Exhibit 10.6
BOB EVANS FARMS, INC. 1998 STOCK OPTION AND INCENTIVE PLAN
SECOND AMENDED AND RESTATED
(Effective as of January 1, 2008)
          l. Purpose. The purpose of the Bob Evans Farms, Inc. Second Amended
and Restated 1998 Stock Option and Incentive Plan (the “Plan”) is to foster and
promote the long-term success of Bob Evans Farms, Inc. (the “Company”) and
materially increase stockholder value by (a) motivating superior performance by
means of performance-related incentives, (b) encouraging and providing for the
acquisition of an ownership interest in the Company by the directors and
officers and other key employees of the Company and its Subsidiaries and
(c) enabling the Company to attract and retain the services of an outstanding
management team upon whose judgment, interest and special effort the successful
conduct of the operations of the Company is largely dependent.
          2. Administration. The Plan will be administered by a committee (the
“Committee”) of at least three persons who shall be either the Compensation
Committee of the Board of Directors of the Company or such other committee
comprised entirely of “outside directors” within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the “Code”), and the
regulations and rulings thereunder, as the Committee may from time to time
select. The Committee shall interpret the Plan; prescribe, amend and rescind
rules and regulations relating thereto; and make all other determinations
necessary or advisable for the administration of the Plan. Any determination,
decision or action of the Committee in connection with the construction,
interpretation, administration or application of the Plan shall be final,
conclusive and binding upon all persons participating in the Plan and any person
validly claiming under or through persons participating in the Plan. A majority
of the members of the Committee shall constitute a quorum at any meeting of the
Committee, and all determinations of the Committee at a meeting shall be made by
a majority of its members. Any determination of the Committee under the Plan may
be made without a meeting of the Committee by a writing signed by all of its
members. No member of the Board of Directors of the Company or of the Committee
shall be liable for any action or determination made in good faith, with respect
to the Plan or any Award granted under the Plan. The Company shall effect the
granting of Awards under the Plan in accordance with the determination of the
Committee, by execution of instruments in writing in such form as approved by
the Committee.
          With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), transactions under the
Plan are intended to comply with all applicable conditions of Rule l6b-3 under
the Exchange Act, or any successor rule or regulation. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Committee.
          3. Participants. Participants in the Plan will consist of the
directors and officers and other key employees of the Company or any of its
Subsidiaries, as the Committee in its sole discretion may designate from time to
time to receive Awards hereunder (the “Participants”). The Committee’s
designation of a Participant in any year shall not require the

 

--------------------------------------------------------------------------------

 

Committee to designate such person to receive an Award in any other year. The
Committee shall consider such factors as it deems pertinent in selecting
Participants and in determining the type and amount of their respective Awards,
including, without limitation: (a) the financial condition of the Company and
its Subsidiaries; (b) anticipated profits for the current or future years;
(c) contributions of Participants to the profitability and development of the
Company and its Subsidiaries; and (d) other compensation provided to
Participants. During any calendar year, no Participant shall be granted Awards
under this Plan covering, in the aggregate, more than Three Hundred Thousand
(300,000) Common Shares and no Participant shall be granted stock options
covering, in the aggregate, more than Two Hundred and Fifty Thousand (250,000)
Common Shares.
          4. Types of Awards. Awards under the Plan may be granted in any one or
a combination of: (a) Incentive Stock Options; (b) Non-Qualified Stock Options;
(c) Stock Appreciation Rights; (d) Performance Share Awards; and (e) Restricted
Stock, all as described below in Sections 6, 7, 8, 9 and 10 hereof.
Notwithstanding the foregoing, no Stock Appreciation Rights or Performance Share
Awards have been granted under the Plan through December 31, 2007, and no
further Awards may be granted under the Plan after September 11, 2006.
          5. Common Shares Reserved Under the Plan. There is hereby reserved for
issuance under the Plan an aggregate of Five Million (5,000,000) Common Shares,
which may be newly issued or treasury shares. If there is a lapse, expiration,
termination or cancellation of any Award granted hereunder without the issuance
of Common Shares or payment of cash thereunder, or if Common Shares are issued
under any Award and thereafter are reacquired by the Company pursuant to rights
reserved upon the issuance thereof, the Common Shares subject to or reserved for
such Award may again be used for new Stock Options or other Awards under the
Plan so long as the holder thereof has not received any benefits of ownership of
such Common Shares; provided, however, that in no event may the number of Common
Shares issued under the Plan exceed the total number of Common Shares reserved
for issuance hereunder.
          6. Incentive Stock Options. Incentive Stock Options will consist of
Stock Options, qualifying as “incentive stock options” under the requirements of
Section 422 of the Code, to purchase Common Shares at purchase prices of not
less than One Hundred Percent (100%) of the Fair Market Value of such Common
Shares on the date of grant. Incentive Stock Options will only be eligible for
grant to employees of the Company. Incentive Stock Options will be exercisable
over not more than ten (10) years after the date of grant. In the event of the
termination of a Participant’s employment for any reason other than Disability,
death, Retirement or for Cause, the right of the Participant to exercise an
Incentive Stock Option shall terminate upon the earlier to occur of the end of
the original term of the Incentive Stock Option or ninety (90) days after the
date of such termination of employment. In the event that a Participant is
Terminated for Cause, the right of the Participant to exercise an Incentive
Stock Option shall terminate immediately upon the termination of employment. In
the event of the termination of a Participant’s employment due to Disability,
the right of the Participant (or, in the case of the death of the Participant
after his or her termination of employment due to Disability, his or her
successor in interest) to exercise an Incentive Stock Option shall terminate
upon the earlier to occur of (i) the end of the original term of the Incentive
Stock Option or (ii) one (l) year after the

