exv10w27



 





Exhibit 10.27




GOLDEN PHOENIX MINERALS, INC.,

A Minnesota corporation




2007 EQUITY INCENTIVE PLAN



1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and
motivate Eligible Persons whose present and potential contributions are important to the success of
the Company by offering them an opportunity to participate in the Company’s future performance
through awards of Incentive and Nonqualified Stock Options (“Options”), Stock (“Restricted Stock”
or “Unrestricted Stock”) and Stock Appreciation Rights (“SARs”). This Plan is not intended to
replace any current plan of, or awards issued by, the Company, nor will it limit the ability of the
Company to create additional or new plans, or to issue additional or new awards. Capitalized terms
not defined in the text are defined in Section 29.



2. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will be approved by the Shareholders of
the Company, consistent with applicable laws, after the date this Plan is approved by the Board.
No Award will be granted after termination of this Plan but all Awards granted prior to termination
will remain in effect in accordance with their terms. The effective date of this Plan will be the
date of approval by the Board subject to approval of the Shareholders within twelve (12) months of
such adoption (the “Effective Date”). So long as the Company is subject to Section 16(b) of the
Exchange Act, the Company will comply with the requirements of Rule 16b-3 (or its successor), as
amended.



3. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will terminate
ten (10) years from the date this Plan is adopted by the Board.



4. SHARES SUBJECT TO THIS PLAN.




     4.1.
Number of Shares Available. Subject to Section 4.2, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be equal to nine percent (9%) of the total number of outstanding shares of common stock of the Company
at the Effective Date with an increase at the beginning of each fiscal year if additional shares of common stock were issued in the
preceding fiscal year so that the total number of Shares reserved and available for grant and issuance, not including Shares that are
subject to outstanding Awards, will be nine percent (9%) of the total number of outstanding shares of common stock of the Company on
that date (the “Maximum Number”). Notwithstanding the foregoing, not more than two million (2,000,000) shares of Stock shall be granted in the form of
Incentive Stock Options.



     Shares issued under the Plan will be drawn from authorized and unissued shares or shares now
held or subsequently acquired by the Company.



     Outstanding shares of the Company shall, for the purposes of such calculation, include the
number of shares of Stock into which other securities or instruments issued by the Company are
currently convertible (e.g., convertible preferred stock, convertible debentures, or warrants for
common stock), but not outstanding Options to acquire Stock.



          4.1.1. Future Awards. Subject to Section 4.2 and to the fullest extent permissible
under Rule 16b-3 under the Exchange Act and Section 422 of the Code and any other applicable laws,
rules and regulations, (i) if an Award is canceled, terminates, expires, is forfeited or lapses for
any reason without having been exercised or settled, any shares of Stock subject to the Award will
be added back into the Maximum Number and will again be available for the grant of an Award under
the Plan and (ii) and the number of shares of Stock withheld to satisfy a Participant’s minimum tax
withholding obligations will be added back into the Maximum
Number and will be available for the grant of an Award under the Plan. Also, only the net



 









 








numbers of Shares that are issued pursuant to the exercise of an Award will be counted against the
Maximum Number.




     However, in the event that prior to the Award’s cancellation, termination, expiration,
forfeiture or lapse, the holder of the Award at any time received one or more elements of
“beneficial ownership” pursuant to such Award (as defined by the SEC, pursuant to any rule or
interpretations promulgated under Section 16 of the Exchange Act), the Shares subject to such Award
will not again be made available for regrant under the Plan.



          4.1.2.
Acquired Company Awards. Notwithstanding anything in the Plan to the
contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if the other plans are
or were plans of other acquired entities (“Acquired Entities”) (or the parent of an Acquired
Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger,
consolidation, acquisition of property or stock, reorganization or liquidation (the “Acquisition
Transaction”). In the event that a written agreement pursuant to which the Acquisition Transaction
is completed is approved by the Board and said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the Acquired Entity, said terms and
conditions will be deemed to be the action of the Plan Administrator without any further action by
the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange
Act, and the persons holding such awards will be deemed to be Participants.




          4.1.3. Reserve of Shares. At all times, the Company will reserve and keep available a
sufficient number of Shares as will be required to satisfy the requirements of all outstanding
Awards granted under this Plan. The Shares to be issued hereunder upon exercise of an Award may be
either authorized but unissued; supplied to the Plan through acquisitions of Shares on the open
market; Shares purchased under the Plan and forfeited back to the Plan; Shares surrendered in
payment of the exercise price of an option; or Shares withheld for payment of applicable employment
taxes and/or withholding obligations resulting from the exercise of an Option. The following rules
will apply for purposes of the determination of the number of Shares available for grant under the
Plan:




               i. Grants. The grant of an Award will reduce the Shares available for grant under the
Plan by the number of Shares subject to such Award.



               ii. Outstanding. While an Award is outstanding, it will be counted against the
authorized pool of Shares regardless of its vested status.



     4.2. Adjustments. Should any change be made to the Stock of the Company by reason of
any stock split (including reverse stock split), stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common Stock as a class
without the Company’s receipt of consideration, the Administrator will make the appropriate
adjustments to (i) the maximum number and/or class of securities issuable under the Plan; and (ii)
the number and/or class of securities and the exercise price per Share in effect under each
outstanding Award in order to prevent the dilution or enlargement of benefits thereunder; provided
however, that the number of Shares subject to any Award will always be a whole number and the
Administrator will make such adjustments as are necessary to insure Awards of whole Shares.



 









 





     4.3. Limitations on Awards. Notwithstanding any provision in the Plan to the contrary
(but subject to adjustment as provided in Section 4.2), the Maximum Number of Shares of Stock with
respect to one or more Options and/or SARs that may be granted during any one fiscal year under the
Plan to any one Participant will be two hundred fifty thousand (250,000), except that the Company
may make an additional one-time grant of such Award to a newly-hired individual for up to one
hundred thousand (100,000) shares for a maximum annual grant of three hundred fifty thousand
(350,000) (all of which may be granted as Incentive Stock Options
subject to the limitations set forth in Section 6.3.1). Determinations under the
preceding sentence will be made in a manner that is consistent with Section 162(m) of the Code and
regulations promulgated thereunder. The provisions of this Section will not apply in any
circumstance with respect to which the Administrator determines that compliance with Section 162(m)
of the Code is not necessary.



     4.4. No Repricing. Absent shareholder approval, neither the Administrator nor the
Board will have any authority, with or without the consent of the affected holders of Awards, to
“reprice” an Award in the event of a decline in the price of Shares after the date of their initial
grant either by reducing the exercise price from the original exercise price or through
cancellation of outstanding Awards in connection with regranting of Awards at a lower price to the
same individual. This paragraph may not be amended, altered or repealed by the Administrator or
the Board without approval of the shareholders of the Company.



     4.5. No Reloading. No Option or SAR will provide for the automatic grant of
replacement or reload Options or SARs upon the Participant exercising the Option or SAR and paying
the Exercise Price by tendering Shares of Stock, net exercise or otherwise. This paragraph may not
be amended, altered or repealed by the Administrator or the Board without approval of the
shareholders of the Company.



