**EXHIBIT10.1**

 

**SUMMA INDUSTRIES**

AMENDED &RESTATED2005 EQUITY INCENTIVE PLAN

 

ARTICLE IPURPOSE OF PLAN

 

The Company has adoptedthis Plan to promote the interests of the Company and its stockholders by usinginvestment interests in the Company to attract, retain and motivate itsmanagement, directors, employees and other persons, to encourage and rewardtheir contributions to the performance of the Company, and to align theirinterests with the interests of the Company’s stockholders.  Capitalized terms not otherwise definedherein have the meanings ascribed to them in Article VIII.

 

# ARTICLE IIEFFECTIVE DATE AND TERM OF PLAN

 

2.1         Termof Plan.

 

This Plan becameeffective as of the Effective Date and will continue in effect until theearlier of (a) the Expiration Date, or (b) the date of any Plantermination by the Administrator pursuant to the provisions in Section 4.4.

 

2.2         Effecton Awards.

 

Awards may be grantedonly during the Plan Term, but each Award properly granted during the Plan Termwill remain in effect after the Expiration Date until such Award has beenexercised, terminated or expired in accordance with its terms and the terms ofthis Plan.

 

2.3         StockholderApproval.

 

This Plan shall beapproved by the Company’s stockholders. The effectiveness of any Awards granted prior to such stockholderapproval shall be subject to such stockholder approval.

 

# ARTICLE IIISHARES SUBJECT TO PLAN

 

3.1         Numberof Shares.

 

The maximum number ofshares of Common Stock that may be issued pursuant to Awards under this Plan is500,000, subject to adjustment as set forth in Section 3.4.

 

3.2         Sourceof Shares.

 

The Common Stock to beissued under this Plan will be made available, at the discretion of theAdministrator, either from authorized but unissued shares of Common Stock orfrom previously issued shares of Common Stock reacquired by the Company,including without limitation shares purchased on the open market.

 

3.3         Availabilityof Unused Shares.

 

Shares of Common Stocksubject to unexercised portions of any Award that expire, terminate or arecanceled, and shares of Common Stock issued pursuant to an Award that arereacquired by the Company pursuant to this Plan or the terms of the Award underwhich such shares were issued, will again become available for the grant offurther Awards under this Plan as part of the shares available under Section 3.1.  However, if the exercise price of, orwithholding taxes incurred in connection with, an Award is paid with shares ofCommon Stock, or if shares of Common Stock otherwise issuable pursuant toAwards are withheld by the Company in satisfaction of an exercise price or thewithholding taxes incurred in connection with any exercise or vesting of anAward, then the number of shares of Common Stock available for issuance under thePlan will be reduced by the gross number of shares for which the Award isexercised or for which the Award vests, as applicable, and not by the netnumber of shares of Common Stock issued to the holder of such Award.

 

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3.4         AdjustmentProvisions.

 

(a)**                                 **Adjustments.**** Subject to Section 3.4(e), if theCompany consummates any Reorganization in which holders of shares of CommonStock are entitled to receive in respect of such shares any additional sharesor new or different shares or securities, cash or other consideration(including, without limitation, a different number of shares of Common Stock),or if the outstanding shares of Common Stock are increased, decreased orexchanged for a different number or kind of shares or other securities throughmerger, consolidation, sale or exchange of all or substantially all of theassets of the Company, reorganization, recapitalization, reclassification,combination, stock dividend, stock split, reverse stock split, spin-off, orsimilar transaction then, subject to Section 7.1, an appropriateand proportionate adjustment shall be made by the Administrator in:  (i) the maximum number and kind ofshares subject to this Plan as provided in Section 3.1; (ii) thenumber and kind of shares or other securities subject to then outstandingAwards; and (iii) the price for each share or other unit of any othersecurities subject to, or measurement criteria applicable to, then outstandingAwards.

 

(b)**                                **NoFractional Interests.  No fractional interests will be issued underthe Plan resulting from any adjustments.

 

(c)                                  AdjustmentsRelated to Company Stock.  To the extent any adjustments relate to stockor securities of the Company, such adjustments will be made by theAdministrator, whose determination in that respect will be final, binding andconclusive.

 

(d)                                 Rightto Make Adjustment.  The grant of an Award will not affect in anyway the right or power of the Company to make adjustments, reclassifications,reorganizations or changes of its capital or business structure or to merge orto consolidate or to dissolve, liquidate or sell, or transfer all or any partof its business or assets.

 

(e)                                  Limitations.  Notwithstanding anything to the contraryherein, no adjustment to the terms of an Incentive Stock Option may be madeunless such adjustment either:  (i) wouldnot cause the Option to lose its status as an Incentive Stock Option; or (ii) isagreed to in writing by the Administrator and the Recipient.

 

3.5         Reservationof Shares.

 

The Company will at alltimes reserve and keep available shares of Common Stock equaling at least thetotal number of shares of Common Stock issuable pursuant to all outstandingAwards.

 

# ARTICLE IVADMINISTRATION OF PLAN

 

4.1         Administrator.

 

(a)                                  PlanAdministration.  Subject to theprovisions of Section 4.1(b), this Plan will be administered by theBoard and may also be administered by the Compensation Committee of the Boardappointed pursuant to Section 4.1(b).

 

(b)                                 Administrationby Compensation Committee.  The Boardin its sole discretion may from time to time appoint a Compensation Committeeof not fewer than two (2) Board members with authority to administer thisPlan in whole or part and, subject to applicable law, to exercise any or all ofthe powers, authority and discretion of the Board under this Plan.  As long as the Board has delegated authorityto administer this Plan to the Compensation Committee and the Company has aclass of equity securities registered under Section 12 of the ExchangeAct, this Plan may be administered by a Compensation Committee of not less thantwo (2) Board members appointed by the Board in its sole discretion fromtime to time, each of whom is (i) a Non-Employee Director, (ii) an “OutsideDirector” as defined in the regulations adopted under Section 162(m) ofthe IRC, and (iii) “independent” as defined under applicable stockexchange regulations.  The Board may fromtime to time increase or decrease (but not below two (2)) the number of membersof the Compensation Committee, remove from membership on the CompensationCommittee all or any portion of its members, and/or appoint such person orpersons as it desires to fill any vacancy existing on the CompensationCommittee, whether caused by removal, resignation or otherwise.  Unless otherwise required by this Section 4.1(b),the Board may disband the Compensation Committee at any time.

 

4.2         Authorityof Administrator.

 

(a)                                  Authorityto Interpret Plan.  Subject to theexpress provisions of this Plan, the Administrator will have the power toimplement, interpret and construe this Plan and any Awards and Award Documentsor other documents defining the rights and obligations of the Company andRecipients hereunder and thereunder, to determine all questions 

 

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arisinghereunder and thereunder, and to adopt and amend such rules and regulationsfor the administration hereof and thereof as it may deem desirable.  The interpretation and construction by theAdministrator of any provisions of this Plan or of any Award or Award Document,and any action taken by, or inaction of, the Administrator relating to thisPlan or any Award or Award Document, will be within the discretion of theAdministrator and will be conclusive and binding upon all persons.  Subject only to compliance with the expressprovisions hereof, the Administrator may act in its discretion in mattersrelated to this Plan and any and all Awards and Award Documents.