-2-

--------------------------------------------------------------------------------

 

date of termination of employment. If a Participant should die while employed,
the right of the Participant’s successor in interest to exercise an Incentive
Stock Option granted to the Participant shall terminate upon the earlier to
occur of (i) the end of the original term of the Incentive Stock Option or
(ii) one year after the Participant’s last date of employment. Upon Retirement
of a Participant, the right of the Participant (or, in the case of the death of
the Participant after his or her termination of employment due to Retirement,
his or her successor in interest) to exercise an Incentive Stock Option shall
terminate upon the earlier of (i) ninety (90) days after the date of such
Retirement or (ii) the end of the original term of the Incentive Stock Option;
provided, however, that if the Participant or his or her successor in interest
does not exercise the Incentive Stock Option within ninety (90) days after the
date of such Retirement, the Incentive Stock Option shall automatically convert
into a Non-Qualified Stock Option upon the end of such ninety (90) day period
and the Participant’s or his or her successor in interest’s right to exercise
such converted Non-Qualified Stock Option shall terminate at the end of the
original term of the option. For purposes of this Section 6, if a Participant
terminates his or her employment voluntarily, the date of termination of
employment shall be deemed to be the date on which he or she notifies the
Company of his or her intention to terminate his or her employment; in all other
cases, the date of termination of employment shall be the last day of
employment.
          The aggregate Fair Market Value (determined as of the time the Stock
Option is granted) of the Common Shares with respect to which incentive stock
options are exercisable for the first time by any Participant during any
calendar year (under all option plans of the Company and all Subsidiaries and
Parents of the Company) shall not exceed $100,000. Anything contained herein to
the contrary notwithstanding, no Incentive Stock Option shall be granted to an
employee who, at the time the Incentive Stock Option is granted, owns (actually
or constructively under the provisions of Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary of the Company, unless the
option exercise price is not less than 110% of the Fair Market Value of the
Common Shares subject to the Incentive Stock Option on the date of grant and the
Incentive Stock Option by its terms is not exercisable more than five (5) years
from the date it is granted.
          7. Non-Qualified Stock Options. Non-Qualified Stock Options will
consist of options to purchase Common Shares at purchase prices of not less than
One Hundred Percent (100%) of the Fair Market Value of such Common Shares on the
date of grant and with terms as determined by the Committee in its discretion.
In the event of the termination of a Participant’s employment or service as a
director for any reason other than Retirement, Disability, death or for Cause,
the right of the Participant to exercise a Non-Qualified Stock Option shall
terminate upon the earlier to occur of the end of the original term of the
Non-Qualified Stock Option or ninety (90) days after the date of such
termination of employment or service. If a Participant is Terminated for Cause,
the right of the Participant to exercise a Non-Qualified Stock Option shall
terminate immediately upon the termination of employment or service. In the
event of the termination of a Participant’s employment or service due to
Disability or death, the right of the Participant or his or her successor in
interest to exercise a Non-Qualified Stock Option shall terminate upon the
earlier to occur of (i) the end of the original term of the Non-Qualified Stock
Option or (ii) one (l) year after the date of termination of employment or
service as a result of such Disability or death. In the event of the termination
of a Participant’s employment or service due to Retirement, the right of the
Participant (or, in the case of the death of the Participant after

