Document:

Exhibit 10.6

 

Summary of Current Director Compensation

 

	
  Cash
  Compensation for Directors

  	
   

  	
   

  	
   

  
	
  Annual Retainer

  	
   

  	
  $

  	
  45,000

  	
   

  
	
  For Each Board Meeting

  	
   

  	
  $

  	
  1,500

  	
   

  
	
  For Each Telephone Board Meeting

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  For Each Committee Meeting

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  For Each Telephone Committee Meeting

  	
   

  	
  $

  	
  750

  	
   

  
	
  For Serving as Chairman of the Audit Committee

  	
   

  	
  $

  	
  20,000

  	
   

  
	
  For Serving as Chairman of the Compensation Committee

  	
   

  	
  $

  	
  20,000

  	
   

  
	
  For Serving as Chairman of the Nominating and Corporate Governance
  Committee

  	
   

  	
  $

  	
  10,000

  	
   

  
	
  Per Day for Special Assignments

  	
   

  	
  $

  	
  1,000

  	
   

  
	
  For Serving as an Audit Committee Member

  	
   

  	
  $

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equity Compensation for Directors

  	
   

  	
   

  	
   

  
	
  Annual Stock Option Grant upon Re-election to the Board

  	
   

  	
  12,500

  	
   

  
	
  Initial Stock Option Grant upon Appointment or Election to the Board

  	
   

  	
  30,000

  	
   

  

 

These options vest ratably every six months over a two-year
period.  In addition to the compensation
listed in the table, non-employee directors are reimbursed for expenses
incurred in attending Board, committee and stockholder meetings.

 

1Exhibit 10.1

 

CANDELA
CORPORATION

 

SECOND
AMENDED AND RESTATED 1998 STOCK PLAN

 

October
5, 2005

 

PURPOSE.  The
purpose of the Candela Corporation 1998 Stock Plan (the “Plan”) is to encourage
employees of Candela Corporation (the “Company”) and of any present or future
parent or subsidiary of the Company (collectively, “Related Corporations”) and
other individuals who render services to the Company or a Related Corporation,
by providing opportunities to participate in the ownership of the Company and
its future growth through (a) the grant of options which qualify as “incentive
stock options” (“ISOs”) under Section 422(b) of the Internal Revenue Code of
1986, as amended (the “Code”); (b) the grant of options that do not qualify as
ISOs (“Non-Qualified Options”); (c) awards of stock in the Company (“Awards”);
(d) the grant of stock appreciation rights (“SARs”); and (e) opportunities
to make direct purchases of stock in the Company (“Purchases”).  Both ISOs and Non-Qualified Options are
referred to hereafter individually as an “Option” and collectively as “Options.”  Options, Awards, SARs and authorizations to
make Purchases are referred to hereafter collectively as “Stock Rights.”  As used herein, the terms “parent” and “subsidiary”
mean “parent corporation” and “subsidiary corporation,” respectively, as those
terms are defined in Section 424 of the Code.

 

ADMINISTRATION OF THE PLAN.

 

BOARD OR COMMITTEE
ADMINISTRATION.  The Plan shall be
administered by the Board of Directors of the Company (the “Board”) or, subject
to paragraph 0(D) (relating to compliance with Section 162(m) of the Code), by
a committee appointed by the Board (the “Committee”).  Hereinafter, all references in this Plan to
the “Committee” shall mean the Board if no Committee has been appointed.  Subject to ratification of the grant or
authorization of each Stock Right by the Board (if so required by applicable
state law), and subject to the terms of the Plan, the Committee shall have the
authority to (i) determine to whom (from among the class of employees eligible
under paragraph 0 to receive ISOs) ISOs shall be granted, and to whom (from
among the class of individuals and entities eligible under paragraph 0 to
receive Non-Qualified Options, SARs and Awards and to make Purchases)
Non-Qualified Options, SARs, Awards and authorizations to make Purchases may be
granted; (ii) determine the time or times at which Options, SARs or Awards
shall be granted or Purchases made; (iii) determine the purchase price of
shares subject to each Option or Purchase, which prices shall not be less than
the minimum price specified in paragraph 0; (iv) determine the grant price of
SARs; (v) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (vi) determine (subject to paragraph 0) the time or times
when each Option or SAR shall become exercisable and the duration of the
exercise period; (vii) extend the period during which outstanding Options or
SARs may be exercised; (viii) determine whether restrictions such as repurchase
options are to be

