EXHIBIT 10.42


 


TRI-S SECURITY CORPORATION


2004 STOCK INCENTIVE PLAN


 


1.                                        PURPOSE OF PLAN


 


The purpose of the
Tri-S Security Corporation 2004 Stock Incentive Plan (the “Plan”) is to advance
the interests of Tri-S Security Corporation (the “Company”) and its shareholders
by enabling the Company and its Subsidiaries to attract and retain persons of
ability to perform services for the Company and its Subsidiaries by providing
an incentive to such individuals through equity participation in the Company
and by rewarding such individuals who contribute to the achievement by the
Company of its economic objectives.


 


2.                                        DEFINITIONS


 


The following terms
will have the meanings set forth below, unless the context clearly otherwise
requires:


 


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


 


2.2                                   “Broker
Exercise Notice” means a written notice pursuant to which a
Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.


 


2.3                                   “Change in
Control” means an event described in Section 11.1 of the Plan.


 


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


 


2.5                                   “Committee”
means the group of individuals administering the Plan, as provided in
Section 3 of the Plan.


 


2.6                                   “Common
Stock” means the common stock of the Company, $.001 par value per
share, or the number and kind of shares of stock or other securities into which
such Common Stock may be changed in accordance with Section 4.5 of the
Plan.


 


2.7                                   “Company”
means Tri-S Security Corporation, a Georgia corporation.


 


2.8                                   “Disability”
means, except with respect to Incentive Stock Options, the disability of the
Participant such as would entitle the Participant to receive disability income
benefits pursuant to the long-term disability plan of the Company or Subsidiary
then covering the Participant or, if no such plan exists or is applicable to
the Participant, the permanent and total disability of the Participant within
the meaning of Section 22(e)(3) of the Code.  In the context of the period of exercisability
of an Incentive Stock Option after termination of employment as


 
















 


addressed in
Section 9.1(a) of the Plan, “Disability” shall in all events mean the
permanent and total disability of the Participant within the meaning of
Section 22(e) of the Code.


 


2.9                                   “Eligible
Recipients” means all employees of the Company or any Subsidiary and
any non-employee directors, consultants and independent contractors of the
Company or any Subsidiary.  An Incentive
Award may be granted to an employee, in connection with hiring, retention or
otherwise, prior to the date the employee first performs services for the
Company or the Subsidiaries, provided that such Incentive Award shall not
become vested prior to the date the employee first performs such services.


 


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


 


2.11                             “Fair Market
Value” means, with respect to the Common Stock, as of any date (or,
if no shares were traded or quoted on such date, as of the next preceding date
on which there was such a trade or quote) (a) the mean between the reported
high and low sale prices of the Common Stock if the Common Stock is listed,
admitted to unlisted trading privileges or reported on any national securities
exchange or on the Nasdaq National Market; (b) if the Common Stock is not so
listed, admitted to unlisted trading privileges or reported on any national
securities exchange or on the Nasdaq National Market, the closing bid price as
reported by the Nasdaq SmallCap Market, OTC Bulletin Board or the National
Quotation Bureau, Inc. or other comparable service; or (c) if the Common Stock
is not so listed or reported, such price as the Committee determines in good
faith in the exercise of its reasonable discretion.  If determined by the Committee, such
determination will be final, conclusive and binding for all purposes and on all
persons, including, without limitation, the Company, the shareholders of the
Company, the Participants and their respective successors-in-interest.  No member of the Committee will be liable for
any determination regarding the fair market value of the Common Stock that is
made in good faith.


 


2.12                             “Incentive
Award” means an Option, Restricted Stock Award or Stock Bonus
granted to an Eligible Recipient pursuant to the Plan.


 


2.13                             “Incentive
Stock Option” means a right to purchase Common Stock granted to an
Eligible Recipient (who must be an employee of the Company or any Subsidiary)
pursuant to Section 6 of the Plan that qualifies as an “incentive stock
option” within the meaning of Section 422 of the Code.


 


2.14                             “Non-Statutory
Stock Option” means a right to purchase Common Stock granted to an
Eligible Recipient pursuant to Section 6 of the Plan that does not qualify
as an Incentive Stock Option.


 


2.15                             “Option”
means an Incentive Stock Option or a Non-Statutory Stock Option.


 


2.16                             “Participant”
means an Eligible Recipient who receives one or more Incentive Awards under the
Plan.


 


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2.17                             “Previously
Acquired Shares” means shares of Common Stock that are already owned
by the Participant or, with respect to any Incentive Award, that are to be
issued upon the grant, exercise or vesting of such Incentive Award.


