Document:

EX-10.4

 

Exhibit 10.4

THOR INDUSTRIES, INC.

2006 EQUITY INCENTIVE PLAN

	 	1.	 	Purpose; Eligibility.

          1.1 General Purpose. The name of this plan is the Thor Industries, Inc. 2006 Equity
Incentive Plan (the “Plan”). The purpose of the Plan is to enable Thor Industries, Inc., a
Delaware corporation (the “Company”), and any Affiliate to obtain and retain the services of the
types of Employees, Consultants and Directors who will contribute to the Company’s long range
success and to provide incentives that are linked directly to increases in share value which will
inure to the benefit of all stockholders of the Company.

          1.2 Eligible Award Recipients. The persons eligible to receive Awards are the
Employees, Consultants and Directors of the Company and its Affiliates and any such parties who are
reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.

          1.3 Available Awards. The purpose of the Plan is to provide a means by which eligible
recipients of Awards may be given an opportunity to benefit from increases in value of the Common
Stock through the granting of one or more of the following Awards: (a) Incentive Stock Options,
(b) Nonstatutory Stock Options, (c) Restricted Awards, (d) Performance Compensation Awards, (e)
Stock Appreciation Rights and (f) 409A Awards.

	 	2.	 	Definitions.

          2.1 “409A Award” means an Award that is considered “nonqualified deferred compensation” within
the meaning of Section 409A of the Code and Section 8 of this Plan.

          2.2 “Administrator” means the Board or the Committee appointed by the Board in accordance with
Section 3.5.

          2.3 “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether
now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of
the Code.

          2.4 “Award” means any right granted under the Plan, including an Incentive Stock Option, a
Nonstatutory Stock Option, a Restricted Award, a Performance Compensation Award, a Stock
Appreciation Right and a 409A Award.

          2.5 “Award Agreement” means a written agreement between the Company and a holder of an Award
evidencing the terms and conditions of an individual Award grant. Each Award Agreement shall be
subject to the terms and conditions of the Plan.

          2.6 “Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5
under the Exchange Act, except that in calculating the beneficial ownership of any particular
“person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person”

 

 

shall be deemed to have beneficial ownership of all securities that such “person” has the
right to acquire by conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and
“Beneficially Owned” have a corresponding meaning.

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

          2.8 “Cause” means (a) with respect to any Participant who is a party to an employment or
service agreement or employment policy manual with the Company or its Affiliates and such agreement
or policy manual provides for a definition of Cause, as defined therein and (b) with respect to all
other Participants (i) the commission of, or plea of guilty or no contest to, a felony or a crime
involving moral turpitude or the commission of any other act involving willful malfeasance or
material fiduciary breach with respect to the Company or an Affiliate, (ii) conduct tending to
bring the Company into substantial public disgrace, or disrepute, (iii) gross negligence or willful
misconduct with respect to the Company or an Affiliate or (iv) material violation of state or
federal securities laws. The Administrator, in its absolute discretion, shall determine the effect
of all matters and questions relating to whether a Participant has been discharged for Cause.

          2.9 “Change in Control” shall mean:

               (a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all or substantially
all of the properties or assets of the Company and it Affiliates, taken as a whole, to any “person”
(as that term is used in Section 13(d)(3) of the Exchange Act (a “Person”)) that is not an
Affiliate of the Company;

               (b) The Incumbent Directors cease for any reason to constitute at least a majority of the
Board;

               (c) The adoption of a plan relating to the liquidation or dissolution of the Company; or

               (d) The acquisition by any Person of Beneficial Ownership of 50% or more (on a fully diluted
basis) of either (A) the then outstanding shares of Common Stock of the Company, taking into
account as outstanding for this purpose such Common Stock issuable upon the exercise of options or
warrants, the conversion of convertible stock or debt, and the exercise of any similar right to
acquire such Common Stock (the “Outstanding Company Common Stock”) or (B) the combined voting power
of then outstanding voting securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of
this Plan, the following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or any Affiliate, (ii) any acquisition by any employee benefit plan
sponsored or maintained by the Company or any Affiliate, (iii) any acquisition which complies with
clauses, (i), (ii) and (iii) of subsection (e) of this Section 2.9 or (iv) in respect of an
Award held by a particular Participant, any acquisition by the Participant or any group of persons
including the Participant (or any entity controlled by the Participant or any group of persons
including the Participant); or

 

 

               (e) The consummation of a reorganization, merger, consolidation, statutory share exchange or
similar form of corporate transaction involving the Company that requires the approval of the
Company’s stockholders, whether for such transaction or the issuance of securities in the
transaction (a “Business Combination”), unless immediately following such Business Combination:
(i) more than 50% of the total voting power of (x) the entity resulting from such Business
Combination (the “Surviving Company”), or (y) if applicable, the ultimate parent entity that
directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a
majority of the members of the board of directors (or the analogous governing body) of the
Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting
Securities that were outstanding immediately prior to such Business Combination (or, if applicable,
is represented by shares into which the Outstanding Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Outstanding Company Voting Securities
among the holders thereof immediately prior to the Business Combination, (ii) no Person (other than
any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company)
is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting
power of the outstanding voting securities eligible to elect members of the board of directors of
the Parent Company (or the analogous governing body) (or, it there is no Parent Company, the
Surviving Company) and (iii) at least a majority of the members of the board of directors (or the
analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving
Company) following the consummation of the Business Combination were Board members at the time of
the Board’s approval of the execution of the initial agreement providing for such Business
Combination.

          2.10 “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time.

          2.11 “Committee” means a committee of one or more members of the Board appointed by the Board
to administer the Plan in accordance with Section 3.5.

          2.12 “Common Stock” means the common stock, $0.10 par value per share, of the Company.

          2.13 “Company” means Thor Industries, Inc. a Delaware corporation.

          2.14 “Consultant” means any person, including an advisor (a) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services or who
provides bona fide services to the Company or an Affiliate pursuant to a written agreement or (b)
who is a member of the Board of Directors of an Affiliate; provided that, except as otherwise
permitted in Section 5.3 hereof, such person is a natural person and such services are not
in connection with the offer or sale of securities in a capital raising transaction and do not
directly or indirectly promote or maintain a market for the Company’s securities.

          2.15 “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The
Participant’s Continuous Service shall not be deemed to have terminated merely

 

 

because of a change in the capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or termination of the
Participant’s Continuous Service. For example, a change in status from an Employee of the Company
to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous
Service. The Administrator or its delegate, in its sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any leave of absence approved by
that party, including sick leave, military leave or any other personal or family leave of absence.

          2.16 “Covered Employee” has the same meaning as set forth in Section 162(m)(3) of the Code.

          2.17 “Date of Grant” means the date on which the Administrator adopts a resolution, or takes
other appropriate action, expressly granting an Award to a Participant that specifies the key terms
and conditions of the Award and from which the Participant begins to benefit from or be adversely
affected by subsequent changes in the Fair Market Value of the Company Common Stock or, if a later
date is set forth in such resolution, then such date as is set forth in such resolution.

          2.18 “Detrimental Activity” means: (a) violation of the terms of any agreement with the
Company or any of its Affiliates concerning non-disclosure, confidentiality, intellectual property,
privacy or exclusivity; (b) disclosure of the Company’s or its Affiliates’ confidential information
to anyone outside the Company or its Affiliates, without prior written authorization from the
Company or its Affiliates, or in conflict with the interests of the Company or its Affiliates,
whether the confidential information was acquired or disclosed by the Participant during or after
employment by the Company or its Affiliates; (c) failure or refusal to disclose promptly or assign
to the Company or its Affiliates all right, title and interest in any invention, work product or
idea, patentable or not, made or conceived by the Participant during employment by the Company or
its Affiliates, relating in any manner to the interests of the Company or its Affiliates or the
failure or refusal to do anything reasonably necessary to enable the Company or its Affiliates to
secure a patent where appropriate in the United States and in other countries; (d) activity that is
discovered to be grounds for or results in termination of the Participant’s employment for Cause;
(e) any breach of a restrictive covenant contained in any employment agreement, Award Agreement or
other agreement between the Participant and the Company or its Affiliates, during any period for
which a restrictive covenant prohibiting Detrimental Activity, or other similar conduct or act, is
applicable to the Participant during or after employment by the Company or its Affiliates; (f) any
attempt directly or indirectly to induce any Employee of the Company or its Affiliates to be
employed or perform services or acts in conflict with the interests of the Company or its
Affiliates; (g) any attempt, in conflict with the interests of the Company or its Affiliates,
directly or indirectly, to solicit the trade or business of any current or prospective customer,
client, supplier or partner of the Company or its Affiliates; (h) the conviction of, or guilty plea
entered by, the Participant for any felony or a crime involving moral turpitude whether or not
connected with the Company; or (i) the commission of any other act involving willful malfeasance or
material fiduciary breach with respect to the Company.

          2.19 “Director” means a member of the Board.

 

 

          2.20 “Disability” means that the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment; provided, however,
for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10
hereof, the term Disability shall have the meaning ascribed to it under Code Section 22(e)(3). The
determination of whether an individual has a Disability shall be determined under procedures
established by the Administrator. Except in situations where the Administrator is determining
Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10
hereof within the meaning of Code Section 22(e)(3), the Administrator may rely on any determination
that a Participant is disabled for purposes of benefits under any long-term disability plan
maintained by the Company or any Affiliate in which a Participant participates.

          2.21 “Effective Date” shall mean October 16, 2006, the date the Board adopted the Plan.

          2.22 “Employee” means any person employed by the Company or an Affiliate. Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to
constitute “employment” by the Company or an Affiliate.

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

          2.24 “Fair Market Value” means, as of any date, the value of the Common Stock as determined
below. The Fair Market Value on any date on which the Company’s shares of Common Stock are
registered under Section 12 of the Exchange Act and listed on the New York Stock Exchange shall be
the closing price of a share of Common Stock on the New York Stock Exchange on such date, and
thereafter (a) if the Common Stock is admitted to quotation on the over the counter market or any
interdealer quotation system, the Fair Market Value on any given date shall not be less than the
average of the highest bid and lowest asked prices of the Common Stock reported for such date or,
if no bid and asked prices were reported for such date, for the last day preceding such date for
which such prices were reported, or (b) in the absence of an established market for the Common
Stock, the Fair Market Value determined in good faith by the Administrator and such determination
shall be conclusive and binding on all persons.

          2.25 “Form S-8” has the meaning set forth in Section 5.3.

          2.26 “Free Standing Rights” has the meaning set forth in Section 7.3(a).

          2.27 “Incentive Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

          2.28 “Incumbent Directors” means individuals who, on the Effective Date, constitute the Board,
provided that any individual becoming a Director subsequent to the Effective Date whose election or
nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for Director without objection to such
nomination) shall be an Incumbent Director. No individual initially elected or nominated as a
director of the Company as a result of an actual or threatened election

 

 

contest with respect to Directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent
Director.

          2.29 “Negative Discretion” means the discretion authorized by the Plan to be applied by the
Administrator to eliminate or reduce the size of a Performance Compensation Award in accordance
with Section 7.2(d)(iv) of the Plan; provided, that, the exercise of such discretion would
not cause the Performance Compensation Award to fail to qualify as “performance-based compensation”
under Section 162(m) of the Code.

          2.30 “Non-Employee Director” means a Director who is a “non-employee director” within the
meaning of Rule 16b-3.

          2.31 “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.

          2.32 “Officer” means a person who is an officer of the Company within the meaning of Section
16 of the Exchange Act and the rules and regulations promulgated thereunder.

          2.33 “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant
to the Plan.

          2.34 “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be
subject to the terms and conditions of the Plan and need not be identical.

          2.35 “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

          2.36 “Outside Director” means a Director who is an “outside director” within the meaning of
Section 162(m) of the Code and Treasury Regulations Section 1.162-27(e)(3) or any successor to such
statute and regulation.

          2.37 “Participant” means a person to whom an Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Award.

          2.38 “Performance Compensation Award” means any Award designated by the Administrator as a
Performance Compensation Award pursuant to Section 7.2 of the Plan.

          2.39 “Performance Criteria” means the criterion or criteria that the Administrator shall
select for purposes of establishing the Performance Goal(s) for a Performance Period with respect
to any Performance Compensation Award under the Plan. The Performance Criteria that will be used
to establish the Performance Goal(s) shall be based on the attainment of specific levels of
performance of the Company (or Affiliate, division or operational unit of the Company) and shall be
limited to the following:

               (a) net earnings or net income (before or after taxes);

 

 

               (b) basic or diluted earnings per share (before or after taxes);

               (c) net revenue or net revenue growth;

               (d) gross revenue;

               (e) gross profit or gross profit growth;

               (f) net operating profit (before or after taxes);

               (g) return measures (including, but not limited to, return on assets, capital, invested
capital, equity, or sales);

               (h) cash flow (including, but not limited to, operating cash flow, free cash flow, and cash
flow return on capital);

               (i) earnings before or after taxes, interest, depreciation and/or amortization;

               (j) gross or operating margins;

               (k) productivity ratios;

               (l) share price (including, but not limited to, growth measures and total stockholders
return);

               (m) expense targets;

               (n) margins;

               (o) operating efficiency;

               (p) objective measures of customer satisfaction;

               (q) working capital targets;

               (r) measures of economic value added;

               (s) inventory control; and

               (t) enterprise value.

