Exhibit 10.1

 

TILE SHOP HOLDINGS, INC.

 

2012 equity award plan

 

1.           Purpose and Effective Date.

 

(a)          Purpose. The Tile Shop Holdings, Inc. 2012 Equity Award Plan (the
“Plan”) has several complementary purposes: (i) to promote the growth and
success of Tile Shop Holdings, Inc. (the “Company”) by linking a significant
portion of Participant compensation to the increase in value of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”); (ii) to attract
and retain top quality, experienced executive officers and employees by offering
a competitive incentive compensation program; (iii) to reward innovation and
outstanding performance as important contributing factors to the Company’s
growth and progress; (iv) to align the interests of executive officers,
employees, Directors and Consultants with those of the Company’s shareholders by
reinforcing the relationship between Participant rewards and shareholder gains
obtained through the achievement by Plan Participants of short-term objectives
and long-term goals; and (iv) to encourage executive officers, employees,
Directors and Consultants to obtain and maintain an equity interest in the
Company.

 

(b)          Effective Date. The Plan will become effective, and Awards may be
granted under the Plan, on and after the Effective Date; provided that any
Awards granted prior to the date the Plan is approved by the Company’s
shareholders shall be contingent on such approval.

 

2.           Definitions. Capitalized terms used but not otherwise defined in
the Plan shall have the following meanings:

 

(a)          “10% Stockholder” means an Participant who, as of the date that an
Incentive Stock Option is granted to such individual, owns more than ten percent
(10%) of the total combined voting power of all classes of capital stock then
issued by the Company or a Subsidiary.

 

(b)          “Affiliate” and “Associate” have the respective meanings ascribed
to such terms in Rule 12b-2 under the Exchange Act. Notwithstanding the
foregoing, for purposes of determining those individuals to whom an Option may
be granted, the term “Affiliate” means any entity that, directly or through one
or more intermediaries, is controlled by, controls, or is under common control
with the Company within the meaning of Code Sections 414(b) or (c); provided
that, in applying such provisions, the phrase “at least 20 percent” shall be
used in place of “at least 80 percent” each place it appears therein.

 

(c)          “Award” means a grant of Options or Restricted Stock.

 

(d)          “Board” means the Board of Directors of the Company.

 

(e)          “Cause” means, except as otherwise determined by the Committee and
set forth in an Award agreement, such act or omission by a Participant as is
determined by the Committee to constitute cause for termination, including but
not limited to any of the following: (i) a material violation of any Company
policy, including but not limited to any policy contained in the Company’s Code
of Business Conduct and Ethics; (ii) embezzlement from, or theft of property
belonging to, the Company or any Affiliate; (iii) willful failure to perform, or
gross negligence in the performance of, assigned duties; or (iv) other
intentional misconduct, whether related to employment or otherwise, which has,
or has the potential to have, a material adverse effect on the business
conducted by the Company or its Affiliates.

  

(f)          “Change of Control” means (unless otherwise expressly provided in a
particular Award, employment, and/or severance agreement) any of the following:

 

(i)          a transaction or series of transactions (other than an offering of
Common Stock to the general public through a registration statement filed with
the Securities and Exchange Commission) whereby any “person” or related “group”
of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the
Exchange Act) (other than the Company, any of its Subsidiaries, an employee
benefit plan maintained by the Company or any of its Subsidiaries or a “person”
that, prior to such transaction, directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company possessing more than 50% of the total
combined voting power of the Company’s securities outstanding immediately after
such acquisition; or

 

 

 

 

(ii)         during any period of two consecutive years, individuals who, at the
beginning of such period, constitute the Board together with any new director(s)
(other than a director designated by a person who shall have entered into an
agreement with the Company to effect a transaction described in Section 2(f)(i)
or Section 2(f)(iii)) whose election by the Board or nomination for election by
the Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or

 

(iii)        the consummation by the Company (whether directly involving the
Company or indirectly involving the Company through one or more intermediaries)
of (x) a merger, consolidation, reorganization, or business combination or (y) a
sale or other disposition of all or substantially all of the Company’s assets in
any single transaction or series of related transactions, in each case other
than a transaction:

 

(A)         that results in the Company’s voting securities outstanding
immediately before the transaction continuing to represent (either by remaining
outstanding or by being converted into voting securities of the Company or the
person that, as a result of the transaction, controls, directly or indirectly,
the Company or owns, directly or indirectly, all or substantially all of the
Company’s assets or otherwise succeeds to the business of the Company (the
Company or such person, the “Successor Entity”)) directly or indirectly, at
least a majority of the combined voting power of the Successor Entity’s
outstanding voting securities immediately after the transaction, and

 

(B)         after which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor Entity;
provided, however, that no person or group shall be treated for purposes of this
Section 2(f)(iii)(B) as beneficially owning 50% or more of combined voting power
of the Successor Entity solely as a result of the voting power held in the
Company prior to the consummation of the transaction; or

  

(iv)        the Company’s shareholders approve a liquidation or dissolution of
the Company.

