**EXHIBIT 10.1**

 

**CITI TRENDS**

 

**AMENDED AND RESTATED**

 

**2005 LONG-TERM INCENTIVE PLAN**

 

TABLE OF CONTENTS

 
| 1.     | Establishment, Purpose and Effective Date | 3                                                                            |
|--------|-------------------------------------------|------------------------------------------------------------------------------|
|   | (a)                                       | Establishment                                                                | 3 |
|   | (b)                                       | Purpose                                                                      | 3 |
|   | (c)                                       | Effective  Date                                                              | 3 |
| 2.     | Definitions                               | 3                                                                            |
| 3.     | Scope of the Plan                         | 8                                                                            |
|   | (a)                                       | Number of  Shares Available Under the Plan                                   | 8 |
|   | (b)                                       | Reduction in  the Available Shares in Connection with Award Grants           | 8 |
|   | (c)                                       | Effect of  the Expiration, Termination, Cancellation or Settlement of Awards | 9 |
| 4.     | Administration                            | 9                                                                            |
|   | (a)                                       | Committee  Administration                                                    | 9 |
|   | (b)                                       | Board  Reservation and Delegation                                            | 9 |
|   | (c)                                       | Committee  Authority                                                         | 9 |
|   | (d)                                       | Committee  Determinations Final                                              | 10 |
| 5.     | Eligibility                               | 10                                                                           |
| 6.     | Conditions to Grants                      | 11                                                                           |
|   | (a)                                       | General  Conditions                                                          | 11 |
|   | (b)                                       | Grant of  Options and Exercise Price                                         | 11 |
|   | (c)                                       | Grant of  Incentive Stock Options                                            | 11 |
|   | (d)                                       | Grant of  Shares of Restricted Stock                                         | 12 |
|   | (e)                                       | Grant of  Performance Units and Performance Shares                           | 14 |
|   | (f)                                       | Grant of  Stock Appreciation Rights                                          | 16 |
|   | (g)                                       | Tandem  Awards                                                               | 16 |
| 7.     | Non-transferability                       | 16                                                                           |
| 8.     | Exercise                                  | 16                                                                           |
|   | (a)                                       | Exercise of  Options and Stock Appreciation Rights                           | 16 |
|   | (b)                                       | Exercise of  Performance Units                                               | 17 |
|   | (c)                                       | Payment of  Performance Shares                                               | 18 |
|   | (d)                                       | Exercise,  Cancellation, Expiration or Forfeiture of Tandem Awards           | 18 |
| 9.     | Effect of Certain Transactions            | 19                                                                           |
| 10.    | Mandatory Withholding Taxes               | 19                                                                           |
| 11.    | Termination of Employment                 | 19                                                                           |
| 12.    | Securities Law Matters                    | 19                                                                           |
| 13.    | No Funding Required                       | 20                                                                           |

 

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| 14. | No Employment Rights       | 20 |
|-----|----------------------------|----|
| 15. | Rights as a Stockholder    | 20 |
| 16. | Nature of Payments         | 20 |
| 17. | Non-Uniform Determinations | 20 |
| 18. | Adjustments                | 21 |
| 19. | Amendment of the Plan      | 21 |
| 20. | Termination of the Plan    | 21 |
| 21. | No Illegal Transactions    | 21 |
| 22. | Governing Law              | 22 |
| 23. | Severability               | 22 |
| 24. | Translations               | 22 |

 

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1.                                       **Establishment, Purpose and Effective Date**.

 

(a)                                  Establishment. The Company hereby establishes the Citi Trends 2005 Long-Term Incentive Plan (as set forth herein and from time to time amended, the “Plan”).

 

(b)                                 Purpose. The primary purpose of the Plan is to provide a means by which key employees and directors of the Company can acquire and maintain stock ownership, thereby strengthening their commitment to the success of the Company and their desire to remain employed by the Company, focusing their attention on managing the Company as an equity owner, and aligning their interests with those of the Company’s stockholders. The Plan also is intended to attract and retain key employees and to provide such employees with additional incentive and reward opportunities designed to encourage them to enhance the profitable growth of the Company.

 

(c)                                  Effective Date. The Plan shall become effective upon its adoption by the Board and a majority of the stockholders of the Company.

 

2.                                       **Definitions**. As used in the Plan, terms defined parenthetically immediately after their use shall have the respective meanings provided by such definitions and the terms set forth below shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

(a)                                  “Award” means Options, shares of restricted Stock, performance units, performance shares, Stock Appreciation Rights or Director’s Shares granted under the Plan.

 

(b)                                 “Award Agreement” means the written agreement by which an Award is evidenced.

 

(c)                                  “Beneficial Owner,” “Beneficially Owned” and “Beneficially Owning” shall have the meanings applicable under Rule 13d-3 promulgated under the 1934 Act.

 

(d)                                 “Board” means the board of directors of the Company.

 

(e)                                  “Change in Capitalization” means any increase or reduction in the number of shares of Stock, or any change in the shares of Stock or exchange of shares of Stock for a different number or kind of shares or other securities by reason of a stock dividend, extraordinary dividend, stock split, reverse stock split, share combination, reclassification, recapitalization, merger, consolidation, spin-off, split-up, reorganization, issuance of warrants or rights, liquidation, exchange of shares, repurchase of shares, change in corporate structure, or similar event, of or by the Company.