Any one or more of the Performance Criteria may be used on an absolute or relative basis to measure
the performance of the Company and/or an Affiliate as a whole or any business unit of the Company
and/or an Affiliate or any combination thereof, as the Administrator may deem appropriate, or any
of the above Performance Criteria as compared to the performance of a group of comparable
companies, or published or special index that the Administrator, in its sole discretion, deems
appropriate, or the Company may select Performance Criterion (l) above as compared to various stock
market indices. The Administrator also has the authority to provide

 

 

for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the
Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of
the Code, the Administrator shall, within the first 90 days of a Performance Period (or, if longer
or shorter, within the maximum period allowed under Section 162(m) of the Code), define in an
objective fashion the manner of calculating the Performance Criteria it selects to use for such
Performance Period. In the event that applicable tax and/or securities laws change to permit
Administrator discretion to alter the governing Performance Criteria without obtaining stockholder
approval of such changes, the Administrator shall have sole discretion to make such changes without
obtaining stockholder approval.

          2.40 “Performance Formula” means, for a Performance Period, the one or more objective formulas
applied against the relevant Performance Goal to determine, with regard to the Performance
Compensation Award of a particular Participant, whether all, some portion but less than all, or
none of the Performance Compensation Award has been earned for the Performance Period.

          2.41 “Performance Goals” means, for a Performance Period, the one or more goals established by
the Administrator for the Performance Period based upon the Performance Criteria. The
Administrator is authorized at any time during the first 90 days of a Performance Period (or, if
longer or shorter, within the maximum period allowed under Section 162(m) of the Code), or at any
time thereafter (but only to the extent the exercise of such authority after such period would not
cause the Performance Compensation Awards granted to any Participant for the Performance Period to
fail to qualify as “performance-based compensation” under Section 162(m) of the Code), in its sole
and absolute discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in order to prevent the
dilution or enlargement of the rights of Participants based on the following events:

               (a) asset write-downs;

               (b) litigation or claim judgments or settlements;

               (c) the effect of changes in tax laws, accounting principles, or other laws or regulatory
rules affecting reported results;

               (d) any reorganization and restructuring programs;

               (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No.
30 (or any successor or pronouncement thereto) and/or in management’s discussion and analysis of
financial condition and results of operations appearing in the Company’s annual report to
stockholders for the applicable year;

               (f) acquisitions or divestitures;

               (g) any other specific unusual or nonrecurring events, or objectively determinable category
thereof;

               (h) foreign exchange gains and losses; and

 

 

               (i) a change in the Company’s fiscal year.

          2.42 “Performance Period” means the one or more periods of time not less than one (1) year in
duration, as the Administrator may select, over which the attainment of one or more Performance
Goals will be measured for the purpose of determining a Participant’s right to and the payment of a
Performance Compensation Award.

          2.43 “Plan” means this Thor Industries, Inc. 2006 Equity Incentive Plan.

          2.44 “Related Rights” has the meaning set forth in Section 7.3(a).

          2.45 “Restricted Award” means any Award granted pursuant to Section 7.1(a).

          2.46 “Restricted Period” has the meaning set forth in Section 7.1(a).

          2.47 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

          2.48 “SAR Amount” has the meaning set forth in Section 7.3(h).

          2.49 “SAR exercise price” has the meaning set forth in Section 7.3(b).

          2.50 “Securities Act” means the Securities Act of 1933, as amended.

          2.51 “Stock Appreciation Right” means the right pursuant to an award granted under Section
7.3 to receive an amount equal to the excess, if any, of (A) the Fair Market Value, as of the
date such Stock Appreciation Right or portion thereof is surrendered, of the shares of stock
covered by such right or such portion thereof, over (B) the aggregate SAR exercise price of such
right or such portion thereof.

          2.52 “Stock for Stock Exchange” has the meaning set forth in Section 6.4.

          2.53 “Ten Percent Stockholder” means a person who owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or of any of its Affiliates.

	 	3.	 	Administration.

          3.1 Administration by Board. The Plan shall be administered by the Board unless and
until the Board delegates administration to a Committee, as provided in Section 3.5.

          3.2 Powers of Administrator. The Administrator shall have the power and authority to
select and grant to Participants Awards pursuant to the terms of the Plan.

          3.3 Specific Powers. In particular, the Administrator shall have the authority: (a)
to construe and interpret the Plan and apply its provisions; (b) to promulgate, amend, and rescind
rules and regulations relating to the administration of the Plan; (c) to authorize any person to
execute, on behalf of the Company, any instrument required to carry out the purposes of the

 

 

Plan; (d) to delegate its authority to one or more Officers of the Company with respect to awards
that do not involve Covered Employees or “insiders” within the meaning of Section 16 of the
Exchange Act; (e) to determine when Awards are to be granted under the Plan and the applicable Date
of Grant; (f) from time to time to select, subject to the limitations set forth in this Plan, those
Participants to whom Awards shall be granted; (g) to determine the number of shares of Common Stock
to be made subject to each Award; (h) to determine whether each Option is to be an Incentive Stock
Option or a Nonstatutory Stock Option; (i) to prescribe the terms and conditions of each Award,
including, without limitation, the exercise price and medium of payment, vesting provisions and
Right of Repurchase provisions, and to specify the provisions of the Award Agreement relating to
such grant or sale; (j) to amend any outstanding Awards, including for the purpose of modifying the
time or manner of vesting, or the term of any outstanding Award; provided, however, that if any
such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or
her Award or creates or increases a Participant’s federal income tax liability with respect to an
Award, such amendment shall also be subject to the Participant’s consent; (k) to determine the
duration and purpose of leaves of absences which may be granted to a Participant without
constituting termination of their employment for purposes of the Plan, which periods shall be no
shorter than the periods generally applicable to Employees under the Company’s employment policies;
(l) to make decisions with respect to outstanding Awards that may become necessary upon a change in
corporate control or an event that triggers anti-dilution adjustments; and (m) to exercise
discretion to make any and all other determinations which it determines to be necessary or
advisable for administration of the Plan. The Administrator also may modify the purchase price or
the exercise price of any outstanding Award, provided that if the modification effects a repricing,
stockholder approval shall be required before the repricing is effective.

          3.4 Decisions Final. All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final and binding on the Company and the Participants, unless such
decisions are determined by a court having jurisdiction to be arbitrary and capricious.

          3.5 The Committee.

               (a) General. The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board, and the term “Committee” shall apply to any person
or persons to whom such authority has been delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in this Plan to the
Board or the Administrator shall thereafter be to the Committee or subcommittee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time
to time by the Board. The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. The members of the Committee shall be appointed by and serve at the
pleasure of the Board. From time to time, the Board may increase or decrease the size of the
Committee, add additional members to, remove members (with or without cause) from, appoint new
members in substitution therefor, and fill vacancies, however caused, in the Committee. The
Committee shall act pursuant to a vote of the majority of its members or, in the case of a
committee comprised of only two members, the unanimous consent of its members, whether present or
not,

 

 

or by the written consent of the majority of its members and minutes shall be kept of all of
its meetings and copies thereof shall be provided to the Board. Subject to the limitations
prescribed by the Plan and the Board, the Committee may establish and follow such rules and
regulations for the conduct of its business as it may determine to be advisable.

               (b) Committee Composition when Common Stock is Registered. At such time as the Common
Stock is required to be registered under Section 12 of the Exchange Act, in the discretion of the
Board, a Committee may consist solely of two or more Non-Employee Directors who are also Outside
Directors. The Board shall have discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the Board
intends to satisfy such exemption requirements, with respect to Awards to any Covered Employee and
with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a
compensation committee of the Board that at all times consists solely of two or more Non-Employee
Directors who are also Outside Directors. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one or more members of the Board who are not Outside
Directors the authority to grant Awards to eligible persons who are either (A) not then Covered
Employees and are not expected to be Covered Employees at the time of recognition of income
resulting from such Award or (B) not persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code or (ii) delegate to a committee of one or more members of the Board who
are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an option
is not validly granted under the Plan in the event Awards are granted under the Plan by a
compensation committee of the Board that does not at all times consist solely of two or more
Non-Employee Directors who are also Outside Directors.

          3.6 Indemnification. In addition to such other rights of indemnification as they may
have as Directors or members of the Committee, and to the extent allowed by applicable law, the
Administrator shall be indemnified by the Company against the reasonable expenses, including
attorney’s fees, actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which the Administrator may be party by reason of any action
taken or failure to act under or in connection with the Plan or any option granted under the Plan,
and against all amounts paid by the Administrator in settlement thereof (provided, however, that
the settlement has been approved by the Company, which approval shall not be unreasonably withheld)
or paid by the Administrator in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action, suit or proceeding
that such Administrator did not act in good faith and in a manner which such person reasonably
believed to be in the best interests of the Company, and in the case of a criminal proceeding, had
no reason to believe that the conduct complained of was unlawful; provided, however, that within 60
days after institution of any such action, suit or proceeding, such Administrator shall, in
writing, offer the Company the opportunity at its own expense to handle and defend such action,
suit or proceeding.

	 	4.	 	Shares Subject to the Plan.

          Subject to adjustment in accordance with Section 12, the total number of shares of
Common Stock that shall be available for the grant of Awards under the Plan shall not exceed

 

 

1,100,000; provided, that, for purposes of this limitation, any Common Stock subject to an
Option or Award that is canceled, forfeited or expires prior to exercise or realization shall
again become available for issuance under the Plan. Subject to adjustment in accordance with
Section 12, no Participant shall be granted, during any one (1) year period, Options to
purchase Common Stock or any other Awards with respect to more than 1,100,000 shares of Common
Stock. Stock available for distribution under the Plan shall be authorized and unissued shares,
treasury shares or shares reacquired by the Company in any manner. Notwithstanding anything to the
contrary contained herein: (i) shares tendered in payment of an Option shall not be added to the
aggregate plan limit described above; (ii) shares withheld by the Company to satisfy any tax
withholding obligation shall not be added to the aggregate plan limit described above; and (iii)
all shares covered by a Stock Appreciation Right or other Awards, whether or not shares of Common
Stock are actually issued to the Participant upon exercise or settlement of the Award, shall be
considered issued or transferred pursuant to the Plan. All shares reserved for issuance under the
Plan may be used for Incentive Stock Options. No fractional shares of Common Stock may be issued.

	 	5.	 	Eligibility.

          5.1 Eligibility for Specific Awards. Incentive Stock Options may be granted only to
Employees. Awards other than Incentive Stock Options may be granted to Employees, Directors and
Consultants and those individuals whom the Administrator determines are reasonably expected to
become Employees, Directors and Consultants following the Date of Grant.

          5.2 Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market
Value of the Common Stock at the Date of Grant and the Option is not exercisable after the
expiration of five years from the Date of Grant.

          5.3 Consultants. A Consultant shall not be eligible for the grant of an Award if, at
the time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not
available to register either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the Company (i.e.,
capital raising), or because the Consultant is not a natural person, or as otherwise provided by
the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A)
shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration
Statement) or (B) does not require registration under the Securities Act in order to comply with
the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.

          5.4 Directors. Each Director of the Company shall be eligible to receive
discretionary grants of Awards under the Plan.

	 	6.	 	Option Provisions.

          Each Option shall be in such form and shall contain such terms and conditions as the
Administrator shall deem appropriate. All Options shall be separately designated Incentive

 

 

Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a
separate certificate or certificates will be issued for shares of Common Stock purchased on
exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no
liability to any Participant or any other person if an Option designated as an Incentive Stock
Option fails to qualify as such at any time or if an Option is determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms
of such Option do not satisfy the additional conditions applicable to nonqualified deferred
compensation under Section 409A of the Code and Section 8 of the Plan. The provisions of
separate Options need not be identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each of the following
provisions:

          6.1 Term. Subject to the provisions of Section 5.2 regarding Ten Percent
Stockholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from
the date it was granted.

          6.2 Exercise Price of an Incentive Stock Option. Subject to the provisions of
Section 5.2 regarding Ten Percent Stockholders, the exercise price of each Incentive Stock
Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.

          6.3 Exercise Price of a Nonstatutory Stock Option. The exercise price of each
Nonstatutory Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the date the Option is granted; provided, however, any Nonstatutory Stock
Option may be granted with an exercise price less than 100% of the Fair Market Value of the Common
Stock subject to the Option on the date the Option is granted if such Option satisfies the
additional conditions applicable to nonqualified deferred compensation under Section 409A of the
Code, in accordance with Section 6.13 and Section 8 hereof. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set
forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of the Code.

