Document:

ex10-1.htm

    

                 Exhibit
10.1

    

    THE
TORO COMPANY

    

    FIRST
AMENDMENT TO EMPLOYMENT AGREEMENT

    

    THIS
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment"), is entered into as
of December 31, 2008 and effective as of January 1, 2009 and amends the
Employment Agreement (the "Agreement") dated as of [__________] between The Toro
Company, a Delaware corporation (the Company"), and [__________] (the
"Executive").

     

    WHEREAS,
the Company and the Executive wish to amend the Agreement in certain respects to
reflect the provisions of Section 409A of the Internal Revenue Code, as
amended, and any regulations and other guidance issued thereunder;

     

    NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, and for other good and valuable consideration, the Company and the
Executive agree as follows:

    

    1.  Section
3 shall be amended in its entirety to read as follows:

    

    Employment
Period.  The Company hereby agrees to continue the Executive in
its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period"); provided, however, that for purposes of Section
6(a), the Employment Period shall end two and one-half months plus one day after
the end of the year that contains the first day of the Window Period, as that
term is defined in Section 5(c).

    

    2.  Section
4(b)(ii) shall be amended in its entirety to read as follows:

    

    (ii)   Annual Bonus.  In
addition to Annual Base Salary, the Executive shall be awarded, for each fiscal
year ending during the Employment Period, an annual bonus (the "Annual Bonus")
in cash at least equal to the Executive's highest bonus under the Company's
applicable annual cash incentive plans, or any comparable bonus under any
predecessor or successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year) (the "Recent Annual
Bonus").  Each such Annual Bonus shall be paid during the period two
and one-half months after the end of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus in accordance with the Company's
applicable deferred compensation plan.

    

    
      
        
           

        

        
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    3.  Section
4(b)(v) shall be amended in its entirety to read as follows:

    

    (v)  Expenses.  During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies;
provided that the Executive shall submit any request for such expense
reimbursement under this Section 4(b)(v) or any other provision of this
Agreement within six months of the date the expense was incurred.  If
the Company reimburses the Executive for any amount to which the Executive is
entitled to reimbursement hereunder, such reimbursement shall be made promptly,
but in any event on or before the last day of the Executive's taxable year
following the taxable year in which the expense or cost was incurred and
otherwise so as not to provide for a "deferral of compensation" within the
meaning of Code Section 409A.

    

    4.  Section
5(c) shall be amended in its entirety to read as follows:

    

    (c)  Good Reason.  The
Executive's employment may be terminated during the Employment Period by the
Executive for Good Reason.  For purposes of this Agreement, "Good
Reason" shall mean the occurrence or existence of any of the following events or
conditions during the Employment Period:

    

    
      	
               
      

            	
              (i)  any
      action by the Company which results in a diminution in the Executive's
      authority, duties or responsibilities, excluding for this purpose an
      isolated, immaterial or inadvertent action not taken in bad faith and
      which is remedied by the Company promptly after receipt of notice thereof
      given by the Executive;

            

    

    

    
      	
               
      

            	
              (ii)  any
      failure by the Company to comply with any of the provisions of Section
      4(b) of this Agreement, other than an isolated, immaterial or inadvertent
      failure not occurring in bad faith and which is remedied by the Company
      promptly after receipt of notice thereof given by the
      Executive;

            

    

    

    
      	
               
      

            	
              (iii)  the
      Company's requiring the Executive to be based at any office or location
      other than as provided in Section 4(a)(i)(B)
  hereof;

            

    

    

    
      	
               
      

            	
              (iv)  any
      termination by the Company of the Executive's employment otherwise than as
      expressly permitted by this Agreement;
or

            

    

    

    
      	
               
      

            	
              (v)  any
      failure by the Company to comply with and satisfy Section 11(c) of this
      Agreement.

