EXHIBIT 10.1

 

 

EL CAPITAN PRECIOUS METALS, INC.

 

2015 EQUITY INCENTIVE PLAN

 

(Effective October 8, 2015, pursuant to Section 11.8)

 

1.     General.

 

1.1     Purpose. The purpose of the 2015 Equity Incentive Plan (the “Plan”) of
El Capitan Precious Metals, Inc. (the “Company”) is to increase stockholder
value and to advance the interests of the Company by furnishing a variety of
economic incentives (“Incentives”) designed to attract, retain and motivate
Employees, certain key consultants and directors of the Company. Incentives may
consist of opportunities to purchase or receive shares of Common Stock, $0.001
par value per share, of the Company (“Common Stock”) on terms determined under
this Plan.

 

1.2     Eligible Participants. Employees, Directors and Consultants are eligible
to receive Incentives. Participants may be designated individually or by groups
or categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance
objectives relating to such officers must be approved by the Committee.
Participation by others and any performance objectives relating to others may be
approved by groups or categories (for example, by pay grade) and authority to
designate participants who are not officers and to set or modify such targets
may be delegated.

 

1.3     Types of Incentives. Incentives under the Plan may be granted in any one
or a combination of the following forms: (a) Incentive Stock Options and
non-statutory stock options (Section 4); (b) stock appreciation rights (“SARs”)
(Section 5); (c) stock awards, restricted stock awards and restricted stock unit
awards (Section 6); (d) performance awards (Section 7), and (e) other forms of
Incentives valued in whole or in part by reference to, or otherwise based on,
Common Stock, including the appreciation in value thereof (with the Board having
sole and complete authority to determine the persons to whom and the time or
times at which such other forms of Incentives will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted and all
other terms and conditions of such other Incentives. Subject to the specific
limitations provided in this Plan, payment of Incentives may also be in the form
of cash, Common Stock or combinations thereof as the Board shall determine, and
with such other restrictions as it may impose.

 

2.     Administration.

 

2.1     Administration by the Board. The Plan shall be administered by the board
of directors of the Company (the “Board”). The Board may delegate administration
of the Plan to a stock option or compensation committee of the Board to whom
authority has been delegated by the Board, in accordance with Section 2.3 (a
“Committee”).

 

2.2     Powers of Board. The Board will have the power, subject to, and within
the limitations of, the express provisions of the Plan:

 

(a)     To determine: (i) who will be granted Incentives; (ii) when and how each
Incentive will be granted; (iii) what type of Incentive will be granted; (iv)
the provisions of each Incentive (which need not be identical), including when a
person will be permitted to exercise or otherwise receive cash or Common Stock
under the Incentive; (v) the number of shares of Common Stock subject to, or the
cash value of, an Incentive; and (vi) the Fair Market Value applicable to an
Incentive.

 

(b)     To construe and interpret the Plan and Incentives granted under it, and
to establish, amend and revoke rules and regulations for administration of the
Plan and Incentives. The Board, in the exercise of these powers, may correct any
defect, omission or inconsistency in the Plan or in any written agreement (an
“Incentive Agreement”) between the Company and a person to whom an Incentive is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Incentive (a “Participant”), in a manner and to the extent it will
deem necessary or expedient to make the Plan or Incentive fully effective.

 

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(c)     To settle all controversies regarding the Plan and Incentives granted
under it.

 

(d)     To accelerate, in whole or in part, the time at which an Incentive may
be exercised or vest (or at which cash or shares of Common Stock may be issued).

 

(e)     To suspend or terminate the Plan at any time. Except as otherwise
provided in the Plan or an Incentive Agreement, suspension or termination of the
Plan will not materially impair a Participant’s rights under his or her
then-outstanding Incentive without his or her written consent except as provided
in subsection (viii) below.

 

(f)     To submit the Plan and any amendment to the Plan for shareholder
approval, including, but not limited to, amendments to the Plan intended to
satisfy the requirements of (A) Section 162(m) of the Internal Revenue Code of
1986, as amended (including the regulations promulgated thereunder, the “Code”)
regarding the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to “covered employees” (within the
meaning of Section 162(m)(3) under the Code), (B) Section 422 of the Code
regarding incentive stock options, or (C) Rule 16b-3 of the Securities Exchange
Act of 1934 (including the regulations promulgated thereunder, the “Exchange
Act”) (“Rule 16b-3”).

 

(g)     To approve forms of Incentive Agreements for use under the Plan and to
amend the terms of any one or more Incentives, including, but not limited to,
amendments to provide terms more favorable to the Participant than previously
provided in the Incentive Agreement, subject to any specified limits in the Plan
that are not subject to Board discretion; provided, however, that a
Participant’s rights under any Incentive will not be impaired by any such
amendment unless (i) the Company requests the consent of the affected
Participant, and (ii) such Participant consents in writing. Notwithstanding the
foregoing, (A) a Participant’s rights will not be deemed to have been impaired
by any such amendment if the Board, in its sole discretion, determines that the
amendment, taken as a whole, does not materially impair the Participant’s
rights, and (B) subject to the limitations of applicable law, if any, the Board
may amend the terms of any one or more Incentives without the affected
Participant’s consent: (1) to maintain the qualified status of the Incentive as
an Incentive Stock Option under Section 422 of the Code; (2) to change the terms
of an Incentive Stock Option, if such change results in impairment of the
Incentive solely because it impairs the qualified status of the Incentive as an
Incentive Stock Option under Section 422 of the Code; (3) to clarify the manner
of exemption from, or to bring the Incentive into compliance with, Section 409A;
or (4) to comply with other applicable laws or securities exchange rule or
listing requirements.

 

(h)     Generally, to exercise such powers and to perform such acts as the Board
deems necessary or expedient to promote the best interests of the Company and
that are not in conflict with the provisions of the Plan or Incentives.

 

(i)     To adopt such procedures and sub-plans as are necessary or appropriate
to permit participation in the Plan by Employees, Directors or Consultants who
are foreign nationals or employed outside the United States (provided that Board
approval will not be necessary for immaterial modifications to the Plan or any
Incentive Agreement that are required for compliance with the laws of the
relevant foreign jurisdiction).

