exhibit4-1.htm


    

       

    

    
 

    Exhibit
4.1

    ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.

     

    2010 EQUITY INCENTIVE
PLAN

     

     

    1. Purpose
and Objectives

     

     

    The
Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan (the “Plan”) is
designed to align the interests of (i) designated employees of Arrhythmia
Research Technology, Inc. (the “Company”) and its subsidiaries, (ii)
non-employee members of the board of directors of the Company, and (iii)
consultants and key advisors of the Company and its subsidiaries with the
interests of the Company’s stockholders and to provide an opportunity for such
persons to acquire and maintain a proprietary interest in the Company through
stock ownership.  By extending the opportunity to receive grants of
stock options, stock units, stock awards, stock appreciation rights and other
stock-based awards, the Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company’s shareholders, and will align the economic interests of
the participants with those of the shareholders.  The Plan may
furthermore be expected to benefit the Company and its stockholders by making it
possible for the Company to attract and retain the best available
talent.  The Plan shall become effective if and at the time it is
approved by the shareholders of the Company.

     

     

    2. Definitions

     

    Whenever
used in this Plan, the following terms will have the respective meanings set
forth below:

     

    a. “Board”
means the Company’s Board of Directors.

     

    b. “Cause,”
unless otherwise defined in the instrument evidencing an award or in a written
employment, services or other agreement between the Participant and the Company,
means dishonesty, fraud, serious or willful misconduct, violation of Company
policies and procedures including the Code of Ethics, unauthorized use or
disclosure of confidential information or trade secrets, or conduct prohibited
by law (except minor violations), in each case as determined by the Compensation
Committee, whose determination shall be conclusive and binding.

     

    c. “Change
of Control” shall be deemed to have occurred if:

     

    i. A merger,
consolidation, liquidation or reorganization of the Company into or with another
company or other legal person, after which merger, consolidation, liquidation or
reorganization of the capital stock of the Company outstanding prior to
consummation of the transaction is not converted into or exchanged for or does
not represent more than 50% of the aggregate voting power of the surviving or
resulting entity;

     

    ii. The
direct or indirect acquisition by any person (as the term “person” is used in
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of more than fifty percent (50%) of the voting capital stock of the Company, in
a single or series of related transactions; or

     

    iii. The sale,
exchange, or transfer of all or substantially all of the Company’s assets (other
than a sale, exchange or transfer to one or more entities where the stockholders
of the Company immediately before such sale, exchange or transfer retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the entity or entities to which the assets were
transferred).

     

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

     

    e. “Committee”
means the Compensation Committee of the Board or another committee appointed by
the Board to administer the Plan.  Grants that are intended to be
“qualified performance-based compensation” under section 162(m) of the Code
shall be made by a committee that consists of two or more persons appointed by
the Board, all of whom shall be “outside directors” as defined under
section 162(m) of the Code and related Treasury regulations.

     

    f. “Company”
means Arrhythmia Research Technology, Inc., any present or future subsidiary,
and any successor corporation.

     

    g. “Company
Stock” means the common stock, $0.01 par value, of the Company.

     

    h. “Consultant”
means a consultant or advisor who performs services for the Employer and who
renders bona fide services to the Employer, if the services are not in
connection with the offer and sale of securities in a capital-raising
transaction and the Consultant does not directly or indirectly promote or
maintain a market for the Employer’s securities.

     

    
      
         

      

      
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    i. “Disability”
means a Participant’s becoming disabled within the meaning of section 22(e)(3)
of the Code, within the meaning of the Employer’s long-term disability plan
applicable to the Participant, or as otherwise determined by the
Committee.

     

    j. “Effective
Date” of the Plan means April 30, 2010.

     

    k. “Employee”
means an employee of the Employer (including an officer or director who is also
an employee).

     

    l. “Employer”
means the Company and its subsidiaries.

     

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

     

    n. “Exercise
Price” means the per share price at which shares of Company Stock may be
purchased under an Option, as designated by the Committee.

     

    o. “Fair
Market Value” means, with respect to a share of Common Stock, the fair market
value thereof as of the relevant date of determination, as determined in
accordance with the valuation methodology approved by the
Committee.  In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common Stock
shall equal the closing price for the Common Stock on any given date during
regular trading, or if not trading on that date, such price on the last
preceding date on which the Common Stock was traded.

