Document:

Exhibit 4.1

999999|  999999|2544C|RESTRICTED12345678901234|DTC
99999  *TEST * TEST DMA|3|9999-99999

 

	
  COMMON STOCK

  	
  SPECIMEN

  	
  COMMON STOCK

  

 

	
  

  Certificate

  Number

  999999

  	
  

  	
  Shares

  **999999******

  ***999999*****

  ****999999****

  
	
   

  	
   

  	
  *****999999***

  
	
   

  	
  INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

  	
  ******999999**

  

 

	
   

  THIS
  CERTIFIES THAT

  	
  

  	
   

  CUSIP 20061Q 10 6

  SEE REVERSE FOR

  CERTAIN DEFINITIONS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  is
  the owner of

  	
  

  	
   

  

 

FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

 

Commerce
Energy Group, Inc. (hereinafter called the “Company”), transferable on the books of the Company in
person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed. This Certificate and the shares represented hereby, are
issued and shall be held subject to all of the provisions of the Certificate of
Incorporation, as amended, and the By-Laws, as amended, of the Company (copies
of which are on file with the Company and with the Transfer Agent), to all of
which each holder, by acceptance hereof, assents. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.

 

Witness the facsimile seal of the Company and the
facsimile signatures of its duly authorized officers.

 

 

	
  

  	
   

  	
  DATED
   03/06/2008

  

  COUNTERSIGNED AND REGISTERED:

  COMPUTERSHARE TRUST COMPANY, N.A.

  
	
   

  	
  Commerce Energy Group

  	
  (DENVER)

  
	
   

  	
  SEAL

  	
  TRANSFER
  AGENT AND REGISTRAR,

  
	
   

  	
  DELAWARE

  	
   

  
	
  

  	
   

  	
  

  

 

SECURITY INSTRUCTIONS ON REVERSE

 

THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES
THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN
THE COMMERCE ENERGY GROUP, INC. AND COMPUTERSHARE TRUST COMPANY, INC., DATED AS
OF JULY 1, 2004, AND AS AMENDED FROM TIME TO TIME (THE “RIGHTS AGREEMENT”), THE
TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE
EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF
THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. AS DESCRIBED IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO
BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR
ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND
VOID.

 

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

 

	
  TEN
  COM

  	
  - as tenants in common

  	
  UNIF GIFT MIN ACT - 

  	
                                

  	
   Custodian

  	
   

  
	
   

  	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  TEN
  ENT 

  	
  - as tenants by the
  entireties

  	
                                      under
  Uniform Gifts to Minors Act

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (State)

  
	
  JT
  TEN

  	
  -
  as joint tenants with right of survivorship 

  	
  UNIF TRF MIN ACT

  	
   

  	
  Custodian (until age

  	
   

  	
  )

  	
   

  
	
   

  	
  and
  not as tenants in common

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
   

  	
   

  	
                                     under
  Uniform Transfers to Minors Act

  	
   

  
	
   

  	
   

  	
   

  	
  (State)

  
	
   

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

  	
   

  
														

 

COMMERCE ENERGY GROUP, INC.

 

THE COMPANY WILL FURNISH WITHOUT CHARGE TO
EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF
EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS,
PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE
CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF
THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF
DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE
TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE
BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK
CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY
IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE
AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH
CERTIFICATE.

 

	
  For value received,

  	
   

  	
    hereby sell, assign
  and transfer unto

  

 

 

	
  PLEASE INSERT SOCIAL
  SECURITY

  OR OTHER IDENTIFYING NUMBER

  OF ASSIGNEE 

  	
   

  	
   

  

 

 

 

	
   

  
	
  (PLEASE PRINT OR TYPEWRITE
  NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)

  
	
   

  
	
   

  
	
   

  
	
   

  	
  Shares

  
	
  of the capital stock
  represented by the within Certificate, and do hereby irrevocably constitute
  and appoint

  	
   

  
	
   

  	
  Attorney

  
	
  to transfer the said stock
  on the books of the within-named Corporation with full power of substitution
  in the premises.

  	
   

  
			

 

 

	
  Dated:

  	
   

  	
  20

  	
   

  	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature(s) Guaranteed:

  	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
   

  	
  Notice:

  	
  THE SIGNATURE TO THIS ASSIGNMENT
  

  
	
  THE SIGNATURE(S) SHOULD BE
  GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings
  and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED
  SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15.

  	
   

  	
   

  	
   

  	
  MUST CORRESPOND WITH THE
  NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
  WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

  
										

 

	
  SECURITY
  INSTRUCTIONS

  	
  

  
	
   

  
	
  THIS IS WATERMARKED PAPER,
  DO NOT ACCEPT WITHOUT NOTING

  
	
  WATERMARK. HOLD TO LIGHT
  TO VERIFY WATERMARK.Exhibit 4.6

 

COMMERCE
ENERGY GROUP, INC.

 

FALLQUIST
INCENTIVE PLAN

 

1.   Establishment, Purpose,
and Types of Awards

 

Commerce Energy Group, Inc. (the “Company”)
hereby establishes this equity-based incentive compensation plan to be known as
the “Commerce Energy Group, Inc. Fallquist Incentive Plan” (hereinafter
referred to as the “Plan”), in order to provide incentives and awards to
Michael Fallquist, to whom an offer of employment has been extended to serve as
an officer and employee of the Company, and who may serve, from time to time,
as an officer and employee of the Company’s Affiliates.

 

The Plan permits the granting of the following types
of awards (“Awards”), according to the Sections of the Plan listed here:

 

	
  Section 6

  	
   

  	
  Options

  
	
  Section 7

  	
   

  	
  Restricted Shares, Restricted Share Units, and
  Unrestricted Shares

  
	
  Section 8

  	
   

  	
  Performance Awards

  

 

The Plan is not intended to affect and shall not
affect any stock options, equity-based compensation, or other benefits that the
Company or its Affiliates may have provided, or may separately provide in the
future pursuant to any agreement, plan, or program that is independent of this
Plan.

 

2.   Defined Terms

 

Terms in the Plan that begin with an initial capital
letter have the defined meaning set forth in Appendix A, unless defined elsewhere in
this Plan or the context of their use clearly indicates a different meaning.

 

3.   Shares Subject to the
Plan

 

Subject to the provisions of Section 11 of the
Plan, the maximum number of Shares that the Company may issue for all Awards is
375,000 Shares. For all Awards, the Shares issued pursuant to the Plan may be
authorized but unissued Shares, or Shares that the Company has reacquired or
otherwise holds in treasury.

 

Shares that are subject to an Award that for any
reason expires, is forfeited, is cancelled, or becomes unexercisable, and
Shares that are for any other reason not paid or delivered under the Plan shall
again, except to the extent prohibited by Applicable Law, be available for
subsequent Awards under the Plan. In addition, the Committee may make future
Awards with respect to Shares that the Company retains from otherwise
delivering pursuant to an Award either (i) as payment of the exercise
price of an Award, or (ii) in order to satisfy the withholding or
employment taxes due upon the grant, exercise, vesting or distribution of an
Award.

