Document:

Exhibit 10.02

 

RESTRICTED SHARES AWARD AGREEMENT

 

This Restricted Shares
Award Agreement (the “Award Agreement”), made as of the 21st day of February,
2006 (the “Grant Date”), between Apex Silver Mines Limited, a Cayman Islands
corporation (“Apex”), and Keith R. Hulley (“Mr. Hulley”).

 

WHEREAS, Apex desires to encourage and enable Mr. Hulley
to acquire a proprietary interest in Apex through the ownership of Apex’s
ordinary shares, par value US$0.01 per share (the “Ordinary Shares”) pursuant
to the terms and conditions of the Apex Silver Mines Limited 2004 Equity
Incentive Plan (the “Plan”) and this Award Agreement.  Such ownership will provide Mr. Hulley
with a more direct stake in the future of Apex and encourage Mr. Hulley to
continue to serve as a Director of Apex.

 

1.             Grant
of Restricted Shares.

 

1.1           The Company hereby
grants to Mr. Hulley 20,000 restricted Ordinary Shares (the “Restricted
Shares”) on the terms and conditions set forth in this Award Agreement.

 

1.2           Mr. Hulley’s
rights with respect to the Restricted Shares shall remain forfeitable at all
times prior to the dates set forth below (each a  “Lapse Date”):

 

	
  Number of Shares

  	
   

  	
  Lapse Date

  
	
  5,000

  	
   

  	
  February 21, 2007

  
	
  5,000

  	
   

  	
  February 21, 2008

  
	
  5,000

  	
   

  	
  February 21, 2009

  
	
  5,000

  	
   

  	
  February 21, 2010

  

 

1.3           This Award Agreement
shall be construed in accordance with, and subject to, the terms of the
Plan.  For purposes of this Award
Agreement, all capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Plan.

 

2.             Rights
of Participant.

 

2.1           Except as provided
in Section 2.2, Section 6 and otherwise in this Award Agreement, Mr. Hulley
shall be entitled, at all times on and after the Grant Date, to exercise all
rights, powers and privileges of a shareholder with respect to the Restricted
Shares (whether or not the restrictions thereon shall have lapsed), other than
those Restricted Shares which have been forfeited pursuant to Section 3.2
hereof.

 

2.2           Prior to the earlier
of the Lapse Date or the Accelerated Lapse Date (as defined below in Section 3.1),
Mr. Hulley shall not be entitled to transfer, sell, pledge, encumber,
hypothecate or assign the Restricted Shares (collectively, the “Transfer
Restrictions”).

 

 

3.             Lapse
of Restrictions.

 

3.1           The Transfer Restrictions
and all other restrictions with respect to the Restricted Shares shall lapse,
and such Restricted Shares shall become fully nonforfeitable on the earlier of
the following dates:

 

(a)           the applicable Lapse
Date, provided Mr. Hulley continues to serve as a director of Apex until
such Lapse Date; or

 

(b)           the date (the “Accelerated
Lapse Date”) of Mr. Hulley’s termination of service as a director of Apex (i) as
the result of Mr. Hulley’s death or Disability, (ii) as the result of
Mr. Hulley’s removal as a director of Apex without cause or his failure to
be reelected as a director of Apex by Apex Shareholders, or (iii) in
anticipation or as the result of a Change in Control as provided in Section 4.

 

3.2           Upon the termination
of Mr. Hulley’s service as a director of Apex prior to a Lapse Date, other
than as provided in Section 3.1(b), the Restricted Shares with respect to
which the Transfer Restrictions have not yet lapsed shall be forfeited and
automatically transferred to and reacquired by Apex at no cost to Apex, and
neither Mr. Hulley nor his heirs, executors, administrators or successors
shall have any right or interest in the Restricted Shares.

 

4.             Change of Control. 
Upon the occurrence of a Change of Control, the Transfer Restrictions
and all other restrictions shall lapse, the Restricted Shares shall become
fully nonforfeitable, and the Board shall have the power and discretion to
provide for modification of this award of Restricted Stock in accordance with
the Plan.  The provisions of this Section 4
shall not apply to any transaction undertaken for the purpose of
reincorporating Apex under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of Apex’s
capital stock.

 

5.             Escrow
and Delivery of Shares.

 

5.1           Certificates
representing the Restricted Shares shall be issued in the name of Mr. Hulley
and held by Apex in escrow and shall remain in the custody of Apex until (i) their
delivery to Mr. Hulley or his estate as set forth in Section 5.2, or (ii) their
forfeiture and transfer to Apex as set forth in Section 3.2.

 

5.2           Certificates
representing the Restricted Shares shall be delivered to Mr. Hulley as
soon as practicable following the Lapse Date or Accelerated Lapse Date,
provided that Mr. Hulley has satisfied all applicable tax withholding
requirements with respect to the Restricted Shares.

 

(a)           If the Accelerated
Lapse Date occurs as a result of Mr. Hulley’s death, certificates
representing the Restricted Shares shall be delivered to Mr. Hulley’s
estate as soon as practicable following Apex’s receipt of an official death
certificate or other evidence of death acceptable to Apex, provided that Mr. Hulley’s
estate has satisfied all applicable tax withholding requirements with respect
to the Restricted Shares.

 

2

 

6.             Dividends;
Voting Rights.

 

6.1           All dividends
declared and paid by Apex on Restricted Shares shall be held by Apex in escrow
for the account of Mr. Hulley. 
Dividends so held shall not bear interest.  Upon the earlier of the Lapse Date or the
Accelerated Lapse Date, the dividends shall be paid to Mr. Hulley or his
estate, as the case may be.  Upon the
forfeiture of the Restricted Shares pursuant to Section 3.2, all related
dividends shall also be forfeited.

 

6.2           Mr. Hulley
shall not have the right to vote all or any portion of the Restricted Shares
until the earlier of the applicable Lapse Date or the Accelerated Lapse Date.

 

7.             Adjustments Upon
Recapitalization.  If, by reason
of a recapitalization or other change in corporate or capital structure, Mr. Hulley
shall be entitled to new, additional or different shares of stock or securities
of Apex or any successor Company or entity or other property pursuant to Section 11
of the Plan, such new, additional or different shares or other property shall
thereupon be subject to all of the conditions and restrictions which were
applicable to the Restricted Shares immediately prior to such recapitalization
or other change in corporate or capital structure.

 

8.             Withholding of Taxes. 
If Mr. Hulley makes an election under Section 83(b) of
the Code with respect to the grant of Restricted Shares, the grant of the
Restricted Shares shall be conditioned upon the prompt payment by Mr. Hulley
to Apex of an amount equal to the applicable federal, state and local income
taxes and other amounts required by law to be withheld (the “Withholding Taxes”)
in connection with such election.  If Mr. Hulley
does not make an election under Section 83(b) of the Code with
respect to the grant of Restricted Shares, Mr. Hulley shall pay to Apex
the Withholding Taxes upon the earlier of a Lapse Date or Accelerated Lapse
Date.  The delivery of the Restricted
Shares and related dividends shall be conditioned upon the prior payment of the
applicable Withholding Taxes.

 

The Company shall have the right to require Mr. Hulley or Mr. Hulley’s
beneficiaries or legal representatives to remit to Apex an amount sufficient to
satisfy any Cayman Islands or United States federal, state and local withholding
tax requirements.  Whenever payments
under the Plan or this Award Agreement are to be made to Mr. Hulley in
cash, such payments shall be net of any amounts sufficient to satisfy all
applicable taxes, including without limitation, all applicable Cayman Islands
or United States federal, state and local withholding tax requirements to be
withheld or submitted by Apex concerning such payments.  The Board may, in its sole discretion, permit
Mr. Hulley to satisfy the withholding obligation either by (i) surrendering
Ordinary Shares owned by Mr. Hulley or (ii) having Apex withhold from
Ordinary Shares otherwise deliverable to Mr. Hulley.  Ordinary Shares surrendered or withheld shall
be valued at their Fair Market Value, as defined in the Plan as of the date on
which income is required to be recognized for income tax purposes.

 

9.             Modification of Award
Agreement.  Except as set forth in the Plan and in this
Award Agreement, this Award Agreement may be modified, amended, suspended or
terminated, and any terms or conditions may be waived, but only by a written
instrument executed by the parties hereto.

 

3

 

10.          Plan Controlling. 
This Award Agreement is intended to conform in all respects with the
requirements of the Plan. 
Inconsistencies between the requirements of this Award Agreement and the
Plan shall be resolved according to the terms of the Plan.  Mr. Hulley acknowledges receipt of a
copy of the Plan.

 

11.          Severability. 
Should any provision of this Award Agreement be held by a court of
competent jurisdiction to be unenforceable or invalid for any reason, the
remaining provisions of this Award Agreement shall not be affected by such
holding and shall continue in full force and effect in accordance with their terms.

 

12.          Governing Law. 
This Award Agreement and all rights arising hereunder shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Colorado.

 

13.          Successors in Interest. 
This Award Agreement shall inure to the benefit of and be binding upon
any successor to Apex and upon Mr. Hulley’s heirs, executors,
administrators and successors.

