Exhibit 4.6


 


MERITAGE
HOMES CORPORATION

2006 STOCK INCENTIVE PLAN


 


EFFECTIVE
DATE: MAY 17, 2006

APPROVED BY STOCKHOLDERS: MAY 17, 2006

TERMINATION DATE: MAY 16, 2016


 


ARTICLE
1

PURPOSE


 


1.1    GENERAL.    The
purpose of the Meritage Homes Corporation 2006 Stock Incentive Plan (the “Plan”) is to promote the success and
enhance the value of Meritage Homes Corporation (the “Company”) by linking the personal
interests of the members of the Board, employees, officers, executives,
consultants and advisors to those of Company stockholders and by providing such
individuals with an incentive for outstanding performance to generate superior
returns to Company stockholders. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of Board members, employees, officers, executives, consultants and
advisors upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.


 


ARTICLE
2

EFFECTIVE AND EXPIRATION DATE


 


2.1    EFFECTIVE DATE.    The Plan
is effective as of the date the Plan is approved by the Company’s stockholders
(the “Effective Date”).


 


2.2    EXPIRATION DATE.    The Plan
will expire on, and no Award may be granted under the Plan after, the tenth
anniversary of the Effective Date. Any Awards that are outstanding on the tenth
anniversary of the Effective Date shall remain in force according to the terms
of the Plan and the Award Agreement.


 


ARTICLE
3

DEFINITIONS AND CONSTRUCTION


 


3.1    DEFINITIONS.    The following
words and phrases shall have the following meanings:


 


(a)   “Award” means any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award, or
Performance-Based Award granted to a Participant under the Plan.


 


(b)   “Award Agreement” means any written
agreement, contract, or other instrument or document evidencing an Award.


 


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


 


(d)   “Cause” means and will exist in the
following circumstances in which the Participant: (i) is convicted of a
felony, (ii) engages in any fraudulent or other dishonest act to the
detriment of the Company, (iii) fails to report for work on a regular
basis, except for periods of authorized absence or bona fide illness, (iv) misappropriates
trade secrets, customer lists, or other proprietary information belonging to
the Company for his or her own benefit or for the benefit of a competitor, (v) engages
in any willful misconduct designed to harm the Company or its stockholders, or (vi) fails
to perform properly his or her assigned duties.


 


(e)   “Change of Control” means and includes each
of the following:


 


(1)   A
sale, transfer, or other disposition by the Company through a single
transaction or a series of transactions of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities to any “Unrelated Person” or 


 

















 


“Unrelated Persons”
acting in concert with one another. For purposes of this definition, the term “Person”
shall mean and include any individual, partnership, joint venture, association,
trust, corporation, or other entity (including a “group” as referred to in Section 13(d)(3) of
the Exchange Act). For purposes of this definition, the term “Unrelated Person”
shall mean and include any Person other than the Company, or an employee
benefit plan of the Company; or


 


(2)   A
sale, transfer, or other disposition through a single transaction or a series
of related transactions of all or substantially all of the assets of the
Company to an Unrelated Person or Unrelated Persons acting in concert with one
another; or


 


(3)   Any
consolidation or merger of the Company with or into an Unrelated Person, unless
immediately after the consolidation or merger the holders of the common stock
of the Company immediately prior to the consolidation or merger are the
beneficial owners of securities of the surviving corporation representing at
least 50% of the combined voting power of the surviving corporation’s then
outstanding securities.


 


(f)    “Code” means the Internal Revenue Code of
1986, as amended.


 


(g)   “Committee” means the committee of the
Board described in Section 4.1.


 


(h)   “Covered Employee” means an employee who
is, or could be, a “covered employee” within the meaning of Section 162(m) of
the Code.


 


(i)    “Disability” means, for purposes of this
Plan, that the Participant qualifies to receive long term disability payments
under the Company’s long term disability insurance program, as it may be
amended from time to time.


 


(j)    “Exchange Act” means the Securities
Exchange Act of 1934, as amended.


 


(k)   “Fair Market Value” means, as of any given
date, the fair market value of Stock on a particular date determined by such
methods or procedures as may be established from time to time by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value of Stock as
of any date shall be the closing price for the Stock as reported on the New
York Stock Exchange (or on any national securities exchange on which the Stock
is then listed) for that date or, if no such prices are reported for that date,
the average of the high and low trading prices on the next preceding date for
which such prices were reported.


 


(l)    “Incentive Stock Option” means an Option
that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.


 


(m)  “Non-Employee Director” means a member of
the Board who qualifies as a “Non-Employee Director” as defined in Rule 16b-3(b)(3) of
the Exchange Act, or any successor definition adopted by the Board.


 


(n)   “Non-Qualified Stock Option” means an
Option that is not intended to be an Incentive Stock Option.