 

4.   Administration

 

(a) General.  The
Committee shall administer the Plan in accordance with its terms, provided that
the Board may act in lieu of the Committee on any matter. The Committee shall
hold meetings at such times and places as it may determine and shall make such rules and
regulations for the conduct of its business as it deems advisable. In the
absence of a duly appointed Committee or if the Board otherwise chooses to act
in lieu of the Committee, the Board shall function as the Committee for all
purposes of the Plan.

 

(b) Committee
Composition.  The Board shall appoint the members of the
Committee. The Board may at any time appoint additional members to the
Committee, remove and replace members of the Committee with or without Cause,
and fill vacancies on the Committee however caused.

 

(c) Powers of
the Committee.  Subject to the provisions of the Plan, the
Committee shall have the authority, in its sole discretion:

 

(i) to determine the
number of Shares or units, to be covered by each Award to Mr. Fallquist
under the Plan;

 

(ii) to determine,
from time to time, the Fair Market Value of Shares;

 

(iii) to determine,
and to set forth in Award Agreements, the terms and conditions of all Awards,
including any applicable exercise or purchase price, the installments and
conditions under which an Award shall become vested (which may be based on
performance), terminated, expired, cancelled, or replaced, and the
circumstances for vesting acceleration or waiver of forfeiture restrictions,
and other restrictions and limitations;

 

(iv) to approve the
forms of Award Agreements and all other documents, notices and certificates in
connection therewith which need not be identical either as to type of Award or
among Participants;

 

(v) to construe and
interpret the terms of the Plan and any Award Agreement, to determine the
meaning of their terms, and to prescribe, amend, and rescind rules and
procedures relating to the Plan and its administration; and

 

(vi) in order to
fulfill the purposes of the Plan, modify, cancel, or waive the Company’s rights
with respect to any Awards, to adjust or to modify Award Agreements for changes
in Applicable Law, and to recognize differences in foreign law, tax policies,
or customs; and

 

(vii) to make all
other interpretations and to take all other actions that the Committee may
consider necessary or advisable to administer the Plan or to effectuate its
purposes.

 

Subject to Applicable Law and the restrictions set
forth in the Plan, the Committee may delegate administrative functions to
individuals who are Reporting Persons, officers, or Employees of the Company or
its Affiliates.

 

(d) Deference
to Committee Determinations.  The Committee shall have the
discretion to interpret or construe ambiguous, unclear, or implied (but
omitted) terms in any fashion it deems to be appropriate in its sole
discretion, and to make any findings of fact needed in the administration of
the Plan or Award Agreements. The Committee’s prior exercise of its
discretionary authority shall not obligate it to exercise its authority in a
like fashion thereafter. The Committee’s interpretation and construction of any
provision of the Plan, or of any Award or Award Agreement, shall be final,
binding, and conclusive. The validity of any such interpretation, construction,
decision or finding of fact shall not be given de novo review if challenged in
court, by arbitration, or in any other forum, and shall be upheld unless
clearly made in bad faith or materially affected by fraud.

 

(e) No
Liability; Indemnification.  Neither the Board nor any
Committee member, nor any Person acting at the direction of the Board or the
Committee, shall be liable for any act, omission, interpretation, construction
or determination made in good faith with respect to the Plan, any Award or any
Award Agreement. The Company and its Affiliates shall pay or reimburse any
member of the Committee, as well as any Director, Employee, or Consultant who
takes action in connection with the Plan, for all expenses incurred with
respect to the Plan, and to the full extent allowable under Applicable Law
shall indemnify each and every one of them for any claims, liabilities, and
costs (including reasonable attorney’s fees) arising out of their good faith
performance of duties under the Plan. The Company and its Affiliates may obtain
liability insurance for this purpose.

 

5.   Eligibility

 

(a) Awards may be granted to Michael Fallquist in
accordance with the terms of the Plan.  Subject
to the express provisions of the Plan, the Committee shall determine the number
of Shares subject to each Award, the price (if any) to be paid for the Shares
or the Award and, in the case of Performance Awards, in addition to the matters
addressed in Section 8 below, the specific objectives, goals and
performance criteria that further define the Performance Award. Each Award
shall be evidenced by an Award Agreement signed by the Company and, if required
by the Committee, by the Participant. The Award Agreement shall set forth the
material terms and conditions of the Award established by the Committee, and
each Award shall be subject to the terms and conditions set forth in Sections
21, 22, and 23 unless otherwise specifically provided in an Award Agreement.

 

2

 

(b) Limits on
Awards.  During any calendar year, no Participant may
receive Options that relate to more than 125,000 Shares. The Committee will
adjust this limitation pursuant to Section 11 below.

 

(c) Replacement
Awards.  Subject to Applicable Laws (including any
associated Shareholder approval requirements), the Committee may, in its sole
discretion and upon such terms as it deems appropriate, require as a condition
of the grant of an Award to a Participant that the Participant surrender for
cancellation some or all of the Awards that have previously been granted to the
Participant under this Plan or otherwise. An Award that is conditioned upon
such surrender may or may not be the same type of Award, may cover the same (or
a lesser or greater) number of Shares as such surrendered Award, may have other
terms that are determined without regard to the terms or conditions of such
surrendered Award, and may contain any other terms that the Committee deems appropriate.
In the case of Options, these other terms may not involve an Exercise Price
that is lower than the Exercise Price of the surrendered Option unless the
Company’s shareholders approve the grant itself or the program under which the
grant is made pursuant to the Plan.

 

6.   Option
Awards

 

(a) Types;
Documentation.  The Committee may in its discretion grant
Non-ISOs to Mr. Fallquist, and shall evidence any such grants in an Award
Agreement that is delivered to the Participant. Each Option shall be designated
in the Award Agreement as a Non-ISO. At the sole discretion of the Committee,
any Option may be exercisable, in whole or in part, immediately upon the grant
thereof, or only after the occurrence of a specified event, or only in
installments, which installments may vary. Options granted under the Plan may
contain such terms and provisions not inconsistent with the Plan that the
Committee shall deem advisable in its sole and absolute discretion.

 

(b) Term of
Options.  Each Award Agreement shall specify a term at the
end of which the Option automatically expires, subject to earlier termination
provisions contained in Section 6(g) hereof; provided, that, the term
of any Option may not exceed ten years from the Grant Date.

 

(c) Exercise
Price.  The exercise price of an Option shall be
determined by the Committee in its sole discretion and shall be set forth in
the Award Agreement, provided that the per Share exercise price shall not be
less than 100% of the Fair Market Value per Share on the Grant Date. Neither
the Company nor the Committee shall, without shareholder approval, allow for a
repricing within the meaning of the federal securities laws applicable to proxy
statement disclosures.

 

(d) Exercise
of Option.  The times, circumstances and conditions under which
an Option shall be exercisable shall be determined by the Committee in its sole
discretion and set forth in the Award Agreement. The Committee shall have the
discretion to determine whether and to what extent the vesting of Options shall
be tolled during any unpaid leave of absence; provided, however, that in the
absence of such determination, vesting of Options shall be tolled during any
such leave approved by the Company.