-3-

--------------------------------------------------------------------------------

 

his or her termination of employment or service due to Retirement, his or her
successor in interest) to exercise a Non-Qualified Stock Option shall terminate
upon the end of the original term of the Non-Qualified Stock Option. For
purposes of this Section 7, if a Participant terminates his or her employment or
service voluntarily, the date of termination of employment or service shall be
deemed to be the date on which he or she notifies the Company of his or her
intention to terminate his or her employment or service; in all other cases, the
date of termination of employment or service shall be the last day of employment
or service.
          8. Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to Participants at the same time as such Participants are
awarded Stock Options under the Plan. Such Stock Appreciation Rights shall be
evidenced by an agreement in such form as the Committee shall from time to time
approve. Such agreements shall comply with, and be subject to, the following
terms and conditions:
               (a) Grant. Each Stock Appreciation Right shall relate to a
specific Stock Option under the Plan and shall be awarded to a Participant
concurrently with the grant of such Stock Option. The number of Stock
Appreciation Rights granted to a Participant shall be equal to a proportion of
the number of Common Shares that the Participant is entitled to receive pursuant
to the Plan.
               (b) Grant of Parallel Award. Since each Stock Appreciation Right
is parallel to a Stock Option, the exercise of all or a portion of the Stock
Options shall cause an equal exercise of the same proportion of Stock
Appreciation Rights granted under the Plan. A Stock Appreciation Right can only
be exercisable in conjunction with the exercise of the parallel Stock Option.
               (c) Calculation of Appreciation. Each Stock Appreciation Right
shall entitle a Participant to the excess of the Fair Market Value of a Common
Share on the exercise date over the Fair Market Value of a Common Share on the
date the Stock Appreciation Right was granted.
               (d) Payment of Appreciation. The total appreciation available to
a Participant from an exercise of Stock Appreciation Rights shall be paid in a
manner determined by the Committee.
               (e) Exercise Limitations. A Participant may exercise a Stock
Appreciation Right only in conjunction with the exercise of the Stock Option to
which the Stock Appreciation Right is attached. Stock Appreciation Rights may be
exercised only at such times and by such persons as may exercise Stock Options
under the Plan.
          9. Performance Share Awards. The Committee may grant awards under
which payment may be made in Common Shares, cash or any combination of Common
Shares and cash if the performance of the Company or any Subsidiary selected by
the Committee during the Performance Period meets certain goals established by
the Committee (“Performance Share Awards”). Such Performance Share Awards shall
be subject to the following terms and conditions and such other terms and
conditions as the Committee may prescribe:

-4-

--------------------------------------------------------------------------------

 

               (a) Performance Period and Performance Goals. The Committee shall
determine and include in a Performance Share Award grant the period of time for
which a Performance Share Award is made (“Performance Period”). The Committee
shall also establish performance objectives (“Performance Goals”) to be met by
the Company or Subsidiary during the Performance Period as a condition to
payment of the Performance Share Award. The Performance Goals may include
earnings per share, return on stockholders’ equity, return on assets, net income
or any other financial or other measure established by the Committee. The
Performance Goals may include minimum and optimum objectives or a single set of
objectives.
               (b) Payment of Performance Share Awards. The Committee shall
establish the method of calculating the amount of payment to be made under a
Performance Share Award if the Performance Goals are met, including the fixing
of a maximum payment. The Performance Share Award shall be expressed in terms of
Common Shares and referred to as “Performance Shares.” After the completion of a
Performance Period, the performance of the Company or Subsidiary shall be
measured against the Performance Goals, and the Committee shall determine
whether all, none or any portion of a Performance Share Award shall be paid. Any
such payment shall be made as soon as administratively feasible after the
Committee’s determination (but no later than the 15th day of the third month
following the last day of the Performance Period). The Committee, in its
discretion, may elect to make payment in Common Shares, cash or a combination of
Common Shares and cash. Any cash payment shall be based on the Fair Market Value
of the underlying Common Shares on, or as soon as practicable prior to, the date
of payment.
               (c) Revision of Performance Goals. At any time prior to the end
of a Performance Period, the Committee may revise the Performance Goals and the
computation of payment if unforeseen events occur which have a substantial
effect on the performance of the Company or Subsidiary and which in the judgment
of the Committee make the application of the Performance Goals unfair unless a
revision is made.
               (d) Requirement of Employment. A Participant who receives a
Performance Share Award must remain in the employment of the Company or
Subsidiary or remain in the service of the Company or Subsidiary as a director
until the completion of the Performance Period in order to be entitled to
payment under the Performance Share Award; provided that the Committee may, in
its sole discretion, provide for a partial payment (in accordance with the
requirements of Section 9(b) above) where such an exception is deemed equitable.
               (e) Compliance With Code Section 162(m). Any Performance Share
Awards granted under this Plan shall satisfy the requirements of the applicable
provisions of Section 162(m) of the Code as “qualified performance-based
compensation.”
          10. Restricted Stock Awards. To the extent not inconsistent with the
terms of this Plan, the Committee may grant Restricted Stock Awards to
Participants. Restricted Stock Awards will consist of Common Shares transferred
to a Participant who is eligible to participate in the Plan without other
payment therefor (other than the payment of the par value of such Common Shares
if required by applicable law) as additional compensation for his or her
services to the Company or one of its Subsidiaries. Restricted Stock Awards
shall be subject to such

