Exhibit
10.16


 


 


AMERICAN
DEFENSE SYSTEMS, INC.


2007
INCENTIVE COMPENSATION PLAN


 


 

















 


AMERICAN
DEFENSE SYSTEMS, INC.


2007
INCENTIVE COMPENSATION PLAN


	
  1.

  	
  Purpose

  	
  1

  
	
  2.

  	
  Definitions

  	
  1

  
	
  3.

  	
  Administration.

  	
  6

  
	
  4.

  	
  Shares Subject to Plan.

  	
  7

  
	
  5.

  	
  Eligibility; Per-Person Award
  Limitations

  	
  8

  
	
  6.

  	
  Specific Terms of Awards.

  	
  8

  
	
  7.

  	
  Certain Provisions Applicable
  to Awards.

  	
  13

  
	
  8.

  	
  Code Section 162(m) Provisions.

  	
  15

  
	
  9.

  	
  Change in Control.

  	
  17

  
	
  10.

  	
  General Provisions.

  	
  19

  



 


 

















 


AMERICAN
DEFENSE SYSTEMS, INC.


2007
INCENTIVE COMPENSATION PLAN


1.             Purpose.  The
purpose of this 2007 INCENTIVE COMPENSATION PLAN (the “Plan”) is to assist
AMERICAN DEFENSE SYSTEMS, INC., a Delaware corporation (the “Company”) and its
Related Entities (as hereinafter defined) in attracting, motivating, retaining
and rewarding high-quality executives and other employees, officers, directors,
consultants and other persons who provide services to the Company or its
Related Entities by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests
between such persons and the Company’s shareholders, and providing such persons
with performance incentives to expend their maximum efforts in the creation of
shareholder value.


2.             Definitions.  For purposes
of the Plan, the following terms shall be defined as set forth below, in
addition to such terms defined in Section 1 hereof and elsewhere herein.


(a)           “Award” means any Option, Stock
Appreciation Right, Restricted Stock Award, Deferred Stock Award, Share granted
as a bonus or in lieu of another Award, Dividend Equivalent, Other Stock-Based
Award or Performance Award, together with any other right or interest, granted
to a Participant under the Plan.


(b)           “Award Agreement” means any written
agreement, contract or other instrument or document evidencing any Award
granted by the Committee hereunder.


(c)           “Beneficiary” and “Beneficial
Ownership” means the person, persons, trust or trusts that have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the Plan upon such Participant’s death or to which Awards or other rights are
transferred if and to the extent permitted under Section 10(b) hereof.  If, upon a Participant’s death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person, persons, trust or trusts entitled by will or the
laws of descent and distribution to receive such benefits.


(d)           “Beneficial Owner” shall have the
meaning ascribed to such term in Rule 13d-3 under the Exchange Act and
any successor to such Rule.


(e)           “Board” means the Company’s Board of
Directors.


(f)            “Cause” shall, with respect to any
Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award
Agreement, “Cause” shall have the equivalent meaning or the same meaning as “cause”
or “for cause” set forth in any employment, consulting, or other agreement for
the performance of services between the Participant and the Company or a
Related Entity or, in the absence of any such agreement or any such definition
in such agreement, such term shall mean (i) the failure by the Participant to
perform, in a reasonable manner, his or her duties as assigned by the Company
or a Related Entity, (ii) any violation or breach by the Participant of his or
her employment, consulting or other similar agreement with the Company or a
Related Entity, if any, (iii) any violation or


 

















 


breach
by the Participant of any non-competition, non-solicitation, non-disclosure
and/or other similar agreement with the Company or a Related Entity, (iv) any
act by the Participant of dishonesty or bad faith with respect to the Company
or a Related Entity, (v) use of alcohol, drugs or other similar substances in a
manner that adversely affects the Participant’s work performance, or (vi) the
commission by the Participant of any act, misdemeanor, or crime reflecting
unfavorably upon the Participant or the Company or any Related Entity.  The good faith determination by the Committee
of whether the Participant’s Continuous Service was terminated by the Company
for “Cause” shall be final and binding for all purposes hereunder.


(g)           “Change in Control” means a Change in
Control as defined in Section 9(b) of the Plan.


(h)           “Code” means the Internal Revenue
Code of 1986, as amended from time to time, including regulations thereunder
and successor provisions and regulations thereto.


(i)            “Committee” means a committee
designated by the Board to administer the Plan; provided, however, that if the
Board fails to designate a committee or if there are no longer any members on
the committee so designated by the Board, then the Board shall serve as the
Committee. In
the event that the Company becomes a Publicly Held Corporation (as hereinafter
defined), then the Committee shall consist of at least two directors, and each
member of the Committee shall be (i) a “non-employee director” within the
meaning of  Rule 16b-3 (or any successor
rule) under the Exchange Act, unless administration of the Plan by “non-employee
directors” is not then required in order for exemptions under Rule 16b-3 to
apply to transactions under the Plan, (ii) an “outside director” within the
meaning of Section 162(m) of the Code, and (iii) “Independent”.


(j)            “Consultant” means any person (other
than an Employee or a Director, solely with respect to rendering services in
such person’s capacity as a director) who is engaged by the Company or any
Related Entity to render consulting or advisory services to the Company or such
Related Entity.


(k)           “Continuous Service” means the
uninterrupted provision of services to the Company or any Related Entity in any
capacity of Employee, Director, Consultant or other service provider.  Continuous Service shall not be considered to
be interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entities, or any successor entities, in any
capacity of Employee, Director, Consultant or other service provider, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity in any capacity of Employee, Director, Consultant
or other service provider (except as otherwise provided in the Award
Agreement).  An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave.


(l)            “Deferred Stock” means a right to
receive Shares, including Restricted Stock, cash measured based upon the value
of Shares or a combination thereof, at the end of a specified deferral period.


(m)          “Deferred
Stock Award” means an Award of Deferred Stock granted to a
Participant under Section 6(e) hereof.


 


 


2

















 


(n)           “Director” means a member of the Board
or the board of directors of any Related Entity.


(o)           “Disability” means a permanent and
total disability (within the meaning of Section 22(e) of the Code), as
determined by a medical doctor satisfactory to the Committee.


(p)           “Dividend Equivalent” means a right,
granted to a Participant under Section 6(g) hereof, to receive cash, Shares,
other Awards or other property equal in value to dividends paid with respect to
a specified number of Shares, or other periodic payments.


(q)           “Effective Date” means the effective
date of the Plan, which shall be                                    ,
2007.