          6.4 Consideration. The exercise price of Common Stock acquired pursuant to an Option
shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash
or by certified or bank check at the time the Option is exercised or (b) in the discretion of the
Administrator, upon such terms as the Administrator shall approve, the exercise price may be paid:
(i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company,
with a Fair Market Value on the date of delivery equal to the exercise price (or portion thereof)
due for the number of shares being acquired, or by means of attestation whereby the Participant
identifies for delivery specific shares of Common Stock that have a Fair Market Value on the date
of attestation equal to the exercise price (or portion thereof) and receives a number of shares of
Common Stock equal to the difference between the number of shares thereby purchased and the number
of identified attestation shares of Common Stock (a “Stock for Stock

 

 

Exchange”); (ii) a “cashless” exercise program established with a broker; (iii) by reduction in the
number of shares of Common Stock otherwise deliverable upon exercise of such Option with a
Fair Market Value equal to the aggregate exercise price at the time of exercise, or (iv) in any
other form of legal consideration that may be acceptable to the Administrator. Unless otherwise
specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an
Option that is paid by delivery (or attestation) to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the
Company that have been held for more than six months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the
foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock
is listed on any established stock exchange or a national market system) an exercise by a Director
or executive officer that involves or may involve a direct or indirect extension of credit or
arrangement of an extension of credit by the Company, directly or indirectly, in violation of
Section 402(a) of the Sarbanes-Oxley Act (codified as Section 13(k) of the Exchange Act) shall be
prohibited with respect to any Award under this Plan.

          6.5 Transferability of an Incentive Stock Option. An Incentive Stock Option shall not
be transferable except by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing,
the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

          6.6 Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option may,
in the sole discretion of the Administrator, be transferable to a permitted transferee upon written
approval by the Administrator to the extent provided in the Option Agreement. A permitted
transferee includes: (a) a transfer by gift or domestic relations order to a member of the
Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person
sharing the Optionholder’s household (other than a tenant or employee), a trust in which these
persons have more than 50% of the beneficial interest, a foundation in which these persons (or the
Optionholder) control the management of assets, and any other entity in which these persons (or the
Optionholder) own more than 50% of the voting interests; (b) third parties designated by the
Administrator in connection with a program established and approved by the Administrator pursuant
to which Participants may receive a cash payment or other consideration in consideration for the
transfer of such Nonstatutory Stock Option; and (c) such other transferees as may be permitted by
the Administrator in its sole discretion. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by
the laws of descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise
the Option.

          6.7 Vesting Generally. The Option may, but need not, vest and therefore become
exercisable in periodic installments that may, but need not, be equal. The Option may be

 

 

subject to such other terms and conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Administrator may deem appropriate. The
vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a
share of Common Stock. The Administrator may, but shall not be required to, provide for an
acceleration of vesting and exercisability in the terms of any Option Agreement upon the occurrence
of a specified event.

          6.8 Termination of Continuous Service. Unless otherwise provided in an Option
Agreement or in an employment agreement the terms of which have been approved by the Administrator,
in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s
death or Disability or termination by the Company for Cause), the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date
of termination) but only within such period of time ending on the earlier of (a) the date three
months following the termination of the Optionholder’s Continuous Service, or (b) the expiration of
the term of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate. Unless otherwise provided in an Option Agreement or in an employment
agreement the terms of which have been approved by the Administrator, or as otherwise provided in
Sections 6.10 and 6.11 of this Plan, outstanding Options that are not exercisable
at the time an Optionholder’s Continuous Service terminates for any reason other than for Cause
(including an Optionholder’s death or Disability) shall be forfeited and expire at the close of
business on the date of such termination. Unless otherwise provided in an Option Agreement or in
an employment agreement the terms of which have been approved by the Administrator, if the
Optionholder’s Continuous Service terminates for Cause, all outstanding Options shall be forfeited
(whether or not vested) and expire as of the beginning of business on the date of such termination
for Cause.

          6.9 Extension of Termination Date. An Optionholder’s Option Agreement may also
provide that if the exercise of the Option following the termination of the Optionholder’s
Continuous Service for any reason would be prohibited at any time because the issuance of shares of
Common Stock would violate the registration requirements under the Securities Act or any other
state or federal securities law or the rules of any securities exchange or interdealer quotation
system, then the Option shall terminate on the earlier of (a) the expiration of the term of the
Option in accordance with Section 6.1 or (b) the expiration of a period after termination
of the Participant’s Continuous Service that is three months after the end of the period during
which the exercise of the Option would be in violation of such registration or other securities law
requirements.

          6.10 Disability of Optionholder. Unless otherwise provided in an Option Agreement, in
the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s
Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only within such period of
time ending on the earlier of (a) the date 12 months following such termination or (b) the
expiration of the term of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified herein, the Option
shall terminate.

 

 

          6.11 Death of Optionholder. Unless otherwise provided in an Option Agreement, in the
event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then
the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as
of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the Option upon the
Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months
following the date of death or (b) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate.

          6.12 Incentive Stock Option $100,000 Limitation. To the extent that the aggregate
Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by any Optionholder during any calendar year
(under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions
thereof which exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

          6.13 Additional Requirements Under Section 409A. Each Option Agreement shall include
a provision whereby, notwithstanding any provision of the Plan or the Option Agreement to the
contrary, the Option shall satisfy the additional conditions applicable to nonqualified deferred
compensation under Section 409A of the Code, in accordance with Section 8 hereof, in the
event any Option under this Plan is granted with an exercise price less than Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted (regardless of whether or
not such exercise price is intentionally or unintentionally priced at less than Fair Market Value,
or is materially modified at a time when the Fair Market Value exceeds the exercise price), or is
otherwise determined to constitute “nonqualified deferred compensation” within the meaning of
Section 409A of the Code.

	 	7.	 	Provisions of Awards Other Than Options.

          7.1 Restricted Awards

               (a) General.

               A Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or
hypothetical Common Stock units (“Restricted Stock Units”) having a value equal to the Fair Market
Value of an identical number of shares of Common Stock, which may, but need not, provide that such
Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or
hypothecated as collateral for a loan or as security for the performance of any obligation or for
any other purpose for such period (the “Restricted Period”) as the Administrator shall determine.

               (b) Restricted Stock and Restricted Stock Units.

                    (i) Each Participant granted Restricted Stock shall execute and deliver to the Company an
Award agreement with respect to the Restricted Stock setting forth the restrictions and other terms
and conditions applicable to such Restricted Stock. If the

 

 

Administrator determines that the Restricted Stock shall be held by the Company or in escrow
rather than delivered to the Participant pending the release of the applicable restrictions,
the Administrator may require the Participant to additionally execute and deliver to the Company
(a) an escrow agreement satisfactory to the Administrator, if applicable and (b) the appropriate
blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant
shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an
escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions
set forth in the Award, the Participant generally shall have the rights and privileges of a
stockholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the
discretion of the Administrator, cash dividends and stock dividends with respect to the Restricted
Stock may be either currently paid to the Participant or withheld by the Company for the
Participant’s account, and interest may be credited on the amount of the cash dividends withheld at
a rate and subject to such terms as determined by the Administrator. The cash dividends or stock
dividends so withheld by the Administrator and attributable to any particular share of Restricted
Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at
the discretion of the Administrator, in shares of Common Stock having a Fair Market Value equal to
the amount of such dividends, if applicable, upon the release of restrictions on such share and, if
such share is forfeited, the Participant shall have no right to such dividends.

                    (ii) The terms and conditions of a grant of Restricted Stock Units shall be reflected in a
written Award Agreement. No shares of Common Stock shall be issued at the time a Restricted Stock
Unit is granted, and the Company will not be required to set aside a fund for the payment of any
such Award. At the discretion of the Administrator, each Restricted Stock Unit (representing one
share of Common Stock) may be credited with cash and stock dividends paid by the Company in respect
of one share of Common Stock (“Dividend Equivalents”). At the discretion of the Administrator,
Dividend Equivalents may be either currently paid to the Participant or withheld by the Company for
the Participant’s account, and interest may be credited on the amount of cash Dividend Equivalents
withheld at a rate and subject to such terms as determined by the Administrator. Dividend
Equivalents credited to a Participant’s account and attributable to any particular Restricted Stock
Unit (and earnings thereon, if applicable) shall be distributed in cash or, at the discretion of
the Administrator, in shares of Common Stock having a Fair Market Value equal to the amount of such
Dividend Equivalents and earnings, if applicable, to the Participant upon settlement of such
Restricted Stock Unit and, if such Restricted Stock Unit is forfeited, the Participant shall have
no right to such Dividends Equivalents.

               (c) Restrictions.

                    (i) Restricted Stock awarded to a Participant shall be subject to the following restrictions
until the expiration of the Restricted Period, and to such other terms and conditions as may be set
forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant
shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the
restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject
to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such
shares are forfeited, the stock certificates shall be returned to the Company, and all rights of
the Participant to such shares and as a shareholder with respect to such shares shall terminate
without further obligation on the part of the Company.

 

 

                    (ii) Restricted Stock Units awarded to any Participant shall be subject to (A) forfeiture
until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals
during such period, to the extent provided in the applicable Award Agreement, and to the extent
such Restricted Stock Units are forfeited, all rights of the Participant to such Restricted Stock
Units shall terminate without further obligation on the part of the Company and (B) such other
terms and conditions as may be set forth in the applicable Award Agreement.

                    (iii) The Administrator shall have the authority to remove any or all of the restrictions on
the Restricted Stock and Restricted Stock Units whenever it may determine that, by reason of
changes in applicable laws or other changes in circumstances arising after the date of the
Restricted Stock or Restricted Stock Units are granted, such action is appropriate.

               (d) Restricted Period. With respect to Restricted Stock and Restricted Stock Units,
the Restricted Period shall commence on the Date of Grant and end at the time or times set forth on
a schedule established by the Administrator in the applicable Award agreement.

               (e) Delivery of Restricted Stock and Settlement of Restricted Stock Units. Upon the
expiration of the Restricted Period with respect to any shares of Restricted Stock, the
restrictions set forth in Section 7.1(c) and the applicable Award Agreement shall be of no
further force or effect with respect to such shares, except as set forth in the applicable Award
Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to
the Participant, or his beneficiary, without charge, the stock certificate evidencing the shares of
Restricted Stock which have not then been forfeited and with respect to which the Restricted Period
has expired (to the nearest full share) and any cash dividends or stock dividends credited to the
Participant’s account with respect to such Restricted Stock and the interest thereon, if any. Upon
the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the
Company shall deliver to the Participant, or his beneficiary, without charge, one share of Common
Stock for each such outstanding Restricted Stock Unit (“Vested Unit”) and cash equal to any
Dividend Equivalents credited with respect to each such Vested Unit in accordance with Section
7.1(b)(ii) hereof and the interest thereon or, at the discretion of the Administrator, in
shares of Common Stock having a Fair Market Value equal to such Dividend Equivalents interest
thereon, if any; provided, however, that, if explicitly provided in the applicable Award Agreement,
the Administrator may, in its sole discretion, elect to pay cash or part cash and part Common Stock
in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in
lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair
Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect
to such Vested Unit.

               (f) Stock Restrictions. Each certificate representing Restricted Stock awarded under
the Plan shall bear a legend in the form of the Company deems appropriate.

          7.2 Performance Compensation Awards.

 

 

               (a) General. The Administrator shall have the authority, at the time of grant of any
Award described in this Plan (other than Options and Stock Appreciation Rights
granted with an exercise price or grant price, as the case may be, equal to or greater than
the Fair Market Value per share of Stock on the date of grant), to designate such Award as a
Performance Compensation Award in order to qualify such Award as “performance-based compensation”
under Section 162(m) of the Code. In addition, the Administrator shall have the authority to make
an award of a cash bonus to any Participant and designate such Award as a Performance Compensation
Award in order to qualify such Award as “performance-based compensation” under Section 162(m).

               (b) Eligibility. The Administrator will, in its sole discretion, designate within the
first 90 days of a Performance Period (or, if longer or shorter, within the maximum period allowed
under Section 162(m) of the Code) which Participants will be eligible to receive Performance
Compensation Awards in respect of such Performance Period. However, designation of a Participant
eligible to receive an Award hereunder for a Performance Period shall not in any manner entitle the
Participant to receive payment in respect of any Performance Compensation Award for such
Performance Period. The determination as to whether or not such Participant becomes entitled to
payment in respect of any Performance Compensation Award shall be decided solely in accordance with
the provisions of this Section 7.2. Moreover, designation of a Participant eligible to
receive an Award hereunder for a particular Performance Period shall not require designation of
such Participant eligible to receive an Award hereunder in any subsequent Performance Period and
designation of one person as a Participant eligible to receive an Award hereunder shall not require
designation of any other person as a Participant eligible to receive an Award hereunder in such
period or in any other period.

