**Exhibit 10.3**

 

**BROADWINDENERGY, INC.**

**2007EQUITY INCENTIVE PLAN**

(**AS AMENDEDTHROUGH AUGUST 8, 2008)**

 

**SECTION 1.**

**DEFINITIONS**

 

As used herein, the following terms shallhave the meanings indicated below:

 

(a)                                  “Administrator”****shall mean the Board of Directors of theCompany (herein after referred to as the “Board”), or one or more Committeesappointed by the Board, as the case may be.

 

(b)                                 “Affiliate(s)” shallmean a Parent or Subsidiary of the Company.

 

(c)                                  “Award” shall meanany grant of an Option, Restricted Stock or Restricted Stock Unit Award, StockAppreciation Right or Performance Award.

 

(d)                                 “Committee” shall meana Committee of two or more directors who shall be appointed by and serve at thepleasure of the Board. To the extent necessary for compliance with Rule 16b-3,or any successor provision, each of the members of the Committee shall be a “non-employeedirector.”  Solely for purposes of this Section 1(d),“non-employee director” shall have the same meaning as set forth in Rule 16b-3,or any successor provision, as then in effect, of the General Rules andRegulations under the Securities Exchange Act of 1934, as amended.

 

(e)                                  The “Company” shallmean Broadwind Energy, Inc., a Delaware corporation.

 

(f)                                    “Fair Market Value”as of any date shall mean (i) if such stock is listed on the Nasdaq GlobalMarket, Nasdaq Capital Market, or an established stock exchange, the price ofsuch stock at the close of the regular trading session of such market orexchange on such date, as reported by The Wall Street Journal or acomparable reporting service, or, if no sale of such stock shall have occurredon such date, on the next date on which there was a sale of stock; (ii) ifsuch stock is not so listed on the Nasdaq Global Market, Nasdaq Capital Market,or an established stock exchange, the average of the closing “bid” and “asked”prices quoted by the OTC Bulletin Board, the National Quotation Bureau, or anycomparable reporting service on such date or, if there are no quoted “bid” and “asked”prices on such date, on the next date for which there are such quotes; or (iii) ifsuch stock is not publicly traded as of such date, the per share value asdetermined by the Board, or the Committee, in its sole discretion by applyingprinciples of valuation with respect to the Company’s Common Stock.

 

(g)                                 The “Internal RevenueCode” or “Code” is the Internal Revenue Code of 1986, as amended from time totime.

 

(h)                                 “Option” means anincentive stock option or nonqualified stock option granted pursuant to thePlan.

 

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(i)                                     “Parent” shallmean any corporation which owns, directly or indirectly in an unbroken chain,fifty percent (50%) or more of the total voting power of the Company’soutstanding stock.

 

(j)                                     The “Participant”means (i) a key employee or officer of the Company or any Affiliate towhom an incentive stock option has been granted pursuant to Section 9; (ii) aconsultant or advisor to, or director, key employee or officer, of the Companyor any Affiliate to whom a nonqualified stock option has been granted pursuantto Section 10; (iii) a consultant or advisor to, or director, keyemployee or officer, of the Company or any Affiliate to whom a Restricted Stockor Restricted Stock Unit Award has been granted pursuant to Section 11; (iv) aconsultant or advisor to, or director, key employee or officer, of the Companyor any Affiliate to whom a Performance Award has been granted pursuant to Section 12;or (v) a consultant or advisor to, or director, key employee or officer,of the Company or any Affiliate to whom a Stock Appreciation Right has beengranted pursuant to Section 13.

 

(k)                                  “Performance Award”shall mean any Performance Shares or Performance Units granted pursuant to Section 12hereof.

 

(l)                                     “PerformanceObjective(s)” shall mean one or more performance objectives established by theAdministrator, in its sole discretion, for Awards granted under this Plan. PerformanceObjectives may include, but shall not be limited to, any one, or a combinationof, (i) revenue, (ii) net income, (iii) earnings per share, (iv) returnon equity, (v) return on assets, (vi) increase in revenue, (vii) increasein share price or earnings, (viii) return on investment, or (ix) increasein market share, in all cases including, if selected by the Administrator,threshold, target and maximum levels.

 

(m)                               “Performance Period”shall mean the period, established at the time any Performance Award is grantedor at any time thereafter, during which any Performance Objectives specified bythe Administrator with respect to such Performance Award are to be measured.

 

(n)                                 “Performance Share”shall mean any grant pursuant to Section 12 hereof of an Award, whichvalue, if any, shall be paid to a Participant by delivery of shares of CommonStock of the Company upon achievement of such Performance Objectives during thePerformance Period as the Administrator shall establish at the time of suchgrant or thereafter.

 

(o)                                 “Performance Unit”shall mean any grant pursuant to Section 12 hereof of an Award, whichvalue, if any, shall be paid to a Participant by delivery of cash uponachievement of such Performance Objectives during the Performance Period as theAdministrator shall establish at the time of such grant or thereafter.

 

(p)                                 The “Plan” means theBroadwind Energy, Inc. 2007 Equity Incentive Plan, as amended hereafterfrom time to time, including the form of Agreements as they may be modified bythe Administrator from time to time.

 

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(q)                                 “Restricted StockAward” shall mean any grant of restricted shares of Stock of the Companypursuant to Section 11 hereof.

 

(r)                                    “Restricted StockUnit Award” shall mean any grant of restricted stock units pursuant to Section 11hereof.