 

(b)                                 Authorityto Grant Awards.  Subject to theexpress provisions of this Plan, the Administrator may from time to time in itsdiscretion select the Eligible Persons to whom, and the time or times at which,Awards will be granted or sold, the nature of each Award, the number of sharesof Common Stock or the number of rights that make up or underlie each Award,the exercise price and period (if applicable) for the exercise of each Award,and such other terms and conditions applicable to each individual Award as theAdministrator may determine.  Any and allterms and conditions of Awards may be established by the Administrator withoutregard to existing Awards or other grants and without incurring any obligationof the Company in respect of subsequent Awards. The Administrator may grant at any time new Awards to an Eligible Personwho has previously received Awards or other grants (including other stockoptions) regardless of the status of such other Awards or grants.  The Administrator may grant Awards singly orin combination or in tandem with other Awards as it determines in itsdiscretion.

 

(c)                                  Procedures.**** Subject to theCompany’s charter or bylaws or any Board resolution conferring authority on theCompensation Committee, any action of the Administrator with respect to theadministration of this Plan must be taken pursuant to a majority vote of theauthorized number of members of the Administrator or by the unanimous writtenconsent of its members; *provided, however,*that (i) if the Administrator is the Compensation Committee and consistsof two (2) members, then actions of the Administrator must be unanimous,and (ii) actions taken by the Board will be valid if approved inaccordance with applicable law.

 

4.3         NoLiability.

 

No member of the Board orthe Compensation Committee or any designee thereof will be liable for anyaction or inaction with respect to this Plan or any Award or any transactionarising under this Plan or any Award except in circumstances constituting badfaith of such member.

 

4.4         Amendments.

 

(a)                                  PlanAmendments.  The Administrator may atany time and from time to time in its discretion, insofar as permitted byapplicable law, rule or regulation and subject to Section 4.4(c),suspend or discontinue this Plan or revise or amend it in any respectwhatsoever, and this Plan as so revised or amended will govern all Awards,including those granted before such revision or amendment.  Without limiting the generality of theforegoing, the Administrator is authorized to amend this Plan to comply with ortake advantage of amendments to applicable laws, rules or regulations,including the Securities Act, the Exchange Act, the IRC, or the rules ofany exchange or market system upon which the Common Stock is listed or trades,or any rules or regulations promulgated thereunder.  Except as provided in Section 4.4(c),no stockholder approval of any amendment or revision will be required unlesssuch approval is required by applicable law, rule or regulation.

 

(b)                                 AwardAmendments.**** The Administrator may at any time and fromtime to time in its discretion, but subject to Section 4.4(c) andSection 6.1(c) and compliance with applicable statutory oradministrative requirements, accelerate or extend the vesting or exerciseperiod of any Award as a whole or in part, and make such other modifications inthe terms and conditions of an Award as it deems advisable, *provided, however,* that any repricing,reduction or modification of the exercise price of a Stock Option by theAdministrator is subject to Section 5.16 regarding stockholderapproval of certain actions. Notwithstanding the foregoing, the Administrator shall not waive anyapplicable minimum restriction periods or minimum vesting periods applicable toexisting grants under the Plan.

 

(c)                                  Limitation.  Except as otherwise provided in this Plan orin the applicable Award Document, no amendment, revision, suspension ortermination of this Plan or an outstanding Award that would cause an IncentiveStock Option to cease to qualify as such or that would alter, impair ordiminish in any material respect any rights or obligations under any Awardtheretofore granted under this Plan may be effected without the written consentof the Recipient to whom such Award was granted.

 

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4.5         OtherCompensation Plans.

 

The adoption of this Planwill not affect any other stock option, restricted stock, incentive or othercompensation plans in effect from time to time for the Company, and this Planwill not preclude the Company from establishing any other forms of incentive orother compensation for employees, directors, advisors or consultants of theCompany, whether or not approved by stockholders.

 

4.6         PlanBinding on Successors.

 

This Plan will be bindingupon the successors and assigns of the Company.

 

4.7         Referencesto Successor Statutes, Regulations and Rules.

 

Any reference in thisPlan to a particular statute, regulation or rule will also refer to anysuccessor provision of such statute, regulation or rule.

 

4.8         Issuancesfor Compensation Purposes Only.

 

This Plan constitutes an “employeebenefit plan” as defined in Rule 405 promulgated under the SecuritiesAct.  Awards to eligible employees ordirectors shall be made for any lawful consideration, including compensationfor services rendered, promissory notes or otherwise.  Awards to consultants and advisors shall bemade only in exchange for bona fide services rendered by such consultants oradvisors and such services must not be in connection with the offer and sale ofsecurities in a capital-raising transaction.

 

4.9         InvalidProvisions.

 

In the event that anyprovision of this Plan is found to be invalid or otherwise unenforceable underany applicable law, such invalidity or unenforceability is not to be construedas rendering any other provisions contained herein invalid or unenforceable,and all such other provisions are to be given full force and effect to the sameextent as though the invalid and unenforceable provision were not contained herein.

 

4.10             GoverningLaw.

 

This Plan will begoverned by and interpreted in accordance with the internal laws of the Stateof Delaware, without giving effect to the principles of the conflicts of lawsthereof.

 

4.11             Interpretation.

 

Headings herein are forconvenience of reference only, do not constitute a part of this Plan, and willnot affect the meaning or interpretation of this Plan.  References herein to Sections or Articles arereferences to the referenced Section or Article hereof, unlessotherwise specified.

 

# ARTICLE VGENERAL AWARD PROVISIONS

 

5.1         Participationin Plan.

 

(a)                                  Eligibilityto Receive Awards.  A person iseligible to receive grants of Awards if, at the time of the grant of the Award,such person is an Eligible Person or has received an offer of employment fromthe Company, *provided, however*,that Awards granted to a person who has received an offer of employment willterminate and be forfeited without consideration if the employment offer is notaccepted within such time as may be specified by the Company.  Status as an Eligible Person will not beconstrued as a commitment that any Award will be granted under this Plan to anEligible Person or to Eligible Persons generally.

 

(b)                                 Eligibilityto Receive Incentive Stock Options.**** Incentive Stock Options may be granted only toEligible Persons meeting the employment requirements of Section 422 of theIRC.

 

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(c)                                  Awardsto Foreign Nationals. Notwithstanding anything to the contrary herein, the Administrator may,in order to fulfill the purposes of this Plan, modify grants of Awards toRecipients who are foreign nationals or employed outside of the United Statesto recognize differences in applicable law, tax policy or local custom.

 

5.2         AwardDocuments.

 

Each Award must beevidenced by an agreement duly executed on behalf of the Company and by theRecipient or, in the Administrator’s discretion, a confirming memorandum issuedby the Company to the Recipient, setting forth such terms and conditionsapplicable to the Award as the Administrator may in its discretiondetermine.  Awards will not be deemedmade or binding upon the Company, and Recipients will have no rights thereto,until such an agreement is entered into between the Company and the Recipient orsuch a memorandum is delivered by the Company to the Recipient, but an Awardmay have an effective date prior to the date of such an agreement ormemorandum.  Award Documents may be (butneed not be) identical and must comply with and be subject to the terms andconditions of this Plan, a copy of which will be provided to each Recipient andincorporated by reference into each Award Document.  Any Award Document may contain such otherterms, provisions and conditions not inconsistent with this Plan as may bedetermined by the Administrator.  In caseof any conflict between this Plan and any Award Document, this Plan shallcontrol.

