EX-10.1








    Exhibit 10.1



 




    BELL
    INDUSTRIES, INC.

    2007
    STOCK INCENTIVE PLAN, AS AMENDED



 




    ARTICLE ONE

    



 




    GENERAL
    PROVISIONS
    



 


		
	
    A.  
	
    Purpose
    of the Plan




 



    1. This 2007 Stock Incentive Plan (the “Plan”) is
    intended to promote the interests of Bell Industries, Inc., a
    California corporation (the “Corporation”), by
    providing eligible persons with the opportunity to acquire a
    proprietary interest, or otherwise increase their proprietary
    interest, in the Corporation as an incentive for them to remain
    in the Service of the Corporation.



 



    2. Capitalized terms shall have the meanings assigned to
    such terms in the attached Appendix.



 


		
	
    B.  
	
    Structure
    of the Plan




 



    1. The Plan shall be divided into two separate equity
    programs:



 



    (a) the Discretionary Option Grant Program under which
    eligible persons may, at the discretion of the Plan
    Administrator, be granted options to purchase shares of Common
    Stock and stock appreciation rights; and



 



    (b) the Stock Issuance Program under which eligible persons
    may, at the discretion of the Plan Administrator, be issued
    shares of Common Stock directly, either through the immediate
    purchase of such shares, as bonus for services rendered the
    Corporation (or any Parent or Subsidiary), or pursuant to share
    right awards which entitle Participants to receive shares upon
    the attainment of designated Performance Goals or Service
    requirements.



 



    2. The provisions of Articles One and Five shall apply
    to both equity programs under the Plan and shall govern the
    interests of all persons under the Plan.



 


		
	
    C.  
	
    Administration
    of the Plan




 



    1. The Plan shall be administered by the Board or one or
    more committees appointed by the Board, provided that with
    respect to Section 16 Insiders (a) the Board may
    administer the Plan in compliance with
    Rule 16b-3
    of the 1934 Act, or (b) the Primary Committee may, at
    the Board’s discretion, administer the Plan. Administration
    of the Plan may otherwise, at the Board’s discretion, be
    vested in the Primary Committee or a Secondary Committee. Any
    discretionary option grants or stock issuances to members of the
    Board or the Primary Committee must be authorized and approved
    by a disinterested majority of the Board.



 



    2. Members of the Primary Committee or any Secondary
    Committee shall serve for such period of time as the Board may
    determine and may be removed by the Board at any time. The Board
    may also at any time terminate the functions of the Primary
    Committee or any Secondary Committee and reassume all powers and
    authority previously delegated to such committee.



 



    3. Each Plan Administrator shall, within the scope of its
    administrative functions under the Plan, have full power and
    authority (subject to the provisions of the Plan) to establish
    such rules and regulations as it may deem appropriate for proper
    administration of the Discretionary Option Grant and Stock
    Issuance Programs and to make such determinations under, and
    issue such interpretations of, the provisions of such programs
    and any outstanding options or stock issuances thereunder as it
    may deem necessary or advisable. Decisions of the Plan
    Administrator within the scope of its administrative functions
    under the Plan shall be final and binding on all parties who
    have an interest in the Discretionary Option Grant and Stock
    Issuance Programs under its jurisdiction or any option or stock
    issuance thereunder.



 



    4. Each Plan Administrator shall, within the scope of its
    administrative jurisdiction under the Plan, have full authority
    to determine: (a) with respect to the option grants or
    stock appreciation rights under the Discretionary




    

    A-1








 






    Option Grant Program, which eligible persons are to receive
    grants, the time or times when such grants are to be made, the
    number of shares to be covered by each such grant, the status of
    a granted option as either an Incentive Option or a
    Non-Statutory Option, the time or times when each option is to
    become exercisable, the vesting schedule (if any) applicable to
    the option shares and the maximum term for which the option is
    to remain outstanding; and (b) with respect to stock
    issuances under the Stock Issuance Program, which eligible
    persons are to receive stock issuances, the time or times when
    such issuances are to be made, the number of shares to be issued
    to each Participant, the vesting schedule (if any) applicable to
    the issued shares and the consideration for such shares.



 



    5. The Plan Administrator shall have the absolute
    discretion either to grant options or stock appreciation rights
    in accordance with the Discretionary Option Grant Program or to
    effect stock issuances in accordance with the Stock Issuance
    Program.



 



    6. Service on the Primary Committee or any Secondary
    Committee shall constitute service as a Board member, and
    members of each such committee shall accordingly be entitled to
    full indemnification and reimbursement as Board members for
    their service on such committee. No member of the Primary
    Committee or any Secondary Committee shall be liable for any act
    or omission made in good faith with respect to the Plan or any
    option grants or stock issuances under the Plan.



 


		
	
    D.  
	
    Eligibility




 



    1. The persons eligible to participate in the Discretionary
    Option Grant and Stock Issuance Programs are as follows:



 



    (a) Employees,



 



    (b) non-employee members of the Board or the board of
    directors of any Parent or Subsidiary, and



 



    (c) consultants and other independent advisors who provide
    services to the Corporation (or any Parent or Subsidiary).



 




    E.  Stock
    Subject to the Plan



 



    1. The stock issuable under the Plan shall be shares of
    authorized but unissued or reacquired Common Stock, including
    shares repurchased by the Corporation on the open market. The
    maximum number of shares of Common Stock initially reserved for
    issuance over the term of the Plan shall not exceed 1,000,000
    [amendment proposal: 5,000,000] shares. No one person
    participating in the Plan may receive stock options, direct
    stock issuances and share right awards for more than
    1,000,000 [amendment proposal: 2,000,000] shares of
    Common Stock in the aggregate in any calendar year.



 



    2. Shares of Common Stock subject to outstanding options
    (including options incorporated into this Plan from the
    Predecessor Plan) shall be available for subsequent issuance
    under the Plan to the extent those options expire or terminate
    for any reason prior to exercise in full. Unvested shares issued
    under the Plan and subsequently cancelled or repurchased by the
    Corporation at the original exercise or issue price paid per
    share, pursuant to the Corporation’s repurchase rights
    under the Plan, shall be added back to the number of shares of
    Common Stock reserved for issuance under the Plan and shall
    accordingly be available for reissuance through one or more
    subsequent option grants or direct stock issuances under the
    Plan. In addition, should the exercise price of an option under
    the Plan be paid with shares of Common Stock or should shares of
    Common Stock otherwise issuable under the Plan be withheld by
    the Corporation in satisfaction of the withholding taxes
    incurred in connection with the exercise of an option or the
    vesting of a stock issuance under the Plan, then the number of
    shares of Common Stock available for issuance under the Plan
    shall be reduced only by the net number of shares of Common
    Stock issued to the holder of such option or stock issuance, and
    not by the gross number of shares for which the option is
    exercised or which vest under the stock issuance. However,
    shares of Common Stock underlying one or more stock appreciation
    rights exercised under Section D of Article Two of the
    Plan shall not be available for subsequent issuance under the
    Plan.




