Document:

EX-10.2

Exhibit 10.2

AMENDMENT NO. 4 TO

MASTER SHELF AGREEMENT

(SAIA, Inc. f/k/a SCS Transportation, Inc.)

June 4, 2008

Prudential Investment Management, Inc. (“Prudential”)

The Prudential Insurance Company

     of America

Pruco Life Insurance Company

Reliastar Life Insurance Company

Southland Life Insurance Company

Pruco Life Insurance

Company of New Jersey

Prudential Retirement

Insurance and Annuity Company

United of Omaha Life

Insurance Company

Universal Prudential Arizona

Reinsurance Company

Zurich American Insurance Company

Each Prudential Affiliate (as defined herein)

     which becomes bound by certain provisions of the

     Agreement as hereinafter provided (together with

     each above-named entity, the “Purchasers”)

c/o Prudential Capital Group

Gateway Center Four

100 Mulberry Street

Newark, NJ 07102-4069

Ladies and Gentlemen:

     We
refer to the Master Shelf Agreement, dated as of September 20, 2002 (as amended or modified
to date, the “Agreement”), among the undersigned, SAIA, Inc. f/k/a SCS
Transportation, Inc., a
Delaware Corporation (the “Company”) and Purchasers. Unless otherwise defined
herein, the terms
defined in the Agreement shall be used herein as therein defined.

     We refer also to that certain Consent Letter, dated as of January 28, 2008 (the “Consent
Letter”), among the Company, SAIA Motor Freight Line, LLC, a Delaware
limited liability company
(“Guarantor”) and Purchasers.

     Pursuant to the requirements of the Consent Letter and Section 5M of the Agreement, the
Company and Purchasers desire to amend the Agreement to include

 

therein any Additional Covenants and Additional Defaults contained in the Restated Credit
Agreement (as that term is defined in the Consent Letter).

     Therefore, Purchasers and the Company, in consideration of the mutual promises and agreements
set forth herein and in the Agreement, agree as follows:

1. Amendments.

(a) Paragraph 5D. Paragraph 5D of the Agreement
is amended to add the following sentence at the end of such paragraph:

Notwithstanding the above, in the event, and each time, Company or one of its Subsidiaries
acquires one hundred percent (100%) of the outstanding stock of an entity (or entities)
(each a “Target”) which operates a primary line of business within Company’s core
industry, the indebtedness of such Target assumed as a result of such acquisition, and
Liens affecting the assets of such Target and securing such indebtedness, may be
maintained and remain in effect for a period of time not beyond the existing maturity date
of such indebtedness; provided, however, that the aggregate amount of assumed indebtedness
from all Targets shall not exceed $25,000,000 at any one time outstanding.

(b) Paragraph 5F.
Paragraph 5F of the Agreement is amended in its entirety to read as follows:

     5F.
Insurance. The Company will, and will cause each of its Subsidiaries to, maintain, with
financially sound and reputable insurers, insurance with respect to their respective properties and
businesses against such casualties and contingencies, of such types, on such terms and in such
amounts as is customary in the case of entities of established reputations engaged in the same or a
similar business and similarly situated; and upon the written request of any Purchaser, the Company
promptly shall deliver evidence thereof to Purchasers.

(c) Paragraph 5J. Paragraph 5J of
the Agreement is amended to add the following sentence at the end of such paragraph:

Notwithstanding the
above, the requirements of this Section 5J shall not apply to
indebtedness of a Target assumed by the Company or one of its Subsidiaries, as allowed
under Section 5D.

(d) Paragraph 6A. Paragraph 6A of
the Agreement is amended in its entirety to read as follows:

     6A Financial Covenants.

     6A(1) Fixed Charge Coverage Ratio. The Company will not permit, as of the last day of any
fiscal quarter, the Fixed Charge Coverage Ratio, calculated on a consolidated basis, to be less
than 1.10 to 1.00

2

 

     6A(2) Leverage Ratio. The Company will not permit, as of the last day of any fiscal quarter,
the Leverage Ratio, calculated on a consolidated basis, to be greater than 3.25 to 1.00.

     6A(3) Adjusted Leverage Ratio. The Company will not permit, as of the last day of any fiscal
quarter, the Adjusted Leverage Ratio, calculated on a consolidated basis, to be greater than 3.75
to 1.00.

     6A(4) Tangible Net Worth. The Company will not permit Tangible Net Worth at any time to be
less than $180,000,000 plus the sum of (i) 75% of positive Net Income from Continuing
Operations in each fiscal quarter commencing with the fiscal quarter ended June 30, 2006, and (ii)
75% of the Net Proceeds from the issuance and sale of equity securities after the date hereof, plus
or minus loss from Discontinued Operations commencing with the fiscal quarter ended June 30, 2006
minus the total amount paid by the Company for the repurchase of its shares after June 30,
2006, up to $25,000,000.

(e) Paragraph 6(C)(1). (i) Paragraph 6(C)(1) is amended by deleting clause (vi) thereof in its entirety.

(f) Paragraph 6C(3) is hereby amended by changing the period at the end of the
clause (viii) thereof to a semi-colon and by inserting therein the following new clauses
(ix) and (x):

	 	(ix)	 	the repurchase of shares of common stock of the Company. Repurchases made
prior to the date of this Agreement will be excluded from the Fixed Charge Coverage
Ratio. Repurchases made subsequent to the date of this Agreement up to the aggregate
amount of $50,000,000 will also be excluded from the Fixed Charge Coverage Ratio
calculation, provided that (i) Borrower’s pro forma Leverage Ratio following the
repurchase shall be less than or equal to 2.75 to 1.00, (ii) the Company’s pro forma
Adjusted Leverage Ratio following the repurchase shall be less than or equal to 3.25
to 1.00, and (iii) the Company’s pro forma Available Liquidity following the
repurchase shall be greater than or equal to $30,000,000.; and
	 
	 	(x)	 	the Permitted Acquisitions.