-5-

--------------------------------------------------------------------------------

 

terms and conditions as the Committee determines appropriate including, without
limitation, restrictions on the sale or other disposition of such Common Shares
and rights of the Company to reacquire such Common Shares upon termination of
the Participant’s employment or service as a director with the Company within
specified periods. Subject to such other restrictions as are imposed by the
Committee and federal and state securities laws, the Common Shares covered by a
Restricted Stock Award granted to a Participant under the Plan may be sold or
otherwise disposed of only after six (6) months from the grant date of the
Award.
          11. Nontransferability. Each Stock Option, Performance Share Award and
Restricted Stock Award granted under this Plan shall not be transferable other
than by will or the laws of descent and distribution, and Stock Options shall be
exercisable, during the Participant’s lifetime, only by the Participant or the
Participant’s guardian or legal representative.
          12. Other Provisions. The grant of any Award under the Plan may also
be subject to such other provisions (whether or not applicable to any Award
granted to any other Participant) as the Committee determines appropriate
including, without limitation, provisions for the purchase of Common Shares
under Stock Options in installments, provisions for the payment of the option
exercise price of Common Shares under a Stock Option by delivery of other Common
Shares of the Company having a then Fair Market Value equal to the option
exercise price of such Common Shares, restrictions on resale or other
disposition, such provisions as may be appropriate to comply with federal or
state securities laws and stock exchange requirements and understandings or
conditions as to the Participant’s employment or service as a director in
addition to those specifically provided for under the Plan. If the Committee
does not specify another exercise schedule at the time of grant, the number of
Common Shares under each Stock Option which may be purchased in any one year
ending on an anniversary date of the grant of the Stock Option shall be the
total number of Common Shares subject to the Stock Option divided by the number
of years constituting the term of the Stock Option; provided, however, that if a
Participant does not purchase in any one option year the full number of Common
Shares to which he or she is then entitled, the Participant may purchase those
Common Shares in any subsequent year during the term of the Stock Option.
          The Committee may, in its discretion, permit payment of the option
exercise price of Common Shares under Stock Options by delivery of a properly
executed exercise notice together with a copy of irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds to
pay the option exercise price. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms.
          The Committee may, in its discretion and subject to such rules as it
may adopt, permit a Participant to pay all or a portion of the federal, state
and local taxes, including FICA withholding tax, arising in connection with the
following transactions: (a) the exercise of a Non-Qualified Stock Option; or
(b) the receipt or exercise of any other Award by electing (i) to have the
Company withhold Common Shares, (ii) to tender back Common Shares received in
connection with such Award or (iii) to deliver other previously acquired Common
Shares of the Company having a Fair Market Value approximately equal to the
amount to be withheld.

