Document:

Exhibit 10.25

 

EMPLOYMENT AGREEMENT

 

AGREEMENT (“Agreement”),
dated as of July 30, 2007
(“Effective Date”) by and among Centro Watt Management Joint Venture 2 LP,
(“CWMJV”), Centro Properties Group, an entity listed on the Australian
Securities Exchange (“Centro”) (collectively referred to as “Company”) and
Leonard Brumberg (“Executive”).

 

RECITAL

 

CWMJV desires to employ
Executive as of the Effective Date, on the terms and conditions set forth in
this Agreement, and Executive desires to be so employed.

 

AGREEMENT

 

IN CONSIDERATION of the
premises and the mutual covenants set forth below, the parties hereby agree as
follows:

 

1.                                       Employment. CWMJV hereby agrees to
employ Executive and Executive hereby agrees to accept such employment, on the
terms and conditions hereinafter set forth.

 

2.                                       Prior Agreements.
The Parties hereby agree that this Agreement terminates and supersedes the
Employment Agreement between Executive and New Plan Realty Trust, Inc.
dated as of September 14, 2000 (“Prior Employment Agreement”) and that any
provisions of the Prior Employment Agreement that specifically survive closing
are hereby waived and deemed to be null and void and no force or effect.
Accordingly, as of the Effective Date, neither the Company (or Centro NP LLC,
the corporate successor to New Plan Excel Realty Trust, Inc.) nor the
Executive shall have any rights or obligations pursuant to the Prior Employment
Agreement; provided, however, that prior service with New Plan Realty Trust,
Inc will be recognized for all relevant purposes including, without limitation,
Sections 6(e) and (f) of this Agreement.

 

3.                                       Term. Executive’s employment
by CWMJV hereunder shall commence on the Effective Date and shall continue for
one (1) year (“Original Term”). The term of employment hereunder shall
thereafter be automatically extended for an unlimited number of additional
one-year periods (each, an “Additional Term”, and together with the Original
Term and any Additional Terms, the “Term”) unless, at least 180 days prior to the expiration of the Term, either
the Executive or the Company gives written notice to the other that it is
electing not to so extend the Term. Notwithstanding the foregoing, the Term may
be earlier terminated in strict accordance with the provisions of Section 7
hereof, but subject to the provisions of Sectin 9 hereof. At the time Executive
ceases to be a full-time employee of CWMJV, the Executive agrees that he shall
resign from any office he holds with Company and its subsidiaries and any
entity in control of, controlled by or under common control with the Company or
in which the Company owns any common or preferred stock or any ownership
interest or any entity in control of, controlled by or under common control
with such entity (“Affiliate”).

 

 

4.                                       Position and Duties

 

Executive
Vice President — Portfolio Management. During the Term, the Executive shall serve as the Executive Vice
President - Portfolio Management of all United States operations of Centro and
its Affiliates (“Centro US”); shall have all authorities, duties and
responsibilities customarily exercised by an individual serving as the
Executive Vice President - Portfolio Management of an entity of the size and
nature of Centro US; shall have such other duties, authorities and
responsibilities as the Centro US Chief Investment Officer may from time to
time reasonably designate, consistent with the foregoing; and shall report
directly to the Centro US Chief Investment Officer. Executive will comply with
the Company’s policies including, but not limited to, the Code of Conduct and
the Employee Trading in Securities Policy. During the Term, the Executive shall
devote substantially all of his business time and efforts to the business and
affairs of Centro US (unless otherwise directed by the Centro US Chief Investment
Officer); however, nothing shall preclude the Executive from the following: (i) serving
on the boards of a reasonable number of non-competing business entities, trade
associations and charitable organizations, (ii) engaging in charitable
activities and community affairs, (iii) accepting and fulfilling a
reasonable number of speaking engagements, and (iv) managing his personal financial
and legal affairs provided that such activities do not either individually or
in the aggregate interfere with the proper performance of his duties and
responsibilities hereunder and are not likely to be contrary to the Company’s
interests. The Executive has disclosed to the Company a list of boards of which
he is currently a member, and the Company has consented to his continued
membership on such boards. The Executive shall give prior written notice before
joining any new business board on or after the Effective Date.

 

5.                                       Place of Performance. The principal place of employment of
Executive shall be at the Company’s US corporate offices in New York, New York.

 

6.                                       Compensation and Related Matters.

 

(a)                                  Salary. During the Term, CWMJV shall pay Executive
an annual base salary of not less than US$338,600 (“Base Salary”). Executive’s
Base Salary shall be paid in approximately equal installments in accordance
with CWMJV’s customary payroll practices. If Executive’s Base Salary is
increased, such increased Base Salary shall then constitute the Base Salary for
all purposes of this Agreement.

 

(b)                                 Short Term Incentive-Bonus. Executive shall be eligible for an annual
short term incentive-bonus (“STI”) based on the achievement of certain
financial goals. For the financial year ending June 30, 2008, fifty
percent of the STI will be based on achievement of Centro Distributions per
Security target and maximum goals (as defined by the Centro Board) and fifty
percent of the STI will be based on achievement of Centro US Funds from
Operations target and maximum goals (as defined by the Centro CEO and the
Centro US CEO). The target and maximum goals for the financial year ending June 30,
2008 shall be established prior to July 31, 2007. If a target goal is
achieved, Executive shall receive a STI of 25% of Base Salary for that STI
measure. If a maximum goal is achieved, Executive shall receive a STI of 37.5%
of Base Salary for that STI measure. If performance for a measure between
target goal and maximum goal is achieved, Executive shall receive a pro rata
STI between 25% and 37.5% of Base Salary for that measure. Any payment of a
prorated STI, if target for a measure is not

 

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achieved, shall be subject to the discretion
of the Centro Board. For the financial year ending June 30, 2007,
Executive shall be eligible for a guaranteed STI payment (the “Stub STI
Payment”) between US$45,000 and US$65,000, the amount of such guaranteed STI
within such range to be at the discretion of the Centro Board payable within 5
days following the execution of this agreement. For financial years commencing
after June 30, 2008, the Centro Board may change the basis upon which STI
may be calculated, but if the target is achieved the Executive shall continue
to receive an STI payout of a total of 50% of Base Salary and if the maximum
goal is achieved the payout shall be a total of 75% of Base Salary (the “STI
Range”). If Executive’s employment is terminated for any reason prior to the
end of a financial year, he shall not be entitled to a prorated STI unless
otherwise specifically agreed by the Centro Board. Notwithstanding anything
contained herein to the contrary, a change in the basis upon which STI may be
calculated after June 30, 2008 (but not a reduction to the STI Range)
shall not constitute a breach or violation of this Agreement by the Company or
constitute Good Reason for Executive to terminate his employment. With the
exception of the STI for the financial year ending June 30, 2007, all STI
amounts will be paid at the first appropriate opportunity after June 30 of
that financial year, but not later than July 31 of that same calendar
year.

 

(c)                                  Long Term Incentive Compensation Executive shall from time to time be invited
to participate in the Centro Employee Security Plan, the Centro Executive
Option Plan or other stock or option related plans that may be developed in the
future. The Centro Board shall periodically review the nature and extent of
such plans in line with comparable market practice.

 

(d)                                 Expenses. CWMJV shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with CWMJV’s policies and procedures
now in force or as such policies and procedures may be modified with respect to
all senior executive officers of CWMJV.

 

(e)                                  Vacation. Executive shall be entitled to the number of
weeks of vacation per year provided to the CWMJV’s senior executive officers,
but in no event less than four (4) weeks annually.

 

(f)                                    Welfare, Pension and
Incentive Benefit Plans. During
the Term, the Executive shall be entitled to participate in all employee
benefit plans, programs and arrangements made available to other CWMJV senior
executives generally, including, without limitation, pension, income deferral,
savings, 401 (k), and other retirement plans or programs, medical, dental, vision,
prescription drug, hospitalization, short-term and long-term disability and
life insurance plans and programs, accidental death and dismemberment
protection, travel accident insurance, and any other employee benefit plan,
program or arrangement that may from time to time be made available to other
CWMJV senior executives generally, including any plans, programs or
arrangements that supplement the above-listed types of plans, programs or
arrangements, whether funded or unfunded, subject to the terms of the
applicable plan documents and generally applicable CWMJV policies, in each case
on terms and conditions that are no less favorable to him than those applying
to other CWMJV senior executives generally. To the extent that post-retirement
welfare and other benefits then exist, the Executive shall be entitled to
post-retirement welfare and other benefits on terms and conditions that are no
less favorable to him than those applying to other CWMJV senior executives
generally. Nothing in this Section 6(f) shall be construed to require
CWMJV to establish or maintain any particular

 

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employee or post-retirement benefit plan,
program or arrangement except as expressly set forth elsewhere in this
Agreement. CWMJV may, to the extent consistent with the foregoing, alter,
modify, supplement or delete its employee and post-retirement benefit plans at
any time as it sees fit without recourse by the Executive, subject to the terms
of this Section 6(f).

 

(g)                                 No Hedging. During the Term, Executive will not in any
way attempt to limit the financial risk with respect to stock options or
restricted stock which are not vested by means of any hedging (including
without limitation, selling short) or other techniques.

 

7.                                       Termination. Notwithstanding the foregoing, Executive’s employment hereunder may
be terminated during the Term under the following circumstances:

 

(a)                                  Death. Executive’s employment hereunder shall
terminate upon his death.

 

(b)                                 Disability. If, as a result of Executive’s incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of one hundred twenty (120)
consecutive days, and within thirty (30) days after written Notice of Termination
(as defined in Section 8(a)) is given after such one hundred twenty (120)
day consecutive period, Executive shall not have returned to the substantial
performance of his duties on a full-time basis, CWMJV shall have the right to
terminate Executive’s employment hereunder for “Disability”, and such
termination in and of itself shall not be, nor shall it be deemed to be, a
breach of this Agreement, but shall be subject to the terms of Section 9(c).

 

(c)                                  Cause. CWMJV shall have the right to terminate Executive’s
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement; provided that no
termination of the Executive’s employment hereunder for Cause shall be
effective as a termination for Cause unless the provisions of this Section shall
first have been complied with. The Executive shall be given written notice by
the Centro Chief Executive Officer of the intention to terminate him for Cause
(the “Notice of Intention”). The Notice of Intention shall state in reasonable
detail the particular circumstances that constitute the grounds on which the
proposed termination for Cause is based. The Executive shall have 10 days after
receiving the Notice of Intention in which to cure the purported grounds for
termination asserted therein. Termination for Cause shall be effective
immediately upon the Centro Chief Executive Officer’s issuance to Executive of
a written Termination for Cause Notice in the event that Executive fails to
cure the purported grounds for termination within such 10 day period. Any
allegation that Cause existed, or that cure was not achieved, shall be subject
to review, at the Executive’s election, through arbitration in accordance with Section 14
hereof.

 

For purposes of this Agreement, CWMJV shall
have “Cause” to terminate Executive’s employment upon Executive’s:

 

(i)                                          conviction of, or plea of guilty or nolo
contendere to, a felony; or

 

(ii)                                       willful and continued failure to use
reasonable best efforts to substantially perform his duties hereunder (other
than such failure resulting from Executive’s incapacity due to physical or
mental illness or subsequent to the

 

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issuance of a Notice of
Termination by Executive for Good Reason (as defined in Section 7(d))
after demand for substantial performance is delivered by CWMJV in writing that
specifically identifies the manner in which CWMJV believes Executive has
willfully and continually failed to use reasonable best efforts to substantially
perform his duties hereunder; or

 

(iii)                                    willful misconduct that has a materially
adverse effect on the Company or to any Affiliate.

 

For purposes of this Section 7(c),
no act, or failure to act, by Executive shall be considered “willful” unless
committed in bad faith and without a reasonable belief that the act or omission
was in the best interests of the Company or any Affiliates thereof; provided,
however, that the willful requirement outlined in paragraphs (ii) or (iii) above
shall be deemed to have occurred if the Executive’s action or non-action
continues for more than ten (10) days after Executive has received written
notice of the inappropriate action or non-action.

 

(d)                                 Good Reason. Executive may terminate his employment for
“Good Reason” within thirty (30) days after Executive has actual knowledge of
the occurrence, without the written consent of Executive, of one of the
following events that has not been cured within thirty (30) days after written
notice thereof has been given by Executive to the Company; provided, however,
that any allegation that Good Reason existed, or that cure was not achieved,
shall be subject to review, at CWMJV’s election, through arbitration in
accordance with Section 14 hereof:

 

(i)                                          the assignment to Executive of duties
materially and adversely inconsistent with Executive’s status as Centro US
Executive Vice President - Portfolio Management or a material and adverse
alteration in the nature of the following: Executive’s duties and/or
responsibilities, reporting obligations, titles or authority as Executive Vice
President - Portfolio Management;

 

(ii)                                       a reduction in Executive’s Base Salary or a
failure to pay any such amounts when due;

 

(iii)                                    a failure by the Company to pay the Stub STI
Payment due June 30, 2007 as described in Section 6(b) within 5
days following the execution of this agreement;

 

(iv)                                   a failure by the Company to pay either the
First Payment or the Second Payment pursuant to Section 10 when due:

 

(v)                                      the relocation of Executive’s own office
location to a location that is more than fifty (50) miles from New York, New
York;

 

(vi)                                   any purported termination of Executive’s
employment for Cause which is not effected pursuant to the procedures of Section 7(c) (and
for purposes of this Agreement, no such purported termination shall be
effective);

 

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(vii)                           CWMJV’s failure to pay or provide any
material employee benefits due to be provided to Executive under this Agreement
including, but not limited to, a failure to allow the Executive to participate
in all employee benefit plans, programs and arrangements contemplated under Section 6(f);

 

(viii)                        CWMJV’s failure to provide in all material
respects the indemnification set forth in Section 13 of this Agreement, or
to require any successor to assume and agree to perform this Agreement as set
forth in Section 15 of this Agreement;

 

(ix)                                a Change in Control (as defined below);

 

(x)                                   a reduction in the STI Range as provided for
in Section 6(b); or

 

(xi)                                the issuance of a notice by CWMJV to
Executive indicating that CWMJV has elected not to renew or extend the Term for
an Additional Period.

