or a Subsidiary that
is materially damaging to the interests of the Company or Subsidiary.
     2.8 “Change in Control” means the occurrence after the Effective Date of
any of the following events:

 

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     (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than an Exempt Entity, is or becomes the “beneficial owner”
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have “beneficial ownership” of all shares that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of 30% or more of
the total voting power of all of the Company’s voting securities then
outstanding (“Voting Shares”);
     (ii) immediately after a merger or consolidation of the Company or any
Subsidiary of the Company with or into, or the sale or other disposition of all
or substantially all of the Company’s assets to, any other corporation (where
pursuant to the terms of such transaction outstanding Awards are assumed by the
surviving, resulting or acquiring corporation or new Awards are substituted
therefore), the Voting Shares of the Company outstanding immediately prior to
such transaction do not represent (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity or any
parent thereof) more than 50% of the total voting power of the voting securities
of the Company or surviving or acquiring entity or any parent thereof
outstanding immediately after such merger or consolidation.
     2.9 “Code” means the United States Internal Revenue Code of 1986, as
amended, and the regulations and rulings thereunder. References to any
particular section of the Code include references to any successor amendments or
replacements of such section.
     2.10 “Committee” means the committee appointed by the Board and consisting
of two or more Directors of the Company, each of whom shall be a “non-employee
director” as defined in Rule 16b-3 and an “outside director” as defined in the
regulations under Section 162(m) of the Code.
     2.11 “Common Stock” means the Company’s Common Stock, par value $.01 per
share, and any successor security.
     2.12 “Company” means JMAR Technologies, Inc.
     2.13 “Designated Payment Date” has the meaning set forth in Section 8.2(a).
     2.14 “Director” means any person serving on the Board of Directors of the
Company or any of its Subsidiaries who is not an Officer (or officer) or
Employee of the Company or any Subsidiary, except that a person serving as Chief
Executive Officer and director shall be considered a “Director”.
     2.15 “Disability” means (i) a “permanent and total disability” within the
meaning of Section 22(e)(3) of the Code as determined by the Committee in good
faith upon receipt of medical advice from one or more individuals, selected by
the Committee, who are qualified to give professional medical advice, or (ii) in
the case of an Employee, a disability that qualifies as a long-term disability
under the Company’s or a Subsidiary’s Long Term Disability insurance, or (iii)
any other definition of disability set forth in an Award Agreement.
     2.16 “Effective Date” means June 23, 2006.
     2.17 “Eligible Person” means any person who is either an Employee, Director
or Advisor.
     2.18 “Employee” means (i) any officer or employee of the Company or a
Subsidiary (including those employees on military leave, sick leave, or other
bona fide leave of absence approved by the Company or a Subsidiary) or (ii) any
person who has received and accepted an offer of employment from the Company or
a Subsidiary.
     2.19 “Exchange Act” means the Securities Exchange Act of 1934.
     2.20 “Exempt Entity” means (i) an underwriter temporarily holding
securities pursuant to an offering of such securities and (ii) the Company, any
of its Subsidiaries or any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Subsidiaries.

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     2.21 “Fair Market Value” means, as of any date, (i) in case the Common
Stock shall then be listed and traded upon a recognized securities exchange,
upon the basis of the average of the closing selling prices at which shares of
the Common Stock were traded on such recognized securities exchange for the
5 days prior to the Date of Grant or, if the Common Stock was not traded on said
date, upon the basis of the average of the closing selling prices for the 5 days
prior to the nearest date preceding the Date of Grant, or (ii) in case the
Common Stock shall not then be listed and traded upon a recognized securities
exchange, upon the basis of the average between the closing bid and asked
quotations for such stock (or the closing selling price for such stock, if
applicable) for the 5 days prior to the Date of Grant (as reported by a
newspaper of general circulation or a recognized stock quotation service) or, in
the event that there shall be no bid or asked quotations (or reported closing
selling price) on the Date of Grant, then upon the basis of the average between
the closing bid and asked quotations (or the closing selling price, as the case
may be), for the 5 days prior to the nearest date preceding the Date of Grant.
     2.22 “Immediate Family” means any child, stepchild, grandchild, spouse,
son-in-law or daughter-in-law and shall include adoptive relationships;
provided, however, that if the Committee adopts a different definition of
“immediate family” (or similar term) in connection with the transferability of
Stock Options and SARs awarded under this Plan, such definition shall apply,
without further action of the Board.
     2.23 “Incentive Stock Option” means any Stock Option awarded under
Section VII of this Plan intended to be and designated as an “Incentive Stock
Option” within the meaning of Section 422 of the Code.
     2.24 “Non-Qualified Stock Option” means any Stock Option awarded under
Section VII of this Plan that is not an Incentive Stock Option.
     2.25 “Officer” means a person who has been determined to be an officer of
the Company under Rule 16a-1(f) in a resolution adopted by the Board.
     2.26 “Option Price” or “Exercise Price” means the price per share at which
Common Stock may be purchased upon the exercise of an Option or an Award.
     2.27 “Participant” means an Eligible Person to whom an Award has been made
pursuant to this Plan.
