Document:

Exhibit 10.2

 

Langer, Inc.

 

Form of Amendment To Restricted Stock
Award Agreement

 

Amendment To Restricted Stock Award Agreement,
made as of this           day of December,
2005, by and between Langer, Inc., a Delaware corporation, having its
principal office at 450 Commack Road, Deer Park, New York 11729 (the “Company”),
and                                    (the
“Grantee”).

 

Whereas, the Company
has previously granted to the Grantee a restricted stock award of 40,000 shares
(the “Restricted Shares”) of the Company’s common stock, $0.02 par value (“Common
Stock”) pursuant to the restricted stock award agreement dated as of                             
(the “Restricted Stock Award Agreement”) between the Company and the Grantee, and
of which                        
Restricted Shares remain unvested, all such unvested Restricted Shares referred
to herein as the “Unvested Restricted Shares”);

 

Now, Therefore, the
parties agree as follows:

 

1.                                       The
vesting date of the Unvested Restricted Shares is hereby accelerated to December [      ],
2005.  The Unvested Restricted Shares, as
vested pursuant to the foregoing provision, may sometimes be referred to herein
as the “Locked-up Restricted  Shares.”

 

2.                                       The
Restricted Stock Award Agreement is hereby amended to include the following
provisions:

 

2.1.                              Lock-up
Release Schedule.  Notwithstanding
the vesting of the Locked-up Restricted Shares as hereinabove provided, the Grantee
shall not sell, transfer, exchange, hypothecate, grant a security interest in,
pledge or otherwise dispose of (collectively, “Transfer”), other than by
will or by the laws of descent and distribution, the Locked-up Restricted
Shares at any time, including subsequent to the termination of the Grantee’s
employment with the Company and/or service as a Director of or consultant to
the Company, except in accordance with the following schedule:

 

	
  Lockup
  Release Date

  	
   

  	
  Number of Restricted Shares

  	
   

  	
  Total Restricted Shares

  not Locked Up

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [First
  Lock-up Relase Date]

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Second
  Lock-up Relase Date]

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Notwithstanding the lock-up release schedule set forth above, such
lock-up release schedule may be accelerated by the Compensation Committee or
the Board of Directors in its sole discretion.

 

1

 

2.2                                 Extension
of Lock-up Upon Termination.  (a) 
Upon the Grantee’s voluntary termination of employment with the Company and/or
service as a Director of or consultant to the Company, except as a result of
Grantee’s death or disability, or upon the Grantee’s termination by the Company
for Cause, any of the lock-up release periods set forth in Section 2.1
which, as of the Grantee’s termination of employment with the Company and/or
service as a Director of or consultant to the Company, have not yet expired
shall each be automatically extended an additional five (5) years from the
lock-up release date(s) set forth in Section 2.1.

 

(b)                                 Notwithstanding
any extension of the lock-up release periods pursuant to this Section 2.2,
any such lock-up release extension may be reduced by the Committee in its sole
discretion.

 

2.3                                 Acceleration
of Lock-up Release Upon Change-of-Control Event.  Notwithstanding the lock-up periods set forth
in Sections 2.1 and 2.2 above, Locked-up Restricted Shares shall immediately
become eligible for Transfer upon the occurrence of a “Change-of-Control Event,”
as defined in the Restricted Stock Award Agreement.

 

3.                                       Section 5,
Transferability, of the Restricted Stock Award Agreement is hereby deleted in
its entirety.

 

4.                                       Except
as expressly amended by this Amendment, the Restricted Stock Award Agreement shall
remain in full force and effect.

 

5.                                       This
Amendment shall be governed by and construed in accordance with, and on the
same basis as, the Restricted Stock Award Agreement as set forth therein.

 

6.                                       This
Amendment may be executed in any number of counterparts, but all of which
together will constitute one and the same agreement.

 

[Signature Page Follows:]

 

2

 

In Witness Whereof,
the parties hereto have each executed and delivered this Amendment to Restricted
Stock Award Agreement as of the day and year first above written.

 

	
   

  	
  Langer, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Grantee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:Exhibit 10.1

 

2005

OMNIBUS STOCK AND INCENTIVE PLAN

FOR

THOMAS GROUP, INC.

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Purpose

  	
  1

  
	
  2.

  	
  Definitions

  	
  1

  
	
   

  	
  (a)

  	
  “Administrator

  	
  1

  
	
   

  	
  (b)

  	
  “Agreed Price

  	
  1

  
	
   

  	
  (c)

  	
  “Applicable Laws

  	
  1

  
	
   

  	
  (d)

  	
  “Award

  	
  1

  
	
   

  	
  (e)

  	
  “Board

  	
  1

  
	
   

  	
  (f)

  	
  “Cause

  	
  1

  
	
   

  	
  (g)

  	
  “Change in Control

  	
  1

  
	
   

  	
  (h)

  	
  “Change in Control Price

  	
  2

  
	
   

  	
  (i)

  	
  “Code

  	
  3

  
	
   

  	
  (j)

  	
  “Committee

  	
  3

  
	
   

  	
  (k)

  	
  “Common Stock

  	
  3

  
	
   

  	
  (l)

  	
  “Company

  	
  3

  
	
   

  	
  (m)

  	
  “Consultant

  	
  3

  
	
   

  	
  (n)

  	
  “Date of Grant

  	
  3

  
	
   

  	
  (o)

  	
  “Director

  	
  3

  
	
   

  	
  (p)

  	
  “Disability

  	
  3

  
	
   

  	
  (q)

  	
  “Effective Date

  	
  3

  
	
   

  	
  (r)

  	
  “Eligible Person(s)

  	
  3

  
	
   

  	
  (s)

  	
  “Employee(s)

  	
  3

  
	
   

  	
  (t)

  	
  “Fair Market Value

  	
  3

  
	
   

  	
  (u)

  	
  “Holder

  	
  4

  
	
   

  	
  (v)

  	
  “Incentive Stock Option

  	
  4

  
	
   

  	
  (w)

  	
  “Non-Qualified Stock
  Option

  	
  4

  
	
   

  	
  (x)

  	
  “Option

  	
  4

  
	
   

  	
  (y)

  	
  “Option Price

  	
  4

  
	
   

  	
  (z)

  	
  “Performance Award

  	
  4

  
	
   

  	
  (aa)

  	
  “Performance Measures

  	
  4

  
	
   

  	
  (bb)

  	
  “Performance Period

  	
  4

  
	
   

  	
  (cc)

  	
  “Plan

  	
  4

  
	
   

  	
  (dd)

  	
  “Plan Year

  	
  4

  
	
   

  	
  (ee)

  	
  “Reserved Shares

  	
  5

  
	
   

  	
  (ff)

  	
  “Restriction(s)

  	
  5

  
	
   

  	
  (gg)

  	
  “Restricted Period

  	
  5

  
	