     

    p. “Grant”
means an Option, Stock Unit, Stock Award, SAR or Other Stock-Based Award granted
under the Plan.

     

    q. “Grant
Agreement” means the written instrument that sets forth the terms and conditions
of a Grant, including all amendments thereto.

     

    r. “Incentive
Stock Option” means an Option that is intended to meet the requirements of an
incentive stock option under section 422 of the Code.

     

    s. “Non-Employee
Director” means a member of the Board who is not an employee of the
Employer.

     

    t. “Nonqualified
Stock Option” means an Option that is not intended to be taxed as an incentive
stock option under section 422 of the Code.

     

    u. “Option”
means an option to purchase shares of Company Stock, as described in Section
7.

     

    v. “Other
Stock-Based Award” means any Grant based on, measured by or payable in Company
Stock (other than a Grant described in Sections 7, 8 or 9 of the Plan), as
described in Section 10.

     

    w. “Participant”
means an Employee, Consultant or Non-Employee Director designated by the
Committee to participate in the Plan.

     

    x. “Plan”
means this Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan, as
in effect from time to time.

     

    y. “SAR”
means a stock appreciation right as described in Section 10.

     

    z. “Stock
Award” means an award of Company Stock as described in Section 9.

     

    aa. “Stock
Unit” means an award of a phantom unit representing a share of Company Stock, as
described in Section 8.

     

     

    3. Administration

     

    a. Committee.  The
Plan shall be administered and interpreted by the Committee.  The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform functions designated by the Committee, to the extent that
such delegation is permitted under the Delaware General Corporation Law and
other applicable laws.  Other provisions of the Plan notwithstanding,
the Board may perform any function of the Committee under the Plan, in order to
ensure that transactions under the Plan are exempt under Rule 16b-3 or for
any other reason; provided,
however, that authority specifically reserved to the Board under the
terms of the Plan, the Company’s Certificate of Incorporation or By-Laws, or
applicable law shall be exercised by the Board and not by the
Committee.

     

    b. Committee
Authority.  Except as otherwise provided herein or as required
by law, the Committee shall have the authority to make recommendations to the
Board as to (i) the Participants to whom Grants shall be made under the Plan,
(ii) the type, size and terms and conditions of the Grants to be made to each
such Participant, (iii) the time when the grants will be made and the duration
of any applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability, and (iv) amendment of the
terms and conditions of any previously issued Grant, subject to the provisions
of Section 17 below, and to deal with any other matters arising under the
Plan.

     

    
      
         

      

      
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    c. Committee
Determinations.  The Committee shall have full power and
express discretionary authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for the conduct of its business as
it deems necessary or advisable.  The interpretations of the Plan and
all determinations made by the Committee and/or the Board pursuant to the powers
vested in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder.  All powers
of the Committee and/or the Board shall be executed in its sole discretion, in
the best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
Participants.

     

    d. Limitation of
Liability.  Each member of the Committee or the Board shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company’s independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional retained
by the Company to assist in the administration of the Plan.  No member
of the Committee or the Board, nor any officer or employee of the Company acting
on behalf of the Committee or the Board, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Committee or the Board and any
officer or employee of the Company acting on behalf of the Committee or the
Board or members thereof shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.

     

     

    4. Grants

     

    a. Grants
under the Plan may consist of Options as described in Section 7, Stock Units as
described in Section 8, Stock Awards as described in Section 9, and SARs or
Other Stock-Based Awards as described in Section 10.  All Grants shall
be subject to such terms and conditions as the Committee deems appropriate and
as are specified in writing by the Committee to the Participant in the Grant
Agreement.

     

    b. All
Grants shall be made conditional upon the Participant’s acknowledgement, in
writing or by acceptance of the Grant, that all decisions and determinations of
the Committee shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under such
Grant.  Grants under a particular Section of the Plan need not be
uniform as among the Participants.

     

     

    5. Shares
Subject to the Plan

     

    a. Shares
Authorized.  The aggregate number of shares of Company Stock
that may be issued under the Plan shall be, subject to adjustment as described
in subsection (d) below:

     

    i. 400,000
shares plus

     

    ii. 100,000
shares reserved for issuance pursuant to the 2005 Stock Award Plan, which shares
shall cease, as of the Effective Date, to be available for grant and issuance
under the 2005 Stock Award Plan but shall be available for issuance under the
Plan.