 

1

 

imposed on shares subject to Options, SARs, Awards and
Purchases and the nature of such restrictions, if any, and (ix) interpret the
Plan and prescribe and rescind rules and regulations relating to it.  If the Committee determines to issue a
Non-Qualified Option, it shall take whatever actions it deems necessary, under
Section 422 of the Code and the regulations promulgated thereunder, to ensure
that such Option is not treated as an ISO. 
The interpretation and construction by the Committee of any provisions
of the Plan or of any Stock Right granted under it shall be final unless
otherwise determined by the Board.  The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem advisable. 
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Stock Right
granted under it.

 

COMMITTEE ACTIONS.  The Committee may select one of its members
as its chairman, and shall hold meetings at such time and places as it may
determine.  A majority of the Committee
shall constitute a quorum and acts of a majority of the members of the
Committee at a meeting at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Committee (if consistent with
applicable state law), shall be the valid acts of the Committee.  From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.

 

GRANT OF STOCK RIGHTS TO
BOARD MEMBERS.  Stock Rights may be
granted to members of the Board.  All
grants of Stock Rights to members of the Board shall in all respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons.  Members of the Board who either
(i) are eligible to receive grants of Stock Rights pursuant to the Plan or (ii)
have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself or
herself of Stock Rights, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is taken
with respect to the granting to such member of Stock Rights.

 

PERFORMANCE-BASED
COMPENSATION.  The Board, in its
discretion, may take such action as may be necessary to ensure that Stock
Rights granted under the Plan qualify as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Code and applicable
regulations promulgated thereunder (“Performance-Based Compensation”).  Such action may include, in the Board’s
discretion, some or all of the following: (i) if the Board determines that
Stock Rights granted under the Plan generally shall constitute Performance-
Based Compensation, the Plan shall be administered, to the extent required for
such Stock Rights to constitute Performance-Based Compensation, by a Committee
consisting solely of two or more “outside directors” (as defined in applicable
regulations promulgated under Section 162(m) of the Code), (ii) if any
Non-Qualified Options with an exercise price less than the fair market value
per share of the Company’s common stock, $0.01 par value per share (the “Common
Stock”), are granted under the Plan and the Board determines that such Options
should constitute Performance-Based

 

2

 

Compensation, such options shall be made exercisable only
upon the attainment of a pre-established, objective performance goal
established by the Committee, and such grant shall be submitted for, and shall
be contingent upon shareholder approval, and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as are necessary for
compensation recognized in connection with the exercise or disposition of such
Stock Right or the disposition of Common Stock acquired pursuant to such Stock
Right, to constitute Performance-Based Compensation.

 

ELIGIBLE EMPLOYEES AND OTHERS.  ISOs may be granted only to employees of the
Company or any Related Corporation. 
Non-Qualified Options, Awards, SARs and authorizations to make Purchases
may be granted to any employee, officer or director (whether or not also an employee)
or consultant of the Company or any Related Corporation.  The Committee may take into consideration a
recipient’s individual circumstances in determining whether to grant a Stock
Right.  The granting of any Stock Right
to any individual or entity shall neither entitle that individual or entity to,
nor disqualify such individual or entity from, participation in any other grant
of Stock Rights.

 

STOCK.  The
stock subject to Stock Rights shall be authorized but unissued shares of Common
Stock or shares of Common Stock reacquired by the Company in any manner.  The aggregate number of shares which may be
issued pursuant to the Plan is 5,300,000, subject to adjustment as provided in
paragraph 0.  If any Option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part or
shall be repurchased by the Company, the unpurchased shares of Common Stock
subject to such Option shall again be available for grants of Stock Rights
under the Plan.  Where payment upon
exercise of a SAR is made in shares of Common Stock, only the net number of
shares of Common Stock issued in connection with such exercise shall be deemed “issued”
for purposes of this paragraph 0.