   

  	
  (hh)

  	
  “Restricted Shares

  	
  5

  
	
   

  	
  (ii)

  	
  “Restricted Share Award

  	
  5

  
	
   

  	
  (jj)

  	
  “Restricted Share
  Distributions

  	
  5

  
	
   

  	
  (kk)

  	
  “SAR

  	
  5

  
	
   

  	
  (ll)

  	
  “Share(s)

  	
  5

  
	
   

  	
  (mm)

  	
  “Shareholders

  	
  5

  
	
   

  	
  (nn)

  	
  “Spread

  	
  5

  
	
   

  	
  (oo)

  	
  “Separation

  	
  5

  
	
   

  	
  (pp)

  	
  “Subsidiary

  	
  5

  
	
   

  	
  (qq)

  	
  “1933 Act

  	
  6

  

 

i

 

	
   

  	
  (rr)

  	
  “1934 Act

  	
  6

  
	
   

  	
  (ss)

  	
  “Vested

  	
  6

  
	
   

  	
  (tt)

  	
  “10% Person

  	
  6

  
	
  3.

  	
  Award of Reserved Shares.

  	
  6

  
	
  4.

  	
  Conditions for Grant of Awards.

  	
  6

  
	
  5.

  	
  Grant of Options.

  	
  7

  
	
  6.

  	
  Option Price.

  	
  8

  
	
  7.

  	
  Exercise of Options

  	
  8

  
	
  8.

  	
  Vesting of Award

  	
  8

  
	
  9.

  	
  Termination of Option Period.

  	
  8

  
	
  10.

  	
  Acceleration

  	
  9

  
	
  11.

  	
  Adjustment of Reserved Shares.

  	
  9

  
	
  12.

  	
  Transferability of Awards

  	
  11

  
	
  13.

  	
  Issuance of Reserved Shares

  	
  11

  
	
  14.

  	
  Exercise of Discretion and Administration of the Plan.

  	
  12

  
	
  15.

  	
  Tax Withholding

  	
  13

  
	
  16.

  	
  Restricted Share Awards.

  	
  13

  
	
  17.

  	
  Performance Awards.

  	
  14

  
	
  18.

  	
  Stock Appreciation Rights.

  	
  15

  
	
  19.

  	
  Section 83(b) Election

  	
  17

  
	
  20.

  	
  Interpretation.

  	
  17

  
	
  21.

  	
  Amendment and Discontinuation of the Plan

  	
  17

  
	
  22.

  	
  Effective Date and Termination Date

  	
  18

  

 

ii

 

2005 OMNIBUS STOCK AND INCENTIVE PLAN FOR

 

THOMAS GROUP, INC.

 

1.                                      Purpose.  The purpose of this Plan is to advance the
interests of Thomas Group, Inc., and increase Shareholder value by providing
additional incentives to attract, retain and motivate those qualified and
competent employees and consultants, upon whose efforts and judgment its
success is largely dependent.

 

2.                                      Definitions.  As used herein, the following terms shall
have the meaning indicated:

 

(a)                                  “Administrator”
shall mean the person(s) designated by the Committee to carry out
nondiscretionary administrative duties with respect to the Plan and Awards.

 

(b)                                  “Agreed
Price” shall relate to the grant of an Award in the form of a SAR, and
shall mean the value assigned to the Award’s Reserved Shares which will form
the basis for calculating the Spread on the date of exercise of the SAR, which
assigned value shall be the Fair Market Value of such Reserved Shares on the
Date of Grant.

 

(c)                                  “Applicable
Laws” means the requirements relating to the administration of stock option
plans under U.S. state corporate laws, U.S. federal and state securities laws,
and the Code; and the similar laws of any foreign country or jurisdiction where
Options are, or will be, granted.

 

(d)                                  “Award”
shall mean either an Option, a SAR, a Restricted Share Award, or a Performance
Award, except that where it shall be appropriate to identify the specific type
of Award, reference shall be made to the specific type of Award; and provided,
further, that references to Award shall be deemed to be references to the
written agreement evidencing such Award, and provided, finally, without limitation,
that unless expressly provided to the contrary in the terms of the Award, in
the event of a conflict between the terms of the Plan and the terms of an
Award, the terms of the Plan are controlling.

 

(e)                                  “Board”
shall mean the Board of Directors of the Company.

 

(f)                                    “Cause”
shall mean the occurrence of any one or more of the following: (i) Holder
engages in any act of gross misconduct that is injurious to the Company or its
business: (ii) Holder engages in any act of dishonesty, misconduct, fraud,
misappropriation, embezzlement, theft, moral turpitude or the like; (iii)
Holder refuses to perform the duties or responsibilities properly assigned to
him by the Company, or the dereliction of duty by Holder; or (iv) a material
breach or a violation by Holder of any material provision of Holder’s
employment agreement.

 

(g)                                 “Change in Control” shall mean the first date, if any, upon
which any of the following occurs:

 

(1)                                  any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) (a “Person”) is or becomes the “beneficial owner” (as

 

 

defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50 percent or more of the combined voting power of the
Company’s then outstanding securities; provided,
however, that the term “Person” shall not include (A) the Company,
(B) any employee benefits plan of the Company, (C) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company and acting in such
capacity, (D) a subsidiary of a corporation owned, directly or indirectly, by
the Shareholders in substantially the same proportions as their ownership of
voting securities of the Company, (E) any other person whose acquisitions of
shares of voting securities is approved in advance by a majority of the Board, or
(F) General John T. Chain, Jr. or Edward P. Evans;

 

(2)                                  individuals
who, as of December 20, 2005, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute more than 50 percent of the members of the
Board; provided, however, that
any individual becoming a director subsequent to the date hereof whose election
or nomination for election by the Company’s Shareholders was approved by a vote
of at least two-thirds of the directors then constituting the Incumbent Board,
shall be considered as though such individual were a member of the Incumbent
Board;

 

(3)                                  Shareholders
approve a merger, consolidation, or reorganization of the Company with or into
another corporation or other legal person and, as a result of such merger, consolidation
or reorganization, the holders of the Company’s Shares immediately prior to
such transaction do not have the same proportionate ownership of the common
stock of the surviving entity immediately after such transaction;

 

(4)                                  Shareholders
approve a sale or disposition of all or substantially all of the Company’s
assets to any other corporation or other legal person and as a result of such
transaction, the holders of the Company’s Shares immediately prior to such
transaction do not have the same proportionate ownership of the common stock of
the surviving entity immediately after such transaction;

 

(5)                                  Shareholders
approve a plan of liquidation or dissolution of the Company;

 

(6)                                  a
public announcement is made of a tender or exchange offer by any Person for
fifty percent or more of the outstanding voting securities of the Company, and
the Board approves or fails to oppose that tender or exchange offer in its
statements in Schedule 14D-9 under the Exchange Act; or

 

(7)                                  in
a Title 11 Bankruptcy Proceeding, there is the appointment of a trustee or the
conversion of a case involving the Company to a case under Chapter 7.