 

	
   

  	
  APEX
  SILVER MINES LIMITED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey G.
  Clevenger

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Jeffrey G. Clevenger

  
	
   

  	
   

  	
  Title:

  	
    President and Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MR. HULLEY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Keith R.
  Hulley

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Keith R. Hulley

  
							

 

4EXHIBIT 10.1

 

QUANEX CORPORATION

2006 OMNIBUS INCENTIVE PLAN

 

 

	
  ARTICLE I

  	
  ESTABLISHMENT, PURPOSE AND DURATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Establishment

  	
  1

  
	
   

  	
  1.2

  	
  Purpose of the Plan

  	
  1

  
	
   

  	
  1.3

  	
  Duration of Plan

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Affiliate

  	
  1

  
	
   

  	
  2.2

  	
  Annual Incentive Award

  	
  1

  
	
   

  	
  2.3

  	
  Award

  	
  1

  
	
   

  	
  2.4

  	
  Award Agreement

  	
  1

  
	
   

  	
  2.5

  	
  Board

  	
  1

  
	
   

  	
  2.6

  	
  Cash-Based Award

  	
  1

  
	
   

  	
  2.7

  	
  Code

  	
  2

  
	
   

  	
  2.8

  	
  Committee

  	
  2

  
	
   

  	
  2.9

  	
  Company

  	
  2

  
	
   

  	
  2.10

  	
  Corporate Change

  	
  2

  
	
   

  	
  2.11

  	
  Director

  	
  2

  
	
   

  	
  2.12

  	
  Disability

  	
  2

  
	
   

  	
  2.13

  	
  Dividend Equivalent

  	
  2

  
	
   

  	
  2.14

  	
  Employee

  	
  2

  
	
   

  	
  2.15

  	
  Fair Market Value

  	
  2

  
	
   

  	
  2.16

  	
  Fiscal Year

  	
  2

  
	
   

  	
  2.17

  	
  Holder

  	
  2

  
	
   

  	
  2.18

  	
  Minimum Statutory Tax Withholding Obligation

  	
  2

  
	
   

  	
  2.19

  	
  Option

  	
  2

  
	
   

  	
  2.20

  	
  Option Price

  	
  2

  
	
   

  	
  2.21

  	
  Other Stock-Based Award

  	
  3

  
	
   

  	
  2.22

  	
  Performance Goals

  	
  3

  
	
   

  	
  2.23

  	
  Performance Stock Award

  	
  3

  
	
   

  	
  2.24

  	
  Performance Unit Award

  	
  3

  
	
   

  	
  2.25

  	
  Period of Restriction

  	
  3

  
	
   

  	
  2.26

  	
  Plan

  	
  3

  
	
   

  	
  2.27

  	
  Restricted Stock

  	
  3

  
	
   

  	
  2.28

  	
  Restricted Stock Award

  	
  3

  
	
   

  	
  2.29

  	
  RSU

  	
  3

  
	
   

  	
  2.30

  	
  RSU Award

  	
  3

  
	
   

  	
  2.31

  	
  SAR

  	
  3

  
	
   

  	
  2.32

  	
  Section 409A

  	
  3

  
	
   

  	
  2.33

  	
  Stock

  	
  3

  
	
   

  	
  2.34

  	
  Substantial Risk of Forfeiture

  	
  3

  
	
   

  	
  2.35

  	
  Termination of Employment

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  ELIGIBILITY AND PARTICIPATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Eligibility

  	
  4

  
	
   

  	
  3.2

  	
  Participation

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  GENERAL PROVISIONS RELATING TO AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Authority to Grant Awards

  	
  4

  
	
   

  	
  4.2

  	
  Dedicated Shares; Maximum Awards

  	
  4

  

 

i

 

	
   

  	
  4.3

  	
  Non-Transferability

  	
  5

  
	
   

  	
  4.4

  	
  Requirements of Law

  	
  5

  
	
   

  	
  4.5

  	
  Changes in the Company’s Capital Structure

  	
  5

  
	
   

  	
  4.6

  	
  Election Under Section 83(b) of the Code

  	
  8

  
	
   

  	
  4.7

  	
  Forfeiture for Cause

  	
  8

  
	
   

  	
  4.8

  	
  Forfeiture Events

  	
  8

  
	
   

  	
  4.9

  	
  Award Agreements

  	
  8

  
	
   

  	
  4.10

  	
  Amendments of Award Agreements

  	
  8

  
	
   

  	
  4.11

  	
  Rights as Stockholder

  	
  8

  
	
   

  	
  4.12

  	
  Issuance of Shares of Stock

  	
  8

  
	
   

  	
  4.13

  	
  Restrictions on Stock Received

  	
  9

  
	
   

  	
  4.14

  	
  Compliance With Section 409A

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  OPTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Authority to Grant Options

  	
  9

  
	
   

  	
  5.2

  	
  Option Agreement

  	
  9

  
	
   

  	
  5.3

  	
  Option Price

  	
  9

  
	
   

  	
  5.4

  	
  Duration of Option

  	
  9

  
	
   

  	
  5.5

  	
  Amount Exercisable

  	
  9

  
	
   

  	
  5.6

  	
  Exercise of Option

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  STOCK APPRECIATION RIGHTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Authority to Grant SAR Awards

  	
  10

  
	
   

  	
  6.2

  	
  General Terms

  	
  10

  
	
   

  	
  6.3

  	
  SAR Agreement

  	
  10

  
	
   

  	
  6.4

  	
  Term of SAR

  	
  10

  
	
   

  	
  6.5

  	
  Exercise of SAR

  	
  10

  
	
   

  	
  6.6

  	
  Payment of SAR Amount

  	
  10

  
	
   

  	
  6.7

  	
  Termination of Employment

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  RESTRICTED STOCK AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Restricted Stock Awards

  	
  11

  
	
   

  	
  7.2

  	
  Restricted Stock Award Agreement

  	
  11

  
	
   

  	
  7.3

  	
  Holder’s Rights as Stockholder

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  RESTRICTED STOCK UNIT AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Authority to Grant RSU Awards

  	
  11

  
	
   

  	
  8.2

  	
  RSU Award

  	
  11

  
	
   

  	
  8.3

  	
  RSU Award Agreement

  	
  12

  
	
   

  	
  8.4

  	
  Dividend Equivalents

  	
  12

  
	
   

  	
  8.5

  	
  Form of Payment Under RSU Award

  	
  12

  
	
   

  	
  8.6

  	
  Time of Payment Under RSU Award

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  PERFORMANCE STOCK AWARDS AND PERFORMANCE UNIT AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Authority to Grant Performance Stock Awards and
  Performance Unit Awards

  	
  12

  
	
   

  	
  9.2

  	
  Performance Goals

  	
  12

  
	
   

  	
  9.3

  	
  Time of Establishment of Performance Goals

  	
  13

  
	
   

  	
  9.4

  	
  Written Agreement

  	
  13

  
	
   

  	
  9.5

  	
  Form of Payment Under Performance Unit Award

  	
  13

  
	
   

  	
  9.6

  	
  Time of Payment Under Performance Unit Award

  	
  13

  

 

ii

 

	
   

  	
  9.7

  	
  Holder’s Rights as Stockholder With Respect to a
  Performance Stock Award

  	
  13

  
	
   

  	
  9.8

  	
  Increases Prohibited

  	
  13

  
	
   

  	
  9.9

  	
  Stockholder Approval

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  ANNUAL INCENTIVE AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Authority to Grant Annual Incentive Awards

  	
  13

  
	
   

  	
  10.2

  	
  Performance Goals

  	
  14

  
	
   

  	
  10.3

  	
  Time of Establishment of Performance Goals

  	
  14

  
	
   

  	
  10.4

  	
  Written Agreement

  	
  14

  
	
   

  	
  10.5

  	
  Form of Payment Under Annual Incentive Award

  	
  14

  
	
   

  	
  10.6

  	
  Time of Payment Under Annual Incentive Award

  	
  14

  
	
   

  	
  10.7

  	
  Increases Prohibited

  	
  14

  
	
   

  	
  10.8

  	
  Stockholder Approval

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  OTHER STOCK-BASED AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Authority to Grant Other Stock-Based Awards

  	
  15

  
	
   

  	
  11.2

  	
  Value of Other Stock-Based Award

  	
  15

  
	
   

  	
  11.3

  	
  Payment of Other Stock-Based Award

  	
  15

  
	
   

  	
  11.4

  	
  Termination of Employment

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  CASH-BASED AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Authority to Grant Cash-Based Awards

  	
  15

  
	
   

  	
  12.2

  	
  Value of Cash-Based Award

  	
  15

  
	
   

  	
  12.3

  	
  Payment of Cash-Based Award

  	
  15

  
	
   

  	
  12.4

  	
  Termination of Employment

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
  SUBSTITUTION AWARDS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
  ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Awards

  	
  16

  
	
   

  	
  14.2

  	
  Authority of the Committee

  	
  16

  
	
   

  	
  14.3

  	
  Decisions Binding

  	
  16

  
	
   

  	
  14.4

  	
  No Liability

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  AMENDMENT OR TERMINATION OF PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Amendment, Modification, Suspension, and Termination

  	
  17

  
	
   

  	
  15.2

  	
  Awards Previously Granted

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XVI

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Unfunded Plan/No Establishment of a Trust Fund

  	
  17

  
	
   

  	
  16.2

  	
  No Employment Obligation

  	
  17

  
	
   

  	
  16.3

  	
  Tax Withholding

  	
  18

  
	
   

  	
  16.4

  	
  Gender and Number

  	
  18

  
	
   

  	
  16.5

  	
  Severability

  	
  18

  
	
   

  	
  16.6

  	
  Headings

  	
  18

  
	
   

  	
  16.7

  	
  Other Compensation Plans

  	
  18

  
	
   

  	
  16.8

  	
  Other Awards

  	
  18

  
	
   

  	
  16.9

  	
  Successors

  	
  19

  
	
   

  	
  16.10

  	
  Law Limitations/Governmental Approvals

  	
  19

  
	
   

  	
  16.11

  	
  Delivery of Title

  	
  19

  

 

iii

 

	
   

  	
  16.12

  	
  Inability to Obtain Authority

  	
  19

  
	
   

  	
  16.13

  	
  Investment Representations

  	
  19

  
	
   

  	
  16.14

  	
  Persons Residing Outside of the United States

  	
  19

  
	
   

  	
  16.15

  	
  Arbitration of Disputes

  	
  19

  
	
   

  	
  16.16

  	
  Governing Law

  	
  19

  

 

iv

 

ARTICLE I

ESTABLISHMENT, PURPOSE AND DURATION

 

1.1                           Establishment. The Company
hereby establishes an incentive compensation plan, to be known as the “Quanex
Corporation 2006 Omnibus Incentive Plan,” as set forth in this document. The
Plan permits the grant of Options, SARs, Restricted Stock, RSUs, Performance
Stock Awards, Performance Unit Awards, Annual Incentive Awards, Cash-Based Awards
and Other Stock-Based Awards. The Plan shall become effective on the later of (a) the
date the Plan is approved by the Board and (b) the date the Plan is
approved by the stockholders of the Company.

