**Exhibit10.2**

 

ADVANCED LIFESCIENCES HOLDINGS, INC.

2005 STOCK INCENTIVE PLAN

(As Amended May 1, 2008)

 

ADVANCED LIFE SCIENCES HOLDINGS, INC. 2005 STOCK INCENTIVE PLAN

 

TABLE OF CONTENTS

 

 
| ** **       | ** ** | ** **                                     | ** ** | **Page** |
|------------------|------------|------------------------------------------------|------------|----------|
|             |       |                                           |       |     |
| Article 1.  |       | Establishment,  Objectives and Duration        |       | 1        |
| Article 2.  |       | Definitions                                    |       | 2        |
| Article 3.  |       | Administration                                 |       | 6        |
| Article 4.  |       | Shares  Subject to the Plan and Maximum Awards |       | 6        |
| Article 5.  |       | Eligibility  and Participation                 |       | 7        |
| Article 6.  |       | Stock  Options                                 |       | 7        |
| Article 7.  |       | Stock  Appreciation Rights                     |       | 9        |
| Article 8.  |       | Restricted  Stock and Restricted Stock Units   |       | 10       |
| Article 9.  |       | Performance  Shares                            |       | 11       |
| Article 10. |       | Performance  Measures                          |       | 12       |
| Article 11. |       | Beneficiary  Designation                       |       | 13       |
| Article 12. |       | Deferrals                                      |       | 13       |
| Article 13. |       | Rights  of Participants                        |       | 13       |
| Article 14. |       | Change  in Control                             |       | 13       |
| Article 15. |       | Amendment,  Modification and Termination       |       | 14       |
| Article 16. |       | Nontransferability  of Awards                  |       | 14       |
| Article 17. |       | Withholding                                    |       | 15       |
| Article 18. |       | Indemnification                                |       | 15       |
| Article 19. |       | Successors                                     |       | 15       |
| Article 20. |       | Breach  of Restrictive Covenants               |       | 16       |
| Article 21. |       | Legal  Construction                            |       | 16       |

 

ADVANCEDLIFE SCIENCES HOLDINGS, INC. 2005 STOCK INCENTIVE PLAN

 

ARTICLE1.           ESTABLISHMENT, OBJECTIVES ANDDURATION

 

1.1           ESTABLISHMENT OF THEPLAN. Advanced Life Sciences Holdings, Inc., aDelaware corporation, hereby establishes theAdvanced Life Sciences Holdings, Inc. 2005 Stock Incentive Plan, as set forthin this document. Capitalized terms used but not otherwise defined herein willhave the meanings given to them in Article 2. The Plan permits the grantof Nonstatutory Stock Options, Incentive Stock Options, Stock AppreciationRights, Restricted Stock, Restricted Stock Units, and Performance Shares. Inaddition, the Plan provides the opportunity for the deferral of the payment ofsalary, bonuses and other forms of incentive compensation.

 

Subject to the approval of the Company’s stockholders, the Plan, asamended and restated herein, will become effective upon its approval by theBoard of Directors, and will remain in effect as provided in Section 1.3hereof.

 

1.2           OBJECTIVES OF THEPLAN. The objectives of the Plan are to optimize the profitability and growthof the Company through long-term incentives thatare consistent with the Company’s objectivesand that link the interests of Participants to those of the Company’sstockholders; to provide Participants with an incentive for excellence inindividual performance; to promote teamworkamong Participants; and to give the Company asignificant advantage inattracting and retaining officers, key employees and directors.

 

ThePlan is further intended to provide flexibility to the Company in itsability to motivate, attractand retain the services of Participants who makesignificant contributions to the Company’ssuccess, and to allow Participants toshare in the success of the Company.

 

1.3           DURATION OF THE PLAN.This Plan will be effective on the EffectiveDate, as described in Article 2, and willremain in effect, subject to the rightof the Committee to amend or terminate thePlan at any time pursuant to Article15, until all Shares subject to it pursuant toArticle 4 have been issued or

 

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transferredaccording to the Plan’s provisions. In no event may an Award begranted under the Plan on orafter the tenth annual anniversary of the EffectiveDate.

 

ARTICLE2.           DEFINITIONS

 

Wheneverused in the Plan, the following terms have the meanings set forthbelow, and when the meaningis intended, the initial letter of the word iscapitalized:

 

“AFFILIATE”means (a) for purposes of Incentive Stock Options, anycorporation that is a Parentor Subsidiary of the Company, and (b) for all otherpurposes hereunder, an entitythat (directly or indirectly) controls, iscontrolled by or under common control with theCompany.

 

“AWARD”means, individually or collectively, a grant under this Plan to aParticipant of NonstatutoryStock Options, Incentive Stock Options, StockAppreciation Rights, Restricted Stock,Restricted Stock Units, and PerformanceShares.

 

“AWARDAGREEMENT” means an agreement entered into by the Company and aParticipant setting forth theterms and provisions applicable to an Award orAwards granted to the Participant or the termsand provisions applicable to anelection to defer compensation under Section 8.2.

 

“BOARD”or “BOARD OF DIRECTORS” means the Board of Directors of theCompany.

 

“CAUSE”shall have the meaning set forth in any employment, consulting, orother written agreementbetween a Participant and the Company or an Affiliate.  If there is noemployment, consulting, or other written agreement between theParticipant and the Companyor an Affiliate, or if such agreement does notdefine “Cause,” then “Cause” shall have themeaning specified by the Committeein connection with the grant of any Award;provided, that if the Committee doesnot so specify, “Cause” shall mean any of thefollowing, as determined by theCommittee in its discretion:

 

(a)                                  conviction of,or plea of guilty or NOLO CONTENDERE to, anycriminal violation involving dishonesty orfraud;

 

(b)                                 engagement inconduct that is injurious to the Company or anAffiliate;

 

(c)                                  engagement inany act of dishonesty or misconduct that results in damage to the Company or anAffiliate or their business or reputation or that the Committee determines toadversely affect thevalue,reliability or performance of the Participant to the Company or an Affiliate;

 

(d)                                 refusal orfailure to substantially comply with the human resources rules, policies,directions and/or restrictions of the Company oran Affiliate relating to harassment and/ordiscrimination, or with compliance or risk management rules, policies,directions and/or restrictions;

 

(e)                                   unauthorizeduse or disclosure of confidential information or other trade secrets of the Companyor an Affiliate;

 

(f)                                    loss of anylicense or registration that is necessary for the Participant to perform his orher duties to the Company or an Affiliate, or commission of any act that couldresult in the legal disqualification of the Participant from being employed bythe Company or an Affiliate;

 

(g)                                 failure tocooperate with the Company or an Affiliate in any internal investigation oradministrative, regulatory or judicial proceeding; or

 

(h)                                 continuousfailure by the Participant to perform his or her duties to the Company or anAffiliate (including any sustained and unexcused absence of the Participantfrom the performance of such

 

 

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duties,which absence has not been certified in writing as due to physical or mentalillness or disability), after a written demand for performance has beendelivered to the Participant identifying the manner in which the Participanthas failed to substantially perform such duties.

