exv4w1






Exhibit 4.1




DIGITAL ANGEL CORPORATION




2003 FLEXIBLE STOCK PLAN




(as Amended and Restated through September 25, 2009)




ii









 





DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through September 25, 2009)




TABLE OF CONTENTS




	 	 	 	 	 
	1.
	 	NAME AND PURPOSE	 	1
	1.1
	 	Name	 	1
	1.2
	 	Purpose	 	1
	 
	 	 	 	 
	2.
	 	DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION	 	1
	2.1
	 	General Definitions	 	1
	2.1.1
	 	Affiliate	 	1
	2.1.2
	 	Agreement	 	1
	2.1.3
	 	Benefit	 	1
	2.1.4
	 	Board	 	1
	2.1.5
	 	Cash Award	 	1
	2.1.6
	 	Change of Control	 	2
	2.1.7
	 	Code	 	3
	2.1.8
	 	Company	 	3
	2.1.9
	 	Committee	 	3
	2.1.10
	 	Common Stock	 	3
	2.1.11
	 	Effective Date	 	3
	2.1.12
	 	Employee	 	3
	2.1.13
	 	Employer	 	3
	2.1.14
	 	Exchange Act	 	3
	2.1.15
	 	Fair Market Value	 	4
	2.1.16
	 	Fiscal Year	 	4
	2.1.17
	 	ISO	 	4
	2.1.18
	 	NQSO	 	4
	2.1.19
	 	Option	 	4
	2.1.20
	 	Other Stock Based Award	 	4
	2.1.21
	 	Parent	 	4
	2.1.22
	 	Participant	 	4
	2.1.23
	 	Performance Based Compensation	 	4
	2.1.24
	 	Performance Share	 	4
	2.1.25
	 	Plan	 	5
	2.1.26
	 	Reload Option	 	5






iii









 






	 	 	 	 	 
	2.1.27
	 	Restricted Stock	 	5
	2.1.28
	 	Rule 16b-3	 	5
	2.1.29
	 	SEC	 	5
	2.1.30
	 	Share	 	5
	2.1.31
	 	SAR	 	5
	2.1.32
	 	Subsidiary	 	5
	2.2
	 	Other Definitions	 	5
	2.3
	 	Conflicts	 	5
	 
	 	 	 	 
	3.
	 	COMMON STOCK	 	6
	3.1
	 	Number of Shares	 	6
	3.2
	 	Reusage	 	6
	3.3
	 	Adjustments	 	6
	 
	 	 	 	 
	4.
	 	ELIGIBILITY	 	6
	4.1
	 	Determined By Committee	 	6
	 
	 	 	 	 
	5.
	 	ADMINISTRATION	 	6
	5.1
	 	Committee	 	6
	5.2
	 	Authority	 	7
	5.3
	 	Delegation	 	7
	5.4
	 	Determination	 	7
	 
	 	 	 	 
	6.
	 	AMENDMENT	 	8
	6.1
	 	Power of Board	 	8
	6.2
	 	Limitation	 	8
	 
	 	 	 	 
	7.
	 	TERM AND TERMINATION	 	8
	7.1
	 	Term	 	8
	7.2
	 	Termination	 	8
	 
	 	 	 	 
	8.
	 	MODIFICATION OR TERMINATION OF BENEFITS	 	8
	8.1
	 	General	 	8
	8.2
	 	Committee’s Right	 	8
	8.3
	 	Compliance with Applicable Laws	 	8
	 
	 	 	 	 
	9.
	 	CHANGE OF CONTROL	 	9






iv









 






	 	 	 	 	 
	9.1
	 	Vesting and Payment	 	9
	9.2
	 	Other Action	 	9
	 
	 	 	 	 
	10.
	 	AGREEMENTS AND CERTAIN BENEFITS	 	9
	10.1
	 	Grant Evidenced by Agreement	 	9
	10.2
	 	Provisions of Agreement	 	9
	10.3
	 	Transferability	 	10
	 
	 	 	 	 
	11.
	 	REPLACEMENT AND TANDEM AWARDS	 	10
	11.1
	 	Replacement	 	10
	11.2
	 	Tandem Awards	 	10
	 
	 	 	 	 
	12.
	 	PAYMENT, DIVIDENDS AND WITHHOLDING	 	10
	12.1
	 	Payment	 	10
	12.2
	 	Dividend Equivalents	 	10
	12.3
	 	Withholding	 	11
	 
	 	 	 	 
	13.
	 	OPTIONS	 	11
	13.1
	 	Types of Options	 	11
	13.2
	 	Grant of ISOs and Option Price	 	11
	13.3
	 	Other Requirements for ISOs	 	11
	13.4
	 	NQSOs	 	11
	13.5
	 	Determination by Committee	 	11
	 