     2.28 “Performance-Based Compensation” means compensation intended to
satisfy the requirements for “performance-based compensation” within the meaning
of Section 162(m) of the Code and the Treasury Regulations thereunder.
     2.29 “Performance Measures” means any one or more of the following, as
selected by the Committee and applied to the Company as a whole or individual
units thereof, and measured either absolutely or relative to a designated group
of comparable companies: (i) earnings before interest, taxes, depreciation, and
amortization (“EBITDA”); (ii) appreciation in the Fair Market Value, book value
or other measure of value of the Common Stock; (iii) cash flow; (iv) earnings
(including, without limitation, earnings per share); (v) return on equity;
(vi) return on investment; (vii) total stockholder return; (viii) return on
capital; (ix) return on assets or net assets; (x) revenue; (xi) income
(including, without limitation, net income); (xii) operating income (including,
without limitation, net operating income); (xiii) operating profit (including,
without limitation, net operating profit); (xiv) operating margin; (xv) return
on operating revenue; and (xvi) market share.
     2.30 “Reference Price” with respect to a SAR means a dollar amount
determined by the Committee at the time of Grant.
     2.31 “Replacement Option” means a Stock Option granted pursuant to
Section 7.4 upon the exercise of a Stock Option granted pursuant to the Plan
where the Option Price is paid with previously owned shares of Common Stock.
     2.32 “Restricted Stock” means those shares of Common Stock issued pursuant
to a Restricted Stock Award which are subject to the restrictions set forth in
the related Award Agreement.

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     2.33 “Restricted Stock Award” means an award of a fixed number of Shares to
a Participant which is subject to forfeiture provisions and other conditions set
forth in the Award Agreement.
     2.34 “Retirement” means an Employee’s or Director’s Separation from Service
(in each case other than by reason of death or Disability or for Cause) on or
after (i) attainment of age 65 or (ii) attainment of age 55 with 10 years of
employment with, or service on the Board of, the Company or a Subsidiary.
     2.35 “Rule 16b-3” and “Rule 16a-1(f)” mean Rules 16b-3 and 16a-1(f) under
the Exchange Act or any corresponding successor rules or regulations.
     2.36 “Separation from Service” or “Separates from Service” has the meaning
ascribed to such term in Section 409A of the Code.
     2.37 “Share” means one share of the Company’s Common Stock.
     2.38 “Short-term Deferral Deadline” means the later of the 15th day of the
third month following the Participant’s first taxable year in which an Award is
no longer subject to a substantial risk of forfeiture (within the meaning of
Section 409A of the Code) or the 15th day of the third month following the end
of the Company’s first taxable year in which an Award is no longer subject to a
substantial risk of forfeiture (within the meaning of Section 409A of the Code).
Notwithstanding the foregoing, if it is administratively impracticable for the
Company to make a payment or to deliver Shares by the end of the applicable 2
1/2 month period, or if making the payment or delivering the Shares by the end
of the applicable 2 1/2 month period would jeopardize the solvency of the
Company, and, as of the Grant Date, such impracticability or insolvency was
unforeseeable, the payment or delivery shall be made as soon as reasonably
practicable after the applicable 2 1/2 month period and shall be considered as
having been made prior to the Short-term Deferral Deadline. For purposes of this
definition, an action or failure to act of the Participant or a person under the
Participant’s control, such as a failure to provide necessary information or
documentation, is not an unforeseeable event.
     2.39 “Specified Employee Delayed Payment Date” has the meaning set forth in
Section 8.2(a).
     2.40 “Stock Appreciation Right” or “SAR” means the right to receive, for
each unit of the SAR, an amount of cash, a number of Shares or a combination
thereof equal in value to, the excess of the Fair Market Value of one Share on
the date of exercise of the SAR over the Reference Price of the SAR.
     2.41 “Stock Option” or “Option” means the right to purchase shares of
Common Stock (including a Replacement Option) granted pursuant to Section VII of
this Plan.
     2.42 “Subsidiary” means, with respect to grants of Awards (other than
Incentive Stock Options), any entity directly or indirectly controlled by the
Company or any entity, including an acquired entity, in which the Company has a
significant equity interest, as determined by the Committee, in its sole
discretion, provided such entity is considered a service recipient (within the
meaning of Section 409A) that may be aggregated with the Company.
     With respect to grants of Incentive Stock Options, the term “Subsidiary”
means any corporation and any other entity considered a subsidiary as defined in
Section 424(f) of the Code.
     2.43 “Transfer” means alienation, attachment, sale, assignment, pledge,
encumbrance, charge or other disposition; and the terms “Transferred” or
“Transferable” have corresponding meanings.
     2.44 “Unrestricted Stock Award” means an Award granted pursuant to
Section 8.3.
     2.45 “Vest” means, in the case of any Award, to become exercisable or
become free of restrictions solely as a result of either (i) the passage of
required time periods specified under the terms of the Award (“Passage of Time
Criteria”) or (ii) the inapplicability of Passage of Time Criteria due to a
Change of Control or a Separation from Service pursuant to the provisions of
Section X. For purposes of this Plan, “Vest” does not refer to an Award becoming
exercisable or free of restrictions due to the attainment of performance
criteria or any other criteria not solely related to the passage of time (“Other
Criteria”). An Award whose terms specify Other Criteria that have not been fully
satisfied at the time of a Change of Control or Separation from Service will not
Vest

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(unless otherwise determined by the Committee or specifically provided by such
terms) as a result of such Change of Control or Separation from Service (even if
the terms of such Award contain Passage of Time Criteria in addition to, in
combination with, or as an alternative to such Other Criteria).