 

5.3         Paymentfor Awards.

 

(a)                                  Paymentof Exercise Price.  The exerciseprice or other payment for an Award is payable upon the exercise of a StockOption or upon other purchase of shares pursuant to an Award granted hereunderby delivery of legal tender of the United States or payment of such otherconsideration as the Administrator may from time to time deem acceptable in anyparticular instance; *provided, however*,that the Administrator may, in the exercise of its discretion, allow exerciseof an Award in a broker-assisted or similar transaction in which the exerciseprice is not received by the Company until promptly after exercise.

 

(b)                                 NoCompany Loans.  The Company may notassist any person to whom an Award is granted (including, without limitation,any officer or director of the Company) in the payment of the purchase price orother amounts payable in connection with the receipt or exercise of that Awardby lending such amounts to such person.

 

(c)                                  CashlessExercise.  If permitted in any caseby the Administrator in its discretion, the exercise price for Awards may bepaid by capital stock of the Company delivered in transfer to the Company by oron behalf of the person exercising the Award and duly endorsed in blank oraccompanied by stock powers duly endorsed in blank, with signatures guaranteedin accordance with the Exchange Act if required by the Administrator; orretained by the Company from the stock otherwise issuable upon exercise orsurrender of vested and/or exercisable Awards or other equity awards previouslygranted to the Recipient and being exercised (if applicable) (in either casevalued at Fair Market Value as of the exercise date); or such other considerationas the Administrator may from time to time in the exercise of its discretiondeem acceptable in any particular instance.

 

(d)                                 NoPrecedent.  Recipients will have norights to the exercise techniques described in Section 5.3(c), andthe Company may offer or permit such techniques on an *ad hoc*basis to any Recipient without incurring any obligation to offer or permit suchassistance or techniques on other occasions or to other Recipients.

 

5.4         NoEmployment Rights.

 

Nothing contained in thisPlan (or in Award Documents or in any other documents related to this Plan orto Awards) will confer upon any Eligible Person or Recipient any right tocontinue in the employ of or engagement by the Company or any Affiliated Entityor constitute any contract or agreement of employment or engagement, orinterfere in any way with the right of the Company or any Affiliated Entity toreduce such person’s compensation or other benefits or to terminate theemployment or engagement of such Eligible Person or Recipient, with or withoutcause.  Except as expressly provided inthis Plan or in any statement evidencing the grant of an Award, the Company hasthe right to deal with each Recipient in the same manner as if this Plan andany such statement evidencing the grant of an Award did not exist, including,without limitation, with respect to all matters related to the hiring,discharge, compensation and conditions of the employment or engagement of theRecipient.  Unless otherwise set forth ina written agreement binding upon the Company or an Affiliated Entity, allemployees of the Company or an Affiliated Entity are “at will” employees whoseemployment may be terminated by the Company or the Affiliated Entity at anytime for any reason or no reason, without payment or penalty of any kind.  Any question(s) as to whether and when therehas been a termination of a Recipient’s employment or engagement, the reason(if any) for such termination, and/or the consequences thereof under the termsof this Plan or any statement evidencing the grant of an Award pursuant to thisPlan will be determined by the Administrator and the Administrator’sdetermination thereof will be final and binding.

 

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5.5         RestrictionsUnder Applicable Laws and Regulations.

 

(a)                                  GovernmentApprovals.  All Awards will besubject to the requirement that, if at any time the Company determines, in itsdiscretion, that the listing, registration or qualification of the securitiessubject to Awards granted under this Plan upon any securities exchange orinterdealer quotation system or under any federal, state or foreign law, or theconsent or approval of any governmental or regulatory body, is necessary ordesirable as a condition of, or in connection with, the granting of such anAward or the issuance, if any, or purchase of shares in connection therewith,such Award may not be exercised as a whole or in part unless and until suchlisting, registration, qualification, consent or approval has been effected orobtained free of any conditions not acceptable to the Company.  During the term of this Plan, the Companywill use its reasonable efforts to seek to obtain from the appropriategovernmental and regulatory agencies any requisite qualifications, consents,approvals or authorizations in order to issue and sell such number of shares ofits Common Stock as is sufficient to satisfy the requirements of thisPlan.  The inability of the Company toobtain any such qualifications, consents, approvals or authorizations willrelieve the Company of any liability in respect of the nonissuance or sale ofsuch stock as to which such qualifications, consents, approvals orauthorizations pertain.

 

(b)                                 NoRegistration Obligation; Recipient Representations.  The Company will be under no obligation toregister or qualify the issuance of Awards or underlying securities under theSecurities Act or applicable state securities laws.  Unless the issuance of Awards and underlyingsecurities have been registered under the Securities Act and qualified or registeredunder applicable state securities laws, the Company shall be under noobligation to issue any Awards or underlying securities unless the Awards andunderlying securities may be issued pursuant to applicable exemptions from suchregistration or qualification requirements. In connection with any such exempt issuance, the Administrator mayrequire the Recipient to provide a written representation and undertaking tothe Company, satisfactory in form and scope to the Company and upon which theCompany may reasonably rely, that such Recipient is acquiring such Awards andunderlying securities for such Recipient’s own account as an investment and notwith a view to, or for sale in connection with, the distribution of any suchsecurities, and that such person will make no transfer of the same except incompliance with any rules and regulations in force at the time of suchtransfer under the Securities Act and other applicable law, and that ifsecurities are issued without registration, a legend to this effect (togetherwith any other legends deemed appropriate by the Administrator) may be endorsedupon the securities so issued, and to the effect of any additionalrepresentations that are appropriate in light of applicable securities laws andrules.  The Company may also order itstransfer agent to stop transfers of such shares.  The Administrator may also require theRecipient to provide the Company such information and other documents as theAdministrator may request in order to satisfy the Administrator as to theinvestment sophistication and experience of the Recipient and as to any otherconditions for compliance with any such exemptions from registration orqualification.

 

5.6         AdditionalConditions.

 

Any Award may be subjectto such provisions (whether or not applicable to any other Award or Recipient)as the Administrator deems appropriate, including without limitation provisionsfor the forfeiture of or restrictions on resale or other disposition ofsecurities of the Company acquired under this Plan, provisions giving theCompany the right to repurchase securities of the Company acquired under thisPlan in the event the Recipient leaves the Company for any reason or elects toeffect any disposition thereof, and provisions to comply with federal and statesecurities laws.

 

5.7         NoPrivileges Regarding Stock Ownership or Specific Assets. 

 

Except as otherwise setforth herein, a Recipient or a permitted transferee of an Award will have norights as a stockholder with respect to any shares issuable or issued inconnection with the Award until the Recipient has delivered to the Company allamounts payable and performed all obligations required to be performed inconnection with the exercise of the Award and the Company has issued suchshares.  No person will have any right,title or interest in any fund or in any specific asset (including shares ofcapital stock) of the Company by reason of any Award granted hereunder.  Neither this Plan (or any documents relatedhereto) nor any action taken pursuant hereto is to be construed to create atrust of any kind or a fiduciary relationship between the Company and anyperson.  To the extent that any personacquires a right to receive an Award hereunder, such right shall be no greaterthan the right of any unsecured general creditor of the Company.

