Exhibit
10.6


 


STANLEY
ASSOCIATES, INC.


 


EXECUTIVE DEFERRED
COMPENSATION AND


 


EQUITY INCENTIVE
PLAN


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION I

  	
  PURPOSE

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION II

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  SECTION III

  	
  RESTRICTED STOCK
  RESERVE

  	
  5

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Restricted Stock Reserve

  	
  5

  
	
  3.2

  	
  Adjustments to Reserve

  	
  6

  
	
  3.3

  	
  Distribution of
  Restricted Stock

  	
  6

  
	
   

  	
   

  	
   

  
	
  SECTION IV

  	
  AWARD DETERMINATIONS
  AND PROCEDURES

  	
  6

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Types of Awards

  	
  6

  
	
  4.2

  	
  Limit on Restricted
  Stock Awards

  	
  6

  
	
  4.3

  	
  Cash Awards

  	
  6

  
	
  4.4

  	
  Eligible Participants

  	
  6

  
	
  4.5

  	
  Participation in Other
  Stock Option Plans

  	
  6

  
	
  4.6

  	
  Selection by the
  Committee Board

  	
  7

  
	
  4.7

  	
  Conditions to Vesting

  	
  7

  
	
  4.8

  	
  Award Agreement/Payment

  	
  7

  
	
  4.9

  	
  Section 83(b) Election

  	
  7

  
	
   

  	
   

  	
   

  
	
  SECTION V

  	
  RESTRICTED STOCK AWARDS

  	
  7

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Transfer/Issuance

  	
  7

  
	
  5.2

  	
  Stock Splits,
  Dividends, etc.

  	
  9

  
	
   

  	
   

  	
   

  
	
  SECTION VI

  	
  STOCK OPTION AWARDS

  	
  9

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Grant of Stock Option
  Awards

  	
  9

  
	
  6.2

  	
  Exercise of Stock
  Option Awards

  	
  9

  
	
  6.3

  	
  Exercise Price

  	
  10

  
	
  6.4

  	
  Expiration of Stock
  Option Awards

  	
  10

  
	
  6.5

  	
  Adjustment Provisions

  	
  11

  
	
  6.6

  	
  Notice of Disposition
  of Shares

  	
  11

  
	
  6.7

  	
  Forfeiture or
  Suspension of Stock Option Awards for Cause

  	
  11

  
	
  6.8

  	
  Designation of
  Beneficiaries

  	
  11

  



 

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION VII

  	
  RESTRICTIONS ON
  TRANSFER OF RESTRICTED STOCK

  	
  12

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Restrictions on
  Transfer

  	
  12

  
	
  7.2

  	
  Transfers Upon Death

  	
  12

  
	
  7.3

  	
  Permitted Transfers of
  Vested Plan Shares

  	
  12

  
	
  7.4

  	
  Right of First Refusal

  	
  13

  
	
  7.5

  	
  Death or Permanent
  Disability of a Recipient

  	
  14

  
	
  7.6

  	
  Voluntary Termination
  of Employment

  	
  14

  
	
  7.7

  	
  Termination of
  Employment with Cause or without Cause

  	
  14

  
	
  7.8

  	
  Transfer Restrictions
  Imposed by the Securities Act

  	
  15

  
	
  7.9

  	
  Lapse of Transfer
  Restrictions

  	
  16

  
	
   

  	
   

  	
   

  
	
  SECTION VIII

  	
  VESTING AND PAYMENT

  	
  16

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Vested Awards

  	
  16

  
	
  8.2

  	
  Cash Awards

  	
  16

  
	
  8.3

  	
  Financial Hardship

  	
  16

  
	
  8.4

  	
  Non-Vested Restricted
  Stock Awards; Forfeiture or Suspension for Cause

  	
  17

  
	
  8.5

  	
  Settlement if Company
  Purchases Restricted Stock

  	
  18

  
	
  8.6

  	
  Payment

  	
  18

  
	
  8.7

  	
  Legal Prohibition on
  Repurchase

  	
  19

  
	
  8.8

  	
  Purchase by Other
  Shareholders

  	
  19

  
	
  8.9

  	
  Delivery of Restricted
  Stock and Documents

  	
  19

  
	
  8.10

  	
  Remedy for Failure to
  Transfer Shares

  	
  19

  
	
  8.11

  	
  Tax Withholding

  	
  20

  
	
  8.12

  	
  Treatment of Trust
  Awards

  	
  20

  
	
  8.13

  	
  Stock Option Award
  Buyout Provisions

  	
  20

  
	
   

  	
   

  	
   

  
	
  SECTION IX

  	
  FINALITY OF
  DETERMINATION

  	
  21

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Authority of Committee

  	
  21

  
	
  9.2

  	
  Rules Governing the
  Administration of the Committee

  	
  21

  
	
  9.3

  	
  Indemnification

  	
  21

  
	
   

  	
   

  	
   

  
	
  SECTION X

  	
  LIMITATIONS

  	
  21

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  No Right to Award

  	
  21

  
	
  10.2

  	
  Right of Recipients

  	
  22

  
	
  10.3

  	
  No Right to Continued
  Employment

  	
  22

  
	
  10.4

  	
  Unsecured Creditor
  Status

  	
  22

  
	
  10.5

  	
  Limitation on Actions

  	
  22

  
	
   

  	
   

  	
   

  
	
  SECTION XI

  	
  AMENDMENT, SUSPENSION
  OR TERMINATION OF PLAN

  	
  23

  



 


ii

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION XII

  	
  GOVERNING LAW

  	
  23

  
	
   

  	
   

  	
   

  
	
  SECTION XIII

  	
  EXPENSES OF
  ADMINISTRATION

  	
  23

  
	
   

  	
   

  	
   

  
	
  SECTION XIV

  	
  REGISTRATION OF
  RESTRICTED STOCK

  	
  23

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Registration
  Requirement

  	
  23

  
	
  14.2

  	
  Written Notification

  	
  24

  
	
  14.3

  	
  Prospectus;
  Indemnification

  	
  24

  
	
   

  	
   

  	
   

  
	
  SECTION XV

  	
  EFFECTIVE DATE

  	
  24

  



 


iii

















 


STANLEY
ASSOCIATES, INC.


 


EXECUTIVE DEFERRED
COMPENSATION AND


 


EQUITY INCENTIVE
PLAN


 


 


SECTION I


 


PURPOSE


 


This Plan’s purpose is to keep personnel of experience
and ability in the employ of, or on the board of directors of, Stanley
Associates, Inc. and its affiliated corporations and to compensate them for
their contributions to the growth and profits of the Company and thereby induce
them to continue to make such contributions in the future.


 


SECTION II


 


DEFINITIONS


 


For purposes of this Plan, the following terms will
have the definitions set forth below.


 


2.1                               “Approved Charitable Organization” shall mean an
organization approved by a majority vote of the Board acting in its sole and
absolute discretion which is one or more of the following:


 


(a)                                 A
corporation, trust, or community chest, fund, or foundation –


 


i. created or organized
in the United States or in any possession thereof, or under the law of the
United States, any State, the District of Columbia, or any possession of the
United States;


 


ii. organized and
operated exclusively for religious, charitable, scientific, literary, or
educational purposes, or to foster national or international amateur sports
competition (but only if no part of its activities involve the provision of
athletic facilities or equipment), or for the prevention of cruelty to children
or animals;


 


iii. no part of the net
earnings of which inures to the benefit of any private shareholder or
individual; and


 


iv. which is not
disqualified for tax exemption under section 501(c)(3) of the Code.


 


(b)                                 A
post or organization of war veterans, or an auxiliary unit or society of, or
trust or foundation for, any such post or organization –


 


i. organized in the
United States or any of its possessions, and


 

















 


ii. no part of the net
earnings of which inures to the benefit of any private shareholder or
individual.


 


(c)                                  A
domestic fraternal society, order, or association, operating under the lodge
system, but only if the Vested Plan Shares or proceeds thereof are to be used
exclusively for religious, charitable, scientific, literary, or educational
purposes, or for the prevention of cruelty to children or animals.


 


2.2                               “Award” shall mean an award granted or issued under the
Plan, including a Stock Option Award, Restricted Stock Award, or a Cash Award,
or a combination of any or all of them.


 


2.3                               “Award Agreement” shall mean the written agreement with
respect to an Award described in Section 4.8.


 


2.4                               “Board” shall mean the Company’s Board of Directors.


