ex10_3.htm


    Exhibit 10.3

     

    INTERACTIVE
INTELLIGENCE, INC.

     

    1999
STOCK OPTION AND INCENTIVE PLAN

     

    (Restated
to reflect all amendments adopted through February 22, 2000)

     

     

    1.  Plan
Purpose.  The purpose of the Plan is to promote the long-term
interests of the Company and its shareholders by providing a means for
attracting and retaining officers and key employees of the Company and its
Affiliates.

     

    2.  Definitions.  The
following definitions are applicable to the Plan:

     

    "Affiliate"—means
any "parent corporation" or "subsidiary corporation" of the Company as such
terms are defined in Section 424(e) and (f), respectively, of the Code and
any other corporation or other entity (including partnerships, limited liability
companies, and joint ventures) controlled by or under common control with the
Company.

     

    "Award"—means,
individually or collectively, the grant by the Committee of an Incentive Stock
Option, a Non-Qualified Stock Option, or Restricted Stock, or any combination
thereof, as provided in the Plan.

     

    "Board or
Board of Directors"—means the Board of Directors of the Company.

     

    "Cashless
Exercise"—means, if there is a public market for the Shares, the payment of the
Exercise Price (a) through a "same day sale" commitment from the
Participant and an NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares so purchased in order to
pay the Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such stock to forward the Exercise Price directly to the Company, or
(b) through a "margin" commitment from the Participant and an NASD Dealer
whereby the Participant irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the NASD Dealer in a margin account as security for a
loan from the NASD Dealer in the amount of the Exercise Price and whereby the
NASD Dealer irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company.

     

    "Cause"—means,
for purposes of determining whether and when a Participant has incurred a
Termination of Continuous Service for Cause, any act or failure to act which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement or, in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause,"
then "Cause" for purposes of the Plan shall mean any act or failure to act
deemed to constitute "cause" under the Company's established and applied
practices, policies or guidelines applicable to the Participant.

     

    "Change
in Control"—means each of the events specified in the following clauses
(i) through (iii): (i) any third person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act shall, after the date of
the adoption of the Plan by the Board, first become the beneficial owner of
Shares of the Company with respect to which 25% or more of the total number of
votes for the election of the Board of Directors of the Company may be cast,
(ii) as a result of, or in connection with, any cash tender offer, exchange
offer, merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the persons who were directors of the
Company shall cease to constitute a majority of the Board of Directors of the
Company or (iii) the stockholders of the Company shall approve an agreement
providing either for a transaction in which the Company will cease to be an
independent publicly owned entity or for a sale or other disposition of all or
substantially all the assets of the Company.

     

    "Code"—means
the Internal Revenue Code of 1986, as amended.

     

    "Committee"—means
the Committee referred to in Section 3 hereof.

     

    "Company"—means
Interactive Intelligence, Inc., an Indiana corporation.

     

    "Continuous
Service"—means the absence of any interruption or termination of service as an
employee of the Company or an Affiliate. Service shall not be considered
interrupted in the case of sick leave, military leave, or any other leave of
absence approved by the Company or in the case of any transfer between the
Company and an Affiliate or any successor to the Company.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    "Disability"—means
a mental or physical illness that entitles the Participant to receive benefits
under the long-term disability plan of the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under the Plan if
it is the result, as determined by the Committee, of (a) an intentionally
self-inflicted injury or an intentionally self-induced sickness, or (b) an
injury or disease contracted, suffered or incurred while participating in a
criminal offense. The determination of a Disability for purposes of the Plan
shall not be construed to be an admission of a disability for any other
purpose.

     

    "Employee"—means
any person, including an officer or director, who is employed by the Company or
any Affiliate.

     

    "Exchange
Act"—means the Securities Exchange Act of 1934, as amended.

     

    "Exercise
Price"—means the price per Share at which the Shares subject to an Option may be
purchased upon exercise of such Option.

     

    "Incentive
Stock Option"—means an option to purchase Shares granted by the Committee
pursuant to the terms of the Plan which is intended to qualify under
Section 422 of the Code.

     

    "Market
Value"—means the last reported sale price on the date in question (or, if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred) of one Share on the principal exchange on which the
Shares are listed for trading, or if the Shares are not listed for trading on
any exchange, on the NASDAQ National Market System or any similar system then in
use, or, if the Shares are not listed on the NASDAQ National Market System, the
mean between the closing high bid and low asked quotations of one Share on the
date in question as reported by NASDAQ or any similar system then in use, or, if
no such quotations are available, the fair market value on such date of one
Share as the Committee shall determine.

     

    "NASD
Dealer"—means a broker-dealer who is a member of the National Association of
Securities Dealers, Inc.

     

    "Non-Qualified
Stock Option"—means an option to purchase Shares granted by the Committee
pursuant to the terms of the Plan, which option is not intended to qualify under
Section 422 of the Code.

     

    "Option"—means
an Incentive Stock Option or a Non-Qualified Stock Option.

     

    "Participant"—means
any officer, key employee, or consultant of the Company or any Affiliate or any
other individual who is selected by the Committee to receive an
Award.

     

    "Plan"—means
the Interactive Intelligence, Inc. 1999 Stock Option and Incentive Plan, as
set forth in this instrument and as hereafter amended from time to
time.

