Document:

ex10-1.htm

Exhibit 10.1

 CEC ENTERTAINMENT, INC.

THIRD AMENDED AND RESTATED 2004 RESTRICTED STOCK PLAN

The CEC Entertainment, Inc. 2004 Restricted Stock Plan (hereinafter called the “Plan” as amended, from time to time) was adopted by the Board of Directors of CEC Entertainment, Inc., a Kansas corporation (hereinafter called the “Company”), on March 29, 2004, became effective in 2004 as of the date the Plan was approved by the stockholders of the Company, and was amended by the Board of Directors of the Company on April 17, 2007 and became effective in 2007 as of the date the amendments to the Plan were approved by the stockholders of the Company.  Further amendments to the Plan were approved by the Board of Directors of the Company on April 15, 2008 and on February 24, 2009, and became effective as of the date the respective amendments to the Plan were approved by the stockholders of the Company.  Additional amendments to the Plan, which did not require stockholder approval became effective on May 8, 2009, the date such amendments were approved by the Compensation Committee of the Board of Directors of the Company.  The amendments to the Plan, as reflected in this amendment and restatement of the Plan, were approved by the Board of Directors of the Company on February 23, 2010, and will become effective upon the approval of the stockholders of the Company.

ARTICLE 1

PURPOSE

The purpose of the Plan is to attract, retain, and reward the services of the employees of the Company and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of restricted stock and rights to receive restricted stock, that will:

 

	  	
 

(a)

	
 

increase the interest of such persons in the Company’s welfare;

	 	  

(b)

	  

furnish an incentive to such persons to continue their services to the Company; and

	 	  

(c)

	  

provide a means through which the Company may attract able persons as employees.

 

 

 

 

ARTICLE 2

DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:

2.1 “Award” means a Restricted Stock Award or a Restricted Stock Unit.

2.2  “Award Agreement” means the written document evidencing the grant of an Award executed by the Company, including any amendments thereto. Each Award Agreement shall be subject to the terms and conditions of the Plan and need not be executed by the Participant receiving the Award pursuant to the Agreement.

2.3 “Board” means the Board of Directors of the Company.

2.4 “Change of Control” means any of the following: (i) any consolidation, merger or share exchange of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a consolidation, merger or share exchange of the Company in which the holders of the Company’s Common Stock immediately prior to such transaction have the same proportionate ownership of Common Stock of the surviving corporation immediately after such transaction; (ii) any sale, lease, exchange or other transfer (excluding transfer by way of pledge or hypothecation) in one transaction or a series of related transactions, of all or substantially all of the assets of the Company; (iii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; (iv) the cessation of control (by virtue of their not constituting a majority of directors) of the Board by the individuals (the “Continuing Directors”) who were members of the Board for the immediately preceding two (2) years (unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least two-thirds (2/3) of the directors then still in office who were directors at the beginning of such a period); (v) the acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, as defined in

  

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Section 2.13) of an aggregate of 30% of the voting power of the Company’s outstanding voting securities by any person or group (as such term is used in Rule 13d-5 under the Exchange Act, as defined in Section 2.13) who beneficially owned less than 15% of the voting power of the Company’s outstanding voting securities on the date of this Plan, or the acquisition of beneficial ownership of an additional 15% of the voting power of the Company’s outstanding voting securities by any person or group who beneficially owned at least 15% of the voting power of the Company’s outstanding voting securities on the date of this Plan, provided, however, that notwithstanding the foregoing, an acquisition shall not constitute a Change of Control hereunder if the acquirer is (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company and acting in such capacity, (B) a Subsidiary of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of voting securities of the Company or (C) any other person whose acquisition of shares of voting securities is approved in advance by a majority of the Continuing Directors; or (vi) in a Title 11 bankruptcy proceeding, the appointment of a trustee or the conversion of a case involving the Company to a case under Chapter 7.

2.5 “Code” means the Internal Revenue Code of 1986, as amended.

2.6 “Committee” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.

2.7 “Common Stock” means the common stock of the Company, par value $ 0.10 per share, which the Company is currently authorized to issue or may in the future be authorized to issue.

2.8 “Date of Grant” means the effective date on which an Award is made, as determined in accordance with the corporate laws of the state of Kansas, to a Participant as set forth in the applicable Award Agreement.

2.9 “Director” means a member of the Board.

2.10 “Disability” means the “disability” of a person as defined in a then effective long-term disability plan maintained by the Company that covers such person, or if such a plan does not exist at any relevant time, “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code. Section 22(e)(3) of the Code provides that an individual is totally and permanently disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

2.11 “Dividend Equivalents” means rights granted to a Participant with respect to Restricted Stock Units to receive the equivalent value of dividends paid on the shares of the Common Stock prior to vesting of the Award.  Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formulas and at such time and subject to such limitations as may be determined by the Committee.

2.12 “Employee” means a common law employee, including an employee who is also an Officer or Director, (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary. “Employee” does not include Non-employee Directors.

2.13 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute. Reference in the Plan to any section of the Exchange Act shall be deemed to include any amendments or successor provisions to such section and rules and regulations relating to such section.

2.14 “Fair Market Value” of a share of Common Stock means, as of any given date, the closing price of the Common Stock as reported on the New York Stock Exchange Consolidated Tape, or such reporting service as the Committee may select, or, if the Common Stock is not traded on the New York Stock Exchange, the closing price of the Common Stock on the principal national securities exchange or national market system on which the Common Stock is listed, on the date of determination, as reported on such source as the Committee deems reliable (or if no sale occurred on such date, on the first immediately preceding trading date on which a sale occurred), or, if the Common Stock is not listed on the New York Stock Exchange or another securities exchange or market system, but is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, the Fair Market Value shall be the closing sales price for the Common Stock as quoted on such system or by such securities dealer on the date of determination (or if no sale occurred on that date, on the first immediately preceding date on which a sale is reported), as reported on such source as the Committee deems reliable, or, in the in the absence of an established market of the Common Stock of the type described in the foregoing, the “Fair Market Value” of a share of Common Stock shall

  

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be as determined by the Committee in good faith in accordance with such fair and reasonable means as the Board or the Committee shall specify.

2.15 “Officer” means a person who is an “officer” of the Company or a Subsidiary within the meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the requirements of the Exchange Act).

2.16 “Non-employee Director” means a member of the Board who is not an Employee.

2.17 “Participant” means an Employee to whom an Award is granted under the Plan.

2.18 “Performance Awards” means an Award subject to Performance Goals, as provided for in Section 6.1 of this Plan.

 

2.19 “Restriction Period” means the period during which the Common Stock under a Restricted Stock Award is nontransferable and subject to “Forfeiture Restrictions” as defined in Section 6.2 of this Plan and set forth in any related Award Agreement.

2.20 “Restricted Stock” means shares of Common Stock issued or transferred to a Participant pursuant to a Restricted Stock Award under Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in any related Award Agreement.

2.21 “Restricted Stock Award” means an award granted under Section 6.4 of this Plan of shares of Common Stock issued to the Participant for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions and other terms and conditions as are established by the Committee.

2.22 “Restricted Stock Unit” means the right to receive a share of Common Stock, or the Fair Market Value of a share of Common stock in cash, granted pursuant to Section 6.5 of this Plan and shall be evidenced by a bookkeeping entry representing the equivalent of one share of Common Stock.

2.23 “Securities Act” means the Securities Act of 1933, as amended, and any successor statute. Reference in the Plan to any section of the Securities Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section.

2.24 “Subsidiary” means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interests and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. “Subsidiaries” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.

2.25 “Termination of Service” occurs when a Participant shall cease to serve as an Employee for any reason.

ARTICLE 3

ADMINISTRATION

The Plan shall be administered by the Committee. The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board.

While the Common Stock of the Company is publicly traded, if necessary to satisfy the requirements of Code Section 162(m) and/or Rule 16b-3 promulgated under the Exchange Act, membership on the Committee shall be limited to those members of the Board who are “outside directors” under Section 162(m) of the Code and/or “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act, and/or who exhibit the independence necessary to comply with the rules of any exchange upon which the Company’s securities are traded, and any other applicable law, as necessary. The Committee shall select one of its members to act as its Chairman. A majority of the

  

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Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee.

The Compensation Committee of the Board shall serve as the Committee unless and until such time as the Board appoints other members of the Board to serve as the Committee.