5. ADMINISTRATION OF THIS PLAN.




     5.1. Authority. Authority to control and manage the operation and administration of
this Plan will be vested in a committee consisting of two (2) or more independent members of the
Board (the “Committee”). It is intended that the directors appointed to serve on the Committee
will be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the Exchange
Act) and “outside directors” (within the meaning of Section 162(m) of the Code) to the extent that
Rule 16b-3 and, if necessary for relief from the limitation under Section 162(m) of the Code and
such relief sought by the Company, Section 162(m) of the Code, respectively, are applicable.
However, the mere fact that a Committee member will fail to qualify under either of the foregoing
requirements will not invalidate any Award made by the Committee which Award is otherwise validly
made under the Plan. Members of the Committee may be appointed from time to time by, and will
serve at the pleasure of, the Board. As used herein, the term “Administrator” means the Committee.



     5.2. Interpretation. Subject to the express provisions of this Plan, the
Administrator will have the exclusive power, authority and discretion to:



               (1) construe and interpret this Plan and any agreements defining the rights and obligations of
the Company and Participants under this Plan;



               (2) select Participants;



               (3) determine the terms and conditions of any Award granted under the Plan, including, but not
limited to, the Exercise Price, grant price or purchase price, any



 









 







restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of the Award, and acceleration or waivers thereof, based in each
case on such considerations as the Administrator in its sole discretion determines that is not
inconsistent with any rule or regulation under any tax or securities laws or includes an
alternative right that does not disqualify an Incentive Stock Option under applicable regulations.
Determinations made by the Administrator under this Plan need not be uniform but may be made on a
Participant-by-Participant basis;



               (4) determine the number of Shares or other consideration subject to Awards;



               (5) determine whether Awards will be subject to a condition, or grant a right, that is not
inconsistent with any rule or regulation under any tax or securities laws or includes an
alternative right that does not disqualify an incentive stock option under applicable regulations;



               (6) prescribe the form of each Award Agreement, which need not be identical for each
Participant;



               (7) further define the terms used in this Plan;



               (8) correct any defect or supply any omission or reconcile any inconsistency in this Plan or
in any Award Agreement;



               (9) provide for rights of refusal and/or repurchase rights;



          (10) amend outstanding Award Agreements to provide for, among other things, any change or
modification which the Administrator could have provided for upon the grant of an Award or in
furtherance of the powers provided for herein that does not disqualify an Incentive Stock Option
under applicable regulations unless the Participant so consents;




          (11) prescribe, amend and rescind rules and regulations relating to the administration of this
Plan; and




          (12) make all other determinations necessary or advisable for the administration of this Plan.




     5.3. Decisions Binding. Any decision or action of the Administrator in connection
with this Plan or Awards granted or shares of Stock purchased under this Plan will be final and
binding. The Administrator will not be liable for any decision, action or omission respecting this
Plan, or any Awards granted or shares of Stock sold under this Plan.



     5.4. Limitation on Liability. To the extent permitted by applicable law in effect
from time to time, no member of the Committee will be liable for any action or omission of any
other member of the Committee nor for any act or omission on the member’s own part, excepting only
the member’s own willful misconduct, gross negligence, or bad faith and without reasonable belief
that it was in the best interests of the Company, arising out of or related to this Plan. The
Company will pay expenses incurred by, and satisfy a judgment or fine rendered or levied against, a
present or former member of the Committee in any action against such person (whether or not the
Company is joined as a party defendant) to impose liability or a penalty on such person for an act
alleged to have been committed by such person while a member of the Committee



 









 







arising with respect to this Plan or administration thereof or out of membership on the Committee
or by the Company, or all or any combination of the preceding, provided, the Committee member was
acting in good faith, within what such Committee member reasonably believed to have been within the
scope of his or her employment or authority and for a purpose which he or she reasonably believed
to be in the best interests of the Company or its shareholders. Payments authorized hereunder
include amounts paid and expenses incurred in settling any such action or threatened action. The
provisions of this section will apply to the estate, executor, administrator, heirs, legatees or
devisees of a Committee member, and the term “person” as used on this section will include the
estate, executor, administrator, heirs, legatees, or devisees of such person.



6. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.




     6.1. Grant of Options. One or more Options may be granted to any Eligible Person.
Subject to the express provisions of this Plan, the Administrator will determine from the Eligible
Persons those individuals to whom Options under this Plan may be granted. Each Option granted
under this Plan will be evidenced by an Award Agreement, which will expressly identify the Option
as an Incentive Stock Option or a Non-Qualified Stock Option. The Shares underlying a grant of an
Option may be in the form of Restricted Stock or Unrestricted Stock.



     Further, subject to the express provisions of this Plan, the Administrator will specify the
grant date (the “Grant Date”), the number of Shares covered by the Option, the Exercise Price and
the terms and conditions for exercise of the Options. As soon as practicable after the Grant Date,
the Company will provide the Participant with a written Award Agreement in the form approved by the
Administrator.



     The Administrator may, in its absolute discretion, grant Options under this Plan at any time
and from time to time before the expiration of this Plan.



     6.2. General Terms and Conditions. Except as otherwise provided herein, the Options
will be subject to the following terms and conditions and such other terms and conditions not
inconsistent with this Plan as the Administrator may impose:



          6.2.1. Exercise of Option. The Administrator may determine in its discretion whether
any Option will be subject to vesting and the terms and conditions of any such vesting. The Award
Agreement will contain any such vesting schedule.




          6.2.2. Option Term. Each Option and all rights or obligations thereunder will expire
on such date as will be determined by the Administrator, but not later than ten (10) years after
the Grant Date (five (5) years in the case of an Incentive Stock Option when the Optionee owns more
than ten percent (10%) of the total combined voting power of all classes of stock of the Company
(“Ten Percent Shareholder”)), and will be subject to earlier termination as hereinafter provided.




          6.2.3. Exercise Price. The Exercise Price of any Option will be determined by the
Administrator when the Option is granted and may not be less than one hundred percent (100%) of the
Fair Market Value of the Shares on the Grant Date, and the Exercise Price of any Incentive Stock
Option granted to a Ten Percent Shareholder will not be less than one hundred ten percent (110%) of
the Fair Market Value of the Shares on the Grant Date. Payment for the Shares purchased will be
made in accordance with Section 10 of this Plan. The Administrator is authorized to issue Options,
whether Incentive Stock Options or Non-Qualified Stock Options, at an option price in excess of the
Fair Market Value on the Grant Date.




 









 








          6.2.4. Method of Exercise. Options may be exercised only by delivery to the Company
of a stock option exercise agreement (the “Exercise Agreement”) in a form approved by the
Administrator (which need not be the same for each Participant), stating the number of Shares being
purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any,
and such representations and agreements regarding the Participant’s investment intent and access to
information and other matters, if any, as may be required or desirable by the Company to comply
with applicable securities laws, together with payment in full of the Exercise Price for the number
of Shares being purchased.