            

    

    

    
      
        
           

        

        
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    Notwithstanding any provision in this
Agreement to the contrary, termination of the Executive's employment shall not
be for Good Reason unless (x) the Executive notifies the Company or any
successor in writing of the occurrence or existence of the event or condition
that the Executive believes constitutes Good Reason within 90 days of the
initial existence of such event or condition (which notice specifically
identifies the event or condition), (y) the Company or any successor fails to
correct the event or condition so identified in all material respects within 30
days after the date on which it receives such notice (the "Remedial Period"),
and (z) the Executive actually terminates employment within 30 days after the
expiration of the Remedial Period and before the Company or any successor
remedies the event or condition (even if after the end of the Remedial Period).
If the Executive terminates employment before the expiration of the Remedial
Period or after the Company or any successor remedies the event or condition
(even if after the end of the Remedial Period), then the Executive's termination
will not be considered to be for Good Reason. The Executive may combine the
notice required by this Section 5(c) with the Notice of Termination required by
Section 5(d).  Anything in this Agreement to the contrary
notwithstanding, a termination by the Executive for any reason during the 30-day
period immediately following the first anniversary of the Effective Date (the
"Window Period") shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.

    

    5.  The
first line of Section 6(a)(i) shall be amended to read in its entirety as
follows:

    

    (i)  the
Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts; provided,
however, that no payments may be made pursuant to this Section 6(a)(i) later
than two and one-half months after the end of the year that contains the first
day of the Window Period:

    

    6.  Section
6(a)(i)(A) shall be amended to read in its entirety as follows:

    

    A.  the sum of (1) the
Executive's Annual Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable (and annualized for any fiscal
year consisting of less than twelve full months or during which the Executive
was employed for less than twelve full months), for the most recently completed
fiscal year during the Employment Period, if any (such higher amount being
referred to as the "Highest Annual Bonus") and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, and (3) any accrued vacation
pay to the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued
Obligations");

    

    7.  Section
6(a)(ii) shall be amended in its entirety to read as follows:

    

    
      
        
           

        

        
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    (ii) for three years after the
Executive's Date of Termination, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family at least equal
to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this Agreement
(to the extent not subject to the requirements of Code Section 409A) if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility; provided further, that to the extent the
foregoing coverage commitment applies to a group health plan subject to the
requirements Section 4980B(f) of the Internal Revenue Code of 1986, as
amended ("COBRA"), the Company shall be deemed to satisfy such commitment by
providing COBRA coverage at no cost to the Executive for the COBRA term and such
coverage commitment shall be conditioned on the Executive properly electing
COBRA coverage.  Thereafter, the value of any group health plan
coverage pursuant to this Section 6(a)(ii) shall be taxed to the
Executive.  For purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for retiree benefits pursuant to
such plans, practices, programs and policies, the Executive shall be considered
to have remained employed until three years after the Date of Termination and to
have retired on the last day of such period.

    

    8.  Section
6(a)(iii) shall be amended in its entirety to read as follows:

    

    (iii) the
Company shall pay, as incurred, the reasonable costs of outplacement services
for a period of two years after the Executive's Date of Termination, the scope
and provider of which shall be selected by the Executive in his sole
discretion;

    

    9.  Section
9(a) shall be amended by adding the following sentence to the end of the
section:

    

    Notwithstanding
anything to the contrary in this Agreement, the Company shall pay the Gross-Up
Payment to the Executive by the end of the Executive's taxable year that
immediately follows the Executive's taxable year in which the related Excise Tax
is remitted to the relevant taxing authorities.  In the event a
reduction is required to be applied to the Payments pursuant to the foregoing
provisions of this Section 9(a), the Payments shall be reduced by the Company in
its reasonable discretion in the following order: (i) reduction of any
Payments that are subject to Code Section 409A on a pro-rata basis or such
other manner that complies with Code Section 409A, as determined by the
Company and (ii) reduction of any Payments that are exempt from Code
Section 409A.