	 	 	 	 
	14.
	 	SARS	 	11
	14.1
	 	Grant and Payment	 	11
	14.2
	 	Grant of Tandem Award	 	11
	14.3
	 	ISO Tandem Award	 	12
	14.4
	 	Payment of Award	 	12
	 
	 	 	 	 
	15.
	 	ANNUAL LIMITATIONS	 	12
	15.1
	 	Limitation on Options and SARs	 	12
	15.2
	 	Limitation on Performance Shares	 	12
	15.3
	 	Computations	 	12
	 
	 	 	 	 
	16.
	 	RESTRICTED STOCK AND PERFORMANCE SHARES	 	12
	16.1
	 	Restricted Stock	 	12






v









 






	 	 	 	 	 
	16.2
	 	Cost of Restricted Stock	 	12
	16.3
	 	Non-Transferability	 	13
	16.4
	 	Performance Shares	 	13
	16.5
	 	Grant	 	13
	 
	 	 	 	 
	17.
	 	CASH AWARDS	 	13
	17.1
	 	Grant	 	13
	17.2
	 	Annual Limits	 	13
	17.3
	 	Restrictions	 	13
	 
	 	 	 	 
	18.
	 	OTHER STOCK BASED AWARDS AND OTHER BENEFITS	 	14
	18.1
	 	Other Stock Based Awards	 	14
	18.2
	 	Other Benefits	 	14
	 
	 	 	 	 
	19.
	 	MISCELLANEOUS PROVISIONS	 	14
	19.1
	 	Underscored References	 	14
	19.2
	 	Number and Gender	 	14
	19.3
	 	Unfunded Status of Plan	 	14
	19.4
	 	Termination of Employment	 	14
	19.5
	 	Designation of Beneficiary	 	14
	19.6
	 	Governing Law	 	15
	19.7
	 	Purchase for Investment	 	15
	19.8
	 	No Employment Contract	 	15
	19.9
	 	No Effect on Other Benefits	 	15







vi











 





DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through September 25, 2009)




1. NAME AND PURPOSE




1.1 Name.




The name of this Plan is the “Digital Angel Corporation 2003 Flexible Stock Plan.”




1.2 Purpose.




The Company has established this Plan to attract, retain, motivate and reward Employees and other
individuals, to encourage ownership of the Company’s common stock by Employees and other
individuals, and to promote and further the best interests of the Company by granting cash and
other awards. The Company also intends in appropriate circumstances to grant awards of its common
stock in lieu of cash compensation pursuant to the mutual agreement of the Participant and the
Company.



2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION




2.1 General Definitions.




The following words and phrases, when used in the Plan, unless otherwise specifically defined or
unless the context clearly otherwise requires, shall have the following respective meanings:



2.1.1 Affiliate.




A Parent or Subsidiary of the Company.



2.1.2 Agreement.




The document which evidences the grant of any Benefit under the Plan and which sets forth the
Benefit and the terms, conditions and provisions of, and restrictions relating to, such Benefit.



2.1.3 Benefit.




Any benefit granted to a Participant under the Plan.



2.1.4 Board.




The Board of Directors of the Company.



2.1.5 Cash Award.




A Benefit payable in the form of cash.



1









 





2.1.6 Change of Control.




The occurrence of any of the following:




	 	A.	 	An acquisition of any common stock or other voting securities of the
Company entitled to vote generally for the election of directors (the “Voting
Securities”) by any “Person” or “Group” (as each such term is used for purposes of
Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person or
Group, as the case may be, has “Beneficial Ownership” (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than 20% of the then outstanding shares of common stock or the combined voting power of the Company’s then
outstanding Voting Securities; provided, however, that in determining whether a
Change of Control has occurred, shares of common stock or Voting Securities that
are acquired in a Non-Control Acquisition (as defined below) shall not constitute
an acquisition which would cause a Change of Control. A “Non-Control Acquisition”
shall mean an acquisition by (i) the Company, (ii) any Subsidiary or (ii) any
employee benefit plan maintained by the Company or any Subsidiary, including a
trust forming part of any such plan (an “Employee Benefit Plan”);
	 
	 	B.	 	When, during any 2-year period, individuals who, at the beginning of
the 2-year period, constitute the Board (the “Incumbent Board”), cease for any
reason to constitute at least 50% of the members of the Board; provided, however,
that (i) if the election or nomination for election by the Company’s shareholders
of any new director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes hereof, be deemed to be a member of
the Incumbent Board; and (ii) no individual shall be deemed to be a member of the
Incumbent Board if such individual initially assumed office as a result of either
an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person or Group other than the Board (a “Proxy
Contest”) including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest;
	 