          6.2.5. Transferability of Options. Except as otherwise provided below for
Non-Qualified Stock Options, no Option will be transferable other than by will or by the laws of
descent and distribution and during the lifetime of a Participant only the Participant, his
guardian or legal representative may exercise an Option, except in the case of an Incentive Stock
Option, pursuant to a domestic relations order that would satisfy Section 414(p)(1)(A) of the Code
if such Section applied to an Award under the Plan and Nonqualified Options may be transferred to a
Participant’s former spouse pursuant to a property settlement made part of an agreement or court
order incident to the divorce.




          At its discretion, the Administrator may provide for transfer of an Option (other than an
Incentive Stock Option), without payment of consideration, to the following family members of the
Participant, including adoptive relationships: a child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, sister-in-law, niece, nephew, former spouse (whether by gift or pursuant to a
domestic relations order), any person sharing the employee’s household (other than a tenant or
employee), a family-controlled partnership, corporation, limited liability company and trust, or a
foundation in which family members heretofore described control the management of assets. The
assigned portion may only be exercised by the person or persons who acquire a proprietary interest
in the Option pursuant to the assignment. The terms applicable to the assigned portion will be the
same as those in effect for the Option immediately prior to such assignment and will be set forth
in such documents issued to the assignee as the Administrator may deem appropriate. A request to
assign an Option may be made only by delivery to the Company of a written stock option assignment
request in a form approved by the Administrator, stating the number of Options and Shares
underlying Options requested for assignment, that no consideration is being paid for the
assignment, identifying the proposed transferee, and containing such other representations and
agreements regarding the Participant’s investment intent and access to information and other
matters, if any, as may be required or desirable by the Company to comply with applicable
securities laws.




          6.2.6. Beneficiaries. Notwithstanding Section 6.2.5, a Participant may, in the manner
determined by the Administrator, designate a beneficiary to exercise the rights of the Participant
and to receive any distribution with respect to any Option upon the Participant’s death. If no
beneficiary has been designated or survives the Participant, payment will be made to the
Participant’s estate. Subject to the foregoing, a beneficiary designation may be changed or
revoked by a Participant at any time, provided the change or revocation is filed with the
Administrator.




          6.2.7. Exercise After Certain Events.




               i. Termination of Employment — Employee/Officer



 









 





                    (1) Incentive Stock Options.



                         (a) Termination of All Services. If for any reason other than retirement (as defined
below), permanent and total Disability (as defined below) or death, a Participant Terminates
employment with the Company (including employment as an Officer of the Company), vested Incentive
Stock Options held at the date of such termination may be exercised, in whole or in part, at any
time within three (3) months after the date of such Termination or such lesser period specified in
the Award Agreement (but in no event after the earlier of (i) the expiration date of the Incentive
Stock Option as set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date (five
(5) years for a Ten Percent (10%) Shareholder)).



                         (b) Continuation of Services as Consultant/Advisor. If a Participant granted an
Incentive Stock Option terminates employment but continues as a consultant, advisor or in a similar
capacity to the Company, Participant need not exercise the Incentive Stock Option within three (3)
months of Termination of employment but will be entitled to exercise within three (3) months of
Termination of services to the Company (one (1) year in the event of permanent and total Disability
or death) or such lesser period specified in the Award Agreement (but in no event after the earlier
of (i) the expiration date of the Option as set forth in the Award Agreement, and (ii) ten (10)
years from the Grant Date). However, if Participant does not exercise within three (3) months of
Termination of employment, the Option will not qualify as an Incentive Stock Option.



                    (2) Non-Qualified Stock Options.



                         (a) Termination of All Services. If for any reason other than Retirement (as defined
below), permanent and total Disability (as defined below) or death, a Participant terminates
employment with the Company (including employment as an Officer of the Company), vested Options
held at the date of such Termination may be exercised, in whole or in part, at any time within
three (3) months of the date of such Termination or such lesser period specified in the Award
Agreement (but in no event after the earlier of (i) the expiration date of the Option as set forth
in the Award Agreement, and (ii) ten (10) years from the Grant Date).



                         (b) Continuation of Services as Consultant/Advisor. If a Participant Terminates
employment but continues as a consultant, advisor or in a similar capacity to the Company
Participant need not exercise the Option within three (3) months of Termination but will be
entitled to exercise within three (3) months of Termination of services to the Company (one (1)
year in the event of permanent and total Disability or death) or such lesser period specified in
the Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as
set forth in the Award Agreement, and (ii) ten (10) years from the Grant Date).



               ii. Retirement. If a Participant ceases to be an employee of the Company (including
as an officer of the Company) as a result of Retirement, Participant need not exercise the Option
within three (3) months of Termination of employment but will be entitled to exercise the Option
within the maximum term of the Option to the extent the Option was otherwise exercisable at the
date of Retirement. However, if a Participant does not exercise within three (3) months of
Termination of employment, the Option will not qualify as an Incentive Stock Option if it otherwise
so qualified. The term “Retirement” as used herein means such Termination of employment as will
entitle the Participant to early or normal retirement



 









 







benefits under any then existing pension or salary continuation plans of the Company excluding
401(k) participants (except as otherwise covered under other pension or salary continuation plans).



               iii. Permanent Disability and Death. If a Participant becomes permanently and totally
Disabled while employed by the Company (including as an officer of the Company), or dies while
employed by the Company (including as an Officer of the Company) or death occurs three (3) months
thereafter, vested Options then held may be exercised by the Participant, the Participant’s
personal representative, or by the person to whom the Option is transferred by will or the laws of
descent and distribution, in whole or in part, at any time within one (1) year after the
Termination of employment because of the Disability or death or any lesser period specified in the
Award Agreement (but in no event after the earlier of (i) the expiration date of the Option as set
forth in the Award Agreement, and (ii) ten (10) years from the Grant Date).



     6.3. Limitations on Grant of Incentive Stock Options.



          6.3.1. Threshold. The aggregate Fair Market Value (determined as of the Grant Date)
of the Shares for which Incentive Stock Options may first become exercisable by any Participant
during any calendar year under this Plan, together with that of Shares subject to Incentive Stock
Options first exercisable by such Participant under any other plan of the Company or any
Subsidiary, will not exceed $100,000. For purposes of this Section, all Options in excess of the
$100,000 threshold will be treated as Non-Qualified Stock Options notwithstanding the designation
as Incentive Stock Options. For this purpose, Options will be taken into account in the order in
which they were granted, and the Fair Market Value of the Shares will be determined as of the date
the Option with respect to such Shares is granted.




          6.3.2. Compliance with Section 422 of the Code. There will be imposed in the Award
Agreement relating to Incentive Stock Options such terms and conditions as are required in order
that the Option be an “incentive stock option” as that term is defined in Section 422 of the Code.




          6.3.3. Requirement of Employment. No Incentive Stock Option may be granted to any
person who is not an Employee of the Company or a Subsidiary of the Company.