 

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2.3     Delegation to Committee.

 

(a)     General. The Board may delegate some or all of the administration of the
Plan to a Committee or Committees. If administration of the Plan is delegated to
a Committee, the Committee will have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board that have been delegated
to the Committee, including the power to delegate to a subcommittee of the
Committee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board will thereafter be to the
Committee or subcommittee). Any delegation of administrative powers will be
reflected in resolutions, not inconsistent with the provisions of the Plan,
adopted from time to time by the Board or Committee (as applicable). The
Committee may, at any time, abolish the subcommittee and/or re-vest in the
Committee any powers delegated to the subcommittee. The Board may retain the
authority to concurrently administer the Plan with the Committee and may, at any
time, revest in the Board some or all of the powers previously delegated.

 

(b)     Section 162(m) and Rule 16b-3 Compliance. The Committee shall consist of
not less than two (2) Directors. During any time period in which the Company has
a class of equity securities registered under Section 12 of the Exchange Act,
each such Committee member or, if applicable, each member of a subcommittee to
which power to administer the Company’s equity incentive plans and compensation
under Section 162(m) under the Code, has been delegated, shall be an “outside
director” within the meaning of Section 162(m) under the Code and a
“non-employee director” within the meaning of Rule 16b-3.

 

2.4     Delegation to an Officer. The Board may delegate to one (1) or more
Directors or officers of the Company (within the meaning of Section 16 of the
Exchange Act, “Officers”), subject to such terms, conditions and limitation as
the Board may establish in its discretion, the authority to grant Incentives;
provided, however, that the Board shall not delegate such authority (i) with
respect to grants of Incentives to be made to Officers or (ii) in such a manner
as would cause the Plan not to comply with the requirements of Section 162(m)
under the Code, applicable exchange rules or applicable corporate law.

 

2.5     Effect of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith will not be subject to review by
any person and will be final, binding and conclusive on all persons.

 

3.     Shares Subject to the Plan.

 

3.1     Number of Shares. Subject to adjustment in connection with a
Capitalization Adjustment, the number of shares of Common Stock which may be
issued under the Plan shall not exceed 15,000,000 shares of Common Stock. Shares
of Common Stock that are issued under the Plan or are subject to outstanding
Incentives will be applied to reduce the maximum number of shares of Common
Stock remaining available for issuance under the Plan. For purposes of
clarification, the award of any Incentives payable only in cash will not reduce
the number of shares of Common Stock remaining and available to be issued under
the Plan. Shares may be issued in connection with a merger or acquisition as
permitted by NASDAQ Listing Rule 5635(c) or, if applicable, NYSE Listed Company
Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule,
and such issuance will not reduce the number of shares available for issuance
under the Plan.

 

3.2     Share Counting.

 

(a)     To the extent that cash in lieu of shares of Common Stock is delivered
upon the exercise of a SAR pursuant to Section 5.4, the Company shall be deemed,
for purposes of applying the limitation on the number of shares, to have issued
the greater of the number of shares of Common Stock which it was entitled to
issue upon such exercise or on the exercise of any related option.

 

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(b)     In the event that a stock option or SAR granted hereunder expires or is
terminated or canceled unexercised as to any shares of Common Stock, such shares
shall be added back to the Plan share reserve and shall be available again for
issuance pursuant to Incentives granted under the Plan.

 

(c)     To the extent that the full number of shares subject to a performance
share award other performance based-stock award (other than a stock option or
SAR) is not issued by reason of failure to achieve maximum performance goals,
the number of shares not issued shall be added back to the Plan share reserve
and shall be available again for issuance pursuant to Incentives granted under
the Plan.

 

(d)     In the event that shares of Common Stock are issued as performance
shares, restricted stock or pursuant to another stock award and thereafter are
forfeited or reacquired by the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant, then
the shares that are forfeited or repurchased shall be added back to the Plan
share reserve and shall be available again for issuance pursuant to Incentives
granted under the Plan.

 

(e)     Shares withheld or deducted from an Incentive in satisfaction of tax
withholding obligations on an Incentive or as consideration for the exercise or
purchase price of an Incentive shall not be added back to the Plan share reserve
and shall not again become available for issuance under the Plan.

 

3.3     Incentive Stock Option Limit. Subject to Section 9.1 relating to
Capitalization Adjustments, the aggregate maximum number of shares of Common
Stock that may be issued pursuant to the exercise of Incentive Stock Options
will be 15,000,000 shares of Common Stock.

 

3.4     Section 162(m) Limitations. Subject to Section 9.1 relating to
Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, the following limitations
shall apply:

 

(a)      A maximum of 15,000,000 shares of Common Stock subject to stock
options, SARs and Other Stock Awards whose value is determined by reference to
an increase over an exercise or strike price of at least one hundred percent
(100%) of the Fair Market Value on the date any such Incentive is granted may be
granted to any Participant during any calendar year. Notwithstanding the
foregoing, if any additional options, SARs or Other Stock Awards whose value is
determined by reference to an increase over an exercise or strike price of at
least one hundred percent (100%) of the Fair Market Value on the date the Stock
Award are granted to any Participant during any calendar year, compensation
attributable to the exercise of such additional Incentive will not satisfy the
requirements to be considered “qualified performance-based compensation” under
Section 162(m) of the Code unless such additional Incentive is approved by the
Company’s shareholders.

 

(b)      A maximum of 15,000,000 performance shares may be granted to any one
Participant during any one calendar year (whether the grant, vesting or exercise
is contingent upon the attainment during the Performance Period of the
Performance Goals).

 

(c)      A maximum of $500,000 may be granted as a performance cash awards to
any one Participant during any one calendar year.

 

3.5     Source of Shares. The stock issuable under the Plan will be shares of
authorized but unissued Common Stock.

 

4.     Stock Options. A stock option is a right to purchase shares of Common
Stock from the Company. Each stock option granted under this Plan shall be
subject to the following terms and conditions:

 

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4.1     Price. The option price per share shall be determined by the Board,
subject to adjustment under Section 9.1; provided that option price shall be not
less than the Fair Market Value of the Common Stock subject to the option on the
date of grant.