(r)            “Eligible Person” means each officer,
Director, Employee, Consultant and other person who provides services to the
Company or any Related Entity.  The
foregoing notwithstanding, only employees of the Company, or any parent
corporation or subsidiary corporation of the Company (as those terms are
defined in Sections 424(e) and (f) of the Code, respectively), shall be
Eligible Persons for purposes of receiving any Incentive Stock Options.  An Employee on leave of absence may be
considered as still in the employ of the Company or a Related Entity for
purposes of eligibility for participation in the Plan.


(s)           “Employee” means any person,
including an officer or Director, who is an employee of the Company or any
Related Entity.  The payment of a
director’s fee by the Company or a Related Entity shall not be sufficient to
constitute “employment” by the Company.


(t)            “Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.


(u)           “Fair Market Value” means the fair
market value of Shares, Awards or other property as determined by the
Committee, or under procedures established by the Committee.  Unless otherwise determined by the Committee,
the Fair Market Value of a Share as of any given date after which the Company
is a Publicly Held Corporation shall be the closing sale price per Share
reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Shares are traded on the date immediately preceding
the date as of which such value is being determined or, if there is no sale on
that date, then on the last previous day on which a sale was reported.


(v)           “Good Reason” shall, with respect to
any Participant, have the meaning specified in the Award Agreement.  In the absence of any definition in the Award
Agreement, “Good Reason” shall have the equivalent meaning or the same meaning
as “good reason” or “for good reason” set forth in any employment, consulting
or other agreement for the performance of services between the Participant and
the Company or a Related Entity or, in the absence of any such agreement or any
such definition in such agreement, such term shall mean the occurrence
of any of the following: (i) a material diminution in the Participant’s base
compensation; (ii) a material diminution in the Participant’s authority,
duties, or responsibilities; (iii) a material change in the geographic location
at which the Participant must perform the services under this Agreement; or
(iv) any other action or inaction that constitutes a material breach by the
Company of any employment


 


3

















agreement with the Participant.  For purposes of this Plan, Good Reason shall
not be deemed to exist unless the Participant’s termination of employment for
Good Reason occurs within 2 years following the initial existence of one of the
conditions specified in clauses (i) through (iv) above, the Participant
provides the Company with written notice of the existence of such condition
within 90 days after the initial existence of the condition, and the Company
fails to remedy the condition within 30 days after its receipt of such notice.


(w)          “Incentive
Stock Option” means any Option intended to be designated as an
incentive stock option within the meaning of Section 422 of the Code or any
successor provision thereto.


(x)            “Independent”, when referring to
either the Board or members of the Committee, shall have the same meaning as
used in the rules of the Nasdaq Stock Market or any national securities
exchange on which any securities of the Company are listed for trading, and if
not listed for trading, by the rules of the Nasdaq Stock Market.


(y)           “Incumbent Board” means the Incumbent
Board as defined in Section 9(b)(ii) of the Plan.


(z)            “Option” means a right granted to a
Participant under Section 6(b) hereof, to purchase Shares or other Awards at a
specified price during specified time periods.


(aa)         “Optionee”
means a person to whom an Option is granted under this Plan or any person who
succeeds to the rights of such person under this Plan.


(bb)         “Other
Stock-Based Awards” means Awards granted to a Participant under
Section 6(i) hereof.


(cc)         “Participant”
means a person who has been granted an Award under the Plan which remains
outstanding, including a person who is no longer an Eligible Person.


(dd)         “Performance
Award” shall mean any Award of Performance Shares or Performance
Units granted pursuant to Section 6(h).


(ee)         “Performance
Period” means that period established by the Committee at the
time any Performance Award is granted or at any time thereafter during which
any performance goals specified by the Committee with respect to such Award are
to be measured.


(ff)           “Performance Share” means any grant
pursuant to Section 6(h) of a unit valued by reference to a designated number
of Shares, which value may be paid to the Participant by delivery of such
property as the Committee shall determine, including cash, Shares, other
property, or any combination thereof, upon achievement of such performance
goals during the Performance Period as the Committee shall establish at the
time of such grant or thereafter.


(gg)         “Performance
Unit” means any grant pursuant to Section 6(h) of a unit valued
by reference to a designated amount of property (including cash) other than
Shares, which value may be paid to the Participant by delivery of such property
as the Committee shall


 


4

















determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.


(hh)         “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a “group”
as defined in Section 13(d) thereof.


(ii)           “Prior Plan” means the 2003 Stock
Option Plan.


(jj)           “Publicly Held Corporation” shall
mean a publicly held corporation as that term is used under Section 162(m)(2)
of the Code.


(kk)         “Related
Entity” means any Subsidiary, and any business, corporation,
partnership, limited liability company or other entity designated by the Board,
in which the Company  or a Subsidiary
holds a  substantial ownership interest,
directly or indirectly.


(ll)           “Restricted Stock” means any Share
issued with the restriction that the holder may not sell, transfer, pledge or
assign such Share and with such risks of forfeiture and other restrictions as
the Committee, in its sole discretion, may impose (including any restriction on
the right to vote such Share and the right to receive any dividends), which
restrictions may lapse separately or in combination at such time or times, in
installments or otherwise, as the Committee may deem appropriate.


(mm)       “Restricted
Stock Award” means an Award granted to a Participant under
Section 6(d) hereof.


(nn)         “Rule
16b-3” means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.


(oo)         “Shares”
means the shares of common stock of the Company, par value $.001 per share, and
such other securities as may be substituted (or resubstituted) for Shares
pursuant to Section 10(c) hereof.


(pp)         “Stock
Appreciation Right” means a right granted to a Participant under
Section 6(c) hereof.


(qq)         “Subsidiary”
means any corporation or other entity in which the Company has a direct or
indirect ownership interest of 50% or more of the total combined voting power
of the then outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution of profits or
50% or more of the assets on liquidation or dissolution.


(rr)           “Substitute Awards” means Awards
granted or Shares issued by the Company in assumption of, or in substitution or
exchange for, Awards previously granted, or the right or obligation to make
future Awards, by a company acquired by the Company or any Related Entity or
with which the Company or any Related Entity combines.


 


5

















3.             Administration.


(a)           Authority of the
Committee.  The Plan shall
be administered by the Committee; provided,
however, that except as otherwise expressly provided in this Plan, the Board
may exercise any power or authority granted to the Committee under this Plan
and in that case, references herein shall be deemed to include references to
the Board.  The Committee shall have full
and final authority, subject to and consistent with the provisions of the Plan,
to select Eligible Persons to become Participants, grant Awards, determine the
type, number and other terms and conditions of, and all other matters relating
to, Awards, prescribe Award Agreements (which need not be identical for each
Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award Agreements and correct defects,
supply omissions or reconcile inconsistencies therein, and to make all other
decisions and determinations as the Committee may deem necessary or advisable
for the administration of the Plan.  In
exercising any discretion granted to the Committee under the Plan or pursuant
to any Award, the Committee shall not be required to follow past practices, act
in a manner consistent with past practices, or treat any Eligible Person or
Participant in a manner consistent with the treatment of other Eligible Persons
or Participants.