 


2.18                             “Restricted
Stock Award” means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 7 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 7.


 


2.19                             “Retirement”
means termination of employment or service pursuant to and in accordance with
the regular (or, if approved by the Board for purposes of the Plan, early)
retirement/pension plan or practice of the Company or Subsidiary then covering
the Participant, provided that if the Participant is not covered by any such
plan or practice, the Participant will be deemed to be covered by the Company’s
plan or practice for purposes of this determination.


 


2.20                             “Securities
Act” means the Securities Act of 1933, as amended.


 


2.21                             “Stock Bonus”
means an award of Common Stock granted to an Eligible Recipient pursuant to
Section 8 of the Plan.


 


2.22                             “Subsidiary”
means any entity that is directly or indirectly controlled by the Company or
any entity in which the Company has a significant equity interest, as
determined by the Committee; provided, however, that in the context of
eligibility to receive Incentive Stock Options, as well as the effects of
termination of employment  with respect
thereto as addressed in Section 9 hereof, “Subsidiary” shall have the
meaning ascribed to “subsidiary corporation” by Section 424(f) of the
Code.


 


3.                                        PLAN ADMINISTRATION


 


3.1                                   The Committee.  The
Plan will be administered by the Board or by a committee of the Board. So long
as the Company has a class of its equity securities registered under
Section 12 of the Exchange Act, any committee administering the Plan will
consist solely of two or more members of the Board who are “non-employee
directors” within the meaning of Rule 16b-3 under the Exchange Act and, if the
Board so determines in its sole discretion, who are “outside directors” within
the meaning of Section 162(m) of the Code. Such a committee, if
established, will act by majority approval of the members (including written
consent of a majority of the members), and a majority of the members of such a
committee will constitute a quorum.  As
used in the Plan, “Committee” will refer to the Board or to such a committee,
if established.  To the extent consistent
with corporate law, the Committee may delegate to any officers of the Company
the duties, power and authority of the Committee under the Plan pursuant to
such conditions or limitations as the Committee may establish; provided,
however, that only the Committee may exercise such duties, power and authority
with respect to Eligible Recipients who are subject to Section 16 of the
Exchange Act.


 


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The Committee may exercise
its duties, power and authority under the Plan in its sole and absolute
discretion without the consent of any Participant or other party, unless the
Plan specifically provides otherwise. 
Each determination, interpretation or other action made or taken by the
Committee pursuant to the provisions of the Plan will be conclusive and binding
for all purposes and on all persons, and no member of the Committee will be
liable for any action or determination made in good faith with respect to the
Plan or any Incentive Award granted under the Plan.


 


3.2                                   Authority of the Committee.


 


(a)                                    In accordance with and subject to the
provisions of the Plan, the Committee will have the authority to determine all
provisions of Incentive Awards as the Committee may deem necessary or desirable
and as consistent with the terms of the Plan, including, without limitation,
the following: (i) the Eligible Recipients to be selected as Participants; (ii)
the nature and extent of the Incentive Awards to be made to each Participant
including the number of shares of Common Stock to be subject to each Incentive
Award, any exercise price, the manner in which Incentive Awards will vest or
become exercisable and whether Incentive Awards will be granted in tandem with
other Incentive Awards) and the form of written agreement, if any, evidencing
such Incentive Award; (iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award; and (v) the restrictions
and other conditions to which the payment or vesting of Incentive Awards may be
subject.  In addition, the Committee will
have the authority under the Plan in its sole discretion to pay the economic
value of any Incentive Award in the form of cash, Common Stock or any
combination of both.


 


(b)                                   The Committee will have the authority under
the Plan to amend or modify the terms of any outstanding Incentive Award in any
manner, including, without limitation, the authority to modify the number of
shares or other terms and conditions of an Incentive Award, extend the term of
an Incentive Award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive Award, accept the surrender
of any outstanding Incentive Award or, to the extent not previously exercised
or vested, authorize the grant of new Incentive Awards in substitution for
surrendered Incentive Awards; provided, however that the amended or modified
terms are permitted by the Plan as then in effect and that any Participant
adversely affected by such amended or modified terms has consented to such
amendment or modification. No amendment or modification to an Incentive Award,
however, whether pursuant to this Section 3.2 or any other provisions of
the Plan, will be deemed to be a regrant of such Incentive Award for purposes
of this Plan.