 

Theapplication of any part of the definition of “Cause” set forth in paragraphs(a) through (h) aboveto a Participant shall not preclude or prevent thereliance by the Committee on any other part ofthe definition that also may beapplicable. In addition, the Participant’sService shall be deemed to haveterminated for Cause if, after the Participant’sService has terminated, factsand circumstances are discovered that would have justified a terminationfor Cause.

 

“CHANGEIN CONTROL” means the occurrence of any one or more of thefollowing:

 

(a)                                  Any “person” (assuch term is defined in Section 3(a)(9) of theExchange Act and as used inSections 13(d)(3) and 14(d)(2) of the Exchange Act), including a “group”(as defined in Section 13(d)(3) of the Exchange Act), other than (i) theCompany, (ii) any wholly-owned subsidiary of the Company, (iii) anyemployee benefit plan (or related trust) sponsored or maintained by the Companyor any Affiliate or (iv) a Permitted Holder, becomes a “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act), directlyor indirectly, of securitiesof the Company having fifty percent(50%) or more of the combined voting power ofthe then-outstanding securities of the Company that may be cast for theelection of directors of the Company (other than as a result of an issuance ofsecurities initiated by the Company in the ordinary course of business) (the “CompanyVoting Securities”); provided, however, that the event described in thisparagraph (a) shall not be deemed to be a Change in Control by virtue ofany underwriter temporarily holding securities pursuant to an offering of suchsecurities;

 

(b)                                 During anyperiod of two consecutive years, individuals who at the beginning of any suchperiod constitute the Board (the “Incumbent Directors”) cease for any reason toconstitute at least a majority of the Board, unless the election, or thenomination for election by the stockholders of the Company, of each newdirector of the Company during such period was approved by a vote of at leasttwo-thirds of the Incumbent Directors then still in office;

 

(c)                                  As the resultof, or in connection with, any cash tender or exchange offer, merger or otherbusiness combination, sale of all or substantially all of the assets orcontested election, or any combination of the foregoing transactions, less thana majority of the combined voting power of the then-outstanding securities ofthe Company or any successor corporation or entity entitled to vote generallyin the election of the directors of the Company or such other corporation orentity after such transaction is held in the aggregate by the holders of thesecurities of the Company entitled to vote generally in the election ofdirectors of the Company immediately prior to such transaction; or

 

(d)           The stockholders of the Companyapprove a plan of completeliquidation of the Company.

 

Notwithstandingthe foregoing, a Change in Control shall not be deemed tooccur solely because anyperson acquires beneficial ownership of more than fiftypercent (50%) of the CompanyVoting Securities as a result of the acquisition ofCompany Voting Securities by the Company whichreduces the number of CompanyVoting Securities outstanding; provided, however, that if after suchacquisitionby the Companysuch person becomes the beneficial owner of additional CompanyVoting Securities thatincreases the percentage of outstanding Company VotingSecurities beneficially ownedby such person, a Change in Control transactionshall then occur.

 

Furthernotwithstanding the foregoing, unless a majority of the IncumbentDirectors determines otherwise,no Change in Control shall be deemed to haveoccurred with respect to a particularParticipant if the Change in Controlresults from actions or events in which suchParticipant is a participant in a

 

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capacityother than solely as an officer, employee or director of the Company oran Affiliate.

 

“CODE”means the Internal Revenue Code of 1986, as amended from time totime.

 

“COMMITTEE”shall mean the Compensation Committee of the Board ofDirectors; provided, however,that the Committee shall at all times consist ofat least two directors who are “outsidedirectors” within the meaning of Code Section 162(m), “independentdirectors” within the meaning of the NASDAQ marketplace rules, and “nonemployeedirectors” within the meaning of Exchange Act Rule 16b-3.

 

“COMPANY”means Advanced Life Sciences Holdings, Inc., a Delaware corporation, andany successor thereto as provided in Article 19.

 

“CONSULTANT”means any person, including an advisor, engaged by the Company or an Affiliateto render services to such entity and who is not a Director or an Employee.

 

“DIRECTOR”means any individual who is a member of the Board of Directors or the board ofdirectors of an Affiliate.

 

“DISABILITY”shall have the meaning set forth in any employment, consulting, or otherwritten agreement between the Participant and the Company or an Affiliate. Ifthere is no employment, consulting, or other written agreement between theParticipant and the Company or an Affiliate, or if such agreement does notdefine “Disability,” then “Disability” shall mean (a) long-term disability asdefined under the long-term disability plan of the Company or an Affiliate thatcovers the Participant, (b) if the Participant is not covered by such along-term disability plan, disability as defined for purposes of eligibilityfor a disability award under the Social Security Act, or (c) if theParticipant is not covered by a long-term disability plan or the U.S. SocialSecurity Act, the Committee shall determine whether the Participant has incurreda Disability, in its sole discretion. Notwithstanding the foregoing, forpurposes of determining the period of time after termination of Service duringwhich a Participant may exercise an Incentive Stock Option, “Disability” willhave the meaning set forth in Code Section 22(e)(3), which is, generally, thatthe Participant is unable to engage in any substantial gainful activity by reasonof a medically determinable physical or mental impairment that can be expectedto result in death or that has lasted or can be expected to last for a continuousperiod of at least twelve months.

 

“EFFECTIVEDATE” means the date of the Plan’s adoption by the Board, subject to theapproval of the Plan by the Company’s stockholders.

 

“EMPLOYEE”means any person employed by the Company or an Affiliate in a common lawemployee-employer relationship. A Service Provider shall not cease to be anEmployee for purposes of this Plan in the case of (a) any leave of absenceapproved by the Company or (b) transfers between locations of the Companyor among the Company, any Affiliate, or any successor. For purposes ofIncentive Stock Options, no such leave may exceed ninety (90) days, unlessreemployment upon expiration of such leave is guaranteed by statute orcontract. If reemployment upon expiration of a leave of absence approved by theCompany is not so guaranteed, on the one hundred and eighty-first (181st) dayof such leave, any Incentive Stock Option held by the Participant shall ceaseto be treated as an Incentive Stock Option and shall be treated for taxpurposes as a Nonstatutory Stock Option. Neither service as a Director norpayment of a director’s fee by the Company or an Affiliate shall be sufficientto constitute “employment” by the Company or an Affiliate.

 

“EXCHANGEACT” means the Securities Exchange Act of 1934, as amended from time to time,or any successor act thereto.

 

“EXERCISEPRICE” means the price at which a Share may be purchased by a Participantpursuant to an Option.

 

“FAIRMARKET VALUE” means:

 

(a)                                  the average ofthe high and low trading prices of the Shares on the New York Stock Exchangeor, if the Shares are not traded on the New

 

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YorkStock Exchange, on any other national securities exchange on which the Sharesare traded, or, if the Shares are not traded on any other exchange and areregularly quoted on the NASDAQ National Market System, on the NASDAQ NationalMarket System if the Shares are admitted for quotation thereon; or

 

(b)                                 if the Sharesare not traded on any exchange or regularly quoted on  the NASDAQ National Market System, the meanbetween the closing bid and asked prices of the Shares in the over-the-countermarket; or

 

(c)                                  if those bid andasked prices are not available, then the fair market value as reported by anynationally recognized quotation service selected by the Committee or asdetermined by the Committee.