 


2.5                               “Bona Fide Offer” shall mean an offer in writing, signed by
an outside offeror (who must be a person and/or entity other than the Company,
an employee pension benefit plan maintained by the Company, or any other
shareholder of the Company) who must be financially capable of carrying out the
terms of such Bona Fide Offer, in a form legally enforceable against such
outside offeror.


 


2.6                               “Cash Award” shall mean a promise to pay a sum of cash upon
the termination of the Recipient’s employment as described in Section IV,
below.


 


2.7                               “Code” shall mean the Internal Revenue Code of 1986, as
amended.


 


2.8                               “Committee” shall mean the Executive Deferred Compensation
and Equity Incentive Plan Committee as appointed from time to time by the
Board, consisting of not less than three members of the Board. Until and unless
the Board has appointed a Committee the powers and function of the Committee
shall be vested in the Board.


 


2.9                               “Company” shall mean Stanley Associates, Inc.; provided that
if Restricted Stock is converted or exchanged for shares of stock or other
equity securities of any other corporation or business entity, as described in
Section 3.1 of this Plan, then “Company” shall include the issuer of such stock
or equity securities.


 


2.10                        “Date of Award” shall mean the date on which an Award is
granted, as determined by the Committee; provided that the Date of a Restricted
Stock Award shall be no later that the date on which the Recipient is issued
shares of Restricted Stock, or if earlier, the date on which the Recipient
makes a payment of the purchase prices of such shares.


 


2.11                        “Fair Market Value” shall mean, with respect to shares of
the Company’s stock, as of any day:  (a)
the closing price of such shares on such day or the nearest prior business day
if the common stock of the Company is then traded on a nationally recognized
stock exchange or quoted on the NASDAQ stock market, or its successor; and (b)
if the stock of the Company is not listed for trading or quotation on any of
the aforesaid dates for which closing prices of the stock are to be determined,
then the Fair Market Value of each share of the


 


2





















 


Company’s stock shall be the fair market value of the shares as last
determined by an appraiser designated by the Committee[; provided that if
determination of Fair Market Value is required in the case of the death or
Permanent Disability of a Recipient more than [nine] months following the last
determination of Fair Market Value of the shares by an appraiser, the Committee
in its discretion may base its determination of Fair Market Value upon a
determination by an appraiser within [three] months following such death or
Permanent Disability.]  The determination
of the Fair Market Value pursuant to this definition shall be conclusive and
binding upon the Company and the Recipients, and shall not be subject to review
by any arbitral, judicial, or other tribunal or authority.


 


2.12                        “Family Member” shall mean the Recipient’s spouse, a member
of the Recipient’s immediate family or a trust, partnership, company or other
entity of which all of the beneficial or equity interests are held by the
Recipient, the Recipient’s spouse or members of the Recipient’s immediate
family.


 


2.13                        “Financial Hardship” shall have the meaning given in Section
8.3.


 


2.14                        “Nonqualified Option” shall mean a Stock Option Award
granted under this Plan which is not intended to qualify as an incentive stock
option under Section 422 of the Code.


 


2.15                        “Offering Shareholder” shall have the meaning given in
Section 7.4.


 


2.16                        “Parent” means a parent corporation of the Company within
the meaning of Section 424(e) of the Code.


 


2.17                        “Permanent Disability” shall mean the inability of an
employee or non-employee director to engage in any subsequent gainful activity
by reason of any medically determinable physical or mental impairment that can
be expected to result in death or which has lasted or can be expected to last
for a continuous period of not less than twelve (12) months. The determination
of the existence or nonexistence of disability shall be made by the Committee
after medical examination(s) by a medical doctor(s) selected or approved by the
Committee. If the employee or non-employee director is determined to be
disabled under either a long-term disability plan of the Company or a Parent or
any Subsidiary of the Company or a Parent or under the Social Security Act, the
Committee shall accept such determination as proof of disability for purposes
of this Section 2.15.


 


2.18                        “Plan” shall mean the Stanley Associates, Inc. Executive
Deferred Compensation and Equity Incentive Plan.


 


2.19                        “Prime Rate” shall mean the rate of interest reported as the
prime rate from time to time in The Wall Street Journal newspaper (or its
successor in interest) in its “Money Rates” column; provided, however, if more
than one rate or a range of rates are reported as the prime rate, then the
higher or highest of such rates shall be considered the Prime Rate.


 


2.20                        “Public Offering” shall mean the consummation of a firm
commitment or the completion of a best efforts underwritten public offering of,
as the case may be, common stock of the Company, or another class of capital
stock of the Company registered under the Securities Act of 1933, as amended.


 


3





















 


2.21                        “Qualified Option” shall mean a Stock Option Award granted
under this Plan which qualifies as an incentive stock option under Section 422
of the Code.


 


2.22                        “Recipient” shall mean an employee or non-employee director
of the Company or a Subsidiary to whom Awards are made under this Plan, or such
individual’s designated beneficiary, surviving spouse, estate, or legal
representative.


 


2.23                        “Registered Notice” shall mean written notice delivered
personally or sent by registered or certified mail, return receipt requested,
and first-class postage prepaid addressed: 
(a) if to the Company, to the principal office of the Company; (b) if to
an employee, to the address as reflected in the payroll records of the employer
of such employee; (c) and if to any other holder of Restricted Stock, to the
address reflected in the stock records of the Company, unless, in each case,
Registered Notice of a change of address has been received; and, if such
Registered Notice is sent with respect to a Bona Fide Offer, such Registered
Notice shall contain a true and complete copy of the Bona Fide Offer, setting
forth the price and all terms and conditions, with the name(s), address(es)
(both home and office) and business (es) or other occupation(s) of the outside
offeror or offerors.


 


2.24                        “Restricted Stock” shall mean the shares of common stock of
the Company reserved pursuant to

Section III hereof and any such shares issued to a Recipient or the Trust
pursuant to this Plan.


 


2.25                        “Restricted Stock Award” shall mean an Award of Restricted
Stock to a Recipient or the Trust as described in Section IV, below.


 


2.26                        “Stock Option Award” shall mean an Award to a Recipient of
options to purchase Restricted Stock as described in Section IV, below.


 


2.27                        “Subsidiary” or “Subsidiaries” shall mean a corporation or
corporations of which the Company owns, directly or indirectly, shares having a
majority of the ordinary voting power for the election of directors.


 


2.28                        “Termination of Employment” shall mean a cessation of the
employee-employer relationship between the Recipient and the Company or an
affiliate of the Company for any reason, including without limitation a
cessation by resignation, discharge, death, Permanent Disability, retirement or
the disaffiliation of an affiliate of the Company, but excluding any such
cessation where there is a simultaneous reemployment by the Company or an
affiliate of the Company. In the case of a non-employee director, the “Termination
of Employment” shall mean the end of service of such director, whether by
death, Permanent Disability, resignation, removal, retirement, or expiration of
the term of office of the non-employee director.


 


2.29                        “Termination of Employment with Cause” shall mean a
Termination of Employment of an employee or non-employee director by reason of
an act of misconduct which (a) is material, (b) is willful and in bad faith,
and (c) results in material damage or harm to the Company or such affiliate, or
materially adversely affects the present or future financial condition of the
Company or such affiliate; provided however, that with respect to an employee
or non-employee director who is a party to a written agreement with, or
alternatively, participates in a compensation or benefit plan that contains a
definition of “for cause” or “cause” (or words of similar import) for purposes
of termination of employment thereunder by the Company or any


 


4





















 


Subsidiary any such termination pursuant to such definition shall be a “Termination
of Employment with Cause” for the purposes of this Plan.


 


2.30                        “Termination of Employment without Cause” shall mean a
Termination of Employment of an employee or non-employee director by the
Company or any affiliate thereof for any reason other than death, Permanent
Disability, Voluntary Termination of Employment or Termination of Employment
with Cause.


 


2.31                        “Trust” shall mean the Stanley Associates, Inc. Executive
Deferred Compensation and Equity Incentive Plan Trust, when and if established
pursuant to a trust document substantially in the form attached as Exhibit A
hereto or such other form as the Board may approve. The Trust is intended to be
an irrevocable grantor trust, of which the Company is the grantor, within the
meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Code.


 


2.32                        “Trust Award” shall mean a Restricted Stock Award pursuant
to which shares of Restricted Stock are issued in the name of the Trust, as
further described in Section 5.1(b).


 


2.33                        “Vested Plan Shares” shall mean any fully vested shares of
Restricted Stock issued to a Recipient or the Trust pursuant to this Plan.