 


(c)                                    In the event of (i) any reorganization,
merger, consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering, extraordinary
dividend or divestiture (including a spin-off) or any other change in corporate
structure or shares, (ii) any purchase, acquisition, sale or disposition of a
significant amount of assets or a significant business, (iii) any


 


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change in accounting
principles or practices, or (iv) any other similar change, in each case with
respect to the Company or any other entity whose performance is relevant to the
grant or vesting of an Incentive Award, the Committee (or, if the Company is
not the surviving corporation in any such transaction, the board of directors
of the surviving corporation) may, without the consent of any affected
Participant, amend or modify the vesting criteria of any outstanding Incentive
Award that is based in whole or in part on the financial performance of the
Company (or any Subsidiary or division thereof) or such other entity so as
equitably to reflect such event, with the desired result that the criteria for
evaluating such financial performance of the Company or such other entity will
be substantially the same (in the sole discretion of the Committee or the board
of directors of the surviving corporation) following such event as prior to
such event; provided, that the amended or modified terms are permitted by the
Plan as then in effect.


 


4.                                        SHARES AVAILABLE FOR ISSUANCE


 


4.1                                   Maximum Number of Shares
Available.  Subject to adjustment as provided in
Section 4.5 of the Plan, the maximum number of shares of Common Stock that
will be available for issuance under the Plan will be 500,000 shares of Common
Stock.


 


4.2                                   Accounting for Incentive
Awards. Shares of Common
Stock that are issued under the Plan or that are subject to outstanding
Incentive Awards will be applied to reduce the maximum number of shares of
Common Stock remaining available for issuance under the Plan.  Any shares of Common Stock that are subject
to an Incentive Award that lapses, expires, is forfeited or for any reason is
terminated unexercised or unvested and any shares of Common Stock that are
subject to an Incentive Award that is settled or paid in cash or any form other
than shares of Common Stock, or used to satisfy the applicable tax withholding
obligation will automatically again become available for issuance under the
Plan. Any shares of Common Stock that constitute the forfeited portion of a
Restricted Stock Award, however, will not become available for further issuance
under the Plan.


 


4.3                                   General Restrictions. 
Delivery of shares of Common Stock or other amounts under the Plan shall
be subject to the following:


 


(a)                                    Notwithstanding any other provision of the
Plan, the Company shall have no liability to deliver any shares of Common Stock
under the Plan or make any other distribution of benefits under the Plan unless
such delivery or distribution would comply with all applicable laws (including,
without limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.


 


(b)                                   To the extent that the Plan provides for
issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be reflected on a non-


 


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certificated basis, to the
extent not prohibited by applicable law or the applicable rules of any
securities exchange or similar entity.


 


4.4                                   Shares of Common Stock Issued
Pursuant to Incentive Stock Options.  Subject to Sections 4.1 and
4.5, the maximum number of shares of Common Stock that may be issued under
Options intended to be Incentive Stock Options pursuant to the Plan shall be
500,000.


 


4.5                                   Adjustments to Shares and
Incentive Awards.  In the event of any reorganization, merger,
consolidation, recapitalization, reclassification, stock dividend, stock split,
of shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other change in the corporate structure or shares of the Company,
the Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) will make
appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities or other property (including cash) available for
issuance or payment under the Plan and, in order to prevent dilution or
enlargement of the rights of Participants, (a) the number and kind of
securities or other property (including cash) to outstanding Options, and (b)
the exercise price of outstanding Options.


 


5.                                        PARTICIPATION


 


Participants in the
Plan will be those Eligible Recipients who, in the judgment of the Committee,
have contributed, are contributing or are expected to contribute to the achievement
of economic objectives of the Company or its Subsidiaries.  Eligible Recipients may be granted from time
to time one or more Incentive Awards, singly or in combination or in tandem
with other Incentive Awards, as may be determined by the Committee in its sole
discretion.  Incentive Awards will be
deemed to be granted as of the date specified in the grant resolution of the
Committee, which date will be the date of any related agreement with the
Participant.


 


6.                                        OPTIONS


 


6.1                                   Grant.  An
Eligible Recipient may be granted one or more Options under the Plan, and such
Options will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its sole
discretion.  The Committee may designate
whether an Option is to be considered an Incentive Stock Option (if the Option
so qualifies) or a Non-Statutory Stock Option. 
To the extent that any Incentive Stock Option granted under the Plan
ceases for any reason to qualify as an “incentive stock option” for purposes of
Section 422 of the Code, such Incentive Stock Option will continue to be
outstanding for purposes of the Plan but will thereafter be deemed to be a
Non-Statutory Stock Option.