 

4.2     Number. The number of shares of Common Stock subject to the option shall
be determined by the Board, subject to adjustment in connection with a
Capitalization Adjustment. The number of shares of Common Stock subject to a
stock option shall be reduced in the same proportion that the holder thereof
exercises a SAR if any SAR is granted in conjunction with or related to the
stock option.

 

4.3     Duration and Time for Exercise. Subject to earlier termination as
provided in Section 10.2, the term of each stock option shall be determined by
the Committee but shall not exceed ten years and one day from the date of grant.
Each stock option shall become exercisable at such time or times during its term
as shall be determined by the Board at the time of grant.

 

4.4     Manner of Exercise. A stock option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of shares
of Common Stock to be purchased and accompanied by the full purchase price for
such shares. The option price shall be payable (a) in United States dollars upon
exercise of the option and may be paid by cash, uncertified or certified check
or bank draft; (b) at the discretion of the Board, by delivery of shares of
Common Stock in payment of all or any part of the option price, which shares
shall be valued for this purpose at the Fair Market Value on the date such
option is exercised; (c) at the discretion of the Committee, by instructing the
Company to withhold from the shares of Common Stock issuable upon exercise of
the stock option shares of Common Stock in payment of all or any part of the
exercise price and/or any related withholding tax obligations, which shares
shall be valued for this purpose at the Fair Market Value or in such other
manner as may be authorized from time to time by the Board, or (d) in any other
form of legal consideration that may be acceptable to the Board or is specified
in the applicable Incentive Agreement. The shares of Common Stock delivered by
the participant pursuant to Section 4.4(b) must have been held by the
participant for a period of not less than six months prior to the exercise of
the option, unless otherwise determined by the Board. Prior to the issuance of
shares of Common Stock upon the exercise of a stock option, a participant shall
have no rights as a shareholder.

 

4.5     Incentive Stock Options. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant Incentive
Stock Options:

 

(a)     To the extent that the aggregate Fair Market Value (determined at the
time of grant) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any calendar year
(under all plans of the Company and any Affiliates) exceeds one hundred thousand
dollars ($100,000) (or such other limit established in the Code) or otherwise
does not comply with the rules governing Incentive Stock Options, the options or
portions thereof that exceed such limit (according to the order in which they
were granted) or otherwise do not comply with such rules will be treated as
non-statutory stock options, notwithstanding any contrary provision of the
applicable Incentive Agreement(s).

 

(b)     Any Incentive Stock Option authorized under the Plan shall contain such
other provisions as the Board shall deem advisable, but shall in all events be
consistent with and contain all provisions required in order to qualify the
options as Incentive Stock Options.

 

(c)     All Incentive Stock Options must be granted within ten years from the
earlier of the date on which this Plan was adopted by Board of Directors or the
date this Plan was approved by the shareholders.

 

(d)     Unless sooner exercised, all Incentive Stock Options shall expire no
later than 10 years after the date of grant.

 

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(e)     The option price for Incentive Stock Options shall be not less than the
Fair Market Value of the Common Stock subject to the option on the date of
grant.

 

(f)     If Incentive Stock Options are granted to any participant who, at the
time such option is granted, would own (within the meaning of Section 422 of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the employer corporation or of its parent or subsidiary
corporation, (i) the option price for such Incentive Stock Options shall be not
less than 110% of the Fair Market Value of the Common Stock subject to the
option on the date of grant and (ii) such Incentive Stock Options shall expire
no later than five years after the date of grant.

 

5.     Stock Appreciation Rights. A SAR is a right to receive, without payment
to the Company, a number of shares of Common Stock, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in
Section 5.4. A SAR may be granted (a) with respect to any stock option granted
under this Plan, either concurrently with the grant of such stock option or at
such later time as determined by the Board (as to all or any portion of the
shares of Common Stock subject to the stock option), or (b) alone, without
reference to any related stock option. Each SAR under this Plan shall be subject
to the following terms and conditions:

 

5.1     Number. Each SAR granted to any participant shall relate to such number
of shares of Common Stock as shall be determined by the Board, subject to
adjustment in connection with a Capitalization Adjustment. In the case of a SAR
granted with respect to a stock option, the number of shares of Common Stock to
which the SAR pertains shall be reduced in the same proportion that the holder
of the option exercises the related stock option.

 

5.2     Duration. Subject to earlier termination as provided in Section 10.2,
the term of each SAR shall be determined by the Board but shall not exceed ten
years and one day from the date of grant. Unless otherwise provided by the
Board, each SAR shall become exercisable at such time or times, to such extent
and upon such conditions as the stock option, if any, to which it relates is
exercisable.

 

5.3     Exercise. A SAR may be exercised, in whole or in part, by giving written
notice to the Company, specifying the number of SARs which the holder wishes to
exercise. Upon receipt of such written notice, the Company shall, within 90 days
thereafter, deliver to the exercising holder certificates for the shares of
Common Stock or cash or both, as determined by the Committee, to which the
holder is entitled pursuant to Section 5.4.

 

5.4     Payment. Subject to the right of the Board to deliver cash in lieu of
shares of Common Stock (which, as it pertains to Officers and Directors, shall
comply with all requirements of the Exchange Act), the number of shares of
Common Stock which shall be issuable upon the exercise of a SAR shall be
determined by dividing:

 

(a)      the number of shares of Common Stock as to which the SAR is exercised
multiplied by the amount of the appreciation in such shares (for this purpose,
the “appreciation” shall be the amount by which the Fair Market Value of the
shares of Common Stock subject to the SAR on the exercise date exceeds (1) in
the case of a SAR related to a stock option, the purchase price of the shares of
Common Stock under the stock option or (2) in the case of a SAR granted alone,
without reference to a related stock option, an amount which shall be determined
by the Board at the time of grant, subject to adjustment under Section 10.6); by

 

(b)      the Fair Market Value of a share of Common Stock on the exercise date.

 

In lieu of issuing shares of Common Stock upon the exercise of a SAR, the Board
may elect to pay the holder of the SAR cash equal to the Fair Market Value on
the exercise date of any or all of the shares which would otherwise be issuable.
No fractional shares of Common Stock shall be issued upon the exercise of a SAR;
instead, the holder of the SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of Common Stock
on the exercise date or to purchase the portion necessary to make a whole share
at its Fair Market Value on the date of exercise.