7. RESTRICTED STOCK AWARDS.




     7.1. Grant of Restricted Stock Awards. Subject to the terms and provisions of this
Plan, the Administrator is authorized to make awards of Restricted Stock to any Eligible Person in
such amounts and subject to such terms and conditions as may be selected by the Administrator (a
“Restricted Stock Award”). All Restricted Stock Awards will be evidenced by an Award Agreement.



     7.2. Issue Date and Vesting Date. At the time of the grant of shares of Restricted
Stock, the Administrator will establish an Issue Date or Issue Dates and a Vesting Date or Vesting
Dates with respect to such Shares. The Administrator may divide such shares of Restricted Stock
into classes and assign a different Issue Date and/or Vesting Date for each class. If the
Participant is employed by the Company on an Issue Date (which may be the date of grant), the
specified number of shares of Restricted Stock will be issued in accordance with the provisions of
Section 7.6. Provided that all conditions to the vesting of a share of Restricted
Stock imposed hereto are satisfied, such share will vest and the restrictions will cease to apply
to such share.



 









 





     7.3. Conditions to Vesting. Restricted Stock will be subject to such restrictions on
or conditions to vesting as the Administrator may impose (including, without limitation, as a
condition to the vesting of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieves such performance goals as the Administrator may specify as
provided for in this Plan, limitations on the right to vote Restricted Stock or the right to
receive dividends on the Restricted Stock). These restrictions may lapse separately or in
combination at such times, under such circumstances, in such installments, time-based, or upon the
satisfaction of performance goals as provided for in this Plan, as the Administrator determines at
the time of the grant of the Award or thereafter.



     7.4. Voting and Dividends. Unless the Administrator in its sole and absolute
discretion otherwise provides in an Award Agreement, holders of Restricted Stock will have the
right to vote such Restricted Stock and the right to receive any dividends declared or paid with
respect to such Restricted Stock. The Administrator may require that any dividends paid on shares
of Restricted Stock will be held in escrow until all restrictions on such shares have lapsed and/or
the Administrator may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions and restrictions
applicable to such Restricted Stock. All distributions, if any, received by a Participant with
respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares,
or other similar transaction will be subject to the restrictions applicable to the original Award.



     7.5. Forfeiture. Except as otherwise determined by the Administrator at the time of
the grant of the Award or thereafter, upon failure to affirmatively accept the grant of a
Restricted Stock Award by execution of a Restricted Stock Award Agreement, termination of
employment during the applicable restriction period, failure to satisfy the restriction period or
failure to satisfy a performance goal during the applicable restriction period, Restricted Stock
that is at that time subject to restrictions will immediately be forfeited and returned to the
Company; provided, however, that the Administrator may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified causes, and the
Administrator may in other cases waive in whole or in part restrictions or forfeiture conditions
relating to Restricted Stock. The Company also will have the right to require the return of all
dividends paid on such shares, whether by termination of any escrow arrangement under which such
dividends are held or otherwise.



     7.6. Certificates for Restricted Stock. Restricted Stock granted under the Plan may
be evidenced in such manner as the Administrator will determine. The Administrator may provide in
an Award Agreement that either (i) the Secretary of the Company will hold such certificates for the
Participant’s benefit pursuant to the provisions of this Plan until such time as the Restricted
Stock is forfeited to the Company or the restrictions lapse) or (ii) such certificates will be
delivered to the Participant, provided, however, that such certificates will bear a legend or
legends that comply with the applicable securities laws and regulations and make appropriate
reference to the restrictions imposed under this Plan and the Award Agreement.



     7.7. Restrictions on Transfer Prior to Vesting. Unless otherwise provided, prior to
the vesting of Restricted Stock, Restricted Stock Awards, granted under this Plan, and any rights
and interests therein, including the Restricted Stock itself, will not be transferable or
assignable by the Participant, and may not be made subject to execution, attachment or similar
process, otherwise
than by will or by the laws of descent and distribution or as consistent with the Award Agreement
provisions relating thereto. Unless otherwise provided in this Plan, during the lifetime of the



 









 







Participant, a Restricted Stock Award and any rights and interests therein, will be exercisable
only by the Participant, and any election with respect thereto may be made only by the Participant.
Any attempt to transfer a Restricted Stock Award or any rights and interests therein including the
Restricted Stock itself, will be void and unless the Administrator determines in its sole and
absolute discretion that the attempt was inadvertent or unintentional, such Award, including the
Restricted Stock itself and any rights and interests therein, will be forfeited by the Participant.



     7.8. Consequences of Vesting. Upon the vesting of a share of Restricted Stock
pursuant to the terms of the Plan and the applicable Award Agreement, the restrictions as provided
by the Administrator will cease to apply to such share. Reasonably promptly after a share of
Restricted Stock vests, the Company will cause to be delivered to the Participant to whom such
shares were granted, a certificate evidencing such share, free of the legend referenced with
respect to such restriction. Notwithstanding the foregoing, such share still may be subject to
restrictions on transfer as a result of applicable securities laws or otherwise pursuant to this
Plan.


8. UNRESTRICTED STOCK AWARDS. The Administrator may, in its sole discretion, award
Unrestricted Stock to any Participant as a Stock Bonus or otherwise pursuant to which such
Participant may receive shares of Stock free of restrictions or limitations that would otherwise be
applied under Section 7 of this Plan.




9. STOCK APPRECIATION RIGHTS.




     9.1. Awards of SARs. A SAR is an award to receive a number of Shares (which may
consist of Restricted Stock), or cash, or Shares and cash, as determined by the Administrator in
accordance with this Plan. A SAR will be awarded pursuant to an Award Agreement that will be in
such form (which need not be the same for each Participant) as the Administrator will from time to
time approve, and will comply with and be subject to the terms and conditions of this Plan. A SAR
may vary from Participant to Participant and between groups of Participants, and may be based upon
performance objectives as provided for in this Plan.



     9.2. Exercise Price. The exercise price per share of an SAR will be determined by the
Administrator at the time of grant, but will in no event be less than the Fair Market Value of a
share of Company Stock on the date of grant.



     9.3. Term. The term of a SAR will be set forth in the Award Agreement as determined
by the Administrator.



     9.4. Exercise. A Participant desiring to exercise a SAR will give written notice of
such exercise to the Company no less than one nor more than ten business days in advance of the
effective date of the proposed exercise. Such notice will specify the number of Shares with
respect to which the SAR is being exercised, and the proposed effective date of the proposed
exercise, which notice will state the proportion of Shares and cash that the Participant desires to
receive pursuant to the SAR exercised, subject to the discretion of the Administrator, and will be
signed by the Participant. Upon receipt of the notice from the Participant, subject to the
Administrator’s election to pay cash as provided below, the Company will deliver to the person
entitled thereto (i) a certificate or certificates for Shares and/or (ii) a cash payment, in
accordance with Section 9.5. The later of the date the Company receives written notice of such
exercise or
the proposed effective date set forth in the written notice hereunder is referred to in this
Section as the “exercise date.”