 

(s)                                  “Stock,” “OptionStock” or “Common Stock” shall mean the common stock, $0.001 par value of the Companyreserved for Options and Awards pursuant to this Plan.

 

(t)                                    “Stock AppreciationRight” shall mean a grant pursuant to Section 13 hereof.

 

(u)                                 A “Subsidiary” shallmean any corporation of which fifty percent (50%) or more of the total votingpower of the Company’s outstanding Stock is owned, directly or indirectly in anunbroken chain, by the Company.

 

**SECTION 2.**

**PURPOSE**

 

The purpose of the Plan is to promote thesuccess of the Company and its Affiliates by facilitating the employment andretention of competent personnel and by furnishing incentive to officers,directors, employees, consultants, and advisors upon whose efforts the successof the Company and its Affiliates will depend to a large degree.

 

It is the intention of the Company to carryout the Plan through the granting of Options which will qualify as “incentivestock options” under the provisions of Section 422 of the Internal RevenueCode, or any successor provision, pursuant to Section 9 of this Plan;through the granting of “nonqualified stock options” pursuant to Section 10of this Plan; through the granting of Restricted Stock or Restricted Stock UnitAwards pursuant to Section 11 of this Plan; through the granting ofPerformance Awards pursuant to Section 12 of this Plan; and through thegranting of Stock Appreciation Rights pursuant to Section 13 of this Plan.Adoption of this Plan shall be and is expressly subject to the condition ofapproval by the stockholders of the Company within twelve (12) months before orafter the adoption of the Plan by the Board. Any incentive stock optionsgranted after adoption of the Plan by the Board shall be treated asnonqualified stock options if stockholder approval is not obtained within suchtwelve-month period.

 

**SECTION 3.**

**EFFECTIVEDATE OF PLAN**

 

The Plan shall be effective as of the date ofadoption by the Board, subject to approval by the stockholders of the Companyas required in Section 2.

 

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**SECTION 4.**

**ADMINISTRATION**

 

The Plan shall be administered by the Boardor by a Committee which may be appointed by the Board from time to time toadminister the Plan (hereinafter collectively referred to as the “Administrator”).Except as otherwise provided herein, the Administrator shall have all of thepowers vested in it under the provisions of the Plan, including but not limitedto exclusive authority to determine, in its sole discretion, whether an Awardshall be granted; the individuals to whom, and the time or times at which,Awards shall be granted; the number of shares subject to each Award; the optionprice, if any; and the performance criteria, if any, and any other terms andconditions of each Award. The Administrator shall have full power and authorityto administer and interpret the Plan, to make and amend rules, regulations andguidelines for administering the Plan, to prescribe the form and conditions ofthe respective agreements evidencing each Award (which may vary fromParticipant to Participant), and to make all other determinations necessary oradvisable for the administration of the Plan. The Administrator’sinterpretation of the Plan, and all actions taken and determinations made bythe Administrator pursuant to the power vested in it hereunder, shall beconclusive and binding on all parties concerned.

 

No member of the Board or the Committee shallbe liable for any action taken or determination made in good faith inconnection with the administration of the Plan. In the event the Board appointsa Committee as provided hereunder, any action of the Committee with respect tothe administration of the Plan shall be taken pursuant to a majority vote ofthe Committee members or pursuant to the written resolution of all Committeemembers.

 

**SECTION 5.**

**PARTICIPANTS**

 

The Administrator shall from time to time, atits discretion and without approval of the stockholders, designate thoseemployees, officers, directors, consultants, and advisors of the Company or ofany Affiliate to whom Awards shall be granted under this Plan; provided,however, that consultants or advisors shall not be eligible to receive Awardshereunder unless such consultant or advisor renders bona fide services to theCompany or any Affiliate and such services are not in connection with the offeror sale of securities in a capital raising transaction and do not directly orindirectly promote or maintain a market for the Company’s securities. TheAdministrator may grant additional Awards under this Plan to some or allParticipants then holding Awards, or may grant Awards solely or partially tonew Participants. In designating Participants, the Administrator shall alsodetermine the number of shares to be optioned or awarded to each suchParticipant and the performance criteria applicable to each Performance Award.The Administrator may from time to time designate individuals as beingineligible to participate in the Plan.

 

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**SECTION 6.**

**STOCK**

 

The Stock to be issued under this Plan shallconsist of authorized but unissued shares of Common Stock. Three million fivehundred thousand (3,500,000) shares of Common Stock shall be reserved andavailable for Awards under the Plan; provided, however, that the total numberof shares reserved for Awards under this Plan shall be subject to adjustment asprovided in Section 14 of the Plan; and provided, further, that all sharesreserved and available under the Plan shall constitute the maximum aggregatenumber of shares of Stock that may be issued through incentive stock options. Thefollowing shares of Stock shall continue to be reserved and available forAwards granted pursuant to the Plan: (i) any outstanding Award thatexpires for any reason, (ii) any portion of an outstanding Option or StockAppreciation Right that is terminated prior to exercise, (iii) any portionof an Award that is terminated prior to the lapsing of the risks of forfeitureon such Award, (iv) shares of Common Stock used to pay the exercise priceunder any Award, (v) shares of Common Stock used to satisfy any taxwithholding obligation attributable to any Award, whether such shares arewithheld by the Company or tendered by the Participant, and (vi) shares ofStock covered by an Award to the extent the Award is settled in cash.