 

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6.     Stock Awards, Restricted Stock and Restricted Stock Units. A stock award
consists of the transfer by the Company to a participant of shares of Common
Stock, without other payment therefor, as additional compensation for services
to the Company. Restricted stock consists of shares of Common Stock which are
sold or transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. Restricted
stock units evidence the right to receive shares of Common Stock at a future
date. The transfer of Common Stock pursuant to stock awards and the transfer and
sale of restricted stock shall be subject to the following terms and conditions:

 

6.1     Number of Shares. The number of shares to be transferred or sold by the
Company to a participant pursuant to a stock award or as restricted stock, or
the number of shares that may be issued pursuant to a restricted stock unit,
shall be determined by the Board.

 

6.2     Sale Price. The Board shall determine the price, if any, at which shares
of restricted stock shall be sold to a participant, which may vary from time to
time and among Participants and which may be below the Fair Market Value of such
shares of Common Stock at the date of sale.

 

6.3     Restrictions. All shares of restricted stock transferred or sold
hereunder, and all restricted stock units granted hereunder, shall be subject to
such restrictions as the Board may determine, including, without limitation any
or all of the following:

 

(a)      a prohibition against either the sale, transfer, pledge or other
encumbrance of the shares of restricted stock, or the delivery of shares
pursuant to restricted stock units, such prohibition to lapse at such time or
times as the Committee shall determine (whether in annual or more frequent
installments, at the time of the death, disability or retirement of the holder
of such shares, or otherwise);

 

(b)      a requirement that the holder of shares of restricted stock or
restricted stock units forfeit, or (in the case of shares sold to a participant)
resell back to the Company at his or her cost, any right to all or a part of
such shares or units in the event of termination of his or her employment or
consulting engagement during any period in which such shares or units are
subject to restrictions; and

 

(c)      such other conditions or restrictions as the Board may deem advisable.

 

6.4     Escrow. In order to enforce the restrictions imposed by the Board
pursuant to Section 6.3, the Participant receiving restricted stock or
restricted stock units, as applicable, shall enter into an Incentive Agreement
with the Company setting forth the conditions of the grant. Shares of restricted
stock shall be registered in the name of the Participant and deposited, together
with a stock power endorsed in blank, with the Company. Each such certificate
shall bear a legend in substantially the following form:

 

The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including conditions
of forfeiture) contained in the 2015 Equity Incentive Plan of El Capitan
Precious Metals, Inc. (the “Company”), and an agreement entered into between the
registered owner and the Company. A copy of the Plan and the agreement is on
file in the office of the Company.

 

6.5     Issuance and Delivery of Shares. Subject to Section 10.6, at the end of
any time period during which the shares of restricted stock are subject to
forfeiture and restrictions on transfer, such shares will be delivered free of
all restrictions to the participant or to the participant’s legal
representative, beneficiary or heir. In the case of restricted stock units, no
shares shall be issued at the time such restricted stock units are granted.
Subject to Section 10.6, upon the lapse or waiver of restrictions applicable to
restricted stock units, or at a later time specified in the agreement governing
the grant of restricted stock units, any shares derived from the restricted
stock units shall be issued and delivered to the holder of the restricted stock
units.

 

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6.6     Shareholder. Subject to the terms and conditions of the Plan, each
Participant receiving restricted stock shall have all the rights of a
shareholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares. Dividends paid in cash or property
other than Common Stock with respect to shares of restricted stock shall be paid
to the participant currently. Any holder of restricted stock units shall not be,
and shall not have rights and privileges of, a shareholder with respect to any
shares that may be derived from the restricted stock units unless and until such
shares have been issued.

 

7.     Performance Awards.

 

7.1     Performance Shares. A performance share is an Incentive (covering a
number of shares not in excess of that set forth in Section 3.4(b) above) that
is payable contingent upon the attainment during a Performance Period of certain
Performance Goals. The length of any Performance Period, the Performance Goals
to be achieved during the Performance Period, and the measure of whether and to
what degree such Performance Goals have been attained will be conclusively
determined by the Committee (or, if not required for compliance with Section
162(m) of the Code, the Board), in its sole discretion. The grant of performance
shares to a Participant shall not create any rights in such Participant as a
shareholder of the Company, until the payment of shares of Common Stock with
respect to an Incentive. No adjustment shall be made in performance shares
granted on account of cash dividends which may be paid or other rights which may
be issued to the holders of Common Stock prior to the end of any period for
which performance objectives were established. In addition, to the extent
permitted by applicable law and the applicable Incentive Agreement, the Board
may determine that cash may be used in payment of performance shares.

 

7.2     Performance Cash Awards. A performance cash award is a cash award (for a
dollar value not in excess of that set forth in Section 3.4(c) above) that is
payable contingent upon the attainment during a Performance Period of certain
Performance Goals. At the time of grant of a performance cash award, the length
of any Performance Period, the Performance Goals to be achieved during the
Performance Period, and the measure of whether and to what degree such
Performance Goals have been attained will be conclusively determined by the
Committee (or, if not required for compliance with Section 162(m) of the Code,
the Board), in its sole discretion. The Board may specify the form of payment of
performance cash awards, which may be cash or other property, or may provide for
a Participant to have the option for his or her performance cash award, or such
portion thereof as the Board may specify, to be paid in whole or in part in cash
or other property.

 

7.3     Board Discretion. The Board retains the discretion to at any time reduce
or eliminate the compensation or economic benefit due upon attainment of
Performance Goals and to define the manner of calculating the Performance
Criteria it selects to use for a Performance Period.