 

(f)                                    “Change of Control” means any of the following:

 

(i)                            the acquisition by any Person of Beneficial Ownership of Voting Securities which, when added to the Voting Securities then Beneficially Owned by such Person, would result in such Person Beneficially Owning 33% or more 

 

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of the combined Voting Power of the Company’s then outstanding Voting Securities; provided, however, that for purposes of this paragraph (i), a Person shall not be deemed to have made an acquisition of Voting Securities if such Person: (1) acquires Voting Securities as a result of a stock split, stock dividend or other corporate restructuring in which all stockholders of the class of such Voting Securities are treated on a pro rata basis; (2) acquires the Voting Securities directly from the Company; (3) becomes the Beneficial Owner of 33% or more of the combined Voting Power of the Company’s then outstanding Voting Securities solely as a result of the acquisition of Voting Securities by the Company or any Subsidiary which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by such Person, provided that if (x) a Person would own at least such percentage as a result of the acquisition by the Company or any Subsidiary and (y) after such acquisition by the Company or any Subsidiary, such Person acquires Voting Securities, then an acquisition of Voting Securities shall have occurred; (4) is the Company or any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Controlled Entity”); or (5) acquires Voting Securities in connection with a “Non-Control Transaction” (as defined in paragraph (iii) below); or

 

(ii)                                  the individuals who, as of the Effective Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least two-thirds of the Board; provided, however, that if either the election of any new director or the nomination for election of any new director by the Company’s stockholders was approved by a vote of at least two-thirds of the Incumbent Board prior to such election or nomination, such new director shall be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered 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 1934 Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or

 

(iii)                               consummation of:

 

(A)                              a merger, consolidation or reorganization involving the Company (a “Business Combination”), unless

 

(1)                                  the stockholders of the Company, immediately before the Business Combination, own, directly or indirectly immediately following the Business Combination, at least a majority of the combined voting power of the outstanding voting securities of the corporation resulting from the Business Combination (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before the Business Combination, and

 

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(2)                                  the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for the Business Combination constitute at least a majority of the members of the Board of Directors of the Surviving Corporation, and

 

(3)                                  no Person (other than the Company or any Controlled Entity, a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Controlled Entity, or any Person who, immediately prior to the Business Combination, had Beneficial Ownership of 33% or more of the then outstanding Voting Securities) has Beneficial Ownership of 33% or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities (a Business Combination satisfying the conditions of clauses (1), (2) and (3) of this subparagraph (A) shall be referred to as a “Non-Control Transaction”);

 

(B)                                a complete liquidation or dissolution of the Company; or

 

(C)                                the sale or other disposition of all or substantially all of the assets of the Company (other than a transfer to a Controlled Entity).

 

Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because 33% or more of the then outstanding Voting Securities is Beneficially Owned by (x) a trustee or other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company or any Controlled Entity or (y) any corporation which, immediately prior to its acquisition of such interest, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the Company immediately prior to such acquisition.

 

(g)                                 “Committee” means the committee of the Board appointed pursuant to Article 4.

 

(h)                                 “Company” means Citi Trends, a Delaware corporation.

 

(i)                                     “Disability” means a mental or physical condition which, in the opinion of the Committee, renders a Grantee unable or incompetent to carry out the job responsibilities which such Grantee held or the duties to which such Grantee was assigned at the time the disability was incurred, and which is expected to be permanent or for an indefinite duration.

 

(j)                                     “Effective Date” means the date that the Plan is adopted by the Board.

 

(k)                                  “Fair Market Value” of any security of the Company or any other issuer means, as of any applicable date:

 

(i)                                     if the security is listed for trading on the New York Stock Exchange, the closing price at the close of the primary trading session of the security on such date on the New York Stock Exchange, or if there has been no 

 

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such closing price of the security on such date, on the next preceding date on which there was such a closing price, or

 

(ii)                                  if the security is not so listed, but is listed on another national securities exchange, the closing price at the close of the primary trading session of the security on such date on such exchange, or if there has been no such closing price of the security on such date, on the next preceding date on which there was such a closing price, or

 

(iii)                               if the security is not listed for trading on the New York Stock Exchange or on another national securities exchange, the last sale price at the end of normal market hours of the security on such date as quoted on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) or, if no such price shall have been so quoted for such date, on the next preceding date for which such price was so quoted, or

 

(iv)                              if the security is not listed for trading on a national securities exchange or is not authorized for quotation on NASDAQ, the fair market value of the security as determined in good faith by the Committee, and in the case of Incentive Stock Options, in accordance with Section 422 of the Internal Revenue Code.

 

(l)                                     “Grant Date” means the date of grant of an Award determined in accordance with Article 6.

 

(m)                               “Grantee” means an individual who has been granted an Award.

 

(n)                                 “Incentive Stock Option” means an Option satisfying the requirements of Section 422 of the Internal Revenue Code and designated by the Committee as an Incentive Stock Option.

 

(o)                                 “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, and regulations and rulings thereunder.  References to a particular Section of the Internal Revenue Code shall include references to successor provisions.

 

(p)                                 “Measuring Period” has the meaning specified in Article 6(e)(ii)(A).

 

(q)                                 “Minimum Consideration” means the $.01 par value per share of Stock or such larger amount determined pursuant to resolution of the Board to be capital within the meaning of Section 154 of the Delaware General Corporation Law.

 

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

 

(s)                                  “Nonqualified Stock Option” means an Option which is not an Incentive Stock Option or other type of statutory stock option under the Internal Revenue Code.

 

(t)                                    “Option” means an option to purchase Stock granted or issued under the Plan.

 

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(u)                                 “Exercise Price” means the per share purchase price of (i) Stock subject to an Option, (ii) Stock subject to a Stock Appreciation Right, or (iii) restricted Stock subject to an Option.

 

(v)                                 “Performance-Based Compensation” means any Option or Award that is intended to constitute “performance based compensation” within the meaning of Section 162(m)(4)(C) of the Internal Revenue Code and the regulations promulgated thereunder.

 

(w)                               “Performance Percentage” has the meaning specified in Article 6(e)(ii)(C).

 

(x)                                   “Person” means a person within the meaning of Sections 13(d) and 14(d) of the 1934 Act.

 

(y)                                 “Plan” has the meaning set forth in Article 1(a).

 

(z)                                   “SEC” means the Securities and Exchange Commission.

 

(aa)                            “Section 16 Grantee” means a person subject to potential liability with respect to equity securities of the Company under Section 16(b) of the 1934 Act.

 

(bb)                          “Stock” means common stock, par value $.01 per share, of the Company.

 

(cc)                            “Stock Appreciation Right” means a right that permits the individual to receive a payment equal to the excess of the stock’s value at exercise over the Exercise Price.

