Document:

Jakks Pacific, Inc. Exhibit 4.1

 

Exhibit 4.1

JAKKS PACIFIC, INC.

2002 Stock Award and Incentive Plan

 

 

JAKKS PACIFIC, INC.

2002 Stock Award and Incentive Plan

	 	 	 	 	 
	
    
    1.  Purpose
    

    	 	 	1	 
	
    
    2.  Definitions
    

    	 	 	1	 
	
    
    3.  Administration
    

    	 	 	2	 
	
    
    4.  Stock Subject to Plan
    

    	 	 	3	 
	
    
    5.  Eligibility; Per-Person Award
    Limitations
    

    	 	 	4	 
	
    
    6.  Specific Terms of Awards
    

    	 	 	4	 
	
    
    7.  Performance Awards, Including
    Annual Incentive Awards
    

    	 	 	7	 
	
    
    8.  Certain Provisions Applicable to
    Awards
    

    	 	 	9	 
	
    
    9.  Change in Control
    

    	 	 	10	 
	
    
    10. Awards to Non-Employee Directors
    

    	 	 	12	 
	
    
    11. General Provisions
    

    	 	 	12	 

i

 

JAKKS PACIFIC, INC.

2002 Stock Award and Incentive Plan

     
1.     Purpose.
The purpose of this 2002 Stock Award and Incentive Plan (the
“Plan”) is to aid JAKKS Pacific, Inc. a Delaware
corporation (the “Company”), in attracting, retaining,
motivating and rewarding employees (including executive officers
and employee directors), non-employee directors, and other
persons (including consultants and advisors) who provide
substantial services to the Company or its subsidiaries or
affiliates, to provide for equitable and competitive
compensation opportunities, to recognize individual
contributions and reward achievement of Company goals, and
promote the creation of long-term value for stockholders by
closely aligning the interests of Participants with those of
stockholders. The Plan authorizes stock-based and cash-based
incentives for Participants.

     
2.     Definitions.
In addition to the terms defined in Section 1 above and
elsewhere in the Plan, the following capitalized terms used in
the Plan have the respective meanings set forth in this Section:

		
	 	     
    (a) “Annual Incentive Award” means
    a type of Performance Award granted to a Participant under
    Section 7(c) representing a conditional right to receive
    cash, Stock or other Awards or payments, as determined by the
    Committee, based on performance in a performance period of one
    fiscal year or a portion thereof.
    
	 
	 	     
    (b) “Award” means any Option, SAR,
    Restricted Stock, Deferred Stock, Stock granted as a bonus or in
    lieu of another award, Dividend Equivalent, Other Stock-Based
    Award, Performance Award or Annual Incentive Award, together
    with any related right or interest, granted to a Participant
    under the Plan.
    
	 
	 	     
    (c) “Beneficiary” means the legal
    representatives of the Participant’s estate entitled by
    will or the laws of descent and distribution to receive the
    benefits under a Participant’s Award upon a
    Participant’s death, provided that, if and to the extent
    authorized by the Committee, a Participant may be permitted to
    designate a Beneficiary, in which case the
    “Beneficiary” instead will be the person, persons,
    trust or trusts (if any are then surviving) which have been
    designated by the Participant in his or her most recent written
    beneficiary designation filed with the Committee to receive the
    benefits specified under the Participant’s Award upon such
    Participant’s death. Unless otherwise determined by the
    Committee, any designation of a Beneficiary other than a
    Participant’s spouse shall be subject to the written
    consent of such spouse.
    
	 
	 	     
    (d) “Board” means the
    Company’s Board of Directors.
    
	 
	 	     
    (e) “Change in Control” and
    related terms have the meanings specified in Section 9.
    
	 
	 	     
    (f) “Code” means the Internal
    Revenue Code of 1986, as amended. References to any provision of
    the Code or regulation (including a proposed regulation)
    thereunder shall include any successor provisions and
    regulations.
    
	 
	 	     
    (g) “Committee” means a committee
    of two or more directors designated by the Board to administer
    the Plan; provided, however, that, directors appointed or
    serving as members of a Board committee designated as the
    Committee shall not be employees of the Company or any
    subsidiary or affiliate. In appointing members of the Committee,
    the Board will consider whether a member is or will be a
    Qualified Member, but such members are not required to be
    Qualified Members at the time of appointment or during their
    term of service on the Committee. The full Board may perform any
    function of the Committee hereunder, in which case the term
    “Committee” shall refer to the Board.
    
	 
	 	     
    (h) “Covered Employee” means an
    Eligible Person who is a Covered Employee as specified in
    Section 11(j).
    
	 
	 	     
    (i) “Deferred Stock” means a
    right, granted to a Participant under Section 6(e), to
    receive Stock or other Awards or a combination thereof at the
    end of a specified deferral period.
    

1

 

		
	 	     
    (j) “Dividend Equivalent” means a
    right, granted to a Participant under Section 6(g), to
    receive cash, Stock, other Awards or other property equal in
    value to all or a specified portion of the dividends paid with
    respect to a specified number of shares of Stock.
    
	 
	 	     
    (k) “Effective Date” means the
    effective date specified in Section 11(q).
    
	 
	 	     
    (l) “Eligible Person” has the
    meaning specified in Section 5.
    
	 
	 	     
    (m) “Exchange Act” means the
    Securities Exchange Act of 1934, as amended. References to any
    provision of the Exchange Act or rule (including a proposed
    rule) thereunder shall include any successor provisions and
    rules.
    
	 
	 	     
    (n) “Fair Market Value” shall mean
    the amount determined by the Board or the Committee, except that
    if the Stock is listed on a national securities exchange (or
    traded on the over-the-counter market), the fair market value
    shall be the closing price of the Stock on such exchange (or
    market as reported by the National Quotation Bureau) on the day
    on which an Award is granted hereby (or with respect to a Change
    in Control or other event requiring the valuation of the Stock,
    the closing price on the appropriate date as determined by the
    Board or Committee), or, if there is no trading or closing price
    on that day, the closing price on the most recent day preceding
    the day for which such prices are available.
    
	 
	 	     
    (o) “Incentive Stock Option” or
    “ISO” means any Option designated as an incentive
    stock option within the meaning of Code Section 422 or any
    successor provision thereto and qualifying thereunder.
    
	 
	 	     
    (p) “Option” means a right,
    granted to a Participant under Section 6(b), to purchase Stock
    or other Awards at a specified price during specified time
    periods.
    
	 
	 	     
    (q) “Other Stock-Based Awards”
    means Awards granted to a Participant under Section 6(h).
    
	 
	 	     
    (r) “Participant” means a person
    who has been granted an Award under the Plan which remains
    outstanding, including a person who is no longer an Eligible
    Person.
    
	 
	 	     
    (s) “Performance Award” means a
    right, granted to a Participant under Sections 6(i) and 7,
    to receive Awards or payments based upon performance criteria
    specified by the Committee.
    
	 
	 	     
    (t) “Preexisting Plan” means the
    Company’s Third Amended and Restated 1995 Stock Option Plan.
    
	 
	 	     
    (u) “Qualified Member” means a
    member of the Committee who is a “Non-Employee
    Director” within the meaning of Rule 16b-3(b)(3) and
    an “outside director” within the meaning of
    Regulation 1.162-27 under Code Section 162(m).
    
