Exhibit 4.1


 


PAWFECT FOODS, INC.


2008 EQUITY COMPENSATION INCENTIVE PLAN


 


1. PURPOSE


 


The Pawfect Foods, Inc.
2008 Equity Compensation Incentive Plan is intended to promote the best
interests of and its stockholders by (i) assisting the Company and its Subsidiaries
in the recruitment and retention of persons with ability and initiative, (ii) providing
an incentive to such persons to contribute to the growth and success of the
Company’s businesses by affording such persons equity participation in the
Company and (iii) associating the interests of such persons with those of
the Company and its Subsidiaries and stockholders.


 


2. DEFINITIONS


 


As used in the Plan the
following definitions shall apply:


 


“AWARD” means any Option
or Restricted Stock Award granted hereunder.


 


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


 


“CAUSE” means in the
case where the Participant does not have an employment, consulting or similar
agreement in effect with the Company or its Subsidiaries or where there is such
an agreement but it does not define “cause” (or words of like import), conduct
related to the Participant’s service to the Company or a Subsidiary for which
either criminal or civil penalties against the Participant may be sought,
misconduct, insubordination, material violation of the Company’s or its
Subsidiaries policies, disclosing or misusing any confidential information or
material concerning the Company or any Subsidiary or material breach of any
employment, consulting agreement or similar agreement, or in the case where the
Participant has an employment agreement, consulting agreement or similar
agreement that defines a termination for “cause” (or words of like import), “cause”
as defined in such agreement; provided, however, that with regard to any
agreement that defines “cause” on occurrence of or in connection with change of
control, such definition of “cause” shall not apply until a change of control
actually occurs and then only with regard to a termination thereafter.


 


“CODE” means the
Internal Revenue Code of 1986, and any amendments thereto.


 


“COMMITTEE” means the
Compensation Committee of the Board ,or such other committee of the Board that
is designated by the Board to administer the Plan, composed of not less than
two members of the Board, all of whom are disinterested persons, as
contemplated by Rule 16b-3 promulgated under the Exchange Act.


 


“COMMON
STOCK” means the common stock, $0.001 par value, of the Company.


 


“COMPANY” means Pawfect
Foods, Inc., a Florida corporation.


 


“CONSULTANT” means any
person, other than an employee, performing consulting or advisory services for
the Company or any Subsidiary.


 

















 


“CONTINUOUS SERVICE”
means that the Participant’s service with the Company or a Subsidiary, whether
as an employee or Consultant, is not interrupted or terminated. A Participant’s
Continuous Service shall not be deemed to have been interrupted or terminated
merely because of a change in the capacity in which the Participant renders
service to the Company or a Subsidiary as an employee or Consultant or a change
in the entity for which the Participant renders such service. The Participant’s
Continuous Service shall be deemed to have terminated either upon an actual
termination or upon the entity for which the Participant is performing services
ceasing to be a Subsidiary of the Company. The Committee shall determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by the Company, including sick leave, military leave
or any other personal leave.


 


“CORPORATION LAW” means
the general corporation law of the jurisdiction of incorporation of the
Company.


 


“DIRECTOR” means a
member of the Board.


 


“DISABILITY” means that
a Participant covered by a Company or Subsidiary-funded long term disability
insurance program has incurred a total disability under such insurance program
and a Participant not covered by such an insurance program has suffered a
permanent and total disability within the meaning of Section 22(e)(3) of
the Code or any successor statute thereto.


 


“ELIGIBLE PERSON” means
an employee, officer, director, consultant or advisor to the Company or a
Subsidiary (including an entity that becomes a Subsidiary after the adoption of
the Plan).


 


“EXCHANGE ACT” means the
Securities Exchange Act of 1934, as amended.


 


“FAIR MARKET VALUE”
means, on any given date, the current fair market value of the shares of Common
Stock as determined as follows:


 


(i) If the Common
Stock is traded on a national securities exchange or on the Nasdaq National
Market System, the closing price for the day of determination as quoted on such
market or exchange which is the primary market or exchange for trading of the
Common Stock or if no trading occurs on such date, the last day on which
trading occurred, or such other appropriate date as determined by the Committee
in its discretion, as reported in The Wall Street Journal or such other source
as the Committee deems reliable;


 


(ii) If not so
traded on a national securities exchange or on the Nasdaq National Market
System, the average of the closing bid and asked prices thereof on such day of
determination or, if the Common Stock is not traded on the date of
determination, on the last preceding date on which the Common Stock is traded;
or


 


(iii) In the
absence of an established market for the Common Stock, Fair Market Value shall
be determined by the Committee in good faith.


 


“INCENTIVE
STOCK OPTION” means an Option (or portion thereof) intended to qualify for
special tax treatment under Section 422 of the Code.


 


“NONQUALIFIED STOCK
OPTION” means an Option (or portion thereof) which is not intended or does not
for any reason qualify as an Incentive Stock Option.


