Document:

Exhibit
10.1

 

SETTLEMENT
AGREEMENT AND RELEASE

 

This Settlement
Agreement is dated as of June 9, 2008, by and between Rockwell Collins, Inc.,
a Delaware corporation (“RC”), and Rockwell Collins Simulation &
Training Solutions LLC, a Delaware limited liability company wholly owed by RC
(“RC Simulation”), on the one hand, and Evans & Sutherland Computer
Corporation, a Utah corporation (“E&S”), on the other.  Each of RC, RC Simulation and E&S is a “Party,”
and collectively are the “Parties.”

 

WHEREAS, RC, RC Simulation and E&S entered into a Laser Projection Systems
Agreement Between Rockwell Collins, Inc., Rockwell Collins Simulation &
Training Solutions LLC and Evans & Sutherland Computer Corporation (the
“Systems Agreement”), RC Simulation and E&S entered into a Laser Projection
System Supply Agreement (the “Supply Agreement”) and RC, E&S and U.S. Bank
National Association (the “Escrow Agent”) entered into an Escrow Agreement (the
“Escrow Agreement”), each dated as of May 26, 2006 (collectively, the “Agreements”);

 

WHEREAS, certain disputes
have arisen between the Parties with respect to the performance of their
respective obligations under the Systems Agreement, the Supply Agreement and
the Escrow Agreement (the “Disputes”);

 

WHEREAS, the
Parties desire to fully and finally resolve the Disputes and all of the claims
now or previously asserted (or which could have been asserted) in connection
with the Agreements;

 

NOW, THEREFORE, in
consideration of the mutual covenants set forth herein, the Parties agree as follows:

 

1.         RC will cause to be paid to
E&S the amount of US $1,050,000, as noted in paragraph 2, infra.

 

2.         Not later than the close
of business on the date this Settlement Agreement is executed, RC and E&S
will issue a joint instruction (in the form of Attachment 1 hereto) to the
Escrow Agent, as defined in the Escrow Agreement, to disburse (i) US
$1,050,000 from the Escrow Fund, as defined in the Escrow Agreement to E&S;
and (ii) the balance of the Escrow Fund to RC within two (2) business
days of the Escrow Agent’s receipt of the joint instruction.

 

3.         The date of the
disbursements from the Escrow Fund to E&S and RC shall be deemed to be the “Closing
Date.”

 

1

 

4.         Effective on the Closing
Date, the Systems Agreement and Supply Agreement will be terminated and of no
further force or effect.

 

5.         Effective on the Closing
Date, the Parties release and discharge each other, and their respective
current and former parents, subsidiaries, controlled affiliates, officers,
directors, employees and agents (collectively, the “Released Parties,” and each
a “Released Party”), from any and all known or unknown claims or causes of
action that any of them may have, had, now have or could have had, arising out
of or relating to the Agreements or the transactions or occurrences
contemplated thereby, including the matters briefed and submitted on May 23,
2008 to Judge Richard Neville, as mediator.

 

6.         Not later than the close
of business on the date this Settlement Agreement is executed , E&S and RC
Simulation shall jointly give written notice to EscrowTech International, Inc.
(in the form of Attachment 2 hereto) terminating, effective as of the Closing
Date, the Technology Escrow Agreement by and between E&S, RC Simulation and
EscrowTech International, Inc., dated May 26, 2006 (the “Technology
Agreement”), and instructing EscrowTech International, Inc. to promptly
return all of the Deposit Materials, as defined in the Technology Agreement, to
E&S.

 

7.         The Parties mutually
acknowledge and agree that (i) this settlement represents the resolution
of disputed claims, and shall not and does not constitute an admission of any
fault, liability, wrongdoing, or neglect on the part of RC, RC Simulation,
E&S, any Released Party, or any of the Released Parties’ current or former
affiliates, officers, directors, employees, or agents, all of which is
expressly denied; and (ii) the fact of this settlement shall not be
admissible in evidence as proof of any admission of fault, liability,
wrongdoing, or neglect on the part of RC, RC Simulation, E&S, any Released
Party, or any of the Released Parties’ current or former affiliates, officers,
directors, employees, or agents, all of which is expressly denied.

 

8.         Each Party acknowledges
that it has relied wholly upon its own judgment, belief, understanding, and
knowledge respecting the existence, nature, and extent of each actual or
potential claim or cause of action (including unknown claims) which is released
under this Settlement Agreement, and that it has not been influenced to any
extent in entering into this Settlement Agreement by any representations or
statements regarding any such claim or cause of action made by any of the other
Parties.  Each Party acknowledges that it
is executing and delivering this Settlement Agreement after having received
from independent legal counsel of its own choosing legal advice as to its
rights hereunder and the legal effect hereof, to the extent each Party deemed
appropriate.  All prior discussions,
negotiations, and agreements are superseded by this Settlement Agreement.

 

2

 

9.         Each Party represents and
warrants that it is duly authorized to enter into and execute this Settlement
Agreement and that the person executing the Settlement Agreement on behalf of
such Party has the authority to do so.

 

10.       This Settlement Agreement
constitutes the entire agreement among the Parties with respect to the subject
matter hereof and shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be fully
performed in Delaware.  It may not be
modified or terminated except in writing signed by the Parties.

 

11.       The Parties agree that each
will bear its own costs, expenses, and attorneys’ fees incurred in connection
with the Agreements and the Dispute.

 

12.       Any dispute, claim or
controversy arising under or in connection with this Settlement Agreement (“Dispute”)
shall be finally settled by binding arbitration under the CPR Non-Administered
Arbitration Rules.  There shall be three
arbitrators.  The arbitration shall be
conducted in the City of New York. 
Judgment upon the award may be entered by any court having jurisdiction.

 

13.       The Parties shall make no
public comments or disclosure concerning the merits of the Dispute or this
Settlement Agreement, other than to state that the Dispute has been resolved to
the Parties’ mutual satisfaction.  In
addition, the Parties may make disclosure regarding the terms of this
Settlement Agreement to their attorneys, auditors, tax advisors, and tax
authorities or as they may be compelled or required by law, regulation or
formal legal process, or as they reasonably and in good faith determine may be
required to comply with the federal securities laws or the rules of any
stock market or exchange.

 

3

 

14.       This Settlement Agreement
may be executed in one or more counterparts, each of which shall be deemed to
be an original, and all of which taken together shall be deemed to be one and
the same instrument.  This Settlement
Agreement may be executed by facsimile signature.

 

IN WITNESS
WHEREOF, the undersigned have caused this Settlement Agreement to be executed
and delivered by their officers thereunto duly authorized as of the date first
above written.

 

 

	
  Evans &
  Sutherland Computer Corporation

  	
  Rockwell
  Collins, Inc.

  
	
  A Utah corporation

  	
  A Delaware corporation

  
	
   

  	
   

  
	
  By

  	
  /s/ David
  Bateman

  	
   

  	
  By

  	
  /s/ Kent L.
  Statler

  
	
   

  	
  David
  Bateman

  	
   

  	
  Kent L.
  Statler

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  President
  and Chief Executive Officer

  	
   

  	
  Its:

  	
  President,
  Rockwell Collins Services

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  June 
  9, 2008

  	
   

  	
  Dated:

  	
  June 
  9, 2008

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Rockwell Collins
  Simulation & Training

  Solutions LLC

  
	
   

  	
  A Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Kent L.
  Statler

  
	
   

  	
   

  	
   

  	
  Kent L.
  Statler

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chairman and
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dated:

  	
  June 
  9, 2008

  
								

 

4Exhibit
10.1

 

CERAGENIX PHARMACEUTICALS, INC.

 

2008 OMNIBUS INCENTIVE PLAN

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  PURPOSE

  	
  1

  
	
  2.

  	
  DEFINITIONS

  	
  1

  
	
  3.

  	
  ADMINISTRATION OF THE PLAN

  	
  6

  
	
   

  	
  3.1.

  	
  Board

  	
  6

  
	
   

  	
  3.2.

  	
  Committee

  	
  7

  
	
   

  	
  3.3.

  	
  Terms of Awards

  	
  8

  
	
   

  	
  3.4.

  	
  No Repricing

  	
  9

  
	
   

  	
  3.5.

  	
  Deferral Arrangement

  	
  9

  
	
   

  	
  3.6.

  	
  No Liability

  	
  9

  
	
   

  	
  3.7.

  	
  Share Issuance/Book-Entry

  	
  9

  
	
  4.

  	
  STOCK SUBJECT TO THE PLAN

  	
  10

  
	
   

  	
  4.1.

  	
  Number of Shares
  Available for Awards

  	
  10

  
	
   

  	
  4.2.

  	
  Adjustments in
  Authorized Shares

  	
  10

  
	
   

  	
  4.3.

  	
  Share Usage

  	
  10

  
	
  5.

  	
  EFFECTIVE DATE, DURATION AND AMENDMENTS

  	
  11

  
	
   

  	
  5.1.

  	
  Effective Date

  	
  11

  
	
   

  	
  5.2.

  	
  Term

  	
  11

  
	
   

  	
  5.3.

  	
  Amendment and Termination of the Plan

  	
  11

  
	
  6.

  	
  AWARD ELIGIBILITY AND LIMITATIONS

  	
  11

  
	
   

  	
  6.1.

  	
  Service Providers and Other Persons

  	
  11

  
	
   

  	
  6.2.

  	
  Successive Awards and Substitute Awards

  	
  12

  
	
   

  	
  6.3.

  	
  Limitation on Shares of Stock Subject to Awards and Cash Awards

  	
  12

  
	
  7.

  	
  AWARD AGREEMENT

  	
  12

  
	
  8.

  	
  TERMS AND CONDITIONS OF OPTIONS

  	
  13

  
	
   

  	
  8.1.

  	
  Option Price

  	
  13

  
	
   

  	
  8.2.

  	
  Vesting

  	
  13

  
	
   

  	
  8.3.