 

(e) Minimum
Exercise Requirements.  An Option may not be exercised for
a fraction of a Share. The Committee may require in an Award Agreement that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent a Participant from purchasing the full number of
Shares as to which the Option is then exercisable.

 

(f) Methods of
Exercise.  Prior to its expiration pursuant to the terms
of the applicable Award Agreement, and subject to the times, circumstances and
conditions for exercise contained in the applicable Award Agreement, each
Option may be exercised, in whole or in part (provided that the Company shall
not be required to issue fractional shares), by delivery of written notice of
exercise to the secretary of the Company accompanied by the full exercise price
of the Shares being purchased. The methods of payment that the Committee may in
its discretion accept or commit to accept in an Award Agreement include:

 

(i) cash or check
payable to the Company (in U.S. dollars);

 

3

 

(ii) other Shares that
(A) are owned by the Participant who is purchasing Shares pursuant to an
Option, (B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is being
exercised, (C) were not acquired by such Participant pursuant to the
exercise of an Option, unless such Shares have been owned by such Participant
for at least six months or such other period as the Committee may determine, (D) are
all, at the time of such surrender, free and clear of any and all claims,
pledges, liens and encumbrances, or any restrictions which would in any manner
restrict the transfer of such shares to or by the Company (other than such
restrictions as may have existed prior to an issuance of such Shares by the
Company to such Participant), and (E) are duly endorsed for transfer to
the Company;

 

(iii) a cashless
exercise program that the Committee may approve, from time to time in its
discretion, pursuant to which a Participant may concurrently provide
irrevocable instructions (A) to such Participant’s broker or dealer to
effect the immediate sale of the purchased Shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to
cover the exercise price of the Option plus all applicable taxes required to be
withheld by the Company by reason of such exercise, and (B) to the Company
to deliver the certificates for the purchased Shares directly to such broker or
dealer in order to complete the sale; or

 

(iv) any combination
of the foregoing methods of payment.

 

The Company shall not be required to deliver Shares
pursuant to the exercise of an Option until payment of the full exercise price
therefore is received by the Company.

 

(g) Termination
of Continuous Service.  The Committee may establish and
set forth in the applicable Award Agreement the terms and conditions on which
an Option shall remain exercisable, if at all, following termination of a
Participant’s Continuous Service. The Committee may waive or modify these
provisions at any time. To the extent that a Participant is not entitled to
exercise an Option at the date of his or her termination of Continuous Service,
or if the Participant (or other person entitled to exercise the Option) does
not exercise the Option to the extent so entitled within the time specified in
the Award Agreement or below (as applicable), the Option shall terminate and
the Shares underlying the unexercised portion of the Option shall revert to the
Plan and become available for future Awards. In no event may any Option be
exercised after the expiration of the Option term as set forth in the Award
Agreement.

 

The following provisions shall apply to the extent an
Award Agreement does not specify the terms and conditions upon which an Option
shall terminate when there is a termination of a Participant’s Continuous
Service:

 

(i) Termination other than Upon Disability or Death or
for Cause.  In the event of termination of a Participant’s
Continuous Service (other than as a result of Participant’s death, disability,
retirement or termination for Cause), the Participant shall have the right to
exercise an Option at any time within 90 days following such termination to the
extent the Participant was entitled to exercise such Option at the date of such
termination.

 

(ii) Disability.  In the event of
termination of a Participant’s Continuous Service as a result of his or her
being Disabled, the Participant shall have the right to exercise an Option at
any time within one year following such termination to the extent the
Participant was entitled to exercise such Option at the date of such
termination.

 

(iii) Retirement.  In the event of
termination of a Participant’s Continuous Service as a result of Participant’s
retirement, the Participant shall have the right to exercise the Option at any
time within six months following such termination to the extent the Participant
was entitled to exercise such Option at the date of such termination.

 

(iv) Death.  In the event of the
death of a Participant during the period of Continuous Service since the Grant
Date of an Option, or within thirty days following termination of the
Participant’s Continuous Service, the Option may be exercised, at any time
within one year following the date of the Participant’s death, by the
Participant’s estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the right to exercise
the Option had vested at the date of death or, if earlier, the date the
Participant’s Continuous Service terminated.

 

4

 

(v) Cause.  If the Committee
determines that a Participant’s Continuous Service terminated due to Cause, the
Participant shall immediately forfeit the right to exercise any Option, and it
shall be considered immediately null and void.

 

(h) Reverse
Vesting.  The Committee in its sole discretion may allow a
Participant to exercise unvested Options, in which case the Shares then issued
shall be Restricted Shares having analogous vesting restrictions to the
unvested Options.

 

(i) Buyout
Provisions.  The Committee may at any time offer to buy
out an Option, in exchange for a payment in cash or Shares, based on such terms
and conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.

 

7.   Restricted
Shares, Restricted Share Units, and Unrestricted Shares

 

(a) Grants.  The
Committee may in its sole discretion grant restricted shares (“Restricted
Shares”) to any Eligible Person and shall evidence such grant in an Award
Agreement that is delivered to the Participant and that sets forth the number
of Restricted Shares, the purchase price for such Restricted Shares (if any),
and the terms upon which the Restricted Shares may become vested. In addition,
the Company may in its discretion grant the right to receive Shares after
certain vesting requirements are met (“Restricted Share Units”) to any Eligible
Person and shall evidence such grant in an Award Agreement that is delivered to
the Participant which sets forth the number of Shares (or formula, that may be
based on future performance or conditions, for determining the number of
Shares) that the Participant shall be entitled to receive upon vesting and the
terms upon which the Shares subject to a Restricted Share Unit may become
vested. The Committee may condition any Award of Restricted Shares or
Restricted Share Units to a Participant on receiving from the Participant such
further assurances and documents as the Committee may require to enforce the
restrictions. In addition, the Committee may grant Awards hereunder in the form
of unrestricted shares (“Unrestricted Shares”), which shall vest in full upon
the date of grant or such other date as the Committee may determine or which
the Committee may issue pursuant to any program under which one or more
Eligible Persons (selected by the Committee in its sole discretion) elect to
receive Unrestricted Shares in lieu of cash bonuses that would otherwise be
paid.

 

(b) Vesting
and Forfeiture.  The Committee shall set forth in an Award
Agreement granting Restricted Shares or Restricted Share Units, the terms and
conditions under which the Participant’s interest in the Restricted Shares or
the Shares subject to Restricted Share Units will become vested and
non-forfeitable. Except as set forth in the applicable Award Agreement or the
Committee otherwise determines, upon termination of a Participant’s Continuous
Service for any other reason, the Participant shall forfeit his or her
Restricted Shares and Restricted Share Units; provided that if a Participant
purchases the Restricted Shares and forfeits them for any reason, the Company
shall return the purchase price to the Participant only if and to the extent
set forth in an Award Agreement.