 

















 


“OPTION” means any
option to purchase shares of Common Stock granted under the Plan.


 


“OUTSIDE DIRECTOR” means
a director who is not an employee or consultant of the Company.


 


“PARTICIPANT” means an
Eligible Person who is selected by the Committee to receive an Option or
Restricted Stock Award and is party to any Stock Option Agreement or Restricted
Stock Award Agreement required by the terms of such Option or Restricted Stock
Award.


 


“PLAN” means this Pawfect
Foods, Inc. 2008 Equity Compensation Incentive Plan.


 


“RESTRICTED STOCK AWARD”
means an award of Common Stock under Section 7.


 


“SECURITIES ACT” means
the Securities Act of 1933 as amended.


 


“STOCK AWARD AGREEMENT”
means a written agreement between the Company and a Participant setting forth
the specific terms and conditions of a Restricted Stock Award granted to the
Participant under Section 7. Each Restricted Stock Award Agreement shall
be subject to the terms and conditions of the Plan and shall include such terms
and conditions as the Committee shall authorize.


 


“STOCK OPTION AGREEMENT”
means a written agreement between the Company and a Participant setting forth
the specific terms and conditions of an Option granted to the Participant. Each
Stock Option Agreement shall be subject to the terms and conditions of the Plan
and shall include such terms and conditions as the Committee shall authorize.


 


“SUBSIDIARY” means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations (other than the last
corporation in the unbroken chain) owns stock possessing at least fifty percent
(50%) of the total combined voting power of all classes of stock in one of the
other corporations in such chain.


 


“TEN PERCENT OWNER”
means any Eligible Person owning at the time an Option is granted more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of a Subsidiary. An individual shall, in accordance with Section 424(d) of
the Code, be considered to own any voting stock owned (directly or indirectly)
by or for his brothers, sisters, spouse, ancestors and lineal descendants and
any voting stock owned (directly or indirectly) by or for a corporation,
partnership, estate, trust or other entity shall be considered as being owned
proportionately by or for its stockholders, partners or beneficiaries.


 


3. ADMINISTRATION


 


A. ADMINISTRATION. The
Committee shall serve as the administrator of the Plan. If permitted by the
Corporation Law, and not prohibited by the charter or the bylaws of the
Company, the Committee may delegate a portion of its authority to administer
the Plan to an officer or officers of Company designated by the Committee.


 

















 


B. POWERS OF THE
COMMITTEE. Subject to the provisions of the Plan, and subject at all times to
the terms and conditions of the delegation of authority from the Board, the
Committee shall have the authority to implement, interpret and administer the
Plan. Such authority shall include, without limitation, the authority:


 


(i) To construe and
interpret all provisions of the Plan and all Stock Option Agreements and
Restricted Stock Award Agreements under the Plan.


 


(ii) To determine
the Fair Market Value of Common Stock.


 


(iii) To select the
Eligible Persons to whom Awards, are granted from time-to-time hereunder.


 


(iv) To determine
the number of shares of Common Stock covered by an Option or Restricted Stock
Award; determine whether an Option shall be an Incentive Stock Option or
Nonqualified Stock Option; and determine such other terms and conditions, not
inconsistent with the terms of the Plan, of each Award. Such terms and
conditions include, but are not limited to, the exercise price of an Option,
purchase price of Common Stock subject to a Restricted Stock Award, the time or
times when Options or Restricted Stock Awards may be exercised or Common Stock
issued thereunder, the right of the Company to repurchase Common Stock issued
pursuant to the exercise of an Option or a Restricted Stock Award and other
restrictions or limitations (in addition to those contained in the Plan) on the
forfeitability or transferability of Options, Restricted Stock Awards or Common
Stock issued pursuant to Awards. Such terms may include conditions as shall be
determined by the Committee and need not be uniform with respect to
Participants.


 


(v) To amend,
cancel, extend, renew, accept the surrender of, modify or accelerate the vesting
of or lapse of restrictions on all or any portion of an outstanding Option or
Restricted Stock Award; and to determine the time at which a Restricted Stock
Award or Common Stock issued under the Plan may become transferable or
nonforfeitable.


 


(vi) To prescribe
the form of Stock Option Agreements and Restricted Stock Award Agreements; to
adopt policies and procedures for the exercise of Options or Restricted Stock
Awards, including the satisfaction of withholding obligations; to adopt, amend,
and rescind policies and procedures pertaining to the administration of the
Plan; and to make all other determinations necessary or advisable for the
administration of the Plan.


 


Any decision made, or
action taken, by the Committee or in connection with the administration of the
Plan shall be final, conclusive and binding on all persons having an interest
in the Plan.


