Document:

fpre14cexb_duska.htm

    2004
EQUITY INCENTIVE PLAN

    OF

    DUSKA
THERAPEUTICS, INC.

     

    
      	
              1.

            	
              PURPOSES OF THE
      PLAN

            

    

     

    The
purposes of the 2004 Equity Incentive Plan (“Plan”) of DUSKA THERAPEUTICS, INC.,
a Nevada corporation (the “Company”), are to:

     

    1.1
Encourage selected employees, directors, consultants and advisers to improve
operations and increase the profitability of the Company;

     

    1.2
Encourage selected employees, directors, consultants and advisers to accept or
continue employment or association with the Company or its Affiliates;
and

     

    1.3
Increase the interest of selected employees, directors, consultants and advisers
in the Company’s welfare through participation in the growth in value of the
common stock of the Company, par value $.001 per share (the “Common
Stock”).

     

    
      	
              2.

            	
              TYPES OF AWARDS;
      ELIGIBLE PERSONS

            

    

     

    2.1 The
Administrator (as defined below) may, from time to time, take the following
action, separately or in combination, under the Plan: (i) grant “incentive stock
options” (“ISOs”) intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
“Code”); (ii) grant “non-qualified options” (“NQOs,” and together with ISOs,
“Options”); (iii) grant or sell Common Stock subject to restrictions
(“restricted stock”) and (iv) grant stock appreciation rights (in general, the
right to receive the excess of the fair market value of Common Stock on the
exercise date over its fair market value on the grant date (“SARs”)), either in
tandem with Options or as separate and independent grants. Any such awards may
be made to employees, including employees who are officers or directors, and to
individuals described in Section 1 of this Plan who the Administrator believes
have made or will make a contribution to the Company or any Affiliate (as
defined below); provided, however, that only a
person who is an employee of the Company or any Affiliate at the date of the
grant of an Option is eligible to receive ISOs under the plan. The term
“Affiliate” as used in this Plan means a parent or subsidiary corporation as
defined in the applicable provisions (currently Sections 424(e) and (f),
respectively) of the Code. The term “employee” includes an officer or director
who is an employee of the Company. The term “consultant” includes persons
employed by, or otherwise affiliated with, a consultant. The term “adviser”
includes persons employed by, or otherwise affiliated with, an
adviser.

     

    2.2 Except as otherwise expressly set
forth in this Plan, no right or benefit under this Plan shall be subject in any
manner to anticipation, alienation, hypothecation, or charge, and any such
attempted action shall be void. No right or benefit under this Plan shall in any
manner be  liable for
or subject to debts, contracts, liabilities, or torts of any option holder or
any other person except as otherwise may be expressly required by applicable
law.

     

    
      	
              3.

            	
              STOCK SUBJECT TO THIS
      PLAN; MAXIMUM NUMBER OF
GRANTS

            

    

     

    Subject
to the provisions of Sections 6.1.1 and 8.2 of this Plan, the total number of
shares of Common Stock which may be offered, or issued as restricted stock or on
the exercise of Options or SARs under the Plan shall not exceed six million five
hundred thousand (6,500,000) shares of Common Stock. The shares subject to an
Option or SAR granted under the Plan which expire, terminate or are cancelled
unexercised shall become available again for grants under this Plan. If shares
of restricted stock awarded under the Plan are forfeited to the Company or
repurchased by the Company, the number of shares forfeited or repurchased shall
again be available under the Plan. Where the exercise price of an Option is paid
by means of the optionee’s surrender of previously owned shares of Common Stock
or the Company’s withholding of shares otherwise issuable upon exercise of the
Option as may be permitted herein, only the net number of shares issued and
which remain outstanding in connection with such exercise shall be deemed
“issued” and no longer available for issuance under this Plan.

     

     

    
      
        
        

      

      
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              4.

            	
              ADMINISTRATION

            

    

     

    4.1 This
Plan shall be administered by the Board of Directors of the Company (the
“Board”) or by a committee (the “Committee”) to which administration of this
Plan, or of part of this Plan, is delegated by the Board (in either case, the
“Administrator”). The Board shall appoint and remove members of the Committee in
its discretion in accordance with applicable laws. At the Board’s discretion,
the Committee may be comprised solely of “non-employee directors” within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or “outside directors” within the meaning of Section 162(m) of
the Code. The Administrator may delegate non-discretionary administrative duties
to such employees of the Company as the Administrator deems proper and the
Board, in its absolute discretion, may at any time and from time to time
exercise any and all rights and duties of the Administrator under this
Plan.