 

7.4     Section 162(m) Compliance. Unless otherwise permitted in compliance with
the requirements of Section 162(m) of the Code with respect to an Incentive
intended to qualify as “performance-based compensation” thereunder, the
Committee will establish the Performance Goals applicable to, and the formula
for calculating the amount payable under, the Incentive no later than the
earlier of (A) the date ninety (90) days after the commencement of the
applicable Performance Period, and (B) the date on which twenty-five percent
(25%) of the Performance Period has elapsed, and in any event at a time when the
achievement of the applicable Performance Goals remains substantially uncertain.
Prior to the payment of any compensation under an Incentive intended to qualify
as “performance-based compensation” under Section 162(m) of the Code, the
Committee will certify the extent to which any Performance Goals and any other
material terms under such Award have been satisfied (other than in cases where
such relate solely to the increase in the value of the Common Stock).
Notwithstanding satisfaction of any completion of any Performance Goals,
options, cash or other benefits granted, issued, retainable and/or vested under
an Incentive on account of satisfaction of such Performance Goals may be reduced
by the Committee on the basis of such further considerations as the Committee,
in its sole discretion, will determine.

 

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8.     Covenants of the Company.

 

8.1     Availability of Shares. The Company will keep available at all times the
number of shares of Common Stock reasonably required to satisfy then-outstanding
Incentives.

 

8.2     Securities Law Compliance. The Company will seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Incentives and to issue and sell shares of Common
Stock upon exercise of the Incentives; provided, however, that this undertaking
will not require the Company to register under the Securities Act of 1933
(including the regulations promulgated thereunder, the “Securities Act”) the
Plan, any Incentive or any Common Stock issued or issuable pursuant to any such
Incentive. If, after reasonable efforts and at a reasonable cost, the Company is
unable to obtain from any such regulatory commission or agency the authority
that counsel for the Company deems necessary for the lawful issuance and sale of
Common Stock under the Plan, the Company will be relieved from any liability for
failure to issue and sell Common Stock upon exercise of such Incentives unless
and until such authority is obtained. A Participant will not be eligible for the
grant of an Incentive or the subsequent issuance of cash or Common Stock
pursuant to the Incentive if such grant or issuance would be in violation of any
applicable securities law.

 

8.3     No Obligation to Notify or Minimize Taxes. The Company will have no duty
or obligation to any Participant to advise such holder as to the time or manner
of exercising any Incentive. Furthermore, the Company will have no duty or
obligation to warn or otherwise advise such holder of a pending termination or
expiration of an Incentive or a possible period in which the Incentive may not
be exercised. The Company has no duty or obligation to minimize the tax
consequences of an Incentive to the holder of such Incentive.

 

9.     Adjustments upon Changes in Common Stock; Other Corporate Events.

 

9.1     Capitalization Adjustments. In the event of a Capitalization Adjustment,
the Board will appropriately and proportionately adjust: (i) the class(es) and
maximum number of securities subject to the Plan pursuant to Section 3(a) and
the shares of Common Stock issuable pursuant to any Incentive, the exercise
price of any stock option or SAR, the performance goals for any Incentive, and
other provisions of this Plan and outstanding Incentives, in order to reflect
the change in the Common Stock and to provide Plan participants with the same
relative rights before and after such adjustment. The Board will make such
adjustments, and its determination will be final, binding and conclusive.

 

9.2     Dissolution or Liquidation. Except as otherwise provided in the
Incentive Agreement, in the event of a dissolution or liquidation of the
Company, all outstanding Incentives (other than Incentives consisting of vested
and outstanding shares of Common Stock not subject to a forfeiture condition or
the Company’s right of repurchase) will terminate immediately prior to the
completion of such dissolution or liquidation, and the shares of Common Stock
subject to the Company’s repurchase rights or subject to a forfeiture condition
may be repurchased or reacquired by the Company; provided, however, that the
Board may, in its sole discretion, cause some or all Incentives to become fully
vested, exercisable and/or no longer subject to repurchase or forfeiture (to the
extent such Incentives have not previously expired or terminated) before the
dissolution or liquidation is completed but contingent on its completion.

 

9.3     Corporate Transaction. The following provisions will apply to Incentives
in the event of a Corporate Transaction unless otherwise provided in the
instrument evidencing the Incentive or any other written agreement between the
Company or any Affiliate and the Participant or unless otherwise expressly
provided by the Board at the time of grant of an Incentive. In the event of a
Corporate Transaction, then, notwithstanding any other provision of the Plan,
the Board may take one or more of the following actions with respect to
Incentives, contingent upon the closing or consummation of the Corporate
Transaction:

 

9

 

 

(a)     arrange for the surviving corporation or acquiring corporation (or the
surviving or acquiring corporation’s parent company) to assume or continue the
Incentive or to substitute a similar stock award for the Incentive (including,
but not limited to, an award to acquire the same consideration paid to the
shareholders of the Company pursuant to the Corporate Transaction);

 

(b)     arrange for the assignment of any reacquisition or repurchase rights
held by the Company in respect of Common Stock issued pursuant to the Incentives
to the surviving corporation or acquiring corporation (or the surviving or
acquiring corporation’s parent company);

 

(c)     accelerate the vesting, in whole or in part, of the Incentive (and, if
applicable, the time at which the Incentive may be exercised) to a date prior to
the effective time of such Corporate Transaction as the Board determines (or, if
the Board does not determine such a date, to the date that is five (5) days
prior to the effective date of the Corporate Transaction), with such Incentive
terminating if not exercised (if applicable) at or prior to the effective time
of the Corporate Transaction; provided, however, that the Board may require
Participants to complete and deliver to the Company a notice of exercise before
the effective date of a Corporate Transaction, which exercise is contingent upon
the effectiveness of such Corporate Transaction;

 

(d)     arrange for the lapse, in whole or in part, of any reacquisition or
repurchase rights held by the Company with respect to the Incentive;

 

(e)     cancel or arrange for the cancellation of the Incentive, to the extent
not vested or not exercised prior to the effective time of the Corporate
Transaction, in exchange for such cash consideration, if any, as the Board, in
its sole discretion, may consider appropriate; and

 

(f)     make a payment, in such form as may be determined by the Board equal to
the excess, if any, of (A) the value of the property the Participant would have
received upon the exercise of the Incentive immediately prior to the effective
time of the Corporate Transaction, over (B) any exercise price payable by such
holder in connection with such exercise. For clarity, this payment may be zero
($0) if the value of the property is equal to or less than the exercise price.
Payments under this provision may be delayed to the same extent that payment of
consideration to the holders of the Company’s Common Stock in connection with
the Corporate Transaction is delayed as a result of escrows, earn outs,
holdbacks or any other contingencies.