    

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    3. If any change is made to the Common Stock by reason of
    any stock split, stock dividend, recapitalization, combination
    of shares, exchange of shares or other change affecting the
    outstanding Common Stock as a class without the
    Corporation’s receipt of consideration, appropriate
    adjustments shall be made to:



 



    (a) the maximum number
    and/or class
    of securities issuable under the Plan;



 



    (b) the number
    and/or class
    of securities for which any one person may be granted stock
    options, direct stock issuances and share right awards under
    this Plan per calendar year;



 



    (c) the number
    and/or class
    of securities and the exercise price per share in effect under
    each outstanding option under the Plan;



 



    (d) the number
    and/or class
    of securities and exercise price per share in effect under each
    outstanding option incorporated into this Plan from the
    Predecessor Plan; and



 



    (e) the maximum number
    and/or class
    of securities which may be added to the Plan through the
    forfeiture, surrender, cancellation or termination of shares
    issued under the Predecessor Plan. Such adjustments to the
    outstanding options are to be effected in a manner which shall
    preclude the enlargement or dilution of rights and benefits
    under such options. The adjustments determined by the Plan
    Administrator shall be final, binding and conclusive.



 




    ARTICLE TWO

    



 




    DISCRETIONARY
    OPTION GRANT PROGRAM
    



 


		
	
    A.  
	
    Option
    Terms




 



    Each option shall be evidenced by one or more documents in the
    form approved by the Plan Administrator; provided, however, that
    each such document shall comply with the terms specified below.
    Each document evidencing an Incentive Option shall, in addition,
    be subject to the provisions of the Plan applicable to such
    option.



 



    1. Exercise Price.



 



    (a) The exercise price per share shall be fixed by the Plan
    Administrator but shall not be less than 100% of the Fair Market
    Value per share of Common Stock on the option grant date.



 



    (b) The exercise price shall become immediately due upon
    exercise of the option and may, subject to the provisions of
    Section A of Article Five and the documents evidencing
    the option, be payable in one or more of the forms specified
    below:



 



    (i) cash or certified check made payable to the Corporation,



 



    (ii) shares of Common Stock held for the requisite period
    necessary to avoid a charge to the Corporation’s earnings
    for financial reporting purposes and valued at Fair Market Value
    on the Exercise Date, or



 



    (iii) to the extent the sale complies with all applicable
    laws relating to the regulation and sale of securities, through
    a special sale and remittance procedure pursuant to which the
    Optionee shall concurrently provide irrevocable written
    instructions to: (x) a brokerage firm to effect the
    immediate sale of the purchased shares and remit to the
    Corporation, out of the sale proceeds available on the
    settlement date, sufficient funds to cover the aggregate
    exercise price payable for the purchased shares plus all
    applicable Federal, state and local income and employment taxes
    required to be withheld by the Corporation by reason of such
    exercise; and (y) the Corporation to deliver the
    certificates for the purchased shares directly to such brokerage
    firm in order to complete the sale.



 



    Except to the extent such sale and remittance procedure is
    utilized, payment of the exercise price for the purchased shares
    must be made on the Exercise Date.



 



    2. Exercise and Term of Options.




    

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    Each option shall be exercisable at such time or times, during
    such period and for such number of shares as shall be determined
    by the Plan Administrator and set forth in the documents
    evidencing the option. However, no option shall have a term in
    excess of ten years measured from the option grant date.



 



    3. Effect of Termination of Service.



 



    (a) The following provisions shall govern the exercise of
    any options held by the Optionee at the time of cessation of
    Service or death:



 



    (i) Any option outstanding at the time of the
    Optionee’s cessation of Service for any reason shall remain
    exercisable for such period of time thereafter as shall be
    determined by the Plan Administrator and set forth in the
    documents evidencing the option.



 



    (ii) Any option held by the Optionee at the time of death
    and exercisable in whole or in part at that time may be
    subsequently exercised by the personal representative of the
    Optionee’s estate or by the person or persons to whom the
    option is transferred pursuant to the Optionee’s will or in
    accordance with the laws of descent and distribution of by the
    Optionee’s designated beneficiary or beneficiaries of that
    option.



 



    (iii) Except as otherwise determined in the discretion of
    the Plan Administrator either at the time an option is granted
    or at any time the option remains outstanding, should the
    Optionee’s Service be terminated for Misconduct or should
    the Optionee otherwise engage in Misconduct while holding one or
    more outstanding options under this Article Two, then all
    those options shall terminate immediately and cease to be
    outstanding.



 



    (b) During the applicable post-Service exercise period, the
    option may not be exercised in the aggregate for more than the
    number of vested shares for which the option is exercisable on
    the date of the Optionee’s cessation of Service. Upon the
    expiration of the applicable exercise period or (if earlier)
    upon the expiration of the option term, the option shall
    terminate and cease to be outstanding for any vested shares for
    which the option has not been exercised. However, the option
    shall, immediately upon the Optionee’s cessation of
    Service, terminate and cease to be outstanding to the extent the
    option is not otherwise at that time exercisable for vested
    shares.



 



    (c) The Plan Administrator shall have complete discretion,
    either at the time an option is granted or at any time while the
    option remains outstanding, to:



 



    (i) extend the period of time for which the option is to
    remain exercisable following the Optionee’s cessation of
    Service from the limited exercise period otherwise in effect for
    that option to such greater period of time as the Plan
    Administrator shall deem appropriate, but in no event beyond the
    expiration of the option term, and/or



 



    (ii) permit the option to be exercised, during the
    applicable post-Service exercise period, not only with respect
    to the number of vested shares of Common Stock for which such
    option is exercisable at the time of the Optionee’s
    cessation of Service but also with respect to one or more
    additional installments in which the Optionee would have vested
    had the Optionee continued in Service.



 



    4. Shareholder Rights.



 



    The holder of an option shall have no shareholder rights with
    respect to the shares subject to the option until such person
    shall have exercised the option, paid the exercise price and
    become a holder of record of the purchased shares.



 



    5. Repurchase Rights.



 



    The Plan Administrator shall have the discretion to grant
    options which are exercisable for unvested shares of Common
    Stock. Should the Optionee cease Service while holding such
    unvested shares, the Corporation shall have the right to
    repurchase, at the exercise price paid per share, any or all of
    those unvested shares. The terms upon which such repurchase
    right shall be exercisable (including the period and procedure
    for exercise and the appropriate vesting schedule for the
    purchased shares) shall be established by the Plan Administrator
    and set forth in the document evidencing such repurchase right.