     

    "Reorganization"—means
the liquidation or dissolution of the Company or any merger, consolidation or
combination of the Company (other than a merger, consolidation or combination in
which the Company is the continuing entity and which does not result in the
outstanding Shares being converted into or exchanged for different securities,
cash or other property or any combination thereof).

     

    "Restricted
Period"—means the period of time selected by the Committee for the purpose of
determining when restrictions are in effect under Section 10 hereof with
respect to Restricted Stock awarded under the Plan.

     

    "Restricted
Stock"—means Shares which have been contingently awarded to a Participant by the
Committee subject to the restrictions referred to in Section 10 hereof, so
long as such restrictions are in effect.

     

    "Retirement"—means
the date on which a Participant attains age sixty-five (65) or such other
"normal retirement age" as the Company shall specify in its written
policies.

     

    "Securities
Act"—means the Securities Act of 1933, as amended.

     

    "Shares"—means
the common stock, $.01 par value, of the Company and shall include common stock
as it may be changed from time to time as described in Section 11
hereof.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    "Termination
of Continuous Service"—means the occurrence of any act or event or any failure
to act whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in a Participant ceasing, for whatever reason, to
be an Employee of the Company or an Affiliate, including, but not limited to,
death, Disability, Retirement, termination by the Company or an Affiliate of the
Participant's employment with the Company or an Affiliate (whether with or
without Cause), and voluntary resignation or termination by the Participant of
his or her employment with the Company or an Affiliate. A Termination of
Continuous Service also shall occur with respect to an Employee who is employed
by an Affiliate if the Affiliate shall cease to be an Affiliate of the Company
and the Participant shall not immediately thereafter become an Employee of the
Company or another Affiliate. For purposes of the Plan, transfers or changes of
employment of a Participant between the Company and an Affiliate (or between
Affiliates) shall not be deemed a Termination of Continuous
Service.

     

    3.  Administration.  The
Plan shall be administered by the Committee, which shall consist of two or more
members of the Board, each of whom shall be a "non-employee director" as
provided under Rule 16b-3 of the Exchange Act, and an "outside director" as
provided under Section 162(m) of the Code. Failure by the Committee to be
so comprised shall not result in the cancellation, termination, expiration, or
lapse of any Award. The members of the Committee shall be appointed by the
Board. If the Committee does not exist, or for any other reason determined by
the Board, the Board may take any action under the Plan that would otherwise be
the responsibility of the Committee. Except as limited by the express provisions
of the Plan, the Committee shall have sole and complete authority and discretion
to (a) select Participants and grant Awards; (b) determine the number
of Shares to be subject to and the types of Awards generally, as well as to
individual Awards granted under the Plan; (c) determine the terms and
conditions upon which Awards shall be granted under the Plan; (d) prescribe
the form and terms of instruments evidencing such grants; (e) establish
procedures and regulations for the administration of the Plan; (f) construe
and interpret the Plan, any Award agreement executed in connection therewith,
and any other agreements or instruments entered into under the Plan;
(g) make all determinations deemed necessary or advisable for the
administration of the Plan; and (h) establish, amend, or waive rules and
regulations for the administration of the Plan.

     

    A
majority of the Committee shall constitute a quorum, and the acts of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by all members of the Committee without a meeting, shall be
acts of the Committee. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan shall be final, conclusive, and binding
on all persons, and shall be given the maximum deference permitted by law. Each
Award shall be evidenced by a written agreement between the Company and the
Participant and shall contain such terms and conditions established by the
Committee consistent with the provisions of the Plan. Any notice or document
required to be given to or filed with the Committee will be properly given or
filed if hand delivered (and a delivery receipt is received) or mailed by
certified mail, return receipt requested, postage paid, to the Committee at
8909 Purdue Road, Suite 300, Indianapolis, Indiana 46268.

     

    4.  Participants.  The
Committee may select from time to time Participants from those officers, key
employees and consultants of the Company or its Affiliates and such other
individuals who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Company or its Affiliates. Neither the Plan nor any Award agreement executed
under the Plan shall constitute a contract of employment between a Participant
and the Company or an Affiliate, and participation in the Plan shall not give a
Participant the right to be rehired by or retained in the employment of the
Company or an Affiliate.

     

    5.  Shares
Subject to Plan.  Subject to adjustment by the operation of
Sections 11 and 12 hereof, the maximum number of Shares with respect to
which Awards may be granted under the Plan is Three Million Seven Hundred Fifty
Thousand (3,750,000) Shares. The number of Shares which may be granted under the
Plan to any Participant during any calendar year of the Plan, under all forms of
Awards, shall not exceed Two Hundred Fifty Thousand (250,000) Shares. The Shares
with respect to which Awards may be made under the Plan may either be authorized
and unissued Shares or unissued Shares heretofore or hereafter reacquired and
held as treasury Shares. With respect to any Option which terminates or is
surrendered for cancellation or with respect to Restricted Stock which is
forfeited, new Awards may be granted under the Plan with respect to the number
of Shares as to which such termination or forfeiture has occurred.