 


2.34                        “Voluntary Termination of Employment” means the Termination
of Employment by an employee or non-employee director; provided that such
person has complied with all notice requirements with respect to such
termination under this Plan, the applicable policies of the Board and of the
employee’s employer and any employment or other agreement to which the person
is a party, and provided further that the employee or non-employee director is
not Permanently Disabled at the time of such termination.


 


2.35                        “Voting Award” shall mean a Restricted Stock Award pursuant
to which shares of Restricted Stock are issued in the name of the Recipient, as
further described in Section 5.1(a).


 


SECTION III



RESTRICTED STOCK RESERVE


 


3.1                               Restricted
Stock Reserve. The Company will establish a Restricted Stock Reserve to
which will be credited 500,000 shares of the common stock of the Company, par
value $.01 per share. Should the shares of the Company’s common stock, due to a
stock split or stock dividend or combination of shares or any other change, or
exchange for other securities, by reclassification, reorganization, merger,
consolidation, recapitalization or otherwise be increased or decreased or
changed into, or exchanged for, a different number or kind of shares of stock
or other securities of the Company or of another corporation, the number and
kind of shares then remaining in the Restricted Stock Reserve shall be
appropriately adjusted by the Committee to reflect such action to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan. If any such adjustment results in a fractional
share, the fraction shall be disregarded.


 


5





















 


3.2                               Adjustments
to Reserve. Upon the grant of a Restricted Stock Award or Stock Option
Award hereunder, the reserve will be reduced by the number of shares of
Restricted Stock so awarded or underlying such Stock Option Award. Upon the
repurchase of Restricted Stock by the Company pursuant to Section V, VII or
VIII hereof, or expiration or termination of Stock Option Awards unexercised
for any reason, the reserve shall be increased by such number of shares, and
such shares of Restricted Stock may again be the subject of an Award hereunder.


 


3.3                               Distributions
of Restricted Stock. Distributions of Restricted Stock, as the Committee
shall in its sole discretion determine, may be made from authorized but
unissued shares or from treasury shares. All authorized and unissued shares
issued as Restricted Stock in accordance with the Plan shall be fully paid and
non-assessable shares and free from preemptive rights.


 


SECTION IV



AWARD DETERMINATIONS AND PROCEDURES


 


4.1                               Types
of Awards. Awards to Recipients under the Plan may be composed of any or
all of (a) promises to pay cash, the amount of which may be fixed at the time
of the grant or vary based on factors such as the achievement of performance
objectives or changes in the Fair Market Value of Company stock (“Cash Awards”),
(b) issuance of shares of Restricted Stock (“Restricted Stock Awards”), and (c)
grants of options to purchase Restricted Stock (“Stock Option Awards”). Restricted
Stock Awards may be issued as Voting Awards or Trust Awards. Stock Option
Awards may be issued as Qualified Options or Nonqualified Options; provided
that Qualified Options may only be issued to employees of the Company or a
Subsidiary.


 


4.2                               Limit
on Restricted Stock Awards. The total number of shares of Restricted Stock,
which may be awarded pursuant to this Plan, including Restricted Stock issuable
pursuant to Stock Option Awards, will not exceed the amount available therefor
in the Restricted Stock reserve. Any or all of such shares of Restricted Stock
may be issued under Qualified Options.


 


4.3                               Cash
Awards. In the case of Cash Awards, the Committee may, at its discretion,
provide that Awards shall be deemed to accrue interest until paid, and such
deemed interest shall become part of the Cash Award payable to the Recipient
hereunder. Unless otherwise determined by the Committee and set forth in the
Award Agreement, the rate of such interest shall be equal to the Prime Rate on
the Date of Award.


 


4.4                               Eligible
Participants. Any key employee of the Company or any Subsidiary (including
officers and directors) shall be eligible to receive an Award pursuant to the
Plan. Any non-employee director of the Company or any Subsidiary shall be
eligible to receive an Award (other than a Qualified Option) pursuant to the
Plan.


 


4.5                               Participation
in Other Stock Option Plans. A person who has received options to purchase
stock under any stock option plan of the Company or a Subsidiary may exercise
the same in accordance with their terms, and will not by reason thereof be
ineligible to receive Awards under this Plan.


 


6





















 


4.6                               Selection
by the Committee; Board.


 


(a)                                 Awards
to Employees. From the employees eligible to receive Awards pursuant to the
Plan, the Committee may from time to time select those employees who shall
receive Awards. Such determinations shall include the amount of cash and/or the
number of shares of Restricted Stock or Stock Options that are to be awarded to
each such individual, the purchase price, if any, for such shares, and the
vesting criteria for the Award. In making Awards, the Committee shall consider
the position and responsibilities of the eligible employees, the value of their
services to the Company and its Subsidiaries and such other factors as the
Committee deems pertinent.


 


(b)                                 Awards
to Non-Employee Directors. The Committee may make recommendations to the
Board for Awards to non-employee directors. The recommendations shall include
the amount of cash and/or the number of shares of Restricted Stock or Non-Qualified
Stock Options that are to be awarded to each such non-employee director, the
purchase price, if any, for such shares and any vesting criteria. Awards to non-employee
directors shall be made by the Board.


 


4.7                               Conditions
to Vesting. The Committee may, at its discretion, condition Awards in
whatever manner it so chooses, including, but not limited to, continued
employment for a specific period and/or the achievement of other performance
objectives. Upon the satisfaction of all such conditions as determined by the
Committee pursuant to Section 9.1, the Recipient’s rights with respect to the
Award shall be vested in accordance with the terms of the Plan.


 


4.8                               Award
Agreement/Payment. Each Award shall be evidenced by a written agreement
between the Company and the Recipient setting forth the terms and conditions of
the Award in the form prescribed by the Committee. Upon receiving an Award, the
Recipient shall deliver to the Company (a) the purchase price, if any, for
shares of Restricted Stock distributed on the Date of Award and (b) the Award
Agreement, signed by the Recipient. Unless otherwise determined by the
Committee, the failure to deliver such Award Agreement, and, if applicable such
payment, within fifteen (15) days from the Date of Award shall terminate any
and all rights of the Recipient in such Award.


 


4.9                               Section
83(b) Election. If, in the case of any Restricted Stock Award that is not a
Trust Award, the Recipient makes an election to include the value of such
shares of Restricted Stock in income under Section 83(b) of the Code or revokes
such an election, the Recipient must notify the Company in writing of such
election or revocation within thirty (30) days thereof.


 


SECTION V



RESTRICTED STOCK AWARDS


 


5.1                               Transfer/Issuance.
After all requirements described in Section 4.8, above, and Section 8.11 below,
are satisfied, the shares of Restricted Stock will be promptly issued or


 


7





















 


transferred and a certificate or certificates for such shares shall be
issued in the name of the Recipient or the Trust as provided below. The Restricted
Shares so issued shall constitute issued and outstanding shares of Common Stock
for all corporate purposes and the record holder of such shares shall thereupon
be a shareholder of all the shares represented by the certificate or
certificates. As such, the record holder will have all the rights of a
shareholder with respect to such shares, including the right to vote them and
to receive all dividends and other distributions paid with respect to them,
provided, however, that the shares shall be subject to the restrictions in this
Section V and Section VII.


 


(a)                                 Voting
Award. If the Committee so determines, certificates representing shares of
Restricted Stock may be issued in the Recipient’s name. Such certificates shall
remain in the custody of the Company and the Recipient shall deposit with the
Company stock powers or other instruments of assignment, each endorsed in
blank, so as to permit retransfer to the Company of all or any portion of the
Restricted Shares that shall be forfeited or otherwise not become vested in
accordance with the Plan and the Award Agreement; provided that, if the
Committee so determines, such certificates and instruments may be deposited
with an escrow agent designated by the Committee, under a deposit agreement
containing such terms and conditions as the Committee shall approve, the
expenses of such escrow to be borne by the Company. Unless otherwise provided
in the Award Agreement, the Recipient will have the right to vote such shares
of Restricted Stock, to receive and retain all dividends and distributions paid
or distributed on such shares, and to exercise all other rights, powers and
privileges of a shareholder with respect to such Restricted Shares; except that
(i) the Recipient will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until and unless all vesting
requirements with respect thereto shall have been fulfilled or waived; (ii) any
such dividends and distributions paid in shares of Company stock shall
constitute shares of Restricted Stock and be subject to all of the same
restrictions as the Restricted Stock with respect to which they were paid;
(iii) the Recipient may not sell, assign, transfer, pledge, exchange, encumber
or dispose of the shares of Restricted Stock or his or her interest in any of
them until all vesting requirements and other applicable provisions of the Plan
with respect thereto have been fulfilled or waived; and (iv) a breach of any
restrictions, terms or conditions provided in the Plan or established by the
Committee with respect to any Restricted Stock Award will cause a forfeiture of
such Restricted Stock.