 









 





     9.5. Number of Shares or Amount of Cash. Subject to the discretion of the
Administrator to substitute cash for Shares, or some portion of the Shares for cash, the amount of
Shares that may be issued pursuant to the exercise of a SAR will be determined by dividing: (i) the
total number of Shares as to which the SAR is exercised, multiplied by the amount by which the Fair
Market Value of the Shares on the exercise date exceeds the Fair Market Value of a Share on the
date of grant of the SAR, by (ii) the Fair Market Value of a Share on the exercise date; provided,
however, that fractional Shares will not be issued and in lieu thereof, a cash adjustment will be
paid. In lieu of issuing Shares upon the exercise of a SAR, the Administrator in its sole
discretion may elect to pay the cash equivalent of the Fair Market Value of the Shares on the
exercise date for any or all of the Shares that would otherwise be issuable upon exercise of the
SAR.



     9.6. Effect of Exercise. A partial exercise of an SAR will not affect the right to
exercise the remaining SAR from time to time in accordance with this Plan and the applicable Award
Agreement with respect to the remaining shares subject to the SAR.



     9.7. Forfeiture. Except as otherwise determined by the Administrator at the time of
the grant of the Award or thereafter, upon failure to affirmatively accept the grant of a SAR by
execution of an Award Agreement, or an event of forfeiture pursuant to the Award Agreement
including failure to satisfy any restriction period or a performance objective, any SAR that has
not vested prior to the date of termination will automatically expire, and all of the rights, title
and interest of the Participant thereunder will be forfeited in their entirety; provided, however
that the Administrator may provide in any Award Agreement that restrictions or forfeiture
conditions relating to the SAR will be waived in whole or in part in the event of termination
resulting from specified causes, and the Administrator may in other cases waive in whole or in part
restrictions or forfeiture conditions relating to the SAR.



     9.8. Effect of Termination of Employment. Notwithstanding the foregoing, the
provisions set forth in Section 6.2.7 with respect to the exercise of Options following termination
of employment will apply as well to such exercise of SARs.



     9.9. Transferability. During the lifetime of a Participant each SAR granted to a
Participant will be exercisable only by the Participant and no SAR will be assignable or
transferable otherwise than by will or by the laws of descent and distribution. In no event may a
SAR be transferred for consideration. Notwithstanding the foregoing, to the extent permissible,
SARs may be transferred to a Participant’s former spouse pursuant to a property settlement made
part of an agreement or court order incident to the divorce.



10. PAYMENT FOR SHARE PURCHASES.




     10.1. Payment. Payment for Shares purchased pursuant to this Plan may be made in cash
(by check) or, where expressly approved for the Participant at the sole discretion of the
Administrator and where permitted by law as follows:



          10.1.1. Cancellation of Indebtedness. By cancellation of indebtedness of the Company
to the Participant.




          10.1.2. Surrender of Shares. By surrender of shares of Stock of the Company that have
been owned by the Participant for more than six (6) months or lesser period if the surrender of
Shares is otherwise exempt from Section 16 of the Exchange Act and, if such shares




 









 








were purchased
from the Company by use of a promissory note, such note has been fully paid with respect to such
shares.




          10.1.3. Deemed Net-Stock Exercise. By forfeiture of Shares equal to the value of the
exercise price pursuant to a “deemed net-stock exercise” by requiring the Participant to accept
that number of Shares determined in accordance with the following formula, rounded down to the
nearest whole integer:









where:




a = net Shares to be issued to Participant




b = number of Awards being exercised




c = Fair Market Value of a Share




d = Exercise price of the Awards




          10.1.4. Broker-Assisted. By delivering a properly executed exercise notice to the
Company together with a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds necessary to pay the exercise price and the amount of
any required tax or other withholding obligations.




          10.1.5 Combination of Methods. By any combination of the foregoing methods of payment
or any other consideration or method of payment as will be permitted by applicable corporate law.




11. WITHHOLDING TAXES.




     11.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of
Awards granted under this Plan or Shares are forfeited pursuant to a “deemed net-stock exercise,”
the Company may require the Participant to remit to the Company by
cash, or check payable to the Company an amount sufficient to satisfy
federal, state and local taxes and FICA withholding requirements prior to the delivery of any
certificate or certificates for such Shares. When, under applicable tax laws, a Participant incurs
tax liability in connection with the exercise or vesting of any Award, the Company will have the
authority and right to deduct or withhold an amount sufficient to satisfy federal, state and
local taxes and FICA withholding requirements, with respect to such transactions. Any such payment
must be made, or any such withholding may be made, promptly when the amount of such obligation becomes determinable.



     11.2. Stock for Withholding. To the extent permissible under applicable tax,
securities and other laws, the Administrator may, in its sole discretion and upon such terms and
conditions as it may deem appropriate, permit a Participant to satisfy his or her obligation to pay
any such withholding tax, in whole or in part, with Stock up to an amount not greater than the
Company’s minimum statutory withholding rate for federal and state tax purposes, including payroll
taxes. The Administrator may exercise its discretion, by (i) directing the Company to apply shares
of
Stock to which the Participant is entitled as a result of the exercise of an Award, or (ii)
delivering to the Company Shares of Stock owned by the Participant for more than six (6) months,
unless the delivery of the Shares is otherwise exempt from Section 16 of the Exchange Act. A



 









 




Participant who has made an election pursuant to this Section 11.2 may satisfy his or her
withholding obligation only with shares of Stock that are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements. The shares of Stock so applied or
delivered for the withholding obligation will be valued at their Fair Market Value as of the date
of measurement of the amount of income subject to withholding.




12. PROVISIONS APPLICABLE TO AWARDS.




     12.1. Acceleration. The Administrator may, in its absolute discretion, without
amendment to the Plan, (i) accelerate the date on which any Award granted under the Plan becomes
exercisable, (ii) waive or amend the operation of Plan provisions respecting exercise after
termination of service or otherwise adjust any of the terms of such Award and (iii) accelerate the
Vesting Date, or waive any condition imposed hereunder, with respect to any share of Restricted
Stock or otherwise adjust any of the terms applicable to such share.



     12.2. Compliance with Section 162(m) of the Code. Notwithstanding any provision of
this Plan to the contrary, if the Administrator determines that compliance with Section 162(m) of
the Code is required or desired, all Awards granted under this Plan to Named Executive Officers
will comply with the requirements of Section 162(m) of the Code. In addition, in the event that
changes are made to Section 162(m) of the Code to permit greater flexibility with respect to any
Award or Awards under this Plan, the Administrator may make any adjustments it deems appropriate.