 



    6. Limited Transferability of Options.




    

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    During the lifetime of the Optionee, Incentive Options shall be
    exercisable only by the Optionee and shall not be assignable or
    transferable other than by will or by the laws of descent and
    distribution following the Optionee’s death. Non-Statutory
    Options shall be subject to the same limitation, except that a
    Non-Statutory Option may be assigned in whole or in part during
    Optionee’s lifetime to one or more members of the
    Optionee’s Immediate Family or to a trust established for
    the exclusive benefit of one or more members of the
    Optionee’s Immediate Family or the Optionee’s former
    spouse, to the extent such assignment is in connection with
    Optionee’s estate plan or pursuant to a domestic relations
    order. The assigned portion shall be exercisable only by the
    person or persons who acquire a proprietary interest in the
    option pursuant to such assignment. The terms applicable to the
    assigned portion shall be the same as those in effect for this
    option immediately prior to such assignment and shall be set
    forth in such documents issued to the assignee as the Plan
    Administrator may deem appropriate. Notwithstanding the
    foregoing, the Optionee may also designate one or more persons
    as the beneficiary or beneficiaries of his or her outstanding
    options under this Article Two, and those options shall, in
    accordance with such designation, automatically be transferred
    to such beneficiary or beneficiaries upon the Optionee’s
    death while holding those options. Such beneficiary or
    beneficiaries shall take the transferred option subject to all
    the terms and conditions of this Agreement, including (without
    limitation) the limited time period during which the option may
    be exercised following the Optionee’s death.



 


		
	
    B.  
	
    Incentive
    Options




 



    1. The terms specified below shall be applicable to all
    Incentive Options. Except as modified by the provisions of this
    Section B of Article Two, all the provisions of
    Articles One, Two and Five shall be applicable to Incentive
    Options. Options which are specifically designated as
    Non-Statutory Options when issued under the Plan shall NOT be
    subject to the terms of this Section B of Article Two.



 



    2. Eligibility.



 



    Incentive Options may only be granted to Employees.



 



    3. Exercise Price.



 



    The exercise price per share shall not be less than 100% of the
    Fair Market Value per share of Common Stock on the option grant
    date.



 



    4. Dollar Limitation.



 



    The aggregate Fair Market Value of the shares of Common Stock
    (determined as of the respective date or dates of grant) for
    which one or more options granted to any Employee under the Plan
    (or any other option plan of the Corporation or any Parent or
    Subsidiary) may for the first time become exercisable as
    Incentive Options during any one calendar year shall not exceed
    the sum of $100,000. To the extent the Employee holds two or
    more such options which become exercisable for the first time in
    the same calendar year, the foregoing limitation on the
    exercisability of such options as Incentive Options shall be
    applied on the basis of the order in which such options are
    granted.



 



    5. Failure to Qualify as Incentive Option.



 



    To the extent that any option governed by this Plan does not
    qualify as an Incentive Option by reason of the dollar
    limitation described in Section B.4 of this
    Article Two or for any other reason, such option shall
    continue to be outstanding and exercisable in accordance with
    its terms and conditions, but as a Non-Statutory Option under
    the Federal tax laws.



 



    6. 10% Shareholder.



 



    If any Employee to whom an Incentive Option is granted is a 10%
    Shareholder, then the exercise price per share shall not be
    less than 110% of the Fair Market Value per share of Common
    Stock on the option grant date, and the option term shall not
    exceed five years measured from the option grant date.




    

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    C.  
	
    Change in
    Control/Hostile Take-Over




 



    1. No option outstanding at the time of a Change in Control
    shall become exercisable on an accelerated basis if and to the
    extent:



 



    (a) that option is, in connection with the Change in
    Control, assumed by the successor corporation (or parent
    thereof) or otherwise continued in full force and effect
    pursuant to the terms of the Change in Control transaction,



 



    (b) such option is replaced with a cash incentive program
    of the successor corporation which preserves the spread existing
    at the time of the Change in Control on the shares of Common
    Stock for which the option is not otherwise at that time
    exercisable, provides for subsequent payout in accordance with
    the same exercise/vesting schedule applicable to those option
    shares and does not cause any IRC 409A Consequences, or



 



    (c) the acceleration of such option is subject to other
    limitations imposed by the Plan Administrator at the time of the
    option grant.



 



    However, if none of the foregoing conditions are satisfied, then
    each option outstanding at the time of the Change in Control but
    not otherwise exercisable for all the shares of Common Stock at
    that time subject to such option shall automatically accelerate
    so that each such option shall, immediately prior to the
    effective date of the Change in Control, become exercisable for
    all the shares of Common Stock at the time subject to such
    option and may be exercised for any or all of those shares as
    fully vested shares of Common Stock.



 



    2. All of the Corporation’s outstanding repurchase
    rights under the Discretionary Option Grant Program shall also
    terminate automatically, and the shares of Common Stock subject
    to those terminated rights shall immediately vest in full, in
    the event of any Change in Control, except to the extent:



 



    (a) those repurchase rights are assigned to the successor
    corporation (or parent thereof) or otherwise continued in full
    force and effect pursuant to the terms of the Change in Control
    transaction or



 



    (b) such accelerated vesting is precluded by other
    limitations imposed by the Plan Administrator at the time the
    repurchase right is issued.



 



    3. Immediately following the consummation of the Change in
    Control, all outstanding options shall terminate and cease to be
    outstanding, except to the extent assumed by the successor
    corporation (or parent thereof) or otherwise expressly continued
    in full force and effect pursuant to the terms of the Change in
    Control transaction.



 



    4. Each option which is assumed in connection with a Change
    in Control or otherwise continued in effect shall be
    appropriately adjusted, immediately after such Change in
    Control, to apply to the number and class of securities which
    would have been issuable to the Optionee in consummation of such
    Change in Control had the option been exercised immediately
    prior to such Change in Control. Appropriate adjustments to
    reflect such Change in Control shall also be made to:



 



    (a) the exercise price payable per share under each
    outstanding option (including options incorporated into this
    Plan from the Predecessor Plan), provided the aggregate exercise
    price payable for such securities shall remain the same;



 



    (b) the maximum number
    and/or class
    of securities available for issuance over the remaining term of
    the Plan;



 



    (c) the maximum number
    and/or class
    of securities available for issuance over the remaining term of
    the Plan;



 



    (d) the maximum number
    and/or class
    of securities for which any one person may be granted options,
    direct stock issuances and share right awards under the Plan per
    calendar year; and



 



    (e) the maximum number and class of securities which may be
    added to the Plan through the repurchase of shares issued under
    the Predecessor Plan. To the extent the actual holders of the
    Corporation’s outstanding Common Stock receive cash
    consideration for their Common Stock in consummation of the
    Change in Control transaction, the successor corporation may, in
    connection with the assumption of the outstanding options under




    

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    the Discretionary Option Grant Program, substitute one or more
    shares of its own common stock with a fair market value
    equivalent to the cash consideration paid per share of Common
    Stock in such Change in Control transaction.