    

    

    
      
        
           

        

        
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      10.  Section
9(c) shall be amended to add the following language to the end of the
section:

    

    

    Any
indemnification payments made by the Company to the Executive pursuant to this
Section 9(c) for any Excise Tax (including interest and penalties with respect
thereto) incurred by the Executive in connection with such tax contest shall be
made to the Executive by the end of the Executive's taxable year that
immediately follows the Executive's taxable year in which the Excise Tax
(together with any interest and penalties) is remitted to the relevant taxing
authority. Any indemnification payments made by the Company to the Executive for
any other costs or expenses (other than Excise Tax, together with penalties and
interest with respect thereto) incurred by the Executive in connection with such
tax contest shall be made to the Executive (i) by the end of the Executive's
taxable year that immediately follows the Executive's taxable year in which the
taxes that are the subject of the tax contest are remitted to the relevant
taxing authority or (ii) where as a result of such tax contest no taxes are
remitted, the end of the Executive's taxable year immediately following the
Executive's taxable year in which the tax contest is completed or there is a
final and nonappealable settlement or other resolution of the tax
contest.

    

    11.  Section
9(d) is amended in its entirety to read as follows:

    

    (d)  If, after the receipt by
the Executive of an amount paid by the Company pursuant to Section 9, the
Executive becomes entitled to receive any tax refund due to an overpayment of
any Excise Tax (including interest and penalties with respect thereto), the
Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon).  If, after the receipt by
the Executive of an amount paid by the Company pursuant to Section 9, a
determination (within the meaning of Section 1313 of the Code) is made that the
Executive shall not be entitled to any tax refund and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, the Executive shall
not be required to make any repayments to the Company pursuant to this Section
9(d).

     

    12.  A
new Section 12 is added to the Agreement as follows, and the remaining Section
is renumbered accordingly:

     

    12.  Code Section
409A.  The parties intend that this Agreement and the benefits
provided hereunder be exempt from the requirements of Code Section 409A to
the maximum extent possible, whether pursuant to the short-term deferral
exception described in Treasury Regulation Section 1.409A-1(b)(4), the
involuntary separation pay plan exception described in Treasury Regulation
Section 1.409A-1(b)(9)(iii), or otherwise.  To the extent Code
Section 409A is applicable to this Agreement, the parties intend that this
Agreement comply with the deferral, payout and other limitations and
restrictions imposed under Code Section 409A.  Notwithstanding any
other provision of this Agreement to the contrary, this Agreement shall be
interpreted, operated and administered in a manner consistent with such
intentions.  Without limiting the generality of the foregoing, and
notwithstanding any other provision of this Agreement to the contrary, with
respect to any payments and benefits under this Agreement to

    

    
      
        
           

        

        
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    which
Code Section 409A applies, all references in this Agreement to the
termination of the Executive's employment or separation from service are
intended to mean the Executive's "separation from service," within the meaning
of Code Section 409A(a)(2)(A)(i).  In addition, if the Executive
is a "specified employee" within the meaning of Code Section 409A at the
time of the Executive's separation from service, then to the extent necessary to
avoid subjecting the Executive to the imposition of any additional tax under
Code Section 409A, amounts that would otherwise be payable under this
Agreement based on the Executive's separation from service, shall not be paid to
the Executive during the six-month period immediately following the Executive's
separation from service, but shall instead be accumulated and paid to the
Executive (or, in the event of the Executive's death, the Executive's estate) in
a lump sum on the first business day after the earlier of the date that is six
months following the Executive's separation from service or the Executive's
death.  No additional interest or earnings shall be due on such
amounts during such six-month period, except as otherwise specified by this
Agreement.  This Agreement shall be deemed to be amended, and any
deferrals and distributions hereunder shall be deemed to be modified, to the
extent permitted by and necessary to comply with Code Section 409A and to avoid
or mitigate the imposition of additional taxes under Code Section
409A.  Notwithstanding the foregoing, no provision of this Agreement
shall be interpreted or construed to transfer any liability for failure to
comply with Code Section 409A from the Executive or any other individual to
the Company or any of its Affiliated Companies.

    

    13.  New
Section 13(a) is amended to read in its entirety as follows:

     

    (a)  This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws, except to the extent
preempted by federal law.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.  This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

     

    COUNTERPARTS.
This Amendment may be executed in counterparts, each of which shall be deemed to
be an original.