 

The Board need not take the same action or actions with respect to all
Incentives or portions thereof or with respect to all Participants. The Board
may take different actions with respect to the vested and unvested portions of
an Incentive prior to the earlier of (i) the effective time of the Corporate
Transaction and (ii) the effectiveness of such action(s) with respect to the
Incentives.

 

9.4     Change in Control. Incentives may be subject to additional acceleration
of vesting and exercisability upon or after a Change in Control as may be
provided in the Incentive Agreement for such Incentive, as may be provided in
any other written agreement between the Company or any Affiliate and the
Participant, or as may be determined by the Board in its sole discretion, but in
the absence of such provision or determination, no such acceleration will occur.

 

10.     General.

 

10.1     Effective Date. The Plan will become effective the Effective Date.

 

10.2     Duration.

 

(a)     The Board may suspend or terminate the Plan at any time. No Incentive
Stock Option will be granted after the tenth (10th) anniversary of the earlier
of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is
approved by the shareholders of the Company. No Incentives may be granted under
the Plan while the Plan is suspended or after it is terminated.

 

10

 

 

(b)      Suspension or termination of the Plan will not impair rights and
obligations under any Incentive granted while the Plan is in effect except with
the written consent of the affected Participant or as otherwise permitted in the
Plan.

 

10.3     Corporate Action Constituting Grant of Incentives. Corporate action
constituting a grant by the Company of an Incentive to any Participant will be
deemed completed as of the date of such corporate action, unless otherwise
determined by the Board, regardless of when the Incentive Agreement, instrument,
certificate, or letter evidencing the Incentive is communicated to, or actually
received or accepted by, the Participant. In the event that the corporate
records (e.g., Board consents, resolutions or minutes) documenting the corporate
action constituting the grant contain terms (e.g., exercise price, vesting
schedule or number of shares) that are inconsistent with those in the Incentive
Agreement as a result of a clerical error in the papering of the Incentive
Agreement, the corporate records will control and the Participant will have no
legally binding right to the incorrect term in the Incentive Agreement.

 

10.4     Non-transferability of Incentives. No stock option, SAR, restricted
stock, restricted stock unit or performance award may be transferred, pledged or
assigned by the holder thereof (except, in the event of the holder’s death, by
will or the laws of descent and distribution to the limited extent provided in
the Plan or the Incentive, or pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder), and the Company shall not be required to
recognize any attempted assignment of such rights by any participant.
Notwithstanding the preceding sentence, stock options may be transferred by the
holder thereof to Employee’s spouse, children, grandchildren or parents
(collectively, the “Family Members”), to trusts for the benefit of Family
Members, to partnerships or limited liability companies in which Family Members
are the only partners or shareholders, or to entities exempt from federal income
taxation pursuant to Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended. During a participant’s lifetime, a stock option may be exercised only
by him or her, by his or her guardian or legal representative or by the
transferees permitted by the preceding sentence.

 

10.5     Effect of Termination or Death. In the event that a Participant ceases
to be an Employee Director, or Consultant for any reason, including death or
disability, any Incentives may be exercised (or payments or shares may be
delivered thereunder) or shall expire at such times as may be determined by the
Board and, if applicable, set forth in the Incentive Agreement.

 

10.6     Investment Assurances; Additional Condition. Notwithstanding anything
in this Plan to the contrary, the Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Incentive, (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Incentive; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Incentive for the Participant’s own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, will be inoperative if (A) the issuance of the shares upon
the exercise or acquisition of Common Stock under the Incentive has been
registered under a then currently effective registration statement under the
Securities Act, or (B) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock. If at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive or the
shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the award of any Incentive,
the issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall not be
removed, as the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.

 

11

 

 

10.7     Incentive Plans and Agreements. Except in the case of stock awards, the
terms of each Incentive shall be stated in a plan or agreement approved by the
Board. The Board may also determine to enter into agreements with holders of
options to reclassify or convert certain outstanding options, within the terms
of the Plan, as Incentive Stock Options or as non-statutory stock options and in
order to eliminate SARs with respect to all or part of such options and any
other previously issued options.

 

10.8     Withholding. Unless prohibited by the terms of an Incentive Agreement,
the Company may, in its sole discretion, satisfy any federal, state or local tax
withholding obligation relating to an Incentive by any of the following means
(in addition to the Company’s right to withhold from any compensation paid to
the Participant by the Company) or by a combination of such means: (i) causing
the Participant to tender a cash payment; (ii) withholding shares of Common
Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Incentive; provided, however, that no shares
of Common Stock are withheld with a value exceeding the minimum amount of tax
required to be withheld by law (or such lesser amount as may be necessary to
avoid classification of the Incentive as a liability for financial accounting
purposes); (iii) withholding cash from an Incentive settled in cash; (iv)
withholding payment from any amounts otherwise payable to the Participant; or
(v) by such other method as may be set forth in the Incentive Agreement. If a
Participant desires and the Board permits, Participant the Participant may
satisfy its obligation to pay to the Company the amount required to be withheld
by electing (the “Election”) to have the Company withhold from the distribution
shares of Common Stock having a value up to the minimum amount of withholding
taxes required to be collected on the transaction. The value of the shares to be
withheld shall be based on the Fair Market Value of the Common Stock on the date
that the amount of tax to be withheld shall be determined (“Tax Date”). Each
Election must be made prior to the Tax Date. The Board may disapprove of any
Election, may suspend or terminate the right to make Elections, or may provide
with respect to any Incentive that the right to make Elections shall not apply
to such Incentive. An Election is irrevocable.

 

10.9     No Continued Employment, Engagement or Right to Corporate Assets.
Nothing in the Plan, any Incentive Agreement or any other instrument executed
thereunder or in connection with any Incentive granted pursuant thereto will
confer upon any Participant any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Incentive was granted or
will affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii)
the service of a Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate, or (iii) the service of a Director pursuant to
the bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be. Nothing contained in the Plan shall be
construed as giving an Employee, a consultant, such persons’ beneficiaries or
any other person any equity or interests of any kind in the assets of the
Company or creating a trust of any kind or a fiduciary relationship of any kind
between the Company and any such person.