     

    4.2
Subject to the other provisions of this Plan, the Administrator shall have the
authority, in its discretion: (i) to grant Options and SARs and grant or sell
restricted stock; (ii) to determine the fair market value of the Common Stock
subject to Options or other awards; (iii) to determine the exercise price of
Options granted, the economic terms of SARs granted, or the offering price of
restricted stock; (iv) to determine the persons to whom, and the time or times
at which, Options or SARs shall be granted or restricted stock granted or sold,
and the number of shares subject to each Option or SAR or the number of shares
of restricted stock granted or sold; (v) to construe and interpret the terms and
provisions of this Plan, of any applicable agreement and all Options and SARs
granted under this Plan, and of any restricted stock award under this Plan; (vi)
to prescribe, amend, and rescind rules and regulations relating to this Plan;
(vii) to determine the terms and provisions of each Option and SAR granted and
award of restricted stock (which need not be identical), including but not
limited to, the time or times at which Options and SARs shall be exercisable or
the time at which the restrictions on restricted stock shall lapse; (viii) with
the consent of the grantee, to rescind any award or exercise of an Option or SAR
and to modify or amend the terms of any Option, SAR or restricted stock; (ix) to
reduce the exercise price of any Option, the base value from which appreciation
is to be determined with respect to an SAR or the purchase price of restricted
stock; (x) to accelerate or defer (with the consent of the grantee) the exercise
date of any Option or SAR or the date on which the restrictions on restricted
stock lapse; (xi) to issue shares of restricted stock to an optionee in
connection with the accelerated exercise of an Option by such optionee; (xii) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option. SAR or award of restricted stock; (xiii) to
determine the duration and purposes of leaves of absence which may be granted to
participants without constituting a termination of their employment for the
purposes of the Plan; and (xiv) to make all other determinations deemed
necessary or advisable for the administration of this Plan, any applicable
agreement, Option, SAR or award of restricted stock.

     

    4.3 All
questions of interpretation, implementation, and application of this Plan or any
agreement or Option, SAR or award of restricted stock shall be determined by the
Administrator, which determination shall be final and binding on all
persons.

     

    
      	
              5.

            	
              GRANTING OF OPTIONS
      AND SARS; AGREEMENTS

            

    

     

    5.1 No
Options or SARs shall be granted under this Plan after ten (10) years from the
date of adoption of this Plan by the Board.

     

    5.2 Each
Option and SAR shall be evidenced by a written agreement, in form satisfactory
to the Administrator, executed by the Company and the person to whom such grant
is made. In the event of a conflict between the terms or conditions of an
agreement and the terms and conditions of this Plan, the terms and conditions of
this Plan shall govern.

     

    5.3 Each
agreement shall specify whether the Option it evidences is an NQO or an ISO,
provided, however, all Options
granted under this Plan to non-employee directors, consultants and advisers of
the Company are intended to be NQOs.

     

     

    
      
        
        

      

      
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    5.4
Subject to Section 6.3.3 with respect to ISOs, the Administrator may approve the
grant of Options or SARs under this Plan to persons who are expected to become
employees, directors, consultants or advisers of the Company, but are not
employees, directors, consultants or advisers at the date of
approval.

     

    
      	
              6.

            	
              TERMS AND CONDITIONS
      OF OPTIONS AND SARS

            

    

     

    Each
Option and SAR granted under this Plan shall be subject to the terms and
conditions set forth in Section 6.1. NQOs and SARs shall also be subject to the
terms and conditions set forth in Section 6.2, but not those set forth in
Section 6.3. ISOs shall also be subject to the terms and conditions set forth in
Section 6.3, but not those set forth in Section 6.2. SARs shall be subject to
the terms and conditions of Section 6.4.