 

The Committee shall determine the Participants to whom Awards shall be granted, and shall set forth in the Award Agreement of each Participant the Award, the Restriction Period, the vesting schedule, the Date of Grant, and such other terms, provisions, and limitations as are approved by the Committee, but not inconsistent with the Plan.

The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and (iii) make such other determinations and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties.

With respect to restrictions in the Plan that are based on the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other applicable law, rule or restriction, to the extent that any such restrictions are no longer required by applicable law, the Committee shall have the sole discretion and authority to prescribe terms for Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.

ARTICLE 4

ELIGIBILITY

Any Employee whose judgment, initiative and efforts are expected to contribute to the successful performance of the Company is eligible to participate in the Plan. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee may determine. Except as required by this Plan, Awards granted at different times need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation recommendations regarding which Employees, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Employees who receive, or are eligible to receive, Awards under the Plan.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

Shares to be issued may be made available from Common Stock held by the Company in its treasury or Common Stock that is newly issued; provided, however, that to the extent an Award is made to a newly hired Employee as a condition of employment, only shares of Common Stock held by the Company in its treasury may be used.

Subject to adjustment as provided in Articles 9 and 10, the maximum number of shares of Common Stock that may be issued pursuant to Awards granted under the Plan is 2,300,000 shares. Shares of Common Stock previously subject to Awards which are forfeited or terminated, are withheld for payment of any applicable employment taxes and/or withholding obligations or are settled in cash may be reissued pursuant to future Awards.

ARTICLE 6

GRANT OF RESTRICTED STOCK AWARD AND RESTRICTED STOCK UNITS

6.1 (a) In General. The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the number of shares of Common Stock subject to the Award, the Restriction Period (in the case of a Restricted Stock Award), the vesting conditions and vesting schedule, the Date of Grant, and such other terms, provisions, and limitations as are approved by the Committee, but not inconsistent with the Plan. The Company shall issue an Award Agreement to the Participant after the Committee approves the issuance of an Award.

 

Each Award Agreement shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. The terms and conditions of such Award Agreements may change from time to time and the

  

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terms and conditions of separate Award Agreements need not be identical, but each such Award Agreement shall be subject to the applicable terms and conditions of this Article 6.

(b) Performance Awards. The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are (i) not inconsistent with the Plan and  (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. Performance Awards granted in the form of Restricted Stock Awards shall provide for the issuance of the shares of Restricted Stock at the time of the grant of the Performance Award and Performance Awards granted in the form of Restricted Stock Units shall provide for the issuance of the shares of Common Stock at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided, however, if shares of Restricted Stock are issued at the time of the grant of the Performance Award (granted in the form of a Restricted Stock Award), the consideration for the issuance of such shares shall be the achievement of the Performance Goals established at the time of the grant of the Performance Award, and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Restricted Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of Restricted Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other Forfeiture Restrictions (as defined in Section 6.2 hereof) provided for in this Plan. Each Performance Award granted to one or more Participants shall have its own terms and conditions.

If it is determined to be necessary in order to satisfy Code Section 162(m), the Committee shall, at the time of the grant of a Performance Award, and to the extent permitted under Code Section 162(m) and the regulations issued thereunder, provide for the manner in which the Performance Goals shall be reduced to take into account the negative effect on the achievement of specified levels of the Performance Goals which may result from enumerated corporate transactions, extraordinary events, accounting changes and other similar occurrences which were unanticipated at the time of the grant. In no event, however, may the Committee increase the shares of Common Stock that may be earned under a Performance Award, unless the reduction in the Performance Goals would reduce or eliminate the number of shares of Common Stock to be earned under the Performance Award and the Committee determines not to make such reduction or elimination. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee.

With respect to a Performance Award that is not intended to satisfy the requirements of Code Section 162(m), if the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.

(c) Maximum Performance Award. Notwithstanding the foregoing, in order to comply with the requirements of Section 162(m) of the Code, no Employee may receive in any calendar year Performance Awards having an aggregate value of more than $3,000,000.00, based on the Fair Market Value of the Common Stock subject to the Award on the Date of Grant.

(d) Performance Goals. Performance Awards may be made subject to the attainment of Performance Goals relating to one or more business criteria which, where applicable, shall be within the meaning of Section 162(m) of the Code and consist of one or more or any combination of the following criteria: cash flow; cost; revenues; same store or general sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws,

  

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(iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of a Performance Award.

6.2 Forfeiture Restrictions. Shares of Common Stock that are the subject of a Restricted Stock Award shall be subject to restrictions on disposition by the Participant and to an obligation of the Participant to forfeit and surrender the shares to the Company under certain circumstances (the “Forfeiture Restrictions”). The Forfeiture Restrictions shall be determined by the Committee, in its sole discretion, and the Committee may provide that the Forfeiture Restrictions shall lapse on the passage of time or the occurrence of such other event or events determined to be appropriate by the Committee. The Forfeiture Restrictions applicable to a particular Restricted Stock Award (which may differ from any other such Restricted Stock Award) shall be stated in the Award Agreement.

6.3 Minimum Vesting Restrictions. The Forfeiture Restrictions for any particular Restricted Stock Award or vesting schedule applicable to a Restricted Stock Unit shall not provide for (i) a vesting period of less than one year nor more than five years, (ii)  full vesting within a period of less than three years and (iii) vesting that is more favorable than a pro rata vesting over a period of three years.

6.4 Restricted Stock Awards. At the time any Restricted Stock Award is granted under the Plan, the Company shall issue to the Participant an Award Agreement setting forth each of the matters addressed in this Article 6 and such other matters as the Committee may determine to be appropriate. Shares of Common Stock awarded pursuant to a Restricted Stock Award shall be represented by a stock certificate registered in the name of the Participant of such Restricted Stock Award or by a book entry account with the Company or the Company’s transfer agent.  To the extent and on the terms and conditions authorized by the Committee and set forth in the Award Agreement, the Participant shall have the right to receive dividends with respect to the shares of Common Stock subject to a Restricted Stock Award, to vote the shares of Common Stock subject thereto and, except as otherwise provided herein, to enjoy all other stockholder rights with respect to the shares of Common Stock subject thereto, except that, unless provided otherwise in the Award Agreement, (i) the Participant shall not be entitled to delivery of the certificate evidencing the shares of Common Stock covered by a Restricted Stock Award until the Forfeiture Restrictions have expired, (ii) the Company or an escrow agent shall retain custody of the certificate evidencing the shares of Common Stock (or such shares shall be held in a book entry account with the Company’s transfer agent) until the Forfeiture Restrictions have expired, (iii) the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the shares of Common Stock until the Forfeiture Restrictions have expired, and (iv) a breach of the terms and conditions established by the Committee and set forth in the Award Agreement shall cause a forfeiture of the Restricted Stock Award.  The right to vote and receive dividends on the shares of Common Stock shall be subject to such limitations and restrictions as may be determined by the Committee and set forth in the Award Agreement (including, without limitation, whether any dividends that are authorized to be paid under the Restricted Stock Award shall be paid to the Participant at the time the dividends are declared on the shares of Common Stock or held in escrow and paid to the Participant at the time the related shares of Common Stock subject to the Restricted Stock Award vest).  At the time of such Restricted Stock Award, the Committee may, in its sole discretion, prescribe additional terms, conditions or restrictions relating to the Restricted Stock Award, including rules pertaining to the Participant’s Termination of Service prior to expiration of the Forfeiture Restrictions. Such additional terms, conditions or restrictions shall also be set forth in the Award Agreement made in connection with the Restricted Stock Award.