 


6.2                                   Exercise Price.  The
per-share price to be paid by a Participant upon exercise of an Option will be
determined by the Committee in its discretion at the time of the Option grant,
provided that price will not be less than 100% of the Fair Market


 


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Value of one share of Common
Stock on the date of grant with respect to an Incentive Stock Option; provided,
however, that such price will not be less than 110% of the Fair Market Value
if, at the time the Incentive Stock Option is granted, the Participant owns, directly
or indirectly (as determined pursuant to Section 424(d) of the Code), more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary or parent corporation of the Company (within the
meaning of Sections 424(f) and 424(e), respectively, of the Code).


 


6.3                                   Exercisability and Duration.  An
Option will become exercisable at such times and in such installments as may be
determined by the Committee in its sole discretion at the time of grant;
provided, however, that no Option may be exercisable after 10 years from its
date of grant or, in the case of an Eligible Participant (other than in the
case of any Non-Statutory Stock Option that may be issued to  Ronald G. Farrell) who owns, directly or
indirectly (as determined pursuant to Section 424(d) of the Code), more
than 10% of the combined voting power of all classes of stock of the Company or
any subsidiary or parent corporation of the Company (within the meaning of
Sections 424(f) and 424(e), respectively, of the Code), five years from its
date of grant. Notwithstanding the foregoing, each Option granted to a
participant shall vest at a rate of at least 20% per year over 5 years from the
date the Option is granted.


 


6.4                                   Payment of Exercise Price.  The
total purchase price of the shares to be purchased upon exercise of an Option
will be paid entirely in cash (including check, bank draft or money order);
provided, however, that the Committee, in its sole discretion and upon terms
and conditions established by the Committee, may allow such payments to be
made, in whole or in part, by tender of a Broker Exercise Notice, Previously
Acquired Shares, a promissory note (on terms acceptable to the Committee in its
sole discretion) or a combination of such items with or without some cash.


 


6.5                                   Manner of Exercise.  An
Option may be exercised by a Participant in whole or in part from time to time,
subject to the conditions contained in the Plan and in the agreement evidencing
such Option, by delivery in person, by facsimile or electronic transmission or
through the mail of written notice of exercise to the Company (Attention: Chief
Financial Officer) at its office at 3700 Mansell Road, Suite 220, Alpharetta,
Georgia 30022 (or such other office as the Company may designate), and by paying
in full the total exercise price for the shares of Common Stock to be purchased
in accordance with Section 6.4 of the Plan.


 


6.6                                   Aggregate
Limitation of Common Stock Subject to Incentive Stock Options.  To the extent that the aggregate Fair Market
Value (determined as of the date an Incentive Stock Option is granted) of the
shares of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by a Participant during any calendar year (under
the Plan and any other incentive stock option plans of the Company, any
subsidiary or parent corporation of the Company (within the meaning of Sections
424(f) and 424(e), respectively, of the


 


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Code) exceeds $100,000 (or
such other amount as may be prescribed by the Code from time to time), such
excess Options shall constitute Non-Statutory Stock Options.  The determination shall be made by taking
Incentive Stock Options into account in the order in which they were
granted.  If such excess only applies to
a portion of an Incentive Stock Option, the Committee, in its discretion, may
designate which shares shall be treated as shares to be acquired upon exercise
of an Incentive Stock Option.


 


6.7                                   Options to Purchase Stock of
Acquired Companies.  After any reorganization, merger or
consolidation involving the Company or a subsidiary of the Company, the
Committee may grant Options in substitution of options issued under a plan of
another party to the reorganization, merger or consolidation, where such
party’s stock may no longer be outstanding following such transaction pursuant
to Section 424(a) of the Code, the Committee shall have sole discretion to
determine all terms and conditions of Options issued under this
Section 6.7, including, but not limited to, exercise price and expiration
date.


 


7.                                        RESTRICTED STOCK AWARDS


 


7.1                                   Grant.  An
Eligible Recipient may be granted one or more Restricted Stock Awards under the
Plan, and such Restricted Stock Awards will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion.  The Committee may impose such restrictions or
conditions, not inconsistent with the provisions of the Plan, to the vesting of
such Restricted Stock Awards as it deems appropriate, including, without
limitation, that the Participant remain in the continuous employ or service of
the Company or a Subsidiary for a certain period or that the Participant or the
Company (or any Subsidiary or division thereof) satisfy certain performance
goals or criteria.


