Document:

Exhibit 10.37

 

SANMINA-SCI
CORPORATION

 

2009
INCENTIVE PLAN

 

1.                                       Purposes
of the Plan.  The purposes of this
Plan are:

 

·                  to
attract and retain the best available personnel for positions of substantial
responsibility,

 

·                  to
provide additional incentive to Employees, Directors, and Consultants, and

 

·                  to
promote the success of the Company’s business.

 

The
Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance
Units, Performance Shares and other stock or cash awards as the Administrator
may determine.

 

2.                                       Definitions.  As used herein, the following definitions
will apply:

 

(a)           “Accounts
Payable Days” means as to any Performance Period the ratio of 365 days to
Accounts Payable Turns.

 

(b)           “Accounts
Payable Turns” means as to any Performance Period the ratio of four times
the Company’s cost of goods sold for the Performance Period to accounts payable
on the last day of the Performance Period, in each case calculated in
accordance with GAAP.

 

(c)           “Administrator”
means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

 

(d)           “Affiliate” means any corporation or
any other entity (including, but not limited to, partnerships and joint
ventures) controlling, controlled by, or under common control with the Company.

 

(e)           “Annual
Revenue” means the Company’s or a business unit’s net sales for the
Performance Period, determined in accordance with GAAP.

 

(f)            “Applicable
Laws” means the requirements relating to the administration of equity-based
awards under U.S. state corporate laws, U.S. federal and state securities laws,
the Code, any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or jurisdiction
where Awards are, or will be, granted under the Plan.

 

(g)           “Award”
means, individually or collectively, a grant under the Plan of Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units (including Performance Units payable in cash), Performance
Shares and other stock or cash awards as the Administrator may determine.

 

 

(h)           “Award
Agreement” means the written or electronic agreement setting forth the terms
and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms
and conditions of the Plan.

 

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

 

(j)            “Cash
Collections” means the actual cash or other freely negotiable
consideration, in any currency, received in satisfaction of accounts receivable
created by the sale of any Company products or services.

 

(k)           “Cash
Cycle Days” means the ratio of 365 days to Inventory Turns, plus Days Sales
Outstanding minus Accounts Payable Days.

 

(l)            “Change
in Control” means the occurrence of any of the following events:

 

(i)            A change in the ownership of the
Company  which occurs on the date
that any one person, or more than one person acting as a group, (“Person”)
acquires ownership of the stock of the Company that, together with the stock
held by such Person, constitutes more than 50% of the total voting power of the
stock of the Company; provided, however, that for purposes of this subsection
(i), the acquisition of additional stock by any one Person, who is considered
to own more than 50% of the total voting power of the stock of the Company will
not be considered a Change in Control; or

 

(ii)           A change in the effective control of
the Company which occurs on the date that a majority of members of the Board is
replaced during any twelve (12) month period by Directors whose appointment or
election is not endorsed by a majority of the members of the Board prior to the
date of the appointment or election.  For
purposes of this clause (ii), if any Person is considered to effectively
control the Company, the acquisition of additional control of the Company by
the same Person will not be considered a Change in Control; or

 

(iii)          A change in the ownership of a
substantial portion of the Company’s assets which occurs on the date that any
Person acquires (or has acquired during the twelve (12) month period ending on
the date of the most recent acquisition by such person or persons) assets from
the Company that have a total gross fair market value equal to or more than 50%
of the total gross fair market value of all of the assets of the Company
immediately prior to such acquisition or acquisitions; provided, however, that
for purposes of this subsection (iii), the following will not constitute a
change in the ownership of a substantial portion of the Company’s assets: (A) a
transfer to an entity that is controlled by the Company’s stockholders
immediately after the transfer, or (B) a transfer of assets by the Company
to: (1) a stockholder of the Company (immediately before the asset
transfer) in exchange for or with respect to the Company’s stock, (2) an
entity, 50% or more of the total value or voting power of which is owned,
directly or indirectly, by the Company, (3) a Person, that owns, directly
or indirectly, 50% or more of the total value or voting power of all the
outstanding stock of the Company, or (4) an entity, at least 50% of the
total value or voting power of which is owned, directly or indirectly, by a
Person described in this subsection (iii)(B)(3).  For purposes of this subsection (iii), gross
fair market value means the value of the assets of the Company, or the value of
the assets being disposed of, determined without regard to any liabilities
associated with such assets.

 

2

 

(iv)          For purposes of this Section 2(l),
persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition
of stock, or similar business transaction with the Company.

 

(m)          “Code”
means the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein
will be a reference to any successor or amended section of the Code.

 

(n)           “Committee”
means a committee of Directors or of
one or more other individuals satisfying Applicable Laws appointed by the Board
in accordance with Section 4 hereof.

 

(o)           “Common
Stock” means the common stock of the Company.

 

(p)           “Company”
means Sanmina-SCI Corporation, a Delaware corporation, or any successor
thereto.

 

(q)           “Consultant”
means any person, including an advisor,
who is (i) engaged by the Company or an Affiliate to render consulting or
advisory services and is compensated for such services, or (ii) serving as
a member of the Board of Directors of an Affiliate and is compensated for such
services.  However, service solely as a
Director, or payment of a fee for such service, shall not cause a Director to
be considered a “Consultant” for purposes of the Plan.

 

(r)            “Customer Satisfaction MBOs”
means as to any Participant, the objective and measurable individual goals set
by a “management by objectives” process and approved by the Administrator,
which goals relate to the satisfaction of external or internal customer requirements.

 

(s)           “Days
Sales Outstanding” means as to any Performance Period the ratio of accounts
receivable, net, on the last day of the Performance Period calculated in
accordance with GAAP, to average daily net sales for the Performance Period

 

(t)            “Determination
Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based
compensation” under Code Section 162(m).

 

(u)           “Director”
means a member of the Board.

 

(v)           “Disability”
means total and permanent disability as defined in Code Section 22(e)(3), provided that in the case of Awards other
than Incentive Stock Options, the Administrator in its discretion may determine
whether a permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Administrator from time to time.

 

(w)          “Earnings
Per Share” means as to any Performance Period, the Company’s Net Income or
a business unit’s Pro Forma Net Income, divided by a weighted average number of
Shares outstanding and dilutive common equivalent Shares deemed outstanding.