 


4. ELIGIBILITY


 


A. ELIGIBILITY FOR
AWARDS. Incentive Stock Options may be granted only to employees of the Company
or Subsidiary. Other Awards may be granted to any Eligible Person selected by
the Committee.


 


B. SUBSTITUTION AWARDS.
The Committee may make Restricted Stock Awards and may grant Options under the
Plan by assumption, substitution or replacement of stock awards or stock
options, granted by another entity (including a Subsidiary), if such
assumption, substitution or 


 

















 


replacement is in
connection with an asset acquisition, stock acquisition, merger, consolidation
or similar transaction involving the Company (and/or its Subsidiary) and such
other entity (and/or its Subsidiary). Notwithstanding any provision of the Plan
(other than the maximum number of shares of Common Stock that may be issued
under the Plan), the terms of such assumed, substituted or replaced Restricted
Stock Awards or Options shall be as the Committee, in its discretion,
determines is appropriate.


 


5. COMMON STOCK SUBJECT
TO PLAN


 


A. SHARE RESERVE AND
LIMITATIONS ON GRANTS. Subject to adjustment as provided in Section 9, the
maximum aggregate number of shares of Common Stock that may be (i) issued
under the Plan pursuant to the exercise of Options and (ii) issued
pursuant to Restricted Stock Awards is 6,500,000 shares of Common Stock.


 


B. REVERSION OF SHARES.
If an Option or Restricted Stock Award is terminated, expires or becomes
unexercisable, in whole or in part, for any reason, the unissued or unpurchased
shares of Common Stock which were subject thereto shall become available for
future grant under the Plan. Shares of Common Stock that have been actually
issued under the Plan shall not be returned to the share reserve for future
grants under the Plan; except that shares of Common Stock issued pursuant to a
Restricted Stock Award which are repurchased or reacquired by the Company at
the original purchase price of such shares (including, in the case of shares
forfeited back to the Company, no purchase price), shall be returned to the
share reserve for future grant under the Plan. For avoidance of doubt, this Section 5.B
shall not apply to any per Participant limit set forth in Section 5.A.


 


C. SOURCE OF SHARES.
Common Stock issued under the Plan may be shares of authorized and unissued
Common Stock or shares of previously issued Common Stock that have been
reacquired by the Company.


 


D. BOOK-ENTRY.
Notwithstanding any other provision of the Plan to the contrary, the Company
may elect to satisfy any requirement under the Plan for the delivery of stock
certificates through the use of book-entry.


 


6. OPTIONS


 


A. AWARD. In accordance
with the provisions of Section 4, the Committee will designate each
Eligible Person to whom an Option is to be granted and will specify the number
of shares of Common Stock covered by such Option. The Stock Option Agreement
shall specify whether the Option is an Incentive Stock Option or Nonqualified
Stock Option, the vesting schedule applicable to such Option and any other
terms of such Option. No Option that is intended to be an Incentive Stock
Option shall be invalid for failure to qualify as an Incentive Stock Option.


 


B. EXERCISE PRICE. The
exercise price per share for Common Stock subject to an Option shall be
determined by the Committee, but shall comply with the following:


 


(i) The exercise
price per share for Common Stock subject to a Nonqualified Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value on the
date of grant.


 


(ii) The exercise
price per share for Common Stock subject to an Incentive Stock Option:


 

















 


·                  granted to a Participant who is deemed to be
a Ten Percent Owner on the date such option is granted, shall not be less than
one hundred ten percent (110%) of the Fair Market Value on the date of grant.


 


·                  granted to any other
Participant, shall not be less than one hundred percent (100%) of the Fair
Market Value on the date of grant.


 


C. MAXIMUM OPTION
PERIOD. The maximum period during which an Option may be exercised shall be
determined by the Committee on the date of grant, except that no Option shall be
exercisable after the expiration of ten years from the date such Option was
granted. In the case of an Incentive Stock Option that is granted to a
Participant who is or is deemed to be a Ten Percent Owner on the date of grant,
such Option shall not be exercisable after the expiration of five years from
the date of grant. The terms of any Option may provide that it is exercisable
for a period less than such maximum period.


 


D. MAXIMUM VALUE OF
OPTIONS WHICH ARE INCENTIVE STOCK OPTIONS. To the extent that the aggregate
Fair Market Value of the Common Stock with respect to which Incentive Stock
Options granted to any person are exercisable for the first time during any
calendar year (under all stock option plans of the Company or any of its
Subsidiaries or parent) exceeds $100,000 (or such other amount provided in Section 422
of the Code), the Options are not Incentive Stock Options. For purposes of this
section, the Fair Market Value of the Common Stock will be determined as of the
time the Incentive Stock Option with respect to the Common Stock is granted.
This section will be applied by taking Incentive Stock Options into account in
the order in which they are granted.


