EXECUTION COPY
 
PERCEPTRON, INC.

 
FIRST AMENDED AND RESTATED
 
2004 STOCK INCENTIVE PLAN
 
I. GENERAL PROVISIONS
 
1.1 Establishment. On October 22, 2004, the Board of Directors (“Board”) of
Perceptron, Inc., a Michigan corporation (“Corporation”), adopted the 2004 Stock
Incentive Plan (“Plan”). On October 2, 2008, the Plan was amended and restated.
 
1.2 Purpose. The purpose of the Plan is (i) to promote the best interests of the
Corporation and its shareholders by encouraging Employees, Consultants and
non-employee directors of the Corporation and its Subsidiaries to acquire an
ownership interest in the Corporation through Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Share Awards,
Director Stock Purchase Rights and Deferred Stock Units, thus identifying their
interests with those of shareholders, and (ii) to enhance the ability of the
Corporation to attract and retain qualified Employees, Consultants and
non-employee directors. It is the further purpose of the Plan to permit the
granting of Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units and Performance Share Awards that will constitute
performance based compensation, as described in Section 162(m) of the Code, and
regulations promulgated thereunder. After the Effective Date, the Corporation
shall no longer issue any awards under the 1992 Stock Option Plan and the
Directors Stock Option Plan.
 
1.3 Definitions. As used in this Plan, the following terms have the meaning
described below:
 
(a) “Agreement” means the written agreement that sets forth the terms of a
Participant’s Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award, Director Stock Purchase Right or
Deferred Stock Unit.
 
(b) “Approval Date” means October 22, 2004, the date the Plan was approved by
the Board.
 
(c) “Award” means Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Share Awards, Deferred Stock Units and
Director Stock Purchase Rights.
 
(d) “Board” means the Board of Directors of the Corporation.

 

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(e) “Change in Control” means (i) a merger involving the Corporation in which
the Corporation is not the surviving corporation (other than a merger with a
wholly-owned subsidiary of the Corporation formed for the purpose of changing
the Corporation's corporate domicile); (ii) a share exchange in which the
shareholders of the Corporation exchange their stock in the Corporation for
stock of another corporation (other than a share exchange in which all or
substantially all of the holders of the voting stock of the Corporation,
immediately prior to the transaction, exchange, on a pro rata basis, their
voting stock of the Corporation for more than 50% of the voting stock of such
other corporation); (iii) the sale of all or substantially all of the assets of
the Corporation; or (iv) any person or group of persons (as defined by Section
13(d) of the Securities Exchange Act of 1934, as amended) (other than any
employee benefit plan or employee benefit trust benefitting the employees of the
Corporation) becoming a beneficial owner, directly or indirectly, of securities
of the Corporation representing more than fifty (50%) percent of either the then
outstanding Common Stock of the Corporation, or the combined voting power of the
Corporation's then outstanding voting securities. Notwithstanding any other
provision in this Plan to the contrary, to the extent that Awards under the Plan
subject to Code Section 409A are payable upon a Change in Control, an event
shall not be considered to be a Change in Control under the Plan with respect to
such Awards unless such event is also a “change in ownership,” a “change in
effective control” or a “change in the ownership of a substantial portion of the
assets” of the Corporation within the meaning of Code Section 409A.
 
(f) “Code” means the Internal Revenue Code of 1986, as amended.
 
(g) “Code Section 409A” means Code Section 409A of the Code and the applicable
guidance issued thereunder.
 
(h) “Committee” means the Management Development, Compensation and Stock Option
Committee of the Corporation or other committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
If no committee of the Board has been appointed to administer the Plan, the
Board shall exercise all of the powers of the Committee granted herein, and, in
any event, the Board may in its discretion exercise any or all of such powers.
The Committee shall be comprised of two or more members of the Board.
 
(i) “Common Stock” means shares of the Corporation’s authorized common stock.
 
(j) “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to the
Corporation, provided that the identity of such person, the nature of such
services or the entity to which such services are provided would not preclude
the Corporation from offering or selling securities to such person pursuant to
the Plan in reliance on a Form S-8 Registration Statement under the Securities
Act.
 
(k) “Corporation” means Perceptron, Inc. a Michigan corporation.
 
(l) “Deferred Stock Unit” means a bookkeeping entry representing a right granted
to a Participant pursuant to Article VII of the Plan to receive a share of
Common Stock on a date determined in accordance with the provisions of Article
VII of the Plan.
 
(m) “Director” means a member of the Corporation’s Board of Directors.
 
(n) “Director Fee Payment Date” shall mean each March 1, June 1, September 1 and
December 1.
 
(o) “Director Stock Purchase Right” means an election by a Director to purchase
Common Stock in accordance with Article VI of the Plan.

 
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(p) “Disability” means total and permanent disability, as defined in Code
Section 22(e).
 
(q) “Dividend Equivalent” means a credit, made at the discretion of the
Committee or as otherwise provided by the Plan, to the account of a Participant
in an amount equal to the cash dividends paid on one share of Common Stock for
each share of Common Stock represented by an Award held by such Participant.
 
(r) “Effective Date” means the day after the Plan is approved by shareholders of
the Corporation.
 
(s) “Employee” means an individual who has an “employment relationship” with the
Corporation or a Subsidiary, as defined in Treasury Regulation 1.421-7(h), and
the term “employment” means employment with the Corporation, or a Subsidiary of
the Corporation.
 
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time and any successor thereto.
 
(u) “Fair Market Value” means for purposes of determining the value of Common
Stock on the Grant Date:
 
(i) the final reported sales price (or, if there is no reported sale on such
date, the final reported sales price on the last preceding date for which such
reported sales price exists) of the Common Stock on the principal United States
securities exchange on which the Common Stock may at the time be listed on the
Grant Date; or
 
(ii) if the Common Stock is not listed on any domestic stock exchange, the
closing bid quotation with respect to a share as reported by the OTC Bulletin
Board on the Grant Date; or
 
(iii) if none of the foregoing clauses apply, the value as determined by the
Committee in accordance with Code Section 409A.
 
Unless otherwise specified in the Plan, “Fair Market Value” for purposes of
determining the value of Common Stock on the date of exercise means the
applicable definitions under (i)-(iii) above, substituting the date of exercise
for the Grant Date, unless otherwise required by applicable law.
 
(v) “Grant Date” means the date on which the Committee authorizes an individual
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Unit,
Performance Share Award, or a Director Fee Payment Date in the case of a
Director Stock Purchase Right, or such later date as shall be designated by the
Committee.
 
(w) “Incentive Stock Option” means an Option that is intended to meet the
requirements of Section 422 of the Code.
 
(x) “Nonqualified Stock Option” means an Option that is not intended to
constitute an Incentive Stock Option.

 
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(y) “Option” means either an Incentive Stock Option, a Nonqualified Stock
Option.
 
(z) “Participant” means an Employee or non-employee director or Consultant
designated by the Committee to participate in the Plan.
 
(aa) “Performance Measures” shall mean the measures of performance of the
Corporation and its Subsidiaries used to determine a Participant’s entitlement
to an award under the Plan. Performance Measures shall have the same meanings as
used in the Corporation’s financial statements, or, if such terms are not used
in the Corporation’s financial statements, they shall have the meaning applied
pursuant to generally accepted accounting principles, or as used generally in
the Corporation’s industry. Performance Measures shall be calculated with
respect to the Corporation and each Subsidiary consolidated therewith for
financial reporting purposes or such division or other business unit as may be
selected by the Committee. For purposes of the Plan, the Performance Measures
shall be calculated in accordance with generally accepted accounting principles,
but, unless otherwise determined by the Committee, prior to the accrual or
payment of any award under this Plan for the same performance period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the performance goals.
Performance Measures may be one or more of the following, or a combination of
the any of the following, as determined by the Committee:
 

(i)
 
revenue;
     
(ii)
 
gross margin;
     
(iii)
 
operating margin;
     
(iv)
 
operating income;
     
(v)
 
pre-tax profit;
     
(vi)
 
earnings before interest, taxes and depreciation;
     
(vii)
 
net income;
     
(viii)
 
cash flow;
     
(ix)
 
expenses;
     
(x)
 
the market price of the Common Stock;
     
(xi)
 
earnings per share;
     
(xii)
 
operating income per share
     
(xiii)
 
return on stockholder equity;
     
(xiv)
 
return on capital;

 
 
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(xv)
 
return on net assets;
     
(xvi)
 
economic value added;
     
(xvii)
 
market share;
     
(xviii)
 
return on investment;
     
(xix)
 
profit after tax;
     
(xx)
 
product approval;
     
(xxi)
 
market capitalization;
     
(xxii)
 
new products; and
     
(xxiii)
 
research and development activity.

 
Performance measures are required to be reapproved by shareholders of the
Corporation, to the extent required by Section 162(m) of the Code, which
currently requires such reapproval at the first shareholders meeting that occurs
in the fifth year following the Effective Date.
 
(bb) “Performance Share Award” means a performance share award that is granted
in accordance with Article V of the plan.
 
(cc) “Performance Share Award Unit” means a Performance Share Award described in
Section 5.2(d)(ii).
 
(dd) “Plan” means the First Amended and Restated Perceptron, Inc. 2004 Stock
Incentive Plan, the terms of which are set forth herein, and amendments thereto.
 
(ee) “Restriction Period” means the period of time during which a Participant’s
Restricted Stock or Restricted Stock Unit grant is subject to restrictions and
is nontransferable.
 
(ff) “Restricted Stock” means Common Stock that is subject to restrictions.
 