(g) Paragraph 10B. (i) Paragraph 10B of the Agreement is hereby amended by
deleting the definitions of “EBIT”, “EBITDAR”, “Indebtedness”, “Interest Expense”,
“Net Income” and “Total Indebtedness” therein and replacing such definitions with the
following revised definitions:

“EBITDAR” means, for any period, the sum of Net Income plus, to the extent
deducted in the determination of Net Income, (i) all provisions for federal, state and
other income tax of the Company and its Subsidiaries (ii) Interest Expense, (iii)
provisions for depreciation and amortization and (iv) Rental Expense, excluding
(a) any gains or losses resulting from the sale, conversion or other

3

 

disposition of capital assets (i.e., assets other than current assets), (b) any gains resulting
from the write-up of assets, (c) any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise for any period prior to the date
of acquisition, (d) any deferred credit representing the excess of equity in any such Subsidiary
at the date of acquisition over the cost of the investment in such Subsidiary, (e) any gains or
losses from the acquisition of securities or the retirement or extinguishment of Indebtedness, (f)
any gains on collections from the proceeds of insurance policies or settlements, (g) any
restoration to income of any Contingency Reserve, except to the extent that provision for such
reserve was made out of income accrued during such period, (h) any income, gain or loss during
such period from any discontinued operations or the disposition thereof, from any extraordinary
items or from any prior period adjustments, and (i) any equity of the Company or any Subsidiary in
the undistributed earnings (but not losses) of any corporation or other entity which is not a
Subsidiary of the Company, which in the aggregate will be deducted only to the extent they are
positive, adjusted for minority interests in Subsidiaries.

“Indebtedness” means with respect to any Person without duplication, (1) indebtedness or liability
for borrowed money; (2) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (3) obligations for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other title retention agreement with
respect to any such property); (4) redemption obligations in respect of mandatorily redeemable
Preferred Stock; (5) obligations as lessee under Capital Leases; (6) current liabilities in respect
of unfunded vested benefits under Plans covered by ERISA; (7) obligations under acceptance
facilities; (8) the outstanding balance of the purchase price of uncollected accounts receivable of
such Person subject at such time to a sale of receivables or other similar transaction, regardless
of whether such transaction is effected without recourse to such Person or in a manner which would
not be reflected on the balance sheet of such Person in accordance with GAAP; (9) obligations
secured by any Liens, whether or not the obligations have been assumed; and (10) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any
Person or entity, or otherwise to assure a creditor against loss with respect to liabilities of a
type described in any of the clauses above.

“Interest Expense” means, with respect to any period, the sum (without duplication) of (i) all
interest and prepayment charges in respect of any Indebtedness (including imputed interest in
respect of Capitalized Lease Obligations and net costs of Swaps) deducted in determining Net
Income for such period, together with all interest capitalized or deferred during such period and
not deducted in determining Net Income for such period, plus (ii) all debt discount and
expenses amortized or required to be amortized in the determination of Net Income for such period.

4

 

“Net Income” means, for any period of determination, with respect to the Company on a
Consolidated basis with its Subsidiaries (other than any Subsidiary which is restricted
from declaring or paying dividends or otherwise advancing funds to its parent whether by
contract or otherwise), cumulative net income earned during such period as determined in
accordance with GAAP.

“Total Indebtedness” means Indebtedness as of a particular date of determination plus six
(6) times Rental Expense for the period of four (4) consecutive fiscal quarters most
recently ended on or prior to such date.

(ii) Paragraph 10B of the Agreement is further amended by adding therein new definitions of
“Adjusted EBITDAR”, “Adjusted Leverage Ratio”, “Adjusted Total Indebtedness”, “Available
Liquidity”, “Capital Expenditures”, “Fixed Charge Coverage Ratio”, “Leverage Ratio”, “Maintenance
Capital Expenditures”, “Net Cash Flow”, “Permitted Acquisitions” and “Total Debt Service” in
alphabetical order to read as follows:

“Adjusted EBITDAR” means EBITDAR plus (i) pro forma additions related to Permitted
Acquisitions, and (ii) certain non-recurring charges and/or extraordinary items proposed
by the Company and to be included at the Required Holders’ sole discretion, which will not
be withheld unreasonably.

“Adjusted Leverage Ratio” means the ratio of (i) Adjusted Total Indebtedness on the last
day of a completed fiscal quarter of the Company, to (ii) Adjusted EBITDAR for the period
of four (4) consecutive fiscal quarters ended on such date.

“Adjusted Total Indebtedness” means Total Indebtedness plus the aggregate face amount of
all letters of credit issued and outstanding under the Credit Agreement.

“Available Liquidity” means, as of a particular date of determination, unused availability
under the Credit Agreement plus net cash on hand of the Company and its
Subsidiaries.

“Capital Expenditures” means, for any applicable period of determination, the aggregate
amount of all expenditures of the Company and its Subsidiaries for fixed or capital assets
made during such period which, in accordance with GAAP, would be classified as capital
expenditures.

“Fixed Charge Coverage Ratio” means, as of the last day of a completed fiscal quarter of
the Company, the ratio of (i) Net Cash Flow for the period of four (4) consecutive fiscal
quarters ended on such date to (ii) Total Debt Service for such period.

5

 

“Leverage Ratio” means the ratio of (i) Total Indebtedness on the last day of a completed
fiscal quarter of the Company, to (ii) Adjusted EBITDAR for the period of four (4)
consecutive fiscal quarters ended on such date.

“Maintenance Capital Expenditures” means Capital Expenditures by the Company and its
Subsidiaries during a particular period of determination (i) for purchases of tractors,
trailers, and other revenue equipment deemed by the Company to be replacement purchases
and (ii) to maintain long term assets (e.g., property, plant and equipment) in good
working order.

“Net Cash Flow” means Adjusted EBITDAR less the sum of Rental Expense, cash taxes,
Maintenance Capital Expenditures, distributions and treasury stock purchases not otherwise
excluded pursuant to Paragraph 6C(3)(ix).