 

1.2                           Purpose of the Plan. The Plan is
intended to advance the best interests of the Company, its Affiliates and its
stockholders by providing those persons who have substantial responsibility for
the management and growth of the Company and its Affiliates with additional
performance incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in
their employment or affiliation with the Company or its Affiliates.

 

1.3                           Duration of Plan. The Plan shall
continue indefinitely until it is terminated pursuant to Section 15.1. The
applicable provisions of the Plan will continue in effect with respect to an
Award granted under the Plan for as long as such Award remains outstanding.

 

ARTICLE II

DEFINITIONS

 

The
words and phrases defined in this Article shall have the meaning set out
below throughout the Plan, unless the context in which any such word or phrase
appears reasonably requires a broader, narrower or different meaning.

 

2.1                           “Affiliate”
means any corporation, partnership, limited liability company or association,
trust or other entity or organization which, directly or indirectly, controls,
is controlled by, or is under common control with, the Company. For purposes of
the preceding sentence, “control” (including, with correlative meanings, the
terms “controlled by” and “under common control with”), as used with respect to
any entity or organization, shall mean the possession, directly or indirectly,
of the power (a) to vote more than fifty percent (50%) of the securities
having ordinary voting power for the election of directors of the controlled
entity or organization, or (ii) to direct or cause the direction of the
management and policies of the controlled entity or organization, whether
through the ownership of voting securities or by contract or otherwise.

 

2.2                           “Annual Incentive Award” means an
Award granted to a Holder pursuant to Article X.

 

2.3                           “Award”
means, individually or collectively, a grant under the Plan of Options, SARs,
Restricted Stock, RSUs, Performance Stock Awards, Performance Unit Awards,
Annual Incentive Awards, Other Stock-Based Awards and Cash-Based Awards, in
each case subject to the terms and provisions of the Plan.

 

2.4                           “Award
Agreement” means an agreement that sets forth the terms and
conditions applicable to an Award granted under the Plan.

 

2.5                           “Board”
means the board of directors of the Company.

 

2.6                           “Cash-Based
Award” means an Award granted pursuant to Article XII.

 

1

 

2.7                           “Code”
means the United States Internal Revenue Code of 1986, as amended from time to
time.

 

2.8                           “Committee”
means the Compensation Committee of the Board.

 

2.9                           “Company”
means Quanex Corporation, a Delaware corporation, or any successor (by
reincorporation, merger or otherwise).

 

2.10                     “Corporate
Change” shall have the meaning ascribed to that term in Section 4.5(c).

 

2.11                     “Director” means a director of the Company who is
not an Employee.

 

2.12                     “Disability”
means as determined by the Committee in its discretion exercised in good faith,
a physical or mental condition of the Holder that would entitle him to payment
of disability income payments under the Company’s long-term disability
insurance policy or plan for Employees as then in effect; or in the event that
the Holder is not covered, for whatever reason, under the Company’s long-term
disability insurance policy or plan for Employees or in the event the Company
does not maintain such a long-term disability insurance policy, “Disability”
means a permanent and total disability as defined in section 22(e)(3) of
the Code. A determination of Disability may be made by a physician
selected or approved by the Committee and, in this respect, the Holder shall
submit to an examination by such physician upon request by the Committee.

 

2.13                     “Dividend Equivalent” means a payment equivalent in amount to
dividends paid to the Company’s stockholders.

 

2.14                     “Employee”
means a person employed by the Company or any Affiliate as a common law
employee.

 

2.15                     “Fair
Market Value” of the
Stock as of any particular date means (1) if the Stock is traded on a
stock exchange, the closing sale price of the Stock on that date as reported on
the principal securities exchange on which the Stock is traded, or (2) if
the Stock is traded in the over-the-counter market, the average between the
high bid and low asked price on that date as reported in such over-the-counter
market; provided that (a) if the Stock is not so traded, (b) if no
closing price or bid and asked prices for the stock was so reported on that
date or (c) if, in the discretion of the Committee, another means of
determining the fair market value of a share of Stock at such date shall be
necessary or advisable, the Committee may provide for another means for
determining such fair market value.

 

2.16                     “Fiscal
Year” means the Company’s fiscal year.

 

2.17                     “Holder”
means a person who has been granted an Award or any person who is entitled to
receive shares of Stock or cash under an Award.

 

2.18                     “Minimum
Statutory Tax Withholding Obligation” means, with respect to an
Award, the amount the Company or an Affiliate is required to withhold for
federal, state and local taxes based upon the applicable minimum statutory
withholding rates required by the relevant tax authorities.

 

2.19                     “Option”
means a “nonqualified stock option” to purchase Stock granted pursuant to Article V
that does not satisfy the requirements of section 422 of the Code.

 

2.20                     “Option
Price” shall have the meaning ascribed to that term in Section 5.3.

 

2

 

2.21                     “Other Stock-Based
Award” means an equity-based or equity-related Award not
otherwise described by the terms and provisions of the Plan that is granted
pursuant to Article XI.

 

2.22                     “Performance
Goals” means one or more of the criteria described in Section 9.2
on which the performance goals applicable to an Award are based.

 

2.23                     “Performance
Stock Award” means an Award designated as a performance stock
award granted to a Holder pursuant to Article IX.

 

2.24                     “Performance
Unit Award” means an Award designated as a performance unit
award granted to a Holder pursuant to Article IX.

 

2.25                     “Period of
Restriction” means the period during which Restricted
Stock is subject to a substantial risk of forfeiture (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, in its discretion), as provided in Article VII.

 

2.26                     “Plan”
means the Quanex Corporation 2006 Omnibus Incentive Plan, as set forth in this
document as it may be amended from time to time.

 

2.27                     “Restricted
Stock” means shares of restricted Stock issued or granted under
the Plan pursuant to Article VII.

 

2.28                     “Restricted
Stock Award” means an authorization by the Committee to issue or
transfer Restricted Stock to a Holder.

 

2.29                     “RSU”
means a restricted stock unit credited to a Holder’s ledger account maintained
by the Company pursuant to Article VIII.

 

2.30                     “RSU
Award” means an Award granted pursuant to Article VIII.

 

2.31                     “SAR” means a stock appreciation right granted
under the Plan pursuant to Article VI.

 

2.32                     “Section 409A” means section 409A
of the Code and Department of Treasury rules and regulations issued
thereunder.

 

2.33                     “Stock”
means the common stock of the Company, $0.50 par value per share (or such other
par value as may be designated by act of the Company’s stockholders). In
addition, for purposes of the Plan and the Awards, the term Stock shall also be
deemed to include any rights to purchase (“Rights”) the Series A
Junior Participating Preferred Stock of the Company that may then be
trading together with the Stock as provided in the Rights Agreement between the
Company and Wells Fargo Bank, N.A. relating to the Rights.

 

2.34                     “Substantial Risk of
Forfeiture” shall have the meaning ascribed to that term in section 409A of the
Code and Department of Treasury guidance issued thereunder.

 

2.35                     “Termination
of Employment” means the termination of the Award recipient’s employment
relationship with the Company and all Affiliates.

 

3

 

ARTICLE III

ELIGIBILITY AND PARTICIPATION

 

3.1                           Eligibility. The persons who
are eligible to receive Awards under the Plan other than Annual Incentive
Awards are key Employees and Directors. The persons who are eligible to receive
Annual Incentive Awards under the Plan are key executive Employees who, by the
nature and scope of their positions, regularly directly make or influence
policy decisions which significantly impact the overall results or success of
the Company.

 

3.2                           Participation. Subject to the
terms and provisions of the Plan, the Committee may, from time to time, select
the Employees and Directors to whom Awards shall be granted and shall determine
the nature and amount of each Award.

 

ARTICLE IV

GENERAL PROVISIONS RELATING TO AWARDS

 

4.1                           Authority to Grant Awards. The Committee may grant Awards to
those key Employees and Directors as the Committee shall from time to time determine,
under the terms and conditions of the Plan. Subject only to any applicable
limitations set out in the Plan, the number of shares of Stock or other value
to be covered by any Award to be granted under the Plan shall be as determined
by the Committee in its sole discretion.