 


E. NONTRANSFERABILITY.
Options granted under the Plan which are intended to be Incentive Stock Options
shall be nontransferable except by will or by the laws of descent and
distribution and during the lifetime of the Participant shall be exercisable by
only the Participant to whom the Incentive Stock Option is granted. If the
Stock Option Agreement so provides or the Committee so approves, a Nonqualified
Stock Option may be transferred by a Participant through a gift or domestic
relations order to the Participant’s family members to the extent in compliance
with applicable securities registration rules. The holder of a Nonqualified
Stock Option transferred pursuant to this section shall be bound by the same
terms and conditions that governed the Option during the period that it was
held by the Participant; provided that unless the Committee approves a
subsequent transfer, such Option shall be nontransferable by the initial
transferee of such Option except by will or by the laws of descent and
distribution. Except to the extent transferability of a Nonqualified Stock
Option is provided for in the Stock Option Agreement or is approved by the
Committee, during the lifetime of the Participant to whom the Nonqualified
Stock Option is granted, such Option may be exercised only by the Participant.
No right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.


 


F.
VESTING AND TERMINATION OF CONTINUOUS SERVICE.
Except as provided in a Stock Option Agreement, the following rules shall
apply:


 


(i) Options will
vest as provided in the Stock Option Agreement. An Option will be exercisable
only to the extent that it is vested on the date of exercise. Vesting of an
Option will cease on the date of the Participant’s termination of Continuous
Service and the Option will be exercisable only to the extent the Option is
vested on the date of termination of Continuous Service.


 

















 


(ii) If the
Participant’s termination of Continuous Service is for reason of death or
Disability, the right to exercise the Option (to the extent vested) will expire
on the earlier of (a) one (1) year after the date of the Participant’s
termination of Continuous Service, or (b) the expiration date under the
terms of the Stock Option Agreement. Until the expiration date, the Participant
or, in the event of the Participant’s death (including death after termination
of Continuous Service but before the right to exercise the Option expires)
Participant’s heirs, legatees or legal representative may exercise the Option,
except to the extent the Option was previously transferred pursuant to 

Section 6.E.


 


(iii) If the
Participant’s termination of Continuous Service is an involuntary termination
without Cause or a voluntary termination (other than a voluntary termination
described in Section 6.F(iv)), the right to exercise the Option (to the
extent that it is vested) will expire on the earlier of (a) three (3) months
after the date of the Participant’s termination of Continuous Service, or (b) the
expiration date under the terms of the Stock Option Agreement. If the
Participant’s termination of Continuous Service is an involuntary termination
without Cause or a voluntary termination (other than a voluntary termination
described in Section 6.F(iv)) and the Participant dies after his or her
termination of Continuous Service but before the right to exercise the Option
has expired, the right to exercise the Option (to the extent vested) shall
expire on the earlier of (x) one (1) year after the date of the
Participant’s termination of Continuous Service or (y) the date the Option
expires under the terms of the Stock Option Agreement, and, until expiration,
the Participant’s heirs, legatees or legal representative may exercise the
Option, except to the extent the Option was previously transferred pursuant to Section 6.E.


 


(iv) If the Participant’s
termination of Continuous Service is for Cause or is a voluntary termination at
any time after an event which would be grounds for termination of the
Participant’s Continuous Service for Cause, the right to exercise the Option
shall expire as of the date of the Participant’s termination of Continuous
Service.


 


G. EXERCISE. An Option,
if exercisable, shall be exercised by completion, execution and delivery of
notice (written or electronic) to the Company of the Option which states (i) the
Option holder’s intent to exercise the Option, (ii) the number of shares
of Common Stock with respect to which the Option is being exercised, (iii) such
other representations and agreements as may be required by the Company and (iv) the
method for satisfying any applicable tax withholding as provided in Section 10.
Such notice of exercise shall be provided on such form or by such method as the
Committee may designate, and payment of the exercise price shall be made in
accordance with Section 6.H. Subject to the provisions of the Plan and the
applicable Stock Option Agreement, an Option may be exercised to the extent
vested in whole at any time or in part from time to time at such times and in
compliance with such requirements as the Committee shall determine. A partial
exercise of an Option shall not affect the right to exercise the Option from
time to time in accordance with the Plan and the applicable Stock Option
Agreement with respect to the remaining shares subject to the Option. An Option
may not be exercised with respect to fractional shares of Common Stock.


 

















 


H. PAYMENT.


 


(i) Unless
otherwise provided by the Stock Option Agreement, payment of the exercise price
for an Option shall be made in cash or a cash equivalent acceptable to the
Committee. Payment of all or part of the exercise price of an Option may also
be made (a) by surrendering shares of Common Stock to the Company, or (b) if
the Common Stock is traded on an established securities market, payment of the
exercise price by a broker-dealer or by the Option holder with cash advanced by
the broker-dealer if the exercise notice is accompanied by the Option holder’s
written irrevocable instructions to deliver the Common Stock acquired upon
exercise of the Option to the broker-dealer.