 

5.8         Nonassignability.

 

No Award is assignable ortransferable except:  (a) by will orby the laws of descent and distribution; or (b) subject to the finalsentence of this Section 5.8, upon dissolution of marriage pursuantto a qualified domestic relations order or, in the discretion of theAdministrator on a case-by-case basis and under circumstances that would notadversely affect the interests of the Company, transfers for estate planningpurposes or pursuant to a nominal transfer that does not result in a change in beneficialownership.  Subject to the final sentenceof this Section 5.8, during the lifetime of a Recipient, an 

 

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Award granted to suchperson will be exercisable only by the Recipient (or the Recipient’s permittedtransferee) or such person’s guardian or legal representative.  Notwithstanding the foregoing, Stock Optionsintended to be treated as Incentive Stock Options (or other Awards subject totransfer restrictions under the IRC) (i) may not be assigned ortransferred in violation of Section 422(b)(5) of the IRC or theregulations thereunder, and nothing herein is intended to allow such assignmentor transfer; and (ii) will be exercisable during a Recipient’s lifetimeonly by the Recipient.

 

5.9         Informationto Recipients.

 

(a)                                  Provisionof Information.**** The Administrator in its sole discretion maydetermine what, if any, financial and other information is to be provided toRecipients and when such financial and other information is to be providedafter giving consideration to applicable federal and state laws, rules andregulations, including, without limitation, applicable federal and statesecurities laws, rules and regulations.

 

(b)                                 Confidentiality.  The furnishing of financial and otherinformation that is confidential to the Company is subject to the Recipient’sagreement to maintain the confidentiality of such financial and otherinformation, and not to disclose or use the information for any purpose otherthan evaluating the Recipient’s position under this Plan.  The Administrator may impose otherrestrictions on the access to and use of such confidential information and mayrequire a Recipient to acknowledge the Recipient’s obligations under this Section 5.9(b) (whichacknowledgment is not to be a condition to Recipient’s obligations under this Section 5.9(b)).

 

5.10             WithholdingTaxes.

 

Whenever the granting,vesting or exercise of any Award, or the issuance of any Common Stock or othersecurities upon exercise of any Award or transfer thereof, gives rise to tax ortax withholding liabilities or obligations, the Administrator will have theright as a condition thereto to require the Recipient to remit to the Companyan amount sufficient to satisfy any federal, state and local withholding taxrequirements arising in connection therewith. The Administrator may, in the exercise of its discretion, allowsatisfaction of tax withholding requirements by accepting delivery of stock ofthe Company or by withholding a portion of the stock otherwise issuable inconnection with an Award, in each case valued at Fair Market Value as of thedate of such delivery or withholding, as the case may be.

 

5.11             Legendson Awards and Stock Certificates. 

 

Each Award Document andeach certificate representing securities acquired upon vesting or exercise ofan Award must be endorsed with all legends, if any, required by applicablefederal and state securities and other laws to be placed on the Award Documentand/or the certificate.  Thedetermination of which legends, if any, will be placed upon Award Documents orthe certificates will be made by the Administrator in its discretion and suchdecision will be final and binding.

 

5.12             Effectof Termination of Employment on Awards.

 

(a)                                  Terminationof Vesting.  Notwithstanding anythingto the contrary herein, but subject to Section 5.12(b), Awards willbe exercisable by a Recipient (or the Recipient’s successor in interest)following such Recipient’s termination of employment or service only to theextent that installments thereof had become exercisable on****orprior to the date of such termination.

 

(b)                                 Alterationof Vesting and Exercise Periods.**** Subject to Section 6.1(c) andnotwithstanding anything to the contrary herein, the Administrator may in itsdiscretion (i) designate shorter or longer periods following a Recipient’stermination of employment or service during which Awards may vest or beexercised; *provided, however,* that any shorterperiods determined by the Administrator will be effective only if provided forin this Plan or the instrument that evidences the grant to the Recipient of theaffected Award or if such shorter period is agreed to in writing by theRecipient, and (ii) accelerate the vesting of all or any portion of anyAwards by increasing the number of shares purchasable at any time, withoutincreasing the total number of shares subject to such Awards.

 

(c)                                  Leaveof Absence.  In the case of anyemployee on an approved leave of absence, the Administrator may make suchprovision respecting continuance of Awards granted to such employee as theAdministrator in its discretion deems appropriate, except that in no event willan Award be exercisable after the date such Award would expire in accordancewith its terms had the Recipient remained continuously employed.

 

(d)                                 GeneralCessation.  Except as otherwise setforth in this Plan or an Award Document or as determined by the Administratorin its discretion, all Awards granted to a Recipient, and all of such Recipient’srights thereunder, will terminate upon termination for any reason of suchRecipient’s employment or service with the Company or any Affiliated Entity (orcessation of any other service relationship between the Recipient and theCompany or any Affiliated Entity in place as of the date the Award wasgranted).

 

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5.13             Lock-UpAgreements.

 

Each Recipient agrees asa condition to receipt of an Award that, in connection with any public offeringby the Company of its equity securities and upon the request of the Company andthe principal underwriter (if any) in such public offering, any shares ofCommon Stock acquired or that may be acquired upon exercise or vesting of anAward may not be sold, offered for sale, encumbered, or otherwise disposed ofor subjected to any transaction that will involve any sales of securities ofthe Company, without the prior written consent of the Company or suchunderwriter, as the case may be, for a period of not more than 180 days afterthe effective date of the registration statement for such public offering.  Each Recipient will, if requested by theCompany or the principal underwriter, enter into a separate agreement to theeffect of this Section 5.13.

 

5.14             Restrictionson Common Stock and Other Securities. 

 

Common Stock or othersecurities of the Company issued or issuable in connection with any Award willbe subject to all of the restrictions imposed under this Plan upon Common Stockissuable or issued upon exercise of Stock Options, except as otherwisedetermined by the Administrator.

 

5.15             Limitson Awards to Eligible Persons.

 

Notwithstanding any otherprovision of this Plan, no one Eligible Person shall be granted Awards withrespect to more than 100,000 shares of Common Stock in any one calendar year.The limitation set forth in this Section 5.15 will be subject toadjustment as provided in Section 3.4 or under Section 7.1,but only to the extent such adjustment would not affect the status ofcompensation attributable to Awards as Performance-Based Compensation.

 

5.16             NoOption Repricing.

 

Without the approval ofthe stockholders of the Company, the Company shall not reprice any StockOptions.  For purposes of this Plan, theterm “reprice” shall include (i) lowering the exercise price of previouslyawarded Stock Options within the meaning of Item 402(i) under Securitiesand Exchange Commission Regulation S-K, and (ii) canceling previouslyawarded Stock Options and granting in their place Stock Options having a lowerexercise price.

 

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# ARTICLE VIAWARDS

 

6.1         StockOptions.

 

(a)                                  Natureof Stock Options.  Stock Options maybe Incentive Stock Options or Nonqualified Stock Options.

 

(b)                                 OptionExercise Price.  The exercise pricefor each Stock Option will be determined by the Administrator as of the datesuch Stock Option is granted; provided that, Stock Options shall not be grantedwith exercise prices less than the fair market value of Common Stock on date ofgrant.