(gg) “Restricted Stock Unit” means a right granted pursuant to Article IV to
receive Restricted Stock or an equivalent value in cash pursuant to the terms of
the Plan and the related Agreement.
 
(hh) “Retirement” means termination of employment on or after the attainment of
age 65 and completion of three (3) years of service with the Corporation.
 
(ii) “Securities Act” means the Securities Act of 1933, as amended.
 
(jj) “Stock Appreciation Right” means the right to receive a cash or Common
Stock payment from the Corporation, in accordance with Article III of the Plan.
 
(kk) “Subsidiary” means a corporation or other entity defined in Code Section
424(f).

 
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(ll) “Tandem Stock Appreciation Right” means a Stock Appreciation Right granted
in tandem with an Option.
 
(mm) “Vested” means the extent to which an Option or Stock Appreciation Right
granted hereunder has become exercisable in accordance with this Plan and the
terms of the respective Agreement pursuant to which such Option or Stock
Appreciation Right was granted.
 
1.4 Administration.
 
(a) The Plan shall be administered by the Committee. At all times it is intended
that the directors appointed to serve on the Committee shall be “disinterested
persons” (within the meaning of Rule 16b-3 promulgated under the Exchange Act)
and “outside directors” (within the meaning of Code Section 162(m)); however,
the mere fact that a Committee member shall fail to qualify under either of
these requirements shall not invalidate any award made by the Committee if the
award is otherwise validly made under the Plan. The members of the Committee
shall be appointed by, and may be changed at any time and from time to time, at
the discretion of the Board.
 
(b) The Committee shall interpret the Plan, prescribe, amend, and rescind rules
and regulations relating to the Plan, and make all other determinations
necessary or advisable for its administration. The decision of the Committee on
any question concerning the interpretation of the Plan or its administration
with respect to any Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award or Deferred Stock Unit granted
under the Plan or any Director Stock Purchase Right shall be final and binding
upon all Participants. No member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any grant or
award hereunder.
 
(c) In addition to any other powers set forth in the Plan and subject to the
provisions of the Plan, but, in the case of Options, Stock Appreciation Rights
and other Awards designated as Awards under Code Section 162(m), subject to the
requirements of Code Section 162(m), the Committee shall have the full and final
power and authority, in its discretion:
 
(i) to the extent permitted under Code Section 409A, to amend, modify, extend,
cancel or renew any Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award, Deferred Stock Unit or Director
Stock Purchase Right or to waive any restrictions or conditions applicable to
any Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock
Unit, Performance Share Award, Deferred Stock Unit or Director Stock Purchase
Right or any shares acquired pursuant thereto;
 
(ii) to the extent permitted under Code Section 409A, to accelerate, continue,
extend or defer the exercisability or vesting of any Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Unit, Performance Share Award,
Deferred Stock Unit or Director Stock Purchase Right or any shares acquired
pursuant thereto, including with respect to the period following a Participant's
termination of employment with the Corporation;
 
(iii) to the extent permitted under Code Section 409A, to authorize, in
conjunction with any applicable deferred compensation plan of the Corporation,
that the receipt of cash or Common Stock subject to any Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit, Performance
Share Award, Deferred Stock Unit or Director Stock Purchase Right under this
Plan may be deferred under the terms and conditions of such deferred
compensation plan;

 
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(d) To the extent permitted under Code Section 409A and other applicable law,
the Committee may delegate to one or more officers of the Corporation or a
committee of such officers, the authority, subject to such terms and limitations
as the Committee shall determine, to grant Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Performance Share Awards and Deferred
Stock Units to, or to cancel, modify, waive rights with respect to, alter,
discontinue or terminate any of the foregoing, held by Participants who are not
officers or directors of the Corporation for purposes of Section 16 of the
Exchange Act.
 
1.5 Participants.  Participants in the Plan shall be such Employees (including
Employees who are directors), non-employee directors of, or Consultants to, the
Corporation and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee may grant Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Share Awards and
Deferred Stock Units to an individual upon the condition that the individual
become an Employee of the Corporation or of a Subsidiary, provided that the
Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Share Award or Deferred Stock Unit shall be deemed to be granted
only on the date that the individual becomes an Employee. Awards covered by Code
Section 162(m) shall be made to key Employees designated by the Committee.
 
1.6 Stock.  The Corporation has reserved 600,000 shares of the Corporation’s
Common Stock for issuance in conjunction with all Options and other stock-based
awards to be granted under the Plan. All of the 600,000 shares of the
Corporation’s Common Stock so reserved may be granted as ISOs. Shares subject to
any unexercised portion of a terminated, cancelled or expired Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit, or
Performance Share Award granted hereunder may again be subjected to grants and
awards under the Plan. In the event that an Option granted under the Plan is
exercised by delivering shares of Common Stock that previously were acquired by
exercising Options granted under the Plan, such shares of previously-acquired
Common Stock so delivered to the Corporation may again be subject to grants
under the Plan. Shares of Common Stock shall not be deemed to have been granted
pursuant to the Plan (a) with respect to any portion of an Award that is settled
in cash or (b) to the extent such shares are withheld in satisfaction of tax
withholding obligations pursuant to Section 10.6. Upon payment in shares of
Common Stock pursuant to the exercise of a Stock Appreciation Right, the number
of shares available for grant under the Plan shall be reduced only by the number
of shares actually issued in such payment. All provisions in this Section 1.6
shall be adjusted, as applicable, in accordance with Article VIII.
 
1.7 No Repricing. Without the affirmative vote of holders of a majority of the
shares of Common Stock cast in person or by proxy at a meeting of the
shareholders of the Corporation at which a quorum representing a majority of all
outstanding shares of Common Stock is present or represented by proxy, and
without complying with the requirements of Code Section 409A, the Board shall
not approve a program providing for either (a) the cancellation of outstanding
Options and/or Stock Appreciation Rights and the grant in substitution therefore
of any new awards under the Plan having a lower exercise price or (b) the
amendment of outstanding Options and/or Stock Appreciation Rights to reduce the
exercise price thereof. This paragraph shall not be construed to apply to
“issuing or assuming a stock option in a transaction to which section 424(a)
applies,” within the meaning of Section 424 of the Code.

 
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II. STOCK OPTIONS
 
2.1 Grant of Options. The Committee, at any time and from time to time, subject
to the terms and conditions of the Plan, may grant Options to such Participants
and for such number of shares of Common Stock (whole or fractional) as it shall
designate; provided, however, that no Participant may be granted Options during
any one fiscal year of the Corporation to purchase more than 200,000 shares of
Common Stock. Any Participant may hold more than one Option under the Plan and
any other Plan of the Corporation or Subsidiary. The Committee shall determine
the general terms and conditions of exercise, including any applicable vesting
requirements, which shall be set forth in a Participant’s Option Agreement. The
Committee may designate any Option granted as either an Incentive Stock Option
or a Nonqualified Stock Option, or the Committee may designate a portion of an
Option as an Incentive Stock Option or a Nonqualified Stock Option. At the
discretion of the Committee, an Option may be granted in tandem with a Stock
Appreciation Right. Options are intended to satisfy the requirements of Code
Section 162(m) and the regulations promulgated thereunder, to the extent
applicable. No Option shall be granted with an exercise term that extends beyond
ten (10) years from the Grant Date.
 
2.2 Incentive Stock Options. Any Option intended to constitute an Incentive
Stock Option shall comply with the requirements of this Section 2.2. An
Incentive Stock Option may only be granted to an Employee. No Incentive Stock
Option shall be granted with an exercise price below the Fair Market Value of
Common Stock on the Grant Date nor with an exercise term that extends beyond ten
(10) years from the Grant Date. An Incentive Stock Option shall not be granted
to any Participant who owns (within the meaning of Code Section 424(d)) stock of
the Corporation or any Subsidiary possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation or a Subsidiary unless,
at the Grant Date, the exercise price for the Option is at least 110% of the
Fair Market Value of the shares subject to the Option and the Option, by its
terms, is not exercisable more than five (5) years after the Grant Date. The
aggregate Fair Market Value of the underlying Common Stock (determined at the
Grant Date) as to which Incentive Stock Options granted under the Plan
(including a plan of a Subsidiary) may first be exercised by a Participant in
any one calendar year shall not exceed $100,000. To the extent that an Option
intended to constitute an Incentive Stock Option shall violate the foregoing
$100,000 limitation (or any other limitation set forth in Code Section 422), the
portion of the Option that exceeds the $100,000 limitation (or violates any
other Code Section 422 limitation) shall be deemed to constitute a Nonqualified
Stock Option.
 
2.3 Option Price. The Committee shall determine the per share exercise price for
each Option granted under the Plan; provided, however, that the option price of
an option shall not be less than 100% of the Fair Market Value of the shares of
Common Stock covered by the Option on the Grant Date. Notwithstanding the
foregoing, an Option may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying under Code
Section 424(a) and/or Code Section 409A. The option price will be subject to
adjustment in accordance with the provisions of Section 9.1 of this Plan.