 

Notwithstanding the foregoing, with respect to an Award that is considered
deferred compensation subject to Code Section 409A, the definition of “Change of
Control” shall be amended and interpreted in a manner that allows the definition
to satisfy the requirements of a change of control under Code Section 409A
solely for purposes of determining the timing of payment of such Award.

 

The Committee shall have full and final authority, which shall be exercised in
its discretion, to determine conclusively whether a Change in Control of the
Company has occurred pursuant to the above definition, and the date of the
occurrence of such Change in Control and any incidental matters relating
thereto.

 

(g)          “Code” means the Internal Revenue Code of 1986, as amended. Any
reference to a specific provision of the Code includes any successor provision
and the regulations promulgated under such provision.

 

(h)          “Committee” means the Compensation Committee of the Board (or a
successor committee with the same or similar authority).

 

(i)          “Consultant” means a Person or entity rendering services to the
Company or an Affiliate other than as an employee of any such entity or a
Director.

 

(j)          “Director” means a member of the Board.

 

(k)          “Disability” means, except as otherwise determined by the Committee
and set forth in an Award agreement: (i) with respect to an Incentive Stock
Option, the meaning given in Code Section 22(e)(3), and (ii) with respect to all
other Awards, a physical or mental incapacity which qualifies an individual to
collect a benefit under a long term disability plan maintained by the Company,
or such similar mental or physical condition which the Committee may determine
to be a disability, regardless of whether either the individual or the condition
is covered by any such long term disability plan. The Committee shall make the
determination of Disability and may request such evidence of Disability as it
reasonably determines.

 

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(l)          “Effective Date” means the date of the consummation of the
transactions contemplated pursuant to that certain Contribution and Merger
Agreement, dated as of June 27, 2012, by and between JWC Acquisition Corp., The
Tile Shop, LLC (“The Tile Shop”), ILTS, LLC, The Tile Shop, Inc., JWTS, Inc.,
each of the other members of The Tile Shop is a party thereto, Nabron
International Inc., the Company, Tile Shop Merger Sub, Inc., and Peter Jacullo.

 

(m)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended. Any reference to a specific provision of the Exchange Act includes any
successor provision and the regulations and rules promulgated under such
provision.

 

(n)          “Fair Market Value” means, per Share on a particular date, the last
sales price on such date on the NASDAQ Stock Market, as reported in The Wall
Street Journal, or if no sales of Common Stock occur on the date in question, on
the last preceding date on which there was a sale on such market. If the Shares
are not listed on the NASDAQ Stock Market, but are traded on a national
securities exchange or in another over-the-counter market, the last sales price
(or, if there is no last sales price reported, the average of the closing bid
and asked prices) for the Shares on the particular date, or on the last
preceding date on which there was a sale of Shares on that exchange or market,
will be used. If the Shares are neither listed on a national securities exchange
nor traded in an over-the-counter market, the price determined by the Committee,
in its discretion, will be used.

 

(o)          “Incentive Stock Option” means an Option that meets the
requirements of Code Section 422.

 

(p)          “Non-Employee Director” means a Director who is not an employee of
the Company or any Subsidiary.

 

(q)          “Nonqualified Stock Option” means an Option that does not meet the
requirements of Code Section 422.

 

(r)          “Option” means the right to purchase Shares at a stated price for a
specified period of time.

 

(s)          “Participant” means an individual selected by the Committee to
receive an Award.

 

(t)          “Performance Goals” means any goals the Committee establishes that
relate to one or more of the following with respect to the Company or any one or
more of its Subsidiaries, Affiliates or other business units: net income; income
from continuing operations; stockholder return; stock price appreciation;
earnings per share (including diluted earnings per share); net operating profit
(including after-tax); revenue growth; organic sales growth; return on equity;
return on investment; return on invested capital (including after-tax); earnings
before interest, taxes, depreciation and amortization; operating income;
operating margin; market share; return on sales; asset reduction; cost
reduction; return on equity; cash flow (including free cash flow); bookings; and
new product releases. As to each Performance Goal, the relevant measurement of
performance shall be computed in accordance with generally accepted accounting
principles, if applicable; provided that, the Committee may, at the time of
establishing the Performance Goal(s), exclude the effects of (i) extraordinary,
unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the
disposition of a business, (iii) changes in tax regulations or laws, or (iv) the
effect of a merger or acquisition. Notwithstanding the foregoing, the
calculation of any Performance Goal established for purposes of an Award shall
be made without regard to changes in accounting methods used by the Company or
in accounting standards that may be required by the Financial Accounting
Standards Board after a Performance Goal relative to an Award is established and
prior to the time the compensation earned by reason of the achievement of the
relevant Performance Goal is paid to the Participant. In the case of Awards that
the Committee determines will not be considered “performance-based compensation”
under Code Section 162(m), the Committee may establish other Performance Goals
not listed in the Plan. Where applicable, the Performance Goals may be
expressed, without limitation, in terms of attaining a specified level of the
particular criterion or the attainment of an increase or decrease (expressed as
absolute numbers or a percentage) in the particular criterion or achievement in
relation to a peer group or other index. The Performance Goals may include a
threshold level of performance below which no payment will be made (or no
vesting will occur), levels of performance at which specified payments will be
paid (or specified vesting will occur), and a maximum level of performance above
which no additional payment will be made (or at which full vesting will occur).