“Permitted Acquisitions” means acquisitions otherwise prohibited hereunder, which meet the
following criteria: (i) the acquisition target is in the same line of business as the
Company, (ii) no Default exists at the time of such acquisition or would result from such
acquisition, (iii) the Company has delivered to Purchasers written notice of the intended
acquisition not less than ten (10) days prior to the consummation of such acquisition
transaction, (iv) the Company’s pro forma, post-acquisition Leverage Ratio shall be less
than or equal to 2.75 to 1.00, and (v) the Company’s pro forma, post-acquisition Adjusted
Leverage Ratio shall be less than or equal to 3.25 to 1.00, and (vi) the Company’s pro
forma, post-acquisition Available Liquidity shall be greater than or equal to $30,000,000.

“Total Debt Service” means the sum of interest expense, schedule principal payments on
long-term debt and Capital Lease payments.

(h) Paragraph 10C.
The first sentence of Paragraph 10C is amended in its entirety to read as follows:

References in this Agreement to “GAAP” shall be deemed to refer to generally accepted
accounting principles in effect in the United States on January 1, 2008, as amended from
time to time.

2. Conditions Precedent.
The effectiveness of this Amendment is contingent on:

(a) the Consent attached hereto
shall have been executed by the Subsidiary Guarantors;

(b) receipt by Prudential of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the amendments to the Agreement
herein contained.

3. Representation and Warranties. The Company hereby represents and warrants
to each Purchaser as follows:

6

 

(a) The Company is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware, each Subsidiary is duly organized and
validly existing in good standing under the laws of the jurisdiction in which it is
organized, and the Company has and each Subsidiary has the power to own its respective
property and to carry on its respective business as now being conducted. The execution,
delivery and performance by the Company of this Amendment are within the Company’s
corporate powers and have been duly authorized by all necessary corporate action.

(b) Neither the execution nor delivery of this Amendment, nor fulfillment of nor
compliance with the terms and provisions hereof will conflict with, or result in a breach
of the terms, conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties or assets of
the Company pursuant to, the charter or by-laws of the Company, any award of any
arbitrator of any agreement (including any agreement with stockholders), instrument,
order, judgment, decree, statute, law, rule or regulation to which the Company is subject.

(c) This Amendment constitutes the valid and binding obligation of the Company enforceable in accordance with its terms.

(d) No Default or Event of Default has occurred and is continuing.

4. Expenses. The Company hereby confirms its obligations under the Agreement,
whether or not the transactions hereby contemplated are consummated, to pay, promptly
after request by the Purchasers, all reasonable out-of-pocket costs and expenses, including
attorneys’ fees and expenses, incurred by the Purchasers in connection with this Letter
Agreement or the transactions contemplated hereby, in enforcing any rights under this
Letter Agreement, or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this letter agreement or the transactions
contemplated hereby. The obligations of the Company under this Section 4 shall survive
transfer by any Purchaser of any Note and payment of any Note.

5. Miscellaneous. On and after the effective date of this Letter Amendment, each
reference in the Agreement to “this Agreement,” “hereunder,” “hereof,” or words of like
import referring to the Agreement, and each reference in the Notes to “the Agreement,”
“thereunder,” “thereof,” or words of like import referring to the Agreement, shall mean
the Agreement as amended by this Letter Amendment. The Agreement, as amended by
this Letter Amendment, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed. The execution, delivery and effectiveness of this
Letter Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy under the Agreement nor constitute a waiver of any provision
of the Agreement. This Letter Agreement is not intended by the parties to be, and shall
not be construed to be, a novation of the Agreement or an accord and satisfaction in
regard thereto.

     This Amendment may be executed in any number of counterparts and by any combination of the
parties hereto in separate counterparts, each of which counterpart shall

7

 

be an original and all of which, taken together, shall constitute one and the same Amendment.

     If you agree to the terms and provisions hereof, please evidence your agreement by executing
and returning at least one counterpart of this Amendment to SAIA, Inc., 11465 Johns Creek Parkway,
Suite 400, Duluth, GA 30097, Attention of Chief Financial Officer. This Amendment shall become
effective as of the date first above written when and if counterparts of this Amendment shall have
been executed by us and you.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	SAIA, Inc.
	 	 	f/k/a SCS
Transportation,
Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ James A. Darby
	 

	 	 	 	 
	 

	 	Title: Vice President Finance and
Chief Financial
Officer

Accepted:

	 	 	 	 	 
	 

	 	 	 	 
	Prudential investment management, inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 
	 
	 	 	 	 
	THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 
	 
	 	 	 	 
	Pruco
Life
Insurance
Company	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 

8

 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	
Reliastar
Life
Insurance

Company	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	Prudential Private Placement Investors, 

L.P. (as Investment Advisor)	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	Prudential Private Placement Investors, Inc.
(as
its General Partner)	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Jay White	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	
Security
Life
Of
Denver
Insurance
Company
(formerly Southland Life Insurance Company)
	 
	 	 	 	 	 	 
	By:

	 	Prudential Private Placement Investors, 

L.P. (as Investment Advisor)	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	Prudential Private Placement
Investors, Inc.
 (as
its General Partner)	 	 	 	 
	 
	By:
	 	/s/ Jay White	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	Pruco
Life
Insurance
Company
Of
New
Jersey
	 
	 	 	 	 	 	 
	By:
	 	/s/ Jay White	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	Prudenital
 Retirement
Insurance
And
Annuity
Company	 	 
	 
	 	 	 	 	 	 
	By:

	 	Prudential Investment Management, Inc.,
as
investment manager	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Jay White	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Vice president	 	 	 	 

9

 

	 	 	 	 	 
	 

	 	 	 	 
	
United
 Of
Omaha
Life
Insurance
Company	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,

L.P. (as Investment Advisor)	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors, Inc.

(as its General Partner)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 
	 
	 	 	 	 
	Universal
Prudential
Arizona
Reinsurance
Company	 	 
	 
	 	 	 	 
	By:

	 	Prudential Investment Management, Inc.,

as investment manager	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 
	 
	 	 	 	 
	Zurich
American
Insurance
Company	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,

L.P. (as Investment Advisor)	 	 
	 
	 	 	 	 
	By:

	 	Prudential Private Placement Investors,
Inc.
 (as its General Partner)	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jay White	 	 
	 

	 	 	 	 
	 

	 	Vice President	 	 

10

 

CONSENT

     The undersigned, as a Guarantor under the Guaranty Agreement dated as of September 20, 2002
(the “Guaranty”) in favor of the holders from time to time of the Notes issued pursuant to the
Agreement, referred to in the foregoing Amendment No. 4 to Master Shelf Agreement (the
“Amendment”), hereby consents to the Amendment and hereby confirms and agrees that, notwithstanding
the effectiveness of the Amendment, the Guaranty is, and shall continue to be, in full force and
effect and is hereby confirmed and ratified in all respects.