	 
	 	     
    (v) “Restricted Stock” means Stock
    granted to a Participant under Section 6(d) that is subject
    to certain restrictions and to a risk of forfeiture.
    
	 
	 	     
    (w) “Rule 16b-3” means
    Rule 16b-3, as from time to time in effect and applicable
    to Participants, promulgated by the Securities and Exchange
    Commission under Section 16 of the Exchange Act.
    
	 
	 	     
    (x) “Stock” means the
    Company’s Common Stock, par value $.001 per share, and any
    other equity securities of the Company that may be substituted
    or resubstituted for Stock pursuant to Section 11(c).
    
	 
	 	     
    (y) “Stock Appreciation Rights” or
    “SAR” means a right granted to a Participant under
    Section 6(c).
    

     
3.     Administration.

     
(a) Authority of the Committee. The
Plan shall be administered by the Committee (subject to the
Board’s authority to restrict the Committee), which shall
have full and final authority, in each case subject to and
consistent with the provisions of the Plan, to select Eligible
Persons to become Participants; to grant Awards; to determine
the type and number of Awards, the dates on which Awards may be
exercised and on which the risk of forfeiture or deferral period
relating to Awards shall lapse or terminate, the acceleration of
any such dates, the expiration date of any Award, whether, to
what extent, and under what circumstances an

2

 

Award may be settled, or the exercise price of an
Award may be paid, in cash, Stock, other Awards, or other
property, and other terms and conditions of, and all other
matters relating to, Awards; to prescribe documents evidencing
or setting terms of Awards (such Award documents need not be
identical for each Participant), amendments thereto, and rules
and regulations for the administration of the Plan and
amendments thereto; to construe and interpret the Plan and Award
documents and correct defects, supply omissions or reconcile
inconsistencies therein; and to make all other decisions and
determinations as the Committee may deem necessary or advisable
for the administration of the Plan. Decisions of the Committee
with respect to the administration and interpretation of the
Plan shall be final, conclusive, and binding upon all persons
interested in the Plan, including Participants, Beneficiaries,
transferees under Section 11(b) and other persons claiming
rights from or through a Participant, and stockholders. The
foregoing notwithstanding, the Board shall perform the functions
of the Committee for purposes of granting Awards under the Plan
to non-employee directors (authority with respect to other
aspects of non-employee director awards is not exclusive to the
Board, however).

     
(b) Manner of Exercise of Committee
Authority. At any time that a member of the Committee is not
a Qualified Member, (i) any action of the Committee
relating to an Award intended by the Committee to qualify as
“performance-based compensation” within the meaning of
Code Section 162(m) and regulations thereunder may be taken
by a subcommittee, designated by the Committee or the Board,
composed solely of two or more Qualified Members, and
(ii) any action relating to an Award granted or to be
granted to a Participant who is then subject to Section 16
of the Exchange Act in respect of the Company may be taken
either by such a subcommittee or by the Committee but with each
such member who is not a Qualified Member abstaining or recusing
himself or herself from such action, provided that, upon such
abstention or recusal, the Committee remains composed solely of
two or more Qualified Members. Such action, authorized by such a
subcommittee or by the Committee upon the abstention or recusal
of such non-Qualified Member(s), shall be the action of the
Committee for purposes of the Plan. The express grant of any
specific power to the Committee, and the taking of any action by
the Committee, shall not be construed as limiting any power or
authority of the Committee. The Committee may delegate to
officers or managers of the Company or any subsidiary or
affiliate, or committees thereof, the authority, subject to such
terms as the Committee shall determine, to perform such
functions, including administrative functions, as the Committee
may determine. Notwithstanding the foregoing, no action may be
taken pursuant to this Section 3(b) if such action would
result in the loss of an exemption under Rule 16b-3(d) for
Awards granted to Participants subject to Section 16 of the
Exchange Act in respect of the Company and would cause Awards
intended to qualify as “performance-based
compensation” under Code Section 162(m) to fail to so
qualify.

     
(c) Limitation of Liability. The
Committee and each member thereof, and any person acting
pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other
information furnished by any executive officer, other officer or
employee of the Company or a subsidiary or affiliate, the
Company’s independent auditors, consultants or any other
agents assisting in the administration of the Plan. Members of
the Committee, any person acting pursuant to authority delegated
by the Committee, and any officer or employee of the Company or
a subsidiary or affiliate acting at the direction or on behalf
of the Committee or a delegee shall not be personally liable for
any action or determination taken or made in good faith with
respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect
to any such action or determination.

4.     Stock Subject
to Plan.

     
(a) Overall Number of Shares Available
for Delivery. Subject to adjustment as provided in
Section 11(c), the total number of shares of Stock reserved
and available for delivery in connection with Awards under the
Plan shall be (i) 2,300,000, plus (ii) the number of
shares that remain available for issuance under the Preexisting
Plan after all awards thereunder have been settled, plus
(iii) the number of shares subject to awards under the
Preexisting Plan that become available in accordance with
Section 4(b) after the Effective Date; provided, however,
that (A) the total number of shares with respect to which
ISOs may be granted shall not exceed the number specified under
clause (i) above and (B) no more than 2,000,000 shares
shall be used

3

 

for Awards other than options or SARs. Any shares
of Stock delivered under the Plan shall consist of authorized
and unissued shares or treasury shares.

     
(b) Share Counting Rules. The
Committee may adopt reasonable counting procedures to ensure
appropriate counting, avoid double counting (as, for example, in
the case of tandem or substitute awards) and make adjustments if
the number of shares of Stock actually delivered differs from
the number of shares previously counted in connection with an
Award. Shares subject to an Award or an award under the
Preexisting Plan that is canceled, expired, forfeited, settled
in cash or otherwise terminated without a delivery of shares to
the Participant will again be available for Awards, and shares
withheld in payment of the exercise price or taxes relating to
an Award or Preexisting Plan award and shares equal to the
number surrendered in payment of any exercise price or taxes
relating to an Award or Preexisting Plan award shall be deemed
to constitute shares not delivered to the Participant and shall
be deemed to again be available for Awards under the Plan. In
addition, in the case of any Award granted in substitution for
an award of a company or business acquired by the Company or a
subsidiary or affiliate, shares issued or issuable in connection
with such substitute Award shall not be counted against the
number of shares reserved under the Plan, but shall be available
under the Plan by virtue of the Company’s assumption of the
plan or arrangement of the acquired company or business. This
Section 4(b) shall apply to the number of shares reserved
and available for ISOs only to the extent consistent with
applicable regulations relating to ISOs under the Code.

