Document:

exv10w3

 

Exhibit 10.3

THREE-FIVE SYSTEMS, INC.

2004 INCENTIVE COMPENSATION PLAN

 

 

	 	 	 	 	 	 	 	 	 
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	1.	 	Purpose	 	 	1	 
	2.	 	Administration.	 	 	1	 
	 
	 	(a)	 	Authority of the Committee	 	 	1	 
	 
	 	(b)	 	Manner of Exercise of Committee Authority	 	 	1	 
	 
	 	(c)	 	Limitation of Liability	 	 	1	 
	3.	 	Stock Subject to Plan	 	 	2	 
	 
	 	(a)	 	Limitation on Overall Number of Shares Subject to Awards	 	 	2	 
	 
	 	(b)	 	Application of Limitations	 	 	2	 
	4.	 	Eligibility; Per-Person Award Limitations	 	 	2	 
	5.	 	Specific Terms of Awards.	 	 	2	 
	 
	 	(a)	 	General	 	 	2	 
	 
	 	(b)	 	Options	 	 	2	 
	 
	 	(c)	 	Stock Appreciation Rights	 	 	3	 
	 
	 	(d)	 	Restricted Stock	 	 	4	 
	 
	 	(e)	 	Bonus Stock and Awards in Lieu of Obligations	 	 	5	 
	 
	 	(f)	 	Other Stock-Based Awards	 	 	5	 
	6.	 	Certain Provisions Applicable to Awards.	 	 	5	 
	 
	 	(a)	 	Stand-Alone, Additional, Tandem, and Substitute Awards	 	 	5	 
	 
	 	(b)	 	Term of Awards	 	 	5	 
	 
	 	(c)	 	Form and Timing of Payment Under Awards; Deferrals	 	 	6	 
	 
	 	(d)	 	Exemptions from Section 16(b) Liability	 	 	6	 
	7.	 	Change in Control.	 	 	6	 
	 
	 	(a)	 	Effect of “Change in
Control.”	 	 	6	 
	 
	 	(b)	 	Definition of “Change in Control”	 	 	6	 
	 
	 	(c)	 	Definition of “Change in Control Price.”	 	 	7	 
	8.	 	Automatic Grant Program	 	 	7	 
	 
	 	(a)	 	Amount and Date of Grant	 	 	7	 
	 
	 	(b)	 	Exercise Price	 	 	8	 
	 
	 	(c)	 	Vesting	 	 	8	 
	 
	 	(d)	 	Term of Automatic Options	 	 	8	 
	 
	 	(e)	 	Other Terms	 	 	8	 
	9.	 	General Provisions.	 	 	8	 
	 
	 	(a)	 	Compliance With Legal and Other Requirements	 	 	8	 
	 
	 	(b)	 	Limits on Transferability; Beneficiaries	 	 	8	 
	 
	 	(c)	 	Adjustments.	 	 	9	 
	 
	 	(d)	 	Taxes	 	 	10	 
	 
	 	(e)	 	Changes to the Plan and Awards	 	 	10	 
	 
	 	(f)	 	Limitation on Rights Conferred Under Plan	 	 	10	 
	 
	 	(g)	 	Unfunded Status of Awards; Creation of Trusts	 	 	10	 
	 
	 	(h)	 	Nonexclusivity of the Plan	 	 	10	 
	 
	 	(i)	 	Payments in the Event of Forfeitures; Fractional Shares	 	 	11	 
	 
	 	(j)	 	Governing Law	 	 	11	 
	 
	 	(k)	 	Plan Effective Date and Stockholder Approval; Termination of Plan	 	 	11	 
	10.	 	Director Fees	 	 	11	 
	11.	 	Definitions	 	 	11	 
	 
	 	(a)	 	“Automatic Options”	 	 	11	 
	 
	 	(b)	 	“Award”	 	 	11	 
	 
	 	(c)	 	“Beneficiary”	 	 	11	 
	 
	 	(d)	 	“Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership”	 	 	11	 
	 
	 	(e)	 	“Board”	 	 	11	 
	 
	 	(f)	 	“Change in Control”	 	 	11	 
	 
	 	(g)	 	“Change in Control Price”	 	 	12	 
	 
	 	(h)	 	“Code”	 	 	12	 
	 
	 	(i)	 	“Committee”	 	 	12	 
	 
	 	(j)	 	“Consultant”	 	 	12	 

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	 	(k)	 	“Continuous Service”	 	 	12	 
	 