	 	 	 	 	 
	 	 	SAIA MOTOR FREIGHT LINE, 

LLC, as successor to Saia Motor
 Freight Line, Inc.
	 
	 	 	 	 
	 

	 	By:	 	/s/ James A. Darby
	 

	 	 	 	 
	 	 	Name: James A. Darby
	 	 	Title: Vice President Finance and
          Chief Financial Officer

11Exhibit 10.1

Exhibit 10.1

ORCHIDS PAPER PRODUCTS COMPANY

STOCK INCENTIVE PLAN

as amended by the stockholders on May 20, 2008

 

 

ORCHIDS PAPER PRODUCTS COMPANY

STOCK INCENTIVE PLAN

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE
	 
	1. Purpose of the Plan
	 	 	1	 
	 
	 	 	 	 
	2. Definitions
	 	 	1	 
	 
	 	 	 	 
	A. “Act”
	 	 	1	 
	B. “Award”
	 	 	1	 
	C. “Award Agreement”
	 	 	1	 
	D. “Board”
	 	 	1	 
	E. “Cash-Based Award”
	 	 	1	 
	F. “Change in Control”
	 	 	1	 
	G. “Code”
	 	 	2	 
	H. “Committee”
	 	 	2	 
	I.   “Company”
	 	 	2	 
	J.   “Fair Market Value”
	 	 	2	 
	K. “Incentive Stock Option”
	 	 	2	 
	L. “Non-qualified Stock Option”
	 	 	2	 
	M. “Option”
	 	 	2	 
	N. “Other Stock-Based Award”
	 	 	2	 
	O. “Parent”
	 	 	3	 
	P. “Participant”
	 	 	3	 
	Q. “Plan”
	 	 	3	 
	R. “Public Offering”
	 	 	3	 
	S. “Stock”
	 	 	3	 
	T. “Stock Appreciation Right”
	 	 	3	 
	U. “Subsidiary”
	 	 	3	 
	 
	 	 	 	 
	3. Stock Subject to the Plan
	 	 	3	 
	 
	 	 	 	 
	4. Administration
	 	 	4	 
	 
	 	 	 	 
	5. Committee
	 	 	4	 
	 
	 	 	 	 
	6. Options
	 	 	4	 
	 
	 	 	 	 
	A. Type of Option
	 	 	4	 
	C. Exercise — Elections and Restrictions
	 	 	5	 
	D. Option Terms
	 	 	5	 
	E. Successive Option Grants
	 	 	6	 
	F. Additional Incentive Stock Option Requirements
	 	 	6	 
	G. Deferral of Gain on a Non-qualified Stock Option
	 	 	6	 
	 
	 	 	 	 
	7. Stock Appreciation Rights
	 	 	6	 
	 
	 	 	 	 
	8. Other Stock-Based Awards and Cash-Based Awards
	 	 	7	 
	 
	 	 	 	 
	9. Performance-Based Awards
	 	 	7	 
	 
	 	 	 	 
	10. Nontransferability of Awards
	 	 	8	 
	 
	 	 	 	 
	11. Investment Purpose
	 	 	8	 
	 
	A. Right of First Refusal
	 	 	8	 
	B. Take-Along Rights
	 	 	9	 
	C. Effect of Prohibited Transfer
	 	 	9	 

 

 

	 	 	 	 	 
	 	 	PAGE
	 
	D. Buy-Back Rights
	 	 	10	 
	E. Exceptions to Transfer Restrictions
	 	 	10	 
	F. Termination of Transfer Restrictions
	 	 	10	 
	 
	 	 	 	 
	12. Adjustments Upon Changes in Capitalization or Corporation Acquisitions
	 	 	10	 
	 
	 	 	 	 
	13. Amendment and Termination
	 	 	11	 
	 
	 	 	 	 
	14. Effectiveness of the Plan
	 	 	11	 
	 
	 	 	 	 
	15. Time of Granting of an Award
	 	 	11	 
	 
	 	 	 	 
	16. Term of Plan
	 	 	11	 
	 
	 	 	 	 
	17. No Right To Continued Employment
	 	 	11	 
	 
	 	 	 	 
	18. Choice of Law
	 	 	12	 

 

 

ORCHIDS PAPER PRODUCTS COMPANY

STOCK INCENTIVE PLAN

1. Purpose of the Plan.

     The purpose of the Plan is to provide the Company with a means to assist in recruiting,
retaining and rewarding certain employees, directors and consultants and to motivate such
individuals to exert their best efforts on behalf of the Company by providing incentives through
the granting of Awards. By granting Awards to such individuals, the Company expects that the
interests of the recipients will be better aligned with those of the Company.

2. Definitions.

     Unless the context clearly indicates otherwise, the following capitalized terms shall have the
meanings set forth below:

	 	A.	 	“Act” means the Securities Exchange Act of 1934, as amended, or any successor thereto.
	 
	 	B.	 	“Award” means a grant under the Plan of an Option, Stock Appreciation Right, Cash-Based Award or Other Stock-Based Award.
	 
	 	C.	 	“Award Agreement” means an agreement entered into between the Company and a
Participant setting forth the terms and provisions applicable to Awards granted under the Plan.
	 