     
5.     Eligibility;
Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. For purposes of the Plan, an
“Eligible Person” means an employee of the Company or
any subsidiary or affiliate, including any executive officer, a
non-employee director of the Company, a consultant, advisor or
other person who provides substantial services to the Company or
a subsidiary or affiliate, and any person who has been offered
employment by the Company or a subsidiary or affiliate, provided
that such prospective employee may not receive any payment or
exercise any right relating to an Award until such person has
commenced employment with the Company or a subsidiary or
affiliate. An employee on leave of absence may be considered as
still in the employ of the Company or a subsidiary or affiliate
for purposes of eligibility for participation in the Plan. For
purposes of the Plan, a joint venture in which the Company or a
subsidiary has a substantial direct or indirect equity
investment shall be deemed an affiliate, if so determined by the
Committee. In each calendar year during any part of which the
Plan is in effect, an Eligible Person may be granted Awards
intended to qualify as “performance-based
compensation” under Code Section 162(m) under each of
Section 6(b), 6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) relating
to up to his or her Annual Limit (such Annual Limit to apply
separately to the type of Award authorized under each specified
subsection, except that the limitation applies to Dividend
Equivalents under Section 6(g) only if such Dividend
Equivalents are granted separately from and not as a feature of
another Award). A Participant’s Annual Limit, in any
calendar year during any part of which the Participant is then
eligible under the Plan, shall equal 1,000,000 shares plus the
amount of the Participant’s unused Annual Limit relating to
the same type of Award as of the close of the previous year,
subject to adjustment as provided in Section 11(c). In the
case of an Award which is not valued in a way in which the
limitation set forth in the preceding sentence would operate as
an effective limitation satisfying Treasury
Regulation 1.162-27(e)(4) (including a Performance Award
under Section 7 not related to an Award specified in
Section 6), an Eligible Person may not be granted Awards
authorizing the earning during any calendar year of an amount
that exceeds the Participant’s Annual Limit, which for this
purpose shall equal $5,000,000 plus the amount of the
Participant’s unused cash Annual Limit as of the close of
the previous year (this limitation is separate and not affected
by the number of Awards granted during such calendar year
subject to the limitation in the preceding sentence). For this
purpose, (i) “earning” means satisfying performance
conditions so that an amount becomes payable, without regard to
whether it is to be paid currently or on a deferred basis or
continues to be subject to any service requirement or other
non-performance condition, and (ii) a Participant’s
Annual Limit is used to the extent an amount or number of shares
may be potentially earned or paid under an Award, regardless of
whether such amount or shares are in fact earned or paid.

     
6.     Specific Terms
of Awards.

     
(a) General. Awards may be granted on
the terms and conditions set forth in this Section 6. In
addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter

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(subject to Section 11(e)), such additional
terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of
employment or service by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The
Committee shall retain full power and discretion with respect to
any term or condition of an Award that is not mandatory under
the Plan. The Committee shall require the payment of lawful
consideration for an Award to the extent necessary to satisfy
the requirements of the Delaware General Corporation Law, and
may otherwise require payment of consideration for an Award
except as limited by the Plan.

     
(b) Options. The Committee is
authorized to grant Options to Eligible Persons on the following
terms and conditions:

		
	 	     
    (i) Exercise Price. The exercise
    price per share of Stock purchasable under an Option (including
    both ISOs and non-qualified Options) shall be determined by the
    Committee, provided that such exercise price shall be not less
    than the Fair Market Value of a share of Stock on the date of
    grant of such Option, subject to Sections 6(f) and 9(a).
    
	 
	 	     
    (ii) Option Term; Time and Method of
    Exercise. The Committee shall determine the term of each
    Option, provided that in no event shall the term of any ISO or
    SAR in tandem therewith exceed a period of ten years from the
    date of grant. The Committee shall determine the time or times
    at which or the circumstances under which an Option may be
    exercised in whole or in part (including based on achievement of
    performance goals and/or future service requirements), the
    methods by which such exercise price may be paid or deemed to be
    paid and the form of such payment (subject to
    Section 11(k)), including, without limitation, cash, Stock,
    other Awards or awards granted under other plans of the Company
    or any subsidiary or affiliate, or other property (including
    notes and other contractual obligations of Participants to make
    payment on a deferred basis, such as through “cashless
    exercise” arrangements, to the extent permitted by
    applicable law), and the methods by or forms in which Stock will
    be delivered or deemed to be delivered in satisfaction of
    Options to Participants (including deferred delivery of shares
    representing the Option “profit,” at the election of
    the Participant or as mandated by the Committee, with such
    deferred shares subject to any vesting, forfeiture or other
    terms as the Committee may specify).
    
	 
	 	     
    (iii) ISOs. The terms of any ISO
    granted under the Plan shall comply in all respects with the
    provisions of Code Section 422, including but not limited
    to the requirement that no ISO shall be granted more than ten
    years after the Effective Date.
    

     
(c) Stock Appreciation Rights. The
Committee is authorized to grant SARs to Eligible Persons on the
following terms and conditions:

		
	 	     
    (i) Right to Payment. An SAR shall
    confer on the Participant to whom it is granted a right to
    receive, upon exercise thereof, the excess of (A) the Fair
    Market Value of one share of Stock on the date of exercise (or,
    in the case of a “Limited SAR,” the Fair Market Value
    determined by reference to the Change in Control Price, as
    defined under Section 9(d) hereof) over (B) the grant
    price of the SAR as determined by the Committee.
    
	 
	 	     
    (ii) Other Terms. The Committee shall
    determine at the date of grant or thereafter the time or times
    at which and the circumstances under which an SAR may be
    exercised in whole or in part (including based on achievement of
    performance goals and/or future service requirements), the
    method of exercise, method of settlement, form of consideration
    payable in settlement, method by or forms in which Stock will be
    delivered or deemed to be delivered to Participants, and whether
    or not an SAR shall be free-standing or in tandem or combination
    with any other Award. Limited SARs that may only be exercised in
    connection with a Change in Control or other event as specified
    by the Committee may be granted on such terms, not inconsistent
    with this Section 6(c), as the Committee may determine.
    

5

 

     
(d) Restricted Stock. The Committee
is authorized to grant Restricted Stock to Eligible Persons on
the following terms and conditions:

		
	 	     
    (i) Grant and Restrictions.
    Restricted Stock shall be subject to such restrictions on
    transferability, risk of forfeiture and other restrictions, if
    any, as the Committee may impose, which restrictions may lapse
    separately or in combination at such times, under such
    circumstances (including based on achievement of performance
    goals and/or future service requirements), in such installments
    or otherwise and under such other circumstances as the Committee
    may determine at the date of grant or thereafter. Except to the
    extent restricted under the terms of the Plan and any Award
    document relating to the Restricted Stock, a Participant granted
    Restricted Stock shall have all of the rights of a stockholder,
    including the right to vote the Restricted Stock and the right
    to receive dividends thereon (subject to any mandatory
    reinvestment or other requirement imposed by the Committee).
    
	 
	 	     
    (ii) Forfeiture. Except as otherwise
    determined by the Committee, upon termination of employment or
    service during the applicable restriction period, Restricted
    Stock that is at that time subject to restrictions shall be
    forfeited and reacquired by the Company; provided that the
    Committee may provide, by rule or regulation or in any Award
    document, or may determine in any individual case, that
    restrictions or forfeiture conditions relating to Restricted
    Stock will lapse in whole or in part, including in the event of
    terminations resulting from specified causes.
    
	 
	 	     
    (iii) Certificates for Stock.
    Restricted Stock granted under the Plan may be evidenced in
    such manner as the Committee shall determine. If certificates
    representing Restricted Stock are registered in the name of the
    Participant, the Committee may require that such certificates
    bear an appropriate legend referring to the terms, conditions
    and restrictions applicable to such Restricted Stock, that the
    Company retain physical possession of the certificates, and that
    the Participant deliver a stock power to the Company, endorsed
    in blank, relating to the Restricted Stock.
    