 

(h)                                 “Change
in Control Price” shall mean the higher of (i) the highest price per Share
paid in any transaction reported on the NASDAQ or such other exchange or market
as is the principal trading market for the Shares, or (ii) the highest price
per Share paid in any bona fide transaction related to a Change in Control, at
any time during the 60 day period immediately preceding such occurrence; with
such occurrence date to be determined by the Committee.

 

2

 

(i)                                    “Code”
shall mean the Internal Revenue Code of 1986, as now or hereafter amended.

 

(j)                                    “Committee”
shall mean the Compensation and Corporate Governance Committee of the Board,
provided, further, that in granting Performance Awards, Committee shall refer
to only those members of the Compensation and Corporate Governance Committee who
are “Outside Directors” within the meaning of Section 162(m) of the Code.

 

(k)                                “Common
Stock” shall mean the common stock, par value $.01 per Share, of the Company.

 

(l)                                    “Company”
shall mean the Thomas Group, Inc.

 

(m)                              “Consultant”
shall mean, any person or entity who or which is engaged by the Company or a
Subsidiary to render consulting services and is compensated for such consulting
services, and meets the definition of “employee” as set forth in the
instructions to Form S-8 Registration Statement under the 1933 Act.

 

(n)                                 “Date
of Grant” shall mean the date on which the Committee takes formal action to
grant an Award, provided that it is followed, as soon as reasonably
practicable, by written notice to the Eligible Person receiving the Award.

 

(o)                                  “Director”
shall mean a member of the Board of the Company.

 

(p)                                  “Disability”
shall mean a Holder’s present incapacity resulting from an injury or illness
(either mental or physical) which, in the reasonable opinion of the Committee
based on such medical evidence as it deems necessary, will result in death or
can be expected to continue for a period of at least twelve (12) months and
will prevent the Holder from performing the normal services required of the
Holder by the Company; provided, however, that such disability did not result,
in whole or in part:  (i) from chronic
alcoholism; (ii) from addiction to narcotics; (ii) from a felonious
undertaking; or (iv) from an intentional self inflicted wound.

 

(q)                                  “Effective
Date” shall mean December 20, 2005.

 

(r)                                  “Eligible
Person(s)” shall mean those persons or entities, as applicable, who are
Employees, or Consultants.

 

(s)                                  “Employee(s)”
shall mean each person who is designated as an employee on the books of the
Company, including, without limitation, persons so designated who are employed
by a Subsidiary.

 

(t)                                    “Fair
Market Value” per Share shall be determined by the Committee and, on the
date of reference, shall be the Closing Price on such date, provided, further,
that if the actual transaction involving the Shares occurs at a time when the
NASDAQ National Market System (“NASDAQ”) (or
other exchange on which Shares are traded) is closed for regular trading, then
it shall be the most recent Closing Price; provided, further, that “Closing
Price” means the closing price of the Shares on the NASDAQ as reported in any
newspaper of general circulation,

 

3

 

or in the absence
of such report, as reflected on the records of the system on which the Shares
are reported or quoted.

 

(u)                                 “Holder”
shall mean, at each time of reference, each person with respect to whom an
Award is in effect; provided, further, that following the death of a Holder, it
shall refer to the person who succeeds to the rights of such Holder.

 

(v)                                   “Incentive
Stock Option” shall mean an Option that is an incentive stock option as
defined in Section 422 of the Code.

 

(w)                                “Non-Qualified
Stock Option” shall mean an Option that is not an Incentive Stock Option.

 

(x)                                  “Option”
(when capitalized) shall mean the grant of the right to purchase Reserved
Shares through the payment of the Option Price and taking the form of either an
Incentive Stock Option or a Non-Qualified Stock Option; except that, where it
shall be appropriate to identify a specific type of Option, reference shall be
made to the specific type of Option; provided, further, without limitation,
that a single Option may include both Incentive Stock Option and Non-Qualified
Stock Option provisions.

 

(y)                                  “Option
Price” shall mean the price per Reserved Share which is required to be paid
by the Holder in order to exercise his or her right to acquire the Reserved
Share under the terms of the Option.

 

(z)                                  “Performance
Award” shall mean the award which is granted contingent upon the attainment
of the performance objectives during the Performance Period, all as described
more fully in Section 17.

 

(aa)                            “Performance
Measures” shall mean one or more of the following: (i) Share price (ii) earnings
per Share, (iii) return on average common equity, (iv) pre-tax income, (iv)
pre-tax operating income, (v) net revenue, (vi) net income, (vii) profits
before taxes, (viii) Fair Market Value per Share, (ix) net asset value, (x) net
asset value per Share, (xi) operating cost reductions, or (xii) such other
similar measures as the Committee may select, and provided that such measures
may be made before or after adjustments as determined by the Committee at the
time of the grant of the Award and designated in writing in the Award,
provided, without limitation, that while a performance standard can include
remaining in the employ of the Company for a period of time, it shall not be
based on merely remaining in the employ of the Company for a specified period
of time.

 

(bb)                            “Performance
Period” shall mean the period selected by the Committee with respect to
which the performance objectives relate or a measured.

 

(cc)                            “Plan”
shall mean this 2005 Omnibus Stock and Incentive Plan for Thomas Group, Inc..

 

(dd)                            “Plan
Year” shall mean the calendar year.

 

4

 

(ee)                            “Reserved
Shares” shall mean, at each time of reference, the total number of Shares
described in Section 3 with respect to which
the Committee may grant an Award, all of which Reserved Shares shall be held in
the Company’s treasury or shall be made available from the Company’s authorized
and unissued Shares.

 

(ff)                                “Restriction(s)”
“Restricted” and similar shall mean the
restrictions applicable to Reserved Shares subject to an Award which constitute
“a substantial risk of forfeiture” of such Reserved Shares within the meaning
of Section 83(a)(1) of the Code.

 

(gg)                          “Restricted
Period” shall mean the period during which Restricted Shares are subject to
Restrictions.

 

(hh)                          “Restricted
Shares” shall mean the Reserved Shares granted to an Eligible Person which
are subject to Restrictions; provided, further, that the Committee may, in its
sole discretion, determine that the Restrictions which otherwise would have
been imposed have been fully satisfied on the Date of Grant by reason of prior
service and/or other considerations, and thus provide that such Restricted
Shares shall be fully Vested on the Date of Grant.

 

(ii)                                “Restricted
Share Award” shall mean the award of Restricted Shares.

 

(jj)                                “Restricted
Share Distributions” shall mean any amounts, whether Shares, cash or other
property (other than regular cash dividends) paid or distributed by the Company
with respect to Restricted Shares during a Restricted Period.