 

**SECTION 7.**

**DURATIONOF PLAN**

 

Incentive stock options may be grantedpursuant to the Plan from time to time during a period of ten (10) yearsfrom the effective date as defined in Section 3. Other Awards may begranted pursuant to the Plan from time to time after the effective date of thePlan and until the Plan is discontinued or terminated by the Administrator.

 

**SECTION 8.**

**PAYMENT**

 

Participants may pay for shares upon exerciseof Options granted pursuant to this Plan with cash, personal check, certifiedcheck or, if approved by the Administrator in its sole discretion,previously-owned shares of the Company’s Common Stock, or any combinationthereof. Any stock so tendered as part of such payment shall be valued at suchstock’s then Fair Market Value, or such other form of payment as may beauthorized by the Administrator. The Administrator may, in its sole discretion,limit the forms of payment available to the Participant and may exercise suchdiscretion any time prior to the termination of the Option granted to theParticipant or upon any exercise of the Option by the Participant. “Previously-ownedshares” means shares of the Company’s Common Stock which the Participant hasowned for at least six (6) months prior to the exercise of the Option, orfor such other period of time as may be required by generally acceptedaccounting principles.

 

With respect to payment in the form of CommonStock of the Company, the Administrator may require advance approval or adoptsuch rules as it deems necessary to assure

 

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compliance with Rule 16b-3,or any successor provision, as then in effect, of the General Rules andRegulations under the Securities Exchange Act of 1934, if applicable.

 

**SECTION 9.**

**TERMS ANDCONDITIONS OF INCENTIVE STOCK OPTIONS**

 

Each incentive stock option granted pursuantto this Section 9 shall be evidenced by a written incentive stock optionagreement (the “Option Agreement”). The Option Agreement shall be in such formas may be approved from time to time by the Administrator and may vary fromParticipant to Participant; provided, however, that each Participant and eachOption Agreement shall comply with and be subject to the following terms andconditions:

 

(a)                                  Number of Sharesand Option Price. The Option Agreement shall state the total number ofshares covered by the incentive stock option. Except as permitted by Code Section 424(a),or any successor provision, the option price per share shall not be less thanone hundred percent (100%) of the per share Fair Market Value of the CommonStock on the date the Administrator grants the Option; provided, however, thatif a Participant owns stock possessing more than ten percent (10%) of the totalcombined voting power of all classes of stock of the Company or of its Parentor any Subsidiary, the option price per share of an incentive stock optiongranted to such Participant shall not be less than one hundred ten percent(110%) of the per share Fair Market Value of the Company’s Common Stock on thedate of the grant of the Option. The Administrator shall have full authorityand discretion in establishing the option price and shall be fully protected inso doing.

 

(b)                                 Term andExercisability of Incentive Stock Option. The term during which anyincentive stock option granted under the Plan may be exercised shall beestablished in each case by the Administrator. Except as permitted by Code Section 424(a),in no event shall any incentive stock option be exercisable during a term ofmore than ten (10) years after the date on which it is granted; provided,however, that if a Participant owns stock possessing more than ten percent(10%) of the total combined voting power of all classes of stock of the Companyor of its Parent or any Subsidiary, the incentive stock option granted to suchParticipant shall be exercisable during a term of not more than five (5) yearsafter the date on which it is granted.

 

The Option Agreement shall state when theincentive stock option becomes exercisable and shall also state the maximumterm during which the Option may be exercised. In the event an incentive stockoption is exercisable immediately, the manner of exercise of the Option in theevent it is not exercised in full immediately shall be specified in the OptionAgreement. The Administrator may accelerate the exercisability of any incentivestock option granted hereunder which is not immediately exercisable as of thedate of grant.

 

(c)                                  Nontransferability.No incentive stock option shall be transferable, in whole or in part, by theParticipant other than by will or by the laws of descent and distribution. Duringthe Participant’s lifetime, the incentive stock option may be exercised only bythe Participant. If the Participant shall attempt any transfer of any incentivestock option granted under the Plan during

 

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the Participant’s lifetime,such transfer shall be void and the incentive stock option, to the extent notfully exercised, shall terminate.

 

(d)                                 No Rights asStockholder. A Participant (or the Participant’s successor or successors)shall have no rights as a stockholder with respect to any shares covered by anincentive stock option until the date the Participant is recorded on the stocktransfer books of the Company as the owner of the Stock. No adjustment shall bemade for dividends (ordinary or extraordinary, whether in cash, securities orother property), distributions or other rights for which the record date isprior to the date such transfer is actually recorded (except as otherwiseprovided in Section 14 of the Plan).

 

(e)                                  Withholding. TheCompany or its Affiliate shall be entitled to withhold and deduct from futurewages of the Participant all legally required amounts necessary to satisfy anyand all withholding and employment-related taxes attributable to theParticipant’s exercise of an incentive stock option or a “disqualifyingdisposition” of shares acquired through the exercise of an incentive stockoption as defined in Code Section 421(b). In the event the Participant isrequired under the Option Agreement to pay the Company, or make arrangementssatisfactory to the Company respecting payment of, such withholding andemployment-related taxes, the Administrator may, in its discretion and pursuantto such rules as it may adopt, require the Participant to satisfy suchobligation, in whole or in part, by delivering shares of the Company’s CommonStock or by electing to have the Company withhold Common Stock otherwiseissuable to the Participant as a result of the exercise of the incentive stockoption. Such shares shall have a Fair Market Value equal to the minimumrequired tax withholding, based on the minimum statutory withholding rates forfederal and state tax purposes, including payroll taxes, that are applicable tothe supplemental income resulting from such exercise. In no event may theCompany or any Affiliate withhold shares having a Fair Market Value in excessof such statutory minimum required tax withholding. The Participant’s electionto deliver shares or to have shares withheld for this purpose shall be made onor before the date the incentive stock option is exercised or, if later, thedate that the amount of tax to be withheld is determined under applicable taxlaw. Such election shall be approved by the Administrator and otherwise complywith such rules as the Administrator may adopt to assure compliance with Rule 16b-3,or any successor provision, as then in effect, of the General Rules andRegulations under the Securities Exchange Act of 1934, if applicable.