 

Executive’s right to
terminate his employment hereunder for Good Reason shall not be affected by his
incapacity due to physical or mental illness. Executive’s continued employment
during the thirty (30) day cure period referred to above in this paragraph (d) shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.

 

If Executive teiminates
employment hereunder for Good Reason and thereafter accepts reemployment by
CWMJV or any successor or Affiliate within six months of such termination of
employment, Executive’s termination of employment shall retroactively not be
considered a termination for Good Reason and Executive shall have no
entitlement to any payments or benefits pursuant to Section 9(a). To the
extent Executive has already received payments or benefits pursuant to Section 9(a),
Executive shall repay to such payments or benefits or make other equitable
restitution, as the Centro Board shall determine. It is the express intent of
the parties that the provisions of this paragraph survive termination of this
Agreement.

 

As provided in Section 2
of this Agreement, any similar provision contained in the Prior Employment
Agreement is specifically waived and notwithstanding the terms thereof shall
not survive the termination of the Prior Employment Agreement.

 

In furtherance of clause
(xii) above, the issuance of a notice by the Executive, indicating that the
Executive has elected not to renew or extend the Term for an Additional Period
shall not constitute Good Reason.

 

For purposes of this
Agreement, a “Change in Control” means the occurrence of one of the following
events:

 

(1)                                            any person or party not currently affiliated
with Centro gains control of fifty percent plus one share of Centro’s issued
Stapled Securities; however, that an event described in this paragraph (1) shall
not be deemed to be a

 

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Change in Control if any of
following becomes such a beneficial owner: (A) the Company or any
majority-owned entity (provided, that this exclusion applies solely to the
ownership levels of the Company or the majority-owned entity), (B) any
tax-qualified, broad-based employee benefit plan sponsored or maintained by the
Company or any majority-owned entity, (C) any underwriter temporarily
holding securities pursuant to an offering of such securities, or (D) Executive
or any group of persons including Executive (or any entity controlled by
Executive or any group of persons including Executive);

 

(2)                                            Centro sells, transfers or otherwise disposes
of more than a fifty percent share of CWMJV or any Centro Affiliate then
employing Executive or more than 50% of the assets of or aggregate interests in
Centro US provided that the acquisition of ownership or such assets by another
entity within Centro or affiliated with Centro or the assignment of Executive
to work for such entity or Affiliate shall not be considered a Change in
Control, but shall still be subject to the other provisions of Section 7(d) above.

 

If a Change in Control occurs, regardless of
whether Executive elects to terminate his employment for Good Reason, all
unvested stock options and restricted stock grants received by Executive,
regardless of any vesting conditions or performance and/or time hurdles, shall
automatically vest 100% upon the occurrence of such Change in Control. In
addition, in the event that Executive’s employment is terminated by CWMJV
without Cause in contemplation of a Change in Control, then notwithstanding any
other provision of this Agreement regarding the vesting of stock options and
restricted stock grants, then all unvested stock options and restricted stock
grants received by Executive, regardless of any vesting conditions or
performance and/or time hurdles, shall automatically vest 100% upon such
employment termination..

 

(e)                                  Without Good Reason. Executive shall have the right to terminate
his employment hereunder without Good Reason by providing CWMJV with a Notice
of Termination, and such termination shall not in and of itself be, nor shall
it be deemed to be, a breach of this Agreement.

 

8.                                       Termination Procedure.

 

(a)                                  Notice of Termination. Any termination of Executive’s employment by
CWMJV or by Executive during the Term (other than termination pursuant to Section 7(a))
shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 16. For purposes of this Agreement, a
“Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.

 

(b)                                 Date of Termination. “Date of Termination” shall mean (i) if
Executive’s employment is terminated by his death, the date of his death, (ii) if
Executive’s employment is terminated pursuant to Section 7(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), or (iii) if Executive’s employment is
terminated for any other

 

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reason (other than for Cause), the date on
which a Notice of Termination is given or any later date (within thirty (30)
days after the giving of such notice) set forth in such Notice of Termination.

 

9.                                       Compensation Upon Termination or During
Disability. In the event
Executive is disabled or his employment terminates during the Term, CWMJV shall
provide Executive with the payments and benefits set forth below; provided,
however, as a specific condition to being entitled to any payments or benefits
under this Section 9, Executive must have resigned all offices and
positions with Centro and all of its subsidiaries and Affiliates and must have
joined CWMJV in having executed a mutual release of Centro, CWMJV and their
respective Affiliates, in the form attached hereto as Exhibit C. Executive
acknowledges and agrees that the payments set forth in this Section 9
constitute liquidated damages for termination of his employment during the
Term.

 

(a)                                       Termination B yCWMJV
Without Cause or By Executive for Good Reason. If Executive’s employment is terminated by
CWMJV without Cause or by Executive for Good Reason:

 

(i)                                          CWMJV shall pay to Executive his Base Salary
and accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination; and

 

(ii)                                       CWMJV shall pay to Executive as soon as
practicable following the Date of Termination, a lump-sum payment equal to
twelve months of his Base Salary and the average STI received by Executive for
the two (2) preceding fiscal years ending on or prior to termination or,
where necessary to calculate the average due to a termination prior to the
completion of two (2) fiscal years with CWMJV, those bonus payments
received by Executive from New Plan Excel Realty Trust, Inc. during the
relevant period required to permit a two (2) year average calculation;

 

(iii)                                    CWMJV shall reimburse Executive pursuant to Section 6(d) for
reasonable expenses incurred, but not paid prior to such termination of
employment;

 

(iv)                                   Executive shall be entitled to any other
rights, compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of CWMJV;

 

(v)                                      Unless otherwise provided herein, unvested
stock options and restricted stock granted to Executive that vest based on
performance shall be forfeited immediately unless the Centro Board decides
otherwise;

 

(vi)                                   CWMJV shall maintain in full force and
effect, for the continued benefit of Executive, his spouse and his dependents
for a period of one (1) year following the Date of Termination the
medical, hospitalization, dental, and life insurance programs in which
Executive, his spouse and his dependents were participating immediately prior
to the Date of Termination at the level in effect

 

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and upon substantially the
same terms and conditions (including without limitation contributions required
by Executive for such benefits) as existed immediately prior to the Date of
Termination; provided, that if Executive, his spouse or his dependents cannot
continue to participate in the CWMJV programs providing such benefits, CWMJV
shall arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs (“Continued Benefits”),
provided, that such Continued Benefits shall terminate on the date or dates
Executive receives substantially equivalent coverage and benefits, without
waiting period or pre-existing condition limitations, under the plans and
programs of a subsequent employer (such coverage and benefits to be determine
on a coverage-by-coverage, or benefit-by-benefit, basis);

 

(vii)                                CWMJV shall pay to Executive as soon as
practicable following the Date of Termination the First Payment and the Second
Payment to the extent either has not already been received by the Executive.

 

The foregoing
notwithstanding, the total of the severance payments payable under this Section 9(a) shall
be reduced to the extent the payment of such amounts would cause Executive’s
total termination benefits (as determined by Executive’s tax advisor) to
constitute an “excess” parachute payment under Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”) and by reason of such
excess parachute payment Executive would be subject to an excise tax under Section 4999(a) of
the Code, but only if Executive determines that the after-tax value of the
termination benefits calculated with the foregoing restriction exceed those
calculated without the foregoing restriction.

 

(b)                                      Cause or By Executive
Without Good Reason. If
Executive’s employment is terminated by CWMJV for Cause or by Executive (other
than for Good Reason):

 

(i)                                          CWMJV shall pay Executive his Base Salary
and, to the extent required by law or CWMJV vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable following
the Date of Termination; and

 

(ii)                                       CWMJV shall reimburse Executive pursuant to Section 6(d) for
reasonable expenses incurred, but not paid prior to such termination of
employment, unless such termination resulted from a misappropriation of funds;
and

 

(iii)                                    Executive shall be entitled to any other
rights, compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of CWMJV;

 

(c)                                       Disability. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or
mental illness (“Disability Period”), Executive shall continue to receive his
full Base Salary set forth in Section 6(a) until his

 

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employment is terminated
pursuant to Section 7(b). In the event Executive’s employment is
terminated for Disability pursuant to Section 7(b):

 

(i)                                          CWMJV shall pay to Executive his Base Salary
and accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and continued Base Salary (as
provided for in Section 6(a)) for six (6) months; and

 

(ii)                                       CWMJV shall reimburse Executive pursuant to Section 6(d) for
reasonable expenses incurred, but not paid prior to such termination of employment;

 

(iii)                                    Unvested stock options and restricted stock
granted to Executive that vest based on performance shall be forfeited
immediately unless the Centro Board decides otherwise;

 

(iv)                                   Executive shall be entitled to any other
rights, compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of the
CWMJV;

 

(v)                                      CWMJV shall pay to Executive the First
Payment and the Second Payment-to the extent either has not already been received
by the Executive.

 

(d)                                      Death. If Executive’s employment is terminated by
his death:

 

(i)                                          CWMJV shall pay in a lump sum to Executive’s
beneficiary, legal representatives or estate, as the case may be, Executive’s
Base Salary through the Date of Termination and one (1) times Executive’s
annual rate of Base Salary;

 

(ii)                                       CWMJV shall reimburse Executive’s
beneficiary, legal representatives, or estate, as the case may be, pursuant to Section 6(d) for
reasonable expenses incurred, but not paid prior to such termination of
employment;

 

(iii)                                    Unvested stock options and restricted stock
granted to Executive that vest based on performance shall be forfeited
immediately unless the Centro Board decides otherwise;

 

(iv)                                   Executive’s beneficiary, legal
representatives or estate, as the case may be, shall be entitled to any other
rights, compensation and benefits as may be due to any such persons or estate
in accordance with the terms and provisions of any agreements, plans or
programs of CWMJV;

 

(v)                                      CWMJV shall pay to Executive the First
Payment and the Second Payment-to the extent either has not already been
received by the Executive.

 

10.                                 Retention Bonus.  CWMJV
agrees to pay the Executive $985,000 (Nine Hundred Eighty Five Thousand
Dollars) in consideration of Executive entering into this Agreement (the

 

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“Retention Bonus”). The
Retention Bonus shall be payable in two parts; (i) fifty percent (50%) of
the Retention Bonus shall be paid within 5 business days of the date of
execution of this Agreement (the “First Payment”), subject to the forfeiture rule described
in the next sentence, and (ii) except for such earlier payment as may be
required by Sections 9(a), 9(c) or 9(d), the remaining fifty percent (50%)
of the Retention Bonus shall be paid on April 20, 2008 (the “Second
Payment”). If Executive terminates his employment under Section 9(b) prior
to October 19, 2007, Executive promptly shall repay the amount of the
First Payment (and provided Executive has not terminated his employment under Section 9(b) prior
to October 19, 2007, the First Payment shall be irrevocable and not
subject to any repayment after October 19, 2007). In addition, if
Executive terminates employment under Section 9(b) prior to April 20,
2008, Executive shall forfeit the Second Payment. In addition, in the event
that CWMJV issues a notice to Executive indicating that CWMJV has elected not
to renew or extend the Term for an Additional Period such that this Agreement
will expire upon the one year anniversary of the date of this Agreement, then,
in addition to the other rights and benefits afforded Executive pursuant to Section 9(a),
the Second Payment shall be due and payable simultaneously with CWMJV providing
such non-renewal/non-extension notice.

 

11.         Mitigation. Executive shall not be required to
mitigate amounts payable under this Agreement by seeking other employment or
otherwise, and there shall be no offset against amounts due Executive under
this Agreement on account of subsequent employment. Additionally, amounts owed
to Executive under this Agreement shall not be offset by any claims CWMJV may
have against Executive, and CWMJV’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which CWMJV may have against
Executive or others.

 

12.         Confidential Information; Ownership of Documents;
Non-Competition.

 

(a)           Confidential
Information. Executive shall hold in a fiduciary capacity for the benefit of the
Company all trade secrets and confidential information, knowledge or data
relating to the Company and its businesses and investments, which shall have
been obtained by Executive during Executive’s employment by CWMJV and which is
not generally available public knowledge (other than by acts by Executive in
violation of this Agreement). Except as may be required or appropriate in
connection with his carrying out his duties under this Agreement, Executive
shall not, without the prior written consent of CWMJV or as may otherwise be
required by law or any legal process, or as is necessary in connection with any
adversarial proceeding against the Company (in which case Executive shall use
his reasonable best efforts in cooperating with the Company in obtaining a
protective order against disclosure by a court of competent jurisdiction),
communicate or divulge any such trade secrets, information, knowledge or data
to anyone other than the Company and those designated by the Company or on
behalf of the Company in the furtherance of its business or to perform duties
hereunder.

 

(b)           Removal
of Documents; Rights to Products.  All
records, files, drawings, documents, models, equipment, and the like relating
to the Company’s business, which Executive has control over shall not be
removed from the Company’s premises without its written consent, unless such
removal is in the furtherance of the Company’s business or is in

 

11

 

connection with Executive’s
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive’s employment
hereunder, or otherwise promptly after removal if such removal occurs following
telmination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company’s business developed
by him alone or in conjunction with others at any time while employed by the
Company.

 

(c)           Injunctive
Relief. In the event of
a breach or threatened breach of this Section 12, Executive agrees that
CWMJV shall be entitled to injunctive relief in a court of appropriate
jurisdiction to remedy any such breach or threatened breach, Executive
acknowledging that damages would be inadequate and insufficient.

 

(d)           Continuing
Operation. Except as
specifically provided in this Section 12, the termination of Executive’s
employment or of this Agreement shall have no effect on the continuing
operation of this Section 12.

 

13.           Indemnification.

 

(a)           General. CWMJV agrees that if Executive is made a party or a threatened to be
made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “Proceeding”), by reason of the fact that
Executive is or was a trustee, director or officer of the Company or any
subsidiary of the Company or is or was serving at the request of the Company or
any subsidiary as a trustee, director, officer, member, employee or agent of
another corporation or a partnership, joint venture, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a trustee, director, officer, member, employee or agent while, serving
as a trustee, director, officer, member, employee or agent, Executive shall be
indemnified and held harmless by the Company to the same extent as other
officers and directors, as in effect from time to time, against all Expenses
incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if Executive has ceased to
be an officer, director, trustee or agent, or is no longer employed by the
Company and shall inure to the benefit of his heirs, executors and
administrators.