  

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(u)          “Person” has the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof.

 

(v)         “Restriction Period” means the length of time established relative
to an Award during which (i) the Participant cannot sell, assign, transfer,
pledge or otherwise encumber the Common Stock subject to such Award or during
which the Common Stock are subject to vesting or a right of repurchase in favor
of the Company and (ii) at the end of which the Participant obtains an
unrestricted right to such Common Stock.

 

(w)          “Restricted Stock” means a Share that is subject to a risk of
forfeiture or restrictions on transfer, or both a risk of forfeiture and
restrictions on transfer.

 

(x)          “Section 16 Participants” means Participants who are subject to the
provisions of Section 16 of the Exchange Act.

 

(y)          “Share” means a share of Common Stock.

 

(z)          “Subsidiary” means any corporation or limited liability company
(except that is treated as a partnership for U.S. income tax purposes) in an
unbroken chain of entities beginning with the Company if each of the entities
(other than the last entity in the chain) owns stock or equity interests
possessing more than fifty percent (50%) of the total combined voting power of
all classes of stock or equity interests in one of the other entities in the
chain.

 

3.           Administration.

 

(a)          Committee Administration. The Committee shall administer the Plan.
In addition to the authority specifically granted to the Committee in the Plan,
the Committee has full discretionary authority to administer the Plan, including
but not limited to the authority to: (i) interpret the provisions of the Plan;
(ii) prescribe, amend and rescind rules and regulations relating to the Plan;
(iii) correct any defect, supply any omission, or reconcile any inconsistency in
any Award or agreement covering an Award in the manner and to the extent it
deems desirable to carry the Plan into effect; and (iv) make all other
determinations necessary or advisable for the administration of the Plan. All
Committee determinations are final and binding.

 

Notwithstanding the above statement or any other provision of the Plan, once
established, the Committee shall have no discretion to increase the amount of
compensation payable under an Award that is intended to be performance-based
compensation under Code Section 162(m), although the Committee may decrease the
amount of compensation a Participant may earn under such an Award. Any action by
the Committee to accelerate or otherwise amend an Award for reasons other than
retirement, death, Disability or a termination by the Company without Cause, or
in connection with a Change of Control, shall include application of a
commercially reasonable discount to the compensation otherwise payable to
reflect the value of the accelerated payment.

 

(b)          Delegation to Other Committees or Officers. To the extent
applicable law permits, the Board may delegate to another committee of the Board
or the Committee may delegate to one or more officers of the Company, any or all
of the authority and responsibility of the Committee; provided that no such
delegation is permitted with respect to Awards made to Section 16 Participants
at the time any such delegated authority or responsibility is exercised. The
Board may also delegate to another committee of the Board consisting entirely of
Non-Employee Directors any or all of the authority and responsibility of the
Committee with respect to individuals who are Section 16 Participants. In
addition, the Board may reserve for itself any and all authority or
responsibility previously delegated to any Committee. If the Board or the
Committee has made such a delegation, then all references to the Committee in
the Plan include the Board, such other committee, or one or more officers to the
extent of such delegation.

 

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Notwithstanding anything contained herein to the contrary, only the full Board
shall have the authority to administer the Plan with respect to Awards granted
to Non-Employee Directors.

 

(c)          Indemnification. The Company will indemnify and hold harmless each
member of the Board and the Committee, and each officer or member of any other
committee to whom a delegation under Section 3(b) has been made, as to any acts
or omissions with respect to the Plan or any Award to the maximum extent that
the law and the Company’s By-Laws permit.

 

4.           Eligibility. The Committee may designate any of the following as a
Participant from time to time, to the extent of the Committee’s authority: any
executive officer, employee, Consultant or Director of the Company or any
Subsidiary. The Committee’s granting of an Award to a Participant will not
require the Committee to grant an Award to such individual at any future time.
The Committee’s granting of a particular type of Award to a Participant will not
require the Committee to grant any other type of Award to such individual.