    

    6.1 Terms and Conditions to
Which All Options and SARs Are Subject. All Options and SARs granted
under this Plan shall be subject to the following terms and
conditions:

     

    6.1.1
Changes in Capital
Structure. Subject to Section 6.1.2, if the stock of the Company is
changed by reason of a stock split, reverse stock split, stock dividend,
recapitalization, combination or reclassification, or if the Company effects a
spin-off of the Company’s subsidiary, appropriate adjustments shall be made by
the Administrator, in its sole discretion, in (a) the number and class of shares
of stock subject to this Plan and each Option and SAR outstanding under this
Plan, and (b) the exercise price of each outstanding Option; provided, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments. Any adjustment, however, in an outstanding Option shall be made
without change in the total price applicable to the unexercised portion of the
Option but with a corresponding adjustment in the price for each share covered
by the unexercised portion of the Option. Adjustments under this Section 6.1.1
shall be made by the Administrator, whose determination as to the nature of the
adjustments that shall be made, and the extent thereof, shall be final, binding,
and conclusive. If an adjustment under this Section 6.1.1 would result in a
fractional share interest under an option or any installment, the
Administrator’s decision as to inclusion or exclusion of that fractional share
interest shall be final, but no fractional shares of stock shall be issued under
the Plan on account of any such adjustment.

     

    6.1.2
Corporate
Transactions. Except as otherwise provided in the applicable agreement,
in the event of a Corporate Transaction (as defined below), the Administrator
shall notify each holder of an Option or SAR at least thirty (30) days prior
thereto or as soon as may be practicable. To the extent not then exercised all
Options and SARs shall terminate immediately prior to the consummation of such
Corporate Transaction unless the Administrator determines otherwise in its sole
discretion; provided. however, that the
Administrator, in its sole discretion, may (i) permit exercise of any Options or
SARs prior to their termination, even if such Options or SARs would not
otherwise have been exercisable, and/or (ii) provide that all or certain of the
outstanding Options and SARs shall be assumed or an equivalent Option or SAR
substituted by an applicable successor corporation or entity or any Affiliate of
the successor corporation or entity. A “Corporate Transaction” means (i) a
liquidation or dissolution of the Company; (ii) a merger or consolidation of the
Company with or into another corporation or entity (other than a merger with a
wholly-owned subsidiary); (iii) a sale of all or substantially all of the assets
of the Company; or (iv) a purchase or other acquisition of more than 50% of the
outstanding stock of the Company by one person or by more than one person acting
in concert.

     

    6.1.3
Time of Option or SAR
Exercise. Subject to Section 5 and Section 6.3.4, an Option or SAR
granted under the Plan shall be exercisable (a) immediately as of the effective
date of the of the applicable agreement or (b) in accordance with a schedule or
performance criteria as may be set by the Administrator and specified in the
applicable agreement. However, in no case may an Option or SAR be exercisable
until a written agreement in form and substance satisfactory to the Company is
executed by the Company and the grantee.

     

    6.1.4
Grant Date. The
date of grant of an Option or SAR under the Plan shall be the effective date of
the applicable agreement.

     

     

    
      
        
        

      

      
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    6.1.5
Non-Transferability of
Rights. Except with the express written approval of the Administrator,
which approval the Administrator is authorized to give only with respect to NQOs
and SARs, no Option or SAR granted under this Plan shall be assignable or
otherwise transferable by the grantee except by will or by the laws of descent
and distribution. During the life of the grantee, an Option or SAR shall be
exercisable only by the grantee.

     

    6.1.6
Payment. Except
as provided below, payment in full, in cash, shall be made for all stock
purchased at the time written notice of exercise of an Option is given to the
Company and the proceeds of any payment shall be considered general funds of the
Company. The Administrator, in the exercise of its absolute discretion after
considering any tax, accounting and financial consequences, may authorize any
one or more of the following additional methods of payment:

     

    (a)
Subject to the Sarbanes-Oxley Act of 2002, acceptance of the optionee’s full
recourse promissory note for all or part of the Option price, payable on such
terms and bearing such interest rate as determined by the Administrator (but in
no event less than the minimum interest rate specified under the Code at which
no additional interest or original issue discount would be imputed), which
promissory note may be either secured or unsecured in such manner as the
Administrator shall approve (including, without limitation, by a security
interest in the shares of the Company);