 

(b)           Expenses. As used in this Agreement, the term “Expenses” shall include, without
limitation, damages, losses, judgments, liabilities, fines, penalties, excise
taxes, settlements, and costs, attorneys’ fees, accountants’ fees, and
disbursements and costs of attachment or similar bonds, investigations, and any
expenses of establishing a fight to indemnification under this Agreement.

 

(c)           Enforcement. If a claim or request under this Agreement is not paid by CWMJV or on
its behalf, within thirty (30) days after a written claim or request has been
received by CWMJV, Executive may at any time thereafter bring suit against
CWMJV to recover the unpaid amount of the claim or request and, if Executive
prevails in respect to the material issues, Executive shall be entitled to be
paid also the Expenses of prosecuting such suit. All obligations for
indemnification hereunder shall be subject to, and paid in accordance with,
applicable New York law.

 

12

 

(d)           Partial Indemnification. If Executive is entitled under any provision
of this Agreement to indemnification by CWMJV for some or a portion of any
Expenses, but not, however, for the total amount thereof, CWMJV, shall
nevertheless indemnify Executive for the portion of such Expenses to which
Executive is entitled.

 

(e)           Advances of Expenses. Expenses incurred by Executive in connection
with any Proceeding shall be paid by CWMJV in advance upon request of Executive
that CWMJV pay such Expenses; but only in the event that Executive shall have
delivered in writing to CWMJV (i) an undertaking to reimburse CWMJV for
Expenses with respect to which Executive is not entitled to indemnification and
(ii) an affirmation of his good faith belief that the standard of conduct
necessary for indemnification by CWMJV has been met.

 

(f)            Notice of Claim. Executive shall give to CWMJV notice of any
claim made against him for which indemnification will or could be sought under
this Agreement. In addition, Executive shall give CWMJV such information and
cooperation as it may reasonably require and as shall be within Executive’s
power and at such times and places as are convenient for Executive.

 

(g)           Defense of Claim.
With respect to any Proceeding as to which Executive notifies CWMJV of the
commencement thereof:

 

(i)            CWMJV will be entitled to
participate therein at its own expense; and

 

(ii)           Except as otherwise provided below,
to the extent that it may wish, CWMJV will be entitled to assume the defense
thereof, with counsel reasonably satisfactory to Executive, which in CWMJV’s
sole discretion may be regular counsel to CWMJV and may be counsel to other
officers and directors of CWMJV or any subsidiary. Executive also shall have
the right to employ his own counsel in such action, suit or proceeding if he
reasonably concludes that failure to do so would involve a conflict of interest
between CWMJV and Executive, and under such circumstances the fees and expenses
of such counsel shall be at the expense of CWMJV.

 

(iii)          CWMJV shall not be liable to indemnify
Executive under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. CWMJV shall not settle any
action or claim in any manner which would impose any penalty or limitation on
Executive without Executive’s written consent. Neither CWMJV nor Executive will
unreasonably withhold or delay their consent to any proposed, settlement.

 

(h)           Non-exclusivity.
The right to indemnification and the payment of expenses incurred in defending
a Proceeding in advance of its final disposition conferred in this Section 13
shall not be exclusive of any other right which Executive may have or hereafter
may acquire under any statute, provision of the declaration of trust or
certificate of incorporation or by-laws of CWMJV or any subsidiary, agreement,
vote of shareholders or disinterested directors or trustees or otherwise.

 

13

 

14.         Disputes

 

Any claim arising out of or
relating to this Agreement, any other agreement between the Executive and
Company or its Affiliates, the Executive’s employment with or any termination
thereof (collectively, “Covered
Claims”) shall (except to
the extent otherwise provided in Section 12(c) hereof with respect to
certain requests for injunctive relief) be resolved by binding confidential
arbitration, to be held in New York, New York in accordance with the Commercial
Arbitration Rules (and not the National Rules for Resolution of
Employment Disputes) of the American Arbitration Association and this Section 14
and each of CWMJV, Centro and Executive submits to jurisdiction in New York,
New York for such arbitration. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
CWMJV shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive prevails in respect of the material issues in dispute of Executive’s
claims brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent CWMJV receives reasonable
written evidence of such fees and expenses.

 

15.         Successors; Binding Agreement.

 

(a)           Company’s Successors. No rights or obligations of CWMJV under this
Agreement may be assigned or transferred except that CWMJV will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of CWMJV
or Centro to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that CWMJV and/or Centro would be required to
perform it if no such succession had taken place. As used in this Agreement,
“Company” or “CWMJV” shall mean the Company or CWMJV, respectively, as herein
before defined and any successor to its business and/or assets (by merger,
purchase or otherwise) which executes and delivers the agreement provided for
in this Section 15 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.

 

(b)           Executive’s Successors. No rights or obligations of Executive under
this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive’s death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive’s beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive’s interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive’s death by giving CWMJV
written notice thereof. In the event of Executive’s death or a judicial
deteimination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in

 

14

 

accordance with the terms of
this Agreement to such person or persons so appointed in writing by Executive,
or otherwise to his legal representatives or estate.

 

16.           Notice.   All
notices or other communications which are required or permitted hereunder shall
be in writing and sufficient if delivered personally, or sent by
nationally-recognized, overnight courier or by registered or certified mail,
return receipt requested and postage prepaid, addressed as follows:

 

If to Executive:

Mr. Leonard Brumberg

c/o Centro Watt Management
Joint Venture 2 LP

420 Lexington Avenue

7th Floor

New York, NY 10070

 

If to Centro:

Centro Properties Group

Level 3, 235 Springvale Road

Glen Waverley, VIC 3150

AUSTRALIA

Attention: Andrew T. Scott

 

15

 

If to CWMJV:

Centro Watt Management Joint
Venture 2 LP

420 Lexington Avenue

7th Floor

New York, NY 10070

Attention Steven F. Siegel

 

or to such other address as any party may
have furnished to the others in writing in accordance herewith. All such
notices and other communications shall be deemed to have been received (a) in
the case of personal delivery, on the date of such delivery, (b) in the
case of delivery by nationally-recognized, overnight courier, on the business
day following dispatch and (c) in the case of mailing, on the third
business day following such mailing.

 

17.         Miscellaneous. No provisions of this Agreement may be
amended, modified, or waived unless such amendment or modification is agreed to
in writing signed by Executive and by a duly authorized officer of CWMJV, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive’s termination of
employment and the termination of this Agreement to the extent necessary for
the intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of New York without regard to its conflicts
of law principles.

 

18.         Jurisdiction. Subject to the obligations with respect
to arbitration as provided in Section 14 hereof, CWMJV, Centro and
Executive each submits to the jurisdiction of any New York State Court or
Federal Court of the United States of America sitting in the borough of
Manhattan, and any appellate court from any such court, in any suit, action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each hereby agrees that all claims in respect
of any such suit, action or proceeding shall be brought in and may be heard and
determined in such New York State Court or, to the extent permitted by law, in
such Federal Court. CWMJV, Centro and Executive each waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any New York State Court or Federal
Court sitting in the borough of Manhattan..

 

19.         Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.

 

20.         Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.

 

16

 

21.         Entire Agreement.
This Agreement sets forth the entire agreement of the parties hereto in respect
of the subject matter contained herein and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, director, employee or
representative of any party hereto in respect of such subject matter. Any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled.

 

22.         Withholding. All
payments hereunder shall be subject to any required withholding of Federal,
state and local taxes pursuant to any applicable law or regulation.

 

23.         Noncontravention.  CWMJV represents that CWMJV is not prevented
from entering into, or performing this Agreement by the terms of any law,
order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a
material adverse effect on CWMJV’s ability to enter into or perform this
Agreement. Executive represents to CWMJV that he is not a party to any contract
that would preclude him from accepting employment as Chief Executive Officer of
Centro US and he has no reason to believe that accepting employment as Chief
Executive Officer of Centro US would result in a disclosure of any confidential
information of any prior employer.

 

24.         Section Headings.
The section headings in this Agreement are for convenience of reference only,
and they form no part of this Agreement and shall not affect its
interpretation.

 

25.         Centro Properties Group. Centro is executing this Agreement as a guarantor
of all obligations of CWMJV hereunder and by its execution hereof agrees to all
of the terms and conditions of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.

 

	
   

  	
  CENTRO PROPERTIES GROUP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Andrew T. Scott

  
	
   

  	
   

  	
  Name: Andrew T. Scott

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  CENTRO WATT MANAGEMENT JOINT VENTURE 2 LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew T. Scott

  
	
   

  	
   

  	
  Name: Andrew T. Scott

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  Centro Properties Group

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ LEONARD
  BRUMBERG

  
	
   

  	
  LEONARD
  BRUMBERG

  

 

17Exhibit 10.31

 

AXT, Inc.

 

2007 Equity Incentive Plan

 

(As Amended Through December 8,
2008)

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Establishment, Purpose
  and Term of Plan

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Establishment

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Purpose

  	
   

  	
  1

  
	
   

  	
  1.3

  	
  Term of Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions and
  Construction

  	
   

  	
  1

  
	
   

  	
  2.1

  	
  Definitions

  	
   

  	
  1

  
	
   

  	
  2.2

  	
  Construction

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  	
   

  	
  7

  
	
   

  	
  3.1

  	
  Administration by the
  Committee

  	
   

  	
  7

  
	
   

  	
  3.2

  	
  Authority of Officers

  	
   

  	
  7

  
	
   

  	
  3.3

  	
  Administration with
  Respect to Insiders

  	
   

  	
  8

  
	
   

  	
  3.4

  	
  Committee Complying
  with Section 162(m)

  	
   

  	
  8

  
	
   

  	
  3.5

  	
  Powers of the Committee

  	
   

  	
  8

  
	
   

  	
  3.6

  	
  Indemnification

  	
   

  	
  9

  
	
   

  	
  3.7

  	
  Arbitration

  	
   

  	
  10

  
	
   

  	
  3.8

  	
  Repricing Prohibited

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Shares Subject to Plan

  	
   

  	
  10

  
	
   

  	
  4.1

  	
  Maximum Number of
  Shares Issuable

  	
   

  	
  10

  
	
   

  	
  4.2

  	
  Adjustments for Changes
  in Capital Structure

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Eligibility and Award
  Limitations

  	
   

  	
  11

  
	
   

  	
  5.1

  	
  Persons Eligible for
  Awards

  	
   

  	
  11

  
	
   

  	
  5.2

  	
  Participation

  	
   

  	
  11

  
	
   

  	
  5.3

  	
  Incentive Stock Option
  Limitations

  	
   

  	
  11

  
	
   

  	
  5.4

  	
  Award Limits

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Terms and Conditions of
  Options

  	
   

  	
  13

  
	
   

  	
  6.1

  	
  Exercise Price

  	
   

  	
  13

  
	
   

  	
  6.2

  	
  Exercisability and Term
  of Options

  	
   

  	
  13

  
	
   

  	
  6.3

  	
  Payment of Exercise
  Price

  	
   

  	
  14

  
	
   

  	
  6.4

  	
  Effect of Termination
  of Service

  	
   

  	
  14

  
	
   

  	
  6.5

  	
  Transferability of
  Options

  	
   

  	
  15

  

 

i

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Terms and Conditions of
  Stock Appreciation Rights

  	
   

  	
  15

  
	
   

  	
  7.1

  	
  Types of SARs
  Authorized

  	
   

  	
  15

  
	
   

  	
  7.2

  	
  Exercise Price

  	
   

  	
  15

  
	
   

  	
  7.3

  	
  Exercisability and Term
  of SARs

  	
   

  	
  16

  
	
   

  	
  7.4

  	
  Deemed Exercise of SARs

  	
   

  	
  16

  
	
   

  	
  7.5

  	
  Effect of Termination
  of Service

  	
   

  	
  16

  
	
   

  	
  7.6

  	
  Nontransferability of
  SARs

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Terms and Conditions of
  Restricted Stock Awards

  	
   

  	
  16

  
	
   

  	
  8.1

  	
  Types of Restricted
  Stock Awards Authorized

  	
   

  	
  17

  
	
   

  	
  8.2

  	
  Purchase Price

  	
   

  	
  17

  
	
   

  	
  8.3

  	
  Purchase Period

  	
   

  	
  17

  
	
   

  	
  8.4

  	
  Vesting and
  Restrictions on Transfer

  	
   

  	
  17

  
	
   

  	
  8.5

  	
  Voting Rights;
  Dividends and Distributions

  	
   

  	
  17

  
	
   

  	
  8.6

  	
  Effect of Termination
  of Service

  	
   

  	
  17

  
	
   

  	
  8.7

  	
  Nontransferability of
  Restricted Stock Award Rights

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Terms and Conditions of
  Performance Awards

  	
   

  	
  18

  
	
   

  	
  9.1

  	
  Types of Performance
  Awards Authorized

  	
   

  	
  18

  
	
   

  	
  9.2

  	
  Initial Value of
  Performance Shares and Performance Units

  	
   

  	
  18

  
	
   

  	
  9.3

  	
  Establishment of
  Performance Period, Performance Goals and Performance Award Formula

  	
   

  	
  18

  
	
   

  	
  9.4

  	
  Measurement of
  Performance Goals

  	
   

  	
  19

  
	
   

  	
  9.5

  	
  Settlement of
  Performance Awards

  	
   

  	
  20

  
	
   

  	
  9.6

  	
  Voting Rights; Dividend
  Equivalent Rights and Distributions

  	
   

  	
  20

  
	
   

  	
  9.7

  	
  Effect of Termination
  of Service

  	
   

  	
  21

  
	
   

  	
  9.8

  	
  Nontransferability of
  Performance Awards

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Terms and Conditions of
  Restricted Stock Unit Awards

  	
   

  	
  22

  
	
   

  	
  10.1

  	
  Grant of Restricted
  Stock Unit Awards

  	
   

  	
  22

  
	
   

  	
  10.2

  	
  Vesting

  	
   

  	
  22

  
	
   

  	
  10.3

  	
  Voting Rights, Dividend
  Equivalent Rights and Distributions

  	
   

  	
  22

  
	
   

  	
  10.4

  	
  Effect of Termination
  of Service

  	
   

  	
  23

  

 

ii

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.5

  	
  Settlement of
  Restricted Stock Unit Awards

  	
   

  	
  23

  
	
   