 

5.          Types of Awards. Subject to the terms of the Plan, the Committee may
grant any type of Award to any Participant it selects; provided, however that
only executive officers and employees of the Company or a Subsidiary may receive
grants of Incentive Stock Options. Awards may be granted alone or in addition
to, in tandem with, or in substitution for, any other Award (or any other award
granted under another equity compensation plan of the Company or any Affiliate).

 

6.           Shares Reserved under the Plan.

 

(a)          Plan Reserve. Subject to adjustment as provided in Section 12, an
aggregate of 2,500,000 Shares are reserved for issuance under the Plan. On
January 1 of each year beginning after the Effective Date, an additional number
of Shares shall become available for issuance under the Plan equal to the lesser
of: (i) 2,500,000 Shares; (ii) six percent (6%) of the number of Shares issued
and outstanding (on an as-converted basis) as of the immediately preceding
December 31; and (iii) another amount determined by the Board. Subject to
Section 6(b) and Section 12(a), all Shares reserved for issuance under the Plan
may be issued as Incentive Stock Options.

  

(b)          Replenishment of Shares Under the Plan. The number of Shares
reserved for issuance under the Plan shall be reduced only by the number of
Shares actually delivered in payment or settlement of Awards. If Shares are
forfeited under an Award, or if Shares are issued under any Award and the
Company subsequently reacquires them pursuant to rights reserved upon the
issuance of the Shares, or if previously owned Shares are delivered to the
Company in payment of the exercise price or withholding taxes of an Award, then
such Shares may again be used for new Awards under the Plan under Section 6(a),
but such Shares may not be issued pursuant to an Incentive Stock Option.

 

(c)          Limitation on Number of Shares Subject to Awards. Notwithstanding
any provision in the Plan to the contrary, and subject to Section 12(a), the
maximum number of Shares with respect to one or more Awards that may be granted
to (or where the value of the Award is based on the Fair Market Value of the
Shares, is with respect to) any one Participant during any calendar year shall
be 2,000,000

 

7.           Options. Subject to the terms of the Plan, the Committee will
determine all terms and conditions of each Option, including but not limited to:

 

(a)          Whether the Option is an Incentive Stock Option or a Nonqualified
Stock Option;

 

(b)          The number of Shares subject to the Option;

 

(c)          The date of grant, which may not be prior to the date of the
Committee’s approval of the grant;

 

(d)          The exercise price, which may not be less than the Fair Market
Value of the Shares subject to the Option as determined on the date of grant;
provided that an Incentive Stock Option granted to a 10% Stockholder must have
an exercise price at least equal to 110% of the Fair Market Value of the Shares
subject to the Option as determined on the date of grant;

 

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(e)          The terms and conditions of exercise; provided, however, that, if
the aggregate Fair Market Value of the Shares subject to the Option (as
determined on the date of grant of such Option) that becomes exercisable during
a calendar year exceeds $100,000, then such Option shall be treated as a
Nonqualified Stock Option to the extent such $100,000 limitation is exceeded;
and

 

(f)          The term of the Option; provided, however, that each Option must
terminate no later than ten (10) years after the date of grant and each
Incentive Stock Option granted to a 10% Stockholder must terminate no later than
five (5) years after the date of grant.

 

In all other respects, the terms of any Incentive Stock Option should comply
with the provisions of Code Section 422 except to the extent the Committee
determines otherwise. If an Option that is intended to be an Incentive Stock
Option fails to meet the requirements thereof, the Option shall automatically be
treated as a Nonqualified Stock Option to the extent of such failure.

 

Subject to the terms and conditions of the Award, vested Options may be
exercised, in whole or in part, by giving notice of exercise to the Company in
such manner as the Company may prescribe. This notice must be accompanied by
payment in full of the exercise price in cash or by use of such other instrument
as the Committee may agree to accept.

 

Payment of the exercise price, applicable withholding taxes due upon exercise of
the Option, or both may be made in the form of Common Stock already owned by the
Participant, which Common Stock shall be valued at Fair Market Value on the date
the Option is exercised. A Participant who elects to make payment in Common
Stock may not transfer fractional shares or shares of Common Stock with an
aggregate Fair Market Value in excess of the Option exercise price plus
applicable withholding taxes. A Participant need not present stock certificates
when making payment in Common Stock, so long as other satisfactory proof of
ownership of the Common Stock tendered is provided (e.g., attestation of
ownership of a sufficient number of shares of Common Stock to pay the exercise
price). The Committee shall have the discretion to authorize or accept payment
by other forms or methods or to establish a cashless exercise program, all
within such limitations as may be imposed by the Plan or any applicable law.