 

(dd)                          “Subsidiary” means (i) except as provided in subsection (ii) below, any corporation which is a subsidiary corporation within the meaning of Section 424(f) of the Internal Revenue Code with respect to the Company, and (ii) in relation to the eligibility to receive Options or Awards other than Incentive Stock Options, any entity, whether or not incorporated, in which the Company directly or indirectly owns either (A) Voting Securities possessing at least 50% of the Voting Power of such entity, or (B) if such entity does not issue Voting Securities, at least 50% of the ownership interests in such entity.

 

(ee)                            “10% Owner” means a person who owns stock (including stock treated as owned under Section 424(d) of the Internal Revenue Code) possessing more than 10% of the Voting Power of the Company.

 

(ff)                                “Termination of Employment” occurs the first day on which an individual is for any reason no longer employed by, or providing services to, the Company or any of its Subsidiaries, or with respect to an individual who is an employee of a Subsidiary, the first day on which the Company no longer owns Voting Securities possessing at least 50% of the Voting Power of such Subsidiary.

 

(gg)                          “Voting Power” means the combined voting power of the then outstanding Voting Securities.

 

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(hh)                          “Voting Securities” means, with respect to the Company or any Subsidiary, any securities issued by the Company or such Subsidiary, respectively, which generally entitle the holder thereof to vote for the election of directors of the Company.

 

3.                                       **Scope of the Plan.**

 

(a)                                  Number of Shares Available Under the Plan. The maximum number of shares of Stock that may be made the subject of Awards granted under the Plan is 1,300,000 (or the number and kind of shares of Stock or other securities to which such shares of Stock are adjusted upon a Change in Capitalization pursuant to Article 18); provided, however, that in the aggregate, not more than 50% of total shares of Stock may be made the subject of Awards other than Options. The maximum number of shares of Stock that may be the subject of Options and Awards granted to any individual pursuant to the Plan in any calendar year period may not exceed 5% of total number of reserved shares. The maximum dollar amount of cash or the Fair Market Value of Stock that any individual may receive in any calendar year in respect of performance units denominated in dollars may not exceed $2,500,000. The Company shall reserve for the purpose of the Plan, out of its authorized but unissued shares of Stock or out of shares held in the Company’s treasury, or partly out of each, such number of shares as shall be determined by the Board. The Board shall have the authority to cause the Company to purchase from time to time shares of Stock to be held as treasury shares and used for or in connection with Awards.

 

(b)                                 Reduction in the Available Shares in Connection with Award Grants. Upon the grant of an Award, the number of shares of Stock available under Article 3(a) for the granting of further Awards shall be reduced as follows:

 

(i)                                     Generally. In connection with the granting of each Award, other than a performance unit denominated in dollars, the number of shares of Stock available under Article 3(a) for the granting of further Awards shall be reduced by a number of shares equal to the number of shares of Stock in respect of which the Award is granted or denominated; provided, however, that if any Award is exercised by tendering shares of Stock, either actually or by attestation, to the Company as full or partial payment of the exercise price, the maximum number of shares of Stock available under Article 3(a) shall be increased by the number of shares of Stock so tendered.

 

(ii)                                  Performance Units Denominated in Dollars. In connection with the granting of a performance unit denominated in dollars, there shall be no reduction in the number of shares of Stock available under Article 3(a) for the granting of further Awards. If a performance unit denominated in dollars is settled in Stock, the number of shares of Stock available under Article 3(a) for the granting of further Awards shall be reduced at the time of settlement by the number of shares of Stock issued in connection with the settlement of the performance unit.

 

(iii)                               Cash Settlement; Shares Subject to Multiple Awards.  Notwithstanding anything contained herein to the contrary, (A) if an Award is granted that cannot be settled in shares of Stock, there shall be no reduction in the number of shares of Stock available under Article 3(a) for the granting of further Awards, and (B) where two or more Awards are granted with respect to the same 

 

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shares of Stock, such shares shall be taken into account only once for purposes of this Article 3(b).

 

(c)                                  Effect of the Expiration, Termination, Cancellation or Settlement of Awards. If and to the extent an Option or Award expires, terminates or is canceled, settled in cash (including the settlement of tax withholding obligations using shares of Stock) or forfeited for any reason without having been exercised in full (including, without limitation, a cancellation of an Option pursuant to Article 4(c)(vi)), the shares of Stock associated with the expired, terminated, canceled, settled or forfeited portion of the Award (to the extent the number of shares available for the granting of Awards was reduced pursuant to Article 3(b)) shall again become available for Awards under the Plan.

 

4.                                       **Administration**.

 

(a)                                  Committee Administration. The Plan shall be administered by the Committee, which shall consist of not less than two “non-employee directors” within the meaning of Rule 16b-3, and to the extent necessary for any Award intended to qualify as Performance-Based Compensation to so qualify, each member of the Committee shall be an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code. For purposes of the preceding sentence, if one or more members of the Committee is not a “non-employee director” within the meaning of Rule 16b-3 and an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code but recuses himself or herself or abstains from voting with respect to a particular action taken by the Committee, then the Committee, with respect to that action, shall be deemed to consist only of the members of the Committee who have not recused themselves or abstained from voting.

 

(b)                                 Board Reservation and Delegation. Except to the extent necessary for any Award intended to qualify as Performance-Based Compensation to so qualify, the Board may, in its discretion, reserve to itself or exercise any or all of the authority and responsibility of the Committee hereunder and may also delegate to another committee of the Board any or all of the authority and responsibility of the Committee with respect to Awards to Grantees who are not Section 16 Grantees at the time any such delegated authority or responsibility is exercised.  Such other committee may consist of one or more directors who may, but need not be, officers or employees of the Company or of any of its Subsidiaries. To the extent that the Board has reserved to itself, or exercised the authority and responsibility of the Committee, or delegated the authority and responsibility of the Committee to such other committee, all references to the Committee in the Plan shall be to the Board or to such other committee.