 

4.2                           Dedicated Shares; Maximum Awards. The aggregate number of shares of Stock with
respect to which Awards may be granted under the Plan is 1,750,000. The
aggregate number of shares of Stock with respect to which full value awards
(such as Restricted Stock Awards and Performance Stock Awards) may be
granted under the Plan is 875,000. The maximum number of shares of Stock with
respect to which Options may be granted to an Employee during a Fiscal
Year is 200,000. The maximum number of shares of Stock with respect to which
Performance Stock Awards may be granted to an Employee during a Fiscal
Year is 100,000. The maximum number of shares of Stock with respect to which
Performance Unit Awards payable in Stock may be granted to an Employee
during a Fiscal Year is 100,000. The maximum value of cash with respect to
which Performance Unit Awards payable in cash may be granted to an
Employee during a Fiscal Year, determined as of the dates of Grants of the
Performance Unit Awards, is $2,000,000. The maximum amount that may be
paid to an Employee under Annual Incentive Award(s) granted to an Employee
during a Fiscal Year is $2,000,000. The maximum number of shares with respect
to which SARs may be granted to an Employee during a Fiscal Year is 200,000.
Each of the foregoing numerical limits stated in this Section 4.2 shall be
subject to adjustment in accordance with the provisions of Section 4.5. The
number of shares of Stock stated in this Section 4.2 shall also be
increased by such number of shares of Stock as become subject to substitute
Awards granted pursuant to Article XIII; provided,
however, that such increase shall be conditioned upon the approval
of the stockholders of the Company to the extent stockholder approval is
required by law or applicable stock exchange rules. If shares of Stock are
withheld from payment of an Award to satisfy tax obligations with respect to
the Award, such shares of Stock will count against the aggregate number of
shares of Stock with respect to which Awards may be granted under the Plan.
If shares of Stock are tendered in payment of an Option Price of an Option,
such shares of Stock will not be added to the aggregate number of shares of
Stock with respect to which Awards may be granted under the Plan. To the
extent that any outstanding Award is forfeited or cancelled for any reason or
is settled in cash in lieu of shares of Stock, the shares of Stock allocable to
such portion of the Award may again be subject to an Award granted under
the Plan. When a SAR is settled in shares of Stock, the number of shares of
Stock subject to the SAR under the SAR Award Agreement will be counted against
the aggregate number of 

 

4

 

shares of Stock with respect to which Awards may be
granted under the Plan as one share for every share subject to the SAR,
regardless of the number of shares used to settle the SAR upon exercise.

 

4.3                           Non-Transferability. Except as specified in the applicable Award
Agreements or in domestic relations court orders, an Award shall not be
transferable by the Holder other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Holder’s lifetime, only by
him or her. Any attempted assignment of an Award in violation of this Section 4.3
shall be null and void. In the discretion of the Committee, any attempt to
transfer an Award other than under the terms of the Plan and the applicable
Award Agreement may terminate the Award.

 

4.4                           Requirements of Law. The Company
shall not be required to sell or issue any shares of Stock under any Award if
issuing those shares of Stock would constitute or result in a violation by the
Holder or the Company of any provision of any law, statute or regulation of any
governmental authority. Specifically, in connection with any applicable statute
or regulation relating to the registration of securities, upon exercise of any
Option or pursuant to any other Award, the Company shall not be required to
issue any shares of Stock unless the Committee has received evidence
satisfactory to it to the effect that the Holder will not transfer the shares
of Stock except in accordance with applicable law, including receipt of an
opinion of counsel satisfactory to the Company to the effect that any proposed
transfer complies with applicable law. The determination by the Committee on
this matter shall be final, binding and conclusive. The Company may, but shall
in no event be obligated to, register any shares of Stock covered by the Plan
pursuant to applicable securities laws of any country or any political
subdivision. In the event the shares of Stock issuable on exercise of an Option
or pursuant to any other Award are not registered, the Company may imprint
on the certificate evidencing the shares of Stock any legend that counsel for
the Company considers necessary or advisable to comply with applicable law, or,
should the shares of Stock be represented by book or electronic entry rather
than a certificate, the Company may take such steps to restrict transfer
of the shares of Stock as counsel for the Company considers necessary or
advisable to comply with applicable law. The Company shall not be obligated to
take any other affirmative action in order to cause or enable the exercise of
an Option or any other Award, or the issuance of shares of Stock pursuant
thereto, to comply with any law or regulation of any governmental authority.

 

4.5                           Changes in the Company’s Capital
Structure.

 

(a)                                  The existence of outstanding
Awards shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference shares ahead of or affecting the
Stock or Stock rights, the dissolution or liquidation of the Company, any sale
or transfer of all or any part of its assets or business or any other
corporate act or proceeding, whether of a similar character or otherwise.

 

(b)                                 If the Company shall effect
a subdivision or consolidation of Stock or other capital readjustment, the
payment of a Stock dividend, or other increase or reduction of the number of
shares of Stock outstanding, without receiving compensation therefor in money,
services or property, then (1) the number, class or series and
per share price of Stock subject to outstanding Options or other Awards under
the Plan shall be appropriately adjusted in such a manner as to entitle a
Holder to receive upon exercise of an Option or other Award, for the same
aggregate cash consideration, the equivalent total number and class or series of
Stock the Holder would have received had the Holder exercised his or her Option
or other Award in full immediately prior to the event requiring the adjustment,
and (2) the number and class or series of Stock then reserved to
be issued under the Plan shall be adjusted by substituting for the total number
and class or series of Stock then reserved, that number and class or
series of Stock that would 

 

5

 

have been received by the owner of an equal number of outstanding
shares of Stock of each class or series of Stock as the result of the
event requiring the adjustment.

 

(c)                                  If while unexercised Options
or other Awards remain outstanding under the Plan (1) the Company shall
not be the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than an
entity that was wholly-owned by the Company immediately prior to such merger,
consolidation or other reorganization), (2) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any other person or entity (other than an entity wholly-owned by the
Company), (3) the Company is to be dissolved or (4) the Company is a
party to any other corporate transaction (as defined under section 424(a) of
the Code and applicable Department of Treasury regulations) that is not
described in clauses (1), (2) or (3) of this sentence (each such
event is referred to herein as a “Corporate Change”),
then, except as otherwise provided in an Award Agreement or another agreement
between the Holder and the Company (provided that such exceptions shall not
apply in the case of a reincorporation merger), or as a result of the Committee’s
effectuation of one or more of the alternatives described below, there shall be
no acceleration of the time at which any Award then outstanding may be
exercised, and no later than ten days after the approval by the stockholders of
the Company of such Corporate Change, the Committee, acting in its sole and
absolute discretion without the consent or approval of any Holder, shall act to
effect one or more of the following alternatives, which may vary among
individual Holders and which may vary among Awards held by any individual
Holder (provided that, with respect to a reincorporation merger in which
Holders of the Company’s ordinary shares will receive one ordinary share of the
successor corporation for each ordinary share of the Company, none of such
alternatives shall apply and, without Committee action, each Award shall
automatically convert into a similar award of the successor corporation
exercisable for the same number of ordinary shares of the successor as the
Award was exercisable for ordinary shares of Stock of the Company):

 

(1)                                  accelerate the time at which
some or all of the Awards then outstanding may be exercised so that such
Awards may be exercised in full for a limited period of time on or before
a specified date (before or after such Corporate Change) fixed by the
Committee, after which specified date all such Awards that remain unexercised
and all rights of Holders thereunder shall terminate;

 

(2)                                  require the mandatory
surrender to the Company by all or selected Holders of some or all of the then
outstanding Awards held by such Holders (irrespective of whether such Awards
are then exercisable under the provisions of the Plan or the applicable Award
Agreement evidencing such Award) as of a date, before or after such Corporate
Change, specified by the Committee, in which event the Committee shall
thereupon cancel such Award and the Company shall pay to each such Holder an
amount of cash per share equal to the excess, if any, of the per share price
offered to stockholders of the Company in connection with such Corporate Change
over the exercise prices under such Award for such shares;

 

(3)                                  with respect to all or
selected Holders, have some or all of their then outstanding Awards (whether
vested or unvested) assumed or have a new award of a similar nature substituted
for some or all of their then outstanding Awards under the Plan (whether vested
or unvested) by an entity which is a party to the transaction resulting in such
Corporate Change and which is then employing such Holder or which is affiliated
or associated with such Holder in the same or a substantially similar manner as
the Company prior to the Corporate Change, or a parent or subsidiary of such
entity, provided that (A) such assumption or substitution is on a basis
where the excess of the aggregate fair market value of the Stock subject to the
Award immediately after the 

 

6

 

assumption or substitution over the aggregate exercise price of such
Stock is equal to the excess of the aggregate fair market value of all Stock
subject to the Award immediately before such assumption or substitution over
the aggregate exercise price of such Stock, and (B) the assumed rights
under such existing Award or the substituted rights under such new Award, as
the case may be, will have the same terms and conditions as the rights
under the existing Award assumed or substituted for, as the case may be;

 

(4)                                  provide that the number and class or
series of Stock covered by an Award (whether vested or unvested)
theretofore granted shall be adjusted so that such Award when exercised shall
thereafter cover the number and class or series of Stock or other
securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement or plan
relating to such Corporate Change if, immediately prior to such Corporate
Change, the Holder had been the holder of record of the number of shares of
Stock then covered by such Award; or

 

(5)                                  make such adjustments to
Awards then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in
its sole and absolute discretion that no such adjustment is necessary).