 
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2.4 Payment for Option Shares. The purchase price for shares of Common Stock to
be acquired upon exercise of an Option granted hereunder shall be paid in full
in cash or by personal check, bank draft or money order at the time of exercise;
provided that the Committee may (but is not obligated to) permit payment to be
made by (a) delivery to the Corporation of outstanding shares of Common Stock on
such terms and conditions as may be specified in the optionee’s Agreement, (b)
by delivery to the Corporation of a properly executed exercise notice,
acceptable to the Corporation, together with irrevocable instructions to the
Participant’s broker to deliver to the Corporation sufficient cash to pay the
exercise price and any applicable income and employment withholding taxes, in
accordance with a written agreement between the Corporation and the brokerage
firm (“cashless exercise procedure”), (c) other means determined by the
Committee, or (d) any combination of the foregoing. Shares of Common Stock
surrendered upon exercise shall be valued at Fair Market Value as of the date of
exercise, and the certificate(s) for such shares, duly endorsed for transfer or
accompanied by appropriate stock powers, shall be surrendered to the
Corporation. Participants who are subject to short swing profit restrictions
under the Exchange Act and who exercise an Option by tendering
previously-acquired shares shall do so only in accordance with the provisions of
Rule 16b-3 of the Exchange Act. Notwithstanding the foregoing, an Option may not
be exercised by delivery to the Corporation of shares of Common Sock to the
extent such delivery would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Corporation’s stock.
Until the optionee has been issued a certificate or certificates for the shares
of Common Stock so purchased, he or she shall possess no rights as a record
holder with respect to any such shares. In the event any Common Stock is
delivered to or retained by the Corporation to satisfy all or any part of the
purchase price, the part of the purchase price deemed to have been satisfied by
such Common Stock shall be equal to the product derived by multiplying the Fair
Market Value as of the date of exercise times the number of shares of Common
Stock delivered to or retained by the Corporation. The number of shares of
Common Stock delivered to or retained by the Corporation in satisfaction of the
purchase price shall not be a number which when multiplied by the Fair Market
Value as of the date of exercise would result in a product greater than the
purchase price. No fractional shares of Common Stock shall be delivered to or
retained by the Corporation in satisfaction of the purchase price. In the event
that an optionee exercises both an Incentive Stock Option and a Nonqualified
Stock Option, separate share certificates shall be issued for shares acquired
pursuant to the Incentive Stock Option and for shares acquired pursuant to the
Nonqualified Stock Option.
 
III. STOCK APPRECIATION RIGHTS
 
3.1 Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted, held and exercised in such form and upon such general terms and
conditions as determined by the Committee on an individual basis. A Stock
Appreciation Right may be granted to a Participant with respect to such number
of shares of Common Stock of the Corporation as the Committee may determine;
provided, however, that no Participant may be granted a Stock Appreciation Right
during any one fiscal year of the Corporation for more than 200,000 shares of
Common Stock. A Stock Appreciation Right may be granted on a stand-alone basis
or as a Tandem Stock Appreciation Right. If a Tandem Stock Appreciation Right,
the number of shares covered by the Stock Appreciation Right shall not exceed
the number of shares of stock which the Participant could purchase upon the
exercise of the related Option. Stock Appreciation Rights are intended to
satisfy the requirements of Code Section 162(m) and the regulations promulgated
thereunder, to the extent applicable. No Stock Appreciation Right shall be
granted with an exercise term that extends beyond ten (10) years from the Grant
Date.
 
3.2 Exercise Price. The Committee shall determine the per share exercise price
for each Stock Appreciation Right granted under the Plan; provided, however,
that (i) the exercise price of a Stock Appreciation Right shall not be less than
100% of the Fair Market Value of the shares of Common Stock covered by the Stock
Appreciation Right on the Date such Stock Appreciation Right is granted; and
(ii) the per share exercise price subject to a Tandem Stock Appreciation Right
shall be the per share exercise price under the related Option.

 
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3.3 Exercise of Stock Appreciation Rights. A Stock Appreciation Right shall be
deemed exercised upon receipt by the Corporation of written notice of exercise
from the Participant. Except as permitted under Rule 16b-3, notice of exercise
of a Stock Appreciation Right by a Participant subject to the insider trading
restrictions of Section 16(b) of the Securities Exchange Act of 1934, shall be
limited to a period determined by the Committee or, if no period is so
determined, the period beginning on the second day following the release of the
Corporation’s quarterly or annual summary of earnings and ending on the 15th day
of the third month of the calendar quarter in which such release is made. The
exercise term of each Stock Appreciation Right shall be limited to such period
as set by the Committee or in a related Option. If a Tandem Stock Appreciation
Right, a Stock Appreciation Right shall be exercisable only at such times and in
such amounts as the related Option may be exercised. A Tandem Stock Appreciation
Right shall terminate and cease to be exercisable no later than the date on
which the related Option expires or is terminated or canceled. Upon the exercise
of a Tandem Stock Appreciation Right with respect to some or all of the shares
subject to such Stock Appreciation Right, the related Option shall be canceled
automatically as to the number of shares with respect to which the Tandem Stock
Appreciation Right was exercised. Upon the exercise of an Option related to a
Tandem Stock Appreciation Right as to some or all of the shares subject to such
Option, the related Tandem Stock Appreciation Right shall be canceled
automatically as to the number of shares with respect to which the related
Option was exercised.
 
3.4 Stock Appreciation Right Entitlement. Upon exercise of a Stock Appreciation
Right, a Participant shall be entitled to payment from the Corporation, in cash,
shares of Common Stock, or partly in each (as determined by the Committee in
accordance with any applicable terms of the Agreement), of an amount equal to
the difference between the aggregate Fair Market Value on the date of exercise
for the specified number of shares being exercised and the aggregate exercise
price of the Stock Appreciation Right being exercised. If the Stock Appreciation
Right is granted in tandem with an Option, the payment shall be equal to the
difference between:
 
(a) the Fair Market Value of the number of shares subject to the Stock
Appreciation Right on the exercise date; and
 
(b) the option price of the associated Option multiplied by the number of shares
available under the Option.
 
3.5 Maximum Stock Appreciation Right Amount Per Share. The Committee may, at its
sole discretion, establish (at the time of grant) a maximum amount per share
which shall be payable upon the exercise of a Stock Appreciation Right,
expressed as a dollar amount or as a percentage or multiple of the Option price
of a related Option.
 
IV. RESTRICTED STOCK GRANTS AND UNITS
 
4.1 Grant of Restricted Stock and Restricted Stock Units. Subject to the terms
and conditions of the Plan, the Committee, at any time and from time to time,
may grant shares of Restricted Stock and Restricted Stock Units under this Plan
to such Participants and in such amounts as it shall determine.
 
4.2 Restricted Stock Agreement. Each grant of Restricted Stock or Restricted
Stock Units shall be evidenced by an Agreement that shall specify the terms of
the restrictions, including the Restriction Period, or periods, the number of
Common Stock shares subject to the grant or units, the purchase price for the
shares of Restricted Stock, if any, the form of consideration that may be used
to pay the purchase price of the Restricted Stock, including those specified in
Section 2.4, and such other general terms and conditions, including performance
goals, as the Committee shall determine.

 
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4.3 Transferability. Except as provided in this Article X, Section 10.4 or
Section 10.5 of the Plan, the shares of Common Stock subject to a Restricted
Stock grant or Restricted Stock Unit hereunder may not be transferred, pledged,
assigned, or otherwise alienated or hypothecated until the termination of the
applicable Restriction Period or for such period of time as shall be established
by the Committee and as shall be specified in the applicable Agreement, or upon
the earlier satisfaction of other conditions as specified by the Committee in
its sole discretion and as set forth in the applicable Agreement.
 
4.4 Other Restrictions. The Committee shall impose such other restrictions on
any shares of Common Stock subject to a Restricted Stock grant or Restricted
Stock Unit under the Plan as it may deem advisable including, without
limitation, restrictions under applicable federal or state securities laws, and
may legend the certificates representing such shares to give appropriate notice
of such restrictions.
 
4.5 Certificate Legend. In addition to any legends placed on certificates
pursuant to Sections 4.3 and 4.4, each certificate representing shares of Common
Stock subject to a Restricted Stock grant or Restricted Stock Unit shall bear
the following legend:
 
The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject
to certain restrictions on transfer set forth in the First Amended and Restated
Perceptron, Inc. 2004 Stock Incentive Plan (“Plan”), rules and administrative
guidelines adopted pursuant to such Plan and an Agreement dated
                            . A copy of the Plan, such rules and such Agreement
may be obtained from the Secretary of Perceptron, Inc.
 
4.6 Removal of Restrictions. Except as otherwise provided in this Article IV of
the Plan, and subject to applicable federal and state securities laws, shares of
Common Stock subject to a Restricted Stock grant or Restricted Stock Unit under
the Plan shall become freely transferable by the Participant after the last day
of the Restriction Period. Once the shares are released from the restrictions,
the Participant shall be entitled to have the legend required by Section 4.5 of
the Plan removed from the applicable Common Stock certificate. Provided further,
except as set forth in Section 4.9, the Committee shall have the discretion to
waive the applicable Restriction Period with respect to all or any part of the
Common Stock subject to a Restricted Stock grant or Restricted Stock Unit.
 
4.7 Voting Rights.  
 
(a) During the Restriction Period, Participants holding shares of Common Stock
subject to a Restricted Stock grant hereunder may exercise full voting rights
with respect to the Restricted Stock.
 
(b) Participants shall have no voting rights with respect to shares of Common
Stock represented by Restricted Stock Units until the date of the issuance of
such shares (as evidenced by the appropriate entry on the books of the
Corporation or of a duly authorized transfer agent of the Corporation).

 
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4.8 Dividends and Other Distributions. 
 
(a) Except as otherwise provided in Section 4.9 or in the Participant’s
Agreement, during the Restriction Period, a Participant shall be entitled to
receive all dividends and other distributions paid with respect to shares of
Common Stock subject to a Restricted Stock grant. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Common Stock with respect to
which they were paid.
 