 

3

 

(x)            “Employee”
means any person, including Officers and Directors, employed by the Company or
its Affiliates.  Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

 

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

 

(z)            “Fair
Market Value” means, as of any date the value of Common Stock determined as
follows:

 

(i)            If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq
Global Select Market or the Nasdaq Capital Market, its Fair Market Value will
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for such date, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable;

 

(ii)           If the Common Stock is regularly
quoted by a recognized securities dealer but selling prices are not reported,
the Fair Market Value of a Share of Common Stock will be the mean between the
high bid and low asked prices for the Common Stock for such date, as reported
in The Wall Street Journal or such other
source as the Administrator deems reliable; or

 

(iii)          In the absence of an established
market for the Common Stock, the Fair Market Value will be determined in good
faith by the Administrator.

 

(iv)          Notwithstanding the preceding, for
federal, state, and local income tax reporting purposes and for such other
purposes as the Administrator deems appropriate, the Fair Market Value shall be
determined by the Administrator in accordance with uniform and
nondiscriminatory standards adopted by it from time to time.

 

(aa)         “Fiscal Year” means the fiscal year of
the Company.

 

(bb)         “Free Cash Flow” means as to any
Performance Period the combination of cash provided by (used in) operations of
the Company and cash provided by (used in) investing activities of the Company,
in each case determined in accordance with GAAP.

 

(cc)         “GAAP” means United States Generally
Accepted Accounting Principles.

 

(dd)         “Gross Margin” means as to any
Performance Period Gross Profit of the Company or any business unit divided
by gross revenue of the Company or such business unit, in each case determined in accordance with GAAP.

 

(ee)         “Gross Profit” means as to any
Performance Period the difference between gross revenue of the Company or any
business unit and cost of goods sold of the Company or such business
unit, in each case determined in
accordance with GAAP.

 

(ff)           “Incentive
Stock Option” means an Option that by its terms qualifies and is otherwise
intended to qualify as an incentive stock option within the meaning of Code Section 422
and the regulations promulgated thereunder.

 

4

 

(gg)         “Inventory
Turns” means as to any Performance Period the ratio of four times cost of
goods sold for the Performance Period to inventory on the last day of the
Performance Period, in each case calculated in accordance with GAAP.

 

(hh)         “Net
Income” means as to any Performance Period, the income after taxes of the
Company determined in accordance with GAAP.

 

(ii)           “New
Orders” means as to any Performance Period, the firm orders for a system,
product, part, or service that are being recorded for the first time as defined
in the Company’s order recognition policy.

 

(jj)           “Nonstatutory
Stock Option” means an Option that by its terms does not qualify or is not
intended to qualify as an Incentive Stock Option.

 

(kk)         “Officer”
means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

 

(ll)           “Operating
Income” means as to any Performance Period, the difference between Gross
Profit and operating expenses, determined in accordance with GAAP.

 

(mm)       “Option”
means a stock option granted pursuant to Section 6 of the Plan.

 

(nn)         “Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in
Code Section

424(e).

 

(oo)         “Participant” means the holder of an
outstanding Award.

 

(pp)         “Performance-Based Award” means any
Awards that are subject to the terms and conditions set forth in Section 13.  All Performance-Based Awards are intended to
qualify as qualified performance-based compensation under Code Section 162(m).

 

(qq)         “Performance Bonus Award” means a cash
award set forth in Section 12.

 

(rr)           “Performance
Goals” will have the meaning set forth in Section 11 of the Plan.

 

(ss)         “Performance
Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.

 

(tt)           “Performance
Share” means an Award denominated in Shares which may be earned in whole or
in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.

 

(uu)         “Performance
Unit” means an Award which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator
may determine and which, in the Administrator’s sole discretion, may be settled
for cash, Shares or other securities or a combination of the foregoing pursuant
to Section 10, in the Administrator’s sole discretion.

 

5

 

(vv)         “Period
of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are
subject to a substantial risk of forfeiture. 
Such restrictions may be based on the passage of time, the achievement
of target levels of performance, or the occurrence of other events as
determined by the Administrator.

 

(ww)       “Plan”
means this 2009 Incentive Plan.

 

(xx)          “Pro
Forma Net Income” means as to any business unit for any Performance Period,
the Net Income of such business unit, minus allocations of designated corporate
expenses.

 

(yy)         “Product
Shipments” means as to any Performance Period, the quantitative and
measurable number of units of a particular product that shipped during such
Performance Period.

 

(zz)          “Restricted
Stock” means Shares issued pursuant
to an Award of Restricted Stock under Section 8 of the Plan, or issued
pursuant to the early exercise of an Option.

 

(aaa)       “Restricted Stock Unit” means a
bookkeeping entry representing an amount equal to the Fair Market Value of one
Share, granted pursuant to Section 9. 
Each Restricted Stock Unit represents an unfunded and unsecured
obligation of the Company.

 

(bbb)      “Return
on Designated Assets” means as to any Performance Period, the Pro Forma Net
Income of a business unit, divided by the average of beginning and ending
business unit designated assets, or Net Income of the Company, divided by the
average of beginning and ending designated corporate assets.

 

(ccc)       “Return
on Equity” means, as to any Performance Period, the percentage equal to the
value of the Company’s or any business unit’s common stock investments at the
end of such Performance Period, divided by the value of such common stock
investments at the start of such Performance Period, excluding any common stock
investments so designated by the Administrator.

 

(ddd)      “Return
on Sales” means as to any Performance Period, the percentage equal to the
Company’s Net Income or the business unit’s Pro Forma Net Income, divided by
the Company’s or the business unit’s Annual Revenue.

 

(eee)       “Rule 16b-3”
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

 

(fff)         “Section 16(b)”
means Section 16(b) of the Exchange Act.

 

(ggg)      “Service
Provider” means an Employee, Director or Consultant.

 

(hhh)      “Share”
means a share of the Common Stock, as adjusted in accordance with Section 15
of the Plan.

 

(iii)          “Stock
Appreciation Right” means an Award, granted alone or in connection with an
Option, that pursuant to Section 7 is designated as a Stock Appreciation
Right.

 

6

 

(jjj)          “Subsidiary”
means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Code Section 424(f).

 

(kkk)       “Successor
Corporation” has the meaning given to such term in Section 15(c) of
the Plan.