 

In effecting one or more of
the alternatives set out in paragraphs (3), (4) or (5) immediately
above, and except as otherwise may be provided in an Award Agreement, the
Committee, in its sole and absolute discretion and without the consent or
approval of any Holder, may accelerate the time at which some or all
Awards then outstanding may be exercised.

 

(d)                                 In the event of changes in
the outstanding Stock by reason of recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of the grant of any Award and not
otherwise provided for by this Section 4.5, any outstanding Award and any
Award Agreement evidencing such Award shall be subject to adjustment by the
Committee in its sole and absolute discretion as to the number and price of
Stock or other consideration subject to such Award. In the event of any such
change in the outstanding Stock, the aggregate number of shares of Stock
available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.

 

(e)                                  After a merger of one or
more corporations into the Company or after a consolidation of the Company and
one or more corporations in which the Company shall be the surviving
corporation, each Holder shall be entitled to have his Restricted Stock
appropriately adjusted based on the manner in which the shares of Stock were
adjusted under the terms of the agreement of merger or consolidation.

 

(f)                                    The issuance by the Company
of stock of any class or series, or securities convertible into, or
exchangeable for, stock of any class or series, for cash or property, or
for labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion or exchange of stock or
obligations of the Company convertible into, or exchangeable for, stock or
other securities, shall not affect, and no adjustment by reason of such
issuance shall be made with respect to, the number, class or series, or
price of shares of Stock then subject to outstanding Options or other Awards.

 

7

 

4.6                           Election Under Section 83(b) of
the Code. No Holder shall exercise the election permitted
under section 83(b) of the Code with respect to any Award without the
written approval of the Chief Financial Officer or General Counsel of the
Company. Any Holder who makes an election under section 83(b) of the
Code with respect to any Award without the written approval of the Chief
Financial Officer or General Counsel of the Company may, in the discretion of
the Committee, forfeit any or all Awards granted to him or her under the Plan.

 

4.7                           Forfeiture for Cause. Notwithstanding
any other provision of the Plan or an Award Agreement, if the Committee finds
by a majority vote that a Holder, before or after his Termination of Employment
(a) committed fraud, embezzlement, theft, felony or an act of dishonesty
in the course of his employment by the Company or an Affiliate which conduct
damaged the Company or an Affiliate or (b) disclosed trade secrets of the
Company or an Affiliate, then as of the date the Committee makes its finding,
any Awards awarded to the Holder that have not been exercised by the Holder
(including all Awards that have not yet vested) will be forfeited to the
Company. The findings and decision of the Committee with respect to such
matter, including those regarding the acts of the Holder and the damage done to
the Company, will be final for all purposes. No decision of the Committee,
however, will affect the finality of the discharge of the individual by the
Company or an Affiliate.

 

4.8                           Forfeiture Events. The Committee may specify in an
Award Agreement that the Holder’s rights, payments, and benefits with respect
to an Award shall be subject to reduction, cancellation, forfeiture, or
recoupment upon the occurrence of certain specified events, in addition to any
otherwise applicable vesting or performance conditions of an Award. Such events
may include, but shall not be limited to, Termination of Employment for
cause, termination of the Holder’s provision of services to the Company or its
Affiliates, violation of material policies of the Company and its Affiliates,
breach of noncompetition, confidentiality, or other restrictive covenants that may apply
to the Holder, or other conduct by the Holder that is detrimental to the
business or reputation of the Company and its Affiliates.

 

4.9                           Award Agreements. Each Award shall be
embodied in a written agreement that shall be subject to the terms and
conditions of the Plan. The Award Agreement shall be signed by an executive
officer of the Company, other than the Holder, on behalf of the Company, and may be
signed by the Holder to the extent required by the Committee. The Award
Agreement may specify the effect of a change in control on the Award. The
Award Agreement may contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the terms and
provisions of the Plan.

 

4.10                     Amendments of Award Agreements. The terms of any outstanding Award under
the Plan may be amended from time to time by the Committee in its
discretion in any manner that it deems appropriate and that is consistent with
the terms of the Plan. However, no such amendment shall adversely affect in a
material manner any right of a Holder without his or her written consent. Except
as specified in Section 4.5(b), the Committee may not directly or
indirectly lower the exercise price of a previously granted Option or the grant
price of a previously granted SAR.

 

4.11                           Rights as Stockholder. A Holder shall
not have any rights as a stockholder with respect to Stock covered by an
Option, a SAR, an RSU, a Performance Stock Unit, or an Other Stock-Based Award
until the date, if any, such Stock is issued by the Company; and, except as otherwise
provided in Section 4.5, no adjustment for dividends, or otherwise, shall
be made if the record date therefor is prior to the date of issuance of such
Stock.

 

4.12                           Issuance of Shares of Stock. Shares of
Stock, when issued, may be represented by a certificate or by book or
electronic entry.

 

8

 

4.13                           Restrictions on Stock Received. The Committee may impose
such conditions and/or restrictions on any shares of Stock issued pursuant to
an Award as it may deem advisable or desirable. These restrictions may include,
but shall not be limited to, a requirement that the Holder hold the shares of
Stock for a specified period of time.

 

4.14                           Compliance With Section 409A.
Awards shall be designed and operated in such a manner that they are
either exempt from the application of, or comply with, the requirements of Section 409A.

 

ARTICLE V

OPTIONS

 

5.1                                 Authority to Grant Options. Subject to the terms and provisions of the Plan, the
Committee, at any time, and from time to time, may grant Options under the
Plan to eligible persons in such number and upon such terms as the Committee
shall determine.

 

5.2                                 Option Agreement. Each Option grant under the Plan shall be evidenced by
an Award Agreement that shall specify (a) the Option Price, (b) the
duration of the Option, (c) the number of shares of Stock to which the
Option pertains, (d) the exercise restrictions, if any, applicable to the
Option and (e) such other provisions as the Committee shall determine that
are not inconsistent with the terms and provisions of the Plan.

 

5.3                                 Option Price. The price at
which shares of Stock may be purchased under an Option (the “Option Price”) shall not be less than one hundred percent
(100%) of the Fair Market Value of the shares of Stock on the date the Option
is granted. Subject to the limitations set forth in the preceding sentences of
this Section 5.3, the Committee shall determine the Option Price for each
grant of an Option under the Plan.

 

5.4                                 Duration of Option. An Option shall not be exercisable after the earlier
of (i) the general term of the Option specified in the applicable Award
Agreement (which shall not exceed ten years) or (ii) the period of time
specified in the applicable Award Agreement that follows the Holder’s Termination
of Employment or severance of affiliation relationship with the Company.

 

5.5                                 Amount Exercisable. Each Option may be exercised at the time, in the
manner and subject to the conditions the Committee specifies in the Award
Agreement in its sole discretion.

 

5.6                                 Exercise of Option.

 

(a)                                  General Method of Exercise. Subject to the terms and provisions of
the Plan and the applicable Award Agreement, Options may be exercised in
whole or in part from time to time by the delivery of written notice in
the manner designated by the Committee stating (1) that the Holder wishes
to exercise such Option on the date such notice is so delivered, (2) the
number of shares of Stock with respect to which the Option is to be exercised
and (3) the address to which any certificate representing such shares of
Stock should be mailed. Except in the case of exercise by a third party broker
as provided below, in order for the notice to be effective the notice must be
accompanied by payment of the Option Price by any combination of the following:
(a) cash, certified check, bank draft or postal or express money order for
an amount equal to the Option Price under the Option, (b) an election to
make a cashless exercise through a registered broker-dealer (if approved in
advance by the Committee or an executive officer of the Company) or (c) any
other form of payment which is acceptable to the Committee.

 

(b)                                 Exercise
Through Third-Party Broker. The Committee may permit
a Holder to elect to pay the Option Price and any applicable tax withholding
resulting from such exercise by authorizing a 

 

9

 

third-party broker to sell all or a portion of the shares of Stock
acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the Option Price and any applicable tax
withholding resulting from such exercise.

 

ARTICLE VI

STOCK APPRECIATION RIGHTS

 

6.1                                 Authority to Grant SAR Awards. Subject to the
terms and provisions of the Plan, the Committee, at any time, and from time to
time, may grant SARs under the Plan to eligible persons in such number and
upon such terms as the Committee shall determine. Subject to the terms and
conditions of the Plan, the Committee shall have complete discretion in
determining the number of SARs granted to each Holder and, consistent with the
provisions of the Plan, in determining the terms and conditions pertaining to
such SARs.

 

6.2                                 General Terms. Subject to the
terms and conditions of the Plan, a SAR granted under the Plan shall confer on
the recipient a right to receive, upon exercise thereof, an amount equal to the
excess of (a) the Fair Market Value of one share of the Stock on the date
of exercise over (b) the grant price of the SAR, which shall not be less
than one hundred percent (100%) of the Fair Market Value of one share of the
Stock on the date of grant of the SAR.

 

6.3                                 SAR Agreement. Each Award of
SARs granted under the Plan shall be evidenced by an Award Agreement that shall
specify (a) the grant price of the SAR, (b) the term of the SAR, (c) the
vesting and termination provisions of the SAR and (d) such other
provisions as the Committee shall determine that are not inconsistent with the
terms and provisions of the Plan. The Committee may impose such additional
conditions or restrictions on the exercise of any SAR as it may deem
appropriate.

 

6.4                                 Term of SAR. The term of a
SAR granted under the Plan shall be determined by the Committee, in its sole
discretion; provided that no SAR shall be exercisable on or after the tenth
anniversary date of its grant.