     

    (b)
Subject to the discretion of the Administrator and the terms of the stock option
agreement granting the Option, delivery by the optionee of shares of Common
Stock already owned by the optionee for all or part of the Option price,
provided the fair market value (determined as set forth in Section 6.1.9) of
such shares of Common Stock is equal on the date of exercise to the Option
price, or such portion thereof as the optionee is authorized to pay by delivery
of such stock;

     

    (c)
Subject to the discretion of the Administrator, through the surrender of shares
of Common Stock then issuable upon exercise of the Option, provided the fair
market value (determined as set forth in Section 6.1.9) of such shares of Common
Stock is equal on the date of exercise to the Option price, or such portion
thereof as the optionee is authorized to pay by surrender of such stock;
and

     

    (d) By
means of so-called cashless exercises as permitted under applicable rules and
regulations of the Securities and Exchange Commission and the Federal Reserve
Board.

     

    6.1.7
Withholding and
Employment Taxes. At the time of exercise and as a condition thereto, or
at such other time as the amount of such obligation becomes determinable, the
grantee of an Option or SAR shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. Such obligation to remit may
be satisfied, if authorized by the Administrator in its sole discretion, after
considering any tax, accounting and financial consequences, by the holder’s (i)
delivery of a promissory note in the required amount on such terms as the
Administrator deems appropriate, (ii) tendering to the Company previously owned
shares of Common Stock or other securities of the Company with a fair market
value equal to the required amount, or (iii) agreeing to have shares of Common
Stock (with a fair market value equal to the required amount), which are
acquired upon exercise of the Option or SAR, withheld by the
Company.

     

    6.1.8
Other
Provisions. Each Option and SAR granted under this Plan may contain such
other terms, provisions, and conditions not inconsistent with this Plan as may
be determined by the Administrator, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify the Option as
an “incentive stock option” within the meaning of Section 422 of the
Code.

     

    6.1.9
Determination of
Value. For purposes of this Plan, the fair market value of Common Stock
or other securities of the Company shall be determined as follows:

     

    (a) If
the stock of the Company is listed on a securities exchange or is regularly
quoted by a recognized securities dealer, and selling prices are reported, its
fair market value shall be the closing price of such stock on the date the value
is to be determined, but if selling prices are not reported, its fair market
value shall be the mean between the high bid and low asked prices for such stock
on the date the value is to be determined (or if there are no quoted prices for
the date of grant, then for the last preceding business day on which there were
quoted prices).

     

     

     

    
      
        
        

      

      
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    (b) In
the absence of an established market for the stock, the fair market value
thereof shall be determined in good faith by the Administrator, with reference
to the Company’s net worth, prospective earning power, dividend-paying capacity,
and other relevant factors, including the goodwill of the Company, the economic
outlook in the Company’s industry, the Company’s position in the industry, the
Company’s management, and the values of stock of other corporations in the same
or a similar line of business.

     

    6.1.10
Option and SAR
Term. No Option or SAR shall be exercisable more than 10 years after the
date of grant, or such lesser period of time as is set forth in the applicable
agreement (the end of the maximum exercise period stated in the agreement is
referred to in this Plan as the “Expiration Date”).

     

    6.2 Terms and Conditions to
Which Only NQOs Are Subject. Options granted under this Plan which are
designated as NQOs shall be subject to the following terms and
conditions:

     

    6.2.1
Exercise Price.
The exercise price of an NQO shall be the amount determined by the Administrator
as specified in the option agreement.

     

    6.2.2
Termination of
Employment. Except as otherwise provided in the applicable agreement, if
for any reason a grantee ceases to be employed by the Company or any of its
Affiliates, Options that are NQOs and SARs held at the date of termination (to
the extent then exercisable) may be exercised in whole or in part at any time
within ninety (90) days of the date of such termination (but in no event after
the Expiration Date). For purposes of this Section 6.2.2, “employment” includes
service as a director, consultant or adviser. For purposes of this Section
6.2.2, a grantee’s employment shall not be deemed to terminate by reason of the
grantee’s transfer from the Company to an Affiliate, or vice versa, or sick
leave, military leave or other leave of absence approved by the Administrator,
if the period of any such leave does not exceed ninety (90) days or, if longer,
if the grantee’s right to reemployment by the Company or any Affiliate is
guaranteed either contractually or by statute.