     

    b. Source of Shares; Share
Counting.  Shares issued under the Plan may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market.  If and
to the extent Options and SARs granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised, and
if and to the extent that any Stock Awards, Stock Units or Other Stock-Based
Awards are forfeited or terminated, or otherwise are not paid in full, the
shares reserved for such Grants shall again be available for purposes of the
Plan.

     

    c. Individual
Limits.  In no event shall the aggregate fair market value
(determined at the time the option is granted) of Common Stock for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock plans of the Company) exceed
$100,000.

     

    d. Adjustments.  If
there is any change in the number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spinoff, recapitalization, stock split, or
combination or exchange of shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company’s receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company’s payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for issuance under the Plan, the maximum number of shares of
Company Stock for which any individual may receive Grants in any year, the
number of shares covered by outstanding Grants, the kind of shares issued and to
be issued under the Plan, and the price per share or the applicable market value
of such Grants may be appropriately adjusted by the Board to reflect any
increase or decrease in the number of, or change in the kind or value of, issued
shares of Company Stock to preclude, to the extent practicable, the enlargement
or dilution of rights and benefits under such Grants; provided, however, that
any fractional shares resulting from such adjustment shall be
eliminated.  Any adjustments determined by the Board shall be final,
binding and conclusive.

     

    
      
         

      

      
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    6. Eligibility
for Participation

     

    a. Eligible
Persons.  All Employees, Consultants and Non-Employee Directors
shall be eligible to participate in the Plan.

     

    b. Selection of
Participants.  The Committee shall recommend and the Board
shall select the Employees, Consultants and Non-Employee Directors to receive
Grants, and shall determine the type of Grant and the number of shares of
Company Stock subject to each Grant.

     

     

    7. Options

     

    a. General Requirements.
The Committee may recommend and the Board may grant Options to an Employee,
Consultant or Non-Employee Director upon such terms and conditions as the Board
deems appropriate under this Section 7.  The Committee shall recommend
to the Board for its determination the number of shares of Company Stock that
will be subject to each Grant of Options to Employees, Consultants and
Non-Employee Directors.

     

    b. Type of Option, Price and
Term. The Committee may recommend and the Board may grant Incentive
Stock Options or Nonqualified Stock Options or any combination of the two, all
in accordance with the terms and conditions set forth
herein.  Incentive Stock Options may be granted only to Employees of
the Company or its parents or subsidiaries, as defined in section 424 of the
Code.  Nonqualified Stock Options may be granted to Employees,
Consultants or Non-Employee Directors.

     

    i. The
Exercise Price of Company Stock subject to an Option shall be determined by the
Board; provided, however, that the Exercise Price for an Incentive Stock Option
will be equal to, or greater than, the Fair Market Value of a share of Company
Stock on the date the Option is granted and further provided that an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary, as defined in section 424
of the Code, unless the Exercise Price per share is not less than 110% of the
Fair Market Value of the Company Stock on the date of grant.

     

    ii. The
Committee shall recommend to and the Board shall determine the term of each
Option, which shall not exceed ten years from the date of
grant.  However, an Incentive Stock Option that is granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary, as defined in section 424 of the Code, may not have a term that
exceeds five years from the date of grant.

     

    iii. Exercisability
of Options.

     

    iv. Options
shall become exercisable in accordance with such terms and conditions as may be
determined by the Board and specified in the Grant Agreement.  The
Board upon the recommendation of the Committee may accelerate the exercisability
of any or all outstanding Options at any time for any reason.

     

    v. Options
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, may not be exercisable for at least six months after
the date of grant (except that such Options may become exercisable, as
determined by the Board upon the recommendation of the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).

     

    c. Termination of Employment or
Service.  Unless otherwise specifically provided in the
instrument evidencing an award or in a written employment, services or other
agreement between the Participant and the Company, upon termination of
employment or the services of a Participant, an Option may only be exercised as
follows:

     

    i. In the
event that a Participant ceases to be employed by, or provide service to, the
Employer for any reason other than Disability, death, or termination for Cause,
any Option which is otherwise exercisable by the Participant shall terminate
unless exercised within three months after the date on which the Participant
ceases to be employed by, or provide service to, the Employer (or within such
other period of time as may be specified by the Board upon the recommendation of
the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Participant’s Options that are not otherwise exercisable
as of the date on which the Participant ceases to be employed by, or provide
service to, the Employer shall terminate as of such date.