SECTION III.
ADMINISTRATION
     3.1 The Committee. This Plan shall be administered and interpreted by the
Committee. Except as provided in Section 3.4, any function of the Committee also
may be performed by the Board. Actions of the Committee may be taken by a
majority of its members at a meeting or by the unanimous written consent of all
of its members without a meeting.
     3.2 Powers of the Committee. The Committee shall have the power and
authority to operate, manage and administer the Plan on behalf of the Company,
which includes, but is not limited to, the power and authority:
     (i) to grant to Eligible Persons one or more Awards consisting of any or a
combination of Stock Options, Restricted Stock, Unrestricted Stock, and Stock
Appreciation Rights;
     (ii) to select the Eligible Persons to whom Awards may be granted;
     (iii) to determine the types and combinations of Awards to be granted to
Eligible Persons;
     (iv) to determine the number of Shares or units which may be subject to
each Award;
     (v) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Award (including, but not limited to, the term, price,
exercisability, method of exercise and payment, any restriction or limitation on
transfer, any applicable performance measures or contingencies, any vesting
schedule or acceleration, or any forfeiture provisions or waiver, regarding any
Award) and the related Shares, based on such factors as the Committee shall
determine; and
     (vi) to modify or waive any restrictions, contingencies or limitations
contained in, and grant extensions to the terms or exercise periods of, or
accelerate the vesting of, any outstanding Awards, as long as such
modifications, waivers, extensions or accelerations would not either cause the
Award to be treated as the granting of a new Award under Code Section 409A that
is not exempt from, or compliant with, the requirements of Section 409A or be
inconsistent with the terms of the Plan, but no such changes shall impair the
rights of any Participant without his or her consent unless required by law or
integrally related to a requirement of law.
     3.3 Guidelines. The Committee will have the authority and discretion to
interpret the Plan and any Awards granted under the Plan, to establish, amend,
and rescind any rules and regulations relating to the Plan, and to make all
other determinations that may be necessary or advisable for the administration
of the Plan. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or in any related Award Agreement in the
manner and to the extent it deems necessary to carry the Plan into effect.
     3.4 Delegation of Authority. The Committee may delegate to one or more of
the Company’s Officers or (in the case of ministerial duties only) other
employees all or any portion of the Committee’s authority, powers,
responsibilities and administrative duties under the Plan, with such conditions
and limitations as the Committee shall prescribe in writing; provided, however,
that only the Committee is authorized to grant Awards to, or make any decisions
with respect to Awards granted to, Officers. A record of all actions taken by
any Officer to whom the Committee has delegated a portion of its powers or
responsibilities shall be filed with the minutes of the meetings of the
Committee and shall be made available for review by the Committee upon request.
     3.5 Decisions Final. Any action, decision, interpretation or determination
by or at the direction of the Committee (or of any person acting under a
delegation pursuant to Section 3.4) concerning the application or administration
of the Plan or any Award(s) shall be final and binding upon all persons and need
not be uniform with respect to its determination of recipients, amount, timing,
form, terms or provisions of Awards.
     3.6 Award Agreements. Each Award under the Plan shall be evidenced by an
Award Agreement substantially in the form approved by the Committee from time to
time.

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SECTION IV.
SHARES SUBJECT TO PLAN
     4.1 Shares Available for Issuance of Awards. Subject to adjustment as
provided in Section 4.3, the aggregate number of Shares which may be issued
under this Plan shall not exceed 2,000,000 Shares. As determined from time to
time by the Committee, the Shares available under this Plan for grants of Awards
may consist either in whole or in part of authorized but unissued Shares or
Shares which have been reacquired by the Company following original issuance.
     4.2 Re-Use of Shares. If any Award granted under this Plan shall expire,
terminate or be forfeited or canceled for any reason before it has vested or
been exercised in full, the number of unissued or undelivered Shares subject to
such Award shall again be available for future grants. The Committee may make
such other determinations regarding the counting of Shares issued pursuant to
this Plan as it deems necessary or advisable, provided that such determinations
shall be permitted by law. Notwithstanding the foregoing, Shares that are
tendered to or withheld by the Company as full or partial payment in connection
with any Award under the Plan, as well as any Shares tendered to or withheld by
the Company to satisfy the tax withholding obligations related to any Award,
shall not be available for subsequent Awards under the Plan. In addition, a SAR
settled in Shares of Common Stock shall be considered settled in full against
the number of Shares available for award.