	 	D.	 	“Board” means the Board of Directors of the Company.
	 
	 	E.	 	“Cash-Based Award” means an Award described in Section 8 as a Cash-Based Award.
	 
	 	F.	 	“Change in Control” means (i) the purchase or other acquisition (other than from the
Company) by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of
the Act (excluding, for this purpose, the Company or its subsidiaries or any employee benefit plan
of the Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 20% or more of either the then-outstanding shares of common stock of
the Company or the combined voting power of the Company’s then-outstanding voting securities
entitled to vote generally in the election of directors; or (ii) individuals who, as of the date
hereof, constitute the Board (and, as of the date hereof, the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board, provided that any person who becomes a
director subsequent to the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) shall be, for
purposes of this section, considered as though such person were a member of the Incumbent Board; or
(iii) approval by the stockholders of the Company of a reorganization, merger or consolidation, in
each case with respect to which persons who were the stockholders of the Company immediately prior
to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50%
of, respectively, the common stock and the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated corporation’s then-outstanding
voting securities, or of a liquidation or dissolution of the Company or of the sale of all or
substantially all of the assets of the Company.
	 
	 	G.	 	“Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto.

 

 

	 	H.	 	“Committee” means the committee described in Section 5.
	 
	 	I.	 	“Company” means Orchids Paper Products Company, a Delaware corporation.
	 
	 	J.	 	“Fair Market Value” means (i) if there should be a public market for the relevant Stock on the determination date, the arithmetic
mean between the high and lows of prices of such Stock as reported
on such date on the Composite Tape of the principal national
securities exchange or, if applicable, the NASDAQ National Market
on which such Stock is listed or admitted to trading, or, if such
Stock is not listed or admitted on any national securities exchange
or the NASDAQ National Market, the arithmetic mean of the per share
closing bid price and per share closing asked price on such date as
quoted on the National Association of Securities Dealers Automated
Quotation System (or such market in which such prices are regularly
quoted) (“NASDAQ”), or if no sale of such shares shall have been
reported on the Composite Tape of any national securities exchange
or the NASDAQ National Market or quoted on the NASDAQ on such date,
then the immediately preceding date on which sales of such shares
have been so reported or quoted shall be used, and (ii) if there
should not be a public market for the Stock on such date, the value
established by the Committee in good faith.
	 
	 	K.	 	“Incentive Stock Option” means a stock option which is an incentive stock option within the meaning of Code Section 422.
	 
	 	L.	 	“Non-qualified Stock Option” means a stock option which is not an Incentive Stock Option.
	 
	 	M.	 	“Option” means both an Incentive Stock Option and a Non-Qualified Stock Option.
	 
	 	N.	 	“Other Stock-Based Award” means an Award granted pursuant to Section 8 and described as an Other Stock-Based Award.
	 
	 	O.	 	“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the
time of the granting of the Option, each of the corporations other
than the Company owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other

 

 

	 	 	 	corporations in such chain, or such other meaning as may be hereafter ascribed to it in Code Section 424.
	 
	 	P.	 	“Participant” means an employee, director or consultant of the Company who is selected by the Committee to receive an Award.
	 
	 	Q.	 	“Plan” means the Orchids Paper Products Company 2002 Stock Incentive Plan.
	 
	 	R.	 	“Public Offering” means the creation of an active trading market in Common Stock by the sale of Common Stock to the public pursuant to
a registration statement under the Securities Act of 1933.
	 
	 	S.	 	“Stock” means the common stock of the Company.
	 
	 	T.	 	“Stock Appreciation Right” means a stock appreciation right described in Section 7.
	 
	 	U.	 	“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at
the time of granting an Award, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain, or such other
meaning as may be hereafter ascribed to it in Code Section 424.

3. Stock Subject to the Plan.

     Eight hundred ninety-seven thousand five hundred (897,500) shares of Stock have been allocated to the Plan and will be reserved to satisfy Awards under the Plan.
The maximum number of shares of Stock subject to Awards which may be granted during a calendar year
to a Participant shall be                     (      ). The Company may, in its discretion, use shares held in the treasury in lieu of
authorized but unissued shares. If any Award shall expire or terminate for any
reason, the shares subject to the Award shall again be available for the
purposes of the Plan. Any shares of Stock which are used by a Participant as
full or partial payment to the Company to satisfy a purchase price related to an
Award shall again be available for the purposes of the Plan. To the extent any
shares subject to an Award are not delivered to a Participant because such
shares are used to satisfy an applicable tax-withholding obligation, such
withheld shares shall again be available for the purposes of the Plan.

 

 

4. Administration.

     The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, Awards shall be granted and the number of shares, if applicable, to be
subject to each Award. In making such determinations, the Committee may take
into account the nature of services rendered by the respective individuals,
their present and potential contributions to the Company’s success and such
other factors as the Committee, in its discretion, shall deem relevant. Subject
to the express provisions of the Plan, the Committee shall also have plenary
discretionary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective Award Agreements (which need not be identical) and to make all
other determinations necessary or advisable for the administration of the Plan.
The Committee’s determinations on the matters referred to in this Section 4
shall be conclusive.

5. Committee.

     The Committee shall be comprised of directors on the compensation committee of the Board of Directors of the Company (“Board of Directors”). A
majority of its members shall constitute quorum. All determinations of the
Committee shall be made by a majority of its members present at any meeting at
which there is a quorum. Any decision or determination reduced to writing and
signed by all of the members shall as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee may, to the extent permitted by law, delegate its responsibilities and
authority hereunder to an officer of the Company.

     The Committee shall be appointed by the Board, which may from time to time appoint members of the Committee in substitution for members previously
appointed and may fill vacancies, however caused, in the Committee.

6.
Options. 

     The Committee, in its discretion, may grant Options which
are Incentive Stock Options or Non-qualified Stock Options, as
evidenced by the Award Agreement, and shall be subject to the
foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

	 	A.	 	Type of Option. Incentive Stock Options may be granted to any individual classified by the Committee as an employee of the
Company, a Parent or a Subsidiary. A Non-Qualified Stock Option may
be granted to any individual selected by the Committee.
	 
	 	B.	 	Option Prices. The purchase price of the Stock under each Incentive

 

 

	 	 	 	Stock Option shall not be less than 100% of the Fair Market Value
of the Stock at the time of the granting of the Option; provided
that, in the case of a Participant who owns more than 10% of the
total combined voting power of all classes of stock of the Company,
a Parent or a Subsidiary, the purchase price of the Stock under
each Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Stock on the date such Option is granted. The
purchase price of the Stock under each Non-qualified Stock Option shall be determined from time
to time by the Committee, which need not be uniform for all
Participants, and shall not be less than 100% of Fair Market Value.
	 