 

(c)                                  OptionPeriod and Vesting.**** Stock Options granted hereunder will vest andmay be exercised as determined by the Administrator; *provided, however*, that (i) no Stock Option shall firstbecome exercisable within one year from its date of grant, other than upon aChange in Control as set forth in Section 7.1, and (ii) anyexercise of Stock Options after termination of the Recipient’s employment orservice shall be subject to Section 5.12 and Section 6.1(e).  Each Stock Option granted hereunder and allrights or obligations thereunder shall expire on such date as may be determinedby the Administrator, but not later than 10 years after the date the StockOption is granted and may be subject to earlier termination as provided hereinor in the Award Document.  Except asotherwise provided herein, a Stock Option will become exercisable, as a wholeor in part, on the date or dates specified by the Administrator and thereafterwill remain exercisable until the exercise, expiration or earlier terminationof the Stock Option.

 

(d)                                 Exerciseof Stock Options.** **The exercise price for StockOptions will be paid as set forth in Section 5.3.  No Stock Option will be exercisable except inrespect of whole shares, and fractional share interests shall bedisregarded.  Not fewer than 100 sharesof Common Stock (or such other amount as may be set forth in the applicableAward Document) may be purchased at one time and Stock Options must beexercised in multiples of 100 unless the number purchased is the total numberof shares for which the Stock Option is exercisable at the time ofexercise.  A Stock Option will be deemedto be exercised when the Secretary or other designated official of the Companyreceives written notice of such exercise from the Recipient in such form as theCompany may specify from time to time, together with payment of the exerciseprice in accordance with Section 5.3 and any amounts required underSection 5.10 or, with permission of the Administrator, arrangementfor such payment.  Notwithstanding anyother provision of this Plan, the Administrator may impose, by rule and/orin Award Documents, such conditions upon the exercise of Stock Options(including, without limitation, conditions limiting the time of exercise tospecified periods) as may be required to satisfy applicable regulatoryrequirements, including, without limitation, Rule 16b-3 and Rule 10b-5under the Exchange Act, and any amounts required under Section 5.10,or any applicable section of or regulation under the IRC.

 

(e)                                  Terminationof Employment.

 

(i)                                     Terminationfor Just Cause.  Subject to Section 5.12and except as otherwise provided in a written agreement between the Company oran Affiliated Entity and the Recipient, which may be entered into at any time beforeor after termination of employment or service, in the event of a Just CauseDismissal of a Recipient all of the Recipient’s unexercised Stock Options,whether or not vested, will expire and become unexercisable as of the date ofsuch Just Cause Dismissal.

 

(ii)                                  TerminationOther Than for Just Cause.  Subjectto Section 5.12 and except as otherwise provided in a writtenagreement between the Company or an Affiliated Entity and the Recipient, whichmay be entered into at any time before or after termination of employment orservice, if a Recipient’s employment or service with the Company or anyAffiliated Entity terminates for:

 

(A)                              anyreason other than for Just Cause Dismissal, death, Permanent Disability ornormal retirement, the Recipient’s Stock Options, to the extent unvested, willexpire and become unexercisable as of the date of termination, and to theextent vested, will expire and become unexercisable as of the earlier of:  (1) the date such Stock Options wouldexpire in accordance with their terms had the Recipient remained employed; and (2) 90days after the date of termination of employment or service.

 

(B)                                death,Permanent Disability or normal retirement, the Recipient’s unexercised StockOptions, to the extent unvested, will expire and become unexercisable as of thedate of termination, and to the extent vested, will expire and becomeunexercisable as of the earlier of:  (1) thedate such Stock Options would expire in accordance with their terms had theRecipient remained employed; and (2) two years after the date oftermination of employment or service.

 

(f)                                    SpecialProvisions Regarding Incentive Stock Options.  Notwithstanding anything herein to thecontrary,

 

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(i)                                     Theexercise price and vesting period of any Stock Option intended to be treated asan Incentive Stock Option must comply with the provisions of Section 422of the IRC and the regulations thereunder. As of the Effective Date, such provisions require, among other matters,that:  (A) the exercise price mustnot be less than the Fair Market Value of the underlying stock as of the datethe Incentive Stock Option is granted, and not less than 110% of the FairMarket Value as of such date in the case of a grant to a SignificantStockholder; and (B) that the Incentive Stock Option not be exercisableafter the expiration of 10 years from the date of grant or the expiration of 5years from the date of grant in the case of an Incentive Stock Option grantedto a Significant Stockholder.

 

(ii)                                  Iffor any reason other than death or Permanent Disability, the employment orservice of a Recipient of Incentive Stock Options with the Company or anyAffiliated Entity terminates, such Recipient’s Incentive Stock Options, whetheror not vested, shall cease to qualify as such and will be treated as NonqualifiedStock Options as of the earlier of:  (A) thedate such Incentive Stock Options would expire in accordance with their termshad the Recipient remained employed with the Company or any Affiliated Entity;and (B) three months after the date of termination of the Recipient’semployment or service.

 

(iii)                               Ifas a result of death or Permanent Disability, the employment or service of aRecipient of Incentive Stock Options with the Company or any Affiliated Entityterminates, such Recipient’s Incentive Stock Options, whether or not vested,shall cease to qualify as such and will be treated as Nonqualified StockOptions as of the earlier of:  (A) thedate such Incentive Stock Options would expire in accordance with their termshad the Recipient remained employed with the Company or any Affiliated Entity;and (B) one year after the date of termination of the Recipient’semployment or service.

 

(iv)                              Theaggregate Fair Market Value (determined as of the respective date or dates ofgrant) of the Common Stock for which one or more Incentive Stock Optionsgranted to any Recipient under this Plan (or any other plan of the Company orof any Parent Corporation or Subsidiary Corporation) may for the first timebecome exercisable as Incentive Stock Options under such plans during any onecalendar year may not exceed $100,000.

 

(v)                                 AnyStock Options granted as Incentive Stock Options pursuant to this Plan that forany reason fail or cease to qualify as such will be treated as NonqualifiedStock Options.  If the limit described inSection 6.1(f)(iv) is exceeded, the earliest granted StockOptions will be treated as Incentive Stock Options, up to such limit.

 

6.2         PerformanceAwards.

 

(a)                                  Grantof Performance Award.**** The Administrator will determine in itsdiscretion the pre-established, objective performance goals (which need not beidentical and may be established on an individual or group basis) governingPerformance Awards, the terms thereof, and the form and time of payment ofPerformance Awards.

 

(b)                                 Paymentof Award.**** Upon satisfaction of the conditions applicableto a Performance Award, payment will be made to the Recipient in cash, inshares of Common Stock valued at Fair Market Value as of the date payment isdue, or in a combination of Common Stock and cash, as the Administrator in itsdiscretion may determine.

 

(c)                                  MaximumAmount of Compensation.  The maximumamount payable pursuant to that portion of a Performance Award granted for anycalendar year to any Recipient that is intended to satisfy the requirements forPerformance-Based Compensation shall not exceed $1,000,000.

 

6.3         RestrictedStock.

(a)                                  Awardof Restricted Stock.  The Administrator will determine the PurchasePrice (if any), the terms of payment of the Purchase Price, the restrictionsupon the Restricted Stock, and when such restrictions will lapse.