 



    5. The Plan Administrator shall have the discretionary
    authority to structure one or more outstanding options under the
    Discretionary Option Grant Program so that those options shall,
    immediately prior to the effective date of a Change in Control,
    become exercisable for all the shares of Common Stock at that
    time subject to such options on an accelerated basis and may be
    exercised for any or all of such shares as fully vested shares
    of Common Stock, whether or not those options are to be assumed
    or otherwise continued in full force and effect or replaced with
    a cash incentive program pursuant to the express terms of the
    Change in Control transaction. In addition, the Plan
    Administrator shall have the discretionary authority to
    structure one or more of the Corporation’s repurchase
    rights under the Discretionary Option Grant Program so that
    those rights shall immediately terminate at the time of such
    Change in Control and shall not be assignable to the successor
    corporation (or parent thereof), and the shares subject to those
    terminated rights shall accordingly vest in full at the time of
    such Change in Control.



 



    6. The Plan Administrator shall have full power and
    authority to structure one or more outstanding options under the
    Discretionary Option Grant Program so that those options shall
    vest and become exercisable for all the shares of Common Stock
    at that time subject to such options on an accelerated basis in
    the event the Optionee’s Service is subsequently terminated
    by reason of an Involuntary Termination within a designated
    period (not to exceed 18 months) following the effective
    date of any Change in Control in which those options do not
    otherwise accelerate. Any options so accelerated shall remain
    exercisable for fully vested shares of Common Stock until the
    expiration or sooner termination of the option term. In
    addition, the Plan Administrator may structure one or more of
    the Corporation’s repurchase rights under the Discretionary
    Option Grant Program so that those rights shall immediately
    terminate with respect to any shares of Common Stock held by the
    Optionee at the time of his or her Involuntary Termination, and
    the shares subject to those terminated repurchase rights shall
    accordingly vest in full at that time.



 



    7. The Plan Administrator shall have the discretionary
    authority to structure one or more outstanding options under the
    Discretionary Option Grant Program so that those options shall,
    immediately prior to the effective date of a Hostile Take-Over,
    vest and become exercisable for all the shares of Common Stock
    at that time subject to such options on an accelerated basis and
    may be exercised for any or all of such shares as fully vested
    shares of Common Stock. In addition, the Plan Administrator
    shall have the discretionary authority to structure one or more
    of the Corporation’s repurchase rights under the
    Discretionary Option Grant Program so that those rights shall
    terminate automatically upon the consummation of such Hostile
    Take-Over, and the shares subject to those terminated rights
    shall thereupon immediately vest in full. Alternatively, the
    Plan Administrator may condition the automatic acceleration of
    one or more outstanding options under the Discretionary Option
    Grant Program and the termination of one or more of the
    Corporation’s outstanding repurchase rights under such
    program upon the Involuntary Termination of the Optionee’s
    Service within a designated period (not to exceed
    18 months) following the effective date of such Hostile
    Take-Over. Each option so accelerated shall remain exercisable
    for fully vested shares of Common Stock until the expiration or
    sooner termination of the option term.



 



    8. The portion of any Incentive Option accelerated in
    connection with change in Control or Hostile Take-Over shall
    remain exercisable as an Incentive Option only to the extent the
    applicable $100,000 limitation is not exceeded. To the extent
    such dollar limitation is exceeded, the accelerated portion of
    such option shall be exercisable as a Non-Statutory Option under
    the Federal tax laws.



 



    9. The grant of options under the Discretionary Option
    Grant Program shall in no way affect the right of the
    Corporation to adjust, reclassify, reorganize or otherwise
    change its capital or business structure or to merge,
    consolidate, dissolve, liquidate or sell or transfer all or any
    part of its business or assets.



 


		
	
    D.  
	
    Stock
    Appreciation Rights




 



    1. The Plan Administrator shall have full power and
    authority to grant to selected Optionees tandem stock
    appreciation rights
    and/or
    limited stock appreciation rights.




    

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    2. The following terms shall govern the grant and exercise
    of tandem stock appreciation rights:



 



    (a) One or more Optionees may be granted the right,
    exercisable upon such terms as the Plan Administrator may
    establish, to elect between the exercise of the underlying
    option for shares of Common Stock and the surrender of that
    option in exchange for a payment from the Corporation in an
    amount equal to the excess of (i) the Fair Market Value (on
    the option surrender date) of the number of shares in which the
    Optionee is at the time vested under the surrendered option (or
    surrendered portion thereof) over (ii) the aggregate
    exercise price payable for such shares.



 



    (b) No such option surrender shall be effective unless it
    is made in accordance with the terms and conditions of the grant
    as approved by the Plan Administrator. If the surrender is so
    made, then the payment to which the Optionee shall be entitled
    may be made in shares of Common Stock valued at Fair Market
    Value on the option surrender date, in cash, or partly in shares
    and partly in cash, as the Plan Administrator in its sole
    discretion shall establish and set forth in the document
    evidencing such tandem stock appreciation right.



 



    (c) If the surrender of an option is not made in accordance
    with the terms and conditions of the grant as approved by the
    Plan Administrator, then the Optionee shall retain whatever
    rights the Optionee had under the surrendered option (or
    surrendered portion thereof) on the option surrender date and
    may exercise such rights at any time prior to the later of
    (i) five business days after the receipt of the rejection
    notice or (ii) the last day on which the option is
    otherwise exercisable in accordance with the terms of the
    documents evidencing such option.



 



    3. The following terms shall govern the grant and exercise
    of limited stock appreciation rights:



 



    (a) One or more Section 16 Insiders may be granted
    limited stock appreciation rights with respect to their
    outstanding options.



 



    (b) Upon the occurrence of a Hostile Take-Over, each
    individual holding one or more options with such a limited stock
    appreciation rights shall have the unconditional right
    (exercisable for a
    30-day
    period following such Hostile Take-Over) to surrender each such
    option (or any portion thereof) to the Corporation. In return
    for the surrendered option, the Optionee shall receive a cash
    payment from the Corporation in an amount equal to the excess of
    (i) the Take-Over Price of the shares of Common Stock at
    the time subject to such option (whether or not the option is
    otherwise vested and exercisable for those shares) over
    (ii) the aggregate exercise price payable for those shares.
    Such cash payment shall be paid within five days following the
    option surrender date.



 



    (c) At the time such limited stock appreciation right is
    granted, the Plan Administrator shall pre-approve any subsequent
    exercise of that right in accordance with the terms of this
    Section D. Accordingly, no further approval of the Plan
    Administrator or the Board shall be required at the time of the
    actual option surrender and cash payment.



 



    (d) The balance of the option (if any) shall remain
    outstanding and exercisable in accordance with the documents
    evidencing such option.



 




    ARTICLE THREE

    



 




    STOCK
    ISSUANCE PROGRAM
    



 


		
	
    A.  
	
    Stock
    Issuances




 



    Shares of Common Stock may be issued under the Stock Issuance
    Program through direct and immediate issuances without any
    intervening option grants. Each such stock issuance shall be
    evidenced by a Stock Issuance Agreement which complies with the
    terms specified below. Shares of Common Stock may also be issued
    under the Stock Issuance Program pursuant to share right awards
    which entitle the recipients to receive those shares upon the
    attainment of designated Performance Goals or Service
    requirements.