 


(b)                                 Trust
Award. If the Committee so determines, certificates representing shares of
Restricted Stock may be issued in the name of the Trust. The Recipient will
have no rights in respect of such shares of Restricted Stock other than those
set forth in the Plan or the Award Agreement. Except as otherwise provided in
the Plan or the Award Agreement, such rights may not be assigned or transferred
except by will or by the laws of descent and distribution. The Recipient will
not have the right to vote such shares of Restricted Stock, to receive or
retain any dividends and distributions paid or distributed on such shares of
Restricted Stock, or to exercise any other rights,


 


8





















 


powers and
privileges of a holder of Common Stock with respect to such shares of
Restricted Stock held by the Trust, all of which rights shall be exercised as
provided in the Trust; provided, however, that any such dividends and
distributions paid in shares of Company stock shall constitute additional
shares of Restricted Stock and be subject to all of the same rights and
restrictions as the shares of Restricted Stock with respect to which they were
paid. Upon Termination of Employment, the Recipient will be entitled to
delivery of all shares of Restricted Stock which have become vested (including
any shares of Restricted Stock that become vested as a result of such
Termination of Employment); provided that with respect to any shares of
Restricted Stock which the Company is obligated to purchase pursuant to the
Plan, or has exercised its option to purchase under the Plan, the Recipient
shall have only the right to receive the proceeds of such sale, net of any
applicable withholding amounts, as provided in Section 8.12. All shares of
Restricted Stock, whether held by the Trust or the Recipient shall be subject
to the terms and provisions of the Plan and the Award Agreement.


 


5.2                               Stock
Splits, Dividends, etc. If, due to a stock split, stock dividend,
combination of shares, or any other change or exchange for other securities by
reclassification, reorganization, merger, consolidation, recapitalization or
otherwise, the Recipient, as the owner of Restricted Stock subject to
restrictions hereunder, shall be entitled to new, additional, or different
shares of stock or securities, then all Plan provisions relating to
restrictions and lapse of restrictions will apply to such new, additional, or
different shares or securities to the extent applicable to the shares with
respect to which they were distributed (all of which shall be deemed Restricted
Stock hereunder), and the certificate or certificates for, or other evidences
of, such new, additional, or different shares or securities, together with a
stock power or other instrument of transfer appropriately endorsed, shall be
delivered to the Company or escrow agent, as applicable, in accordance with the
Plan and all Award Agreements relating thereto.


 


SECTION VI


 


STOCK OPTION AWARDS


 


6.1                               Grant
of Stock Option Awards. No Stock Option Award may be granted after the
expiration of ten (10) years from the effective date of this Plan.


 


6.2                               Exercise
of Stock Option Awards. Recipients may exercise at any time or from time to
time all or any portion of a vested Stock Option Award. A Stock Option Award
shall be exercisable only to the extent it is vested. Stock Option Awards will
vest either immediately or periodically over a period not exceeding ten (10) years
as set forth in the Award Agreement and Section VIII. Vesting of all or any
portion of a Stock Option Award may be accelerated at the discretion of the
Committee at any time or upon the occurrence of any event other than a
Termination of Employment with Cause.


 


(a)                                 To
the extent that the aggregate Fair Market Value of the common stock of the
Company with respect to which options qualifying as incentive stock options
under Section 422 of the Code are exercisable by the Recipient for the first


 


9





















 


time during any
calendar year (under all stock option plans of the Company, its Parents and
Subsidiaries) exceeds $100,000, such Stock Option Awards are Nonqualified
Options. For the purposes of this paragraph, the Fair Market Value of the
common stock of the Company shall be determined as of the Date of Award of the
Stock Option Award with respect to such common stock. This paragraph shall be
applied by taking Stock Option Awards into account in the order in which they
were granted.


 


(b)                                 A
Recipient shall exercise a Stock Option Award by delivering to the Company at
its headquarters a written notice signed by the Recipient that states the
number of shares of Restricted Stock to be purchased in cash accompanied by payment
of the exercise price. If approved in advance by the Board, payment of the
exercise price may be in the form of stock of the Company having an aggregate
Fair Market Value equal to the cash exercise price or may be deferred in
accordance with a deferred payment or other arrangement approved by the
Committee. In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at not less than the applicable
federal rate of interest determined in accordance with Section 1274(d) of the
Code. Shares of Restricted Stock issuable pursuant to an exercise of a Stock
Option Award shall be issued pursuant to and in accordance with Section V, and
unless otherwise provided in the Award Agreement, shall be issued to the Recipient
as a fully-vested Voting Award.


 


6.3                               Exercise
Price. The exercise price of each Stock Option Award shall be established
by the Committee or the Board pursuant to Section 4.6, subject to the
provisions of this Section 6.3:


 


(a)                                 The
exercise price of each Qualified Option shall be at least equal to the Fair
Market Value of the common stock of the Company on the Date the Award of the
Qualified Option. In the case of a Qualified Option granted to a person who
owns, immediately after the grant of such Qualified Option, stock possessing
more than 10% of the total combined voting power of the Company, or of its
Parent or Subsidiary, the exercise price of the Qualified Option shall be at
least 110% of the Fair Market Value of the common stock of the Company on the
Date of Award of the Qualified Option.


 


(b)                                 The
exercise price of each Nonqualified Option shall be at least equal to 85% of
the Fair Market Value of the common stock of the Company on the Date of Award
of the Nonqualified Option. In the case of a Nonqualified Option granted to a
person who owns, immediately after the grant of such Nonqualified Option, stock
possessing more than 10% of the total combined voting power of the Company, or
its Parent or Subsidiary, the exercise price of the Nonqualified Option shall
be at least 110% of the Fair Market Value of the Common Stock on the Date of
Award of the Nonqualified Option.


 


6.4                               Expiration
of Stock Option Awards. Each Stock Option Award shall expire on the date
set forth in the Award Agreement, provided that (a) each Stock Option Award
shall


 


10





















 


expire not later than ten (10) years after the Date of
Award, and (b) each Qualified Option granted to any person who owns stock
possessing more than 10% of the total combined voting power of the Company, or
of its Parent or Subsidiary, shall expire not later than five (5) years after
the Date of Award. Notwithstanding the foregoing, if a Termination of
Employment occurs before the expiration date set forth in the Award Agreement,
the Stock Option Award granted under the Award Agreement shall terminate on the
date of such Termination of Employment; provided, however, that the portion of
the Stock Award Option which is vested as of the date of such Termination of Employment
shall be exercisable for a period of sixty (60) days thereafter or, if such
Termination of Employment is due to the Recipient’s death or Permanent
Disability, for a period ending no later than one (1) year following the date
of death or Permanent Disability.


 


6.5                               Adjustment
Provisions. Subject to any required action by the shareholders of the
Company, the Committee will make a proportionate adjustment in the number and
kind of shares of Restricted Stock covered by each outstanding Stock Option
Award and the exercise price per share to account for any increase or decrease
in the number of issued shares of common stock of the Company resulting from a
stock split (whether by subdivision or consolidation of shares) or any payment
of a share dividend (but only on the common stock of the Company) or any change
or exchange of issued shares of common stock of the Company by
reclassification, reorganization, merger, consolidation, recapitalization or
other similar actions so as to prevent dilution or enlargement of the benefits
of such Stock Option Award to the Recipient.


 


6.6                               Notice
of Disposition of Shares. The Recipient shall give written notice to the
Company of his or her intent to make any disposition of the shares acquired
upon exercise of a Qualified Option if such disposition occurs within two (2)
years after the Date of Award of the Qualified Option or within one year after
the date the Qualified Option was exercised. The Recipient shall be required to
make appropriate arrangements with the Company for satisfaction of any federal
state or local taxes the Company is required to withhold as a result of such
disposition.


 


6.7                               Forfeiture
or Suspension of Stock Option Awards for Cause. If the President of the
Company or his or her designee reasonably believes a Recipient has committed an
act of misconduct as described in this Section 6.7, the President or such
designee may suspend the Recipient’s rights to exercise any Stock Option Award
pending a determination by the Board. If the Board determines a Recipient has
committed an act of embezzlement, fraud, dishonesty, nonpayment of any
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of Company rules resulting in loss, damage or injury to the Company,
or if a Recipient makes an unauthorized disclosure of any trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any customer to breach a contract with the Company,
engages in any conduct constituting discrimination, sexual harassment or
retaliation in violation of Company policies or induces any principal for whom
the Company acts as agent to terminate such agency relationship, neither the
Recipient nor his or her estate shall be entitled to exercise any Stock Option
Awards whatsoever. In making such determination, the Board shall act fairly and
shall give the Recipient an opportunity to appear and present evidence on his
or her behalf at a hearing before the Board.