 

“FREESTANDINGSAR” means a SAR that is granted independently of any Options, as described in Article 7.

 

“INCENTIVESTOCK OPTION” or “ISO” means an option to purchase Shares granted under Article 6that is designated as an Incentive Stock Option and that is intended to meetthe requirements of Code Section 422.

 

“NONSTATUTORYSTOCK OPTION” or “NQSO” means an option to purchase Shares granted under Article 6that is not intended to meet the requirements of Code Section 422.

 

“OPTION”means an Incentive Stock Option or a Nonstatutory Stock Option, as described inArticle 6.

 

“PARENT”means a “parent corporation,” whether now or hereafter existing, as defined in Code Section 424(e).

 

“PARTICIPANT”means an Employee, Consultant or Director who the Committee has selected toparticipate in the Plan pursuant to Section 5.2 and who has an Awardoutstanding under the Plan.

 

“PERFORMANCE-BASEDEXCEPTION” means the performance-based exception from the tax deductibilitylimitations of Code Section 162(m) and any regulations promulgatedthereunder.

 

“PERFORMANCEPERIOD” means the time period during which performanceobjectives must be met inorder for a Participant to earn Performance Sharesgranted under Article 9.

 

“PERFORMANCESHARE” means an Award of Shares with an initial value equal to

theFair Market Value of a Share on the date of grant which is based on the

Participant’sattainment of certain performance objectives specified in the

AwardAgreement, as described in Article 9.

 

“PERMITTEDHOLDERS” means (a) Michael T. Flavin (the “Principal”), (b) the spouseor any immediate family member of the Principal and any child or spouse of anyspouse or immediate family member of the Principal, (c) a trust, corporation,partnership or other entity, the beneficiaries, stockholders, partners, ownersor persons beneficially holding, directly or indirectly, a controlling interestof which consists of the Principal and/or such other persons referred to in theimmediately preceding clause (b), or (c) the trustees of any trustreferred to in clause (d).

 

“PLAN”means the Advanced Life Sciences Holdings, Inc. 2005 Stock Incentive Plan,as set forth in this document, and as amended from time to time.

 

“1999PLAN” means the Advanced Life Sciences, Inc. Stock Incentive Plan, as heretoforeamended.

 

“RESTRICTIONPERIOD” means the period during which the transfer of Shares of RestrictedStock is limited in some way (based on the passage of time, the achievement ofperformance objectives, or the occurrence of other events as determined by theCommittee, in its sole discretion) or the Restricted Stock is not vested.

 

“RESTRICTEDSTOCK” means a contingent grant of Shares awarded to a

 

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Participantpursuant to Article 8. The Shares awarded to the Participant will vestover the Restricted Period and according to the time-based or performance-basedcriteria, specified in the Award Agreement.

 

“RESTRICTEDSTOCK UNIT” or “RSU” means a notional account established pursuant to an Awardgranted to a Participant, as described in Article 8, that is (a) valuedsolely by reference to Shares, (b) subject to restrictions specified inthe Award Agreement, and (c) payable only in Shares. The RSUs awarded tothe Participant will vest according to the time-based or performance-basedcriteria specified in the Award Agreement.

 

“SERVICE”means the provision of services to the Company or its Affiliates in thecapacity of (i) an Employee, (ii) a Director, or (iii) aConsultant.

 

“SERVICEPROVIDER” means an Employee, Director or Consultant.

 

“SHARES”means the shares of common stock, $0.01 par value, of the Company.

 

“STOCKAPPRECIATION RIGHT” or “SAR” means an Award of the contingent right to receiveShares or cash, as specified in the Award Agreement, in the future, based onthe value, or the appreciation in the value, of Shares, pursuant to the termsof Article 7. SARs may be granted alone or in connection with a related Option.

 

“SUBSIDIARY”means a “subsidiary corporation”, whether now or hereafter existing, as defined in Code Section 424(f).

 

“TANDEMSAR” means a SAR that is granted in connection with a related Option pursuantto Article 7, the exercise of which requires forfeiture of the right topurchase a Share under the related Option (and when a Share is purchased underthe Option, the Tandem SAR will similarly be canceled).

 

ARTICLE3.           ADMINISTRATION

 

3.1           THE COMMITTEE. The Plan will beadministered by the Committee, or by any other committee appointed by theBoard, which committee (unless otherwise determined by the Board) will satisfythe “nonemployee director” requirements of Rule 16b-3 under the ExchangeAct and the regulations of Rule 16b-3 under the Exchange Act, the “independentdirector” requirements of the NASDAQ marketplace rules, and the “outside director” provisions ofCode Section 162(m), or any successor regulations or provisions.

 

3.2           AUTHORITY OF THE COMMITTEE. Except aslimited by law and subject tothe provisions of this Plan, the Committee will have full power to:selectServiceProviders to participate in the Plan; determine the sizes and types ofAwards; determine the termsand conditions of Awards in a manner consistent withthe Plan; construe and interpret the Plan andany agreement or instrumententered into under the Plan; establish, amend or waive rules andregulations forthe Plan’sadministration; and (subject to the provisions of Article 15) amendthe terms and conditions ofany outstanding Award to the extent they are withinthe discretion of the Committee as provided inthe Plan. Further, the Committeewill make all other determinations that may benecessary or advisable toadminister the Plan. As permitted by law and consistent with Section 3.1,theCommittee maydelegate some or all of its authority under the Plan, including toan officer of the Company todesignate the Employees (other than such officerhimself or herself) to receive Awards and todetermine the number of Sharessubject to the Awards such Employees willreceive.

 

3.3           DECISIONS BINDING. All determinationsand decisions made by theCommittee pursuant to the provisions of the Plan will be final,conclusive andbinding on allpersons, including, without limitation, the Company, its Board ofDirectors, its stockholders,all Affiliates, Service Providers, Participants andtheir estates and beneficiaries.

 

ARTICLE4.           Shares SUBJECT to the Planand Maximum Awards

 

4.1           NUMBER OF SHARES AVAILABLE FORAWARDS. Subject to adjustment asprovided below and in Sections 4.2 and 4.3,the maximum number of Shares thatmay be subject to Awards under the Plan willbe 3,972,455, reduced by anyShares that are subject to awards under the 1999 Plan on or after theEffective Date, and increasedby any Shares that are or that become available

 

 

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forgrants of Awards under the Plan and/or awards under the 1999 Plan on orafter the Effective Date as aresult of lapsed Awards or awards (as describedin Section 4.2).