 


(o)   “Option” means a right granted to a
Participant pursuant to Article 7 of the Plan to purchase Stock at a
specified price during specified time periods. An Option may be either an
Incentive Stock Option or a Non-Qualified Stock Option.


 


(p)   “Participant” means a person who, as a
member of the Board, employee, officer, or executive of, or consultant or
advisor to, the Company or any Subsidiary, has been granted an Award pursuant
to the Plan.


 


(q)   “Performance-Based Awards” means the
Performance Share Awards and Restricted Stock Awards granted to select Covered
Employees pursuant to Articles 9 and 10, respectively, but which are
subject to the terms and conditions set forth in Article 11. All
Performance-Based Awards are intended to qualify as “performance-based
compensation” pursuant to Section 162(m) of the Code.


 

















 


(r)   “Performance Criteria” means the criteria
that the Committee selects for purposes of establishing the Performance Goal or
Performance Goals for a Participant for a Performance Period. The Performance
Criteria that will be used to establish Performance Goals are limited to the
following: pre- or after-tax net earnings, earnings before interest expense
(including interest amortized to cost of sales) and income taxes (“EBIT”),
earnings before interest expense (including interest amortized to cost of
sales), income taxes, depreciation and amortization (“EBITDA”), revenue growth,
operating income, operating cash flow, return on net assets, return on
shareholders’ equity, return on assets, return on capital, share price growth,
shareholder returns, gross or net profit margin, earnings per share, price per
share, and market share, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to results of a peer
group. The Committee shall, within the time prescribed by Section 162(m) of
the Code, define in an objective fashion the manner of calculating the
Performance Criteria it selects to use for such Performance Period for such
Participant.


 


(s)   “Performance Goals” means, for a
Performance Period, the goals established in writing by the Committee for the
Performance Period based upon the Performance Criteria. Depending on the
Performance Criteria used to establish such Performance Goals, the Performance
Goals may be expressed in terms of overall Company performance or the
performance of a division, business unit, or an individual. The Committee, in
its discretion, may, within the time prescribed by Section 162(m) of
the Code, adjust or modify the calculation of Performance Goals for such
Performance Period in order to prevent the dilution or enlargement of the
rights of Participants (i) in the event of, or in anticipation of, any
unusual or extraordinary corporate item, transaction, event, or development, or
(ii) in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial statements of the
Company, or in response to, or in anticipation of, changes in applicable laws,
regulations, accounting principles, or business conditions.


 


(t)    “Performance Period” means the one or more
periods of time, which may be of varying and overlapping durations, as the
Committee may select, 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, a Performance-Based Award.


 


(u)  “Performance Share Award” means a right
granted to a Participant pursuant to Article 9, to receive cash, Stock, or
other Awards, the payment of which is contingent upon achieving certain
performance goals established by the Committee.


 


(v)   “Plan” means this Meritage Homes
Corporation 2006 Stock Incentive Plan, as amended.


 


(w)  “Restricted Stock Award” means Stock
granted to a Participant pursuant to Article 10 that is subject to certain
restrictions and to risk of forfeiture.


 


(x)   “Stock” means the common stock of the
Company and such other securities of the Company that may be substituted for
Stock pursuant to Article 13.


 


(y)   “Stock Appreciation Right” or “SAR” means a right granted to a
Participant under Article 8 to receive the appreciation on Stock.


 


(z)   “Subsidiary” means any corporation or other
entity of which a majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.


 

















 


ARTICLE
4

ADMINISTRATION


 


4.1    COMMITTEE.    The Plan shall
be administered by the Executive Compensation Committee of the Board. The
Committee (or subcommittee thereof) shall consist of at least two individuals,
each of whom qualifies as (i) a Non-Employee Director, and (ii) an “outside
director” pursuant to Section 162(m) of the Code and the regulations
issued thereunder.


 


4.2    ACTION BY THE COMMITTEE.    A
majority of the Committee shall constitute a quorum. The acts of a majority of
the members present at any meeting at which a quorum is present, and acts
approved in writing by a majority of the Committee in lieu of a meeting, shall
be deemed the acts of the Committee. Each member of the Committee is entitled
to, in good faith, rely or act upon any report or other information furnished to
that member by any officer or other employee of the Company or any Subsidiary,
the Company’s independent registered public accountants, or any executive
compensation consultant or other professional retained by the Company to assist
in the administration of the Plan.