 

(c) Issuance
of Restricted Shares Prior to Vesting.  The Company shall
issue stock certificates that evidence Restricted Shares pending the lapse of
applicable restrictions, and that bear a legend making appropriate reference to
such restrictions. Except as set forth in the applicable Award Agreement or the
Committee otherwise determines, the Company or a third party that the Company
designates shall hold such Restricted Shares and any dividends that accrue with
respect to Restricted Shares pursuant to Section 7(e) below.

 

(d) Issuance
of Shares upon Vesting.  As soon as practicable after
vesting of a Participant’s Restricted Shares (or Shares underlying Restricted
Share Units) and the Participant’s satisfaction of applicable tax withholding
requirements, the Company shall release to the Participant, free from the
vesting restrictions, one Share for each vested Restricted Share (or issue one
Share free of the vesting restriction for each vested Restricted Share Unit),
unless an Award Agreement provides otherwise. No fractional shares shall be distributed,
and cash shall be paid in lieu thereof.

 

(e) Dividends
Payable on Vesting.  Whenever Shares are released to a
Participant or duly-authorized transferee pursuant to Section 7(d) above
as a result of the vesting of Restricted Shares or the Shares underlying
Restricted Share Units are issued to a Participant pursuant to Section 7(d) above,
such Participant or duly-authorized transferee shall also be entitled to
receive (unless otherwise provided in the Award Agreement), with respect to
each Share released or issued, an amount equal to any cash dividends (plus, in
the sole discretion of the Committee, simple 

 

5

 

interest at a rate
as the Committee may determine) and a number of Shares equal to any stock
dividends, which were declared and paid to the holders of Shares between the
Grant Date and the date such Share is released from the vesting restrictions in
the case of Restricted Shares or issued in the case of Restricted Share Units.

 

(f) Section 83(b) Elections.  A
Participant may make an election under Section 83(b) of the Code (the
“Section 83(b) Election”) with respect to Restricted Shares. If a
Participant who has received Restricted Share Units provides the Committee with
written notice of his or her intention to make a Section 83(b) Election
with respect to the Shares subject to such Restricted Share Units, the
Committee may in its discretion convert the Participant’s Restricted Share
Units into Restricted Shares, on a one-for-one basis, in full satisfaction of
the Participant’s Restricted Share Unit Award. The Participant may then make a Section 83(b) Election
with respect to those Restricted Shares.

 

8.   Performance
Awards

 

(a) Performance
Units.  Subject to the limitations set forth in paragraph (c) hereof,
the Committee may in its discretion grant Performance Units to Mr. Fallquist
and shall evidence such grant in an Award Agreement that is delivered to the
Participant which sets forth the terms and conditions of the Award.

 

(b) With respect to each such Performance Unit,
the Committee may establish, in writing, a “Performance Period,” “Performance
Measure(s)”, and “Performance Formula(e)” (each such term being hereinafter
defined). If applicable, as soon as practicable after the close of each Performance
Period, the Committee shall review and certify in writing whether, and to what
extent, the Performance Measure(s) for the Performance Period have been
achieved and, if so, determine and certify in writing the amount of the
Performance Unit to be paid to the Participant and, in so doing, may use
negative discretion to decrease, but not increase, the amount of the Award
otherwise payable to the Participant based upon such performance.

 

(c) Limitations
on Awards.  The maximum Performance Unit Award that any
one Participant may receive for any one Performance Period shall not together
exceed 375,000 Shares and $1,000,000 in cash. The Committee may provide in any
Award Agreement that any amounts earned in excess of these limitations will be
credited as deferred cash compensation under a separate plan of the Company
(provided in the latter case that such deferred compensation either bears a
reasonable rate of interest or has a value based on one or more predetermined
actual investments). Any amounts for which payment to the Participant is
deferred pursuant to the preceding sentence shall be paid to the Participant in
a future year or years not earlier than, and only to the extent that, the
Participant is either not receiving compensation in excess of these limits for
a Performance Period, or is not subject to the restrictions set forth under Section 162(b) of
the Code.

 

(d) Definitions.

 

(i) “Performance
Formula” means, for a Performance Period, one or more objective formulas or
standards established by the Committee for purposes of determining whether or
the extent to which an Award has been earned based on the level of performance
attained or to be attained with respect to one or more Performance Measure(s).
Performance Formulae may vary from Performance Period to Performance Period and
from Participant to Participant and may be established on a stand-alone basis,
in tandem or in the alternative.

 

(ii) “Performance
Measure” means one or more of the following selected by the Committee to
measure Company, Affiliate, and/or business unit performance for a Performance
Period, whether in absolute or relative terms (including, without limitation,
terms relative to a peer group or index): basic, diluted, or adjusted earnings
per share; sales or revenue; earnings before interest, taxes, and other
adjustments (in total or on a per share basis); basic or adjusted net income;
returns on equity, assets, capital, revenue or similar measure; economic value
added; working capital; total shareholder return; and product development,
product market share, research, licensing, litigation, human resources,
information services, mergers, acquisitions, sales of assets of Affiliates or
business units. Each such measure shall be, to the extent applicable,
determined in accordance with generally accepted accounting principles as
consistently applied by the Company (or such other standard applied by the
Committee) and, if so determined by the Committee, adjusted to omit the effects
of extraordinary items, gain or loss on the disposal of a business segment,
unusual or infrequently occurring events and transactions and cumulative
effects of changes in accounting principles. Performance Measures may vary from
Performance 

 

6

 

Period to Performance Period and from Participant to
Participant, and may be established on a stand-alone basis, in tandem or in the
alternative.

 

(iii) “Performance
Period” means one or more periods of time (of not less than one fiscal year of
the Company), as the Committee may designate, over which the attainment of one
or more Performance Measure(s) will be measured for the purpose of
determining a Participant’s rights in respect of an Award.

 

9.   Taxes

 

(a) General.  As
a condition to the issuance or distribution of Shares pursuant to the Plan, the
Participant (or in the case of the Participant’s death, the person who succeeds
to the Participant’s rights) shall make such arrangements as the Company may
require for the satisfaction of any applicable federal, state, local or foreign
withholding tax obligations that may arise in connection with the Award and the
issuance of Shares. The Company shall not be required to issue any Shares until
such obligations are satisfied. If the Committee allows the withholding or
surrender of Shares to satisfy a Participant’s tax withholding obligations, the
Committee shall not allow Shares to be withheld in an amount that exceeds the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes.

 

(b) Default Rule for
Employees.  In the absence of any other arrangement, an
Employee shall be deemed to have directed the Company to withhold or collect
from his or her cash compensation an amount sufficient to satisfy such tax
obligations from the next payroll payment otherwise payable after the date of
the exercise of an Award.

 

(c) Special
Rules.  In the case of a Participant other than an
Employee (or in the case of an Employee where the next payroll payment is not
sufficient to satisfy such tax obligations, with respect to any remaining tax
obligations), in the absence of any other arrangement and to the extent
permitted under Applicable Law, the Participant shall be deemed to have elected
to have the Company withhold from the Shares or cash to be issued pursuant to
an Award that number of Shares having a Fair Market Value determined as of the
applicable Tax Date (as defined below) or cash equal to the amount required to
be withheld. For purposes of this Section 11, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined under the Applicable Law (the “Tax Date”).