 


6.8                               Designation
of Beneficiaries. If permitted by the Committee, a Recipient of a Stock
Option Award may designate a beneficiary or beneficiaries in the event of the
death of the


 


11





















 


Recipient and may change such designation from time to time by filing a
written designation of beneficiary or beneficiaries with the Committee on a
form to be prescribed by it, provided that no such designation shall be
effective unless so filed prior to the death of such Recipient.


 


SECTION VII



RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK


 


7.1                               Restrictions
on Transfer. Except as otherwise provided under the Plan, a Recipient
(including for the purposes of this Section 7.1 any former Recipient or
transferee of a Recipient) shall not sell, exchange, deliver or assign, pledge,
mortgage, hypothecate or otherwise encumber, transfer or permit to be
transferred any shares of Restricted Stock acquired pursuant to this Plan
(including Vested Plan Shares), whether voluntarily, involuntarily or by
operation of law, including, without limitation, the laws of bankruptcy,
insolvency, intestacy, descent and distribution, or succession, except as
required to do so under applicable law.


 


7.2                               Transfers
Upon Death. In the event of the death of a Recipient (including for the
purposes of this

Section 7.2 any former Recipient or transferee of a Recipient), any
Restricted Stock then held of record by the Recipient may be transferred to
such Recipient’s executor, administrator, personal or legal representative,
legatee, heir or distributees of his or her estate, provided, that, as a
condition of any such transfer, such prospective transferee shall provide to
the Company, at its request, sufficient evidence of his or its legal right and
authority to have any of the Restricted Sock so transferred. The Restricted
Stock so transferred shall be subject to the provisions of this Plan.


 


7.3                               Permitted
Transfers of Vested Plan Shares. Notwithstanding Section 7.1, a Recipient
(including for the purposes of this Section 7.3 any former Recipient or
transferee of a Recipient) may sell, grant, transfer or deliver any Vested Plan
Shares to any one or more employees or non-employee directors of the Company or
any Subsidiary to the Company, to an Approved Charitable Organization or to a
Family Member; provided that the approval of the Board of such sale, grant,
transfer, or delivery is obtained by the affirmative vote of the members of the
Board. Furthermore, a Recipient (including a former Recipient or transferee)
may sell any Vested Plan Shares to an employee stock, profit sharing or
retirement benefit plan sponsored or maintained by the Company; provided that
the approval of such sale is approved by the Board and the trustees of any such
plan. Any Vested Plan Shares transferred to any one or more employees or non-employee
directors of the Company or any Subsidiary, to an Approved Charitable
Organization or to a Family Member shall continue to be subject to the
provisions of the Plan, including the purchase rights of the Company and its
other shareholders set forth in this Section VII and Section VIII; provided
that in the case of a transfer to an Approved Charitable Organization or to a
Family Member, each reference to the Termination of Employment of the Recipient
herein shall be deemed continued reference to the Recipient who transferred the
Vested Plan Shares to the Approved Charitable Organization or the Family
Member, including, without limitation, for the purposes of Sections 7.5, 7.6,
7.7 and 8.4(b). Any transfer of Vested Plan Shares pursuant to this Section 7.3
shall be conditioned upon the receipt by the Company of the agreement in
writing, satisfactory to the Board, of the transferee to be bound by the
provisions of this Plan.


 


12





















 


7.4                               Right
of First Refusal.


 


(a)                                 In
the event that a Recipient (including for the purposes of this Section 7.4 any
former Recipient or transferee of a Recipient) shall receive a Bona Fide Offer
to purchase (whether outright or pursuant to a merger, consolidation,
reorganization, or similar transaction) all (but not less than all) of such
Recipient’s Vested Plan Shares, and in the further event that such Recipient
(hereinafter referred to for all purposes of this Section 7.4 as the “Offering
Shareholder”) is willing to accept such Bona Fide Offer, he or she shall promptly
send Registered Notice to the Company, offering to sell his or her Vested Plan
Shares to the Company at the price provided in Section 7.4(b) hereof and upon
the same terms and conditions as are contained in the Bona Fide Offer. The
Company shall then have such rights and privileges for the prescribed time
periods as are set forth in Section 7.4(c) hereof.


 


(b)                                 For
purposes of this Section 7.4, the purchase price for the Vested Plan Shares of
the Offering Shareholder shall be the lower of (A) the Fair Market Value as
determined pursuant to the last valuation preceding the receipt of such Bona
Fide Offer or (B) the price provided under such Bona Fide Offer.


 


(c)                                  Whenever
the Recipient has received a Bona Fide Offer to purchase all of his or her
Vested Plan Shares and provided Registered Notice pursuant to Section 7.4(a)
hereof, the following procedures shall be complied with:


 


i. For a period of sixty (60) days from its receipt of
the Registered Notice pursuant to Section 7.4(a) hereof, the Company shall have
the right, at its sole option, to purchase all or any part of the Vested Plan
Shares so offered at the purchase price provided in Section 7.4(b) hereof and
upon such other terms and conditions as are contained in the Bona Fide Offer. If
the Company shall not elect to purchase all of the shares so offered within
such sixty (60)-day period for any reason whatsoever, then each employee stock,
profit sharing or retirement benefit plan maintained by the Company that is
authorized to purchase and hold shares of common stock of the Company shall
have the right, at its sole option, for a period of thirty (30) days after the
expiration of such sixty (60)-day period, to purchase pro  rata,
in proportion to such plan’s respective ownership of shares of common stock, or
in such other proportion as they shall otherwise agree upon, all (but not less
than all) of the Vested Plan Shares offered as aforesaid to the Company and not
elected to be purchased by the Company. The Company and the employee pension
benefit plans shall exercise such options to purchase by giving Registered
Notice to the Offering Shareholder, within the prescribed time periods, of such
intention to exercise.


 


ii. If the Company and the employee pension benefit
plans shall not, individually or together, purchase within the prescribed time
periods all of the


 


13

















 


shares covered by the Bona Fide Offer, the Offering
Shareholder shall have the right to accept the Bona Fide Offer in whole (but
not in part) and to sell such Vested Plan Shares, subject to the provisions and
restrictions of this Plan, but only in strict accordance with all of the
provisions of the Bona Fide Offer.


 


iii. For all purposes of this Section 7.4, such sale
by the Offering Shareholder must be fully consummated within one hundred twenty
(120) days after the date of mailing of the Registered Notice by the Offering
Shareholder, and, in the event that such sale is not fully consummated within
such period or the terms of the Bona Fide Offer change, the provisions of this
Section 7.4 must again be complied with by the Offering Shareholder.


 


7.5                               Death
or Permanent Disability of a Recipient. In the case of the death or
Permanent Disability of a Recipient, such Recipient shall have the obligation
to sell to the Company, and the Company shall have the obligation to purchase,
all of the Vested Plan Shares held by such Recipient, in accordance with this
Section 7.5 and Sections 8.5 through 8.12. The price for the Vested Plan Shares
to be acquired or purchased under this Section 7.5 shall be equal to the Fair
Market Value of such Vested Plan Shares as of the date of Termination of
Employment.


 


7.6                               Voluntary
Termination of Employment. In the event of a Voluntary Termination of
Employment of a Recipient, the Company may elect to purchase and, if the
Company so elects, the Recipient shall have the obligation to sell to the
Company, all of the Vested Plan Shares held by such Recipient, in accordance
with the provisions of this Section 7.6 and Sections 8.5 through 8.12. The
price for the Vested Plan Shares of the Recipient to be purchased pursuant to
this Section 7.6 shall be equal to the Fair Market Value of such Vested Plan
Shares as of the date of Termination of Employment. A Recipient shall give at
least ten (10) days prior written notice of Voluntary Termination of Employment
to the Company. The Company shall give written notice of its election to
purchase (or its decision not to purchase) such Vested Plan Shares within sixty
(60) days thereafter; provided that if the Recipient is entitled to exercise a
Stock Option Award following the Termination of Employment of the Recipient,
the Company shall give written notice of its election to purchase (or its
decision not to purchase) Vested Plan Shares issuable upon such exercise within
sixty (60) days after the exercise of such Stock Option Award.