                Notwithstanding the foregoing,the maximum number of Shares that may beissued or transferred to Participants asIncentive Stock Options is 200,000,and the maximum number of Shares that may beissued or transferred toParticipants as Restricted Stock is 200,000. The maximum number ofSharesand Shareequivalent units that may be granted during any calendar year to anyone Participant under alltypes of Awards available under the Plan is 100,000(on an aggregate basis); the foregoing limitwill apply whether the Awards arepaid in Shares or in cash. All limitsdescribed in this Section 4.1 are subjectto adjustment as provided in Section 4.3.

 

4.2           LAPSED AWARDS. Any Shares (a) subjectto an Award under the Plan orto an award under the 1999 Plan that are forfeited, canceled, settled orotherwise terminated withouta distribution of Shares to a Participant; or (b)delivered by attestation to, or withheld by,the Company in connection with theexercise of an Option awarded under the Planor the 1999 Plan, or in payment ofany required income tax withholding for theexercise of an Option or the vestingof Restricted Stock awarded under the Plan orthe 1999 Plan, will thereafter bedeemed to be available for Award under thePlan.

 

4.3           ADJUSTMENTS IN AUTHORIZED SHARES.

 

(a)                                  If the Shares,as currently constituted, are changed into or exchanged for a different numberor kind of shares of stock or other securities of the Company or of anothercorporation (whether because of merger, consolidation, recapitalization,reclassification, split, reverse split, combination of shares, or otherwise) orif the number of Shares is increased through the payment of a stock dividend,then the Committee will substitute for or add to each Share previouslyappropriated, later subject to, or which may become subject to, an Award, thenumber and kind of shares of stock or other securities into which eachoutstanding Share was changed, for which each such Share was exchanged, or towhich each such Share is entitled, as the case may be. The Committee will alsoappropriately amend outstanding Awards as to price and other terms, to theextent necessary to reflect the events described above. If there is any otherchange in the number or kind of the outstanding Shares, of any stock or othersecurities into which the outstanding Shares have been changed, or for whichthey have been exchanged, the Committee may, in its sole discretion,appropriately adjust any Award already granted or whichmay be afterward granted.

 

(b)                                 FractionalShares resulting from any adjustment in Awards pursuant to this section may besettled in cash or otherwise as the Committee determines. The Company will givenotice of an adjustment to each Participant who holds an Award that has beenadjusted and the adjustment (whether or not that notice is given) will beeffective and binding for all Plan purposes.

 

ARTICLE5.           ELIGIBILITY and PARTICIPATION

 

5.1           ELIGIBILITY. All Service Providersare eligible to participate inthis Plan.

 

5.2           ACTUAL PARTICIPATION. Subject to theprovisions of the Plan, theCommittee will, from time to time, select those Service Providers towhom Awardswill be granted,and will determine the nature and amount of each Award.

 

ARTICLE6.           STOCK OPTIONS

 

6.1           GRANT OF OPTIONS. Subject to theterms and provisions of the Plan,Options may be granted to Service Providers inthe number, and upon the terms,and at any time and from time to time, asdetermined by the Committee.

 

6.2           AWARD AGREEMENT. Each Option grantwill be evidenced by an AwardAgreement that specifies the Exercise Price, the duration of the Option,thenumber of Sharesto which the Option pertains, the manner, time and rate ofexercise or vesting of theOption, and such other provisions as the Committee

 

 

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determines.The Award Agreement will also specify whether the Option is intendedto be an ISO or an NQSO, andwhether reload options will be granted.

 

6.3           EXERCISE PRICE. The Exercise Pricefor each Share subject to anOption will be at least one hundred percent of the Fair Market Value onthe datethe Option isgranted.

 

6.4           DURATION OF OPTIONS. Each Option willexpire at the time determinedby the Committee at the time of grant, but no later than the tenthanniversaryof the date ofits grant.

 

6.5           DIVIDEND EQUIVALENTS. The Committeemay, but will not be requiredto, grant payments in connection with Options that are equivalent todividendsdeclared andpaid on the Shares underlying the Options. Such dividend equivalentpayments may be made in cashor in Shares, upon such terms as the Committee, in its sole discretion, deemsappropriate.

 

6.6           EXERCISE OF OPTIONS. Options will beexercisable at such times andbe subject to such restrictions and conditions as the Committee in eachinstanceapproves, whichneed not be the same for each Award or for each Participant.

 

6.7           PAYMENT. The holder of an Option mayexercise the Option only bydelivering a written notice, or if permitted by the Committee in itsdiscretionand inaccordance with procedures adopted by it, a notice by electronic or other  acceptablemeans, of exercise to the Company (or its designee) setting forth thenumber of Shares as to whichthe Option is to be exercised, together with fullpayment at the Exercise Price for the Sharesand any withholding tax relating to the exercise of the Option.

 

TheExercise Price and any related withholding taxes will be payable to theCompany in full either: 

 

(a)           in cash, or its equivalent, in UnitedStatesdollars;

 

(b)                                 if permitted inthe governing Award Agreement, by tendering (i)Shares acquired outside of the Plan and ownedby the Participant for at leastsix months and duly endorsed for transfer tothe Company, (ii) Shares issuableto the Participant upon exercise of theOption, or any (iii) combination ofcash, certified or cashier’s check and Sharesdescribed in this clause (b); or

 

(c)                                  by any othermeans the Committee determines to be consistent with the Plan’spurposes and applicable law.Cashless exercise must meet the requirements of theFederal Reserve Board’s Regulation T and anyapplicable securities lawrestrictions. In a “cashless” exercise, the Participant notifies theCompany orits designatedadministrator it will exercise, and the Company is instructed todeliver the Share issuable onexercise to a broker, who sells the Shares andholds back the exercise price (and, often, thefederal and state withholdings).No more than the minimum required withholdingmay be satisfied by the tender ofShares.

 

6.8           SPECIAL PROVISIONS FOR ISOS.Notwithstanding any other provision of this Article 6, the followingspecial provisions shall apply to any Award ofIncentive Stock Options:

 

(a)           The Committee may award IncentiveStock Options only to Employees.

 

(b)                                  An Option willnot constitute an Incentive Stock Option under this Plan to the extent it wouldcause the aggregate Fair Market Value of Shares with respect to which IncentiveStock Options are exercisable by the Participant for the first time during acalendar year (under all plans of the Company and its Affiliates) to exceed$100,000. Such Fair Market Value shall be determined as of the date on whicheach such Incentive Stock Option is granted.

 

(c)                                  If the Employeeto whom the Incentive Stock Option is granted is aTen Percent Owner of the Company, then: (i) theExercise Price for each Share subject to an Option will be at least one hundredtenpercent (110%)of the Fair Market Value of the Shares on the effective date of the Award; and (ii) theOption will expire uponthe earlier of (A) the time specified by the Committee in the AwardAgreement, or (B) the fifth anniversary of the date of grant.