 


7.2                                   Rights as a Shareholder;
Transferability.  Except as provided in Sections 7.1, 7.3 and
12.3 of the Plan, a Participant will have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock issued to the Participant
as a Restricted Stock Award under this Section 7 upon the Participant
becoming the holder of record of such shares as if such Participant were a
holder of record of shares of unrestricted Common Stock.


 


7.3                                   Dividends and Distributions. 
Unless the Committee determines otherwise in its sole discretion (either
in the agreement evidencing the Restricted Stock Award at the time of grant or
at any time after the grant of the Restricted Stock Award), any dividends or
distributions (including regular quarterly cash dividends) paid with respect to
shares of Common Stock subject to the unvested portion of a Restricted Stock
Award will be subject to the same restrictions as the shares to which such
dividends or distributions relate. In the event the Committee determines not to
pay such dividends or distributions currently, the Committee will determine in
its sole discretion whether any interest will be paid on such dividends or
distributions. In addition, the Committee in its sole discretion may


 


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require such dividends and
distributions to be reinvested (and in such case the Participants consent to
such reinvestment) in shares of Common Stock that will be subject to the same
restrictions as the shares to which such dividends or distributions relate.


 


7.4                                   Enforcement of Restrictions.  To
enforce the restrictions referred to in this Section 7, the Committee may
place a legend on the stock certificates referring to such restrictions and may
require the Participant, until the restrictions have lapsed, to keep the stock
certificates, together with duly endorsed stock powers, in the custody of the
Company or its transfer agent or to maintain evidence of stock ownership, together
with duly endorsed stock powers, in a certificateless book-entry stock account
with the Company’s transfer agent.


 


8.                                        STOCK BONUSES


 


An Eligible Recipient
may be granted one or more Stock Bonuses under the Plan, and such Stock Bonuses
will be subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee. The Participant
will have all voting, dividend, liquidation and other rights with respect to
the shares of Common Stock issued to a Participant as a Stock Bonus under this
Section 10 upon the Participant becoming the holder of record of such
shares; provided, however, that the Committee may impose such restrictions on
the assignment or transfer of a Stock Bonus as it deems appropriate.


 


9.                                        EFFECT OF TERMINATION OF
EMPLOYMENT OR OTHER SERVICE


 


9.1                                   Termination Due to Death,
Disability or Retirement.  In the event a Participant’s employment or
other service with the Company and all Subsidiaries is terminated by reason of
death, Disability or (except in the case of Incentive Stock Options)
Retirement:


 


(a)                                    all outstanding Options then held by the
Participant will become immediately exercisable in full and will remain
exercisable for a period of one year after such termination (but in no event
after the expiration date of any such Option);


 


(b)                                   all Restricted Stock Awards then held by the
Participant will become fully vested; and


 


(c)                                    all Stock Bonuses then held by the Participant
will vest and/or continue to vest in the manner determined by the Committee and
set forth in the agreement evidencing such Stock Bonuses.


 


9.2                                   Termination for Reasons Other
Than Death, Disability or Retirement.


 


(a)                                    Subject to the second sentence of this
Section 9.2(a), in the event a Participant’s employment or other service
is terminated with the Company and all Subsidiaries for any reason other than
death, Disability or Retirement (but including Retirement in the case of
Incentive Stock Options), or a Participant is in the employ or service of a
Subsidiary and the Subsidiary ceases to be a Subsidiary of


 


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the Company
(unless the Participant continues in the employ or service of the Company or
another Subsidiary), (i) all outstanding Options then held by the Participant
will remain exercisable to the extent exercisable as of such termination until
the earlier of three months after such termination or the expiration date of
any such Option, unless termination is for cause, in which case all Options
will remain exercisable as of such termination for a period of one month after
such termination (but in no event after the expiration of any such Option); (
ii ) all Restricted Stock Awards then held by the Participant that have not
vested will be terminated and forfeited; and ( iii) all Stock Bonuses then held
by the Participant will vest and/or continue to vest in the manner determined
by the committee and set forth in the agreement evidencing such Stock Bonuses.


 


(b)                                   For purposes of this Section 9.2, “cause”
(as determined by the Committee) will be as defined in any employment or other
agreement or policy applicable to the Participant or, if no such agreement or
policy exists, will mean (i) fraud, misrepresentation, embezzlement or
deliberate injury or attempted injury, in each case related to the Company or
any Subsidiary, (ii) any unlawful or criminal activity of a serious nature,
(iii) any intentional and deliberate breach of a duty or duties that,
individually or in the aggregate, are material in relation to the Participant’s
overall duties, or (iv) any material breach of any employment, service, or
noncompete agreement entered into with the Company or any Subsidiary.