	 	C.	 	The consummation of:






	 	i.	 	a merger, consolidation or reorganization involving
the Company or any Subsidiary, unless the merger, consolidation or
reorganization is a Non-Control Transaction. A “Non-Control Transaction”
shall mean a merger, consolidation or reorganization of the Company or
any Subsidiary where:






	 	(a)	 	the shareholders of the Company immediately prior to the merger,
consolidation or reorganization own, directly or indirectly,
immediately following such merger, consolidation or reorganization, at
least 50% of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the common
stock or Voting Securities, as the case may be, immediately prior to
the merger, consolidation or reorganization,
	 
	 	(b)	 	the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for the merger,
consolidation or reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a majority of
the voting securities of the Surviving Corporation, and
	 
	 	(c)	 	no Person or Group, other than (1) the Company, (2) any Subsidiary,
(3) any Employee Benefit Plan or (4) any other Person or Group who,
immediately prior to the merger, consolidation or reorganization, had
Beneficial Ownership of not less than 20% of the then outstanding
Voting Securities or common stock, has Beneficial Ownership of 20% or
more of the combined voting power of the Surviving Corporation’s then
outstanding voting securities or common stock;
	 
	 	(d)	 	A complete liquidation or dissolution of the Company; or




2









 












	 	(e)	 	The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a
Subsidiary).





Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred solely
because any Person or Group (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities or common stock of the Company as a
result of an acquisition of Voting Securities or common stock by the Company which, by reducing the
number of shares of Voting Securities or common stock then outstanding, increases the proportional
number of shares beneficially owned by the Subject Person; provided, however, that if a Change of
Control would have occurred (but for the operation of this sentence) as a result of the acquisition
of Voting Securities or common stock by the Company, and after such acquisition by the Company, the
Subject Person becomes the beneficial owner of any additional shares of Voting Securities or common
stock, which increases the percentage of the then outstanding shares of Voting Securities or common
stock beneficially owned by the Subject Person, then a Change of Control shall be deemed to have
occurred.



2.1.7 Code.




The Internal Revenue Code of 1986, as amended. Any reference to the Code includes the regulations
promulgated pursuant to the Code.



2.1.8 Company.




Digital Angel Corporation




2.1.9 Committee.




The Committee described in Section 5.1.



2.1.10 Common Stock.




The Company’s common stock, which presently has a par value of $.01 per Share.



2.1.11 Effective Date.




The date that the amended and restated Plan is approved by the shareholders of the Company which
must occur within one year before or after approval by the Board. Any grants of Benefits prior to
the approval by the shareholders of the Company shall be void if such approval is not obtained.



2.1.12 Employee.




Any person employed by the Employer.



2.1.13 Employer.




The Company and all Affiliates.



2.1.14 Exchange Act.




The Securities Exchange Act of 1934, as amended.



3









 





2.1.15 Fair Market Value.




The closing price of Shares on the Nasdaq National Market on a given date, or, in the absence of
sales on a given date, the closing price on the Nasdaq National Market on the last day on which a
sale occurred prior to such date.



2.1.16 Fiscal Year.




The taxable year of the Company which is the calendar year.



2.1.17 ISO.




An Incentive Stock Option as defined in Section 422 of the Code.



2.1.18 NQSO.




A non-qualified stock Option, which is an Option that does not qualify as an ISO.



2.1.19 Option.




An option to purchase Shares granted under the Plan.



2.1.20 Other Stock Based Award.




An award under Section 3.1 that is valued in whole or in part by reference to, or otherwise based
on, common stock.



2.1.21 Parent.




Any corporation (other than the Company or a Subsidiary) in an unbroken chain of corporations
ending with the Company, if, at the time of the grant of an Option or other Benefit, each of the
corporations (other than the Company) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.



2.1.22 Participant.




An individual who is granted a Benefit under the Plan. Benefits may be granted only to Employees,
members of the Board, (including former Employees and former members of the Board if in connection
with their separation from the Company), employees and owners of entities which are not Affiliates
but which have a direct or indirect ownership interest in an Employer or in which an Employer has a
direct or indirect ownership interest, individuals who, and employees and owners of entities which,
are customers and suppliers of an Employer, individuals who, and employees and owners of entities
which, render services to an Employer, and individuals who, and employees and owners of entities,
which have ownership or business affiliations with any individual or entity previously described.



2.1.23 Performance Based Compensation.




Compensation which meets the requirements of Section 162(m)(4)(C) of the Code.



2.1.24 Performance Share.




A Share awarded to a Participant under Section 16.4 of the Plan.



4









 





2.1.25 Plan.




The Digital Angel Corporation 2003 Flexible Stock Plan and all amendments and supplements to it.