6.5 Restricted Stock Units.  The Committee is authorized to award Restricted Stock Units to any Employee selected by the Committee covering such number of shares of Common Stock and subject to such terms and conditions as determined by the Committee and, including rules pertaining to the Participant’s Termination of Service prior to vesting of the Restricted Stock Units.  At the time of grant, the Committee shall specify the date or dates on which the Restricted Stock Units shall vest and become nonforfeitable, and may specify such conditions to vesting as it deems appropriate.  On the vesting date, the Company shall transfer to the Participant one unrestricted, fully transferable share of Common Stock for each Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited.  Alternatively, settlement of a Restricted Stock Unit may be made in cash (in an amount reflecting the Fair Market Value of the Common Stock that would have been issued) or any combination of cash and shares of Common Stock, as determined by the Committee, in its sole discretion, at the time of grant or settlement of the Restricted Stock Unit.  The Committee may authorize Dividend Equivalents to be paid on outstanding Restricted Stock Units.  If Dividend Equivalents are authorized to be paid, they may be paid at the time dividends are declared on the shares of Common Stock or at the time the Restricted Stock Units vest and they may be paid in either cash or shares of Common Stock, in the discretion of the Committee.  At the time of grant, the Committee shall specify the settlement date applicable to a Restricted Stock Unit, which shall be no earlier than the vesting date(s) applicable to the applicable Restricted Stock Unit

  

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and may be later than the vesting date(s) to the extent and under the terms determined by the Committee.  A Restricted Stock Unit shall be granted in compliance with the applicable requirements of Section 409A of the Code and the treasury regulations and other guidance issued thereunder.  At the time any Restricted Stock Unit is granted under the Plan, the Company shall issue to the Participant an Award Agreement setting forth each of the matters addressed in this Section 6.5 and other applicable matters in this Article 6 and such other matters as the Committee may determine to be appropriate.

6.6 Rights and Obligations of Participant. One or more stock certificates representing shares of Common Stock, free of Forfeiture Restrictions, shall be delivered to the Participant promptly after, and only after, the Forfeiture Restrictions have expired and vesting conditions, including Performance Goals, if any, have been satisfied and the Participant has satisfied all applicable federal, state and local income and employment tax withholding requirements. Each Award Agreement covering a Restricted Stock Award shall require that (i) the Participant, by his or her acceptance of the Award, shall irrevocably grant to the Company a power of attorney to transfer any shares that are forfeited to the Company and agrees to execute any documents requested by the Company in connection with such forfeiture and transfer, and (ii) such provisions regarding transfers of forfeited shares of Common Stock shall be specifically performable by the Company in a court of equity or law.

 

6.7 Restriction Period. The Restriction Period for a Restricted Stock Award shall commence on the Date of Grant of the Restricted Stock Award and, unless otherwise established by the Committee and stated in the Award Agreement, shall expire upon satisfaction of the conditions set forth in the Award Agreement pursuant to which the Forfeiture Restrictions will lapse. The Committee may, in its sole discretion, accelerate the Restriction Period for all or a part of a Restricted Stock Award; provided, however, that the Committee shall have no discretion to accelerate the Restriction Period for any Participant unless that Participant has been continuously an Employee for at least one (1) year after the Date of Grant.

6.8 Securities Restrictions. The Committee may impose other conditions on any shares of Common Stock subject to an Award as it may deem advisable, including (i) restrictions under applicable state or federal securities laws, and (ii) the requirements of any stock exchange or national market system upon which shares of Common Stock are then listed or quoted.

6.9 Payment for Common Stock. The Committee shall determine the amount and form of any payment for shares of Common Stock received pursuant to an Award; provided, that in the absence of such a determination, the Participant shall not be required to make any payment for shares of Common Stock received pursuant to an Award, except to the extent otherwise required by law.

6.10 Forfeiture of Restricted Stock. Subject to the provisions of the particular Award Agreement, on Participant’s Termination of Service during the Restriction Period, the shares of Common Stock still subject to the Forfeiture Restrictions contained in the Award shall be forfeited by the Participant. Upon any forfeiture, all rights of the Participant with respect to the forfeited shares of Common Stock subject to the Award shall cease and terminate, without any further obligation on the part of the Company, except that if so provided in the Award Agreement applicable to the Restricted Stock Award, the Company shall repurchase each of the shares of Common Stock forfeited for the purchase price per share paid by the Participant. The Committee will have discretion to determine the date of the Participant’s Termination of Service.

6.11 Lapse of Forfeiture Restrictions and Vesting Conditions in Certain Events; Committee’s Discretion. Notwithstanding the provisions of Section 6.10 or any other provision in the Plan to the contrary, the Committee may, on account of the Participant’s Disability or retirement, in its discretion and as of a date determined by the Committee, fully vest any Restricted Stock Unit or all Common Stock awarded to the Participant pursuant to a Restricted Stock Award, and upon such vesting, all Forfeiture Restrictions or vesting conditions applicable to such Award shall lapse or terminate; provided, however, that the Committee shall have no discretion to fully vest any Common Stock awarded unless the Participant has been continuously an Employee for at least one (1) year after the Date of Grant. The Committee shall have discretion to determine whether a Participant’s Termination of Service was as a result of Disability or retirement. Notwithstanding the foregoing provisions of this Section 6.11, the Committee shall not have the discretion or the right, in the case of a Participant’s retirement, to grant to or permit a Participant to vest in an Award that is a Performance Award designated by the Committee as being an Award to which Section 162(m) of the Code applies, except to the extent the Performance Goals which were established in order for such Performance Award to be granted or to be retained have been met.  Any action by the Committee pursuant to this Section 6.11 may vary among individual Participants and may vary among the Awards held by any individual Participant.

  

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    6.12 Lapse of Forfeiture Restrictions Upon Death. Notwithstanding the provisions of Section 6.10 or any other provision in the Plan or the applicable Award Agreement to the contrary, all Restricted Stock Units or Common Stock awarded to a Participant pursuant to a Restricted Stock Award shall fully vest upon the death of such Participant, and upon such vesting all Forfeiture Restrictions applicable to a Restricted Stock Award or Restricted Stock Unit shall lapse or terminate; even though the Participant’s death occurs before he has been continuously an Employee for at least one (1) year after the Date of Grant.

6.13 Withholding Taxes. The Committee may establish such rules and procedures as it considers desirable in order to satisfy any obligation of the Company to withhold applicable federal, state and local income and employment taxes with respect to the lapse of Forfeiture Restrictions or issuance of shares or any other taxable event applicable to Awards, including allowing the Participant to elect to have the Company withhold shares otherwise issuable under an Award (or allow the return of shares) having a Fair Market Value equal to the sum required to be withheld.  Notwithstanding any other provision of the Plan, the number of shares which may be withheld with respect to the issuance, vesting or payment of any Award (or which may be repurchased from the Participant after such shares were acquired by the Participant from the Company) in order to satisfy the Participant’s federal, state and local income and employment tax liabilities with respect to the issuance, vesting or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state and local income tax and payroll tax purposes that are applicable to such taxable income.  Prior to delivery of shares of Common Stock upon the lapse of Forfeiture Restrictions applicable to an Award, the Participant shall pay or make adequate provision acceptable to the Committee for the satisfaction of all tax withholding obligations of the Company.

 

ARTICLE 7

AMENDMENT OR DISCONTINUANCE

Subject to the limitations set forth in this Article 7, the Board or the Committee may at any time and from time to time, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that any amendment to the Plan must be approved by the stockholders of the Company if the amendment would (a) materially increase the aggregate number of shares of Common Stock which may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, (c) materially increase the benefits accruing to Participants under the Plan, or (d) otherwise require stockholder approval due to the requirements of any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or in order for the Plan or Awards to continue to comply with sections of the Code or any other laws applicable to Awards made under this Plan. Any such amendment shall, to the extent deemed necessary by the Committee, be applicable to any outstanding Awards theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Awards outstanding under the Plan shall, upon request of the Committee and as a condition to the applicable lapse of Forfeiture Restrictions thereon, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 7 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Awards theretofore granted under the Plan without the consent of the affected Participant.

ARTICLE 8

TERM

Unless sooner terminated by action of the Board, the Plan will terminate on December 31, 2014, but Awards granted before that date will continue to be effective in accordance with the terms and conditions of the respective Award Agreement.

ARTICLE 9

CAPITAL ADJUSTMENTS

If at any time while the Plan is in effect, or Awards are outstanding, there shall be any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from (1) the declaration or payment of a stock dividend, (2) any recapitalization resulting in a stock split up, combination, or exchange of shares of Common Stock, or

  

8

  

(3) other increase or decrease in such shares of Common Stock effected without receipt of consideration by the Company, then and in such event:

 

	  	
(a)

	
An appropriate adjustment shall be made in the maximum number of shares of Common Stock then subject to being awarded under the Plan and in the maximum number of shares of Common Stock that may be awarded to a Participant to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock shall continue to be subject to being so awarded.