 

(kk)                        “SAR”
shall mean a stock appreciation right as defined in Section 18 hereof.

 

(ll)                                “Share(s)”
shall mean a share or shares of Common Stock.

 

(mm)                    “Shareholders”
shall mean persons owning one or more Shares at the time of reference.

 

(nn)                          “Spread”
shall mean the difference between the Option Price, or the Agreed Price, as the
case may be, of the Share(s) on the Date of Grant of the Award, and the Fair
Market Value of such Share(s) on the later date of reference.

 

(oo)                            “Separation”
shall mean the date on which a Holder ceases to have an employment relationship
with the Company for any reason, including death or Disability; and provided,
further, without limitation, such employment relationship will cease, in the
case of a consultant, upon his or her ceasing to render services to the
Company, as determined by the Committee in its sole discretion; provided,
however, that a Separation will not be considered to have occurred while an
Employee is on sick leave, military leave, or any other leave of absence
approved by the Company, if the period of such leave does not exceed 90 days,
or, if longer, so long as the Employee’s right to redeployment with the Company
is guaranteed either by statute or by contract.

 

(pp)                            “Subsidiary”
shall mean, where the Award is an Incentive Stock Option, a “subsidiary corporation”, as defined in Section 424(f) of
the Code, and where the Award is not

 

5

 

an Incentive Stock
Option, any entity which would be a “subsidiary corporation” as defined in
Section 424(f) of the Code if it were a corporation.

 

(qq)                            “1933
Act” shall mean the Securities Act of 1933, as amended.

 

(rr)                            “1934
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(ss)                            “Vested”
and similar terms shall mean the number of Option Shares which have become
nonforfeitable and the portion of an Award on which the Restrictions have
lapsed; provided, further, and without limitation, that the lapse of
Restrictions based on the attainment of performance objectives may also be a
Vesting event to the extent provided in the Award.

 

(tt)                                “10%
Person” shall mean a person who owns directly (or indirectly through
attribution under Section 425(d) of the Code) at the Date of Grant of an
Incentive Stock Option, stock possessing more than 10% of the total combined
voting power of all classes of voting stock (as defined in Section 424 of the
Code) of the Company on the Date of Grant.

 

3.                                      Award
of Reserved Shares.

 

(a)                                  As
of the Effective Date, One Million (1,000,000) Shares shall automatically, and
without further action, become Reserved Shares. 
To the extent any Award shall terminate, expire or be canceled, the
Reserved Shares subject to such Award (or with respect to which the Award is
measured), shall remain Reserved Shares. 
Where an Award is settled on a basis other than the issuance of Reserved
Shares, the Reserved Shares which measured the amount of such Award settlement
shall be canceled and no longer considered Reserved Shares.

 

(b)                                  Notwithstanding
any provision in this Plan to the contrary, in order to insure that Performance
Awards are performance-based compensation within the meaning of Section 162(m)
of the Code, no person whose compensation may be subject to the limitations on
deductibility under Section 162(m) of the Code shall be eligible for a grant
during a single calendar year of an Award with respect to, or measured by, more
than Seven Hundred Thousand (700,000) Reserved Shares.  The limitation under this Section 3(b) shall be construed so as to comply with the
requirements of Section 162(m) of the Code.

 

4.                                      Conditions
for Grant of Awards.

 

(a)                                  Without
limiting the generality of the provisions hereof which deal specifically with
each form of Award, Awards shall only be granted to such one or more Eligible
Persons as shall be selected by the Committee.

 

(b)                                  In
granting Awards, the Committee shall take into consideration the contribution
the Eligible Person has made or may be reasonably expected to make to the
success of the Company and such other factors as the Committee shall determine.  The Committee shall also have the authority
to consult with and receive recommendations from officers and other personnel
of the Company with regard to these matters. 
The Committee may from time to time in granting Awards under the Plan
prescribe such terms and conditions concerning such Awards as it deems
appropriate, including, without limitation, relating an Award to achievement of
specific goals established by the Committee or to the continued employment of
the Eligible

 

6

 

Person for a
specified period of time, provided that such terms and conditions are not
inconsistent with the provisions of this Plan.

 

(c)                                  Incentive
Stock Options may be granted only to Employees, and all other Awards may be
granted to any Eligible Person.

 

(d)                                  The
Plan shall not confer upon any Holder any right with respect to continuation of
employment by the Company, or any right to provide services to the Company, nor
shall it interfere in any way with his or her right or the Company’s right to
terminate his or her employment at any time.

 

(e)                                  The
Awards granted to Eligible Persons shall be in addition to regular salaries,
pension, life insurance or other benefits (if any) related to their service to
the Company, and nothing herein shall be deemed to limit the ability of the
Company to enter into any other compensation arrangements with any Eligible
Person.

 

(f)                                    The
Committee shall determine in each case whether periods of military or
government service shall constitute a continuation of employment or service for
the purposes of this Plan or any Award.

 

(g)                                 Notwithstanding
any provision hereof to the contrary, each Award which in whole or in part
involves the issuance of Reserved Shares may provide for the issuance of such
Reserved Shares for consideration consisting of cash or cash equivalents, or
such other consideration as the Committee may determine, including (without
limitation) as compensation for past services rendered.

 

5.                                      Grant
of Options.

 

(a)                                  The
Committee may grant Options to Eligible Persons from time to time, alone, in
addition to, or in tandem with, other Awards granted under the Plan.  An Option granted hereunder shall be either
an Incentive Stock Option or a Non-Qualified Stock Option, and shall clearly
state whether it is (in whole or in part) an Incentive Stock Option or a
Non-Qualified Stock Option; provided, further, that failure of an Option
designated as an Incentive Stock Option to qualify as an Incentive Stock Option
will not affect its validity, and the portion which does not qualify as an
Incentive Stock Option shall be a Non-Qualified Stock Option.

 

(b)                                  If
both Incentive Stock Options and Non-Qualified Stock Options are granted to a
Holder, the right to exercise, to the full extent thereof, Options of either
type shall not be contingent in whole or in part upon the exercise of, or
failure to exercise, Options of the other type.

 

(c)                                  The
aggregate Fair Market Value (determined as of the Date of Grant) of the
Reserved Shares with respect to which any Incentive Stock Option is exercisable
for the first time by a Holder during any calendar year under the Plan and all
such plans of the Company (as defined in Section 425 of the Code) shall not
exceed $100,000; provided, further, without limitation, that any portion of an
Option designated as an Incentive Stock Option which exceeds such $100,000
limit will, notwithstanding such designation, be a validly granted
Non-Qualified Stock Option.

 

7

 

(d)                                  The
Committee may at any time offer to buy out for a payment in cash, an Option
previously granted, based on such terms and conditions as the Committee shall
establish and as communicated to the Holder by the Committee at the time that
such offer is made.