     

    6.3 Terms and Conditions to
Which Only ISOs Are Subject. Options granted under this Plan which are
designated as ISOs shall be subject to the following terms and
conditions:

     

    6.3.1
Exercise Price.
The exercise price of an ISO shall not be less than the fair market value
(determined in accordance with Section 6.1.9) of the stock covered by the Option
at the time the Option is granted. The exercise price of an ISO granted to any
person who owns, directly or by attribution under the Code (currently Section
424(d)), stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any Affiliate (a “Ten
Percent Stockholder”) shall in no event be less than one hundred ten percent
(110%) of the fair market value (determined in accordance with Section 6.1.9) of
the stock covered by the Option at the time the Option is granted.

     

    6.3.2
Disqualifying
Dispositions. If stock acquired by exercise of an ISO granted pursuant to
this Plan is disposed of in a “disqualifying disposition” within the meaning of
Section 422 of the Code (a disposition within two (2) years from the date of
grant of the Option or within one year after the issuance of such stock on
exercise of the Option), the holder of the stock immediately before the
disposition shall promptly notify the Company in writing of the date and terms
of the disposition and shall provide such other information regarding the Option
as the Company may reasonably require.

     

    6.3.3
Grant Date. If
an ISO is granted in anticipation of employment as provided in Section 5.4, the
Option shall be deemed granted, without further approval, on the date the
grantee assumes the employment relationship forming the basis for such grant,
and, in addition, satisfies all requirements of this Plan for Options granted on
that date.

     

     

    
      
        
        

      

      
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    6.3.4
Term.
Notwithstanding Section 6.1.10, no ISO granted to any Ten Percent Stockholder
shall be exercisable more than five (5) years after the date of
grant.

     

    6.3.5
Termination of
Employment. Except as otherwise provided in the stock option agreement,
if for any reason an optionee ceases to be employed by the Company or any of its
Affiliates, Options that are ISOs held at the date of termination (to the extent
then exercisable) may be exercised in whole or in part at any time within ninety
(90) days of the date of such termination (but in no event after the Expiration
Date). For purposes of this Section 6.3.5, an optionee’s employment shall not be
deemed to terminate by reason of the optionee’s transfer from the Company to an
Affiliate, or vice versa, or sick leave, military leave or other leave of
absence approved by the Administrator, if the period of any such leave does not
exceed ninety (90) days or, if longer, if the optionee’s right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.

     

    6.4 Terms and Conditions
Applicable Solely to SARs. In addition to the other terms and conditions
applicable to SARs in this Section 6, the holder shall be entitled to receive on
exercise of an SAR only Common Stock at a fair market value equal to the benefit
to be received by the exercise. At the request of the holder, and with the
approval of the Administrator (which approval may be granted or withheld in the
sole and absolute discretion of the Administrator), the benefit may be payable
in cash or partly in Common Stock and partly in cash.

     

    
      	
              7.

            	
              MANNER OF
      EXERCISE

            

    

     

    7.1 An
optionee wishing to exercise an Option or SAR shall give written notice to the
Company at its principal executive office, to the attention of the officer of
the Company designated by the Administrator, accompanied by payment of the
exercise price and/or withholding taxes as provided in Sections 6.1.6 and 6.1.7.
The date the Company receives written notice of an exercise hereunder
accompanied by the applicable payment will be considered as the date such Option
or SAR was exercised.

     

    7.2
Promptly after receipt of written notice of exercise and the applicable payments
called for by Section 7.1, the Company shall, without stock issue or transfer
taxes to the holder or other person entitled to exercise the Option or SAR,
deliver to the holder or such other person a certificate or certificates for the
requisite number of shares of Common Stock. A holder or permitted transferee of
an Option or SAR shall not have any privileges as a stockholder with respect to
any shares of Common Stock to be issued until the date of issuance (as evidenced
by the appropriate entry on the books of the Company or a duly authorized
transfer agent) of such shares.

     

    
      	
              8.