     

    

    
      
        
           

        

        
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    IN
WITNESS WHEREOF, the parties have executed this Amendment on the dates set forth
below.

     

    

    THE
TORO COMPANY

    

    

    By: ____________________________________

          
[insert name]

          
[insert title]

    

    Dated:
___________________

    

    EXECUTIVE

    

    

    ____________________________________

          
[insert name]

    

    Dated:
___________________

    

    
      
        
           

        

        
          7ex10-2.htm

                     Exhibit
10.2

    

    THE
TORO COMPANY

    2000
DIRECTORS STOCK PLAN

    (As
Amended January 20, 2009)

    

    

    1.           
Purpose of the
Plan.  The purpose of The Toro Company 2000 Directors Stock
Plan (“Plan”) is to enable The Toro Company (the “Company”) to attract and
retain experienced and knowledgeable directors to serve on the Board of
Directors of the Company or its subsidiaries, and to further align their
interests with those of the stockholders of the Company by providing for or
increasing their stock ownership interests in the Company.  It is
intended that the Plan be interpreted so that transactions under the Plan are
exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), to the extent applicable.

    

    2.           
Eligibility.  All
members of the Company’s Board of Directors who are not current employees of the
Company or any of its subsidiaries (“Nonemployee Directors”) are eligible to
participate in the Plan.

    

    3.           
Plan
Awards.

    

    a.           
Directors
Shares.  To carry out the purposes of the Plan, the Company
shall, on the first business day of each fiscal year, issue to each person who
is then a Nonemployee Director, shares of the Company’s Common Stock, $1.00 par
value (the “Common Stock”), in an amount equal to $20,000 divided by the fair
market value of one share of Common Stock rounded down to the greatest number of
whole  shares (“Directors Shares”), subject to adjustment as provided in
Section 5 hereof.  Fair market value for this purpose shall be
the average of the 4 p.m. Eastern Time closing prices of the Common Stock as
reported by the New York Stock Exchange for each of the trading days in the
three calendar months immediately prior to the date of issue of the Directors
Shares.

    

    b.           
Directors
Options.

    

    i.           
Annual
Grant.  Subject to the terms and conditions of this
Section 3.b., on the first business day of each fiscal year, the Company
shall grant to each person who is then a Nonemployee Director, a nonqualified option
to purchase shares of the Common Stock (a “Directors Option”).  Each
such option shall have a grant date fair value of $40,000, determined using a
standard Black-Scholes, binomial or monte carlo valuation formula, based on
assumptions consistent with those used to value option grants disclosed under
Schedule 14A under the Securities Exchange Act of 1934, or successor
requirements, for the business day prior to the date of grant.

    

    ii.           
Vesting,
Transferability and Exercisability.

    

    (a)           
Vesting.  Except
as provided in Sections 3.b.ii.(c)(1) and (2) and Section 6,
Directors Options shall vest and become exercisable in three equal installments
on each of the first, second and third anniversaries following the date of
grant, and shall remain exercisable for a term of ten years after the date of
grant.

    

    (b)           
No
Transfer.   No Directors Option shall be assigned or
transferred, except by will or the laws of descent and
distribution.  An option so transferred may be exercised after the
death of the individual to whom it is granted only by such individual’s legal
representatives, heirs or legatees, not later than the earlier of the date the
option expires or one year after the date of death of such individual, and only
with respect to an option exercisable at the time of death.

    
      
         

      

      
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    (c)           
Exercise.  During
the lifetime of a Nonemployee Director, Directors Options held by such
individual may be exercised only by the Nonemployee Director and only while
serving as a member of the Board of Directors of the Company and only if the
Nonemployee Director has been continuously so serving since the date such
options were granted, except as follows:

    

    (1)           
Disability
or Death.  In the event of disability or death of a Nonemployee
Director, all outstanding unvested options shall vest effective as of the date
of death or termination of service by reason of disability, and all such vested
options may be exercised by such individual or his or her legal representatives
not later than the earlier of the date the option expires or one year after the
date such service as a Nonemployee Director ceases by reason of disability or
death.