(b)           Manner of Exercise of
Committee Authority. In the event that the Company becomes
a Publicly Held Corporation, the Committee, and not the Board, shall exercise sole
and exclusive discretion on any matter relating to a Participant then subject
to Section 16 of the Exchange Act with respect to the Company to the
extent necessary in order that transactions by such Participant shall be exempt
under Rule 16b-3 under the Exchange Act. 
Any action of the Committee shall be final, conclusive and binding on
all persons, including the Company, its Related Entities, Eligible Persons,
Participants, Beneficiaries, transferees under Section 10(b) hereof or other
persons claiming rights from or through a Participant, and shareholders.  The express grant of any specific power to
the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee.  The Committee may delegate to officers or
managers of the Company or any Related Entity, or committees thereof, the
authority, subject to such terms as the Committee shall determine, to perform
such functions, including administrative functions as the Committee may
determine to the extent that such delegation will not result in the loss of an
exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to
Section 16 of the Exchange Act in respect of the Company and will not cause
Awards intended to qualify as “performance-based compensation” under Code
Section 162(m) to fail to so qualify. 
The Committee may appoint agents to assist it in administering the Plan.


(c)           Limitation of Liability.  The Committee and the Board, and each member
thereof, shall be entitled to, in good faith, rely or act upon any report or
other information furnished to him or her by any officer or Employee, the
Company’s independent auditors, Consultants or any other agents assisting in
the administration of the Plan.  Members
of the Committee and the Board, and any officer or Employee acting at the
direction or on behalf of the Committee or the Board, shall not be personally
liable for any action or determination taken or made in good faith with respect
to the Plan, and shall, to the extent permitted by law, be fully indemnified
and protected by the Company with respect to any such action or determination.


 


6

















4.             Shares
Subject to Plan.


(a)           Limitation on Overall Number of
Shares Available for Delivery Under Plan.  Subject to adjustment as provided in Section
10(c) hereof, the total number of Shares reserved and available for delivery
under the Plan shall be 5,000,000.  Any
Shares delivered under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares.


(b)           Application of Limitation
to Grants of Award.  No
Award may be granted if the number of Shares to be delivered in
connection with such an Award or, in the case of an Award relating to Shares
but settled only in cash (such as cash-only Stock Appreciation Rights), the
number of Shares to which such Award relates, exceeds the number of Shares
remaining available for delivery under the Plan, minus the number of Shares
deliverable in settlement of or relating to then outstanding Awards.  The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if
the number of Shares actually delivered differs from the number of Shares
previously counted in connection with an Award.


(c)           Availability of Shares Not Delivered under
Awards and Adjustments to Limits.


(i)            If any Shares subject to an Award are forfeited, expire
or otherwise terminate without issuance of such Shares, or any Award is settled
for cash or otherwise does not result in the issuance of all or a portion of
the Shares subject to such Award, the Shares shall, to the extent of such
forfeiture, expiration, termination, cash settlement or non-issuance, again be
available for Awards under the Plan, subject to Section 4(c)(v) below.


(ii)           In the event that any Option or other Award granted
hereunder is exercised through the tendering of Shares (either actually or by
attestation) or by the withholding of Shares by the Company, or withholding tax
liabilities arising from such option or other award are satisfied by the
tendering of Shares (either actually or by attestation) or by the withholding
of Shares by the Company, then only the number of Shares issued net of the
Shares tendered or withheld shall be counted for purposes of  determining the maximum number of Shares available for
grant under the Plan.


(iii)          Substitute Awards shall not reduce the Shares authorized
for grant under the Plan or authorized for grant to a Participant in any
period.  Additionally, in the event that
a company acquired by the Company or any Related Entity or with which the
Company or any Related Entity combines has shares available under a pre-existing
plan approved by shareholders and not adopted in contemplation of such
acquisition or combination, the shares available for delivery pursuant to the
terms of such pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or formula used in
such acquisition or combination to determine the consideration payable to the
holders of common stock of the entities party to such acquisition or
combination) may be used for Awards under the Plan and shall not reduce the
Shares authorized for delivery under the Plan; provided that Awards using such
available shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the acquisition or combination,


 


7

















and shall only be made to individuals who were not Employees or
Directors prior to such acquisition or combination.


(iv)          Any Share that again become available for delivery pursuant
to this Section 4(c) shall be added back as one (1) Share.


(v)           Notwithstanding anything in this Section 4(c) to the
contrary but subject to adjustment as provided in Section 10(c) hereof, the
maximum aggregate number of Shares that may be issued under the Plan as a result
of the exercise of the Incentive Stock Options shall be 5,000,000 shares.


(d)           No Further Awards Under Prior
Plan.  In light of the adoption of this Plan, no
further Awards shall be made under the Prior Plan after the Effective Date.


5.             Eligibility;
Per-Person Award Limitations.  Awards
may be granted under the Plan only to Eligible Persons.  Subject to adjustment as provided in Section
10(c), in any fiscal year of the Company during any part of which the Plan is
in effect, no Participant may be granted (i) Options or Stock Appreciation
Rights with respect to more than 500,000 Shares or (ii) Restricted Stock,
Deferred Stock, Performance Shares and/or Other Stock-Based Awards with respect
to more than 500,000 Shares.  In
addition, the maximum dollar value payable to any one Participant with respect
to Performance Units is (x) $2,500,000 with respect to any 12 month Performance
Period (pro-rated for any Performance Period that is less than 12 months based
upon the ratio of the number of days in the Performance Period as compared to
365), and (y) with respect to any Performance Period that is more than 12
months, $2,500,000 multiplied by the number of full 12 months periods that are
in the Performance Period.


6.             Specific
Terms of Awards.


(a)           General.  Awards may be granted on the terms and
conditions set forth in this Section 6. 
In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to Section 10(e)), such
additional terms and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall determine, including terms requiring forfeiture of
Awards in the event of termination of the Participant’s Continuous Service and
terms permitting a Participant to make elections relating to his or her
Award.  The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term or
condition of an Award that is not mandatory under the Plan.  Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
Delaware law, no consideration other than services may be required for the
grant (as opposed to the exercise) of any Award.


(b)           Options.  The Committee is authorized to grant Options
to any Eligible Person on the following terms and conditions:


(i)            Exercise Price.  Other
than in connection with Substitute Awards, the exercise price per Share
purchasable under an Option shall be determined by the Committee, provided that
such exercise price shall not, in the case of Incentive Stock Options, be less
than


 


8

















100% of the Fair Market Value of a Share on the date of grant of the
Option and shall not, in any event, be less than the par value of a Share on
the date of grant of the Option.  If an
Employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company (or any parent corporation
or subsidiary corporation of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, respectively) and an Incentive Stock
Option is granted to such employee, the exercise price of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
less than 110% of the Fair Market Value of a Share on the date such Incentive
Stock Option is granted.