	 
	 	     
    (iv) Dividends and Splits. As a
    condition to the grant of an Award of Restricted Stock, the
    Committee may require that any dividends paid on a share of
    Restricted Stock shall be either (A) paid with respect to
    such Restricted Stock at the dividend payment date in cash, in
    kind, or in a number of shares of unrestricted Stock having a
    Fair Market Value equal to the amount of such dividends, or (B)
    automatically reinvested in additional Restricted Stock or held
    in kind, which shall be subject to the same terms as applied to
    the original Restricted Stock to which it relates, or
    (C) deferred as to payment, either as a cash deferral or
    with the amount or value thereof automatically deemed reinvested
    in shares of Deferred Stock, other Awards or other investment
    vehicles, subject to such terms as the Committee shall determine
    or permit a Participant to elect. Unless otherwise determined by
    the Committee, Stock distributed in connection with a Stock
    split or Stock dividend, and other property distributed as a
    dividend, shall be subject to restrictions and a risk of
    forfeiture to the same extent as the Restricted Stock with
    respect to which such Stock or other property has been
    distributed.
    

     
(e) Deferred Stock. The Committee is
authorized to grant Deferred Stock to Eligible Persons, which
are rights to receive Stock, other Awards, or a combination
thereof at the end of a specified deferral period, subject to
the following terms and conditions:

		
	 	     
    (i) Award and Restrictions. Issuance
    of Stock will occur upon expiration of the deferral period
    specified for an Award of Deferred Stock by the Committee (or,
    if permitted by the Committee, as elected by the Participant).
    In addition, Deferred Stock shall be subject to such
    restrictions on transferability, risk of forfeiture and other
    restrictions, if any, as the Committee may impose, which
    restrictions may lapse at the expiration of the deferral period
    or at earlier specified times (including based on achievement of
    performance goals and/or future service requirements),
    separately or in combination, in installments or otherwise, and
    under such other circumstances as the Committee may determine at
    the date of grant or thereafter. Deferred Stock may be satisfied
    by delivery of Stock, other Awards, or a combination thereof
    (subject to Section 11(k)), as determined by the Committee
    at the date of grant or thereafter.
    

6

 

		
	 	     
    (ii) Forfeiture. Except as otherwise
    determined by the Committee, upon termination of employment or
    service during the applicable deferral period or portion thereof
    to which forfeiture conditions apply (as provided in the Award
    document evidencing the Deferred Stock), all Deferred Stock that
    is at that time subject to such forfeiture conditions shall be
    forfeited; provided that the Committee may provide, by rule or
    regulation or in any Award document, or may determine in any
    individual case, that restrictions or forfeiture conditions
    relating to Deferred Stock will lapse in whole or in part,
    including in the event of terminations resulting from specified
    causes.
    
	 
	 	     
    (iii) Dividend Equivalents. Unless
    otherwise determined by the Committee, Dividend Equivalents on
    the specified number of shares of Stock covered by an Award of
    Deferred Stock shall be either (A) paid with respect to
    such Deferred Stock at the dividend payment date in cash or in
    shares of unrestricted Stock having a Fair Market Value equal to
    the amount of such dividends, or (B) deferred with respect
    to such Deferred Stock, either as a cash deferral or with the
    amount or value thereof automatically deemed reinvested in
    additional Deferred Stock, other Awards or other investment
    vehicles having a Fair Market Value equal to the amount of such
    dividends, as the Committee shall determine or permit a
    Participant to elect.
    

     
(f) Bonus Stock and Awards in Lieu of
Obligations. The Committee is authorized to grant Stock as a
bonus, or to grant Stock or other Awards in lieu of obligations
of the Company or a subsidiary or affiliate to pay cash or
deliver other property under the Plan or under other plans or
compensatory arrangements, subject to such terms as shall be
determined by the Committee.

     
(g) Dividend Equivalents. The
Committee is authorized to grant Dividend Equivalents to
Eligible Persons, which are rights to receive cash, Stock, other
Awards, or other property equivalent to all or a portion of the
dividends paid with respect to a specified number of shares of
Stock. Dividend Equivalents may be awarded on a free-standing
basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and
subject to restrictions on transferability, risks of forfeiture
and such other terms as the Committee may specify.

     
(h) Other Stock-Based Awards. The
Committee is authorized, subject to limitations under applicable
law, to grant to Eligible Persons such other Awards that may be
denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock or
factors that may influence the value of Stock, including,
without limitation, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Stock, purchase
rights for Stock, Awards with value and payment contingent upon
performance of the Company or business units thereof or any
other factors designated by the Committee, and Awards valued by
reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or affiliates or
other business units. The Committee shall determine the terms
and conditions of such Awards. Stock delivered pursuant to an
Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration,
paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards, notes,
or other property, as the Committee shall determine. Cash
awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).

     
(i) Performance Awards. Performance
Awards, denominated in cash or in Stock or other Awards, may be
granted by the Committee in accordance with Section 7.

     
7.     Performance
Awards, Including Annual Incentive Awards.

     
(a) Performance Awards Generally. The
Committee is authorized to grant Performance Awards on the terms
and conditions specified in this Section 7. Performance
Awards may be denominated as a cash amount, number of shares of
Stock, or specified number of other Awards (or a combination)
which may be earned upon achievement or satisfaction of
performance conditions specified by the Committee. In addition,
the Committee may specify that any other Award shall constitute
a Performance Award by conditioning the right of a Participant
to exercise the Award or have it settled, and the timing
thereof, upon achievement or satisfaction of such performance
conditions as may be specified by the Committee. The Committee
may use

7

 

such business criteria and other measures of
performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject
to performance conditions, except as limited under Sections 7(b)
and 7(c) in the case of a Performance Award intended to qualify
as “performance-based compensation” under Code
Section 162(m).

     
(b) Performance Awards Granted to Covered
Employees. If the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by
the Committee as likely to be a Covered Employee should qualify
as “performance-based compensation” for purposes of
Code Section 162(m), the grant, exercise and/or settlement of
such Performance Award shall be contingent upon achievement of a
preestablished performance goal and other terms set forth in
this Section 7(b).

		
	 	     
    (i) Performance Goal Generally. The
    performance goal for such Performance Awards shall consist of
    one or more business criteria and a targeted level or levels of
    performance with respect to each of such criteria, as specified
    by the Committee consistent with this Section 7(b). The
    performance goal shall be objective and shall otherwise meet the
    requirements of Code Section 162(m) and regulations
    thereunder (including Regulation 1.162-27 and successor
    regulations thereto), including the requirement that the level
    or levels of performance targeted by the Committee result in the
    achievement of performance goals being “substantially
    uncertain.” The Committee may determine that such
    Performance Awards shall be granted, exercised and/or settled
    upon achievement of any one performance goal or that two or more
    of the performance goals must be achieved as a condition to
    grant, exercise and/or settlement of such Performance Awards.
    Performance goals may differ for Performance Awards granted to
    any one Participant or to different Participants.
    