	 	(l)	 	“Corporate Transaction”	 	 	12	 
	 
	 	(m)	 	“Director”	 	 	12	 
	 
	 	(n)	 	“Effective Date”	 	 	12	 
	 
	 	(o)	 	“Eligible Person”	 	 	12	 
	 
	 	(p)	 	“Employee”	 	 	12	 
	 
	 	(q)	 	“Exchange Act”	 	 	12	 
	 
	 	(r)	 	“Executive Officer”	 	 	12	 
	 
	 	(s)	 	“Fair Market Value”	 	 	12	 
	 
	 	(t)	 	“Incentive Stock Option”	 	 	13	 
	 
	 	(u)	 	“Incumbent Board”	 	 	13	 
	 
	 	(v)	 	“Limited Stock Appreciation Right”	 	 	13	 
	 
	 	(w)	 	“Option”	 	 	13	 
	 
	 	(x)	 	“Optionee”	 	 	13	 
	 
	 	(y)	 	“Other Stock-Based Awards”	 	 	13	 
	 
	 	(z)	 	“Participant”	 	 	13	 
	 
	 	(aa)	 	“Person”	 	 	13	 
	 
	 	(bb)	 	“Prior Plans”	 	 	13	 
	 
	 	(cc)	 	“Related Entity”	 	 	13	 
	 
	 	(dd)	 	“Repricing”	 	 	13	 
	 
	 	(ee)	 	“Restricted Stock”	 	 	13	 
	 
	 	(ff)	 	“Rule 16b-3” and “Rule 16a-1(c)(3)”	 	 	13	 
	 
	 	(gg)	 	“Stock”	 	 	13	 
	 
	 	(hh)	 	“Stock Appreciation Right”	 	 	13	 
	 
	 	(ii)	 	“Subsidiary”	 	 	13	 

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THREE-FIVE SYSTEMS, INC.

2004 INCENTIVE COMPENSATION PLAN

     1. Purpose. The purpose of this 2004 Incentive Compensation Plan (the
“Plan”) is to assist Three-Five Systems, Inc., a Delaware corporation (the
“Company”), and its Related Entities in attracting, motivating, retaining, and
rewarding high-quality executives and other Employees, officers, Directors, and
Consultants by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests
between such persons and the Company’s stockholders, and providing such persons
with annual and long-term performance incentives to expend their maximum
efforts in the creation of stockholder value. The Plan is intended to qualify
certain compensation awarded under the Plan for tax deductibility under Section
162(m) of the Code to the extent deemed appropriate by the applicable Committee
(or any successor committee) of the Board of Directors of the Company. The
Plan is a consolidation of all of the Prior Plans. Upon the Effective Date of
the Plan, no Awards shall be made thereafter under the Prior Plans. The
aggregate number of shares of Stock reserved for Awards under the Plan is equal
to the aggregate number of shares of Stock available for Awards under the Prior
Plans as of the Effective Date.

     2. Administration.

          (a) Authority of the Committee. The Plan shall be administered by the
Committee; provided, however, that except as otherwise expressly provided in
this Plan or, during the period that the Company is a Publicly Held
Corporation, in order to comply with Code Section 162(m) or Rule 16b-3 under
the Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and
final authority, in each case subject to and consistent with the provisions of
the Plan, to select Eligible Persons to become Participants, grant Awards,
determine the type, number and other terms and conditions of, and all other
matters relating to, Awards, prescribe Award agreements (which need not be
identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award
agreements and correct defects, supply omissions or reconcile inconsistencies
therein, and to make all other decisions and determinations as the Committee or
the Board may deem necessary or advisable for the administration of the Plan.
In exercising any discretion granted to the Committee or the Board under the
Plan or pursuant to any Award, the Committee or the Board shall not be required
to follow past practices, act in a manner consistent with past practices, or
treat any Eligible Person in a manner consistent with the treatment of other
Eligible Persons.

          (b) Manner of Exercise of Committee Authority. The Committee, and not the
Board, shall exercise sole and exclusive discretion on any matter relating to a
Participant then subject to Section 16 of the Exchange Act with respect to the
Company to the extent necessary in order that transactions by such Participant
shall be exempt under Rule 16b-3 under the Exchange Act. Any action of the
Committee or the Board shall be final, conclusive, and binding on all persons,
including the Company, its Related Entities, Participants, Beneficiaries,
transferees under Section 9(b) hereof, or other persons claiming rights from or
through a Participant, and stockholders. The express grant of any specific
power to the Committee or the Board, and the taking of any action by the
Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may
delegate to officers or managers of the Company or any Related Entity, or
committees thereof, the authority, subject to such terms as the Committee or
the Board shall determine, (i) to perform administrative functions, (ii) with
respect to Participants not subject to Section 16 of the Exchange Act, to
perform such other functions as the Committee or the Board may determine, and
(iii) with respect to Participants subject to Section 16, to perform such other
functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in the
loss of an exemption under Rule 16b-3 otherwise available for transactions by
such persons, in each case to the extent permitted under applicable law. The
Committee or the Board may appoint agents to assist it in administering the
Plan.

          (c) Limitation of Liability. The Committee and the Board, and each member thereof, shall be entitled
to, in good faith, rely or act upon any report or other information furnished
to him or her by any Executive Officer, other officer or Employee, the
Company’s independent auditors, Consultants or any other agents assisting in
the administration of the Plan. Members of the Committee and the Board, and
any officer or Employee acting at the direction or on behalf of the Committee
or the Board, shall not be personally liable for any action or

 

 

determination
taken or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company with
respect to any such action or determination.

     3. Stock Subject to Plan

          (a) Limitation on Overall Number of Shares Subject to Awards. Subject to
adjustment as provided in Section 9(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan and the Prior Plans shall be 4,079,299 shares in the aggregate. If any
Awards previously granted under the Plan or the Prior Plans terminate without
being exercised, expire, are forfeited or canceled, do not vest, or are
surrendered in payment of any Awards or any tax withholding with regard
thereto, new Awards may thereafter be granted covering such shares of Stock.
Any shares of Stock delivered under the Plan may consist, in whole or in part,
of authorized and unissued shares or treasury shares. Subject to adjustment as
provided in Section 9(c) hereof, the number of shares of Stock that may be
issued pursuant to Incentive Stock Options shall not exceed 4,079,299 shares.