 

3.                                       Stock Subject to the Plan.

 

(a)           Stock
Subject to the Plan.  Subject to the
provisions of Section 15 of the
Plan, the maximum aggregate number of Shares that may be awarded and
sold under the Plan is 45,000,000 Shares.  The Shares may be authorized, but unissued,
or reacquired Common Stock.

 

(b)           Full
Value Awards.  Any Shares subject to
Awards other than Options or Stock Appreciation Rights will be counted against
the numerical limits of this Section 3 as 1.22 Shares for every one Share
subject thereto.  Further, if Shares
acquired pursuant to any such Award are forfeited or repurchased by the Company
and would otherwise return to the Plan pursuant to Section 3(c), 1.22
times the number of Shares so forfeited or repurchased will return to the Plan
and will again become available for issuance.

 

(c)           Lapsed
Awards.  If an Award expires or
becomes unexercisable without having been exercised in full, or, with respect
to Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units which are to be settled in Shares, is forfeited to or repurchased by the
Company, the unpurchased Shares (or for Awards other than Options and Stock
Appreciation Rights, the forfeited or repurchased Shares) which were subject
thereto will become available for future grant or sale under the Plan (unless
the Plan has terminated).  Upon exercise of a Stock Appreciation Right settled in
Shares, the gross number of Shares covered by the portion of the Award so
exercised will cease to be available under the Plan.  If unvested Shares of Restricted Stock, or
unvested Shares issued pursuant to Awards of Restricted Stock Units,
Performance Shares or Performance Units are repurchased by or forfeited to the
Company, such Shares will become
available for future grant under the Plan. 
Shares used to pay the tax and exercise price of an Award will not become available for future
grant or sale under the Plan.  To the
extent an Award under the Plan is paid out in cash rather than Shares, such
cash payment will not result in
reducing the number of Shares available for issuance under the Plan.  Notwithstanding the foregoing and, subject to
adjustment provided in Section 15, the maximum number of Shares that may
be issued upon the exercise of Incentive Stock Options will equal the aggregate
Share number stated in Section 3(a), plus, to the extent allowable under
Code Section 422, any Shares that become available for issuance under the
Plan under this Section 3(b).

 

(d)           Share
Reserve.  The Company, during the
term of this Plan, will at all times reserve and keep available such number of
Shares as will be sufficient to satisfy the requirements of the Plan.

 

4.                                       Administration
of the Plan.

 

(a)           Procedure.

 

(i)            Multiple Administrative Bodies.  Different Committees with respect to
different groups of Service Providers may administer the Plan.

 

7

 

(ii)           Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Code Section 162(m), the Plan will be
administered by a Committee of two or more “outside directors” within the
meaning of Code Section 162(m).

 

(iii)          Rule 16b-3.  To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.

 

(iv)          Delegation to an Officer.  The Board may delegate to one or more Officers of the
Company the authority to do one or both of the following (i) designate
Employees or Consultants of the Company or any of its Subsidiaries who are not
Officers to be recipients of Options, Restricted Stock and Restricted Stock
Units and the terms thereof, and (ii) determine the number of shares of
Common Stock to be subject to such Awards granted to such Employees and
Consultants; provided, however, that
the Board resolutions regarding such delegation shall specify the total number
of shares of Common Stock that may be subject to the Awards granted by such
Officer.  Notwithstanding anything to the contrary in this Section 4(a),
the Board may not delegate to an Officer authority to determine the Fair Market
Value of the Common Stock pursuant to Section 4(b) below.

 

(v)           Other Administration.  Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which committee
will be constituted to satisfy Applicable Laws.

 

(b)           Powers
of the Administrator.  Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator will have
the authority, in its discretion:

 

(i)            to determine the Fair Market Value;

 

(ii)           to select the Service Providers to
whom Awards may be granted hereunder;

 

(iii)          to determine the terms and
conditions, not inconsistent with the terms of the Plan, of any Award granted
hereunder;

 

(iv)          to construe and interpret the terms of
the Plan and Awards granted pursuant to the Plan;

 

(v)           to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating
to sub-plans established for the purpose of satisfying applicable foreign laws;

 

(vi)          to modify or amend each Award (subject
to Section 22(c) of
the Plan).  Notwithstanding the previous
sentence, the Administrator may not modify or amend an Option or Stock
Appreciation Right to reduce the exercise price of such Option or Stock
Appreciation Right after it has been granted (except for adjustments made
pursuant to Section 17), and neither may the Administrator cancel any
outstanding Option or Stock Appreciation Right in exchange for cash,  

 

8

 

other awards or an Option or Stock Appreciation Right with an exercise price that is
less than the exercise price of the original Option or  Stock
Appreciation Right, unless such action is approved by stockholders prior to
such action being taken;

 

(vii)         to authorize any person to execute on
behalf of the Company any instrument required to effect the grant of an Award
previously granted by the Administrator;

 

(viii)        to allow a Participant to defer the
receipt of the payment of cash or the delivery of Shares that would otherwise
be due to such Participant under an Award pursuant to such procedures as the
Administrator may determine; and

 

(ix)           to make all other determinations
deemed necessary or advisable for administering the Plan.

 

(c)           Effect
of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards.

 

5.                                       Eligibility.  Nonstatutory Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance
Units, Performance Shares and such other cash or stock awards as the
Administrator determines may be granted to Service Providers.  Incentive
Stock Options may be granted only to employees of the Company or any Parent or
Subsidiary of the Company.

 

6.                                       Stock
Options.

 

(a)           Limitations.  Each Option will be designated in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option.  However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time by the Participant during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options will be
treated as Nonstatutory Stock Options. 
For purposes of this Section 6(a), Incentive Stock Options will be
taken into account in the order in which they were granted.  The Fair Market Value of the Shares will be
determined as of the time the Option with respect to such Shares is granted.

 

(b)           Number
of Shares.  The Administrator will
have complete discretion to determine the number of Shares subject to an Option
granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted an Option covering more than 5,000,000 Shares.  Notwithstanding the limitation in the
previous sentence, an Employee may be granted Options covering up to an
additional 5,000,000 Shares during the fiscal year in which his or her initial
service as an Employee begins.

 

(c)           Term
of Option.  The Administrator will
determine the term of each Option in its sole discretion; provided,
however, that the term will be no more than ten (10) years from the date
of grant thereof.  Moreover, in
the case of an Incentive Stock Option granted to a Participant who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
will be five (5) years from the date of grant or such shorter term as may
be provided in the Award Agreement.