 

(c)                                  Committee Authority. The Committee shall have full and final authority, in its discretion, but subject to the express provisions of the Plan, as follows:

 

(i)                                     to grant Awards,

 

(ii)                                  to determine (A) when Awards may be granted, and (B) whether or not specific Awards shall be identified with other specific Awards, and if so, whether they shall be exercisable cumulatively with, or alternatively to, such other specific Awards,

 

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(iii)                               to interpret the Plan and to make all determinations necessary or advisable for the administration of the Plan,

 

(iv)                              to prescribe, amend, and rescind rules and regulations relating to the Plan, including, without limitation, rules with respect to the exercisability and nonforfeitability of Awards upon the Termination of Employment of a Grantee,

 

(v)                                 to determine the terms and provisions of the Award Agreements, which need not be identical and, with the consent of the Grantee, to modify any such Award Agreement at any time,

 

(vi)                              to cancel, with the consent of the Grantee, outstanding Awards,

 

(vii)                           to accelerate the exercisability of, and to accelerate or waive any or all of the restrictions and conditions applicable to, any Award,

 

(viii)                        to authorize any action of or make any determination by the Company as the Committee shall deem necessary or advisable for carrying out the purposes of the Plan, and

 

(ix)                                to impose such additional conditions, restrictions, and limitations upon the grant, exercise or retention of Awards as the Committee may, before or concurrently with the grant thereof, deem appropriate, including, without limitation, requiring simultaneous exercise of related identified Awards, and limiting the percentage of Awards which may from time to time be exercised by a Grantee.

 

Notwithstanding anything herein to the contrary, the exercise price of outstanding Options may not be decreased (except pursuant to Article 18 of the Plan) and Options may not be cancelled or forfeited and re-granted to effect the same result. Notwithstanding anything herein to the contrary, with respect to Grantees working outside the United States, the Committee may determine the terms and provisions of the Award Agreements and make such adjustments or modifications to Awards as are necessary and advisable to fulfill the purposes of the Plan.

 

(d)                                 Committee Determinations Final. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be conclusive and final. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award.

 

5.                                       **Eligibility.**

 

Awards may be granted to any employee of the Company, and to any nonemployee director of the Company. In selecting the individuals to whom Awards may be granted, as well as in determining the number of shares of Stock subject to, and the other terms and conditions applicable to, each Award, the Committee shall take into consideration such factors as it deems relevant in promoting the purposes of the Plan.

 

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6.                                       **Conditions to Grant**s.

 

(a)                                  General Conditions.

 

(i)                                     The Grant Date of an Award shall be the date on which the Committee grants the Award or such later date as specified in advance by the Committee.

 

(ii)                                  The term of each Award (subject to Article 6(c) with respect to Incentive Stock Options) shall be a period of not more than ten years from the Grant Date and shall be subject to earlier termination as provided herein or in the applicable Award Agreement; provided, however, that the Committee may provide that an Option (other than an Incentive Stock Option) may, upon the death of the Grantee, be exercised for up to one year following the date of the Grantee’s death even if such period extends beyond ten years from the date the Option is granted.

 

(iii)                               A Grantee may, if otherwise eligible, be granted additional Awards in any combination.

 

(iv)                              The Committee may grant Awards with terms and conditions which differ among the Grantees thereof. To the extent not set forth in the Plan, the terms and conditions of each Award shall be set forth in an Award Agreement.

 

(b)                                 Grant of Options and Exercise Price. The Committee may, in its discretion, shall grant Options as follows:

 

(i)                                     Employee Options. Options to acquire unrestricted Stock or restricted Stock may be granted to any employee eligible under Article 5 to receive Awards. No later than the Grant Date of any Option, the Committee shall determine the Exercise Price.

 

(ii)                                  Nonemployee Director Options.

 

(A)                              Discretionary Grants. Nonqualified Stock Options to acquire unrestricted or restricted stock may be granted to nonemployee directors of the Company from time to time.

 

(B)                                Terms Applicable to all Nonemployee Director Options. Each Nonqualified Stock Option granted to a nonemployee director will be granted with an Exercise Price of not less than 100% of the Fair Market Value of the Stock on the Grant Date, and will have a term of not more than ten years.

 

(c)                                  Grant of Incentive Stock Options. At the time of the grant of any Option to an employee of the Company, the Committee may designate that such Option shall be an Incentive Stock Option. Any Option designated as an Incentive Stock Option:

 

(i)                                     shall have an Exercise Price of (A) not less than 100% of the Fair Market Value of the Stock on the Grant Date or (B) in the case of a 10% Owner, not less than 110% of the Fair Market Value of the Stock on the Grant Date;

 

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(ii)                                  shall have a term of not more than ten years (five years, in the case of a 10% Owner) from the Grant Date, and shall be subject to earlier termination as provided herein or in the applicable Award Agreement;

 

(iii)                               shall, if, with respect to any grant, the aggregate Fair Market Value of Stock (determined on the Grant Date) of all Incentive Stock Options granted under the Plan and “incentive stock options” (within the meaning of Section 422 of the Internal Revenue Code) granted under any other stock option plan of the Grantee’s employer or any parent or subsidiary thereof (in either case determined without regard to this Article 6(c)) are exercisable for the first time during any calendar year exceeds $100,000, be treated as Nonqualified Stock Options. For purposes of the foregoing sentence, Incentive Stock Options shall be treated as Nonqualified Stock Options according to the order in which they were granted such that the most recently granted Incentive Stock Options are first treated as Nonqualified Stock Options;

 

(iv)                              shall be granted within ten years from the earlier of the date the Plan is adopted by the Board or the date the Plan is approved by the stockholders of the Company; and

 

(v)                                 shall require the Grantee to notify the Committee of any disposition of any Stock issued pursuant to the exercise of the Incentive Stock Option under the circumstances described in Section 421(b) of the Internal Revenue Code (relating to certain disqualifying dispositions), within ten days of such disposition.

 

(d)                                 Grant of Shares of Restricted Stock.