-6-

--------------------------------------------------------------------------------

 

          13. Term of the Plan and Amendment, Modification, Cancellation or
Acceleration of Awards. No Award shall be granted under the Plan more than ten
(10) years after the date of the adoption of the Plan by the Company’s Board of
Directors. The terms and conditions applicable to any Award granted prior to
such date may at any time be amended, modified or canceled, without stockholder
approval, by mutual agreement between the Committee and the Participant or such
other persons as may then have an interest therein, so long as stockholder
approval of such amendment, modification or cancellation is not required under
Rule l6b-3 under the Exchange Act or any applicable requirements of any
securities exchange on which are listed any of the Company’s equity securities
or any applicable requirements for issuers whose securities are traded in the
NASDAQ National Market System or any applicable requirements of the Code. The
Committee may, at any time and in its sole discretion, declare any or all Stock
Options then outstanding under this Plan to be exercisable, whether or not such
Stock Options are then otherwise exercisable.
          l4. Taxes. The Company shall be entitled to withhold the amount of any
tax attributable to any amount payable or Common Shares deliverable under the
Plan after giving the person entitled to receive such amount or Common Shares
notice as far in advance as practicable.
          l5. Definitions.
               (a) Award. The term “Award” means an award or grant of a Stock
Option, Stock Appreciation Right, Performance Share or Restricted Stock made to
a Participant under Section 6, 7, 8, 9 or 10 of the Plan.
(b) Change in Control. A “Change in Control” shall be deemed to have occurred:
                    (i) With respect to a Participant who is a party to a change
in control agreement and to which the Company also is a party (“Change
Agreement”), a “change in control” occurs as defined in (and subject to the
terms of) that Participant’s Change Agreement; and
                    (ii) With respect to all Participants, approval by the
Company’s stockholders of a definitive agreement (A) to merge or consolidate the
Company with or into another corporation in which the Company is not the
continuing or surviving corporation or pursuant to which any Common Shares would
be converted into cash, securities or other property of another corporation,
other than a merger of the Company in which holders of Common Shares immediately
before the merger have the same proportionate ownership of shares of the
surviving corporation immediately after the merger as immediately before or
(B) within a 12-consecutive-calendar-month period, to sell or otherwise dispose
of 50 percent or more of the book value of the combined assets of the Company
and all Subsidiaries. For purposes of this definition, (A) “book value” will be
established on the basis of the latest consolidated financial statement the
Company filed with the Securities and Exchange Commission before the

-7-

--------------------------------------------------------------------------------

 

date any 12-consecutive-calendar month measurement period began and (B) “related
entity” means (I) an entity related to the Company by application of Sections
414(b) and (c) of the Code, as modified by Section 414(h) of the Code or (II) an
affiliated service group [as defined in Section 414(m) of the Code] or other
organization described in Section 414(o) of the Code that includes the Company.
               (c) Code. “Code” means the Internal Revenue Code of 1986, as
amended, and the regulations and rulings thereunder. References to a particular
section of the Code shall include references to successor provisions.
               (d) Committee. The “Committee” means the Committee of the Board
of Directors of the Company constituted as provided in Section 2 hereof.
               (e) Common Shares. “Common Shares” means the shares of Common
Stock, par value $0.01 per share, of the Company or any security of the Company
issued in substitution, exchange or lieu thereof.
               (f) Company. The “Company” means Bob Evans Farms, Inc., a
Delaware corporation, or any successor corporation.
               (g) Disability. The term “Disability” means, as it relates to the
exercise of an Incentive Stock Option after termination of employment, a
disability within the meaning of Section 22(e)(3) of the Code, and for all other
purposes, a mental or physical condition which, in the opinion of the Committee,
renders a Participant unable or incompetent to carry out the job
responsibilities which such Participant held or the tasks to which such
Participant was assigned at the time the disability was incurred, and which is
expected to be permanent or for an indefinite duration exceeding one year.
               (h) Exchange Act. The term “Exchange Act” means the Securities
Exchange Act of 1934, as amended, or a successor statute.
               (i) Fair Market Value. The “Fair Market Value” of the Company’s
Common Shares shall mean, on any given date, the last reported sales price of
the Common Shares, as reported on the NASDAQ National Market System or on any
securities exchange on which the Company’s Common Shares may be listed on such
date or, if there are no reported sales of Common Shares on such date, then the
last reported sales price on the next preceding day on which such a sale was
transacted.
               (j) Incentive Stock Option. “Incentive Stock Option” means any
Stock Option granted pursuant to the provisions of Section 6 of the Plan that is
intended to be and is specifically designated as an “incentive stock option”
within the meaning of Section 422 of the Code.
               (k) Non-Qualified Stock Option. A “Non-Qualified Stock Option”
means any Stock Option granted pursuant to the provisions of Section 7 of the
Plan that is not an Incentive Stock Option.