 


7.7                               Termination
of Employment with Cause or without Cause. In the event of a Termination of
Employment with Cause or without Cause, the terminated Recipient shall sell to
the Company, and the Company shall purchase, all of the Vested Plan Shares held
by such Recipient, in accordance with the provisions of this Section 7.7 and
Sections 8.5 through 8.12. The price for the Vested Plan Shares of the
Recipient to be purchased pursuant to this Section 7.7 upon Termination of
Employment without Cause shall be equal to the Fair Market Value of such Vested
Plan Shares. The price for the Vested Plan Shares of the Recipient to be
purchased pursuant to this Section 7.7 upon Termination of Employment with
Cause shall be the least of (i) the federal income tax basis of the
Recipient for such Vested Plan Shares or (ii) the Fair Market Value of such
Vested Plan Shares as of the date of Termination of Employment or (iii) the
amount, if any, determined pursuant to Section 8.4(b).


 


14





















 


7.8                               Transfer
Restrictions Imposed by the Securities Act.


 


(a)                                 Notwithstanding
any other provision of this Plan, no transfer for value of any Restricted
Stock, shall be valid unless (i) there is an effective registration statement
under the Securities Act covering the Restricted Stock; (ii) the holder has
furnished an opinion of counsel satisfactory to the Company that such
registration is not required; or (iii) the holder has furnished a “no-action”
letter from the staff of the Securities and Exchange Commission satisfactory to
the Company that such registration is not required.


 


(b)                                 There
shall be imprinted on the face of each certificate representing Restricted Stock
a legend stating that the transferability of such shares is restricted, and the
following legend shall be imprinted on the back of each such certificate:


 


“THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SUCH ACT OR LAWS OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL
TO THE COMPANY) SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED OR A “NO ACTION” LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
THAT SUCH REGISTRATION IS NOT REQUIRED.


 


THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO, AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, CERTAIN
TRANSFER AND OTHER RESTRICTIONS CONTAINED IN THE STANLEY ASSOCIATES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.”


 


(c)                                  Recipients
may acquire Restricted Stock only for their own account and not with a view to,
or for resale in connection with, any distribution thereof within the meaning
of the Securities Act, and may dispose of such stock only in a manner
consistent with the provisions of this Section VII. The Company may require
Recipients to execute and be bound by an “Investment Letter” representing such
investment intent.


 


15





















 


7.9                               Lapse
of Transfer Restrictions. Notwithstanding anything to the contrary in this
Plan, upon a Public Offering the transfer restrictions set forth in Section
VII, other than those set forth in Section 7.8(a), shall lapse with respect to
all Vested Plan Shares and a Recipient shall be entitled to have the second
legend set forth in Section 7.8(b) removed from any certificates representing
only Vested Plan Shares. Upon a Public Offering, the rights and obligations of
the Company and the Recipients set forth in Section 7.5, 7.6 and 7.7 shall
remain in full force and effect with respect to all Vested Plan Shares.


 


SECTION VIII



VESTING AND PAYMENT


 


8.1                               Vested
Awards. An Award shall be considered vested and eligible for payment under
this Section VIII only if all preconditions to vesting established pursuant to
Section IV, including any set forth in an Award Agreement, have been satisfied
prior to or at the time of the Termination of Employment of the Recipient. The
Committee may, in its sole discretion, cause all or a portion of an Award to
immediately vest in full at any time or upon the occurrence of any event other
than a Termination of Employment with Cause.


 


8.2                               Cash
Awards. Any vested Cash Awards shall be paid to the Recipient by the first
day of the month beginning at least twenty-seven (27) days after the Termination
of Employment with the Company; provided that if the amount of such Cash Award
is in excess of $50,000, the Cash Award, including accrued interest at the
Prime Rate from the date of Termination of Employment, shall be paid in equal
quarterly installments of not more than $12,500 each; provided, further,
however that the Committee may, in its sole discretion, cause any or all of
such quarterly installments to be accelerated or to be made in amounts larger
than the amounts required by this Section 8.2.


 


8.3                               Financial
Hardship. Any or all amounts held as vested Cash Awards or Trust Awards may
be paid out or, in the case of Trust Awards, repurchased by the Company, prior
to the time specified in this Section VIII in the event of a Financial Hardship.
The Committee, acting in its sole discretion, shall determine whether a
Financial Hardship exists (if the Committee determines that a Financial
Hardship has occurred, the Committee shall also determine in its sole and
absolute discretion shall determine the amount that will be distributed as a
result). The Committee shall determine whether a Financial Hardship shall have
occurred within thirty (30) days after receipt of Recipient’s written
application to the Committee. Such notice shall contain such information as
reasonably required by the Committee to make such a determination and shall
specify the amount that Recipient requests. The approval of the Committee shall
be given only if such Recipient is able to demonstrate that (a) a withdrawal is
necessary because of an immediate and heavy financial need of the Recipient,
and (b) that the amount is not in excess of the amount necessary to satisfy
such financial need (including amounts necessary to pay any federal, state or
local income taxes or penalties reasonably anticipated to result from the
distribution) and is not reasonably available from other resources of the
Recipient. For purposes of this Section, a distribution will be deemed to be
made on account of an immediate and heavy financial need of the Recipient if
the distribution is on account of:


 


16





















 


i. medical expenses as
described in Section 213(d) of the Code incurred by the Recipient, the
Recipient’s spouse, or any dependents of the Recipient;


 


ii. purchase (excluding
mortgage payments) of a principal residence for the Recipient;


 


iii. payment of tuition
and related educational fees for the next twelve months of post-secondary
education for the Recipient, his or her spouse, children or dependents; or


 


iv. the need to prevent
the eviction of the Recipient from his or her principal residence or
foreclosure on the mortgage of the Recipient’s principal residence.


 


The distribution may be treated as necessary to
satisfy an immediate and heavy financial need of the Recipient where the
Committee reasonably relies upon the Recipient’s representation that the need
cannot be relieved by:


 


i. reimbursement or
compensation by insurance or otherwise;


 


ii. reasonable
liquidation of the Recipient’s assets, to the extent such liquidation would not
itself cause an immediate and heavy financial need; or


 


iii. other distributions
or nontaxable (at the time of the loan) loans from plans maintained by the
Company, or by borrowing from commercial sources on reasonable terms.


 


8.4                               Non-Vested
Restricted Stock Awards; Forfeiture or Suspension for Cause.


 


(a)                                 If
a Recipient owns any non-vested shares of Restricted Stock at the time of the
Termination of Employment of the Recipient, then (i) if the Recipient paid a
purchase price for the shares, the Company shall repurchase such shares for an
amount equal to the price paid by the Recipient to purchase such shares less
the amount of any dividends or other distributions paid to or on behalf of the
Recipient with respect to such shares; and (ii) otherwise, the shares shall be
forfeited to the Company. Notwithstanding the previous sentence, if the amount
payable to the Recipient pursuant to clause (i) of the preceding sentence
exceeds the Fair Market Value of such shares, the Committee may, in its sole
discretion, reduce such repurchase price to the Fair Market Value.


 


(b)                                 If
the President of the Company or his or her designee reasonably believes a
Recipient has committed an act of misconduct as described in this Section
8.4(b), the President or such designee may suspend the Recipient’s rights under
any Restricted Stock Award pending a determination by the Board. If the Board
determines a Recipient has committed an act of embezzlement, fraud, dishonesty,
nonpayment of any obligation owed to the Company, breach of fiduciary duty or
deliberate disregard of Company rules resulting in loss, damage or injury to
the Company, or if a Recipient makes an unauthorized disclosure of any trade
secret or confidential information, engages in any conduct constituting unfair
competition, induces any customer to breach a contract with the Company,
engages in any conduct constituting discrimination, sexual harassment or
retaliation in violation of Company


 


17





















 


policies or
induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Recipient nor his or her estate shall be
entitled to exercise any rights with respect to Restricted Stock whatsoever;
and any and all shares of Restricted Stock owned by such Recipient (or his or
her estate) shall be deemed non-vested and repurchased or forfeited as provided
in Section 8.4(a) and the further provisions of this Section VIII. In making
such determination, the Board shall act fairly and shall give the Recipient an
opportunity to appear and present evidence on his or her behalf at a hearing
before the Board.