          (b) Application of Limitations. The limitation contained in Section 3(a)
shall apply not only to Awards that are settleable by the delivery of shares of
Stock but also to Awards relating to shares of Stock but settleable only in
cash (such as cash-only Stock Appreciation Rights). The Committee or the Board
may adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute awards),
and make adjustments if the number of shares of Stock actually delivered
differs from the number of shares previously counted in connection with an
Award.

     4. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 100,000 shares of Stock, subject to adjustment as
provided in Section 9(c), under each of Sections 5(b), 5(c), 5(d), 5(e), and
5(f). Directors, who are not Employees, proposed directors, proposed
employees, and independent contractors shall be eligible to receive awards
other than Incentive Stock Options.

     5. Specific Terms of Awards.

          (a) General. Awards may be granted on the terms and conditions set forth in
this Section 5. In addition, the Committee or the Board may impose on any
Award or the exercise thereof, at the date of grant or thereafter (subject to
Section 9(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of
Continuous Service by the Participant and terms permitting a Participant to
make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive, or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan.

          (b) Options. The Committee and the Board each is authorized to grant Options
to Participants on the following terms and conditions:

     (i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall not be less than 100% of the Fair
Market Value of the Stock on the date of grant of the Option and
shall not be less than the par value of a share of Stock on the
date of grant of such Option. If an employee owns or is deemed to
own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company or Subsidiary and an Incentive
Stock Option is granted to such employee, the option price of such
Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no less than 110% of the Fair Market Value
of the Stock on the date such Incentive Stock Option is granted.

     (ii) Time and Method of Exercise. The Committee or the Board shall
determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including
based on achievement of performance goals and/or future service
requirements), the time or times at which Options shall cease to be
or become exercisable

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following termination of Continuous Service
or upon other conditions, the methods by which such exercise price
may be paid or deemed to be paid (including in the discretion of
the Committee or the Board a cashless exercise procedure), the form
of such payment, including, without limitation, cash, Stock, other
Awards, or awards granted under other plans of the Company or a
Related Entity, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis provided that such deferred payments are not in
violation of the Sarbanes-Oxley Act of 2002, or any rule or
regulation adopted thereunder or any other applicable law), and the
methods by or forms in which Stock will be delivered or deemed to
be delivered to Participants.

     (iii) Incentive Stock Options. The terms of any Incentive Stock Option
granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code. Anything in the Plan to the
contrary notwithstanding, no term of the Plan relating to Incentive
Stock Options (including any Stock Appreciation Right in tandem
therewith) shall be interpreted, amended or altered, nor shall any
discretion or authority granted under the Plan be exercised, so as
to disqualify either the Plan or any Incentive Stock Option under
Section 422 of the Code, unless the Participant has first
requested, or consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply
with Section 422 of the Code, Options granted as Incentive Stock
Options shall be subject to the following special terms and
conditions:

          (A) The Option shall not be exercisable more than ten years
after the date such Incentive Stock Option is granted; provided,
however, that if a Participant owns or is deemed to own (by reason
of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the
Company and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be (to
the extent required by the Code at the time of the grant) for no
more than five years from the date of grant; and

          (B) The aggregate Fair Market Value (determined as of the date
the Incentive Stock Option is granted) of the shares of Stock with
respect to which Incentive Stock Options granted under the Plan and
all other option plans of the Companyduring any calendar year
exercisable for the first time by the Participant during any
calendar year shall not (to the extent required by the Code at the
time of the grant) exceed $100,000.

     (iv) Repurchase Rights. The Committee and the Board shall have the
discretion to grant Options that are exercisable for unvested shares
of Stock. Should the Optionee’s Continuous Service cease
while holding such unvested shares, the Company shall have the
right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase
right shall be
exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be
established by the Committee or the Board and set forth in the
document evidencing such repurchase right.

     (v) No Repricing without Stockholder Approval. No Options granted to
any Optionee under the Plan may be Repriced without the approval of
the stockholders of the Company within 12 months of such Repricing.
Stockholder approval shall be evidenced by the affirmative vote of
the holders of the majority of the shares of Stock present in
person or by proxy and voting at the meeting.

          (c) Stock Appreciation Rights. The Committee and the Board each is authorized to
grant Stock Appreciation Right’s to Participants on the following terms and
conditions:

     (i) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of
stock on the date of exercise (or, in the case of a “Limited Stock
Appreciation Right” that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by reference to
the Change in Control Price, as defined under Section

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7(c) hereof),
over (B) the grant price of the Stock Appreciation Right as
determined by the Committee or the Board. The grant price of a
Stock Appreciation Right shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as provided
under Section 6(a) hereof.

     (ii) Other Terms. The Committee or the Board shall determine at the
date of grant or thereafter, the time or times at which and the
circumstances under which a Stock Appreciation Right may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or
times at which Stock Appreciation Rights shall cease to be or
become exercisable following termination of Continuous Service or
upon other conditions, the method of exercise, method of
settlement, form of consideration payable in settlement, method by
or forms in which Stock will be delivered or deemed to be delivered
to Participants, whether or not a Stock Appreciation Right shall be
in tandem or in combination with any other Award, and any other
terms and conditions of any Stock Appreciation Right. Limited
Stock Appreciation Rights that may only be exercised in connection
with a Change in Control or other event as specified by the
Committee or the Board, may be granted on such terms, not
inconsistent with this Section 5(c), as the Committee or the Board
may determine. Stock Appreciation Rights and Limited Stock
Appreciation Rights may be either freestanding or in tandem with
other Awards.