  	
  10.6

  	
  Nontransferability of
  Restricted Stock Unit Awards

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Deferred Compensation
  Awards

  	
   

  	
  23

  
	
   

  	
  11.1

  	
  Establishment of
  Deferred Compensation Award Programs

  	
   

  	
  23

  
	
   

  	
  11.2

  	
  Terms and Conditions of
  Deferred Compensation Awards

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Other Stock-Based
  Awards

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Effect of Change in
  Control on Awards

  	
   

  	
  25

  
	
   

  	
  13.1

  	
  Accelerated Vesting

  	
   

  	
  25

  
	
   

  	
  13.2

  	
  Assumption or
  Substitution

  	
   

  	
  26

  
	
   

  	
  13.3

  	
  Effect of Change in
  Control on Restricted Stock and Other Type of Awards

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Compliance with
  Securities Law

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Compliance with
  Section 409A

  	
   

  	
  27

  
	
   

  	
  15.1

  	
  Awards Subject to
  Section 409A

  	
   

  	
  27

  
	
   

  	
  15.2

  	
  Deferral and/or
  Distribution Elections

  	
   

  	
  27

  
	
   

  	
  15.3

  	
  Subsequent Elections

  	
   

  	
  28

  
	
   

  	
  15.4

  	
  Payments Pursuant to
  Deferral Elections

  	
   

  	
  28

  
	
   

  	
  15.5

  	
  Unforeseeable Emergency

  	
   

  	
  29

  
	
   

  	
  15.6

  	
  Disabled

  	
   

  	
  29

  
	
   

  	
  15.7

  	
  Death

  	
   

  	
  30

  
	
   

  	
  15.8

  	
  Prohibition of
  Acceleration of Payments

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Tax Withholding

  	
   

  	
  30

  
	
   

  	
  16.1

  	
  Tax Withholding in
  General

  	
   

  	
  30

  
	
   

  	
  16.2

  	
  Withholding in Shares

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Amendment or
  Termination of Plan

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Miscellaneous
  Provisions

  	
   

  	
  31

  
	
   

  	
  18.1

  	
  Repurchase Rights

  	
   

  	
  31

  
	
   

  	
  18.2

  	
  Provision of
  Information

  	
   

  	
  31

  
	
   

  	
  18.3

  	
  Rights as Employee,
  Consultant or Director

  	
   

  	
  31

  
	
   

  	
  18.4

  	
  Rights as a Stockholder

  	
   

  	
  31

  

 

iii

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.5

  	
  Fractional Shares

  	
   

  	
  32

  
	
   

  	
  18.6

  	
  Severability

  	
   

  	
  32

  
	
   

  	
  18.7

  	
  Beneficiary Designation

  	
   

  	
  32

  
	
   

  	
  18.8

  	
  Unfunded Obligation

  	
   

  	
  32

  

 

iv

 

AXT, Inc.

2007
Equity Incentive Plan

(As Amended Through December       ,
2008)

 

1.                                       ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

 

1.1                                 Establishment.  The AXT, Inc. 2007 Equity Incentive Plan
(the “Plan”) is hereby adopted April 30, 2007
subject to approval by the stockholders of the Company (the date of such
approval, the “Effective Date”).  The Plan is an amendment and restatement of
the AXT, Inc. 1997 Stock Option Plan. 
An Award under the Plan shall be subject to the terms of the Plan and
governing Agreements in effect on the date of the Award’s grant.

 

1.2                                 Purpose.  The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract and retain the best qualified personnel to perform
services for the Participating Company Group, by motivating such persons to
contribute to the growth and profitability of the Participating Company Group,
by aligning their interests with interests of the Company’s stockholders, and
by rewarding such persons for their services by tying a significant portion of
their total compensation package to the success of the Company.  The Plan seeks to achieve this purpose by
providing for Awards in the form of Options, Stock Appreciation Rights,
Restricted Stock Awards, Performance Shares, Performance Units, Restricted
Stock Units, Deferred Compensation Awards and other Stock-Based Awards as
described below.

 

1.3                                 Term of Plan.  The
Plan shall continue in effect until the earlier of its termination by the Board
or the date on which all of the shares of Stock available for issuance under
the Plan have been issued and all restrictions on such shares under the terms
of the Plan and the agreements evidencing Awards granted under the Plan have
lapsed.  However, Awards shall not be
granted later than ten (10) years from the Effective Date.  The Company intends that the Plan comply with
Section 409A of the Code (including any amendments to or replacements of
such section), and the Plan shall be so construed.

 

2.                                       DEFINITIONS AND CONSTRUCTION.

 

2.1                                 Definitions.  Whenever
used herein, the following terms shall have their respective meanings set forth
below:

 

(a)                                  “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company
directly, or indirectly through one or more intermediary entities.  For this purpose, the term “control”
(including the term “controlled by”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

 

1

 

(b)                                 “Award” means any Option, SAR,
Restricted Stock Award, Performance Share, Performance Unit, Restricted Stock
Unit or Deferred Compensation Award or other Stock-Based Award granted under
the Plan.

 

(c)                                  “Award Agreement” means a written
agreement between the Company and a Participant setting forth the terms,
conditions and restrictions of the Award granted to the Participant.

 

(d)                                 “Board” means the
Board of Directors of the Company.

 

(e)                                  “Change in Control” means, unless
such term or an equivalent term is otherwise defined with respect to an Award
by the Participant’s Award Agreement or written contract of employment or
service, the occurrence of any of the following:

 

(i)                                     an
Ownership Change Event or a series of related Ownership Change Events
(collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction, in substantially the same proportions as
their ownership of shares of the Company’s voting stock immediately before the
Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting securities
of the Company or, in the case of an Ownership Change Event described in Section 2.1(y)(iii),
the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or

 

(ii)                                  the
liquidation or dissolution of the Company.

 

For
purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through one
or more subsidiary corporations or other business entities.  The Board shall have the right to determine
whether multiple sales or exchanges of the voting securities of the Company or
multiple Ownership Change Events are related, and its determination shall be
final, binding and conclusive.

 

(f)                                    “Code” means the
Internal Revenue Code of 1986, as amended, and any applicable regulations or
administrative guidelines promulgated thereunder.

 

(g)                                 “Committee” means the
Compensation Committee or other committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the
Board.  If no committee of the Board has
been appointed to administer the Plan, the Board shall exercise all of the
powers of the Committee granted herein,
and, in any event, the Board may in its discretion exercise any or all of such
powers, provided, however, that any
discretionary grants to non-Employee Directors shall only be made by a Board
committee comprised solely of independent directors..  The Committee shall have the exclusive
authority to administer the Plan and shall have all of the powers granted
herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

 

2

 

(h)                                 “Company” means AXT, Inc.,
a Delaware corporation, or any Successor.

 

(i)                                     “Consultant” means a
person engaged to provide consulting or advisory services (other than as an
Employee or a member of the Board) to a Participating Company.

 

(j)                                     “Deferred Compensation Award” means an award of Stock Units
granted to a Participant pursuant to Section 11 of the Plan.

 

(k)                                  “Director” means a member of the
Board or of the board of directors of any Participating Company.

 

(l)                                     “Disability” means the
permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of
the Code.

 

(m)                               “Dividend Equivalent” means a
credit, made at the discretion of the Committee or as otherwise provided by the
Plan, to the account of a Participant in an amount equal to the cash dividends
paid on one share of Stock for each share of Stock represented by an Award held
by such Participant.

 

(n)                                 “Employee” means any
person treated as an employee (including an Officer or a member of the Board
who is also treated as an employee) in the records of a Participating Company
and, with respect to any Incentive Stock Option granted to such person, who is
an employee for purposes of Section 422 of the Code; provided, however,
that neither service as a member of the Board nor payment of a director’s fee
shall be sufficient to constitute employment for purposes of the Plan.  The Company shall determine in good faith and
in the exercise of its discretion whether an individual has become or has
ceased to be an Employee and the effective date of such individual’s employment
or termination of employment, as the case may be.  For purposes of an individual’s rights, if
any, under the Plan as of the time of the Company’s determination, all such
determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.

 

(o)                                 “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

 

(p)                                 “Fair Market Value” means, as
of any date, the value of a share of Stock or other property as determined by
the Committee, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:

 

(i)                                     Except
as otherwise determined by the Committee, if, on such date, the Stock is listed
on a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing price of a share of Stock as
quoted on such national or regional securities exchange or market system
constituting the primary market for the Stock on the day of determination, as
reported in The Wall Street Journal
or such other source as the Company deems reliable.  If there is no such closing price on the day
of

 

3

 

determination, the Fair Market Value of a share of Stock
under this Section 2.1(p)(i) shall be the closing price of a share of
Stock on the next trading day following the day of determination.

 

(ii)                                  Notwithstanding
the foregoing, the Committee may, in its discretion, determine the Fair Market
Value on the basis of the closing, high, low or average sale price of a share
of Stock or the actual sale price of a share of Stock received by a
Participant, on such date, the preceding trading day, the next succeeding
trading day or an average determined over a specified period of trading days
that is within thirty (30) days before or thirty (30) days after such date,
provided that, with respect to the grant of an Option or SAR, the commitment to
grant such Award based on such valuation method must be irrevocable before the
beginning of the specified period.  The
Committee may vary its method of determination of the Fair Market Value as
provided in this Section for different purposes under the Plan to the
extent consistent with the requirements of Section 409A.

 

(iii)                               If, on such date, the
Stock is not listed on a national or regional securities exchange or market
system, the Fair Market Value of a share of Stock shall be as determined by the
Committee in good faith without regard to any restriction other than a restriction
which, by its terms, will never lapse, and in a manner consistent with the
requirements of Section 409A.

 

(q)                                 “Incentive Stock Option” means an Option intended to be (as
set forth in the Award Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.

 

(r)                                    “Insider” means an Officer, a Director or any other person
whose transactions in Stock are subject to Section 16 of the Exchange Act.

 

(s)                                  “Insider Trading” means the written policy of the Company
pertaining to the purchase, sale, transfer or other disposition of the Company’s
equity securities by Directors, Officers, Employees or other service providers
who may possess material, nonpublic information regarding the Company or its
securities.

 

(t)                                    “Non-Control Affiliate” means any
entity in which any Participating Company has an ownership interest and which
the Committee shall designate as a Non-Control Affiliate.

 

(u)                                 “Nonemployee
Director” means a Director who is not an Employee.

 

(v)                                 “Nonstatutory Stock
Option”
means an Option not intended to be (as set forth in the Award Agreement) an
incentive stock option within the meaning of Section 422(b) of the
Code.

 

(w)                               “Officer” means any person
designated by the Board as an officer of the Company.

 

4

 

(x)                                   “Option” means the
right to purchase Stock at a stated price for a specified period of time
granted to a Participant pursuant to Section 6 of the Plan.  An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.

 

(y)                                 “Option Expiration Date” means the
date of expiration of the Option’s term as set forth in the Award Agreement.

 

(z)                                   An
“Ownership Change Event” shall be
deemed to have occurred if any of the following occurs with respect to the
Company:  (i) the direct or indirect
sale or exchange in a single or series of related transactions by the
stockholders of the Company of more than fifty percent (50%) of the voting
stock of the Company; (ii) a merger or consolidation in which the Company
is a party; or (iii) the sale, exchange, or transfer of all or
substantially all, as determined by the Board in its discretion, of the assets
of the Company.

 

(aa)                            “Parent Corporation” means any
present or future “parent corporation” of the Company, as defined in Section 424(e) of
the Code.

 

(bb)                          “Participant” means any eligible
person who has been granted one or more Awards.

 

(cc)                            “Participating
Company”
means the Company or any Parent Corporation, Subsidiary Corporation or
Affiliate.

 

(dd)                          “Participating
Company Group” means, at any point in time, all
entities collectively which are then Participating Companies.

 

(ee)                            “Performance Award” means an Award
of Performance Shares or Performance Units.

 

(ff)                                “Performance Award Formula” means,
for any Performance Award, a formula or table established by the Committee
pursuant to Section 9.3 of the Plan which provides the basis for computing
the value of a Performance Award at one or more threshold levels of attainment
of the applicable Performance Goal(s) measured as of the end of the
applicable Performance Period.

 

(gg)                          “Performance Goal” means a
performance goal established by the Committee pursuant to Section 9.3 of
the Plan.

 

(hh)                          “Performance Period” means a period
established by the Committee pursuant to Section 9.3 of the Plan at the
end of which one or more Performance Goals are to be measured.

 

(ii)                                  “Performance Share” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 9
of the Plan to receive a payment equal to the value of a Performance Share, as
determined by the Committee, based on performance.

 

5

 

(jj)                                  “Performance Unit” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 9
of the Plan to receive a payment equal to the value of a Performance Unit, as
determined by the Committee, based upon performance.

 

(kk)                            “Restricted Stock Award” means an
Award of Restricted Stock.

 

(ll)                                  “Restricted Stock Unit” or “Stock Unit”
means a bookkeeping entry representing a right granted to a Participant
pursuant to Section 10 or Section 11 of the Plan, respectively, to
receive a share of Stock on a date determined in accordance with the provisions
of Section 10 or Section 11, as applicable, and the Participant’s
Award Agreement.

 

(mm)                      “Restriction Period” means the
period established in accordance with Section 8.4 of the Plan during which
shares subject to a Restricted Stock Award are subject to Vesting Conditions.

 

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

 

(oo)                          “SAR” or “Stock
Appreciation Right” means a bookkeeping entry representing, for
each share of Stock subject to such SAR, a right granted to a Participant
pursuant to Section 7 of the Plan to receive payment in any combination of
shares of Stock or cash of an amount equal to the excess, if any, of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price.

 

(pp)                          “Section 409A” means Section 409A of the Code.

 

(qq)                          “Section 409A Deferred Compensation” means
compensation provided pursuant to an Award that constitutes deferred
compensation subject to and not exempted from the requirements of Section 409A.

 

(rr)                                “Section 162(m)” means Section 162(m) of the
Code.

 

(ss)                            “Securities Act” means the
Securities Act of 1933, as amended.