(ii)           Time and
Method of Exercise.  The
Committee shall determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time
or times at which Options shall cease to be or become exercisable following
termination of Continuous Service or upon other conditions, the methods by
which the exercise price may be paid or deemed to be paid (including in the
discretion of the Committee a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Shares (including without
limitation the withholding of Shares otherwise deliverable pursuant to the
Award), other Awards or awards granted under other plans of the Company or a
Related Entity, or other property (including notes or other contractual
obligations of Participants to make payment on a deferred basis provided that
such deferred payments are not in violation of the Sarbanes-Oxley Act of 2002,
or any rule or regulation adopted thereunder or any other applicable law), and
the methods by or forms in which Shares will be delivered or deemed to be
delivered to Participants.


(iii)          Incentive Stock Options.  The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the provisions of
Section 422 of the Code.  Anything in the
Plan to the contrary notwithstanding, no term of the Plan relating to Incentive
Stock Options (including any Stock Appreciation Right issued in tandem
therewith) shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be exercised, so as to disqualify either
the Plan or any Incentive Stock Option under Section 422 of the Code, unless
the Participant has first requested, or consents to, the change that will
result in such disqualification.  Thus,
if and to the extent required to comply with Section 422 of the Code, Options
granted as Incentive Stock Options shall be subject to the following special
terms and conditions:


(A)          the Option shall not be exercisable for more than ten years
after the date such Incentive Stock Option is granted; provided, however, that
if a Participant owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company (or any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e) and
(f) of the Code, respectively) and the Incentive Stock Option is granted to
such Participant, the term of the Incentive Stock Option shall be (to the
extent required by the Code at the time of the grant) for no more than five
years from the date of grant; and


(B)           The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the Shares with respect to which
Incentive Stock


 


9

















Options granted under the Plan and all other option plans of the
Company (and any parent corporation or subsidiary corporation of the Company,
as those terms are defined in Sections 424(e) and (f) of the Code,
respectively) that become exercisable for the first time by the Participant
during any calendar year shall not (to the extent required by the Code at the time
of the grant) exceed $100,000.


(c)           Stock Appreciation Rights.  The Committee may grant Stock Appreciation
Rights to any Eligible Person in conjunction with all or part of any Option
granted under the Plan or at any subsequent time during the term of such Option
(a “Tandem Stock Appreciation Right”), or without regard to any Option (a “Freestanding
Stock Appreciation Right”), in each case upon such terms and conditions as the
Committee may establish in its sole discretion, not inconsistent with the
provisions of the Plan, including the following:


(i)            Right to Payment.  A Stock Appreciation Right shall confer on
the Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one Share on the date of
exercise over (B) the grant price of the Stock Appreciation Right as determined
by the Committee.  The grant price of a
Stock Appreciation Right  shall not be
less than 100% of the Fair Market Value of a Share on the date of grant, in the
case of a Freestanding Stock Appreciation Right, or less than the associated
Option exercise price, in the case of a Tandem Stock Appreciation Right.


(ii)           Other Terms.  The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances under
which a Stock Appreciation Right may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the time or times at which Stock Appreciation Rights shall cease
to be or become exercisable following termination of Continuous Service or upon
other conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Shares will be
delivered or deemed to be delivered to Participants, whether or not a Stock
Appreciation Right shall be in tandem or in combination with any other Award,
and any other terms and conditions of any Stock Appreciation Right.


(iii)          Tandem
Stock Appreciation Rights.
Any Tandem Stock Appreciation Right may be granted at the same time as
the related Option is granted or, for Options that are not Incentive Stock
Options, at any time thereafter before exercise or expiration of such
Option.  Any Tandem Stock Appreciation
Right related to an Option may be exercised only when the related Option would
be exercisable and the Fair Market Value of the Shares subject to the related
Option exceeds the exercise price at which Shares can be acquired pursuant to
the Option.  In addition, if a Tandem
Stock Appreciation Right exists with respect to less than the full number of
Shares covered by a related Option, then an exercise or termination of such
Option shall not reduce the number of Shares to which the Tandem Stock
Appreciation Right applies until the number of Shares then exercisable under
such Option equals the number of Shares to which the Tandem Stock Appreciation
Right applies. Any Option related to a Tandem Stock Appreciation Right shall no
longer be exercisable to the extent the Tandem Stock Appreciation Right has
been exercised, and any Tandem Stock Appreciation Right shall no longer be
exercisable to the extent the related Option has been exercised.


 


10

















(d)           Restricted Stock Awards.  The Committee is authorized to grant
Restricted Stock Awards to any Eligible Person on the following terms and
conditions:


(i)            Grant and Restrictions.  Restricted Stock Awards shall be subject to
such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, or as otherwise provided in
this Plan, covering a period of time specified by the Committee (the “Restriction
Period”).  The terms of any Restricted
Stock Award granted under the Plan shall be set forth in a written Award Agreement
which shall contain provisions determined by the Committee and not inconsistent
with the Plan.  The restrictions may
lapse separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. 
Except to the extent restricted under the terms of the Plan and any
Award Agreement relating to a Restricted Stock Award, a Participant granted
Restricted Stock shall have all of the rights of a shareholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee).  During the Restriction
Period, subject  to Section 10(b) below,
the Restricted Stock may not be sold, transferred, pledged, hypothecated,
margined or otherwise encumbered by the Participant.


(ii)           Forfeiture.  Except as otherwise determined by the
Committee, upon termination of a Participant’s Continuous Service during the
applicable Restriction Period, the Participant’s Restricted Stock that is at
that time subject to a risk of forfeiture that has not lapsed or otherwise been
satisfied shall be forfeited and reacquired by the Company; provided that the
Committee may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that forfeiture conditions relating to
Restricted Stock Awards shall be waived in whole or in part in the event of
terminations resulting from specified causes.


(iii)          Certificates for Stock.  Restricted Stock granted under the Plan may
be evidenced in such manner as the Committee shall determine.  If certificates representing Restricted Stock
are registered in the name of the Participant, the Committee may require that
such certificates bear an appropriate legend referring to the terms, conditions
and restrictions applicable to such Restricted Stock, that the Company retain
physical possession of the certificates, and that the Participant deliver a
stock power to the Company, endorsed in blank, relating to the Restricted
Stock.