 


(ii) If Common Stock
is used to pay all or part of the exercise price, the sum of the cash or cash
equivalent and the Fair Market Value (determined as of the date of exercise) of
the shares surrendered must not be less than the exercise price of the shares
for which the Option is being exercised.


 


(iii) On
or after the date any Option other than an Incentive Stock Option is granted,
the Committee may determine that payment of the exercise price may also be made
in whole or part in the form of Restricted Stock or other Common Stock that is
subject to a risk of forfeiture or restrictions on transfer. Unless otherwise
determined by the Committee, whenever the exercise price is paid in whole or in
part in accordance with this Section 6.H(iii), the Stock received by the
Participant upon such exercise shall be subject to the same risks of forfeiture
or restrictions on transfer as those that applied to the consideration
surrendered by the Participant, provided that such risks of forfeiture and
restrictions on transfer shall apply only to the same number of shares received
by the Participant as applied to the forfeitable or restricted shares
surrendered by the Participant.


 


I. STOCKHOLDER RIGHTS.
No Participant shall have any rights as a stockholder with respect to shares
subject to an Option until the date of exercise of such Option and the
certificate for shares of Common Stock to be received on exercise of such
Option has been issued by the Company.


 


J. DISPOSITION. A
Participant shall notify the Company of any sale or other disposition of Common
Stock acquired pursuant to an Incentive Stock Option if such sale or
disposition occurs (i) within two years of the grant of an Option or (ii) within
one year of the issuance of the Common Stock to the Participant. Such notice
shall be in writing and directed to the Secretary of the Company.


 


7. RESTRICTED STOCK
AWARDS


 


Each Restricted Stock
Award Agreement for a Restricted Stock Award shall be in such form and shall
contain such terms and conditions as the Committee shall deem appropriate. The
terms and conditions of the Restricted Stock Award Agreements for Restricted
Stock Awards may change from time to time, and the terms and conditions of
separate Restricted Stock Awards need not be identical, but each Restricted
Stock Award shall include (through incorporation of the provisions hereof by
references in the agreement or otherwise) the substance of each of the
following provisions.


 


(I) PURCHASE PRICE.
The Committee may establish a purchase price for Common Stock subject to a
Restricted Stock Award.


 

















 


(II) CONSIDERATION.
The purchase price, if any, of Common Stock acquired pursuant to the Restricted
Stock Award shall be paid either: (a) in cash at the time of purchase, or (b) in
any other form of legal consideration that may be acceptable to the Committee
in its discretion.


 


(III) VESTING.
Shares of Common Stock acquired under a Restricted Stock Award may, but need
not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Committee. Any grant
or the vesting thereon may be further conditioned upon the attainment of
Performance Objectives established by the Committee.


 


(IV) PARTICIPANT’S
TERMINATION OF SERVICE OR FAILURE OF VESTING. In the event of a Participant’s
termination of Continuous Service before vesting or other failure of the Common
Stock to vest, then, unless otherwise provided in the Restricted Stock Award
Agreement, the Participant shall forfeit shares of Common Stock held by a
Participant under the terms of a Restricted Stock Award which have not vested
and for which no purchase price was paid by the Participant and the Company may
repurchase or otherwise reacquire (including by way of forfeiture by the
Participant) any or all of the shares of Common Stock held by the Participant
which have not vested under the terms of the Restricted Stock Award Agreement
for such Restricted Stock Award and for which a purchase price was paid by the
Participant at such purchase price.


 


(V) TRANSFERABILITY.
Rights to acquire shares of Common Stock under a Restricted Stock Award shall
be transferable by the Participant only upon such terms and conditions as are
set forth in the Restricted Stock Award Agreement for such Restricted Stock
Award, as the Committee shall determine in its discretion, so long as Common
Stock granted under the Restricted Stock Award remains subject to the terms of
the Restricted Stock Award Agreement.


 


(VI) ADDITIONAL
RIGHTS. Any grant may require that any or all dividends or other distributions
paid on the shares acquired under a Restricted Stock Award during the period of
such restrictions be automatically sequestered and reinvested on an immediate
or deferred basis in additional shares of Common Stock which may be subject to
the same restrictions as the underlying Award or such other restrictions as the
Committee shall determine. Unless provided otherwise in the Restricted Stock
Award Agreement, Participants holding shares of Common Stock subject to
restrictions under a Restricted Stock Award Agreement may exercise full voting
rights with respect to the shares.


 


8. CHANGES IN CAPITAL
STRUCTURE


 


A. NO LIMITATIONS OF
RIGHTS. The existence of outstanding Options or Restricted Stock Awards shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company’s capital structure or its business, or any merger
or consolidation of the Company, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Stock or
the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.