 

(tt)                                “Service” means a
Participant’s employment or service with the Participating Company Group,
whether in the capacity of an Employee, a Director or a Consultant.  Unless otherwise provided by the Committee, a
Participant’s Service shall not be deemed to have terminated merely because of
a change in the capacity in which the Participant renders such Service or a
change in the Participating Company for which the Participant renders such
Service, provided that there is no interruption or termination of the
Participant’s Service.  Furthermore, a
Participant’s Service shall not be deemed to have terminated if the Participant
takes any military leave, sick leave, or other bona fide leave of absence
approved by the Company.  However, if any
such leave taken by a Participant exceeds ninety (90) days, then on the
ninety-first (91st) day following the commencement of such leave the
Participant’s Service shall be deemed to have terminated, unless the
Participant’s right to return to Service is guaranteed by statute or
contract.  Notwithstanding the foregoing,
unless otherwise designated by the Company or required by law, a leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant’s Award Agreement. 
A Participant’s Service shall

 

6

 

be deemed to have terminated either upon an actual
termination of Service or upon the entity for which the Participant performs
Service ceasing to be a Participating Company. 
Subject to the foregoing, the Company, in its discretion, shall
determine whether the Participant’s Service has terminated and the effective
date of such termination.

 

(uu)                          “Stock” means the
common stock of the Company, as adjusted from time to time in accordance with Section 4.2
of the Plan.

 

(vv)                          “Stock-Based Awards” means any
award that is valued in whole or in part by reference to, or is otherwise based
on, the Stock, including dividends on the Stock, but not limited to those
Awards described in Sections 6 through 11 of the Plan.

 

(ww)                      “Subsidiary
Corporation”
means any present or future “subsidiary corporation” of the Company, as defined
in Section 424(f) of the Code.

 

(xx)                              “Successor” means a corporation into
or with which the Company is merged or consolidated or which acquires all or
substantially all of the assets of the Company and which is designated by the
Board as a Successor for purposes of the Plan.

 

(yy)                          “Ten Percent Owner” means a Participant who, at the time an
Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of
the Code.

 

(zz)                              “Vesting Conditions” mean those
conditions established in accordance with Section 8.4 or Section 10.2
of the Plan prior to the satisfaction of which shares subject to a Restricted
Stock Award or Restricted Stock Unit Award, respectively, remain subject to
forfeiture or a repurchase option in favor of the Company upon the Participant’s
termination of Service.

 

2.2                                 Construction. 
Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

 

3.                                       ADMINISTRATION.

 

3.1                                 Administration by the Committee.  The Plan shall be administered by the
Committee.  All questions of
interpretation of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Award.

 

3.2                                 Authority of Officers. 
Any Officer shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the Officer has apparent authority with respect to such matter, right,
obligation, determination or election.

 

7

 

3.3                                 Administration with Respect to Insiders. 
With respect to participation by Insiders in the Plan, at any time that
any class of equity security of the Company is registered pursuant to Section 12
of the Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.

 

3.4                                 Committee Complying with Section 162(m). 
While the Company is a “publicly held corporation” within the meaning of
Section 162(m), the Board may establish a Committee of “outside directors”
within the meaning of Section 162(m) to approve the grant of any
Award which might reasonably be anticipated to result in the payment of
employee remuneration that would otherwise exceed the limit on employee
remuneration deductible for income tax purposes pursuant to Section 162(m).

 

3.5                                 Powers of the Committee.  In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:

 

(a)                                  to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock or units to be subject to each Award;

 

(b)                                 to
determine the type of Award granted and to designate Options as Incentive Stock
Options or Nonstatutory Stock Options;

 

(c)                                  to
determine the Fair Market Value of shares of Stock or other property;

 

(d)                                 to
determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of
shares purchased pursuant to any Award, (ii) the method of payment for
shares purchased pursuant to any Award, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with Award, including
by the withholding or delivery of shares of Stock, (iv) the timing, terms
and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the Performance Award Formula and
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of
any Award, (vii) the effect of the Participant’s termination of Service on
any of the foregoing, and (viii) all other terms, conditions and
restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;

 

(e)                                  to
determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;

 

(f)                                    to
approve one or more forms of Award Agreement;

 

(g)                                 to
amend, modify, extend, cancel or renew any Award or to waive any restrictions
or conditions applicable to any Award or any shares acquired pursuant thereto;

 

8

 

(h)                                 to
accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;

 

(i)                                     without
the consent of the affected Participant and notwithstanding the provisions of
any Award Agreement to the contrary, to unilaterally substitute at any time a
Stock Appreciation Right providing for settlement solely in shares of Stock in
place of any outstanding Option, provided that such Stock Appreciation Right
covers the same number of shares of Stock and provides for the same exercise price
(subject in each case to adjustment in accordance with Section 4.2) as the
replaced Option and otherwise provides substantially equivalent terms and
conditions as the replaced Option, as determined by the Committee;

 

(j)                                     to
prescribe, amend or rescind rules, guidelines and policies relating to the
Plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards;

 

(k)                                  to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Committee may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law; and

 

(l)                                     to
delegate to any proper Officer the authority to grant one or more Awards,
without further approval of the Committee, to any person eligible pursuant to Section 5,
other than a person who, at the time of such grant, is an Insider; provided,
however, that (i) the exercise price per share of each such Option shall
be equal to the Fair Market Value per share of the Stock on the effective date
of grant, and (ii) each such Award shall be subject to the terms and
conditions of the appropriate standard form of Award Agreement approved by the
Committee and shall conform to the provisions of the Plan and such other
guidelines as shall be established from time to time by the Committee.

 

3.6                                 Indemnification.  In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys’ fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60)
days after the institution of such action, suit or

 

9

 

proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.

 

3.7                                 Arbitration.  Any
dispute or claim concerning any Awards granted (or not granted) pursuant to
this Plan and any other disputes or claims relating to or arising out of the
Plan shall be fully, finally and exclusively resolved by binding arbitration
conducted pursuant to the Commercial Arbitration Rules of the American
Arbitration Association.  By accepting an
Award, Participants and the Company waive their respective rights to have any
such disputes or claims tried by a judge or jury.

 

3.8                                 Repricing Prohibited. 
Without the affirmative vote of holders of a majority of the shares of
Stock cast in person or by proxy at a meeting of the stockholders of the
Company at which a quorum representing a majority of all outstanding shares of
Stock is present or represented by proxy, the Committee shall not approve a
program providing for either (a) the cancellation of outstanding Options
or SARs and the grant in substitution therefore of new Awards having a lower
exercise price or (b) the amendment of outstanding Options or SARs to
reduce the exercise price thereof.  This
paragraph shall not be construed to apply to the issuance or assumption of an
Award in a transaction to which Code section 424(a) applies, within the
meaning of Section 424 of the Code.

 

4.                                       SHARES SUBJECT TO PLAN.

 

4.1                                 Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2,
the maximum aggregate number of shares of Stock that may be issued under the
Plan shall be seven million five hundred fifty thousand (7,550,000) (including
the shares of Stock issuable under the Plan prior to the Effective Date) and
shall consist of authorized but unissued or reacquired shares of Stock or any
combination thereof.  Any shares of Stock
that are Subject to Awards of Options or SARs shall be counted against the
limit as one (1) share for every one (1) share granted.  Any shares of Stock that are subject to
Awards (other than Options or SARs) shall be counted against this limit as two (2) shares
for every one (1) share granted.  If
an outstanding Award for any reason expires or is terminated or canceled
without having been exercised or settled in full, or if shares of Stock
acquired pursuant to an Award subject to forfeiture or repurchase are forfeited
or repurchased by the Company, the shares of Stock allocable to the terminated
portion of such Award or such forfeited or repurchased shares of Stock shall
again be available for issuance under the Plan. 
When a SAR settled in shares of Stock is exercised, the total number of
shares subject to the SAR Agreement with respect to which the exercise occurs
shall count against the limit, regardless of the number of shares actually
issued in settlement of the SAR.  Shares
used to pay the exercise price of an option shall not again become available
for future grant or issuance under the Plan. 
Shares used to satisfy tax withholding obligations shall not become
available for future grant or issuance under the Plan.  To the extent an Award is settled in cash
rather than shares of Stock, such cash payment shall not reduce the number of
shares available for issuance under the Plan.

 

4.2                                 Adjustments for Changes in Capital Structure.  Subject to any
required action by the stockholders of the Company and the requirements of Section 409A
and 424 of the Code to the extent applicable, in the event of any change in the
Stock effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization,

 

10

 

reincorporation, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, split-up, split-off,
spin-off, combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number
and kind of shares subject to the Plan and to any outstanding Awards, in the
Award limits set forth in Section 5.4, and in the exercise or purchase
price per share under any outstanding Award in order to prevent dilution or
enlargement of Participants’ rights under the Plan.  For purposes of the foregoing, conversion of
any convertible securities of the Company shall not be treated as “effected
without receipt of consideration by the Company.”  If a majority of the shares which are of the
same class as the shares that are subject to outstanding Awards are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally
amend the outstanding Options to provide that such Options are exercisable for
New Shares.  In the event of any such
amendment, the number of shares subject to, and the exercise price per share
of, the outstanding Awards shall be adjusted in a fair and equitable manner as
determined by the Board, in its discretion. 
Any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number.  The Committee in its sole discretion, may
also make such adjustments in the terms of any Award to reflect, or related to,
such changes in the capital structure of the Company or distributions as it
deems appropriate, including modification of Performance Goals, Performance
Award Formulas and Performance Periods. 
The adjustments determined by the Committee pursuant to this Section 4.2
shall be final, binding and conclusive.

 

5.                                       ELIGIBILITY AND AWARD LIMITATIONS.

 

5.1                                 Persons Eligible for Awards.  Awards may be granted only to Employees,
Consultants and Directors.

 

5.2                                 Participation. 
Awards are granted solely at the discretion of the Committee, other than
Nonemployee Director Awards that may be granted by the Committee or a
subcommittee of independent members of the Board.  Eligible persons may be granted more than one
Award.  However, eligibility in
accordance with this Section shall not entitle any person to be granted an
Award, or, having been granted an Award, to be granted an additional Award.

 

5.3                                 Incentive Stock Option Limitations.

 

(a)                                  Persons Eligible.  An Incentive Stock Option may be granted only
to a person who, on the effective date of grant, is an Employee of the Company,
a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”).  Any person who is not an Employee of an
ISO-Qualifying Corporation on the effective date of the grant of an Option to
such person may be granted only a Nonstatutory Stock Option.

 

(b)                                 Fair Market Value Limitation.  To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred

 

11

 

Thousand Dollars ($100,000), the portion of such
options which exceeds such amount shall be treated as Nonstatutory Stock
Options.  For purposes of this Section,
options designated as Incentive Stock Options shall be taken into account in
the order in which they were granted, and the Fair Market Value of stock shall
be determined as of the time the option with respect to such stock is
granted.  If the Code is amended to
provide for a limitation different from that set forth in this Section, such
different limitation shall be deemed incorporated herein effective as of the
date and with respect to such Options as required or permitted by such
amendment to the Code.  If an Option is
treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option
in part by reason of the limitation set forth in this Section, the Participant
may designate which portion of such Option the Participant is exercising.  In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock Option
portion of the Option first.  Upon
exercise, shares issued pursuant to each such portion shall be separately
identified.

 

5.4                                 Award Limits.

 

(a)                                  Maximum Number of Shares Issuable
Pursuant to Incentive Stock Options. 
Subject to adjustment as provided in Section 4.2, the maximum
aggregate number of shares of Stock that may be issued under the Plan pursuant
to the exercise of Incentive Stock Options shall not exceed seven million five
hundred fifty thousand (7,550,000) shares. 
The maximum aggregate number of shares of Stock that may be issued under
the Plan pursuant to all Awards other than Incentive Stock Options shall be the
number of shares determined in accordance with Section 4.1, subject to adjustment
as provided in Section 4.2.

 

(b)                                 Limits on Full Value Awards.  Any Restricted Stock Awards, Restricted Stock
Unit Awards and Performance Awards (“Full Value Awards”)
which vest on the basis of the Participant’ continued Service shall not provide
for vesting which is any more rapid than annual pro rata vesting over a three (3) year
period and any Full Value Awards which vest upon the attainment of Performance
Goals shall provide for a Performance Period of at least twelve (12)
months.  There shall be no acceleration
of vesting of such Full Value Awards except in connection with death,
Disability or Change in Control.

 

(c)                                  Section 162(m) Award
Limits.  The following
limits shall apply to the grant of any Award if, at the time of grant, the
Company is a “publicly held corporation” within the meaning of Section 162(m).

 

(i)                                     Options and SARs.  Subject to adjustment as provided in Section 4.2,
no Employee shall be granted within any fiscal year of the Company one or more
Options or Freestanding SARs which in the aggregate are for more than five
hundred thousand (500,000) shares of Stock reserved for issuance under the
Plan.

 

(ii)                                  Restricted Stock, Restricted Stock Unit Awards and
Performance Shares.  Subject
to adjustment as provided in Section 4.2, no Employee shall be granted
within any fiscal year of the Company one or more Restricted Stock Awards or
Restricted Stock Unit Awards, subject to Vesting Conditions based on the
attainment of Performance Goals, or Performance Shares, for more than three
hundred thousand shares (300,000) shares of Stock in the aggregate under the
Plan.

 

12

 

(iii)                               Performance Units.  Subject to adjustment as provided in Section 4.2,
no Employee shall be granted Performance Units which could result in such
Employee receiving more than two million dollars ($2,000,000) for each full
fiscal year of the Company contained in the Performance Period for such
Award.  No Participant may be granted
more than one Performance Award for the same Performance Period.

 

6.                                       TERMS AND CONDITIONS OF OPTIONS.

 

Options shall be
evidenced by Award Agreements specifying the number of shares of Stock covered
thereby, in such form as the Committee shall from time to time establish.  No Option or purported Option shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award
Agreements evidencing Options may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:

 

6.1                                 Exercise Price.  The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option.  Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

 

6.2                                 Exercisability and Term of Options.

 

(a)                                  Option Vesting and Exercisability.  Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock
Option granted to a Ten Percent Owner shall be exercisable after the expiration
of five (5) years after the effective date of grant of such Option, and (c) no
Option shall become fully vested in a period of less than three (3) years
from the date of grant, other than in connection with a termination of Service
without cause or a Change in Control or in the case of an option granted to a
Nonemployee Director.  Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall terminate ten (10) years after
the effective date of grant of the Option, unless earlier terminated in
accordance with its provisions, or the terms of the Plan.