 


4.3    AUTHORITY OF COMMITTEE.    Subject
to any specific designation in the Plan, the Committee has the exclusive power,
authority and discretion to:


 


(a)   designate
Participants to receive Awards;


 


(b)   determine
the type or types of Awards to be granted to each Participant;


 


(c)   determine
the number of Awards to be granted and the number of shares of Stock to which
an Award will relate;


 


(d)   determine
the terms and conditions of any Award granted pursuant to the Plan, including,
but not limited to, the exercise price, grant price, or purchase price, any
restrictions or limitations on the Award, any schedule for lapse of forfeiture
restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines; provided, however, that the
Committee shall not (i) have the authority to accelerate the vesting or
waive the forfeiture of any Performance-Based Awards, or (ii) take any
action or fail to take any action with respect to the operation of the Plan
that would cause all or part of the payment under any Award to be subject to
the additional tax under Section 409A of the Code;


 


(e)   determine
whether, to what extent, and pursuant to what circumstances an Award may be
settled in, or the exercise price of an Award may be paid in, cash, Stock,
other Awards, or other property, or an Award may be canceled, forfeited, or
surrendered;


 


(f)    prescribe
the form of each Award Agreement, which need not be identical for each
Participant;


 


(g)   decide
all other matters that must be determined in connection with an Award;


 


(h)   establish,
adopt, or revise any rules and regulations as it may deem necessary or
advisable to administer the Plan;


 


(i)    interpret
the terms of, and any matter arising pursuant to, the Plan or any Award
Agreement; and


 


(j)    make
all other decisions and determinations that may be required pursuant to the
Plan or as the Committee deems necessary or advisable to administer the Plan.


 


4.4    DECISIONS BINDING.    The
Committee’s interpretation of the Plan, any Awards granted pursuant to the
Plan, any Award Agreement and all decisions and determinations by the Committee
with respect to the Plan are final, binding, and conclusive on all parties.


 

















 


ARTICLE
5

SHARES SUBJECT TO THE PLAN


 


5.1    NUMBER OF SHARES.    Subject to adjustment provided in Article 13,
the aggregate number of shares of Stock reserved and available for grant
pursuant to the Plan shall be 1,600,000, plus (i) the number of shares of
Stock available for grant pursuant to the Meritage Homes Corporation Stock
Option Plan (“Prior Plan”) as of the Effective Date, and (ii) the number
of shares of Stock that were previously granted pursuant to the Prior Plan and
that either terminate, expire, or lapse for any reason after the Effective
Date. Any shares of Stock issued in connection with Awards other than
Options and Stock Appreciation Rights shall be counted against the shares
available for grant pursuant to the previous sentence as 1.38 shares for every
one share issued in connection with such Award or by which the Award is valued
by reference. Notwithstanding the above, the maximum number of shares of Stock
that may be awarded as Incentive Stock Options under the Plan is 1,200,000.


 


5.2    LAPSED OR ASSUMED AWARDS.    To
the extent that an Award terminates, expires, or lapses for any reason, any
shares of Stock subject to the Award will again be available for the grant of
an Award pursuant to the Plan. Additionally, to the maximum extent permitted by
applicable law or any securities exchange rule, shares of Stock issued in
assumption of, or in substitution for, any outstanding awards of any entity
acquired in any form of combination by the Company or any Subsidiary shall not
be counted against shares of Stock available for grant pursuant to this Plan.
However, for avoidance of doubt, the exercise of a stock-settled SAR or
net-cashless exercise of an Option (or a portion thereof) will reduce the
number of shares of Stock available for issuance hereunder by the entire number
of shares of Stock subject to that SAR or Option (or applicable portion
thereof), even though a smaller number of shares of Stock will be issued upon
such an exercise. Also, shares of Stock tendered to pay the exercise price of
an Option or to satisfy a tax withholding obligation arising in connection with
an Award will not become available for grant or sale under the Plan.


 


5.3    STOCK DISTRIBUTED.    Any
Stock distributed pursuant to an Award may consist, in whole or in part, of
authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.


 


5.4    LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS.    Notwithstanding any provision in the Plan to
the contrary, and subject to the adjustment in Article 13, the maximum
number of shares (counted, as described in Section 5.1 above, as 1.38
shares awarded for every one share issued in connection with such Award or by
which the Award is valued by reference) of Stock with respect to one or more
Awards that may be granted to any one Participant during a calendar year shall
be 250,000.


 


ARTICLE
6

ELIGIBILITY AND PARTICIPATION


 


6.1    ELIGIBILITY.


 


        (a)    General.    Persons
eligible to participate in this Plan include all members of the Board,
employees, officers, and executives of, and consultants and advisors providing
services to, the Company or a Subsidiary, as determined by the Committee.


 


        (b)    Foreign
Participants.    In order to assure
the viability of Awards granted to Participants employed in foreign countries,
the Committee may provide for such special terms as it may consider necessary
or appropriate to accommodate differences in local law, tax policy, or custom.
Moreover, the Committee may approve such supplements to, or amendments,
restatements, or alternative versions of, the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the
Plan as in effect for any other purpose; provided, however, that no such
supplements, amendments, restatements, or alternative versions shall increase
the share limitations contained in Article 5 of the Plan.