     

    
      
         

      

      
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    ii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of a termination for Cause by the Employer, any Option held
by the Participant shall terminate as of the date the Participant ceases to be
employed by, or provide service to, the Employer.  In addition,
notwithstanding any other provisions of this Section 7, if the Board determines
that the Participant has engaged in conduct that constitutes Cause at any time
while the Participant is employed by, or providing service to, the Employer or
after the Participant’s termination of employment or service, any Option held by
the Participant shall immediately terminate and the Participant shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Participant for such
shares.  Upon any exercise of an Option, the Company may withhold
delivery of share certificates pending resolution of an inquiry that could lead
to a finding resulting in forfeiture.

     

    iii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of the Participant’s Disability, any Option which is
otherwise exercisable by the Participant shall terminate unless exercised within
one year after the date on which the Participant ceases to be employed by, or
provide service to, the Employer (or within such other period of time as may be
specified by the Board), but in any event no later than the date of expiration
of the Option term.  Except as otherwise provided by the Board, any of
the Participant’s Options which are not otherwise exercisable as of the date on
which the Participant ceases to be employed by, or provide service to, the
Employer shall terminate as of such date.

     

    iv. If the
Participant dies while employed by, or providing service to, the Employer or
while an Option remains outstanding under Section 7(d)(i) or 7(d)(iii) above (or
within such other period of time as may be specified by the Board), any Option
that is otherwise exercisable by the Participant shall terminate unless
exercised within one year after the date on which the Participant ceases to be
employed by, or provide service to, the Employer (or within such other period of
time as may be specified by the Board), but in any event no later than the date
of expiration of the Option term.  Except as otherwise provided by the
Board, any of the Participant’s Options that are not otherwise exercisable as of
the date on which the Participant ceases to be employed by, or provide service
to, the Employer shall terminate as of such date.

     

    d. Exercise of
Options.  A Participant may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company.  The Participant shall pay the Exercise Price for the Option
(i) in cash, (ii) by delivering shares of Company Stock owned by the Participant
and having a Fair Market Value on the date of exercise equal to the Exercise
Price or by attestation to ownership of shares of Company Stock having an
aggregate Fair Market Value on the date of exercise equal to the Exercise Price,
(iii) by payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board, or (iv) by such other method as the
Committee may approve.  Shares of Company Stock used to exercise an
Option shall have been held by the Participant for the requisite period of time
to avoid adverse accounting consequences to the Company with respect to the
Option.  Payment for the shares pursuant to the Option, and any
required withholding taxes, must be received by the time specified by the
Committee depending on the type of payment being made, but in all cases prior to
the issuance of the Company Stock.

     

    e. Limits on Incentive Stock
Options.  Each Incentive Stock Option shall provide that, if
the aggregate Fair Market Value of the stock on the date of the grant with
respect to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year, under the Plan or any other stock option
plan of the Company or a parent or subsidiary, as defined in section 424 of the
Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option.  An Incentive Stock Option shall not be
granted to any person who is not an Employee of the Company or a parent or
subsidiary, as defined in section 424 of the Code.

     

     

    8. Stock
Units

     

    a. General
Requirements.  The Committee may recommend and the Board may
grant Stock Units to an Employee, Consultant or Non-Employee Director, upon such
terms and conditions as it deems appropriate under this Section
8.  Each Stock Unit shall represent the right of the Participant to
receive a share of Company Stock or an amount based on the value of a share of
Company Stock.  All Stock Units shall be credited to bookkeeping
accounts on the Company’s records for purposes of the Plan.

     

    
      
         

      

      
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    b. Terms of Stock
Units.  The Committee may recommend and the Board may grant
Stock Units that are payable on terms and conditions determined by it, which may
include payment based on achievement of performance goals.  Stock
Units may be paid at the end of a specified vesting or performance period, or
payment may be deferred to a date authorized by the Committee.  The
Committee shall recommend and the Board shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock
Units.