 


		
	
    B.  
	
    Stock
    Issuance Terms




 



    1. Purchase Price.




    

    A-8








 






    (a) The purchase price per share shall be fixed by the Plan
    Administrator, but shall not be less than 100% of the Fair
    Market Value per share of Common Stock on the issuance date.



 



    (b) Subject to the provisions of Section A of
    Article Five, shares of Common Stock may be issued under
    the Stock Issuance Program for any of the following items of
    consideration which the Plan Administrator may deem appropriate
    in each individual instance:



 



    (i) cash or certified check made payable to the
    Corporation, or



 



    (ii) past services rendered to the Corporation (or any
    Parent or Subsidiary).



 



    2. Vesting Provisions.



 



    (a) Shares of Common Stock issued under the Stock Issuance
    Program may, in the discretion of the Plan Administrator, be
    fully and immediately vested upon issuance or may vest in one or
    more installments over the Participant’s period of Service
    or upon attainment of specified performance objectives. The
    elements of the vesting schedule applicable to any unvested
    shares of Common Stock issued under the Stock Issuance Program
    shall be determined by the Plan Administrator and incorporated
    into the Stock Issuance Agreement. Shares of Common Stock may
    also be issued under the Stock Issuance Program pursuant to
    share right awards which entitle the recipients to receive those
    shares upon the attainment of designated Performance Goals or
    Service requirements. Upon the attainment of such Performance
    Goals or Service requirements, fully vested shares of Common
    Stock shall be issued upon satisfaction of those share right
    awards. For purposes of qualifying grants of stock as
    “performance-based compensation” under
    Section 162(m) of the Code, the Administrator, in its
    discretion, may set restrictions based upon the achievement of
    Performance Goals. The Performance Goals shall be set by the
    Administrator on or before the latest date permissible to enable
    the stock to qualify as “performance-based
    compensation” under Section 162(m) of the Code. In
    granting stock which is intended to qualify under
    Section 162(m) of the Code, the Administrator shall follow
    any procedures determined by it from time to time to be
    necessary or appropriate to ensure qualification of the stock
    under Section 162(m) of the Code (e.g., in determining the
    Performance Goals).



 



    (b) Any new, substituted or additional securities or other
    property(including money paid other than as a regular cash
    dividend) which the Participant may have the right to receive
    with respect to the Participant’s unvested shares of Common
    Stock by reason of any stock dividend, stock split,
    recapitalization, combination of shares, exchange of shares or
    other change affecting the outstanding Common Stock as a class
    without the Corporation’s receipt of consideration shall be
    issued subject to: (i) the same vesting requirements
    applicable to the Participant’s unvested shares of Common
    Stock; and (ii) such escrow arrangements as the Plan
    Administrator shall deem appropriate.



 



    (c) The Participant shall have full shareholder rights with
    respect to any shares of Common Stock issued to the Participant
    under the Stock Issuance Program, whether or not the
    Participant’s interest in those shares is vested.
    Accordingly, the Participant shall have the right to vote such
    shares and to receive any regular cash dividends paid on such
    shares. The holder of a share right award shall have no
    shareholder rights with respect to such award until shares of
    Common Stock have been issued to such Participant in
    satisfaction of such award.



 



    (d) Should the Participant cease to remain in Service while
    holding one or more unvested shares of Common Stock issued under
    the Stock Issuance Program or should the performance objectives
    not be attained with respect to one or more such unvested shares
    of Common Stock, then those shares shall be immediately
    surrendered to the Corporation for cancellation, and the
    Participant shall have no further shareholder rights with
    respect to those shares. To the extent the surrendered shares
    were previously issued to the Participant for consideration paid
    in cash or cash equivalent (including the Participant’s
    purchase-money indebtedness), the Corporation shall repay to the
    Participant the cash consideration paid for the surrendered
    shares and shall cancel the unpaid principal balance of any
    outstanding purchase-money note of the Participant attributable
    to the surrendered shares.



 



    (e) The Plan Administrator may in its discretion waive the
    surrender and cancellation of one or more unvested shares of
    Common Stock which would otherwise occur upon the cessation of
    the Participant’s Service or then on-attainment of the
    performance objectives applicable to those shares. Such waiver
    shall result in the immediate vesting of the Participant’s
    interest in the shares as to which the waiver applies. Such
    waiver may be effected at




    

    A-9








 






    anytime, whether before or after the Participant’s
    cessation of Service or the attainment or non-attainment of the
    applicable performance objectives.



 



    (f) Outstanding share right awards under the Stock Issuance
    Program shall automatically terminate, and no shares of Common
    Stock shall actually be issued in satisfaction of those awards,
    if the Performance Goals or Service requirements established for
    such awards are not attained. The Plan Administrator, however,
    shall have the discretionary authority to issue shares of Common
    Stock under one or more outstanding share right awards as to
    which the designated Performance Goals or Service requirements
    have not been attained.



 


		
	
    C.  
	
    Change in
    Control/Hostile Take-Over




 



    1. All of the Corporation’s outstanding repurchase
    rights under the Stock Issuance Program shall terminate
    automatically, and all the shares of Common Stock subject to
    those terminated rights shall immediately vest in full, in the
    event of any Change in Control, except to the extent
    (a) those repurchase rights are assigned to the successor
    corporation (or parent thereof) or otherwise continued in full
    force and effect pursuant to the express terms of the Change in
    Control transaction or (b) such accelerated vesting is
    precluded by other limitations imposed in the Stock Issuance
    Agreement.



 



    2. The Plan Administrator shall have the discretionary
    authority to structure one or more of the Corporation’s
    repurchase rights under the Stock Issuance Program so that those
    rights shall automatically terminate in whole or in part upon
    the occurrence of a Change in Control and shall not be
    assignable to the successor corporation (or parent thereof), and
    the shares of Common Stock subject to those terminated rights
    shall immediately vest in full at the time of such Change in
    Control.



 



    3. The Plan Administrator shall also have the discretionary
    authority to structure one or more of the Corporation’s
    repurchase rights under the Stock Issuance Program so that those
    rights shall automatically terminate in whole or in part, and
    the shares of Common Stock subject to those terminated rights
    shall immediately vest in full, upon the Involuntary Termination
    of the Participant’s Service within a designated period
    (not to exceed 18 months) following the effective date of
    any Change in Control in which those repurchase rights do not
    otherwise terminate.



 



    4. The Plan Administrator shall also have the discretionary
    authority to structure one or more of the Corporation’s
    repurchase rights under the Stock Issuance Program so that those
    rights shall automatically terminate in whole or in part upon
    the occurrence of a Hostile Take-Over, and the shares of Common
    Stock subject to those terminated rights shall immediately vest
    in full at the time of such Hostile Take-Over.



 




    ARTICLE FOUR



 



    [RESERVED]



 




    ARTICLE FIVE



 



    MISCELLANEOUS



 


		
	
    A.  
	