	 	C.	 	Exercise — Elections and Restrictions. The purchase price for an Option is to be paid in full upon the exercise of the Option,
either (i) in cash, (ii) in the discretion of the Committee, by the
tender to the Company (either actual or by attestation) of shares
of Stock already owned by the Participant for a period of at least
six months as of the date of tender and registered in his or her
name, having a Fair Market Value equal to the cash exercise price
of the Option being exercised, or (iii) in the discretion of the
Committee, by any combination of the payment methods specified in
clauses (i) and (ii) hereof; provided that, no shares of Stock may
be tendered in exercise of an Incentive Stock Option if such shares
were acquired by the Participant through the exercise of an
Incentive Stock Option unless (a) such shares have been held by the
Participant for at least one year and (b) at least two years have
elapsed since such prior Incentive Stock Option was granted; and
provided further that, unless otherwise specifically provided in an
Award Agreement, until such time as a Public Offering shall occur,
the only method of payment of the purchase price for an Option
shall be cash. The Committee may provide in an Award Agreement that
payment in full of the option price need not accompany the written
notice of exercise provided that the notice of exercise directs
that the certificate or certificates for the shares of Stock for
which the Option is exercised be delivered to a licensed broker acceptable to the Company as the agent for the individual
exercising the Option and, at the time such certificate or
certificates are delivered, the broker tenders to the Company cash (or cash equivalents acceptable to the Company) equal to the option price for the shares of Stock purchased pursuant to the exercise of
the Option plus the amount (if any) of any withholding obligations

 

 

	 	 	 	on the part of the Company. The proceeds of sale of Stock subject
to the Option are to be added to the general funds of the Company
or to the shares of the Stock held in its Treasury, and used for
its corporate purposes as the Board shall determine.
	 
	 	D.	 	Option Terms. The term of each Option shall not be more than ten
(10) years from the date of granting thereof or such shorter period
as is prescribed in the Award Agreement; provided that, in the case
of a Participant who owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, a
Parent or a Subsidiary, the term of any Incentive Stock Option
shall not be more than five (5) years from the date of granting
thereof or such shorter period as prescribed in the Award
Agreement. Within such limit, Options will be exercisable at such
time or times, and subject to such restrictions and conditions, as
the Committee shall, in each instance, approve, which need not be
uniform for all Participants. The holder of an Option shall have
none of the rights of a shareholder with respect to the shares
subject to Option until such shares shall be issued to him or her
upon the exercise of his or her Option. Upon exercise of an Option,
the Committee shall withhold a sufficient number of shares to
satisfy the Company’s minimum required statutory withholding
obligations for any taxes incurred as a result of such exercise (based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes);
provided that, in lieu of all or part of such withholding, the
Participant may pay an equivalent amount of cash to the Company.
	 
	 	E.	 	Successive Option Grants. As determined by the Committee, successive option grants may be made to any Participant under the Plan.
	 
	 	F.	 	Additional Incentive Stock Option Requirements. The maximum aggregate Fair Market Value (determined at the time an Option is
granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by a Participant during any
calendar year (under all plans of the Company, a Parent and a
Subsidiary) shall not exceed $100,000. A Participant who disposes
of Stock acquired upon the exercise of an Incentive Stock Option
either (i) within two years after the date of grant of such

 

 

	 	 	 	Incentive Stock Option or (ii) within one year after the transfer
of such shares to the Participant, shall notify the Company of such
disposition and of the amount realized upon such disposition.
	 
	 	G.	 	Deferral of Gain on a Non-qualified Stock Option. In accordance with the terms of the applicable non-qualified deferred
compensation plan, if any, in which a Participant is eligible to
participate, a Participant may elect to defer any gain realized
upon the exercise of a Non-qualified Stock Option. The election to
defer the gain must be made in accordance with the applicable
non-qualified deferred compensation plan, if any.

7. Stock Appreciation Rights.

	 	A.	 	Grant Terms. The Committee may grant a Stock Appreciation Right independent of an Option or in connection with an Option or a
portion thereof. A Stock Appreciation Right granted in connection
with an Option or a portion thereof shall cover the same shares of
Stock covered by the Option, or a lesser number as the Committee
may determine. A Stock Appreciation Right shall be subject to the
same terms and conditions as an Option, and any additional
limitations set forth in this Section 7 or the Award Agreement.
	 
	 	B.	 	Exercise Terms. The exercise price per share of Stock of a Stock Appreciation Right shall be an amount determined by the Committee
and shall not be less than 100% of Fair Market Value. A Stock
Appreciation Right granted independent of an Option shall entitle
the Participant upon exercise to a payment from the Company in an
amount equal to the excess of the Fair Market Value on the exercise
date of a share of Stock over the exercise price per share, times
the number of Stock Appreciation Rights exercised. A Stock
Appreciation Right granted in connection with an Option shall
entitle the Participant to surrender an unexercised Option (or
portion thereof) and to receive in exchange an amount equal to the
excess of the Fair Market Value on the exercise date of a share of
Stock over the exercise price per share for the Option, times the
number of shares covered by the Option (or portion thereof) which
is surrendered. Payment may be made, in the discretion of the
Committee, in (i) Stock, (ii) cash or (iii) any combination of
Stock and cash. Cash shall be paid for fractional shares of Stock
upon the exercise of a Stock Appreciation Right.
	 
	 	C.	 	Limitations. The Committee may impose such conditions upon the exercisability or transferability of Stock Appreciation Rights as
it determines in its sole discretion.

 

 

8. Other Stock-Based Awards and Cash-Based Awards.

     The Committee may, in its sole discretion, grant Awards of Stock, restricted Stock and other
Awards that are valued in whole or in part by reference to the Fair Market Value of Stock. These
Awards shall collectively be referred to herein as Other Stock-Based Awards. The Committee may
also, in its sole discretion, grant Cash-Based Awards, which shall have a value as may be
determined by the Committee. Other Stock-Based Awards shall be in such form, and dependent on such
conditions, as the Committee shall determine, including, but not limited to, the right to receive
one or more shares of Stock (or the cash-equivalent thereof) upon the completion of a specified
period of service, the occurrence of an event or the attainment of performance objectives. Other
Stock-Based Awards and Cash-Based Awards may be granted with or in addition to other Awards.
Subject to the other terms of the Plan, Other Stock-Based Awards and Cash-Based Awards may be
granted to such Participants in such amounts and upon such terms, and at any time and from time to
time, as shall be determined by the Committee and set forth in an Award Agreement.