(b) The Committee, in its discretion, may provide in the Agreement evidencing
any Restricted Stock Unit that the Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Common
Stock having a record date prior to date on which Restricted Stock Units held by
such Participant are settled. Such Dividend Equivalents, if any, shall be paid
by crediting the Participant with additional whole Restricted Stock Units as of
the date of payment of such cash dividends on Common Stock. The number of
additional Restricted Stock Units (rounded to the nearest whole number) to be so
credited shall be determined by dividing (a) the amount of cash dividends paid
on such date with respect to the number of shares of Common Stock represented by
the Restricted Stock Units previously credited to the Participant by (b) the
Fair Market Value per share of Common Stock on such date. Such additional
Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter
as practicable) as the Restricted Stock Units originally subject to the
Restricted Stock Unit. In the event of a dividend or distribution paid in shares
of Common Stock or any other adjustment made upon a change in the capital
structure of the Corporation as described in Section 9.1, appropriate
adjustments shall be made in the Participant's Restricted Stock Unit so that it
represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant would be entitled by reason of the shares of Common Stock
issuable upon settlement of the Restricted Stock Unit, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same restrictions as are applicable to the Restricted Stock Unit.
 
4.9 Restricted Stock Grants and Units Under Code Section 162(m). The Committee,
at its discretion, may designate certain Restricted Stock grants or Restricted
Stock Units as being granted pursuant to Code Section 162(m). Such Restricted
Stock and Restricted Stock Units must comply with the following additional
requirements, which override any other provision set forth in this Article IV:
 
(a) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit
shall be based upon pre-established, objective performance goals that are
intended to satisfy the performance-based compensation requirements of Code
Section 162(m) and the regulations promulgated thereunder. Further, at the
discretion of the Committee, a Restricted Stock Award or Restricted Stock Unit
also may be subject to goals and restrictions in addition to the performance
requirements.
 
(b) Each Code Section 162(m) Restricted Stock Award or Restricted Stock Unit
shall be based upon the attainment of specified levels of Corporation or
Subsidiary performance during a specified performance period, as measured by any
or all of the Performance Measures.

 
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(c) For each designated performance period, the Committee shall (i) select those
Employees who shall be eligible to receive a Restricted Stock Award or
Restricted Stock Unit, (ii) determine the performance period, which may be a one
to five fiscal year period, (iii) determine the target levels of Corporation or
Subsidiary performance, and (iv) determine the number of shares subject to a
Restricted Stock Award or Restricted Stock Unit to be paid to each selected
Employee. Unless otherwise permitted in compliance with the requirements under
Section 162(m) with respect to “performance-based compensation,” the Committee
shall establish the performance goal(s) applicable to each Restricted Stock
grant or Restricted Stock Unit no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable performance period or (b) the
date on which 25% of the performance period has elapsed, and, in any event, at a
time when the outcome of the performance goals remains substantially uncertain,
or such other period as is permitted by Code Section 162(m).
 
(d) For each performance period, the Committee shall certify, in writing: (i) if
the Corporation has attained the performance targets, and (ii) the number of
shares pursuant to the Code Section 162(m) Restricted Stock Award or Restricted
Stock Unit that are to become freely transferable. The Committee shall have no
discretion to waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Code Section 162(m)
Restricted Stock Award or Restricted Stock Unit. Any certificate for shares
under a Code Section 162(m) Restricted Stock Unit shall be issued only after the
Committee certifies in writing that the performance goals and restrictions have
been satisfied.
 
(e) No shares under a Code Section 162(m) Restricted Stock Award or Restricted
Stock Unit shall become transferable until the Committee certifies in writing
that the performance goals and restrictions have been satisfied. Any dividends
paid during the Restriction Period automatically shall be reinvested on behalf
of the Employee in additional shares of Common Stock under the Plan, and such
additional shares shall be subject to the same performance goals and
restrictions as the other shares under the Code Section 162(m) Restricted Stock
Award or Restricted Stock Unit.
 
(f) Except as otherwise provided in this Article X, Section 10.4 and Section
10.5 of the Plan, and subject to applicable federal and state securities laws,
shares covered by each Code Section 162(m) Restricted Stock Award or Restricted
Stock Unit made under the Plan may not be transferred, pledged, assigned, or
otherwise alienated or hypothecated until the applicable performance targets and
other restrictions are satisfied, as shall be certified in writing by the
Committee. At such time, shares covered by the Code Section 162(m) Restricted
Stock Award or Restricted Stock Unit shall become freely transferable by the
Employee. Once the shares are released from the restrictions, the Employee shall
be entitled to have the legend required by Section 4.5 of the Plan removed from
the applicable Common Stock certificate.
 
(g) No Participant may be granted a Code Section 162(m) Restricted Stock Award
or Restricted Stock Units during any one fiscal year of the Corporation for more
than 200,000 shares of Common Stock.
 
4.10 Settlement of Restricted Stock Unit Awards. If a Restricted Stock Unit is
payable in Common Stock, the Corporation shall issue to a Participant on the
date on which Restricted Stock Units subject to the Participant's Restricted
Stock Unit vest, one (1) share of Common Stock (and/or any other new,
substituted or additional securities or other property pursuant to an adjustment
described in Section 4.8 or Section 9.1) for each Restricted Stock Unit then
becoming vested or otherwise to be settled on such date, subject to the
withholding of applicable taxes.

 
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V. PERFORMANCE SHARE AWARDS
 
5.1 Grant of Performance Share Awards. The Committee, at its discretion, may
grant Performance Share Awards to Participants and may determine, on an
individual or group basis, the performance goals to be attained pursuant to each
Performance Share Award.
 
5.2 Terms of Performance Share Awards.  
 
(a) Performance Share Awards shall consist of rights to receive cash, Common
Stock or a combination of each, if designated performance goals are achieved.
 
(b) The terms of a Participant’s Performance Share Award shall be set forth in
his or her individual Performance Share Agreement. Each Agreement shall specify
the performance goals applicable to a particular Participant or group of
Participants, the period over which the targeted goals are to be attained, the
payment schedule if the goals are attained, and any other general terms and
conditions applicable to an individual Performance Share Award as the Committee
shall determine.
 
(c) Except as set forth in Section 5.3 of the Plan, the Committee, at its
discretion, may waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance Share
Award.
 
(d) Performance Share Awards may be granted in two different forms, at the
discretion of the Committee as follows:
 
(i) Under one form, the Participant shall receive a Performance Share Award that
consists of a legended certificate of Common Stock, restricted from transfer
prior to the satisfaction of the designated performance goals and restrictions,
as determined by the Committee and specified in the Participant’s Performance
Share Agreement.
 
(ii) Under the second form (a “Performance Share Award Unit”), the Participant
shall receive a Performance Share Agreement from the Committee that specifies
the performance goals and restrictions that must be satisfied before the
Corporation shall issue the payment, which may be cash, a designated number of
shares of Common Stock or a combination of the two.
 
(e) Each certificate representing shares under a Performance Share Award shall
bear the following legend:
 
The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is subject
to certain restrictions on transfer set forth in the First Amended and Restated
Perceptron, Inc. 2004 Stock Incentive Plan (“Plan”), rules and administrative
guidelines adopted pursuant to such Plan and a Performance Share Agreement dated
                             . A copy of the Plan, such rules and such
Performance Share Agreement may be obtained from the Secretary of Perceptron,
Inc.

 
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(f) In its discretion, the Committee may, either at the time it grants a
Performance Share Award or at any time thereafter, provide for the positive or
negative adjustment of the performance goals applicable to a Performance Share
Award granted to any Participant whose Performance Share Award has not been
designated as a Code Section 162(m) Performance Share Award to reflect such
Participant's individual performance in his or her position with the Corporation
or such other factors as the Committee may determine.
 
(g) Notwithstanding any other provision in this Plan, including Section 5.3, the
Performance Share Award shall be paid to the Participant within thirty (30) days
after the Committee certifies that the performance goals and restrictions
relating to the Performance Share Award have been satisfied.
 
(h) If payment is to be made in shares of Common Stock, the number of such
shares shall be determined by dividing the final value of the Performance Share
Award by the value of a share of Common Stock determined by the method specified
in the Agreement.
 
(i) Participants holding Performance Share Awards or Performance Share Award
Units shall have the same voting rights and rights to dividends and other
distributions as would Participants holding Restricted Stock or Restricted Stock
Units under Article IV.
 
5.3 Performance Share Awards Granted Under Code Section 162(m). The Committee,
at its discretion, may designate certain Performance Share Awards as granted
pursuant to Code Section 162(m). Such Performance Share Awards must comply with
the following additional requirements, which, except for Section 5.2(g),
override any other provision set forth in this Article V:
 
(a) The Committee, at its discretion, may grant Code Section 162(m) Performance
Share Awards based upon pre-established, objective performance goals that are
intended to satisfy the performance-based compensation requirements of Code
Section 162(m) and the regulations promulgated thereunder. Further, at the
discretion of the Committee, a Performance Share Award also may be subject to
goals and restrictions in addition to the performance requirements.
 
(b) Each Code Section 162(m) Performance Share Award shall be based upon the
attainment of specified levels of Corporation or Subsidiary performance during a
specified performance period, as measured by any or all of the Performance
Measures.
 