     4.3 Adjustment Provisions.
          (a) Adjustment for Change in Capitalization. If the Company shall at
any time change the number of issued Shares without new consideration to the
Company (such as by stock dividend, stock split, recapitalization,
reorganization, exchange of shares, liquidation, combination or other change in
corporate structure affecting the Shares) or make a distribution to shareholders
of cash or property which, in the Committee’s sole judgment, has a substantial
impact on the value of outstanding Shares, then the numbers of Shares and SAR
units specified in Section 4.1, the specified or fixed numbers of Shares or SAR
units covered by each outstanding Award, and, if applicable, the Option Price or
Reference Price for each outstanding Award shall be proportionately adjusted in
such manner as the Committee in its sole judgment determines to be equitable and
appropriate; provided that (i) any adjustments made in the number of Shares with
respect to which Incentive Stock Options may be or have been granted shall be
made in accordance with Code Section 424, (ii) the numbers of Shares or SAR
units covered by each outstanding Award shall be made in accordance with
Section 409A of the Code, and (iii) fractions of a Share will not be issued but
either will be replaced by a cash payment equal to Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee.
          (b) Other Equitable Adjustments. Notwithstanding any other provision
of the Plan, and without affecting the number of Shares or SAR units reserved or
available hereunder, the Committee may authorize the issuance, continuation or
assumption of Awards or provide for equitable adjustments or changes in the
terms of Awards, in connection with any merger, consolidation, sale of assets,
acquisition of property or stock, recapitalization, reorganization or similar
occurrence in which the Company is the continuing or surviving corporation, upon
such terms and conditions as it may deem equitable and appropriate; provided,
that the numbers and types of Shares or SAR units covered by each outstanding
Award shall be made in accordance with Section 409A of the Code.
SECTION V.
CHANGE IN CONTROL; MERGER, CONSOLIDATION, ETC.
     5.1 Effect of Change in Control On Outstanding Awards. In the event of, and
upon a Change in Control, all Awards outstanding on the date of such Change in
Control shall become fully (100%) Vested.
     5.2 Separation from Service After Change in Control. In the event that an
Employee has a Separation from Service as a result of the Company or a
Subsidiary terminating such Employee’s service for any reason other than for
Cause within one (1) year after a Change in Control, all of the outstanding
Vested Stock Options and SARs held by such Employee on the date of Separation
from Service shall be exercisable for a period

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ending on the earlier to occur of the first anniversary of the date of
Separation from Service or the respective Expiration Dates of such Stock Options
and SARs.
     5.3 Merger, Consolidation, Etc. In the event that the Company shall,
pursuant to action by its Board of Directors, propose to (i) merge into,
consolidate with, sell or otherwise dispose of all or substantially all of its
assets, to another corporation or other entity and provision is not made
pursuant to the terms of such transaction for the assumption by the surviving,
resulting or acquiring corporation of outstanding Awards under the Plan, or the
substitution of new Awards therefor, or (ii) dissolve or liquidate, then (A) the
Committee shall cause written notice of such proposed transaction to be given to
each Participant not less than 30 days prior to the anticipated date on which
such proposed transaction is to be consummated, and (B) all outstanding Awards
that are not so assumed or substituted for shall become fully (100%) Vested
immediately prior, but subject, to actual consummation of the transaction. Prior
to a date specified in the notice, which shall not be more than 3 days prior to
the consummation of such transaction, each Participant shall have the right to
exercise all Stock Options and SARs held by such Participant that are not so
assumed or substituted for on the following basis: (x) such exercise shall be
conditioned on consummation of such transaction, (y) such exercise shall be
effective immediately prior to the consummation of such transaction, and (z) the
Option Price for any such Stock Options shall not be required to be paid until
7 days after written notice by the Company to the Participant that such
transaction has been consummated. If such transaction is consummated, each Stock
Option and SAR, to the extent not previously exercised prior to the date
specified in the foregoing notice of proposed transaction, shall terminate upon
the consummation of such transaction. If such transaction is abandoned, (a) any
and all conditional exercises of Stock Options and SARs in accordance with this
Section 5.3 shall be deemed annulled and of no force or effect and (b) to the
extent that any Award shall have Vested solely by operation of this Section 5.3,
such Vesting shall be deemed annulled and of no force or effect and the Vesting
provisions of such Award shall be reinstated.
     5.4 Applicability of Section V. The provisions of Section V shall apply to
all Awards granted under the Plan, unless and to the extent that the Committee
expressly provides otherwise in the terms of an Award at the time it is granted.
SECTION VI.
EFFECTIVE DATE AND DURATION OF PLAN
     6.1 Duration of Plan. The Plan shall continue in effect indefinitely until
terminated by the Board pursuant to Section XI. Notwithstanding the continued
effectiveness of this Plan, no Incentive Stock Option shall be granted under
this Plan on or after the tenth anniversary of the Effective Date.
SECTION VII.
STOCK OPTIONS
     7.1 Grants. Stock Options may be granted alone or in addition to other
Awards granted under this Plan. Each Option granted shall be designated as
either a Non-Qualified Stock Option or an Incentive Stock Option. One or more
Stock Options may be granted to any Eligible Person, except that only
Non-Qualified Stock Options may be granted to any Director of or Advisor to the
Company.
     7.2 Terms of Options. Except as otherwise required by Sections 7.3 and 7.4,
Options granted under this Plan shall be subject to the following terms and
conditions and shall be in such form and contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem desirable:
          (a) Option Price. The Option Price per share of Common Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant, except that in the case of Incentive Stock Options in no event
shall the Option Price be less than 100% of Fair Market Value on the Grant Date.