  	
  Term

  	
  13

  
	
   

  	
  8.4.

  	
  Termination of Service

  	
  13

  
	
   

  	
  8.5.

  	
  Limitations on
  Exercise of Option

  	
  13

  
	
   

  	
  8.6.

  	
  Method of Exercise

  	
  14

  
	
   

  	
  8.7.

  	
  Rights of Holders of Options

  	
  14

  
	
   

  	
  8.8.

  	
  Delivery of Stock Certificates

  	
  14

  
	
   

  	
  8.9.

  	
  Transferability of Options

  	
  14

  
	
   

  	
  8.10.

  	
  Family Transfers

  	
  15

  
	
   

  	
  8.11.

  	
  Limitations on Incentive Stock Options

  	
  15

  
	
   

  	
  8.12.

  	
  Notice of Disqualifying Disposition

  	
  15

  
	
  9.

  	
  TERMS AND CONDITIONS OF STOCK APPRECIATION
  RIGHTS

  	
  15

  
	
   

  	
  9.1.

  	
  Right to Payment and Grant Price

  	
  15

  
	
   

  	
  9.2.

  	
  Other Terms

  	
  16

  
					

 

i

 

	
   

  	
  9.3.

  	
  Term

  	
  16

  
	
   

  	
  9.4.

  	
  Transferability of SARS

  	
  16

  
	
   

  	
  9.5.

  	
  Family Transfers

  	
  16

  
	
  10.

  	
  TERMS AND CONDITIONS OF RESTRICTED STOCK
  AND STOCK UNITS

  	
  17

  
	
   

  	
  10.1.

  	
  Grant of Restricted Stock or Stock Units

  	
  17

  
	
   

  	
  10.2.

  	
  Restrictions

  	
  17

  
	
   

  	
  10.3.

  	
  Restricted Stock Certificates

  	
  17

  
	
   

  	
  10.4.

  	
  Rights of Holders of Restricted Stock

  	
  18

  
	
   

  	
  10.5.

  	
  Rights of Holders of Stock Units

  	
  18

  
	
   

  	
   

  	
  10.5.1.

  	
  Voting and Dividend Rights

  	
  18

  
	
   

  	
   

  	
  10.5.2.

  	
  Creditor’s Rights

  	
  18

  
	
   

  	
  10.6.

  	
  Termination of Service

  	
  18

  
	
   

  	
  10.7.

  	
  Purchase of Restricted Stock and Shares Subject to Stock Units

  	
  19

  
	
   

  	
  10.8.

  	
  Delivery of Stock

  	
  19

  
	
  11.

  	
  TERMS AND CONDITIONS OF UNRESTRICTED STOCK
  AWARDS

  	
  19

  
	
  12.

  	
  FORM OF PAYMENT FOR OPTIONS AND
  RESTRICTED STOCK

  	
  19

  
	
   

  	
  12.1.

  	
  General Rule

  	
  19

  
	
   

  	
  12.2.

  	
  Surrender of Stock

  	
  20

  
	
   

  	
  12.3.

  	
  Cashless Exercise

  	
  20

  
	
   

  	
  12.4.

  	
  Other Forms of Payment

  	
  20

  
	
  13.

  	
  TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT
  RIGHTS

  	
  20

  
	
   

  	
  13.1.

  	
  Dividend Equivalent Rights

  	
  20

  
	
   

  	
  13.2.

  	
  Termination of Service

  	
  21

  
	
  14.

  	
  TERMS AND
  CONDITIONS OF PERFORMANCE SHARES, PERFORMANCE UNITS, PERFORMANCE AWARDS AND
  ANNUAL INCENTIVE AWARDS

  	
  21

  
	
   

  	
  14.1.

  	
  Grant of Performance Units/Performance Shares

  	
  21

  
	
   

  	
  14.2.

  	
  Value of Performance Units/Performance Shares

  	
  21

  
	
   

  	
  14.3.

  	
  Earning of Performance Units/Performance Shares

  	
  21

  
	
   

  	
  14.4.

  	
  Form and Timing of Payment of Performance Units/Performance Shares

  	
  22

  
	
   

  	
  14.5.

  	
  Performance Conditions

  	
  22

  
	
   

  	
  14.6.

  	
  Performance Awards or Annual Incentive
  Awards Granted to Designated Covered Employees

  	
  22

  
	
   

  	
   

  	
  14.6.1.

  	
  Performance Goals Generally

  	
  22

  
	
   

  	
   

  	
  14.6.2.

  	
  Timing for Establishing Performance Goals

  	
  23

  
	
   

  	
   

  	
  14.6.3.

  	
  Settlement of Awards; Other Terms

  	
  23

  
	
   

  	
   

  	
  14.6.4.

  	
  Performance Measures

  	
  23

  
	
   

  	
   

  	
  14.6.5.

  	
  Evaluation of Performance

  	
  25

  
						

 

ii

 

	
   

  	
   

  	
  14.6.6.

  	
  Adjustment of Performance-Based Compensation

  	
  25

  
	
   

  	
   

  	
  14.6.7.

  	
  Board Discretion

  	
  25

  
	
   

  	
  14.7.

  	
  Status of Section Awards Under Code Section 162(m)

  	
  25

  
	
  15.

  	
  PARACHUTE LIMITATIONS

  	
  26

  
	
  16.

  	
  REQUIREMENTS OF LAW

  	
  27

  
	
   

  	
  16.1.

  	
  General

  	
  27

  
	
   

  	
  16.2.

  	
  Rule 16b-3

  	
  27

  
	
  17.

  	
  EFFECT OF CHANGES IN CAPITALIZATION

  	
  28

  
	
   

  	
  17.1.

  	
  Changes in Stock

  	
  28

  
	
   

  	
  17.2.

  	
  Reorganization in Which the Company Is the
  Surviving Entity Which Does Not Constitute a Corporate Transaction

  	
  29

  
	
   

  	
  17.3.

  	
  Corporate Transaction in which Awards Are Not Assumed

  	
  29

  
	
   

  	
  17.4.

  	
  Corporation
  Transaction in which Awards Are Assumed

  	
  30

  
	
   

  	
  17.5.

  	
  Adjustments

  	
  30

  
	
   

  	
  17.6.

  	
  No Limitations on Company

  	
  31

  
	
  18.

  	
  GENERAL PROVISIONS

  	
  31

  
	
   

  	
  18.1.

  	
  Disclaimer of Rights

  	
  31

  
	
   

  	
  18.2.

  	
  Nonexclusivity of the Plan

  	
  31

  
	
   

  	
  18.3.

  	
  Withholding Taxes

  	
  31

  
	
   

  	
  18.4.

  	
  Captions

  	
  32

  
	
   

  	
  18.5.

  	
  Other Provisions

  	
  32

  
	
   

  	
  18.6.

  	
  Number and Gender

  	
  32

  
	
   

  	
  18.7.

  	
  Severability

  	
  33

  
	
   

  	
  18.8.

  	
  Governing Law

  	
  33

  
	
   

  	
  18.9.

  	
  Section 409A of the Code

  	
  33

  

 

iii

 

CERAGENIX PHARMACEUTICALS, INC.

 

2008 OMNIBUS INCENTIVE PLAN

 

Ceragenix Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), sets forth herein the terms of its 2008 Omnibus
Incentive Plan (the “Plan”), as follows:

 

1.                                      PURPOSE

 

The
Plan is intended to enhance the Company’s and its Affiliates’ (as defined
herein) ability to attract and retain highly qualified officers, directors, key
employees, and other persons, and to motivate such persons to serve the Company
and its Affiliates and to expend maximum effort to improve the business results
and earnings of the Company, by providing to such persons an opportunity to
acquire or increase a direct proprietary interest in the operations and future
success of the Company.  To this end, the Plan provides for the grant of
stock options, stock appreciation rights, restricted stock, stock units
(including deferred stock units), unrestricted stock, dividend equivalent
rights, and cash bonus awards.  Any of
these awards may, but need not, be made as performance incentives to reward
attainment of annual or long-term performance goals in accordance with the
terms hereof.  Stock options granted
under the Plan may be non-qualified stock options or incentive stock options,
as provided herein, except that stock options granted to outside directors and
any consultants or advisers providing services to the Company or an Affiliate
shall in all cases be non-qualified stock options.

 

2.                                      DEFINITIONS

 

For purposes of interpreting the Plan and related
documents (including Award Agreements), the following definitions shall apply:

 

2.1           “Affiliate” means, with respect to the Company, any
company or other trade or business that controls, is controlled by or is under
common control with the Company within the meaning of Rule 405 of
Regulation C under the Securities Act, including, without limitation, any
Subsidiary.  For purposes of granting
stock options or stock appreciation rights, an entity may not be considered an
Affiliate unless the Company holds a “controlling interest” in such entity,
where the term “controlling interest” has the same meaning as provided in
Treasury Regulation 1.414(c)-2(b)(2)(i), provided that the language “at least
50 percent” is used instead of “at least 80 percent” and, provided further,
that where granting of stock options or stock appreciation rights is based upon
a legitimate business criteria, the language “at least 20 percent” is used
instead of “at least 80 percent” each place it appears in Treasury Regulation
1.414(c)-2(b)(2)(i).

 

 

2.2           “Annual Incentive Award”
means an Award made subject to attainment of performance goals (as described in
Section 14) generally over a
one-year performance period (the Company’s fiscal year, unless otherwise
specified by the Committee).

 

2.3           “Award” means a grant of an Option, Stock Appreciation
Right, Restricted Stock, Unrestricted Stock, Stock Unit, Dividend Equivalent
Right, Performance Share, Performance Unit or cash award  under
the Plan.

 

2.4           “Award Agreement” means the agreement between the Company
and a Grantee that evidences and sets out the terms and conditions of an Award.

 

2.5           “Benefit Arrangement” shall have the meaning set forth in Section 15 hereof.