 

(b)                                 Requirementsof Restricted Stock.  All shares ofRestricted Stock granted or sold pursuant to this Plan will be subject to thefollowing conditions:

 

(i)                                     NoTransfer.  The shares may not besold, assigned, transferred, pledged, hypothecated or otherwise disposed of,alienated or encumbered until the restrictions are removed or expire;

 

(ii)                                  Certificates.  The Administrator may require that thecertificates representing Restricted Stock granted or sold to a Recipientremain in the physical custody of an escrow holder or the Company until allrestrictions are removed or expire;

 

(iii)                               RestrictiveLegends.**** Each certificate representing Restricted Stockgranted or sold to a Recipient pursuant to this Plan will bear such legend orlegends making reference to the restrictions imposed upon such Restricted Stockas the Administrator in its discretion deems necessary or appropriate toenforce such restrictions; and

 

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(iv)                              OtherRestrictions.  The Administrator may imposesuch other conditions on Restricted Stock as the Administrator may deemadvisable, including, without limitation, restrictions under the SecuritiesAct, under the Exchange Act, under the requirements of any stock exchange orinterdealer quotation system upon which such Restricted Stock or othersecurities of the Company are then listed or traded and under any blue sky orother securities laws applicable to such shares.

 

(v)                                 MinimumRestriction Periods.  No RestrictedStock shall first be transferable within one year from date of grant.

 

(c)                                  Lapseof Restrictions.  The restrictionsimposed upon Restricted Stock will lapse in accordance with such terms or otherconditions as are determined by the Administrator.

 

(d)                                 Rightsof Recipient.  Subject to the provisionsof Section 6.3(b) and any restrictions imposed upon theRestricted Stock, the Recipient will have all rights of a stockholder withrespect to the Restricted Stock granted or sold to such Recipient under thisPlan, including, without limitation, the right to vote the shares and receiveall dividends and other distributions paid or made with respect thereto.

 

(e)                                  Terminationof Employment.  Unless the Administrator in its discretiondetermines otherwise, if a Recipient’s employment or service with the Companyor any Affiliated Entity terminates for any reason, all of the Recipient’sRestricted Stock remaining subject to restrictions on the date of suchtermination of employment or service will be repurchased by the Company at thePurchase Price (if any) paid by the Recipient to the Company, without interestor premium, and otherwise returned to the Company without consideration.

 

6.4         StockAppreciation Rights.

 

(a)                                  Grantingof Stock Appreciation Rights.  TheAdministrator may at any time and from time to time approve the grant toEligible Persons of Stock Appreciation Rights, related or unrelated to StockOptions.

 

(b)                                 StockAppreciation Rights Related to Options.

 

(i)                                     AStock Appreciation Right related to a Stock Option will entitle the holder ofthe related Stock Option, upon exercise of the Stock Appreciation Right, tosurrender such Stock Option, or any portion thereof to the extent previouslyvested but unexercised, with respect to the number of shares as to which suchStock Appreciation Right is exercised, and to receive payment of an amountcomputed pursuant to Section 6.4(b)(iii).  Such Stock Option will, to the extentsurrendered, then cease to be exercisable.

 

(ii)                                  AStock Appreciation Right related to a Stock Option hereunder will be exercisableat such time or times, and only to the extent that, the related Stock Option isexercisable, and will not be transferable except to the extent that suchrelated Stock Option may be transferable (and under the same conditions), willexpire no later than the expiration of the related Stock Option, and may beexercised only when the market price of the Common Stock subject to the relatedStock Option exceeds the exercise price of the Stock Option.

 

(iii)                               Uponthe exercise of a Stock Appreciation Right related to a Stock Option, theRecipient will be entitled to receive payment of an amount determined bymultiplying: (A) the difference obtained by subtracting the exercise priceof a****share of Common Stock specified in therelated Stock Option from the Fair Market Value of a share of Common Stock onthe date of exercise of such Stock Appreciation Right (or, in the case of aStock Appreciation Right related to a Nonqualified Stock Option, as of suchother date or as of the occurrence of such event as may have been specified inthe instrument evidencing the grant of the Stock Appreciation Right), by (B) thenumber of shares as to which such Stock Appreciation Right is exercised.

 

(c)                                  StockAppreciation Rights Unrelated to Options.**** The Administrator may grant Stock AppreciationRights unrelated to Stock Options.  Section 6.4(b)(iii) willgovern the amount payable at exercise under such Stock Appreciation Right,except that in lieu of an option exercise price the initial base amountspecified in the Award shall be used.

 

(d)                                 Limits.  Notwithstanding the foregoing, theAdministrator, in its discretion, may place a dollar limitation on the maximumamount that will be payable upon the exercise of a Stock Appreciation Right.

 

(e)                                  Payments.  Payment of the amount determined under theforegoing provisions may be made solely in whole shares of Common Stock valuedat their Fair Market Value on the date of exercise of the Stock AppreciationRight or, alternatively, at the discretion of the Administrator, in cash or ina combination of cash and shares of 

 

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CommonStock as the Administrator deems advisable. The Administrator has full discretion to determine the form in whichpayment of a Stock Appreciation Right will be made and to consent to ordisapprove the election of a Recipient to receive cash in full or partialsettlement of a Stock Appreciation Right. If the Administrator decides to make full payment in shares of CommonStock, and the amount payable results in a fractional share, payment for thefractional share will be made in cash.

 

6.5         StockPayments.

 

The Administrator mayapprove Stock Payments to any Eligible Person on such terms and conditions asthe Administrator may determine; provided that, no individual Stock Paymentshall exceed five percent (5%) of the shares reserved for issuance under thePlan.  Stock Payments will replace cashcompensation at the Fair Market Value of the Common Stock on the date paymentis due.

 

6.6         DividendEquivalents.

 

The Administrator maygrant Dividend Equivalents to any Recipient who has received a Stock Option,Stock Appreciation Right or other Award denominated in shares of CommonStock.  Dividend Equivalents may be paidin cash, Common Stock or other Awards; the amount of Dividend Equivalents paidother than in cash will be determined by the Administrator by application ofsuch formula as the Administrator may deem appropriate to translate the cashvalue of dividends paid to the alternative form of payment of the DividendEquivalent.  Dividend Equivalents will becomputed as of each dividend record date and will be payable to Recipientsthereof at such time as the Administrator may determine.  Notwithstanding the foregoing, if it isintended that an Award qualify as Performance-Based Compensation, and theamount of compensation the Recipient could receive under the Award is basedsolely on an increase in value of the underlying stock after the date of thegrant or award, then the payment of any Dividend Equivalents related to theAward shall not be made contingent on the exercise of the Award.

 

6.7         StockBonuses.

 

The Administrator mayissue Stock Bonuses to Eligible Persons on such terms and conditions as theAdministrator may determine.  In no eventshall any individual grant hereunder exceed five percent (5%) of the shares reservedfor issuance under the Plan.

 

6.8         StockSales.

 

The Administrator maysell to Eligible Persons shares of Common Stock on such terms and conditions asthe Administrator may determine.

 

6.9         PhantomStock.

 

The Administrator maygrant Awards of Phantom Stock to Eligible Persons.  Phantom Stock is a cash payment measured bythe Fair Market Value of a specified number of shares of Common Stock on aspecified date, or measured by the excess of such Fair Market Value over aspecified minimum, which may but need not include a Dividend Equivalent.