     

    Subject
to the limitations set forth in the Plan, the Committee shall have full
authority to determine the number of Shares available for Awards, and in its
discretion may include (without limitation) as available for distribution any
Shares that have ceased to be subject to an Award, any Shares subject to an
Award that have been previously forfeited, and any Shares under an Award that
otherwise terminates without the issuance of Shares being made to a
Participant.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


     

    Shares
issued upon exercise of an Award shall be subject to the terms and conditions
specified herein and to such other terms, conditions and restrictions as the
Committee in its discretion may determine or provide in the Award agreement. The
Company shall not be required to issue or deliver any certificates for Shares or
other property prior to (a) the listing of such Shares on any stock
exchange (or other public market) on which the Shares may then be listed (or
regularly traded); and (b) the completion of any registration or
qualification of such Shares under federal, state, local or other law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable. The Company may cause any certificate for any Shares to
be delivered hereunder to be properly marked with a legend or other notation
reflecting the limitations on transfer of such Shares as provided in the Plan or
as the Committee may otherwise require. Participants, or any other persons
entitled to benefits under the Plan, must furnish to the Committee such
documents, evidence, data, or other information as the Committee considers
necessary or desirable for the purpose of administering the Plan. The benefits
under the Plan for each Participant, and each other person who is entitled to
benefits hereunder, are to be provided on the condition that he furnish full,
true, and complete data, evidence, or other information, and that he will
promptly sign any document reasonably related to the administration of the Plan
requested by the Committee. No fractional Shares shall be issued under the Plan;
rather, fractional Shares shall be aggregated and then rounded to the next lower
whole Share.

     

    6.  General
Terms and Conditions of Options.  The Committee shall have full
and complete authority and discretion, except as expressly limited by the Plan,
to grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (a) the type of Option;
(b) the Exercise Price; (c) the number of Shares subject to, and the
expiration date of, any Option; (d) the manner, time and rate (cumulative
or otherwise) of exercise of such Option; (e) the restrictions, if any, to
be placed upon such Option or upon Shares which may be issued upon exercise of
such Option; and (f) such other terms and conditions consistent with the
Plan as the Committee determines in its discretion. The Committee may, as a
condition of granting any Option, require that a Participant agree to surrender
for cancellation one or more Options previously granted to such
Participant.

     

    7.  Exercise
of Options.  

     

    (a)  Restriction on
Exercise.  Except as provided in Section 14, all Options
granted under the Plan shall be exercisable during the lifetime of the
Participant to whom such Option was granted only by such Participant, and except
as provided in Section 8, no Option may be exercised unless, at the time
the Participant exercises the Option, the Participant has maintained Continuous
Service since the date of the grant of the Option. Except as provided in
Section 13, or as otherwise determined by the Committee, all Options
granted under the Plan shall vest and become exercisable in accordance with the
following schedule:

     

    
      	 
      	 	
              Percentage
      of Option

              Shares
      Vested

              and
      Exercisable

            	 
	
              Date
      of Vesting

            	 	
              Percent
    Vested

            	 	 	
              Cumulative

            	 
	
              First
      anniversary of date of Option grant

            	 	 	25
      	%	 	 	25
      	%
	
              Second
      anniversary of date of Option grant

            	 	 	25
      	%	 	 	50
      	%
	
              Third
      anniversary of date of Option grant

            	 	 	25
      	%	 	 	75
      	%
	
              Fourth
      anniversary of date of Option grant

            	 	 	25
      	%	 	 	100
      	%


    

     

    (b)  Method of
Exercise.  To exercise an Option under the Plan, the
Participant must give written notice to the Company specifying the number of
Shares with respect to which the Participant elects to exercise the Option
together with full payment of the Exercise Price. The date of exercise shall be
the date on which the notice is received by the Company. Payment may be made
either (i) in cash (including check, bank draft, or money order),
(ii) by tendering Shares already owned by the Participant for more than six
months and having a Market Value on the date of exercise equal to the Exercise
Price, (iii) the delivery of cash by a broker-dealer as a Cashless
Exercise, or (iv) by any other means determined by the Committee in its
sole discretion.

     

    (c)  Reload
Provision.  In the event a Participant exercises an Option and
pays all or a portion of the Exercise Price in Shares, in the manner permitted
by Section 7(b), such Participant may (either pursuant to terms of the
Award agreement or pursuant to the sole discretion of the Committee at the time
the Option is exercised) be issued a new Option to purchase additional Shares
equal to the number of Shares surrendered to the Company in such payment. Such
new Option shall (a) have an Exercise Price equal to the Market Value per
Share on the grant date of the new Option, (b) first be exercisable six
(6) months from such grant date, and (c) expire on the same date as
the original Option so exercised by payment of the Exercise Price in
Shares.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


     

    8.  Termination
of Options.  Unless otherwise specifically provided by the
Committee in the Award agreement between the Participant and the Company, each
Option granted under the Plan shall terminate as provided in this
Section 8.

     

    (a)  Maximum
Term.  Unless sooner terminated under the provisions of this
Section 8, Options shall expire on the earlier of the date specified by the
Committee or the expiration of ten (10) years from the date of
grant.

     

    (b)  Termination for
Cause.  If the Participant incurs a Termination of Continuous
Service for Cause, all rights under any Options granted to the Participant shall
terminate immediately upon the Participant's Termination of Continuous Service,
and the Participant shall (if the Committee in its sole discretion exercises its
rights under this Section 8(b) within ten (10) days of such
Termination of Continuous Service) repay to the Company within ten
(10) days of the Committee's demand therefor the amount of any gain
realized by the Participant upon any exercise within the 90-day period prior to
the Termination of Continuous Service of any Options granted to such Participant
under the Plan.