-8-

--------------------------------------------------------------------------------

 

               (l) Parent. The term “Parent of the Company” shall have the
meaning set forth in 424(e) of the Code.
               (m) Participant. The term “Participant” shall have the meaning
set forth in Section 3 of the Plan.
               (n) Performance Goals. The term “Performance Goals” shall have
the meaning set forth in Section 9 of the Plan.
               (o) Performance Period. The term “Performance Period” shall have
the meaning set forth in Section 9 of the Plan.
               (p) Performance Share Award. The term “Performance Share Award”
shall have the meaning set forth in Section 9 of the Plan.
               (q) Plan. The “Plan” means the Bob Evans Farms, Inc. Second
Amended and Restated 1998 Stock Option and Incentive Plan, as set forth herein,
and as it may be hereafter amended and from time to time in effect.
               (r) Restricted Stock. The term Restricted Stock shall have the
meaning described in Section 10 of this Plan.
               (s) Retirement. The term “Retirement” for all purposes of the
Plan shall mean voluntary separation from employment or termination of service
as a director with the Company and each of its Subsidiaries on or after the date
the person both has attained age fifty-five (55) and is credited with at least
ten (10) years of service.
               (t) Stock Appreciation Right. The term Stock Appreciation Right
or “SAR” shall mean a right to receive cash in an amount equal to the excess of
the Fair Market Value of a Common Share on the exercise date of the SAR over the
Fair Market Value of a Common Share on the date the SAR is granted pursuant to
the provisions of the Plan.
               (u) Stock Option. The term “Stock Option” means any Incentive
Stock Option or Non-Qualified Stock Option granted under the Plan.
               (v) Stock Option Awards. The term “Stock Option Awards” means any
grant of a Stock Option to a Participant under the Plan.
               (w) Subsidiary. The term “Subsidiary” for all purposes other than
the Incentive Stock Option plan described in Section 6, shall mean any
corporation, partnership, joint venture or business trust, fifty percent (50%)
or more of the control of which is owned, directly or indirectly, by the
Company. For purposes of the Incentive Stock Option plan described in Section 6,
the term “Subsidiary” shall be defined as provided in Section 424(f) of the
Code.
               (x) Terminated for Cause. The term “Terminated for Cause” for
purposes of the Plan shall mean termination on account of any act of fraud or
intentional misrepresentation or embezzlement, misappropriation or conversion of
assets or opportunities of

-9-

--------------------------------------------------------------------------------

 

the Company or a Subsidiary, the conviction of a felony or intentional and
repeated violations of the written policies or procedures of the Company or any
Subsidiary.
          l6. Adjustment Provisions.
               (a) The existence of the Plan and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Board of
Directors or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company’s
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting the Company’s capital stock or the rights thereof, the dissolution or
liquidation of the Company or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
               (b) In the event of any change in capitalization affecting the
Common Shares, such as a stock dividend, stock split, recapitalization, merger,
consolidation, split-up, combination or exchange of shares or other form of
reorganization, or any other change affecting the Common Shares, the Committee
shall make proportionate adjustments to reflect such change with respect to the
aggregate number of Common Shares for which Awards in respect thereof may be
granted under the Plan, the maximum number of Common Shares which may be sold or
awarded to any Participant, the number of Common Shares covered by each
outstanding Award and the price per share in respect of outstanding Awards.
Notwithstanding the foregoing, an adjustment to a Stock Option pursuant to this
Section 16(b) shall be made only to the extent such adjustment complies, to the
extent applicable, with Section 409A of the Code.
               (c) The Committee also shall make such adjustments in the number
of shares covered by, and the price or other value of, any outstanding Awards in
the event of a spin-off or other distribution (other than normal cash dividends)
of assets of the Company to stockholders. Notwithstanding the foregoing, an
adjustment to a Stock Option pursuant to this Section 16(c) shall be made only
to the extent such adjustment complies, to the extent applicable, with
Section 409A of the Code.
               (d) Subject to the terms of a Change Agreement (as defined in
Section 15(b)), if, within 36 months after a Change in Control, (i) the Plan is
terminated and not replaced with a similar program providing comparable benefits
and features or (ii) with respect to a Participant who is a party to a Change
Agreement, an event occurs that generates a change in control payment under that
Participant’s Change Agreement, then (iii) all Stock Options then outstanding
under this Plan shall become fully exercisable as of the date of the Change in
Control, whether or not then otherwise exercisable. In addition, upon Retirement
of any Participant, all Stock Options held by such retiring Participant shall
immediately vest and become exercisable.
          17. Amendment and Termination of Plan. The Committee, with the
approval of the Board of Directors of the Company, may amend the Plan from time
to time or terminate the Plan at any time without the approval of the
stockholders of the Company except as such stockholder approval may be required
(a) to satisfy the requirements of Rule l6b-3 under the Exchange Act, or any
successor rule or regulation, (b) to satisfy applicable requirements of the