9. Performance-Based Awards.

     To the extent applicable, the Committee may, in its sole and absolute discretion, determine
that certain Other Stock-Based Awards and/or Cash-Based Awards should be subject to such
requirements so that they are deductible by the Company under Code Section 162(m). If the Committee
so determines, such Awards shall be considered Performance-Based Awards subject to the terms of
this Section 9, as provided in the Award Agreement. A Performance-Based Award shall be granted by
the Committee in a manner to satisfy the requirements of Code Section 162(m) and the regulations
thereunder. The performance measures to be used for purposes of a Performance-Based Award shall be
chosen by the Committee, in its sole and absolute discretion, from among the following: earnings
per share of Stock; book value per share of Stock; net income (before or after taxes); operating
income; return on invested capital, assets or equity; cash flow return on investments which equals
net cash flows divided by owners’ equity; earnings before interest or taxes; gross revenues or
revenue growth; market share; expense management; improvements in capital structure; profit
margins; Stock price; total shareholder return; free cash flow; or working capital. The performance
measures may relate to the Company, a Parent, a Subsidiary, or one or more units of such an entity.

     The Committee shall determine whether, with respect to a performance period, the applicable
performance goals have been met with respect to an Award and, if they have, to so certify and
ascertain the amount of the applicable Performance-Based Award. The Committee shall have the
discretion to adjust Performance-Based Awards downward.

 

 

     For calendar years beginning after the “reliance period” defined in Treas. Reg. Section
1.162-27(f)(2) or any successor thereto with respect to the Company, an Award shall be a
Performance-Based Award only if the Committee consists solely of two or more Outside Directors
within the meaning of Treas. Reg. Section 1.162-27(e)(3) or any successor thereto.

10. Nontransferability of Awards.

     Unless otherwise determined by the Committee and expressly set forth in an Award Agreement, an
Award granted under the Plan shall, by its terms, be non-transferable otherwise than by will or the
laws or descent and distribution and an Award may be exercised, if applicable, during the lifetime
of the Participant thereof, only by the Participant or his or her guardian or legal representative.
Notwithstanding the above, the Committee may not provide in an Award Agreement that an Incentive
Stock Option is transferable.

11. Investment Purpose.

     Each Award under the Plan shall be awarded only on the condition that all purchases of Stock
thereunder shall be for investment purposes, and not with a view to resale or distribution, except
that the Committee may make such provision with respect to Awards granted under this Plan as it
deems necessary or advisable for the release of such condition upon the registration with the
Securities and Exchange Commission of Stock subject to the Award, or upon the happening of any
other contingency warranting the release of such condition.

If deemed advisable by the Committee, the certificates evidencing the shares acquired by the
Participant pursuant to this Plan may bear a restrictive legend, if appropriate, indicating that
the shares have not been registered under said Act and are subject to restrictions on the transfer
thereof, which legend may be in the following form (or such other form as the Company shall
determine to be proper), to-wit:

“The shares represented by this certificate have not been registered under the Securities Act
of 1933, but have been issued or transferred to the registered owner pursuant to the exemption
afforded by Section 4(2) of said Act. No transfer or assignment of these shares by the registered
owner shall be valid or effective, and the issuer of these shares shall not be required to give any
effect to any transfer or attempted transfer of these shares, including without limitation, a

 

 

transfer by operation of law, unless (a) the issuer shall have received an opinion of its
counsel that the shares may be transferred without requirement of registration under said Act, or
(b) there shall have been delivered to the issuer a `no-action’ letter from the staff of the
Securities and Exchange Commission, or (c) the shares are registered under said Act.”

In addition to the restrictions described above, the Participant may not sell, pledge, transfer,
donate, assign or otherwise dispose of (collectively, “transfer”), whether voluntarily or by
operation of law, any shares of Stock acquired pursuant to the Plan except as provided in this
Section 11.

	 	A.	 	Right of First Refusal.

	 	i.	 	If the Participant intends to transfer any shares of Stock pursuant to a bona fide purchase
offer of an offeror who has agreed to be bound by transfer and buy/sell restrictions identical
to those to which the Participant is subject (“Offeror”), the Participant shall deliver to the
Company a written notice (“Notice”) of such intention to transfer such shares, setting forth
in reasonable detail: (i) the proposed price, (ii) the number of shares proposed to be
transferred, (iii) the other terms and conditions of the proposed transfer of such shares, (iv) an
offer to sell the shares to the Company as provided herein and (v) the identity of the Offeror.
The shares proposed to be transferred are hereinafter referred to as the “Offered Shares.”
	 
	 	ii.	 	The Company may elect to purchase all (but not less than all) of the Offered Shares at any
time during the thirty (30) day period following its receipt of the Notice. The Company shall
be entitled to purchase the Offered Shares from the Participant at the same price and on the
same terms and conditions as those pursuant to which the Participant proposes to transfer the
Offered Shares, as described in the Notice. If the Company fails to respond to such offer
within the 30-day period, it shall be deemed to have rejected the offer.
	 
	 	iii.	 	Unless the Participant and the Company otherwise agree, the

 

 

	 	 	 	closing of the purchase of the Offered Shares shall take place at the principal offices of the
Company at 10:00 a.m. on the tenth day (or if such day is not a business day on the next
business day) after the expiration of the 30-day period. At the closing, the Participant
shall tender the Offered Shares, together with appropriate instruments of transfer endorsed
to the Company, and the Company shall tender a certified check, cashier’s check or a wire
transfer of immediately available funds in the amount of the purchase price therefore.
	 
	 	iv.	 	If the Offered Shares are not purchased by the Company pursuant to this Section 11, the
Participant shall be entitled to sell all of the Offered Shares to the Offeror at the price
and on the terms and conditions specified in the Notice, provided that such sale is
consummated within one-hundred twenty (120) days from the date the Notice is delivered to the
Company. For any sale of shares after such one-hundred twenty (120) day period, the
Participant shall give a new notice which shall reinstate the rights of the Company set forth
in this Section 11 to purchase the Offered Shares.