 

6.5                                 Exercise of SAR. A SAR may be
exercised upon whatever terms and conditions the Committee, in its sole
discretion, imposes.

 

6.6                                 Payment of SAR Amount. Upon the exercise of a SAR, a Holder
shall be entitled to receive payment from the Company in an amount determined
by multiplying the excess of the Fair Market Value of a share of
Stock on the date of exercise over the grant price of the SAR by the number of shares of 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 Stock of
equivalent value, in some combination thereof or in any other manner approved
by the Committee in its sole discretion. The Committee’s determination
regarding the form of SAR payout shall be set forth in the Award Agreement
pertaining to the grant of the SAR.

 

6.7                                 Termination of Employment. Each Award Agreement shall set forth the
extent to which the Holder of a SAR shall have the right to exercise the SAR
following the Holder’s Termination of Employment. Such provisions shall be
determined in the sole discretion of the Committee, may be included in the
Award Agreement entered into with the Holder, need not be uniform among
all SARs issued pursuant to the Plan, and may reflect distinctions based
on the reasons for termination.

 

10

 

ARTICLE VII

RESTRICTED STOCK AWARDS

 

7.1                                 Restricted
Stock Awards. The Committee may make
Awards of Restricted Stock to eligible persons selected by it. The amount of,
the vesting and the transferability restrictions applicable to any Restricted
Stock Award shall be determined by the Committee in its sole discretion. If the
Committee imposes vesting or transferability restrictions on a Holder’s rights
with respect to Restricted Stock, the Committee may issue such
instructions to the Company’s share transfer agent in connection therewith as
it deems appropriate. The Committee may also cause the certificate for
shares of Stock issued pursuant to a Restricted Stock Award to be imprinted
with any legend which counsel for the Company considers advisable with respect
to the restrictions or, should the shares of Stock be represented by book or
electronic entry rather than a certificate, the Company may take such
steps to restrict transfer of the shares of Stock as counsel for the Company
considers necessary or advisable to comply with applicable law.

 

7.2                                 Restricted Stock Award Agreement. Each Restricted Stock Award shall be evidenced by an
Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.

 

7.3                                 Holder’s Rights as Stockholder. Subject to the
terms and conditions of the Plan, each recipient of a Restricted Stock Award
shall have all the rights of a stockholder with respect to the shares of
Restricted Stock included in the Restricted Stock Award during the Period of
Restriction established for the Restricted Stock Award. Dividends paid with
respect to Restricted Stock in cash or property other than shares of Stock or
rights to acquire shares of Stock shall be paid to the recipient of the
Restricted Stock Award currently. Dividends paid in shares of Stock or rights
to acquire shares of Stock shall be added to and become a part of the
Restricted Stock. During the Period of Restriction, certificates representing
the Restricted Stock shall be registered in the Holder’s name and bear a
restrictive legend to the effect that ownership of such Restricted Stock, and
the enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms, and conditions provided in the Plan and the applicable
Award Agreement. Such certificates shall be deposited by the recipient with the
Secretary of the Company or such other officer of the Company as may be
designated by the Committee, together with all stock powers or other
instruments of assignment, each endorsed in blank, which will permit transfer
to the Company of all or any portion of the Restricted Stock which shall be
forfeited in accordance with the Plan and the applicable Award Agreement.

 

ARTICLE VIII

RESTRICTED STOCK UNIT AWARDS

 

8.1                                 Authority to Grant RSU Awards. Subject to the
terms and provisions of the Plan, the Committee, at any time, and from time to
time, may grant RSU Awards under the Plan to eligible persons in such
amounts and upon such terms as the Committee shall determine. The amount of,
the vesting and the transferability restrictions applicable to any RSU Award
shall be determined by the Committee in its sole discretion. The Committee
shall maintain a bookkeeping ledger account which reflects the number of RSUs
credited under the Plan for the benefit of a Holder.

 

8.2                                 RSU Award. An RSU Award
shall be similar in nature to a Restricted Stock Award except that no shares of
Stock are actually transferred to the Holder until a later date specified in
the applicable Award Agreement. Each RSU shall have a value equal to the Fair
Market Value of a share of Stock.

 

11

 

8.3                                 RSU
Award Agreement. Each RSU Award shall be evidenced by an Award
Agreement that contains any Substantial Risk of Forfeiture, transferability
restrictions, form and time of payment provisions and other provisions not
inconsistent with the Plan as the Committee may specify.

 

8.4                                 Dividend Equivalents. An Award Agreement for an RSU Award may specify
that the Holder shall be entitled to the payment of Dividend Equivalents under
the Award.

 

8.5                                 Form of Payment Under RSU
Award. Payment under an RSU Award shall be made in either cash or shares of
Stock as specified in the applicable Award Agreement.

 

8.6                                 Time of Payment Under RSU Award. A Holder’s
payment under an RSU Award shall be made at such time as is specified in the
applicable Award Agreement. The Award Agreement shall specify that the payment
will be made (1) by a date that is no later than the date that is two and
one-half (2 1/2) months after the end of the Fiscal Year in which the RSU Award
payment is no longer subject to a Substantial Risk of Forfeiture or (2) at
a time that is permissible under Section 409A.

 

ARTICLE IX

PERFORMANCE STOCK AWARDS AND PERFORMANCE UNIT AWARDS

 

9.1                                 Authority to Grant Performance
Stock Awards and Performance Unit Awards. Subject to the terms and
provisions of the Plan, the Committee, at any time, and from time to time, may grant
Performance Stock Awards and Performance Unit Awards under the Plan to eligible
persons in such amounts and upon such terms as the Committee shall determine. The
amount of, the vesting and the transferability restrictions applicable to any
Performance Stock Award or Performance Unit Award shall be based upon the
attainment of such Performance Goals as the Committee may determine. If
the Committee imposes vesting or transferability restrictions on a Holder’s
rights with respect to Performance Stock or Performance Unit Awards, the
Committee may issue such instructions to the Company’s share transfer
agent in connection therewith as it deems appropriate. The Committee may also
cause the certificate for shares of Stock issued pursuant to a Performance
Stock or Performance Unit Award to be imprinted with any legend which counsel
for the Company considers advisable with respect to the restrictions or, should
the shares of Stock be represented by book or electronic entry rather than a
certificate, the Company may take such steps to restrict transfer of the
shares of Stock as counsel for the Company considers necessary or advisable to
comply with applicable law.

 

9.2                                 Performance
Goals. A Performance Goal must be objective such that a third party having
knowledge of the relevant facts could determine whether the goal is met. Such a
Performance Goal may be based on one or more business criteria that apply
to the Holder, one or more business units of the Company, or the Company as a
whole, with reference to one or more of the following: earnings per share,
total shareholder return, cash return on capitalization, increased revenue,
revenue ratios (per employee or per customer), net income, stock price, market
share, return on equity, return on assets, return on capital, return on capital
compared to cost of capital, return on capital employed, return on invested
capital, shareholder value, net cash flow, operating income, earnings before
interest and taxes, cash flow, cash flow from operations, cost reductions and
cost ratios (per employee or per customer). Goals may also be based on
performance relative to a peer group of companies. Unless otherwise stated,
such a Performance Goal need not be based upon an increase or positive result
under a particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses (measured, in each case,
by reference to specific business criteria). In interpreting Plan provisions applicable
to Performance Goals and Performance Stock or Performance Unit Awards, it is
intended that the Plan will conform with the standards of section 162(m)
of the Code and Treasury Regulations § 1.162-27(e)(2)(i), and the
Committee in establishing such goals and interpreting the Plan shall be guided
by such provisions. Prior to the payment of any compensation based on the
achievement of Performance Goals, the Committee must certify in 

 

12

 

writing that applicable Performance Goals and any of
the material terms thereof were, in fact, satisfied. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Performance
Stock or Performance Unit Awards made pursuant to the Plan shall be determined
by the Committee.

 

9.3                                 Time of Establishment of
Performance Goals. A
Performance Goal for a particular Performance Stock Award or Performance Unit
Award must be established by the Committee prior to the earlier to occur of (a) 90
days after the commencement of the period of service to which the Performance
Goal relates or (b) the lapse of 25 percent of the period of service,
and in any event while the outcome is substantially uncertain.

 

9.4                                 Written Agreement. Each Performance Stock Award or Performance Unit Award
shall be evidenced by an Award Agreement that contains any vesting,
transferability restrictions and other provisions not inconsistent with the
Plan as the Committee may specify.

 

9.5                                 Form of Payment Under Performance Unit Award. Payment under a Performance Unit Award
shall be made in cash and/or shares of Stock as specified in the Holder’s Award
Agreement.

 

9.6                                 Time of Payment Under Performance
Unit Award. A Holder’s payment under a Performance Unit Award
shall be made at such time as is specified in the applicable Award Agreement. The
Award Agreement shall specify that the payment will be made (1) by a date
that is no later than the date that is two and one-half (2 1/2) months after
the end of the calendar year in which the Performance Unit Award payment is no
longer subject to a Substantial Risk of Forfeiture or (2) at a time that
is permissible under Section 409A.

 

9.7                                 Holder’s Rights as Stockholder
With Respect to a Performance Stock Award. Subject to the
terms and conditions of the Plan, each Holder of a Performance Stock Award
shall have all the rights of a stockholder with respect to the shares of Stock
issued to the Holder pursuant to the Award during any period in which such
issued shares of Stock are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares of Stock.