 

9

 

(d)           Option
Exercise Price and Consideration.

 

(i)            Exercise Price.  The per share exercise price for the Shares
to be issued pursuant to exercise of an Option will be determined by the
Administrator, but will
be no less than 100% of the Fair Market Value per Share on the date of
grant.  In addition, in the case
of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.  Notwithstanding
the foregoing provisions of this Section 6(c), Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a transaction described in, and in a manner
consistent with, Code Section 424(a).

 

(ii)           Waiting Period and Exercise Dates.  At the time an Option is granted, the
Administrator will fix the period within which the Option may be exercised and
will determine any conditions that must be satisfied before the Option may be
exercised.

 

(iii)          Form of Consideration.  The Administrator will determine the
acceptable form(s) of consideration for exercising an Option, including
the method of payment, to the extent permitted by Applicable Laws, which forms
of consideration shall be set forth in the Award Agreement at the time of
grant.

 

(e)           Exercise
of Option.

 

(i)            Procedure for Exercise; Rights as
a Stockholder.  Any Option granted
hereunder will be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set
forth in the Award Agreement.  An Option
may not be exercised for a fraction of a Share.

 

An Option will be deemed
exercised when the Company receives: (i) notice of exercise (in such form
as the Administrator specifies from time to time) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised (together with any applicable withholding
taxes).  No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 15 of the Plan.

 

(ii)           Termination of Relationship as a
Service Provider.  If a Participant
ceases to be a Service Provider, other than upon the Participant’s termination
as the result of the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). 
In the absence of a specified time in the Award Agreement, the Option
will remain exercisable for ninety (90) days following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified by the 

 

10

 

Administrator, the Option will terminate, and the
Shares covered by such Option will revert to the Plan.

 

(iii)          Disability of Participant.  If a Participant ceases to be a Service
Provider as a result of the Participant’s Disability, the Participant may
exercise his or her Option within such period of time as is specified in the
Award Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement).  In the
absence of a specified time in the Award Agreement, the Option will remain
exercisable for five (5) years following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option will revert to the Plan. 
If after termination the Participant does not exercise his or her Option
within the time specified herein, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.

 

(iv)          Death of Participant.  If a Participant dies while a Service
Provider, the Option may be exercised following the Participant’s death within
such period of time as is specified in the Award Agreement to the extent of all
of the shares subject to the Option, including Shares that had not yet vested
on the date of death (but in no event may the option be exercised later than
the expiration of the term of such Option as set forth in the Award Agreement),
by the Participant’s designated beneficiary, provided such beneficiary has been
designated in a form acceptable to the Administrator.  If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the person(s) to whom the
Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution.  In
the absence of a specified time in the Award Agreement, the Option will remain
exercisable for five (5) years following Participant’s death. If the
Option is not so exercised within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.

 

(v)           Other Termination.  A Participant’s Award Agreement may also
provide that if the exercise of the Option following the termination of
Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would result in liability under Section 16(b), then
the Option will terminate on the earlier of (A) the expiration of the term
of the Option set forth in the Award Agreement, or (B) the 10th day after
the last date on which such exercise would result in such liability under Section 16(b).  Finally, a Participant’s Award Agreement may
also provide that if the exercise of the Option following the termination of
the Participant’s status as a Service Provider (other than upon the Participant’s
death or Disability) would be prohibited at any time solely because the
issuance of Shares would violate the registration requirements under the
Securities Act, then the Option will terminate on the earlier of (A) the
expiration of the term of the Option, or (B) the expiration of a period of
ninety (90) days after the termination of the Participant’s status as a Service
Provider during which the exercise of the Option would not be in violation of
such registration requirements.

 

11

 

7.                                       Stock
Appreciation Rights.

 

(a)           Grant
of Stock Appreciation Rights. 
Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as
will be determined by the Administrator, in its sole discretion.

 

(b)           Number
of Shares.  The Administrator will
have complete discretion to determine the number of Stock Appreciation Rights
granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted Stock Appreciation Rights covering more than
5,000,000 Shares. Notwithstanding the limitation in the previous sentence, an
Employee may be granted Stock Appreciation Rights covering up to an additional
5,000,000 Shares during the fiscal year in which his or her initial service as
an Employee begins.

 

(c)           Exercise
Price and Other Terms.  The
Administrator, subject to the provisions of the Plan, will have complete
discretion to determine the terms and conditions of Stock Appreciation Rights
granted under the Plan, provided, however, that the exercise price will be not less than 100% of the Fair Market Value
of a Share on the date of grant.

 

(d)           Stock
Appreciation Right Agreement.  Each
Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the
term of the Stock Appreciation Right, the conditions of exercise, and such
other terms and conditions as the Administrator, in its sole discretion, will
determine.

 

(e)           Expiration
of Stock Appreciation Rights.  A
Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement; provided, however,
that the term will be no more than ten (10) years from the date of grant
thereof.  Notwithstanding the
foregoing, the rules of Section 6(e) also will apply to Stock
Appreciation Rights.

 

(f)            Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

 

(i)            The difference between the Fair
Market Value of a Share on the date of exercise over the exercise price; times

 

(ii)           The number of Shares with respect to
which the Stock Appreciation Right is exercised.

 

At the discretion of the
Administrator, the payment upon Stock Appreciation Right exercise may be in
cash, in Shares of equivalent value, or in some combination thereof.

 

8.                                       Restricted
Stock.

 

(a)           Grant
of Restricted Stock.  Subject to the
terms and provisions of the Plan, the Administrator, at any time and from time
to time, may grant Shares of Restricted Stock to Service Providers in such
amounts as the Administrator, in its sole discretion, will determine.

 

(b)           Restricted
Stock Agreement.  Each Award of
Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares 

 

12

 

granted, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing sentence, for
Restricted Stock intended to qualify as “performance-based compensation” within
the meaning of Code Section 162(m), during any Fiscal Year no Participant
will receive more than an aggregate of 2,000,000 Shares of Restricted
Stock.  Notwithstanding the foregoing
limitation, for restricted stock intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), an Employee may
be granted up to 2,000,000 additional Shares of Restricted Stock during the
fiscal year in which his or her initial service as an Employee begins. Unless
the Administrator determines otherwise, Shares of Restricted Stock will be held
by the Company as escrow agent until the restrictions on such Shares have
lapsed.