 

(b)                                 Participant Responsibility for Exercise of Option.  Each Participant is responsible for taking
any and all actions as may be required to exercise any Option in a timely
manner, and for properly executing any documents as may be required for the
exercise of an Option in accordance with such rules and procedures as may
be established from time to time.  By
signing an Option Agreement each Participant acknowledges that information

 

13

 

regarding the procedures and requirements for the
exercise of any Option is available upon such Participant’s request.  The Company shall have no duty or obligation
to notify any Participant of the expiration date of any Option.

 

6.3                                 Payment of Exercise Price.

 

(a)                                  Forms of Consideration Authorized.  Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check
or in cash equivalent, (ii) by tender to the Company, or attestation to
the ownership, of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price, (iii)   provided that the
Participant is an Employee, and not an Officer or Director (unless otherwise
not prohibited by law, including, without limitation, any regulation
promulgated by the Board of Governors of the Federal Reserve System) and in the
Company’s sole and absolute discretion at the time the Option is exercised, by
delivery of the Participant’s promissory note in a form approved by the Company
for the aggregate exercise price, provided that, if the Company is incorporated
in the State of Delaware, the Participant shall pay in cash that portion of the
aggregate exercise price not less than the par value of the shares being
acquired, (iv) by such other consideration as may be approved by the
Committee from time to time to the extent permitted by applicable law, or (v) by
any combination thereof.  The Committee
may at any time or from time to time grant Options which do not permit all of
the foregoing forms of consideration to be used in payment of the exercise
price or which otherwise restrict one or more forms of consideration.

 

(b)                                 Limitations on Forms of Consideration.

 

(i)                                     Tender of Stock. 
Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.

 

(ii)                                  Payment by Promissory Note. 
No promissory note shall be permitted if the exercise of an Option using
a promissory note would be a violation of any law.  Any permitted promissory note shall be on
such terms as the Committee shall determine. 
The Committee shall have the authority to permit or require the
Participant to secure any promissory note used to exercise an Option with the
shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company. 
Unless otherwise provided by the Committee, if the Company at any time
is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company’s securities, any promissory note
shall comply with such applicable regulations, and the Participant shall pay
the unpaid principal and accrued interest, if any, to the extent necessary to
comply with such applicable regulations.

 

6.4                                 Effect of Termination of Service.

 

(a)                                  Option Exercisability.  Subject to earlier termination of the Option
as otherwise provided herein and unless otherwise provided by the Committee, an
Option shall

 

14

 

be exercisable after a Participant’s termination of
Service only during the applicable time periods provided in the Award
Agreement.

 

(b)                                 Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, unless the
Committee provides otherwise in the Award Agreement, if the exercise of an
Option within the applicable time periods is prevented by the provisions of Section 14
below, the Option shall remain exercisable until three (3) months (or such
longer period of time as determined by the Committee, in its discretion) after
the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

 

(c)                                  Extension if Participant Subject to Section 16(b).  Notwithstanding the foregoing, if a sale
within the applicable time periods of shares acquired upon the exercise of the
Option would subject the Participant to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of
such shares by the Participant would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Participant’s termination of
Service, or (iii) the Option Expiration Date.

 

6.5                                 Transferability of Options. 
During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal
representative.  Prior to the issuance of
shares of Stock upon the exercise of an Option, the Option shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. 
Notwithstanding the foregoing, to the extent permitted by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such Option,
a Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.

 

7.                                       TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.

 

Stock Appreciation
Rights shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to
time establish.  No SAR or purported SAR
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement.  Award
Agreements evidencing SARs may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:

 

7.1                                 Types of SARs Authorized. 
SARs may be granted in tandem with all or any portion of a related
Option (a “Tandem SAR”) or may be
granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may be granted either
concurrently with the grant of the related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of such
related Option.

 

7.2                                 Exercise Price.  The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share
subject

 

15

 

to a Tandem SAR shall be the exercise price per share
under the related Option and (b) the exercise price per share subject to a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.

 

7.3                                 Exercisability and Term of SARs.

 

(a)                                  Tandem SARs.  Tandem SARs shall be exercisable only at the
time and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option.

 

(b)                                 Freestanding SARs.  Freestanding SARs
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Committee and set forth in the Award Agreement
evidencing such SAR; provided, however, that no Freestanding SAR shall be
exercisable after the expiration of ten (10) years after the effective
date of grant of such SAR.  No SAR shall
become fully vested in a period of less than three (3) years from the date
of grant, other than in connection with a termination of Service or a Change in
Control or in the case of an SAR granted to a Nonemployee Director.

 

7.4                                 Deemed Exercise of SARs. 
If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so exercised, would result in a payment to the holder of
such SAR, then any portion of such SAR which has not previously been exercised
shall automatically be deemed to be exercised as of such date with respect to
such portion.

 

7.5                                 Effect of Termination of Service.  Subject to earlier termination of the SAR as
otherwise provided herein and unless otherwise provided by the Committee in the
grant of an SAR and set forth in the Award Agreement, an SAR shall be
exercisable after a Participant’s termination of Service only as provided in
the Award Agreement.

 

7.6                                 Nontransferability of SARs. 
During the lifetime of the Participant, an SAR shall be exercisable only
by the Participant or the Participant’s guardian or legal representative.  Prior to the exercise of an SAR, the SAR
shall not be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution.

 

8.                                       TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.

 

Restricted Stock
Awards shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to
time establish.  No Restricted Stock
Award or purported Restricted Stock Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing
Restricted Stock Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

 

16

 

8.1                                 Types of Restricted
Stock Awards Authorized.  Restricted
Stock Awards may or may not require the payment of cash compensation for the
stock.  Restricted Stock Awards may be
granted upon such conditions as the Committee shall determine, including,
without limitation, upon the attainment of one or more Performance Goals
described in Section 9.4.  If either
the grant of a Restricted Stock Award or the lapsing of the Restriction Period
is to be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth
in Sections 9.3 through 9.5(a).

 

8.2                                 Purchase Price.  The purchase price, if any, for shares of
Stock issuable under each Restricted Stock Award and the means of payment shall
be established by the Committee in its discretion.

 

8.3                                 Purchase Period.  A Restricted Stock Award requiring the
payment of cash consideration shall be exercisable within a period established
by the Committee.

 

8.4                                 Vesting and Restrictions on
Transfer.  Shares issued pursuant to any Restricted
Stock Awards will be subject to Vesting Conditions as described in 5.4(b), and
may be based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 9.4, as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award.  During any Restriction Period in which shares
acquired pursuant to a Restricted Stock Award remain subject to Vesting
Conditions, such shares may not be sold, exchanged, transferred, pledged,
assigned or otherwise disposed of other than as provided in the Award Agreement
or as provided in Section 8.7.  Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder.

 

8.5                                 Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.4
and any Award Agreement, during the Restriction Period applicable to shares
subject to a Restricted Stock Award, the Participant shall have all of the
rights of a stockholder of the Company holding shares of Stock, including the
right to vote such shares and to receive all dividends and other distributions
paid with respect to such shares. 
However, in the event of a dividend or distribution paid in shares of
Stock or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.2, any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant is entitled by reason of the Participant’s Restricted
Stock Award shall be immediately subject to the same Vesting Conditions as the
shares subject to the Restricted Stock Award with respect to which such
dividends or distributions were paid or adjustments were made.

 

8.6                                 Effect of Termination of Service.  Unless otherwise provided
by the Committee in the grant of a Restricted Stock Award and set forth in the
Award Agreement, if a Participant’s Service terminates for any reason, whether
voluntary or involuntary (including the Participant’s death or disability),
then the Participant shall forfeit to the Company any shares acquired by the
Participant pursuant to a Restricted Stock Award which remain subject to
Vesting Conditions as of the date of the Participant’s termination of Service
in exchange for the payment of the purchase price, if any, paid by the
Participant.  The Company shall have the
right

 

17

 

to assign at any time any repurchase right it may
have, whether or not such right is then exercisable, to one or more persons as
may be selected by the Company.

 

8.7                                 Nontransferability of Restricted
Stock Award Rights.  Prior to the issuance of shares of Stock
pursuant to a Restricted Stock Award, rights to acquire such shares shall not
be subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or the laws of
descent and distribution.  All rights
with respect to a Restricted Stock Award granted to a Participant hereunder
shall be exercisable during his or her lifetime only by such Participant or the
Participant’s guardian or legal representative.

 

9.                                       TERMS AND CONDITIONS OF PERFORMANCE AWARDS.

 

Performance Awards
shall be evidenced by Award Agreements in such form as the Committee shall from
time to time establish.  No Performance
Award or purported Performance Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Performance
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:

 

9.1                                 Types of Performance Awards Authorized.  Performance Awards may be in the form of
either Performance Shares or Performance Units. 
Each Award Agreement evidencing a Performance Award shall specify the
number of Performance Shares or Performance Units subject thereto, the
Performance Award Formula, the Performance Goal(s) and Performance Period
applicable to the Award, and the other terms, conditions and restrictions of
the Award.

 

9.2                                 Initial Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in
granting a Performance Award, each Performance Share shall have an initial
value equal to the Fair Market Value of one (1) share of Stock, subject to
adjustment as provided in Section 4.2, on the effective date of grant of
the Performance Share.  Each Performance
Unit shall have an initial value determined by the Committee.  The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.

 

9.3                                 Establishment of Performance Period, Performance Goals and Performance
Award Formula.  In granting
each Performance Award, the Committee shall establish in writing the applicable
Performance Period, Performance Award Formula and one or more Performance Goals
which, when measured at the end of the Performance Period, shall determine on
the basis of the Performance Award Formula the final value of the Performance
Award to be paid to the Participant.  To
the extent compliance with the requirements under Section 162(m) with
respect to “performance-based compensation” is desired, the Committee shall
establish the Performance Goal(s) and Performance Award Formula applicable
to each Performance Award no later than the earlier of (a) the date ninety
(90) days after the

 

18

 

commencement of the applicable Performance Period or (b) the
date on which 25% of the Performance Period has elapsed, and, in any event, at
a time when the outcome of the Performance Goals remains substantially
uncertain.  Once established, the
Performance Goals and Performance Award Formula shall not be changed during the
Performance Period.  The Company shall
notify each Participant granted a Performance Award of the terms of such Award,
including the Performance Period, Performance Goal(s) and Performance
Award Formula.

 

9.4                                 Measurement of Performance Goals.  Performance Goals shall be established by the
Committee on the basis of targets to be attained (“Performance
Targets”) with respect to one or more measures of business or
financial performance (each, a “Performance Measure”),
subject to the following:

 

(a)                                  Performance Measures.  Performance
Measures shall have the same meanings as used in the Company’s financial
statements, or, if such terms are not used in the Company’s financial
statements, they shall have the meaning applied pursuant to generally accepted
accounting principles, or as used generally in the Company’s industry.  Performance Measures shall be calculated with
respect to the Company and each Subsidiary Corporation consolidated therewith
for financial reporting purposes or such division or other business unit as may
be selected by the Committee.  For
purposes of the Plan, the Performance Measures applicable to a Performance
Award shall be calculated in accordance with generally accepted accounting
principles, but prior to the accrual or payment of any Performance Award for
the same Performance Period and excluding the effect (whether positive or
negative) of any change in accounting standards or any extraordinary, unusual
or nonrecurring item, as determined by the Committee, occurring after the
establishment of the Performance Goals applicable to the Performance
Award.  Each such adjustment, if any,
shall be made solely for the purpose of providing a consistent basis from
period to period for the calculation of Performance Measures in order to
prevent the dilution or enlargement of the Participant’s rights with respect to
a Performance Award.  Performance
Measures may be one or more of the following, as determined by the
Committee:  (i) sales revenue; (ii) gross
margin; (iii) operating margin; (iv) operating income; (v) pre-tax
profit; (vi) earnings before stock-based compensation expense, interest,
taxes and depreciation and amortization; (vii) earnings before interest,
taxes and depreciation and amortization; (viii) earnings before interest
and taxes; (ix) net income; (x) expenses; (xi) the market price
of the Stock; (xii) stock price; (xiii) earnings per share;
(xiv) return on stockholder equity; (xv) return on capital;
(xvi) return on net assets; (xvii) economic value added;
(xviii) market share; (xix) customer service; (xx) customer
satisfaction; (xxi) safety; (xxii) total stockholder return;
(xxiii) free cash flow; (xxiv) net operating income;
(xxv) operating cash flow; (xxvi) return on investment; (xxvii)
employee satisfaction; (xxviii) employee retention; (xxix) balance of
cash, cash equivalents and marketable securities; (xxx) product
development; (xxxi) research and development expenses; (xxxii) completion of an
identified special project; (xxxiii) completion of a joint venture or
other corporate transaction; (xxxiv) inventory balance; (xxxv) inventory
turnover ratio; or (xxxvi) such other measures as determined by the
Committee consistent with this Section 9.4(a).

 

(b)                                 Performance Targets.  Performance Targets
may include a minimum, maximum, target level and intermediate levels of
performance, with the final value of a Performance Award determined under the
applicable Performance Award Formula by the level

 

19

 

attained during the applicable Performance
Period.  A Performance Target may be
stated as an absolute value or as a value determined relative to a standard
selected by the Committee.

 

9.5                                 Settlement of Performance Awards.

 

(a)                                  Determination of Final Value.  As soon as
practicable following the completion of the Performance Period applicable to a
Performance Award, the Committee shall certify in writing the extent to which
the applicable Performance Goals have been attained and the resulting final
value of the Award earned by the Participant and to be paid upon its settlement
in accordance with the applicable Performance Award Formula.

 

(b)                                 Discretionary Adjustment of Award
Formula.  In its discretion,
the Committee may, either at the time it grants a Performance Award or at any
time thereafter, provide for the positive or negative adjustment of the
Performance Award Formula applicable to a Performance Award that is not
intended to constitute “qualified performance based compensation” to a “covered
employee” within the meaning of Section 162(m) (a “Covered Employee”) to reflect such Participant’s
individual performance in his or her position with the Company or such other
factors as the Committee may determine. 
With respect to a Performance Award intended to constitute qualified
performance-based compensation to a Covered Employee, the Committee shall have
the discretion to reduce some or all of the value of the Performance Award that
would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value
of the Performance Award determined in accordance with the Performance Award
Formula.