 

9.8                                 Increases
Prohibited. None of the Committee or the Board may increase
the amount of compensation payable under a Performance Stock or Performance
Unit Award. If the time at which a Performance Stock or Performance Unit Award
will vest or be paid is accelerated for any reason, the number of shares of
Stock subject to, or the amount payable under, the Performance Stock or
Performance Unit Award shall be reduced pursuant to Department of Treasury
Regulation section 1.162-27(e)(2)(iii) to reasonably reflect the time
value of money.

 

9.9                                 Stockholder Approval. No payments of Stock or cash will be made
pursuant to this Article IX unless the stockholder approval requirements
of Department of Treasury Regulation section 1.162-27(e)(4) are
satisfied.

 

ARTICLE X

ANNUAL INCENTIVE AWARDS

 

10.1                           Authority to Grant Annual
Incentive Awards. Subject to the terms and provisions of the Plan, the
Committee, at any time, and from time to time, may grant Annual Incentive
Awards under the Plan to key executive Employees who, by the nature and scope
of their positions, regularly directly make or influence policy decisions which
significantly impact the overall results or success of the Company in such
amounts and upon such terms as the Committee shall determine. The amount of any
Annual Incentive Awards shall be based on the attainment of such Performance
Goals as the Committee may determine.

 

13

 

10.2                           Performance
Goals. A Performance Goal must be objective such that a third party having
knowledge of the relevant facts could determine whether the goal is met. Such a
Performance Goal may be based on one or more business criteria that apply
to the Holder, one or more business units of the Company, or the Company as a
whole, with reference to one or more of the following:  earnings per share, total shareholder return,
cash return on capitalization, increased revenue, revenue ratios (per employee
or per customer), net income, stock price, market share, return on equity,
return on assets, return on capital, return on capital compared to cost of
capital, return on capital employed, return on invested capital, shareholder
value, net cash flow, operating income, earnings before interest and taxes,
cash flow, cash flow from operations, cost reductions and cost ratios (per
employee or per customer). Goals may also be based on performance relative
to a peer group of companies. Unless otherwise stated, such a Performance Goal
need not be based upon an increase or positive result under a particular
business criterion and could include, for example, maintaining the status quo
or limiting economic losses (measured, in each case, by reference to specific
business criteria). In interpreting Plan provisions applicable to Performance
Goals and Performance Stock or Performance Unit Awards, it is intended that the
Plan will conform with the standards of section 162(m) of the Code
and Treasury Regulations § 1.162-27(e)(2)(i), and the Committee in
establishing such goals and interpreting the Plan shall be guided by such
provisions. Prior to the payment of any compensation based on the achievement
of Performance Goals, the Committee must certify in writing that applicable
Performance Goals and any of the material terms thereof were, in fact,
satisfied. Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Annual Incentive Awards made pursuant to the Plan
shall be determined by the Committee.

 

10.3                           Time of Establishment of
Performance Goals. A
Performance Goal for a particular Annual Incentive Award must be established by the
Committee prior to the earlier to occur of (a) 90 days after the
commencement of the period of service to which the Performance Goal relates or (b) the
lapse of 25 percent of the period of service, and in any event while the
outcome is substantially uncertain.

 

10.4                           Written Agreement. Each Annual Incentive Award shall be evidenced by an Award
Agreement that contains any vesting, transferability restrictions and other
provisions not inconsistent with the Plan as the Committee may specify.

 

10.5                           Form of Payment Under Annual Incentive Award. Payment under an Annual
Incentive Award shall
be made in cash.

 

10.6                           Time of Payment Under Annual
Incentive Award. A Holder’s payment under an Annual Incentive Award
shall be made at such time as is specified in the applicable Award Agreement. The
Award Agreement shall specify that the payment will be made (1) by a date
that is no later than the date that is two and one-half (2 1/2) months after
the end of the calendar year in which the Annual Incentive Award payment is no
longer subject to a Substantial Risk of Forfeiture or (2) at a time that
is permissible under Section 409A.

 

10.7                           Increases
Prohibited. None of the Committee or the Board may increase
the amount of compensation payable under an Annual Incentive Award. If the time
at which an Annual Incentive Award will be paid is accelerated for any reason,
the amount payable under the Annual Incentive Award shall be reduced pursuant
to Department of Treasury Regulation section 1.162-27(e)(2)(iii) to
reasonably reflect the time value of money.

 

10.8                           Stockholder Approval. No payments of cash will be made pursuant
to this Article X unless the stockholder approval requirements of
Department of Treasury Regulation section 1.162-27(e)(4) are
satisfied.

 

14

 

ARTICLE XI

OTHER STOCK-BASED AWARDS

 

11.1                           Authority to Grant Other
Stock-Based Awards. The Committee may grant to eligible persons
other types of equity-based or equity-related Awards not otherwise described by
the terms and provisions of the Plan (including the grant or offer for sale of
unrestricted shares of Stock) in such amounts and subject to such terms and
conditions, as the Committee shall determine. Such Awards may involve the
transfer of actual shares of Stock to Holders, or payment in cash or otherwise
of amounts based on the value of shares of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.

 

11.2                           Value of Other Stock-Based Award. Each Other
Stock-Based Award shall be expressed in terms of shares of Stock or units based
on shares of Stock, as determined by the Committee.

 

11.3                           Payment of Other Stock-Based
Award. Payment, if any, with respect to an Other Stock-Based Award shall be
made in accordance with the terms of the Award, in cash or shares of Stock as the
Committee determines.

 

11.4                           Termination of Employment. The Committee
shall determine the extent to which a Holder’s rights with respect to Other
Stock-Based Awards shall be affected by the Holder’s Termination of Employment.
Such provisions shall be determined in the sole discretion of the Committee and
need not be uniform among all Other Stock-Based Awards issued pursuant to
the Plan

 

ARTICLE XII

CASH-BASED AWARDS

 

12.1                           Authority to Grant Cash-Based
Awards. Subject
to the terms and provisions of the Plan, the Committee, at any time, and from
time to time, may grant Cash-Based Awards under the Plan to eligible
persons in such amounts and upon such terms as the Committee shall determine.

 

12.2                           Value of Cash-Based Award. Each Cash-Based Award shall specify a
payment amount or payment range as determined by the Committee.

 

12.3                           Payment of Cash-Based Award. Payment, if any, with respect to a
Cash-Based Award shall be made in accordance with the terms of the Award, in
cash.

 

12.4                           Termination of Employment. The Committee shall determine the
extent to which a Holder’s rights with respect to Cash-Based Awards shall be
affected by the Holder’s Termination of Employment. Such provisions shall be
determined in the sole discretion of the Committee and need not be uniform among
all Cash-Based Awards issued pursuant to the Plan.

 

ARTICLE XIII

SUBSTITUTION AWARDS

 

Awards
may be granted under the Plan from time to time in substitution for stock
options and other awards held by employees of other entities who are about to
become Employees, or whose employer is about to become an Affiliate as the
result of a merger or consolidation of the Company with another corporation, or
the 

 

15

 

acquisition by the Company of substantially all the assets of another
corporation, or the acquisition by the Company of at least fifty percent (50%)
of the issued and outstanding stock of another corporation as the result of
which such other corporation will become a subsidiary of the Company. The terms
and conditions of the substitute Awards so granted may vary from the terms
and conditions set forth in the Plan to such extent as the Board at the time of
grant may deem appropriate to conform, in whole or in part, to the
provisions of the Award in substitution for which they are granted.

 

ARTICLE XIV

ADMINISTRATION

 

14.1                           Awards. The Plan shall
be administered by the Committee or, in the absence of the Committee, the Plan
shall be administered by the Board. The members of the Committee shall serve at
the discretion of the Board. The Committee shall have full and exclusive power
and authority to administer the Plan and to take all actions that the Plan
expressly contemplates or are necessary or appropriate in connection with the
administration of the Plan with respect to Awards granted under the Plan.

 

14.2                           Authority of the Committee. The Committee shall have full and exclusive power to
interpret and apply the terms and provisions of the Plan and Awards made under
the Plan, and to adopt such rules, regulations and guidelines for implementing
the Plan as the Committee may deem necessary or proper, all of which
powers shall be exercised in the best interests of the Company and in keeping
with the objectives of the Plan. A majority of the members of the Committee
shall constitute a quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any question
brought before that meeting. Any decision or determination reduced to writing
and signed by a majority of the members shall be as effective as if it had been
made by a majority vote at a meeting properly called and held. All questions of
interpretation and application of the Plan, or as to Awards granted under the
Plan, shall be subject to the determination, which shall be final and binding,
of a majority of the whole Committee. No member of the Committee shall be
liable for any act or omission of any other member of the Committee or for any
act or omission on his own part, including but not limited to the exercise of
any power or discretion given to him under the Plan, except those resulting
from his own gross negligence or willful misconduct. In carrying out its
authority under the Plan, the Committee shall have full and final authority and
discretion, including but not limited to the following rights, powers and
authorities to (a) determine the persons to whom and the time or times at
which Awards will be made; (b) determine the number and
exercise price of shares of Stock covered in each Award subject to the terms
and provisions of the Plan; (c) determine the terms, provisions and conditions of
each Award, which need not be identical and need not match the default terms
set forth in the Plan; (d) accelerate the
time at which any outstanding Award will vest; (e) prescribe, amend and rescind
rules and regulations relating to administration of the Plan; and (f) make all other
determinations and take all other actions deemed necessary, appropriate or
advisable for the proper administration of the Plan.