 


6.2    ACTUAL PARTICIPATION.    Subject
to the provisions of the Plan, the Committee may, from time to time, select
from among all eligible individuals, those to whom Awards shall be granted and
shall determine the nature and amount of each Award. No individual shall have
any right to be granted an Award pursuant to this Plan.


 

















 


ARTICLE
7

STOCK OPTIONS


 


7.1    GENERAL.    The Committee is
authorized to grant Options to Participants on the following terms and
conditions:


 


(a)    Exercise
Price.    The exercise price per
share of Stock pursuant to an Option shall be determined by the Committee and
set forth in the Award Agreement; provided that the exercise price for any
Option shall not be less than the Fair Market Value as of the date of grant.


 


(b)    Time
and Conditions of Exercise.    The
Committee shall determine the time or times at which an Option may be exercised
in whole or in part provided that the term of any Option granted under the Plan
shall not exceed ten years. The Committee shall also determine the performance
or other conditions, if any, that must be satisfied before all or part of an
Option may be exercised. Unless otherwise provided in an Award Agreement, an
Option will lapse immediately if a Participant’s employment is terminated for
Cause.


 


(c)    Payment.    The
Committee shall determine the methods by which the exercise price of an Option
may be paid, the form of payment, including, without limitation, cash,
promissory note, shares of Stock held for longer than six months (through
actual tender or by attestation), or other property acceptable to the Committee
(including broker-assisted “cashless exercise” arrangements), and the methods
by which shares of Stock shall be delivered or deemed to be delivered to
Participants.


 


(d)    Evidence
of Grant.    All Options shall be
evidenced by a written Award Agreement between the Company and the Participant
in the form attached to this Plan as Exhibit A. The Award Agreement shall
include such additional provisions as may be specified by the Committee.


 


7.2    INCENTIVE
STOCK OPTIONS.    Incentive Stock Options
shall be granted only to employees and the terms of any Incentive Stock Options
granted pursuant to the Plan must comply with the following additional
provisions of this Section 7.2:


 


(a)    Exercise
Price.    Subject to Section 7.2(d),
the exercise price per share of Stock shall be set by the Committee, provided
that the exercise price for any Incentive Stock Option may not be less than the
Fair Market Value as of the date of the grant.


 


(b)    Exercise.    In
no event, may any Incentive Stock Option be exercisable for more than ten years
from the date of its grant.


 


(c)    Lapse
of Option.    An Incentive Stock
Option shall lapse pursuant to the following circumstances.


 


        (1)   The
Incentive Stock Option shall lapse ten years from the date it is granted,
unless an earlier time is set in the Award Agreement.


 


        (2)   The
Incentive Stock Option shall lapse upon termination of employment for Cause or
for any other reason other than the Participant’s death or Disability, unless
otherwise provided in the Award Agreement.


 


        (3)   If
the Participant terminates employment on account of Disability or death before
the Option lapses pursuant to paragraph (1) or (2) above, the
Incentive Stock Option shall lapse, unless it is previously exercised, on the
earlier of (i) the scheduled termination date of the Option; or (ii) 12 months
after the date of the Participant’s termination of employment on account of
Disability or death. Upon the Participant’s Disability or death, any Incentive
Stock Options exercisable at the Participant’s Disability or death may be
exercised by the Participant’s legal representative or representatives, by the
person or persons entitled to do so pursuant to the Participant’s last will and
testament, or, if the Participant fails to make testamentary disposition of
such Incentive Stock Option or dies intestate, by the person or persons
entitled to receive the Incentive Stock Option pursuant to the applicable laws
of descent and distribution.


 

















 


(d)    Individual
Dollar Limitation.    The aggregate
Fair Market Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00 or such other
limitation as imposed by Section 422(d) of the Code, or any successor
provision. To the extent that Incentive Stock Options are first exercisable by
a Participant in excess of such limitation, the excess shall be considered
Non-Qualified Stock Options.


 


(e)    Ten
Percent Owners.    An Incentive Stock
Option shall be granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of all
classes of Stock of the Company only if such Option is granted at a price that
is not less than 110% of Fair Market Value on the date of grant and the Option
is exercisable for no more than five years from the date of grant.


 


(f)    Expiration
of Incentive Stock Options.    No
Award of an Incentive Stock Option may be made pursuant to this Plan after the
tenth anniversary of the Effective Date.


 


(g)    Right
to Exercise.    Except as provided in
Section 12.5, during a Participant’s lifetime, an Incentive Stock Option
may be exercised only by the Participant.