            	
              RESTRICTED
      STOCK

            

    

     

    8.1 Grant or Sale of Restricted
Stock.

     

    8.1.1 No
awards of restricted stock shall be granted under this Plan after ten (10) years
from the date of adoption of this Plan by the Board.

     

    8.1.2 The
Administrator may issue shares under the Plan as a grant or for such
consideration (including services, and, subject to the Sarbanes-Oxley Act of
2002, promissory notes) as determined by the Administrator. Shares issued under
the Plan shall be subject to the terms, conditions and restrictions determined
by the Administrator. The restrictions may include restrictions concerning
transferability, repurchase by the Company and forfeiture of the shares issued,
together with such other restrictions as may be determined by the Administrator.
If shares are subject to forfeiture or repurchase by the Company, all dividends
or other distributions paid by the Company with respect to the shares may be
retained by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All Common Stock issued pursuant to this Section 8 shall be subject
to a purchase or grant agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase or grant agreement may
contain any terms, conditions, restrictions, representations and warranties
required by the Administrator. 

     

     

     

    
      
        
        

      

      
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    The
certificates representing the shares shall bear any legends required by the
Administrator. The Administrator may require any purchaser of restricted stock
to pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Administrator may withhold that
amount from other amounts payable by the Company to the purchaser, including
salary, subject to applicable law. With the consent of the Administrator in its
sole discretion, a purchaser may deliver Common Stock to the Company to satisfy
this withholding obligation. Upon the issuance of restricted stock, the number
of shares reserved for issuance under the Plan shall be reduced by the number of
shares issued.

     

    8.2 Changes in Capital
Structure. In the event of a change in the Company’s capital structure,
as described in Section 6.1.1, appropriate adjustments shall be made by the
Administrator, in its sole discretion, in the number and class of restricted
stock subject to this Plan and the restricted stock outstanding under this Plan;
provided, however, that the
Company shall not be required to issue fractional shares as a result of any such
adjustments.

     

    8.3 Corporate
Transactions. In the event of a Corporate Transaction, as defined in
Section 6.1.2 hereof, to the extent not previously forfeited, all restricted
stock shall be forfeited immediately prior to the consummation of such Corporate
Transaction unless the Administrator determines otherwise in its sole
discretion; provided, however, that the
Administrator, in its sole discretion, may remove any restrictions as to any
restricted stock. The Administrator may, in its sole discretion, provide that
all outstanding restricted stock participate in the Corporate Transaction with
an equivalent stock substituted by an applicable successor corporation subject
to the restriction.

     

    
      	
              9.

            	
              EMPLOYMENT OR
      CONSULTING RELATIONSHIP

            

    

     

    Nothing
in this Plan or any Option granted hereunder shall interfere with or limit in
any way the right of the Company or of any of its Affiliates to terminate the
employment, consulting or advising of any optionee or restricted stock holder at
any time, nor confer upon any optionee or restricted stock holder any right to
continue in the employ of, or consult or advise with, the Company or any of its
Affiliates.

     

    
      	
              10.

            	
              CONDITIONS UPON
      ISSUANCE OF SHARES

            

    

     

    10.1
Securities Act.
Shares of Common Stock shall not be issued pursuant to the exercise of an Option
or the receipt of restricted stock unless the exercise of such Option or such
receipt of restricted stock and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended (the “Securities
Act”).

     

    10.2
Non-Compete
Agreement. As a further condition to the receipt of Common Stock pursuant
to the exercise of an Option or the receipt of restricted stock, the optionee or
recipient of restricted stock may be required not to render services for any
organization, or engage directly or indirectly in any business, competitive with
the Company at any time during which (i) an Option is outstanding to such
Optionee and for six (6) months after any exercise of an Option or the receipt
of Common Stock pursuant to the exercise of an Option and (ii) restricted stock
is owned by such recipient and for six (6) months after the restrictions on such
restricted stock lapse. Failure to comply with this condition shall cause such
Option and the exercise or issuance of shares thereunder and/or the award of
restricted stock to be rescinded and the benefit of such exercise, issuance or
award to be repaid to the Company.

     

    
      	
              11.

            	
              NON-EXCLUSIVITY OF
      THIS PLAN

            

    

     

    The
adoption of this Plan shall not be construed as creating any limitations on the
power of the Company to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options other
than under this Plan.