 

The Committee may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any Award to a Holder in the manner and to the extent the Committee deems
necessary or desirable to further the Plan’s objectives. Further, the Committee
shall make all other determinations that may be necessary or advisable for
the administration of the Plan. As permitted by law and the terms and
provisions of the Plan, the Committee may delegate its authority as
identified in this Section 14.2. The Committee may employ attorneys,
consultants, accountants, agents, and other persons, any of whom may be an
Employee, and the Committee, the Company, and its officers and Board shall be
entitled to rely upon the advice, opinions, or valuations of any such persons.

 

14.3                           Decisions Binding. All
determinations and decisions made by the Committee or the Board, as the case may be,
pursuant to the provisions of the Plan and all related orders and resolutions
of the Committee or 

 

16

 

the Board, as the case may be, shall be final,
conclusive and binding on all persons, including the Company, its stockholders,
Holders and the estates and beneficiaries of Holders.

 

14.4                           No Liability. Under no
circumstances shall the Company, the Board or the Committee incur liability for
any indirect, incidental, consequential or special damages (including lost
profits) of any form incurred by any person, whether or not foreseeable
and regardless of the form of the act in which such a claim may be
brought, with respect to the Plan or the Company’s, the Committee’s or the
Board’s roles in connection with the Plan.

 

ARTICLE XV

AMENDMENT OR TERMINATION OF PLAN

 

15.1                           Amendment, Modification,
Suspension, and Termination. Subject to Section 15.2,
the Committee may, at any time and from time to time, alter, amend, modify,
suspend, or terminate the Plan and any Award Agreement in whole or in part;
provided, however, that, without the prior approval of the Company’s
stockholders and except as provided in Section 4.5, the Committee shall
not directly or indirectly lower the Option Price of a previously granted
Option, and no amendment of the Plan shall be made without stockholder approval
if stockholder approval is required by applicable law or stock exchange rules.

 

15.2                           Awards Previously Granted. Notwithstanding
any other provision of the Plan to the contrary, no termination, amendment,
suspension, or modification of the Plan or an Award Agreement shall adversely
affect in any material way any Award previously granted under the Plan, without
the written consent of the Holder holding such Award.

 

ARTICLE XVI

MISCELLANEOUS

 

16.1                           Unfunded Plan/No Establishment of
a Trust Fund. Holders shall have no right, title, or interest
whatsoever in or to any investments that the Company or any of its Affiliates may make
to aid in meeting obligations under the Plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company and
any Holder, beneficiary, legal representative, or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be
paid from the general funds of the Company and no special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts, except as expressly set forth in the Plan. No property
shall be set aside nor shall a trust fund of any kind be established to secure
the rights of any Holder under the Plan. The Plan is not intended to be subject
to the Employee Retirement Income Security Act of 1974, as amended.

 

16.2                           No Employment Obligation. The granting of
any Award shall not constitute an employment contract, express or implied, nor
impose upon the Company or any Affiliate any obligation to employ or continue
to employ, or utilize the services of, any Holder. The right of the Company or
any Affiliate to terminate the employment of any person shall not be diminished
or affected by reason of the fact that an Award has been granted to him, and
nothing in the Plan or an Award Agreement shall interfere with or limit in any
way the right of the Company or its Affiliates to terminate any Holder’s
employment at any time or for any reason not prohibited by law.

 

17

 

16.3                           Tax Withholding. The Company or
any Affiliate shall be entitled to deduct from other compensation payable to
each Holder any sums required by federal, state or local tax law to be withheld
with respect to the vesting or exercise of an Award or lapse of restrictions on
an Award. In the alternative, the Company may require the Holder (or other
person validly exercising the Award) to pay such sums for taxes directly to the
Company or any Affiliate in cash or by check within one day after the date of
vesting, exercise or lapse of restrictions. In the discretion of the Committee,
and with the consent of the Holder, the Company may reduce the number of
shares of Stock issued to the Holder upon such Holder’s exercise of an Option
to satisfy the tax withholding obligations of the Company or an Affiliate;
provided that the Fair Market Value of the shares of Stock held back shall not
exceed the Company’s or the Affiliate’s Minimum Statutory Tax Withholding
Obligation. The Committee may, in its discretion, permit a Holder to satisfy
any Minimum Statutory Tax Withholding Obligation arising upon the vesting of an
Award by delivering to the Holder a reduced number of shares of Stock in the
manner specified herein. If permitted by the Committee and acceptable to the
Holder, at the time of vesting of shares under the Award, the Company shall (a) calculate
the amount of the Company’s or an Affiliate’s Minimum Statutory Tax Withholding
Obligation on the assumption that all such shares of Stock vested under the
Award are made available for delivery, (b) reduce the number of such
shares of Stock made available for delivery so that the Fair Market Value of
the shares of Stock withheld on the vesting date approximates the Company’s or
an Affiliate’s Minimum Statutory Tax Withholding Obligation and (c) in
lieu of the withheld shares of Stock, remit cash to the United States Treasury
and/or other applicable governmental authorities, on behalf of the Holder, in
the amount of the Minimum Statutory Tax Withholding Obligation. The Company
shall withhold only whole shares of Stock to satisfy its Minimum Statutory Tax
Withholding Obligation. Where the Fair Market Value of the withheld shares of
Stock does not equal the amount of the Minimum Statutory Tax Withholding
Obligation, the Company shall withhold shares of Stock with a Fair Market Value
slightly less than the amount of the Minimum Statutory Tax Withholding
Obligation and the Holder must satisfy the remaining minimum withholding
obligation in some other manner permitted under this Section 16.3. The
withheld shares of Stock not made available for delivery by the Company shall
be retained as treasury shares or will be cancelled and the Holder’s right,
title and interest in such shares of Stock shall terminate. The Company shall
have no obligation upon vesting or exercise of any Award or lapse of
restrictions on an Award until the Company or an Affiliate has received payment
sufficient to cover the Minimum Statutory Tax Withholding Obligation with
respect to that vesting, exercise or lapse of restrictions. Neither the Company
nor any Affiliate shall be obligated to advise a Holder of the existence of the
tax or the amount which it will be required to withhold.

 

16.4                           Gender and Number. If the context
requires, words of one gender when used in the Plan shall include the other and
words used in the singular or plural shall include the other.

 

16.5                           Severability. In the event
any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

 

16.6                           Headings. Headings of
Articles and Sections are included for convenience of reference only and do not
constitute part of the Plan and shall not be used in construing the terms
and provisions of the Plan.

 

16.7                           Other Compensation Plans. The adoption of
the Plan shall not affect any other option, incentive or other compensation or
benefit plans in effect for the Company or any Affiliate, nor shall the Plan
preclude the Company from establishing any other forms of incentive
compensation arrangements for Employees or Directors.

 

16.8                           Other Awards. The grant of an
Award shall not confer upon the Holder the right to receive any future or other
Awards under the Plan, whether or not Awards may be granted to similarly
situated Holders, or the right to receive future Awards upon the same terms or
conditions as previously granted.

 

18

 

16.9                           Successors. All obligations
of the Company under the Plan with respect to Awards granted hereunder shall be
binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.

 

16.10                     Law Limitations/Governmental
Approvals. The granting of Awards and the issuance of shares
of Stock under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.

 

16.11                     Delivery of Title. The Company shall have no obligation to issue or deliver evidence of
title for shares of Stock issued under the Plan prior to (a)obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and (b)completion of any registration or other
qualification of the Stock under any applicable national or foreign law or
ruling of any governmental body that the Company determines to be necessary or
advisable.

 

16.12                     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 of Stock hereunder,
shall relieve the Company of any liability in respect of the failure to issue
or sell such shares of Stock as to which such requisite authority shall not
have been obtained.

 

16.13                     Investment Representations. The Committee
may require any person receiving Stock pursuant to an Award under the Plan
to represent and warrant in writing that the person is acquiring the shares of
Stock for investment and without any present intention to sell or distribute
such Stock.

 

16.14                     Persons Residing Outside of the United States. Notwithstanding any provision of the Plan
to the contrary, in order to comply with the laws in other countries in which
the Company or any of its Affiliates operates or has Employees, the Committee,
in its sole discretion, shall have the power and authority to (a)determine
which Affiliates shall be covered by the Plan; (b)determine which persons
employed outside the United States are eligible to participate in the Plan; (c)amend or vary the terms and
provisions of the Plan and the terms and conditions of any Award granted to
persons who reside outside the United States; (d)establish subplans and modify exercise
procedures and other terms and procedures to the extent such actions may be
necessary or advisable — any subplans and modifications to Plan terms and
procedures established under this Section 16.14 by the Committee shall be
attached to the Plan document as Appendices; and (e)take any action, before or after an Award is
made, that it deems advisable to obtain or comply with any necessary local
government regulatory exemptions or approvals. Notwithstanding the above, the
Committee may not take any actions hereunder, and no Awards shall be
granted, that would violate the Securities Exchange Act of 1934, as amended,
the Code, any securities law or governing statute or any other applicable law.

 

16.15                     Arbitration of Disputes. Any controversy
arising out of or relating to the Plan or an Award Agreement shall be resolved
by arbitration conducted pursuant to the arbitration rules of the American
Arbitration Association. The arbitration shall be final and binding on the
parties.

 

16.16                     Governing Law. The provisions
of the Plan and the rights of all persons claiming thereunder shall be
construed, administered and governed under the laws of the State of Texas.

 

19

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