 

(c)                                  Payment in Settlement of Performance Awards.  As soon as
practicable following the Committee’s determination and certification in
accordance with Sections 9.5(a) and (b), but in any event within the
Short-Term Deferral Period described in Section 15.1 (except as otherwise
provided below or consistent with the requirements of Section 409A),
payment shall be made to each eligible Participant (or such Participant’s legal
representative or other person who acquired the right to receive such payment
by reason of the Participant’s death) of the final value of the Participant’s
Performance Award.  Payment of such
amount shall be made in cash in a lump sum or in installments, shares of Stock
(either fully vested or subject to vesting), or a combination thereof, as
determined by the Committee.

 

9.6                                 Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with
respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company).  However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share
Award that the Participant shall be entitled to receive Dividend Equivalents
with respect to the payment of cash dividends on Stock having a record date
prior to the date on which the Performance Shares are settled or
forfeited.  Such Dividend Equivalents, if
any, shall be credited to the Participant in the form of additional whole
Performance Shares as of the date of payment of such cash dividends on
Stock.  The number of additional
Performance Shares (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the
Performance Shares previously credited to the

 

20

 

Participant by (b) the Fair Market Value per
share of Stock on such date.  Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee.  Settlement of Dividend Equivalents may be
made in cash, shares of Stock, or a combination thereof as determined by the
Committee, and may be paid on the same basis as settlement of the related
Performance Share as provided in Section 9.5.  Dividend Equivalents shall not be paid with
respect to Performance Units.  In the
event of a dividend or distribution paid in shares of Stock or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.2, appropriate adjustments shall be made in the
Participant’s Performance Share Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities
or other property (other than normal cash dividends) to which the Participant
would entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.

 

9.7                                 Effect of Termination of Service.  Unless otherwise provided by the Committee in
the grant of a Performance Award and set forth in the Award Agreement, the
effect of a Participant’s termination of Service on the Performance Award shall
be as follows:

 

(a)                                  Death or Disability. 
If the Participant’s Service terminates because of the death or
Disability of the Participant before the completion of the Performance Period
applicable to the Performance Award, the final value of the Participant’s
Performance Award shall be determined by the extent to which the applicable
Performance Goals have been attained with respect to the entire Performance
Period and shall be prorated based on the number of months of the Participant’s
Service during the Performance Period. 
Payment shall be made following the end of the Performance Period in any
manner permitted by Section 9.5.

 

(b)                                 Other Termination of Service. 
If the Participant’s Service terminates for any reason except death or
Disability before the completion of the Performance Period applicable to the
Performance Award, such Award shall be forfeited in its entirety; provided,
however, that in the event of an involuntary termination of the Participant’s
Service, the Committee, in its sole discretion, may waive the automatic
forfeiture of all or any portion of any such Award (e.g., by determining the
final value of the Participant’s Performance Award in the manner provided by Section 9.7(a))
and provide for payment following the end of the Performance Period in any
manner permitted by Section 9.5.

 

9.8                                 Nontransferability of Performance Awards.  Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and
distribution.  All rights with respect to
a Performance Award granted to a Participant hereunder shall be exercisable
during his or her lifetime only by such Participant or the Participant’s
guardian or legal representative.

 

21

 

10.                                 TERMS AND CONDITIONS OF RESTRICTED STOCK UNIT
AWARDS.

 

Restricted Stock
Unit Awards shall be evidenced by Award Agreements specifying the number of
Restricted Stock Units subject to the Award, in such form as the Committee
shall from time to time establish.  No
Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the
following terms and conditions:

 

10.1                           Grant of Restricted Stock Unit Awards. 
Restricted Stock Unit Awards may be granted upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment
of one or more Performance Goals described in Section 9.4.  If either the grant of a Restricted Stock
Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee
shall follow procedures substantially equivalent to those set forth in
Sections 9.3 through 9.5(a).

 

10.2                           Vesting.  Restricted Stock Units
may or may not be made subject to Vesting Conditions based upon the
satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 9.4, as shall be established by the Committee and set
forth in the Award Agreement evidencing such Award.  The Committee, in its discretion, may provide
in any Award Agreement evidencing a Restricted Stock Unit Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to the
Award would otherwise occur on a day on which the sale of such shares would
violate the provisions of the Insider Trading Policy, then the satisfaction of
the Vesting Conditions automatically shall be determined on the first to occur
of (a) the next trading day on which the sale of such shares would not
violate the Insider Trading Policy or (b) the later of (i) last day
of the calendar year in which the original vesting date occurred or (ii) the
last day of the Company’s taxable year in which the original vesting date
occurred.

 

10.3                           Voting Rights, Dividend Equivalent Rights and
Distributions.  Participants shall have no voting rights with
respect to shares of Stock represented by Restricted Stock Units until the date
of the issuance of such shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company).  However, the Committee, in its discretion,
may provide in the Award Agreement evidencing any Restricted Stock Unit Award
that the Participant shall be entitled to receive Dividend Equivalents with
respect to the payment of cash dividends on Stock having a record date prior to
the date on which Restricted Stock Units held by such Participant are
settled.  Such Dividend Equivalents, if
any, shall be paid by crediting the Participant with additional whole
Restricted Stock Units as of the date of payment of such cash dividends on
Stock.  The number of additional
Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the
Restricted Stock Units previously credited to the Participant by (b) the
Fair Market Value per share of Stock on such date.  Such additional Restricted Stock Units shall
be subject to the same terms and conditions and shall be settled in the same manner
and at the same

 

22

 

time (or as soon thereafter as practicable) as the
Restricted Stock Units originally subject to the Restricted Stock Unit
Award.  In the event of a dividend or
distribution paid in shares of Stock or any other adjustment made upon a change
in the capital structure of the Company as described in Section 4.2,
appropriate adjustments shall be made in the Participant’s Restricted Stock
Unit Award so that it represents the right to receive upon settlement any and
all new, substituted or additional securities or other property (other than
normal cash dividends) to which the Participant would entitled by reason of the
shares of Stock issuable upon settlement of the Award, and all such new, substituted
or additional securities or other property shall be immediately subject to the
same Vesting Conditions as are applicable to the Award.

 

10.4                           Effect of Termination of Service. 
Unless otherwise provided by the Committee in the grant of a Restricted
Stock Unit Award and set forth in the Award Agreement, if a Participant’s
Service terminates for any reason, whether voluntary or involuntary (including
the Participant’s death or disability), then the Participant shall forfeit to
the Company any Restricted Stock Units pursuant to the Award which remain
subject to Vesting Conditions as of the date of the Participant’s termination
of Service.

 

10.5                           Settlement of Restricted Stock Unit Awards. 
The Company shall issue to a Participant on the date on which Restricted
Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on
such other date determined by the Committee, in its discretion, and set forth
in the Award Agreement one (1) share of Stock (and/or any other new,
substituted or additional securities or other property pursuant to an
adjustment described in Section 10.3) for each Restricted Stock Unit then
becoming vested or otherwise to be settled on such date, subject to the
withholding of applicable taxes. 
Notwithstanding the foregoing, if permitted by the Committee and set
forth in the Award Agreement, the Participant may elect, consistent with the
requirements of Section 409A, to defer receipt of all or any portion of
the shares of Stock or other property otherwise issuable to the Participant
pursuant to this Section, and such deferred issuance date(s) and amount(s) elected
by the Participant shall be set forth in the Award Agreement.

 

10.6                           Nontransferability of Restricted Stock Unit Awards. 
Prior to the issuance of shares of Stock in settlement of a Restricted
Stock Unit Award, the Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.  All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his
or her lifetime only by such Participant or the Participant’s guardian or legal
representative.

 

11.                                 DEFERRED COMPENSATION AWARDS.

 

11.1                           Establishment of Deferred Compensation Award Programs.  This Section 11 shall not be effective
unless and until the Committee determines to establish a program pursuant to
this Section.  The Committee, in its
discretion and upon such terms and conditions as it may determine, consistent
with the requirements of Section 409A, may establish one or more programs
pursuant to the Plan under which:

 

23

 

(a)                                  Participants
designated by the Committee who are Insiders or otherwise among a select group
of highly compensated Employees may irrevocably elect, prior to a date
specified by the Committee in compliance with Section 409A, to reduce such
Participant’s compensation otherwise payable in cash (subject to any minimum or
maximum reductions imposed by the Committee) and to be granted automatically at
such time or times as specified by the Committee one or more Awards of Stock
Units with respect to such numbers of shares of Stock as determined in
accordance with the rules of the program established by the Committee and
having such other terms and conditions as established by the Committee.

 

(b)                                 Participants
designated by the Committee who are Insiders or otherwise among a select group
of highly compensated Employees may irrevocably elect, prior to a date
specified by the Committee in compliance with Section 409A, to be granted
automatically an Award of Stock Units with respect to such number of shares of
Stock and upon such other terms and conditions as established by the Committee
in lieu of:

 

(i)                                     shares
of Stock otherwise issuable to such Participant upon the exercise of an Option;

 

(ii)                                  cash
or shares of Stock otherwise issuable to such Participant upon the exercise of
an SAR; or

 

(iii)                               cash or shares of Stock
otherwise issuable to such Participant upon the settlement of a Performance
Award or Performance Unit.

 

11.2                         Terms and Conditions of Deferred Compensation Awards.  Deferred Compensation Awards granted pursuant
to this Section 11 shall be evidenced by Award Agreements in such form as
the Committee shall from time to time establish.  No such Deferred Compensation Award or
purported Deferred Compensation Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Deferred
Compensation Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

 

(a)                                Vesting Conditions.  Deferred Compensation Awards shall not be
subject to any vesting conditions.

 

(b)                               Terms and Conditions of Stock Units.

 

(i)                                     Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with
respect to shares of Stock represented by Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company).  However, a Participant shall be entitled to
receive Dividend Equivalents with respect to the payment of cash dividends on
Stock having a record date prior to date on which Stock Units held by such
Participant are settled.  Such Dividend
Equivalents shall be paid by crediting the Participant with additional whole
and/or fractional Stock Units as of the date of payment of such cash dividends
on Stock.  The method of determining the
number of additional Stock Units to be so credited shall be specified by the
Committee and set forth in the Award Agreement.

 

24

 

Such additional Stock Units shall be subject to the
same terms and conditions and shall be settled in the same manner and at the
same time (or as soon thereafter as practicable) as the Stock Units originally
subject to the Stock Unit Award.  In the
event of a dividend or distribution paid in shares of Stock or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.2, appropriate adjustments shall be made in the
Participant’s Stock Unit Award so that it represent the right to receive upon
settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would be
entitled by reason of the shares of Stock issuable upon settlement of the
Award.

 

(ii)                                  Settlement of Stock Unit Awards.  A Participant electing to receive an Award of
Stock Units pursuant to this Section 11 shall specify at the time of such
election a settlement date with respect to such Award in compliance with the
requirements of Section 409A.  The
Company shall issue to the Participant as soon as practicable following the
earlier of the settlement date elected by the Participant or the date of termination
of the Participant’s Service, a number of whole shares of Stock equal to the
number of whole Stock Units subject to the Stock Unit Award.  Such shares of Stock shall be fully vested,
and the Participant shall not be required to pay any additional consideration
(other than applicable tax withholding) to acquire such shares.  Any fractional Stock Unit subject to the
Stock Unit Award shall be settled by the Company by payment in cash of an
amount equal to the Fair Market Value as of the payment date of such fractional
share.

 

(iii)                               Nontransferability
of Stock Unit Awards.  Prior
to their settlement in accordance with the provision of the Plan, no Stock Unit
Award shall be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the Participant or the Participant’s beneficiary, except transfer
by will or by the laws of descent and distribution.  All rights with respect to a Stock Unit Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.

 

12.                               OTHER STOCK-BASED AWARDS.

 

In addition to the
Awards set forth in Sections 6 through 11 above, the Committee, in its sole
discretion, may carry out the purpose of this Plan by awarding Stock-Based
Awards as it determines to be in the best interests of the Company and subject
to such other terms and conditions as it deems necessary and appropriate.

 

13.                               EFFECT OF CHANGE IN CONTROL ON AWARDS.

 

13.1                           Accelerated Vesting.  The Committee, in its sole discretion, may
provide in any Award Agreement or, in the event of a Change in Control, may
take such actions as it deems appropriate to provide for the acceleration of
the exercisability and vesting in connection with such Change in Control of any
or all outstanding Options and SARs and shares acquired upon the exercise of
such Options and SARs upon such conditions and to such extent as the Committee
shall determine.

 

25

 

13.2                           Assumption or Substitution. 
In the event of a Change in Control, the surviving, continuing,
successor, or purchasing corporation or other business entity or parent
thereof, as the case may be (the “Acquiring Corporation”), may,
without the consent of the Participant, either assume the Company’s rights and
obligations under outstanding Options and SARs or substitute for outstanding
Options and SARs substantially equivalent options or stock appreciation rights
for the Acquiring Corporation’s stock. 
Any Options or SARs which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised as
of the date of the Change in Control shall terminate and cease to be outstanding
effective as of the date of the Change in Control.  Notwithstanding the foregoing, shares
acquired upon exercise of an Option or SAR prior to the Change in Control and
any consideration received pursuant to the Change in Control with respect to such
shares shall continue to be subject to all applicable provisions of the Award
Agreement evidencing such Award except as otherwise provided in such Award
Agreement.  Furthermore, notwithstanding
the foregoing, if the corporation the stock of which is subject to the
outstanding Options or SARs immediately prior to an Ownership Change Event
described in Section 2.1(y)(i) constituting a Change in Control is
the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power
of its voting stock is held by another corporation or by other corporations
that are members of an affiliated group within the meaning of Section 1504(a) of
the Code without regard to the provisions of Section 1504(b) of the
Code, the outstanding Options and SARs shall not terminate unless the Board
otherwise provides in its discretion.

 

13.3                           Effect of Change in Control on Restricted Stock and Other Type of
Awards.  The Committee may, in
its discretion, provide in any Award Agreement evidencing a Restricted Stock or
Other Type of Award that, in the event of a Change in Control, the lapsing of
any applicable Vesting Condition, Restriction Period or Performance Goal
applicable to the shares subject to such Award held by a Participant whose
Service has not terminated prior to the Change in Control shall be accelerated
and/or waived effective immediately prior to the consummation of the Change in
Control to such extent as specified in such Award Agreement.  Any acceleration, waiver or the lapsing of
any restriction that was permissible solely by reason of this Section 13.3
and the provisions of such Award Agreement shall be conditioned upon the
consummation of the Change in Control.