     

    (c)  Termination Due to
Retirement or Without Cause or Voluntary Termination.  If the
Continuous Service of a Participant is terminated by reason of Retirement,
terminated by the Company without Cause, or by Voluntary Termination, the
Participant may exercise outstanding Options to the extent that the Participant
was entitled to exercise the Options at the date of Termination of Continuous
Service, but only within the period of one (1) month immediately succeeding
the Participant's Termination of Continuous Service, and in no event after the
applicable expiration dates of the Options. Any Option that is not exercisable
on the date of Termination of Continuous Service shall terminate and be
forfeited effective on such date.

     

    (d)  Termination Due to Death
or Disability.  In the event of the Participant's death or
Disability, the Participant or the Participant's beneficiary, as the case may
be, may exercise outstanding Options to the extent that the Participant was
entitled to exercise the Options at the date of Termination of Continuous
Service, but only within the one (1)-year period immediately succeeding the
Participant's Termination of Continuous Service in the case of Disability, and
in no event after the applicable expiration date of the Options. Any Option that
is not exercisable on the date of Termination of Continuous Service shall
terminate and be forfeited effective on such date.

     

    (e)  Committee
Discretion.  Notwithstanding the provisions of the foregoing
paragraphs of this Section 8, the Committee may, in its sole discretion,
establish different terms and conditions pertaining to the effect of the
Termination of Continuous Service, to the extent permitted by applicable federal
and state law.

     

    9.  Incentive
Stock Options.  Incentive Stock Options may be granted only to
Participants who are Employees. Any provisions of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than
ten (10) years from the date the Plan is adopted by the Board of Directors
of the Company and no Incentive Stock Option shall be exercisable more than ten
(10) years from the date such Incentive Stock Option is granted,
(ii) the Exercise Price of any Incentive Stock Option shall not be less
than the Market Value per Share on the date such Incentive Stock Option is
granted, (iii) any Incentive Stock Option shall not be transferable by the
Participant to whom such Incentive Stock Option is granted other than by will or
the laws of descent and distribution and shall be exercisable during such
Participant's lifetime only by such Participant, and (iv) no Incentive
Stock Option shall be granted which would permit a Participant to acquire,
through the exercise of Incentive Stock Options in any calendar year, Shares or
Shares of any capital stock of the Company or any Affiliate thereof having an
aggregate Market Value (determined as of the time any Incentive Stock Option is
granted) in excess of One Hundred Thousand Dollars ($100,000). The foregoing
limitation shall be determined by assuming that the Participant will exercise
each Incentive Stock Option on the date that such Option first becomes
exercisable. Notwithstanding the foregoing, in the case of any Participant who,
at the date of grant, owns stock possessing more than Ten Percent (10%) of the
total combined voting power of all classes of capital stock of the Company or
any Affiliate, the Exercise Price of any Incentive Stock Option shall not be
less than One Hundred Ten Percent (110%) of the Market Value per Share on the
date such Incentive Stock Option is granted and such Incentive Stock Option
shall not be exercisable more than five (5) years from the date such
Incentive Stock Option is granted.

     

    10.  Terms
and Conditions of Restricted Stock.  The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (g) of this Section 10, to
provide such other terms and conditions (which need not be identical among
Participants) in respect of such Awards as the Committee shall determine and
provide in the agreement referred to in paragraph (d) of this
Section 10.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


     

    (a)  Restricted
Period.  At the time of an Award of Restricted Stock, the
Committee shall establish for each Participant a Restricted Period during which,
or at the expiration of which, the Shares of Restricted Stock shall vest. The
Committee may also restrict or prohibit the sale, assignment, transfer, pledge,
or other encumbrance of the Shares of Restricted Stock by the Participant during
the Restricted Period. Except for such restrictions, and subject to
paragraphs (c), (d) and (e) of this Section 10 and
Section 11 hereof, the Participant as owner of such Shares shall have all
the rights of a stockholder, including but not limited to the right to receive
all dividends paid on such Shares and the right to vote such Shares. Except in
the case of grants of Restricted Stock which are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, the
Committee shall have the authority, in its discretion, to accelerate the time at
which any or all of the restrictions shall lapse with respect to any Shares of
Restricted Stock prior to the expiration of the Restricted Period with respect
thereto, or to remove any or all of such restrictions, whenever it may determine
that such action is appropriate by reason of changes in applicable tax or other
laws or other changes in circumstances occurring after the commencement of such
Restricted Period.