     12.3. Performance Goals. In order to preserve the deductibility of an Award under
Section 162(m) of the Code, the Administrator may determine that any Award granted pursuant to this
Plan to a Participant that is or is expected to become a Covered Employee will be determined solely
on the basis of (a) the achievement by the Company or Subsidiary of a specified target return, or
target growth in return, on equity or assets, (b) the Company’s stock price, (c) the Company’s
total shareholder return (stock price appreciation plus reinvested dividends) relative to a defined
comparison group or target over a specific performance period, (d) the achievement by the Company
or a Parent or Subsidiary, or a business unit of any such entity, of a specified target, or target
growth in, net income, earnings per share, earnings before income and taxes, and earnings before
income, taxes, depreciation and amortization, or (e) any combination of the goals set forth in (a)
through (d) above, and will be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as qualified performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and the Plan will be deemed amended
to the extent deemed necessary by the Administrator to conform to such requirements. If an Award
is made on such basis, the Administrator will establish goals prior to the beginning of the period
for which such performance goal relates (or such later date as may be permitted under Section
162(m) of the Code or the regulations thereunder but not later than ninety (90) days after
commencement of the period of services to which the performance goal relates), and the
Administrator has the right for any reason to reduce (but not increase) the Award, notwithstanding
the achievement of a specified goal. Any payment of an Award granted with performance goals will
be conditioned on the written certification of the Administrator in each case that the performance
goals and any other material conditions were satisfied.



     In addition, to the extent that Section 409A is applicable, (i) performance-based compensation
will also be contingent on the satisfaction of preestablished organizational or individual
performance criteria relating to a performance period of at least twelve (12)



 









 




consecutive months in
which the Eligible Participant performs services and (ii) performance goals will be established not
later than ninety (90) days after the beginning of any performance period to which the performance
goal relates, provided that the outcome is substantially uncertain at the time the criteria are
established.




     12.4. Compliance with Section 409A of the Code. Notwithstanding any provision of this
Plan to the contrary, if any provision of this Plan or an Award Agreement contravenes any
regulations or Treasury guidance promulgated under Section 409A of the Code or could cause an Award
to be subject to the interest and penalties under Section 409A of the Code, such provision of this
Plan or any Award Agreement will be modified to maintain, to the maximum extent practicable, the
original intent of the applicable provision without violating the provisions of Section 409A of the
Code. In addition, in the event that changes are made to Section 409A of the Code to permit
greater flexibility with respect to any Award under this Plan, the Administrator may make any
adjustments it deems appropriate.



     12.5. Section 280G of the Code. Notwithstanding any other provision of this Plan to
the contrary, unless expressly provided otherwise in the Award Agreement, if the right to receive
or benefit from an Award under this Plan, either alone or together with payments that a Participant
has a right to receive from the Company, would constitute a “parachute payment” (as defined in
Section 280G of the Code), all such payments will be reduced to the largest amount that will result
in no portion being subject to the excise tax imposed by Section 4999 of the Code. 



     12.6. Cancellation of Awards. In the event a Participant’s Continuous Services has
been terminated for “Cause”, he or she will immediately forfeit all rights to any and all Awards
outstanding. The determination by the Board that termination was for Cause will be final and
conclusive. In making its determination, the Board will give the Participant an opportunity to
appear and be heard at a hearing before the full Board and present evidence on the Participant’s
behalf. Should any provision to this Section be held to be invalid or illegal, such illegality
will not invalidate the whole of this Section, but rather this Plan will be construed as if it did
not contain the illegal part or narrowed to permit its enforcement, and the rights and obligations
of the parties will be construed and enforced accordingly.


13. PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a
shareholder with respect to any Shares until the Shares are issued to the Participant. After
Shares are issued to the Participant, the Participant will be a shareholder and have all the rights
of a shareholder with respect to such Shares, including the right to vote and receive all dividends
or other distributions made or paid with respect to such Shares; provided, that if such Shares are
Restricted Stock, then any new, additional or different securities the Participant may become
entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any
other change in the corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock. The Company will issue (or cause to be issued) such stock
certificate promptly upon exercise of the Award. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate is issued.



14. RESTRICTION ON SHARES. At the discretion of the Administrator, the Company may reserve
to itself and/or its assignee(s) in the Award Agreement that the Participant not dispose of the
Shares for a specified period of time, or that the Shares are subject to a right of first refusal
or a right to repurchase at the Shares Fair Market Value at the time of sale. The terms and
conditions of any such rights or other restrictions will be set forth in the Award Agreement
evidencing the Award.




 









 







15. CERTIFICATES. All certificates for Shares or other securities delivered under this
Plan will be subject to such stock transfer orders, legends and other restrictions as the
Administrator may deem necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other requirements of the SEC or any
stock exchange or automated quotation system upon which the Shares may be listed or quoted.



16. ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the
Administrator may require the Participant to deposit all certificates representing Shares, together
with stock powers or other instruments of transfer approved by the Administrator, appropriately
endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Administrator may cause a legend or legends
referencing such restrictions to be placed on the certificates. In connection with any pledge of
the Shares, the Participant will be required to execute and deliver a written pledge agreement in
such form, as the Administrator will from time to time approve.




17. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.




     17.1. Compliance With Applicable Laws. An Award will not be effective unless such
Award is in compliance with all applicable federal and state securities laws, rules and regulations
of any governmental body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed or quoted, as they are in effect on the Grant Date and
also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan,
the Company will have no obligation to issue or deliver certificates for Shares under this Plan
prior to (i) obtaining any approvals from governmental agencies that the Company determines are
necessary or advisable; and/or (ii) completion of any registration or other qualification of such
Shares under any state or federal laws or rulings of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation system, and the
Company will have no liability for any inability or failure to do so. Upon exercising all or any
portion of an Award, a Participant may be required to furnish representations or undertakings
deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent
transfers of any interest in such Shares to comply with applicable securities laws. Evidences of
ownership of Shares acquired pursuant to an Award will bear any legend required by, or useful for
purposes of compliance with, applicable securities laws, this Plan or the Award Agreement.



     17.2. Rule 16b-3 Exemption. During any time when the Company has a class of equity
security registered under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Awards granted hereunder will qualify for the
exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the
Plan or action by the Board or the Administrator does not comply with the requirements of Rule
16b-3, it will be deemed inoperative to the extent permitted by law and deemed advisable by the
Board or the Administrator, and will not affect the validity of the Plan. In the event that Rule
16b-3 is revised or replaced, the Board or the Administrator may exercise its discretion to modify
this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any
features of, the revised exemption or its replacement.


18. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan
will confer or be deemed to confer on any Participant any right to continue in the employ of,

 









 






or to
continue any other relationship with, the Company or to limit in any way the right of the Company
to terminate such Participant’s employment or other relationship at any time, with or without
cause.



19. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. The existence of outstanding Awards will not
affect the Company’s right to effect adjustments, recapitalizations, reorganizations or other
changes in its or any other corporation’s capital structure or business, any merger or
consolidation, any issuance of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock, the dissolution or liquidation of the Company’s or any other corporation’s
assets or business or any other corporate act whether similar to the events described above or
otherwise.