    Financing




 



    The Plan Administrator may permit any Optionee or Participant to
    pay the option exercise price under the Discretionary Option
    Grant Program or the purchase price of shares issued under the
    Stock Issuance Program by delivering a full-recourse, interest
    bearing promissory note payable in one or more installments,
    provided that such purchase with a promissory note shall not be
    permitted if it will cause any violation of the Sarbanes-Oxley
    Act of 2002. The terms of any such promissory note (including
    the interest rate and the terms of repayment) shall be
    established by the Plan Administrator in its sole discretion. In
    no event may the maximum credit available to the Optionee or
    Participant exceed the sum of (1) the aggregate option
    exercise price or purchase price payable for the purchased
    shares plus (2) any Federal, state and local income and
    employment tax liability incurred by the Optionee or the
    Participant in connection with the option exercise or share
    purchase.




    

    A-10








 





		
	
    B.  
	
    Share
    Escrow/Legends




 



    Unvested shares issued under the Plan may, in the Plan
    Administrator’s discretion, be held in escrow by the
    Corporation until the Participant’s interest in such shares
    vests or may be issued directly to the Participant with
    restrictive legends on the certificates evidencing those
    unvested shares.



 


		
	
    C.  
	
    Tax
    Withholding




 



    1. The Corporation’s obligation to deliver shares of
    Common Stock upon the exercise of options or the issuance or
    vesting of such shares under the Plan shall be subject to the
    satisfaction of all applicable Federal, state and local income
    and employment tax withholding requirements.



 



    2. The Plan Administrator may, in its discretion, provide
    any or all holders of Non-Statutory Options or unvested shares
    of Common Stock under the Plan with the right to use shares of
    Common Stock in satisfaction of all or part of the Taxes
    incurred by such holders in connection with the exercise of
    their options or the vesting of their shares. Such right may be
    provided to any such holder in either or both of the following
    formats:



 



    (a) The election to have the Corporation withhold from the
    shares of Common Stock otherwise issuable upon the exercise of
    such Non-Statutory Option or the vesting of such shares, a
    portion of those shares with an aggregate Fair Market Value
    equal to the amount of the Taxes (not to exceed one hundred
    percent (100%) of such Taxes) to be satisfied in such manner as
    designated by the holder in writing; or



 



    (b) The election to deliver to the Corporation, at the time
    the Non-Statutory Option is exercised or the shares vest, one or
    more shares of Common Stock previously acquired by such holder
    (other than in connection with the option exercise or share
    vesting triggering the Taxes) with an aggregate Fair Market
    Value equal to the amount of the Taxes (not to exceed 100% of
    such Taxes) to be satisfied in such manner as designated by the
    holder in writing.



 


		
	
    D.  
	
    Effective
    Date and Term of the Plan




 



    1. The Plan shall become effective immediately upon the
    Plan Effective Date. Options may be granted under the
    Discretionary Option Grant at any time on or after the Plan
    Effective Date. However, no options granted under the Plan maybe
    exercised, and no shares shall be issued under the Plan, until
    the Plan is approved by the Corporation’s shareholders. If
    such shareholder approval is not obtained within 12 months
    after the Plan Effective Date, then all options previously
    granted under this Plan shall terminate and cease to be
    outstanding, and no further options shall be granted and no
    shares shall be issued under the Plan.



 



    2. The Plan shall serve as the successor to the Predecessor
    Plan, and no further option grants or direct stock issuances
    shall be made under the Predecessor Plan after the Plan
    Effective Date. All options outstanding under the Predecessor
    Plan on the Plan Effective Date shall be incorporated into the
    Plan at that time and shall be treated as outstanding options
    under the Plan. However, each outstanding option so incorporated
    shall continue to be governed solely by the terms of the
    documents evidencing such option, and no provision of the Plan
    shall be deemed to affect or otherwise modify the rights or
    obligations of the holders of such incorporated options with
    respect to their acquisition of shares of Common Stock.



 



    3. One or more provisions of the Plan, including (without
    limitation) the option/vesting acceleration provisions of
    Article Two relating to Changes in Control and Hostile
    Take-Overs, may, in the Plan Administrator’s discretion, be
    extended to one or more options incorporated from the
    Predecessor Plan which do not otherwise contain such provisions.



 



    4. The Plan shall terminate upon the earliest of
    (a) the tenth anniversary of the Plan Effective Date,
    (b) the date on which all shares available for issuance
    under the Plan shall have been issued as fully-vested shares or
    (c) the termination of all outstanding options in
    connection with a Change in Control. Upon such plan termination,
    all outstanding option grants and unvested stock issuances shall
    thereafter continue to have force and effect in accordance with
    the provisions of the documents evidencing such grants or
    issuances.




    

    A-11








 





		
	
    E.  
	
    Amendment
    of the Plan




 



    1. The Board shall have complete and exclusive power and
    authority to amend or modify the Plan in any or all respects.
    However, no such amendment or modification shall adversely
    affect the rights and obligations with respect to stock options,
    stock appreciation rights or unvested stock issuances at the
    time outstanding under the Plan unless the Optionee or the
    Participant consents to such amendment or modification. In
    addition, certain amendments may require shareholder approval
    pursuant to applicable laws or regulations.



 



    2. Options to purchase shares of Common Stock may be
    granted under the Discretionary Option Grant Program and shares
    of Common Stock may be issued under the Stock Issuance Program
    that are in each instance in excess of the number of shares then
    available for issuance under the Plan, provided any excess
    shares actually issued under those programs shall be held in
    escrow until there is obtained any required approval of an
    amendment sufficiently increasing the number of shares of Common
    Stock available for issuance under the Plan. If such approval is
    not obtained within 12 months after the date the first such
    excess issuances are made, then (a) any unexercised options
    granted on the basis of such excess shares shall terminate and
    cease to be outstanding and (b) the Corporation shall
    promptly refund to the Optionees and the Participants the
    exercise or purchase price paid for any excess shares issued
    under the Plan and held in escrow, together with interest(at the
    applicable Short Term Federal Rate) for the period the shares
    were held in escrow, and such shares shall thereupon be
    automatically cancelled and cease to be outstanding.



 


		
	
    F.  
	
    Use of
    Proceeds




 



    Any cash proceeds received by the Corporation from the sale of
    shares of Common Stock under the Plan shall be used for general
    corporate purposes.



 


		
	
    G.  
	
    Regulatory
    Approvals




 



    1. The implementation of the Plan, the granting of any
    stock option under the Plan and the issuance of any shares of
    Common Stock (a) upon the exercise of any granted option or
    (b) under the Stock Issuance Program shall be subject to
    the Corporation’s procurement of all approvals and permits
    required by regulatory authorities having jurisdiction over the
    Plan, the stock options granted under it and the shares of
    Common Stock issued pursuant to it.