 

(i)                                     The Committee may, in its discretion, grant shares of restricted Stock to any individual eligible under Article 5 to receive Awards.

 

(ii)                                  Before the grant of any shares of restricted Stock, the Committee shall determine, in its discretion:

 

(A)                              whether the certificates for such shares shall be delivered to the Grantee or held (together with a stock power executed in blank by the Grantee) in escrow by the Secretary of the Company until such shares become nonforfeitable or are forfeited;

 

(B)                                the per share purchase price of such shares, which may be zero; provided, however, that the per share purchase price of all such shares (other than treasury shares) shall not be less than the Minimum Consideration for each such share;

 

(C)                                the restrictions applicable to such grant and the time or times upon which any applicable restrictions on the restricted Stock shall lapse; provided, however, that except in the case of shares of restricted Stock issued to nonemployee directors or the case of restricted stock issued in full or partial settlement of another Award or other earned compensation, or in the event of the Grantee’s Termination of Employment or a Change of Control, as determined by the Committee 

 

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and set forth in an Award Agreement, such restrictions shall not lapse prior to the first anniversary of the Grant Date of the restricted Stock; and

 

(D)                               whether the payment to the Grantee of dividends, or a specified portion thereof, declared or paid on such shares by the Company shall be deferred until the lapsing of the restrictions imposed upon such shares and shall be held by the Company for the account of the Grantee, whether such dividends shall be reinvested in additional shares of restricted Stock (to the extent shares are available under Article 3) subject to the same restrictions and other terms as apply to the shares with respect to which such dividends are issued or otherwise reinvested in Stock or held in escrow, whether interest will be credited to the account of the Grantee with respect to any dividends which are not reinvested in restricted or unrestricted Stock, and whether any Stock dividends issued with respect to the restricted Stock to be granted shall be treated as additional shares of restricted Stock.

 

(iii)                               Payment of the purchase price (if greater than zero) for shares of restricted Stock shall be made in full by the Grantee before the delivery of such shares and, in any event, no later than ten days after the Grant Date for such shares. Such payment may be made, as determined by the Committee in its discretion, in any one or any combination of the following:

 

(A)                              cash; or

 

(B)                                with the prior approval of the Committee, shares of restricted or unrestricted Stock owned by the Grantee prior to such grant and valued at its Fair Market Value on the business day immediately preceding the date of payment;

 

provided, however, that, in the case of payment in shares of restricted or unrestricted Stock, if the purchase price for restricted Stock (“New Restricted Stock”) is paid with shares of restricted Stock (“Old Restricted Stock”), the restrictions applicable to the New Restricted Stock shall be the same as if the Grantee had paid for the New Restricted Stock in cash unless, in the judgment of the Committee, the Old Restricted Stock was subject to a greater risk of forfeiture, in which case a number of shares of New Restricted Stock equal to the number of shares of Old Restricted Stock tendered in payment for New Restricted Stock shall be subject to the same restrictions as the Old Restricted Stock, determined immediately before such payment.

 

(iv)                              The Committee may, but need not, provide that all or any portion of a Grantee’s Award of restricted Stock shall be forfeited:

 

(A)                              except as otherwise specified in the Award Agreement, upon the Grantee’s Termination of Employment within a specified time period after the Grant Date; or

 

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(B)                                if the Company or the Grantee does not achieve specified performance goals within a specified time period after the Grant Date and before the Grantee’s Termination of Employment; or

 

(C)                                upon failure to satisfy such other restrictions as the Committee may specify in the Award Agreement.

 

(v)                                 If a share of restricted Stock is forfeited, then:

 

(A)                              the Grantee shall be deemed to have resold such share of restricted Stock to the Company at the lesser of (1) the purchase price paid by the Grantee (such purchase price shall be deemed to be zero dollars ($0) if no purchase price was paid) or (2) the Fair Market Value of a share of Stock on the date of such forfeiture;

 

(B)                                the Company shall pay to the Grantee the amount determined under clause (A) of this sentence, if not zero, as soon as is administratively practicable, but in any case within 90 days after forfeiture; and

 

(C)                                such share of restricted Stock shall cease to be outstanding, and shall no longer confer on the Grantee thereof any rights as a stockholder of the Company, from and after the date of the Company’s tender of the payment specified in clause (B) of this sentence, whether or not such tender is accepted by the Grantee, or the date the restricted Stock is forfeited if no purchase price was paid for the restricted Stock.

 

(vi)                              Any share of restricted Stock shall bear an appropriate legend specifying that such share is non-transferable and subject to the restrictions set forth in the Plan and the Award Agreement. If any shares of restricted Stock become nonforfeitable, the Company shall cause certificates for such shares to be issued or reissued without such legend and delivered to the Grantee or, at the request of the Grantee, shall cause such shares to be credited to a brokerage account specified by the Grantee.

 

(e)                                  Grant of Performance Units and Performance Shares.

 

(i)                                     The Committee may, in its discretion, grant performance units or performance shares to any employee of the Company eligible under Article 5 to receive Awards.

 

(ii)                                  Before the grant of any performance unit or performance share, the Committee shall:

 

(A)                              designate a period, of not less than one year nor more than five years, for the measurement of the extent to which performance goals are attained (the “Measuring Period”);

 

(B)                                determine performance goals applicable to such grant; provided, however, that the performance goals with respect to a

 

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Measuring Period shall be established in writing by the Committee by the earlier of (x) the date on which a quarter of the Measuring Period has elapsed or (y) the date which is ninety (90) days after the commencement of the Measuring Period, and in any event while the performance relating to the performance goals remain substantially uncertain; and

 

(C)                                assign a “Performance Percentage” to each level of attainment of performance goals during the Measuring Period, with the percentage applicable to minimum attainment being zero percent (0%) and the percentage applicable to optimum attainment to be determined by the Committee from time to time.