          (d) Restricted Stock. The Committee and the Board each is authorized to grant
Restricted Stock to Participants on the following terms and conditions:

     (i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture, and other
restrictions, if any, as the Committee or the Board may impose, or
as otherwise provided in this Plan. The restrictions may lapse
separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments, or
otherwise, as the Committee or the Board may determine at the date
of grant or thereafter. Except to the extent restricted under the
terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock and
the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee or the
Board). During the restricted period applicable to the Restricted
Stock, subject to Section 9(b) below, the Restricted Stock may not
be sold, transferred, pledged, hypothecated, margined, or otherwise
encumbered by the Participant.

     (ii) Forfeiture. Except as otherwise determined by the Committee or the
Board at the time of the Award, upon termination of a Participant’s
Continuous Service during the applicable restriction period, the
Participant’s Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company;
provided that the Committee or the Board may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions
relating to Restricted Stock shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in part
the forfeiture of Restricted Stock.

     (iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee or the Board shall
determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee or the
Board may require that such certificates bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to
such Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock power
to the Company, endorsed in blank, relating to the Restricted
Stock.

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     (iv) Dividends and Splits. As a condition to the grant of an Award of
Restricted Stock, the Committee or the Board may require that any
cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to
the purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee or the Board, Stock distributed in
connection with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with
respect to which such Stock or other property has been distributed.

          (e) Bonus Stock and Awards in Lieu of Obligations. The Committee and the
Board each is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under the Plan or under other plans or compensatory arrangements, provided
that, in the case of Participants subject to Section 16 of the Exchange Act,
the amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined
by the Committee or the Board.

          (f) Other Stock-Based Awards. The Committee and the Board each is authorized,
subject to limitations under applicable law, to grant to Participants such
other Awards that may be denominated or payable in, valued in whole or in part
by reference to, or otherwise based on, or related to, Stock, as deemed by the
Committee or the Board to be consistent with the purposes of the Plan,
including, without limitation, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Stock, purchase rights for Stock,
Awards with value and payment contingent upon performance of the Company or any
other factors designated by the Committee or the Board, and Awards valued by
reference to the book value of Stock or the value of securities of or the
performance of specified Related Entities or
business units. The Committee or the Board shall determine the terms and
conditions of such Awards. Stock delivered pursuant to an Award in the nature
of a purchase right granted under this Section 5(f) shall be purchased for such
consideration (including without limitation loans from the Company or a Related
Entity), paid for at such times, by such methods, and in such forms, including,
without limitation, cash, Stock, other Awards, or other property, as the
Committee or the Board shall determine. The Committee and the Board shall have
the discretion to grant such other Awards that are exercisable for unvested
shares of Stock. Should the Optionee’s Continuous Service cease while holding
such unvested shares, the Company shall have the right to repurchase, at the
exercise price paid per share, any or all of those unvested shares. The terms
upon which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Committee or the Board and set forth in the
document evidencing such repurchase right. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 5(f).

     6. Certain Provisions Applicable to Awards.

          (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee or the Board, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company,
any Related Entity, or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive payment from the
Company or any Related Entity. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee or the Board
shall require the surrender of such other Award or award in consideration for
the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of
the Company or any Related Entity, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price “discounted”
by the amount of the cash compensation surrendered).

          (b) Term of Awards. The term of each Award shall be for such period as may be
determined by the Committee or the Board; provided that in no event shall the
term of any Option or Stock

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Appreciation Right exceed a period of ten years (or
such shorter term as may be required in respect of an Incentive Stock Option
under Section 422 of the Code).

          (c) Form and Timing of Payment Under Awards; Deferrals. Subject to the terms
of the Plan and any applicable Award agreement, payments to be made by the
Company or a Related Entity upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee or the Board
shall determine, including, without limitation, cash, Stock, other Awards or
other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. Any installment or deferral provided for
in the preceding sentence shall, however, be subject to the Company’s
compliance with the provisions of the Sarbanes-Oxley Act of 2002, the rules and
regulations adopted by the Securities and Exchange Commission thereunder, and
all applicable rules of any national securities exchange on which the Company’s
securities are listed for trading. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 9(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of other amounts in respect of installment or deferred payments
denominated in Stock.

          (d) Exemptions from Section 16(b) Liability. It is the intent of the Company that this Plan comply in all respects
with applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent
necessary to ensure that neither the grant of any Awards to nor other
transaction by a Participant who is subject to Section 16 of the Exchange Act
is subject to liability under Section 16(b) thereof (except for transactions
acknowledged in writing to be non-exempt by such Participant). Accordingly, if
any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such
transaction, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule
16a-1(c)(3) so that such Participant shall avoid liability under Section 16(b).
In addition, the purchase price of any Award conferring a right to purchase
Stock shall be not less than any specified percentage of the Fair Market Value
of Stock at the date of grant of the Award then required in order to comply
with Rule 16b-3.