 


9.3                                   Modification of Rights Upon
Termination. Notwithstanding
the other provisions of this Section 9, upon a Participant’s termination
of employment or other service with the Company and all Subsidiaries, the
Committee may, in its sole discretion (which may be exercised at any time on or
after the date of grant, including following such termination), cause Options (or
any part thereof) then held by such Participant to become or continue to become
exercisable and/or remain exercisable following such termination of employment
or service and Restricted Stock Awards and Stock Bonuses then held by such
Participant to vest and/or continue to vest or become free of transfer
restrictions, as the case may be, such termination of employment or service, in
each case in the manner determined by the Committee; provided, however, no
Option may remain exercisable beyond its expiration date.


 


9.4                                   Breach of Confidentiality or
Noncompete Agreements.  Notwithstanding anything in the Plan to the
contrary, in the event that a Participant materially breaches the terms of any
confidentiality or noncompete agreement entered into with the Company or any
Subsidiary, such breach occurs before or after 
termination of such Participant’s employment or other service with the
Company or any Subsidiary, the Committee in its sole discretion may immediately
terminate all rights of the Participant under the Plan and any agreements
evidencing an Incentive Award then held by the Participant without notice of
any kind.


 


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9.5                                   Date of Termination of
Employment or Other Service.  Unless the Committee otherwise determines in
its sole discretion, a Participant’s employment or other service will, for
purposes of the Plan, be deemed to have terminated on the date recorded on the
personnel or other records of the Company or the Subsidiary for which the
Participant provides employment or other service, determined by the Committee
in its sole discretion based upon such records.


 


10.                                 PAYMENT OF WITHHOLDING TAXES


 


10.1                             General Rules.  The
Company is entitled to (a) withhold and deduct from future wages of the
Participant (or from other amounts that may be due and owing to the Participant
from the Company or a Subsidiary), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy any and all
federal, state and local withholding and employment-related tax requirements
attributable to an Incentive Award, including, without limitation, the grant,
exercise or vesting of, or payment of dividends with respect to, an Incentive
Award or a disqualifying disposition of stock received upon exercise of an
Incentive Stock Option, or (b) require the Participant promptly to remit the
amount of such withholding to the Company before taking any action, including
issuing any shares of Common Stock, with respect to an Incentive Award.


 


10.2                             Special Rules.  The
Committee may, in its sole discretion and upon terms and conditions established
by the Committee, permit or require a Participant to satisfy, in whole or in
part, any withholding or employment-related tax obligation described in
Section 10.1 of the Plan by electing to tender Previously Acquired Shares,
a Broker Exercise Notice or a promissory note (on terms acceptable to the
Committee in its sole discretion), or by a combination of such methods.


 


11.                                 CHANGE IN CONTROL


 


11.1                             Change in Control.  For purposes
of this Section 11, a “Change in Control” of the Company will mean the
following:


 


(a)                                    the sale, lease, exchange or other transfer,
directly or indirectly, of substantially all of the assets of the Company (in
one transaction or in a series of related transactions) to a person or entity
that is not controlled by the Company;


 


(b)                                   the approval by the shareholders of the
Company of any plan or proposal for the liquidation or dissolution of the
Company;


 


(c)                                    any person (other than Ronald G. Farrell or
any of his Affiliates (as that term is defined in Rule 144(a)(1) under the
Securities Act)) becomes after the effective date of the Plan the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of (i) 20% or more, but less than 50%, of the combined voting power
of the Company’s outstanding securities ordinarily having the right to vote at
elections of directors, unless the transaction resulting in such ownership has
been approved in advance by the Incumbent Directors (as


 


11
















 


defined in Section 11.23
below), or (ii) 50% or more of the combined voting power of the Company’s
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent Directors);


 


(d)                                   a merger or consolidation to which the Company
is a party if the shareholders of the Company immediately prior to effective
date of such merger or consolidation have “beneficial ownership” (as defined in
Rule 13d-3 under the Exchange Act), immediately following the effective date of
such merger or consolidation, of securities of the surviving corporation
representing (i) more than 50%, but less than 80%, of the combined voting power
of the surviving corporation’s then outstanding securities ordinarily having
the right to vote at elections of directors, unless such merger or
consolidation has been approved in advance by the Incumbent Directors, or (ii)
50% or less of the combined voting power of the surviving corporation’s then
outstanding securities ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent Directors);


 


(e)                                    the Incumbent Directors cease for any reason
to constitute at least a majority of the Board; or


 


(f)                                      any other change in control of the Company of
a nature that would be required to be reported pursuant to Section 13 or
15(d) of the Exchange Act, whether or not the Company is then subject to such
reporting requirements.