 


B. CHANGES IN
CAPITALIZATION. If the Company shall effect (i) any stock dividend, stock
split, subdivision or consolidation of shares, recapitalization or other
capital readjustment, (ii) any merger, consolidation, separation of the
Company (including a spin-off or split-up), reorganization, partial or complete
liquidation or other distribution of assets (other than ordinary 


 

















 


dividends or
distributions) without receiving consideration therefore in money, services or
property, or (iii) any other corporate transaction having a similar
effect, then (iv) the number, class, and per share price or base amount of
shares of Common Stock subject to outstanding Options and Restricted Stock
Awards shall be equitably adjusted by the Committee as it in good faith
determines is required in order to prevent enlargement, dilution, or
diminishment of rights, (v) the number and class of shares of Common Stock
then reserved for issuance under the Plan and the maximum number of shares for which
Awards may be granted to a Participant during a specified time period shall be
adjusted as the Committee deems appropriate to reflect such transaction, and (vi) the
Committee shall make such modifications to the Performance Objectives for each
outstanding Restricted Award as the Committee determines are appropriate in
accordance with Section 2, “Performance Objectives.” The conversion of
convertible securities of the Company shall not be treated as effected “without
receiving consideration.” The Committee shall make such adjustments, and its
determinations shall be final, binding and conclusive.


 


C. MERGER, CONSOLIDATION
OR ASSET SALE. If the Company (i) is dissolved, liquidated, merged or
consolidated with another entity, (ii) sells or otherwise disposes of
substantially all of its assets to another entity or (iii) engages in any
transaction (including without limitation a merger or reorganization in which
the Company is the surviving entity) that results in any person or entity
(other than persons who are stockholders or Subsidiaries immediately prior to
the transaction) owning fifty percent (50%) or more of the combined voting
power of all classes of stock of the Company, while Options or Restricted Stock
Awards remain outstanding under the Plan, unless provisions are made in
connection with such transaction for the continuance of the Plan and/or the
assumption or substitution of such Options or Restricted Stock Awards with new
options or stock awards covering the stock of the successor entity, or parent
or Subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices, then all outstanding Options and Restricted Stock Awards
which have not been continued, assumed or for which a substituted award has not
been granted shall become exercisable immediately prior to and terminate
immediately as of the effective date of any such merger, consolidation, sale,
or other applicable transaction. In the alternative, the Board may elect, in
its sole discretion, to cancel any outstanding Options and Restricted Stock
Awards and pay or deliver, or cause to be paid or delivered, to the holder
thereof an amount in cash or securities having a value (as determined by the
Board acting in good faith), in the case of Restricted Stock Awards, equal to
the formula or fixed price per share paid to holders of shares of Stock and, in
the case of Options, equal to the product of the number of shares of Stock
subject to the Option multiplied by the amount, if any, by which (A) the
formula or fixed price per share paid to holders of shares of Stock pursuant to
such transaction exceeds (B) the exercise price applicable to such Option.


 


D. CHANGE OF
CONTROL.  Except as expressly provided in
any Stock Option Agreement or Restricted Award Agreement, in the event of a
Change of Control, the Participant shall have the cumulative right to purchase
up to 100% of the shares of Common Stock subject to the Option or Restricted
Stock Award, as the case may be.


 


A Change of Control
means the happening of any of the following:


 


(a) When any
person, as defined in Section 3(a)(9) of the Securities Exchange Act
of 1934 (the “Exchange Act”) and as used in Sections 13(d) and 14(d) thereof,
including a group as defined in Section 13(d) of the Exchange Act,
but excluding the Company and any subsidiary and any employee benefit plan
sponsored or maintained by the Company 


 

















 


or any subsidiary
(including any trustee of such plan acting as trustee), or any person, entity
or group specifically excluded by the Board, directly or indirectly, becomes
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act, as
amended from time to time) of securities of the Company representing 20 percent
or more of the combined voting power of the Company’s then outstanding
securities;


 


(b) When Incumbent
Directors cease for any reason to constitute at least two-thirds of the Board
(where Incumbent Director means any director on the date of adoption of the
Plan and any director elected by, or on the recommendation of, or with the
approval of, a majority of the directors who then qualified as Incumbent
Directors);


 


(c) The effective
date of any merger or consolidation of the Company with another corporation
where (i) the shareholders of the Company, immediately prior to the merger
or consolidation, do not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all votes
(without consideration of the rights of any class of stock to elect directors
by a separate class vote) to which all shareholders of the corporation issuing
cash or securities in the merger or consolidation would be entitled in the
election of directors, or (ii) where the members of the Board, immediately
prior to the merger or consolidation, do not, immediately after the merger or
consolidation, constitute a majority of the board of directors of the
corporation issuing cash or securities in the merger; provided, however, that,
in each of the cases set forth above in clauses (c)(i) or (c)(ii), no
Change of Control shall be deemed to take place if the transaction was approved
by the Board of Directors, the majority of the members of which were in place
prior to the commencement of such sale, merger or consolidation; or


 


(d) The date of
approval by the shareholders of the Company of the liquidation of the Company
or the sale or other disposition of all or substantially all of the assets of
the Company.