(iv)          Dividends and Splits.  As a condition to the grant of a Restricted
Stock Award, the Committee may require or permit a Participant to elect that
any cash dividends paid on a Share of Restricted Stock be automatically
reinvested in additional Shares of Restricted Stock or applied to the purchase
of additional Awards under the Plan. 
Unless otherwise determined by the Committee, Shares distributed in
connection with a stock split or stock dividend, and other property distributed
as a dividend, shall be subject to restrictions and a risk of forfeiture to the
same extent as the Restricted Stock with respect to which such Shares or other
property have been distributed.


(e)           Deferred Stock Award.  The Committee is authorized to grant Deferred
Stock Awards to any Eligible Person on the following terms and conditions:


 


11
















(i)            Award and Restrictions.  Satisfaction of a Deferred Stock Award shall
occur upon expiration of the deferral period specified for such Deferred Stock
Award by the Committee (or, if permitted by the Committee, as elected by the
Participant).  In addition, a Deferred
Stock Award shall be subject to such restrictions (which may include a risk of
forfeiture) as the Committee may impose, if any, which restrictions may lapse
at the expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise, as
the Committee may determine.  A Deferred
Stock Award may be satisfied by delivery of Shares, cash equal to the Fair Market
Value of the specified number of Shares covered by the Deferred Stock, or a
combination thereof, as determined by the Committee at the date of grant or
thereafter.  Prior to satisfaction of a
Deferred Stock Award, a Deferred Stock Award carries no voting or dividend or
other rights associated with Share ownership.


(ii)           Forfeiture.  Except as otherwise determined by the
Committee, upon termination of a Participant’s Continuous Service during the
applicable deferral period or portion thereof to which forfeiture conditions
apply (as provided in the Award Agreement evidencing the Deferred Stock Award),
the Participant’s Deferred Stock Award that is at that time subject to a risk
of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited;
provided that the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that forfeiture conditions
relating to a Deferred Stock Award shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of any Deferred Stock
Award.


(iii)          Dividend Equivalents.  Unless otherwise determined by the Committee
at date of grant, any Dividend Equivalents that are granted with respect to any
Deferred Stock Award shall be either (A) paid with respect to such Deferred
Stock Award at the dividend payment date in cash or in Shares of unrestricted
stock having a Fair Market Value equal to the amount of such dividends, or (B)
deferred with respect to such Deferred Stock Award and the amount or value
thereof automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine or permit
the Participant to elect.


(f)            Bonus Stock and Awards in
Lieu of Obligations.  The
Committee is authorized to grant Shares to any Eligible Persons as a
bonus, or to grant Shares or other Awards in lieu of obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Eligible Persons subject to Section
16 of the Exchange Act, the amount of such grants remains within the discretion
of the Committee to the extent necessary to ensure that acquisitions of Shares
or other Awards are exempt from liability under Section 16(b) of the Exchange
Act.  Shares or Awards granted hereunder
shall be subject to such other terms as shall be determined by the Committee.


(g)           Dividend Equivalents.  The Committee is authorized to grant Dividend
Equivalents to any Eligible Person entitling the Eligible Person to receive
cash, Shares, other Awards, or other property equal in value to the dividends
paid with respect to a specified number of Shares, or other periodic
payments.  Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award.  The Committee may provide that Dividend


 


12

















Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares, Awards, or other
investment vehicles, and subject to such restrictions on transferability and
risks of forfeiture, as the Committee may specify.


(h)           Performance Awards.  The Committee is
authorized to grant Performance Awards to any Eligible Person payable in cash,
Shares, or other Awards, on terms and conditions established by the Committee,
subject to the provisions of Section 8 if and to the extent that the Committee
shall, in its sole discretion, determine that an Award shall be subject to
those provisions.  The performance
criteria to be achieved during any Performance Period and the length of the
Performance Period shall be determined by the Committee upon the grant of each
Performance Award.  Except as provided in
Section 9 or as may be provided in an Award Agreement, Performance Awards will
be distributed only after the end of the relevant Performance Period.  The performance goals to be achieved for each
Performance Period shall be conclusively determined by the Committee and may be
based upon the criteria set forth in Section 8(b), or in the case of an Award
that the Committee determines shall not be subject to Section 8 hereof, any
other criteria that the Committee, in its sole discretion, shall determine
should be used for that purpose.  The
amount of the Award to be distributed shall be conclusively determined by the
Committee.  Performance Awards may be
paid in a lump sum or in installments following the close of the Performance
Period or, in accordance with procedures established by the Committee, on a
deferred basis.


(i)            Other Stock-Based Awards.  The Committee is authorized, subject to
limitations under applicable law, to grant to any Eligible Person such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan.  Other Stock-Based Awards may be granted to
Participants either alone or in addition to other Awards granted under the
Plan, and such Other Stock-Based Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan.  The Committee shall determine the terms and conditions
of such Awards.  Shares delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 6(i) shall be purchased for such consideration, (including without limitation loans from the Company or a Related Entity
provided that such loans are not in violation of the Sarbanes Oxley Act of
2002, or any rule or regulation adopted thereunder or any other applicable law)
paid for at such times, by such methods, and in such forms, including,
without limitation, cash, Shares, other Awards or other property, as the
Committee shall determine.


7.             Certain
Provisions Applicable to Awards.


(a)           Stand-Alone, Additional,
Tandem, and Substitute Awards. 
Awards granted under the Plan may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under
another plan of the Company, any Related Entity, or any business entity to be
acquired by the Company or a Related Entity, or any other right of a
Participant to receive payment from the Company or any Related Entity.  Such additional, tandem, and substitute or
exchange Awards may be granted at any time. 
If an Award is granted in substitution or exchange for another Award or
award, the Committee shall require the surrender of such other Award or award
in consideration for the grant of the new Award.  In addition, Awards may be


 


13

















granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Related Entity, in which the
value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which the
exercise price, grant price or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying
Stock minus the value of the cash compensation surrendered (for example,
Options or Stock Appreciation Right granted with an exercise price or grant
price “discounted” by the amount of the cash compensation surrendered).


(b)           Term of Awards.  The term of each Award shall be for such
period as may be determined by the Committee; provided that in no event shall
the term of any Option or Stock Appreciation Right exceed a period of ten years
(or in the case of an Incentive Stock Option such shorter term as may be
required under Section 422 of the Code).