 

(d)                                 No Option thatis intended to be an Incentive Stock Option may begranted under the Plan until the Company’sstockholders approve the Plan. If such stockholder approval is not obtainedwithin 12 months

 

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afterthe Board’s adoption of the Plan, then no Stock Options may be granted underthe Plan that are intended to be Incentive Stock Options. No Option that isintended to be an Incentive Stock Option may be granted under the Plan afterthe tenth anniversary of the date the Company adopted the Plan or the Company’sstockholdersapproved thePlan, whichever was earlier.

 

(e)                                  An IncentiveStock Option must be exercised, if at all, within three months after theParticipant’s termination of Service for a reason other than death orDisability and within twelve months after the Participant’s termination ofService for death orDisability.

 

(f)                                    For purposes ofthis Section, “Ten Percent Owner” means anindividual who, at the time a Stock Option isgranted under this Plan, owns stock possessing more than ten percent (10%) ofthe total combined voting power of all classes of stock of the Companyor any Affiliate.

 

6.9           RELOAD OPTIONS. The Committee mayprovide for reload options in theAward Agreement evidencing an Option. Anyreload feature will be subject to thefollowing requirements:

 

(a)           it must not be added to an alreadyoutstanding Option, but must be part of the Option as originally granted;

 

(b)           the reload must be automatic, not subjectto the discretion of the Committee or anyone else;

 

(c)            it must have an Exercise Price atleast equal to the Fair Market Value of a Share at the time of reload;

 

(d)                                 it may begranted with respect only to previously-owned Shares usedto pay the Exercise Price ofthe original Option, and only if theParticipant has owned the Shares used to paythe Exercise Price forat least six months;

 

(e)                                  the AwardAgreement that contains the reload feature must notp ermit multiple reloads (I.E., no reloadOptions may be granted onShares acquired through reload Options) and must subject any Optiongranted on reload to a vesting period of at least six months; and

 

(f)                                    it must limitthe duration of reload Options, by providing that anOption granted on reload expires at the sametime as the initialOption wouldhave.

 

6.10         RESTRICTIONS ON SHARE TRANSFERABILITY.The Committee may imposesuch restrictions on any Shares acquired through exercise of an Optionas itdeems necessaryor advisable, including, without limitation, restrictions underapplicable federal securitieslaws, under the requirements of any stock exchangeor market upon which the Shares are thenlisted or traded, and under any bluesky or state securities laws applicable to theShares.

 

6.11         TERMINATION OF SERVICE. Each OptionAward Agreement will set forththe extent to which the Participant has theright to exercise the Option afterhis or her termination of Service. These termswill be determined by theCommittee, in its sole discretion, need not be uniform among allOptions, andmay reflect,among other things, distinctions based on the reasons fortermination of Service.However, notwithstanding any other provision herein tothe contrary, no additionalOptions will vest after a Participant’s Serviceceases or has terminated for any reason,whether such cessation or terminationis lawful or unlawful.

 

ARTICLE7.           STOCK APPRECIATION RIGHTS

 

7.1           GRANT OF SARS. Subject to the termsand conditions of the Plan,SARs may be granted to Participants at any time and from time to time,asdetermined bythe Committee. The Committee may grant Freestanding SARs, TandemSARs or any combination ofthe two, as specified in the Award Agreement.

 

                Within the limits of Article 4,the Committee will have sole discretion to

 

 

 

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determinethe number of SARs granted to each Participant and, consistent withthe provisions of the Plan,to determine the terms and conditions pertaining toSARs.

 

Thegrant price of a Freestanding SAR will equal the Fair Market Value onthe date of grant of the SAR.The grant price of a Tandem SAR will equal the perShare Exercise Price of the Option to which itrelates.

 

7.2           EXERCISE OF TANDEM SARS. Tandem SARsmay be exercised for all orpart of the Shares subject to the related Option, upon the surrender oftheright toexercise the equivalent portion of the related Option. A Tandem SAR may beexercised only with respectto the Shares for which its related Option isthen exercisable.

 

7.3           EXERCISE OF FREESTANDING SARS.Freestanding SARs may be exercisedupon whatever terms and conditions theCommittee, in its sole discretion, imposes.

 

7.4           AWARD AGREEMENT. Each SAR grant willbe evidenced by an Award

Agreementthat specifies the grant price, whether settlement of the SAR will bemade in cash or Shares, theterm of the SAR and such other provisions as theCommittee determines.

 

7.5           TERM OF SARS. The term of a SAR willbe determined by theCommittee, inits sole discretion, but may not exceed ten years.

 

7.6           PAYMENT OF SAR AMOUNT. Upon exerciseof a SAR with respect to a

Share,a Participant will be entitled to receive an amount equal to the excess,if any, of the Fair MarketValue on the date of exercise of the SAR over thegrant price specified in the Award Agreement.At the discretion of theCommittee, the payment that may become due upon SAR exercise may be madeincash, in Sharesor in some combination of the two.

 

7.7           TERMINATION OF SERVICE. Each SARAward Agreement will set forth theextent to which the Participant has the rightto exercise the SAR after his orher termination of Service. These terms willbe determined by the Committee, inits sole discretion, need not be uniform amongall SARs issued under the Plan,and may reflect, among other things,distinctions based on the reasons fortermination of Service.

 

ARTICLE8.           RESTRICTED STOCK ANDRESTRICTED STOCK UNITS

 

8.1           GRANT OF RESTRICTED STOCK ORRESTRICTED STOCK UNITS. Subject to theterms and provisions of the Plan, theCommittee may, at any time and from timeto time, grant Restricted Stock or RestrictedStock Units to Participants in

suchamounts as it determines.

 

8.2           DEFERRAL OF COMPENSATION INTORESTRICTED STOCK UNITS. Subject tothe terms and provisions of the Plan and therequirements of Code Section 409A,the Committee may, at any time and from timeto time, allow (or require, as tobonuses) selected Service Providers to deferthe payment of any portion of theirsalary or bonuses or both pursuant to thissection. A Participant’s deferralunder this section will be credited to theParticipant in the form of Shares orRestricted Stock Units. The Committee willestablish rules and procedures forsuch deferrals, as it deems appropriate.

 

Inconsideration for foregoing compensation, the number of Restricted StockUnits granted to theParticipant may be increased. If a Participant’scompensation is deferred under this Section 8.2,he or she will be credited, asof the date specified in the Award Agreement,with a number of Restricted StockUnits equal to the amount of the deferral(increased as described above) dividedby the Fair Market Value on that date.

 

8.3           AWARD AGREEMENT. Each grant ofRestricted Stock or Restricted StockUnits will be evidenced by an Award Agreementthat specifies the RestrictionPeriods, the number of Shares or Shareequivalent units granted, and such otherprovisions as the Committee determines.

 

8.4           OTHER RESTRICTIONS. Subject to Article 10,the Committee may imposesuch other conditions or restrictions on any Restricted Stock orRestrictedStock Units asit deems advisable, including, without limitation, restrictions

 

 

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basedupon the achievement of specific performance objectives (Company-wide,business unit, individual, orany combination of them), time-based restrictionson vesting, and restrictions under applicablefederal or state securities laws.The Committee may provide that restrictionsestablished under this Section 8.4as to any given Award will lapse all at onceor in installments.