 

(c)           Transferability.  Except as provided in this Section 16,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 

(d)           Other
Restrictions.  The Administrator, in
its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate and contained in the Award
Agreement on the date of grant, including granting an Award of Restricted Stock
subject to the requirements of Section 13.

 

(e)           Removal
of Restrictions.  Except as otherwise
provided in this Section 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan will be released from escrow as soon
as practicable after the last day of the Period of Restriction.  The Administrator, in its discretion, may
accelerate the time at which any restrictions will lapse or be removed.

 

(f)            Voting
Rights.  During the Period of Restriction,
Service Providers holding Shares of Restricted Stock granted hereunder may
exercise full voting rights with respect to those Shares, unless the
Administrator determines otherwise.

 

(g)           Dividends
and Other Distributions.  During the
Period of Restriction, Service Providers holding Shares of Restricted Stock
will be entitled to receive all dividends and other distributions paid with
respect to such Shares unless otherwise provided in the Award Agreement.  If any such dividends or distributions are
paid in Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid.

 

(h)           Return
of Restricted Stock to Company.  On
the date set forth in the Award Agreement, the Restricted Stock for which
restrictions have not lapsed will revert to the Company and again will become
available for grant under the Plan.

 

(i)            Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Code Section 162(m),
the Compensation Committee, in its discretion, may set restrictions based upon
the achievement of Performance Goals. 
The Performance Goals will be set by the Compensation Committee on or
before the Determination Date.  In
granting Performance Units/Shares which are intended to qualify under Code Section 162(m),
the Compensation Committee will follow the provisions of Section 13 

 

13

 

any procedures determined by
it from time to time to be necessary or appropriate to ensure qualification of
the Award under Code Section 162(m) (e.g., in determining the
Performance Goals).

 

9.                                       Restricted
Stock Units.

 

(a)           Grant.  Restricted Stock Units may be
granted at any time and from time to time as determined by the
Administrator.  Each Restricted Stock
Unit grant will be evidenced by an Award Agreement that will specify such other
terms and conditions as the Administrator, in its sole discretion, will
determine, including all terms, conditions, and restrictions related to the
grant, the number of Restricted Stock Units and the form of payout, which,
subject to Section 9(d), may be left to the discretion of the
Administrator. Notwithstanding anything to the contrary in this
subsection (a), for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), during any Fiscal
Year of the Company, no Participant will receive more than an aggregate of 2,000,000 Restricted Stock Units. Notwithstanding
the foregoing limitation, for Restricted Stock Units intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), an Employee may
be granted up to 2,000,000 additional Restricted Stock Units during the fiscal
year in which his or her initial service as an Employee begins.

 

(b)           Vesting
Criteria and Other Terms.  The
Administrator will set vesting criteria in its discretion, which, depending on
the extent to which the criteria are met, will
determine the number of Restricted Stock Units that will be paid out to the Participant, including granting an Award
of Restricted Stock Units subject to the requirements of Section 13.  After the grant of Restricted Stock Units,
the Administrator, in its sole discretion, may reduce or waive any restrictions
for such Restricted Stock Units.  Each
Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and
such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

(c)           Earning Restricted Stock Units.  Upon
meeting the applicable vesting criteria, the Participant will be entitled to
receive a payout as specified in the Award Agreement.  Notwithstanding the foregoing, at any time
after the grant of Restricted Stock Units, the Administrator, in its sole
discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.

 

(d)           Form and Timing of Payment. 
Payment of earned Restricted Stock Units will be made as soon as
practicable after the date(s) set forth in the Award Agreement.  The Administrator, in its sole discretion,
may pay earned Restricted Stock Units in cash, Shares, or a combination
thereof.  Shares represented by Restricted
Stock Units that are fully paid in cash again will be available for grant under
the Plan.

 

(e)           Cancellation.  On
the date set forth in the Award Agreement, all unearned Restricted Stock Units
will be forfeited to the Company.

 

(f)            Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Code Section 162(m),
the Compensation Committee, in its discretion, may set restrictions based upon
the achievement of Performance Goals. 
The Performance Goals will be set by the Compensation Committee on or 

 

14

 

before the Determination
Date.  In granting Performance
Units/Shares which are intended to qualify under Code Section 162(m), the
Compensation Committee will follow the provisions of Section 13 any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Award under Code Section 162(m) (e.g., in
determining the Performance Goals).

 

10.                                 Performance
Units and Performance Shares.

 

(a)           Grant
of Performance Units/Shares. 
Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. 
The Administrator will have complete discretion in determining the
number of Performance Units/Shares granted to each Participant provided that
during any Fiscal Year, for Performance Units or Performance Shares intended to
qualify as “performance-based compensation” within the meaning of Code Section 162(m),
(i) no Participant will receive Performance Units having an initial value
greater than $5,000,000, and (ii) no Participant will receive more than
2,000,000 Performance Shares.  Notwithstanding
the foregoing limitation, for Performance Shares intended to qualify as “performance-based
compensation” within the meaning of Code Section 162(m), in connection
with his or her initial service, a Service Provider may be granted up to an
additional 2,000,000 Performance Shares and additional Performance Units having
an initial value up to $5,000,000.

 

(b)           Value
of Performance Units/Shares.  Each
Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. 
Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

 

(c)           Performance
Objectives and Other Terms.  The
Administrator will set Performance Goals or other vesting provisions (including,
without limitation, continued status as a Service Provider) in its discretion
which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares
that will be paid out to the Participant, including granting an Award of
Performance Units and Performance Shares subject to the requirements of Section 13.  The Administrator may set performance
objectives based upon the achievement of Company-wide, divisional, or
individual goals, or any other basis determined by the Administrator in its
discretion.  Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period,
Performance Goals, any other vesting provisions and such other terms and
conditions as the Administrator, in its sole discretion, will determine.

 

(d)           Earning
of Performance Units/Shares.  After
the applicable Performance Period has ended, the holder of Performance
Units/Shares will be entitled to receive a payout of the number of Performance
Units/Shares earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
objectives or other vesting provisions have been achieved.  After the grant of a Performance Unit/Share,
the Administrator, in its sole discretion, may reduce or waive any performance
objectives or other vesting provisions for such Performance Unit/Share.