 

(f)                                    Other Provisions.The Option Agreement authorized under this Section 9 shall contain suchother provisions as the Administrator shall deem advisable. Any such OptionAgreement shall contain such limitations and restrictions upon the exercise ofthe Option as shall be necessary to ensure that such Option will be consideredan “incentive stock option” as defined in Section 422 of the InternalRevenue Code or to conform to any change therein.

 

**SECTION 10.**

**TERMS ANDCONDITIONS OF NONQUALIFIED STOCK OPTIONS**

 

Each nonqualified stock option grantedpursuant to this Section 10 shall be evidenced by a written nonqualifiedstock option agreement (the “Option Agreement”). The Option

 

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Agreement shall be in such formas may be approved from time to time by the Administrator and may vary fromParticipant to Participant; provided, however, that each Participant and eachOption Agreement shall comply with and be subject to the following terms andconditions:

 

(a)                                  Number of Sharesand Option Price. The Option Agreement shall state the total number ofshares covered by the nonqualified stock option. Unless otherwise determined bythe Administrator, the option price per share shall be one hundred percent(100%) of the per share Fair Market Value of the Common Stock on the date theAdministrator grants the Option.

 

(b)                                 Term andExercisability of Nonqualified Stock Option. The term during which anynonqualified stock option granted under the Plan may be exercised shall beestablished in each case by the Administrator. The Option Agreement shall statewhen the nonqualified stock option becomes exercisable and shall also state themaximum term during which the Option may be exercised. In the event anonqualified stock option is exercisable immediately, the manner of exercise ofthe Option in the event it is not exercised in full immediately shall bespecified in the Option Agreement. The Administrator may accelerate theexercisability of any nonqualified stock option granted hereunder which is notimmediately exercisable as of the date of grant.

 

(c)                                  Transferability.A nonqualified stock option shall be transferable, in whole or in part, by theParticipant by will or by the laws of descent and distribution. In addition,the Administrator may, in its sole discretion, permit the Participant to transferany or all nonqualified stock options to any member of the Participant’s “immediatefamily” as such term is defined in Rule 16a-1(e) promulgated underthe Securities Exchange Act of 1934, or any successor provision, or to one ormore trusts whose beneficiaries are members of such Participant’s “immediatefamily” or partnerships in which such family members are the only partners;provided, however, that the Participant cannot receive any consideration forthe transfer and such transferred nonqualified stock option shall continue tobe subject to the same terms and conditions as were applicable to suchnonqualified stock option immediately prior to its transfer.

 

(d)                                 No Rights asStockholder. A Participant (or the Participant’s successor or successors)shall have no rights as a stockholder with respect to any shares covered by anonqualified stock option until the date the Participant is recorded on thestock transfer books of the Company as the owner of the Stock. No adjustmentshall be made for dividends (ordinary or extraordinary, whether in cash,securities or other property), distributions or other rights for which therecord date is prior to the date such transfer is actually recorded (except asotherwise provided in Section 14 of the Plan).

 

(e)                                  Withholding. TheCompany or its Affiliate shall be entitled to withhold and deduct from futurewages of the Participant all legally required amounts necessary to satisfy anyand all withholding and employment-related taxes attributable to theParticipant’s exercise of a nonqualified stock option. In the event theParticipant is required under the Option Agreement to pay the Company, or makearrangements satisfactory to the Company respecting payment of, suchwithholding and employment-related taxes, the Administrator may, in itsdiscretion and pursuant to such rules as it may adopt, require theParticipant to satisfy such obligation, in whole or in part, by deliveringshares of the Company’s Common Stock or by electing to have the Companywithhold Common Stock otherwise issuable to the Participant as a result of the

 

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exercise of the nonqualifiedstock option. Such shares shall have a Fair Market Value equal to the minimumrequired tax withholding, based on the minimum statutory withholding rates forfederal and state tax purposes, including payroll taxes, that are applicable tothe supplemental income resulting from such exercise. In no event may theCompany or any Affiliate withhold shares having a Fair Market Value in excessof such statutory minimum required tax withholding. The Participant’s electionto deliver shares or to have shares withheld for this purpose shall be made onor before the date the nonqualified stock option is exercised or, if later, thedate that the amount of tax to be withheld is determined under applicable taxlaw. Such election shall be approved by the Administrator and otherwise complywith such rules as the Administrator may adopt to assure compliance with Rule 16b-3,or any successor provision, as then in effect, of the General Rules andRegulations under the Securities Exchange Act of 1934, if applicable.

 

(f)                                    Other Provisions.The Option Agreement authorized under this Section 10 shall contain suchother provisions as the Administrator shall deem advisable.