 

6.                                      Option
Price.

 

(a)                                  The
Option Price shall be any price determined by the Committee which is not less
than one hundred percent (100%) of the Fair Market Value per Share as
determined under the terms of the Plan on the Date of Grant; provided, however,
that in the case of an Incentive Stock Option granted to a 10% Person the
Option Price shall not be less than 110% of the Fair Market Value per Share as
determined under the terms of the Plan on the Date of Grant.  The Committee shall determine the Fair Market
Value per Share.

 

(b)                                  Unless
further limited by the Committee in any Option, the Option Price may be paid in
cash, by certified or cashier’s check, by wire transfer, by money order,
through a Broker Assisted Exercise, with Shares (but with Shares only if
expressly permitted by the terms of the Option), or by a combination of the
above; provided, however, that the Committee may accept a personal check in
full or partial payment.  If the Option
Price is permitted to be, and is, paid in whole or in part with Shares, the
value of the Shares surrendered shall be the Shares’ Fair Market Value on the
date delivered to the Administrator.

 

7.                                      Exercise
of Options.  An Option shall be
deemed exercised when (i) the Administrator has received written notice of such
exercise in accordance with the terms of the Option, and (ii) full payment of
the aggregate Option Price plus required withholding tax amounts, if any,
described in Section 15, of the Reserved Shares
as to which the Option is exercised has been made.  Separate stock certificates shall be issued
by the Company for any Reserved Shares acquired as a result of exercising an
Incentive Stock Option and a Non-Qualified Stock Option.

 

8.                                      Vesting
of Award

 

(a)                                  Without
limitation, each Award shall Vest in whole or in part, and shall expire,
according to the terms of the Award.

 

(b)                                  The
Committee, in its sole discretion, may accelerate the date on which all or any
portion of an otherwise unVested Award shall Vest.

 

9.                                      Termination
of Option Period.

 

(a)                                  Unless
the terms of an Option expressly provide for a different date of termination,
the unexercised portion of an Option shall automatically and without notice
terminate and become null and void at the time of the earliest to occur of the
following:

 

(1)                                  on
the 90th day following Holder’s Separation for any reason except death,
Disability or for Cause; or

 

(2)                                  immediately
upon Separation as a result, in whole or in material part, of a discharge for
Cause; or

 

8

 

(3)                                  on
the one hundred-eightieth (180th) day following a Separation by reason of death
or Disability;

 

(4)                                  in
the case of a 10% Person, on the fifth (5th ) anniversary of the Date of Grant;
or

 

(5)                                  on
the tenth (10th) anniversary of the Date of Grant.

 

(b)                                  Notwithstanding
any provision of the Plan to the contrary, in the event of the proposed
dissolution or liquidation of the Company, or in the event of a proposed sale
of all or substantially all of the assets of the Company, or the proposed
merger of the Company with or into another corporation (collectively, the “Transaction”),
unless otherwise expressly provided (by express reference to this Section 9(b)) in the terms of an Option, after the public
announcement of the Transaction, the Committee may, in its sole discretion,
deliver a written notice (“Cancellation Notice”)
to any Holder of an Option, canceling the unexercised Vested portion (including
the portion which becomes Vested by reason of acceleration), if any, of such
Option, effective on the date specified in the Cancellation Notice (“Cancellation Date”). 
Notwithstanding the forgoing, the Cancellation Date may not be earlier
than the last to occur of (i) the 15th day following delivery of the
Cancellation Notice, and (ii) the 60th day prior to the proposed date for the
consummation of the Transaction (“Proposed Date”).  Without limitation, the Cancellation Notice
will provide that, unless the Holder elects in writing to waive, in whole or in
part, a Conditional Exercise, that the exercise of the Option will be a
Conditional Exercise.  A “Conditional Exercise” shall mean that in the event the
Transaction does not occur within 180 days of the Proposed Date, the exercising
Holder shall be refunded any amounts paid to exercise such Holder’s Option,
such Option will be reissued, and the purported exercise of such Option shall
be null and void ab intitio.

 

10.                               Acceleration.  In the event of a Change in Control, in the
sole discretion of the Committee, the Committee may provide that an Award will become
fully or partially exercisable, Vested, or the Restricted Period shall
terminate, as the case may be (hereafter, in this Section 10,
such Award shall be “accelerated”), and (ii) thereafter, in the sole discretion
of the Committee, the value of some or all Vested Awards may be cashed out on
the basis of the Change in Control Price, at any time during the 60 day period
immediately preceding any bona fide transaction related to a Change in Control;
provided, further, that if a date prior to such occurrence is selected for a
cash out, any subsequent increase in the Change in Control Price shall be
computed with respect to such Awards which have been cashed-out and will be
paid to each Holder on the date of such occurrence, or as soon thereafter as
reasonably possible.

 

11.                               Adjustment
of Reserved Shares.

 

(a)                                  If
at any time while the Plan is in effect or Awards with respect to Reserved Shares
are outstanding, there shall be any increase or decrease in the number of
issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split up, combination or
exchange of Shares, then and in such event:

 

(i)                                     appropriate
adjustment shall be made in the maximum number of Reserved Shares which may be
granted under Section 3, and equitably in the
Reserved

 

9

 

Shares which are
then subject to each Award, so that the same proportion of the Company’s issued
and outstanding Common Stock shall continue to be subject to grant under Section 3, and to such Award, and

 

(ii)                                  
in addition, and without limitation, in the case of each Award (including,
without limitation, Options) which requires the payment of consideration by the
Holder in order to acquire Reserved Shares, an appropriate equitable adjustment
shall be made in the consideration (including, without limitation the Option
Price) required to be paid to acquire the each Reserved Share, so that (i) the
aggregate consideration to acquire all of the Reserved Shares subject to the
Award remains the same and, (ii) so far as possible, (and without disqualifying
an Incentive Stock Option) the relative cost of acquiring each Reserved Share
subject to such Award remains the same; and

 

(iii)                               in addition, shall make
appropriate adjustment in the Performance Measures for each Performance Award
so as to reasonably insure that the same level of performance will result in
the same Vesting and other material rights and benefits under the Performance
Award.

 

All such determinations
shall be made by the Board in its sole discretion.