(c)           Form and Timing of Payment
Under Awards; Deferrals. 
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Related Entity upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Shares,
other Awards or other property, and may be made in a single payment or
transfer, in installments, or on a deferred basis.  Any installment or deferral provided for in
the preceding sentence shall, however, be subject to the Company’s compliance
with the provisions of the Sarbanes-Oxley Act of 2002, the rules and
regulations adopted by the Securities and Exchange Commission thereunder, and
all applicable rules of the Nasdaq Stock Market or any national securities
exchange on which the Company’s securities are listed for trading and, if not
listed for trading on either the Nasdaq Stock Market or a national securities
exchange, then the rules of the Nasdaq Stock Market.  The settlement of any Award may be accelerated,
and cash paid in lieu of Shares in connection with such settlement, in the
discretion of the Committee or upon occurrence of one or more specified events
(in addition to a Change in Control). 
Installment or deferred payments may be required by the Committee
(subject to Section 10(e) of the Plan, including the consent provisions thereof
in the case of any deferral of an outstanding Award not provided for in the
original Award Agreement) or permitted at the election of the Participant on
terms and conditions established by the Committee.  The Committee may, without limitation, make
provision for the payment or crediting of a reasonable interest rate on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Shares.


(d)           Exemptions from Section
16(b) Liability. If  the
Company becomes a Publicly Held Corporation, it is the intent of the Company
that the grant of any Awards to or other transaction by a Participant who is subject
to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to
an applicable exemption (except for transactions acknowledged in writing to be
non-exempt by such Participant). 
Accordingly, if any provision of this Plan or any Award Agreement does
not comply with the requirements of Rule 16b-3 then applicable to any such
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 so that such
Participant shall avoid liability under Section 16(b).


 


14

















(e)           Code Section 409A.  


(i)            If any Award
constitutes a “nonqualified deferred compensation plan” under Section 409A of
the Code (a “Section 409A Plan”), then the Award shall be subject to the
following additional requirements, if and to the extent required to comply with
Section 409A of the Code:


(A)          Payments under the
Section 409A Plan may not be made earlier than (u) the Participant’s separation
from service, (v) the date the Participant becomes disabled, (w) the
Participant’s death, (x) a specified time (or pursuant to a fixed schedule)
specified in the Award Agreement at the date of the deferral of such
compensation, (y) a change in the ownership or effective control of the
corporation, or in the ownership of a substantial portion of the assets of the
corporation, or (z) the occurrence of an unforeseeble emergency;


(B)           The time or schedule
for any payment of the deferred compensation may not be accelerated, except to
the extent provided in applicable Treasury Regulations or other applicable
guidance issued by the Internal Revenue Service;


(C)           Any elections with
respect to the deferral of such compensation or the time and form of
distribution of such deferred compensation shall comply with the requirements
of Section 409A(a)(4) of the Code; and


(D)          In the case of any
Participant who is specified employee, a distribution on account of a
separation from service may not be made before the date which is six months after
the date of the Participant’s separation from service (or, if earlier, the date
of the Participant’s death).


For
purposes of the foregoing, the terms “separation from service”, “disabled”, and
“specified employee”, all shall be defined in the same manner as those terms
are defined for purposes of Section 409A of the Code, and the limitations set
forth herein shall be applied in such manner (and only to the extent) as shall
be necessary to comply with any requirements of Section 409A of the Code that are
applicable to the Award.


(ii)           The Award Agreement
for any Award that the Committee reasonably determines to constitute a Section
409A Plan, and the provisions of the Plan applicable to that Award, shall be
construed in a manner consistent with the applicable requirements of Section
409A, and the Committee, in its sole discretion and without the consent of any
Participant, may amend any Award Agreement (and the provisions of the Plan
applicable thereto) if and to the extent that the Committee determines that
such amendment is necessary or appropriate to comply with the requirements of
Section 409A of the Code.


8.             Code
Section 162(m) Provisions.


(a)           Covered Employees. If the Company
becomes a Publicly Held Corporation, the Committee, in its discretion, may determine
at the time an Award is granted to an Eligible Person who is, or is likely to
be, as of the end of the tax year in which the Company


 


15

















would claim a tax deduction in connection with such Award, a Covered
Employee, that the provisions of this Section 8 shall be applicable to such
Award.


(b)           Performance Criteria.  If an Award is subject to this Section 8,
then the lapsing of restrictions thereon and the distribution of cash, Shares
or other property pursuant thereto, as applicable, shall be contingent upon
achievement of one or more objective performance goals.  Performance goals shall be objective and
shall otherwise meet the requirements of Section 162(m) of the Code and
regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance
goals being “substantially uncertain.” 
One or more of the following business criteria for the Company, on a
consolidated basis, and/or for Related Entities, or for business or
geographical units of the Company and/or a Related Entity (except with respect
to the total shareholder return and earnings per share criteria), shall be used
by the Committee in establishing performance goals for such Awards:
(1) earnings per share; (2) revenues or margins; (3) cash flow;
(4) operating margin; (5) return on net assets, investment, capital,
or equity; (6) economic value added; (7) direct contribution; (8) net
income; pretax earnings; earnings before interest and taxes; earnings before
interest, taxes, depreciation and amortization; earnings after interest expense
and before extraordinary or special items; operating income; income before
interest income or expense, unusual items and income taxes, local, state or
federal and excluding budgeted and actual bonuses which might be paid under any
ongoing bonus plans of the Company; (9) working capital;
(10) management of fixed costs or variable costs; (11) identification
or consummation of investment opportunities or completion of specified projects
in accordance with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total shareholder return;
(13) debt reduction; (14) market share; (15) entry into new markets, either
geographically or by business unit; (16) customer retention and satisfaction;
(17) strategic plan development and implementation, including turnaround plans;
and/or (18) the Fair Market Value of a Share. 
Any of the above goals may be determined on an absolute or relative
basis or as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard &
Poor’s 500 Stock Index or a group of companies that are comparable to the
Company.  The Committee shall exclude the
impact of an event or occurrence which the Committee determines should
appropriately be excluded, including without limitation (i) restructurings,
discontinued operations, extraordinary items, and other unusual or non-recurring
charges, (ii) an event either not directly related to the operations of the
Company or not within the reasonable control of the Company’s management, or
(iii) a change in accounting standards required by generally accepted
accounting principles.


(c)           Performance Period; Timing For
Establishing Performance Goals.  Achievement of performance goals in respect
of Performance Awards shall be measured over a Performance Period as specified
by the Committee.  Performance goals
shall be established not later than 90 days after the beginning of any
Performance Period applicable to such Performance Awards, or at such other date
as may be required or permitted for “performance-based compensation” under Code
Section 162(m).


(d)           Adjustments.  The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with Awards
subject to this Section 8, but may not exercise discretion to increase any such
amount payable to a Covered Employee in respect


 


16

















of an Award subject to this Section 8. 
The Committee shall specify the circumstances in which such Awards shall
be paid or forfeited in the event of termination of Continuous Service by the
Participant prior to the end of a Performance Period or settlement of Awards.