2.1.26 Reload Option.




An Option to purchase the number of Shares used by a Participant to exercise an Option and to
satisfy any withholding requirement incident to the exercise of such Option.



2.1.27 Restricted Stock.




Shares issued under Section 16.1 of the Plan.



2.1.28 Rule 16b-3.




Rule 16b-3 promulgated by the SEC, as amended, or any successor rule in effect from time to time.



2.1.29 SEC.




The Securities and Exchange Commission.



2.1.30 Share.




A share of common stock.



2.1.31 SAR.




A stock appreciation right, which is the right to receive an amount equal to the appreciation, if
any, in the Fair Market Value of a Share from the date of the grant of the right to the date of its
payment.



2.1.32 Subsidiary.




Any corporation, other than the Company, in an unbroken chain of corporations beginning with the
Company if, at the time of grant of an Option or other Benefit, each of the corporations, other
than the last corporation in the unbroken chain, owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations in such chain.



2.2 Other Definitions.




In addition to the above definitions, certain words and phrases used in the Plan and any Agreement
may be defined in other portions of the Plan or in such Agreement.



2.3 Conflicts.




In the case of any conflict in the terms of the Plan relating to a Benefit, the provisions in the
section of the Plan which specifically grants such Benefit shall control those in a different
section. In the case of any conflict between the terms of the Plan relating to a Benefit and the
terms of an Agreement relating to a Benefit, the terms of the Plan shall control.



5









 





3. COMMON STOCK




3.1 Number of Shares.




The number of Shares which may be issued or sold or for which Options, SARs or Performance Shares
may be granted under the Plan shall be 2,875,000 Shares. Such Shares may be authorized but unissued
Shares, Shares held in the treasury, or both. The full number of Shares available may be used for
any type of Option or other Benefit; provided, however, that the number of Shares that may be
issued under ISOs shall not exceed 162,500.



3.2 Reusage.




If an Option or SAR expires or is terminated, surrendered, or canceled without having been fully
exercised, if Restricted Shares or Performance Shares are forfeited, or if any other grant results
in any Shares not being issued, the Shares covered by such Option or SAR, grant of Restricted
Shares, Performance Shares or other grant, as the case may be, shall again be available for use
under the Plan. Any Shares which are used as full or partial payment to the Company upon exercise
of an Option or for any other Benefit that requires a payment to the Company shall be available for
purposes of the Plan.



3.3 Adjustments.




If there is any change in the common stock of the Company by reason of any stock dividend,
spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination
or exchange of shares, or otherwise, the number of SARs and number and class of shares available
for Options and grants of Restricted Stock, Performance Shares and Other Stock Based Awards and the
number of Shares subject to outstanding Options, SARs, grants of Restricted Stock which are not
vested, grants of Performance Shares which are not vested, and Other Stock Based Awards, and the
price thereof, as applicable, may be appropriately adjusted by the Committee.



4. ELIGIBILITY




4.1 Determined By Committee.




The Participants and the Benefits they receive under the Plan shall be determined solely by the
Committee. In making its determinations, the Committee shall consider past, present and expected
future contributions of Participants and potential Participants to the Employer, including, without
limitation, the performance of, or the refraining from the performance of, services. Unless
specifically provided otherwise herein, all determinations of the Committee in connection with the
Plan or an Agreement shall be made in its sole discretion.



5. ADMINISTRATION




5.1 Committee.




The Plan shall be administered by the Committee. The Committee shall consist of the “outside
directors” of the Board, unless the Board appoints a Committee of two or more but less than all of
the Board all of whom are “outside directors” as defined in Section 162(m) of the Code. The
Committee shall use its best efforts to grant Options, SARs, Restricted Stock, Performance Shares,
Cash Awards and Other Stock Based Awards under this Plan to an Employee which will qualify as
“performance-based compensation” for purposes of Section 162(m) of the Code, except where the
Committee deems that the Company’s interests when viewed broadly will be better served by a grant
which is free of the conditions required to so qualify any such grant for purposes of Section
162(m) of the Code.



If the Committee does not include the entire outside directors of the Board, it shall serve at the
pleasure of the outside directors of the Board, which may from time to time appoint members in
substitution for members previously appointed and fill vacancies, however caused, in the Committee.
The Committee may select one of its



6









 





members as its Chairman and shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the Committee made at a
meeting at which a quorum is present shall be made by a majority of its members present at the
meeting. Any decision or determination reduced to writing and signed by a majority of the members
shall be fully as effective as if it had been made by a majority vote at a meeting duly called and
held.