     7. Change in Control.

          (a) Effect of “Change in Control.” If and to the extent provided in the
Award, in the event of a “Change in Control,” as defined in Section 7(b):

     (i) The Committee may, within its discretion, accelerate the
vesting and exercisability of any Award carrying a right to
exercise that was not previously vested and exercisable as of the
time of the Change in Control, subject to applicable restrictions
set forth in Section 9(a) hereof;

     (ii) The Committee may, within its discretion, accelerate the
exercisability of any limited Stock Appreciation Rights (and other
Stock Appreciation Rights if so provided by their terms) and
provide for the settlement of such Stock Appreciation Rights for
amounts, in cash, determined by reference to the Change in Control
Price; and

     (iii) The Committee may, within its discretion, lapse the
restrictions, deferral of settlement, and forfeiture conditions
applicable to any other Award granted under the Plan and such
Awards may be deemed fully vested as of the time of the Change in
Control, except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 9(a)
hereof.

          (b) Definition of “Change in Control. A “Change in Control” shall be deemed
to have occurred upon:

     (i) Approval by the stockholders of the Company of a
reorganization, merger, consolidation, or other form of corporate
transaction or series of transactions, in each case, with

6

 

respect
to which persons who were the stockholders of the Company
immediately prior to such reorganization, merger, consolidation, or
other transaction do not, immediately thereafter, own more than 50%
of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged, or consolidated
company’s then outstanding voting securities, or a liquidation or
dissolution of the Company or the sale of all or substantially all
of the assets of the Company (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation,
dissolution or sale (any such event being referred to as a
“Corporate Transaction”) is subsequently abandoned);

     (ii) Individuals who, as of the date on which the Award is
granted, constitute the Board (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Board, provided
that any person becoming a director subsequent to the date on which
the Award was granted whose election, or nomination for election by
the Company’s stockholders, was approved by a vote of at least a
majority of the Directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
Directors of the Company)
shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or

     (iii) the acquisition (other than from the Company) by any
person, entity, or “group”, within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act, of more than 50% of
either the then outstanding shares of the Company’s Stock or the
combined voting power of the Company’s then outstanding voting
securities entitled to vote generally in the election of directors
(hereinafter referred to as the ownership of a “Controlling
Interest”) excluding, for this purpose, any acquisitions by (1) the
Company or a Related Entity, (2) any person, entity, or “group”
that as of the date on which the Award is granted owns beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act) of a Controlling Interest or (3) any
employee benefit plan of the Company a Related Entity.

          (c) Definition of “Change in Control Price.” The “Change in Control Price”
means an amount in cash equal to the higher of (i) the amount of cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any Corporate Transaction triggering the Change in
Control under Section 7(b)(i) hereof or any liquidation of shares following a
sale of substantially all of the assets of the Company, or (ii) the highest
Fair Market Value per share at any time during the 60-day period preceding and
the 60-day period following the Change in Control.

     8. Automatic Grant Program

          (a) Amount and Date of Grant. During the term of the Plan, the Company shall
make automatic grants of Options (“Automatic Options”) to each Director who is
not employed by the Company.

     (i) Annual Grants. Each year on the Annual Grant Date, an Automatic
Option to acquire 2000 shares of Stock shall be granted to each
Director for as long as shares of Stock are available under Section
3(a) hereof. The “Annual Grant Date” shall be the date of the
Company’s annual stockholders meeting commencing as of the first
annual meeting occurring after the Effective Date. Any Director
that was granted an Automatic Option under Section 8(a)(ii) within
90 days of an Annual Grant Date shall be ineligible to receive an
Automatic Option pursuant to this Section 8(a)(i) on such Annual
Grant Date.

     (ii) Initial New Director Grants. On the Initial Grant Date, every new
member of the Board that has not previously received an Automatic
Option under this Section 8(a)(ii) shall be granted an Automatic
Option to acquire 5000 shares of Stock for as long as shares of
Stock are available under Section 3(a) hereof. The “Initial Grant
Date” shall be the date that a Director is first appointed or
elected to the Board.

7

 

          (b) Exercise Price. The exercise price per share of Stock subject to each
Automatic Option granted under Section 8(a)(i) or (ii) shall be equal to 100
percent of the Fair Market Value per share of the Stock on the date such
Automatic Option was granted.

          (c) Vesting. Each Automatic Option granted pursuant to Section 8(a)(i) shall
vest and become exercisable 12 months after the date of grant. Each Automatic
Option granted pursuant to Section 8(a)(ii) shall vest and become
exercisable in a series of three equal and successive installments with
the first installment vested on the date of grant and the next two installments
12 months and 24 months after the date of grant. Each Automatic Option shall
vest and become exercisable only if the optionholder has not ceased serving as
a Board member as of such vesting date.

          (d) Term of Automatic Options. Each Automatic Option shall expire on the
tenth anniversary (the “Expiration Date”) of the date on which such Automatic
Option was granted. Except as otherwise determined, should a Director’s
service as a Board member cease prior to the Expiration Date for any reason
while an Automatic Option remains outstanding and unexercised, the Automatic
Option term shall immediately be modified and the Automatic Option shall
terminate and cease to be outstanding in accordance with the following
provisions:

     (i) The Automatic Option shall immediately terminate and cease
to be outstanding with respect to any shares that were not vested
at the time of the optionholder’s cessation of Board service.