 

10.10     Change in Time Commitment. In the event a Participant’s regular level
of time commitment in the performance of his or her services for the Company and
any Affiliates is reduced (for example, and without limitation, if the
Participant is an Employee of the Company and the Employee has a change in
status from a full-time Employee to a part-time Employee) after the date of
grant of any Incentive to the Participant, the Board has the right in its sole
discretion to (i) make a corresponding reduction in the number of shares or cash
amount subject to any portion of such Incentive that is scheduled to vest or
become payable after the date of such change in time commitment, and (ii) in
lieu of or in combination with such a reduction, extend the vesting or payment
schedule applicable to such Award. In the event of any such reduction, the
Participant will have no right with respect to any portion of the Incentive that
is so reduced or extended.

 

12

 

 

10.11     Electronic Delivery. Any reference herein to a “written” agreement or
document will include any agreement or document delivered electronically, filed
publicly at www.sec.gov (or any successor website thereto) or posted on the
Company’s intranet (or other shared electronic medium controlled by the Company
to which the Participant has access).

 

10.12     Deferral Permitted. To the extent permitted by applicable law, the
Board, in its sole discretion, may determine that the delivery of Common Stock
or the payment of cash, upon the exercise, vesting or settlement of all or a
portion of any Incentive may be deferred and may establish programs and
procedures for deferral elections to be made by Participants. Deferrals by
Participants will be made in accordance with Section 409A.

 

10.13     Amendment of the Plan. The Board may amend, modify, suspend,
discontinue or terminate the Plan or any portion of the Plan at any time as it
deems necessary or advisable; provided, however, any amendment or modification
that requires the approval of the Company’s shareholders pursuant to any
applicable law, regulation or securities exchange rule or listing requirement,
shall be subject to approval by the Company’s shareholders. Except as provided
in the Plan (including Section 2.2(g)) or an Incentive Agreement, no amendment,
modification, suspension, discontinuance or termination of the Plan shall impair
a Participant’s rights under an outstanding Incentive without his or her written
consent, provided that such consent shall not be required with respect to any
Plan amendment, modification or other such action if the Board determines in its
sole discretion that such amendment, modification or other such action is not
reasonably likely to significantly reduce or diminish the benefits provided to
the Participant under such Incentive.

 

10.14     Code Section 409A Provisions. Unless otherwise expressly provided for
in an Incentive Agreement, the Plan and Incentive Agreements will be interpreted
to the greatest extent possible in a manner that makes the Plan and the
Incentives granted hereunder exempt from Section 409A of the Code, and, to the
extent not so exempt, in compliance with Section 409A of the Code. If the Board
determines that any Incentive granted hereunder is not exempt from and is
therefore subject to Section 409A of the Code, the Incentive Agreement
evidencing such Incentive will incorporate the terms and conditions necessary to
avoid the consequences specified in Section 409A(a)(1) of the Code and to the
extent an Incentive Agreement is silent on terms necessary for compliance, such
terms are hereby incorporated by reference into the Incentive Agreement.
Notwithstanding anything to the contrary in this Plan (and unless the Incentive
Agreement specifically provides otherwise), if the shares of Common Stock are
publicly traded, and if a Participant holding an Incentive that constitutes
“deferred compensation” under Section 409A of the Code is a “specified employee”
for purposes of Section 409A of the Code, no distribution or payment of any
amount that is due because of a “separation from service” (as defined in Section
409A of the Code without regard to alternative definitions thereunder) will be
issued or paid before the date that is six (6) months following the date of such
Participant’s “separation from service” or, if earlier, the date of the
Participant’s death, unless such distribution or payment can be made in a manner
that complies with Section 409A of the Code, and any amounts so deferred will be
paid in a lump sum on the day after such six (6) month period elapses, with the
balance paid thereafter on the original schedule.

 

10.15     Clawback/Recovery. All Incentives granted under the Plan will be
subject to recoupment in accordance with any clawback policy that the Company is
required to adopt pursuant to the listing standards of any national securities
exchange or association on which the Company’s securities are listed or as is
otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection
Act or other applicable law. In addition, the Board may impose such other
clawback, recovery or recoupment provisions in an Incentive Agreement as the
Board determines necessary or appropriate. No recovery of compensation under
such a clawback policy will be an event giving rise to a right to resign for
“good reason” or “constructive termination” (or similar term) under any
agreement with the Company.

 

13

 

 

11.     Additional Definitions.

 

11.1     Affiliate. “Affiliate” means, at the time of determination, any
“parent” or “subsidiary” of the Company as such terms are defined in Rule 405.
The Board will have the authority to determine the time or times at which
“parent” or “subsidiary” status is determined within the foregoing definition.

 

11.2     Capitalization Adjustment. A “Capitalization Adjustment” means any
change that is made in, or other events that occur with respect to, the Common
Stock subject to the Plan or subject to any Incentive after the Effective Date
without the receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, stock split, reverse stock split, combination of shares, exchange of
shares, change in corporate structure or any similar equity restructuring
transaction, as that term is used in Statement of Financial Accounting Standards
Board Accounting Standards Codification Topic 718 (or any successor thereto).
Notwithstanding the foregoing, the conversion of any convertible securities of
the Company will not be treated as a Capitalization Adjustment.