 

(d) Surrender
of Shares.  If permitted by the Committee, in its
discretion, a Participant may satisfy the minimum applicable tax withholding
and employment tax obligations associated with an Award by surrendering Shares
to the Company (including Shares that would otherwise be issued pursuant to the
Award) that have a Fair Market Value determined as of the applicable Tax Date
equal to the amount required to be withheld. In the case of Shares previously
acquired from the Company that are surrendered under this Section 11, such
Shares must have been owned by the Participant for more than six months on the
date of surrender (or such longer period of time the Company may in its
discretion require).

 

(e) Income
Taxes and Deferred Compensation.  Participants are solely
responsible and liable for the satisfaction of all taxes and penalties that may
arise in connection with Awards (including any taxes arising under Section 409A
of the Code), and the Company shall not have any obligation to indemnify or
otherwise hold any Participant harmless from any or all of such taxes. The
Committee shall have the discretion to organize any deferral program, to
require deferral election forms, and to grant or to unilaterally modify any
Award in a manner that (i) conforms with the requirements of Section 409A
of the Code with respect to compensation that is deferred and that vests after December 31,
2004, (ii) that voids any Participant election to the extent it would
violate Section 409A of the Code, and (iii) for any distribution
election that would violate Section 409A of the Code, to make
distributions pursuant to the Award at the earliest to occur of a distribution
event that is allowable under Section 409A of the Code or any distribution
event that is both allowable under Section 409A of the Code and is elected
by the Participant, subject to any valid second election to defer, provided
that the Committee permits second elections to defer in accordance with Section 409A(a)(4)(C).
The Committee shall have the sole discretion to interpret the requirements of
the Code, including Section 409A, for purposes of the Plan and all Awards.

 

7

 

10.  Non-Transferability of
Awards

 

(a) General.  Except
as set forth in this Section 10, or as otherwise approved by the
Committee, Awards may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or by the laws of descent or
distribution. The designation of a beneficiary by a Participant will not
constitute a transfer. An Award may be exercised, during the lifetime of the
holder of an Award, only by such holder, the duly-authorized legal
representative of a Participant who is Disabled, or a transferee permitted by
this Section 10.

 

(b) Limited
Transferability Rights.  Notwithstanding anything else in
this Section 10, the Committee may in its discretion provide in an Award Agreement
that an Award may be transferred, on such terms and conditions as the Committee
deems appropriate, either (i) by instrument to the Participant’s “Immediate
Family” (as defined below), (ii) by instrument to an inter vivos or testamentary trust (or
other entity) in which the Award is to be passed to the Participant’s
designated beneficiaries, or (iii) by gift to charitable institutions. Any
transferee of the Participant’s rights shall succeed and be subject to all of
the terms of the applicable Award Agreement and the Plan. “Immediate Family”
means any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships.

 

11.  Adjustments Upon
Changes in Capitalization, Merger or Certain Other Transactions

 

(a) Changes in
Capitalization.  The Committee shall equitably adjust the
number of Shares covered by each outstanding Award, and the number of Shares
that have been authorized for issuance under the Plan but as to which no Awards
have yet been granted or that have been returned to the Plan upon cancellation,
forfeiture, or expiration of an Award, as well as the price per Share covered
by each such outstanding Award, to reflect any increase or decrease in the
number of issued Shares resulting from a stock-split, reverse stock-split,
stock dividend, combination, recapitalization or reclassification of the
Shares, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company. In the event of any
such transaction or event, the Committee may provide in substitution for any or
all outstanding Options under the Plan such alternative consideration
(including securities of any surviving entity) as it may in good faith
determine to be equitable under the circumstances and may require in connection
therewith the surrender of all Options so replaced. In any case, such
substitution of securities shall not require the consent of any person who is
granted Options pursuant to the Plan. Except as expressly provided herein, or
in an Award Agreement, if the Company issues for consideration shares of stock
of any class or securities convertible into shares of stock of any class, the
issuance shall not affect, and no adjustment by reason thereof shall be
required to be made with respect to the number or price of Shares subject to
any Award.

 

(b) Dissolution
or Liquidation.  In the event of the dissolution or
liquidation of the Company other than as part of a Change of Control, each
Award will terminate immediately prior to the consummation of such action,
subject to the ability of the Committee to exercise any discretion authorized
in the case of a Change in Control.

 

(c) Change in
Control.  In the event of a Change in Control, the
Committee may in its sole and absolute discretion and authority, without
obtaining the approval or consent of the Company’s shareholders or any
Participant with respect to his or her outstanding Awards, take one or more of
the following actions:

 

(i) arrange for or
otherwise provide that each outstanding Award shall be assumed or a
substantially similar award shall be substituted by a successor corporation or
a parent or subsidiary of such successor corporation (the “Successor
Corporation”);

 

(ii) accelerate the
vesting of Awards so that Awards shall vest (and, to the extent applicable,
become exercisable) as to the Shares that otherwise would have been unvested
and provide that repurchase rights of the Company with respect to Shares issued
upon exercise of an Award shall lapse as to the Shares subject to such
repurchase right;

 

(iii) arrange or
otherwise provide for the payment of cash or other consideration to Participants
in exchange for the satisfaction and cancellation of outstanding Awards;

 

8

 

(iv) terminate each
Award upon the consummation of the transaction, provided that the Committee may
in its sole discretion provide for vesting of all or some outstanding Awards in
full as of a date immediately prior to consummation of the Change of Control.
To the extent that an Award is not exercised prior to consummation of a
transaction in which the Award is not being assumed or substituted, such Award
shall terminate upon such consummation; or

 

(v) make such other
modifications, adjustments or amendments to outstanding Awards or this Plan as
the Committee deems necessary or appropriate, subject however to the terms of Section 13(a) below.

 

Notwithstanding the above, in the event a Participant
holding an Award assumed or substituted by the Successor Corporation in a
Change in Control is Involuntarily Terminated by the Successor Corporation in
connection with, or within 12 months following consummation of, the Change in
Control, then any assumed or substituted Award held by the terminated
Participant at the time of termination shall accelerate and become fully vested
(and exercisable in full in the case of Options), and any repurchase right
applicable to any Shares shall lapse in full, unless an Award Agreement
provides for a more restrictive acceleration or vesting schedule or more
restrictive limitations on the lapse of repurchase rights or otherwise places
additional restrictions, limitations and conditions on an Award. The
acceleration of vesting and lapse of repurchase rights provided for in the
previous sentence shall occur immediately prior to the effective date of the
Participant’s termination, unless an Award Agreement provides otherwise.

 

(d) Certain
Distributions.  In the event of any distribution to the
Company’s shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Committee may, in its discretion,
appropriately adjust the price per Share covered by each outstanding Award to
reflect the effect of such distribution.