 


ARTICLE
8

STOCK APPRECIATION RIGHTS


 


8.1    Grant Of SARs.    The
Committee is authorized to grant SARs to Participants on the following terms
and conditions:


 


(a)    Right
to Payment.    Upon the exercise of a
SAR, the Participant to whom it is granted has the right to receive the excess,
if any, of:


 


        (1)   the
Fair Market Value of a share of Stock on the date of exercise; over


 


        (2)   the
grant price of the SAR as determined by the Committee, which shall not be less
than the Fair Market Value of a share of Stock on the date of grant.


 


(b)    Term.    The
term of each SAR shall not exceed ten years from the date of grant.


 


(c)    Other
Terms.    All SARs grants will be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, and any other terms and conditions of any SAR will be determined by
the Committee at the time of the grant of the Award and as set forth in the
Award Agreement; provided that the form of consideration payable in settlement
of a SAR shall be Stock.


 


ARTICLE
9

PERFORMANCE SHARES


 


9.1    GRANT OF PERFORMANCE SHARES.    The
Committee is authorized to grant Performance Shares to Participants on such
terms and conditions as may be selected by the Committee. The Committee shall
have the complete discretion to determine the number of Performance Shares granted
to each Participant. All Awards of Performance Shares shall be evidenced by an
Award Agreement.


 


9.2    RIGHT TO PAYMENT.    A grant
of Performance Shares gives the Participant rights, valued as determined by the
Committee, and payable to, or exercisable by, the Participant to whom the
Performance Shares are granted, in whole or in part, as the Committee shall
establish at grant or thereafter. Subject to the terms of the Plan, the
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.


 

















 


9.3    OTHER TERMS.    Performance
Shares may be payable in cash, Stock, or other property, and have such other
terms and conditions as determined by the Committee and reflected in a written
Performance Share Award Agreement. Unless otherwise provided in an Award
Agreement, Performance Shares will lapse immediately if a Participant’s
employment is terminated for Cause.


 


ARTICLE
10

RESTRICTED STOCK AWARDS


 


10.1    GRANT OF RESTRICTED STOCK.    The
Committee is authorized to make Awards of Restricted Stock to Participants in
such amounts and subject to such terms and conditions as determined by the
Committee. All Awards of Restricted Stock shall be evidenced by a written
Restricted Stock Award Agreement.


 


10.2    ISSUANCE AND RESTRICTIONS.    Restricted
Stock shall be subject to such restrictions on transferability and other
restrictions as the Committee may impose (including, without limitation,
limitations on the right to vote Restricted Stock or the right to receive
dividends on the Restricted Stock). These restrictions may lapse separately or
in combination at such times, pursuant to such circumstances, in such
installments, or otherwise, as the Committee determines at the time of the
grant of the Award or thereafter.


 


10.3    FORFEITURE.    Except as
otherwise determined by the Committee at the time of the grant of the Award or
thereafter, upon termination of employment during the applicable restriction
period, Restricted Stock that is at that time subject to restrictions shall be
forfeited; provided, however, that the Committee may provide in any Restricted
Stock Award Agreement that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in other
cases waive in whole or in part restrictions or forfeiture conditions relating
to Restricted Stock. Unless otherwise provided in an Award Agreement,
Restricted Stock will be forfeited immediately if a Participant’s employment is
terminated for Cause.


 


10.4    CERTIFICATES FOR RESTRICTED STOCK.    Restricted
Stock granted pursuant to the Plan may be evidenced in such manner as the
Committee shall determine. If certificates representing shares of Restricted
Stock are registered in the name of the Participant, certificates must bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company may, at its discretion,
retain physical possession of the certificate until such time as all applicable
restrictions lapse.


 


ARTICLE
11

PERFORMANCE-BASED AWARDS


 


11.1    PURPOSE.    The purpose of
this Article 11 is to provide the Committee the ability to qualify the
Performance Share Awards pursuant to Article 9 and the Restricted Stock
Awards pursuant to Article 10 as “performance-based compensation” pursuant
to Section 162(m) of the Code. If the Committee, in its discretion,
decides to grant a Performance-Based Award to a Covered Employee, the
provisions of this Article 11 shall control over any contrary provision
contained in Articles 9 or 10.


 


11.2    APPLICABILITY.    This Article 11
shall apply only to those Covered Employees selected by the Committee to
receive Performance-Based Awards. The Committee may, in its discretion, grant
Restricted Stock Awards or Performance Share Awards to Covered Employees that
do not satisfy the requirements of this Article 11. The designation of a
Covered Employee as a Participant for a Performance Period shall not in any
manner entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance
Period shall not require designation of such Covered Employee as a Participant
in any subsequent Performance Period and designation of one Covered Employee as
a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.