 

**SECTION 11.**

**RESTRICTEDSTOCK AND RESTRICTED STOCK UNIT AWARDS**

 

Each Restricted Stock Award or RestrictedStock Unit Award granted pursuant to the Plan shall be evidenced by a writtenrestricted stock/restricted stock unit agreement (the “Restricted StockAgreement” or “Restricted Stock Unit Agreement,” as the case may be). TheRestricted Stock Agreement or Restricted Stock Unit Agreement shall be in suchform as may be approved from time to time by the Administrator and may vary fromParticipant to Participant; provided, however, that each Participant and eachRestricted Stock Agreement or Restricted Stock Unit Agreement shall comply withand be subject to the following terms and conditions:

 

(a)                                  Number of Shares.The Restricted Stock Agreement or Restricted Stock Unit Agreement shall statethe total number of shares of Stock covered by the Restricted Stock/RestrictedStock Unit Award.

 

(b)                                 Risks of Forfeiture.The Restricted Stock Agreement or Restricted Stock Unit Agreement shall setforth the risks of forfeiture or vesting conditions, if any, including risks offorfeiture or vesting conditions based on Performance Objectives, which shallapply to the shares of Stock covered by the Restricted Stock/Restricted StockUnit Award, and shall specify the manner in which such risks of forfeitureshall lapse or vesting conditions shall vest. The Administrator may, in itssole discretion and to the extent permitted by applicable tax and securitieslaws and regulations, accelerate the date on which the risks of forfeitureshall lapse or vesting conditions shall vest, but only with respect to thoseshares of Stock which are restricted as of the effective date of theacceleration.

 

(c)                                  Issuance ofShares; Rights as Stockholder.

 

(i)                                     Withrespect to a Restricted Stock Award, the Company shall cause to be issued astock certificate representing such shares of Stock in the

 

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Participant’s name, and shall deliver suchcertificate to the Participant; provided, however, that the Company shall placea legend on such certificate describing the risks of forfeiture and othertransfer restrictions set forth in the Participant’s Restricted Stock Agreementand providing for the cancellation and return of such certificate if the sharesof Stock subject to the Restricted Stock Award are forfeited. Until the risksof forfeiture have lapsed or the shares subject to such Restricted Stock Awardhave been forfeited, the Participant shall be entitled to vote the shares ofStock represented by such stock certificate and shall receive all dividendsattributable to such shares, but the Participant shall not have any otherrights as a stockholder with respect to such shares.

 

(ii)                                  Withrespect to a Restricted Stock Unit Award, as the vesting conditions on theRestricted Stock Units are satisfied, the Administrator shall cause to beissued one or more stock certificates in the Participant’s name and shalldeliver such certificates to the Participant in satisfaction of such RestrictedStock Units. Until the vesting conditions on the Restricted Stock Units aresatisfied, the Participant shall not be entitled to vote any shares of stockwhich may be acquired through the Restricted Stock Units, shall not receive anydividends attributable to such shares, and shall not have any other rights as astockholder with respect to such shares.

 

(d)                                 Withholding Taxes.The Company or its Affiliate shall be entitled to withhold and deduct fromfuture wages of the Participant all legally required amounts necessary tosatisfy any and all withholding and employment-related taxes attributable tothe Participant’s Restricted Stock/Restricted Stock Unit Award. In the eventthe Participant is required under the Restricted Stock Agreement or RestrictedStock Unit Agreement to pay the Company or its Affiliate, or make arrangementssatisfactory to the Company or its Affiliate respecting payment of, suchwithholding and employment-related taxes, the Administrator may, in itsdiscretion and pursuant to such rules as it may adopt, permit theParticipant to satisfy such obligations, in whole or in part, by deliveringshares of Common Stock, including shares of Stock received pursuant to theRestricted Stock/Restricted Stock Unit Award on which the risks of forfeiturehave lapsed. Such shares shall have a Fair Market Value equal to the minimumrequired tax withholding, based on the minimum statutory withholding rates forfederal and state tax purposes, including payroll taxes, that are applicable tothe supplemental income resulting from the lapsing of the risks of forfeitureon such Restricted Stock/Restricted Stock Unit. In no event may the Participantdeliver shares having a Fair Market Value in excess of such statutory minimumrequired tax withholding. The Participant’s election to deliver shares ofCommon Stock for this purpose shall be made on or before the date that theamount of tax to be withheld is determined under applicable tax law. Suchelection shall be approved by the Administrator and otherwise comply with such rules asthe Administrator may adopt to assure compliance with Rule 16b-3, or any successorprovision, as then in effect, of the General Rules and Regulations underthe Securities Exchange Act of 1934, if applicable.

 

(e)                                  Nontransferability.No Restricted Stock/Restricted Stock Unit Award shall be transferable, in wholeor in part, by the Participant, other than by will or by the laws of descentand distribution, prior to the date the risks of forfeiture described in theRestricted Stock

 

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Agreement or Restricted StockUnit Agreement have lapsed. If the Participant shall attempt any transfer ofany Restricted Stock/Restricted Stock Unit Award granted under the Plan priorto such date, such transfer shall be void and the Restricted Stock/RestrictedStock Unit Award shall terminate.

 

(f)                                    Other Provisions.The Restricted Stock Agreement or Restricted Stock Unit Agreement authorizedunder this Section 11 shall contain such other provisions as the Administratorshall deem advisable.