 

12.  Time of Granting
Awards.

 

The date of grant (“Grant Date”) of an Award shall be the
date on which the Committee makes the determination granting such Award or such
other date as is determined by the Committee.

 

13.  Modification of Awards
and Substitution of Options.

 

(a) Modification,
Extension, and Renewal of Awards.  Within the limitations
of the Plan, the Committee may modify an Award to accelerate the rate at which
an Option may be exercised (including without limitation permitting an Option
to be exercised in full without regard to the installment or vesting provisions
of the applicable Award Agreement or whether the Option is at the time
exercisable, to the extent it has not previously been exercised), to accelerate
the vesting of any Award, to extend or renew outstanding Awards or to accept
the cancellation of outstanding Awards to the extent not previously exercised.
However, the Committee may not cancel an outstanding option that is underwater
for the purpose of reissuing the option to the participant at a lower exercise
price or granting a replacement award of a different type. Notwithstanding the
foregoing provision, no modification of an outstanding Award shall materially
and adversely affect such Participant’s rights thereunder, unless either the
Participant provides written consent or there is an express Plan provision permitting
the Committee to act unilaterally to make the modification.

 

(b) Substitution
of Options.  Notwithstanding any inconsistent provisions
or limits under the Plan, in the event the Company or an Affiliate acquires
(whether by purchase, merger or otherwise) all or substantially all of
outstanding capital stock or assets of another corporation or in the event of
any reorganization or other transaction qualifying under Section 424 of
the Code, the Committee may, in accordance with the provisions of that Section,
substitute Options for options under the plan of the acquired company provided (i) the
excess of the aggregate fair market value of the shares subject to an option
immediately after the substitution over the aggregate option price of such
shares is not more than the similar excess immediately before such substitution
and (ii) the new option does not give persons additional benefits,
including any extension of the exercise period.

 

14.  Term of Plan.

 

The Plan shall continue in effect for a term of ten (10) years
from its effective date as determined under Section 15 below, unless the
Plan is sooner terminated under Section 15 below.

 

9

 

15.  Amendment and
Termination of the Plan.

 

(a) Authority
to Amend or Terminate.  Subject to Applicable Laws, the
Board may from time to time amend, alter, suspend, discontinue, or terminate
the Plan.

 

(b) Effect of
Amendment or Termination.  No amendment, suspension, or
termination of the Plan shall materially and adversely affect Awards already
granted unless either it relates to an adjustment pursuant to Section 11
above, or it is otherwise mutually agreed between the Participant and the
Committee, which agreement must be in writing and signed by the Participant and
the Company. Notwithstanding the foregoing, the Committee may amend the Plan to
eliminate provisions which are no longer necessary as a result of changes in
tax or securities laws or regulations, or in the interpretation thereof.

 

16.  Conditions Upon
Issuance of Shares.

 

Notwithstanding any other provision of the Plan or any
agreement entered into by the Company pursuant to the Plan, the Company shall
not be obligated, and shall have no liability for failure, to issue or deliver
any Shares under the Plan unless such issuance or delivery would comply with
Applicable Law, with such compliance determined by the Company in consultation
with its legal counsel.

 

17.  Reservation of Shares.

 

The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient
to satisfy the requirements of the Plan.

 

18.  Effective Date.

 

This Plan shall become effective on March 10,
2008, the effective date set forth by the Company’s Board of Directors in its
resolution of March 7, 2008 approving the Plan.

 

19.  Controlling Law.

 

All disputes relating to or arising from the Plan
shall be governed by the internal substantive laws (and not the laws of
conflicts of laws) of the State of Delaware, to the extent not preempted by
United States federal law. If any provision of this Plan is held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions shall continue to be fully effective.

 

20.  Laws And Regulations.

 

(a) U.S.
Securities Laws.  This Plan, the grant of Awards, and the
exercise of Options under this Plan, and the obligation of the Company to sell
or deliver any of its securities (including, without limitation, Options,
Restricted Shares, Restricted Share Units, and Shares) under this Plan shall be
subject to all Applicable Law. In the event that the Shares are not registered
under the Securities Act of 1933, as amended (the “Act”), or any applicable
state securities laws prior to the delivery of such Shares, the Company may
require, as a condition to the issuance thereof, that the persons to whom
Shares are to be issued represent and warrant in writing to the Company that
such Shares are being acquired by him or her for investment for his or her own
account and not with a view to, for resale in connection with, or with an
intent of participating directly or indirectly in, any distribution of such
Shares within the meaning of the Act, and a legend to that effect may be placed
on the certificates representing the Shares.

 

(b) Other Jurisdictions.  To
facilitate the making of any grant of an Award under this Plan, the Committee
may provide for such special terms for Awards to Participants who are foreign
nationals or who are employed by the Company or any Affiliate outside of the
United States of America as the Committee may consider necessary or appropriate
to accommodate differences in local law, tax policy or custom. The Company may
adopt rules and procedures relating to the operation and administration of
this Plan to accommodate the specific requirements of local laws and procedures
of particular countries. Without limiting the foregoing, the Company is
specifically authorized to adopt rules and procedures regarding the
conversion of local currency, taxes, withholding procedures 

 

10

 

and handling of
stock certificates which vary with the customs and requirements of particular
countries. The Company may adopt sub-plans and establish escrow accounts and
trusts as may be appropriate or applicable to particular locations and
countries.

 

21.  No Shareholder Rights.

 

Neither a Participant nor any transferee of a
Participant shall have any rights as a shareholder of the Company with respect
to any Shares underlying any Award until the date of issuance of a share
certificate to a Participant or a transferee of a Participant for such Shares
in accordance with the Company’s governing instruments and Applicable Law. Prior
to the issuance of Shares pursuant to an Award, a Participant shall not have the
right to vote or to receive dividends or any other rights as a shareholder with
respect to the Shares underlying the Award, notwithstanding its exercise in the
case of Options. No adjustment will be made for a dividend or other right that
is determined based on a record date prior to the date the stock certificate is
issued, except as otherwise specifically provided for in this Plan.

 

22.  No Employment Rights.

 

The Plan shall not confer upon any Participant any
right to continue an employment, service or consulting relationship with the
Company, nor shall it affect in any way a Participant’s right or the Company’s
right to terminate the Participant’s employment, service, or consulting
relationship at any time, with or without Cause.

 

23.  Termination, Rescission
and Recapture.

 

(a) Each Award under the Plan is intended to
align the Participant’s long-term interest with those of the Company. If the
Participant engages in certain activities discussed below, either during
employment or after employment with the Company terminates for any reason, the
Participant is acting contrary to the long-term interests of the Company.
Accordingly, except as otherwise expressly provided in the Award Agreement, the
Company may terminate any outstanding, unexercised, unexpired, unpaid, or
deferred Awards (“Termination”), rescind any exercise, payment or delivery
pursuant to the Award (“Rescission”), or recapture any Common Stock (whether
restricted or unrestricted) or proceeds from the Participant’s sale of Shares
issued pursuant to the Award (“Recapture”), if the Participant does not comply
with the conditions of subsections (b) and (c) hereof (collectively,
the “Conditions”).