 

	 	
 

(b)

	
 

Appropriate adjustments shall be made in the number of outstanding shares of Restricted Stock with respect to which Forfeiture Restrictions have not yet lapsed or outstanding shares of Common Stock that are subject to a Restricted Stock Unit that have not vested or have yet been issued prior to any such change.

 

 

Except as otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to the number of outstanding shares of Restricted Stock or shares of Common Stock subject to an Award.

Upon the occurrence of each event requiring an adjustment with respect to any Award, the Company shall communicate by reasonable means intended to reach each affected Participant its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant.

ARTICLE 10

RECAPITALIZATION, MERGER AND

CONSOLIDATION; CHANGE IN CONTROL

10.1 The existence of this Plan and Awards granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

10.2 Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Awards granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Awards would have been entitled.

10.3 In the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the outstanding Awards, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Awards to be thereafter applicable to such stock, securities, cash, or property in accordance with their terms. Notwithstanding the foregoing, however, all such Awards may be canceled by the Company as of the effective date of any such reorganization, merger, consolidation, or share exchange by giving notice to each holder thereof or his personal representative of its intention to do so and by permitting the purchase by the Company during the thirty (30) day period next preceding such effective date of all of the shares of Common Stock subject to such outstanding Awards at a price equal to the Fair Market Value of such shares on the date of purchase.

10.4 In the event of a Change of Control, then, notwithstanding any other provision in this Plan to the contrary, all Awards outstanding shall thereupon automatically be vested. The determination of the Committee that any of the foregoing conditions has been met shall be binding and conclusive on all parties.

  

9

  

ARTICLE 11

LIQUIDATION OR DISSOLUTION

In case the Company shall, at any time while any Award under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be thereafter entitled to receive, in lieu of each share of Common Stock of the Company in which the Participant is vested, pursuant to the terms of the Participant’s Award Agreement, as of the date the Company sells all or substantially all of its property, or dissolves, liquidates or winds up its affairs, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. Notwithstanding the foregoing, the Committee may, in its sole and absolute discretion accelerate the vesting of any Participant’s Award in connection with any sale, dissolution, liquidation, or winding up contemplated in this Article 11.

ARTICLE 12

MISCELLANEOUS PROVISIONS

12.1 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the shares of Common Stock to be received from an Award are being acquired for investment and not with a view to their distribution.

12.2 No Right to Continued Employment. Neither the Plan nor any Award granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.

12.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any Officer or Employee acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any Officer or Employee acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.

12.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.

12.5 Severability And Reformation. The Company intends all provisions of the Plan to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as written, the court should reform the provision to such narrower scope as it determines to be enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid, or unenforceable under present or future law, such provision shall be fully severable and severed, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions of the Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance.

12.6 Governing Law. The Plan shall be construed and interpreted in accordance with the laws of the State of Kansas.

12.7 Compliance With Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Award if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act); and, as a condition of any sale or issuance of shares of Common Stock under an Award, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan and the grant of Awards hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.

 

  

10

  

    12.8 Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):

On the face of the certificate:

“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”

On the reverse:

“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain CEC Entertainment, Inc. 2004 Restricted Stock Plan and the related Award Agreement, copies of which are on file at the principal office of the Company in Irving, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan and Agreement. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan and Agreement.”

The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:

“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”

12.9           Limits on Transfer.  No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to or for the benefit of any other party other than the Company or a Subsidiary.  Except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation procedures approved from time to time by the Committee.  The Committee by express provision in the Award or an amendment thereto may, to the extent permitted by applicable law, permit an Award to be transferred or paid to certain persons or entities related to the Participant, including, but not limited to, members of the Participant’s family, charitable institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Committee, pursuant to such conditions and procedures as the Committee may establish.  Any permitted transfer shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.

12.10           Fractional Shares.  No fractional shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

12.11           Unfunded Status of Awards.  The Plan is intended to be an “unfunded” plan for incentive compensation.  With respect to any payments not yet made or any obligations owing to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

12.12           Internal Revenue Code Section 409A.  It is the intent that the Plan, the Award Agreement and any Award granted hereunder shall either be exempt from or comply with Section 409A of the Code, and any ambiguity in the terms to which Awards are subject shall be so construed.  In furtherance of this interest, to the extent that any regulations or other guidance issued under Section 409A after the effective date of this Plan would result in a Participant being subject to payment of interest and tax penalty under Section 409A, the Committee may amend the Plan or any Award Agreement, without the Participant’s consent, including with respect to the timing of payment of benefits, in order to avoid the application of, or to comply with the requirements of, Section 409A; provided, however, that the

  

11

  

Company makes no representation that compensation or benefits payable under this Plan or Award granted under this Plan shall be exempt from or comply with Section 409A and makes no representation to preclude Section 409A from applying to the compensation or benefits payable under the Plan.

A copy of this Plan shall be kept on file in the principal office of the Company in Irving, Texas.

  

12exhibit4-1.htm

    

       

    

    
 

    Exhibit
4.1

    ARRHYTHMIA
RESEARCH TECHNOLOGY, INC.

     

    2010 EQUITY INCENTIVE
PLAN

     

     

    1. Purpose
and Objectives

     

     

    The
Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan (the “Plan”) is
designed to align the interests of (i) designated employees of Arrhythmia
Research Technology, Inc. (the “Company”) and its subsidiaries, (ii)
non-employee members of the board of directors of the Company, and (iii)
consultants and key advisors of the Company and its subsidiaries with the
interests of the Company’s stockholders and to provide an opportunity for such
persons to acquire and maintain a proprietary interest in the Company through
stock ownership.  By extending the opportunity to receive grants of
stock options, stock units, stock awards, stock appreciation rights and other
stock-based awards, the Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company’s shareholders, and will align the economic interests of
the participants with those of the shareholders.  The Plan may
furthermore be expected to benefit the Company and its stockholders by making it
possible for the Company to attract and retain the best available
talent.  The Plan shall become effective if and at the time it is
approved by the shareholders of the Company.

     

     

    2. Definitions

     

    Whenever
used in this Plan, the following terms will have the respective meanings set
forth below:

     

    a. “Board”
means the Company’s Board of Directors.

     

    b. “Cause,”
unless otherwise defined in the instrument evidencing an award or in a written
employment, services or other agreement between the Participant and the Company,
means dishonesty, fraud, serious or willful misconduct, violation of Company
policies and procedures including the Code of Ethics, unauthorized use or
disclosure of confidential information or trade secrets, or conduct prohibited
by law (except minor violations), in each case as determined by the Compensation
Committee, whose determination shall be conclusive and binding.

     

    c. “Change
of Control” shall be deemed to have occurred if:

     

    i. A merger,
consolidation, liquidation or reorganization of the Company into or with another
company or other legal person, after which merger, consolidation, liquidation or
reorganization of the capital stock of the Company outstanding prior to
consummation of the transaction is not converted into or exchanged for or does
not represent more than 50% of the aggregate voting power of the surviving or
resulting entity;

     

    ii. The
direct or indirect acquisition by any person (as the term “person” is used in
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of more than fifty percent (50%) of the voting capital stock of the Company, in
a single or series of related transactions; or

     

    iii. The sale,
exchange, or transfer of all or substantially all of the Company’s assets (other
than a sale, exchange or transfer to one or more entities where the stockholders
of the Company immediately before such sale, exchange or transfer retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the entity or entities to which the assets were
transferred).

     

    d. “Code”
means the Internal Revenue Code of 1986, as amended.

     

    e. “Committee”
means the Compensation Committee of the Board or another committee appointed by
the Board to administer the Plan.  Grants that are intended to be
“qualified performance-based compensation” under section 162(m) of the Code
shall be made by a committee that consists of two or more persons appointed by
the Board, all of whom shall be “outside directors” as defined under
section 162(m) of the Code and related Treasury regulations.

     

    f. “Company”
means Arrhythmia Research Technology, Inc., any present or future subsidiary,
and any successor corporation.

     

    g. “Company
Stock” means the common stock, $0.01 par value, of the Company.

     

    h. “Consultant”
means a consultant or advisor who performs services for the Employer and who
renders bona fide services to the Employer, if the services are not in
connection with the offer and sale of securities in a capital-raising
transaction and the Consultant does not directly or indirectly promote or
maintain a market for the Employer’s securities.