 

11.3    Change in Control. A “Change in Control” means any of the following:

 

(a)     Any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act (a “Person”) becomes the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then-outstanding shares of Common Stock of the Company
(the “Outstanding Company Common Stock”) or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that, for purposes of this Section 11.3, the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any affiliated company or (iv) any acquisition
pursuant to a transaction that complies with Sections 11.3(b)(1), 11.3(b)(2) and
11.3(b)(3);

 

(b)     Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (1) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock (or,
for a non-corporate entity, equivalent securities) and the combined voting power
of the then-outstanding voting securities entitled to vote generally in the
election of directors (or, for a non-corporate entity, equivalent governing
body), as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (2) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (3) at least
a majority of the members of the board of directors (or, for a non-corporate
entity, equivalent governing body) of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing for such Business
Combination; or

 

14

 

 

(c)     Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

 

Notwithstanding the foregoing definition or any other provision of this Plan,
(A) the term Change in Control will not include a sale of assets, merger or
other transaction effected exclusively for the purpose of changing the domicile
of the Company, and (B) the definition of Change in Control (or any analogous
term) in an individual written agreement between the Company or any Affiliate
and the Participant will supersede the foregoing definition with respect to
Incentives subject to such agreement; provided, however, that if no definition
of Change in Control or any analogous term is set forth in such an individual
written agreement, the foregoing definition will apply; provided, further, that
no Change in Control shall be deemed to occur upon announcement or commencement
of a tender offer or upon a potential takeover or upon shareholder approval of a
merger or other transaction, in each case without a requirement that the Change
in Control actually occur. If required for compliance with Section 409A of the
Code, in no event will a Change in Control be deemed to have occurred if such
transaction is not also a “change in the ownership or effective control of” the
Company or “a change in the ownership of a substantial portion of the assets of”
the Company as determined under Treasury Regulation Section 1.409A-3(i)(5)
(without regard to any alternative definition thereunder). The Board may, in its
sole discretion and without a Participant’s consent, amend the definition of
“Change in Control” to conform to the definition of “Change in Control” under
Section 409A of the Code, and the regulations thereunder.

 

11.4     Corporate Transaction. “Corporate Transaction” means the consummation,
in a single transaction or in a series of related transactions, of any one or
more of the following events:

 

(a)     a sale or other disposition of all or substantially all, as determined
by the Board, in its sole discretion, of the consolidated assets of the Company
and its Subsidiaries;

 

(b)     a sale or other disposition of at least ninety percent (90%) of the
outstanding securities of the Company;

 

(c)     a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or

 

(d)     a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger, consolidation or similar transaction are
converted or exchanged by virtue of the merger, consolidation or similar
transaction into other property, whether in the form of securities, cash or
otherwise.

 

To the extent required for compliance with Section 409A of the Code, in no event
will an event be deemed a Corporate Transaction if such transaction is not also
a “change in the ownership or effective control of” the Company or “a change in
the ownership of a substantial portion of the assets of” the Company as
determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to
any alternative definition thereunder).

 

15

 

 

11.5     Employee. “Employee” means any person employed by the Company or an
Affiliate. However, service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an “Employee” for purposes
of the Plan.

 

11.6     Consultant. “Consultant” means any person, including an advisor, who is
(i) engaged by the Company or an Affiliate to render consulting or advisory
services and is compensated for such services, or (ii) serving as a member of
the board of directors of an Affiliate and is compensated for such services.
However, service solely as a Director, or payment of a fee for such service,
will not cause a Director to be considered a “Consultant” for purposes of the
Plan. Notwithstanding the foregoing, a person is treated as a Consultant under
this Plan only if a Form S-8 Registration Statement under the Securities Act of
1933 is available to register either the offer or the sale of the Company’s
securities to such person.

 

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

 

11.8     Effective Date. “Effective Date” means the effective date of this Plan
document, which is the date on which this Plan is approved by the Board.

 

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

 

(a)      If the Common Stock is listed on any established stock exchange or
traded on any established market, the Fair Market Value of a share of Common
Stock will be, unless otherwise determined by the Board, the closing sales price
for such stock as quoted on such exchange or market (or the exchange or market
with the greatest volume of trading in the Common Stock) on the date of
determination, as reported in a source the Board deems reliable.

 

(b)     Unless otherwise provided by the Board, if there is no closing sales
price for the Common Stock on the date of determination, then the Fair Market
Value will be the closing selling price on the last preceding date for which
such quotation exists.

 

(c)     In the absence of such markets for the Common Stock, the Fair Market
Value will be determined by the Board in good faith and in a manner that
complies with Sections 409A and 422 of the Code.

 

11.10     Incentive Stock Option. “Incentive Stock Option” means a stock option
that is intended to be, and qualifies as, an “incentive stock option” within the
meaning of Section 422 of the Code.

 

11.11     Performance Criteria. “Performance Criteria” means the one or more
criteria that the Board will select for purposes of establishing the Performance
Goals for a Performance Period. The Performance Criteria that will be used to
establish such Performance Goals may be based on any one of, or combination of,
the following as determined by the Board: (i) earnings (including earnings per
share and net earnings); (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization; (iv) total
stockholder return; (v) return on equity or average stockholder’s equity; (vi)
return on assets, investment, or capital employed; (vii) stock price; (viii)
margin (including gross margin); (ix) income (before or after taxes); (x)
operating income; (xi) operating income after taxes; (xii) pre-tax profit;
(xiii) operating cash flow; (xiv) sales or revenue targets; (xv) increases in
revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii)
improvement in or attainment of working capital levels; (xiii) economic value
added (or an equivalent metric); (xix) market share; (xx) cash flow; (xxi) cash
flow per share; (xxii) share price performance; (xxiii) debt reduction; (xxiv)
implementation or completion of projects or processes; (xxv) customer
satisfaction; (xxvi) stockholders’ equity; (xxvii) capital expenditures; (xxiii)
debt levels; (xxix) operating profit or net operating profit; (xxx) workforce
diversity; (xxxi) growth of net income or operating income; (xxxii) billings;
and (xxxiii) to the extent that an Incentive is not intended to comply with
Section 162(m) of the Code, other measures of performance selected by the Board.

 

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11.12     Performance Goals. “Performance Goals” means, for a Performance
Period, the one or more goals established by the Board for the Performance
Period based upon the Performance Criteria. Performance Goals may be based on a
Company-wide basis, with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms or relative to
the performance of one or more comparable companies or the performance of one or
more relevant indices.

 

11.13     Performance Period. “Performance Period” means the period of time
selected by the Board over which the attainment of one or more Performance Goals
will be measured for the purpose of determining a Participant’s right to and the
payment of an Incentive. Performance Periods may be of varying and overlapping
duration, at the sole discretion of the Board.

 

11.14     Transaction Proceeds Per Share. “Transaction Proceeds Per Share” in
connection with a Change in Control shall mean the cash plus the Fair Market
Value of the non-cash consideration to be received per share by the shareholders
of the Company upon the occurrence of the transaction.

 

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