 

**SECTION 12.**

**PERFORMANCEAWARDS**

 

Each Performance Award granted pursuant tothis Section 12 shall be evidenced by a written performance awardagreement (the “Performance Award Agreement”). The Performance Award Agreementshall be in such form as may be approved from time to time by the Administratorand may vary from Participant to Participant; provided, however, that eachParticipant and each Performance Award Agreement shall comply with and besubject to the following terms and conditions:

 

(a)                                  Awards. PerformanceAwards in the form of Performance Units or Performance Shares may be granted toany Participant in the Plan. Performance Units shall consist of monetary awardswhich may be earned or become vested in whole or in part if the Company or theParticipant achieves certain Performance Objectives established by theAdministrator over a specified Performance Period. Performance Shares shallconsist of shares of Stock or other Awards denominated in shares of Stock thatmay be earned or become vested in whole or in part if the Company or theParticipant achieves certain Performance Objectives established by theAdministrator over a specified Performance Period.

 

(b)                                 PerformanceObjectives, Performance Period and Payment. The Performance Award Agreementshall set forth:

 

(i)                                     the number ofPerformance Units or Performance Shares subject to the Performance Award, andthe dollar value of each Performance Unit;

 

(ii)                                  one or morePerformance Objectives established by the Administrator;

 

(iii)                               the Performance Periodover which Performance Units or Performance Shares may be earned or may becomevested;

 

(iv)                              the extent to whichpartial achievement of the Performance Objectives may result in a payment orvesting of the Performance Award, as determined by the Administrator; and

 

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(v)                                 the date upon whichpayment of Performance Units will be made or Performance Shares will be issued,as the case may be, and the extent to which such payment or the receipt of suchPerformance Shares may be deferred.

 

(c)                                  Withholding Taxes.The Company or its Affiliates shall be entitled to withhold and deduct fromfuture wages of the Participant all legally required amounts necessary tosatisfy any and all withholding and employment-related taxes attributable tothe Participant’s Performance Award. In the event the Participant is requiredunder the Performance Award Agreement to pay the Company or its Affiliates, ormake arrangements satisfactory to the Company or its Affiliates respectingpayment of, such withholding and employment-related taxes, the Administratormay, in its discretion and pursuant to such rules as it may adopt, requirethe Participant to satisfy such obligations, in whole or in part, by deliveringshares of the Company’s Common Stock or by electing to have the Companywithhold shares of Common Stock otherwise issuable to Participant as a resultof the grant of Performance Shares. Such shares shall have a Fair Market Valueequal to the minimum required tax withholding, based on the minimum statutorywithholding rates for federal and state tax purposes, including payroll taxes. Inno event may the Participant deliver shares having a Fair Market Value inexcess of such statutory minimum required tax withholding. The Participant’selection to deliver shares or to have shares withheld for this purpose shall bemade on or before the date that the amount of tax to be withheld is determinedunder applicable tax law. Such election shall be approved by the Administratorand otherwise comply with such rules as the Administrator may adopt toassure compliance with Rule 16b-3, or any successor provision, as then ineffect, of the General Rules and Regulations under the Securities ExchangeAct of 1934, if applicable.

 

(d)                                 Nontransferability.No Performance Award shall be transferable, in whole or in part, by theParticipant, other than by will or by the laws of descent and distribution. Ifthe Participant shall attempt any transfer of any Performance Award grantedunder the Plan, such transfer shall be void and the Performance Award shallterminate.

 

(e)                                  No Rights asStockholder. A Participant (or the Participant’s successor or successors)shall have no rights as a stockholder with respect to any shares covered by aPerformance Award until the date Participant is recorded on the stock transferbooks of the Company as the owners of the shares. No adjustment shall be madefor dividends (ordinary or extraordinary, whether in cash, securities or otherproperty), distributions or other rights for which the record date is prior tothe date such transfer is actually recorded (except as otherwise provided in Section 14of the Plan).

 

(f)                                    Other Provisions.The Performance Award Agreement authorized under this Section 12 shallcontain such other provisions as the Administrator shall deem advisable.

 

**SECTION 13.**

**STOCKAPPRECIATION RIGHTS**

 

Each Stock Appreciation Right grantedpursuant to this Section 13 shall be evidenced by a written stockappreciation right agreement (the “Stock Appreciation Right Agreement”). The

 

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Stock Appreciation RightAgreement shall be in such form as may be approved from time to time by theAdministrator and may vary from Participant to Participant; provided, however,that each Participant and each Stock Appreciation Right Agreement shall complywith and be subject to the following terms and conditions:

 

(a)                                  Awards. AStock Appreciation Right shall entitle the Participant to receive, uponexercise, cash, shares of Stock, or any combination thereof, having a valueequal to the excess of (i) the Fair Market Value of a specified number ofshares of Stock on the date of such exercise, over (ii) a specifiedexercise price. Unless otherwise determined by the Administrator, the specifiedexercise price shall not be less than 100% of the Fair Market Value of suchshares of Stock on the date of grant of the Stock Appreciation Right. A StockAppreciation Right may be granted independent of or in tandem with a previouslyor contemporaneously granted Option.

 

(b)                                 Term andExercisability. The term during which any Stock Appreciation Right grantedunder the Plan may be exercised shall be established in each case by theAdministrator. The Stock Appreciation Right Agreement shall state when theStock Appreciation Right becomes exercisable and shall also state the maximumterm during which such Stock Appreciation Right may be exercised. In the eventa Stock Appreciation Right is exercisable immediately, the manner of exerciseof such Stock Appreciation Right in the event it is not exercised in fullimmediately shall be specified in the Stock Appreciation Right Agreement. TheAdministrator may accelerate the exercisability of any Stock Appreciation Rightgranted hereunder which is not immediately exercisable as of the date of grant.