 

(b)                                  The
Committee may change, or may direct the Administrator to change, the terms of Awards
outstanding under this Plan when, in the Committee’s judgment, such adjustments
become appropriate by reason of a corporate transaction (as defined in Treasury
Regulation § 1.425 1(a)(1)(ii)); provided, however, that if by reason of such
corporate transaction an Incentive Stock Option is assumed or a new Incentive
Stock Option is substituted therefore, the Committee, or at the direction of
the Committee, the Administrator, may only change the terms of such Incentive
Stock Option such that (i) the excess of the aggregate Fair Market Value of the
Reserved Shares subject to the substituted Incentive Stock Option immediately
after the substitution or assumption, over the aggregate Option Price of such
Reserved Shares at such time, is not more than the excess of the aggregate Fair
Market Value of all Reserved Shares subject to the Incentive Stock Option
immediately before such substitution or assumption over the aggregate Option
Price of such Reserved Shares at such time, and (ii) the substituted Incentive Stock
Option, or the assumption of the original Incentive Stock Option does not give
the Holder additional benefits which such Holder did not have under the
original Incentive Stock Option.  Without
limiting the generality of any other provisions hereof, including, without
limitation, Section 21, except to the minimum
extent, if any, required by Section 424(a) of the Code with respect to
Incentive Stock Options, no change made under the authority of this Section 11(b) in the terms of an Award shall alter such Award’s
material provisions in a way that makes such Award less valuable to its Holder.

 

(c)                                  Except
as otherwise expressly provided herein, the issuance by the Company of shares
of its capital stock of any class, or securities convertible into shares of
capital stock of any class, either in connection with direct sale for adequate
consideration, or upon the exercise of rights or warrants to subscribe
therefore, or upon conversion of Shares or obligations of the Company
convertible into such Shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, Reserved Shares
subject to Awards granted under

 

10

 

the Plan;
provided, further, that such issuance shall require the Committee to make such
adjustments as are required under Section 11(a)(iii).

 

(d)                                  Without
limiting the generality of the foregoing, except for making the adjustments
required under Section 11(a)(iii), the existence
of outstanding Awards with respect to Reserved Shares granted under the Plan
shall not affect in any manner the right or power of the Company to make,
authorize or consummate (1) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company’s capital structure or its
business; (2) any merger or consolidation of the Company; (3) any issue by the Company
of debt securities, or preferred or preference stock which would rank above the
Reserved Shares subject to outstanding Awards; (4) the dissolution or liquidation
of the Company; (5) any sale, transfer or assignment of all or any part of the
assets or business of the Company; or (6) any other corporate act or
proceeding, whether of a similar character or otherwise.

 

12.                               Transferability
of Awards.  Each Award which is an
Incentive Stock Option shall not be transferable by the Holder otherwise than
(i) by will or the laws of descent and distribution, or (ii) pursuant to a
domestic relations order as that term is defined in section 414(p)(1)(B) of the
Internal Revenue Code, provided that such order satisfies Section 414(p)(1)(A)
of the Internal Revenue Code; and in the case of each other Award, subject to
the same transfer restrictions in (i) and (ii) except that, if expressly
provided in the Award, it is transferable, in whole or in part, without payment
of consideration (i) to members of the Holder’s Immediate Family, (ii) to
trusts for such Immediate Family members, or (iii) to partnerships whose only
partners are such Immediately Family members, or (iv) except as prohibited by
Rule 16b-3, to a person or other entity for which the Holder is entitled to a
deduction for a “charitable contribution” under Section 170(a)(i) of the Code
(provided, in each such case that no further transfer by any such permitted
transferee(s) shall be permitted); provided, further that, except for the right
to exercise an Award which is subject to exercise, the Holder retains all of
the rights, duties and obligations under the Award (including, without
limitation, satisfaction of the Vesting requirements and the payment of
withholding.)

 

13.                               Issuance
of Reserved Shares.  No Holder shall
be, or have any of the rights or privileges of, the owner of Reserved Shares
subject to an Award unless and until certificates representing such Shares
shall have been issued and delivered to such Holder or, where Vested Shares are
held by the Company to ensure compliance with specific requirements of an Award,
to the extent expressly provided in the Award. 
As a condition of any issuance of Shares, the Administrator may obtain
such agreements or undertakings, if any, as the Administrator may deem
necessary or advisable to assure compliance with any such law or regulation or Shareholder
agreement including, but not limited to, a representation, warranty or agreement
to be bound by any legends that are, in the opinion of the Administrator,
necessary or appropriate to comply with the provisions of any securities law
deemed by the Administrator to be applicable to the issuance of the Reserved
Shares and which are endorsed upon the Share certificates.

 

Share certificates issued to
the Holder receiving such Reserved Shares who is a party to any Shareholders
agreement, voting trust, or any similar agreement shall bear the legends
contained in such agreements.  Notwithstanding
any provision hereof to the contrary, no Reserved Shares shall be required to
be issued with respect to an Award unless counsel for the

 

11

 

Company shall be reasonably
satisfied that such issuance will be in compliance with applicable federal or
state securities laws.

 

In no event shall the
Company be required to sell or issue Reserved Shares under any Award if the
sale or issuance thereof would constitute a violation of applicable federal or
state securities law or regulation or a violation of any other law or
regulation of any governmental authority or any national securities exchange.  As a condition to any sale or issuance of
Reserved Shares, the Company may place legends on Reserved Shares, issue stop
transfer orders, and require such agreements or undertakings as the Company may
deem necessary or advisable to assure compliance with any such law or
regulation.

 

Without limitation, the
Company shall use its best efforts to register the Reserved Shares with the
Securities and Exchange Commission.

 

14.                               Exercise
of Discretion and Administration of the Plan.

 

(a)                                  The
Plan shall be administered by the Administrator and, except for the powers
expressly reserved to the Board and the Committee, the Administrator shall have
all of the administrative powers under Plan. 
Notwithstanding the forgoing, except as provided in Section 13,
the Administrator shall only exercise nondiscretionary and purely ministerial
authority hereunder.

 

(b)                                  The
Administrator, from time to time, may adopt rules and regulations for carrying
out the administrative purposes of the Plan. 
The determinations under, and the interpretations of, any provision of
the Plan or an Award by the Committee (or the Administrator in the exercise of
its administrative authority) shall, in all cases, be in its sole discretion,
and shall be final and conclusive.

 

(c)                                  Any
and all determinations and interpretations of the Committee (and the
Administrator solely in the exercise of administrative authority) shall be made
either (i) by a majority vote of the members at a meeting duly called, with at
least 2 days prior notice, or (ii) without a meeting, by the written approval
of all members.

 

(d)                                  No
member of the Committee, or the Administrator, shall be liable for any action
taken or omitted to be taken by such member or by any other member of the
Committee or by the Administrator with respect to the Plan, and to the extent
of liabilities not otherwise insured under a policy purchased by the Company,
the Company does hereby indemnify and agree to defend and save harmless any
member of the Committee, and the Administrator, with respect to any liabilities
asserted or incurred in connection with the exercise and performance of their
powers and duties hereunder, unless such liabilities are judicially determined
to have arisen out of such person’s gross negligence, fraud or bad faith.  Such indemnification shall include attorney’s
fees and all other costs and expenses reasonably incurred in defense of any
action arising from such act of commission or omission.  Nothing herein shall be deemed to limit the
Company’s ability to insure itself with respect to its obligations hereunder.