               (c) Discretion of Administrator with Respect to Performance Compensation Awards. With
regard to a particular Performance Period, the Administrator shall have full discretion to select
the length of such Performance Period (provided any such Performance Period shall be not less than
one (1) year in duration), the type(s) of Performance Compensation Awards to be issued, the
Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or
level(s) of the Performance Goals(s) that is (are) to apply to the Company and the Performance
Formula. Within the first 90 days of a Performance Period (or, if longer or shorter, within the
maximum period allowed under Section 162(m) of the Code), the Administrator shall, with regard to
the Performance Compensation Awards to be issued for such Performance Period, exercise its
discretion with respect to each of the matters enumerated in the immediately preceding sentence of
this Section 7.2(c) and record the same in writing.

               (d) Payment of Performance Compensation Awards.

                    (i) Condition to Receipt of Payment. Unless otherwise provided in the applicable
Award Agreement, a Participant must be employed by the Company on the last day of a Performance
Period to be eligible for payment in respect of a Performance Compensation Award for such
Performance Period.

                    (ii) Limitation. A Participant shall be eligible to receive payment in respect of a
Performance Compensation Award only to the extent that: (A) the Performance

 

 

Goals for such period are achieved; and (B) the Performance Formula as applied against such
Performance Goals determines that all or some portion of such Participant’s Performance
Compensation Award has been earned for the Performance Period.

                    (iii) Certification. Following the completion of a Performance Period, the
Administrator shall review and certify in writing whether, and to what extent, the Performance
Goals for the Performance Period have been achieved and, if so, calculate and certify in writing
that amount of the Performance Compensation Awards earned for the period based upon the Performance
Formula. The Administrator shall then determine the actual size of each Participant’s Performance
Compensation Award for the Performance Period and, in so doing, may apply Negative Discretion in
accordance with Section 7.1(d)(iv) hereof, if and when it deems appropriate.

                    (iv) Use of Discretion. In determining the actual size of an individual Performance
Compensation Award for a Performance Period, the Administrator may reduce or eliminate the amount
of the Performance Compensation Award earned under the Performance Formula in the Performance
Period through the use of Negative Discretion if, in its sole judgment, such reduction or
elimination is appropriate. The Administrator shall not have the discretion to (a) grant or
provide payment in respect of Performance Compensation Awards for a Performance Period if the
Performance Goals for such Performance Period have not been attained; or (b) increase a Performance
Compensation Award above the maximum amount payable under Section 7.2(d)(vi) of the Plan.

                    (v) Timing of Award Payments. Performance Compensation Awards granted for a
Performance Period shall be paid to Participants as soon as administratively practicable following
completion of the certifications required by this Section 7.2.

                    (vi) Maximum Award Payable. Notwithstanding any provision contained in this Plan to
the contrary, the maximum Performance Compensation Award payable to any one Participant under the
Plan for a Performance Period is 1,100,000 shares of Common Stock or, in the event such Performance
Compensation Award is paid in cash, the equivalent cash value thereof on the first or last day of
the Performance Period to which such Award relates, as determined by the Administrator. The
maximum amount that can be paid in any calendar year to any Participant pursuant to a cash bonus
Award described in the last sentence of Section 7.1(a) shall be $10,000,000. Furthermore,
any Performance Compensation Award that has been deferred shall not (between the date as of which
the Award is deferred and the payment date) increase (A) with respect to Performance Compensation
Award that is payable in cash, by a measuring factor for each fiscal year greater than a reasonable
rate of interest set by the Administrator or (B) with respect to a Performance Compensation Award
that is payable in shares of Common Stock, by an amount greater than the appreciation of a share of
Common Stock from the date such Award is deferred to the payment date.

          7.3 Stock Appreciation Rights.

               (a) General. Stock Appreciation Rights may be granted either alone (“Free Standing
Rights”) or, provided the requirements of Section 7.3(b) are satisfied, in

 

 

tandem with all or part of any Option granted under the Plan (“Related Rights”). In the case of a
Nonstatutory Stock Option, Related Rights may be granted either at or after the time of the
grant of such Option. In the case of an Incentive Stock Option, Related Rights may be granted only
at the time of the grant of the Incentive Stock Option.

               (b) Grant Requirements. A Stock Appreciation Right may only be granted if the Stock
Appreciation Right: (i) does not provide for the deferral of compensation within the meaning of
Section 409A of the Code; or (ii) satisfies the requirements of Section 7.3(h) and
Section 8 hereof. A Stock Appreciation Right does not provide for a deferral of
compensation if: (A) the value of the Common Stock the excess over which the right provides for
payment upon exercise (the “SAR exercise price”) may never be less than the Fair Market Value of
the underlying Common Stock on the date the right is granted, (B) the compensation payable under
the Stock Appreciation Right can never be greater than the difference between the SAR exercise
price and the Fair Market Value of the Common Stock on the date the Stock Appreciation Right is
exercised, (C) the number of shares of Common Stock subject to the Stock Appreciation Right must be
fixed on the date of grant of the Stock Appreciation Right, and (D) the right does not include any
feature for the deferral of compensation other than the deferral of recognition of income until the
exercise of the right.

               (c) Exercise and Payment. Upon exercise thereof, the holder of a Stock Appreciation
Right shall be entitled to receive from the Company, an amount equal to the product of (i) the
excess of the Fair Market Value, on the date of such written request, of one share of Common Stock
over the SAR exercise price per share specified in such Stock Appreciation Right or its related
Option, multiplied by (ii) the number of shares for which such Stock Appreciation Right shall be
exercised. Payment with respect to the exercise of a Stock Appreciation Right that satisfies the
requirements of Section 7.3(b)(i) shall be paid on the date of exercise and made in shares
of Common Stock (with or without restrictions as to substantial risk of forfeiture and
transferability, as determined by the Administrator in its sole discretion), valued at Fair Market
Value on the date of exercise. Payment with respect to the exercise of a Stock Appreciation Right
that does not satisfy the requirements of Section 7.3(b)(i) shall be paid at the time
specified in the Award in accordance with the provisions of Section 7.3(h) and Section
8. Payment may be made in the form of shares of Common Stock (with or without restrictions as
to substantial risk of forfeiture and transferability, as determined by the Administrator in its
sole discretion), cash or a combination thereof, as determined by the Administrator.

               (d) Exercise Price. The exercise price of a Free Standing Stock Appreciation Right
shall be determined by the Administrator, but shall not be less than 100% of the Fair Market Value
of one share of Common Stock on the Date of Grant of such Stock Appreciation Right. A Related
Right granted simultaneously with or subsequent to the grant of an Option and in conjunction
therewith or in the alternative thereto shall have the same exercise price as the related Option,
shall be transferable only upon the same terms and conditions as the related Option, and shall be
exercisable only to the same extent as the related Option; provided, however, that a Stock
Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of
Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price
per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless
the Administrator determines that the requirements of Section 7.3(b)(i) are satisfied.

 

 

               (e) Reduction in the Underlying Option Shares. Upon any exercise of a Stock
Appreciation Right, the number of shares of Common Stock for which any related Option shall be
exercisable shall be reduced by the number of shares for which the Stock Appreciation Right shall
have been exercised. The number of shares of Common Stock for which a Stock Appreciation Right
shall be exercisable shall be reduced upon any exercise of any related Option by the number of
shares of Common Stock for which such Option shall have been exercised.

               (f) Written Request. Unless otherwise determined by the Administrator in its sole
discretion and only if permitted in the Stock Appreciation Right’s Award Agreement, any exercise of
a Stock Appreciation Right for cash, may be made only by a written request filed with the Corporate
Secretary of the Company. Within 30 days of the receipt by the Company of a written request to
receive cash in full or partial settlement of a Stock Appreciation Right or to exercise such Stock
Appreciation Right for cash, the Administrator shall, in its sole discretion, either consent to or
disapprove, in whole or in part, such written request. A written request to receive cash in full
or partial settlement of a Stock Appreciation Right or to exercise a Stock Appreciation Right for
cash may provide that, in the event the Administrator shall disapprove such written request, such
written request shall be deemed to be an exercise of such Stock Appreciation Right for shares of
Common Stock.

               (g) Disapproval by Administrator. If the Administrator disapproves in whole or in
part any election by a Participant to receive cash in full or partial settlement of a Stock
Appreciation Right or to exercise such Stock Appreciation Right for cash, such disapproval shall
not affect such Participant’s right to exercise such Stock Appreciation Right at a later date, to
the extent that such Stock Appreciation Right shall be otherwise exercisable, or to elect the form
of payment at a later date, provided that an election to receive cash upon such later exercise
shall be subject to the approval of the Administrator. Additionally, such disapproval shall not
affect such Participant’s right to exercise any related Option.

               (h) Additional Requirements under Section 409A. A Stock Appreciation Right that is
not intended to or fails to satisfy the requirements of Section 7.3(b)(i) shall satisfy the
requirements of this Section 7.3(h) and the additional conditions applicable to
nonqualified deferred compensation under Section 409A of the Code, in accordance with Section
8 hereof. The requirements herein shall apply in the event any Stock Appreciation Right under
this Plan is granted with an SAR exercise price less than Fair Market Value of the Common Stock
underlying the Award on the date the Stock Appreciation Right is granted (regardless of whether or
not such SAR exercise price is intentionally or unintentionally priced at less than Fair Market
Value, or is materially modified at a time when the Fair Market Value exceeds the SAR exercise
price), provides that it is settled in cash, or is otherwise determined to constitute “nonqualified
deferred compensation” within the meaning of Section 409A of the Code. Any such Stock Appreciation
Right may provide that it is exercisable at any time permitted under the governing written
instrument, but such exercise shall be limited to fixing the measurement of the amount, if any, by
which the Fair Market Value of a share of Common Stock on the date of exercise exceeds the SAR
exercise price (the “SAR Amount”). However, once the Stock Appreciation Right is exercised, the
SAR Amount may only be paid on the fixed time, payment schedule or other event specified in the
governing written instrument or in Section 8.1 hereof.

 

 

	 	8.	 	Additional Conditions Applicable to Nonqualified Deferred Compensation Under
Section 409A of the Code.

          In the event any Award under this Plan is granted with an exercise price less than Fair Market
Value of the Common Stock subject to the Award on the Date of Grant (regardless of whether or not
such exercise price is intentionally or unintentionally priced at less than Fair Market Value, or
such Award is materially modified and deemed a new Award at a time when the Fair Market Value
exceeds the exercise price), or is otherwise determined to constitute a 409A Award, the following
additional conditions shall apply and shall supersede any contrary provisions of this Plan or the
terms of any 409A Award agreement.

          8.1 Exercise and Distribution. No 409A Award shall be exercisable or distributable
earlier than upon one of the following:

               (a) Specified Time. A specified time or a fixed schedule set forth in the written
instrument evidencing the 409A Award, but not later than after the expiration of 10 years from the
Date of Grant. If the written grant instrument does not specify a fixed time or schedule, such
time shall be the date that is the fifth anniversary of the Date of Grant.

               (b) Separation from Service. Separation from service (within the meaning of Section
409A of the Code) by the 409A Award recipient; provided, however, if the 409A Award recipient is a
“key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof)
and any of the Company’s stock is publicly traded on an established securities market or otherwise,
exercise or distribution under this Section 8.1(b) may not be made before the date which is
six months after the date of separation from service.

               (c) Death. The date of death of the 409A Award recipient.

               (d) Disability. The date the 409A Award recipient becomes disabled (within the
meaning of Section 8.4(b) hereof).

               (e) Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the
meaning of Section 8.4(c) hereof), but only if the net value (after payment of the exercise
price) of the number of shares of Common Stock that become issuable does not exceed the amounts
necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a
result of the exercise, after taking into account the extent to which the emergency is or may be
relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s other assets (to the extent such liquidation would not itself cause severe financial
hardship).

               (f) Change in Control Event. The occurrence of a Change in Control Event (within the
meaning of Section 8.4(a) hereof), including the Company’s discretionary exercise of the
right to accelerate vesting of such Award upon a Change in Control Event or to terminate the Plan
or any 409A Award granted hereunder within 12 months of the Change in Control Event.

 

 

          8.2 Term. Notwithstanding anything to the contrary in this Plan or the terms of any
409A Award agreement, the term of any 409A Award shall expire and such Award shall no
longer be exercisable on the date that is the later of: (a) 2-1/2 months after the end of the
Company’s taxable year in which the 409A Award first becomes exercisable or distributable pursuant
to this Section 8 and is not subject to a substantial risk of forfeiture; or (b) 2-1/2
months after the end of the 409A Award recipient’s taxable year in which the 409A Award first
becomes exercisable or distributable pursuant to this Section 8 and is not subject to a
substantial risk of forfeiture, but not later than the earlier of (i) the expiration of 10 years
from the date the 409A Award was granted, or (ii) the term specified in the 409A Award agreement.

          8.3 No Acceleration. A 409A Award may not be accelerated or exercised prior to the
time specified in this Section 8, except in the case of one of the following events:

               (a) Domestic Relations Order. The 409A Award may permit the acceleration of the
exercise or distribution time or schedule to an individual other than the Participant as may be
necessary to comply with the terms of a domestic relations order (as defined in Section
414(p)(1)(B) of the Code).