20. DISSOLUTION, LIQUIDATION, MERGER.




     20.1 Company Not the Survivor. In the event of a dissolution or liquidation of the Company,
a merger, consolidation, combination or reorganization in which the Company is not the surviving corporation,
or a sale of substantially all of the assets of the Company (as determined in the sole discretion of the Board),
the Administrator, in its absolute discretion, may cancel each outstanding Award upon payment in cash or stock,
or combination thereof, as determined by the Board, to the Participant of the amount by which any cash and the fair market
value of any other property which the Participant would have received as consideration for the Shares covered by the Award
if the Award had been exercised before such liquidation, dissolution, merger, consolidation, combination, reorganization or
sale exceeds the Exercise Price of the Award or negotiate to have such option assumed by the surviving corporation and in its
absolute discretion, may accelerate the time within which each outstanding Award may be exercised, provided however, that
the Change of Control in Section 21 will control with respect to acceleration in vesting in the event of a merger,
consolidation, combination or reorganization that results in a change of control as so defined. The exercise or vesting
of any Award that was permissible solely by reason of this section and the applicable Award Agreement will be conditioned
upon the consummation of the applicable event. Upon consummation of such dissolution, liquidation, merger, consolidation,
combination, reorganization or sale of substantially all of the assets, any outstanding but unexercised Options and SARs
not otherwise canceled, assumed or substituted as provided for above, will terminate.




     20.2. Company is the Survivor. In the event of a merger, consolidation, combination
or reorganization in which the Company is the surviving corporation
(“Survivor Event”), the Board, as it was comprised before
the Survivor Event, will determine the
appropriate adjustment of the number and kind of securities with respect to which outstanding
Awards may be exercised, and the exercise price at which outstanding Awards may be exercised. The
Board will determine, in its sole and absolute discretion, when the Company will be deemed to
survive for purposes of this Plan.


21. CHANGE OF CONTROL. The Administrator will have the authority, in its absolute
discretion exercisable either in advance of any actual or anticipated “change of control” in the
Company, to fully vest all outstanding Awards. A “change of control” will mean an event involving
one transaction or a related series of transactions, in which (i) the Company issues securities
equal to 50% or more of the Company’s issued and outstanding voting securities, determined as a
single class, to any individual, firm, partnership, limited liability company, or other entity,
including a “group” within the meaning of Exchange Act Rule 13d-3, (ii) the Company issues voting
securities equal to 50% or more of the issued and outstanding voting stock of the Company in
connection with a merger, consolidation other business combination,
(iii) the Company is acquired in a merger, consolidation, combination or reorganization in which
the Company is not the surviving company, or (iv) all or substantially all of the Company’s assets
are sold or transferred.




 









 







22. DEFERRAL OF AWARDS. The Administrator may permit or require the deferral of payment or
settlement of any Stock Award subject to such rules and procedures as it may establish. Payment or
settlement of Options or SARs may not be deferred unless such deferral would not cause the
provisions of Section 409A of the Code to be violated.



23. NOTIFICATION OF ELECTION UNDER SECTION 83(b) OF THE CODE. If any Participant will, in
connection with the acquisition of shares of Company Stock under the Plan, make the election
permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year
of transfer the amounts specified in Section 83(b)), such Participant will notify the Company of
such election within ten (10) days of filing notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to regulations issued under
the authority of Code Section 83(b).



24. TERMINATION; AMENDMENT. The Board may amend, suspend or terminate this Plan at any
time and for any reason; provided, however, that shareholder approval will be required for the
following types of amendments to this Plan: (i) any increase in
the Maximum Number of Shares, or the maximum number of Shares
available as incentive stock options,
issuable under the Plan except for a proportional increase in the
Maximum Number or maximum number of Shares available as incentive
stock options, as a result of
stock split or stock dividend or (ii) a change in the class of Employees entitled to be granted
Incentive Stock Options. Further, the Board may, in its discretion, determine that any amendment
should be effective only if approved by the Shareholders even if such approval is not expressly
required by this Plan or by law. No Awards will be made after the termination of the Plan. At any
time and from time to time, the Administrator may amend or modify any outstanding Award or Award
Agreement without approval of the Participant; provided, however, that no amendment or
modification of any Award will adversely affect any outstanding Award without the written consent
of the Participant; provided further, however, that the original term of any Award
may not be extended unless it would not cause the provisions of Section 409A to be violated. No
termination, amendment, or modification of the Plan will adversely affect any Award previously
granted under the Plan, without the written consent of the Participant. Notwithstanding any
provision herein to the contrary, the Administrator will have broad authority to amend this Plan or
any outstanding Award under this Plan without approval of the Participant to the extent necessary
or desirable (i) to comply with, or take into account changes in, applicable tax laws, securities
laws, accounting rules and other applicable laws, rules and regulations, or (ii) to ensure that an
Award is not subject to interest and penalties under Section 409A of the Code or the excise tax
imposed by Section 4999 of the Code.



25. TRANSFERS UPON DEATH; NONASSIGNABILITY. Upon the death of a Participant outstanding
Awards granted to such Participant including Options, Stock and SARs may be transferred and
exercised only by the executor or administrator of the Participant’s estate or by a person who will
have acquired the right to such exercise by will or by the laws of descent and distribution in
accordance with and as provided for in this Plan. No transfer of an Award by will or the laws of
descent and distribution will be effective to bind the Company unless the Company will have been
furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the
Administrator may deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Award that are or would have been
applicable to the Participant and to be bound by the acknowledgments made by the Participant in
connection with the grant of the Award. Except as otherwise provided, no
Award or interest in it may be transferred, assigned, pledged or hypothecated by the Participant,
whether by operation of law or otherwise, or be made subject to execution, attachment or similar
process.




 









 







26. FAILURE TO COMPLY. In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant (or beneficiary) to comply with any of the terms and conditions of
the Plan or the applicable Award Agreement, unless such failure is remedied by such Participant (or
beneficiary) within ten days after notice of such failure by the Administrator, will be grounds for
the cancellation and forfeiture of such Award, in whole or in part, as the Administrator, in its
sole discretion, may determine.



27. GOVERNING LAW. Except to the extent preempted by any applicable federal law, this Plan
and the rights of all persons under this Plan will be construed in accordance with and under
applicable provisions of the laws of the State of Nevada, without reference to the principles of
conflicts of laws thereunder.



28. MISCELLANEOUS. Except as specifically provided in a retirement or other benefit plan
of the company or a related entity, Awards will not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or a related entity,
and will not affect any benefits under any other benefit plan of any kind or any benefit plan
subsequently instituted under which the availability or amount of benefits is related to level of
compensation. This Plan is not a “retirement plan” or “welfare plan” under the Employee Retirement
Income Security Act of 1974, as amended.



29. DEFINITIONS. As used in this Plan, the following terms will have the following
meanings:



“Administrator” means the Committee appointed by the Board to administer this Plan or if there is
no such Committee, the Board itself.



“Award” means, individually and collectively, any award under this Plan, including any Option,
Restricted Stock Award, Unrestricted Stock Award or SAR.



“Award Agreement” means, with respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the Award.



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



“Cause” will mean, termination of employment of a Participant for cause under the Company’s
generally applicable policies and procedures or, in the case of a non-employee director of the
Company, for circumstances which would constitute cause if such policies and procedures were
applicable.



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



“Committee” means the Committee appointed by the Board to administer this Plan.



“Company” means Golden Phoenix Minerals, Inc., a Nevada corporation, or any successor corporation,
and its Subsidiary as the context so warrants.