          (b) Option Term. The Term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten (10) years
after its Award Date.

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          (c) Exercisability. A Stock Option shall be exercisable at such time
or times and subject to such terms and conditions as shall be specified in the
Award Agreement; provided, however, that an Option may not be exercised as to
less than one hundred (100) Shares at any time unless the number of Shares for
which the Option is exercised is the total number available for exercise at that
time under the terms of the Option.
          (d) Method of Exercise. A Stock Option may be exercised in whole or in
part at any time during its Term by giving written notice of exercise to the
Company specifying the number of Shares to be purchased. Such notice shall be
accompanied by payment in full of the Option Price in cash unless some other
form of consideration is approved by the Committee at or after the grant.
Payment in full or in part also may be made in the form of Shares of Common
Stock owned by the Participant for at least six (6) months prior to exercise,
which Shares shall be valued at the Fair Market Value of the Common Stock on the
date of exercise.
          (e) Cashless Exercise. A Participant may elect to pay the Exercise
Price upon the exercise of an Option by authorizing a broker to sell all or a
portion of the Shares 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.
          (f) Non-Transferability of Options. Stock Options shall be
Transferable only to the extent provided in Section 12.3 of this Plan.
          (g) Termination. Stock Options shall terminate in accordance with
Section X of this Plan.
          (h) No Right to Defer. In no event shall a Stock Option awarded under
this Plan include any feature for the deferral of compensation other than the
deferral of recognition of income until the later of exercise or disposition of
the Stock Option under Treas. Reg. § 1.83-7, or the time the Shares acquired
pursuant to the exercise of the Stock Option first become substantially vested
(as defined in Treas. Reg. § 1.83-3(b)).
          (i) Fixed Number of Shares. The number of Shares subject to a Stock
Option shall be fixed on the Grant Date.
     7.3 Incentive Stock Options. Incentive Stock Options shall be subject to
the following terms and conditions:
          (a) Award Agreement. Any Award Agreement relating to an Incentive
Stock Option shall contain such terms and conditions as are required for the
Option to be an “incentive stock option” as that term is defined in Section 422
of the Code.
          (b) Ten Percent Shareholder. An Incentive Stock Option shall not be
awarded to any person who, at the time of the Award, owns or is deemed to own
(by reason of attribution rules of Section 424(d) of the Code) Shares possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, its parent corporation (as defined in Section 424(e) of
the Code), if any, and its subsidiary corporations (as defined in Section 424(f)
of the Code).
          (c) Qualification under the Code. Notwithstanding anything in this
Plan to the contrary, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall 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 an affected Participant, to
disqualify any Incentive Stock Option under Section 422 of the Code, except as
may result in the event of a Change of Control.
          (d) Notification of Disqualifying Disposition. Each Award Agreement
with respect to an Incentive Stock Option shall require the Participant to
notify the Company of any disposition of Shares of Common Stock issued pursuant
to the exercise of such Option under the circumstances described in Section
421(b) of the Code (relating to certain disqualifying dispositions), within ten
(10) days of such disposition.
     7.4 Replacement Options. Each grant of an Option shall automatically
include the right to acquire a Replacement Option upon the exercise of such
Option (in whole or in part) prior to an Employee’s Separation from Service if
the payment of the Option Price is paid in Shares. In addition to any other
terms and conditions the Committee deems appropriate, the Replacement Option
shall be subject to the following terms:
          (a) Number of Shares. The number of Shares subject to the Replacement
Option shall not exceed the sum of the number of whole Shares used to satisfy
the Option Price (whether by delivery of Shares to the Company or by reduction
of Shares otherwise deliverable to the Participant on exercise) of the original
Option

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and the number of whole Shares, if any, used to satisfy the payment for
withholding taxes (whether by such delivery or such reduction) in accordance
with Section 12.6.
          (b) Grant Date. The Replacement Option Grant Date will be the date of
the exercise of the original Option.
          (c) Option Price. The Option Price per share of Common Stock
purchasable under a Replacement Option shall be determined by the Committee at
the time of grant, except that in the case of Incentive Stock Options in no
event shall the Option Price be less than 100% of Fair Market Value on the
Replacement Option Grant Date.
          (d) Vesting. The Replacement Option shall be exercisable no earlier
than one (1) year after the Replacement Option Grant Date.
SECTION VIII.
RESTRICTED AND UNRESTRICTED STOCK AWARDS
     8.1 Grants of Restricted Stock Awards. The Committee may, in its
discretion, grant one or more Restricted Stock Awards to any Eligible Person.
Each Restricted Stock Award shall specify the number of Shares to be issued to
the Participant, the date of such issuance, the price, if any, to be paid for
such Shares by the Participant and the restrictions imposed on such Shares. The
Committee may grant Awards of Restricted Stock subject to the attainment of
specified performance goals, continued employment or such other limitations or
restrictions as the Committee may determine. Such conditions may, but need not,
be conditions that cause the Award to be treated as subject to a substantial
risk of forfeiture (within the meaning of Sections 83 or 409A of the Code).