	 	B.	 	Take-Along Rights. If an offeror desires to purchase all of the outstanding shares of
Stock and if the owners of at least 50% of the outstanding shares desire to make such sale,
the Participant agrees to sell all of his or her shares to such offeror on the terms and
conditions approved by the owners of at least 50% of the outstanding shares.
	 
	 	C.	 	Effect of Prohibited Transfer. If any transfer of shares is made or attempted by a
Participant other than in accordance with the terms of this Plan and the Award Agreement, the
Company may refuse for any purpose to recognize any transferee who receives shares and any
such transferee shall have no right to claim or retain any dividends on such shares which
were paid or become payable subsequent to the date on which the prohibited transfer was made
or attempted. In addition to
any other legal or equitable rights that it may have, the Company may enforce its rights by
specific performance to the extent permitted by law.

 

 

	 	D.	 	Buy-Back Rights. If the Participant terminates employment for any reason, the Participant
must, upon request by the Committee, sell his or her shares of Stock to the Company at a
price equal to the Fair Market Value, as defined in the Plan, of such shares of Stock on the
date of such sale. The Company shall exercise the buy-back right with respect to a
Participant no later than twelve (12) months after the date the Participant terminates
employment.
	 
	 	E.	 	Exceptions to Transfer Restrictions. Notwithstanding anything to the contrary in this
Plan and Award Agreement, the restrictions upon transfer set forth in this Section 11 shall
not apply to a transfer of shares of Stock by a Participant to any of (i) the Participant’s
heirs, executors, administrators or other personal representative upon death of the
Participant or (ii) the Participant’s spouse, children or grandchildren, or a trust for
their or the Participant’s benefit; provided that, the restrictions on transfer in this
Section 11 shall continue to apply to the shares received by any such permitted transferee,
including without limitation that such permitted transferee shall not again transfer such shares except in accordance with this Section 11.
	 
	 	F.	 	Termination of Transfer Restrictions. The restrictions described in Sections 11(A) through
11(E) shall apply except as provided otherwise in the Award Agreement and shall terminate on
the earlier of a Public Offering of shares of Stock or mutual agreement of the parties to an
Award Agreement.

12. Adjustments Upon Changes in Capitalization or Corporation Acquisitions.

     Notwithstanding
any other provisions of the Plan, the Award Agreements may contain such provisions as the Committee
shall determine to be appropriate for the adjustment of the number and class of shares subject to
each outstanding Award and the exercise prices, if applicable, in the event of changes in the
outstanding Stock by reason of stock dividends, recapitalization, mergers, consolidations,
split-ups, combinations or exchanges of shares and the like, and, in the event of any such change
in the outstanding Stock, the aggregate number and class of shares available under the Plan and the
maximum number of shares as to which Awards may be granted to an individual shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. In the event the Company, a
Parent or a Subsidiary enters into a transaction described in Section 424(a) of the Code with any
other corporation, the Committee may grant options to employees or former employees of such
corporation in substitution of options previously granted to them upon such terms and conditions as
shall be necessary to qualify such grant as a substitution described in Section 424(a) of the Code.

     In the event of a Change in Control, notwithstanding any other

 

 

provisions of the Plan or an Award Agreement to the contrary, the Committee may, in its sole
discretion, provide for:

     (1) Accelerated vesting of any outstanding Awards that are otherwise unexercisable or
unvested as of a date selected by the Committee;

     (2) Issuance of substitute Awards to substantially preserve the terms of any Awards previously
granted under the Plan.

13. Amendment and Termination.

     The Board may at any time terminate the Plan, or make such modifications to the Plan as it
shall deem advisable; provided, however, that the Board may not, without further approval by the
holders of Stock, increase the maximum number of shares as to which Awards may be granted under the
Plan (except under the anti-dilution provisions of Section 12), or change the class of employees to
whom Incentive Stock Options may be granted, or withdraw the authority to administer the Plan from
a committee whose members satisfy the requirements of Section 5. No termination or amendment of the
Plan may, without the consent of the Participant to whom any Award shall theretofore have been
granted, adversely affect the rights of such Participant under such Award.

14. Effectiveness of the Plan.

     The Plan shall become effective upon adoption by the Board subject, however, to its further
approval by the shareholders of the Company given within twelve (12) months of the date the Plan is
adopted by the Board at a regular meeting of the shareholders or at a special meeting duly called
and held for such purpose. Grants of Awards may be made prior to such shareholder approval but all
Award grants made prior to shareholder approval shall be subject to the obtaining of such approval
and if such approval is not obtained, such Awards shall not be effective for any purpose.

15. Time of Granting of an Award. An Award grant under the Plan shall be deemed to be made on
the date on which the Committee, by formal action of its members duly recorded in the records
thereof, makes an Award to a Participant (but in no event prior to the adoption of the Plan by the
Board); provided that, such Award is evidenced by a written Award Agreement duly executed on behalf
of the Company and on behalf of the Participant within a reasonable time after the date of the
Committee action.

16. Term of Plan.

     This Plan shall terminate ten (10) years after the date on which it is

 

 

approved and adopted by the Board and no Award shall be granted hereunder after the expiration of
such ten-year period. Awards outstanding at the termination of the Plan shall continue in
accordance with their terms and shall not be affected by such termination.

17. No Right To Continued Employment.

     Nothing in the Plan or in any Award granted pursuant to the Plan shall confer on any
individual any right to continue in the employ of the Company or interfere in any way with the
right of the Company to terminate his or her employment at any time.

18. Choice of Law.

     The Plan shall be governed by and construed in accordance with the laws
of the State of Delaware without regard to conflicts of law.

* * *

     The foregoing Plan was approved and adopted by the Board on April 14, 2005. It was amended by
the shareholders as to the number of authorized shares set forth in Item 3 on May 20, 2008.

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