     

    (b)  Lapse and
Forfeiture.  Except as provided in Section 13 hereof, if a
Participant incurs a Termination of Continuous Service for any reason (other
than death, Disability or Retirement), unless the Committee shall otherwise
determine, all Shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such Termination of Continuous Service are
subject to the restrictions imposed by paragraph (a) of this
Section 10 shall upon such Termination of Continuous Service be forfeited
and returned to the Company. If a Participant incurs a Termination of Continuous
Service by reason of death or Disability, then the restrictions with respect to
the Ratable Portion of the Shares of Restricted Stock shall lapse and such
Shares shall be free of restrictions and shall not be forfeited. The Ratable
Portion shall be determined with respect to each separate Award of Restricted
Stock issued and shall be equal to (i) the number of Shares of Restricted
Stock awarded to the Participant multiplied by the portion of the Restricted
Period that expired at the date of the Participant's death or Disability reduced
by (ii) the number of Shares of Restricted Stock awarded with respect to
which the restrictions had lapsed as of the date of the death or Disability of
the Participant. Likewise, on the date set forth in the applicable Award
agreement, the Restricted Stock for which restrictions have not lapsed by the
last day of the Restricted Period shall be forfeited and returned to the Company
and thereafter shall be available for the grant of new Awards under the
Plan.

     

    (c)  Legend on
Certificates.  Each certificate issued in respect of Shares of
Restricted Stock awarded under the Plan shall be registered in the name of the
Participant and deposited by the Participant, together with a stock power
endorsed in blank, with the Company and shall bear the following (or a similar)
legend:

     

    "The
sale, pledge or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law is subject to
the terms and conditions (including forfeiture) contained in the Interactive
Intelligence, Inc. 1999 Stock Option and Incentive Plan and an Award
agreement entered into between the registered owner and Interactive
Intelligence, Inc. Copies of such Plan and Award agreement are on file in
the office of the Secretary of Interactive Intelligence, Inc."

     

    (d)  Award
Agreement.  At the time of an Award of Shares of Restricted
Stock, the Participant shall enter into an Agreement with the Company in a form
specified by the Committee, agreeing to the terms and conditions of the Award,
and to such other matters as the Committee shall in its sole discretion
determine.

     

    (e)  Dividend
Rights.  At the time of an Award of Shares of Restricted Stock,
the Committee may, in its discretion, determine that the payment to the
Participant of dividends declared or paid on such Shares by the Company or a
specified portion thereof, shall be deferred until the earlier to occur of
(i) the lapsing of the restrictions imposed under paragraph (a) of
this Section 10, or (ii) the forfeiture of such Shares under
paragraph (b) of this Section 10, and shall be held by the Company for
the account of the Participant until such time. In the event of such deferral,
there shall be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Payment of deferred dividends,
together with interest accrued thereon as aforesaid, shall be made upon the
earlier to occur of the events specified in (i) and (ii) of the
immediately preceding sentence.

     

    (f)  Lapse of
Restrictions.  At the expiration of the restrictions imposed by
paragraph (a) of this Section 10, the Company shall redeliver to the
Participant (or where the relevant provision of paragraph (b) of this
Section 10 applies in the case of a deceased Participant, to his legal
representative, beneficiary or heir) the certificate(s) and stock power
deposited with it pursuant to paragraph (c) of this Section 10 and the
Shares represented by such certificate(s) shall be free of the restrictions
referred to in paragraph (a) of this Section 10. Notwithstanding any
other provision of this Section 10 and Section 12 to the contrary, in
the case of grants of Restricted Stock that are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code, no
Shares of Restricted Stock shall become vested unless the performance goals with
respect to such Restricted Stock shall have been satisfied. If the vesting of
Shares of Restricted Stock is accelerated after the applicable performance goals
have been met, the amount of Restricted Stock distributed shall be discounted by
the Committee to reasonably reflect the time value of money in connection with
such early vesting.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (g)  Section 162(m)
Performance Restrictions.  Notwithstanding any other provision
of this Section 10 to the contrary, for purposes of qualifying grants of
Restricted Stock as "performance-based compensation" under Section 162(m)
of the Code, the Committee shall establish restrictions based upon the
achievement of performance goals. The specific targets under the performance
goals that must be satisfied for the Restricted Period to lapse or terminate
shall be set by the Committee on or before the latest date permissible to enable
the Restricted Stock to qualify as "performance-based compensation" under
Section 162(m) of the Code. The business criteria for performance goals
under this Section 10 shall be one or more of the return on equity, total
revenues, net earnings, or earnings per share of the Company as selected by the
Committee on, where applicable, a consolidated basis, for a calendar year
calculated in accordance with generally accepted accounting principles
consistently applied. In granting Restricted Stock that is intended to qualify
under Section 162(m), the Committee shall follow any procedures determined
by it in its sole discretion from time to time to be necessary, advisable or
appropriate to ensure qualification of the Restricted Stock under
Section 162(m) of the Code.

     

    11.  Adjustments
Upon Changes in Capitalization.  In the event of any change in
the Shares by virtue of any stock dividends, stock splits, recapitalizations, or
reclassifications or any acquisition, merger, consolidation, share exchange,
tender offer, or other combination involving the Company that does not
constitute a Change in Control but that results in the acquisition of a
subsidiary by the Company, or in the event that other stock shall be substituted
for the Shares as the result of any merger, consolidation, share exchange, or
reorganization or any similar transaction which constitutes a Change in Control
of the Company, the Committee shall correspondingly adjust (a) the number,
kind, and class of Shares which may be delivered under the Plan; (b) the
number, kind, class, and price of Shares subject to outstanding Awards (except
for mergers or other combinations in which the Company is the surviving entity);
and (c) the numerical limits of Section 5, all in such manner as the
Committee in its sole discretion shall determine to be advisable or appropriate
to prevent the dilution or diminution of such Awards; provided, however, in no
event shall the One Hundred Thousand Dollar ($100,000) limit on Incentive Stock
Options contained in Section 9 be affected by an adjustment under this
Section 11. The Committee's determination in this respect shall be final
and conclusive.