     

    
      
         

      

      
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    i. “Disability”
means a Participant’s becoming disabled within the meaning of section 22(e)(3)
of the Code, within the meaning of the Employer’s long-term disability plan
applicable to the Participant, or as otherwise determined by the
Committee.

     

    j. “Effective
Date” of the Plan means April 30, 2010.

     

    k. “Employee”
means an employee of the Employer (including an officer or director who is also
an employee).

     

    l. “Employer”
means the Company and its subsidiaries.

     

    m. “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

     

    n. “Exercise
Price” means the per share price at which shares of Company Stock may be
purchased under an Option, as designated by the Committee.

     

    o. “Fair
Market Value” means, with respect to a share of Common Stock, the fair market
value thereof as of the relevant date of determination, as determined in
accordance with the valuation methodology approved by the
Committee.  In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common Stock
shall equal the closing price for the Common Stock on any given date during
regular trading, or if not trading on that date, such price on the last
preceding date on which the Common Stock was traded.

     

    p. “Grant”
means an Option, Stock Unit, Stock Award, SAR or Other Stock-Based Award granted
under the Plan.

     

    q. “Grant
Agreement” means the written instrument that sets forth the terms and conditions
of a Grant, including all amendments thereto.

     

    r. “Incentive
Stock Option” means an Option that is intended to meet the requirements of an
incentive stock option under section 422 of the Code.

     

    s. “Non-Employee
Director” means a member of the Board who is not an employee of the
Employer.

     

    t. “Nonqualified
Stock Option” means an Option that is not intended to be taxed as an incentive
stock option under section 422 of the Code.

     

    u. “Option”
means an option to purchase shares of Company Stock, as described in Section
7.

     

    v. “Other
Stock-Based Award” means any Grant based on, measured by or payable in Company
Stock (other than a Grant described in Sections 7, 8 or 9 of the Plan), as
described in Section 10.

     

    w. “Participant”
means an Employee, Consultant or Non-Employee Director designated by the
Committee to participate in the Plan.

     

    x. “Plan”
means this Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan, as
in effect from time to time.

     

    y. “SAR”
means a stock appreciation right as described in Section 10.

     

    z. “Stock
Award” means an award of Company Stock as described in Section 9.

     

    aa. “Stock
Unit” means an award of a phantom unit representing a share of Company Stock, as
described in Section 8.

     

     

    3. Administration

     

    a. Committee.  The
Plan shall be administered and interpreted by the Committee.  The
Committee may delegate to officers or managers of the Company or any subsidiary
of the Company the authority, subject to such terms as the Committee shall
determine, to perform functions designated by the Committee, to the extent that
such delegation is permitted under the Delaware General Corporation Law and
other applicable laws.  Other provisions of the Plan notwithstanding,
the Board may perform any function of the Committee under the Plan, in order to
ensure that transactions under the Plan are exempt under Rule 16b-3 or for
any other reason; provided,
however, that authority specifically reserved to the Board under the
terms of the Plan, the Company’s Certificate of Incorporation or By-Laws, or
applicable law shall be exercised by the Board and not by the
Committee.

     

    b. Committee
Authority.  Except as otherwise provided herein or as required
by law, the Committee shall have the authority to make recommendations to the
Board as to (i) the Participants to whom Grants shall be made under the Plan,
(ii) the type, size and terms and conditions of the Grants to be made to each
such Participant, (iii) the time when the grants will be made and the duration
of any applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability, and (iv) amendment of the
terms and conditions of any previously issued Grant, subject to the provisions
of Section 17 below, and to deal with any other matters arising under the
Plan.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    c. Committee
Determinations.  The Committee shall have full power and
express discretionary authority to administer and interpret the Plan, to make
factual determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for the conduct of its business as
it deems necessary or advisable.  The interpretations of the Plan and
all determinations made by the Committee and/or the Board pursuant to the powers
vested in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder.  All powers
of the Committee and/or the Board shall be executed in its sole discretion, in
the best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
Participants.

     

    d. Limitation of
Liability.  Each member of the Committee or the Board shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company’s independent certified public accountants, or any
executive compensation consultant, legal counsel, or other professional retained
by the Company to assist in the administration of the Plan.  No member
of the Committee or the Board, nor any officer or employee of the Company acting
on behalf of the Committee or the Board, shall be personally liable for any
action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Committee or the Board and any
officer or employee of the Company acting on behalf of the Committee or the
Board or members thereof shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.

     

     

    4. Grants

     

    a. Grants
under the Plan may consist of Options as described in Section 7, Stock Units as
described in Section 8, Stock Awards as described in Section 9, and SARs or
Other Stock-Based Awards as described in Section 10.  All Grants shall
be subject to such terms and conditions as the Committee deems appropriate and
as are specified in writing by the Committee to the Participant in the Grant
Agreement.

     

    b. All
Grants shall be made conditional upon the Participant’s acknowledgement, in
writing or by acceptance of the Grant, that all decisions and determinations of
the Committee shall be final and binding on the Participant, his or her
beneficiaries and any other person having or claiming an interest under such
Grant.  Grants under a particular Section of the Plan need not be
uniform as among the Participants.

     

     

    5. Shares
Subject to the Plan

     

    a. Shares
Authorized.  The aggregate number of shares of Company Stock
that may be issued under the Plan shall be, subject to adjustment as described
in subsection (d) below:

     

    i. 400,000
shares plus

     

    ii. 100,000
shares reserved for issuance pursuant to the 2005 Stock Award Plan, which shares
shall cease, as of the Effective Date, to be available for grant and issuance
under the 2005 Stock Award Plan but shall be available for issuance under the
Plan.

     

    b. Source of Shares; Share
Counting.  Shares issued under the Plan may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market.  If and
to the extent Options and SARs granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised, and
if and to the extent that any Stock Awards, Stock Units or Other Stock-Based
Awards are forfeited or terminated, or otherwise are not paid in full, the
shares reserved for such Grants shall again be available for purposes of the
Plan.

     

    c. Individual
Limits.  In no event shall the aggregate fair market value
(determined at the time the option is granted) of Common Stock for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock plans of the Company) exceed
$100,000.

     

    d. Adjustments.  If
there is any change in the number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spinoff, recapitalization, stock split, or
combination or exchange of shares, (ii) by reason of a merger, reorganization or
consolidation, (iii) by reason of a reclassification or change in par value, or
(iv) by reason of any other extraordinary or unusual event affecting the
outstanding Company Stock as a class without the Company’s receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company’s payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for issuance under the Plan, the maximum number of shares of
Company Stock for which any individual may receive Grants in any year, the
number of shares covered by outstanding Grants, the kind of shares issued and to
be issued under the Plan, and the price per share or the applicable market value
of such Grants may be appropriately adjusted by the Board to reflect any
increase or decrease in the number of, or change in the kind or value of, issued
shares of Company Stock to preclude, to the extent practicable, the enlargement
or dilution of rights and benefits under such Grants; provided, however, that
any fractional shares resulting from such adjustment shall be
eliminated.  Any adjustments determined by the Board shall be final,
binding and conclusive.

     

    
      
         

      

      
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    6. Eligibility
for Participation

     

    a. Eligible
Persons.  All Employees, Consultants and Non-Employee Directors
shall be eligible to participate in the Plan.

     

    b. Selection of
Participants.  The Committee shall recommend and the Board
shall select the Employees, Consultants and Non-Employee Directors to receive
Grants, and shall determine the type of Grant and the number of shares of
Company Stock subject to each Grant.

     

     

    7. Options

     

    a. General Requirements.
The Committee may recommend and the Board may grant Options to an Employee,
Consultant or Non-Employee Director upon such terms and conditions as the Board
deems appropriate under this Section 7.  The Committee shall recommend
to the Board for its determination the number of shares of Company Stock that
will be subject to each Grant of Options to Employees, Consultants and
Non-Employee Directors.

     

    b. Type of Option, Price and
Term. The Committee may recommend and the Board may grant Incentive
Stock Options or Nonqualified Stock Options or any combination of the two, all
in accordance with the terms and conditions set forth
herein.  Incentive Stock Options may be granted only to Employees of
the Company or its parents or subsidiaries, as defined in section 424 of the
Code.  Nonqualified Stock Options may be granted to Employees,
Consultants or Non-Employee Directors.