(c) For each designated performance period, the Committee shall (i) select those
Employees who shall be eligible to receive a Code Section 162(m) Performance
Share Award, (ii) determine the performance period, which may be a one to five
fiscal year period, (iii) determine the target levels of Corporation or
Subsidiary performance, and (iv) determine the Performance Share Award to be
paid to each selected Employee. Unless otherwise permitted in compliance with
the requirements under Section 162(m) with respect to “performance-based
compensation,” the Committee shall establish the performance goal(s) applicable
to each Performance Share Award no later than the earlier of (a) the date ninety
(90) days after the commencement of the applicable performance period or (b) the
date on which 25% of the performance period has elapsed, and, in any event, at a
time when the outcome of the performance goals remains substantially uncertain,
or such other period as is permitted by Code Section 162(m).

 
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(d) For each performance period, the Committee shall certify, in writing: (i) if
the Corporation has attained the performance targets; and (ii) the cash or
number of shares (or combination thereof) pursuant to the Code Section 162(m)
Performance Share Award that shall be paid to each selected Employee (or the
number of shares that are to become freely transferable, if a Code Section
162(m) Performance Share Award is granted subject to attainment of the
designated performance goals). The Committee shall have no discretion to waive
all or part of the conditions, goals and restrictions applicable to the receipt
of full or partial payment of a Code Section 162(m) Performance Share Award. Any
certificate for shares under a Code Section 162(m) Performance Share Award Unit
shall be issued only after the Committee certifies in writing that the
performance goals and restrictions have been satisfied.
 
(e) No shares under a Code Section 162(m) Performance Share Award shall become
transferable until the Committee certifies in writing that the performance goals
and restrictions have been satisfied.
 
(f) Except as otherwise provided in this Article V or Section 10.4 of the Plan,
and subject to applicable federal and state securities laws, shares covered by
each Code Section 162(m) Performance Share Award made under the Plan may not be
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
applicable performance targets and other restrictions are satisfied, as shall be
certified in writing by the Committee. At such time, shares covered by the Code
Section 162(m) Performance Share Award shall become freely transferable by the
Participant. Once the shares are released from the restrictions, the Employee
shall be entitled to have the legend required by Section 5.2(e) removed from the
applicable Common Stock certificate.
 
(g) Participants holding Code Section 162(m) Performance Awards or Performance
Share Award Units shall have the same voting rights and rights to dividends and
other distributions as would Participants holding Code Section 162(m) Restricted
Stock or Restricted Stock Units under Article IV.
 
(h) No Participant may be granted a Code Section 162(m) Performance Share Award
during any one fiscal year for more than 200,000 shares of Common Stock, except
that if a Performance Share Award Unit payout is not based upon a set number of
shares of Common Stock for achievement of the performance goals, then no
Employee may receive a Code Section 162(m) Performance Share Award Unit which
could result in such Employee receiving more than Five Hundred Thousand Dollars
($500,000) for each fiscal year of the Corporation contained in the performance
period for such Award. No Employee may be granted more than one Performance
Share Award for the same performance period.
 
(i) If permitted under the Employee’s Agreement, the Committee shall have the
discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of the Code Section 162(m)
Performance Share Award that would otherwise be paid to the Employee upon its
settlement notwithstanding the attainment of any performance goal. No such
reduction may result in an increase in the amount payable upon settlement of
another Participant's Code Section 162(m) Performance Share Award.
 
VI. DIRECTOR STOCK PURCHASE RIGHTS
 
6.1 Eligibility. A Director of the Corporation may elect to purchase shares of
Common Stock under the Plan using all or a portion of his or her cash fees
received for services as a director of the Corporation for which the Director
has not yet received payment (including but not limited to, quarterly retainer
and Board/Committee meeting fees).

 
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6.2 Elections. Elections to purchase Common Stock under the Plan in lieu of cash
compensation may be submitted to the Corporation annually, prior to the end of
December of each calendar year or such other period established by the
Committee. An election shall cover director cash compensation payable in the
next calendar year.
 
6.3 Purchase Price. Common Stock purchased by a Director hereunder shall have a
purchase price equal to 100% of the Fair Market Value of the Corporation’s
Common Stock on the first day of the month in which the quarterly Director Fee
Payment Date falls.
 
6.4 Termination of Services. If a Director ceases to remain on the Board for any
reason, including but not limited to, voluntary or forced resignation, removal,
failure to be re-elected as a director, death, Disability or retirement, the
Director (or executor, administrator or legal representative, if applicable)
shall receive share certificates for all cash director fees earned prior to the
Director’s departure from the Board for which the Director elected to receive
Common Stock pursuant to this Article VI, but for which the Director has not yet
received a share certificate. Such share certificates shall be issued following
the next quarterly Director Fee Payment Date.
 
6.5 Non-Assignability. Any Common Stock purchase right granted hereunder shall
be exercised by the Director only and is nontransferable. Upon the death of a
Director, any earned, but unpaid cash director fees for which the Director
elected to receive Common Stock pursuant to this Article VI, shall be paid in
the form of share certificates to the Director’s executor, administrator or
legal representative in accordance with Section 6.4 above.
 
6.6 Adjustments. The total amount of Common Stock to be received by a Director
at the time of any issuance of a share certificate shall be appropriately
adjusted for any increase or decrease in the number of outstanding shares of
Common Stock resulting from stock dividends, stock splits, recapitalizations,
reorganizations, mergers, combinations, exchanges or other relevant changes in
the capital structure of the Corporation occurring from the Director Fee Payment
Date on which such shares of Common Stock were earned to the date of issuance of
the share certificate for such shares. The foregoing adjustments and the manner
of application of the foregoing provisions shall be determined by the Board in
its sole discretion.
 
6.7 Rule 16b-3 Requirements. Notwithstanding any provision of the Plan, the
Committee may impose such conditions on the purchase of shares of Common Stock
hereunder as may be required to satisfy the requirements of Rule 16b-3 of the
Exchange Act, as amended from time to time (or any successor rule).
Notwithstanding any provision in the Plan to the contrary, the Committee shall
have no discretion with respect to the terms of purchase made pursuant to this
Article VI, except to the extent such discretion would not result in the
purchase or the Plan failing to qualify for the exemption provided under Rule
16b-3.
 
6.8 Delivery of Shares; Rights Prior to Delivery of Shares. By December 15th of
each year, Directors electing to receive Common Stock will receive share
certificates for shares earned during the year. A Director may request to
receive Common Stock at any or each quarterly Director Fee Payment Date for the
year in which the shares were earned. No Participant shall have any rights as a
shareholder with respect to shares of Common Stock covered by a purchase right
until the issuance of a stock certificate. No adjustment shall be made for
dividends or other rights with respect to such shares for which the record date
is prior to the date the certificate is issued.

 
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VII. DEFERRED STOCK UNITS
 
7.1 Establishment of Deferred Stock Unit Program. The Committee, in its
discretion and upon such terms and conditions as it may determine, may establish
one or more programs pursuant to the Plan under which, subject to the
requirements of Code Section 409A, Participants designated by the Committee who
are among a select group of management or highly compensated Employees may
irrevocably elect, prior to a date specified by the Committee but no later than
the close of the Corporation’s taxable year immediately preceding the first
taxable year of the Corporation in which any services are performed for which
such compensation is payable, to reduce such Participant's compensation
otherwise payable in cash (subject to any minimum or maximum reductions imposed
by the Committee) and to be granted automatically at such time or times as
specified by the Committee one or more awards of Deferred Stock Units with
respect to such numbers of shares of Common Stock as determined in accordance
with the rules of the program established by the Committee and having such other
terms and conditions as established by the Committee.
 
7.2 Terms and Conditions of Deferred Stock Units. Deferred Stock Units granted
pursuant to this Section 7.2 shall be evidenced by Agreements in such form as
the Committee shall from time to time establish. No such Deferred Stock Unit or
purported Deferred Stock Unit shall be a valid and binding obligation of the
Corporation unless evidenced by a fully executed Agreement. Agreements
evidencing Deferred Stock Units may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:
 
(a) Deferred Stock Units shall not be subject to any vesting conditions.
 
(b) Participants shall have no voting rights with respect to shares of Common
Stock represented by Deferred Stock Units until the date of the issuance of such
shares (as evidenced by the appropriate entry on the books of the Corporation or
of a duly authorized transfer agent of the Corporation). However, a Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of
cash dividends on Common Stock having a record date prior to date on which
Deferred Stock Units held by such Participant are settled. Such Dividend
Equivalents shall be paid by crediting the Participant with additional whole
and/or fractional Deferred Stock Units as of the date of payment of such cash
dividends on Common Stock. The method of determining the number of additional
Deferred Stock Units to be so credited shall be specified by the Committee and
set forth in the Agreement. Such additional Deferred Stock Units shall be
subject to the same terms and conditions and shall be settled in the same manner
and at the same time (or as soon thereafter as practicable) as the Deferred
Stock Units originally subject to the Deferred Stock Unit award. In the event of
a dividend or distribution paid in shares of Common Stock or any other
adjustment made upon a change in the capital structure of the Corporation as
described in Section 9.1, appropriate adjustments shall be made in the
Participant's Deferred Stock Unit so that it represents the right to receive
upon settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would be
entitled by reason of the shares of Common Stock issuable upon settlement of the
award.