 

(e)                                  In
particular, and without limitation, except for the authority granted to the
Administrator under Section 13, the
Committee shall have the sole authority, consistent with the terms of the Plan:

 

12

 

(i)                                     to
determine whether and to what extent Awards are to be granted hereunder to one
or more Eligible Persons;

 

(ii)                                  to
determine the number of Reserved Shares to be covered by each such Award
granted hereunder;

 

(iii)                               to determine the terms
and conditions of any Award granted hereunder, and to amend or waive any such
terms and conditions except to the extent, if any, expressly prohibited by the
Plan;

 

(iv)                              to
determine whether and under what circumstances an Option may be settled in
Restricted Shares instead of Reserved Shares;

 

(v)                                 to
determine whether, to what extent, and under what circumstances Awards under
the Plan are to be made, and operate, on a tandem basis vis-a-vis other Awards
under the Plan; and

 

(vi)                              to
determine (or to delegate to the Administrator the authority to determine)
whether to permit payment of tax withholding requirements in Reserved Shares.

 

(f)                                    Without
limitation, Committee, and the Administrator solely with respect to its
ministerial duties, shall have the authority to adopt, alter, and repeal any or
all of its rules, guidelines, and practices with respect to the Plan, and all
questions of interpretation, with respect to the Plan or any Award shall be
decided by the Committee or, if purely ministerial, by the Administrator, as
the case maybe, whose decision shall be final, conclusive and binding upon the
Company and each other affected party.

 

(g)                                 Without
limitation, the Committee in its sole discretion may limit the ministerial
authority granted hereunder to the Administrator by notifying the Administrator
in writing of such limitation.

 

15.                               Tax
Withholding.  On or immediately prior
to the date on which a payment is made to a Holder hereunder or, if earlier,
the date on which an amount is required to be included in the income of the
Holder as a result of the lapse of a restriction on an Award, the Holder shall
be required to pay to the Company, in cash, or in Shares (but in Shares or
Reserved Shares only if expressly permitted in the Award, or by written
authorization of the Administrator, and then only in the minimum amount
required to satisfy the minimum withholding requirements with respect to such
Award), the amount (if any) which the Company reasonably determines to be
necessary in order for the Company to comply with applicable federal or state
tax withholding requirements, and the collection of employment taxes; provided,
further, without limitation, that the Committee may require that such payment
be made in cash.

 

16.                               Restricted
Share Awards.

 

(a)                                  The
Committee may grant Awards of Restricted Shares to any Eligible Person, for no
cash consideration, for such minimum consideration as may be required by
applicable law, or for such other consideration as may be specified in the
grant.  The terms and conditions of

 

13

 

Restricted Shares
shall be specified in the Award.  The Committee,
in its sole discretion, shall determine what rights, if any, the person to whom
an Award of Restricted Shares is made shall have in the Restricted Shares
during the Restriction Period and the Restrictions applicable to the particular
Award, including whether the holder of the Restricted Shares shall have the
right to vote the Restricted Shares and the extent, if any, of Holder’s right
to receive Restricted Share Distributions. 
Unless otherwise provided in the Restricted Share Award, upon the expiration
of Restrictions, the Restricted Shares shall cease to be Restricted Shares.

 

(b)                                  The
Restrictions on Restricted Shares shall lapse in whole, or in installments,
over whatever Restricted Period shall be selected by the Committee.

 

(c)                                  Without
limitations, the Committee may accelerate the date on which Restrictions lapse
with respect to any Restricted Shares.

 

(d)                                  During
the Restricted Period, the certificates representing the Restricted Shares, and
any Restricted Share Distributions, shall be registered in the Holder’s name
and bear a restrictive legend disclosing the Restrictions, the existence of the
Plan, and the existence of such Restricted Share Award.  Such certificates shall be deposited by the
Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit the transfer to the
Company of all or any portion of the Restricted Shares, and any assets
constituting Restricted Share Distributions, which shall be forfeited in
accordance with the terms of such Restricted Share Award.  Restricted Shares shall constitute issued and
outstanding Common Stock for all corporate purposes and the Holder shall have
all rights, powers and privileges of a holder of unrestricted Shares except
those that are expressly excluded under the terms of the Restricted Share
Award, and Holder will not be entitled to delivery of the stock certificates
until all Restrictions shall have terminated and after such period, for any
additional period specified in the Award, and the Company will retain custody
of all related Restricted Share Distributions (which will be subject to the
same Restrictions, terms, and conditions as the related Restricted Shares)
until the conclusion of the Restricted Period with respect to the related
Restricted Shares or for such additional period as may be provided in the Award;
and provided, further, that any Restricted Share Distributions shall not bear
interest or be segregated into a separate account but shall remain a general
asset of the Company, subject to the claims of the Company’s creditors, until
the date of their distribution; and provided, finally, that any material breach
of any terms of the Restricted Share Award, as reasonably determined by the
Committee, will cause a forfeiture of both Restricted Shares and Restricted
Share Distributions.

 

17.                               Performance
Awards.

 

(a)                                  Performance
Awards during a Plan Year may be granted to any Eligible Persons.

 

(b)                                  Without
limitation, the Committee’s grant of Performance Awards may, in its sole
discretion, be made in Reserved Shares, or in cash, or in a combination of
Reserved Shares and cash, but the cash portion of each such Award granted to
each Eligible Person may not exceed $1,000,000 in a Plan Year.

 

(c)                                  The
Committee shall select the Performance Measures which will be required to be
satisfied during the Performance Period in order to earn the Performance Award.  Such

 

14

 

Performance
Measures, and the duration of any Performance Period, may differ with respect
to each Eligible Person, or with respect to separate Performance Awards issued
to the same Eligible Person.  The
selected Performance Measures, the Performance Period(s), and any other
conditions to the Company’s obligation to pay a Performance Award shall be set
forth in each Performance Award on or before the first to occur of (i) the 90th
day of the selected Performance Period, (ii) the first date on which more than
25% of the Performance Period has elapsed, and (iii) the first date, if any, on
which satisfaction of the Performance Measure(s) is no longer substantially
uncertain.

 

(d)                                  Performance
Awards may be payable in a single payment or in installments but may not be
paid in whole or in part prior to the date on which the Performance Measures
are attained, except that such payment may be accelerated upon the death or
Disability of the Eligible Person, or as a result of a Change in Control, it
being understood that if such acceleration events occur prior to the attainment
of the Performance Measures, the Performance Award will not be exempt from
Section 162(m) of the Code.

 

(e)                                  The
extent to which any applicable performance objective has been achieved shall be
conclusively determined by the Committee, but may be specifically delegated to
the Administrator.  Without limitation,
where an Eligible Person has satisfied the Performance Measures with respect to
a Performance Award, if permitted under the terms of such Performance Award,
the Committee, in its sole discretion, may reduce the maximum amount payable
under such Performance Award.