	 
	 	     
    (ii) Business Criteria. One or more
    of the following business criteria for the Company, on a
    consolidated basis, and/or for specified subsidiaries or
    affiliates or other business units of the Company shall be used
    by the Committee in establishing performance goals for such
    Performance Awards: (1) growth in revenues or assets;
    (2) earnings from operations, earnings before or after
    taxes, earnings before or after interest, depreciation,
    amortization, or extraordinary or special items; (3) net
    income or net income per common share (basic or diluted);
    (4) return on assets, return on investment, return on
    capital, or return on equity; (5) cash flow, free cash
    flow, cash flow return on investment, or net cash provided by
    operations; (6) interest expense after taxes;
    (7) economic profit; (8) operating margin or gross margin;
    (9) stock price or total stockholder return; and
    (10) strategic business criteria, consisting of one or more
    objectives based on environmental or safety standards, market
    penetration, geographic business expansion goals, cost targets,
    customer satisfaction, employee satisfaction, management of
    employment practices and employee benefits, supervision of
    litigation and information technology, and goals relating to
    acquisitions or divestitures of subsidiaries, affiliates or
    joint ventures. The targeted level or levels of performance with
    respect to such business criteria may be established at such
    levels and in such terms as the Committee may determine, in its
    discretion, including in absolute terms, as a goal relative to
    performance in prior periods, or as a goal compared to the
    performance of one or more comparable companies or an index
    covering multiple companies.
    
	 
	 	     
    (iii) Performance Period; Timing for
    Establishing Performance Goals. Achievement of performance
    goals in respect of such Performance Awards shall be measured
    over a performance period of up to one year or more than one
    year, as specified by the Committee. A performance goal shall be
    established not later than the earlier of (A) 90 days
    after the beginning of any performance period applicable to such
    Performance Award or (B) the time 25% of such performance
    period has elapsed.
    
	 
	 	     
    (iv) Performance Award Pool. The
    Committee may establish a Performance Award pool, which shall be
    an unfunded pool, for purposes of measuring performance of the
    Company in connection with Performance Awards. The amount of
    such Performance Award pool shall be based upon the achievement
    of a performance goal or goals based on one or more of the
    business criteria set forth in Section 7(b)(ii) during the
    given performance period. The Committee may specify the amount
    of the Performance Award pool as a percentage of any of such
    business criteria, a percentage thereof in excess of a threshold
    amount, or as another amount which need not bear a strictly
    mathematical relationship to such business criteria.
    

8

 

		
	 	     
    (v) Settlement of Performance Awards;
    Other Terms. Settlement of such Performance Awards shall be
    in cash, Stock, other Awards or other property, in the
    Committee’s discretion. The Committee may increase or
    reduce the amount of a settlement otherwise to be made in
    connection with such Performance Awards, but may not exercise
    discretion to increase any such amount payable to a Covered
    Employee in respect of a Performance Award subject to
    Section 7(b). Any settlement which changes the form of
    payment from that originally specified shall be implemented in a
    manner such that the Performance Award and other related Awards
    do not, solely for that reason, fail to qualify as
    “performance-based compensation” for purposes of Code
    Section 162(m). The Committee shall specify the
    circumstances in which such Performance Awards shall be paid or
    forfeited in the event of termination of employment by the
    Participant or other event (including a Change in Control) prior
    to the end of a performance period or settlement of such
    Performance Awards.
    

     
(c) Annual Incentive Awards Granted to
Designated Covered Employees. The Committee may grant an
Annual Incentive Award to an Eligible Person who is designated
by the Committee as likely to be a Covered Employee. Such Annual
Incentive Award will be intended to qualify as
“performance-based compensation” for purposes of Code
Section 162(m), and therefore its grant, exercise and/or
settlement shall be contingent upon achievement of
preestablished performance goals and other terms set forth in
this Section 7(c).

		
	 	     
    (i) Grant of Annual Incentive Awards.
    Not later than the earlier of 90 days after the beginning
    of any performance period applicable to such Annual Incentive
    Award or the time 25% of such performance period has elapsed,
    the Committee shall determine the Covered Employees who will
    potentially receive Annual Incentive Awards, and the amount(s)
    potentially payable thereunder, for that performance period. The
    amount(s) potentially payable shall be based upon the
    achievement of a performance goal or goals based on one or more
    of the business criteria set forth in Section 7(b)(ii) in
    the given performance period, as specified by the Committee. The
    Committee may designate an annual incentive award pool as the
    means by which Annual Incentive Awards will be measured,
    provided that the portion of such pool potentially payable to
    the Covered Employee shall be preestablished. In all cases, the
    maximum Annual Incentive Award of any Participant shall be
    subject to the limitation set forth in Section 5.
    
	 
	 	     
    (ii) Payout of Annual Incentive
    Awards. After the end of each performance period, the
    Committee shall determine the amount, if any, of the Annual
    Incentive Award for that performance period payable to each
    Participant. The Committee may determine that the amount payable
    to any Participant as a final Annual Incentive Award shall be
    reduced from the amount of his or her potential Annual Incentive
    Award, including a determination to make no final Award
    whatsoever, but may not exercise discretion to increase any such
    amount. The Committee shall specify the circumstances in which
    an Annual Incentive Award shall be paid or forfeited in the
    event of termination of employment by the Participant or other
    event (including a Change in Control) prior to the end of a
    performance period or settlement of such Annual Incentive Award.
    

     
(d) Written Determinations.
Determinations by the Committee as to the establishment of
performance goals, the amount potentially payable in respect of
Performance Awards and Annual Incentive Awards, the level of
actual achievement of the specified performance goals relating
to Performance Awards and Annual Incentive Awards, and the
amount of any final Performance Award and Annual Incentive Award
shall be recorded in writing in the case of Performance Awards
intended to qualify under Code Section 162(m). Specifically, the
Committee shall certify in writing, in a manner conforming to
applicable regulations under Code Section 162(m), prior to
settlement of each such Award granted to a Covered Employee,
that the performance objective relating to the Performance Award
and other material terms of the Award upon which settlement of
the Award was conditioned have been satisfied.

     
8.     Certain
Provisions Applicable to Awards.

     
(a) Stand-Alone, Additional, Tandem, and
Substitute Awards. Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution or exchange for,
any other Award or any award granted under another plan of the
Company, any subsidiary or affiliate, or any business entity to
be acquired by the Company or a subsidiary or affiliate, or any
other right of

9

 

a Participant to receive payment from the Company
or any subsidiary or affiliate. Awards granted in addition to or
in tandem with other Awards or awards may be granted either as
of the same time as or a different time from the grant of such
other Awards or awards. Subject to Section 11(k), the
Committee may determine that, in granting a new Award, the
in-the-money value of any surrendered Award or award may be
applied to reduce the exercise price of any Option, grant price
of any SAR, or purchase price of any other Award.

     
(b) Term of Awards. The term of each
Award shall be for such period as may be determined by the
Committee, subject to the express limitations set forth in
Section 6(b)(ii).

     
(c) Form and Timing of Payment under
Awards; Deferrals. Subject to the terms of the Plan
(including Section 11(k)) and any applicable Award
document, payments to be made by the Company or a subsidiary or
affiliate upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the
Committee shall determine, including, without limitation, cash,
Stock, other Awards or other property, and may be made in a
single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the
Committee’s discretion or upon occurrence of one or more
specified events (subject to Section 11(k)). Installment or
deferred payments may be required by the Committee (subject to
Section 11(e)) or permitted at Participant’s election
on terms and conditions established by the Committee. Payments
may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents or
other amounts in respect of installment or deferred payments
denominated in Stock.