     

    i. The
Exercise Price of Company Stock subject to an Option shall be determined by the
Board; provided, however, that the Exercise Price for an Incentive Stock Option
will be equal to, or greater than, the Fair Market Value of a share of Company
Stock on the date the Option is granted and further provided that an Incentive
Stock Option may not be granted to an Employee who, at the time of grant, owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary, as defined in section 424
of the Code, unless the Exercise Price per share is not less than 110% of the
Fair Market Value of the Company Stock on the date of grant.

     

    ii. The
Committee shall recommend to and the Board shall determine the term of each
Option, which shall not exceed ten years from the date of
grant.  However, an Incentive Stock Option that is granted to an
Employee who, at the time of grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary, as defined in section 424 of the Code, may not have a term that
exceeds five years from the date of grant.

     

    iii. Exercisability
of Options.

     

    iv. Options
shall become exercisable in accordance with such terms and conditions as may be
determined by the Board and specified in the Grant Agreement.  The
Board upon the recommendation of the Committee may accelerate the exercisability
of any or all outstanding Options at any time for any reason.

     

    v. Options
granted to persons who are non-exempt employees under the Fair Labor Standards
Act of 1938, as amended, may not be exercisable for at least six months after
the date of grant (except that such Options may become exercisable, as
determined by the Board upon the recommendation of the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).

     

    c. Termination of Employment or
Service.  Unless otherwise specifically provided in the
instrument evidencing an award or in a written employment, services or other
agreement between the Participant and the Company, upon termination of
employment or the services of a Participant, an Option may only be exercised as
follows:

     

    i. In the
event that a Participant ceases to be employed by, or provide service to, the
Employer for any reason other than Disability, death, or termination for Cause,
any Option which is otherwise exercisable by the Participant shall terminate
unless exercised within three months after the date on which the Participant
ceases to be employed by, or provide service to, the Employer (or within such
other period of time as may be specified by the Board upon the recommendation of
the Committee), but in any event no later than the date of expiration of the
Option term. Any of the Participant’s Options that are not otherwise exercisable
as of the date on which the Participant ceases to be employed by, or provide
service to, the Employer shall terminate as of such date.

     

    
      
         

      

      
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    ii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of a termination for Cause by the Employer, any Option held
by the Participant shall terminate as of the date the Participant ceases to be
employed by, or provide service to, the Employer.  In addition,
notwithstanding any other provisions of this Section 7, if the Board determines
that the Participant has engaged in conduct that constitutes Cause at any time
while the Participant is employed by, or providing service to, the Employer or
after the Participant’s termination of employment or service, any Option held by
the Participant shall immediately terminate and the Participant shall
automatically forfeit all shares underlying any exercised portion of an Option
for which the Company has not yet delivered the share certificates, upon refund
by the Company of the Exercise Price paid by the Participant for such
shares.  Upon any exercise of an Option, the Company may withhold
delivery of share certificates pending resolution of an inquiry that could lead
to a finding resulting in forfeiture.

     

    iii. In the
event the Participant ceases to be employed by, or provide service to, the
Employer on account of the Participant’s Disability, any Option which is
otherwise exercisable by the Participant shall terminate unless exercised within
one year after the date on which the Participant ceases to be employed by, or
provide service to, the Employer (or within such other period of time as may be
specified by the Board), but in any event no later than the date of expiration
of the Option term.  Except as otherwise provided by the Board, any of
the Participant’s Options which are not otherwise exercisable as of the date on
which the Participant ceases to be employed by, or provide service to, the
Employer shall terminate as of such date.

     

    iv. If the
Participant dies while employed by, or providing service to, the Employer or
while an Option remains outstanding under Section 7(d)(i) or 7(d)(iii) above (or
within such other period of time as may be specified by the Board), any Option
that is otherwise exercisable by the Participant shall terminate unless
exercised within one year after the date on which the Participant ceases to be
employed by, or provide service to, the Employer (or within such other period of
time as may be specified by the Board), but in any event no later than the date
of expiration of the Option term.  Except as otherwise provided by the
Board, any of the Participant’s Options that are not otherwise exercisable as of
the date on which the Participant ceases to be employed by, or provide service
to, the Employer shall terminate as of such date.

     

    d. Exercise of
Options.  A Participant may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company.  The Participant shall pay the Exercise Price for the Option
(i) in cash, (ii) by delivering shares of Company Stock owned by the Participant
and having a Fair Market Value on the date of exercise equal to the Exercise
Price or by attestation to ownership of shares of Company Stock having an
aggregate Fair Market Value on the date of exercise equal to the Exercise Price,
(iii) by payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board, or (iv) by such other method as the
Committee may approve.  Shares of Company Stock used to exercise an
Option shall have been held by the Participant for the requisite period of time
to avoid adverse accounting consequences to the Company with respect to the
Option.  Payment for the shares pursuant to the Option, and any
required withholding taxes, must be received by the time specified by the
Committee depending on the type of payment being made, but in all cases prior to
the issuance of the Company Stock.

     

    e. Limits on Incentive Stock
Options.  Each Incentive Stock Option shall provide that, if
the aggregate Fair Market Value of the stock on the date of the grant with
respect to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year, under the Plan or any other stock option
plan of the Company or a parent or subsidiary, as defined in section 424 of the
Code, exceeds $100,000, then the Option, as to the excess, shall be treated as a
Nonqualified Stock Option.  An Incentive Stock Option shall not be
granted to any person who is not an Employee of the Company or a parent or
subsidiary, as defined in section 424 of the Code.

     

     

    8. Stock
Units

     

    a. General
Requirements.  The Committee may recommend and the Board may
grant Stock Units to an Employee, Consultant or Non-Employee Director, upon such
terms and conditions as it deems appropriate under this Section
8.  Each Stock Unit shall represent the right of the Participant to
receive a share of Company Stock or an amount based on the value of a share of
Company Stock.  All Stock Units shall be credited to bookkeeping
accounts on the Company’s records for purposes of the Plan.

     

    
      
         

      

      
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    b. Terms of Stock
Units.  The Committee may recommend and the Board may grant
Stock Units that are payable on terms and conditions determined by it, which may
include payment based on achievement of performance goals.  Stock
Units may be paid at the end of a specified vesting or performance period, or
payment may be deferred to a date authorized by the Committee.  The
Committee shall recommend and the Board shall determine the number of Stock
Units to be granted and the requirements applicable to such Stock
Units.

     

    c. Payment With Respect to
Stock Units.  Payment with respect to Stock Units shall be made
in cash, in Company Stock, or in a combination of the two, as determined by the
Committee.  The Grant Agreement shall specify the maximum number of
shares that can be issued under the Stock Units.

     

    d. Requirement of Employment or
Service.  The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Units after termination of the Participant’s employment or service,
and the circumstances under which Stock Units may be forfeited.

     

     

    9. Stock
Awards

     

    a. General Requirements.
The Committee may recommend and the Board may issue shares of Company Stock to
an Employee, Consultant or Non-Employee Director under a Stock Award, upon such
terms and conditions as it deems appropriate under this Section
9.  Shares of Company Stock issued pursuant to Stock Awards may be
issued for cash consideration or for no cash consideration, and subject to
restrictions or no restrictions, as determined by the Board.  The
Committee may recommend and the Board may establish conditions under which
restrictions on Stock Awards shall lapse over a period of time or according to
such other criteria as the Committee deems appropriate, including restrictions
based upon the achievement of specific performance goals.  The
Committee shall recommend and the Board shall determine the number of shares of
Company Stock to be issued pursuant to a Stock Award.

     

    b. Requirement of Employment or
Service.  The Committee shall recommend and the Board shall
determine in the Grant Agreement under what circumstances a Participant may
retain Stock Awards after termination of the Participant’s employment or
service, and the circumstances under which Stock Awards may be
forfeited.

     

    c. Restrictions on
Transfer.  While Stock Awards are subject to restrictions, a
Participant may not sell, assign, transfer, pledge or otherwise dispose of the
shares subject thereof except upon death as described in Section
14(a).  Each certificate for a share subject of a Stock Award shall
contain a legend giving appropriate notice of the restrictions in the
Grant.  The Participant shall be entitled to have the legend removed
when all restrictions on such shares have lapsed.  The Company may
retain possession of any certificates for Stock Awards until all restrictions on
such shares have lapsed.