 

No employee of the Company or any Related Corporation may be granted
Options and/or SARs to acquire, in the aggregate, more than 700,000 shares of
Common Stock under the Plan during any fiscal year of the Company, subject to
adjustment as provided in paragraph 0. 
If any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to
be exercisable in whole or in part or shall be repurchased by the Company, the
shares subject to such Option shall be included in the determination of the
aggregate number of shares of Common Stock deemed to have been granted to such
employee under the Plan.

 

GRANTING OF STOCK RIGHTS.  Stock Rights may be granted under the Plan at
any time on or after September 19, 1998 and prior to September 18, 2008.  The date of grant of a Stock Right under the
Plan will be the date specified by the Committee at the time it grants the
Stock Right; provided, however, that such date shall not be prior to the date
on which the Committee acts to approve the grant.  SARs may be granted in tandem with an Option
(“Tandem SARs”), or may be granted on a freestanding basis, not related to any
Option (“Freestanding SARs”), or any combination of these forms of SARs.

 

3

 

MINIMUM PRICE; ISO LIMITATIONS; FAIR MARKET VALUE.

 

PRICE FOR OPTIONS, SARS,
AWARDS AND PURCHASES.  Subject to
paragraph 0(D) (relating to compliance with Section 162(m) of the Code), the
exercise price per share specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock granted in any Award
or authorized as a Purchase, under the Plan may be less than the fair market
value of the Common Stock of the Company on the date of grant; provided that,
in no event shall such exercise price or such purchase price be less than the
minimum legal consideration required therefor under the laws of any
jurisdiction in which the Company or its successors in interest may be
organized.  The grant price of a
Freestanding SAR shall equal the fair market value of a share of Common Stock
on the date of grant of the SAR.  The
grant price of a Tandem SAR shall equal the exercise price of the related
Option.

 

PRICE FOR ISOS.  The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant.  In the case of an ISO to be granted to an
employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement relating to such
ISO shall not be less than one hundred ten percent (110%) of the fair market
value per share of Common Stock on the date of grant.  For purposes of determining stock ownership
under this paragraph, the rules of Section 424(d) of the Code shall apply.

 

$100,000 ANNUAL LIMITATION ON
ISO VESTING.  Each eligible employee may
be granted Options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the first time by such
employee during any calendar year with respect to stock having a fair market
value (determined at the time the ISOs were granted) in excess of
$100,000.  The Company intends to
designate any Options granted in excess of such limitation as Non-Qualified
Options, and the Company shall issue separate certificates to the optionee with
respect to Options that are Non-Qualified Options and Options that are ISOs.

 

DETERMINATION OF FAIR MARKET
VALUE.  If, at the time an Option or SAR
is granted under the Plan, the Company’s Common Stock is publicly traded, “fair
market value” shall be determined as of the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date of
grant and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market. If the Common Stock is not publicly

 

4

 

traded at the time an Option or SAR is granted under the Plan,
“fair market value” shall mean the fair value of the Common Stock as determined
by the Committee after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm’s length.

 

OPTION AND SAR DURATION.  Subject to earlier termination as provided in
paragraphs 0 and 0 or in the agreement relating to such Option or SAR, each
Option and SAR shall expire on the date specified by the Committee, but not
more than (i) ten years from the date of grant in the case of Options and SARs
generally and (ii) five years from the date of grant in the case of ISOs
granted to an employee owning stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
Related Corporation, as determined under paragraph 0(B).  Subject to earlier termination as provided in
paragraphs 0and 0, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 0.

 

EXERCISE OF OPTION AND SARS.  Subject to the provisions of paragraphs 0
through 0, each Option or SAR granted under the Plan shall be exercisable as
follows:

 

VESTING.  The Option or SAR shall either be fully
exercisable on the date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.

 

FULL VESTING OF
INSTALLMENTS.  Once an installment
becomes exercisable, it shall remain exercisable until expiration or
termination of the Option or SAR, unless otherwise specified by the Committee.