     
(d) Exemptions from Section 16(b)
Liability. With respect to a Participant who is then subject
to the reporting requirements of Section 16(a) of the
Exchange Act in respect of the Company, the Committee shall
implement transactions under the Plan and administer the Plan in
a manner that will ensure that each transaction with respect to
such a Participant is exempt from liability under
Rule 16b-3 (or otherwise not subject to liability under
Section 16(b)), except that this provision shall not limit
sales by such a Participant, and such a Participant may engage
in other non-exempt transactions under the Plan. The Committee
may authorize the Company to repurchase any Award or shares of
Stock deliverable or delivered in connection with any Award
(subject to Section 11(k)) to avoid a Participant who is
subject to Section 16 of the Exchange Act incurring
liability under Section 16(b). Unless otherwise specified
by the Participant, equity securities or derivative securities
acquired under the Plan which are disposed of by a Participant
shall be deemed to be disposed of in the order acquired by the
Participant.

     
(e) Loan Provisions. With the
Committee’s consent, and subject at all times to, and only
to the extent, if any, permitted under and in accordance with,
laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee, or
arrange for a loan or loans to a Participant with respect to the
exercise of any Option or other payment in connection with any
Award, including the payment by a Participant of any or all
federal, state, or local income or other taxes due in connection
with any Award. Subject to such limitations, the Committee shall
have full authority to decide whether to make a loan or loans
hereunder and to determine the amount, terms, and provisions of
any such loan or loans, including the interest rate, if any, to
be charged in respect of any such loan or loans, whether the
loan or loans are to be with or without recourse against the
borrower, the terms on which the loan is to be repaid and
conditions, if any, under which the loan or loans may be
forgiven.

     
9.     Change in
Control.

     
(a) Effect of “Change in
Control” on Non-Performance Based Awards. Unless
otherwise provided by the Committee in the Award document, in
the event of a “Change in Control,” the following
provisions shall apply to non-performance based Awards,
including Awards as to which performance conditions previously
have been satisfied or are deemed satisfied under
Section 9(b):

		
	 	     
    (i) All deferral of settlement, forfeiture
    conditions and other restrictions applicable to Awards granted
    under the Plan shall lapse and such Awards shall be fully
    payable as of the time of the Change in Control without regard
    to deferral and vesting conditions, except to the extent of any
    waiver by the
    

10

 

		
	 	
    Participant or other express election to defer
    beyond a Change in Control and subject to applicable
    restrictions set forth in Section 11(a);
    
	 
	 	     
    (ii) Any Award carrying a right to exercise
    that was not previously exercisable and vested shall become
    fully exercisable and vested as of the time of the Change in
    Control and shall remain exercisable and vested for the balance
    of the stated term of such Award without regard to any
    termination of employment or service by the Participant other
    than a termination for “cause” (as defined in any
    employment or severance agreement between the Company or a
    subsidiary or affiliate and the Participant then in effect or,
    if none, as defined by the Committee and in effect at the time
    of the Change in Control), subject only to applicable
    restrictions set forth in Section 11(a); and
    
	 
	 	     
    (iii) The Committee may, in its discretion,
    determine to extend to any Participant who holds an Option the
    right to elect, during the 60-day period immediately following
    the Change in Control, in lieu of acquiring the shares of Stock
    covered by such Option, to receive in cash the excess of the
    Change in Control Price over the exercise price of such Option,
    multiplied by the number of shares of Stock covered by such
    Option, and to extend to any Participant who holds other types
    of Awards denominated in shares the right to elect, during the
    60-day period immediately following the Change in Control, in
    lieu of receiving the shares of Stock covered by such Award, to
    receive in cash the Change in Control Price multiplied by the
    number of shares of Stock covered by such Award.
    

     
(b) Effect of “Change in
Control” on Performance-Based Awards. In the event of a
“Change in Control,” with respect to an outstanding
Award subject to achievement of performance goals and
conditions, such performance goals and conditions will be deemed
to be met if and to the extent so provided by the Committee in
the Award document governing such Award or other agreement with
the Participant.

     
(c) Definition of “Change in
Control.” A “Change in Control” shall be
deemed to have occurred if, after the Effective Date, there
shall have occurred any of the following:

		
	 	     
    (i) any Person (other than the Company), any
    trustee or other fiduciary holding securities under any employee
    benefit plan of the Company, or any company owned, directly or
    indirectly, by the stockholders of the Company immediately prior
    to the occurrence with respect to which the evaluation is being
    made in substantially the same proportions as their ownership of
    the common stock of the Company) becomes the Beneficial Owner
    (except that a Person shall be deemed to be the Beneficial Owner
    of all shares that any such Person has the right to acquire
    pursuant to any agreement or arrangement or upon exercise of
    conversion rights, warrants or options or otherwise, without
    regard to the sixty day period referred to in Rule 13d-3
    under the Exchange Act), directly or indirectly, of securities
    of the Company or any Significant Subsidiary (as defined below),
    representing 30% of the combined voting power of the
    Company’s or such subsidiary’s then outstanding
    securities;
    
	 
	 	     
    (ii) during any period of two consecutive
    years, individuals who at the beginning of such period
    constitute the Board, and any new director (other than a
    director designated by a person who has entered into an
    agreement with the Company to effect a transaction described in
    clause (i), (iii), or (iv) of this paragraph) whose
    election by the Board or nomination for election by the
    Company’s stockholders was approved by a vote of at least
    two-thirds of the directors then still in office who either were
    directors at the beginning of the two-year period or whose
    election or nomination for election was previously so approved
    but excluding for this purpose any such new director whose
    initial assumption of office occurs as a result of either an
    actual or threatened election contest (as such terms are used in
    Rule 14a-11 of Regulation 14A promulgated under the
    Exchange Act) or other actual or threatened solicitation of
    proxies or consents by or on behalf of an individual,
    corporation, partnership, group, associate or other entity or
    Person other than the Board, cease for any reason to constitute
    at least a majority of the Board;
    
	 
	 	     
    (iii) the consummation of a merger or
    consolidation of the Company or any subsidiary owning directly
    or indirectly all or substantially all of the consolidated
    assets of the Company (a “Significant Subsidiary”)
    with any other entity, other than a merger or consolidation
    which would result in the voting securities of the Company or a
    Significant Subsidiary outstanding immediately prior thereto
    continuing to represent (either by remaining outstanding or by
    being converted into voting securities of the surviving or
    

11

 

		
	 	
    resulting entity) more than 50% of the combined
    voting power of the surviving or resulting entity outstanding
    immediately after such merger or consolidation; or
    
	 
	 	     
    (iv) the stockholders of the Company approve
    a plan or agreement for the sale or disposition of all or
    substantially all of the consolidated assets of the Company
    (other than such a sale or disposition immediately after which
    such assets will be owned directly or indirectly by the
    Company’s stockholders in substantially the same
    proportions as their ownership of the Company’s common
    stock immediately prior to such sale or disposition) in which
    case the Board shall determine the effective date of the Change
    in Control resulting therefrom.
    

     
For purposes of this definition:

		
	 	     
    (A) The term “Beneficial Owner”
    shall have the meaning ascribed to such term in Rule 13d-3
    under the Exchange Act (including any successor to such Rule).
    