     

    12.  Effect
of Reorganization.  Awards will be affected by a Reorganization
as follows:

     

    (a) If
the Reorganization is a dissolution or liquidation of the Company then
(i) the restrictions of Section 10(a) on Shares of Restricted Stock
shall lapse, and (ii) each outstanding Option shall terminate, but each
Participant to whom the Option was granted shall have the right, immediately
prior to such dissolution or liquidation to exercise his Option in full,
notwithstanding the provisions of Section 9, and the Company shall notify
each Participant of such right within a reasonable period of time prior to any
such dissolution or liquidation.

     

    (b) If
the Reorganization is a merger or consolidation, upon the effective date of such
Reorganization (i) each Optionee shall be entitled, upon exercise of his
Option in accordance with all of the terms and conditions of the Plan, to
receive in lieu of Shares, Shares of such stock or other securities or
consideration as the holders of Shares shall be entitled to receive pursuant to
the terms of the Reorganization; and (ii) each holder of Restricted Stock
shall receive Shares of such stock or other securities as the holders of Shares
received which shall be subject to the restrictions set forth in
Section 10(a) unless the Committee accelerates the lapse of such
restrictions and the certificate(s) or other instruments representing or
evidencing such Shares or securities shall be legended and deposited with the
Company in the manner provided in Section 10 hereof.

     

    The
adjustments contained in this Section 12 and the manner of application of
such provisions shall be determined solely by the Committee.

     

    13.  Effect
of Change in Control.  Unless the Committee shall have
otherwise provided in the Award agreement reflecting the applicable Award, upon
the occurrence of a Change in Control (a) any Restricted Period with
respect to Restricted Stock theretofore awarded to a Participant shall lapse and
all Shares awarded as Restricted Stock shall become fully vested in the
Participant to whom such Shares were awarded and (b) all Options
theretofore granted and not fully exercisable shall become exercisable in full
and shall remain so exercisable in accordance with their terms; provided,
however, that no Option which has previously been exercised or otherwise
terminated shall become exercisable.

     

    14.  Assignments
and Transfers.  Except as otherwise determined by the
Committee, no Award nor any right or interest of a Participant under the Plan in
any instrument evidencing any Award under the Plan may be assigned, encumbered,
or transferred except, in the event of the death of a Participant, by will or
the laws of descent and distribution.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    15.  Employee
Rights Under Plan.  No officer, Employee or other person shall
have a right to be selected as a Participant nor, having been so selected, to be
selected again as a Participant and no officer, Employee or other person shall
have any claim or right to be granted an Award under the Plan or under any other
incentive or similar plan of the Company or any Affiliate. Neither the Plan nor
any action taken thereunder shall be construed as giving any Employee any right
to be retained in the employ of the Company or any Affiliate.

     

    16.  Delivery
and Registration of Stock.  Except with respect to Restricted
Stock as provided in Section 10, no person shall have any rights of a
shareholder (including, but not limited to, voting and dividend rights) as to
Shares subject to an Option until, after proper exercise of the Option or other
action as may be required by the Committee in its discretion, such Shares shall
have been recorded on the Company's official shareholder records (or the records
of its transfer agents or registrars) as having been issued and transferred to
the Participant. Upon exercise of the Option or any portion thereof, the Company
will have a reasonable period in which to issue and transfer the Shares to the
Participant, and the Participant will not be treated as a shareholder for any
purpose whatsoever prior to such issuance and transfer. No payment or adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such Shares are recorded as issued and transferred in the
Company's official shareholder records (or the records of its transfer agents or
registrars), except as provided herein or in an Award agreement. The Company's
obligation to deliver Shares with respect to an Award shall, if the Committee so
determines, be conditioned upon the receipt of a representation as to the
investment intention of the Participant to whom such Shares are to be delivered,
in such form as the Company shall determine to be necessary or advisable to
comply with the provisions of the Securities Act or any other applicable federal
or state securities legislation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under the Securities Act
or other securities legislation. The Company shall not be required to deliver
any Shares under the Plan prior to (i) the admission of such Shares to
listing on any stock exchange or system on which Shares may then be listed, and
(ii) the completion of such registration or other qualification of such
Shares under any state or federal law, rule, or regulation, as the Company shall
determine to be necessary or advisable.

     

    17.  Withholding
Tax.  Upon the termination of the Restricted Period with
respect to any Shares of Restricted Stock or the issuance of Shares pursuant to
the exercise of any Option (or at any such earlier time, if any, that an
election is made by the Participant under Section 83(b) of the Code, or any
successor provision thereto, to include the value of such Shares in income), the
Company may, in lieu of requiring the Participant or other person receiving such
Shares, to pay the Company the amount of any taxes which the Company is required
to withhold with respect to such Shares, retain a sufficient number of Shares
held by it to cover the amount required to be withheld. The Company shall have
the right to deduct from all dividends paid with respect to Shares of Restricted
Stock the amount of any taxes which the Company is required to withhold with
respect to such dividend payments.