 

PARTIAL EXERCISE.  Each Option or, subject to subparagraph 0(B),
each SAR or installment thereof, may be exercised at any time or from time to
time, in whole or in part, for up to the total number of shares with respect to
which it is then exercisable

 

ACCELERATION OF VESTING.  The Committee shall have the right to
accelerate the date that any installment of any Option or SAR becomes
exercisable; provided that the Committee shall not, without the consent of an
optionee, accelerate the permitted exercise date of any installment of any
Option granted pursuant to paragraph 0 if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as described
in paragraph 0(C).

 

TERMINATION OF EMPLOYMENT.  Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 0, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate on the earlier of (a) three
months after the date of termination of his or her employment, or (b) their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant
to paragraph 0.

 

5

 

For purposes of this paragraph 0, employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee’s right to re-employment is guaranteed by statute or
by contract.  A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 0, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of
absence.  ISOs granted under the Plan
shall not be affected by any change of employment within or among the Company
and Related Corporations, so long as the optionee continues to be an employee
of the Company or any Related Corporation. 
Nothing in the Plan shall be deemed to give any grantee of any Stock
Right the right to be retained in employment or other service by the Company or
any Related Corporation for any period of time.

 

DEATH; DISABILITY.

 

DEATH.  If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or her death, any ISO
owned by such optionee may be exercised, to the extent otherwise exercisable on
the date of death, by the estate, personal representative or beneficiary who
has acquired the ISO by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
from the date of the optionee’s death.

 

DISABILITY.  If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or her disability,
such optionee shall have the right to exercise any ISO held by him or her on
the date of termination of employment, for the number of shares for which he or
she could have exercised it on that date, until the earlier of (i) the
specified expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee’s employment. 
For the purposes of the Plan, the term “disability” shall mean “permanent
and total disability” as defined in Section 22(e)(3) of the Code or any
successor statute.

 

TRANSFERABILITY OF OPTIONS AND SARS.  Except as otherwise provided in subparagraphs
00 and 00 below, an Option or SAR may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution and may be exercised, during the lifetime
of the optionee or grantee, only by the optionee or grantee.  Notwithstanding the foregoing, with the
consent of the Board or the Compensation Committee thereof, in either case in
its sole discretion, an optionee or grantee may transfer all or a portion of
his or her vested Non-Qualified Options or SARs to:

 

a trust for the exclusive benefit of the optionee or
grantee and/or one or more Immediate Family Members or spouses of Immediate
Family Members.  For the purposes of this
subparagraph 00, “Immediate Family Members” shall mean the optionee’s or
grantee’s spouse, former spouse, children or grandchildren, whether natural or
adopted; and

 

6

 

an organization which qualifies as a tax exempt
organization under Section 501(a) and 501(c)(3) of the Code.

 

As a condition to any transfer pursuant to subparagraphs 00 and 00
each such transferee shall agree in writing (in a form satisfactory to the
Committee) to be bound by the terms and conditions of the Option or SAR
agreement evidencing such transferred Option or SAR, as well as any additional
restrictions or conditions as the Committee may require.  Following the transfer of an Option or SAR in
accordance with this paragraph 0, the term “optionee” and “grantee” shall refer
to the transferee, except that, with respect to any requirements of continued
service or employment or provision of the Company’s tax withholding obligations,
such terms shall refer to the optionee or grantee.  The Committee shall have no obligation to
notify any transferee of any termination of the transferred Option or SAR,
including an early termination resulting from the termination of employment or
service of the original optionee or grantee. 
No transferee shall make a subsequent transfer of a transferred Option
or SAR except to the original optionee or grantee or as otherwise provided in
this paragraph 0.

 

TERMS AND CONDITIONS OF OPTIONS AND SARS.  Options or SARs shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve.  Such
instruments shall conform to the terms and conditions set forth in paragraphs 6
through 11 hereof and may contain such other provisions as the Committee deems
advisable which are not inconsistent with the Plan, including restrictions
applicable to shares of Common Stock issuable upon exercise of Options or
SARs.  The Committee may specify that any
Non-Qualified Option or SARs shall be subject to the restrictions set forth
herein with respect to ISOs, or to such other termination and cancellation
provisions as the Committee may determine. 
The Committee may from time to time confer authority and responsibility
on one or more of its own members and/or one or more officers of the Company to
execute and deliver such instruments. 
The proper officers of the Company are authorized and directed to take
any and all action necessary or advisable from time to time to carry out the
terms of such instruments.