     8.2 Terms and Conditions of Restricted Awards. Restricted Stock Awards
shall be subject to the following provisions:
          (a) Issuance of Shares. Shares of Restricted Stock may be issued
immediately upon grant or upon vesting, as determined by the Committee. If
Shares are to be issued upon vesting, such Shares shall be delivered on or
before the Short-term Deferral Deadline, except that Shares that vest on account
of the Participant’s Separation from Service by reason of Retirement in
accordance with Section 10.1(a) shall be delivered on the first payroll date
following the date of Separation from Service (the “Designated Payment Date”).
If the Shares cannot be delivered on the Designated Payment Date because it is
administratively impracticable, the Shares will be delivered as soon as
administratively practicable, but in no event later than a date within the same
calendar year as the Designated Payment Date or, if later, by the 15th day of
the third calendar month following the Designated Payment Date. Notwithstanding
the forgoing, (i) if it is reasonably determined that Section 409A of the Code
will result in the imposition of additional tax on account of the delivery of
the Shares before the expiration of the 6-month period described in Section
409A(a)(2)(B)(i) (relating to the required delay in payment to a specified
employee pursuant to a Separation from Service), such delivery will in lieu
thereof be made on the date that is six (6) months and one (1) day following the
date of the Participant’s Separation from Service (or, if earlier, the date of
death of the Participant) (the “Specified Employee Delayed Payment Date”), and
(ii) a Participant may defer delivery of the Shares subject to a Restricted
Stock Award to a date or dates after the Restricted Stock Award is no longer
subject to a substantial risk of forfeiture (within the meaning of Section 409A
of the Code) if the terms of the Restricted Stock Award and any deferral
election comply with the requirements of Section 409A of the Code.
          (b) Stock Powers and Custody. If shares of Restricted Stock are issued
immediately upon grant, the Committee may require the Participant to deliver a
duly signed stock power, endorsed in blank, relating to the Restricted Stock
covered by such an Award. The Committee may also require that the stock
certificates evidencing such Shares be held in custody by the Company until the
restrictions on them shall have lapsed.
          (c) Shareholder Rights. Participants receiving Restricted Stock Awards
that provide for issuance of the Shares upon vesting (including Shares that vest
on account of the Participant’s Separation from Service by reason of Retirement
in accordance with Section 10.1(a)) shall not be entitled to dividend or voting
rights in respect of any such Shares until they are fully vested and issued.

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     8.3 Unrestricted Stock Awards. The Committee may make Awards of
unrestricted Common Stock to (i) Eligible Persons in recognition of outstanding
achievements or contributions by such persons or (ii) Directors for service on
the Board or Committees of the Board. Unrestricted Shares issued under this
Section 8.3 may be issued for no cash consideration. In the event an
Unrestricted Stock Award is granted, the Shares subject to such Award shall be
issued immediately upon (or as promptly as is administratively practicable
after) grant; provided that a Participant may defer delivery of the Shares
subject to an Unrestricted Stock Award to a later date or dates if the terms of
the Unrestricted Stock Award and any deferral election comply with the
requirements of Section 409A of the Code.
SECTION IX.
STOCK APPRECIATION RIGHTS
     9.1 Stock Appreciation Rights. The Committee may, in its discretion, grant
Stock Appreciation Rights. Any Stock Appreciation Right granted shall be for a
specified number of units and have such terms and conditions, not inconsistent
with this Plan, as are established by the Committee in connection with the
Award.
     9.2 Terms and Conditions of Stock Appreciation Rights. Stock Appreciation
Rights granted pursuant to this Section IX shall be subject to the following
terms and conditions:
          (a) Reference Price. The Reference Price per Share unit subject to a
SAR shall be determined by the Committee at the time of grant, except that in no
event shall the Reference Price be less than 100% of Fair Market Value on the
Award Date.
          (b) Term. The term of each Stock Appreciation Right shall be fixed by
the Committee, but no Stock Appreciation Right shall be exercisable more than
ten (10) years after its Award Date.
          (c) Exercise. A Stock Appreciation Right shall be exercisable at such
time or times and subject to such terms and conditions as shall be specified in
the Award Agreement.
          (d) Distribution. The Committee shall determine in its sole
discretion, at or after the Award Date, whether Shares, cash or a combination
thereof shall be delivered to the holder upon exercise of a SAR. Shares so
delivered shall be valued at their Fair Market Value on the date of the SAR’s
exercise.
          (e) Non-Transferability and Termination. SARs shall be Transferable
only to the extent provided in Section 12.3 of this Plan and shall terminate in
accordance with Section X of this Plan.
          (f) No Right to Defer. In no event shall a SAR awarded under this Plan
include any feature for the deferral of compensation other than the deferral of
recognition of income until the exercise of the SAR.
          (g) Fixed Number of Shares. The number of Shares subject to a SAR
shall be fixed on the Award Date.
SECTION X.