     (ii) Should an optionholder cease, for any reason other than
death, to serve as a member of the Board, then the optionholder
shall have 90 days measured from the date of such cessation of
Board service in which to exercise his or her Automatic Options
that vested prior to the time of such cessation of Board service.
In no event, however, may any Automatic Option be exercised after
the Expiration Date of such Automatic Option.

     (iii) Should an optionholder die while serving as a Board
member or within 90 days after cessation of Board service, then the
personal representative of the optionholder’s estate (or the person
or persons to whom the Automatic Option is transferred pursuant to
the optionholder’s will or in accordance with the laws of the
descent and distribution) shall have a 90-day period measured from
the date of the optionholder’s cessation of Board service in which
to exercise the Automatic Options that vested prior to the time of
such cessation of Board service. In no event, however, may any
Automatic Option be exercised after the Expiration Date of such
Automatic Option.

          (e) Other Terms. Except as expressly provided otherwise in this Section 8, an
Automatic Option shall be subject to all of the terms and conditions of the
Plan. Directors shall be entitled to receive other awards under the Plan or
other plans of the Company in accordance with the terms and conditions thereof.

     9. General Provisions.

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

          (b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan, including any Award or right that
constitutes a derivative security as generally defined in

8

 

Rule 16a-1(c) under
the Exchange Act, shall be pledged, hypothecated, or otherwise encumbered or
subject to any lien, obligation, or liability of such Participant to any party
(other than the Company or a Subsidiary), or assigned or transferred by
such Participant otherwise than by will or the laws of descent and distribution
or to a Beneficiary upon the death of a Participant, and such Awards or rights
that may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than Incentive Stock
Options and Stock Appreciation Rights in tandem therewith) may be transferred
to one or more Beneficiaries or other transferees during the lifetime of the
Participant, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such transfers and exercises
are permitted by the Committee or the Board pursuant to the express terms of an
Award agreement (subject to any terms and conditions which the Committee or the
Board may impose thereon, and further subject to any prohibitions or
restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise
determined by the Committee or the Board, and to any additional terms and
conditions deemed necessary or appropriate by the Committee or the Board.

          (c) Adjustments.

     (i) Adjustments to Awards. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other
property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, share exchange, liquidation, dissolution, or other
similar corporate transaction or event affects the Stock and/or
such other securities of the Company or any other issuer such that
a substitution, exchange, or adjustment is determined by the
Committee or the Board to be appropriate, then the Committee or the
Board shall, in such manner as it may deem equitable, substitute,
exchange, or adjust any or all of (A) the number and kind of shares
of Stock that may be delivered in connection with Awards granted
thereafter, (B) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 4
hereof, (C) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards, (D) the exercise
price, grant price, or purchase price relating to any Award and/or
make provision for payment of cash or other property in respect of
any outstanding Award, and (E) any other aspect of any Award that
the Committee or Board determines to be appropriate.

     (ii) Adjustments in Case of Certain Corporate Transactions. In the
event of a proposed sale of all or substantially all of the
Company’s assets or any reorganization, merger, consolidation, or
other form of corporate transaction in which the Company does not
survive, or in which the shares of Stock are exchanged for or
converted into securities issued by another entity, then the
successor or acquiring entity or an affiliate thereof may, with the
consent of the Committee or the Board, assume each outstanding
Option or substitute an equivalent option or right. If the
successor or acquiring entity or an affiliate thereof, does not
cause such an assumption or substitution, then each Option shall
terminate upon the consummation of sale, merger, consolidation, or
other corporate transaction. The Committee or the Board shall give
written notice of any proposed transaction referred to in this
Section 9(c)(ii) a reasonable period of time prior to the closing
date for such transaction (which notice may be given either before
or after the approval of such transaction), in order that Optionees
may have a reasonable period of time prior to the closing date of
such transaction within which to exercise any Options that are then
exercisable (including any Options that may become exercisable upon
the closing date of such transaction). An Optionee may condition
his exercise of any Option upon the consummation of the
transaction.

     (iii) Other Adjustments. In addition, the Committee (and the Board if
and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is
authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, acquisitions
and dispositions of
businesses and assets) affecting the Company, any Related

9

 

Entity,
or any business unit, or the financial statements of the Company or
any Related Entity, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations, or
business conditions or in view of the Committee’s assessment of the
business strategy of the Company, any Related Entity or business
unit thereof, performance of comparable organizations, economic and
business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such
adjustment shall be authorized or made if and to the extent that
such authority or the making of such adjustment would cause
Options, or Stock Appreciation Rights hereof to Participants
designated by the Committee as Covered Employees and intended to
qualify as “performance-based compensation” under Code Section
162(m) and the regulations thereunder to otherwise fail to qualify
as “performance-based compensation” under Code Section 162(m) and
regulations thereunder.

          (d) Taxes. The Company and any Related Entity are authorized to withhold from
any Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable in connection
with any transaction involving an Award, and to take such other action as the
Committee or the Board may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant’s tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

          (e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan, or the Committee’s authority to grant
Awards under the Plan, without the consent of stockholders or Participants,
except that any amendment or alteration to the Plan shall be subject to the
approval of the Company’s stockholders not later than the annual meeting next
following such Board action if such stockholder approval is required by any
federal or state law or regulation (including, without limitation, Rule 16b-3
or Code Section 162(m)) or the rules of any stock exchange or automated
quotation system on which the Stock may then be listed or quoted, and the Board
may otherwise, in its discretion, determine to submit other such changes to the
Plan to stockholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely affect
the rights of such Participant under any previously granted and outstanding
Award. The Committee or the Board may waive any conditions or rights under, or
amend, alter, suspend, discontinue, or terminate any Award theretofore granted
and any Award agreement relating thereto, except as otherwise provided in the
Plan; provided that, without the consent of an affected Participant, no such
Committee or the Board action may materially and adversely affect the rights of
such Participant under such Award.