 

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

 

2.7           “Cause”  means, as determined by the Board and unless
otherwise provided in an applicable agreement with the Company or an Affiliate,
(i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense (other than
minor traffic offenses); or (iii) material breach of any term of any
employment, consulting or other services, confidentiality, intellectual
property or non-competition agreements, if any, between the Service Provider
and the Company or an Affiliate.

 

2.8           “Code” means the Internal Revenue Code of 1986, as now in
effect or as hereafter amended.

 

2.9           “Committee” means a committee of, and designated from time
to time by resolution of, the Board, which shall be constituted as provided in Section 3.2.

 

2.10         “Company” means Ceragenix Pharmaceuticals, Inc.

 

2.11         “Corporate Transaction” means (i) the dissolution or liquidation of
the Company or a merger, consolidation, or reorganization of the Company with
one or more other entities in which the Company is not the surviving entity, (ii) a
sale of substantially all of the assets of the Company to another person or
entity, or (iii) any transaction (including without limitation a merger or
reorganization in which the Company is the surviving entity) which results in
any person or entity owning 50% or more of the combined voting power of all
classes of stock of the Company.

 

2.12         “Covered Employee” means a Grantee who is a covered employee
within the meaning of Section 162(m)(3) of the Code.

 

2

 

2.13         “Disability” means the Grantee is unable to perform each of
the essential duties of such Grantee’s position by reason of a medically
determinable physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous period of not less
than 12 months; provided, however, that, with respect to rules regarding
expiration of an Incentive Stock Option following termination of the Grantee’s
Service, Disability shall mean the Grantee is unable to engage in any
substantial gainful activity by reason of a 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 12 months.

 

2.14         “Dividend Equivalent Right” means a right, granted to a
Grantee under Section 13 hereof, to receive
cash, Stock, other Awards or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments.

 

2.15         “Effective Date” means March 8, 2008, the date the Plan
was approved by the Board.

 

2.16         “Exchange Act” means the Securities Exchange Act of 1934, as
now in effect or as hereafter amended.

 

2.17         “Fair
Market Value”  means the
value of a share of Stock, determined as follows:  if on the Grant Date or other determination
date the Stock is listed on an established national or regional stock exchange,
or is publicly traded on an established securities market, the Fair Market
Value of a share of Stock shall be the closing price of the Stock on such
exchange or in such market (if there is more than one such exchange or market
the Board shall determine the appropriate exchange or market) on the Grant Date
or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported.  If the Stock is not listed on such an
exchange or traded on such a market, Fair Market Value shall be the value of
the Stock as determined by the Board by the reasonable application of a
reasonable valuation method, in a manner consistent with Code Section 409A.

 

2.18         “Family Member” means a person who is a spouse, former
spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece,
nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother,
sister, brother-in-law, or sister-in-law, including adoptive relationships, of
the Grantee, any person sharing the Grantee’s household (other than a tenant or
employee), a trust in
which any one or more of these persons have more than fifty percent of the
beneficial interest, a foundation in which any one or more of these persons (or
the Grantee) control the 

 

3

 

management of assets, and
any other entity in which one or more of these persons (or the Grantee) own more than fifty percent of the voting interests.

 

2.19         “Grant Date” means, as determined by the Board, the latest to occur of  (i) the
date as of which the Board approves an Award, (ii) the date on which the
recipient of an Award first becomes eligible to receive an Award under Section 6
hereof, or (iii) such other date as may be specified by the Board.

 

2.20         “Grantee” means a person who receives or holds an Award
under the Plan.

 

2.21         “Incentive Stock Option” means an “incentive stock option”
within the meaning of Section 422 of the Code, or the corresponding
provision of any subsequently enacted tax statute, as amended from time to
time.

 

2.22         “Non-qualified Stock Option” means an Option that is not an
Incentive Stock Option.

 

2.23         “Option” means an option to purchase one or more shares of
Stock pursuant to the Plan.

 

2.24         “Option Price” means the exercise price for each share of
Stock subject to an Option.

 

2.25         “Other Agreement” shall have the meaning set forth in Section 15 hereof.

 

2.26         “Outside Director” means a member of the Board who is not an
officer or employee of the Company.

 

2.27         “Performance Award”
means an Award made subject to the attainment of performance goals (as
described in Section 14) over a
performance period of up to ten (10) years.

 

2.28         “Performance-Based
Compensation” means compensation under an Award that is intended to
satisfy the requirements of Code Section 162(m) for certain
performance-based compensation paid to Covered Employees. Notwithstanding the
foregoing, nothing in this Plan shall be construed to mean that an Award which
does not satisfy the requirements for performance-based compensation under Code
Section 162(m) does not constitute performance-based compensation for
other purposes, including Code Section 409A.

 

2.29         “Performance
Measures”  means
measures as described in Section 14
on which the performance goals are based and which are approved by

 

4

 

the Company’s shareholders
pursuant to this Plan in order to qualify Awards as Performance-Based
Compensation.

 

2.30         “Performance
Period” means the period of time during which the performance goals
must be met in order to determine the degree of payout and/or vesting with respect
to an Award.

 

2.31         “Performance
Share” means an Award under Section 14
herein and subject to the terms of this Plan, denominated in Shares, the value
of which at the time it is payable is determined as a function of the extent to
which corresponding performance criteria have been achieved.

 

2.32         “Performance
Unit”  means an Award
under Section 14 herein and subject to
the terms of this Plan, denominated in units, the value of which at the time it
is payable is determined as a function of the extent to which corresponding
performance criteria have been achieved.

 

2.33         “Plan” means this Ceragenix Pharmaceuticals, Inc. 2008
Omnibus Incentive Plan.

 

2.34         “Purchase Price”  means the purchase price for each share of Stock pursuant to a grant of
Restricted Stock or Unrestricted Stock.

 

2.35         “Reporting Person” means a person who is required to file
reports under Section 16(a) of the Exchange Act.

 

2.36         “Restricted Stock” means shares of Stock, awarded to a
Grantee pursuant to Section 10
hereof.

 

2.37         “SAR Exercise Price” means the per share exercise price of a SAR
granted to a Grantee under Section 9
hereof.

 

2.38         “Securities Act” means the Securities Act of 1933, as now in
effect or as hereafter amended.

 

2.39         “Service” means service as a Service Provider to the Company
or an Affiliate.  Unless otherwise stated
in the applicable Award Agreement, a Grantee’s change in position or duties
shall not result in interrupted or terminated Service, so long as such Grantee
continues to be a Service Provider to the Company or an Affiliate.  Subject to the preceding sentence, whether a
termination of Service shall have occurred for purposes of the Plan shall be
determined by the Board, which determination shall be final, binding and conclusive.

 

5

 

2.40         “Service Provider” means an employee, officer or director of
the Company or an Affiliate, or a consultant or adviser (who is a natural
person) currently providing services to the Company or an Affiliate.

 

2.41         “Stock” means the common stock, par value $0.0001 per share,
of the Company.

 

2.42         “Stock Appreciation Right” or “SAR” means a
right granted to a Grantee under Section 9
hereof.

 

2.43         “Stock Unit” means a bookkeeping entry representing the
equivalent of one share of Stock awarded to a Grantee pursuant to Section 10 hereof.

 

2.44         “Subsidiary” means any “subsidiary corporation” of the
Company within the meaning of Section 424(f) of the Code.

 

2.45         “Substitute Awards” means Awards granted upon assumption of,
or in substitution for, outstanding awards previously granted by a company or
other entity acquired by the Company or any Affiliate or with which the Company
or any Affiliate combines.

 

2.46         “Ten Percent Stockholder”
means an individual who owns more than ten percent (10%) of the total combined
voting power of all classes of outstanding stock of the Company, its parent or
any of its Subsidiaries.  In determining
stock ownership, the attribution rules of Section 424(d) of the
Code shall be applied.

 

2.47         “Unrestricted Stock” means
an Award pursuant to Section 11
hereof.

 

3.                                      ADMINISTRATION OF THE PLAN

 

3.1.                            Board.

 

The Board shall have such powers and authorities
related to the administration of the Plan as are consistent with the Company’s
certificate of incorporation and by-laws and applicable law.  The Board shall have full power and authority
to take all actions and to make all determinations required or provided for
under the Plan, any Award or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan,
any Award or any Award Agreement.  All
such actions and determinations shall be by the affirmative

 

6

 

vote of a majority of the members of the Board present at
a meeting or by unanimous consent of the Board executed in writing in
accordance with the Company’s certificate of incorporation and by-laws and
applicable law.  The interpretation and
construction by the Board of any provision of the Plan, any Award or any Award
Agreement shall be final, binding and conclusive.

 

3.2.                            Committee.

 

The
Board from time to time may delegate to the Committee such powers and
authorities related to the administration and implementation of the Plan, as
set forth in Section 3.1 above and other
applicable provisions, as the Board shall determine, consistent with the certificate  of
incorporation and by-laws of the Company and applicable law.

 

(i)        Except as provided in
Subsection (ii) and except as the Board may otherwise determine, the
Committee, if any, appointed by the Board to administer the Plan shall consist
of two or more Outside Directors of the Company who: (a) qualify as “outside
directors” within the meaning of Section 162(m) of the Code and who (b) meet
such other requirements as may be established from time to time by the
Securities and Exchange Commission for plans intended to qualify for exemption
under Rule 16b-3 (or its successor) under the Exchange Act and who (c) comply
with the independence requirements of the stock exchange on which the Common
Stock is listed. Discretionary Awards to Outside Directors may only be administered
by the Committee.

 

(ii)       The Board may also
appoint one or more separate committees of the Board, each composed of one or
more directors of the Company who need not be Outside Directors, who may
administer the Plan with respect to employees or other Service Providers who
are not officers or directors of the Company, may grant Awards under the Plan
to such employees or other Service Providers, and may determine all terms of
such Awards.