 

6.10             OtherStock-Based Benefits.

 

The Administrator isauthorized to grant Other Stock-Based Benefits. Other Stock-Based Benefits are any arrangements granted under this Plannot otherwise described above that:  (a) bytheir terms might involve the issuance or sale of Common Stock or othersecurities of the Company; or (b) involve a benefit that is measured, as awhole or in part, by the value, appreciation, dividend yield or other featuresattributable to a specified number of shares of Common Stock or othersecurities of the Company.  In no eventshall any individual grant hereunder exceed five percent (5%) of the sharesreserved for issuance under the Plan.

 

# ARTICLE VIICHANGE IN CONTROL

 

7.1         Provisionfor Awards Upon Change in Control.

 

Subject to any requiredaction by stockholders, (i) the maximum number and kind of shares subjectto this Plan as provided in Section 3.1; (ii) the number andkind of shares or other securities subject to then outstanding Awards; and (iii) theprice for each share or other unit of any other securities subject to, ormeasurement criteria applicable to, then outstanding Awards shall beproportionately adjusted for any increase of decrease in the number of issuedshares resulting from a subdivision or consolidation of shares or the paymentof a stock dividend (but only of Common Stock) or any other 

 

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increase or decrease inthe number of issued shares effected without receipt of consideration by theCompany.  Subject to any required actionby stockholders, if the Corporation is the surviving corporation in any mergeror consolidation, each outstanding Award shall pertain and apply to thesecurities to which a holder of the number of shares subject to the Award wouldhave been entitled.  In the event of aChange in Control, either (a) the date of exercisability of each and everyoutstanding Award shall automatically accelerate to a date and time immediatelyprior to such Change in Control, or (b) Awards will be canceled andautomatically converted into the right to receive the securities, cash or otherconsideration that a holder of the shares underlying such Awards would havebeen entitled to receive upon consummation of such Change in Control had suchshares been issued and outstanding immediately prior to the effective date andtime of the Change in Control (net of the appropriate option exerciseprices).  To the extent that theforegoing adjustments relate to securities of the Company, such adjustmentsshall be made by the Administrator whose determination shall be conclusive andbinding on all persons. Except as expressly provided in this Section 7.1,the Recipient shall have no rights by reason of subdivision or consolidation ofshares of stock of any class, the payment of any stock dividend or any otherincrease or decrease in the number of shares of stock of any class or by reasonof any dissolution, liquidation, merger or consolidation or spin-off of assetsor stock of another corporation, and any issue by the Company of shares of stockof any class, or securities convertible into shares of stock of any class,shall not affect, and no adjustment by reason thereof shall be made withrespect to, the terms of existing Awards. The grant of an Award pursuant to thePlan shall not affect in any way the right or power to the Company to makeadjustments, reclassifications, reorganizations or changes of its capital orbusiness structure, to merge or consolidate or to dissolve, liquidate, sell ortransfer all or any part of its business assets.

 

# ARTICLE VIIIDEFINITIONS

 

Capitalized terms used inthis Plan and not otherwise defined have the meanings set forth below:

**“Administrator”** means the Board as long as noCompensation Committee has been appointed and is in effect and also means theCompensation Committee to the extent that the Board has delegated authoritythereto.

**“AffiliatedEntity”** means any Parent Corporation of the Company orSubsidiary Corporation of the Company or any other entity controlling,controlled by, or under common control with the Company.

**“ApplicableDividend Period”** means (i) the period between the date aDividend Equivalent is granted and the date the related Stock Option, SAR, orother Award is exercised, terminates, or is converted to Common Stock, or (ii) suchother time as the Administrator may specify in the written instrumentevidencing the grant of the Dividend Equivalent.

**“Award”**means any Stock Option, Performance Award, Restricted Stock, Stock AppreciationRight, Stock Payment, Stock Bonus, Stock Sale, Phantom Stock, DividendEquivalent, or Other Stock-Based Benefit granted or sold to an Eligible Personunder this Plan, or any similar award granted by the Company prior to theEffective Date and outstanding as of the Effective Date that is governed bythis Plan.

**“AwardDocument”** means the agreement or confirming memorandumsetting forth the terms and conditions of an Award.

**“Board”**means the Board of Directors of the Company.

**“Changein Control”** of the Company shall be deemed to have occurredif (i) there shall have be consummated (x) any consolidation or merger ofthe Company in which the Company is not the continuing or surviving corporationor pursuant to which shares of the Common Stock are converted into cash,securities or other property, other than a merger of the Company in which theholders of the Common Stock immediately prior to the merger have the sameproportionate ownership of common stock of the surviving corporationimmediately after the merger (including a reincorporation), or (y) any sale,lease, exchange or other transfer (in one transaction or a series of relatedtransactions) of all, or substantially all, of the assets of the Company, or (ii) thestockholders of the Company shall approve any plan or proposal for theliquidation or dissolution of the Company, or (iii) any person (as suchterm is used in Sections 13(d) and 14(d)(2) of the Exchange Act)shall become the beneficial owner (within the meaning of Rule 13d-3 underthe Exchange Act) of 30% or more of the outstanding Common Stock (excluding theCompany’s 401(k) Plan from the definition of “person”), or (iv) during anyperiod of two consecutive years, individuals who at the beginning of suchperiod constitute the entire Board shall cease for any reason to constitute amajority thereof unless the election, or the nomination for election by theCompany’s stockholders, of each new director was approved by a vote of at leasta majority of the directors then still in office who were directors at thebeginning of the period.

 **“CommonStock”** means the common stock of the Company, $0.01 par value pershare, as constituted on the Effective Date, and as thereafter adjusted under Section 3.4.

**“Company”**means Summa Industries, a Delaware corporation.

**“CompensationCommittee”** means the compensation committee appointed by theBoard to administer this Plan pursuant to Section 4.1.

**“DividendEquivalent”** means a right granted by the Company under Section 6.6to a holder of a Stock Option, Stock Appreciation Right or other Awarddenominated in shares of Common Stock to receive from the Company during theApplicable Dividend Period payments equivalent to the amount of dividendspayable to holders of the number of shares of Common Stock underlying suchStock Option, Stock Appreciation Right, or other Award.

**“EffectiveDate”** means January 24, 2005, the date this Plan wasapproved and adopted by the Company’s stockholders.

 

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**“EligiblePerson”** includes directors, including Non-Employee Directors,officers, employees, consultants and advisors of the Company or of any AffiliatedEntity; *provided, however,* thatin order to be Eligible Persons, consultants and advisors must render *bona fide* services to the Company or anyAffiliated Entity that are not in connection with capital-raising.

**“ExchangeAct”** means the Securities Exchange Act of 1934, as amended.

**“ExpirationDate”** means the 10th anniversary of the Effective Date.

**“FairMarket Value”** of a share of the Company’s capital stock as ofa particular date means: (i) if the stock is listed on an establishedstock exchange or exchanges (including for this purpose, the Nasdaq NationalMarket), the closing sale price of the stock for such date on the primaryexchange upon which the stock trades, as measured by volume, as published in *The Wall Street Journal*, or, if no sale price was quoted forsuch date, then as of the next preceding date on which such a sale price wasquoted; or (ii) if the stock is not then listed on an exchange or theNasdaq National Market, the average of the closing bid and asked prices pershare for the stock in the over-the-counter market on such date (in the case of(i) or (ii), subject to adjustment as and if necessary and appropriate toset an exercise price not less than 100% of the fair market value of the stockon the date an Award is granted); or (iii) if the stock is not then listedon an exchange or quoted in the over-the-counter market, an amount determinedin good faith by the Administrator, *provided, however,*that (A) when appropriate, the Administrator in determining Fair MarketValue of capital stock of the Company may take into account such other factorsas it may deem appropriate under the circumstances, and (B) if the stockis traded on the Nasdaq SmallCap Market and both sales prices and bid and askedprices are quoted or available, the Administrator may elect to determine FairMarket Value under either clause (i) or (ii) above.  Notwithstanding the foregoing, the FairMarket Value of capital stock for purposes of grants of Incentive Stock Optionsmust be determined in compliance with applicable provisions of the IRC.  The Fair Market Value of rights or propertyother than capital stock of the Company means the fair market value thereof asdetermined by the Administrator on the basis of such factors as it may deemappropriate.