 


11.3    DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE AWARDS.    With
regard to a particular Performance Period, the Committee shall have full
discretion to select the length of such Performance Period, the type of
Performance-Based Awards to be issued, the kind and/or level of the Performance
Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary
or any division or business unit thereof. Unless otherwise provided in an Award
Agreement, Performance- Based Awards will be forfeited if a Participant’s
employment is terminated for Cause.


 

















 


11.4    PAYMENT OF PERFORMANCE AWARDS.    Unless
otherwise provided in the relevant Award Agreement, a Participant must be
employed by the Company or a Subsidiary on the day a Performance Award for such
Performance Period is paid to the Participant. Furthermore, a Participant shall
be eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved.
In determining the actual size of an individual Performance-Based Award, the
Committee may reduce or eliminate the amount of the Performance-Based Award earned
for the Performance Period, if in its sole and absolute discretion, such
reduction or elimination is appropriate.


 


11.5    MAXIMUM AWARD PAYABLE.    The maximum Performance-Based Award payable
to any one Participant pursuant to the Plan for a Performance Period is 250,000
shares (counted, as described in Section 5.1 above, as 1.38 shares awarded
for every one share issued in connection with such Award or by which the Award
is valued by reference) of Stock.


 


ARTICLE
12

PROVISIONS APPLICABLE TO AWARDS


 


12.1    STAND-ALONE AND TANDEM AWARDS.    Awards
granted pursuant to the Plan may, in the discretion of the Committee, be
granted either alone, in addition to, or in tandem with, any other Award
granted pursuant to the Plan. Awards granted in addition to or in tandem with
other Awards may be granted either at the same time as or at a different time
from the grant of such other Awards.


 


12.2    TERM OF AWARD.    The term of
each Award shall be for the period as determined by the Committee, provided
that in no event shall the term of any Option or Stock Appreciation Right
granted in tandem with the Incentive Stock Option exceed a period of ten years
from the date of its grant.


 


12.3    FORM OF PAYMENT FOR AWARDS.    Subject
to the terms of the Plan and any applicable law or Award Agreement, payments or
transfers to be made by the Company or a Subsidiary on the grant or exercise of
an Award may be made in such forms as the Committee determines at or after the
time of grant, including, without limitation, cash, promissory note, Stock held
for more than six months, other Awards, or other property, or any combination,
and may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case determined in accordance with rules adopted
by, and at the discretion of, the Committee.


 


12.4    LIMITS ON TRANSFER.


 


        (a)    General.    Except
as provided in Section 12.4(b) or Section 12.5, no right or
interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to, or in favor of, any party other than the Company or a
Subsidiary, or shall be subject to any lien, obligation, or liability of such
Participant to any other party other than the Company or a Subsidiary. Except
as provided in Section 12.4(b) or Section 12.5, and except as
otherwise provided by the Committee, no Award shall be assigned, transferred,
or otherwise disposed of by a Participant other than by will or the laws of
descent and distribution.


 


        (b)    Transfers
to Family Members.    The Committee
shall have the authority, in its discretion, to grant (or to sanction by way of
amendment to an existing Award) Awards which may be transferred by the
Participant during his or her lifetime to any Family Member (as defined below).
Unless transfers for the Participant have been previously approved by the
Committee, a transfer of an Award pursuant hereto may only be affected by the
Company at the written request of the Participant. In the event an Award is
transferred as contemplated herein, such transferred Award may not be
subsequently transferred by the transferee (other than another transfer meeting
the conditions herein) except by will or the laws of descent and distribution.
A transferred Award shall continue to be governed by and subject to the terms
and limitations of the Plan and relevant Award Agreement, and the transferee
shall be entitled to the same rights as the Participant, as if the transfer had
not taken place. For purposes of this Section 12.4(b), the term “Family
Member” means spouse and any parent, stepparent, grandparent, child, stepchild,
or grandchild, including adoptive relationships or a trust or any other entity
in which these persons (or the Participant) have more than 50% of the
beneficial interest.


 

















 


12.5    BENEFICIARIES.    Notwithstanding
Section 12.4, a Participant may, in the manner determined by the
Committee, designate a beneficiary to exercise the rights of the Participant
and to receive any distribution with respect to any Award upon the Participant’s
death. A beneficiary, legal guardian, legal representative, or other person
claiming any rights pursuant to the Plan is subject to all terms and conditions
of the Plan and any Award Agreement applicable to the Participant, except to
the extent the Plan and Award Agreement otherwise provide, and to any
additional restrictions deemed necessary or appropriate by the Committee. If
the Participant is married and resides in a community property state, a
designation of a person other than the Participant’s spouse as his beneficiary
with respect to more than 50% of the Participant’s interest in the Award shall
not be effective without the prior written consent of the Participant’s spouse.
If no beneficiary has been designated or survives the Participant, payment
shall be made to the person entitled thereto pursuant to the Participant’s will
or the laws of descent and distribution. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is provided to the Committee.