(e)           Committee Certification.  No Participant shall receive any payment
under the Plan that is subject to this Section 8 unless the Committee has
certified, by resolution or other appropriate action in writing, that the performance
criteria and any other material terms previously established by the Committee
or set forth in the Plan, have been satisfied to the extent necessary to
qualify as “performance based compensation” under Code Section 162(m).


9.             Change
in Control.


(a)           Effect of “Change in Control.”  Subject to Section 9(a)(iv), and if and only
to the extent provided in the Award Agreement, or to the extent otherwise
determined by the Committee, upon the occurrence of a “Change in Control,” as
defined in Section 9(b):


(i)            Any Option or Stock Appreciation Right that was not
previously vested and exercisable as of the time of the Change in Control,
shall become immediately vested and exercisable, subject to applicable
restrictions set forth in Section 10(a) hereof.


(ii)           Any restrictions, deferral of settlement, and forfeiture
conditions applicable to a Restricted Stock Award, Deferred Stock Award or an
Other Stock-Based Award subject only to future service requirements granted
under the Plan shall lapse and such Awards shall be deemed fully vested as of
the time of the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in Section 10(a)
hereof.


(iii)          With respect to any outstanding Award subject to achievement
of performance goals and conditions under the Plan, the Committee may, in its
discretion, deem such performance goals and conditions as having been met as of
the date of the Change in Control.


(iv)          Notwithstanding the foregoing or any provision in any Award
Agreement to the contrary, if in the event of a Change in Control the successor
company assumes or substitutes for an Option, Stock Appreciation Right,
Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award, then
each such outstanding Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award shall not be accelerated as
described in Sections 9(a)(i), (ii) and (iii). 
For the purposes of this Section 9(a)(iv), an Option, Stock Appreciation
Right, Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award
shall be considered assumed or substituted for if following the Change in
Control the Award confers the right to purchase or receive, for each Share
subject to the Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award immediately prior to the Change
in Control, the consideration (whether stock, cash or other securities or
property) received in the transaction constituting a Change in Control by
holders of Shares for each Share held on the effective date of such transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the transaction
constituting a Change in Control is not solely common


 


17

















stock of the successor company or its parent or subsidiary, the
Committee may, with the consent of the successor company or its parent or
subsidiary, provide that the consideration to be received upon the exercise or
vesting of an Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award, for each Share subject
thereto, will be solely common stock of the successor company or its parent or
subsidiary substantially equal in fair market value to the per share
consideration received by holders of Shares in the transaction constituting a
Change in Control.  The determination of
such substantial equality of value of consideration shall be made by the
Committee in its sole discretion and its determination shall be conclusive and
binding.


(b)           Definition of “Change in
Control”.  Unless
otherwise specified in an Award Agreement, a “Change in Control” shall mean the
occurrence of any of the following:


(i)            The acquisition by any Person of Beneficial Ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than fifty percent (50%) of either (A) the then outstanding equity securities
of the Company (the “Outstanding Company value of Stock”) or (B) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities) (the foregoing Beneficial Ownership hereinafter being referred to
as a “Controlling Interest”); provided, however, that for purposes of this
Section 9(b), the following acquisitions shall not constitute or result in a
Change in Control:  (v) any acquisition
directly from the Company; (w) any acquisition by the Company; (x) any
acquisition by any Person that as of the Effective Date owns Beneficial
Ownership of a Controlling Interest; (y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Related Entity; or (z) any acquisition by any entity pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii) below; or


(ii)           During any period of two (2) consecutive years (not
including any period prior to the Effective Date) individuals who constitute
the Board on the Effective Date (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Company’s shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or


(iii)          Consummation of a reorganization, merger, statutory share
exchange or consolidation or similar transaction involving the Company or any
of its Related Entities, a sale or other disposition of all or substantially
all of the assets of the Company, or the acquisition of assets or equity of
another entity by the Company or any of its Related Entities (each a “Business
Combination”), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities who were the
Beneficial Owners, respectively, of the Outstanding Company Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more


 


18

















than fifty percent (50%) of the value of the then outstanding equity
securities and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of members of the board
of directors (or comparable governing body of an entity that does not have such
a board), as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of the Company or such entity resulting from such
Business Combination or any Person that as of the Effective Date owns
Beneficial Ownership of a Controlling Interest) beneficially owns, directly or
indirectly, fifty percent (50%) or more of the value of the then outstanding
equity securities of the entity resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such entity
except to the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the Board of
Directors or other governing body of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or


(iv)          Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.


10.           General
Provisions.


(a)           Compliance With Legal and
Other Requirements.  The
Company may, to the extent deemed necessary or advisable by the Committee,
postpone the issuance or delivery of Shares or payment of other benefits under
any Award until completion of such registration or qualification of such Shares
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Shares or other Company securities
are listed or quoted, or compliance with any other obligation of the Company,
as the Committee, may consider appropriate, and may require any Participant to
make such representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate in connection
with the issuance or delivery of Shares or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing requirements,
or other obligations.


(b)           Limits on Transferability;
Beneficiaries.  No
Award or other right or interest granted under the Plan shall be
pledged, hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of such Participant to any party, or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than Incentive Stock
Options and Stock Appreciation Rights in tandem therewith) may be transferred
to one or more Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the


 


19

















extent such transfers are permitted by the Committee pursuant to the
express terms of an Award Agreement (subject to any terms and conditions which the
Committee may impose thereon).  A
Beneficiary, transferee, or other person claiming any rights under the Plan
from or through any Participant shall be subject to all terms and conditions of
the Plan and any Award Agreement applicable to such Participant, except as
otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.


(c)           Adjustments.


(i)            Adjustments
to Awards.  In the event that any extraordinary
dividend or other distribution (whether in the form of cash, Shares, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Shares
and/or such other securities of the Company or any other issuer such that a
substitution, exchange, or adjustment is determined by the Committee to be
appropriate, then the Committee shall, in such manner as it may deem equitable,
substitute, exchange or adjust any or all of (A) the number and kind of
Shares which may be delivered in connection with Awards granted thereafter,
(B) the number and kind of Shares by which annual per-person Award
limitations are measured under Section 5 hereof, (C) the number and kind
of Shares subject to or deliverable in respect of outstanding Awards,
(D) the exercise price, grant price or purchase price relating to any
Award and/or make provision for payment of cash or other property in respect of
any outstanding Award, and (E) any other aspect of any Award that the Committee
determines to be appropriate.