 

(e)           Form and
Timing of Payment of Performance Units/Shares.  Payment of earned Performance Units/Shares
will be made as soon as practicable after the expiration of the 

 

15

 

applicable Performance Period and achievement of the
performance criteria and other vesting provisions.  The Administrator, in its sole discretion,
may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period) or
in a combination thereof.

 

(f)            Cancellation
of Performance Units/Shares.  On the
date set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited
to the Company, and again will be available for grant under the Plan to the
extent such Performance Units/Shares were payable in Shares.

 

(g)           Section 162(m) Performance
Restrictions.  For purposes of qualifying grants of
Performance Units/Shares as “performance-based compensation” under Code Section 162(m),
the Compensation Committee, in its discretion, may set restrictions based upon
the achievement of Performance Goals. 
The Performance Goals will be set by the Compensation Committee on or
before the Determination Date.  In
granting Performance Units/Shares which are intended to qualify under Code Section 162(m),
the Compensation Committee will follow the provisions of Section 13 any
procedures determined by it from time to time to be necessary or appropriate to
ensure qualification of the Award under Code Section 162(m) (e.g., in
determining the Performance Goals).

 

11.                                 Performance Goals.  The
granting and/or vesting of Awards of Options, Restricted Stock, Restricted
Stock Units, Performance Shares and Performance Units (including Performance
Units payable in cash) and other incentives under the Plan may be made subject
to the attainment of performance goals (“Performance Goals”) relating to
one or more of the following measures: (a) Accounts Payable Days, (b) Accounts
Payable Turns, (c) Annual Revenue, (d) Cash Collections, (e) Cash
Cycle Days, (f) Customer Satisfaction MBOs, (g) Days Sales
Outstanding, (h) Earnings Per Share, (i) Free Cash flow, (j) Gross
Margin, (k) Gross Profit, (l) Inventory Turns, (m) Net Income, (n) New
Orders, (o) Operating Income, (p) Pro Forma Net Income, (q) Return
on Designated Assets, (r) Return on Equity, (s) Return on Sales, and (t) Product
Shipments.  Any Performance Goals may be
used to measure the performance of the Company as a whole or a business unit of
the Company and may be measured relative to a peer group or index.  The Performance Goals may differ from
Participant to Participant and from Award to Award. The Compensation Committee
may provide that partial achievement of the Performance Goals may result in the
payment or vesting corresponding to a partial (but not necessarily
proportional) portion of the Award. 
Prior to the Determination Date, the Compensation Committee is
authorized to make adjustments in the method of calculating the attainment of
Performance Goals for a Performance Period as follows: (i) to exclude
restructuring and integration charges (including employee severance and
benefits costs and charges related to excess facilities and assets); (ii) to
exclude impairment charges for goodwill and intangible assets and amortization
expense; (iii) to exclude exchange rate effects, as applicable, for
non-U.S. dollar denominated net sales and operating earnings; (iv) to
exclude the effects of changes to GAAP required by the Financial Accounting
Standards Board; (v) to exclude the effects of any statutory adjustments
to corporate tax rates; (vi) to exclude stock-based compensation expense
determined under generally accepted accounting principles; (vii) to
exclude any other unusual, non-recurring gain or loss or extraordinary item; (vii) to
respond to, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development; (viii) to respond to, or in
anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; (ix) to exclude the dilutive effects
of acquisitions or joint ventures; (x) to assume that any 

 

16

 

business
divested by the Company achieved performance objectives at targeted levels
during the balance of a Performance Period following such divestiture; (xi) to
reflect a corporate transaction, such as a merger, consolidation, separation
(including a spinoff or other distribution of stock or property by a
corporation), or reorganization (whether or not such reorganization comes within
the definition of such term in Code Section 368); and (xii) to reflect any
partial or complete corporate liquidation.  The Compensation Committee
also retains the discretion to reduce or eliminate the compensation or economic
benefit due upon attainment of Performance Goals.

 

12.                                 Performance
Bonus Awards.  Any Service Provider selected by the
Compensation Committee may be granted one or more Performance-Based Awards in
the form of a cash bonus payable upon the attainment of Performance Goals that
are established by the Compensation Committee for a Performance Period prior to
the Determination Date. 
Performance-Based Awards in the form of cash bonuses may not exceed more
than $5,000,000 in any Fiscal Year. 
Performance Bonus Awards established for any Participant who would be
considered a “covered employee” within the meaning of Code Section 162(m) (hereinafter a “Covered Employee”)
will be based upon Performance Goals established in accordance with Section 13.  The provisions contained in this Plan
permitting the Company to grant Performance-Based Awards in the form of cash
bonuses shall not be the exclusive means for the payment of bonuses or other
incentive compensation to Participants, including Covered Employees.

 

13.                                 Terms
and Conditions of Any Performance-Based Award.

 

(a)           Purpose.  The purpose of this Section 13
is to provide the Compensation Committee of the Board (the “Compensation
Committee”) the ability to qualify Awards (other than Options and SARs) that
are granted pursuant to the Plan as qualified performance-based compensation
under Code Section 162(m).  If the
Compensation Committee, in its discretion, decides to grant a Performance-Based
Award subject to Performance Goals to a Covered Employee, the provisions of
this Section 13 will control over any contrary provision in the Plan;
provided, however, that the Compensation Committee may in its discretion grant
Awards that are not intended to qualify as “performance-based compensation”
under Code Section 162(m) to such Participants that are based on
Performance Goals or other specific criteria or goals but that do not satisfy
the requirements of this Section 13.

 

(b)           Applicability.  This
Section 13 will apply to those Covered Employees who are selected by the
Compensation Committee to receive any Award subject to Performance Goals.  The designation of a Covered Employee as
being subject to Code Section 162(m) will not in any manner entitle
the Covered Employee to receive an Award under the Plan.  Moreover, designation of a Covered Employee
subject to Code Section 162(m) for a particular Performance Period
will not require designation of such Covered Employee in any subsequent
Performance Period and designation of one Covered Employee will not require
designation of any other Covered Employee in such period or in any other
period.