 

8.           Restricted Stock Awards. Subject to the terms of the Plan, the
Committee will determine all terms and conditions of each Award of Restricted
Stock, including but not limited to:

 

(a)          The number of Shares and/or units to which such Award relates;

 

(b)          Whether, as a condition for the Participant to realize all or a
portion of the benefit provided under the Award, one or more Performance Goals
must be achieved during such period as the Committee specifies; and

 

(c)          The Restriction Period with respect to Restricted Stock.

 

During the Restriction Period, the Participant shall have all of the rights of a
shareholder with respect to the Restricted Stock, including the right to vote
such Restricted Stock and, unless the Committee shall otherwise provide, the
right to receive dividends paid with respect to such Restricted Stock.

 

Except as otherwise provided in the Plan, at such time as all restrictions
applicable to an Award of Restricted Stock and the Restriction Period expires,
ownership of the Common Stock subject to such restrictions shall be transferred
to the Participant free of all restrictions except those that may be imposed by
applicable law.

 

9.           Transferability.

 

(a)          Restrictions on Transfer. Awards are not transferable other than by
will or the laws of descent and distribution, unless and to the extent the
Committee allows a Participant to designate in writing a beneficiary to exercise
the Award or receive payment under an Award after the Participant’s death or
transfer an Award as provided in Section 9(b).

  

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(b)          Permitted Transfers. If allowed by the Committee, a Participant may
transfer the ownership of some or all of the vested or earned Awards granted to
such Participant, other than Incentive Stock Options to (i) the spouse, children
or grandchildren of such Participant (the “Family Members”), (ii) a trust or
trusts established for the exclusive benefit of such Family Members, or (iii) a
partnership in which such Family Members are the only partners. Notwithstanding
the foregoing, vested or earned Awards may be transferred without the
Committee’s pre-approval if the transfer is made incident to a divorce as
required pursuant to the terms of a “domestic relations order” as defined in
Section 414(p) of the Code; provided that no such transfer will be allowed with
respect to Incentive Stock Options if such transferability is not permitted by
Code Section 422. Any such transfer shall be without consideration and shall be
irrevocable. No Award so transferred may be subsequently transferred, except by
will or applicable laws of descent and distribution. The Committee may create
additional conditions and requirements applicable to the transfer of Awards.
Following the allowable transfer of a vested Option, such Option shall continue
to be subject to the same terms and conditions as were applicable to the Option
immediately prior to the transfer. For purposes of settlement of the Award,
delivery of Stock upon exercise of an Option and the Plan’s Change of Control
provisions, however, any reference to a Participant shall be deemed to refer to
the transferee.

 

10.          Termination and Amendment of Plan; Amendment, Modification or
Cancellation of Awards.

 

(a)          Term of Plan. Unless the Board earlier terminates the Plan pursuant
to Section 10(b), the Plan will terminate on the earlier of the date all Shares
reserved for issuance have been issued or the date that is ten (10) years
following the Effective Date.

 

(b)          Termination and Amendment. The Board or the Committee may amend,
alter, suspend, discontinue or terminate the Plan at any time, subject to the
following limitations:

 

(i)          the Board must approve any amendment of the Plan to the extent the
Company determines such approval is required by: (A) action of the Board,
(B) applicable corporate law, or (C) any other applicable law;

 

(ii)         shareholders must approve any amendment of the Plan to the extent
the Company determines such approval is required by: (A) Section 16 of the
Exchange Act, (B) the Code, (C) the listing requirements of any principal
securities exchange or market on which the Shares are then traded, or (D) any
other applicable law; and

 

(iii)        shareholders must approve any of the following Plan amendments:
(A) an amendment to materially increase any number of Shares specified in
Section 6(a), 6(b) or the limits set forth in Section 6(c) (except as permitted
by Section 12), (B) an amendment to expand the group of individuals that may
become Participants, or (C) an amendment that would diminish the protections
afforded by Section 10(e) or that would materially change the minimum vesting
and performance requirements of an Award as required in the Plan.

  

(c)          Amendment, Modification or Cancellation of Awards. Except as
provided in Section 10(e) and subject to the requirements of the Plan, the
Committee may modify, amend or cancel any Award; or waive any restrictions or
conditions applicable to any Award or the exercise of the Award; provided,
however, that any modification or amendment that materially diminishes the
rights of the Participant, or the cancellation of the Award, shall be effective
only if agreed to by the Participant or any other Person(s) as may then have an
interest in the Award, but the Committee need not obtain Participant (or other
interested party) consent for the adjustment or cancellation of an Award
pursuant to the provisions of Section 12 or the modification of an Award to the
extent deemed necessary to comply with any applicable law, the listing
requirements of any principal securities exchange or market on which the Shares
are then traded, or to preserve favorable accounting or tax treatment of any
Award for the Company. Notwithstanding the foregoing, unless determined
otherwise by the Committee, any such amendment shall be made in a manner that
will enable an Award intended to be exempt from Code Section 409A to continue to
be so exempt, or to enable an Award intended to comply with Code Section 409A to
continue to so comply.