	 
	 	     
    (B) The term “Person” shall have
    the meaning ascribed to such term in Section 3(a)(9) of the
    Exchange Act and used in Sections 13(d) and 14(d) thereof,
    including “group” as defined in Section 13(d)
    thereof.
    

     
(d) Definition of “Change in Control
Price.” The “Change in Control Price” means
an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price
per share paid (including extraordinary dividends) in any
transaction triggering the Change in Control or any liquidation
of shares following a sale of substantially all assets of the
Company, or (ii) the highest Fair Market Value per share at
any time during the 60-day period preceding and 60-day period
following the Change in Control.

     
10.     Awards to
Non-Employee Directors.

     
Unless otherwise determined by the Board in
writing, non-employee directors of the Company shall be entitled
to receive Options in accordance with the following:

		
	 	     
    (a) On the date any non-employee director of
    the Company first becomes a director, such person shall
    automatically be granted, without further action by the Board or
    the Committee, an Option to purchase 37,500 shares of the
    Company’s Stock.
    
	 
	 	     
    (b) On January 1 and July 1 of
    each year during the term of this Plan, non-employee directors
    of the Company then serving in such capacity, shall each be
    granted an Option to purchase 7,500 shares of the Company’s
    Stock.
    
	 
	 	     
    (c) The exercise price of the shares subject
    to the Options set forth in Sections 10(a) and 10(b) hereof
    shall be the Fair Market Value of the Company’s Stock on
    the date such Options are granted. All of such Options shall be
    non-qualified Options. Unless otherwise determined by the Board
    in an award agreement at the time of the Award, the Options
    granted pursuant to this Section 10 shall vest entirely on
    the date they are granted and shall be exercisable for a period
    of ten (10) years.
    
	 
	 	     
    (d) Non-employee directors of the Company
    include attorneys, accountants, consultants and advisors of the
    Company who, in addition to providing services in such capacity,
    serve as directors of the Company.
    

     
11.     General
Provisions.

     
(a) Compliance with Legal and Other
Requirements. The Company may, to the extent deemed
necessary or advisable by the Committee, postpone the issuance
or delivery of Stock or payment of other benefits under any
Award until completion of such registration or qualification of
such Stock or other required action under any federal or state
law, rule or regulation, listing or other required action with
respect to any stock exchange or automated quotation system upon
which the Stock or other securities of the Company are listed or
quoted, or compliance with any other obligation of the Company,
as the Committee may consider appropriate, and may require any
Participant to make such representations, furnish such
information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the

12

 

issuance or delivery of Stock or payment of other
benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations.

     
(b) Limits on Transferability;
Beneficiaries. No Award or other right or interest of a
Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party (other than the
Company or a subsidiary or affiliate thereof), or assigned or
transferred by such Participant otherwise than by will or the
laws of descent and distribution or to a Beneficiary upon the
death of a Participant, and such Awards or rights that may be
exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other
than ISOs and SARs in tandem therewith) may be transferred to
one or more transferees during the lifetime of the Participant,
and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such
transfers are permitted by the Committee, subject to any terms
and conditions which the Committee may impose thereon (including
limitations the Committee may deem appropriate in order that
offers and sales under the Plan will meet applicable
requirements of registration forms under the Securities Act of
1933 specified by the Securities and Exchange Commission). A
Beneficiary, transferee, or other person claiming any rights
under the Plan from or through any Participant shall be subject
to all terms and conditions of the Plan and any Award document
applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions
deemed necessary or appropriate by the Committee.

     
(c) Adjustments. In the event that
any large, special and non-recurring dividend or other
distribution (whether in the form of cash or property other than
Stock), recapitalization, forward or reverse split, Stock
dividend, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event
affects the Stock such that an adjustment is determined by the
Committee to be appropriate under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or
all of (i) the number and kind of shares of Stock which may
be delivered in connection with Awards granted thereafter,
(ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5,
(iii) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards and (iv) the
exercise price, grant price or purchase price relating to any
Award or, if deemed appropriate, the Committee may make
provision for a payment of cash or property to the holder of an
outstanding Option (subject to Section 11(k)). In addition,
the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including
Performance Awards and performance goals and any hypothetical
funding pool relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events
described in the preceding sentence, as well as acquisitions and
dispositions of businesses and assets) affecting the Company,
any subsidiary or affiliate or other business unit, or the
financial statements of the Company or any subsidiary or
affiliate, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or
business conditions or in view of the Committee’s
assessment of the business strategy of the Company, any
subsidiary or affiliate or business unit thereof, performance of
comparable organizations, economic and business conditions,
personal performance of a Participant, and any other
circumstances deemed relevant; provided that no such adjustment
shall be authorized or made if and to the extent that the
existence of such authority (i) would cause Options, SARs,
or Performance Awards granted under Section 7 to
Participants designated by the Committee as Covered Employees
and intended to qualify as “performance-based
compensation” under Code Section 162(m) and
regulations thereunder to otherwise fail to qualify as
“performance-based compensation” under Code
Section 162(m) and regulations thereunder, or
(ii) would cause the Committee to be deemed to have
authority to change the targets, within the meaning of Treasury
Regulation 1.162-27(e)(4)(vi), under the performance goals
relating to Options or SARs granted to Covered Employees and
intended to qualify as “performance-based
compensation” under Code Section 162(m) and
regulations thereunder.

     
(d) Tax Provisions.

     
(i) Withholding. The Company and any
subsidiary or affiliate is authorized to withhold from any Award
granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other
payment to a Participant, amounts of withholding and other taxes
due or potentially

13

 

payable in connection with any transaction
involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of
withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or
receive Stock or other property and to make cash payments in
respect thereof in satisfaction of a Participant’s
withholding obligations, either on a mandatory or elective basis
in the discretion of the Committee. Other provisions of the Plan
notwithstanding, only the minimum amount of Stock deliverable in
connection with an Award necessary to satisfy statutory
withholding requirements will be withheld.

     
(ii) Requirement of Notification of Code
Section 83(b) Election. If any Participant shall make
an election under Section 83(b) of the Code (to include in
gross income in the year of transfer the amounts specified in
Code Section 83(b)) or under a similar provision of the
laws of a jurisdiction outside the United States, such
Participant shall notify the Company of such election within ten
days of filing notice of the election with the Internal Revenue
Service or other governmental authority, in addition to any
filing and notification required pursuant to regulations issued
under Code Section 83(b) or other applicable provision.

     
(iii) Requirement of Notification Upon
Disqualifying Disposition Under Code Section 421(b). If
any Participant shall make any disposition of shares of Stock
delivered pursuant to the exercise of an Incentive Stock Option
under the circumstances described in Code Section 421(b)
(relating to certain disqualifying dispositions), such
Participant shall notify the Company of such disposition within
ten days thereof.

     
(e) Changes to the Plan. The Board
may amend, suspend or terminate the Plan or the Committee’s
authority to grant Awards under the Plan without the consent of
stockholders or Participants; provided, however, that any
amendment to the Plan shall be submitted to the Company’s
stockholders for approval not later than the earliest annual
meeting for which the record date is after the date of such
Board action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Stock may
then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other amendments to the Plan to
stockholders for approval; and provided further, that, without
the consent of an affected Participant, no such Board action may
have a material adverse affect on the rights of such Participant
under any outstanding Award.