 
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(c) A Participant electing to receive an award of Deferred Stock Units pursuant
to this Section 7.2, shall specify at the time of such election that is made in
accordance with the requirements of Section 7.1(a), a payment date with respect
to such Deferred Stock Unit. The Corporation shall issue to the Participant
within sixty (60) days following the earlier of the payment date elected by the
Participant or the date of termination of the Participant's employment (as long
as the termination of employment qualifies as a “separation from service” under
Code Section 409A) a number of whole shares of Common Stock equal to the number
of whole Deferred Stock Units subject to the Deferred Stock Unit Award. Such
shares of Common Stock shall be fully vested, and the Participant shall not be
required to pay any additional consideration (other than applicable tax
withholding) to acquire such shares. Any fractional Deferred Stock Unit subject
to the Deferred Stock Unit Award shall be settled by the Corporation by payment
in cash of an amount equal to the Fair Market Value as of the payment date of
such fractional share.
 
(d) If the Participant makes a subsequent election to defer or change the form
of payment of his or her Deferred Stock Units (1) such election shall not take
effect until at least twelve (12) months after the date on which the election is
made and (ii) the payment of Deferred Stock Units that are subject to this
subsequent election to defer or change in form of payment shall be paid no
earlier than five (5) years from the date such payment would otherwise have been
paid (or in the case of an installment payment, five (5) years from the date the
first amount was scheduled to be paid).

 
VIII. TERMINATION OF EMPLOYMENT OR SERVICES
 
8.1 Options and Stock Appreciation Rights.
 
(a) If, prior to the date that an Option or Stock Appreciation Right first
becomes Vested, a Participant terminates employment or services for any reason,
the Participant’s right to exercise the Option or Stock Appreciation Right shall
terminate and all rights thereunder shall cease.
 
(b) If, on or after the date that an Option or Stock Appreciation Right first
becomes Vested, a Participant terminates employment or services for any reason
other than death or Disability, the Participant shall have the right within the
period specified in the Participant’s Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant’s termination of employment or services, subject to any
other limitation on the exercise of the Option or Stock Appreciation Right in
effect on the date of exercise; provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than three months after a Participant’s termination of
employment.
 
(c) If, on or after the date that an Option or Stock Appreciation Right first
becomes Vested, a Participant terminates employment or services due to death
while an Option or Stock Appreciation Right is still exercisable, the person or
persons to whom the Option or Stock Appreciation Right shall have been
transferred by will or by the laws of descent and distribution, shall have the
right within the exercise period specified in the Participant’s Agreement to
exercise the Option or Stock Appreciation Right to the extent that it was
exercisable and unexercised on the Participant’s date of death, subject to any
other limitation on exercise in effect on the date of exercise; provided,
however, that the beneficial tax treatment of an Incentive Stock Option may be
forfeited if the Option is exercised more than one year after a Participant’s
date of death. If the Participant dies after termination of employment or
services while the Option or Stock Appreciation Right is still exercisable, the
Option or Stock Appreciation Right shall be exercisable in accordance with the
terms of paragraph (c) above.

 
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(d) If, on or after the date that an Option or Stock Appreciation Right first
becomes Vested, a Participant terminates employment or services due to
Disability, the Participant shall have the right, within the exercise period
specified in the Participant’s Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
date of the Participant’s termination of employment or services, subject to any
other limitation on the exercise of the Option or Stock Appreciation Right in
effect on the date of exercise; provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than one year after a Participant’s termination of employment due
to Disability.
 
(e) Subject to Code Section 409A, the Committee may designate in a Participant’s
Agreement that an Option or Stock Appreciation Right shall terminate at an
earlier or later time than set forth above.
 
(f) Subject to Code Section 409A, the Committee, at the time of a Participant’s
termination of employment or services, may accelerate a Participant’s right to
exercise an Option or extend the exercise period of an Option or Stock
Appreciation Right (but in no event past the tenth anniversary of the Grant Date
of such Option or Stock Appreciation Right); provided, however that the
extension of the exercise period for an Incentive Stock Option may cause such
Option to forfeit its preferential tax treatment.
 
(g) Shares subject to Options and Stock Appreciation Rights that are not
exercised in accordance with the provisions of paragraph (a) through (f) above
shall expire and be forfeited by the Participant as of their expiration date
and, subject to Section 1.6, shall become available for new grants and awards
under the Plan as of such date.
 
8.2 Restricted Stock Grants and Units. If a Participant terminates employment or
services for any reason, the Participant’s rights to shares of Common Stock
subject to a Restricted Stock grant or Restricted Stock Unit that are still
subject to the Restriction Period automatically shall terminate and be forfeited
by the Participant (or, if the Participant was required to pay a purchase price
for the Restricted Stock, other than the performance of services, the
Corporation shall have the option to repurchase for the purchase price paid by
the Participant any shares acquired by the Participant which are still subject
to the Restriction Period) and, subject to Section 1.6, said shares shall be
available for new grants and awards under the Plan as of such termination date;
provided, however, that the Committee, in its sole discretion and in accordance
with Code Section 409A, may include a provision in a Participant’s Restricted
Stock or Restricted Stock Unit Agreement providing for the continuation of a
Restricted Stock grant or Restricted Stock Unit after a Participant terminates
employment or services or waiving or changing the remaining restrictions or
adding additional restrictions with respect to any Restricted Stock grant or
Restricted Stock Unit that would otherwise be forfeited, as it deems
appropriate, or may otherwise waive or change all or part of the remaining
restrictions or add additional restrictions to any such Restricted Stock grant
or Restricted Stock Unit. Notwithstanding the foregoing, the Committee shall not
waive any restrictions on a Code Section 162(m) Restricted Stock Award or
Restricted Stock Unit, but the Committee may include a provision in an
Employee’s Code Section 162(m) Restricted Stock or Restricted Stock Unit
Agreement stating that upon the Employee’s termination of employment due to (i)
death or (ii) Disability prior to the attainment of the associated performance
goals and the termination of the Restriction Period, that the performance goals
and restrictions shall be deemed to have been satisfied on terms determined by
the Committee.

 
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8.3 Performance Shares. Performance Share Awards shall expire and be forfeited
by a Participant upon the Participant’s termination of employment or services
for any reason, and, subject to Section 1.6, such shares shall be available for
new grants and awards under the Plan as of such termination date; provided,
however, that the Committee, in its discretion and in accordance with Code
Section 409A, may include a provision in a Participant’s Performance Share Award
Agreement providing for the continuation of a Performance Share Award after a
Participant terminates employment or services or waiving or changing all or part
of the conditions, goals and restrictions applicable to the receipt of full or
partial payment of a Performance Share Award or may otherwise waive or change
all or part of the conditions, goals and restrictions applicable to such
Performance Share Award. Notwithstanding the foregoing, the Committee shall not
waive any restrictions on a Code Section 162(m) Performance Share Award, but the
Committee may include a provision in an Employee’s Code Section 162(m)
Performance Share Agreement stating that upon the Employee’s termination of
employment due to (i) death or (ii) Disability prior to the attainment of the
associated performance goals and restrictions, that the performance goals and
restrictions shall be deemed to have been satisfied on terms determined by the
Committee.
 
8.4 Other Provisions. The transfer of an Employee from one corporation to
another among the Corporation and any of its Subsidiaries, or a leave of absence
under the leave policy of the Corporation or any of its Subsidiaries, shall not
be a termination of employment for purposes of the Plan, unless a provision to
the contrary is expressly stated by the Committee in a Participant’s Agreement
issued under the Plan.
 
IX. ADJUSTMENTS AND CHANGE IN CONTROL
 
9.1 Adjustments.
 
(a) The total amount of Common Stock for which Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Share Awards,
Director Stock Purchase Rights and Deferred Stock Units may be issued under the
Plan, the number of shares subject to any such grants, awards or purchases (both
as to the number of shares of Common Stock and exercise price), and the limit on
the number of shares that can be included in an Award under Sections 2.1, 3.1,
4.9(g) and 5.3(h), shall be adjusted pro rata for any increase or decrease in
the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of Common
Stock, a reclassification of Common Stock or other similar transaction
determined by the Committee to be covered by this Section 9.1(a); provided,
however, in each case, that, with respect to Incentive Stock Options, any such
adjustment shall be made in accordance with Section 422 of the Code or any
successor provision thereto to the extent that such Option is intended to remain
an Incentive Stock Option. Such adjustment shall be made by the Committee or the
Board, whose determination in that respect shall be final, binding and
conclusive.

 
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(b) In the event of a proposed dissolution or liquidation of the Corporation,
the Committee shall notify each Participant as soon as practicable prior to the
effective date of such proposed transaction. The Committee in its discretion may
provide for a Participant to have the right to exercise his or her Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Units, Performance
Share Award or Deferred Stock Unit in full for a period specified by the
Committee as to all of the shares of Common Stock covered thereby, including
shares as to which the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award or Deferred Stock Unit would not
otherwise be exercisable, subject to the proposed dissolution or liquidation
taking place at the time and in the manner contemplated. In addition, the
Committee may provide that any re-purchase option of the Corporation applicable
to the shares purchased upon exercise of an Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Unit, Performance Share Award, Director
Stock Purchase Rights or Deferred Stock Unit shall lapse as to all such shares,
provided that the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award or Deferred Stock Unit shall
terminate immediately prior to the consummation of the proposed dissolution or
liquidation.
 