     

     

    
      
        
        

      

      
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              12.

            	
              MARKET
      STAND-OFF

            

    

     

    Each
optionee, holder of an SAR or recipient of restricted stock, if so requested by
the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act, shall not sell or otherwise transfer any shares of Common Stock
acquired upon exercise of Options, SARs or receipt of restricted stock during
the 180-day period following the effective date of a registration statement of
the Company filed under the Securities Act; provided, however, that such
restriction shall apply only to a registration statement of the Company which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act and the restriction period
shall not exceed 90 days after the registration statement becomes
effective.

    

    
      	
              13.

            	
              AMENDMENTS TO
      PLAN

            

    

     

    The Board
may at any time amend, alter, suspend or discontinue this Plan. Without the
consent of an optionee, holder of an SAR or holder of restricted stock, no
amendment, alteration, suspension or discontinuance may adversely affect such
person’s outstanding Option(s), SAR(s) or the terms applicable to restricted
stock except to conform this Plan and ISOs granted under this Plan to the
requirements of federal or other tax laws relating to incentive stock options.
No amendment, alteration, suspension or discontinuance shall require stockholder
approval unless (a) stockholder approval is required to preserve incentive stock
option treatment for federal income tax purposes or (b) the Board otherwise
concludes that stockholder approval is advisable.

     

    
      	
              14.

            	
              EFFECTIVE DATE OF
      PLAN; TERMINATION

            

    

     

    This Plan
shall become effective upon adoption by the Board; provided, however, that no
Option or SAR shall be exercisable unless and until written consent of the
stockholders of the Company, or approval of stockholders of the Company voting
at a validly called stockholders’ meeting, is obtained within twelve (12) months
after adoption by the Board. If any Options or SARs are so granted and
stockholder approval shall not have been obtained within twelve (12) months of
the date of adoption of this Plan by the Board, such Options and SARs shall
terminate retroactively as of the date they were granted. Awards may be made
under this Plan and exercise of Options and SARs shall occur only after there
has been compliance with all applicable federal and state securities laws. This
Plan (but not Options and SARs previously granted under this Plan) shall
terminate within ten (10) years from the date of its adoption by the Board.
Termination shall not affect any outstanding Options or SARs or the terms
applicable to previously awarded restricted stock.

     

    8EX-10.1

Clifton S. Rankin

General Counsel and Corporate Secretary

March 12, 2008

Mr. David Chapman

4171 Essen Lane

Baton Rouge, LA 70809

Dear Dave:

This letter will confirm the terms of your continued employment with The Shaw Group Inc. (the
“Company”) as President of the Company’s Fabrication & Manufacturing Group.

	•	 	Effective Date – September 1, 2007.

	•	 	Term – Through August 31, 2009; provided that, unless either you or the Company provides at
least 60 days’ notice prior to August 31, 2009 to the contrary, the Term shall automatically
renew for an additional two-year period ending August 31, 2011.

	•	 	Base Salary – $750,000 per year paid biweekly in arrears.

	•	 	Annual Bonus – Participation in the Company’s management incentive plan, with a minimum
bonus of $750,000 per fiscal year. Pro-rated if employment ends before end of any fiscal year.

	•	 	Long Term Incentives – Participation in the Company’s long term incentive program.

	•	 	Benefits – Participation in benefit programs on the same terms as outlined in your previous
employment agreement.

	•	 	Aircraft Reimbursement – The Company will reimburse you for operating expenses (e.g., fuel
and hangar fees and pro rata portion of insurance and scheduled maintenance) incurred by you
for the use of your personal aircraft for Company-approved business. Pro rated operating
expenses will be based upon the actual usage for Company-approved business purposes compared
to total usage as determined by quarterly review of aircraft log books. Total aircraft
operating expenses subject to reimbursement hereunder shall not exceed an average of $400 per
hour of flight time for Company-approved business over the Term.

Notwithstanding the foregoing, upon three months’ prior written notice, either you or the Company
may terminate the Term, and upon such termination you agree to continue to provide services to the
Company on a part-time basis under the terms below. This part-time employment arrangement replaces
the consulting arrangement set forth in your March 8, 200[1] (2002) offer letter (as amended from
time to time).