     

    c. Payment With Respect to
Stock Units.  Payment with respect to Stock Units shall be made
in cash, in Company Stock, or in a combination of the two, as determined by the
Committee.  The Grant Agreement shall specify the maximum number of
shares that can be issued under the Stock Units.

     

    d. Requirement of Employment or
Service.  The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Units after termination of the Participant’s employment or service,
and the circumstances under which Stock Units may be forfeited.

     

     

    9. Stock
Awards

     

    a. General Requirements.
The Committee may recommend and the Board may issue shares of Company Stock to
an Employee, Consultant or Non-Employee Director under a Stock Award, upon such
terms and conditions as it deems appropriate under this Section
9.  Shares of Company Stock issued pursuant to Stock Awards may be
issued for cash consideration or for no cash consideration, and subject to
restrictions or no restrictions, as determined by the Board.  The
Committee may recommend and the Board may establish conditions under which
restrictions on Stock Awards shall lapse over a period of time or according to
such other criteria as the Committee deems appropriate, including restrictions
based upon the achievement of specific performance goals.  The
Committee shall recommend and the Board shall determine the number of shares of
Company Stock to be issued pursuant to a Stock Award.

     

    b. Requirement of Employment or
Service.  The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Awards after termination of the Participant’s employment or
service, and the circumstances under which Stock Awards may be
forfeited.

     

    c. Restrictions on
Transfer.  While Stock Awards are subject to restrictions, a
Participant may not sell, assign, transfer, pledge or otherwise dispose of the
shares subject thereof except upon death as described in Section
14(a).  Each certificate for a share subject of a Stock Award shall
contain a legend giving appropriate notice of the restrictions in the
Grant.  The Participant shall be entitled to have the legend removed
when all restrictions on such shares have lapsed.  The Company may
retain possession of any certificates for Stock Awards until all restrictions on
such shares have lapsed.

     

    d. Right to Vote and to Receive
Dividends.  The Committee shall recommend and the Board shall
determine to what extent, and under what conditions, the Participant shall have
the right to vote shares subject of Stock Awards and to receive any dividends or
other distributions paid on such shares during the restriction
period.

     

     

    10. Stock
Appreciation Rights and Other Stock-Based Awards

     

    a. The
Committee may recommend and the Board may grant SARs to an Employee,
Non-Employee Director or Consultant separately or in tandem with an
Option.  The following provisions are applicable to SARs:

     

    i. Base
Amount.  The base amount of the SAR shall be established at the
time the SAR is granted.  The base amount of each SAR shall be equal
to the per share Exercise Price of the related Option or, if there is no related
Option, an amount that is at least equal to the Fair Market Value of a share of
Company Stock as of the date of Grant of the SAR.

     

    ii. Tandem
SARs.  Tandem SARs may be granted either at the time the Option
is granted or at any time thereafter while the Option remains outstanding;
provided, however, that, in the case of an Incentive Stock Option, SARs may be
granted only at the date of the grant of the Incentive Stock
Option.  In the case of tandem SARs, the number of SARs granted to a
Participant that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Participant may purchase upon the
exercise of the related Option during such period.  Upon the exercise
of an Option, the SARs relating to the Company Stock covered by such Option
shall terminate.  Upon the exercise of SARs, the related Option shall
terminate to the extent of an equal number of shares of Company
Stock.

     

    iii. Exercisability.  An
SAR shall be exercisable during the period specified in the Grant Agreement and
shall be subject to such vesting and other restrictions as may be specified in
the Grant Agreement.  SARs may be granted that are subject to
achievement of performance goals or other conditions.  The Board may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason.  SARs may only be exercised while the Participant is employed
by, or providing service to, the Employer or during the applicable period after
termination of employment or service as described in Section 7(d).  A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable.

     

    
      
         

      

      
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    iv. Grants to Non-Exempt
Employees.  SARs granted to persons who are non-exempt
employees under the Fair Labor Standards Act of 1938, as amended, may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).

     

    v. Value of
SARs.  When a Participant exercises SARs, the Participant shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised.  The stock appreciation
for an SAR is the amount by which the Fair Market Value of the underlying
Company Stock on the date of exercise of the SAR exceeds the base amount of the
SAR as described in subsection (i).