 


E. LIMITATION ON
ADJUSTMENT. Except as previously expressly provided, neither the issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, nor the increase or decrease
of the number of authorized shares of stock, nor the addition or deletion of
classes of stock, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number, class or price of shares of Common Stock then
subject to outstanding Options or Restricted Stock Awards.


 


9. WITHHOLDING OF TAXES


 


The
Company or a Subsidiary shall have the right, before any certificate for any
Common Stock is delivered, to deduct or withhold from any payment owed to a
Participant any amount that is necessary in order to satisfy any withholding
requirement that the Company or Subsidiary in good faith believes is imposed
upon it in connection with Federal, state, or local taxes, including transfer
taxes, as a result of the issuance of, or lapse of restrictions on, such Common
Stock, or otherwise require such Participant to make provision for payment of
any such withholding amount. Subject to such conditions as may be established
by the Committee, the Committee may permit a Participant to (i) have
Common Stock otherwise issuable under an Option or Restricted 


 

















 


Stock
Award withheld to the extent necessary to comply with minimum statutory
withholding rate requirements for supplemental income, (ii) tender back to
the Company shares of Common Stock received pursuant to an Option or Restricted
Stock Award to the extent necessary to comply with minimum statutory
withholding rate requirements for supplemental income, (iii) deliver to
the Company previously acquired Common Stock, (iv) have funds withheld
from payments of wages, salary or other cash compensation due the Participant,
or (v) pay the Company or its Subsidiary in cash, in order to satisfy part
or all of the obligations for any taxes required to be withheld or otherwise
deducted and paid by the Company or its Subsidiary with respect to the Option
or Restricted Stock Award.


 


10. COMPLIANCE WITH LAW
AND APPROVAL OF REGULATORY BODIES


 


A. GENERAL REQUIREMENTS.
No Option or Restricted Stock Award shall be exercisable, no Common Stock shall
be issued, no certificates for shares of Common Stock shall be delivered, and
no payment shall be made under the Plan except in compliance with all
applicable federal and state laws and regulations (including, without
limitation, withholding tax requirements), any listing agreement to which the
Company is a party, and the rules of all domestic stock exchanges or
quotation systems on which the Company’s shares may be listed. The Company
shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence Common Stock when a
Restricted Stock Award is granted or for which an Option or Restricted Stock
Award is exercised may bear such legends and statements as the Committee may
deem advisable to assure compliance with federal and state laws and
regulations. No Option or Restricted Stock Award shall be exercisable, no
Restricted Stock Award shall be granted, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment shall be made under
the Plan until the Company has obtained such consent or approval as the
Committee may deem advisable from regulatory bodies having jurisdiction over
such matters.


 


B. PARTICIPANT
REPRESENTATIONS. The Committee may require that a Participant, as a condition
to receipt or exercise of a particular award, execute and deliver to the
Company a written statement, in form satisfactory to the Committee, in which
the Participant represents and warrants that the shares are being acquired for
such person’s own account, for investment only and not with a view to the
resale or distribution thereof. The Participant shall, at the request of the
Committee, be required to represent and warrant in writing that any subsequent
resale or distribution of shares of Common Stock by the Participant shall be
made only pursuant to either (i) a registration statement on an
appropriate form under the Securities Act of 1933, which registration statement
has become effective and is current with regard to the shares being sold, or (ii) a
specific exemption from the registration requirements of the Securities Act of
1933, but in claiming such exemption the Participant shall, prior to any offer
of sale or sale of such shares, obtain a prior favorable written opinion of
counsel, in form and substance satisfactory to counsel for the Company, as to
the application of such exemption thereto.


 


11. GENERAL PROVISIONS


 


A. EFFECT ON EMPLOYMENT
AND SERVICE. Neither the adoption of the Plan, its operation, nor any documents
describing or referring to the Plan (or any part thereof) shall (i) confer
upon any individual any right to continue in the employ or service of the
Company or a Subsidiary, (ii) in any way affect any right and power of the
Company or a Subsidiary to change an individual’s duties or terminate the
employment or service of any individual at any time with or without assigning a
reason therefor, or (iii) except to the extent the Committee grants an 


 

















 


Option or Restricted
Stock Award to such individual, confer on any individual the right to
participate in the benefits of the Plan.


 


B.
USE OF PROCEEDS. The proceeds received by the Company from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes.


 


C. UNFUNDED PLAN. The
Plan, insofar as it provides for grants, shall be unfunded, and the Company
shall not be required to segregate any assets that may at any time be
represented by grants under the Plan. Any liability of the Company to any
person with respect to any grant under the Plan shall be based solely upon any
contractual obligations that may be created pursuant to the Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.