	•	 	Term – Five years (unless you and the Company otherwise mutually agree in writing).

	•	 	Compensation – $300,000 per year paid biweekly in arrears based upon a minimum of 20 hours
of services per week. In the event that the Company requests hours in excess of 20 hours of
services per week, the Company shall pay you $300.00 per hour for each additional hour.

	•	 	Long Term Incentives – Long term incentives granted to you prior to expiration of the Term
will continue to vest in accordance with the Company’s long term incentive program. You will
not receive new grants of long term incentives during the part-time employment term.

	•	 	Benefits – The Company shall provide medical and dental benefits to you and your dependents
during the part-time employment term.

	•	 	Services – At a minimum, you will review backlogs of all Fabrication & Manufacturing Group
facilities once per month, participate in monthly financial reviews (via telephone
conference), and review all project bids (at the buy stage) equal to or greater than $5
million in revenues.

	•	 	Severance – In the event that you are terminated by the Company prior to the expiration of
the part-time employment Term for any reason other than Misconduct or Disability (both as
defined below), the Company shall pay you, subject to tax and other customary withholdings,
(a) not later than 15 days after the date of termination, a lump sum amount, in cash, equal to
the lesser of (i) $450,000 and (ii) an amount (the “Termination Payment Amount”) equal to the
product of (x) $1,500,000, multiplied by (y) the remaining portion of the part-time employment
Term (expressed as a percentage), and (b) on the first business day occurring after the date
that is six months after the date of termination, a lump sum amount (if greater than zero), in
cash, equal to (I) the Termination Payment Amount, minus (II) $450,000.

Notwithstanding anything to the contrary in this Agreement, in the event that you are
terminated because of Misconduct, the Company shall have no obligations pursuant to this
Agreement after the date of termination other than the payment of any unpaid part-time
employment Compensation accrued through the date of termination. As used herein, the term
“Misconduct” means:

	 	(1)	 	(A) the material and continued failure to substantially perform your
duties with the Company (other than any such failure resulting from your incapacity
due to a Disability) in a manner that is reasonably expected as appropriate for the
position, which failure is not cured within 30 days from receipt by you of written
notice from the Company that specifies the alleged failure;

	 	(2)	 	the intentional misappropriation or attempted misappropriation by you of
a material business opportunity of the Company, including attempting to secure any
personal profit in connection with entering into any transaction on behalf of the
Company;

	 	(3)	 	the intentional misappropriation or attempted misappropriation by you of
any of the Company’s funds or property; or

	 	(4)	 	(A) the commission by you of a felony offense or a misdemeanor offense
involving violent or dishonest behavior or (B) your engaging in any other conduct
involving fraud or dishonesty.

If you shall have been absent from the full time performance of your duties with the Company
for 120 consecutive calendar days as a result of your incapacity due to a Disability, your
employment may be terminated by the Company. For the purposes of this Agreement, a
“Disability” shall exist if:

	 	(1)	 	you are unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be reasonably
expected to result in death or can be expected to last for a continuous period of
not less than 12 months; or

	 	(2)	 	you are, by reason of any medically determinable physical or mental
impairment that can be reasonably expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident
and health plan covering employees of the Company.

If you are terminated due to a Disability prior to expiration of the part-time employment
Term, you shall not be entitled to further compensation pursuant to this Agreement, except
that the Company shall, for the period beginning with the date of termination and ending on
the last day of the part-time employment Term, pay to your monthly the amount by which your
monthly part-time Compensation exceeds the monthly benefit received by you pursuant to any
disability insurance covering you.

In good faith, during the full-time employment Term, you will continue to develop and maintain a
succession plan and identify, train and develop potential successors and key members of the
Fabrication & Manufacturing Group’s management team.

Unless otherwise modified herein, the terms of the March 8, 200[1] (2002) offer letter (as amended
from time to time) remain in effect.

1

Please indicate your agreement to the terms and conditions outlined above by signing and
dating this letter in the space provided below, and return it to me.

Sincerely,

/s/ Clifton S. Rankin

Clifton S. Rankin

Agreed: /s/ David L. Chapman, Sr. Date: March 12, 2008 David L.
Chapman, Sr.

2

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