 

ADJUSTMENTS. 
Upon the occurrence of any of the following events, an optionee’s or
grantee’s rights with respect to Options or SARs granted to such optionee or
grantee hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee or grantee
and the Company relating to such Option or SAR:

 

STOCK DIVIDENDS AND STOCK
SPLITS.  If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or
if the Company shall issue any shares of Common Stock as a stock dividend on
its outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options or SARs shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.

 

7

 

CONSOLIDATIONS OR
MERGERS.  If the Company is to be
consolidated with or acquired by another entity in a merger or other
reorganization in which the holders of the outstanding voting stock of the
Company immediately preceding the consummation of such event, shall,
immediately following such event, hold, as a group, less than a majority of the
voting securities of the surviving or successor entity, or in the event of a
sale of all or substantially all of the Company’s assets or otherwise (each, an
“Acquisition”), the Committee or the board of directors of any entity assuming
the obligations of the Company hereunder (the “Successor Board”), shall, as to
outstanding Options and SARs, either (i) make appropriate provision for the
continuation of such Options or SARs by substituting on an equitable basis for
the shares then subject to such Options or SARs either (a) the consideration
payable with respect to the outstanding shares of Common Stock in connection
with the Acquisition, (b) shares of stock of the surviving or successor
corporation, or (c) such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed the
fair market value of the shares of Common Stock subject to such Options or SARS
immediately preceding the Acquisition; or (ii) upon written notice to the
optionees and grantees, provide that all Options and SARs must be exercised, to
the extent then exercisable or to be exercisable as a result of the
Acquisition, within a specified number of days of the date of such notice, at
the end of which period the Options and SARs shall terminate; or
(iii) terminate all Options and SARs in exchange for a cash payment equal
to the excess of the fair market value of the shares subject to such Options or
SARs (to the extent then exercisable or to be exercisable as a result of the
Acquisition) over the exercise price thereof.

 

RECAPITALIZATION OR
REORGANIZATION.  In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph 0(B) above) pursuant to which securities of the
Company or of another corporation are issued with respect to the outstanding
shares of Common Stock, an optionee or grantee upon exercising an Option or SAR
shall be entitled to receive for the purchase price paid upon such exercise the
securities he or she would have received if he or she had exercised such Option
or SAR prior to such recapitalization or reorganization.

 

MODIFICATION OF ISOS.  Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs 0(A), (B) or (C) with respect to
ISOs shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a “modification”
of such ISOs (as that term is defined in Section 424 of the Code) or would
cause any adverse tax consequences for the holders of such ISOs.  If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs or would cause adverse tax consequences to the holders, it may refrain
from making such adjustments.

 

DISSOLUTION OR
LIQUIDATION.  In the event of the
proposed dissolution or liquidation of the Company, each Option and SAR will
terminate immediately prior to the consummation of such proposed action or at
such other time and subject to such other conditions as shall be determined by
the Committee.

 

8

 

ISSUANCES OF SECURITIES.  Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options and SARs.  No
adjustments shall be made for dividends paid in cash or in property other than
securities of the Company.

 

FRACTIONAL SHARES.  No fractional shares shall be issued under
the Plan and the optionee and grantee shall receive from the Company cash in
lieu of such fractional shares.

 

ADJUSTMENTS.  Upon the happening of any of the events
described in subparagraphs 0(A), (B) or (C) above, the class and aggregate
number of shares set forth in paragraph 4 hereof that are subject to Stock
Rights which previously have been or subsequently may be granted under the Plan
shall also be appropriately adjusted to reflect the events described in such
subparagraphs.  The Committee or the
Successor Board shall determine the specific adjustments to be made under this
paragraph 0 and, subject to paragraph 0, its determination shall be conclusive.

 

MEANS OF EXERCISING OPTIONS AND SARS.