 



    2. No shares of Common Stock or other assets shall be
    issued or delivered under the Plan unless and until there shall
    have been compliance with all applicable requirements of Federal
    and state securities laws, including the filing and
    effectiveness of the
    Form S-8
    registration statement for the shares of Common Stock issuable
    under the Plan, and all applicable listing requirements of any
    stock exchange (or the Nasdaq National Market, if applicable) on
    which Common Stock is then listed for trading.



 


		
	
    H.  
	
    No
    Employment/Service Rights




 



    Nothing in the Plan shall confer upon the Optionee or the
    Participant any right to continue in Service for any period of
    specific duration or interfere with or otherwise restrict in any
    way the rights of the Corporation (or any Parent or Subsidiary
    employing or retaining such person) or of the Optionee or the
    Participant, which rights are hereby expressly reserved by each,
    to terminate such person’s Service at any time for any
    reason, with or without cause.



 



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    A-12








 







    APPENDIX



 



    The following definitions shall be in effect under the Plan:



 



    A. 1934 ACT shall mean the Securities Exchange Act of 1934,
    as amended.



 



    B. BOARD shall mean the Corporation’s Board of
    Directors.



 



    C. CHANGE IN CONTROL shall mean a change in ownership or
    control of the Corporation effected through any of the following
    transactions:



 



    1. a shareholder-approved merger or consolidation in which
    securities possessing more than 50% of the total combined voting
    power of the Corporation’s outstanding securities are
    transferred to a person or persons not related to the persons
    holding those securities immediately prior to such transaction.
    For the purpose of this subsection, the persons are
    “related” if one of them owns, directly or indirectly,
    at least 50% of the voting capital stock of the other or a third
    person owns, directly or indirectly, at least fifty percent 50%
    of the voting capital stock of each of them;



 



    2. a sale, transfer or other disposition of all or
    substantially all of the Corporation’s assets to one or
    more persons that are not related, as defined in subsection 1
    above, to the Company immediately prior to the sale or
    transfer; or



 



    3. the acquisition, directly or indirectly by any person or
    related group of persons (other than the Corporation or a person
    that directly or indirectly controls, is controlled by, or is
    under common control with, the Corporation), of beneficial
    ownership (within the meaning of Rule
    13d-3 of the
    1934 Act) of securities possessing more than 50% of the
    total combined voting power of the Corporation’s
    outstanding securities pursuant to a tender or exchange offer
    made directly to the Corporation’s shareholders which the
    Board recommends such shareholders accept, other than a group of
    two or more persons not acting in concert for the purpose of
    acquiring, holding or disposing of such stock. The acquisition
    of additional stock by any person who immediately prior to such
    acquisition already is the beneficial owner of more than 50% of
    the capital stock of the Company entitled to vote in the
    election of directors is not a Change of Control.



 



    D. CODE shall mean the Internal Revenue Code of 1986, as
    amended.



 



    E. COMMON STOCK shall mean the Corporation’s common
    stock.



 



    F. CORPORATION shall mean Bell Industries, Inc., a
    California corporation, and its successors.



 



    G. DISABILITY shall means a medically determinable physical
    or mental impairment which can be expected to result in death or
    can be expected to last for a continuous period of not less than
    12 months and which: (1) renders the individual unable
    to engage in any substantial gainful activity; or
    (2) results in the individual receiving income replacement
    benefits for a period of not less than three months under any
    policy of long-term disability insurance maintained by a
    Corporation for the benefit of its employees.



 



    H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
    discretionary option grant program in effect under the Plan.



 



    I. EMPLOYEE shall mean an “employee” of the
    Corporation (or any Parent or Subsidiary) within the meaning of
    Section 3401(c) of the Code and the regulations thereunder.



 



    J. EXERCISE DATE shall mean the date on which the
    Corporation shall have received written notice of the option
    exercise.



 



    K. FAIR MARKET VALUE per share of Common Stock on any
    relevant date shall be determined in accordance with the
    following provisions:



 



    1. If the Common Stock is at the time traded on the Nasdaq
    National Market, then the Fair Market Value shall be deemed
    equal to the closing selling price per share of Common Stock on
    the date in question, as such price is reported on the Nasdaq
    National Market or any successor system. If there is no closing
    selling price for




    

    A-13








 






    the Common Stock on the date in question, then the Fair Market
    Value shall be the closing selling price on the last preceding
    date for which such quotation exists.



 



    2. If the Common Stock is at the time listed on any Stock
    Exchange, then the Fair Market Value shall be deemed equal to
    the closing selling price per share of Common Stock on the date
    in question on the Stock Exchange determined by the Plan
    Administrator to be the primary market for the Common Stock, as
    such price is officially quoted in the composite tape of
    transactions on such exchange. If there is no closing selling
    price for the Common Stock on the date in question, then the
    Fair Market Value shall be the closing selling price on the last
    preceding date for which such quotation exists.



 



    L. HOSTILE TAKE-OVER shall mean:



 



    1. the acquisition, directly or indirectly, by any person
    or related group of persons (other than the Corporation or a
    person that directly or indirectly controls, is controlled by,
    or is under common control with, the Corporation), of beneficial
    ownership (within the meaning of
    Rule 13d-3
    of the 1934 Act) of securities possessing more than 35% of
    the total combined voting power of the Corporation’s
    outstanding securities pursuant to a tender or exchange offer
    made directly to the Corporation’s shareholders which the
    Board does not recommend such shareholders to accept; or



 



    2. a change in the composition of the Board over a period
    of 12 consecutive months or less such that a majority of the
    Board members ceases, by reason of one or more contested
    elections for Board membership, to be comprised of individuals
    who either: (1) have been Board members continuously since
    the beginning of such period; or (2) have been elected or
    nominated for election as Board members during such period by at
    least a majority of the Board members described in
    clause (1) who were still in office at the time the Board
    approved such election or nomination.



 



    M. IMMEDIATE FAMILY shall mean any child, stepchild,
    grandchild, parent, stepparent, grandparent, spouse, sibling,
    mother-in-law,
    father-in-law,
    son-in-law,
    daughter-in-law,
    brother-in-law,
    or
    sister-in-law,
    and shall include adoptive relationships.



 



    N. INCENTIVE OPTION shall mean an option which satisfies
    the requirements of Code Section 422.



 



    O. INVOLUNTARY TERMINATION shall mean the termination of
    the Service of any individual which occurs by reason of:



 



    1. such individual’s involuntary dismissal or
    discharge by the Corporation for reasons other than
    Misconduct, or



 



    2. such individual’s voluntary resignation following
    (a) a change in his or her position with the Corporation
    which materially reduces his or her level of responsibility or
    the level of management to which Optionee reports, (b) a
    reduction in his or her level of compensation (including base
    salary, fringe benefits and participation in any
    corporate-performance based bonus or incentive programs) by more
    than 15% or (c) a relocation of such individual’s
    place of employment by more than 50 miles, provided and
    only if such change, reduction or relocation is effected by the
    Corporation without the individual’s consent.