 

In
the event that the Plan, any Award or any
Award Agreement entered into hereunder provides for any action to be
taken by or determination to be made by the Board, such action may be taken or
such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section.  Unless otherwise expressly
determined by the Board, any such action or determination by the Committee
shall be final, binding and conclusive.  To the extent permitted by law, the Committee
may delegate its authority under the Plan to a member of the Board.

 

7

 

3.3.                            Terms of Awards.

 

Subject to the other terms and conditions of the
Plan, the Board shall have full and final authority to:

 

(i)            designate
Grantees,

 

(ii)           determine
the type or types of Awards to be made to a Grantee,

 

(iii)          determine
the number of shares of Stock to be subject to an Award,

 

(iv)          establish
the terms and conditions of each Award (including, but not limited to, the
exercise price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise,
transfer, or forfeiture of an Award or the shares of Stock subject thereto, the
treatment of an Award in the event of a change of control, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock
Options),

 

(v)           prescribe
the form of each Award Agreement evidencing an Award, and

 

(vi)          amend,
modify, or supplement the terms of any outstanding Award.  Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but without amending
the Plan, to make or modify Awards to eligible individuals who are foreign
nationals or are individuals who are employed outside the United States to
recognize differences in local law, tax policy, or custom.  Notwithstanding the foregoing, no amendment,
modification or supplement of any Award shall, without the consent of the
Grantee, impair the Grantee’s rights under such Award.

 

The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of actions taken by the
Grantee in violation or breach of or in conflict with any employment agreement,
non-competition agreement, any agreement prohibiting solicitation of employees
or clients of the Company or any Affiliate  thereof or any
confidentiality obligation with respect to the Company or any Affiliate  thereof or otherwise in competition with the Company or any
Affiliate thereof, to the extent specified in such Award Agreement applicable
to the Grantee.  In addition, the Company
may annul an Award if the Grantee is an employee of the Company or an Affiliate
thereof and is terminated for Cause as defined in the applicable Award
Agreement or the Plan, as applicable.

 

Furthermore, if the Company is required to prepare an accounting restatement
due to the material noncompliance of the Company, as a result of misconduct,
with any financial reporting requirement under the securities laws, the
individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 and any Grantee who knowingly engaged in the
misconduct, was 

 

8

 

grossly
negligent in engaging in the misconduct, knowingly failed to prevent the
misconduct or was grossly negligent in failing to prevent the misconduct, shall
reimburse the Company the amount of any payment in settlement of an Award
earned or accrued during the twelve-(12)month period following the first public
issuance or filing with the United States Securities and Exchange Commission
(whichever first occurred) of the financial document that contained such
material noncompliance.

 

3.4.                            No Repricing.

 

Notwithstanding anything in this Plan to the
contrary, no amendment or modification may be made to an outstanding Option or
SAR, including, without limitation, by replacement of Options or
SARs with cash or other award type, that
would be treated as a repricing under the rules of the stock exchange on
which the Stock is listed, in each case, without the approval of the
stockholders of the Company, provided, that, appropriate adjustments may be
made to outstanding Options and SARs pursuant to Section 17 or Section 5.3 and may be made to make
changes to achieve compliance with applicable law, including Internal Revenue
Code Section 409A.

 

3.5.                            Deferral Arrangement.

 

The Board may permit or
require the deferral of any award payment into a deferred compensation
arrangement, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest or dividend
equivalents, including converting such credits into deferred Stock
equivalents.  Any such deferrals shall be
made in a manner that complies with Code Section 409A.

 

3.6.                            No Liability.

 

No member of the Board or the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Award or Award Agreement.

 

3.7.                            Share Issuance/Book-Entry.

 

Notwithstanding any provision of this Plan to the
contrary, the issuance of the Stock under the Plan may be evidenced in such a
manner as the Board, in its discretion, deems appropriate, including, without
limitation, book-entry registration or issuance of one or more Stock
certificates.

 

9

 

4.                                      STOCK SUBJECT TO THE PLAN

 

4.1.                            Number of
Shares Available for Awards.

 

Subject to adjustment as provided in Section 17
hereof, the number of shares of Stock available for issuance under the Plan
shall be 3,000,000 all of which may be granted as Incentive Stock Options.  Stock issued or to be issued under the Plan
shall be authorized but unissued shares; or, to the extent permitted
by applicable law, issued shares that have been reacquired by the Company.

 

4.2.                            Adjustments in
Authorized Shares.

 

The Board shall have the right to substitute or
assume Awards in connection with mergers, reorganizations, separations, or
other transactions to which Section 424(a) of the Code applies. The
number of shares of Stock reserved pursuant to Section 4
shall be increased by the corresponding number of Awards assumed and, in the
case of a substitution, by the net increase in the number of shares of Stock
subject to Awards before and after the substitution.

 

4.3.                            Share Usage.

 

Shares covered by an Award shall be counted as
used as of the Grant Date.  Any shares of
Stock that are subject to Awards of Options shall be counted against the limit
set forth in Section 4.1 as one (1) share for every one (1) share
subject to an Award of Options.  With
respect to SARs, the number of shares subject to an award of SARs will be
counted against the aggregate number of shares available for issuance under the
Plan regardless of the number of shares actually issued to settle the SAR upon
exercise.  Any shares that are subject to
Awards other than Options or Stock Appreciation Rights shall be counted against
the limit set forth in Section 4.1
as one (1) share for every one (1) share granted.  If any shares covered by an Award granted
under the Plan are not purchased or are forfeited or expire, or if an Award
otherwise terminates without delivery of any Stock subject thereto or is
settled in cash in lieu of shares, then the number of shares of Stock counted
against the aggregate number of shares available under the Plan with respect to
such Award shall, to the extent of any such forfeiture, termination or
expiration, again be available for making Awards under the Plan in the same
amount as such shares were counted against the limit set forth in Section 4.1.  Moreover,
if the Option Price of any Option granted under the Plan, or if pursuant to Section 18.3 the withholding obligation of any Grantee
with respect to an Option or other Award, is satisfied by tendering shares of
Stock to the Company (by either actual delivery or by attestation) or by
withholding shares of Stock, such tendered or withheld shares of Stock will
again be available for issuance under the Plan.

 

10

 

5.                                      EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1.                            Effective Date.

 

The Plan shall be effective as of the Effective
Date, subject to approval of the Plan by the Company’s stockholders within one
year of the Effective Date.  Upon
approval of the Plan by the stockholders of the Company as set forth above, all
Awards made under the Plan on or after the Effective Date shall be fully
effective as if the stockholders of the Company had approved the Plan on the
Effective Date.  If the stockholders fail
to approve the Plan within one year of the Effective Date, any Awards made
hereunder shall be null and void and of no effect.

 

5.2.                            Term.

 

The Plan shall terminate automatically ten (10) years
after the Effective Date and may be terminated on any earlier date as provided
in Section 5.3.

 

5.3.                            Amendment and Termination of the Plan.

 

The Board may, at any time and from time to time,
amend, suspend, or terminate the Plan as to any shares of Stock as to which
Awards have not been made.  An amendment
shall be contingent on approval of the Company’s stockholders to the extent
stated by the Board, required by applicable law or required by applicable stock
exchange listing requirements.  In
addition, an amendment will be contingent on approval of the Company’s
stockholders if the amendment would:  (i) materially
increase the benefits accruing to participants under the Plan, (ii) materially
increase the aggregate number of shares of Stock that may be issued under the
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan.  No Awards
shall be made after termination of the Plan. 
No amendment, suspension, or termination of the Plan shall, without the
consent of the Grantee, impair rights or obligations under any Award
theretofore awarded under the Plan.

 

6.                                      AWARD ELIGIBILITY AND LIMITATIONS

 

6.1.                            Service Providers and Other Persons.

 

Subject to this Section 6,
Awards may be made under the Plan to: (i)  any Service Provider to the
Company or of any Affiliate, including any Service Provider who is an officer
or director of the Company, or of any Affiliate, as the Board shall determine
and designate from time to time and (ii) any other individual whose
participation in the Plan is determined to be in the best interests of the
Company by the Board.

 

11

 

6.2.                            Successive Awards and Substitute Awards.

 

An eligible person may receive more than one
Award, subject to such restrictions as are provided herein.  Notwithstanding Sections 8.1
and 9.1, the Option Price of an Option or
the grant price of a SAR that is a Substitute Award may be less than 100% of
the Fair Market Value of a share of Common Stock on the original date of grant;
provided, that, the Option Price or grant price is determined in accordance
with the principles of Code Section 424 and the regulations thereunder.

 

6.3.                            Limitation on Shares of Stock Subject to Awards and Cash
Awards.

 

During any time when the Company has a class of
equity security registered under Section 12 of the Exchange Act and the
transition period under Treasury Regulation 1.162-27(f) has lapsed or does
not apply.

 

(i) the maximum number of shares of Stock
subject to Options or SARs that can be awarded under the Plan to any person
eligible for an Award under Section 6
hereof is 500,000 per 12 month period;

 

(ii) the maximum number of shares that can be
awarded under the Plan, other than pursuant to an Option or SARs, to any person
eligible for an Award under Section 6
hereof is 250,000 per 12 month period; and

 

(iii) the maximum amount that may
be earned as an Annual Incentive Award or other cash Award in any 12 month
period by any person eligible for an Award shall be $2,000,000 and the maximum
amount that may be earned as a Performance Award or other cash Award in respect
of a performance period by any person eligible for an Award shall be
$5,000,000.

 

The preceding limitations in this Section 6.3
are subject to adjustment as provided in Section 17 hereof.

 

7.                                      AWARD AGREEMENT

 

Each Award granted pursuant to the Plan shall be
evidenced by an Award Agreement, in such form or forms as the Board shall from
time to time determine.  Award Agreements
granted from time to time or at the same time need not contain similar
provisions but shall be consistent with the terms of the Plan.  Each Award Agreement evidencing an Award of
Options shall specify whether such Options are intended to be Non-qualified
Stock Options or Incentive Stock Options, and in the absence of such
specification such options shall be deemed Non-qualified Stock Options.