               (b) Conflicts of Interest. The 409A Award may permit the acceleration of the exercise
or distribution time or schedule as may be necessary to comply with the terms of a certificate of
divestiture (as defined in Section 1043(b)(2) of the Code).

               (c) Change in Control Event. The Administrator may exercise the discretionary right
to accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the
Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and
cancel the 409A Award for compensation. In addition, the Administrator may exercise the
discretionary right to accelerate the vesting of such 409A Award provided that such acceleration
does not change the time or schedule of payment of such Award and otherwise satisfies the
requirements of this Section 8 and the requirements of Section 409A of the Code.

          8.4 Definitions. Solely for purposes of this Section 8 and not for other
purposes of the Plan, the following terms shall be defined as set forth below:

               (a) “Change in Control Event” means the occurrence of a change in the ownership of the
Company, a change in effective control of the Company, or a change in the ownership of a
substantial portion of the assets of the Company (as defined in Proposed Regulations §
1.409A-3(g)(5) and any subsequent guidance interpreting Code Section 409A).

               (b) “Disabled” means a Participant (i) 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 can be expected to last for a continuous period of not less than 12 months, or
(ii) is, by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, receiving income replacement benefits for a period of not less than three months under an
accident and health plan covering Employees.

 

 

               (c) “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting
from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as
defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s
property due to casualty, or similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant.

	 	9.	 	Covenants of the Company.

          9.1 Availability of Shares. During the terms of the Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Awards.

          9.2 Securities Law Compliance. Each Option Agreement and Award Agreement shall
provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (a)
any then applicable requirements of state or federal laws and regulatory agencies shall have been
fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so
by the Company, the Participant shall have executed and delivered to the Company a letter of
investment intent in such form and containing such provisions as the Administrator may require.
The Company shall use reasonable efforts to seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to grant Awards and to
issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act the Plan, any Award
or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the
Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock
upon exercise of such Awards unless and until such authority is obtained.

	 	10.	 	Use of Proceeds from Stock.

          Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall
constitute general funds of the Company.

	 	11.	 	Miscellaneous.

          11.1 Acceleration of Exercisability and Vesting. The Administrator shall have the
power to accelerate the time at which an Award may first be exercised or the time during which an
Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in
the Award stating the time at which it may first be exercised or the time during which it will
vest.

          11.2 Stockholder Rights. Except as provided in the Plan or an Award Agreement, no
Participant shall be deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock subject to such Award unless and until such Participant has
satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or

 

 

other property) or distributions of other rights for which the record date is prior to the date such Common Stock
certificate is issued, except as provided in Section 12 hereof.

          11.3 No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Award granted pursuant thereto shall confer upon any Participant any right to continue
to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or
shall affect the right of the Company or an Affiliate to terminate (a) the employment of an
Employee with or without notice and with or without Cause, (b) the service of a Consultant pursuant
to the terms of such Consultant’s agreement with the Company or an Affiliate or (c) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of
the corporate law of the state in which the Company or the Affiliate is incorporated, as the case
may be.

          11.4 Transfer, Approved Leave of Absence. For purposes of the Plan, no termination of
employment by an Employee shall be deemed to result from either (a) a transfer to the employment of
the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to
another; or (b) an approved leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Employee’s right to re-employment is guaranteed either by a
statute or by contract or under the policy pursuant to which the leave of absence was granted or if
the Administrator otherwise so provides in writing.

          11.5 Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Award (a) to give written assurances satisfactory to
the Company as to the Participant’s knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and risks of exercising
the Award; and (b) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Award for the Participant’s own account and
not with any present intention of selling or otherwise distributing the Common Stock. The
foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Award has been registered under a then currently effective registration
statement under the Securities Act or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the circumstances under
the then applicable securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate
in order to comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

          11.6 Withholding Obligations. To the extent provided by the terms of an Award
Agreement and subject to the discretion of the Administrator, the Participant may satisfy any
federal, state or local tax withholding obligation relating to the exercise or acquisition of
Common Stock under an Award by any of the following means (in addition to the Company’s right to
withhold from any compensation paid to the Participant by the Company) or by a combination of such
means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common
Stock from the shares of Common Stock otherwise issuable to the

 

 

Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of
Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and
unencumbered shares of Common Stock of the Company.

	 	12.	 	Adjustments Upon Changes in Stock.

          Awards granted under the Plan and any agreements evidencing such Awards, the maximum number of
shares of Common Stock subject to all Awards stated in Section 4 and the maximum number of
shares of Common Stock with respect to which any one person may be granted Awards during any period
stated in Section 4 and Section 7.2(d)(vi) will be equitably adjusted or
substituted, as to the number, price or kind of a share of Common Stock or other consideration
subject to such Awards to the extent necessary to preserve the economic intent of such Award in the
event of changes in the outstanding Common Stock or in the capital structure of the Company by
reason of stock or extraordinary cash dividends, stock splits, reverse stock splits,
recapitalization, reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such Award. Any
adjustment in Incentive Stock Options under this Section 12 shall be made only to the extent not
constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any
adjustments under this Section 12 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act or otherwise result in a violation
of Section 409A of the Code. Further, with respect to Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code, such adjustments or
substitutions shall be made only to the extent that the Administrator determines that such
adjustments or substitutions may be made without causing the Company to be denied a tax deduction
on account of Section 162(m) of the Code. The Company shall give each Participant notice of an
adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all
purposes. Notwithstanding the above, in the event of any of the following: (i) the Company is
merged or consolidated with another corporation or entity and, in connection therewith,
consideration is received by shareholders of the Company in a form other than stock or other equity
interests of the surviving entity or outstanding Awards are not to be assumed upon consummation of
the proposed transaction; (ii) all or substantially all of the assets of the Company are acquired
by another person; (iii) the reorganization or liquidation of the Company; or (iv) the Company
shall enter into a written agreement to undergo an event described in clause (i), (ii) or (iii)
above, then the Administrator may, in its discretion and upon at least 10 days’ advance notice to
the affected persons, cancel any outstanding Awards and cause the holders thereof to be paid, in
cash or stock, or any combination thereof, the value of such Awards based upon the price per share
of Common Stock received or to be received by other shareholders of the Company in the event. The
terms of this Section 12 may be varied by the Administrator in any particular Award agreement.

	 	13.	 	Effect of Change in Control

          13.1 Unless otherwise provided in an Award Agreement:

               (a) In the event of a Change in Control, notwithstanding any provision of the Plan or any
applicable Award Agreement to the contrary, and either in or not in

 

 

combination with another event such as a termination of the applicable Participant’s Continuous Service by the Company without
Cause, all Options and Stock Appreciation Rights subject to such Award shall become immediately exercisable with respect to 100 percent of the shares
subject to such Option or Stock Appreciation Rights, and/or that the Restricted Period shall expire
immediately with respect to 100 percent of such shares of Restricted Stock or Restricted Stock
Units subject to such Award (including a waiver of any applicable Performance Goals) and, to the
extent practicable, such acceleration of exercisability and expiration of the Restricted Period (as
applicable) shall occur in a manner and at a time which allows affected Participants the ability to
participate in the Change in Control transaction with respect to the Common Stock subject to their
Awards.

               (b) In the event of a Change in Control, all incomplete Performance Periods in respect of such
Award in effect on the date the Change in Control occurs shall end on the date of such change, and
the Administrator shall (A) determine the extent to which Performance Goals with respect to each
such Award Period have been met based upon such audited or unaudited financial information then
available as it deems relevant, (B) cause to be paid to the applicable Participant partial or full
Awards with respect to Performance Goals for each such Award Period based upon the Administrator’s
determination of the degree of attainment of Performance Goals, and (C) cause the Award, if
previously deferred, to be settled in full as soon as possible.

          13.2 In addition, in the event of a Change in Control, the Administrator may in its discretion
and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards
and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such
Awards based upon the price per share of Common Stock received or to be received by other
shareholders of the Company in the event.

          13.3 The obligations of the Company under the Plan shall be binding upon any successor
corporation or organization resulting from the merger, consolidation or other reorganization of the
Company, or upon any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Company and its Affiliates, taken as a whole.

	 	14.	 	Amendment of the Plan and Awards.

          14.1 Amendment of Plan. The Board at any time, and from time to time, may amend or
terminate the Plan. However, except as provided in Section 12 relating to adjustments upon
changes in Common Stock and Section 14.3, no amendment shall be effective unless approved
by the stockholders of the Company to the extent stockholder approval is necessary to satisfy any
applicable law or securities exchange listing requirements. At the time of such amendment, the
Board shall determine, upon advice from counsel, whether such amendment will be contingent on
stockholder approval.

          14.2 Stockholder Approval. The Board may, in its sole discretion, submit any other
amendment to the Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

 

 

          14.3 Contemplated Amendments. It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with
the maximum benefits provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified
deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards
granted under it into compliance therewith.

          14.4 No Impairment of Rights. Rights under any Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent
of the Participant and (b) the Participant consents in writing.

          14.5 Amendment of Awards. The Administrator at any time, and from time to time, may
amend the terms of any one or more Awards; provided, however, that the Administrator may not effect
any amendment which would otherwise constitute an impairment of the rights under any Award unless
(a) the Company requests the consent of the Participant and (b) the Participant consents in
writing.

	 	15.	 	General Provisions.

          15.1 Other Compensation Arrangements. Nothing contained in this Plan shall prevent
the Board from adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either generally applicable or
applicable only in specific cases. The Plan is intended to constitute an “unfunded” plan for
incentive compensation and nothing contained in the Plan shall give any Participant any rights that
are greater than those of a general unsecured creditor of the Company.

          15.2 Recapitalizations. Each Option Agreement and Award Agreement shall contain
provisions required to reflect the provisions of Section 12.

          15.3 Delivery. Upon exercise of a right granted under this Plan, the Company shall
issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject
to any statutory or regulatory obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of time.

          15.4 Other Provisions. The Option Agreements and Award Agreements authorized under
the Plan may contain such other provisions not inconsistent with this Plan, including, without
limitation, restrictions upon the exercise of the Awards, as the Administrator may deem advisable.

          15.5 Cancellation and Rescission of Awards for Detrimental Activity.

               (a) Upon exercise, payment or delivery pursuant to an Award, the Participant shall certify in
a manner acceptable to the Company that the Participant has not engaged in any Detrimental Activity
described in Section 2.18.

               (b) Unless the Award Agreement specifies otherwise, the Administrator may cancel, rescind,
suspend, withhold or otherwise limit or restrict any

 

 

unexpired, unpaid or deferred Awards at any time if the Participant engages in any Detrimental
Activity described in Section 2.18.

               (c) In the event a Participant engages in Detrimental Activity described in Section
2.18 after any exercise, payment or delivery pursuant to an Award, during any period for which
any restrictive covenant prohibiting such activity is applicable to the Participant, such exercise,
payment or delivery may be rescinded within one year thereafter. In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain realized or payment
received as a result of the exercise, payment or delivery, in such manner and on such terms and
conditions as may be required by the Company. The Company shall be entitled to set-off against the
amount of any such gain any amount owed to the Participant by the Company.

          15.6 Disqualifying Dispositions. Any Participant who shall make a “disposition” (as
defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon
exercise of an Incentive Stock Option within two years from the Date of Grant of such Incentive
Stock Option or within one year after the issuance of the shares of Common Stock acquired upon
exercise of such Incentive Stock Option shall be required to immediately advise the Company in
writing as to the occurrence of the sale and the price realized upon the sale of such shares of
Common Stock.

          15.7 Section 16. It is the intent of the Company that the Plan satisfy, and be
interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated
under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule
16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject
to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of
any provision of the Plan would conflict with the intent expressed in this Section 15.7,
such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid
such conflict.

          15.8 Section 162(m). To the extent the Administrator issues any Award that is
intended to be exempt from the application of Section 162(m) of the Code, the Administrator may,
without shareholder or grantee approval, amend the Plan or the relevant Award agreement
retroactively or prospectively to the extent it determines necessary in order to comply with any
subsequent clarification of Section 162(m) of the Code required to preserve the Company’s Federal
income tax deduction for compensation paid pursuant to any such Award.

	 	16.	 	Effective Date of Plan.

          The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or,
in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

	 	17.	 	Termination or Suspension of the Plan.

          The Plan shall terminate automatically on the day before the 10th anniversary of the Effective
Date. No Award shall be granted pursuant to the Plan after such date, but Awards

 

 

theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan
at any earlier date pursuant to Section 14.1 hereof. No Awards may be granted under the
Plan while the Plan is suspended or after it is terminated. Unless the Company determines to
submit Section 7.2 of the Plan and the definition of “Performance Goal” and “Performance Criteria”
to the Company’s stockholders at the first stockholder meeting that occurs in the fifth year
following the year in which the Plan was last approved by stockholders (or any earlier meeting
designated by the Board), in accordance with the requirements of Section 162(m) of the Code, and
such stockholder approval is obtained, then no further Performance Compensation Awards shall be
made to Covered Employees under Section 7.2 after the date of such annual meeting, but the
Plan may continue in effect for Awards to Participants not in accordance with Section 162(m) of the
Code.