          (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a Related Entity; (ii) interfering in any way with
the right of the Company or a Related Entity to terminate any Eligible Person’s
or Participant’s Continuous Service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and Employees, or (iv) conferring on
a Participant any of the rights of a stockholder of the Company unless and
until the Participant is duly issued or transferred shares of Stock in
accordance with the terms of an Award.

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

          (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board
nor its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the

10

 

power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m).

          (i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise
determined by the Committee or the Board, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee or the Board 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.

          (j) Governing Law. The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the state of Delaware without giving
effect to principles of conflicts of laws, and applicable federal law.

          (k) Plan Effective Date and Stockholder Approval; Termination of Plan. The
Plan shall become effective on the Effective Date, which shall be the date of
approval of the Plan by stockholders of the Company eligible to vote in the
election of directors, by a vote sufficient to meet the requirements of Code
Sections 162(m) (if applicable) and 422, Rule 16b-3 under the Exchange Act (if
applicable), applicable New York Stock Exchange requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. The Plan
shall terminate at such time as no shares of Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.

     10. Director Fees. Each Director shall receive shares of Stock equal in value to
two-thirds of that Director’s annual retainer fees. The Stock received
pursuant to this Section 10 shall be received in lieu of the equivalent value
of annual retainer fees paid in cash. Shares of Stock shall be issued annually
under the Plan on the date of the annual meeting of the stockholders of the
Company. The number of shares of Stock to be received by a Director under the
Plan shall be determined by the Fair Market Value of the Stock on the day prior
to the annual meeting of the stockholders of the Company. The Stock acquired
subject to this Section 10 may be subject to such conditions and restrictions,
if any, as the Board may determine.

     11. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

          (a) “Automatic Options” means as defined in Section 8(a).

          (b) “Award” means any Option, Stock Appreciation Right (including Limited
Stock Appreciation Right), Restricted Stock, Stock granted as a bonus or in
lieu of another award, or Other Stock-Based Award, together with any other
right or interest, granted to a Participant under the Plan.

          (c) “Beneficiary” means the person, persons, trust, or trusts that have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the Plan upon such Participant’s death or to which Awards or other rights are
transferred if and to the extent permitted under Section 9(b) hereof. If, upon
a Participant’s death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person, persons,
trust, or trusts entitled by will or the laws of descent and distribution to
receive such benefits.

          (d) “Beneficial Owner”, “Beneficially Owning” and “Beneficial Ownership” shall
have the meanings ascribed to such terms in Rule 13d-3 under the Exchange Act
and any successor to such Rule.

          (e) “Board” means the Company’s Board of Directors.

          (f) “Change in Control” means a Change in Control as defined with related
terms in Section 7 of the Plan.

11

 

          (g) “Change in Control Price” means the amount calculated in accordance with
Section 7(c) of the Plan.

          (h) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and regulations
thereto.

          (i) “Committee” means a committee designated by the Board to administer the
Plan. The Board may designate more than one committee to administer the Plan
as to various categories of Eligible Persons. The Committee shall consist of
at least two directors, and each member of which shall be (i) a “non-employee
director” within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by “non-employee directors” is not then required in
order for exemptions under Rule 16b-3 to apply to transactions under the Plan,
and (ii) an “outside director” within the meaning of Section 162(m) of the
Code, unless administration of the Plan by “outside directors” is not then
required in order to qualify for tax deductibility under Section 162(m) of the
Code, provided, when appropriate, a Committee shall satisfy the then
requirements of any stock exchange or automated quotation system upon which the
Stock or other Company securities are listed or quoted.

          (j) “Consultant” means any person (other than an Employee or a Director,
solely with respect to rendering services in such person’s capacity as a
director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.

          (k) “Continuous Service” means uninterrupted provision of services to the
Company or any Related Entity in any capacity of Employee, Director, or
Consultant. Continuous Service shall not be considered to be interrupted in
the case of (i) any approved leave of absence, (ii) transfers among the
Company, any Related Entities, or any successor entities, in any capacity of
Employee Director, or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director, or Consultant (except as otherwise provided in
the Option Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave.

          (l) “Corporate Transaction” means a Corporate Transaction as defined in
Section 7(b)(i) of the Plan.

          (m) “Director” means a member of the Board or the board of directors of any
Related Entity.

          (n) “Effective Date” means the effective date of the Plan, which shall be date
on which it is approved by the stockholders of the Company.

          (o) “Eligible Person” means each Executive Officer of the Company (as defined
under the Exchange Act) and other officers, Directors, and Employees of the
Company or of any Related Entity, and Consultants with the Company or any
Related Entity. The foregoing notwithstanding, only employees of the Company
or any Subsidiary shall be Eligible Persons for purposes of receiving any
Incentive Stock Options. An Employee on leave of absence may be considered as
still in the employ of the Company or a Related Entity for purposes of
eligibility for participation in the Plan.