 


11.2                             Incumbent Directors.  For
purposes of this Section 11, “Incumbent Directors” of the Company will
mean any individuals who are members of the Board on the effective date of the
Plan and any individual who subsequently becomes a member of the Board whose
election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the Incumbent Directors (either by
specific vote or by approval of the Company’s proxy statement in which such
individual is named as a nominee for director without objection to such
nomination).


 


11.3                             Acceleration of Vesting. 
Without limiting the authority of the Committee under Sections 3.2 and
4.5 of the Plan, if a Change in Control of the Company occurs, then, unless
otherwise provided by the Committee in its sole discretion either in the
agreement evidencing an Incentive Award at the time of grant or at any time
after the grant of an Incentive Award, (a) all outstanding Options will become
immediately exercisable in full and will remain exercisable for the remainder
of their terms, regardless of whether the Participant to whom such Options have
been granted remains in the employ or service of the Company or any Subsidiary;
(b) all outstanding Restricted Stock Awards will become immediately fully
vested and non-forfeitable; and (c) all outstanding Stock Bonuses then held by
the Participant will vest and/or continue to vest in the manner determined by
the Committee and set forth in the agreement evidencing such Stock Bonuses.


 


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11.4                             Cash Payment for Options.  If a
Change in Control of the Company occurs, then the Committee, if approved by the
Committee in its sole discretion either in an agreement evidencing an Incentive
Award at the time of grant or at any time after the grant of an Incentive
Award, and without the consent of any Participant effected thereby, may
determine that some or all Participants holding outstanding Options will
receive, with respect to some or all of the shares of Common Stock subject to such
Options, as of the effective date of any such Change in Control of the Company,
cash in an amount equal to the excess of the Fair Market Value of such shares
immediately prior to the effective date of such Change in Control of the
Company over the exercise price per share of such Options.


 


11.5                             Limitation on Change in
Control Payments.  Notwithstanding anything in Section 11.3
or 11.4 of the Plan to the contrary, if, respect to a Participant, the
acceleration of the vesting of an Incentive Award as provided in
Section 11.3 or the payment of cash in exchange for all or part of an
Incentive Award as provided in Section 11.4 (which acceleration or payment
could be deemed a “payment” within the meaning of Section 280G(b)(2) of
the Code), together with one another and any other “payments” which such
Participant has the right to receive from the Company or any corporation that
is a member of an “affiliated group” (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) the Code) of which the Company is a
member, would constitute a “parachute payment” (as defined in
Section 280G(b)(2) of the Code), then the “payments” to such Participant
pursuant to Section 11.3 or 11.4 of the Plan will be reduced to the
largest amount as will result in no portion of such “payments” being subject to
the excise tax imposed by Section 4999 of the Code; provided, however,
that if a Participant is subject to a separate agreement with the Company or a
Subsidiary that expressly addresses the potential application of Sections 280G
or 4999 of the Code (including, without limitation, that “payments” under such
agreement or otherwise will be reduced, that such “payments” not be reduced or
that the Participant will have the discretion to determine which “payments”
will be reduced), then this Section 11.5 will not apply, and any
“payments” to a Participant pursuant to Section 11.3 or 11.4 of the Plan
will be treated as “payments” arising under such separate agreement.


 


12.                                 RIGHTS OF ELIGIBLE RECIPIENTS
AND PARTICIPANTS; TRANSFERABILITY.


 


12.1                             Employment or Service. 
Nothing in the Plan will interfere with or limit in any way the right of
the Company or any Subsidiary to terminate the employment or service of any
Eligible Recipient or Participant at any time, nor confer upon any Eligible
Recipient or Participant any right to continue in the employ or service of the
Company or any Subsidiary.


 


12.2                             Rights as a Shareholder.  As a
holder of Incentive Awards (other than Restricted Stock Awards and Stock
Bonuses), a Participant will have no rights as a shareholder unless and until
such Incentive Awards are exercised for, or paid in the form of, of Common
Stock and the Participant becomes the holder of record


 


13
















 


of such shares. Except as
otherwise provided in the Plan, adjustment will be made for dividends or
distributions with respect to such Incentive Awards as to which there is a
record date preceding the date the Participant becomes the holder of record of
such shares, except as the Committee may determine in its discretion.