 

(c)                                  Withholding Taxes.The Company or its Affiliate shall be entitled to withhold and deduct fromfuture wages of the Participant all legally required amounts necessary tosatisfy any and all withholding and employment-related taxes attributable tothe Participant’s Stock Appreciation Right. In the event the Participant isrequired under the Stock Appreciation Right to pay the Company or itsAffiliate, or make arrangements satisfactory to the Company or its Affiliaterespecting payment of, such withholding and employment-related taxes, theAdministrator may, in its discretion and pursuant to such rules as it mayadopt, permit the Participant to satisfy such obligations, in whole or in part,by delivering shares of Common Stock or by electing to have the Companywithhold Common Stock issuable to Participant as a result of the exercise ofthe Stock Appreciation Right. Such shares shall have a Fair Market Value equalto the minimum required tax withholding, based on the minimum statutorywithholding rates for federal and state tax purposes, including payroll taxes. Inno event may the Participant deliver shares having a Fair Market Value inexcess of such statutory minimum required tax withholding. The Participant’selection to deliver shares of Common Stock for this purpose shall be made on orbefore the date that the amount of tax to be withheld is determined underapplicable tax law. Such election shall be approved by the Administrator andotherwise comply with such rules as the Administrator may adopt to assurecompliance with Rule 16b-3, or any successor provision, as then in effect,of the General Rules and Regulations under the Securities Exchange Act of1934, if applicable.

 

(d)                                 Nontransferability.No Stock Appreciation Right shall be transferable, in whole or in part, by theParticipant, other than by will or by the laws of descent and distribution. Ifthe

 

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Participant shall attempt anytransfer of any Stock Appreciation Right granted under the Plan, such transfershall be void and the Stock Appreciation Right shall terminate.

 

(e)                                  No Rights asStockholder. A Participant (or the Participant’s successor or successors)shall have no rights as a stockholder with respect to any shares covered by aStock Appreciation Right until the date of the issuance of a stock certificateevidencing such shares. No adjustment shall be made for dividends (ordinary orextraordinary, whether in cash, securities or other property), distributions orother rights for which the record date is prior to the date such stockcertificate is actually issued (except as otherwise provided in Section 14of the Plan).

 

(f)                                    Other Provisions.The Stock Appreciation Right Agreement authorized under this Section 13shall contain such other provisions as the Administrator shall deem advisable,including but not limited to any restrictions on the exercise of the StockAppreciation Right which may be necessary to comply with Rule 16b-3 of theSecurities Exchange Act of 1934, as amended.

 

**SECTION 14.**

**RECAPITALIZATION,SALE, MERGER, EXCHANGE**

**ORLIQUIDATION**

 

In the event of an increase or decrease inthe number of shares of Common Stock resulting from a stock dividend, stocksplit, reverse split, combination or reclassification of the Common Stock, orany other increase or decrease in the number of issued shares of Common Stockeffected without receipt of consideration by the Company, the Administratormay, in its sole discretion, adjust the number of shares of Stock reservedunder Section 6 hereof, the number of shares of Stock covered by eachoutstanding Award, and, if applicable, the price per share thereof to reflectsuch change. Additional shares which may become covered by the Award pursuantto such adjustment shall be subject to the same restrictions as are applicableto the shares with respect to which the adjustment relates.

 

Unless otherwise provided in the agreementevidencing an Award, in the event of an acquisition of the Company through: thesale of substantially all of the Company’s assets and the consequentdiscontinuance of its business; an acquisition of 50% or more of the totalcombined voting power of all classes of securities of the Company; or a merger,consolidation, exchange, reorganization, reclassification, extraordinarydividend, divestiture (including a spin-off), liquidation, recapitalization,stock split, stock dividend or otherwise (collectively referred to as a “transaction”),the Administrator may provide for one or more of the following:

 

(a)                                  the equitableacceleration of the exercisability of any outstanding Options or StockAppreciation Rights, the vesting and payment of any Performance Awards, or thelapsing of the risks of forfeiture on any Restricted Stock Awards;

 

(b)                                 the completetermination of this Plan, the cancellation of outstanding Options or StockAppreciation Rights not exercised prior to a date specified by the Board (whichdate shall give Participants a reasonable period of time in which to exercise suchOption or Stock

 

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Appreciation Right prior to theeffectiveness of such transaction), the cancellation of any Performance Awardand the cancellation of any Restricted Stock Awards for which the risks offorfeiture have not lapsed;

 

(c)                                  that Participantsholding outstanding Options and Stock Appreciation Rights shall receive, withrespect to each share of Stock subject to such Option or Stock AppreciationRight, as of the effective date of any such transaction, cash in an amountequal to the excess of the Fair Market Value of such Stock on the dateimmediately preceding the effective date of such transaction over the price pershare of such Options or Stock Appreciation Rights; provided that the Board may,in lieu of such cash payment, distribute to such Participants shares of CommonStock of the Company or shares of stock of any corporation succeeding theCompany by reason of such transaction, such shares having a value equal to thecash payment herein;

 

(d)                                 that Participantsholding outstanding Restricted Stock Awards and Performance Share Awards shallreceive, with respect to each share of Stock subject to such Awards, as of theeffective date of any such transaction, cash in an amount equal to the Fair MarketValue of such Stock on the date immediately preceding the effective date ofsuch transaction; provided that the Board may, in lieu of such cash payment,distribute to such Participants shares of Common Stock of the Company or sharesof stock of any corporation succeeding the Company by reason of suchtransaction, such shares having a value equal to the cash payment herein;

 

(e)                                  the continuance ofthe Plan with respect to the exercise of Options or Stock Appreciation Rightswhich were outstanding as of the date of adoption by the Board of such plan forsuch transaction and the right to exercise such Options and Stock AppreciationRights as to an equivalent number of shares of stock of the corporationsucceeding the Company by reason of such transaction;

 

(f)                                    the continuance ofthe Plan with respect to Restricted Stock Awards for which the risks offorfeiture have not lapsed as of the date of adoption by the Board of such planfor such transaction and the right to receive an equivalent number of shares ofstock of the corporation succeeding the Company by reason of such transaction;and

 

(g)                                 the continuance of thePlan with respect to Performance Awards and, to the extent applicable, theright to receive an equivalent number of shares of stock of the corporationsucceeding the Company by reason for such transaction.