     

    d. Right to Vote and to Receive
Dividends.  The Committee shall recommend and the Board shall
determine to what extent, and under what conditions, the Participant shall have
the right to vote shares subject of Stock Awards and to receive any dividends or
other distributions paid on such shares during the restriction
period.

     

     

    10. Stock
Appreciation Rights and Other Stock-Based Awards

     

    a. The
Committee may recommend and the Board may grant SARs to an Employee,
Non-Employee Director or Consultant separately or in tandem with an
Option.  The following provisions are applicable to SARs:

     

    i. Base
Amount.  The base amount of the SAR shall be established at the
time the SAR is granted.  The base amount of each SAR shall be equal
to the per share Exercise Price of the related Option or, if there is no related
Option, an amount that is at least equal to the Fair Market Value of a share of
Company Stock as of the date of Grant of the SAR.

     

    ii. Tandem
SARs.  Tandem SARs may be granted either at the time the Option
is granted or at any time thereafter while the Option remains outstanding;
provided, however, that, in the case of an Incentive Stock Option, SARs may be
granted only at the date of the grant of the Incentive Stock
Option.  In the case of tandem SARs, the number of SARs granted to a
Participant that shall be exercisable during a specified period shall not exceed
the number of shares of Company Stock that the Participant may purchase upon the
exercise of the related Option during such period.  Upon the exercise
of an Option, the SARs relating to the Company Stock covered by such Option
shall terminate.  Upon the exercise of SARs, the related Option shall
terminate to the extent of an equal number of shares of Company
Stock.

     

    iii. Exercisability.  An
SAR shall be exercisable during the period specified in the Grant Agreement and
shall be subject to such vesting and other restrictions as may be specified in
the Grant Agreement.  SARs may be granted that are subject to
achievement of performance goals or other conditions.  The Board may
accelerate the exercisability of any or all outstanding SARs at any time for any
reason.  SARs may only be exercised while the Participant is employed
by, or providing service to, the Employer or during the applicable period after
termination of employment or service as described in Section 7(d).  A
tandem SAR shall be exercisable only during the period when the Option to which
it is related is also exercisable.

     

    
      
         

      

      
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    iv. Grants to Non-Exempt
Employees.  SARs granted to persons who are non-exempt
employees under the Fair Labor Standards Act of 1938, as amended, may not be
exercisable for at least six months after the date of grant (except that such
SARs may become exercisable, as determined by the Committee, upon the
Participant’s death, Disability or retirement, or upon a Change of Control or
other circumstances permitted by applicable regulations).

     

    v. Value of
SARs.  When a Participant exercises SARs, the Participant shall
receive in settlement of such SARs an amount equal to the value of the stock
appreciation for the number of SARs exercised.  The stock appreciation
for an SAR is the amount by which the Fair Market Value of the underlying
Company Stock on the date of exercise of the SAR exceeds the base amount of the
SAR as described in subsection (i).

     

    vi. Form of
Payment.  The Committee shall determine whether the stock
appreciation for an SAR shall be paid in the form of shares of Company Stock,
cash or a combination of the two.  For purposes of calculating the
number of shares of Company Stock to be received, shares of Company Stock shall
be valued at their Fair Market Value on the date of exercise of the
SAR.  If shares of Company Stock are to be received upon exercise of
an SAR, cash shall be delivered in lieu of any fractional share.

     

    b. Other Stock-Based
Awards.  The Committee may recommend and the Board may grant
other awards not specified in Sections 7, 8 or 9 above that are based on or
measured by Company Stock to Employees, Consultants and Non-Employee Directors,
on such terms and conditions as it deems appropriate.  Other
Stock-Based Awards may be granted subject to achievement of performance goals or
other conditions and may be payable in Company Stock or cash, or in a
combination of the two, as determined by the Committee in the Grant
Agreement.

     

     

    11. Qualified
Performance-Based Compensation

     

    a. Designation as Qualified
Performance-Based Compensation.  The Committee may recommend
and the Board may determine that Stock Units, Stock Awards, SARs or Other
Stock-Based Awards granted to an Employee shall be considered “qualified
performance-based compensation” under section 162(m) of the Code, in which case
the provisions of this Section 11 shall apply to such Grants.  The
Committee may recommend and the Board may also grant Options under which the
exercisability of the Options is subject to achievement of performance goals as
described in this Section 11 or otherwise.

     

    b. Performance
Goals.  When Grants are made under this Section 11, the Grant
shall set forth in writing (i) the objective performance goals that must be met,
(ii) the period during which performance will be measured, (iii) the maximum
amounts that may be paid if the performance goals are met, and (iv) any other
conditions that the Committee deems appropriate and consistent with the
requirements of section 162(m) of the Code for “qualified performance-based
compensation.”  The performance goals shall satisfy the requirements
for “qualified performance-based compensation,” including the requirement that
the achievement of the goals be substantially uncertain at the time they are
established and that the performance goals be established in such a way that a
third party with knowledge of the relevant facts could determine whether and to
what extent the performance goals have been met.  The Board shall not
have discretion to increase the amount of compensation that is payable, but may
reduce the amount of compensation that is payable, pursuant to Grants identified
by the Board as “qualified performance-based compensation.”

     

    c. Criteria Used for Objective
Performance Goals.  Objectively determinable performance goals
shall be based on one or more of the following criteria:  stock price,
earnings per share, price-earnings multiples, gross profit, net earnings,
operating earnings, revenue, revenue growth, number of days sales outstanding in
accounts receivable, number of days of cost of sales in inventory, productivity,
margin, EBITDA (earnings before interest, taxes, depreciation and amortization),
net capital employed, return on assets, shareholder return, return on equity,
return on capital employed, growth in assets, unit volume, sales, cash flow,
market share, performance relative to a designated comparison group, debt
reduction, market capitalization or strategic business criteria consisting of
one or more objectives based on meeting specified R&D programs, new product
releases, revenue goals, market penetration goals, customer growth, geographic
business expansion goals, cost targets, quality improvements, cycle time
reductions, manufacturing improvements and/or efficiencies, human resource
programs, customer programs, or goals relating to acquisitions or
divestitures.  The performance goals may relate to one or more
business units or the performance of the Company as a whole, or any combination
of the foregoing.  Performance goals need not be uniform among
Participants.  Performance goals may be set on a pre tax or after tax
basis, may be defined by absolute or relative measures, and may be valued on a
growth or fixed basis.

     

    
      
         

      

      
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    d. Timing of Establishment of
Goals.  Performance goals shall be established in writing
either before the beginning of the performance period or during a period ending
no later than the earlier of (i) 90 days after the beginning of the performance
period or (ii) the date on which 25% of the performance period has been
completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code.

     

    e. Certification of
Results.  The Board shall certify the performance results for
the performance period specified in the Grant Agreement after the performance
period ends.  The Board shall determine the amount, if any, to be paid
pursuant to each Grant based on the achievement of the performance goals and the
satisfaction of all other terms of the Grant Agreement.

     

    f. Death, Disability or Other
Circumstances.  The Grant Agreement may provide that Grants
under this Section 11 shall be payable, in whole or in part, in the event of the
Participant’s death or Disability, a Change of Control or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m) of the Code.

     

     

    12. Deferrals

     

    The
Company may permit or require a Participant to defer receipt of the payment of
cash or the delivery of shares that would otherwise be due to the Participant in
connection with any Grant.  The Company shall establish rules and
procedures for any such deferrals, consistent with applicable requirements of
section 409A of the Code.

     

     

    13. Withholding
of Taxes

     

    a. Required
Withholding.  All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements.  The Company may require that the Participant or other
person receiving or exercising Grants pay to the Company the amount of any
federal, state or local taxes that the Company is required to withhold with
respect to such Grants, or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such
Grants.

     

    b. Election to Withhold
Shares.  If the Committee so permits, a Participant may elect
to satisfy the Company’s tax withholding obligation with respect to Grants paid
in Company Stock by having shares withheld, at the time such Grants become
taxable, up to an amount that does not exceed the minimum applicable withholding
tax rate for federal (including FICA), state and local tax
liabilities.  The election must be in a form and manner prescribed by
the Committee.