 

(b) A Participant shall not, without the Company’s
prior written authorization, disclose to anyone outside the Company, or use in
other than the Company’s business, any proprietary or confidential information
or material, as those or other similar terms are used in any applicable patent,
confidentiality, inventions, secrecy, or other agreement between the
Participant and the Company with regard to any such proprietary or confidential
information or material.

 

(c) Pursuant to any agreement between the
Participant and the Company with regard to intellectual property (including but
not limited to patents, trademarks, copyrights, trade secrets, inventions,
developments, improvements, proprietary information, confidential business and
personnel information), a Participant shall promptly disclose and assign to the
Company or its designee all right, title, and interest in such intellectual
property, and shall take all reasonable steps necessary to enable the Company
to secure all right, title and interest in such intellectual property in the
United States and in any foreign country.

 

(d) Upon exercise, payment, or delivery of cash
or Common Stock pursuant to an Award, the Participant shall certify on a form
acceptable to the Company that he or she is in compliance with the terms and
conditions of the Plan and, if a severance of Continuous Service has occurred
for any reason, shall state the name and address of the Participant’s
then-current employer or any entity for which the Participant performs business
services and the Participant’s title, and shall identify any organization or
business in which the Participant owns a greater-than-five-percent equity
interest.

 

(e) If the Company determines, in its sole and
absolute discretion, that (i) a Participant has violated any of the
Conditions or (ii) during his or her Continuous Service, or within one
year after its termination for any reason, a Participant (a) has rendered
services to or otherwise directly or indirectly engaged in or assisted, any
organization or 

 

11

 

business that, in
the judgment of the Company in its sole and absolute discretion, is or is
working to become competitive with the Company; (b) has solicited any
non-administrative employee of the Company to terminate employment with the
Company; or (c) has engaged in activities which are materially prejudicial
to or in conflict with the interests of the Company, including any breaches of
fiduciary duty or the duty of loyalty, then the Company may, in its sole and
absolute discretion, impose a Termination, Rescission, and/or Recapture with
respect to any or all of the Participant’s relevant Awards, Shares, and the
proceeds thereof.

 

(f) Within ten days after receiving notice from
the Company of any such activity, the Participant shall deliver to the Company
the Shares acquired pursuant to the Award, or, if Participant has sold the
Shares, the gain realized, or payment received as a result of the rescinded
exercise, payment, or delivery; provided, that if the Participant returns
Shares that the Participant purchased pursuant to the exercise of an Option (or
the gains realized from the sale of such Common Stock), the Company shall
promptly refund the exercise price, without earnings, that the Participant paid
for the Shares. Any payment by the Participant to the Company pursuant to this Section 23
shall be made either in cash or by returning to the Company the number of
Shares that the Participant received in connection with the rescinded exercise,
payment, or delivery. It shall not be a basis for Termination, Rescission or
Recapture if after termination of a Participant’s Continuous Service, the
Participant purchases, as an investment or otherwise, stock or other securities
of such an organization or business, so long as (i) such stock or other
securities are listed upon a recognized securities exchange or traded over-the-counter,
and (ii) such investment does not represent more than a five percent (5%)
equity interest in the organization or business.

 

(g) Notwithstanding the foregoing provisions of
this Section, the Company has sole and absolute discretion not to require
Termination, Rescission and/or Recapture, and its determination not to require
Termination, Rescission and/or Recapture with respect to any particular act by
a particular Participant or Award shall not in any way reduce or eliminate the
Company’s authority to require Termination, Rescission and/or Recapture with
respect to any other act or Participant or Award. Nothing in this Section shall
be construed to impose obligations on the Participant to refrain from engaging
in lawful competition with the Company after the termination of employment that
does not violate subsections (b) or (c) of this Section, other than
any obligations that are part of any separate agreement between the Company and
the Participant or that arise under applicable law.

 

(h) All administrative and discretionary
authority given to the Company under this Section shall be exercised by
the most senior human resources executive of the Company or such other person
or committee (including without limitation the Committee) as the Committee may
designate from time to time.

 

(i) Notwithstanding any provision of this
Section, if any provision of this Section is determined to be
unenforceable or invalid under any applicable law, such provision will be
applied to the maximum extent permitted by applicable law, and shall
automatically be deemed amended in a manner consistent with its objectives to
the extent necessary to conform to any limitations required under applicable
law. Furthermore, if any provision of this Section is illegal under any
applicable law, such provision shall be null and void to the extent necessary
to comply with applicable law.

 

Notwithstanding the foregoing, but subject to any
contrary terms set forth in any Award Agreement, this Section shall not be
applicable: (i) to any Participant who is not, on the Award Date, an
Employee of the Company or its Affiliates; and (ii) to any Participant
from and after his or her termination of Continuous Service after a Change in
Control.

 

12

 

COMMERCE
ENERGY GROUP, INC.

 

FALLQUIST
INCENTIVE PLAN

 

 

Appendix
A: Definitions

 

 

As used in the Plan, the following definitions shall
apply:

 

“Affiliate” means, with respect to any Person (as
defined below), any other Person that directly or indirectly controls or is
controlled by or under common control with such Person. For the purposes of
this definition, “control,” when used with respect to any Person, means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of such Person or the power to elect directors,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “affiliated,” “controlling” and “controlled” have meanings
correlative to the foregoing.

 

“Applicable Law” means the legal requirements relating to
the administration of options and share-based plans under applicable U.S.
federal and state laws, the Code, any applicable stock exchange or automated
quotation system rules or regulations, and the applicable laws of any
other country or jurisdiction where Awards are granted, as such laws, rules,
regulations and requirements shall be in place from time to time.

 

“Award” means any award made pursuant to the
Plan, including awards made in the form of an Option, a Restricted Share, a
Restricted Share Unit, an Unrestricted Share, 
and a Performance Award, or any combination thereof, whether alternative
or cumulative, authorized by and granted under this Plan.

 

“Award Agreement” means any written document setting forth
the terms of an Award that has been authorized by the Committee. The Committee
shall determine the form or forms of documents to be used, and may change them
from time to time for any reason.

 

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

 

“Cause” for termination of a Participant’s
Continuous Service will exist if the Participant is terminated from employment
or other service with the Company or an Affiliate for any of the following
reasons: (i) the Participant’s willful failure to substantially perform
his or her duties and responsibilities to the Company or deliberate violation
of a material Company policy; (ii) the Participant’s commission of any
material act or acts of fraud, embezzlement, dishonesty, or other willful
misconduct; (iii) the Participant’s material unauthorized use or
disclosure of any proprietary information or trade secrets of the Company or
any other party to whom the Participant owes an obligation of nondisclosure as
a result of his or her relationship with the Company; or (iv) Participant’s
willful and material breach of any of his or her obligations under any written
agreement or covenant with the Company.