 


12.6    STOCK CERTIFICATES.    Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or
deliver any certificates evidencing shares of Stock pursuant to the exercise of
any Award, unless and until the Board has determined, with advice of counsel,
that the issuance and delivery of such certificates is in compliance with all
applicable laws, regulations of governmental authorities and, if applicable,
the requirements of any exchange on which the shares of Stock are listed or
traded. All Stock certificates delivered pursuant to the Plan are subject to
any stop-transfer orders and other restrictions as the Committee deems
necessary or advisable to comply with Federal, state, or foreign jurisdiction,
securities or other laws, rules and regulations and the rules of any
national securities exchange or automated quotation system on which the Stock
is listed, quoted, or traded. The Committee may place legends on any Stock
certificate to reference restrictions applicable to the Stock. In addition to
the terms and conditions provided herein, the Board may require that a
Participant make such reasonable covenants, agreements, and representations as
the Board, in its discretion, deems advisable in order to comply with any such
laws, regulations, or requirements.


 


12.7    ACCELERATION UPON A CHANGE OF CONTROL.    If
a Change of Control occurs and Awards are converted, assumed, or replaced by a
successor, the Committee shall have the discretion to cause all outstanding
Awards to become fully exercisable and all restrictions on outstanding Awards
to lapse. If a Change of Control occurs and Awards are not converted, assumed,
or replaced by a successor, all outstanding Awards shall automatically become
fully exercisable and all restrictions on outstanding Awards shall lapse. To
the extent that this provision causes Incentive Stock Options to exceed the
dollar limitation set forth in Section 7.2(d), the excess Options shall be
deemed to be Non-Qualified Stock Options. Upon, or in anticipation of, such an
event, the Committee may cause every Award outstanding hereunder to terminate
at a specific time in the future and shall give each Participant the right to
exercise Awards during a period of time as the Committee, in its sole and
absolute discretion, shall determine.


 


ARTICLE
13

CHANGES IN CAPITAL STRUCTURE


 


13.1    SHARES AVAILABLE FOR GRANT.    In
the event of any change in the number of shares of Stock outstanding by reason
of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or similar corporate change, the maximum
aggregate number of shares of Stock with respect to which the Committee may
grant Awards, the number of shares of Stock subject to any Award, and any
numeric limitation expressed in the Plan shall be appropriately adjusted by the
Committee.


 


13.2    OUTSTANDING AWARDS—INCREASE OR DECREASE IN ISSUED SHARES WITHOUT
CONSIDERATION.    Subject to any
required action by the stockholders of the Company, in the event of any increase
or decrease in the number of issued shares of Stock resulting from a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend (but only on the shares of Stock), or any other increase or decrease
in the number of such shares effected without receipt or payment of
consideration by the Company, the Committee shall proportionally adjust the
number of shares of Stock subject to each outstanding Award and the exercise
price per share of Stock of each such Award.


 


13.3    OUTSTANDING AWARDS—CERTAIN MERGERS.    Subject
to any required action by the stockholders of the Company, in the event that
the Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Stock receive securities of another corporation), each Award outstanding on the
date of such merger or consolidation shall pertain to and apply to the
securities that a holder of the number of shares of Stock subject to such Award
would have received in such merger or consolidation.


 

















 


13.4    OUTSTANDING AWARDS—OTHER CHANGES.    In
the event of any other change in the capitalization of the Company or corporate
change other than those specifically referred to in Article 13, the
Committee may, in its absolute discretion, make such adjustments in the number
and class of shares subject to Awards outstanding on the date on which such
change occurs and in the per share exercise price of each Award as the
Committee may consider appropriate to prevent the dilution or enlargement of
rights relating to Awards granted under the Plan.


 


13.5    NO OTHER RIGHTS.    Except as
expressly provided in the Plan, no Participant shall have any rights by reason
of any subdivision or consolidation of shares of stock of any class, the
payment of any dividend, any increase or decrease in the number of shares of
stock of any class or any dissolution, liquidation, merger, or consolidation of
the Company or any other corporation. Except as expressly provided in the Plan,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Stock
subject to an Award or the exercise price of any Award.