 

(iii)                               The performance goals applicable to performance units or performance shares shall, in the discretion of the Committee, be based on stock price, earnings per share, operating income, return on equity or assets, cash flow, EBITDA, revenues, overall revenue or sales growth, expense reduction or management, market position, total shareholder return, return on investment, earnings before interest and taxes (EBIT), net income, return on net assets, economic value added, shareholder value added, cash flow return on investment, net operating profit, net operating profit after tax, return on capital, and return on invested capital, or any combination of the foregoing. Such performance goals may be absolute or relative (to prior performance or to the performance of one or more other entities or external indices) and may be expressed in terms of a progression within a specified range. At the time of the granting of performance units or performance shares, or at any time thereafter, in either case to the extent permitted under Section 162(m) of the Internal Revenue Code and the regulations thereunder without adversely affecting the treatment of the performance unit or performance share as Performance-Based Compensation, the Committee may provide for the manner in which performance will be measured against the performance goals (or may adjust the performance goals) to reflect the impact of specified corporate transactions, special charges, foreign currency effects, accounting or tax law changes and other extraordinary or nonrecurring events.

 

(iv)                              Prior to the vesting, payment, settlement or lapsing of any restrictions with respect to any performance unit or performance share that is intended to constitute Performance-Based Compensation made to a Grantee who is subject to Section 162(m) of the Internal Revenue Code, the Committee shall certify in writing that the applicable performance goals have been satisfied.

 

(v)                                 Unless otherwise expressly stated in the relevant Award Agreement, each performance unit and performance share granted under the Plan is intended to be Performance-Based Compensation and the Committee shall interpret and administer the applicable provisions of the Plan in a manner consistent therewith. Any provisions inconsistent with such treatment shall be inoperative and shall not adversely affect the treatment of performance units or performance shares granted hereunder as Performance-Based Compensation. The Committee shall not be entitled to exercise any discretion otherwise authorized hereunder with respect to such performance unit or performance share if the ability to exercise such discretion or the exercise of such discretion itself would cause the compensation attributable to such performance unit or performance share to fail to qualify as Performance-Based Compensation.

 

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(f)                                    Grant of Stock Appreciation Rights. The Committee may, in its discretion, grant Stock Appreciation Rights to any employee who is eligible under Article 5 to receive Awards as follows:

 

(i)                                     Employee Stock Appreciation Rights. Stock Appreciation Rights may be granted to any employee eligible under Article 5 to receive Awards. No later than the Grant Date of any Stock Appreciation Right, the Committee shall determine the Exercise Price.

 

(ii)                                  Nonemployee Director Stock Appreciation Rights.

 

(A)                              Discretionary Grants. Stock Appreciation Rights may be granted to nonemployee directors of the Company from time to time.

 

(B)                                Terms Applicable to all Nonemployee Director Stock Appreciation Rights. Each Stock Appreciation Right granted to a nonemployee director will be granted with an Exercise Price not less than 100% of the Fair Market Value of the Stock on the Grant Date, and will have a term of not more than ten years.

 

(g)                                 Tandem Awards. The Committee may grant and identify any Award with any other Award granted under the Plan (“Tandem Award”), on terms and conditions determined by the Committee.

 

7.                                       **Non-transferability.**

 

Unless set forth in the applicable Award Agreement with respect to Awards other than Incentive Stock Options, no Award (other than an Award of restricted Stock) granted hereunder shall by its terms be assignable or transferable except by will or the laws of descent and distribution or, in the case of an Option other than an Incentive Stock Option, pursuant to a domestic relations order (within the meaning of Rule 16a-12 promulgated under the Exchange Act). An Option may be exercised during the lifetime of a Grantee only by the Grantee or his or her guardian or legal representatives or, except as would cause an Incentive Stock Option to lose its status as such, by a bankruptcy trustee. Notwithstanding the foregoing, the Committee may set forth in the Award Agreement evidencing an Award (other than an Incentive Stock Option) at the time of grant or thereafter, that the Award may be transferred to members of the Grantee’s immediate family, to trusts solely for the benefit of such immediate family members and to partnerships in which such family members and/or trusts are the only partners, and for purposes of this Plan, a transferee of an Award shall be deemed to be the Grantee. For this purpose, immediate family means the Grantee’s spouse, parents, children, stepchildren and grandchildren and the spouses of such parents, children, stepchildren and grandchildren. The terms of an Award shall be final, binding and conclusive upon the beneficiaries, executors, administrators, heirs and successors of the Grantee. Each share of restricted Stock shall be non-transferable until such share becomes nonforfeitable.

 

8.                                       **Exercise.**

 

(a)                                  Exercise of Options and Stock Appreciation Rights. Subject to such terms and conditions as the Committee may impose, each Option or Stock Appreciation Right shall be exercisable in one or more installments commencing not earlier than the 

 

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first anniversary of the Grant Date of such Option or Stock Appreciation Right; provided, however, that all Options or Stock Appreciation Rights held by each Grantee shall become fully (100%) vested and exercisable upon the occurrence of a Change of Control regardless of whether the acceleration of the exercisability of such Options or Stock Appreciation Rights would cause such Options to lose their eligibility for treatment as Incentive Stock Options. Each Option or Stock Appreciation Right shall be exercised by delivery to the Company of written notice of intent to purchase a specific number of shares of Stock subject to the Option. The Exercise Price of any shares of Stock as to which an Option or Stock Appreciation Right shall be exercised shall be paid in full at the time of the exercise. Payment may be made, as determined by the Committee in its discretion with respect to Options or Stock Appreciation Rights granted to eligible employees and in all cases with respect to Options or Stock Appreciation Rights granted to nonemployee directors, in any one or any combination of the following:

 

(i)                                     cash,

 

(ii)                                  shares of unrestricted Stock held by the Grantee for at least six months (or such lesser period as may be permitted by the Committee) prior to the exercise of the Option or Stock Appreciation Right, and valued at its Fair Market Value on the last business day immediately preceding the date of exercise,

 

(iii)                               through simultaneous sale through a broker of shares of unrestricted Stock acquired on exercise, as permitted under Regulation T of the Federal Reserve Board, or

 

(iv)                              net share settlements.