 

TheCompany will retain the certificates representing Shares of RestrictedStock in its possession untilall conditions and restrictions applicable to theShares have been satisfied.

 

8.5           PAYMENT OF AWARDS. Except asotherwise provided in this Article 8,Shares covered by each Restricted Stock grantwill become freely transferable bythe Participant after the last day of theapplicable Restriction Period, andShare equivalent units covered by a RestrictedUnit will be paid out in cash orShares to the Participant following the lastday of the applicable RestrictionPeriod, or on the date provided in the AwardAgreement.

 

8.6           VOTING RIGHTS. During the RestrictionPeriod, Participants holdingShares of Restricted Stock may exercise full voting rights with respectto thoseShares.

 

8.7           DIVIDENDS AND OTHER DISTRIBUTIONS.During the Restriction Periodand as determined by the Committee in its discretion, ParticipantsawardedShares ofRestricted Stock or Restricted Stock Units hereunder may be creditedwith regular cash dividendsor dividend equivalents paid on those Shares or withrespect to those Share equivalent units.Dividends may be paid currently,accrued as contingent cash obligations, orconverted into additional Shares ofRestricted Stock or Restricted Stock Units,upon such terms as the Committeeestablishes.

 

TheCommittee may apply any restrictions it deems advisable to thecrediting and payment ofdividends and other distributions. Without limiting thegenerality of the precedingsentence, if the grant or vesting of RestrictedStock is designed to qualify for thePerformance-Based Exception, the Committeemay apply any restrictions it deemsappropriate to the payment of dividendsdeclared with respect to the Restricted Stock,so that the dividends and theRestricted Stock continue to be eligible for the Performance-BasedException.

 

8.8           TERMINATION OF SERVICE. Each AwardAgreement will set forth theextent to which the Participant has the right to retain unvestedRestrictedStock orRestricted Stock Units after his or her termination of Service. Theseterms will be determined bythe Committee, in its sole discretion, need not beuniform among all Awards of Restricted Stock,and may reflect, among otherthings, distinctions based on the reasons for termination of Service.

 

ARTICLE9.   PERFORMANCE SHARE

 

9.1           GRANT OF PERFORMANCE SHARES. Subjectto the terms of the Plan, Performance Shares may be granted to Participants insuch amounts and upon suchterms, and at any time and from time to time, as the Committeedetermines. TheAward ofPerformance Shares may be based on the Participant’s attainment ofperformance objectives, orthe vesting of an Award of Performance Shares may bebased on the Participant’s attainment ofperformance objectives, each asdescribed in this Article 9.

 

9.2           VALUE OF PERFORMANCE SHARES. EachPerformance Share will have aninitial value equal to the Fair Market Valueon the date of grant. The Committeewill set performance objectives in itsdiscretion which, depending on the extentto which they are met, will determine thenumber or value (or both) ofPerformance Shares that will be paid out to the Participant. Forpurposes ofthis Article 9,the time period during which the performance objectives must bemet will be called a “PerformancePeriod” and will be set by the Committee inits discretion.

 

9.3           EARNING OF PERFORMANCE SHARES.Subject to the terms of this Plan,after the applicable Performance Period hasended, the holder of PerformanceShares will be entitled to receive payout onthe number and value of PerformanceShares earned by the Participant over thePerformance Period, to be determinedas a function of the extent to which thecorresponding performance objectiveshave been achieved.

 

 

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9.4           AWARD AGREEMENT. Each grant ofPerformance Shares will be evidencedby an Award Agreement specifying the materialterms and conditions of the Award(including the form of payment of earnedPerformance Shares), and such otherprovisions as the Committee determines.

 

9.5           FORM AND TIMING OF PAYMENT OFPERFORMANCE SHARES. Except asprovided in Article 12, payment of earned Performance Shares willbe made assoon aspracticable after the close of the applicable Performance Period, in amanner determined by theCommittee in its sole discretion. The Committee willpay earned Performance Shares in the form ofcash, in Shares, or in acombination of cash and Shares, as specified in the Award Agreement.PerformanceShares may bepaid subject to any restrictions deemed appropriate by theCommittee.

 

9.6           TERMINATION OF SERVICE DUE TO DEATHOR DISABILITY. Unlessdetermined otherwise by the Committee and set forth in the Participant’sAwardAgreement, if aParticipant’s Service is terminated by reason of death orDisability during aPerformance Period, the Participant will receive a proratedpayout of the PerformanceShares, as specified by the Committee, in its solediscretion, in the Award Agreement. Payment ofearned Performance Shares will bemade at a time specified by the Committee inits sole discretion and set forthin the Participant’s Award Agreement.

 

9.7           TERMINATION OF SERVICE FOR OTHERREASONS. If a Participant’sService terminates during a Performance Period for any reason other thandeathor Disability,the Participant will forfeit all Performance Shares to theCompany, unless theParticipant’s Award Agreement provides otherwise.

 

ARTICLE10.         PERFORMANCE MEASURES

 

Unlessand until the Committee proposes and the Company’s stockholdersapprove a change in thegeneral performance measures set forth in this Article10, the performance measure(s) tobe used for purposes of Awards designed toqualify for the Performance-Based Exceptionwill be chosen from among thefollowing alternatives (or in any combination of such alternatives):

 

(a)           net earnings;

 

(b)           operating earnings or income;

 

(c)           earnings growth;

 

(d)           net income (absolute or competitivegrowth rates comparative);

 

(e)           net income applicable to Shares;

 

(f)            gross revenue or revenue bypre-defined business segment (absolute or competitive growth ratescomparative);

 

(g)           revenue backlog;

 

(h)           margins realized on deliveredservices;

 

(i)                                     cash flow,including operating cash flow, free cash flow, discounted cash flow return oninvestment, and cash flow in excess of cost of capital;

 

(j)            earnings per Share;

 

(k)           return on stockholders’ equity(absolute or peer-groupcomparative);

 

(l)            stock price (absolute or peer-groupcomparative);

 

(m)          absolute and/or relative return oncommon stockholders’ equity;

 

(n)           absolute and/or relative return oncapital;

 

(o)           absolute and/or relative return onassets;

 

(p)           economic value added (income inexcess of cost of capital);

 

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(q)           customer satisfaction;

 

(r)             expense reduction;

 

(s)            ratio of operating expenses tooperating revenues;

 

(t)             product development milestones; and

 

(u)           capital raising objectives.

 

Performancemeasures may be stated as goals for the Company, an Affiliate,an individual, business unit,division, or any combination of the foregoing. IfCode Section 162(m) or otherapplicable tax or securities laws change to allowthe Committee discretion to change the typesof performance measures withoutobtaining stockholder approval, the Committeewill have sole discretion to makesuch changes without obtaining stockholderapproval.

 

TheCommittee will have the discretion to adjust targets set forpreestablished performanceobjectives; however, Awards designed to qualify forthe Performance-Based Exception may not beadjusted upward, except to the extentpermitted under Code Section 162(m), to reflectaccounting changes or otherevents. In addition, if the Committee determines it is advisable togrant Awardsthat will notqualify for the Performance-Based Exception, the Committee maygrant Awards that do not soqualify.