 

12

 

8.                                      TERMS AND CONDITIONS OF OPTIONS

 

8.1.                            Option Price.

 

The Option Price of each Option shall be fixed by
the Board and stated in the Award Agreement evidencing such Option.  Except in the case of Substitute Awards,  the Option Price of each Option shall be at least the Fair
Market Value on the Grant Date of a share of Stock; provided, however,
that in the event that a Grantee is a Ten Percent Stockholder, the Option Price
of an Option granted to such Grantee that is intended to be an Incentive Stock
Option shall be not less than 110 percent of the Fair Market Value of a share
of Stock on the Grant Date.   In no case
shall the Option Price of any Option be less than the par value of a share of
Stock.

 

8.2.                            Vesting.

 

Subject to Sections 8.3 and 17.3
hereof, each Option granted under the Plan shall become exercisable at such
times and under such conditions as shall be determined by the Board and stated
in the Award Agreement.  For purposes of
this Section 8.2, fractional numbers of
shares of Stock subject to an Option shall be rounded down to the next nearest
whole number.

 

8.3.                            Term.

 

Each Option granted under the Plan shall
terminate, and all rights to purchase shares of Stock thereunder shall cease,
upon the expiration of ten years from the date such Option is granted, or under
such circumstances and on such date prior thereto as is set forth in the Plan
or as may be fixed by the Board and stated in the Award Agreement relating to
such Option; provided, however, that in the event that the
Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall not be exercisable after the
expiration of five years from its Grant Date.

 

8.4.                            Termination of Service.

 

Each Award Agreement shall set forth the extent to which the Grantee
shall have the right to exercise the Option following termination of the
Grantee’s Service.  Such provisions shall
be determined in the sole discretion of the Board, need not be uniform among
all Options issued pursuant to the Plan, and may reflect distinctions based on
the reasons for termination of Service.

 

8.5.                            Limitations on
Exercise of Option.

 

Notwithstanding any other provision of the Plan,
in no event may any Option be exercised, in whole or in part, prior to the date
the Plan is approved by the 

 

13

 

stockholders of the Company as provided herein or
after the occurrence of an event referred to in Section 17
hereof which results in termination of the Option.

 

8.6.                            Method of Exercise.

 

Subject to the terms of Article 12
and Section 18.3, an Option that
is exercisable may be exercised by the Grantee’s delivery to the Company of
notice of exercise on any business day, at the Company’s principal office, on
the form specified by the Company.  Such
notice shall specify the number of shares of Stock with respect to which the
Option is being exercised and shall be accompanied by payment in full of the
Option Price of the shares for which the Option is being exercised plus the
amount (if any) of federal and/or other taxes which the Company may, in its
judgment, be required to withhold with respect to an Award.

 

8.7.                            Rights of Holders of Options.

 

Unless otherwise stated in the applicable Award
Agreement, an individual holding or exercising an Option shall have none of the
rights of a stockholder (for example, the right to receive cash or dividend
payments or distributions attributable to the subject shares of Stock or to
direct the voting of the subject shares of Stock ) until the shares of Stock
covered thereby are fully paid and issued to him.  Except as provided in Section 17
hereof, no adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date of such issuance.

 

8.8.                            Delivery of Stock Certificates.

 

Promptly after the exercise of an Option by a
Grantee and the payment in full of the Option Price, such Grantee shall be
entitled to the issuance of a stock certificate or certificates evidencing his
or her ownership of the shares of Stock subject to the Option.

 

8.9.                            Transferability of Options.

 

Except as provided in Section 8.10,
during the lifetime of a Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise an Option.  Except as provided
in Section 8.10, no Option shall be
assignable or transferable by the Grantee to whom it is granted, other than by
will or the laws of descent and distribution.

 

14

 

8.10.                     Family
Transfers.

 

If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of an Option which is not an Incentive
Stock Option to any Family Member.  For
the purpose of this Section 8.10,
a “not for value” transfer is a transfer which is (i) a gift, (ii) a
transfer under a domestic relations order in settlement of marital property
rights; or (iii) a transfer to an entity in which more than fifty percent
of the voting interests are owned by Family Members (or the Grantee) in
exchange for an interest in that entity. 
Following a transfer under this Section 8.10,
any such Option shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer.  Subsequent transfers of transferred Options
are prohibited except to Family Members of the original Grantee in accordance
with this Section 8.10 or by will or the
laws of descent and distribution.  The
events of termination of Service of Section 8.4
hereof shall continue to be applied with respect to the original Grantee,
following which the Option shall be exercisable by the transferee only to the
extent, and for the periods specified, in Section 8.4.

 

8.11.                     Limitations
on Incentive Stock Options.

 

An Option shall constitute an Incentive Stock
Option only (i) if the Grantee of such Option is an employee of the
Company or any Subsidiary of the Company; (ii) to the extent specifically
provided in the related Award Agreement; and (iii) to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the shares of Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any calendar year
(under the Plan and all other plans of the Grantee’s employer and its
Affiliates) does not exceed $100,000. 
This limitation shall be applied by taking Options into account in the
order in which they were granted.

 

8.12.                     Notice
of Disqualifying Disposition.

 

If any Grantee shall make any disposition of shares of Stock issued
pursuant to the exercise of an Incentive Stock Option under the circumstances
described in Code Section 421(b) (relating to certain disqualifying
dispositions), such Grantee shall notify the Company of such disposition within
ten (10) days thereof.

 

9.                                      TERMS AND CONDITIONS OF STOCK APPRECIATION
RIGHTS

 

9.1.                            Right to Payment and Grant Price.

 

A SAR shall confer on the Grantee to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair Market Value of
one share of Stock

 

15

 

on the date of exercise over (B) the grant price of the SAR as
determined by the Board.  The Award
Agreement for a SAR shall specify the grant price of the SAR, which shall be at
least the  Fair Market Value of a share
of Stock on the date of grant.  SARs may be granted in
conjunction with all or part of an Option granted under the Plan or at any
subsequent time during the term of such Option, in conjunction with all or part
of any other Award or without regard to any Option or other Award; provided
that a SAR that is granted subsequent to the Grant Date of a related Option
must have a SAR Price that is no less than the Fair Market Value of one share
of Stock on the SAR Grant Date.

 

9.2.                            Other Terms.

 

The Board shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which a SAR may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the time or times at which SARs shall cease to be
or become exercisable following termination of Service or upon other
conditions, the method of exercise, method of settlement, form of consideration
payable in settlement, method by or forms in which Stock will be delivered or
deemed to be delivered to Grantees, whether or not a SAR shall be in tandem or
in combination with any other Award, and any other terms and conditions of any
SAR.

 

9.3.                            Term.

 

Each SAR granted under the Plan shall terminate,
and all rights thereunder shall cease, upon the expiration of ten years from
the date such SAR is granted, or under such circumstances and on such date
prior thereto as is set forth in the Plan or as may be fixed by the Board and
stated in the Award Agreement relating to such SAR.

 

9.4.                            Transferability of SARS.

 

Except as provided in Section 9.5,
during the lifetime of a Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantee’s guardian or legal representative) may
exercise a SAR.  Except as provided in Section 9.5, no SAR shall be assignable or transferable
by the Grantee to whom it is granted, other than by will or the laws of descent
and distribution.

 

9.5.                            Family Transfers.

 

If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of a SAR to any Family Member.  For the purpose of this Section 9.5,
a “not for value” transfer is a transfer which is (i) a gift, (ii) a
transfer 

 

16

 

under a domestic relations order in settlement of marital property
rights; or (iii) a transfer to an entity in which more than fifty percent
of the voting interests are owned by Family Members (or the Grantee) in
exchange for an interest in that entity. 
Following a transfer under this Section 9.5,
any such SAR shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer. 
Subsequent transfers of transferred SARs are prohibited except to Family
Members of the original Grantee in accordance with this Section 9.5
or by will or the laws of descent and distribution.

 

10.                               TERMS AND CONDITIONS OF RESTRICTED STOCK
AND STOCK UNITS

 

10.1.                     Grant
of Restricted Stock or Stock Units.

 

Awards of Restricted Stock or Stock Units may be
made for no consideration (other than par value of the shares which is deemed
paid by Services already rendered).

 

10.2.                     Restrictions.

 

At the time a grant of Restricted Stock or Stock
Units is made, the Board may, in its sole discretion, establish a period of
time (a “restricted period”) applicable to such Restricted Stock or Stock
Units.  Each Award of Restricted Stock or
Stock Units may be subject to a different restricted period.  The Board may in its sole discretion, at the
time a grant of Restricted Stock or Stock Units is made, prescribe restrictions
in addition to or other than the expiration of the restricted period, including
the satisfaction of corporate or individual performance objectives, which may
be applicable to all or any portion of the Restricted Stock or Stock Units as
described in Article 14.  Neither Restricted Stock nor Stock Units may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of
during the restricted period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such Restricted Stock or
Stock Units.

 

10.3.                     Restricted
Stock Certificates.

 

The Company shall issue, in the name of each
Grantee to whom Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock granted to the
Grantee, as soon as reasonably practicable after the Grant Date.  The Board may provide in an Award Agreement
that either (i)  the Secretary of the Company shall hold such certificates
for the Grantee’s benefit until such time as the Restricted Stock is forfeited
to the Company or the restrictions lapse, or (ii)  such certificates shall
be delivered to the Grantee, provided, however, that such
certificates shall bear a legend or legends that comply with the applicable 

 

17

 

securities laws and regulations and makes
appropriate reference to the restrictions imposed under the Plan and the Award
Agreement.