TERMINATION OF AWARDS
     10.1 Termination of Awards to Employees and Directors. Subject to the
provisions of Section 10.2, all Awards issued to Employees and Directors under
this Plan shall terminate as follows:
          (a) Termination by Death, Disability or Retirement. Unless otherwise
determined by the Committee at the time of grant, if such a Participant
Separates from Service by reason of his or her death, Disability or Retirement,
all of the Participant’s Vested or otherwise exercisable Stock Options and SARs
may thereafter be exercised by the Participant or by the Participant’s
beneficiary or legal representative for a period of one (1) year after the date
of such Separation from Service or until the expiration of the stated term of
such Award, whichever period is shorter.
          (b) Termination For Cause. If such a Participant Separates from
Service for Cause, or if after such separation the Participant engages in any
act which would have warranted a Separation from Service for Cause, the
Participant shall forfeit all of his or her rights to any outstanding Awards
which have not been exercised and

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all of such unexercised Awards shall terminate upon the earlier to occur of the
date of Separation from Service or the date upon which the Participant has
engaged in any of the conduct described as justifying such a separation for
Cause.
          (c) Other Termination. Unless otherwise determined by the Committee at
the time of grant, if such a Participant Separates from Service for any reason
other than death, Disability, Retirement or Cause, all of the Participant’s
Vested or otherwise exercisable Stock Options and SARs will terminate on the
earlier to occur of the stated expiration date of the Awards or sixty (60)
calendar days after such Separation from Service. If a Participant dies during
the sixty (60) day period following the Separation from Service, any unexercised
Award held by the Participant shall be exercisable, to the full extent that such
Award was exercisable at the time of death, for a period of one (1) year from
the date of death or until the expiration of the stated term of the Award,
whichever occurs first.
     10.2 Awards to Advisors. An Award granted to an Advisor shall terminate as
provided in the Award Agreement.
     10.3 Acceleration of Vesting Upon Termination. Upon a Participant’s
Separation from Service, excluding, however, any Participant who has been
terminated for Cause, either the Committee or, unless the Committee determines
otherwise, the Chief Executive Officer may, in its or his sole discretion,
accelerate the Vesting of, or otherwise cause to be exercisable or free of
restrictions, all or part of any Awards held by the Participant so that such
Awards will be fully or partially exercisable as of the date of Separation from
Service or such other date as the Committee or Chief Executive Officer may
choose; provided, however, that (i) no person or entity other than the Committee
shall have the authority or discretion to accelerate the Vesting of, otherwise
cause to be exercisable or free of restrictions or conditions, any Award granted
to an Officer or Director of the Company, and (ii) such acceleration or waivers
shall not cause the Award to be treated as the granting of a new Award under
Section 409A of the Code that is not exempt from, or compliant with, the
requirements of Section 409A.
     10.4 Repricing, Exchange and Repurchase of Awards. Notwithstanding any
other provisions of this Plan, without shareholder approval and the consent of
each affected Participant, this Plan does not permit (i) any decrease in the
Exercise Price, Reference Price or other purchase price of an Award or any other
decrease in the pricing of an outstanding Award, (ii) the issuance of any
substitute Option or SAR with a lower Exercise Price or Reference Price than an
existing Option or SAR which is forfeited or cancelled in exchange for the
substitute Option or SAR, or (iii) the repurchase by the Company of any Option
or SAR with an Exercise Price or Reference Price above Fair Market Value at the
time of such repurchase. Additionally, in no event shall any offer to reprice,
exchange or repurchase an Award cause the original Award, the newly granted
Award or the consideration to be paid upon repurchase to be treated as the
granting of a new award under Section 409A of the Code that is not exempt from,
or compliant with, the requirements of Section 409A.
SECTION XI.
          TERMINATION OR AMENDMENT OF THIS PLAN
     11.1 Termination or Amendment. The Board may at any time, amend, in whole
or in part, any or all of the provisions of this Plan, or suspend or terminate
it entirely; provided, however, that, unless otherwise required by law or
integrally related to a requirement of law, the rights of a Participant with
respect to any Awards granted prior to such amendment, suspension or termination
may not be impaired without the consent of such Participant. In addition, no
amendment may be made without first obtaining shareholder approval if such
amendment would increase the maximum number of Shares or amount of cash which
may be granted to any individual Participant, or increase the total number of
Shares available for issuance under this Plan, or if such approval is required
pursuant to applicable requirements of the Code, the Exchange Act or the listing
requirements of any stock exchange on which the Common Stock is traded.
Notwithstanding anything in this Plan to the contrary, the Board, in its
discretion, may amend the Plan or any Award to cause the Plan and such Award to
remain beyond the scope of the types of compensatory arrangements that are
subject to the requirements of Section 409A of the Code or to otherwise comply
with the requirements of Section 409A. If any amendment to the Plan or any
provision of an Award would cause the Participant to be subject to a tax penalty
under Section 409A of the Code, such amendment or provision shall be deemed
modified in such manner as to

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render the Plan or Award exempt from, or compliant with, the requirements of
Section 409A and to effectuate as nearly as possible the original intention of
the Board.
SECTION XII.
GENERAL PROVISIONS
     12.1 No Right to Continued Employment. The adoption of this Plan and the
granting of Awards hereunder shall not confer upon any Employee the right to
continued employment nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of any Employee at any
time.