          (p) “Employee” means any person, including an officer or Director, who is an
employee of the Company or any Related Entity. The Payment of a director’s fee
by the Company or a Related Entity shall not be sufficient to constitute
“employment” by the Company.

          (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, including rules thereunder and successor provisions and rules
thereto.

          (r) “Executive Officer” means an executive officer of the Company as defined
under the Exchange Act.

          (s) “Fair Market Value” means the fair market value of Stock, Awards, or other
property as determined by the Committee or the Board, or under procedures
established by the Committee or the Board. Unless otherwise determined by the
Committee or the Board, the Fair Market Value of Stock as of any given date
after

12

 

which the Company is a Publicly Held Corporation shall be the closing
sale price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which Stock is traded on the date as of
which such value is being determined or, if there is no sale on that date, then
on the last previous day on which a sale was reported.

          (t) “Incentive Stock Option” means any Option intended to be designated as an
incentive stock option within the meaning of Section 422 of the Code or any
successor provision thereto.

          (u) “Incumbent Board” means the Incumbent Board as defined in Section 7(b)(ii)
of the Plan.

          (v) “Limited Stock Appreciation Right” means a right granted to a Participant
under Section 5(c) hereof.

          (w) “Option” means a right granted to a Participant under Section 5(b) hereof,
to purchase Stock or other Awards at a specified price during specified time
periods.

          (x) “Optionee” means a person to whom an Option or Incentive Stock Option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan.

          (y) “Other Stock-Based Awards” means Awards granted to a Participant under
Section 5(f) hereof.

          (z) “Participant” means a person who has been granted an Award under the Plan
which remains outstanding, including a person who is no longer an Eligible
Person.

          (aa) “Person” shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall
include a “group” as defined in Section 13(d) thereof.

          (bb) “Prior Plans” means the 1990 Incentive Stock Option Plan, the 1993 Stock
Option Plan, the Amended and Restated 1994 Automatic Stock Option Plan for
Non-Employee Directors, the Amended and Restated 1997 Employee Stock Option
Plan, the Amended and Restated 1998 Stock Option Plan and the Amended and
Restated Directors’ Stock Plan.

          (cc) “Related Entity” means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Board or the Committee.

          (dd) “Repricing” means that situation in which new Options are issued to an Optionee
in place of cancelled Options and which would be reportable in the repricing
table of the annual proxy.

          (ee) “Restricted Stock”
means Stock granted to a Participant under Section 5(d) hereof, that is
subject to certain restrictions and to a risk of forfeiture.

          (ff) “Rule 16b-3” and “Rule 16a-1(c)(3)” means Rule 16b-3 and Rule 16a-1(c)(3),
as from time to time in effect and applicable to the Plan and Participants,
promulgated by the Securities and Exchange Commission under Section 16 of the
Exchange Act.

          (gg) “Stock” means the Company’s Common Stock, and such other securities as may
be substituted (or resubstituted) for Stock pursuant to Section 9(c) hereof.

          (hh) “Stock Appreciation Right” means a right granted to a Participant under
Section 5(c) hereof.

          (ii) “Subsidiary” means a “subsidiary corporation” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

13Exhibit 4.1 - Subscription Agreement

Exhibit 4.1

HOMELAND PRECIOUS METALS CORP.

INCORPORATION UNDER THE LAWS OF THE THE PROVINCE OF BRITISH COLUMBIA

AUTHORIZED SHARES NO PAR VALUE

	
NUMBER 
	
SHARES

CUSIP 

See Reverse

For Certain Definitions

THIS CERTIFIES THAT

Is The Owner of

FULLY PAID AND NON-ASSESSABLE SHARES OF $0.00001 PAR VALUE COMMON STOCK OF

HOMELAND PRECIOUS METALS CORP.

Transferable only on the books of the Company in person or by duly authorized attorney upon surrender of this Certificate properly endorsed.  This Certificate is not valid unless countersigned by the Transfer Agent and Registrar. 

IN WITNESS WHEREOF, the said Company has caused this Certificate to be executed by the facsimile signatures of its duly authorized officers and to be sealed with the facsimile seal of the Company.

	
Dated:

	

 

	
_______________________
	

 
	
_________________________

	

Secretary
	

SEAL
	

President

 

 

 

 

 

 

 

HOMELAND PRECIOUS METALS CORP.

TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED

The following abbreviations when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable law or regulations:

TEN COM - as tenants in common

TEN ENT - as tenants by the entireties

JT TEN - as joint tenants with right of survivorship and not as tenants in common

UNIF GIFT MIN ACT - __________ Custodian ___________ (Minor) under Uniform Gifts to Minors Act ____________ (State)

Additional abbreviations may also be used though not in the above list.

For Value Received, _________________ hereby sell, assign and transfer unto _______________ (Please insert Social Security or other identifying number of Assignee). 

_________________________________________________________________

(Please print or typewrite name and address, including zip code of Assignee)

_________________________________________________________________

_________________________________________________________________

__________________________________________________________ Shares of the Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________ attorney-in-fact to transfer the said stock on the books of the within-named Corporation, with full power of substitution in the premises.

Dated: _________________

 _____________________________________________
Notice: The signatures to this Assignment must correspond with the name(s) as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever.

Signature(s) Guaranteed:

___________________________

The signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved signature guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.

 

 

 

 

 

 

 

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