 

The Committee shall in its discretion determine
whether or not a Participant is being terminated for Cause. The Committee’s
determination shall, unless arbitrary and capricious, be final and binding on
the Participant, the Company, and all other affected persons. The foregoing
definition does not in any way limit the Company’s ability to terminate a
Participant’s employment or consulting relationship at any time, and the term “Company”
will be interpreted herein to include any Affiliate or successor thereto, if
appropriate.

 

“Change in Control”
means any of
the following:

 

(i) Acquisition of Controlling Interest.  Any
Person becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing 50% or
more of the combined voting power of the Company’s then outstanding securities.
In applying the preceding sentence, (i) securities acquired directly from
the Company or its Affiliates by or for the Person shall not be taken into
account, and (ii) an agreement to vote securities shall be disregarded
unless its ultimate purpose is to cause what would otherwise be a Change in
Control, as reasonably determined by the Board.

 

13

 

(ii) Change in Board Control.  During
a consecutive 2-year period commencing after the date of adoption of this Plan,
individuals who constituted the Board at the beginning of the period (or their
approved replacements, as defined in the next sentence) cease for any reason to
constitute a majority of the Board. A new Director shall be considered an “approved
replacement” Director if his or her election (or nomination for election) was
approved by a vote of at least a majority of the Directors then still in office
who either were Directors at the beginning of the period or were themselves
approved replacement Directors, but in either case excluding any Director whose
initial assumption of office occurred as a result of an actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than
the Board.

 

(iii) Merger.  The Company consummates
a merger, or consolidation of the Company with any other corporation unless: (a) the
voting securities of the Company outstanding immediately before the merger or
consolidation would continue to represent (either by remaining outstanding or
by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; and (b) no Person becomes
the Beneficial Owner, directly or indirectly, of securities of the Company
representing 50% or more of the
combined voting power of the Company’s then outstanding securities.

 

(iv) Sale of Assets.  The
stockholders of the Company approve an agreement for the sale or disposition by
the Company of all, or substantially all, of the Company’s assets.

 

(v) Liquidation or Dissolution.  The
stockholders of the Company approve a plan or proposal for liquidation or
dissolution of the Company.

 

Notwithstanding the foregoing, a “Change in Control”
shall not be deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately following which
the record holders of the common stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or series of
transactions.

 

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

 

“Committee” means one or more committees or
subcommittees of the Board appointed by the Board to administer the Plan in
accordance with Section 4 above. With respect to any decision relating to
a Reporting Person, the Committee shall consist of two or more Directors who are
disinterested within the meaning of Rule 16b-3.

 

“Company” means Commerce Energy Group, Inc.,
a Delaware corporation; provided, however, that in the event the Company
reincorporates to another jurisdiction, all references to the term “Company”
shall refer to the Company in such new jurisdiction.

 

“Consultant” means any person, including an advisor,
who is engaged by the Company or any Affiliate to render services and is
compensated for such services.

 

“Continuous Service” means the absence of any interruption or
termination of service as an Employee, Director, or Consultant. Continuous
Service shall not be considered interrupted in the case of: (i) sick
leave; (ii) military leave; (iii) any other leave of absence approved
by the Committee, provided that such leave is for a period of not more than 90
days, unless reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; (iv) changes in status from Director to
advisory director or emeritus status; or (v) in the case of transfers
between locations of the Company or between the Company, its Affiliates or
their respective successors. Changes in status between service as an Employee,
Director, and a Consultant will not constitute an interruption of Continuous
Service.

 

“Director” means a member of the Board, or a member
of the board of directors of an Affiliate.

 

“Disabled” means a condition under which a
Participant —

 

14

 

(a) is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months, or

 

(b) is, by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than 12 months, received income replacement benefits for a period of not
less than 3 months under an accident or health plan covering employees of the
Company.

 

“Employee” means any person whom the Company or any
Affiliate classifies as an employee (including an officer) for employment tax
purposes, whether or not that classification is correct.

 

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

 

“Fair Market Value” means, as of any date (the “Determination
Date”) means: (i) the closing price of a Share on the New York Stock
Exchange or the American Stock Exchange (collectively, the “Exchange”), on the
Determination Date, or, if shares were not traded on the Determination Date,
then on the nearest preceding trading day during which a sale occurred; or (ii) if
such stock is not traded on the Exchange but is quoted on NASDAQ or a successor
quotation system, (A) the last sales price (if the stock is then listed as
a National Market Issue under The Nasdaq National Market System) or (B) the
mean between the closing representative bid and asked prices (in all other
cases) for the stock on the Determination Date as reported by NASDAQ or such
successor quotation system; or (iii) if such stock is not traded on the
Exchange or quoted on NASDAQ but is otherwise traded in the over-the-counter,
the mean between the representative bid and asked prices on the Determination
Date; or (iv) if subsections (i)-(iii) do not apply, the fair market
value established in good faith by the Board.

 

“Grant Date” has the meaning set forth in Section 12
of the Plan.

 

“Involuntary Termination” means termination of a Participant’s
Continuous Service under the following circumstances occurring on or after a
Change in Control: (i) termination without Cause by the Company or an
Affiliate or successor thereto, as appropriate; or (ii) voluntary
termination by the Participant within 60 days following (A) a material
reduction in the Participant’s job responsibilities, provided that neither a
mere change in title alone nor reassignment to a substantially similar position
shall constitute a material reduction in job responsibilities; (B) an
involuntary relocation of the Participant’s work site to a facility or location
more than 50 miles from the Participant’s principal work site at the time of
the Change in Control; or (C) a material reduction in Participant’s total
compensation other than as part of an reduction by the same percentage amount
in the compensation of all other similarly-situated Employees, Directors or
Consultants.

 

“Non-ISO” means an Option not intended to qualify
as an an incentive stock option within the meaning of Section 422 of the Code,
as designated in the applicable Award Agreement.

 

“Option” means any stock option granted pursuant
to Section 6 of the Plan.

 

“Participant” means any holder of one or more Awards,
or the Shares issuable or issued upon exercise of such Awards, under the Plan.

 

“Performance Awards” mean Performance Units granted pursuant
to Section 8.

 

“Performance Unit” means Awards granted pursuant to Section 10(a) of
the Plan which may be paid in cash, in Shares, or such combination of cash and
Shares as the Committee in its sole discretion shall determine.

 

“Person” means any natural person, association,
trust, business trust, cooperative, corporation, general partnership, joint
venture, joint-stock company, limited partnership, limited liability company,
real estate investment trust, regulatory body, governmental agency or
instrumentality, unincorporated organization or organizational entity.

 

“Plan” means this Commerce Energy Group, Inc.
Fallquist Incentive Plan.

 

15

 

“Reporting Person” means an officer, Director, or greater
than ten percent shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.

 

“Restricted Shares” mean Shares subject to restrictions
imposed pursuant to Section 7 of the Plan.

 

“Restricted Share
Units” mean
Awards pursuant to Section 7 of the Plan.

 

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

 

“Share” means a share of common stock of the
Company, par value $0.001, as adjusted in accordance with Section 11 of
the Plan.

 

“Unrestricted Shares” mean Shares awarded pursuant to Section 7 of the
Plan.

 

16

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