 



    P. IRC 409A CONSEQUENCES shall mean, to the extent imposed
    by Section 409A of the Code, (1) inclusion in gross
    income of deferred compensation from current and prior years,
    (2) interest liability on deferred taxes at increased
    federal rate and (3) 20% excise tax on deferred
    compensation.



 



    Q. MISCONDUCT shall mean the commission of any act of
    fraud, embezzlement or dishonesty by the Optionee or
    Participant, any unauthorized use or disclosure by such person
    of confidential information or trade secrets of the Corporation
    (or any Parent or Subsidiary), or any other intentional
    misconduct by such person adversely affecting the business or
    affairs of the Corporation (or any Parent or Subsidiary) in a
    material manner. The foregoing definition shall not be deemed to
    be inclusive of all the acts or omissions which the Corporation
    (or any Parent or Subsidiary) may consider as grounds for the
    dismissal or discharge of any Optionee, Participant or other
    person in the Service of the Corporation (or any Parent or
    Subsidiary).



 



    R. NON-STATUTORY OPTION shall mean an option not intended
    to satisfy the requirements of Code Section 422.




    

    A-14








 






    S. OPTIONEE shall mean any person to whom an option is
    granted under the Discretionary Option Grant Program.



 



    T. PARENT shall mean any corporation (other than the
    Corporation) in an unbroken chain of corporations ending with
    the Corporation, provided each corporation in the unbroken chain
    (other than the Corporation) owns, at the time of the
    determination, stock possessing 50% or more of the total
    combined voting power of all classes of stock in one of the
    other corporations in such chain.



 



    U. PARTICIPANT shall mean any person who is issued shares
    of Common Stock or a share right award under the Stock Issuance
    Program.



 



    V. PERFORMANCE GOALS shall mean the goal(s) (or combined
    goal(s)) determined by the Administrator (in its discretion) to
    be applicable to a Participant with respect to a share of stock.
    As determined by the Administrator, the Performance Goals shall
    be objective and shall otherwise meet the requirements of
    Section 162(m)(4)(C) of the Code, and shall be based upon
    one or more of the following performance-based business
    criteria, either on a business unit or Company-specific basis or
    in comparison with peer group performance: net sales; gross
    sales; return on net assets; return on assets; return on equity;
    return on capital; return on revenues; asset turnover; economic
    value added; total shareholder return; net income; pre-tax
    income; operating profit margin; net income margin; sales
    margin; market share; inventory turnover; days sales
    outstanding; sales growth; capacity utilization; increase in
    customer base; cash flow; book value; share price performance
    (including options and stock appreciation rights tied solely to
    appreciation in the fair market of the shares of Common Stock);
    earnings per share; stock price earnings ratio; earnings before
    interest, taxes, depreciation and amortization expenses
    (“EBITDA”); earnings before interest and taxes
    (“EBIT”); or EBITDA, EBIT or earnings before taxes and
    unusual or nonrecurring items as measured either against the
    annual budget or as a ratio to revenue. The Performance Goals
    may differ for each Participant and for each stock grant.



 



    W. PLAN shall mean the Corporation’s 2005 Stock
    Incentive Plan, as set forth in this document.



 



    X. PLAN ADMINISTRATOR shall mean the particular entity,
    whether the Board, the Primary Committee or the Secondary
    Committee, which is authorized to administer the Discretionary
    Option Grant and Stock Issuance Programs with respect to one or
    more classes of eligible persons, to the extent such entity is
    carrying out its administrative functions under those programs
    with respect to the persons under its jurisdiction.



 



    Y. PLAN EFFECTIVE DATE shall mean the date on which the
    Plan was adopted by the Board.



 



    Z. PREDECESSOR PLAN shall mean the Corporation’s 2001
    Stock Option Plan, as in effect immediately prior to the Plan
    Effective Date hereunder.



 



    AA. PRIMARY COMMITTEE shall mean a committee of two
    (2) or more Board members appointed by the Board to
    administer the Plan with respect to Section 16 Insiders,
    which shall be constituted in such a manner as to permit grants
    under the Plan in compliance with
    Rule 16b-3
    of the 1934 Act and Section 162(m) of the Code.



 



    BB. SECONDARY COMMITTEE shall mean a committee of two
    (2) or more Board members appointed by the Board to
    administer any aspect of Plan not administered by the Primary
    Committee. The members of the Secondary Committee may be Board
    members who are Employees eligible to receive discretionary
    option grants or direct stock issuances under the Plan or any
    other stock option, stock appreciation, stock bonus or other
    stock plan of the Corporation (or any Parent or Subsidiary).



 



    CC. SECTION 16 INSIDER shall mean an officer or
    director of the Corporation subject to the short-swing profit
    liabilities of Section 16 of the 1934 Act.



 



    DD. SERVICE shall mean the performance of services for the
    Corporation (or any Parent or Subsidiary) by a person in the
    capacity of an Employee, anon-employee member of the board of
    directors or a consultant or independent advisor, except to the
    extent otherwise specifically provided in the documents
    evidencing the option grant or stock issuance.



 



    EE. SHORT TERM FEDERAL RATE shall mean the federal
    short-term rate in effect under Section 1274(d) of the Code
    at the beginning of the period the shares were held in escrow.




    

    A-15








 






    FF. STOCK EXCHANGE shall mean either the American Stock
    Exchange or the New York Stock Exchange.



 



    GG. STOCK ISSUANCE AGREEMENT shall mean the agreement
    entered into by the Corporation and the Participant at the time
    of issuance of shares of Common Stock under the Stock Issuance
    Program.



 



    HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance
    program in effect under the Plan.



 



    II. SUBSIDIARY shall mean any corporation (other than the
    Corporation) in an unbroken chain of corporations beginning with
    the Corporation, provided each corporation (other than the last
    corporation) in the unbroken chain owns, at the time of the
    determination, stock possessing 50% or more of the total
    combined voting power of all classes of stock in one of the
    other corporations in such chain.



 



    JJ. TAKE-OVER PRICE shall mean the greater of (1) the
    Fair Market Value per share of Common Stock on the date the
    option is surrendered to the Corporation in connection with a
    Hostile Take-Over or, if applicable, (2) the highest
    reported price per share of Common Stock paid by the tender
    offeror in effecting the Hostile Take-Over through the
    acquisition of such Common Stock. However, if the surrendered
    option is an Incentive Option, the Take-Over Price shall not
    exceed the price per share described in clause (1) above.



 



    KK. TAXES shall mean the Federal, state and local income
    and employment tax liabilities incurred by the holder of
    Non-Statutory Options or unvested shares of Common Stock in
    connection with the exercise of those options or the vesting of
    those shares.



 



    LL. 10% SHAREHOLDER shall mean the owner of stock (as
    determined under Code Section 424(d)) possessing more than
    10% of the total combined voting power of all classes of stock
    of the Corporation (or any Parent or Subsidiary).




    

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