    

    (2)           
Termination.  If
a Nonemployee Director has served as a member of the Board of Directors for ten
full fiscal years or longer and terminates service on the Board, (A) outstanding
unvested options shall remain outstanding and continue to vest in accordance
with their terms, and (B) the Nonemployee Director may exercise all such
vested outstanding options for up to four years after the date of termination,
but not later than the date an option expires.  If a Nonemployee
Director has served as a member of the Board of Directors for less than ten
years and terminates service on the Board, (C) all unvested options shall
expire and be canceled and (D) the Nonemployee Director may exercise any
vested outstanding options for up to three months after the date of termination,
but not later than the date an option expires.

    

    (d)           
Methods of
Exercise and Payment of Exercise Price.  Subject to the terms
and conditions of the Plan and the terms and conditions of the option agreement,
a vested option may be exercised in whole at any time or in part from time to
time, by delivery to the Company at its principal office of a written notice of
exercise specifying the number of shares with respect to which the option is
being exercised, accompanied by payment in full of the exercise price for shares
to be purchased at that time.  Payment may be made (1) in cash,
(2) by tendering (either actually or by attestation) shares of Common Stock
already owned for at least six months (or shorter period necessary to avoid a
charge to the Company’s earnings for financial statement purposes) valued at the
fair market value of the Common Stock on the date of exercise, (3) in a
combination of cash and Common Stock or (4) by delivery of a notice of
exercise of options, together with irrevocable instructions, approved in advance
by proper officers of the Company, (A) to a brokerage firm designated by
the Company, to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the exercise price and any related tax withholding
obligations and (B) to the Company, to deliver certificates for such
purchased shares directly to such brokerage firm, all in accordance with
regulations of the Federal Reserve Board.

    

    No shares
of Common Stock shall be issued until full payment has been made.

    

    c.           
Share
Proration.  If, on any date on which Directors Shares are to be
issued pursuant to Section 3.a. or Directors Options are to be granted
pursuant to Section 3.b., the number of  shares of Common Stock is
insufficient for the issuance of the entire number of shares to be issued or for
the grant of the entire number of options, as calculated in accordance with
Section 3.a. or Section 3.b., respectively, then the number of shares
to be issued and options to be granted to each Nonemployee Director entitled to
receive Directors Shares or Directors Options on such date shall be such
Nonemployee Director’s proportionate share of the available number of shares and
options (rounded down to the greatest number of whole  shares), provided
that if a sufficient number of shares of Common Stock is available to issue all
of the Directors Shares, then the entire number of Directors Shares shall be
issued first and the number of shares to be subjected to options shall be
prorated in accordance with this section.

    

    4.           
Shares in Lieu of
Fees.  A Nonemployee Director shall have the right to elect to
receive shares of Common Stock in lieu of annual retainer and meeting fees
otherwise payable in cash.  The election to receive Common Stock shall
be made prior to the date fees are otherwise scheduled to be paid but not later
than May 31 of the calendar year for which the fees are to be
paid.  Fees that are earned after the date a director makes an
election shall be reserved through

    
      
         

      

      
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    the rest
of the calendar year and shares shall be issued in December of that
year.  The number of shares to be issued shall be determined by
dividing the dollar amount of reserved fees by the 4 p.m. Eastern Time closing
price of one share of Common Stock as reported by the New York Stock Exchange
for the date that the shares are issued.