5.2 Authority.




Subject to the terms of the Plan, the Committee shall have discretionary authority to:




	 	(a)	 	determine the individuals to whom Benefits are granted, the type and amounts of
Benefits to be granted and the date of issuance and duration of all such grants;
	 
	 	(b)	 	determine the terms, conditions and provisions of, and restrictions relating to,
each Benefit granted;
	 
	 	(c)	 	interpret and construe the Plan and all Agreements;
	 
	 	(d)	 	prescribe, amend and rescind rules and regulations relating to the Plan;
	 
	 	(e)	 	determine the content and form of all Agreements;
	 
	 	(f)	 	determine all questions relating to Benefits under the Plan;
	 
	 	(g)	 	maintain accounts, records and ledgers relating to Benefits;
	 
	 	(h)	 	maintain records concerning its decisions and proceedings;
	 
	 	(i)	 	employ agents, attorneys, accountants or other persons for such purposes as the
Committee considers necessary or desirable;
	 
	 	(j)	 	take, at any time, any action described in Section 9.1 or permitted by Section
9.2(a), irrespective of whether any Change of Control has occurred or is imminent;
	 
	 	(k)	 	determine, except to the extent otherwise provided in the Plan, whether and the
extent to which Benefits under the Plan will be structured to conform to the requirements
applicable to Performance-Based Compensation, and to take such action, establish such
procedures, and impose such restrictions at the time such Benefits are granted as the
Committee determines to be necessary or appropriate to conform to such requirements; and
	 
	 	(l)	 	do and perform all acts which it may deem necessary or appropriate for the
administration of the Plan and carry out the purposes of the Plan.





5.3 Delegation.




Except as required by Rule 16b-3 with respect to grants of Options, Stock Appreciation Awards,
Performance Shares, Other Stock Based Awards, or other Benefits to individuals who are subject to
Section 16b-3 of the Exchange Act or as otherwise required for compliance with Rule 16b-3 or other
applicable law, the Committee may delegate all or any part of its authority under the Plan to any
Employee, Employees or committee.



5.4 Determination.




All determinations of the Committee shall be final and binding on all persons.



7









 





6. AMENDMENT




6.1 Power of Board.




Except as hereinafter provided, the Board shall have the sole right and power to amend the Plan at
any time and from time to time.



6.2 Limitation.




The Board may not amend the Plan, without approval of the shareholders of the Company:




	 	(a)	 	in a manner which would cause Options which are intended to qualify as
ISOs to fail to qualify;
	 
	 	(b)	 	in a manner which would cause the Plan to fail to meet the requirements of Rule 16b-3; or
	 
	 	(c)	 	in a manner which would violate applicable law.





7. TERM AND TERMINATION




7.1 Term.




The Plan shall commence as of the Effective Date and, subject to the terms of the Plan, including
those requiring approval by the shareholders of the Company and those limiting the period over
which ISOs or any other Benefits may be granted, shall continue in full force and effect until
terminated.



7.2 Termination.




The Plan may be terminated at any time by the Board.



8. MODIFICATION OR TERMINATION OF BENEFITS




8.1 General.




Subject to the provisions of Section 8.2, the amendment or termination of the Plan shall not
adversely affect a Participant’s right to any Benefit granted prior to such amendment or
termination.



8.2 Committee’s Right.




Any Benefit granted may be converted, modified, forfeited or canceled, in whole or in part, by the
Committee if and to the extent permitted in the Plan or applicable Agreement or with the consent of
the Participant to whom such Benefit was granted. Except as may be provided in an Agreement, the
Committee may, in its sole discretion, in whole or in part, waive any restrictions or conditions
applicable to, or accelerate the vesting of, any Benefit.



8.3 Compliance with Applicable Laws.




The Plan shall be administered and interpreted in accordance with applicable federal tax laws,
including Section 409A of the Code, and the regulations promulgated thereunder.



8









 





9. CHANGE OF CONTROL




9.1 Vesting and Payment.




In the event of a Change of Control:




	 	(a)	 	provide for the purchase of any Benefit for an amount of cash equal to
the amount which could have been attained upon the exercise or realization of such
Benefit;
	 
	 	(b)	 	all outstanding SARs shall become immediately payable, except to the
extent that the right to exercise the SAR is subject to restrictions established in
connection with an Option that is issued in tandem with the SAR;
	 
	 	(c)	 	all Shares of Restricted Stock shall become fully vested;
	 
	 	(d)	 	all Performance Shares shall be deemed to be fully earned and shall be
paid out in such manner as determined by the Committee; and
	 
	 	(e)	 	all Cash Awards, Other Stock Based Awards and other Benefits shall become
fully vested and/or earned and paid out in such manner as determined by the
Committee.