**“IncentiveStock Option”** means a Stock Option that qualifies as anincentive stock option under Section 422 of the IRC, or any successorstatute thereto.

**“IRC”**means the Internal Revenue Code of 1986, as amended.

**“JustCause Dismissal”** means a termination of a Recipient’s employmentfor any of the following reasons:  (i) theRecipient violates any reasonable rule or regulation of the Board, theCompany’s President or Chief Executive Officer or the Recipient’s superiorsthat results in damage to the Company or any Affiliated Entity or which, afterwritten notice to do so, the Recipient fails to correct within a reasonabletime not exceeding 20 days; (ii) any willful misconduct or grossnegligence by the Recipient in the responsibilities assigned to the Recipient; (iii) anywillful failure to perform the Recipient’s job as required to meet theobjectives of the Company or any Affiliated Entity; (iv) any wrongfulconduct of a Recipient which has an adverse impact on the Company or anyAffiliated Entity or which constitutes a misappropriation of assets of theCompany or any Affiliated Entity; (v) the Recipient’s performing servicesfor any other person or entity that competes with the Company or any AffiliatedEntity while the Recipient is employed by the Company or any Affiliated Entitywithout the written approval of the Chief Executive Officer of the Company; or (vi) anyother conduct that the Administrator reasonably determines in good faithconstitutes Just Cause for Dismissal; *provided, however,*that if a Recipient is party to an employment agreement with the Company or anyAffiliated Entity providing for just cause dismissal (or some comparableconcept) of Recipient from Recipient’s employment with the Company or anyAffiliated Entity, “Just Cause Dismissal” for purposes of this Plan will havethe same meaning as ascribed thereto or to such comparable concept in suchemployment agreement.

**“Non-EmployeeDirector”** means a director of the Company who qualifies as a “Non-EmployeeDirector” under Rule 16b-3 under the Exchange Act.

**“NonqualifiedStock Option”** means a Stock Option that is not an IncentiveStock Option.

**“OtherStock-Based Benefits”** means an Award granted under Section 6.10.

**“ParentCorporation”** means any Parent Corporation as defined in Section 424(e) ofthe IRC.

**“PerformanceAward”****means an Award under Section 6.2,payable in cash, Common Stock or a combination thereof, that vests and becomespayable over a period of time upon attainment of pre-established, objectiveperformance goals established in connection with the grant of the Award.  For this purpose, a pre-established,objective performance goal may include one or more of the following performancecriteria:  (a) cash flow, (b) earningsper share (including earnings before interest, taxes, and amortization), (c) returnon equity, (d) total stockholder return, (e) return on capital, (f) returnon assets or net assets, (g) income or net income, (h) operatingincome or net operating income, (i) operating margin, (j) return onoperating revenue, and (k) any other similar performance criteria.

**“Performance-BasedCompensation”** means performance-based compensation asdescribed in Section 162(m) of the IRC and the regulations issuedthereunder.  If the amount ofcompensation an Eligible Person will receive under any Award is not basedsolely on an increase in the value of Common Stock after the date of grant oraward, the Administrator, in order to qualify an Award as performance-basedcompensation under Section 162(m) of the IRC, can condition the grant,award, vesting, or exercisability of such an Award on the attainment of apre-established, objective performance goal including, but not limited to,those pre-established, objective performance goals described in the definitionof Performance Award above.

**“PermanentDisability”** means that the Recipient becomes physically ormentally incapacitated or disabled so that the Recipient is unable to performsubstantially the same services as the Recipient performed prior to incurringsuch incapacity or disability (the Company, at its option and expense, beingentitled to retain a physician to confirm the existence of such 

 

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incapacity or disability,and the determination of such physician to be binding upon the Company and theRecipient), and such incapacity or disability continues for a period of 3consecutive months or 6 months in any 12-month period or such other period(s)as may be determined by the Administrator with respect to any Award, *provided, however,* that for purposes ofdetermining the period during which an Incentive Stock Option may be exercisedpursuant to Section 6.1(e), Permanent Disability shall mean “permanentand total disability” as defined in Section 22(e)(3) of the IRC.

**“Person”**means any person, entity or group, within the meaning of Section 13(d) or14(d) of the Exchange Act, but excluding (i) the Company and itssubsidiaries, (ii) any employee stock ownership or other employee benefitplan maintained by the Company and (iii) an underwriter or underwritingsyndicate that has acquired the Company’s securities solely in connection witha public offering thereof.

**“PhantomStock”** means an Award granted under Section 6.9.

**“Plan”**means this 2005 Equity Incentive Plan of the Company.

**“PlanTerm”** means the period during which this Plan remains ineffect (commencing the Effective Date and ending on the Expiration Date).

**“PurchasePrice”** means the purchase price (if any) to be paid by aRecipient for Restricted Stock as determined by the Administrator (which priceshall be at least equal to the minimum price required under applicable laws andregulations for the issuance of Common Stock which is nontransferable andsubject to a substantial risk of forfeiture until specific conditions are met).

**“Recipient”**means a person who has received an Award.

**“Reorganization”**means any merger, consolidation or other reorganization.

**“RestrictedStock”****means CommonStock that is the subject of an Award made under Section 6.3 andthat is nontransferable and subject to a substantial risk of forfeiture untilspecific conditions are met, as set forth in this Plan and in any statementevidencing the grant of such Award.

**“SecuritiesAct”** means the Securities Act of 1933, as amended.

**“SignificantStockholder”** is an individual who, at the time a Stock Optionis granted to such individual under this Plan, owns common stock representingmore than 10% of the total combined voting power of all classes of stock of theCompany or of any Parent Corporation or Subsidiary Corporation (afterapplication of the attribution rules set forth in Section 424(d) ofthe IRC).

**“StockAppreciation Right”** or **“SAR”**means a right granted under Section 6.4 to receive a payment thatis measured with reference to the amount by which the Fair Market Value of aspecified number of shares of Common Stock appreciates from a specified date,such as the date of grant of the SAR, to the date of exercise.

**“StockBonus”** means an issuance or delivery of unrestricted orrestricted shares of Common Stock under Section 6.7 as a bonus forservices rendered or for any other valid consideration under applicable law.

**“StockOption”****means a rightto purchase stock of the Company granted under Section 6.1 of thisPlan.

**“StockPayment”** means a payment in shares of the Company’s CommonStock under Section 6.5 to replace all or any portion of the compensationor other payment (other than base salary) that would otherwise become payableto the Recipient in cash.

**“StockSale”** means a sale of Common Stock to an Eligible Personunder Section 6.8.

**“SubsidiaryCorporation”** means any Subsidiary Corporation as defined in Section 424(f) ofthe IRC.

 

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