	 	18.	 	Choice of Law.

          The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to such state’s conflict of law rules.EX-10.5

 

Exhibit 10.5

Non-Qualified Deferred Compensation Plan

Plan Document

NOTICE: Non-qualified deferred compensation plans have significant tax
consequences to both the Employer and Participants. These tax consequences may
be adverse if the non- qualified deferred compensation plan is not
appropriately designed pursuant to Internal Revenue Service and Department of
Labor requirements. Use of this Non-Qualified Deferred Compensation Plan Trust
Agreement is specifically conditioned upon the Employer’s receipt of written
acknowledgment by an attorney, accountant, or other tax professional
representing the Employer that the Employer has reviewed the tax ramifications
of the use of a non-qualified deferred compensation plan, and this document and
any related documents; and (ii) that the Employer understands and assumes all
responsibility relating to the tax consequences of using this document.

This Plan document is to be used in conjunction with the Strong Non-Qualified Deferred Compensation
Plan Joinder Agreement, and is to be interpreted consistent with the options selected in the
Joinder Agreement.

	I.	 	Plan Name and Purpose
	 
	 	 	The Plan shall be named as selected in Part II, Section A of the Joinder Agreement. It has
been adopted by the Employer to provide key selected employees of the Employer with the
benefits of an unfunded, non qualified deferred compensation program. The Plan is intended
to constitute “a plan that is unfunded and maintained by an employer primarily for the
purpose of providing deferred compensation for a select group of management or highly
compensated employees” within the meaning of Sections 201(20), 301(a)(3) and 401(a)(1) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is intended to be
exempt from the provisions of Parts 2, 3 and 4 of Title I of ERISA, and shall be interpreted
and administered to the extent possible in a manner consistent with that intent.
	 
	II.	 	Definitions
	 
	 	 	When used in the Plan, the following words shall have the meanings defined below, unless the
context clearly indicates otherwise:

	 	(a)	 	Accounts: The bookkeeping accounts maintained by the Service Provider on
behalf of the Employer, with appropriate sub accounts, to reflect Contributions to the
Plan adjusted for earnings, losses, and transactions in accordance with this Plan.
Accounts shall be bookkeeping entries only and shall not constitute an actual
allocation of any assets of the Employer, or be deemed to create any trust, custodial
account or deposit with respect to any assets which may be utilized to satisfy the
obligation of the Employer to provide the benefits specified in this Plan.
	 
	 	(b)	 	Beneficiary: Any person who is designated by a Participant to receive payment
of benefits under this Plan, to the extent available, after the Participant’s death.
The Participant may specify his or her Beneficiaries on a form approved by the
Committee and may make such changes to his Beneficiary designation at any time,
pursuant to procedures adopted by the Committee. Notwithstanding anything in this Plan
to the contrary, if the Participant designates his or her spouse as a Beneficiary

 

 

	 	 	 	of benefits payable hereunder, and the Participant’s marriage to that spouse is later
terminated (whether by divorce, annulment, dissolution or otherwise), the
Participant’s designation of his or her spouse as a Beneficiary shall be null and
void, and the portion of the Participant’s benefits that would, but for this
provision be payable to the Participant’s spouse will be payable as designated in
the Participant’s Beneficiary designation, as if the spouse had predeceased the
Participant.
	 
	 	(c)	 	Bonus Deferrals: Those contributions to the Plan, as authorized in the Joinder
Agreement, made pursuant to Part III of this Plan Document, and allocated to the
Accounts of Participants entering into an Elective Deferral Agreement authorizing Bonus
Deferrals.
	 
	 	(d)	 	Board: The Board of Directors (or other governing board) of the Employer.
	 
	 	(e)	 	Change of Control: A Change of Control shall be deemed to have occurred (if
applicable) upon the happening of the criteria specified by the Employer in the Change
of Control Appendix to the Joinder Agreement. If the Employer does not specify the
criteria for determining the existence of a Change of Control, Change of Control shall
be deemed to have occurred upon (i) the sale, lease, exchange, or other transfer of
substantially all of the assets of the Employer, (ii) the liquidation, dissolution or
winding up of the Employer, whether voluntary or involuntary, (iii) any merger,
acquisition or consolidation to which the Employer is a party and either (a) the
Employer is not the surviving company, or (b) more than fifty percent (50%) of the shares of capital stock, by vote and value (the “Stock”), of the surviving company is
beneficially held by a Person (as that term is used in Section 7701(a)(1) of the
Internal Revenue Code of 1986, as amended) or Persons who did not hold, in the
aggregate, more than fifty percent (50%) Stock of the surviving company, prior to the
merger, acquisition, or consolidation, and (iv) any other transaction, whereby more
than fifty percent (50%) Stock of the Employer, is beneficially held by a Person or
Persons who did not hold, in the aggregate, more than fifty percent (50%) of the Stock
of the Employer prior to the transaction, provided however, that a Change of Control
shall not include any change in the percentage ownership of the Stock of the Employer
resulting from the offering of shares under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
	 
	 	(f)	 	Code: The Internal Revenue Code of 1986, and amendments thereto.
	 
	 	(g)	 	Committee: The Committee as provided for in this Plan, which shall have the
authority to direct the operations of the Plan. If the Employer does not appoint
members of the Committee, the Employer shall be the administrator of the Plan, and
direct its day to day operations.
	 
	 	(h)	 	Compensation: An Employee’s salary (unreduced by deferrals made on a pre-tax
basis to any plan maintained under Code §§401(k) or 125) as modified in the Joinder
Agreement for purposes of Elective Deferrals.
	 
	 	(i)	 	Contributions: Collectively, Elective Deferrals, Bonus Deferrals, Matching
Contributions, Discretionary Incentive Contributions, and Employer Special
Contributions, as may be selected in the Joinder Agreement.
	 
	 	(j)	 	Disability: The inability 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 as determined by the Employer based on its current disability policy, applied on a uniform and nondiscriminatory
basis.
	 
	 	(k)	 	Discretionary Incentive Contributions: Those contributions to the Plan, as
authorized in the Joinder Agreement, made pursuant to Part III of this Plan Document.
	 
	 	(l)	 	Effective Date: The date the Plan is effective, and from which benefits will
accrue to Participants under the terms of this Plan as specified in the Joinder
Agreement.
	 
	 	(m)	 	Elective Deferrals: A contribution made to this Plan pursuant to the
Employer’s obligation to provide certain benefits in consideration of a Participant
entering into an Elective Deferral Agreement.
	 
	 	(n)	 	Elective Deferral Agreement: An irrevocable election of the Participant to
forego payment of Compensation in exchange for the Employer’s promise to pay benefits
pursuant to this Plan. Such Elective Deferral Agreement shall (i) be in writing,
signed by the Participant prior to the start of the Plan Year to which it relates
(except that an Eligible Employee may enter into a Elective Deferral Agreement
effective for the remainder of the Plan Year in which the Participant’s participation
in the Plan commences, provided that any reduction in compensation specified in the
Elective Deferral Agreement has effect only with respect to compensation not yet earned
or payable); (ii) take effect as of the start of the following Plan Year (or the date
the Participant commences participation in the Plan, if later); (iii) be irrevocable
during the Plan Year in which it is in effect (except that a Elective Deferral
Agreement may be revoked entirely with respect to the remainder of the Plan Year upon
election of the Participant; and (iv) on a form and submitted as prescribed by the
Committee. Any Elective Deferral Agreement in effect as of the last day of a Plan Year
shall automatically renew for each succeeding Plan Year unless a proper election
modifying or terminating the prior Elective Deferral Agreement is submitted to the
Committee during the period of time designated by the Committee.
	 
	 	(o)	 	Eligible Employee: An Employee described in Part II, Section D of the Joinder
Agreement, who is eligible to be selected as a Participant in this Plan.
	 
	 	(p)	 	Employee: Any common law employee of the Employer, as determined
in the sole discretion of the Employer.
	 
	 	(q)	 	Employer: The Employer specified in the Joinder Agreement and any successor to
the business of the Employer establishing the Plan. No other employer shall be
considered an Employer for purposes of this Plan unless (i) such other employer
consents in writing to being an Employer with respect to this Plan; and (ii) such other
employer is an entity which is part of (a) a controlled group of corporations or
business pursuant to Code §§414(b) or (c); (b) an affiliated service group pursuant to
Code §414(m); or (c) any other entity required to be aggregated with the Employer
pursuant to Code §414(o).
	 
	 	(r)	 	Employer Special Contribution: Those contributions to the Plan, as authorized
in the Joinder Agreement, made pursuant to Part III of this Plan Document, allocated
pursuant to the provisions of an agreement entered into between the Employer and a
Participant.
	 
	 	(s)	 	Employment Commencement Date: The date on which an Employee first is employed
by the Employer.

 

 

	 	(t)	 	Investment Fund: One of the funds provided for in this Plan, as selected by
the Employer.
	 
	 	(u)	 	Investment Fund Selection Form: The form on which the Employer selects
Investment Funds available for the investment of assets held in Trust, which is an
integral part of the Plan.
	 
	 	(v)	 	Joinder Agreement: The document which contains the elections made by the
Employer and which combined with this Plan Document contains the provisions of the
Plan.
	 
	 	(w)	 	Matching Contributions: Those contributions to the Plan, as authorized in the
Joinder Agreement, made pursuant to Part III of this Plan Document, allocated as a
matching contribution to the Elective Deferral or Bonus Deferral Contributions.
	 
	 	(x)	 	Participant: An Eligible Employee who has been selected to participate in the
Plan and who has contributions credited to his or her Account. An individual who has
an Account in the Plan and is due benefits under the Plan (notwithstanding any vesting
or forfeiture provisions contained herein) shall continue to be a Participant despite
no longer being an Eligible Employee.
	 
	 	(y)	 	Plan: The non-qualified deferred compensation plan established by the Employer
through the use of the Joinder Agreement and this Plan Document, which is intended to
be a “top hat” plan, as defined in Department of Labor Regulation § 23.20.104-23, and
exempt from the provisions of Parts 2, 3 and 4 of Title I of the Employee Retirement
Income Security Act of 1974, as amended.
	 
	 	(z)	 	Plan Year. The twelve month period ending on the date specified in the Joinder
Agreement, which shall be the fiscal year of the Plan. Unless otherwise elected in the
Joinder Agreement, the Plan Year shall be the calendar year.
	 
	 	(aa)	 	Service Provider: An affiliate of Strong Capital Management, Inc. that
provides certain administrative services in connection with the operation of the Plan,
pursuant to a services agreement entered into between the Employer and the Service
Provider.
	 
	 	(bb)	 	Trust Agreement: An agreement entered into between the Trustee and the
Employer providing for fiduciary services in connection with a grantor trust
established in connection with this Plan.
	 
	 	(cc)	 	Trustee: The trustee designated in the Trust Agreement, or its successors and
assigns. The Trustee shall not be a party to the Plan, and its responsibilities shall
be governed exclusively by the Trust Agreement.
	 
	 	(dd)	 	Year of Service. A consecutive 12 month period of continuous service in the
employ of the Employer commencing on (i) the Employee’s Employment Commencement Date;
(ii) the effective date of the Employer’s establishment of this Plan; or (iii) the date
the Employee becomes a Participant in the Plan, as the context shall provide.

	II 	 	Eligibility and Participation

	 	A.	 	Eligibility: From among those Employees designated as Eligible Employees by the
Employer in the Joinder Agreement, the Board (or its designee) shall select those who
shall become Participants in the Plan. The Board may impose such terms and conditions
upon such an Employee prior to becoming a Participant, which shall be communicated to the
Employee, in

 

 

	 	 	 	writing, prior to commencement of participation. An Eligible Employee shall
commence Participation as of any date specified by the Board. Eligibility criteria may be
revised at the discretion of the Employer and status as an eligible employee or
Participant in one year does not guarantee such status in any subsequent year.
	 
	 	B.	 	Participation: A Participant shall commence participation in Plan upon completion of
an appropriate Elective Deferral Agreement or allocation of a Contribution to his or her
Account. An Employee shall remain a Participant for so long as the Employee is entitled
to receive benefits under this Plan.

	III.	 	Contributions.
	 
	 	 	As may be selected in the Joinder Agreement, the Employer shall credit each Participant’s
Account with:

	 	a)	 	Elective Deferrals: The amount of any Elective Deferrals elected by the
Participant in an Elective Deferral Agreement for the Plan Year. The Employer shall
specify in the Joinder Agreement the minimum and maximum percentage of Compensation
that may be deferred in each Plan Year;
	 
	 	b)	 	Bonus Deferrals: The amount of any Bonus Deferrals elected by the Participant
in an Elective Deferral Agreement entered into for the purpose of Bonus Deferrals, for
the Plan Year;
	 
	 	c)	 	Discretionary Incentive Contributions: An amount, as determined in the
discretion of the Employer, which will be allocated to the Accounts of Participant’s as
determined by the Employer;
	 
	 	d)	 	Matching Contributions: An amount, as may be specified in the Joinder
Agreement, computed as a matching amount to any contribution made pursuant to an
Elective Deferral Agreement;
	 
	 	e)	 	Employer Special Contributions: An amount as may be specified in an agreement
between the Employer and a Participant.