9.2 Other Action.




In the event of a Change of Control, the Committee, in its sole discretion, may, in addition to the
provisions of Section 9.1 above and to the extent not inconsistent therewith:




	 	(a)	 	provide for the purchase of any Benefit for an amount of cash equal to
the amount which could have been attained upon the exercise or realization of such
Benefit;
	 
	 	(b)	 	make such adjustment to the Benefits then outstanding as the Committee
deems appropriate to reflect such transaction or change; and/or
	 
	 	(c)	 	cause the Benefits then outstanding to be assumed, or new Benefits
substituted therefor, by the surviving corporation in such change.





10. AGREEMENTS AND CERTAIN BENEFITS




10.1 Grant Evidenced by Agreement.




The grant of any Benefit under the Plan may be evidenced by an Agreement which shall describe the
specific Benefit granted and the terms and conditions of the Benefit. The granting of any Benefit
shall be subject to, and conditioned upon, the recipient’s execution of any Agreement required by
the Committee. Except as otherwise provided in an Agreement, all capitalized terms used in the
Agreement shall have the same meaning as in the Plan, and the Agreement shall be subject to all of
the terms of the Plan.



10.2 Provisions of Agreement.




Each Agreement shall contain such provisions that the Committee shall determine to be necessary,
desirable and appropriate for the Benefit granted which may include, but not necessarily be limited
to, the following with respect to any Benefit: description of the type of Benefit; the Benefit’s
duration; its transferability; if an Option, the exercise price, the exercise period and the person
or persons who may exercise the Option; the effect upon such Benefit of the Participant’s death,
disability, changes of duties or termination of employment; the Benefit’s conditions; when, if, and
how any Benefit may be forfeited, converted into another Benefit, modified, exchanged for another
Benefit, or replaced; and the restrictions on any Shares purchased or granted under the Plan.



10.3 Transferability.




Unless otherwise specified in an Agreement or permitted by the Committee, each Benefit granted
shall be not transferable other than by will or the laws of descent and distribution and shall be
exercisable during a Participant’s lifetime only by him.



9









 





11. REPLACEMENT AND TANDEM AWARDS




11.1 Replacement.




The Committee may permit a Participant to elect to surrender a Benefit in exchange for a new
Benefit.



11.2 Tandem Awards.




Awards may be granted by the Committee in tandem. However, no Benefit may be granted in tandem with
an ISO except SARs.



12. PAYMENT, DIVIDENDS AND WITHHOLDING




12.1 Payment.




Upon the exercise of an Option or in the case of any other Benefit that requires a payment by a
Participant to the Company, the amount due the Company is to be paid:




	 	(a)	 	in cash;
	 
	 	(b)	 	by the surrender of all or part of a Benefit (including the Benefit
being exercised) including by means of a so-called “cashless exercise” of an option;
	 
	 	(c)	 	by the tender to the Company of Shares owned by the optionee and
registered in his name having a Fair Market Value equal to the amount due to the
Company;
	 
	 	(d)	 	in other property, rights and credits deemed acceptable by the
Committee, including the Participant’s promissory note;
	 
	 	(e)	 	by any combination of the payment methods specified in (a), (b), (c) and
(d) above.





Notwithstanding, the foregoing, any method of payment other than (a) may be used only with the
consent of the Committee or if and to the extent so provided in an Agreement. The proceeds of the
sale of Shares purchased pursuant to an Option and any payment to the Company for other Benefits
shall be added to the general funds of the Company or to the Shares held in treasury, as the case
may be, and used for the corporate purposes of the Company as the Board shall determine.



12.2 Dividend Equivalents.




Grants of Benefits in Shares or Share equivalents may include dividend equivalent payments or
dividend credit rights.



12.3 Withholding.




The Company may, at the time any distribution is made under the Plan, whether in cash or in Shares,
or at the time any Option is exercised, withhold from such distribution or Shares issuable upon the
exercise of an Option, any amount necessary to satisfy federal, state and local income and/or other
tax withholding
requirements with respect to



10









 





such distribution or exercise of such Options. The Committee or the
Company may require a participant to tender to the Company cash and/or Shares in the amount
necessary to comply with any such withholding requirements.



13. OPTIONS




13.1 Types of Options.




It is intended that both ISOs and NQSOs, which may be Reload Options, may be granted by the
Committee under the Plan.



13.2 Grant of ISOs and Option Price.




Each ISO must be granted to an Employee and granted within ten years from the earlier of the date
of adoption by the Board or the Effective Date. The purchase price for Shares under any ISO shall
be no less than the Fair Market Value of the Shares at the time the Option is granted.



13.3 Other Requirements for ISOs.




The terms of each Option which is intended to qualify as an ISO shall meet all requirements of
Section 422 of the Code.



13.4 NQSOs.




The terms of each NQSO shall provide that such Option will not be treated as an ISO. The purchase
price for Shares under any NQSO shall be no less than 100% of the Fair Market Value of the Shares
at the time the Option is granted.