     

    vi. Form of
Payment.  The Committee shall determine whether the stock
appreciation for an SAR shall be paid in the form of shares of Company Stock,
cash or a combination of the two.  For purposes of calculating the
number of shares of Company Stock to be received, shares of Company Stock shall
be valued at their Fair Market Value on the date of exercise of the
SAR.  If shares of Company Stock are to be received upon exercise of
an SAR, cash shall be delivered in lieu of any fractional share.

     

    b. Other Stock-Based
Awards.  The Committee may recommend and the Board may grant
other awards not specified in Sections 7, 8 or 9 above that are based on or
measured by Company Stock to Employees, Consultants and Non-Employee Directors,
on such terms and conditions as it deems appropriate.  Other
Stock-Based Awards may be granted subject to achievement of performance goals or
other conditions and may be payable in Company Stock or cash, or in a
combination of the two, as determined by the Committee in the Grant
Agreement.

     

     

    11. Qualified
Performance-Based Compensation

     

    a. Designation as Qualified
Performance-Based Compensation.  The Committee may recommend
and the Board may determine that Stock Units, Stock Awards, SARs or Other
Stock-Based Awards granted to an Employee shall be considered “qualified
performance-based compensation” under section 162(m) of the Code, in which case
the provisions of this Section 11 shall apply to such Grants.  The
Committee may recommend and the Board may also grant Options under which the
exercisability of the Options is subject to achievement of performance goals as
described in this Section 11 or otherwise.

     

    b. Performance
Goals.  When Grants are made under this Section 11, the Grant
shall set forth in writing (i) the objective performance goals that must be met,
(ii) the period during which performance will be measured, (iii) the maximum
amounts that may be paid if the performance goals are met, and (iv) any other
conditions that the Committee deems appropriate and consistent with the
requirements of section 162(m) of the Code for “qualified performance-based
compensation.”  The performance goals shall satisfy the requirements
for “qualified performance-based compensation,” including the requirement that
the achievement of the goals be substantially uncertain at the time they are
established and that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met.  The Board shall not
have discretion to increase the amount of compensation that is payable, but may
reduce the amount of compensation that is payable, pursuant to Grants identified
by the Board as “qualified performance-based compensation.”

     

    c. Criteria Used for Objective
Performance Goals.  Objectively determinable performance goals
shall be based on one or more of the following criteria:  stock price,
earnings per share, price-earnings multiples, gross profit, net earnings,
operating earnings, revenue, revenue growth, number of days sales outstanding in
accounts receivable, number of days of cost of sales in inventory, productivity,
margin, EBITDA (earnings before interest, taxes, depreciation and amortization),
net capital employed, return on assets, shareholder return, return on equity,
return on capital employed, growth in assets, unit volume, sales, cash flow,
market share, performance relative to a designated comparison group, debt
reduction, market capitalization or strategic business criteria consisting of
one or more objectives based on meeting specified R&D programs, new product
releases, revenue goals, market penetration goals, customer growth, geographic
business expansion goals, cost targets, quality improvements, cycle time
reductions, manufacturing improvements and/or efficiencies, human resource
programs, customer programs, or goals relating to acquisitions or
divestitures.  The performance goals may relate to one or more
business units or the performance of the Company as a whole, or any combination
of the foregoing.  Performance goals need not be uniform among
Participants.  Performance goals may be set on a pre tax or after tax
basis, may be defined by absolute or relative measures, and may be valued on a
growth or fixed basis.

     

    
      
         

      

      
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    d. Timing of Establishment of
Goals.  Performance goals shall be established in writing
either before the beginning of the performance period or during a period ending
no later than the earlier of (i) 90 days after the beginning of the performance
period or (ii) the date on which 25% of the performance period has been
completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code.

     

    e. Certification of
Results.  The Board shall certify the performance results for
the performance period specified in the Grant Agreement after the performance
period ends.  The Board shall determine the amount, if any, to be paid
pursuant to each Grant based on the achievement of the performance goals and the
satisfaction of all other terms of the Grant Agreement.

     

    f. Death, Disability or Other
Circumstances.  The Grant Agreement may provide that Grants
under this Section 11 shall be payable, in whole or in part, in the event of the
Participant’s death or Disability, a Change of Control or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m) of the Code.