 

10.4.                     Rights
of Holders of Restricted Stock.

 

Unless the Board otherwise provides in an Award
Agreement, holders of Restricted Stock shall have the right to vote such Stock
and the right to receive any dividends declared or paid with respect to such
Stock.  The Board may provide that any
dividends paid on Restricted Stock must be reinvested in shares of Stock, which
may or may not be subject to the same vesting conditions and restrictions
applicable to such Restricted Stock.  All
distributions, if any, received by a Grantee with respect to Restricted Stock
as a result of any stock split, stock dividend, combination of shares, or other
similar transaction shall be subject to the restrictions applicable to the
original Grant.

 

10.5.                     Rights
of Holders of Stock Units.

 

10.5.1.           Voting
and Dividend Rights.

 

Holders of Stock Units shall have no rights as
stockholders of the Company.  The Board
may provide in an Award Agreement evidencing a grant of Stock Units that the
holder of such Stock Units shall be entitled to receive, upon the Company’s
payment of a cash dividend on its outstanding Stock, a cash payment for each
Stock Unit held equal to the per-share dividend paid on the Stock.  Such Award Agreement may also provide that
such cash payment will be deemed reinvested in additional Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.

 

10.5.2.           Creditor’s Rights.

 

A holder of Stock Units shall have no rights other
than those of a general creditor of the Company.  Stock Units represent an unfunded and
unsecured obligation of the Company, subject to the terms and conditions of the
applicable Award Agreement.

 

10.6.                     Termination
of Service.

 

Unless the Board otherwise provides in an Award
Agreement or in writing after the Award Agreement is issued, upon the termination of a Grantee’s Service, any
Restricted Stock or Stock Units held by such Grantee that have not vested, or
with respect to which all applicable restrictions and conditions have not
lapsed, shall immediately be deemed forfeited. 
Upon forfeiture of Restricted Stock or Stock Units, the Grantee shall
have no further rights with respect to such Award, including but 

 

18

 

not limited to any right to vote Restricted Stock
or any right to receive dividends with respect to shares of Restricted Stock or
Stock Units.

 

10.7.                     Purchase
of Restricted Stock and Shares Subject to Stock Units.

 

The Grantee shall be required, to the extent required by applicable
law, to purchase the Restricted Stock or Shares subject to vested Stock Units
from the Company at a Purchase Price equal to the greater of (i) the
aggregate par value of the shares of Stock represented by such Restricted Stock
or Stock Units (ii) the Purchase Price, if any, specified in the Award
Agreement relating to such Restricted Stock or Stock Units.  The Purchase Price shall be payable in a form
described in Section 12 or, in the
discretion of the Board, in consideration for past or future Services rendered
to the Company or an Affiliate.

 

10.8.                     Delivery
of Stock.

 

Upon the expiration or termination of any
restricted period and the satisfaction of any other conditions prescribed by
the Board, the restrictions applicable to shares of Restricted Stock or Stock
Units settled in Stock shall lapse, and, unless otherwise provided in the Award
Agreement, a stock certificate for such shares shall be delivered, free of all
such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as
the case may be.  Neither the Grantee,
nor the Grantee’s beneficiary or estate, shall have any further rights with
regard to a Stock Unit once the share of Stock represented by the Stock Unit
has been delivered.

 

11.                               TERMS AND CONDITIONS OF UNRESTRICTED
STOCK AWARDS

 

The Board may, in its sole discretion, grant (or
sell at par value or such other higher purchase price determined by the Board)
an Unrestricted Stock Award to any Grantee pursuant to which such Grantee may
receive shares of Stock free of any restrictions (“Unrestricted Stock”) under
the Plan.  Unrestricted Stock Awards may
be granted or sold as described in the preceding sentence in respect of past
services and other valid consideration, or in lieu of, or in addition to, any
cash compensation due to such Grantee.

 

12.                               FORM OF PAYMENT FOR OPTIONS AND
RESTRICTED STOCK

 

12.1.                     General
Rule.

 

Payment of the Option Price for the shares purchased pursuant to the
exercise of an Option or the Purchase Price for Restricted Stock shall be made
in cash or in cash equivalents acceptable to the Company.

 

19

 

12.2.                     Surrender
of Stock.

 

To the extent the Award Agreement so provides, payment of the Option
Price for shares purchased pursuant to the exercise of an Option or the
Purchase Price for Restricted Stock may be made all or in part through the
tender or attestation to the Company of shares of Stock, which shall be valued,
for purposes of determining the extent to which the Option Price or Purchase
Price has been paid thereby, at their Fair Market Value on the date of exercise
or surrender.

 

12.3.                     Cashless
Exercise.

 

With respect to an Option only (and not with respect to Restricted
Stock), to the extent permitted by law and to the extent the Award Agreement so
provides, payment of the Option Price for shares purchased pursuant to the
exercise of an Option may be made all or in part by delivery (on a form
acceptable to the Board) of an irrevocable direction to a licensed securities
broker acceptable to the Company to sell shares of Stock and to deliver all or
part of the sales proceeds to the Company in payment of the Option Price and
any withholding taxes described in Section 18.3.

 

12.4.                     Other
Forms of Payment.

 

To the extent the Award Agreement so provides,
payment of the Option Price for shares purchased pursuant to exercise of an
Option or the Purchase Price for Restricted Stock may be made in any other form
that is consistent with applicable laws, regulations and rules, including,
without limitation, Service.

 

13.                               TERMS AND CONDITIONS OF DIVIDEND
EQUIVALENT RIGHTS

 

13.1.                     Dividend
Equivalent Rights.

 

A Dividend Equivalent Right is an Award entitling the recipient to
receive credits based on cash distributions that would have been paid on the
shares of Stock specified in the Dividend Equivalent Right (or other award to
which it relates) if such shares had been issued to and held by the
recipient.  A Dividend Equivalent Right
may be granted hereunder to any Grantee. 
The terms and conditions of Dividend Equivalent Rights shall be specified
in the grant.  Dividend equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or
may be deemed to be reinvested in additional shares of Stock, which may
thereafter accrue additional equivalents. 
Any such reinvestment shall be at Fair Market Value on the date of
reinvestment.  Dividend Equivalent Rights
may be settled in cash or Stock or a combination thereof, in a single
installment or installments, all determined in the sole discretion of the
Board.  A Dividend Equivalent Right 

 

20

 

granted
as a component of another Award may provide that such Dividend Equivalent Right
shall be settled upon exercise, settlement, or payment of, or lapse of
restrictions on, such other award, and that such Dividend Equivalent Right
shall expire or be forfeited or annulled under the same conditions as such
other award.  A Dividend Equivalent Right
granted as a component of another Award may also contain terms and conditions
different from such other award.

 

13.2.                     Termination
of Service.

 

Except
as may otherwise be provided by the Board either in the Award Agreement or in
writing after the Award Agreement is issued, a Grantee’s rights in all Dividend
Equivalent Rights or interest equivalents shall automatically terminate upon
the Grantee’s termination of Service for any reason.

 

14.                               TERMS AND CONDITIONS OF PERFORMANCE
SHARES, PERFORMANCE UNITS, PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS

 

14.1.                     Grant
of Performance Units/Performance Shares.

 

Subject to the terms and provisions of this
Plan, the Board, at any time and from time to time, may grant Performance Units
and/or Performance Shares to Participants in such amounts and upon such terms
as the Committee shall determine.

 

14.2.                     Value
of Performance Units/Performance Shares.

 

Each Performance Unit shall have an initial value
that is established by the Board at the time of grant.  The Board shall set performance goals in its
discretion which, depending on the extent to which they are met, will determine
the value and/or number of Performance Units/Performance Shares that will be
paid out to the Participant.

 

14.3.                     Earning
of Performance Units/Performance Shares.

 

Subject to the terms of this Plan, after the
applicable Performance Period has ended, the holder of Performance
Units/Performance Shares shall be entitled to receive payout on the value and
number of Performance Units/Performance Shares earned by the Participant over
the Performance Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved.

 

21

 

14.4.                     Form and
Timing of Payment of Performance Units/Performance Shares.

 

Payment of earned Performance
Units/Performance Shares shall be as determined by the Board and as evidenced
in the Award Agreement. Subject to the terms of this Plan, the Board, in its
sole discretion, may pay earned Performance Units/Performance Shares in the
form of cash or in shares (or in a combination thereof) equal to the value of
the earned Performance Units/Performance Shares at the close of the applicable
Performance Period, or as soon as practicable after the end of the Performance
Period.  Any Shares may be granted
subject to any restrictions deemed appropriate by the Committee.  The determination of the Committee with
respect to the form of payout of such Awards shall be set forth in the Award
Agreement pertaining to the grant of the Award.

 

14.5.                     Performance
Conditions.

 

The right of a Grantee to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Board.  The Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions. 
If and to the extent required under Code Section 162(m), any power
or authority relating to an Award intended to qualify under Code Section 162(m),
shall be exercised by the Committee and not the Board.

 

14.6.                     Performance
Awards or Annual Incentive Awards Granted to Designated Covered Employees.

 

If and to the extent that
the Board determines that an Award to be granted to a Grantee who is designated
by the Board as likely to be a Covered Employee should qualify as “performance-based
compensation” for purposes of Code Section 162(m), the grant, exercise
and/or settlement of such Award shall be contingent upon achievement of
pre-established performance goals and other terms set forth in this Section 14.6.

 

14.6.1.           Performance
Goals Generally.

 

The performance goals for such Awards shall consist of one or more
business criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee consistent with this Section 14.6.  Performance goals shall be objective and
shall otherwise meet the requirements of Code Section 162(m) and
regulations thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of performance
goals being “substantially uncertain.” 
The Committee may determine that such Awards shall be granted, exercised
and/or settled upon 

 

22

 

achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise and/or
settlement of such Awards.  Performance
goals may differ for Awards granted to any one Grantee or to different
Grantees.

 

14.6.2.           Timing
for Establishing Performance Goals.

 

Performance goals shall be established not later than the earlier of (i) 90
days after the beginning of any performance period applicable to such Awards
and (ii) the day on which 25% of any performance period applicable to such
Awards has expired, or at such other date as may be required or permitted for “performance-based
compensation” under Code Section 162(m).