 


12.3                             Restrictions on Transfer. Except as otherwise provided in this
Section 12.3, a Participant’s rights and interest under the Plan may not
be assigned or transferred other than by will or the laws of descent and
distribution, or (except with respect to Incentive Stock Options) pursuant to
the terms of a domestic relations order, as defined in
Section 414(p)(1)(B) of the Code, which satisfies the requirements of
Section 414(p)(1)(A) of the Code (a “Qualified Domestic Relations
Order”).  During the lifetime of a
Participant, only the Participant personally (or the Participant’s personal
representative or attorney-in-fact) or the alternate payee named in a Qualified
Domestic Relations Order may exercise the Participant’s rights under the
Plan.  The Participant’s beneficiary may
exercise a Participant’s rights to the extent they are exercisable under the
Plan following the death of the Participant. 
Notwithstanding the foregoing, or any other provision of this Plan, a
Participant who holds Non-Qualified Stock Options may transfer such Options to
his or her spouse, ascendants, lineal descendants, or to a duly established
trust for the benefit of one or more of these individuals. Options so
transferred may thereafter be transferred only back to the Participant who
originally received the Options or to an individual or trust to whom the
Participant could have initially transferred the Option pursuant to this
Section 12.3.  Options which are
transferred pursuant to this Section 12.3 shall be exercisable by the
transferee according to the same terms and conditions as applied to the
Participant.


 


12.4                             Non-Exclusivity of the Plan. 
Nothing contained in the Plan is intended to modify or rescind any
previously approved compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt such additional or
other compensation arrangements as the Board may deem necessary or desirable.


 


13.                                 SECURITIES LAW AND OTHER
RESTRICTIONS


 


Notwithstanding any
other provision of the Plan or any agreements entered into pursuant to the
Plan, the Company will not be required to issue any shares of Common Stock
under this Plan, and a Participant may not sell, assign, transfer or otherwise
dispose of shares of Common Stock issued pursuant to Incentive Awards granted
under the Plan, unless (a) there is in effect with respect to such shares a
registration statement under the Securities Act and any applicable state
securities laws or an exemption from such registration under the Securities Act
and applicable state securities laws, and (b) there has been obtained any other
consent, approval or permit from any other regulatory body which the Committee,
in its sole discretion, deems necessary or advisable. The Company may condition
such issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary or
advisable by the Company in order to comply with such securities law or other
restrictions.


 


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14.                                 PLAN AMENDMENT, MODIFICATION
AND TERMINATION


 


The Board may suspend
or terminate the Plan or any portion thereof at any time, and may amend the
Plan from time to time in such respects as the Board may deem advisable in
order that Incentive Awards under the Plan will conform to any change in
applicable laws or regulations or in any other respect the Board may deem to be
in the best interests of the Company; provided, however, that no amendments to
the Plan will be effective without approval of the shareholders of the Company
if shareholder approval of the amendment is then required pursuant to
Section 422 of the Code or the rules of any stock exchange or quotation
system on which the Common Stock is listed, including, but not limited to the
over-the-counter electronic bulletin board and 
the Nasdaq Stock Market.  No
termination, suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected Participant;
provided, however, that this sentence will not impair the right of the
Committee to take whatever action it deems appropriate under Sections 3.2, 4.5
and 13 of the Plan.


 


15.                                 EFFECTIVE DATE AND DURATION
OF THE PLAN


 


The Plan is effective
as of October 13, 2004, the date it was adopted by the Board and the
shareholders. The Plan will terminate at midnight on October 13, 2014, and
may be terminated prior to such time to by Board action, and no Incentive Award
will be granted after such termination. Incentive Awards outstanding upon
termination of the Plan may continue to be exercised, or become free of
restrictions, in accordance with their terms.


 


16.                                 MISCELLANEOUS


 


16.1                             Governing Law.  The
validity, construction, interpretation, and effect of the Plan and any rules,
regulations and actions relating to the Plan will be governed by and construed
exclusively in accordance with the laws of the State of Georgia, notwithstanding
the conflicts of laws principles of any jurisdictions.


 


16.2                             Successors and Assigns.  The
Plan will be binding upon and inure to the benefit of the successors and
permitted assigns of the Company and the Participants.


 


16.3                             Annual Report.  Each
year the Company will provide a copy of its Annual Report to Shareholders on
Form 10-K or Form 10-KSB, as applicable, to all Participants.


 


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