 

Shares of unrestricted Stock acquired by a Grantee on exercise of an Option shall be delivered to the Grantee or, at the request of the Grantee, shall be credited directly to a brokerage account specified by the Grantee.

 

(b)                                 Exercise of Performance Units.

 

(i)                                     Subject to such terms and conditions as the Committee may impose, and unless otherwise provided in the applicable Award Agreement, if, with respect to any performance unit, the Committee has determined that the minimum performance goals have been achieved during the applicable Measuring Period, then such performance unit shall be deemed exercised on the date on which it first becomes exercisable.

 

(ii)                                  The benefit for each performance unit exercised shall be an amount equal to the product of

 

(A)                              the Unit Value (as defined below), multiplied by

 

(B)                                the Performance Percentage attained during the Measuring Period for such performance unit.

 

(iii)                               The Unit Value shall be, as specified by the Committee,

 

(A)                              a dollar amount,

 

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(B)                                an amount equal to the Fair Market Value of a share of Stock on the Grant Date,

 

(C)                                an amount equal to the Fair Market Value of a share of Stock on the exercise date of the performance unit, plus, if so provided in the Award Agreement, an amount (“Dividend Equivalent Amount”) equal to the Fair Market Value of the number of shares of Stock that would have been purchased if each dividend paid on a share of Stock on or after the Grant Date and on or before the exercise date were invested in shares of Stock at a purchase price equal to its Fair Market Value on the respective dividend payment date, or

 

(D)                               an amount equal to the Fair Market Value of a share of Stock on the exercise date of the performance unit (plus, if so specified in the Award Agreement, a Dividend Equivalent Amount), reduced by the Fair Market Value of a share of Stock on the Grant Date of the performance unit.

 

(iv)                              The benefit upon the exercise of a performance unit shall be payable as soon as is administratively practicable (but in any event within 90 days) after the later of (A) the date the Grantee is deemed to exercise such performance unit, or (B) the date (or dates in the event of installment payments) as provided in the applicable Award Agreement. Such benefit shall be payable in cash or restricted Stock, except that the Committee, with respect to any particular exercise, may, in its discretion, pay benefits wholly or partly in Stock delivered to the Grantee or credited to a brokerage account specified by the Grantee. The number of shares of Stock payable in lieu of cash shall be determined by valuing the Stock at its Fair Market Value on the business day next preceding the date such benefit is to be paid.

 

(c)                                  Payment of Performance Shares. Subject to such terms and conditions as the Committee may impose, and unless otherwise provided in the applicable Award Agreement, if the Committee has determined in accordance with Article 6(e)(iv) that the minimum performance goals with respect to an Award of performance shares have been achieved during the applicable Measuring Period, then the Company shall pay to the Grantee of such Award (or, at the request of the Grantee, deliver to a brokerage account specified by the Grantee) shares of restricted Stock or Stock equal in number to the product of the number of performance shares specified in the applicable Award Agreement multiplied by the Performance Percentage achieved during such Measuring Period, except to the extent that the Committee in its discretion determines that cash be paid in lieu of some or all of such shares of Stock. The amount of cash payable in lieu of a share of Stock shall be determined by valuing such share at its Fair Market Value on the business day next preceding the date such cash is to be paid. Payments pursuant to this Article 8(d) shall be made as soon as administratively practicable (but in any event within 90 days) after the end of the applicable Measuring Period. Any performance shares with respect to which the performance goals have not been achieved by the end of the applicable Measuring Period shall expire.

 

(d)                                 Exercise, Cancellation, Expiration or Forfeiture of Tandem Awards. Upon the exercise, cancellation, expiration, forfeiture or payment in respect of any

 

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Award which is identified with any Tandem Award pursuant to Article 6(g), the Tandem Award shall automatically terminate to the extent of the number of shares in respect of which the Award is so exercised, cancelled, expired, forfeited or paid, unless otherwise provided by the Committee at the time of grant of the Tandem Award or thereafter.

 

9.                                       **Effect of Certain Transactions.**

 

With respect to any Award which relates to Stock, in the event of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the Company (a “Transaction”), the Plan and the Awards issued hereunder shall continue in effect in accordance with their respective terms, except that following a Transaction either (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Transaction (the “Transaction Agreement”) or (ii) if not so provided in the Transaction Agreement, each Grantee shall be entitled to receive in respect of each share of Stock subject to any outstanding Awards, upon the vesting, payment or exercise of the Award (as the case may be), the same number and kind of stock, securities, cash, property, or other consideration that each holder of a share of Stock was entitled to receive in the Transaction in respect of a share of Stock.

 

10.                                 **Mandatory Withholding Taxes**.

 

The Company shall have the right to deduct from any distribution of cash to any Grantee an amount equal to the federal, state and local income taxes and other amounts as may be required by law to be withheld (the “Withholding Taxes”) with respect to any Award. If a Grantee is to experience a taxable event in connection with (i) the receipt of an Award, (ii) the receipt of shares pursuant to an Option exercise, (iii) the vesting or payment of another type of Award or (iv) any other event in connection with the Plan (a “Taxable Event”), the Grantee shall pay the Withholding Taxes to the Company prior to the issuance, or release from escrow, of such Award or shares or vesting or payment of such Award or occurrence of such event, as applicable. Payment of the applicable Withholding Taxes may be made, as determined by the Committee in its discretion, in any one or any combination of (i) cash, (ii) shares of restricted or unrestricted Stock owned by the Grantee prior to the Taxable Event and valued at its Fair Market Value on the business day immediately preceding the date of exercise, or (iii) by making a Tax Election (as described below). For purposes of this Article 11, the Committee may provide in the Award Agreement at the time of grant, or at any time thereafter, that the Grantee, in satisfaction of the obligation to pay Withholding Taxes to the Company, may elect to have withheld a portion of the shares then issuable to him or her having an aggregate Fair Market Value equal to the Withholding Taxes.