 

14.6.3.           Settlement
of Awards; Other Terms.

 

Settlement of such Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee.  The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with such
Awards.  The Committee shall specify the
circumstances in which such Performance or Annual Incentive Awards shall be
paid or forfeited in the event of termination of Service by the Grantee prior to
the end of a performance period or settlement of Awards.

 

14.6.4.           Performance
Measures.

 

The performance goals upon which the payment
or vesting of an Award to a Covered Employee that is intended to qualify as
Performance-Based Compensation shall be limited to the following Performance
Measures:

 

(a)  net earnings or net income;

 

(b)  operating earnings;

 

(c)  pretax earnings;

 

(d)  earnings per share;

 

(e)  share price, including growth
measures and total stockholder return;

 

(f)  earnings before interest and taxes;

 

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

 

23

 

(h)  sales or revenue growth, whether in
general, by type of product or service, or by type of customer;

 

(i)  gross or operating margins;

 

(j)  return measures, including return
on assets, capital, investment, equity, sales or revenue;

 

(k)  cash flow, including operating cash
flow, free cash flow, cash flow return on equity and cash flow return on
investment;

 

(l)  productivity ratios;

 

(m)  expense targets;

 

(n)  market share;

 

(o)  financial ratios as provided in
credit agreements of the Company and its subsidiaries;

 

(p)  working capital targets;

 

(q)  completion of acquisitions of
business or companies.

 

(r)  completion of divestitures and
asset sales; and

 

(s)  any combination of any of the
foregoing business criteria.

 

Any Performance Measure(s) may be used
to measure the performance of the Company, Subsidiary, and/or Affiliate as a
whole or any business unit of the Company, Subsidiary, and/or Affiliate or any
combination thereof, as the Committee may deem appropriate, or any of the above
Performance Measures as compared to the performance of a group of comparator
companies, or published or special index that the Committee, in its sole
discretion, deems appropriate, or the Company may select Performance Measure (f) above
as compared to various stock market indices. The Committee also has the
authority to provide for accelerated vesting of any Award based on the
achievement of performance goals pursuant to the Performance Measures specified
in this Section 14.

 

24

 

14.6.5.    Evaluation of Performance.

 

The Committee may provide in any such Award
that any evaluation of performance may include or exclude any of the following
events that occur during a Performance Period: (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 provisions affecting reported results; (d) any
reorganization and restructuring programs; (e) extraordinary nonrecurring
items as described in Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial condition and results of
operations appearing in the Company’s annual report to shareholders for the
applicable year; (f) acquisitions or divestitures; and (g) foreign
exchange gains and losses. To the extent such inclusions or exclusions affect
Awards to Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.

 

14.6.6.    Adjustment of Performance-Based
Compensation.

 

Awards that are intended to qualify as
Performance-Based Compensation may not be adjusted upward.  The Board shall retain the discretion to
adjust such Awards downward, either on a formula or discretionary basis, or any
combination as the Committee determines.

 

14.6.7.    Board Discretion.

 

In the event that applicable tax and/or
securities laws change to permit Board discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes,
the Board shall have sole discretion to make such changes without obtaining
shareholder approval provided the exercise of such discretion does not violate
Code Section 409A. In addition, in the event that the Committee determines
that it is advisable to grant Awards that shall not qualify as
Performance-Based Compensation, the Committee may make such grants without
satisfying the requirements of Code Section 162(m) and base vesting
on Performance Measures other than those set forth in Section 14.6.4.

 

14.7.       Status of Section Awards
Under Code Section 162(m).

 

It
is the intent of the Company that Awards under Section 14.6
hereof granted to persons who are designated by the Committee as likely to be
Covered Employees within the meaning of Code Section 162(m) and regulations
thereunder shall, if so designated by the Committee, constitute “qualified
performance-based compensation” within the meaning of Code Section 162(m) and
regulations thereunder.  Accordingly, the
terms of Section 14.6, including the
definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner

 

25

 

consistent with Code Section 162(m) and
regulations thereunder.  The foregoing
notwithstanding, because the Committee cannot determine with certainty whether
a given Grantee will be a Covered Employee with respect to a fiscal year that
has not yet been completed, the term Covered Employee as used herein shall mean
only a person designated by the Committee, at the time of grant of an Award, as
likely to be a Covered Employee with respect to that fiscal year.  If any provision of the Plan or any agreement
relating to such Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.

 

15.          PARACHUTE LIMITATIONS

 

Notwithstanding any other provision of this Plan
or of any other agreement, contract, or understanding heretofore or hereafter
entered into by a Grantee with the Company or any Affiliate, except an
agreement, contract, or understanding that expressly addresses Section 280G
or Section 4999 of the Code (an “Other Agreement”), and notwithstanding
any formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified
individual,” as defined in Section 280G(c) of the Code, any Option,
Restricted Stock, Stock Unit, Performance Share or Performance Unit held by
that Grantee and any right to receive any payment or other benefit under this
Plan shall not become exercisable or vested (i) to the extent that such
right to exercise, vesting, payment, or benefit, taking into account all other
rights, payments, or benefits to or for the Grantee under this Plan, all Other
Agreements, and all Benefit Arrangements, would cause any payment or benefit to
the Grantee under this Plan to be considered a “parachute payment” within the
meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute
Payment”) and (ii) if, as a result of receiving a Parachute
Payment, the aggregate after-tax amounts received by the Grantee from the
Company under this Plan, all Other Agreements, and all Benefit Arrangements
would be less than the maximum after-tax amount that could be received by the
Grantee without causing any such payment or benefit to be considered a
Parachute Payment.  In the event that the
receipt of any such right to exercise, vesting, payment, or benefit under this
Plan, in conjunction with all other rights, payments, or benefits to or for the
Grantee under any Other Agreement or any Benefit Arrangement would cause the
Grantee to be considered to have received a Parachute Payment under this Plan
that would have the effect of decreasing the after-tax amount received by the
Grantee as described in clause (ii) of the preceding sentence, then
the Grantee shall have the right, in the Grantee’s sole discretion, to
designate those rights, payments, or benefits under this Plan, any Other
Agreements, and any Benefit Arrangements that should be reduced or eliminated
so as to avoid having the payment or benefit to the Grantee under this

 

26

 

Plan be deemed to be a Parachute Payment.

 

16.          REQUIREMENTS OF LAW

 

16.1.       General.

 

The Company shall not be required to sell or issue
any shares of Stock under any Award if the sale or issuance of such shares
would constitute a violation by the Grantee, any other individual exercising an
Option, or the Company of any provision of any law or regulation of any
governmental authority, including without limitation any federal or state
securities laws or regulations.  If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any shares 
subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issuance or purchase of shares hereunder, no shares of
Stock may be issued or sold to the Grantee or any other individual exercising
an Option pursuant to such Award unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company, and any delay caused thereby
shall in no way affect the date of termination of the Award.  Without limiting the generality of the
foregoing, in connection with the Securities Act, upon the exercise of any Option
or any SAR that may be settled in shares of Stock or the delivery of any shares
of Stock underlying an Award, unless a registration statement under such Act is
in effect with respect to the shares of Stock covered by such Award, the
Company shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares 
pursuant to an exemption from registration under the Securities Act.  Any determination in this connection by the
Board shall be final, binding, and conclusive. 
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act.  The Company shall not be obligated to take
any affirmative action in order to cause the exercise of an Option or a SAR or
the issuance of shares of Stock pursuant to the Plan to comply with any law or
regulation of any governmental authority. 
As to any jurisdiction that expressly imposes the requirement that an
Option (or SAR that may be settled in shares of Stock) shall not be exercisable
until the shares of Stock covered by such Option (or SAR) are registered or are
exempt from registration, the exercise of such Option (or SAR) under
circumstances in which the laws of such jurisdiction apply shall be deemed
conditioned upon the effectiveness of such registration or the availability of
such an exemption.

 

16.2.       Rule 16b-3.

 

During any time when the Company has a class of
equity security registered under Section 12 of the Exchange Act, it is the
intent of the Company that Awards

 

27

 

pursuant to the Plan and the exercise of Options
and SARs granted hereunder will qualify for the exemption provided by Rule 16b-3
under the Exchange Act.  To the extent
that any provision of the Plan or action by the Board does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board, and shall not affect the
validity of the Plan.  In the event that Rule 16b-3
is revised or replaced, the Board may exercise its discretion to modify this
Plan in any respect necessary to satisfy the requirements of, or to take
advantage of any features of, the revised exemption or its replacement.

 

17.          EFFECT OF CHANGES IN CAPITALIZATION

 

17.1.       Changes in Stock.

 

If the number of outstanding shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged for
a different number or kind of shares or other securities of the Company on
account of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of shares for which grants of Options and other
Awards may be made under the Plan, including, without limitation, the limits
set forth in Section 6.3, shall be
adjusted proportionately and accordingly by the Company.  In addition, the number and kind of shares
for which Awards are outstanding shall be adjusted proportionately and
accordingly so that the proportionate interest of the Grantee immediately
following such event shall, to the extent practicable, be the same as
immediately before such event.  Any such
adjustment in outstanding Options or SARs shall not change the aggregate Option
Price or SAR Exercise Price payable with respect to shares that are subject to
the unexercised portion of an outstanding Option or SAR, as applicable, but
shall include a corresponding proportionate adjustment in the Option Price or
SAR Exercise Price per share.  The
conversion of any convertible securities of the Company shall not be treated as
an increase in shares effected without receipt of consideration.   Notwithstanding the foregoing, in the event
of any distribution to the Company’s stockholders of securities of any other
entity or other assets (including an extraordinary dividend but excluding a
non-extraordinary dividend of the Company) without receipt of consideration by
the Company, the Company shall, in such manner as the Company deems
appropriate, adjust (i) the number and kind of shares subject to outstanding
Awards and/or (ii) the exercise price of outstanding Options and Stock
Appreciation Rights to reflect such distribution.