 

14.                               COMPLIANCE WITH SECURITIES LAW.

 

The grant of
Awards and the issuance of shares of Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed.  In addition, no Award may be exercised or
shares issued pursuant to an Award unless (a) a registration statement
under the Securities Act shall at the time of such exercise or issuance be in effect
with respect to the shares issuable pursuant to the Award or (b) in the
opinion of legal counsel to the Company, the shares issuable pursuant to the
Award may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act.  The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite

 

26

 

authority
shall not have been obtained.  As a
condition to issuance of any Stock, the Company may require the Participant to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

 

15.                               COMPLIANCE WITH SECTION 409A.

 

15.1                         Awards Subject to Section 409A.  The Company intends that Awards granted
pursuant to the Plan shall either be exempt from or comply with Section 409A,
and the Plan shall be so construed.  The
provisions of this Section 15 shall apply to any Award or portion thereof
that constitutes or provides for payment of Section 409A Deferred
Compensation.  Such Awards may include,
without limitation:

 

(a)                                  A
Nonstatutory Stock Option or SAR that includes any feature for the deferral of
compensation other than the deferral of recognition of income until the later
of (i) the exercise or disposition of the Award or (ii) the time the
stock acquired pursuant to the exercise of the Award first becomes
substantially vested.

 

(b)                                 Any
Restricted Stock Unit Award or Performance Award that either (i) provides
by its terms for settlement of all or any portion of the Award at a time or
upon an event that will or may occur later than the end of the Short-Term
Deferral Period (as defined below) or (ii) permits the Participant granted
the Award to elect one or more dates or events upon which the Award will be
settled after the end of the Short-Term Deferral Period.

 

Subject to the provisions of Section 409A, the term “Short-Term
Deferral Period” means the 21⁄2 month period ending on the later of (i) the
15th day of the third month following the end of the Participant’s taxable year
in which the right to payment under applicable portion of the Award is no
longer subject to a substantial risk of forfeiture or (ii) the 15th day of
the third month following the end of the Company’s taxable year in which the
right to payment under the applicable portion of the Award is no longer subject
to a substantial risk of forfeiture.  For
this purpose, the term “substantial risk of forfeiture” shall have the meaning
provided by Section 409A.

 

15.2                         Deferral and/or Distribution Elections.  Except as otherwise permitted or required by Section 409A,
the following rules shall apply to any compensation deferral and/or
payment elections (each, an “Election”) that may be permitted or required by
the Committee pursuant to an Award providing Section 409A Deferred
Compensation:

 

(a)                                  Elections
must be in writing and specify the amount of the payment in settlement of an Award
being deferred, as well as the time and form of payment as permitted by this
Plan.

 

(b)                                 Elections
shall be made by the end of the Participant’s taxable year prior to the year in
which services commence for which an Award may be granted to such Participant.

 

(c)                                  Elections
shall continue in effect until a written revocation or change in Election is
received by the Company, except that a written revocation or change in

 

27

 

Election must be received by the Company prior to the
last day for making the Election determined in accordance with paragraph (b) above
or as permitted by Section 15.3.

 

15.3                         Subsequent Elections. 
Except as otherwise permitted or required by Section 409A, any
Award providing Section 409A Deferred Compensation which permits a
subsequent Election to delay the payment or change the form of payment in
settlement of such Award shall comply with the following requirements:

 

(a)                                  No
subsequent Election may take effect until at least twelve (12) months after the
date on which the subsequent Election is made.

 

(b)                                 Each
subsequent Election related to a payment in settlement of an Award not
described in Section 15.4(b), 15.4(c) or 15.4(f) must result in
a delay of the payment for a period of not less than five (5) years from
the date on which such payment would otherwise have been made.

 

(c)                                  No
subsequent Election related to a payment pursuant to Section 15.4(d) shall
be made less than twelve (12) months before the date on which such payment
would otherwise have been made.

 

(d)                                 Subsequent
Elections shall continue in effect until a written revocation or change in the
subsequent Election is received by the Company, except that a written
revocation or change in a subsequent Election must be received by the Company
prior to the last day for making the subsequent Election determined in
accordance the preceding paragraphs of this Section 15.3.

 

15.4                         Payments Pursuant to Deferral Elections.  Except as otherwise permitted or required by Section 409A,
an Award providing Section 409A Deferred Compensation must provide for
payment in settlement of the Award only upon one or more of the following:

 

(a)                                  The
Participant’s separation from service (as defined by Section 409A);

 

(b)                                 The
Participant’s becoming Disabled (as defined below);

 

(c)                                  The
Participant’s death;

 

(d)                                 A
time or fixed schedule that is either (i) specified by the Committee upon
the grant of an Award and set forth in the Award Agreement evidencing such
Award or (ii) specified by the Participant in an Election complying with
the requirements of Section 15.2 or 15.3, as applicable;

 

(e)                                  A
change in the ownership or effective control or the Company or in the ownership
of a substantial portion of the assets of the Company determined in accordance
with Section 409A; or

 

28

 

(f)                                    The
occurrence of an Unforeseeable Emergency (as defined by Section 409A).

 

Notwithstanding any provision of the Plan or an Award Agreement to the
contrary, to the extent that any amount constituting Section 409A Deferred
Compensation would become payable under this Plan by reason of a Change in
Control, such amount shall become payable only if the event constituting a
Change in Control would also constitute a change in ownership or effective
control of the Company or a change in the ownership of a substantial portion of
the assets of the Company within the meaning of Section 409A.

 

Notwithstanding any provision of the Plan or an Award Agreement to the
contrary, except as otherwise permitted by Section 409A, no payment
pursuant to Section 15.4(a) in settlement of an Award providing for Section 409A
Deferred Compensation may be made to a Participant who is a “specified employee”
(as defined by Section 409A) as of the date of the Participant’s separation
from service before the date (the “Delayed Payment Date”) that is six (6) months
after the date of such Participant’s separation from service, or, if earlier,
the date of the Participant’s death.  All
such amounts that would, but for this paragraph, become payable prior to the
Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.

 

15.5                         Unforeseeable Emergency. 
The Committee shall have the authority to provide in the Award Agreement
evidencing any Award providing for Section 409A Deferred Compensation for
payment in settlement of all or a portion of such Award in the event that a
Participant establishes, to the satisfaction of the Committee, the occurrence
of an Unforeseeable Emergency.  In such
event, the amount(s) distributed with respect to such Unforeseeable
Emergency cannot exceed the amounts reasonably necessary to satisfy the
emergency need plus amounts necessary to pay taxes reasonably anticipated as a
result of such distribution(s), after taking into account the extent to which
such emergency need is or may be relieved through reimbursement or compensation
by insurance or otherwise, by liquidation of the Participant’s assets (to the
extent the liquidation of such assets would not itself cause severe financial
hardship) or by cessation of deferrals under the Award.  All distributions with respect to an
Unforeseeable Emergency shall be made in a lump sum as soon as practicable
following the Committee’s determination that an Unforeseeable Emergency has
occurred.

 

The occurrence of an Unforeseeable Emergency shall be judged and
determined by the Committee.  The
Committee’s decision with respect to whether an Unforeseeable Emergency has
occurred and the manner in which, if at all, the payment in settlement of an
Award shall be altered or modified, shall be final, conclusive, and not subject
to approval or appeal.

 

15.6                         Disabled.  The
Committee shall have the authority to provide in any Award providing Section 409A
Deferred Compensation for payment in settlement of such Award in the event that
the Participant becomes Disabled.  A
Participant shall be considered “Disabled” if either:

 

(a)                                  the
Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or

 

29

 

(b)                                 the
Participant is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Participant’s employer.

 

All distributions payable by reason of a Participant becoming Disabled
shall be paid in a lump sum or in periodic installments as established by the
Participant’s Election.  If the Participant
has made no Election with respect to distributions upon becoming Disabled, all
such distributions shall be paid in a lump sum upon the determination that the
Participant has become Disabled.

 

15.7                         Death.  If a
Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Section 409A, such undistributed amounts
shall be distributed to his or her beneficiary under the distribution method
for death established by the Participant’s Election upon receipt by the Committee
of satisfactory notice and confirmation of the Participant’s death.  If the Participant has made no Election with
respect to distributions upon death, all such distributions shall be paid in a
lump sum upon receipt by the Committee of satisfactory notice and confirmation
of the Participant’s death.

 

15.8                         Prohibition of Acceleration of Payments.  Notwithstanding any provision of the Plan or
an Award Agreement to the contrary, this Plan does not permit the acceleration
of the time or schedule of any payment under an Award providing Section 409A
Deferred Compensation, except as permitted by Section 409A.

 

16.                               TAX WITHHOLDING.

 

16.1                         Tax Withholding in General. 
The Company shall have the right to deduct from any and all payments
made under the Plan, or to require the Participant, through payroll
withholding, cash payment or otherwise, including by means of a Cashless
Exercise or Net Exercise of an Option, to make adequate provision for, the
federal, state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to an Award or the shares
acquired pursuant thereto.  The Company
shall have no obligation to deliver shares of Stock, to release shares of Stock
from an escrow established pursuant to an Award Agreement, or to make any
payment in cash under the Plan until the Participating Company Group’s tax
withholding obligations have been satisfied by the Participant.

 

16.2                         Withholding in Shares. 
The Company shall have the right, but not the obligation, to deduct from
the shares of Stock issuable to a Participant upon the exercise or settlement
of an Award, or to accept from the Participant the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the tax withholding obligations of the Participating
Company Group.  The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

30

 

17.                               AMENDMENT OR TERMINATION OF PLAN.

 

The Board or the
Committee may amend, suspend or terminate the Plan at any time.  However, without the approval of the Company’s
stockholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by
operation of the provisions of Section 4.2), (b) no change in the
class of persons eligible to receive Incentive Stock Options, (c) no
removal of the stockholder approval requirement in Section 3.8 related to
option and SAR repricings, and (d) no other amendment of the Plan that
would require approval of the Company’s stockholders under any applicable law,
regulation or rule.  Except as provided
by the next sentence, no amendment, suspension or termination of the Plan shall
affect any then outstanding Award unless expressly provided by the Board or the
Committee.  In any event, no amendment,
suspension or termination of the Plan may adversely affect any then outstanding
Award without the consent of the Participant. 
Notwithstanding any other provision of the Plan to the contrary, the
Committee may, in its sole and absolute discretion and without the consent of
any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming the Plan or such Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

 

18.                               MISCELLANEOUS PROVISIONS.

 

18.1                         Repurchase Rights.  Shares issued under the Plan may be subject
to one or more repurchase options, or other conditions and restrictions as
determined by the Committee in its discretion at the time the Award is
granted.  The Company shall have the
right to assign at any time any repurchase right it may have, whether or not
such right is then exercisable, to one or more persons as may be selected by
the Company.  Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

 

18.2                         Provision of Information. 
Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company’s
common stockholders.

 

18.3                         Rights as Employee, Consultant or Director.  No person, even though eligible pursuant to Section 5,
shall have a right to be selected as a Participant, or, having been so
selected, to be selected again as a Participant.  Nothing in the Plan or any Award granted
under the Plan shall confer on any Participant a right to remain an Employee,
Consultant or Director or interfere with or limit in any way any right of a
Participating Company to terminate the Participant’s Service at any time.  To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award shall in no event be understood or interpreted to mean that the Company
is the Employee’s employer or that the Employee has an employment relationship
with the Company.

 

18.4                         Rights as a Stockholder. 
A Participant shall have no rights as a stockholder with respect to any
shares covered by an Award until the date of the issuance of such

 

31

 

shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company).  No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date such shares are issued, except as provided in Section 4.2 or
another provision of the Plan.

 

18.5                         Fractional Shares.  The Company shall not be
required to issue fractional shares upon the exercise or settlement of any
Award.

 

18.6                         Severability.  If any one or more of the provisions (or any
part thereof) of this Plan shall be held invalid, illegal or unenforceable in
any respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected
or impaired thereby.

 

18.7                         Beneficiary Designation. 
Subject to local laws and procedures, each Participant may file with the
Company a written designation of a beneficiary who is to receive any benefit
under the Plan to which the Participant is entitled in the event of such
Participant’s death before he or she receives any or all of such benefit.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  If a married Participant designates a
beneficiary other than the Participant’s spouse, the effectiveness of such
designation may be subject to the consent of the Participant’s spouse.  If a Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s
death, the Company will pay any remaining unpaid benefits to the Participant’s
legal representative.

 

18.8                         Unfunded Obligation. 
Participants shall have the status of general unsecured creditors of the
Company.  Any amounts payable to Participants
pursuant to the Plan shall be unfunded and unsecured obligations for all
purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. 
No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations.  The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder.  Any investments
or the creation or maintenance of any trust or any Participant account shall
not create or constitute a trust or fiduciary relationship between the
Committee or any Participating Company and a Participant, or otherwise create
any vested or beneficial interest in any Participant or the Participant’s
creditors in any assets of any Participating Company.  The Participants shall have no claim against
any Participating Company for any changes in the value of any assets which may
be invested or reinvested by the Company with respect to the Plan.  Each Participating Company shall be
responsible for making benefit payments pursuant to the Plan on behalf of its
Participants or for reimbursing the Company for the cost of such payments, as
determined by the Company in its sole discretion.  In the event the respective Participating
Company fails to make such payment or reimbursement, a Participant’s (or other
individual’s) sole recourse shall be against the respective Participating
Company, and not against the Company.  A
Participant’s acceptance of an Award pursuant to the Plan shall constitute
agreement with this provision.

 

32

 

PLAN HISTORY AND
NOTES TO COMPANY

 

	
  April 30, 2007

  	
   

  	
  Board adopts Plan with a reserve of seven million
  five hundred fifty thousand (7,550,000) shares, including a pre Effective
  Date reserve of five million hundred thousand (5,800,000) shares.

  
	
   

  	
   

  	
   

  
	
  May 22, 2007

  	
   

  	
  Stockholders approve Plan.

  
	
   

  	
   

  	
   

  
	
  December 8, 2008

  	
   

  	
  Board amends Plan to comply with Section 409A
  of the Code.

  

 

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