13.5 Determination by Committee.




Except as otherwise provided in Section 13.1 through Section 13.4, the terms of all Options shall
be determined by the Committee.



14. SARS




14.1 Grant and Payment.




The Committee may grant SARs. Upon electing to receive payment of a SAR, a Participant shall
receive payment in Shares.



14.2 Grant of Tandem Award.




The Committee may grant SARs in tandem with an Option, in which case: the exercise of the Option
shall cause a correlative reduction in SARs standing to a Participant’s credit which were granted
in tandem with the Option; and the payment of SARs shall cause a correlative reduction of the
Shares under such Option.



14.3 ISO Tandem Award.




When SARs are granted in tandem with an ISO, the SARs shall have such terms and conditions as shall
be required for the ISO to qualify as an ISO.



11









 





14.4 Payment of Award.




SARs shall be paid by the Company to a Participant, to the extent payment is elected by the
Participant (and is otherwise due and payable), as soon as practicable after the date on which such
election is made.



15. ANNUAL LIMITATIONS




15.1 Limitation on Options and SARs.




The number of (a) Shares covered by Options where the purchase price is no less than the Fair
Market Value of the Shares on the date of grant plus (b) SARs which may be granted to any
Participant in any Fiscal Year shall not exceed 125,000.



15.2 Limitation on Performance Shares




The number of Shares covered by Performance Shares in any Fiscal Year shall not exceed 62,500.



15.3 Computations.




For purposes of Section 15.1: Shares covered by an Option that is canceled shall count against the
maximum, and, if the exercise price under an Option is reduced, the transaction shall be treated as
a cancellation of the Option and a grant of a new Option; and SARs covered by a grant of SARs that
is canceled shall count against the maximum, and, if the Fair Market Value of a Share on which the
appreciation under a grant of SARs will be calculated is reduced, the transaction will be treated
as a cancellation of the SARs and the grant of a new grant of SARs.



16. RESTRICTED STOCK AND PERFORMANCE SHARES




16.1 Restricted Stock.




The Committee may grant Benefits in Shares available under Section 3.1 of the Plan as Restricted
Stock. Shares of Restricted Stock shall be issued and delivered at the time of the grant or as
otherwise determined by the Committee, but shall be subject to forfeiture until provided otherwise
in the applicable Agreement or the Plan. Each certificate representing Shares of Restricted Stock
shall bear a legend referring to the Plan and the risk of forfeiture of the Shares and stating that
such Shares are nontransferable until all restrictions have been satisfied and the legend has been
removed. At the discretion of the Committee, the grantee may or may not be entitled to full voting
and dividend rights with respect to all shares of Restricted Stock from the date of grant.



16.2 Cost of Restricted Stock.




Unless otherwise determined by the Committee, grants of Shares of Restricted Stock shall be made at
a per Share cost to the Participant equal to par value.



16.3 Non-Transferability.




Shares of Restricted Stock shall not be transferable until after the removal of the legend with
respect to such Shares.



12









 





16.4 Performance Shares.




Performance Shares are the right of an individual to whom a grant of such Shares is made to receive
Shares or cash equal to the Fair Market Value of such Shares at a future date in accordance with
the terms and conditions of such grant. The terms and conditions shall be determined by the
Committee, in its sole discretion, but generally are expected to be based substantially upon the
attainment of targeted profit and/or performance objectives. The Committee shall determine the
performance targets which will be applied with respect to each grant of Performance Shares at the
time of grant, but in no event later than 90 days after the beginning of the period of service to
which the performance targets relate. The performance criteria applicable to Performance Shares
will be one or more of the following: (1) stock price; (2) average annual growth in earnings per
share; (3) increase in shareholder value; (4) earnings per share; (5) net income; (6) return on
assets; (7) return on shareholders’ equity; (8) increase in cash flow; (9) operating profit or
operating margins; (10) revenue growth of the Company; and (11) operating expenses. Each
performance target applicable to a Performance Share award and the deadline for satisfying each
such target shall be stated in the Agreement between the Company and the Employee. The Committee
must certify in writing that each such target has been satisfied before the Performance Shares
award becomes effective.



16.5 Grant.




The Committee may grant an award of Performance Shares. The number of Performance Shares and the
terms and conditions of the grant shall be set forth in the applicable Agreement.



17. CASH AWARDS




17.1 Grant.




The Committee may grant Cash Awards at such times and (subject to Section 17.2) in such amounts as
it deems appropriate.



17.2 Annual Limits.




The amount of any Cash Award in any Fiscal Year to any Participant shall not exceed the greater of
$100,000 or 100% of his cash compensation (excluding any Cash Award under this Section 17.2) for
such Fiscal Year.