	 	 	 	Benefits payable pursuant to this Plan shall be calculated with reference to the amount of
contributions credited to the Participant’s Account, together with any adjustments made
thereto pursuant to the provisions of this Plan. The value of each Account will reflect
Contributions adjusted to reflect (i) gains and losses (realized or unrealized) and income
attributable to the investment options selected by Participant; (ii) payments from the
Account to Participant or a beneficiary; and (iii) Participant’s pro rata share of
administrative expenses and fees arising from operation of the Plan, to the extent not paid
by the Employer.
	 
	 	 	 	The obligation of the Employer to provide benefits pursuant to this Plan shall be the sole
unsecured promise of the Employer with respect to this Plan. Notwithstanding the foregoing,
the Employer may establish a trust pursuant to a Trust Agreement for the purpose of setting
aside funds to provide for the payment of benefits under this Plan. However, the assets of
the Trust shall at all times remain subject to the claims of the general creditors of the
Employer, and no Participant or Beneficiary shall have any claim or right with respect to
the assets held in the Trust, except to the extent that the Participant or Beneficiary is a
general creditor of the Employer. Notwithstanding anything in the Plan (or the Trust
Agreement) to the contrary, if elected in the Joinder Agreement, upon a Change of

 

 

	 	 	 	Control, the Employer shall fully fund its obligations under this Plan by making
sufficient contributions to the Trust within the time limit specified in the Joinder
Agreement.

	IV.	 	Investments
	 
	 	 	To the extent that the Employer establishes a Trust, such contributions made to the Trust
shall be invested in one or more Investment Funds as specified by the Employer in the
Investment Fund Selection Form. It shall be the investment policy of the Employer to have Trust Assets invested in such
Investment Funds so as to provide sufficient assets to fund Employer’s obligation to provide
benefits under this Plan. At the discretion of the Employer, Participants may be entitled to
request that their Accounts be adjusted (for investment gains and losses, as if invested) in
accordance with a deemed investment election of a Participant.

	 
	 	 	Deemed investment elections may be made with respect to existing Account balances, current
contributions to the Participant’s Account, shall be subject to any limitations imposed by the
Committee from time to time, and shall be made by such means as the Employer and Service Provider may agree. The Service Provider shall make such adjustments in Participants’ Accounts to
reflect any investment gains or losses such Participants’ Accounts would experience if funds
were actually invested pursuant to the Participant’s election. Participants may make changes
in deemed investment elections at such time, and in such manner, as may be specified by the
Committee from time to time. Any deemed investment election, or changes to deemed
investment elections, shall remain in effect until changed by the Participant.
	 
	 	 	The Plan Administrator shall provide each Participant with a statement of his or her
Account, valued as of the last business day of each calendar quarter, reflecting the income,
gains and losses (realized or unrealized), amounts of deferrals, and distributions of such
Account since the prior statement.
	 
	V.	 	Vesting
	 
	 	 	A Participant shall be vested in all Contributions together with any income or gains
attributable thereto, as elected by the Employer in the Joinder Agreement.
	 
	 	 	If specified in the Joinder Agreement, a Participant shall become fully vested in his or her
Accounts immediately prior to a Change of Control of the Employer.
	 
	VI.	 	Payments from the Plan
	 
	 	 	Payments to or for the benefit of Participants will commence as described in this Section,
upon determination by the Plan Administrator that one of the following events has occurred,
and upon the following terms:

	 	A.	 	Elections by Participant as to Time and Method of Payment: Each Participant shall
elect the date upon which payment shall commence from the Plan. Each Participant shall
make an irrevocable election whether payment(s) from their Account will be made as
authorized in the Joinder Agreement (as a single lump sum, in annual installments or as
described in the Joinder Agreement). The election of the Participant provided for in
this paragraph as to method of payment is a one time election, made by the Participant at
the inception of his/her participation in the Plan, shall apply to the entire account of
the Participant, shall not be modifiable after acceptance by the Employer, and shall be
binding for the year in which it is made and all subsequent Plan Years regardless of the
Participant’s eligibility to participate or actual participation during any such Plan
Years.
	 
	 	B.	 	Death of Participant: Payment shall be made as soon as practicable in a single lump
sum to the Beneficiary(ies) as their interests appear as last specified by the Participant
on the form specified by, and filed with, the Committee.
	 
	 	C.	 	Disability: In the event of Participant’s Disability, payment of Participant’s
Account shall be made in accordance with the election referred to in paragraph A above,
but payment(s) shall commence as soon as practicable after Participant’s Disability is
determined, in its sole discretion, by the Employer.

 

 

	 	D.	 	Unforeseeable Emergency: If authorized in the Joinder Agreement, the Employer, in
its sole and absolute discretion and upon written application of a Participant requesting
payment of benefits on the basis of an unforeseeable emergency, may direct immediate
commencement of payment of all or a portion of the then vested and current value of such
Participant’s Account. For purposes of this paragraph, the term “unforeseeable emergency”
shall mean severe financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent of the Participant (as
defined in § 152(a) of the Internal Revenue Code of 1986, as amended from time to time),
loss of the Participant’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an unforeseeable emergency will
depend upon the facts of each case, as determined in the sole and absolute discretion of
the Plan Administrator. Withdrawal for unforeseeable emergencies shall not be permitted
the extent that such hardship is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the Participant’s assets,
to the extent the liquidation of such assets would not itself cause severe financial
hardship; or (iii) by cessation of deferrals under this, or any other Plan, sponsored by
the Employer. The Employer shall not consider the need to send a Participant’s child to
college or the desire to purchase a home as unforeseeable emergencies. The Employer shall
permit withdrawals of amounts because of an unforeseeable emergency only to the extent
reasonably required to satisfy the emergency need.
	 
	 	E.	 	Payments Subject to Vesting Requirements. Notwithstanding the foregoing, if a
portion of Participant’s Accounts is subject to a vesting requirement specified in the
Joinder Agreement and Part V of this Plan Document, such portion and the income and net
investment gains arising therefrom shall be payable to Participant only to the extent the
applicable vesting requirements specified in the Joinder Agreement have been fulfilled.
Any portion of the Participant’s Account which is not vested at the time the Participant
terminates employment with the Employer shall be deemed forfeited. To the extent that the
Employer has made a contribution to a trust in connection with respect to this Plan, the
amount of any such contribution held in trust deemed forfeited pursuant to this provision
shall be returned to the Employer if the trust is revocable at the time, or if not revocable,
then the forfeited amounts shall continue to be held in trust until the
satisfaction of all of Employer’s obligations under this Plan.
	 
	 	 	 	If elected in the Joinder Agreement, a Participant’s benefits (without regard to the amount
otherwise vested pursuant to this Plan) may be forfeited on the terms and conditions
established by the Employer on the Forfeiture Appendix.

	VII.	 	Administration and Interpretation of Terms

	 	A.	 	Committee: The Committee, as designated by the Employer in the Joinder Agreement,
shall be the administrator of the Plan, charged with responsibility for the day to day
operations of the Plan, to interpret its provisions, implement operational policies and
shall have such other authority as may be delegated to them by the Employer. To the
extent that the Employer does not name a Committee in the Joinder Agreement, the Employer shall be the administrator and shall
designate such persons, from time to time, as may be required to administer the Plan. The
Committee may delegate any of its powers, authorities or responsibilities for the
administration of the plan to any other Person or committee so designated by it in writing.
The Committee may employ such agents as may be necessary for the effective operation of the
Plan, including but not limited to attorneys, accountants, service providers and other
agents. No member of the Committee shall be personally liable to any person for any action
taken or omitted in connection with the interpretation of the Plan, or its operations,
unless attributable to that person’s own willful misconduct, gross

 

 

	 	 	 	negligence, or lack of good faith. Members of the Committee shall not participate in any action with respect to
benefits they may receive as Participants in the Plan.
	 
	 	B.	 	Procedures: The Committee may establish such procedures as are reasonably necessary
for the implementation and operation of this Plan. To the extent that such procedures are
not directly in conflict with the terms of the Plan, they shall be binding in all respects
on the Participants.
	 
	 	C.	 	Costs of Administration: The Employer shall pay all costs of administering this
Plan. To the extent that such costs are not paid in a reasonably timely manner, they
shall be considered a charge against any Trust established in connection with the
establishment of this Plan.

	VIII.	 	Limitation of Rights of Participants and Beneficiaries

	 	A.	 	No Right of Employment or Other Benefits: Nothing contained in this Plan shall
confer or shall be construed as conferring upon any Participant the right to continue in
the employ of the Employer in any specific capacity, for any specific term, or at any
specific rate of compensation, all of which remain at the sole discretion of the Employer.
Any compensation deferred and any benefits paid under this Plan shall be disregarded in
computing benefits under any employee benefit plan of the Employer, except to the extent
expressly provided herein.
	 
	 	B.	 	General Creditor Status; Unfunded Obligation: This Plan constitutes a mere
contractual promise by the Employer to make the future payments as provided under this
Plan to Participants and, where applicable, to beneficiaries. Notwithstanding any other
provision of this Plan, a Participant and any beneficiary shall be treated as a general
creditor of the Employer. Neither a Participant nor any beneficiary shall have any
preferred claim on, or any beneficial interest in, any assets of the Employer, or any
trust maintained in connection with this Plan which is superior in any manner to the right
of any other general and unsecured creditor of the Employer.
	 
	 	C.	 	Non-assignable: None of the benefits, payments, proceeds or claims of any
Participant or beneficiary shall be subject to any claim of any creditor of any
Participant or beneficiary and the same shall not be subject to attachment, garnishment or
other legal process by any creditor of such Participant or beneficiary, nor shall any
Participant or beneficiary have any right to alienate, anticipate, commute, pledge,
encumber or assign any benefits or payments of proceeds which he or she may expect to
receive, contingently or otherwise, under the Plan.

	IX.	 	Termination and Modification
	 
	 	 	The Employer shall have the right to modify or terminate the Plan by written instrument duly
executed on behalf of the Employer by its authorized officer. Provided any amendment or
termination of the Plan shall not adversely affect the rights of any Participant or
beneficiary as to amounts credited to an Account prior to the effective date of such
amendment or termination. Written notice of each amendment and of the termination of the
Plan shall be provided to each Participant or beneficiary to whom payments have already
commenced. Upon termination, the Employer may choose to have payments continue to be made as they come due, or, in its sole
discretion, accelerate payments by making lump sum payments to those entitled thereto as to
each Account under the Plan.
	 
	 	 	Notwithstanding the above, this Plan shall not automatically be terminated upon the sale,
transfer, merger, or other conveyance of the Employer to, or with another entity, but shall
survive unless amended or terminated pursuant to the provisions of this Plan.

 

 

	X.	 	Parties
	 
	 	 	The terms of this Plan shall be binding upon the Employer and its successors or assigns and
upon any person, persons, or entity acquiring control of the Employer, as that term is
defined in the Act, and upon each Participant and any of his/her beneficiaries, heirs,
executors and administrators.
	 
	XI.	 	Notices
	 
	 	 	Notices, elections, or designations by a Participant to the Employer shall be addressed to
the Employer to the attention of the Plan Administrator. Notices by the Employer to a
Participant shall be addressed to the Participant at his or her most recent home
address reflected in the records of the Employer.
	 
	XII.	 	Effective Date
	 
	 	 	The effective date of the Plan shall be the date specified in the Joinder Agreement.
	 
	XIII.	 	Governing Law
	 
	 	 	This Plan shall be construed and enforced in accordance with, and shall be governed by, the
laws of the state of domicile of the Employer.

 

 

Non-Qualified Deferred Compensation Plan

Investment Fund Selection Form

                                                                 , (the Employer)
implementing the                                          (the “Plan”), hereby
designates the following Investment Funds from among the investment fund options available for use
with the Strong Non Qualified Deferred Compensation Plan, available for the investment of Plan
assets held for Participant’s benefit.

	 	(a)	 	                                                            
	 
	 	(b)	 	                                                            
	 
	 	(c)	 	                                                            
	 
	 	(d)	 	                                                            
	 
	 	(e)	 	                                                            
	 
	 	(f)	 	                                                            
	 
	 	(g)	 	                                                            
	 
	 	(h)	 	                                                            

	 	 	 	o      In addition, if selected, an Employer Stock Fund will also be available.