 

ARTICLE11.         BENEFICIARY DESIGNATION

 

EachParticipant may, from time to time, name any beneficiary orbeneficiaries (who may benamed contingently or successively) to whom anybenefit under the Plan is to be paid in casethe Participant should die beforereceiving any or all of his or her Planbenefits. Each beneficiary designationwill revoke all prior designations by the sameParticipant, must be in a formprescribed by the Committee, and must be madeduring the Participant’s lifetime.If the Participant’s designated beneficiarypredeceases the Participant or nobeneficiary has been designated, benefitsremaining unpaid at the Participant’sdeath will be paid to the Participant’s estateor other entity described in the Participant’s Award Agreement.

 

ARTICLE12.         DEFERRALS

 

Subjectto the requirements of Code Section 409A, the Committee may permitor require a Participant todefer receipt of cash or Shares that would otherwisebe due to him or her by virtue of an Option orSAR exercise, the lapse or waiverof restrictions on Restricted Stock, or thesatisfaction of any requirements or objectives with respect to PerformanceShares. If any such deferral election ispermitted or required, the Committee will, inits sole discretion, establishrules and procedures for such deferrals.Notwithstanding the foregoing, theCommittee in its sole discretion may deferpayment of cash or the delivery ofShares that would otherwise be due to aParticipant under the Plan if payment ordelivery would result in the Company’s or anAffiliate’s being unable to deductcompensation under Code Section 162(m).Deferral of payment or delivery by theCommittee may continue until the Company orAffiliate is able to deduct thepayment or delivery under the Code.

 

ARTICLE13.         RIGHTS OF PARTICIPANTS

 

13.1         EMPLOYMENT AND SERVICE. Nothing in thePlan will confer upon anyParticipant any right to continue in the employ of the Company or anyAffiliate,or interferewith or limit in any way the right of the Company or any Affiliateto terminate any Participant’semployment or Service at any time.

 

13.2         PARTICIPATION. No Employee, Director orConsultant will have theright to receive an Award under this Plan, or, having received anyAward, to receive a future Award.

 

ARTICLE14.  CHANGE IN CONTROL

 

Inthe event of a Change in Control, the Committee will have the discretionto provide that all Awardsgranted under this Plan will become fully vested andimmediately exercisable, eliminate anyrestrictions applicable to Awards, and

 

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deemany performance measures to be satisfied. The Committee also will have thediscretion to provide thatany Award that has not been fully exercised beforethe date a Change in Control is consummatedwill terminate on such date or thatsuch Awards, in connection with the Change inControl, will be continued orassumed or awards to acquire the stock of the surviving, resulting oracquiringcorporation,with any adjustments as the Committee determines appropriate, willbe substituted or to takesuch other actions as it deems appropriate.

 

ARTICLE15.         AMENDMENT, MODIFICATION ANDTERMINATION

 

15.1         AMENDMENT, MODIFICATION ANDTERMINATION. The Committee may at anytime and from time to time, alter, amend,modify or terminate the Plan in wholeor in part. The Committee will not, however,increase the number of Shares thatmay be issued or transferred to Participantsunder the Plan, as described in thefirst sentence of Section 4.1(and subjectto adjustment as provided in Sections4.2 and 4.3).

 

Subjectto the terms and conditions of the Plan, the Committee may modify,extend or renew outstandingAwards under the Plan, or accept the surrender ofoutstanding Awards (to theextent not already exercised) and grant new Awards insubstitution of them (to theextent not already exercised). The Committee willnot, however, modify any outstanding Option soas to specify a lower ExercisePrice, without the approval of the Company’sstockholders.

 

15.2         ADJUSTMENT OF AWARDS UPON THEOCCURRENCE OF CERTAIN UNUSUAL ORNONRECURRING EVENTS. In recognition of unusualor nonrecurring events(including, without limitation, the events described in Section 4.3)affectingthe Company orits financial statements, or in recognition of changes inapplicable laws, regulations,or accounting principles, and, whenever theCommittee determines that adjustments areappropriate in order to preventdilution or enlargement of the benefits orpotential benefits intended to bemade available under the Plan, the Committeemay, using reasonable care, makeadjustments in the terms and conditions of,and the criteria included in,Awards. In case of an Award designed to qualify for thePerformance-BasedException, theCommittee will take care not to make an adjustment that woulddisqualify the Award.

 

15.3         AWARDS PREVIOUSLY GRANTED. Notermination, amendment ormodification of the Plan, and no modification of an Award, willadversely affectin any materialway any Award already granted under the Plan, without thewritten consent of theParticipant who holds the Award.

 

15.4         COMPLIANCE WITH CODE SECTION 162(m).Awards will comply with therequirements of Code Section 162(m), unless the Committeedetermines that suchcompliance isnot desired with respect to an Award available for grant under thePlan. In addition, if changesare made to Code Section 162(m) to permit greaterflexibility as to any Awardavailable under the Plan, the Committee may, subjectto this Article 15, make any adjustmentsit deems appropriate.

 

ARTICLE16.  NONTRANSFERABILITY OF AWARDS.

 

16.1         NONTRANSFERABILITY OF AWARDS. Except asotherwise provided in aParticipant’s Award Agreement, no Option, SAR, Performance Share,RestrictedStock, orRestricted Stock Unit granted under the Plan may be sold, transferred,pledged, assigned, or otherwisealienated or hypothecated, other than by will orby the laws of descent and distribution, orpursuant to a domestic relationsorder (as defined in Code Section 414(p)).All rights with respect toPerformance Shares, Restricted Stock and Restricted Stock Units will beavailable during theParticipant’s lifetime only to the Participant or his orher guardian or legalrepresentative. Except as otherwise provided in aParticipant’s Award Agreement or in Section 16.2below, all Options and SARswill be exercisable during the Participant’s lifetime only by theParticipant orhis or herguardian or legal representative. The Participant’s beneficiary mayexercise the Participant’srights to the extent they are exercisable under thePlan following the Participant’s death. TheCommittee may, in its discretion,require a Participant’s guardian, legalrepresentative or beneficiary to supplyit with the evidence the Committee deemsnecessary to establish the authority ofthe guardian, legal representative or beneficiaryto act on behalf of theParticipant.

 

16.2         PERMITTED TRANSFERS. Notwithstanding Section 16.1,with respect to

 

 

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anyNonstatutory Stock Options, each Participant shall be permitted at all timeto transfer any or all of theOptions, or, in the event the Options have not yetbeen issued to the Participant, the Companyshall be permitted to issue any orall of the Options, to certain trustsdesignated by the Participant as long assuch transfer or issuance is made as a gift(I.E., a transfer for noconsideration, with donative intent), whether during the Participant’slifetimeor to takeeffect upon (or as a consequence of) the Participant’s death, to theParticipant’s spouse orchildren. Gifts in trust shall be deemed gifts to everybeneficiary and contingentbeneficiary, and so shall not be permitted under thisSection 16.2 if thebeneficiaries or contingent beneficiaries shall includeanyone other than such spouseor children. Transfers to a spouse or child forconsideration, regardless of the amount, shallnot be permitted under thisSection. Any Options issued or transferred under this Section 16.2shall besubject to allterms and conditions contained in the Plan and the applicable Award Agreement.If the Committee makes an Option transferable, such Optionshall contain such additionalterms and conditions, as the Committee deemsappropriate. Options transferred in accordancewith this Section 16.2 may beexercised by the transferee.