(c) In the event of a merger of the Corporation with or into another corporation
where the Corporation is not the surviving corporation, a reverse triangular
merger where the Corporation is the surviving corporation, but its stock is
exchanged for stock of the parent company of the other party to the merger, the
sale of substantially all of the assets of the Corporation, the reorganization
of the Corporation or other similar transaction determined by the Committee to
be covered by this Section 9.1(c), it is intended that each outstanding Option,
Stock Appreciation Right, Restricted Stock grant, Restricted Stock Unit,
Performance Share Award, Director Stock Purchase Right or, if permitted under
Code Section 409A, a Deferred Stock Unit shall be assumed or an equivalent
option or right substituted by the successor corporation, the parent or a
subsidiary of the successor corporation or the parent of the Corporation
following a reverse triangular merger. In the event that such successor
corporation (or the parent or a subsidiary thereof or the parent of the
Corporation following a reverse triangular merger) refuses to assume or
substitute for the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award, Deferred Stock Unit, or Director
Stock Purchase Right, the Participant shall fully vest in and/or have the right
to exercise the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit or Performance Share Award, including shares which would
not otherwise be vested or exercisable, and the Participant shall have his or
her Director Stock Purchase Right and, if permitted under Code Section 409A, a
Deferred Stock Unit paid in full in Common Stock for services through the date
of the consummation of the transaction. If an Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Unit or Performance Share Award becomes
fully vested and exercisable in lieu of assumption or substitution in the event
of a merger, sale of assets, reorganization or other transaction, the Committee
shall notify the Participant in writing or electronically that the Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit or Performance
Share Award shall be fully vested and exercisable for a period specified by the
Committee from the date of such notice, provided that if such period expires
prior to the consummation of the merger, sale of assets, reorganization or other
transaction, any exercise shall be subject to the proposed merger, sale of
assets or other transaction taking place, and the Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Unit or Performance Share Award
shall terminate upon the expiration of such period (or the consummation of the
merger, sale of assets, reorganization or other transaction, if later). For the
purposes of this paragraph, the Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Unit, Performance Share Award, Director Stock
Purchase Right or, if permitted under Code Section 409A, Deferred Stock Unit
shall be considered assumed if, following the merger, sale of assets,
reorganization or other transaction, the option or right confers the right to
purchase or receive, for each share covered by the Participant’s Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit, Performance
Share Award, Director Stock Purchase Right or Deferred Stock Unit immediately
prior to such transaction, the consideration (whether stock, cash, or other
securities or property) received in the merger, sale of assets, reorganization,
or other transaction, by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration determined by the Committee); provided,
however, that if such consideration received in the merger, sale of assets,
reorganization, or other transaction, is not solely common stock of the
successor corporation (or the parent or a subsidiary thereof), the Committee
may, with the consent of the successor corporation, provide for the
consideration to be received upon the payment under the Deferred Stock Unit or
Director Stock Purchase Right or exercise and/or vesting of the Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit or Performance
Share Award for each share of Common Stock subject to the Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit, Performance
Share, Director Stock Purchase Right or Deferred Stock Unit Award to be solely
(i) common stock of the successor corporation (or the parent or a subsidiary
thereof) equal in Fair Market Value to the per share consideration received by
holders of Common Stock in the merger, sale of assets, reorganization or other
transaction, or (ii) cash.

 
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(d) In the event of a proposed spin-off or a transfer by the Corporation of a
portion of its assets resulting in the employment of certain Participants by the
spin-off entity or the entity acquiring assets of the Corporation, the Committee
may make whatever adjustments it determines appropriate with respect to such
terminating Participants.
 
(e) The foregoing adjustments shall be made by the Committee. Any such
adjustment may provide for the elimination of any fractional share which might
otherwise become subject to an Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Unit, Performance Share Award, Director Stock
Purchase Right or Deferred Stock Unit. The Committee need not make the same
adjustments for each Participant.
 
9.2 Change in Control. 
 
(a) The Committee in its discretion may provide in a Participant’s Agreement or
otherwise, notwithstanding anything contained herein to the contrary, that in
the event of a Change in Control, or the occurrence of a Change in Control, any
or all of the following will occur: (i) any outstanding Option or Stock
Appreciation Right granted to such Participant hereunder immediately shall
become fully Vested and exercisable in full, regardless of any installment
provision applicable to such Option or Stock Appreciation Right; (ii) the
remaining Restriction Period on any shares of Common Stock subject to a
Restricted Stock grant or Restricted Stock Unit hereunder immediately shall
lapse and the shares shall become fully transferable, subject to any applicable
federal or state securities laws; (iii) all performance goals and conditions
shall be deemed to have been satisfied and all restrictions shall lapse on any
outstanding Performance Share Awards granted to such Participant hereunder, and
such Awards shall become payable in full; (iv), for purposes of any Deferred
Stock Unit granted to such Participant hereunder, payments due under the
Deferred Stock Unit should become immediately payable; or (v) such other
treatment as the Committee may determine.
 
(b) The Committee may, in its sole discretion and without the consent of any
Participant, determine that, upon the occurrence of a Change in Control, each or
any Option or Stock Appreciation Right outstanding immediately prior to the
Change in Control shall be canceled in exchange for a payment with respect to
each vested share of Common Stock subject to such canceled Option or Stock
Appreciation Right in (i) cash, (ii) stock of the Corporation or of a
corporation or other business entity a party to the Change in Control, or (iii)
other property which, in any such case, shall be in an amount having a Fair
Market Value equal to the excess of the Fair Market Value of the consideration
to be paid per share of Common Stock in the Change in Control over the exercise
price per share under such Option or Stock Appreciation Right (the “Spread”). In
the event such determination is made by the Committee, the Spread (reduced by
applicable withholding taxes, if any) shall be paid to Participants in respect
of their canceled Options and Stock Appreciation Rights as soon as practicable
following the date of the Change in Control.

 
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X. MISCELLANEOUS
 
10.1 Partial Exercise/Fractional Shares. The Committee may permit, and shall
establish procedures for, the partial exercise of Options and Stock Appreciation
Rights granted under the Plan. No fractional shares shall be issued in
connection with the exercise of an Option, a Stock Appreciation Right or
Director Stock Purchase Right or payment of a Restricted Stock award, Restricted
Stock Unit, Performance Share Award or Deferred Stock Unit; instead, the Fair
Market Value of the fractional shares shall be paid in cash, or at the
discretion of the Committee, the number of shares shall be rounded down to the
nearest whole number of shares and any fractional shares shall be disregarded,
and, in the case of an Option, the number of shares subject to the Option shall
be rounded down to the nearest whole number of shares and any fractional shares
shall be disregarded.
 
10.2 Rule 16b-3 Requirements. Notwithstanding any other provision of the Plan,
the Committee may impose such conditions on the exercise of an Option or Stock
Appreciation Right (including, without limitation, the right of the Committee to
limit the time of exercise to specified periods), the grant of Restricted Stock
or Restricted Stock Unit, the payment of a Performance Share Award or Deferred
Stock Unit, or a Director Stock Purchase Right, as may be required to satisfy
the requirements of Rule 16b-3 of the Exchange Act.
 
10.3 Rights Prior to Issuance of Shares. No Participant shall have any rights as
a shareholder with respect to shares covered by an Option, Stock Appreciation
Right, Restricted Stock grant, Restricted Stock Unit, Performance Share Award,
Director Stock Purchase Right, or Deferred Stock Unit until the issuance of a
stock certificate for such shares. Except as otherwise provided in the Plan, no
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date the certificate is issued.
 
10.4 Non-Assignability. Except as otherwise determined by the Committee in its
discretion, the following restrictions on assignability of any award under the
Plan shall apply to all Participants: (i) no Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Unit, Performance Share Award, Director
Stock Purchase Right or Deferred Stock Unit shall be transferable by a
Participant except by will or the laws of descent and distribution; (ii) during
the lifetime of a Participant, an Option, Stock Appreciation Right, Restricted
Stock grant, Restricted Stock Unit, Director Stock Purchase Right or Deferred
Stock Unit shall be exercised only by the Participant, except in the event of
the Participant’s Disability, in which case the Participant’s legal guardian or
the individual designated in the Participant’s durable power of attorney may
exercise the Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Director Stock Purchase Right or Deferred Stock Unit; and
(iii) any transferee of the Option, Stock Appreciation Right, Restricted Stock
grant, Restricted Stock Unit, Performance Share Award, Director Stock Purchase
Right or Deferred Stock Unit shall take the same subject to the terms and
conditions of this Plan. No transfer of an Option, Stock Appreciation Right,
Restricted Stock grant, Restricted Stock Unit, Performance Share Award, Director
Stock Purchase Right or Deferred Stock Unit by will or the laws of descent and
distribution, or as otherwise permitted by the Committee, shall be effective to
bind the Corporation unless the Corporation shall have been furnished with
written notice thereof and a copy of the will and/or such evidence as the
Corporation may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of the
Option, Stock Appreciation Right, Restricted Stock grant, Restricted Stock Unit,
Performance Share Award, Director Stock Purchase Right or Deferred Stock Unit.

 
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10.5 Securities Laws.
 
(a) Anything to the contrary herein notwithstanding, the Corporation’s
obligation to sell and deliver Common Stock pursuant to the exercise of an
Option or Stock Appreciation Right or deliver Common Stock pursuant to a
Restricted Stock grant, Restricted Stock Unit, Performance Share Award, Director
Stock Purchase Rights or Deferred Stock Unit is subject to such compliance with
federal and state laws, rules and regulations applying to the authorization,
issuance or sale of securities as the Corporation deems necessary or advisable.
The Corporation shall not be required to sell and deliver or issue Common Stock
unless and until it receives satisfactory assurance that the issuance or
transfer of such shares shall not violate any of the provisions of the
Securities Act of 1933 or the Securities Exchange Act of 1934, or the rules and
regulations of the Securities Exchange Commission promulgated thereunder or
those of The Nasdaq Stock Market or any stock exchange, recognized trading
market or quotation system on which the Common Stock may be listed or traded, or
the provisions of any state securities laws, or that there has been compliance
with the provisions of such acts, rules, regulations and laws.
 