     

     

    12. Deferrals

     

    The
Company may permit or require a Participant to defer receipt of the payment of
cash or the delivery of shares that would otherwise be due to the Participant in
connection with any Grant.  The Company shall establish rules and
procedures for any such deferrals, consistent with applicable requirements of
section 409A of the Code.

     

     

    13. Withholding
of Taxes

     

    a. Required
Withholding.  All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements.  The Company may require that the Participant or other
person receiving or exercising Grants pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with
respect to such Grants, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such
Grants.

     

    b. Election to Withhold
Shares.  If the Committee so permits, a Participant may elect
to satisfy the Company’s tax withholding obligation with respect to Grants paid
in Company Stock by having shares withheld, at the time such Grants become
taxable, up to an amount that does not exceed the minimum applicable withholding
tax rate for federal (including FICA), state and local tax
liabilities.  The election must be in a form and manner prescribed by
the Committee.

     

     

    14. Transferability
of Grants

     

    a. Restrictions on
Transfer.  Except as described in subsection (b) below, only
the Participant may exercise rights under a Grant during the Participant’s
lifetime, and a Participant may not transfer those rights except by will or by
the laws of descent and distribution.  When a Participant dies, the
personal representative or other person entitled to succeed to the rights of the
Participant may exercise such rights.  Any such successor must furnish
proof satisfactory to the Company of his or her right to receive the Grant under
the Participant’s will or under the applicable laws of descent and
distribution.

     

    b. Transfer of Nonqualified
Stock Options to or for Family Members.  Notwithstanding the
foregoing, the Company may provide, in a Grant Agreement, that a Participant may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the Company may
determine; provided that the Participant receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.

     

     

    15. Consequences
of a Change of Control

     

    In the
event of a Change of Control, the Company may take any one or more of the
following actions with respect to any or all outstanding Grants, without the
consent of any Participant: (i) determine that outstanding Options and SARs
shall be fully exercisable, and restrictions on outstanding Stock Awards and
Stock Units shall lapse, as of the date of the Change of Control or at such
other time or subject to specific conditions as the Committee recommends, (ii)
require that Participants surrender their outstanding Options and SARs in
exchange for one or more payments by the Company, in cash or Company Stock as
recommended by the Committee, in an amount equal to the amount by which the then
air Market Value of the shares of Company Stock subject to the Participant’s
unexercised Options and SARs exceeds the Exercise Price, if any, and on such
terms as the Committee determines, (iii) after giving Participants an
opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee recommends, (iv) with
respect to Participants holding Stock Units or Other Stock-Based Awards,
determine that such Participants shall receive one or more payments in
settlement of such Stock Units or Other Stock-Based Awards, in such amount and
form and on such terms as may be determined by the Committee, or (v) determine
that Grants that remain outstanding after the Change of Control shall be
converted to similar grants of the surviving corporation (or a parent or
subsidiary of the surviving corporation).  Such acceleration,
surrender, termination, settlement or assumption shall take place as of the date
of the Change of Control or such other date as the Company may
specify.

     

    
      
         

      

      
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    16. Requirements
for Issuance of Shares

     

    No
Company Stock shall be issued in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance of such Company Stock
have been complied with to the satisfaction of the Company.  The
Company shall have the right to condition any Grant made to any Participant
hereunder on such Participant’s undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Company shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such
restrictions.  Certificates representing shares of Company Stock
issued under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed
thereon.  No Participant shall have any right as a shareholder with
respect to Company Stock covered by a Grant until shares have been issued to the
Participant.

     

     

    17. Amendment
and Termination of the Plan

     

    a. Amendment.  The
Board may amend or terminate the Plan at any time; provided, however, that the
Board shall not amend the Plan without approval of the shareholders of the
Company if such approval is required in order to comply with the Code or
applicable laws, or to comply with applicable stock exchange
requirements.  No amendment or termination of this Plan shall, without
the consent of the Participant, materially impair any rights or obligations
under any Grant previously made to the Participant under the Plan, unless such
right has been reserved in the Plan or the Grant Agreement, or except as
provided in Section 18(b) below.  Notwithstanding anything in the Plan
to the contrary, the Board may amend the Plan in such manner as it deems
appropriate in the event of a change in applicable law or
regulations.