 

(c)           Procedures with Respect to Performance Based
Awards.  To the extent necessary to comply with the
performance-based compensation requirements of Code Section 162(m), with
respect to any Award granted subject to Performance Goals, within the
first twenty-five percent (25%) of the Performance Period, but in no event more
than ninety (90) days following the commencement of any Performance Period (or
such other time as may be required or 

 

17

 

permitted by Code Section 162(m)), the Compensation Committee will, in
writing, (a) designate one or more Participants who are Covered Employees,
(b) select the Performance Goals applicable to the Performance Period, (c) establish
the Performance Goals, and amounts or methods of computation of such Awards, as
applicable, which may be earned for such Performance Period, and (d) specify
the relationship between Performance Goals and the amounts or methods of
computation of such Awards, as applicable, to be earned by each Covered
Employee for such Performance Period. 
Following the completion of each Performance Period, the Compensation
Committee will certify in writing whether the applicable Performance Goals have
been achieved for such Performance Period. 
In determining the amounts earned by a Covered Employee, the
Compensation Committee will have the right to reduce or eliminate (but not to
increase) the amount payable at a given level of performance to take into
account additional factors that the Compensation Committee may deem relevant to
the assessment of individual or corporate performance for the Performance
Period.

 

(d)           Payment
of Performance Based Awards.  Unless
otherwise provided in the applicable Award Agreement, a Covered Employee must
be employed by the Company or an Affiliate on the day a Performance-Based Award
for such Performance Period is paid to the Covered Employee.  Furthermore, a Covered Employee will be
eligible to receive payment pursuant to a Performance-Based Award for a
Performance Period only if the Performance Goals for such period are achieved.

 

(e)           Additional
Limitations.  Notwithstanding any
other provision of the Plan, any Award which is granted to a Covered Employee
and is intended to constitute qualified performance based compensation under
Code Section 162(m) will be subject to any additional limitations set
forth in the Code (including any amendment to Code Section 162(m)) or any
regulations and ruling issued thereunder that are requirements for
qualification as qualified performance-based compensation as described in Code Section 162(m),
and the Plan will be deemed amended to the extent necessary to conform to such
requirements.

 

14.                                 Compliance With Code Section 409A. 
Awards will be designed and operated in such a manner that they are
either exempt from the application of, or comply with, the requirements of Code
Section 409A such that the grant, payment, settlement or deferral will not
be subject to the additional tax or interest applicable under Code Section 409A,
except as otherwise determined in the sole discretion of the
Administrator.  The Plan and each Award
Agreement under the Plan is intended to meet the requirements of Code Section 409A
and will be construed and interpreted in accordance with such intent, except as
otherwise determined in the sole discretion of the Administrator.  To the extent that an Award or payment, or
the settlement or deferral thereof, is subject to Code Section 409A the
Award will be granted, paid, settled or deferred in a manner that will meet the
requirements of Code Section 409A, such that the grant, payment,
settlement or deferral will not be subject to the additional tax or interest
applicable under Code Section 409A.

 

15.                                 Leaves of Absence/Transfer Between Locations. 
Unless the Administrator provides otherwise or as provided by written
Company policies, vesting of Awards granted hereunder will be suspended during
any unpaid leave of absence or as provided by written Company policies.  A Service Provider will not cease to be an
Employee in the case of (i) any leave of absence approved by the Company
or (ii) transfers between locations of the Company or between the Company
and its Affiliates.  For purposes of
Incentive Stock Options, no such leave may exceed three (3) months, unless
reemployment upon expiration of such leave is guaranteed by statute or
contract.  If 

 

18

 

reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, then six (6) months and one day following the commencement of
such leave any Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.

 

16.                                 Transferability of Awards. 
Unless determined otherwise by the Administrator, an Award may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Participant, only by the
Participant.  With the approval of the
Administrator, a Participant may, in a manner specified by the Administrator, (a) transfer
an Award to a Participant’s spouse or former spouse pursuant to a
court-approved domestic relations order which relates to the provision of child
support, alimony payments or marital property rights, and (b) transfer an
Option by bona fide gift and not for any consideration, to (i) a member or
members of the Participant’s immediate family, (ii) a trust established
for the exclusive benefit of the Participant and/or member(s) of the
Participant’s immediate family, (iii) a partnership, limited liability
company of other entity whose only partners or members are the Participant
and/or member(s) of the Participant’s immediate family, or (iv) a
foundation in which the Participant and/or member(s) of the Participant’s
immediate family control the management of the foundation’s assets.  For purposes of this Section 13, “immediate
family” will mean the Participant’s spouse, former spouse, children,
grandchildren, parents, grandparents, siblings, nieces, nephews,
parents-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law,
including adoptive or step relationships and any person sharing the Participant’s
household (other than as a tenant or employee).

 

17.                                 Adjustments;
Dissolution or Liquidation; Merger or Change in Control.

 

(a)           Adjustments.  In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares occurs,
the Administrator, in order to prevent diminution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
will adjust the number and class of Shares that may be delivered under the Plan
and/or the number, class, and price of Shares covered by each outstanding
Award, and the numerical Share limits set forth in Sections 3, 6,
7, 8, 9 and 10.

 

(b)           Dissolution
or Liquidation.  In the event of the
proposed dissolution or liquidation of the Company, the Administrator will
notify each Participant as soon as practicable prior to the effective date of
such proposed transaction.  To the extent
it has not been previously exercised, an Award will terminate immediately prior
to the consummation of such proposed action.

 

(c)           Change
in Control.  In the event of a Change
in Control, each outstanding Award will be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation (the “Successor Corporation”).  In the event that the Successor Corporation
does not assume or substitute for the Award, the Participant will fully vest in
and have the right to exercise all of his or her outstanding Options and Stock
Appreciation Rights, including Shares as to which such Awards would not
otherwise be vested or exercisable, all restrictions on Restricted Stock will
lapse, and, with respect to Restricted Stock Units, Performance 

 

19

 

Shares and Performance Units, all Performance Goals or
other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met.  In addition,
if the Successor Corporation does not assume or substitute an Option or Stock
Appreciation Right in the event of a Change in Control, the Administrator will
notify the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of time
determined by the Administrator in its sole discretion, and the Option or Stock
Appreciation Right will terminate upon the expiration of such period.

 

For the purposes of this
subsection (c), an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or property) or, in the
case of a Stock Appreciation Right upon the exercise of which the Administrator
determines to pay cash or a Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Change in Control is not
solely common stock of the Successor Corporation, the Administrator may, with
the consent of the Successor Corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the
payout of a Restricted Stock Unit, Performance Share or Performance Unit, for
each Share subject to such Award (or in the case of an Award settled in cash,
the number of implied shares determined by dividing the value of the Award by
the per share consideration received by holders of Common Stock in the Change
in Control), to be solely common stock of the Successor Corporation equal in
fair market value to the per share consideration received by holders of Common
Stock in the Change in Control.