 

ARTICLE17.         WITHHOLDING

 

17.1         TAX WITHHOLDING. The Company will havethe power and the right todeduct or withhold, or require a Participant to remit to the Company,theminimum amountnecessary to satisfy federal, state, and local taxes, domestic orforeign, required by law orregulation to be withheld with respect to anytaxable event arising under this Plan. NoAward Agreement will permit reloadoptions to be granted in connection with anyShares used to pay a taxwithholding obligation.

 

17.2         SHARE WITHHOLDING. With respect towithholding required upon theexercise of Options or SARs, upon the lapse of restrictions onRestricted Stock,or upon anyother taxable event arising as a result of Awards granted hereunder,the Company may satisfy theminimum withholding requirement for supplementalwages, in whole or in part, by withholdingShares having a Fair Market Value(determined on the date the Participantrecognizes taxable income on the Award)equal to the minimum withholding tax requiredto be collected on the  transaction. The Participantmay elect, subject to the approval of theCommittee, to deliver the necessary funds tosatisfy the withholding obligationto the Company, in which case there will be noreduction in the Shares otherwisedistributable to the Participant.

 

ARTICLE18.         INDEMNIFICATION

 

Eachperson who is or has been a member of the Committee or the Board, andany individual or individualsto whom the Committee has delegated authorityunder Section 3.1 or 3.2 of the Plan,will be indemnified and held harmless bythe Company from and against any loss, cost,liability, or expense that may beimposed upon or reasonably incurred by him orher in connection with or as aresult of any claim, action, suit orproceeding to which he or she may be aparty or in which he or she may be involved byreason of any action taken, orfailure to act, under the Plan. Each suchperson will also be indemnified andheld harmless by the Company from and againstany and all amounts paid by him orher in a settlement approved by the Company,or paid by him or her insatisfaction of any judgment, of or in a claim, action, suit orproceedingagainst him orher and described in the previous sentence, so long as he or shegives the Company anopportunity, at its own expense, to handle and defend theclaim,action, suit orproceeding before he or she undertakes to handle and defendit. The foregoing right ofindemnification will not be exclusive of any otherrights of indemnification to which a personwho is or has been a member of theCommittee or the Board may be entitled underthe Company’s Articles ofIncorporation or By-Laws, as a matter of law, or otherwise, or any powerthatthe Company mayhave to indemnify him or her or hold him or her harmless.

 

ARTICLE19.         SUCCESSORS

 

Allobligations of the Company under the Plan or any Award Agreement willbe binding on any successorto the Company, whether the existence of thesuccessor results from a direct or indirectpurchase of all or substantially allof the business or assets of the Company orboth, or a merger, consolidation, orotherwise.

 

 

 

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ARTICLE20.         BREACH OF RESTRICTIVECOVENANTS

 

AnAward Agreement may provide that, notwithstanding any other provision ofthis Plan to the contrary, ifthe Participant breaches the competition,nonsolicitation or nondisclosure provisions ofthe Award Agreement, whetherduring or after termination of Service, the Participant will forfeit:

 

(a)     any and all Awards granted or transferredto him or her under thePlan, including Awards that have become vested and exercisable; and

 

(b)     the profit the Participant has realized onthe exercise of anyOptions, whichis the difference between the Exercise Price of the Options andthe applicable Fair Market Valueof the Shares (the Participant may be required to repay such difference to theCompany).

 

ARTICLE21.         LEGAL CONSTRUCTION

 

21.1    NUMBER. Except where otherwise indicated bythe context, any pluralterm used in this Plan includes the singular and a singular termincludes theplural.

 

21.2         SEVERABILITY. If any provision of thePlan is held illegal orinvalid for any reason, the illegality or invalidity will not affect theremaining parts of the Plan,and the Plan will be construed and enforced as ifthe illegal or invalid provision had not beenincluded.

 

21.3         REQUIREMENTS OF LAW. The granting ofAwards and the issuance ofShare or cash payouts under the Plan will be subject to all applicablelaws,rules, andregulations, and to any approvals by governmental agencies ornational securities exchangesas may be required.

 

21.4         SECURITIES LAW COMPLIANCE. As to anyindividual who is, on therelevant date, an officer, director or ten percent beneficial owner ofany classof the Company’sequity securities that is registered pursuant to Section 12 ofthe Exchange Act, all asdefined under Section 16 of the Exchange Act,transactions under this Plan are intended tocomply with all applicableconditions of Rule 16b-3 under the Exchange Act, or any successorrule. To theextent anyprovision of the Plan or action by the Committee fails to so comply,it will be deemed null andvoid, to the extent permitted by law and deemedadvisable by the Committee. In addition, theCommittee may impose trading restrictions it deems advisable to comply with Section 16of the Exchange Actand may requirea Participant to make written representations the Committee deems necessary ordesirable to comply with applicable securities laws. If at any timethe Committee determines thatexercising an Option or SAR, or issuing Sharespursuant to an Award, would violate applicablesecurities laws, the Option orSAR will not be exercisable, and the Companywill not be required to issue Shares.

 

21.5         AWARDS TO FOREIGN NATIONALS ANDEMPLOYEES OUTSIDE THE UNITED STATES. To the extent the Committee deems itnecessary, appropriate or desirableto comply with foreign law or practice and tofurther the purposes of this Plan,the Committee may, without amending the Plan, (i) establish,modify, amend orterminatesubplans or rules applicable to Awards granted to Participants who areforeign nationals or areemployed outside the United States, or both, includingrules that differ fromthose set forth in this Plan, (ii) grant Awards to suchParticipants in accordancewith those subplans or rules, and (iii) take any action it deems necessaryor advisable to obtain, comply with or otherwisereflect any applicable governmental regulatoryprocedures, exemptions orapprovals with respect to the Plan.

 

21.6         UNFUNDED STATUS OF THE PLAN. The Planis intended to constitute an “unfunded” plan for incentive and deferredcompensation. With respect to any payments or deliveries of Shares not yet madeto a Participant by the Company, the Participant’s rights are no greater thanthose of a general creditor of the Company. The Committee may authorize theestablishment of trusts or other arrangements to meet the obligations createdunder the Plan, so long as the arrangement does not cause the Plan to lose itslegal status as an unfunded plan.

 

21.7         GOVERNING LAW. To the extent notpreempted by federal law, the Plan and all agreements hereunder will beconstrued in accordance with and governed by the laws of the State of Illinois.

 

 

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