 


8.5                               Settlement
if Company Purchases Restricted Stock. The settlement on a purchase or
acquisition of shares of Restricted Stock by the Company hereunder shall be
held no later than ninety (90) days after: (i) the Termination of Employment of
the Recipient if the Company is obligated to purchase such shares as a result
of the Termination of Employment or (ii) if the Company is not so obligated,
the date of the Corporation’s written election to purchase the Recipient’s
shares; provided that if the Recipient is entitled to exercise a Stock Option
Award following the Termination of Employment of the Recipient the settlement
shall be held no later than ninety (90) days after the exercise of such Stock
Option Award. The settlement shall be held at the principal office of the
Company or at such other place which the Company and the Recipient or, in the
case of a Trust Award, the Trustees of the Trust, shall otherwise agree upon. At
the settlement, the certificate or certificates representing the shares so
purchased shall be delivered to the Company. Furthermore, at the settlement,
provided there is a purchase of all of his or her shares in connection with a
Termination of Employment, such Recipient shall, if applicable, deliver a
written resignation as a director and/or officer of the Company and any of its
affiliates and/or as a trustee under any employee benefit trust then maintained
by the Company or any of its affiliates.


 


8.6                               Payment.
Payment for the shares of Restricted Stock purchased by the Company shall be as
follows:


 


(a)  If such
purchase price is less than or equal to Twenty Thousand Dollars ($20,000), then
there shall be a cash payment equal to the entire price.


 


(b)  If such
purchase price is greater than Twenty Thousand Dollars ($20,000), then there
shall be a cash payment of Twenty Thousand Dollars ($20,000) and the balance
shall be paid to the Recipient by the issuance of a promissory note, as
described in Section 8.6(c) hereof.


 


(c)  A promissory note issued by the Company to
the Recipient pursuant to this Section 8.6(c) hereof shall provide for a term
of five (5) years and provide for the payment of principal in twenty (20) equal
quarterly installments. Interest shall accrue on the unpaid balance thereof and
shall be payable simultaneously with payments of principal at an annual rate
equal to the Prime Rate as of the date of settlement and with such rate of
interest to be adjusted on each anniversary of the settlement. The first of
such installments of principal and interest shall be due and payable three (3)
months after the settlement. The Company may prepay the unpaid principal
balance and any accrued and unpaid interest at any time without penalty.


 


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8.7                               Legal
Prohibition on Repurchase. In the event that the Company is obligated to
purchase or acquire Restricted Stock pursuant to Section VII or this Section
VIII, and in the further event that, under the applicable laws of the
jurisdiction of incorporation of the Company, the Company is legally prevented
from purchasing or acquiring all such Restricted Stock, the Company shall
promptly take (or cause to be taken) such measures (whether it be an amendment
of the Articles or Certificate of Incorporation or Bylaws of the Company, a
reduction of its capital, a reappraisal of its assets and/or any other legal
corporate action), as are necessary or appropriate to enable the Company to
purchase or acquire such Restricted Stock hereunder. Upon a Public Offering,
the rights and obligations of the Company under this Section 8.7 shall lapse.


 


8.8                               Purchase
by Other Shareholders. In the event that the measures described in Section
8.7 hereof prove ineffective and that, despite such measures, the Company is
legally prevented under the laws of such jurisdiction of incorporation or for
any other reason whatsoever from purchasing all of the Restricted Stock which
the Company is obligated to purchase or acquire hereunder, each of the other
shareholders of the Company who owns at least one percent (1.0%) of the
outstanding shares of the Company’s common stock shall have the option (but
shall not have the obligation) to purchase pro rata, in proportion to such
shareholder’s relative ownership of shares of Company common stock, or in such
other proportion as they shall otherwise agree upon, that part (even to the
extent of all) of the Restricted Stock which the Company is legally prevented
from purchasing or acquiring hereunder, and if such option is so exercised, all
references herein to the Company with respect to such purchase or acquisition
shall be deemed to be references to the Company and/or to such other
shareholders, where applicable. In the event that none of the other
shareholders exercises the aforesaid option to the purchase, or only a portion
of such Recipient’s Restricted Stock are purchased pursuant to such option, the
Company shall purchase or acquire such Restricted Stock or the balance of such
Restricted Stock, as the case may be, as soon as practicable after such time as
it is no longer legally prevented from making such purchase or acquisition. Upon
a Public Offering, the rights and obligations of the Company, the Recipients
and the other shareholders of the Company set forth in this Section 8.8 shall
lapse.


 


8.9                               Delivery
of Restricted Stock and Documents. Upon the closing of any purchase of any
Restricted Stock pursuant to Sections 7.4, 7.5, 7.6, 7.7 or this Section VIII,
the seller shall deliver to the purchaser the following:  the certificate or certificates representing
the Restricted Stock being sold, duly endorsed for transfer, and such
assignments, certificates of authority, consents to transfer, instruments and
evidences of title of the seller and of the seller’s compliance with the
provisions of this Plan as may be required by the Board or as may be reasonably
required by the purchaser.


 


8.10                        Remedy
for Failure to Transfer Shares. The Recipients agree that the Restricted
Stock issued and held hereunder is unique, that failure to perform the
obligations provided by this Plan will result in irreparable damage to the
Company, and that specific performance of these obligations may be obtained by
suit in equity. Further, in the event that a Recipient shall be required to
sell his or her Restricted Stock pursuant to any provision of the Plan, and
such Recipient is unable to, or for any reason does not, deliver the
certificate or certificates evidencing such Restricted Stock to the person who,
or entity which, is (or desires) to purchase or acquire such Restricted Stock,
the purchaser or acquirer of such Restricted Stock


 


19





















 


may deposit the purchase price for such Restricted Stock with any bank
doing business within fifty (50) miles of the Company’s principal office, or
with the Company’s certified public accountant, as agent or trustee, or in
escrow, for such Recipient, to be held by such bank or accountant until
withdrawn by such Recipient. Upon such deposit by the purchaser or acquirer of
such Restricted Stock, and upon Registered Notice to the Recipient who was
required to sell, (i) the Restricted Stock of such Recipient to be sold or
acquired pursuant to the applicable provisions of this Section VIII shall at
such time be deemed to have been sold, assigned, transferred and conveyed to
such purchaser or acquirer, (ii) such Recipient shall have no further rights
thereto, and (iii) the Company shall record such transfer in its stock transfer
book.


 


8.11                        Tax
Withholding. The Company shall have the power and the right to deduct or
withhold, or require a Recipient to remit to the Company, an amount sufficient
to satisfy federal, state and local taxes (including the Recipient’s FICA
obligation) required to be withheld with respect to an Award, any exercise
thereof, or any dividends or other distributions payable with respect thereto. Subject
to the requirements of applicable laws, the Committee, in its sole discretion
and pursuant to such procedures as it may specify from time to time, may permit
a Recipient to satisfy such tax withholding obligation in whole or in part, by
(a) electing to have the Company withhold otherwise deliverable shares of
Restricted Stock having a Fair Market Value not exceeding the minimum amount
required to be withheld, or (b) delivering to the Company shares of stock of
the Company then owned by the Recipient.


 


8.12                        Treatment
of Trust Awards. Upon the Termination of Employment of a Recipient (a) any
vested property, other than Restricted Stock held in the Trust for the
Recipient’s benefit, shall be distributed to the Recipient in accordance with
the terms of the Trust; and (b) any Vested Plan Shares shall either be
distributed to the Recipient or repurchased by the Company pursuant to Section
7.5, 7.6 or 7.7 and (c) any non-vested shares of Restricted Stock shall be
forfeited to the Company. In the event of a Financial Hardship of the
Recipient, the smallest number of whole Vested Plan Shares having a Fair Market
Value not less than the amount of the distribution determined by the Committee
pursuant to Section 8.3 may be repurchased by the Company from the Restricted
Stock held in the Trust for the Recipient’s benefit if so directed by the
Committee. The Company shall determine the amount, if any, of any tax
withholding obligation with respect to Awards held by the Trust and the Trust
shall retain and promptly remit all such amounts to the Company prior to making
any distribution to a Recipient. Where Restricted Stock held in Trust is
repurchased by the Company, the cash or notes received by the Trust in return
for such stock, less any withholding, shall be remitted to the Recipient by the
Trust within seven (7) days of the receipt of such money or notes by the Trust.


 


8.13                        Stock
Option Award Buyout Provisions. Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, subject to applicable laws, the
Committee may cause any Stock Option Award granted hereunder to be cancelled in
consideration of a cash payment or alternative grant made to the holder of such
cancelled Stock Option Award equal in value to the excess of the aggregate Fair
Market Value of the common stock subject to such cancelled Stock Option Award
over the aggregate exercise price of such cancelled Stock Option.