 


ARTICLE
14

AMENDMENT, MODIFICATION, AND TERMINATION


 


14.1    AMENDMENT, MODIFICATION, AND TERMINATION.    With
the approval of the Board, at any time and from time to time, the Committee may
terminate, amend or modify the Plan; provided, however, that (i) to the
extent necessary and desirable to comply with any applicable law, regulation,
or stock exchange rule, the Company shall obtain stockholder approval of any
Plan amendment in such a manner and to such a degree as required, (ii) shareholder
approval is required for any amendment to the Plan that (A) increases the
number of shares available under the Plan (other than any adjustment as
provided by Article 13), (B) permits the Committee to grant Options
with an exercise price that is below Fair Market Value on the date of grant, (C) permits
the Committee to extend the exercise period for an Option beyond ten years from
the date of grant, or (D) permits the Committee to reprice previously
granted Options, and (iii) no such action shall be taken that would cause
all or part of the payment under any Award to be subject to the additional tax
under Section 409A of the Code.


 


14.2    AWARDS PREVIOUSLY GRANTED.    No
termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted pursuant to the Plan without the
prior written consent of the Participant.


 


ARTICLE
15

GENERAL PROVISIONS


 


15.1    NO RIGHTS TO AWARDS.    No
Participant, employee, or other person shall have any claim to be granted any
Award pursuant to the Plan, and neither the Company nor the Committee is
obligated to treat Participants, employees, and other persons uniformly.


 


15.2    NO STOCKHOLDERS RIGHTS.    No
Award gives the Participant any of the rights of a stockholder of the Company
unless and until shares of Stock are in fact issued to such person in
connection with such Award.


 


15.3    WITHHOLDING.    The Company
or any Subsidiary shall have the authority and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local taxes (including the Participant’s FICA
obligation) required by law to be withheld with respect to any taxable event
concerning a Participant arising as a result of this Plan. With the Committee’s
consent, a Participant may elect to (i) have the Company withhold from
those shares of Stock that would otherwise be received upon the exercise of any
Option, a number of shares having a Fair Market Value equal to the minimum
statutory amount necessary to satisfy the Company’s applicable federal, state,
local or foreign income and employment tax withholding obligations with respect
to such Participant, or (ii) tender previously-owned shares of Stock held
by the Participant for six months or longer to satisfy the Company’s applicable
federal, state, local, or foreign income and employment tax withholding
obligations with respect to the Participant.


 

















 


15.4    NO RIGHT TO EMPLOYMENT OR SERVICES.    Nothing
in the Plan or any Award Agreement shall interfere with or limit in any way the
right of the Company or any Subsidiary to terminate any Participant’s
employment or services at any time, nor confer upon any Participant any right
to continue in the employ or service of the Company or any Subsidiary.


 


15.5    UNFUNDED STATUS OF AWARDS.    The
Plan is intended to be an “unfunded” plan for incentive compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award Agreement shall give the Participant
any rights that are greater than those of a general creditor of the Company or
any Subsidiary.


 


15.6    INDEMNIFICATION.    To the
extent allowable pursuant to applicable law, each member of the Committee or of
the Board shall be indemnified and held harmless by the Company from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such member in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action or failure to act pursuant to the Plan and
against and from any and all amounts paid by him or her in satisfaction of
judgment in such action, suit, or proceeding against him or her provided he or
she gives the Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on his or her own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled pursuant
to the Company’s Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.


 


15.7    RELATIONSHIP TO OTHER BENEFITS.    No
payment pursuant to the Plan shall be taken into account in determining any
benefits pursuant to any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any Subsidiary.


 


15.8    EXPENSES.    The expenses of
administering the Plan shall be borne by the Company and its Subsidiaries.


 


15.9    TITLES AND HEADINGS.    The
titles and headings of the Sections in the Plan are for convenience of
reference only and, in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.


 


15.10    FRACTIONAL SHARES.    No
fractional shares of Stock shall be issued and the Committee shall determine,
in its discretion, whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding up or down as
appropriate.


 


15.11    SECURITIES LAW COMPLIANCE.    With
respect to any person who is, on the relevant date, obligated to file reports
pursuant to Section 16 of the Exchange Act, transactions pursuant to this
Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors pursuant to the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be void to the
extent permitted by law and voidable as deemed advisable by the Committee.


 


15.12    GOVERNMENT AND OTHER REGULATIONS.    The
obligation of the Company to make payment of awards in Stock or otherwise shall
be subject to all applicable laws, rules, and regulations, and to such
approvals by government agencies as may be required. The Company shall be under
no obligation to register pursuant to the Securities Act of 1933, as amended,
any of the shares of Stock paid pursuant to the Plan. If the shares paid
pursuant to the Plan may in certain circumstances be exempt from registration
pursuant to the Securities Act of 1933, as amended, the Company may restrict
the transfer of such shares in such manner as it deems advisable to ensure the
availability of any such exemption.


 


15.13    GOVERNING LAW.    The Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Maryland.


 


15.14    SECTION 409A.    If any
payments under this Plan are subject to the provisions of Section 409A of
the Code, it is intended that the terms of this Plan will comply fully with and
meet all the requirements of Section 409A of the Code.