In making the selection of Investment Funds, the Employer hereby confirms and acknowledges that:

	 	•	 	The Employer, or its authorized designee(s) have had the opportunity to request and
receive copies of any prospectuses as may be required under applicable federal
securities law and regulation, or may have been prudent to review prior to selection of
the Investment Funds;
	 
	 	•	 	The Employer has actually received copies of the applicable prospectuses for each
Investment Fund actually selected for investment of Plan assets;
	 
	 	•	 	Service Provider or an affiliate may receive fees for services performed as (i) an
investment manager of a mutual fund or portfolio which is an asset underlying an
Investment Fund; (ii) custodian, distributor or transfer agent for any mutual fund
contained within an Investment Fund; or (iii) other services provided in maintaining
the investment as an investment available for use in daily valued defined contribution
plans serviced by Service Provider (including but not limited to set-up and maintenance
fees, sub-transfer agency fees, processing fees, and sub-accounting fees); and the
Employer specifically acknowledges that such fees received by Service Provider when
aggregated with all other fees constitute reasonable compensation for Service
Provider’s service to the Plan; and
	 
	 	•	 	The Plan, at the direction of the Employer or other fiduciary, may redeem its
interest in any such Investment Fund on reasonably short notice (as may be specified in
appropriate disclosure information with respect to each such Investment Fund) without
penalty.

Service Provider agrees to follow the Employer’s direction with respect to offering the investment
funds available for the investment of the Plan assets.

 

 

In Witness Whereof, the Employer, by its duly authorized representative, has executed this document
in connection with the adoption of the Plan utilizing the Strong Non-Qualified Deferred
Compensation Plan services, as provided by the Service Provider.

	 	 	 	 	 
	 	Employer:

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 

 

 

Non-Qualified Deferred Compensation Plan Joinder Agreement

NOTICE: Non-qualified deferred compensation plans have significant tax
consequences to both the Employer and Participants. These tax consequences may
be adverse if the non-qualified deferred compensation plan is not appropriately
designed pursuant to Internal Revenue Service and Department of Labor
requirements. Use of this Non-Qualified Deferred Compensation Plan Joinder
Agreement is specifically conditioned upon the Employer’s receipt of written
acknowledgment by an attorney, accountant, or other tax professional
representing the Employer that the Employer has reviewed the tax ramifications
of the use of a non-qualified deferred compensation plan, and this document and
any related documents; and (ii) that the Employer understands and assumes all
responsibility relating to the tax consequences of using this document.

The provisions selected in this Agreement are to be interpreted in conjunction with the Strong
Non-Qualified Deferred Compensation Plan Document (“Plan Document”), which is incorporated herein.

The Employer hereby establishes or restates, as designated below, a non-qualified deferred
compensation plan for certain key management or other highly compensated employees who are eligible
to participate in this plan, pursuant to its terms.

	I.	 	Employer Information
	 
	 	 	Name: Thor Industries, Inc.
	 
	 	 	Address: 419 West Pike Street
Jackson Center, Ohio 45334
	 
	 	 	Telephone: (937) 596-6849
	 
	 	 	Primary Contact: Dean Bruick
	 
	 	 	Employer EIN: 93-0768752 Type of Entity: C Corporation
	 
	 	 	Employer Fiscal Year end: July 31

II. Plan Information

	 	A.	 	Plan Name:
	 
	 	 	 	The Employer hereby restates the Thor Industries, Inc. Deferred Compensation Plan
(“Plan”), a non-qualified deferred compensation plan, as of February 1, 2003, which
benefits certain key management or other highly compensated employees, and which was
originally effective as of June 1, 2000.
	 
	 	B.	 	Plan Year shall mean the twelve consecutive month period ending on December 31,
2003 and each anniversary thereafter. If the Effective Date of this Plan is not twelve
months prior to the initial Plan Year end specified, a short first Plan Year shall
result, which shall have only that impact as described in the Plan Documents.

 

 

	 	C.	 	Coverage:

NOTICE: Only those Employees who are considered part of a “select group of
management or other highly compensated employees” as defined by the Department
of Labor in Reg. §2520.104-23 should be included as participants. Inclusion of
employees not falling within the DOL “top-hat” exemption may cause the Plan to
be within the purview of Title I of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), requiring compliance with certain minimum
coverage, participation, and funding requirements.

Only the following (classification of) Employees shall be eligible to be selected as
a Participant in this Plan: All officers and other key employees as designated by
the Employer.

Those Eligible Employees who have been selected as Participants in the Plan shall be
designated on an addendum to this Plan which shall be modifiable to include, or
exclude Eligible Employees as Participants in this Plan.

	 	D.	 	Compensation
	 
	 	 	 	Compensation used to determine the amount of Elective Deferral Contributions with
respect to any Participant means:

Wages, salaries, fees for professional services and other amounts received
(whether or not the amount is paid in cash) for personal services actually
performed in the course of employment with the Employer or an Affiliate to
the extent that such amounts are includable in gross income, including but
not limited to commissions paid to salespersons, compensation for services
on the basis of a percentage of profits, commissions on insurance premiums,
tips, bonuses, but not including those items excludable under the definition
of compensation under Treas. Reg. Section 1.415-2(d)(3).

For Plan purposes Compensation will be determined before Elective Deferrals and
other salary reduction amounts that are not included in the Participant’s gross
income under Code section 125, 402(e), 402(h) or 403(b).

	 	E.	 	Contributions

	 	1.	 	The Employer may make contributions to this Plan, for the
benefit of the Participant, as may be elected below:
	 
	 	 	 	Elective Deferrals. Participants may elect to reduce their Compensation and
to have Elective Deferrals credited to their Accounts by making an election
under the Plan (which may be changed each year as described in the Plan).
The amount a Participant can defer is:

	 	(a)	 	The minimum Elective Deferral amount shall be
1% of the Participant’s Compensation.
	 
	 	(b)	 	The maximum Elective Deferral amount shall be
$20,000.

 

 

	 	(c)	 	The Contribution Period for Elective Deferrals
shall be the payroll period.

Matching Contributions. The Employer will decide from year to year whether
Matching Contributions will be made and will notify Participants annually of
the manner in which Matching Deferrals will be calculated for the subsequent
year.

Discretionary Incentive Contributions. The Employer may make Discretionary
Incentive Contributions at such times, and in such amounts, as the Employer
elects.

Subject to the approval of Strong Capital Management, Inc., or an affiliate,
which shall not be unreasonably withheld, and notwithstanding the terms of
this Plan, the Employer may enter into an agreement with each Participant,
specifying that Employer Special Contributions be made to the Plan and
allocated to the Account of the Participant pursuant to the terms of that
agreement.

	 	F.	 	Forfeiture Provisions:

	 	(1)	 	Vesting provisions:

	 	(a)	 	The Participant’s Account, attributable to
Employer Contributions, shall vest in him or her upon completion of
three (3) Years of Service.
	 
	 	(b)	 	Years of Service for vesting shall mean the
period commencing on the Employee’s Date of Hire and ending on each
annual anniversary of the Employee’s Date of Hire.
	 
	 	(c)	 	Vesting Years of Service shall be counted for
all years of service of the Employee with the employer beginning with
the Employee’s Date of Hire.
	 
	 	(d)	 	Notwithstanding the provisions of this Item of
the Joinder Agreement, a Participant shall become fully vested in his
Accounts subject to a vesting schedule upon a Change of Control (as
defined in the attached Schedule H, “Change of Control”).

 

 

	 	G.	 	Investments:

	 	(1)	 	Participants may elect to have amounts credited to their
Account(s) invested among Investment Funds, selected by the Employer. Such
election may be changed once during each business day that the Trustee and the
New York Stock Exchange are open.
	 
	 	(2)	 	The Participant will designate into which Investment Funds all
contributions to their accounts are deemed invested.

	 	H.	 	Distributions:

	 	(1)	 	Payment of Benefits. Benefits shall be paid in such form as may
be specified following. To the extent that more than one form of benefit is
authorized, the Participant shall, prior to the commencement of participation
in the Plan, irrevocably elect in writing the form in which benefits will be
paid.
	 
	 	 	 	Prior to the Participant’s attainment of age 55, the only form of benefit is
a Single Lump Sum Distribution. Following the attainment of age 55, a
Participant may elect to have benefits paid in a Single Lump Sum, or equal
annual installments not to exceed five years. A Participant will have one
opportunity in the year prior to attaining age 55 to change their
distribution option. Any such change will be effective for all balances in
the Participant’s account.
	 
	 	(2)	 	Time for payment of benefits. Benefits shall be payable at the
times specified below. To the extent that more than one time for the payment of
benefits is authorized, the Participant shall, prior to the commencement of
participation in the Plan, irrevocably elect in writing the time benefits will
be paid.

	 	(a)	 	Upon termination of employment with the
Employer.
	 
	 	(b)	 	Within one year after a Change of Control.
	 
	 	(c)	 	Upon the Participant’s death or disability.
	 
	 	(d)	 	On account of a severe financial hardship due
to an unforeseen emergency, pursuant to the provisions of Plan
Document.

 

 

     IN WITNESS WHEREOF, this Plan (which are specifically incorporated by this reference) is
adopted by appropriate corporate action this 27th day of January, 2003.

Thor Industries, Inc.:

	 	 	 	 	 
	By:

	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	and
	 	 	 	 
	 
	 	 	 	 
	 	 	 

 

 

Schedule H

Change of Control

Change of Control shall be defined, for purposes of the Plan and Trust, as follows:1

(c) “Change in Control” shall mean the occurrence of any one of the following events:

          (i) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Ace and as used
in Sections 13 (d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then outstanding securities
eligible to vote for the election of the Board (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions: (A) by the Company or any subsidiary, (B)
by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant
to a Non-Control Transaction (as defined in paragraph (iii)), or (E) a transaction (other than one
described in (iii) below) in which Company Voting Securities are acquired from the Company, if a
majority of the Incumbent Board (as defined below) approves a resolution providing expressly that
the acquisition pursuant to this clause (E) does not constitute a Change in Control under this
paragraph (i);

          (ii) individuals who, on the Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the Effective Date, whose election or nomination for election was approved
by a vote of at least two-thirds of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in which such person is named as
a nominee for director, without objection to such nomination) shall be considered a member of the
Incumbent Board; provided, however, that no individual initially elected or nominated as a director
of the Company as a result of an actual or threatened election contest with respect to directors or
any other actual or threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be a member of the Incumbent Board;

 

			
	1	 	The definition of Change of Control must include
objective criteria, such as: “the purchase or other acquisition by any person,
entity or group of persons, within the meaning of section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (“Act”), or any comparable successor
provisions, of beneficial ownership (within the meaning of Rule l3d-3
promulgated under the Act) of 30 percent or more of either the outstanding
shares of common stock or the combined voting power of Company’s then
outstanding voting securities entitled to vote generally, or the approval by
the stockholders of Company of a reorganization, merger, or consolidation, in
each case, with respect to which persons who were stockholders of Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated Company’s then outstanding securities, or a liquidation
or dissolution of Company or of the sale of all or substantially all of
Company’s assets.”

 

 

          (iii) the shareholders of the Company approve a merger, consolidation, share exchange or
similar form of corporate reorganization of the Company or any such type of transaction involving
the Company or any of its subsidiaries (whether for such transaction or the issuance of securities
in the transaction or otherwise) (a “Business Combination”), unless immediately following such
Business Combination: (A) more than 50% of the total voting power of the publicly traded
corporation resulting from such Business Combination (including, without limitation, any
corporation which directly or indirectly has beneficial ownership of 100% of the Company Voting
Securities or all or substantially all of the assets of the Company and its subsidiaries) eligible
to elect directors of such corporation would be represented by shares that were Company Voting
Securities immediately prior to such Business Combination (either by remaining outstanding or being
converted), and such voting power would be in substantially the same proportion as the voting power
of such Company Voting Securities immediately prior to the Business Combination, (B) no person
(other than any publicly traded holding company resulting from such Business Combination, any
employee benefit plan sponsored or maintained by the Company (or the Corporation resulting from
such Business Combination), or any person which beneficially owned, immediately prior to such
Business Combination, directly or indirectly, 50% or more of the Company Voting Securities (a
“Company 50% Stockholder”) would become the beneficial owner, directly or indirectly, of 50% or
more of the total voting power of the outstanding voting securities eligible to elect directors of
the corporation resulting from such Business Combination and no Company 50% Stockholder would
increase its percentage of such total voting power, and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business Combination would be members
of the Incumbent Board at the time of the Board’s approval of the execution of the initial
agreement providing for such Business Combination (a “Non-Control Transaction”); or

          (iv) the shareholders of the Company approve a plan of complete liquidation or dissolution of
the Company or the sale or disposition of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 50% of the Company Voting
Securities as a result of the acquisition of Company Voting Securities by the Company which, by
reducing the number of Company Voting Securities outstanding, increases the percentage of shares
beneficially owned by such person; provided, that if a Change in Control of the Company would occur
as a result of such an acquisition by the Company (if not for the operation of this sentence), and
after the Company’s acquisition such person becomes the beneficial owner of additional Company
Voting Securities that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control of the Company shall occur.

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