    

    5.           
Stock Subject to
Plan.  Subject to adjustment as provided in this paragraph and
subject to increase by amendment of the Plan, the total number of shares of
Common Stock reserved and available for issuance in connection with the Plan
shall be 455,000 shares.  If any Directors Option granted hereunder
expires unexercised, terminates, is exchanged for other options without the
issuance of shares of Common Stock or is exercised by delivery or constructive
delivery of shares of Common Stock already owned by the option holder, the
shares of Common Stock reserved for issuance pursuant to such option shall, to
the extent of any such termination or to the extent the shares covered by an
option are not issued or used, again be available for option grants under the
Plan, unless prohibited by applicable law or regulation.  Any shares
issued by the Company in connection with the assumption or substitution of
outstanding option grants from any acquired corporation shall not reduce the
shares available for stock awards or option grants under the Plan.  In
the event of a corporate transaction involving the Company, the Common Stock or
the Company’s corporate or capital structure, including but not limited to any
stock dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, reclassification, split-up, spin-off,
combination or exchange of shares, or a sale of the Company or of all or part of
its assets or any distribution to stockholders other than a normal cash
dividend, the Committee shall make such proportional adjustments as are
necessary to preserve the benefits or potential benefits of the Directors Shares
and Directors Options. Action by the Committee may include all or any
adjustment in (a) the maximum number and kind of securities subject to the
Plan as set forth in this paragraph; (b) the maximum number and kind of
securities that may be made subject to Directors Options and the determination
of the number or kind of Directors Shares; (c) the number and kind of
securities subject to any outstanding Directors Option; and (d) any other
adjustments that the Committee determines to be equitable.

    

    6.           
Change of
Control.  In the event of a Change of Control of the Company as
hereinafter defined, all Directors Options shall fully vest, and be exercisable
in their entirety immediately, and notwithstanding any other provisions of the
Plan, shall continue to be exercisable for three years following the Change of
Control, but not later than ten years after the date of grant.

    

    Change of
Control means:

    

    a.           
The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of 15%
or more of either (i) the then-outstanding shares of Common Stock of the
Company (the “Outstanding Company Common Stock”) or (ii) the combined
voting power of the then-outstanding voting securities of the Company entitled
to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection a., the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii) and (iii) of
subsection c. of this Section 6; or

    

    b.           
Individuals who, as of the date hereof, constitute the Board of Directors of the
Company (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose,

    
      
         

      

      
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    any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or

    

    c.           
Consummation of a reorganization, merger or consolidation of the Company or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition by the Company of assets or stock of another entity (a “Business
Combination”), in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 15% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or

    

    d.           
Approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

    

    7.           
Administration of the
Plan.  The Plan shall be administered by a committee composed
of those members of the Board of Directors of the Company who are also employees
of the Company (the “Committee”).  The Committee shall have the
authority to carry out all provisions of the Plan; provided, however, that it
shall have no discretion to determine which Nonemployee Directors may receive
Directors Shares or Directors Options or to set the value of such Directors
Shares or Directors Options, other than to make the calculations required by
Section 3.a., Section 3.b. or Section 5.

    

    8.           
Tax
Withholding.  The Company shall have the right to deduct from
any settlement made under the Plan, including the exercise of an option or the
sale of shares of Common Stock, any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to require the
option holder to pay the amount of any such taxes or to take such other action
as may be necessary in the opinion of the Company to satisfy all obligations for
the payment of such taxes.  If Common Stock is withheld or surrendered
to satisfy tax withholding, such stock shall be valued at its fair market value
as of the date such Common Stock is withheld or surrendered.  The
Company may also deduct from any such settlement any other amounts due the
Company by the option holder.

    

    9.           
Effective Date and Term of
Plan.  The Plan first became effective March 14, 2001 and
shall end March 12, 2011, unless terminated earlier by action of the Board
of Directors.

    

    10.           
Amendment.  The
Board may amend, suspend or terminate the Plan at any time, with or without
advance notice to Plan participants.  The effective date of any
amendment to the Plan shall be the date of its adoption by the Board of
Directors, subject to stockholder approval, if

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    required.  No
amendment of the Plan shall adversely affect in a material manner any right of
any option holder with respect to any option theretofore granted without such
option holder’s written consent.

    

    11.           
Governing
Law.  The Plan, Directors Shares, Directors Options and
agreements entered into under the Plan shall be construed, administered and
governed in all respects under and by the applicable laws of the State of
Delaware, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan or an option or an
award or agreement to the substantive law of another jurisdiction.

    

     

    

    

    
      
         

      

      
        5

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