 

OPTIONS.  An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall designate.  Such notice shall identify the Option being
exercised and specify the number of shares as to which such Option is being
exercised, accompanied by full payment of the purchase price therefor either
(a) in United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery of shares of Common Stock having a fair market
value equal as of the date of the exercise to the cash exercise price of the
Option, (c) at the discretion of the Committee, by delivery of the optionee’s
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, (d) at the discretion of the Committee and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Option and an authorization to the broker or selling agent
to pay that amount to the Company, which sale shall be at the optionee’s
direction at the time of exercise, or (e) at the discretion of the Committee,
by any combination of (a), (b), (c) and (d) above. If the Committee exercises
its discretion to permit payment of the exercise price of an ISO by means of
the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the
grant of the ISO in question.  The holder
of an Option shall not have the rights of a shareholder with respect to the
shares covered by such Option until the date of issuance of a stock certificate
to such holder for such shares.  Except
as expressly provided above in paragraph 0 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends
or similar rights for which the record date is before the date such stock
certificate is issued.

 

9

 

SARS.  Tandem SARs may be exercised for all or part
of the shares of Common Stock subject to the related Option upon the surrender
of the right to exercise the equivalent portion of the related Option.  A Tandem SAR may be exercised only with
respect to the shares of Common Stock for which its related Option is then
exercisable.  Notwithstanding any other
provision of the Plan to the contrary, with respect to a Tandem SAR granted in
connection with an ISO: (i) the Tandem SAR will expire no later than the
expiration of the underlying ISO; (ii) the value of the payout with respect to
the Tandem SAR may be for no more than one hundred percent (100%) of the
difference between the exercise price of the underlying ISO and the fair market
value of the shares of Common Stock subject to the underlying ISO at the time
the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised
only when the fair market value of the shares of Common Stock subject to the
ISO exceeds the exercise price of the ISO. 
Freestanding SARs may be exercised upon whatever terms and conditions
the Committee, in its sole discretion, imposes upon them and sets forth in the
award agreement.  Upon exercise of a SAR,
a grantee shall 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 of Common Stock on the date of exercise over the grant price; by (ii)
the number of shares of Common Stock with respect to which the SAR is
exercised.  At the discretion of the
Committee, the payment upon SAR exercise may be in cash, in shares of Common
Stock of equivalent value, or in some combination thereof.

 

TERM AND AMENDMENT OF PLAN.  This Plan was adopted by the Board on
September 19, 1998, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by written consent.  If the approval of stockholders is not
obtained prior to September 19, 1999, any grants of ISOs under the Plan made
prior to that date will be rescinded. 
The Plan shall expire at the end of the day on September 18, 2008
(except as to Options outstanding on that date).  Subject to the provisions of paragraph 0
above, Options may be granted under the Plan prior to the date of stockholder
approval of the Plan.  The Board may
terminate or amend the Plan in any respect at any time, except that, without
the approval of the stockholders obtained within 12 months before or after the
Board adopts a resolution authorizing any of the following actions: (a) the
total number of shares that may be issued under the Plan may not be increased
(except by adjustment pursuant to paragraph 0); (b) the provisions of paragraph
0regarding eligibility for grants of ISOs may not be modified; (c) the
provisions of paragraph 0(B) regarding the exercise price at which shares may
be offered pursuant to ISOs may not be modified (except by adjustment pursuant
to paragraph 0); and (d) the expiration date of the Plan may not be extended.
Except as otherwise provided in this paragraph 0, in no event may action of the
Board or stockholders alter or impair the rights of a grantee or optionee,
without such grantee’s or optionee’s consent, under any Stock Right previously
granted to such grantee or optionee.

 

MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO
NON-QUALIFIED OPTIONS.  Subject to
paragraph 0(D), without the prior written consent of the holder of an ISO, the
Committee shall not alter the terms of such ISO (including the means of
exercising such ISO) if such alteration would constitute a

 

10

 

modification (within the meaning of Section 424(h)(3) of the
Code).  The Committee, at the written
request or with the written consent of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee’s ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion.  Such actions may include, but shall not be
limited to, extending the exercise period or reducing the exercise price of the
appropriate installments of such ISOs. 
At the time of such conversion, the Committee (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Committee in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee’s ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action.  Upon
the taking of such action, the Company shall issue separate certificates to the
optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.