     
(f) Right of Setoff. The Company or
any subsidiary or affiliate may, to the extent permitted by
applicable law, deduct from and set off against any amounts the
Company or a subsidiary or affiliate may owe to the Participant
from time to time, including amounts payable in connection with
any Award, owed as wages, fringe benefits, or other compensation
owed to the Participant, such amounts as may be owed by the
Participant to the Company, although the Participant shall
remain liable for any part of the Participant’s payment
obligation not satisfied through such deduction and setoff. By
accepting any Award granted hereunder, the Participant agrees to
any deduction or setoff under this Section 11(f).

     
(g) Unfunded Status of Awards; Creation
of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant or obligation to deliver Stock pursuant to an Award,
nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash,
Stock, other Awards or other property, or make other
arrangements to meet the Company’s obligations under the
Plan. Such trusts or other arrangements shall be consistent with
the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of each affected
Participant.

     
(h) Nonexclusivity of the Plan.
Neither the adoption of the Plan by the Board nor its
submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive
arrangements, apart from the Plan, as it may deem desirable,
including incentive arrangements and awards which do not qualify
under Code Section 162(m), and such other arrangements may
be either applicable generally or only in specific cases.

     
(i) Payments in the Event of Forfeitures;
Fractional Shares. No fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other

14

 

Awards or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise
eliminated.

     
(j) Compliance with Code
Section 162(m). It is the intent of the Company that
Options and SARs granted to Covered Employees and other Awards
designated as Awards to Covered Employees subject to
Section 7 shall constitute qualified
“performance-based compensation” within the meaning of
Code Section 162(m) and regulations thereunder, unless
otherwise determined by the Committee at the time of allocation
of an Award.

     
Accordingly, the terms of Sections 7(b),
(c), and (d), including the definitions of Covered Employee and
other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will
be a Covered Employee with respect to a fiscal year that has not
yet been completed, the term Covered Employee as used herein
shall mean only a person designated by the Committee as likely
to be a Covered Employee with respect to a specified fiscal
year. If any provision of the Plan or any Award document
relating to a Performance Award that is designated as intended
to comply with Code Section 162(m) does not comply or is
inconsistent with the requirements of Code Section 162(m)
or regulations thereunder, such provision shall be construed or
deemed amended to the extent necessary to conform to such
requirements, and no provision shall be deemed to confer upon
the Committee or any other person discretion to increase the
amount of compensation otherwise payable in connection with any
such Award upon attainment of the applicable performance
objectives.

     
(k) Certain Limitations Relating to
Accounting Treatment of Awards. Other provisions of the Plan
notwithstanding, the Committee’s authority under the Plan
is limited to the extent necessary to ensure that any Option or
other Award of a type that the Committee has intended to be
subject to fixed accounting with a measurement date at the date
of grant or the date performance conditions are satisfied under
APB 25 shall not become subject to “variable”
accounting solely due to the existence of such authority, unless
the Committee specifically determines that the Award shall
remain outstanding despite such “variable” accounting.

     
(l) Governing Law. The validity,
construction, and effect of the Plan, any rules and regulations
relating to the Plan and any Award document shall be determined
in accordance with the laws of the State of Delaware, without
giving effect to principles of conflicts of laws, and applicable
provisions of federal law.

     
(m) Awards to Participants Outside the
United States. The Committee may modify the terms of any
Award under the Plan made to or held by a Participant who is
then resident or primarily employed outside of the United States
in any manner deemed by the Committee to be necessary or
appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant
is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by
foreign tax laws and other restrictions applicable as a result
of the Participant’s residence or employment abroad, shall
be comparable to the value of such an Award to a Participant who
is resident or primarily employed in the United States. An Award
may be modified under this Section 11(m) in a manner that
is inconsistent with the express terms of the Plan, so long as
such modifications will not contravene any applicable law or
regulation or result in actual liability under
Section 16(b) of the Exchange Act for the Participant whose
Award is modified.

     
(n) Limitation on Rights Conferred under
Plan. Neither the Plan nor any action taken hereunder shall
be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a
subsidiary or affiliate, (ii) interfering in any way with
the right of the Company or a subsidiary or affiliate to
terminate any Eligible Person’s or Participant’s
employment or service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under
the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the
rights of a stockholder of the Company unless and until the
Participant is duly issued or transferred shares of Stock in
accordance with the terms of an Award or an Option is duly
exercised. Except as expressly provided in the Plan and an Award
document, neither the Plan nor any Award document shall confer
on any person other than the Company and the Participant any
rights or remedies thereunder.

15

 

     
(o) Severability; Entire Agreement.
If any of the provisions of this Plan or any Award document
is finally held to be invalid, illegal or unenforceable (whether
in whole or in part), such provision shall be deemed modified to
the extent, but only to the extent, of such invalidity,
illegality or unenforceability, and the remaining provisions
shall not be affected thereby; provided, that, if any of such
provisions is finally held to be invalid, illegal, or
unenforceable because it exceeds the maximum scope determined to
be acceptable to permit such provision to be enforceable, such
provision shall be deemed to be modified to the minimum extent
necessary to modify such scope in order to make such provision
enforceable hereunder. The Plan and any Award documents contain
the entire agreement of the parties with respect to the subject
matter thereof and supersede all prior agreements, promises,
covenants, arrangements, communications, representations and
warranties between them, whether written or oral with respect to
the subject matter thereof.

     
(p) Awards Under Preexisting Plans.
Upon approval of the Plan by stockholders of the Company as
required under Section 11(q) hereof, no further awards
shall be granted under the Preexisting Plan; however, existing
awards under the Preexisting Plan shall continue to be governed
by the terms and conditions of such plan.

     
(q) Plan Effective Date and Termination.
The Plan shall become effective if, and at such time as, the
stockholders of the Company have approved it by the affirmative
votes of the holders of a majority of the voting securities of
the Company present, or represented, and entitled to vote on the
subject matter at a duly held meeting of stockholders. Unless
earlier terminated by action of the Board, the Plan will remain
in effect until such time as no Stock remains available for
delivery under the Plan and the Company has no further rights or
obligations under the Plan with respect to outstanding Awards
under the Plan.

     
(r) Repricing. No award that could be
characterized as a “repricing” shall be made pursuant
to this Plan without shareholder approval.

16<PAGE>
                                                                  EXHIBIT 10.225

[WILSHIRE TECHNOLOGIES, INC. LETTERHEAD]

                                                                December 9, 2002

To:     Holders of the Warrants expiring November 28, 2002("Warrants") of
        Wilshire Technologies, Inc. ("Wilshire")

Re:     Expiration of Warrants

Dear Wilshire Warrant Holder:

        The above-mentioned Warrants, which were issued in November of 1997
pursuant to the Warrant Agreement dated as of November 24, 1997 between Wilshire
and American Stock Transfer & Trust Company as Warrant Agent, expired by their
terms on November 28, 2002 and, therefore, are worthless.

        If you have any questions with regard to this matter, please contact the
Warrant Agent, American Stock Transfer & Trust Company, 6201 15th Avenue,
Brooklyn, New York 11219, Attention: Mr. Joe Alicia (718) 921-8210.

                                    Sincerely,

                                    WILSHIRE TECHNOLOGIES, INC.

                                    By /s/ KEVIN T. MULVIHILL
                                       -----------------------------------------
                                       Kevin T. Mulvihill
                                       President & Chief Executive Officer

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