(ii)           Adjustments
in Case of Certain Transactions.  In the event of any
merger, consolidation or other reorganization in which the Company does not
survive, or in the event of any Change in Control, any outstanding Awards may
be dealt with in accordance with any of the following approaches, as determined
by the agreement effectuating the transaction or, if and to the extent not so
determined, as determined by the Committee: (a) the continuation of the
outstanding Awards by the Company, if the Company is a surviving entity, (b)
the assumption or substitution for, as those terms are defined in Section
9(b)(iv) hereof, the outstanding Awards by the surviving entity or its parent
or subsidiary, (c) full exercisability or vesting and accelerated expiration of
the outstanding Awards, or (d) settlement of the value of the outstanding
Awards in cash or cash equivalents or other property followed by cancellation
of such Awards (which value, in the case of Options or Stock Appreciation
Rights, shall be measured by the amount, if any, by which the Fair Market Value
of a Share exceeds the exercise or grant price of the Option or Stock
Appreciation Right as of the effective date of the transaction).  The Committee shall give written notice of
any proposed transaction referred to in this Section 10(c)(ii) a reasonable
period of time prior to the closing date for such transaction (which notice may
be given either before or after the approval of such transaction), in order
that Participants may have a reasonable period of time prior to the closing
date of such transaction within which to exercise any Awards that are then
exercisable (including any Awards that may become exercisable upon the closing
date of such transaction).  A Participant
may condition his exercise of any Awards upon the consummation of the
transaction.


(iii)          Other
Adjustments.  The Committee (and the Board if and only to
the extent such authority is not required to be exercised by the Committee to
comply with


 


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Section 162(m) of the Code) is authorized to make adjustments in the
terms and conditions of, and the criteria included in, Awards (including Performance
Awards, or performance goals relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions and
dispositions of businesses and assets) affecting the Company, any Related
Entity or any business unit, or the financial statements of the Company or any
Related Entity, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee’s assessment of the business strategy of the Company, any
Related Entity or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant.


(d)           Taxes.  The Company and any Related Entity are
authorized to withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Shares, or any payroll or
other payment to a Participant, amounts of withholding and other taxes due or potentially
payable in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company or any
Related Entity and Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any Award.  This authority shall include authority to
withhold or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of a Participant’s tax obligations, either on a
mandatory or elective basis in the discretion of the Committee.


(e)           Changes to the Plan and
Awards.  The
Board may amend, alter, suspend, discontinue or terminate the Plan, or
the Committee’s authority to grant Awards under the Plan, without the consent
of shareholders or Participants, except that any amendment or alteration to the
Plan shall be subject to the approval of the Company’s shareholders not later
than the annual meeting next following such Board action if such shareholder
approval is required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock exchange or automated quotation system on which the Shares may then be
listed or quoted, and the Board may otherwise, in its discretion, determine to
submit other such changes to the Plan to shareholders for approval; provided
that, without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any previously
granted and outstanding Award.  The
Committee may waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Award theretofore granted and any Award Agreement
relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee or the Board
action may materially and adversely affect the rights of such Participant under
such Award.  Notwithstanding anything to
the contrary, the Committee shall be authorized to amend any outstanding Option
and/or Stock Appreciation Right to reduce the exercise price or grant price
without the prior approval of the shareholders of the Company.  In addition, the Committee shall be
authorized to cancel outstanding Options and/or Stock Appreciation Rights
replaced with Awards having a lower exercise price without the prior approval
of the shareholders of the Company.


(f)            Limitation on Rights
Conferred Under Plan. 
Neither the Plan nor any action taken hereunder or under any
Award shall be construed as (i) giving any Eligible Person or Participant
the right to continue as an Eligible Person or Participant or in the employ or


 


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service of the Company or a Related Entity; (ii) interfering in
any way with the right of the Company or a Related Entity to terminate any
Eligible Person’s or Participant’s Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
Employees, or (iv) conferring on a Participant any of the rights of a
shareholder of the Company including, without limitation, any right to receive
dividends or distributions, any right to vote or act by written consent, any
right to attend meetings of shareholders or any right to receive any
information concerning the Company’s business, financial condition, results of
operation or prospects, unless and until such time as the Participant is duly
issued Shares on the stock books of the Company in accordance with the terms of
an Award.  None of the Company, its
officers or its directors shall have any fiduciary obligation to the
Participant with respect to any Awards unless and until the Participant is duly
issued Shares pursuant to the Award on the stock books of the Company in
accordance with the terms of an Award. 
Neither the Company nor any of the Company’s officers, directors,
representatives or agents are granting any rights under the Plan to the Participant
whatsoever, oral or written, express or implied, other than those rights
expressly set forth in this Plan or the Award Agreement.


(g)           Unfunded Status of Awards;
Creation of Trusts.  The
Plan is intended to constitute an “unfunded” plan for incentive and
deferred compensation.  With respect to
any payments not yet made to a Participant or obligation to deliver Shares
pursuant to an Award, nothing contained in the Plan or any Award shall give any
such Participant any rights that are greater than those of a general creditor
of the Company; provided that the Committee may authorize the creation of
trusts and deposit therein cash, Shares, other Awards or other property, or
make other arrangements to meet the Company’s obligations under the Plan.  Such trusts or other arrangements shall be
consistent with the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.  The trustee of such trusts may be authorized
to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.


(h)           Nonexclusivity of the
Plan.  Neither the
adoption of the Plan by the Board nor its submission to the shareholders of the
Company for approval shall be construed as creating any limitations on the
power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and
awards which do not qualify under Section 162(m) of the Code.


(i)            Payments in the Event of
Forfeitures; Fractional Shares.  Unless otherwise determined by the Committee,
in the event of a forfeiture of an Award with respect to which a Participant
paid cash or other consideration, the Participant shall be repaid the amount of
such cash or other consideration.  No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award.  The Committee shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.


(j)            Governing Law.  The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award Agreement shall
be determined in


 


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accordance with the laws of the State of Delaware without giving effect
to principles of conflict of laws, and applicable federal law.


(k)           Non-U.S. Laws.  The Committee shall have the authority to
adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Related Entities may operate to assure the viability of the
benefits from Awards granted to Participants performing services in such
countries and to meet the objectives of the Plan.


(l)            Plan Effective Date and
Shareholder Approval; Termination of Plan.  The Plan shall become effective on the
Effective Date, subject to subsequent approval, within 12 months of its
adoption by the Board, by shareholders of the Company eligible to vote in the
election of directors, by a vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable  requirements
under the rules of any stock exchange or automated quotation system on which
the Shares may be listed or quoted, and other laws, regulations, and
obligations of the Company applicable to the Plan.  Awards may be granted subject to shareholder
approval, but may not be exercised or otherwise settled in the event the
shareholder approval is not obtained. 
The Plan shall terminate at the earliest of (a) such time as no Shares
remain available for issuance under the Plan, (b) termination of this Plan
by the Board, or (c) the tenth anniversary of the Effective Date.  Awards outstanding upon expiration of the
Plan shall remain in effect until they have been exercised or terminated, or
have expired.


 


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