 

Notwithstanding anything
in this Section 17(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not be
considered assumed if the Company or its successor modifies any of such
Performance Goals without the Participant’s consent; provided, however, a
modification to such Performance Goals only to reflect the Successor
Corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

 

18.                                 Tax
Withholding

 

(a)           Withholding
Requirements.  Prior to the delivery
of any Shares or cash pursuant to an Award (or exercise thereof), the Company
will have the power and the right to deduct or withhold, or require a Participant
to remit to the Company, an amount sufficient to satisfy federal, state, local,
foreign or other taxes required to be withheld with respect to such Award (or
exercise thereof).

 

(b)           Withholding
Arrangements.  The Administrator, in
its sole discretion and pursuant to such procedures as it may specify from time
to time, may permit a Participant to satisfy such tax withholding obligation,
in whole or in part by (without limitation) (i) paying cash, (ii) electing
to have the Company withhold otherwise deliverable cash or Shares having a Fair
Market Value equal to the minimum amount required to be withheld, (iii) delivering
to the Company 

 

20

 

already-owned Shares having a Fair Market Value equal
to the amount required to be withheld, or (iv) selling a sufficient number of Shares otherwise
deliverable to the Participant through such means as the Administrator may
determine in its sole discretion (whether through a broker or otherwise) equal
to the amount required to be withheld. 
The amount of the withholding requirement will be deemed to include any
amount which the Administrator agrees may be withheld at the time the election
is made, not to exceed the amount determined by using the maximum federal,
state or local marginal income tax rates applicable to the Participant with
respect to the Award on the date that the amount of tax to be withheld is to be
determined.  The Fair Market Value of the
Shares to be withheld or delivered will be determined as of the date that the
taxes are required to be withheld.

 

19.                                 No
Effect on Employment or Service. 
Neither the Plan nor any Award will confer upon a Participant any right
with respect to continuing the Participant’s relationship as a Service Provider
with the Company, nor will they interfere in any way with the Participant’s
right or the Company’s right to terminate such relationship at any time, with
or without cause, to the extent permitted by Applicable Laws.

 

20.                                 Date
of Grant.  The date of grant of an
Award will be, for all purposes, the date on which the Administrator makes the
determination granting such Award, or such other later date as is determined by
the Administrator.  Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.

 

21.                                 Term
of Plan.  The Plan will become
effective upon its approval by the stockholders and no Awards may be made under
the Plan until such approval is obtained. The Plan shall continue in effect for
a term of ten (10) years after the date it becomes effective, unless
terminated earlier under Section 22  of the Plan.

 

22.                                 Amendment
and Termination of the Plan.

 

(a)           Amendment
and Termination.  The Administrator
may at any time amend, alter, suspend or terminate the Plan.

 

(b)           Stockholder
Approval.  The Company will obtain
stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.

 

(c)           Effect
of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan will impair the
rights of any Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company. 
Termination of the Plan will not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Awards granted
under the Plan prior to the date of such termination.

 

23.                                 Conditions
Upon Issuance of Shares.

 

(a)           Legal
Compliance.  Shares will not be
issued pursuant to the exercise of an Award unless the exercise of such Award
and the issuance and delivery of such Shares will comply with Applicable Laws
and will be further subject to the approval of counsel for the Company with
respect to such compliance.

 

21

 

(b)           Investment
Representations.  As a condition to
the exercise of an Award, the Company may require the person exercising such
Award to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.

 

24.                                 Inability
to Obtain Authority.  The inability
of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, will relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority will not have been obtained.

 

25.                                 Stockholder
Approval.

 

(a)           General.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted.  Such stockholder approval
will be obtained in the manner and to the degree required under Applicable
Laws.

 

(b)           Section 162(m).  Subject to Section 22 (regarding the
Administrator’s right to amend or terminate the Plan), the provisions of Section 13
relating to Awards intended to qualify as “performance based compensation”
under Code Section 162(m) shall remain in effect thereafter through
the Company’s 2013 Annual Meeting.

 

22Exhibit 10.9

 

FIRST AMENDMENT TO

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED
EMPLOYMENT AGREEMENT (this “Amendment Agreement”) dated January     ,
2009, is between Tuesday Morning Corporation, a Delaware corporation (the “Company”),
and Kathleen Mason (“Executive”).

 

WHEREAS, the Company and Executive entered into an
amended and restated employment agreement dated September 29, 2008 (the “Amended
and Restated Employment Agreement”); and

 

WHEREAS, the Company and Executive wish to amend the
Amended and Restated Employment Agreement; now therefore:

 

In consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Paragraph 3(d) of the Amended and Restated
Employment Agreement is hereby amended to read as follows in its entirety:

 

“(d) In connection with her employment under this Agreement,
Executive shall be granted by the Company under the 2008 Plan a restricted
stock award of 364,078 shares of Common Stock as promptly as practicable.  The restricted stock award shall be subject
to substantial risk of forfeiture restrictions one-third of which shall lapse
on each of November 14, 2009, November 14, 2010, and November 14,
2011.  In addition, during the Employment
Period, the Company shall pay Executive an amount equal to $500,000 per year on
each of November 14, 2009, November 14, 2010 and November 14,
2011.”

 

2.             Capitalized terms used in this Amendment Agreement and
not otherwise defined shall have the meanings ascribed to them in the Amended
and Restated Employment Agreement.

 

3.             This Amendment Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

 

4.             Any references to the Amended and Restated Employment
Agreement in any other document shall be deemed to mean the Amended and
Restated Employment Agreement, as amended by this Amendment Agreement.

 

5.             The Amended and Restated Employment Agreement, as
amended by this Amendment Agreement, shall remain in full force and effect.

 

1

 

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

 

 

	
   

  	
  TUESDAY MORNING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Stephanie Bowman

  
	
   

  	
  Name:

  	
  Stephanie Bowman

  
	
   

  	
  Title:

  	
  Executive Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Kathleen Mason

  
	
   

  	
   

  	
  Kathleen Mason

  
					

 

2

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