 

18.                               Stock
Appreciation Rights.

 

(a)                                  The
Committee shall have authority to grant (i) a SAR with respect to Reserved
Shares, including, without limitation, Reserved Shares covered by any Option (“Related Option”), or a Performance Award (“Related Performance Award”).  A SAR granted with respect to a Related
Option or Related Performance Award must be granted on the Date of Grant of
such Related Option or Related Performance Award.

 

(1)                                  For
the purposes of this Section 18, the
following definitions shall apply:

 

(i)                             The
term “SAR” shall mean a right granted under
this Plan, including, without limitation, a right granted in tandem with an
Award, that shall entitle the Holder thereof to the number of Reserved Shares
which have a Fair Market Value equal to the SAR Spread payable as described in Section 18(d).

 

(ii)                          The
term “SAR Spread” shall mean with respect to
each SAR an amount equal to the product of (1) the excess of (A) the Fair
Market Value per Share on the date of exercise, over (B) (x) if the SAR is
granted in tandem with an Option, then the Option Price per Reserved Share of
the Related Option, (y) if the SAR is granted in tandem with a Performance
Award, the Agreed Price under the Related Performance Award, or (z) if the SAR
is granted by itself with respect to a designated number of Reserved Shares,
the Agreed Price which, without limitation, is the Fair Market Value of the
Reserved Shares on the Date of Grant, in each case multiplied by (2) the number
of Reserved Shares with

 

15

 

respect to which
such SAR is being exercised; provided, however, without limitation, that with
respect to any SAR granted in tandem with an Incentive Stock Option, in no
event shall the SAR Spread exceed the amount permitted to be treated as the SAR
Spread under applicable Treasury Regulations or other legal authority without
disqualifying the Option as an Incentive Stock Option.

 

(b)                                  To
exercise the SAR the Holder shall:

 

(i)                                     Give
written notice thereof to the Company, specifying the SAR being exercised and
the number or Reserved Shares with respect to which such SAR is being
exercised, and

 

(ii)                                  If
requested by the Company, deliver within a reasonable time the agreement
evidencing the SAR being exercised and, if applicable, the Related Option
agreement, or Related Performance Award agreement, to the Secretary of the
Company who shall endorse or cause to be endorsed thereon a notation of such
exercise and return all agreements to the Holder.

 

(c)                                  As
soon as practicable after the exercise of a SAR, the Company shall transfer to
the Holder Reserved Shares having a Fair Market Value on the date the SAR is
exercised equal to either the SAR Spread; provided, however, without limiting
the generality of Section 15,
that the Company, in its sole discretion, may withhold from such transferred
Reserved Shares any amount necessary to satisfy the Company’s minimum
obligation for federal and state withholding taxes with respect to such
exercise.

 

(d)                                  A
SAR may be exercised only if and to the extent that it is permitted under the
terms of the Award which, in the case of a Related Option, shall be only when
such Related Option is eligible to be exercised.

 

(e)                                  Upon
the exercise or termination of a Related Option, or the payment or termination
of a Related Performance Award, the SAR with respect to such Related Option or
Related Performance Award likewise shall terminate.

 

(f)                                    A
SAR shall be transferable (i) only to the extent, if any, provided in the
agreement evidencing the SAR, or (ii) if granted with respect to a Related
Option, or Related Performance Award, only to the extent, if any, that such
Related Option, or Related Performance Award, is transferable, and under the
same conditions.

 

(g)                                 Each
SAR shall be on such terms and conditions not inconsistent with this Plan as
the Committee may determine.

 

(h)                                 The
Holder shall have no rights as a stockholder with respect to the related
Reserved Shares as a result of the grant of a SAR.

 

(i)                                    With
respect to a Holder who, on the date of a proposed exercise of a SAR, is an
officer (as that term is used in Rule 16a-1 promulgated under the 1934 Act or
any similar rule which may subsequently be in effect), such proposed exercise
may only occur as permitted by

 

16

 

Rule 16b-3,
including without limitation paragraph (e)(3)(iii) (or any similar rule which
may subsequently be in effect promulgated pursuant to Section 16(b) of the 1934
Act).

 

19.                               Section
83(b) Election.  If as a result of
receiving an Award, a Holder receives Restricted Shares, then such Holder may
elect under Section 83(b) of the Code to include in his or her gross income,
for his or her taxable year in which the Restricted Shares are transferred to
such Holder, the excess of the Fair Market Value (determined without regard to
any Restriction other than one which by its terms will never lapse), of such
Restricted Shares at the Date of Grant, over the amount (if any) paid for the
Restricted Shares.  If the Holder makes
the Section 83(b) election described above, the Holder shall (i) make such
election in a manner that is satisfactory to the Administrator, (ii) provide
the Administrator with a copy of such election, (iii) agree to promptly notify
the Company if any Internal Revenue Service or state tax agent, on audit or
otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to pay
the withholding amounts described in Section 15.

 

20.                               Interpretation.

 

(a)                                  If
any provision of the Plan is held invalid for any reason, such holding shall
not affect the remaining provisions hereof, but instead the Plan shall be
construed and enforced as if such provision had never been included in the
Plan.

 

(b)                                  THIS
PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

 

(c)                                  Headings
contained in this Agreement are for convenience only and shall in no manner be
construed as part of this Plan.

 

(d)                                  Any
reference to the masculine, feminine, or neuter gender shall be a reference to
such other gender as is appropriate.

 

(e)                                  Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, subject to Shareholder approval if such
approval is required; and such arrangements may be either generally applicable
or applicable only in specific cases.

 

21.                               Amendment
and Discontinuation of the Plan.  The
Board, or the Committee (subject to the prior written authorization of the
Board), may from time to time amend the Plan or any Award; provided, however,
that (except to the extent provided in Section 9(b))
no such amendment may, without approval by the Shareholders, (a) increase the
number of Reserved Shares or change the class of Eligible Persons, (b) permit
the granting of Awards which expire beyond the maximum 10-year period described
in Section 9(a)(5), or (c) make any change
for which applicable law or regulatory authority (including the regulatory
authority of the NASDAQ or any other market or exchange on which the Common
Stock is traded) would require Shareholder approval or for which Shareholder
approval would be required under Section 162(m) of the Code to secure complete
deductibility of all compensation paid as a result of Awards; and provided,
further, that no amendment or suspension of the Plan or any Award issued
hereunder shall, except as specifically permitted in this Plan or under the
terms of such

 

17

 

Award,
substantially impair any Award previously granted to any Holder without the
consent of such Holder.

 

22.                               Effective
Date and Termination Date.  The Plan
shall be effective as of its Effective Date, and shall terminate on the tenth
anniversary of such Effective Date; provided, further, without limitation, that
unless otherwise expressly provided in an Award, the termination of the Plan
shall not terminate an Award which is outstanding on such date.

 

18

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