 

(d)          Survival of Authority and Awards. Notwithstanding the foregoing,
the authority of the Board and the Committee under this Section 10 and to
otherwise administer the Plan will extend beyond the date of the Plan’s
termination. In addition, termination of the Plan will not affect the rights of
Participants with respect to Awards previously granted to them, and all
unexpired Awards will continue in force and effect after termination of the Plan
except as they may lapse or be terminated by their own terms and conditions.

 

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(e)          Repricing and Backdating Prohibited. Notwithstanding anything in
the Plan to the contrary, and except for the adjustments provided in Section 12,
neither the Committee nor any other Person may decrease the exercise price for
any outstanding Option after the date of grant nor allow a Participant to
surrender an outstanding Option to the Company as consideration for the grant of
a new Option with a lower exercise price. In addition, the Committee may not
make a grant of an Option with a grant date that is effective prior to the date
the Committee takes action to approve such Award.

 

(f)          Foreign Participation. To assure the viability of Awards granted to
Participants employed or residing in foreign countries, the Committee may
provide for such special terms as it may consider necessary or appropriate to
accommodate differences in local law, tax policy or custom. Moreover, the
Committee may approve such supplements to, or amendments, restatements or
alternative versions of, the Plan as it determines is necessary or appropriate
for such purposes. Any such amendment, restatement or alternative versions that
the Committee approves for purposes of using the Plan in a foreign country will
not affect the terms of the Plan for any other country. In addition, all such
supplements, amendments, restatements or alternative versions must comply with
the provisions of Section 10(b)(ii).

 

In addition, if an Award is held by a Participant who is employed or residing in
a foreign country and the amount payable or Shares issuable under such Award
would be taxable to the Participant under Code Section 457A in the year such
Award is no longer subject to a substantial risk of forfeiture, then the amount
payable or Shares issuable under such Award shall be paid or issued to the
Participant as soon as practicable after such substantial risk of forfeiture
lapses (or, for Awards that are not considered nonqualified deferred
compensation subject to Code Section 409A, no later than the end of the
short-term deferral period permitted by Code Section 457A) notwithstanding
anything in the Plan or the Award Agreement to contrary.

  

(g)          Code Section 409A. The provisions of Code Section 409A are
incorporated herein by reference to the extent necessary for any Award that is
subject to Code Section 409A to comply therewith.

 

11.          Taxes.

 

(a)          Withholding. In the event the Company or an Affiliate of the
Company is required to withhold any Federal, state or local taxes or other
amounts in respect of any income recognized by a Participant as a result of the
grant, vesting, payment or settlement of an Award or disposition of any Shares
acquired under an Award, the Company may deduct (or require an Affiliate to
deduct) from any payments of any kind otherwise due to the Participant cash, or
with the consent of the Committee, Shares otherwise deliverable or vesting under
an Award, to satisfy such tax obligations. Alternatively, the Company may
require such Participant to pay to the Company, in cash, promptly on demand, or
make other arrangements satisfactory to the Company regarding the payment to the
Company of the aggregate amount of any such taxes and other amounts. If Shares
are deliverable upon exercise or payment of an Award, the Committee may permit a
Participant to satisfy all or a portion of the Federal, state and local
withholding tax obligations arising in connection with such Award by electing to
(a) have the Company withhold Shares otherwise issuable under the Award,
(b) tender back Shares received in connection with such Award or (c) deliver
other previously owned Shares; provided, however, that the amount to be withheld
may not exceed the total minimum Federal, state and local tax withholding
obligations associated with the transaction to the extent needed for the Company
to avoid an accounting charge. If an election is provided, the election must be
made on or before the date as of which the amount of tax to be withheld is
determined and otherwise as the Committee requires. In any case, the Company may
defer making payment or delivery under any Award if any such tax may be pending
unless and until indemnified to its satisfaction.

 

(b)          No Guarantee of Tax Treatment. Notwithstanding any provisions of
the Plan, the Company does not guarantee to any Participant or any other Person
with an interest in an Award that (i) any Award intended to be exempt from Code
Section 409A shall be so exempt, (ii) any Award intended to comply with Code
Section 409A or Code Section 422 shall so comply, (iii) any Award shall
otherwise receive a specific tax treatment under any other applicable tax law,
nor in any such case will the Company or any Affiliate indemnify, defend or hold
harmless any Person with respect to the tax consequences of any Award.