-10-

--------------------------------------------------------------------------------

 

Code or (c) to satisfy applicable requirements of any securities exchange on
which are listed any of the Company’s equity securities or any requirements
applicable to issuers whose securities are traded in the NASDAQ National Market
System. No such action to amend or terminate the Plan shall reduce the then
existing amount of any Participant’s Award or adversely change the terms and
conditions thereof without the Participant’s consent. No amendment of the Plan
shall result in any Committee member’s losing his or her status as a
“disinterested person” as defined in Rule l6b-3 under the Exchange Act, or any
successor rule or regulation, with respect to any employee benefit plan of the
Company or result in the Plan losing its status as a plan satisfying the
requirements of said Rule l6b-3.
          18. No Right to Employment. Neither the adoption of the Plan nor the
granting of any Awards hereunder shall confer upon any employee or director of
the Company or any Subsidiary any right to continued employment or service with
the Company or any Subsidiary, as the case may be, nor shall it interfere in any
way with the right of the Company or a Subsidiary to terminate the employment or
service of any of its employees or directors at any time, with or without cause.
          19. Unfunded Plan. The Plan shall be unfunded and the Company shall
not be required to segregate any assets that may at any time be represented by
Awards under the Plan. Any liability of the Company to any person with respect
to any Awards under the Plan shall be based solely upon any contractual
obligations that may be effected pursuant to the Plan. No such obligation of the
Company shall be deemed to be secured by any pledge of, or other encumbrance on,
any property of the Company or any Subsidiary.
          20. Other Company Award and Compensation Plans. Payments and other
Awards received by a Participant under the Plan shall not be deemed a part of a
Participant’s regular, recurring compensation for purposes of any termination
indemnity or severance pay law and shall not be included in, nor have any effect
on, the determination of Awards under any other employee benefit plan or similar
arrangement provided by the Company or a Subsidiary unless expressly so provided
by such other plan or arrangement, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive annual cash compensation. Awards
under the Plan may be made in combination or in tandem with, or as alternatives
to, grants, awards or payments under any other Company or Subsidiary plans. The
Plan notwithstanding, the Company or any Subsidiary may adopt such other
compensation programs and additional compensation arrangements as it deems
necessary to attract, retain and reward employees and directors for their
service with the Company and its Subsidiaries.
          21. Securities Law Restrictions. No Common Shares shall be issued
under the Plan unless counsel for the Company shall be satisfied that such
issuance will be in compliance with applicable federal and state securities
laws. Certificates for Common Shares delivered under the Plan may be subject to
such stock transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange upon which the Common Shares are
then listed or traded, the NASDAQ National Market System or any applicable
federal or state

-11-

--------------------------------------------------------------------------------

 

securities law. The Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
          22. Award Agreement. Each Participant receiving an Award under the
Plan shall enter into an agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the Award and such related
matters as the Committee shall, in its sole discretion, determine.
          23. Cost of the Plan. The costs and expenses of administering the Plan
shall be borne by the Company.
          24. Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
          25. Stockholder Approval. The Plan was adopted by the Board of
Directors of the Company on May 1, 1998. The Plan and any Award granted
thereunder shall be null and void if stockholder approval is not obtained within
twelve (12) months of the adoption of the Plan by the Board of Directors.
          26. Effective Date. The first amendment and restatement was effective
with respect to all Awards issued on and after May 1, 2002. This second
amendment and restatement is effective January 1, 2008.
          27. Compliance with Section 409A of the Code. It is intended that the
Plan comply with Section 409A of the Code and the Treasury Regulations
promulgated thereunder (and any subsequent notices or guidance issued by the
Internal Revenue Service), and the Plan shall be interpreted, administered and
operated accordingly. Nothing herein shall be construed as an entitlement to or
guarantee of any particular tax treatment to a Participant.

-12-