 

11.                                 **Termination of Employment.**

 

The Award Agreement pertaining to each Award shall set forth the terms and conditions applicable to such Award upon a Termination of Employment of the Grantee by the Company, a Subsidiary or an operating division or unit, which, shall be as the Committee may, in its discretion, determine at the time the Award is granted or thereafter.

 

12.                                 **Securities Law Matters.**

 

(a)                                  If the Committee deems it necessary to comply with the Securities Act of 1933, the Committee may require a written investment intent representation by the Grantee and may require that a restrictive legend be affixed to certificates for shares of Stock.

 

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(b)                                 If, based upon the opinion of counsel for the Company, the Committee determines that the exercise or nonforfeitability of, or delivery of benefits pursuant to, any Award would violate any applicable provision of (i) federal or state securities law, (ii) the listing requirements of any national securities exchange on which are listed any of the Company’s equity securities or (iii) any other law or regulation, then the Committee may postpone any such exercise, nonforfeitability or delivery, as the case may be, but the Company shall use its best efforts, if applicable, to cause such exercise, nonforfeitability or delivery to comply with all such provisions at the earliest practicable  date.

 

(c)                                  Notwithstanding any provision of the Plan or any Award Agreement to the contrary, no shares of Stock shall be issued to any Grantee in respect of any Award prior to the time a registration statement under the Securities Act of 1933 is effective with respect to such shares.

 

13.                                 **No Funding Required**.

 

Benefits payable under the Plan to any person shall be paid directly by the Company. The Company shall not be required to fund, or otherwise segregate assets to be used for payment of, benefits under the Plan.

 

14.                                 **No Employment Rights**.

 

Neither the establishment of the Plan, nor the granting of any Award shall be construed to (a) give any Grantee the right to remain employed by the Company or to any benefits not specifically provided by the Plan or (b) in any manner modify the right of the Company or any of its Subsidiaries to modify, amend, or terminate any of its employee benefit plans.

 

15.                                 **Rights as a Stockholder.**

 

A Grantee shall not, by reason of any Award (other than restricted Stock), have any right as a stockholder of the Company with respect to the shares of Stock which may be deliverable upon exercise or payment of such Award until such shares have been delivered to him. Shares of restricted Stock held by a Grantee or held in escrow by the Secretary of the Company shall confer on the Grantee all rights of a stockholder of the Company, except as otherwise provided in the Plan.

 

16.                                 **Nature of Payments**.

 

Any and all grants, payments of cash, or deliveries of shares of Stock hereunder shall constitute special incentive payments to the Grantee and shall not be taken into account in computing the amount of salary or compensation of the Grantee for the purposes of determining any pension, retirement, death or other benefits under (a) any pension, retirement, profit-sharing, bonus, life insurance or other employee benefit plan of the Company or any of its Subsidiaries or (b) any agreement between the Company, on the one hand, and the Grantee, on the other hand, except as such plan or agreement shall otherwise expressly provide.

 

17.                                 **Non-Uniform Determinations**.

 

                                                Neither the Committee’s nor the Board’s determinations under the Plan need be uniform and may be made by the Committee or the Board selectively among persons who receive, or are

 

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eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, to enter into non-uniform and selective Award Agreements as to (a) the identity of the Grantees, (b) the terms and provisions of Awards, and (c) the treatment of Terminations of Employment.

 

18.                                 **Adjustments.**

 

In the event of Change in Capitalization, the Committee shall, in its sole discretion, make equitable adjustment of

 

                                                (a)                         the aggregate number and class of shares of Stock or other stock or securities available under Article 3,

 

                                                (b)                        the number and class of shares of Stock or other stock or securities covered by an Award and to be covered by Options or Stock Appreciation Rights,

 

                                                (c)                         the Exercise Price applicable to outstanding Options,

 

                                                (d)                        the terms of performance unit and performance share grants (to the extent permitted under Section 162(m)) of the Internal Revenue Code and the regulations thereunder without adversely affecting the treatment of the performance unit or performance share as Performance-Based Compensation,

 

                                                (e)                         the Fair Market Value of Stock to be used to determine the amount of the benefit payable upon exercise of performance units and performance shares,

 

                                                (f)                           the maximum number and class of shares of Stock or other securities with respect to which Awards may be granted to any individual in any calendar year period.

 

19.                                 **Amendment of the Plan.**

 

The Board may from time to time in its discretion amend or modify the Plan without the approval of the stockholders of the Company, except as such stockholder approval may be required (a) to retain Incentive Stock Option treatment under Section 422 of the Internal Revenue Code, (b) to permit transactions in Stock pursuant to the Plan to be exempt from potential liability under Section 16(b) of the 1934 Act or (c) under the listing requirements of any securities exchange on which any of the Company’s equity securities are listed.

 

20.                                 **Termination of the Plan.**

 

The Plan shall terminate on the tenth (10th) anniversary of the Effective Date or at such earlier time as the Board may determine. Any termination, whether in whole or in part, shall not affect any Award then outstanding under the Plan.

 

21.                                 **No Illegal Transactions.**

 

The Plan and all Awards granted pursuant to it are subject to all laws and regulations of any governmental authority which may be applicable thereto; and notwithstanding any provision of the Plan or any Award, Grantees shall not be entitled to exercise Awards or receive the benefits 

 

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thereof and the Company shallnot be obligated to deliver any Stock or pay any benefits to a Grantee if suchexercise, delivery, receipt or payment of benefits would constitute a violationby the Grantee or the Company of any provision of any such law or regulation orapplicable court order.

 

22.                                 **Governing Law.**

 

Except where preempted by federal law, the law of the State of Georgia shall be controlling in all matters relating to the Plan, without giving effect to the conflicts of law principles thereof.

 

23.                                 **Severability.**

 

If all or any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of the Plan not declared to be unlawful or invalid. Any Article or part of an Article so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Article or part of an Article to the fullest extent possible while remaining lawful and valid.

 

24.                                 **Translations.**

 

Any inconsistency between the terms of the Plan or any Award Agreement and the corresponding translation thereof into a language other than English shall be resolved by reference, solely, to the English language document.

 

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