 

APPLICATION OF FUNDS. 
The proceeds received by the Company from the sale of shares pursuant to
Options granted and Purchases authorized under the Plan shall be used for
general corporate purposes.

 

NOTICE TO COMPANY OF A DISQUALIFYING DISPOSITION.  By accepting an ISO granted under the Plan,
each optionee agrees to notify the Company in writing immediately after such
optionee makes a Disqualifying Disposition (as described in Sections 421, 422
and 424 of the Code and regulations thereunder) of any stock acquired pursuant
to the exercise of ISOs granted under the Plan. 
A Disqualifying Disposition is generally any disposition occurring on or
before the later of (a) the date two years following the date the ISO was
granted, or (b) the date one year following the date the ISO was exercised.

 

WITHHOLDING OF ADDITIONAL INCOME TAXES.  Upon the exercise of a Non-Qualified Option,
the transfer of a Non-Qualified Option pursuant to an arm’s-length transaction,
the grant of an Award, the exercise of a SAR, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 0), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option or SAR hereunder, or
the making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Option, (iii) the grant of an Award, (iv) the exercise of a SAR,
(v) the making of a Purchase of Common Stock for less than its fair market
value, or (vi) the vesting or transferability of restricted stock or securities
acquired by exercising an Option or SAR, on the optionee’s or grantee’s making
satisfactory arrangements for such withholding. 
Such arrangements may include payment by the optionee or grantee in cash
or by check of the amount of the withholding taxes or, at the discretion of the
Committee, by the optionee’s or grantee’s delivery of previously held shares of
Common

 

11

 

Stock or the withholding from the shares of Common Stock otherwise
deliverable upon exercise of a Option or SAR shares having an aggregate fair market
value equal to the amount of such withholding taxes.

 

GOVERNMENTAL REGULATION.  The Company’s obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

 

Government regulations may impose reporting or other obligations on the
Company with respect to the Plan.  For
example, the Company may be required to send tax information statements to
employees and former employees that exercise ISOs under the Plan, and the
Company may be required to file tax information returns reporting the income
received by optionees of Options in connection with the Plan.

 

GOVERNING LAW. 
The validity and construction of the Plan and the instruments evidencing
Stock Rights shall be governed by the laws of Delaware, or the laws of any
jurisdiction in which the Company or its successors in interest may be
organized.

 

CODE SECTION 409A. 
To the extent applicable, it is intended that this Plan and any Options,
SARs and Awards granted and Purchases made hereunder comply with the
requirements of Section 409A of the Code, and any related regulations or other
guidance promulgated with respect to such Section by the U.S. Department of the
Treasury or the Internal Revenue Service (“Section 409A”).  Any provision that would cause the Plan or
any Options, SARs and Awards granted or Purchases made hereunder to fail to
satisfy Section 409A shall have no force or effect until amended to comply with
Section 409A, which amendment may be retroactive to the extent permitted by
Section 409A.

 

12

 

Register of Amendments to 1998 Stock Plan

 

	
  Date

  	
   

  	
  Section

  Affected

  	
   

  	
  Change

  
	
  February 29, 2000

  	
   

  	
  4

  	
   

  	
  Adjusted to reflect 3-for-2 stock
  split.

  
	
  January 30, 2003

  	
   

  	
   

  	
   

  	
  Stockholders voted to increase the
  number of shares available for grant under the Plan from 1,250,000 to
  1,650,000 and amended and restated the Plan (as the Amended and Restated 1998
  Stock Plan) to accomplish same.

  
	
  January 29, 2004

  	
   

  	
  4

  	
   

  	
  Stockholders voted to increase the
  number of shares available for grant under the Plan from 1,650,000 to
  2,650,000.

  
	
  October 17, 2004

  	
   

  	
  4

  	
   

  	
  Adjusted to reflect 2-for-1 stock
  split.

  
	
  October 5, 2005

  	
   

  	
  All

  	
   

  	
  Completely amended and restated the
  Plan (as the Second Amended and Restated 1998 Stock Plan) to add SARs.

  

 

13

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