     

     

    14. Transferability
of Grants

     

    a. Restrictions on
Transfer.  Except as described in subsection (b) below, only
the Participant may exercise rights under a Grant during the Participant’s
lifetime, and a Participant may not transfer those rights except by will or by
the laws of descent and distribution.  When a Participant dies, the
personal representative or other person entitled to succeed to the rights of the
Participant may exercise such rights.  Any such successor must furnish
proof satisfactory to the Company of his or her right to receive the Grant under
the Participant’s will or under the applicable laws of descent and
distribution.

     

    b. Transfer of Nonqualified
Stock Options to or for Family Members.  Notwithstanding the
foregoing, the Company may provide, in a Grant Agreement, that a Participant may
transfer Nonqualified Stock Options to family members, or one or more trusts or
other entities for the benefit of or owned by family members, consistent with
the applicable securities laws, according to such terms as the Company may
determine; provided that the Participant receives no consideration for the
transfer of an Option and the transferred Option shall continue to be subject to
the same terms and conditions as were applicable to the Option immediately
before the transfer.

     

     

    15. Consequences
of a Change of Control

     

    In the
event of a Change of Control, the Company may take any one or more of the
following actions with respect to any or all outstanding Grants, without the
consent of any Participant: (i) determine that outstanding Options and SARs
shall be fully exercisable, and restrictions on outstanding Stock Awards and
Stock Units shall lapse, as of the date of the Change of Control or at such
other time or subject to specific conditions as the Committee recommends, (ii)
require that Participants surrender their outstanding Options and SARs in
exchange for one or more payments by the Company, in cash or Company Stock as
recommended by the Committee, in an amount equal to the amount by which the then
air Market Value of the shares of Company Stock subject to the Participant’s
unexercised Options and SARs exceeds the Exercise Price, if any, and on such
terms as the Committee determines, (iii) after giving Participants an
opportunity to exercise their outstanding Options and SARs, terminate any or all
unexercised Options and SARs at such time as the Committee recommends, (iv) with
respect to Participants holding Stock Units or Other Stock-Based Awards,
determine that such Participants shall receive one or more payments in
settlement of such Stock Units or Other Stock-Based Awards, in such amount and
form and on such terms as may be determined by the Committee, or (v) determine
that Grants that remain outstanding after the Change of Control shall be
converted to similar grants of the surviving corporation (or a parent or
subsidiary of the surviving corporation).  Such acceleration,
surrender, termination, settlement or assumption shall take place as of the date
of the Change of Control or such other date as the Company may
specify.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    16. Requirements
for Issuance of Shares

     

    No
Company Stock shall be issued in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance of such Company Stock
have been complied with to the satisfaction of the Company.  The
Company shall have the right to condition any Grant made to any Participant
hereunder on such Participant’s undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Company shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such
restrictions.  Certificates representing shares of Company Stock
issued under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed
thereon.  No Participant shall have any right as a shareholder with
respect to Company Stock covered by a Grant until shares have been issued to the
Participant.

     

     

    17. Amendment
and Termination of the Plan

     

    a. Amendment.  The
Board may amend or terminate the Plan at any time; provided, however, that the
Board shall not amend the Plan without approval of the shareholders of the
Company if such approval is required in order to comply with the Code or
applicable laws, or to comply with applicable stock exchange
requirements.  No amendment or termination of this Plan shall, without
the consent of the Participant, materially impair any rights or obligations
under any Grant previously made to the Participant under the Plan, unless such
right has been reserved in the Plan or the Grant Agreement, or except as
provided in Section 18(b) below.  Notwithstanding anything in the Plan
to the contrary, the Board may amend the Plan in such manner as it deems
appropriate in the event of a change in applicable law or
regulations.

     

    b. Stockholder Approval for
“Qualified Performance-Based Compensation.”  If Grants are made
under Section 11 above, the Plan must be reapproved by the Company’s
shareholders no later than the first stockholders meeting that occurs in the
fifth year following the year in which the stockholders previously approved the
provisions of Section 11, if additional Grants are to be made under Section 11
and if required by section 162(m) of the Code or the regulations
thereunder.

     

    c. Termination of
Plan.  The Plan shall terminate on the day immediately
preceding the tenth anniversary of its Effective Date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the shareholders.  The termination of the Plan shall not impair the
power and authority of the Board or the Committee with respect to an outstanding
Grant.

     

    18. Miscellaneous

     

    a. Grants in Connection with
Corporate Transactions and Otherwise.  Nothing contained in
this Plan shall be construed to (i) limit the right of the Board to make Grants
under this Plan in connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any corporation, firm
or association, including Grants to employees thereof who become Employees, or
for other proper corporate purposes, or (ii) limit the right of the Company to
grant stock options or make other stock-based awards outside of this
Plan.  Without limiting the foregoing, the Grant may be made to an
employee of another corporation who becomes an Employee by reason of a corporate
merger, consolidation, acquisition of stock or property, reorganization or
liquidation involving the Company in substitution for a grant made by such
corporation.  The terms and conditions of the Grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives, as recommended by the Committee and determined by the
Board.

     

    b. Compliance with
Law.  The Plan, the exercise of Options and the obligations of
the Company to issue or transfer shares of Company Stock under Grants shall be
subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required.  With respect to persons subject
to section 16 of the Exchange Act, it is the intent of the Company that the Plan
and all transactions under the Plan comply with all applicable provisions of
Rule 16b-3 or its successors under the Exchange Act.  In addition, it
is the intent of the Company that Incentive Stock Options comply with the
applicable provisions of section 422 of the Code, that Grants of “qualified
performance-based compensation” comply with the applicable provisions of section
162(m) of the Code and that, to the extent applicable, Grants comply with the
requirements of section 409A of the Code.  To the extent that any
legal requirement of section 16 of the Exchange Act or section 422, 162(m) or
409A of the Code as set forth in the Plan ceases to be required under section 16
of the Exchange Act or section 422, 162(m) or 409A of the Code, that Plan
provision shall cease to apply.  The Board may revoke any Grant if it
is contrary to law or modify a Grant to bring it into compliance with any valid
and mandatory government regulation.  The Committee may also adopt
rules regarding the withholding of taxes on payments to
Participants.  The Committee may, in its sole discretion, agree to
limit its authority under this Section.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    c. Enforceability.  The
Plan shall be binding upon and enforceable against the Company and its
successors and assigns.

     

    d. Funding of the Plan;
Limitation on Rights.  This Plan shall be
unfunded.  The Company shall not be required to establish any special
or separate fund or to make any other segregation of assets to assure the
payment of any Grants under this Plan.  Nothing contained in the Plan
and no action taken pursuant hereto shall create or be construed to create a
fiduciary relationship between the Company and any Participant or any other
person.  No Participant or any other person shall under any
circumstances acquire any property interest in any specific assets of the
Company.  To the extent that any person acquires a right to receive
payment from the Company hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.

     

    e. Rights of
Participants.  Nothing in this Plan shall entitle any Employee,
Non-Employee Director or other person to any claim or right to receive a Grant
under this Plan.  Neither this Plan nor any action taken hereunder
shall be construed as giving any individual any rights to be retained by or in
the employment or service of the Employer nor shall it interfere in any way with
the right of the Company or any subsidiary to terminate such person’s employment
or service at any time.  Unless otherwise specified in the applicable
Grant Agreement, an approved leave of absence shall not be considered a
termination of employment or service for purposes of a Grant under the
Plan

     

    f. No Fractional
Shares.  No fractional shares of Company Stock shall be issued
or delivered pursuant to the Plan or any Grant.  The Company shall
determine whether cash, other 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.

     

    g. Employees Subject to
Taxation Outside the United States.  With respect to
Participants who are subject to taxation in countries other than the United
States, the Board may make Grants on such terms and conditions as the Committee
recommends to comply with the laws of the applicable countries, and the
Committee may adopt such procedures, or recommend the Board adopt such addenda
and subplans and make such modifications as may be necessary or advisable to
comply with such laws.

     

    h. Governing
Law.  The validity, construction, interpretation and effect of
the Plan and Grant Agreements issued under the Plan shall be governed and
construed by and determined in accordance with the laws of the State of
Delaware, without giving effect to the conflict of laws provisions
thereof.

     

    

     

    
      
         

      

      
        10

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