17.3 Restrictions.




Cash Awards may be subject or not subject to conditions (such as an investment requirement),
restricted or nonrestricted, vested or subject to forfeiture and may be payable currently or in the
future or both. The Committee may make grants of Cash Awards that are intended to be Performance
Based Compensation and grants of Cash Awards that are not intended to be Performance Based
Compensation.



The Committee shall determine the performance targets which will be applied with respect to each
grant of Cash Awards that are intended to be Performance Based Compensation at the time of grant,
but in no event later than 90 days after the beginning of the period of service to which the
performance targets relate. The performance criteria applicable to Performance Based Compensation
awards will be one or more of the following: (1) stock price; (2) average annual growth in earnings
per share; (3) increase in shareholder value; (4) earnings per share; (5) net income; (6) return on
assets; (7) return on shareholders’ equity; (8) increase in cash flow; (9) operating profit or
operating margins; (10) revenue growth of the Company; and (11) operating expenses. Each
performance target applicable to a Cash Award intended to be Performance Based Compensation and the
deadline for satisfying each such target shall be stated in the Agreement between the Company and
the Employee. The Committee must certify in writing that each such target has been satisfied before
the Performance Based Compensation award is paid.



18. OTHER STOCK BASED AWARDS AND OTHER BENEFITS



18.1 Other Stock Based Awards.




The Committee shall have the right to grant Other Stock Based Awards which may include, without
limitation, the



13









 





grant of Shares based on certain conditions, the payment of cash based on the performance of the
common stock, the grant of securities convertible into Shares, and the grant of Shares in lieu of
the payment of cash compensation pursuant to the mutual agreement of the Participant and the
Company.



18.2 Other Benefits.




The Committee shall have the right to provide types of Benefits under the Plan in addition to those
specifically listed, if the Committee believes that such Benefits would further the purposes for
which the Plan was established.



19. MISCELLANEOUS PROVISIONS




19.1 Underscored References.




The underscored references contained in the Plan are included only for convenience, and they shall
not be construed as a part of the Plan or in any respect affecting or modifying its provisions.



19.2 Number and Gender.




The masculine and neuter, wherever used in the Plan, shall refer to either the masculine, neuter or
feminine; and, unless the context otherwise requires, the singular shall include the plural and the
plural the singular.



19.3 Unfunded Status of Plan.




The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments or deliveries of Shares not yet made to a Participant by the Company,
nothing contained herein shall give any rights that are greater than those of a general creditor of
the Company. The Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Shares or payments hereunder consistent with the
foregoing.



19.4 Termination of Employment.




If the employment of a Participant by the Company terminates for any reason, except as otherwise
provided in an Agreement, all unexercised, deferred, and unpaid Benefits may be exercisable or paid
only in accordance with rules established by the Committee. These rules may provide, as the
Committee may deem appropriate, for the expiration, forfeiture, continuation, or acceleration of
the vesting of all or part of the Benefits.



19.5 Designation of Beneficiary.




A Participant may file with the Committee a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of beneficiaries and contingent
beneficiaries as the Committee may from time to time prescribe) to exercise, in the event of the
death of the Participant, an Option, or to receive, in such event, any Benefits. The Committee
reserves the right to review and approve beneficiary designations. A Participant may from time to
time revoke or change any such designation of beneficiary and any designation of beneficiary under
the Plan shall be controlling over any other disposition, testamentary or otherwise; provided,
however, that if the Committee shall be in doubt as to the right of any such beneficiary to
exercise any Option or to receive any Benefit, the Committee may determine to recognize only an
exercise by the legal representative of the recipient, in which case the Company, the Committee and
the members thereof shall not be under any further liability to anyone.



19.6 Governing Law.




This Plan shall be construed and administered in accordance with the laws of the State of Delaware



14









 





19.7 Purchase for Investment.




The Committee may require each person purchasing Shares pursuant to an Option or other award under
the Plan to represent to and agree with the Company in writing that such person is acquiring the
Shares for investment and without a view to distribution or resale. The certificates for such
Shares may include any legend which the Committee deems appropriate to reflect any restrictions on
transfer. All certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable under all
applicable laws, rules and regulations, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate references to such restrictions.



19.8 No Employment Contract.




Neither the adoption of the Plan nor any Benefit granted hereunder shall confer upon any Employee
any right to continued employment nor shall the Plan or any Benefit interfere in any way with the
right of the Employer to terminate the employment of any of its Employees at any time.



19.9 No Effect on Other Benefits.




The receipt of Benefits under the Plan shall have no effect on any benefits to which a Participant
may be entitled from the Employer, under another plan or otherwise, or preclude a Participant from
receiving any such benefits.




15