 

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(c)          Participant Responsibilities. If a Participant shall dispose of
Common Stock acquired through exercise of an Incentive Stock Option within
either (i) two (2) years after the date the Option is granted or (ii) one (1)
year after the date the Option is exercised (i.e., in a disqualifying
disposition), such Participant shall notify the Company within seven (7) days of
the date of such disqualifying disposition. In addition, if a Participant
elects, under Code Section 83, to be taxed at the time an Award of Restricted
Stock (or other property subject to such Code Section) is made, rather than at
the time the Award vests, such Participant shall notify the Company within seven
(7) days of the date the Restricted Stock subject to the election is awarded.

  

12.          Adjustment Provisions; Change of Control.

 

(a)          Adjustment of Shares. If: (i) the Company shall at any time be
involved in a merger or other transaction in which the Shares are changed or
exchanged, (ii) the Company shall subdivide or combine the Shares or the Company
shall declare a dividend payable in Shares, other securities or other property,
(iii) the Company shall effect a cash dividend the amount of which, on a per
Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at
the time the dividend is declared, or the Company shall effect any other
dividend or other distribution on the Shares in the form of cash, or a
repurchase of Shares, that the Board determines by resolution is special or
extraordinary in nature or that is in connection with a transaction that the
Company characterizes publicly as a recapitalization or reorganization involving
the Shares, or (iv) any other event shall occur, which, in the case of this
clause (iv), in the judgment of the Board or Committee necessitates an
adjustment to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the Committee shall,
in such manner as it may deem equitable to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
adjust as applicable: (A) the number and type of Shares subject to the Plan
(including the number and type of Shares described in Sections 6(a) and (b)) and
which may after the event be made the subject of Awards; (B) the number and type
of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise
price with respect to any Award; and (D) to the extent such discretion does not
cause an Award that is intended to qualify as performance-based compensation
under Code Section 162(m) to lose its status as such, the Performance Goals of
an Award. In each case, with respect to Awards of Incentive Stock Options, no
such adjustment may be authorized to the extent that such authority would cause
the Plan to violate Code Section 422(b).

 

Without limitation, in the event of any reorganization, merger, consolidation,
combination or other similar corporate transaction or event, whether or not
constituting a Change of Control (other than any such transaction in which the
Company is the continuing corporation and in which the outstanding Common Stock
is not being converted into or exchanged for different securities, cash or other
property, or any combination thereof), the Committee may substitute, on an
equitable basis as the Committee determines, for each Share then subject to an
Award and the Shares subject to the Plan (if the Plan will continue in effect),
the number and kind of shares of stock, other securities, cash or other property
to which holders of Common Stock are or will be entitled in respect of each
Share pursuant to the transaction.

 

Notwithstanding the foregoing, in the case of a stock dividend (other than a
stock dividend declared in lieu of an ordinary cash dividend) or subdivision or
combination of the Shares (including a reverse stock split), if no action is
taken by the Committee, adjustments contemplated by this Section 12(a) that are
proportionate shall nevertheless automatically be made as of the date of such
stock dividend or subdivision or combination of the Shares.

 

(b)          Issuance or Assumption. Notwithstanding any other provision of the
Plan, and without affecting the number of Shares otherwise reserved or available
under the Plan, in connection with any merger, consolidation, acquisition of
property or stock, or reorganization, the Committee may authorize the issuance
or assumption of awards under the Plan upon such terms and conditions as it may
deem appropriate.

  

(c)          Change of Control. If the Participant has in effect an employment,
retention, change of control, severance or similar agreement with the Company or
any Affiliate that discusses the effect of a Change of Control on the
Participant’s Awards, then such agreement shall control in the event of a Change
of Control. In all other cases, in the event of a Change of Control, the
Committee may, in its sole discretion (i) elect to accelerate, in whole or in
part, the vesting of any Award, (ii) elect to make cash payments payable as a
result of the acceleration of vesting of any Award, or (iii) elect to cancel any
Options as of the date of the Change of Control in exchange for a cash payment
equal to the excess of the Change of Control price of the Shares covered by the
Option that is so cancelled over the purchase or grant price of such Shares
under the Award.

 

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Except as otherwise expressly provided in any agreement between a Participant
and the Company or an Affiliate, if the receipt of any payment by a Participant
under the circumstances described above would result in the payment by the
Participant of any excise tax provided for in Section 280G and Section 4999 of
the Code, then the amount of such payment shall be reduced to the extent
required to prevent the imposition of such excise tax.