 

The Administrator may condition any acceleration of exercisability orother right to which Participant is not entitled upon any additional agreementsfrom Participant, including, without limitation, a Participant agreeing toadditional restrictive covenants (e.g., confidentiality, noncompetition,non-solicitation, non-circumvention, etc.) and Participant agreeing to continueto perform services for the Company, a successor or purchaser of all or anyportion of the Company’s business or related assets for substantially the samebase salary for a period of up to six months.

 

The Administrator may restrict the rights of or the applicability ofthis Section 14 to the extent necessary to comply with Section 16(b) ofthe Securities Exchange Act of 1934, the Internal

 

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Revenue Code or any other applicable law or regulation. The grant of anAward pursuant to the Plan shall not limit in any way the right or power of theCompany to make adjustments, reclassifications, reorganizations or changes ofits capital or business structure or to merge, exchange or consolidate or todissolve, liquidate, sell or transfer all or any part of its business orassets.

 

**SECTION 15.**

**INVESTMENTPURPOSE**

 

No shares of Stock shall be issued pursuantto the Plan unless and until there has been compliance, in the opinion ofCompany’s counsel, with all applicable legal requirements, including withoutlimitation, those relating to securities laws and stock exchange listingrequirements. As a condition to the issuance of Stock to Participant, theAdministrator may require Participant to (a) represent that the shares ofStock are being acquired for investment and not resale and to make such otherrepresentations as the Administrator shall deem necessary or appropriate toqualify the issuance of the shares as exempt from the Securities Act of 1933and any other applicable securities laws, and (b) represent thatParticipant shall not dispose of the shares of Stock in violation of theSecurities Act of 1933 or any other applicable securities laws.

 

As a further condition to the grant of anyOption or the issuance of Stock to Participant, Participant agrees to thefollowing:

 

(a)                                  In the event theCompany advises Participant that it plans an underwritten public offering ofits Common Stock in compliance with the Securities Act of 1933, as amended, andthe underwriter(s) seek to impose restrictions under which certainstockholders may not sell or contract to sell or grant any option to buy orotherwise dispose of part or all of their stock purchase rights of the CommonStock underlying Awards, Participant will not, for a period not to exceed 180days from the prospectus, sell or contract to sell or grant an option to buy orotherwise dispose of any Option granted to Participant pursuant to the Plan orany of the underlying shares of Common Stock without the prior written consentof the underwriter(s) or its representative(s).

 

(b)                                 In the event theCompany makes any public offering of its securities and determines in its solediscretion that it is necessary to reduce the number of issued but unexercisedstock purchase rights so as to comply with any state’s securities or Blue Skylaw limitations with respect thereto, the Board of Directors of the Companyshall have the right (i) to accelerate the exercisability of any Optionand the date on which such Option must be exercised, provided that the Companygives Participant prior written notice of such acceleration, and (ii) tocancel any Options or portions thereof which Participant does not exerciseprior to or contemporaneously with such public offering.

 

(c)                                  In the event of atransaction (as defined in Section 14 of the Plan), Participant willcomply with Rule 145 of the Securities Act of 1933 and any otherrestrictions imposed under other applicable legal or accounting principles ifParticipant is an “affiliate” (as defined in such

 

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applicable legal and accountingprinciples) at the time of the transaction, and Participant will execute anydocuments necessary to ensure compliance with such rules.

 

The Company reserves the right to place alegend on any stock certificate issued in connection with an Award pursuant tothe Plan to assure compliance with this Section 15.

 

**SECTION 16.**

**AMENDMENTOF THE PLAN**

 

The Administrator may from time to time,insofar as permitted by law, suspend or discontinue the Plan or revise or amendit in any respect; provided, however, that no such revision or amendment,except as is authorized in Section 14, shall impair the terms andconditions of any Award which is outstanding on the date of such revision oramendment to the material detriment of the Participant without the consent ofthe Participant. Notwithstanding the foregoing, no such revision or amendmentshall (i) materially increase the number of shares subject to the Planexcept as provided in Section 14 hereof, (ii) change the designationof the class of employees eligible to receive Awards, (iii) decrease theprice at which Options may be granted, or (iv) materially increase thebenefits accruing to Participants under the Plan without the approval of thestockholders of the Company if such approval is required for compliance withthe requirements of any applicable law or regulation. Furthermore, the Plan maynot, without the approval of the stockholders, be amended in any manner thatwill cause incentive stock options to fail to meet the requirements of Section 422of the Internal Revenue Code.

 

**SECTION 17.**

**NOOBLIGATION TO EXERCISE OPTION**

 

The granting of an Option shall impose noobligation upon the Participant to exercise such Option. Further, the grantingof an Award hereunder shall not impose upon the Company or any Affiliate anyobligation to retain the Participant in its employ for any period.

 

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