     

    Where a
Participant or other person is entitled to receive Shares pursuant to the
exercise of an Option pursuant to the Plan, the Company may, in lieu of
requiring the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
retain a number of such Shares sufficient to cover the amount required to be
withheld.

     

    18.  Loans.  

     

    (a)  Loans
Authorized.  The Company may make loans to a Participant in
connection with Restricted Stock or the exercise of Options subject to the
following terms and conditions and such other terms and conditions not
inconsistent with the Plan, including the rate of interest, if any, as the
Company shall impose from time to time.

     

    (b)  Limitations on
Loans.  No loan made under the Plan shall exceed (i) with
respect to Options, the sum of (A) the aggregate option price payable upon
exercise of the Option in relation to which the loan is made, plus (B) the
amount of the reasonably estimated income taxes payable by the Participant, and
(ii) with respect to Restricted Stock, the amount of reasonably estimated
income taxes payable by the Participant. In no event may any such loan exceed
the Market Value of the related Shares at the time of the loan.

     

    (c)  Minimum
Terms.  No loan shall have an initial term exceeding three
(3) years; provided, that loans under the Plan shall be renewable at the
discretion of the Committee; and, provided, further, that the indebtedness under
each loan shall become due and payable on a date no later than (i) one year
after Termination of Continuous Service by the Participant due to death,
Disability or Retirement, or (ii) the day of Termination of Continuous
Service by the Participant for any reason other than death, Disability or
Retirement.

     

    (d)  Payment of
Loans.  Loans under the Plan may be satisfied by the
Participant, as determined by the Committee, in cash or, with the consent of the
Committee, in whole or in part in Shares at Market Value on the date of such
payment.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (e)  Collateral.  When
a loan shall have been made, Shares having an aggregate Market Value equal to
the amount of the loan may, in the discretion of the Committee, be required to
be pledged by the Participant to the Company as security for payment of the
unpaid balance of the loan. Portions of such Shares may, in the discretion of
the Committee, be released from time to time as it deems not to be needed as
security.

     

    (f)  Legal
Requirements.  Every loan shall meet all applicable laws,
regulations, and rules of the Federal Reserve Board and any other governmental
agency having jurisdiction.

     

    19.  Amendment,
Suspension or Termination.  The Board may supplement, amend,
alter, or discontinue the Plan in its sole discretion at any time and from time
to time, but no supplement, amendment, alteration, or discontinuation shall be
made which would impair the rights of a Participant under an Award theretofore
granted without the Participant's consent, except that any supplement,
amendment, alteration, or discontinuation may be made to (a) avoid a
material charge or expense to the Company or an Affiliate; (b) cause the
Plan to comply with applicable law; or (c) permit the Company or an
Affiliate to claim a tax deduction under applicable law. In addition, subject to
the provisions of this Section 19, the Board, in its sole discretion at any
time and from time to time, may supplement, amend, alter, or discontinue the
Plan without the approval of the Company's shareholders (a) to the extent
such approval is not required by applicable law or the terms of a written
agreement; and (b) so long as any such amendment or alteration does not
increase the number of Shares subject to the Plan (other than pursuant to
Section 11) or increase the maximum number of Options or Shares of
Restricted Stock that the Committee may award to an individual Participant under
the Plan. The Committee may supplement, amend, alter, or discontinue the terms
of any Award theretofore granted, prospectively or retroactively, on the same
conditions and limitations (and exceptions to limitations) as apply to the Board
under the foregoing provisions of this Section 19, and further subject to
any approval or limitations the Board may impose. Notwithstanding any provision
of the Plan to the contrary, if any right, Award or Award agreement under the
Plan would cause a transaction of or acquisition by the Company to be ineligible
for "pooling of interest" accounting treatment that would, but for such right
hereunder, otherwise be eligible for such accounting treatment, the Committee
may amend, modify, or adjust the right, the Award or the Award agreement of a
Participant (without the prior consent, approval, or authorization of the
Participant) so that pooling of interest accounting treatment shall be available
with respect to such transaction or acquisition even if any such amendment,
modification, or adjustment would be detrimental to or impair the rights of a
Participant under the Plan.

     

    20.  Effective
Date and Term of Plan.  The Plan shall become effective upon
its approval by the holders of at least a majority of the outstanding Shares at
a meeting at which approval of the Plan is considered and shall continue in
effect for a term of ten (10) years from the date of adoption unless sooner
terminated under Section 19 hereof.

     

    21.  Legal
Construction.  

     

    (a)  Gender and
Number.  Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

     

    (b)  Severability.  In
the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had never been included herein.

     

    (c)  Requirements of
Law.  The grant of Awards and the issuance of Shares under the
Plan shall be subject to all applicable statutes, laws, rules, and regulations
and to such approvals and requirements as may be required from time to time by
any governmental authorities or any securities exchange or market on which the
Shares are then listed or traded.

     

    (d)  Governing
Law.  Except to the extent preempted by the Federal laws of the
United States of America, the Plan and all Award agreements shall be construed
in accordance with and governed by the laws of the State of Indiana without
giving effect to any choice or conflict of law provisions, principles or rules
(whether of the State of Indiana or any other jurisdiction) that would cause the
application of any laws of any jurisdiction other than the State of
Indiana.

     

    (e)  Headings.  The
descriptive headings, sections, and paragraphs of the Plan are provided herein
for convenience of reference only and shall not serve as a basis for
interpretation or construction of the Plan.