(b) The Committee may impose such restrictions on any shares of Common Stock
acquired pursuant to the exercise of an Option, Stock Appreciation Right or a
Deferred Stock Unit, the grant of Restricted Stock or a Restricted Stock Unit,
the payment of a Performance Share Award or pursuant to a Director Stock
Purchase Right under the Plan as it may deem advisable, including, without
limitation, restrictions (i) under applicable federal securities laws, (ii)
under the requirements of The Nasdaq Stock Market or any other securities
exchange, recognized trading market or quotation system upon which such shares
of Common Stock are then listed or traded, and (iii) under any state securities
laws applicable to such shares. No shares shall be issued until counsel for the
Corporation has determined that the Corporation has complied with all
requirements under appropriate securities laws.
 
10.6 Withholding Taxes.
 
(a) The Corporation shall have the right to withhold from a Participant’s
compensation or require a Participant to remit sufficient funds to satisfy
applicable withholding for income and employment taxes upon the exercise of an
Option or Stock Appreciation Right, the lapse of the Restriction Period on
shares of Common Stock subject to a Restricted Stock grant or Restricted Stock
Unit or the payment of a Performance Share Award, Director Stock Purchase Right
or Deferred Stock Unit, to the extent the Corporation is required to withhold
such taxes. The Committee may permit a Participant to make a written election to
tender previously-acquired shares of Common Stock or have shares of stock
withheld from the exercise to satisfy applicable withholding for income and
employment taxes associated with an Award under this Plan; provided that the
shares have an aggregate Fair Market Value sufficient to satisfy in whole or in
part the applicable withholding taxes. The Committee may permit a Participant to
use the cashless exercise procedure of Section 2.4 to satisfy the withholding
requirements related to the exercise of an Option. At no point shall the
Corporation withhold more shares than are necessary to meet the established tax
withholding requirements of federal, state and local obligations.

 
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(b) A Participant subject to the insider trading restrictions of Section 16(b)
of the Exchange Act may use Common Stock to satisfy the applicable withholding
requirements only if such disposition is approved in accordance with Rule 16b-3
of the Exchange Act. Any election by a Participant to utilize Common Stock for
withholding purposes is further subject to the discretion of the Committee.
 
10.7 Termination and Amendment.
 
(a) The Plan shall continue in effect until the earlier of October 22, 2014, its
termination by the Board or the date on which all of the shares of Common Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Awards
granted under the Plan have lapsed. The Board may terminate the Plan, the
granting of Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Performance Share Awards or Deferred Stock Units under the Plan, or
purchases of Common Stock pursuant to the Director Stock Purchase Rights, at any
time.
 
(b) The Board may amend or modify the Plan at any time and from time to time,
but no amendment or modification shall, without the approval of the shareholders
of the Corporation and without complying with the requirements of Code Section
409A, (i) materially increase the benefits accruing to Participants under the
Plan; (ii) increase the amount of Common Stock for which grants and awards may
be made under the Plan, except as permitted under Sections 1.6 and 9.1; (iii)
change the provisions relating to the eligibility of individuals to whom grants
and awards may be made under the Plan; (iv) permit the repricing of Options or
Stock Appreciation Rights as prohibited by Section 1.7; or (v) permit the
granting of Options with exercise prices less than Fair Market Value on the date
of grant. In addition, so long as the Corporation’s Common Stock is listed on
The Nasdaq Stock Market or another stock exchange, the Board may not amend the
Plan in a fashion requiring approval of the shareholders of the Corporation
under the rules of The Nasdaq Stock Market or such other stock exchange, without
obtaining the approval of the shareholders.
 
(c) No amendment, modification, or termination of the Plan shall in any manner
affect (i) any Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award or Deferred Stock Unit granted
under the Plan without the consent of the Participant holding the Option, Stock
Appreciation Right, Restricted Stock grant, Restricted Stock Unit, Performance
Share Award or Deferred Stock Unit, except as set forth in any Agreement
relating to such Option, Stock Appreciation Right, Restricted Stock grant,
Restricted Stock Unit, Performance Share Award or Deferred Stock Unit granted
under the Plan or (ii) any election to purchase Common Stock pursuant to a
Director Stock Purchase Right made prior to such amendment, modification or
termination of the Plan, without the consent of the Participant who made such
election.
 
(d) Notwithstanding anything in the Plan or Agreement, the Plan and any
Agreements shall be subject to amendment, with or without the advance notice to
Participants and other interested parties, and on a prospective and retroactive
basis, including, but not limited to, amendment in a manner that adversely
affects the rights of Participants and other interested parties, to the extent
necessary to effect compliance with Code Section 409A.
 
10.8 Effect on Employment. Neither the adoption of the Plan nor the granting of
any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit,
Performance Share Award, Director Stock Purchase Right or Deferred Stock Unit
pursuant to the Plan shall be deemed to create any right in any individual to be
retained or continued in the employment, or as a non-employee director or
Consultant, of the Corporation or a Subsidiary.

 
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10.9 Use of Proceeds. The proceeds received from the sale of Common Stock
pursuant to the Plan will be used for general corporate purposes of the
Corporation.
 
10.10 Repurchase Rights. Subject to the requirements of Code Section 409A,
shares of Common Stock issued under the Plan may be subject to one or more
repurchase options, or other conditions and restrictions, as determined by the
Committee in its discretion at the time the Award is granted. The Corporation
shall have the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons as may be
selected by the Corporation. Upon request by the Corporation, each Participant
shall execute any agreement evidencing such transfer restrictions prior to the
receipt of shares of Common Stock hereunder and shall promptly present to the
Corporation any and all certificates representing shares of Common Stock
acquired hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.
 
10.11 Severability. If any one or more of the provisions (or any part thereof)
of this Plan or of any Agreement issued hereunder, shall be held to be invalid,
illegal or unenforceable in any respect, such provision shall be modified so as
to make it valid, legal and enforceable, and the validity, legality and
enforceability of the remaining provisions (or any part thereof) of the Plan or
of any Agreement shall not in any way be affected or impaired thereby. The
Corporation may, without the consent of any Participant, and in a manner
determined necessary solely in the discretion of the Corporation, amend the Plan
and any outstanding Agreement as the Corporation deems necessary to ensure the
Plan and all Awards remain valid, legal or enforceable in all respects.
 
10.12 Beneficiary Designation. Subject to local laws and procedures, each
Participant may file with the Corporation a written designation of a beneficiary
who is to receive any benefit under the Plan to which the Participant is
entitled in the event of such Participant's death before he or she receives any
or all of such benefit. Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Corporation, and will
be effective only when filed by the Participant in writing with the Corporation
during the Participant's lifetime. If a married Participant designates a
beneficiary other than the Participant's spouse, the effectiveness of such
designation may be subject to the consent of the Participant's spouse. If a
Participant dies without an effective designation of a beneficiary who is living
at the time of the Participant's death, the Corporation will pay any remaining
unpaid benefits to the Participant's legal representative.
 
10.13 Unfunded Obligation. Participants shall have the status of general
unsecured creditors of the Corporation. Any amounts payable to Participants
pursuant to the Plan shall be unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee Retirement
Income Security Act of 1974. The Corporation shall not be required to segregate
any monies from its general funds, or to create any trusts, or establish any
special accounts with respect to such obligations. The Corporation shall retain
at all times beneficial ownership of any investments, including trust
investments, which the Corporation may make to fulfill its payment obligations
hereunder. Any investments or the creation or maintenance of any trust or any
Participant account shall not create or constitute a trust or fiduciary
relationship between the Committee or the Corporation and a Participant, or
otherwise create any vested or beneficial interest in any Participant or the
Participant's creditors in any assets of the Corporation. The Participants shall
have no claim against the Corporation for any changes in the value of any assets
which may be invested or reinvested by the Corporation with respect to the Plan.

 
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10.14 Approval of Plan. Unless this Plan has been approved by the shareholders
of the Corporation within 12 months after adoption of the Plan by the Board, as
required by Section 422 of the Code, this Plan, and any grants or awards made
hereunder, shall be of no further force or effect.
 
10.15 Code Section 409A. Each of the Awards under this Plan and their respective
Agreements are intended to comply with the requirements of Code Section 409A or
be exempt from Code Section 409A. Notwithstanding any provision of this Plan, if
any amount payable under this Plan is not exempt from Code Section 409A and if
the Participant is a “specified employee” (within the meaning of Treasury
Regulation Section 1.409A-1(i)) on the date of the Participant’s “separation
from service” (within the meaning of Treasury Regulation Section 1.409A-1(h)),
then the payment of such amount shall not be made prior to, and shall, if
necessary, be deferred to and paid on the first day of the seventh month
following the Participant’s separation from service or the date of the
Participant’s death, if earlier. Provided, however, that the Corporation does
not by operation of this requirement assume responsibility for compliance with
Code Section 409A. The Participant is responsible for any additional tax,
interest or penalties under Code Section 409A arising out of payments under this
Plan.
 
IN WITNESS WHEREOF, this First Amended and Restated 2004 Stock Incentive Plan
has been executed on behalf of the Corporation on October 2, 2008.
 

 
PERCEPTRON, INC.
     
By:
/s/ Harry T. Rittenour
   
Harry T. Rittenour
 
President and Chief Executive Officer

 
BOARD OF DIRECTORS APPROVAL: 10/22/04 and 10/02/08
SHAREHOLDER APPROVAL: 12/6/04
 
 
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