     

    b. Stockholder Approval for
“Qualified Performance-Based Compensation.”  If Grants are made
under Section 11 above, the Plan must be reapproved by the Company’s
shareholders no later than the first stockholders meeting that occurs in the
fifth year following the year in which the stockholders previously approved the
provisions of Section 11, if additional Grants are to be made under Section 11
and if required by section 162(m) of the Code or the regulations
thereunder.

     

    c. Termination of
Plan.  The Plan shall terminate on the day immediately
preceding the tenth anniversary of its Effective Date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders.  The termination of the Plan shall not impair the
power and authority of the Board or the Committee with respect to an outstanding
Grant.

     

    18. Miscellaneous

     

    a. Grants in Connection with
Corporate Transactions and Otherwise.  Nothing contained in
this Plan shall be construed to (i) limit the right of the Board to make Grants
under this Plan in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any corporation, firm
or association, including Grants to employees thereof who become Employees, or
for other proper corporate purposes, or (ii) limit the right of the Company to
grant stock options or make other stock-based awards outside of this
Plan.  Without limiting the foregoing, the Grant may be made to an
employee of another corporation who becomes an Employee by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company in substitution for a grant made by such
corporation.  The terms and conditions of the Grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives, as recommended by the Committee and determined by the
Board.

     

    b. Compliance with
Law.  The Plan, the exercise of Options and the obligations of
the Company to issue or transfer shares of Company Stock under Grants shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required.  With respect to persons subject
to section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan comply with all applicable provisions of
Rule 16b-3 or its successors under the Exchange Act.  In addition, it
is the intent of the Company that Incentive Stock Options comply with the
applicable provisions of section 422 of the Code, that Grants of “qualified
performance-based compensation” comply with the applicable provisions of section
162(m) of the Code and that, to the extent applicable, Grants comply with the
requirements of section 409A of the Code.  To the extent that any
legal requirement of section 16 of the Exchange Act or section 422, 162(m) or
409A of the Code as set forth in the Plan ceases to be required under section 16
of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan
provision shall cease to apply.  The Board may revoke any Grant if it
is contrary to law or modify a Grant to bring it into compliance with any valid
and mandatory government regulation.  The Committee may also adopt
rules regarding the withholding of taxes on payments to
Participants.  The Committee may, in its sole discretion, agree to
limit its authority under this Section.

     

    
      
         

      

      
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    c. Enforceability.  The
Plan shall be binding upon and enforceable against the Company and its
successors and assigns.

     

    d. Funding of the Plan;
Limitation on Rights.  This Plan shall be
unfunded.  The Company shall not be required to establish any special
or separate fund or to make any other segregation of assets to assure the
payment of any Grants under this Plan.  Nothing contained in the Plan
and no action taken pursuant hereto shall create or be construed to create a
fiduciary relationship between the Company and any Participant or any other
person.  No Participant or any other person shall under any
circumstances acquire any property interest in any specific assets of the
Company.  To the extent that any person acquires a right to receive
payment from the Company hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.

     

    e. Rights of
Participants.  Nothing in this Plan shall entitle any Employee,
Non-Employee Director or other person to any claim or right to receive a Grant
under this Plan.  Neither this Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in
the employment or service of the Employer nor shall it interfere in any way with
the right of the Company or any subsidiary to terminate such person’s employment
or service at any time.  Unless otherwise specified in the applicable
Grant Agreement, an approved leave of absence shall not be considered a
termination of employment or service for purposes of a Grant under the
Plan

     

    f. No Fractional
Shares.  No fractional shares of Company Stock shall be issued
or delivered pursuant to the Plan or any Grant.  The Company shall
determine whether cash, other awards or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.

     

    g. Employees Subject to
Taxation Outside the United States.  With respect to
Participants who are subject to taxation in countries other than the United
States, the Board may make Grants on such terms and conditions as the Committee
recommends to comply with the laws of the applicable countries, and the
Committee may adopt such procedures, or recommend the Board adopt such addenda
and subplans and make such modifications as may be necessary or advisable to
comply with such laws.

     

    h. Governing
Law.  The validity, construction, interpretation and effect of
the Plan and Grant Agreements issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions
thereof.

     

    


     


    
      
         


      

      
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