 

28

 

17.2.       Reorganization in Which the
Company Is the Surviving Entity Which Does Not Constitute a Corporate
Transaction.

 

Subject to Section 17.3
hereof, if the Company shall be the surviving entity in any reorganization,
merger, or consolidation of the Company with one or more other entities which
does not constitute a Corporate Transaction, any Option or SAR theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option or SAR
would have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option
Price or SAR Exercise Price per share so that the aggregate Option Price or SAR
Exercise Price thereafter shall be the same as the aggregate Option Price or
SAR Exercise Price of the shares remaining subject to the Option or SAR
immediately prior to such reorganization, merger, or consolidation.  Subject to any contrary language in an Award
Agreement evidencing an Award, any restrictions applicable to such Award shall
apply as well to any replacement shares received by the Grantee as a result of
the reorganization, merger or consolidation. 
In the event of a transaction described in this Section 17.2, Stock Units shall be
adjusted so as to apply to the securities that a holder of the number of shares
of Stock subject to the Stock Units would have been entitled to receive
immediately following such transaction.

 

17.3.       Corporate Transaction in
which Awards Are Not Assumed.

 

Upon the occurrence of a Corporate Transaction in
which outstanding Options, SARs, Stock Units and Restricted Stock are not being
assumed or continued:

 

(i)  all outstanding shares of Restricted
Stock shall be deemed to have vested, and all Stock Units shall be deemed to
have vested and the shares of Stock subject thereto shall be delivered,
immediately prior to the occurrence of such Corporate Transaction, and

 

(ii) either of the following two actions
shall be taken:

 

(A) fifteen
days prior to the scheduled consummation of a Corporate Transaction, all Options
and SARs outstanding hereunder shall become immediately exercisable and shall
remain exercisable for a period of fifteen days, or

 

(B) the Board may elect, in its sole
discretion, to cancel any outstanding Awards of Options, Restricted Stock,
Stock Units, and/or SARs and pay or deliver, or cause to be paid or delivered,
to the holder thereof an amount in cash or securities having a value (as
determined by the Board acting in good faith), in the case of Restricted Stock
or Stock Units, equal to the formula or fixed price per share paid to holders
of shares of Stock and, in the case of Options or SARs, equal to the product of
the number of shares of Stock subject to the Option or SAR (the “Award

 

29

 

Shares”) multiplied by the amount, if any, by
which (I) the formula or fixed price per share paid to holders of shares
of Stock pursuant to such transaction exceeds (II) the Option Price or SAR
Exercise Price applicable to such Award Shares.

 

With respect to the Company’s establishment of an
exercise window, (i) any exercise of an Option or SAR during such
fifteen-day period shall be conditioned upon the consummation of the event and
shall be effective only immediately before the consummation of the event, and (ii) upon
consummation of any Corporate Transaction, the Plan and all outstanding but
unexercised Options and SARs shall terminate. 
The Board shall send notice of an event that will result in such a
termination to all individuals who hold Options and SARs not later than the
time at which the Company gives notice thereof to its stockholders.

 

17.4.       Corporation Transaction in which Awards Are Assumed.

 

The Plan, Options, SARs, Stock Units and
Restricted Stock theretofore granted shall continue in the manner and under the
terms so provided in the event of any Corporate Transaction to the extent that
provision is made in writing in connection with such Corporate Transaction for
the assumption or continuation of the Options, SARs, Stock Units and Restricted
Stock theretofore granted, or for the substitution for such Options, SARs,
Stock Units and Restricted Stock for new common stock options and stock
appreciation rights and new common stock units and restricted stock relating to
the stock of a successor entity, or a parent or subsidiary thereof, with
appropriate adjustments as to the number of shares (disregarding any
consideration that is not common stock) and option and stock appreciation right
exercise prices.

 

17.5.       Adjustments.

 

Adjustments under this Section 17
related to shares of Stock or securities of the Company shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive.  No fractional shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case
by rounding downward to the nearest whole share. The Board shall determine the
effect of a Corporate Transaction upon Awards other than Options, SARs, Stock
Units and Restricted Stock, and such effect shall be set forth in the
appropriate Award Agreement.  The Board
may provide in the Award Agreements at the time of grant, or any time
thereafter with the consent of the Grantee, for different provisions to apply
to an Award in place of those described in Sections 17.1, 17.2,
17.3 and 17.4.  This Section 17
does not limit the Company’s ability to provide for alternative treatment of
Awards outstanding under the Plan in the event of change of control events that
are not Corporate Transactions.

 

30

 

17.6.       No Limitations on Company.

 

The making of Awards pursuant to the Plan shall
not affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell
or transfer all or any part of its business or assets.

 

18.          GENERAL PROVISIONS

 

18.1.       Disclaimer of Rights.

 

No provision in the Plan or in any Award or Award
Agreement shall be construed to confer upon any individual the right to remain
in the employ or service of the Company or any Affiliate, or to interfere in
any way with any contractual or other right or authority of the Company either
to increase or decrease the compensation or other payments to any individual at
any time, or to terminate any employment or other relationship between any
individual and the Company.  In addition,
notwithstanding anything contained in the Plan to the contrary, unless
otherwise stated in the applicable Award Agreement, no Award granted under the
Plan shall be affected by any change of duties or position of the Grantee, so
long as such Grantee continues to be a director, officer, consultant or employee
of the Company or an Affiliate.  The
obligation of the Company to pay any benefits pursuant to this Plan shall be
interpreted as a contractual obligation to pay only those amounts described
herein, in the manner and under the conditions prescribed herein.  The Plan shall in no way be interpreted to
require the Company to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any Grantee or
beneficiary under the terms of the Plan.

 

18.2.       Nonexclusivity of the Plan.

 

Neither the adoption of the Plan nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations upon the right and authority of the Board
to adopt such other incentive compensation arrangements (which arrangements may
be applicable either generally to a class or classes of individuals or
specifically to a particular individual or particular individuals) as the Board
in its discretion determines desirable, including, without limitation, the
granting of stock options otherwise than under the Plan.

 

18.3.       Withholding Taxes.

 

The Company or an Affiliate, as the case may be,
shall have the right to deduct from payments of any kind otherwise due to a
Grantee any federal, state, or local

 

31

 

taxes of any kind required by law to be withheld
with respect to the vesting of or other lapse of restrictions applicable to an
Award or upon the issuance of any shares of Stock upon the exercise of an Option
or pursuant to an Award.  At the time of
such vesting, lapse, or exercise, the Grantee shall pay to the Company or the
Affiliate, as the case may be, any amount that the Company or the Affiliate may
reasonably determine to be necessary to satisfy such withholding
obligation.  Subject to the prior
approval of the Company or the Affiliate, which may be withheld by the Company
or the Affiliate, as the case may be, in its sole discretion, the Grantee may
elect to satisfy such obligations, in whole or in part, (i) by causing the
Company or the Affiliate to withhold shares of Stock otherwise issuable to the
Grantee or (ii) by delivering to the Company or the Affiliate shares of
Stock already owned by the Grantee.  The
shares of Stock so delivered or withheld shall have an aggregate Fair Market
Value equal to such withholding obligations. 
The Fair Market Value of the shares of Stock used to satisfy such
withholding obligation shall be determined by the Company or the Affiliate as
of the date that the amount of tax to be withheld is to be determined.  A Grantee who has made an election pursuant
to this Section 18.3 may satisfy his or
her withholding obligation only with shares of Stock that are not subject to
any repurchase, forfeiture, unfulfilled vesting, or other similar
requirements.  The maximum number of
shares of Stock that may be withheld from any Award to satisfy any federal,
state or local tax withholding requirements upon the exercise, vesting, lapse
of restrictions applicable to such Award or payment of shares pursuant to such
Award, as applicable, cannot exceed such number of shares having a Fair Market
Value equal to the minimum statutory amount required by the Company to be
withheld and paid to any such federal, state or local taxing authority with
respect to such exercise, vesting, lapse of restrictions or payment of shares.

 

18.4.       Captions.

 

The use of captions in this Plan or any Award
Agreement is for the convenience of reference only and shall not affect the
meaning of any provision of the Plan or such Award Agreement.

 

18.5.       Other Provisions.

 

Each Award granted under the Plan may contain such
other terms and conditions not inconsistent with the Plan as may be determined
by the Board, in its sole discretion.

 

18.6.       Number and Gender.

 

With respect to words used in this Plan, the
singular form shall include the plural form, the masculine gender shall include
the feminine gender, etc., as the context requires.

 

32

 

18.7.       Severability.

 

If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of
law in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.

 

18.8.       Governing Law.

 

The validity and construction of this Plan and the instruments
evidencing the Awards hereunder shall be governed by the laws of the State of
Delaware, other than any conflicts or choice of law rule or principle that
might otherwise refer construction or interpretation of this Plan and the
instruments evidencing the Awards granted hereunder to the substantive laws of
any other jurisdiction.

 

18.9.       Section 409A of the
Code

 

The Board intends to comply with Section 409A of the Code (“Section 409A”),
or an exemption to Section 409A, with regard to Awards hereunder that
constitute nonqualified deferred compensation within the meaning of Section 409A.  To the extent that the Board determines that
a Grantee would be subject to the additional 20% tax imposed on certain
nonqualified deferred compensation plans pursuant to Section 409A as a
result of any provision of any Award granted under this Plan, such provision
shall be deemed amended to the minimum extent necessary to avoid application of
such additional tax.  The nature of any
such amendment shall be determined by the Board.

 

*    *    *

 

To record adoption of the Plan by the Board as of March 8, 2008,
and approval of the Plan by the stockholders on May 29, 2008, the Company
has caused its authorized officer to execute the Plan.

 

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
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