“Continuous Service” means that the provision of services to the Company or a Subsidiary in any
capacity of employee, director or consultant that is not interrupted or terminated. Continuous
Service will not be considered interrupted in the case of (i) any approved leave of absence, (ii)
transfers between locations of the Company or among the Company, any Subsidiary, or any


 









 






successor,
in any capacity of employee, director or consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Subsidiary in any capacity of employee,
director or consultant (except as otherwise provided in the Award Agreement). An approved leave of
absence will include sick leave, maternity or paternity leave, military leave, or any other
authorized personal leave as determined by the Administrator. For purposes of incentive stock
options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract.



“Covered Employee” means a covered employee as defined in Section 162(m)(3) of the Code, provided
that no employee will be a Covered Employee until the deduction limitations of Section 162(m) of
the Code are applicable to the Company and any reliance period under Treasury Regulation Section
1.162-27(f) has expired.



“Disability” or “Disabled” means a disability covered under a long-term disability plan of the
Company applicable to a Participant. The Committee may require such medical or other evidence as
it deems necessary to judge the nature and permanency of the Participant’s condition.
Notwithstanding the above, (i) with respect to an Incentive Stock Option, “Disability” or
“Disabled” will mean permanent and total disability as defined in Section 22(e)(3) of the Code and
(ii) to the extent an Option is subject to Section 409A of the Code, and payment or settlement of
the Option is to be accelerated solely as a result of the Eligible Participant’s Disability,
Disability will have the meaning ascribed thereto under Section 409A of the Code and the Treasury
guidance promulgated thereunder.



“Effective Date” has the meaning set forth in Section 2.



“Eligible Person” means any director, officer or employee of the Company or other person who, in
the opinion of the Committee, is rendering valuable services to the Company, including without
limitation, an independent contractor, outside consultant, or advisor to the Company.



“Employee” means any and all employees of the Company or a Subsidiary.



“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time and any
successor statute.



“Exercise Agreement” has the meaning set forth in Section 6.2.4.



“Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable
upon exercise of the Option.



“Fair Market Value” means the fair market value of the Stock at the date of grant as determined in
good faith by the Administrator. By way of illustration, but not limitation, for this purpose,
good faith will be met if the Administrator employs the following methods:




     (i) Listed Stock. If the Stock is traded on any established stock exchange or quoted
on a national market system, fair market value will be the closing sales price for the Stock as
quoted on that stock exchange or system for the date the value is to be determined (the “Value
Date”). If no sales are reported as having occurred on the Value Date, fair market value will be
that closing sales price for the last preceding trading day on which sales of Stock is reported as
having occurred. If no sales are reported as having occurred during the five (5) trading days
before the Value Date, fair market value will be the closing bid for Stock on the Value Date. If



 









 







Stock is listed on multiple exchanges or systems, fair market value will be based on sales or bids
on the primary exchange or system on which Stock is traded or quoted.



     (ii) Stock Quoted by Securities Dealer. If Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported on any established stock exchange or quoted
on a national market system, fair market value will be the mean between the high bid and low asked
prices on the Value Date. If no prices are quoted for the Value Date, fair market value will be
the mean between the high bid and low asked prices on the last preceding trading day on which any
bid and asked prices were quoted.



     (iii) No Established Market. If Stock is not traded on any established stock exchange
or quoted on a national market system and are not quoted by a recognized securities dealer, the
Administrator will determine fair market value in good faith. The Administrator will consider the
following factors, and any others it considers significant, in determining fair market value: (X)
the price at which other securities of the Company have been issued to purchasers other than
employees, directors, or consultants, (Y) the Company’s net worth, prospective earning power,
dividend-paying capacity, and non-operating assets, if any, and (Z) any other relevant factors,
including the economic outlook for the Company and the Company’s industry, the Company’s position
in that industry, the Company’s goodwill and other intellectual property, and the values of
securities of other businesses in the same industry.



     (iv) Additional Valuation. Methods for Publicly Traded Companies. Any valuation
method permitted under Section 20.2031-2 of the Estate Tax Regulations.



     (v) Non-Publicly Traded Stock. For non-publicly traded stock, the fair market value
of the Stock at the Grant Date based on an average of the fair market values as of such date set
forth in the opinions of completely independent and well-qualified experts (the Participant’s
status as a majority or minority shareholder may be taken into consideration).



     Regardless of whether the Stock offered under the Award is publicly traded, a good faith
attempt for this purpose will not be met unless the fair market value of the Stock on the Grant
Date is determined with regard to nonlapse restrictions (as defined in Section 1.83-3(h) of the
Treasury Regulations) and without regard to lapse restrictions (as defined in Section 1.83-3(i) of
the Treasury Regulations).


“Incentive Stock Option” means an Option within the meaning of Section 422 of the Code.



“Issue Date” will mean the date established by the Administrator on which Certificates representing
shares of Restricted Stock will be issued by the Company pursuant to the terms of this Plan.



“Named Executive Officer” means, if applicable, a Participant who, as of the date of vesting and/or
payout of an Award is one of the group of “covered employees,” as defined in the regulations
promulgated under Section 162(m) of the Code, or any successor statute.



“Non-Qualified Stock Option” means an Option which is not an Incentive Stock Option.



“Officer” means an officer of the Company and an officer who is subject to Section 16 of the
Exchange Act.



“Option” means an award of an option to purchase Shares pursuant to Section 6.

 









 








“Optionee” means the holder of an Option.



“Participant” means a person who receives an Award under this Plan.



“Plan” means this Golden Phoenix Minerals, Inc. 2007 Equity Incentive Plan, as amended from time to
time.



“Restricted Stock Award” means an award of Shares pursuant to Section 7.



“Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Exchange Act, as amended from time to
time, and any successor rule.



“SAR” means a stock appreciation right entitling the Participant Shares or cash compensation, as
established by the Administrator, measured by appreciation in the value of shares of Stock of the
Company as provided for in Section 9.



“SEC” means the Securities and Exchange Commission.



“Securities Act” means the Securities Act of 1933, as amended from time to time.



“Shares” means shares of the Company’s Stock reserved for issuance under this Plan, as adjusted
pursuant to this Plan, and any successor security.



“Stock” means the Common Stock, $.001 par value, of the Company, and any successor entity.



“Stock Award” means an Award of Restricted Stock or Unrestricted Stock.



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



“Ten Percent Shareholder” has the meaning set forth in Section 6.2.2.



“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that
the Participant has for any reason ceased to provide services as an employee, officer, director,
consultant, independent contractor or advisor of the Company. An employee will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any
other leave of absence approved by the Administrator; provided, that such leave is for a period of
not exceeding three (3) months, or if longer, so long as reemployment with the Company granting the
option or the corporation assuming or substituting an option under Section 1.424-1(a) upon the
expiration of such leave is guaranteed by contract or statute.



“Unrestricted Stock Award” means an award of Shares pursuant to Section 8.



“Vesting Date” will mean the date established by the Administrator on which a Share of
Restricted Stock may vest.