 

13.          Miscellaneous.

 

(a)          Other Terms and Conditions. The grant of any Award may also be
subject to other provisions (whether or not applicable to the Award granted to
any other Participant) as the Committee determines appropriate, including,
without limitation, provisions for:

 

(i)          the payment of the purchase price of Options by delivery of cash or
other Shares or other securities of the Company (including by attestation)
having a then Fair Market Value equal to the purchase price of such Shares, or
by delivery (including by fax) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
to a broker-dealer to sell or margin a sufficient portion of the Shares and
deliver the sale or margin loan proceeds directly to the Company to pay for the
exercise price;

 

(ii)         restrictions on resale or other disposition of Shares; and

 

(iii)        compliance with federal or state securities laws and stock exchange
requirements.

 

(b)          Employment and Service. The issuance of an Award shall not confer
upon a Participant any right with respect to continued employment or service
with the Company or any Affiliate, or the right to continue as a Director.
Unless determined otherwise by the Committee, for purposes of the Plan and all
Awards, the following rules shall apply:

 

(i)          a Participant who transfers employment between the Company and its
Affiliates, or between Affiliates, will not be considered to have terminated
employment;

 

(ii)         a Participant who ceases to be a Non-Employee Director because he
or she becomes an employee of the Company or an Affiliate shall not be
considered to have ceased service as a Non-Employee Director with respect to any
Award until such Participant’s termination of employment with the Company and
its Affiliates;

  

(iii)        a Participant who ceases to be employed by the Company or an
Affiliate and immediately thereafter becomes a Non-Employee Director, a
non-employee director of an Affiliate, or a consultant to the Company or any
Affiliate shall not be considered to have terminated employment until such
Participant’s service as a director of, or consultant to, the Company and its
Affiliates has ceased; and

 

(iv)        a Participant employed by an Affiliate will be considered to have
terminated employment when such entity ceases to be an Affiliate.

 

Notwithstanding the foregoing, for purposes of an Award that is subject to Code
Section 409A, if a Participant’s termination of employment or service triggers
the payment of compensation under such Award, then the Participant will be
deemed to have terminated employment or service upon his or her “separation from
service” within the meaning of Code Section 409A.

 

(c)          No Fractional Shares. No fractional Shares or other securities may
be issued or delivered pursuant to the Plan, and the Committee may determine
whether cash, other securities or other property will be paid or transferred in
lieu of any fractional Shares or other securities, or whether such fractional
Shares or other securities or any rights to fractional Shares or other
securities will be canceled, terminated or otherwise eliminated.

 

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(d)          Unfunded Plan. This Plan is unfunded and does not create, and
should not be construed to create, a trust or separate fund with respect to the
Plan’s benefits. This Plan does not establish any fiduciary relationship between
the Company and any Participant or other Person. To the extent any Person holds
any rights by virtue of an Award granted under the Plan, such rights are no
greater than the rights of the Company’s general unsecured creditors.

 

(e)          Requirements of Law and Securities Exchange. The granting of Awards
and the issuance of Shares in connection with an Award are subject to all
applicable laws, rules and regulations and to such approvals by any governmental
agencies or securities exchanges as may be required. Notwithstanding any other
provision of the Plan or any Award agreement, the Company has no liability to
deliver any Shares under the Plan or make any payment unless such delivery or
payment would comply with all applicable laws and the applicable requirements of
any securities exchange or similar entity, and unless and until the Participant
has taken all actions required by the Company in connection therewith. The
Company may impose such restrictions on any Shares issued under the Plan as the
Company determines necessary or desirable to comply with all applicable laws,
rules and regulations or the requirements of any national securities exchanges.

 

(f)          Governing Law. This Plan, and all agreements under the Plan, will
be construed in accordance with and governed by the laws of the State of
Delaware, without reference to any conflict of law principles. Any legal action
or proceeding with respect to the Plan, any Award or any award agreement, or for
recognition and enforcement of any judgment in respect of the Plan, any Award or
any award agreement, may only be heard in a “bench” trial, and any party to such
action or proceeding shall agree to waive its right to a jury trial.

  

(g)          Limitations on Actions. Any legal action or proceeding with respect
to the Plan, any Award or any Award agreement, must be brought within one (1)
year (365 days) after the day the complaining party first knew or should have
known of the events giving rise to the complaint.

 

(h)          Construction. Whenever any words are used herein in the masculine,
they shall be construed as though they were used in the feminine in all cases
where they would so apply; and wherever any words are used in the singular or
plural, they shall be construed as though they were used in the plural or
singular, as the case may be, in all cases where they would so apply. Title of
sections are for general information only, and the Plan is not to be construed
with reference to such titles.

 

(i)          Severability. If any provision of the Plan or any award agreement
or any Award (i) is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any Person or Award, or (ii) would
disqualify the Plan, any award agreement or any Award under any law the
Committee deems applicable, then such provision should be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan, award agreement or Award, then such provision should be
stricken as to such jurisdiction, Person or Award, and the remainder of the
Plan, such award agreement and such Award will remain in full force and effect.

   

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