     12.2 Awards to Persons Outside the United States. To the extent necessary
or appropriate to comply with foreign law or practice, the Committee may,
without amending this Plan: (i) establish special rules applicable to Awards
granted to Eligible Persons who are either or both foreign nationals or employed
outside the United States, including rules that differ from those set forth in
this Plan, and (ii) grant Awards to such Eligible Persons in accordance with
those rules; provided that such special rules and provisions of the Award
Agreements evidencing such Awards do not cause the Plan or such Awards to be
considered to be compensatory arrangements subject to the requirements of
Section 409A of the Code in violation of the exemption for foreign arrangements
contained in any guidance issued thereunder.
     12.3 Non-Transferability of Awards. Except as provided in the following
sentence, no Award or benefit payable under this Plan shall be Transferable by
the Participant during his or her lifetime, nor may it be assigned, exchanged,
pledged, transferred or otherwise encumbered or disposed of except by will or
the laws of descent and distribution; and no Award shall be exercisable by
anyone other than the Participant or the Participant’s guardian or legal
representative during such Participant’s lifetime. The Committee may in its sole
discretion, at the time of grant, permit a Participant to transfer a
Non-Qualified Stock Option, SAR, or Restricted Stock Award for no consideration
to a member of, or for the benefit of, the Participant’s Immediate Family
(including, without limitation, to a trust in which members of the Immediate
Family have more than a 50% beneficial interest, to a partnership or limited
liability company for one or more members of the Immediate Family, or to a
foundation in which members of the Immediate Family hold more than 50% of the
voting interests), subject to such limits as the Committee may establish and so
long as the transferee remains subject to all the terms and conditions
applicable to such Award. The following shall be considered transfers for no
consideration: (i) a transfer under a domestic relations order in settlement of
marital property rights; and (ii) a transfer to an entity in which more than 50%
of the voting interests are owned by the Participant or members of the Immediate
Family, in exchange for an interest in that entity.
     12.4 Other Plans. In no event shall the value of, or income arising from,
any Awards issued under this Plan be treated as compensation for purposes of any
pension, profit sharing, life insurance, disability or other retirement or
welfare benefit plan now maintained or hereafter adopted by the Company or any
Subsidiary, unless such plan specifically provides to the contrary.
     12.5 Unfunded Plan. For purposes of the Employee Retirement Income Security
Act of 1974, this Plan is intended to constitute an unfunded plan of incentive
compensation, and it is not intended to provide retirement income, to result in
a deferral of income for periods extending to the termination of employment or
beyond, or to provide welfare benefits. This Plan shall be unfunded and shall
not create (or be construed to create) a trust or a separate fund or funds. This
Plan shall not establish any fiduciary relationship between the Company or any
of its Subsidiaries and any Participant or any other person. To the extent any
person holds any rights by virtue of an Award granted under this Plan, such
rights shall be no greater than the rights of an unsecured general creditor of
the Company.
     12.6 Withholding of Taxes. The Company shall have the right to deduct from
any payment to be made pursuant to this Plan, or to otherwise require, prior to
the issuance or delivery of any Shares or the payment of any cash to a
Participant, payment by the Participant of any Federal, state, local or foreign
taxes which the Company reasonably believes are required by law to be withheld.
The Committee may permit all or a portion of any such withholding obligation
(not exceeding the minimum amount required to be so withheld) to be satisfied by
reducing the number of shares otherwise deliverable or by accepting the delivery
of Shares previously owned by the Participant, which Shares shall be valued at
the Fair Market Value of the Common Stock on the exercise

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date in the case of a Stock Option and on the vesting date in the case of a
Restricted Stock Award. Any fraction of a Share required to satisfy such tax
obligations shall be disregarded and the amount due shall be paid instead in
cash by the Participant. The Company or a Subsidiary may also withhold from any
future earnings of salary, bonus or any other payment due to the Participant the
amount necessary to satisfy any outstanding tax obligations related to the grant
or exercise of any Award granted pursuant to this Plan.
     12.7 Governing Law. This Plan and all actions taken in connection with it
shall be governed by the laws of the State of Delaware, without regard to the
principles of conflict of laws.
     12.8 Liability. No employee of the Company or a Subsidiary nor member of
the Committee or the Board shall be liable for any action or determination taken
or made in good faith with respect to the Plan or any Award granted hereunder
and, to the fullest extent permitted by law, all employees and members of the
Committee and the Board shall be indemnified by the Company and its Subsidiaries
for any liability and expenses which they may incur through any claim or cause
of action arising under or in connection with this Plan or any Awards granted
under this Plan.
     12.9 Successors. All obligations of the Company under this Plan shall be
binding upon and inure to the benefit of any successor to the Company, whether
the existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business, stock, and/or assets of the Company.
     12.10 Transactions Involving Common Stock. Under no circumstances shall the
Shares issued under this Plan include or be subject to a permanent mandatory
repurchase obligation or put or call right that is based on a purchase price
other than a purchase price equal to the Fair Market Value of such Shares.
     12.11 Exemption from, or Compliance with, Section 409A. For federal income
tax purposes, the Plan and the Awards granted hereunder are intended to be
either exempt from, or compliant with, Section 409A of the Code. This Plan and
all Awards granted hereunder shall be interpreted, operated and administered in
a manner consistent with these intentions.

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