     

    (f)  Mistake of
Fact.  Any mistake of fact or misstatement of facts shall be
corrected when it becomes known by a proper adjustment to an Award or Award
agreement.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (g)  Evidence.  Evidence
required of anyone under the Plan may be by certificate, affidavit, document, or
other information which the person relying thereon considers pertinent and
reliable, and signed, made, or presented by the proper party or
parties.

     

    22.  No
Effect on Employment or Service.  Neither the Plan nor the
grant of any Awards or the execution of any Award agreement shall confer upon
any Participant any right to continued employment by the Company or shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without Cause.
Employment with the Company and its Affiliates is on an at-will basis only,
unless otherwise provided by a written employment or severance agreement, if
any, between the Participant and the Company or an Affiliate, as the case may
be. If there is any conflict between the provisions of the Plan and an
employment or severance agreement between a Participant and the Company, the
provisions of such employment or severance agreement shall control, including,
but not limited to, the vesting and nonforfeiture of any Awards.

     

    23.  No
Company Obligation.  Unless required by applicable law, the
Company, an Affiliate, the Board of Directors, and the Committee shall not have
any duty or obligation to affirmatively disclose material information to a
record or beneficial holder of Shares or an Award, and such holder shall have no
right to be advised of any material information regarding the Company or any
Affiliate at any time prior to, upon, or in connection with the receipt,
exercise, or distribution of an Award. In addition, the Company, an Affiliate,
the Board of Directors, the Committee, and any attorneys, accountants, advisors,
or agents for any of the foregoing shall not provide any advice, counsel, or
recommendation to any Participant with respect to, without limitation, any
Award, any exercise of an Option, or any tax consequences relating to an
Award.

     

    24.  Participation.  No
Employee or consultant shall have the right to be selected to receive an Award
under the Plan or, having been selected, to be selected to receive a future
Award. Participation in the Plan will not give any Participant any right or
claim to any benefit under the Plan, unless such right or claim has specifically
accrued under the terms of the Plan.

     

    25.  Liability
and Indemnification.  No member of the Board, the Committee, or
any officer or Employee of the Company or any Affiliate shall be personally
liable for any action, failure to act, decision, or determination made in good
faith in connection with the Plan. By participating in the Plan, each
Participant agrees to release and hold harmless the Company and its Affiliates
(and their respective directors, officers, and employees) and the Committee from
and against any tax liability, including, but not limited to, interest and
penalties, incurred by the Participant in connection with his receipt of Awards
under the Plan and the payment and exercise thereof. Each person who is or shall
have been a member of the Committee, or of the Board, shall be indemnified and
held harmless by the Company against and from (a) any loss, cost,
liability, or expense (including, but not limited to, attorneys' fees) that may
be imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be a party or in
which he may be involved by reason of any action taken or failure to act under
the Plan or any Award agreement; and (b) any and all amounts paid by him in
settlement thereof, with the Company's prior written approval, or paid by him in
satisfaction of any judgment in any such claim, action, suit, or proceeding
against him; provided, however, that he shall give the Company an opportunity,
at the Company's expense, to handle and defend such claim, action, suit, or
proceeding before he undertakes to handle and defend the same on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or By-Laws, by contract, as a matter of law,
or otherwise, or under any power that the Company may have to indemnify them or
hold them harmless.

     

    26.  Successors.  All
obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether or not the
existence of such successor is the result of a Change in Control. The Company
shall not, and shall not permit its Affiliates to, recommend, facilitate, agree,
or consent to a transaction or series of transactions which would result in a
Change in Control of the Company unless and until the person or persons or
entity or entities acquiring control of the Company as a result of such Change
in Control agree(s) to be bound by the terms of the Plan insofar as it pertains
to Awards theretofore granted and agrees to assume and perform the obligations
of the Company and its successor.

     

    27.  Beneficiary
Designations.  Any Participant may designate, on such forms as
may be provided by the Committee for such purpose, a beneficiary to whom any
vested but unpaid Award shall be paid in the event of the Participant's death.
Each such designation shall revoke all prior designations by the Participant and
shall be effective only if given in a form and manner acceptable to the
Committee. In the absence of any such designation, any vested benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate and,
subject to the terms of the Plan and of the applicable Award agreement, any
unexercised vested Award may be exercised by the administrator or executor of
the Participant's estate.

     

    28.  Funding.  Benefits
payable under the Plan to any person will be paid by the Company from its
general assets. Shares to be distributed hereunder shall be issued directly by
the Company from its authorized but unissued Shares or acquired by the Company
on the open market, or a combination thereof. Neither the Company nor any of its
Affiliates shall be required to segregate on their books or otherwise establish
any funding procedure for any amount to be used for the payment of benefits
under the Plan. The Company or any of its Affiliates may, however, in their sole
discretion, set funds aside in investments to meet any anticipated obligations
under the Plan. Any such action or set-aside shall not be deemed to create a
trust of any kind between the Company or any of its Affiliates and any
Participant or other person entitled to benefits under the Plan or to constitute
the funding of any Plan benefits. Consequently, any person entitled to a payment
under the Plan will have no rights greater than the rights of any other
unsecured general creditor of the Company or its Affiliates.