 


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SECTION IX



FINALITY OF DETERMINATION


 


9.1                               Authority
of Committee. Subject to the express provisions of the Plan, the Committee
shall have plenary authority in its discretion to interpret and construe any
and all provisions of the Plan, to adopt rules and regulations for
administering the Plan, and to make all other determinations deemed necessary
or advisable for administering the Plan. The Committee’s determination on the
foregoing matters shall be conclusive.


 


9.2                               Rules
Governing the Administration of the Committee. The Board may from time to
time appoint members of the Committee in substitution for or in addition to
members previously appointed and may fill vacancies, however caused, in the
Committee. The Committee may select one of its members as its Chairman and
shall hold its meetings at such times and places as it shall deem advisable and
may hold telephonic meetings. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. The Committee may correct any defect or omission or reconcile any
inconsistency in the Plan, in the manner and to the extent it shall deem
desirable. Any decision or determination reduced to writing and signed by a
majority of the members of the Committee shall be as fully effective as if it
had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.


 


9.3                               Indemnification.
In addition to such other rights as they may have as directors, the members of
the Board (in their capacity as such and also as members of the Committee)
shall be indemnified by the Company against the reasonable expenses (including
attorneys’ fees) incurred in connection with the defense of any action, suit or
proceeding, and in connection with any appeal therein, to which they or any of
them may be a party by reason of any action or failure to act in connection
with this Plan, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
finally adjudged in such action, suit or proceeding that the Board member is
liable for willful misconduct or gross negligence in the performance of his
duties or that the Board member knowingly violated criminal law; provided that
within 60 days after institution of any such action, suit, or proceeding (or
within 30 days after service upon such member of legal process in such case, if
later) the Board member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.


 


SECTION X



LIMITATIONS


 


10.1                        No
Right to Award. No person will at any time have the right to receive an
Award except as expressly provided hereunder and no person will have authority
to enter into an agreement for the granting of such an Award or to make any
representation or warranty with respect thereto.


 


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10.2                        Right
of Recipients. Recipients of Awards will have no rights in respect thereof
other than those set forth in the Plan and Award Agreements. Except as provided
in Section VII, above, such rights may not be assigned or transferred except by
will or by the laws of descent and distribution; and each Stock Option Award
shall be exercisable during the Recipient’s lifetime only by the Recipient. If
any attempt is made to sell, exchange, transfer, pledge, hypothecate, or
otherwise dispose of any Restricted Stock held by the Recipient under
restrictions which have not yet lapsed, the shares that are the subject of such
attempted disposition will be deemed offered to the Company for repurchase or
forfeiture. If the Company elects to make such a repurchase:  (a) any Vested Plan Shares will be
repurchased at a price equal to the lesser of (i) the federal income tax basis
of the Recipient for such Vested Plan Shares or (ii) the Fair Market Value of
such Vested Plan Shares as of the date of such attempted disposition; and (b)
any non-vested shares of Restricted Stock will be repurchased in accordance
with Section 8.4. Upon any attempt to transfer a Stock Option Award or any
interest therein contrary to the provisions of this Plan, or to subject the
Stock Option Award or any interest therein to execution, attachment or similar
process, the Stock Option Award shall immediately terminate and become null and
void. Before issuance of shares of Restricted Stock, no such shares will be
earmarked for the Recipients’ accounts nor will such Recipients have any rights
as shareholders with respect to such shares.


 


10.3                        No
Right to Continued Employment. Neither the Company’s action in establishing
the Plan, nor any action taken by it or by the Board or the Committee under the
Plan, nor any provision of the Plan, will be construed as giving to any person
the right to be retained in the employ of the Company or any Subsidiary.


 


10.4                        Unsecured
Creditor Status. The agreement to pay any Cash Award and any contributions
to the Trust on behalf of Recipient are mere promises by the Company to make
payments in the future and each Recipient has the status of a general unsecured
creditor of the Company with respect to any such Award. It is the intention of
the parties that this Plan is unfunded for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended.


 


10.5                        Limitation
on Actions. Every right of action by or on behalf of the Company or by any
shareholder against any past, present, or future member of the Board, the
Committee, or any officer or employee of the Company arising out of or in
connection with this Plan shall, regardless of the place where the action may
be brought and regardless of the place of residence of any such director,
committee member, officer or employee, cease and be barred by the expiration of
one year from the later of:


 


(a)                                 the
date of the act or omission in respect of which such right of action arises; or


 


(b)                                 the
first date upon which there has been made generally available to shareholders
an annual report of the Company and a proxy statement for the annual meeting of
shareholders following the issuance of such annual report, which annual report
and proxy statement alone or together set forth, for the related period, the
amount of the awards.


 


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In addition, any and all right of action by any
employee (past, present or future) against the Company or any member of the
Committee arising out of or in connection with this Plan will, regardless of
the place where action may be brought and regardless of the place of residence
of any Committee member, cease and be barred by the expiration of one year from
the date of the act or omission in respect of which such right of action
arises.


 


SECTION XI



AMENDMENT, SUSPENSION OR TERMINATION OF PLAN


 


Except as otherwise provided in the Plan, the Board
may at any time terminate and, from time to time amend, suspend or modify the
Plan in whole or in part. Any such action of the Board may be taken without the
approval of the Company’s shareholders, but only to the extent that such
shareholder approval is not required by applicable law or regulation, including
Section 422 of the Code and any applicable requirements of a stock exchange or
self regulatory organization or if failure to obtain such approval would give
any shareholder preemptive rights with respect to any shares of Restricted
Stock. No amendment, modification, suspension or termination of the Plan shall
in any manner affect adversely rights or obligations with respect to Awards
previously made without the consent of the Recipient of such Award.


 


SECTION XII



GOVERNING LAW


 


The Plan will be governed by the laws of the state of
incorporation of the Company, except where such laws are superseded by the laws
of the United States of America.


 


SECTION XIII



EXPENSES OF ADMINISTRATION


 


All costs and expenses incurred in the operation and
administration of this Plan will be borne by the Company.


 


SECTION XIV



REGISTRATION OF RESTRICTED STOCK


 


14.1                        Registration
Requirement. If the Company determines at any time to register any of its
securities under the Securities Act of 1933, as amended (or similar statute
then in effect) the Company, at its expense, will include among the securities
which it then registers all shares of Restricted Stock or other stock or securities
issued in respect thereof, in exchange therefor, or in replacement thereof. The
requirement of the preceding sentence, however, will not apply to the extent
that any Recipient at that time has no present intent to sell or distribute the
relevant shares. Also, in the case of stock or securities not of the Company,
the Company’s


 


23





















 


obligation under this Section XIV will be limited to using its best
efforts to effect such registration.


 


14.2                        Written
Notification. As to each registration pursuant to this Section XIV, the
Company will keep the Recipients advised in writing as to the initiation of
proceedings for such registration and as to the completion thereof, and at its
expense will keep such registration effective for a period of nine months, or
until all sales and distributions contemplated in connection therewith are
completed, whichever period is shorter. Each Recipient will at his or her own
expense furnish to the Company such information regarding the Recipient and the
Recipient’s ownership of Restricted Stock (or other stock or securities) as the
Company may reasonably request in writing in connection with any such
registration.


 


14.3                        Prospectus;
Indemnification. To the extent the same are required for resales of
Restricted Stock by Recipients, the Company, at its expense, will furnish to
each Recipient such number of prospectuses incident to any such registration as
such Recipient from time to time reasonably may request. In addition, the
Company will indemnify each such Recipient against all claims, losses, damages,
and liabilities caused by any untrue statement of a material fact contained in
such prospectus (or in any related registration statement) or by any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same may have
been caused by an untrue statement or omission based upon information furnished
in writing to the Company by such Recipient expressly for use therein. Further,
as a condition precedent to the obligations of the Company pursuant to this
Section XIV, each Recipient will agree in writing to indemnify the Company
against all claims, losses, damages and liabilities caused by an untrue statement
or omission based upon information furnished to the Company by such Recipient
expressly for use therein.


 


SECTION XV



EFFECTIVE DATE


 


The effective date of the Plan shall be the date of
its adoption by the Board; provided, however, that if the Company’s
jurisdiction of incorporation is the District of Columbia, then no shares of
Restricted Stock shall be issued pursuant to the Plan until it has been
approved by a two-thirds vote of the shareholders of the Company. Notwithstanding
any other provision of this Plan to the contrary, no Qualified Options shall be
issued unless this Plan has been approved by a vote of the shareholders of the
Company within twelve (12) months of the effective date.


 


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