 


D. FURTHER RESTRICTIONS
ON TRANSFER. Any Award made under the Plan may expressly provide that all or
any part of the shares of Common Stock that are: 

(i) to be issued or transferred by the Company upon the exercise of an
Option , or (ii) no longer subject to a substantial risk of forfeiture and
restrictions on transfer referred to in Section 7 of the Plan, shall be
subject to further restrictions on transfer.


 


E. FRACTIONAL SHARES.
The Company shall not be required to issue fractional shares pursuant to the
Plan. The Committee may provide for elimination of fractional shares or the
settlement of such fraction shares in cash.


 


F. RULES OF
CONSTRUCTION. Headings are given to the Sections of the Plan solely as a
convenience to facilitate reference, and shall not be used in interpreting,
construing or enforcing any provision hereof. The reference to any statute,
regulation, or other provision of law shall be construed to refer to any
amendment to or successor of such provision of law. To the extent that any
provision of the Plan would prevent any Option that was intended to qualify
under particular provisions of the Code from so qualifying, such provision of
the Plan shall be null and void with respect to such Option, provided that such
provision shall remain in effect with respect to other Options, and there shall
be no further effect on any provision of the Plan.


 


G. FOREIGN EMPLOYEES. In
order to facilitate the making of any grant or combination of grants under the
Plan, the. Committee may provide for such special terms for Awards to
Participants who are foreign nationals, or who are employed by the Company or
any subsidiary outside of the United States, as the Committee may consider
necessary or appropriate to accommodate differences in local law, tax policy or
custom. Moreover, the Committee may approve such supplements to, or amendments,
restatements or alternative versions of, the Plan as it may consider necessary
or appropriate for such purposes without thereby affecting the terms of the
Plan, as then in effect, unless the Plan could have been amended to eliminate
such inconsistency without further approval by the Stockholders of the Company.


 


H. CHOICE OF LAW. The
Plan and all Stock Option Agreements and Restricted Stock Award Agreements
entered into under the Plan (except to the extent that any such Stock Option
Agreement or Restricted Stock Award Agreement otherwise provides) shall be
governed by and interpreted under the laws of the jurisdiction of incorporation
of the Company excluding (to the greatest extent permissible by law) any rule of
law that would cause the application of the laws of any jurisdiction other than
the laws of the jurisdiction of incorporation of the Company.


 

















 


12. AMENDMENT AND
TERMINATION


 


The
Board may amend or terminate the Plan from time to time; provided, however,
that with respect to any amendment that (i) increases the aggregate number
of shares of Common Stock that may be issued under the Plan, (ii) changes
the class of employees eligible to receive Incentive Stock Options or (iii) stockholder
approval is required by the terms of any applicable law, regulation, or rule,
including, without limitation, any rule of the American Stock Exchange, or
any national securities exchange or national market on which the Common Stock
is publicly traded, each such amendment shall be subject to the approval of the
stockholders of the Company. Except as specifically permitted by a provision of
the Plan (other than Section 3.B.), the Stock Option Agreement or
Restricted Stock Award Agreement or as required to comply with applicable law,
regulation or rule, no amendment to the Plan or a Stock Option Agreement or
Restricted Stock Award Agreement shall, without a Participant’s consent,
adversely affect any rights of such Participant under any Option or Restricted
Stock Award outstanding at the time such amendment is made; provided, however,
that an amendment that may cause an Incentive Stock Option to become a
Nonqualified Stock Option, and any amendment that is required to comply with
the rules applicable to Incentive Stock Options, shall not be treated as
adversely affecting the rights of the Participant. Notwithstanding anything to
the contrary, the Board shall be authorized to amend any outstanding Option 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 replaced with Awards having a lower exercise price
without the prior approval of the shareholders of the Company.


 


13. EFFECTIVE DATE AND
DURATION OF PLAN


 


A. The Plan became
effective upon adoption by the Board, subject to approval within twelve (12)
months by vote of the holders of a majority of the outstanding shares of the Company
present, or represented, and entitled to vote at a meeting to be duly held in
accordance with the applicable laws of the State of Delaware. Unless and until
the Plan has been approved by the stockholders of the Company, no Option or
Restricted Stock Award may be exercised, and no shares of Common Stock may be
issued under the Plan. In the event that the stockholders of the Company shall
not approve the Plan within such twelve (12) month period, the Plan and any
previously granted Option or Restricted Stock Award shall terminate.


 


B. Unless previously
terminated, the Plan will terminate ten (10) years after the earlier of (i) the
date the Plan is adopted by the Board, or (ii) the date the Plan is
approved by the stockholders, except that Options and Stock Awards that are
granted under the Plan prior to its termination will continue to be
administered under the terms of the Plan until the Options and Stock Awards
terminate or are exercised.